<PAGE>
HARTFORD
LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO (DC II)
[LOGO]
TAX SHELTERED ANNUITY/INDIVIDUAL RETIREMENT ANNUITY
The group variable annuity contracts (hereinafter the "Contract" or
"Contracts") described in this Prospectus are issued by Hartford Life
Insurance Company ("Hartford"). The Contracts provide for an Accumulation
Period and an Annuity Period. 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 may contain a
General Account option which allows Participants to allocate contributions to
the General Account of Hartford. The General Account option, if applicable, is
not described in this Prospectus.
The Contracts are offered for use in (a) annuity purchase plans adopted
according to Section 403(b) of the Internal Revenue Code ("Code") by public
school systems, certain tax-exempt organizations described in Section
501(c)(3) of the Code, (b) employee pension plans established for employees of
a state, a political subdivision of a state, or an agency or instrumentality
of either a state or a political subdivision of a state, and (c) Individual
Retirement Annuity plans adopted according to Section 408 of the 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 Class IA of Hartford Advisers HLS
Sub-Account Fund, Inc. ("Hartford Advisers Fund")
Bond Fund Sub-Account -- shares of Class IA of Hartford Bond HLS Fund,
Inc. ("Hartford Bond Fund")
Capital Appreciation -- shares of Class IA of Hartford Capital
Fund Appreciation HLS Fund, Inc. ("Hartford Capital
Sub-Account Appreciation Fund")
Dividend and Growth Fund -- shares of Class IA of Hartford Dividend and
Sub-Account Growth HLS Fund, Inc. ("Hartford Dividend and
Growth Fund")
Index Fund Sub-Account -- shares of Class IA of Hartford Index HLS Fund,
Inc. ("Hartford Index Fund")
International -- shares of Class IA of Hartford International
Opportunities Fund Opportunities HLS Fund, Inc. ("Hartford
Sub-Account International Opportunities Fund")
Money Market Fund -- shares of Class IA of Hartford Money Market HLS
Sub-Account Fund, Inc. ("Hartford Money Market Fund")
Mortgage Securities Fund -- shares of Class IA of Hartford Mortgage
Sub-Account Securities HLS Fund, Inc. ("Hartford Mortgage
Securities Fund")
Stock Fund Sub-Account -- shares of Class IA of Hartford Stock HLS Fund,
Inc. ("Hartford Stock Fund")
Calvert Social Balanced -- shares of Calvert Social Balanced Portfolio
Portfolio Sub-Account Series of Calvert Variable Series, Inc.
("Calvert Social Balanced Portfolio")
AMS/American Century VP -- shares of American Century Variable Portfolios,
Advantage Fund Inc. American Century VP Advantage
Sub-Account ("AMS/American Century VP Advantage Fund")
AMS/American Century VP -- shares of American Century Variable Portfolios,
Capital Appreciation Inc. American Century VP Capital Appreciation
Fund Sub-Account ("AMS/American Century VP Capital Appreciation
Fund")
AMS/Fidelity VIP II -- shares of Fidelity Investments Variable
Asset Manager Fund Insurance Products Fund II Asset Manager
Sub-Account Portfolio ("AMS/Fidelity VIP II Asset Manager
Portfolio")
AMS/Fidelity VIP II -- shares of Fidelity Investments Variable
Contrafund Fund Insurance Products Fund II Contrafund Portfolio
Sub-Account ("AMS/Fidelity VIP II Contrafund Portfolio")
AMS/Fidelity VIP Growth -- shares of Fidelity Investments Variable
Fund Insurance Products Fund Growth Portfolio
Sub-Account ("AMS/Fidelity VIP Growth Portfolio")
AMS/Fidelity VIP -- shares of Fidelity Investments Variable
Overseas Fund Insurance Products Fund Overseas Portfolio
Sub-Account ("AMS/Fidelity VIP Overseas Portfolio")
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 from Hartford without
charge upon request. To obtain the Statement of Additional Information send a
written request to Hartford Life Insurance Company, Attn.: AMS Service Center
Operations, 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 herein by
reference.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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THE CONTRACT IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK. IT IS NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY GOVERNMENT AGENCY. INVESTMENT
IN A CONTRACT INVOLVES RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
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THIS PROSPECTUS IS NOT VALID UNLESS ATTACHED TO THE CURRENT PROSPECTUSES OF
THE APPLICABLE ELIGIBLE FUNDS LISTED ABOVE WHICH CONTAIN A FULL DESCRIPTION OF
THOSE FUNS. INVESTORS ARE ADVISED TO READ AND RETAIN ALL PROSPECTUSES FOR
FUTURE REFERENCE.
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Prospectus Dated: May 1, 1998
Revised as of: October 21, 1998
Statement of Additional Information Dated: May 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
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<S> <C>
GLOSSARY OF SPECIAL TERMS............................................... 3
FEE TABLE............................................................... 5
SUMMARY................................................................. 7
ACCUMULATION UNIT VALUES................................................ 9
PERFORMANCE RELATED INFORMATION......................................... 12
INTRODUCTION............................................................ 13
THE CONTRACTS AND THE SEPARATE ACCOUNT.................................. 13
What are the Contracts?............................................... 13
Who can buy the Contracts?............................................ 13
What is the Separate Account and how does it operate?................. 13
OPERATION OF THE CONTRACTS.............................................. 14
How are Contributions credited?....................................... 14
May I change the amount of my Contributions?.......................... 14
May I make changes in my Sub-Account allocations?..................... 15
May I transfer assets between Sub-Accounts/the General Account?....... 15
How do I transfer assets between Sub-Accounts or change my Sub-Account
allocations?......................................................... 15
May I systematically transfer assets to the Sub-Accounts?............. 15
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 Individual Account is worth?.................... 17
How is the Accumulation Unit value determined?........................ 17
How are the underlying Fund shares valued?............................ 17
PAYMENT OF BENEFITS..................................................... 17
What would my Beneficiary receive as death proceeds?.................. 17
How can a Contract be redeemed or surrendered?........................ 18
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?... 19
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?......................... 21
Can a Contract be modified?........................................... 22
CHARGES UNDER THE CONTRACTS............................................. 23
How are the charges under the Contracts made?......................... 23
What do the sales charges cover?...................................... 23
What is the mortality, expense risk and administrative charge?........ 23
Are there any other administrative charges?........................... 24
Is there ever a time when the sales charges or the Annual Maintenance
Fee does not apply?.................................................. 24
Experience Rating of the Contracts.................................... 25
How much are the deductions for Premium Taxes on the Contracts?....... 25
What charges are made by the Funds?................................... 25
Are there any other deductions?....................................... 25
HARTFORD LIFE INSURANCE COMPANY AND THE FUNDS........................... 25
What is Hartford?..................................................... 25
What are the Funds?................................................... 26
Hartford Funds...................................................... 26
Calvert Fund........................................................ 27
American Century VP Funds........................................... 27
Fidelity Funds...................................................... 27
FEDERAL TAX CONSIDERATIONS.............................................. 29
What are some of the federal tax consequences which affect the
Contracts?........................................................... 29
MISCELLANEOUS........................................................... 33
What are my voting rights?............................................ 33
Will other contracts be participating in the Separate Account?........ 33
How are the Contracts sold?........................................... 33
Who is the custodian of the Separate Account's assets?................ 34
Are there any material legal proceedings affecting the Separate
Account?............................................................. 34
Year 2000............................................................. 34
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 in the
Sub-Accounts before Annuity payments begin.
ADMINISTRATIVE OFFICE OF HARTFORD: Currently located at 200 Hopmeadow Street,
Simsbury, CT. All correspondence concerning this Contract should be sent to P.O.
Box 2999, Hartford, CT 06104-2999 Attn: AMS Service Center Administration,
except for overnight or express mail packages, which should be sent to: 200
Hopmeadow Street, Simsbury, CT 06089.
ANNUAL MAINTENANCE 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 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 an entity which owns the Contract.
CONTRACT YEAR: A period of 12 consecutive months commencing on the effective
date of the Contract or on any anniversary thereof.
CONTRIBUTION(S): The amount(s) paid or transferred to Hartford by the
Contractholder on behalf of Participants pursuant to the terms of the Contract.
DATE OF COVERAGE: The date on which the application on behalf of the Participant
is received in good order by Hartford.
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 Annuity 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 which consists of all assets of
Hartford other than those allocated to the separate accounts of Hartford,
including the Separate Account.
HARTFORD: 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.
3
<PAGE>
PARTICIPANT (ALSO "YOU," "YOUR," "ME," "MY," "I"): Any employee of an
Employer/Contractholder electing to participate in a Contract. The term
"Participant" includes a Participant Owner under an Individual Retirement
Annuity.
PARTICIPANT'S CONTRACT YEAR: A period of 12 consecutive months commencing with
the Date of Coverage of the Participant and each successive 12 month period
thereafter.
PARTICIPANT'S INDIVIDUAL ACCOUNT: An account to which the General Account values
and Accumulation Units are allocated on behalf of a Participant under a
Contract.
PREMIUM TAX: A tax charged by a state or municipality on Contract premiums,
Contract purchase payments or Contract values.
TAX SHELTERED ANNUITY (ALSO, "TAX DEFERRED ANNUITY"): An Annuity Contract
purchased by an Employer on behalf of its employees and which qualifies for
special tax treatment under Section 403(b) of the Code.
SEPARATE ACCOUNT: Hartford Life Insurance Company Separate Account Two.
SUB-ACCOUNT: An account 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
(generally, 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between successive Valuation Days.
VARIABLE ANNUITY: An Annuity providing for payments which vary in amount in
accordance with the investment experience of the assets held in the underlying
Funds of DC-II.
4
<PAGE>
FEE TABLE
SUMMARY
Contract Owner Transaction Expenses
(All Sub-Accounts)
<TABLE>
<S> <C>
Sales Load 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%
Ninth Year...................................................... 1%
Tenth Year...................................................... 0%
Annual Maintenance Fee............................................ $30.00(1)
Annual Expenses -- Separate Account (as a percentage of average
account value)
Mortality and Expense Risk (DC-II)............................ 1.250%
</TABLE>
The Transfer Fee, Contingent Deferred Sales Charge, and Annual Maintenance
Fee and Mortality and Expense Risk charge may be reduced or eliminated. See
"Experience Rating of Contracts," page 25.
- ---------
(1) The Annual Maintenance Fee is a single $30.00 charge on a Participant's
Individual Account. It is deducted proportionally from the investment
options in use at the time of the charge. Pursuant to requirements of the
1940 Act, the policy fees have been reflected in the Examples by a method
intended to show the "average" impact on the policy fee on an investment in
the Separate Account. In the Example, the Annual Maintenance Fee is
approximated as a 0.11% annual asset charge based on the experience of the
Contracts.
The following table shows annual operating expenses after waivers or
reimbursements for December 31, 1997:
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT FEES OTHER EXPENSES OPERATING EXPENSES
--------------- --------------- --------------------------
<S> <C> <C> <C>
Hartford Bond Fund.......................................... 0.515% 0.020% 0.535%
Hartford Stock Fund......................................... 0.455% 0.020% 0.475%
Hartford Money Market Fund.................................. 0.450% 0.015% 0.465%
Hartford Advisers Fund...................................... 0.635% 0.020% 0.655%
Hartford Capital Appreciation Fund.......................... 0.645% 0.020% 0.665%
Hartford Mortgage Securities Fund........................... 0.450% 0.025% 0.475%
Hartford Index Fund......................................... 0.400% 0.015% 0.415%
Hartford International Opportunities Fund................... 0.705% 0.090% 0.795%
Hartford Dividend & Growth Fund............................. 0.685% 0.020% 0.705%
Calvert Social Balanced Portfolio (1)....................... 0.690% 0.120% 0.810%
American Century VP Advantage Fund.......................... 1.000% 0.000% 1.000%
American Century VP Capital Appreciation Fund............... 1.000% 0.000% 1.000%
AMS/Fidelity VIP Growth Fund (2)............................ 0.600% 0.090% 0.690%
AMS/Fidelity VIP Overseas Fund (2).......................... 0.750% 0.170% 0.920%
AMS/Fidelity VIP II Contrafund (2).......................... 0.600% 0.110% 0.710%
AMS/Fidelity VIP II Asset Manager (2)....................... 0.550% 0.100% 0.650%
</TABLE>
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(1) The figures above for the Calvert Social Balanced Portfolio reflect expenses
for fiscal year 1997, and have been restated to reflect an increase in
transfer agency expenses of 0.01% for the Portfolio expected to be incurred
in 1998. Management and Advisory Expenses includes a performance adjustment,
which depending on performance, could cause the fee to be as high as 0.85%
or as low as 0.55%. "Other Expenses" reflect an indirect fee. Net fund
operating expenses after reductions for fees paid indirectly (again,
restated) would be 0.78%.
(2) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds have entered into
arrangements with their custodian whereby credits realized, as a result of
uninvested cash balances were used to reduce custodian expenses. Including
these reductions, the total operating expenses presented in the table would
have been 0.67% for VIP Growth Portfolio, 0.90% for VIP Overseas Portfolio,
0.76% for VIP II Asset Manager Portfolio, and 0.68% for VIP II Contrafund
Portfolio.
5
<PAGE>
EXAMPLE DC-II
<TABLE>
<CAPTION>
If you surrender your Contract If you annuitize your Contract If you do not surrender your
at the end of the applicable at the end of the applicable Contract, you would pay the
time period, you would pay the time period, you would pay the following expenses on a $1,000
following expenses on a $1,000 following expenses on a $1,000 investment, assuming a 5%
investment, assuming a 5% investment, assuming a 5% annual return on assets:
annual return on assets: annual return on the 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>
Bond Fund.................... $ 71 $ 115 $ 161 $ 223 $ 18 $ 59 $ 102 $ 222 $ 19 $ 60 $ 103 $ 223
Stock Fund (1)............... 70 113 158 217 18 57 99 215 19 58 100 217
Money Market Fund............ 70 113 158 216 18 57 98 214 19 58 100 216
Advisers Fund (1)............ 72 118 167 236 20 63 108 235 21 64 110 236
Capital Appreciation Fund
(1)........................ 72 119 168 237 20 63 109 236 21 64 110 237
Mortgage Securities Fund..... 70 113 158 217 18 57 99 215 19 58 100 217
Index Fund (2)............... 70 111 155 210 17 55 96 209 18 56 97 210
International Opportunities
Fund....................... 73 122 174 251 21 67 116 249 22 68 117 251
Dividend & Growth Fund....... 73 120 170 241 20 64 111 240 21 65 112 241
Calvert Social Balanced
Portfolio.................. 74 123 175 252 21 67 116 251 22 69 118 252
American Century VP Advantage
Fund....................... 75 128 184 272 23 73 126 271 24 74 127 272
American Century VP Capital
Appreciation Fund.......... 75 128 184 272 23 73 126 271 24 74 127 272
AMS/Fidelity VIP Growth
Fund....................... 72 119 169 240 20 64 110 238 21 65 111 240
AMS/Fidelity VIP Overseas
Fund....................... 75 126 180 264 22 71 122 262 23 72 123 264
AMS/Fidelity VIP II
Contrafund................. 73 120 170 242 20 64 111 240 21 66 112 242
AMS/Fidelity VIP II Asset
Manager.................... 72 118 167 236 19 62 108 234 21 64 109 236
</TABLE>
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(1) Hartford voluntarily reduces the charge for administrative undertakings with
respect to assets allocated to certain of the sub-accounts in DC-II. The
reduced total charge for mortality, expense risk and administrative
undertakings in these sub-accounts is as follows: Stock Fund, 1.24%;
Advisers Fund, 1.20%; Capital Appreciation Fund, 1.21%.
(2) With respect to the Index Fund Sub-Account, the combined total of the
applicable charge for mortality, expense risk and administrative
undertakings and expenses of the underlying Fund are voluntarily limited to
1.25%.
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. This 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.
6
<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 offered only with respect 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, Contributions submitted by the
Contractholder are used to purchase variable account interests. Contributions
allocated to purchase variable account interests may, after the deductions
described hereinafter, be invested in selected Sub-Accounts of DC-II. A Contract
may contain a General Account option which allows Participants to allocate
contributions to the General Account. 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 Contract. However, a contingent deferred sales charge may be
assessed against a Participant's Individual Account when it is withdrawn. The
number of Participant's 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 "Charges Under the
Contracts -- Experience Rating of the Contracts," page 25). Aggregate deferred
sales charges will not exceed 8.50% of all Contributions to that Participant's
Individual Account.
The contingent deferred sales charge is a percentage of the amount
surrendered and equals:
<TABLE>
<CAPTION>
CONTRACT YEAR MAXIMUM
OF WITHDRAWAL CHARGE
- -------------------------------------------------------------------- -------------
<S> <C>
1 through 5......................................................... 5%
6................................................................... 4%
7................................................................... 3%
8................................................................... 2%
9................................................................... 1%
10 and thereafter................................................... 0%
</TABLE>
No deduction for contingent deferred sales charges will be made in certain
cases (see "Charges Under the Contract -- Experience Rating of the Contracts,"
page 25).
D. TRANSFER BETWEEN ACCOUNTS
During the Accumulation Period, a Participant may allocate moneys held in
DC-II among the available Sub-Accounts. 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
transfers may occur on consecutive Valuation Days. There may be additional
restrictions under certain circumstances. (See "May I transfer assets between
Sub-Accounts/the General Account?" on 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 Annuities and/or Variable Annuities under the
Contract. (See "How are Contributions made to establish my Annuity account?" on
page 20.) However, Hartford 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 the Participant's 65th birthday or the Annuity
Commencement Date (see "What would my Beneficiary receive as death proceeds?" on
page 17).
7
<PAGE>
G. ANNUITY OPTIONS
The Annuity Commencement Date generally will not be deferred beyond the date
the Participant becomes age 70 1/2 or unless an earlier date is required by
applicable law and/or regulation. If a Participant does not elect otherwise,
Hartford reserves the right to begin Annuity payments automatically upon the
Participant's attaining age 65 under an Annuity option providing for a life
Annuity with 120 monthly payments certain (see "What are the available Annuity
options under the Contracts?" 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 Contracts," 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 for providing the mortality, expense and administrative undertakings
under the Contracts. Such charge is made at 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 "Charges Under the Contracts -- Experience Rating of the
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 Contracts," page 23.)
J. ANNUAL MAINTENANCE FEE
An Annual Maintenance 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 Maintenance Fee is $30 per year on each
Participant's Individual Account. (See "Charges Under the Contracts," page 23.)
Hartford reserves the right to reduce or waive the Annual Maintenance Fee under
certain conditions (see "Charges Under the Contracts -- Experience Rating of the
Contracts," page 25).
K. MINIMUM PAYMENT
There is no minimum amount for initial Contributions or subsequent
Contributions that may be made by the Contractholder on behalf of a
Participant's Individual Account under a Contract.
L. INDIVIDUAL ACCOUNT LOANS
Generally, a Participant may request a loan from his or her Individual
Account under a Tax Sheltered Annuity, subject to a $25 non-refundable loan
processing fee (except as otherwise required by statute). Loans must be at least
$1,000 and may not exceed the lesser of (a) 50% of the Participant's Individual
Account value, or (b) $50,000, reduced by the highest outstanding balance of any
loan to such Participant during the 12-month period ending on the day before the
loan is made. (See "May I request a loan from my Individual Account?" on 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
prospectuses for the Funds accompanying this Prospectus.
N. PAYMENT ALLOCATION TO DC-II
The Contracts permit the allocation of Contributions, in multiples of 10% of
each Contribution, among the Sub-Accounts under 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 Funds underlying the Contracts to the extent that proxies
are solicited by any such Fund. If a Contractholder or vested Participant does
not vote, Hartford shall vote such Contractholder's or Participant's interest in
the same proportion as shares of the Fund for which instructions have been
received by Hartford (see "What are my voting rights?" on page 33).
8
<PAGE>
ACCUMULATION UNIT VALUES
(FOR AN ACCUMULATION UNITS OUTSTANDING THROUGHOUT THE PERIOD)
The following information has been derived from the audited financial
statements of the Separate Account, which have been audited by Arthur Anderson,
LLP, independent public accountants, as indicated in their report thereto, and
should be read in conjunction with those statements which are included in the
Statement of Additional Information, which is incorporated herein by reference
in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
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1997 1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- ------- ------- ------- ------- -------
BOND FUND SUB-ACCOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Inception Date August 25, 1982)
Accumulation Unit value at beginning of
period................................. $ 4.187 $ 4.095 $ 3.500 $ 3.689 $ 3.389 $ 3.251 $ 2.827 $ 2.641
Accumulation Unit value at end of
period................................. $ 4.604 $ 4.187 $ 4.095 $ 3.500 $ 3.689 $ 3.389 $ 3.251 $ 2.827
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 1,606 1,655 1,368 1,123 992 816 732 724
STOCK FUND SUB-ACCOUNT
(Inception Date June 29, 1982)
Accumulation Unit value at beginning of
period................................. $ 11.017 $ 8.968 $ 6.771 $ 6.988 $ 6.188 $ 5.694 $ 4.627 $ 4.874
Accumulation Unit value at end of period $ 14.295 $ 11.017 $ 8.968 $ 6.771 $ 6.988 $ 6.188 $ 5.694 $ 4.627
Number of Accumulation Units outstanding
at end of period
(in thousands) 5,082 4,885 4,413 3,885 3,181 2,517 1,885 1,467
MONEY MARKET FUND SUB-ACCOUNT
(Inception Date June 29, 1982)
Accumulation Unit value at beginning of
period................................. $ 2.725 $ 2.624 $ 2.512 $ 2.447 $ 2.407 $ 2.351 $ 2.245 $ 2.103
Accumulation Unit value at end of period $ 2.834 $ 2.725 $ 2.624 $ 2.512 $ 2.447 $ 2.407 $ 2.351 $ 2.245
Number of Accumulation Units outstanding
at end of period
(in thousands) 1,473 1,333 989 905 886 884 929 881
ADVISERS FUND SUB-ACCOUNT
(Inception Date May 2, 1983)
Accumulation Unit value at beginning of
period................................. $ 4.201 $ 3.647 $ 2.876 $ 2.993 $ 2.700 $ 2.524 $ 2.123 $ 2.123
Accumulation Unit value at end of
period................................. $ 5.168 $ 4.201 $ 3.647 $ 2.876 $ 2.993 $ 2.700 $ 2.524 $ 2.123
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 10,299 10,505 9,212 8,279 7,023 7,323 6,220 5,565
CAPITAL APPRECIATION FUND SUB-ACCOUNT
(Inception Date April 2, 1984)
Accumulation Unit value at beginning of
period................................. $ 6.533 $ 5.478 $ 4.257 $ 4.204 $ 3.524 $ 3.050 $ 2.004 $ 2.278
Accumulation Unit value at end of
period................................. $ 7.896 $ 6.533 $ 5.478 $ 4.257 $ 4.204 $ 3.524 $ 3.050 $ 2.004
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 11,032 10,979 9,081 6,923 4,940 3,276 2,113 1,455
MORTGAGE SECURITIES FUND SUB-ACCOUNT
(Inception Date January 15, 1985)
Accumulation Unit value at beginning of
period................................. $ 2.421 $ 2.333 $ 2.034 $ 2.093 $ 1.993 $ 1.929 $ 1.702 $ 1.571
Accumulation Unit value at end of
period................................. $ 2.606 $ 2.421 $ 2.333 $ 2.034 $ 2.093 $ 1.993 $ 1.929 $ 1.702
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 1,035 1,141 1,149 994 942 802 736 582
<CAPTION>
1989 1988
------- -------
BOND FUND SUB-ACCOUNT
<S> <C> <C>
(Inception Date August 25, 1982)
Accumulation Unit value at beginning of
period................................. $ 2.385 $ 2.244
Accumulation Unit value at end of
period................................. $ 2.641 $ 2.385
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 594 433
STOCK FUND SUB-ACCOUNT
(Inception Date June 29, 1982)
Accumulation Unit value at beginning of
period................................. $ 3.915 $ 3.331
Accumulation Unit value at end of period $ 4.874 $ 3.915
Number of Accumulation Units outstanding
at end of period
(in thousands) 1,156 1,011
MONEY MARKET FUND SUB-ACCOUNT
(Inception Date June 29, 1982)
Accumulation Unit value at beginning of
period................................. $ 1.951 $ 1.840
Accumulation Unit value at end of period $ 2.103 $ 1.951
Number of Accumulation Units outstanding
at end of period
(in thousands) 718 628
ADVISERS FUND SUB-ACCOUNT
(Inception Date May 2, 1983)
Accumulation Unit value at beginning of
period................................. $ 1.766 $ 1.566
Accumulation Unit value at end of
period................................. $ 2.123 $ 1.766
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 5,227 4,631
CAPITAL APPRECIATION FUND SUB-ACCOUNT
(Inception Date April 2, 1984)
Accumulation Unit value at beginning of
period................................. $ 1.858 $ 1.490
Accumulation Unit value at end of
period................................. $ 2.278 $ 1.858
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 1,037 787
MORTGAGE SECURITIES FUND SUB-ACCOUNT
(Inception Date January 15, 1985)
Accumulation Unit value at beginning of
period................................. $ 1.406 $ 1.313
Accumulation Unit value at end of
period................................. $ 1.571 $ 1.406
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 845 764
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- ------- ------- ------- ------- -------
INDEX FUND SUB-ACCOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Inception Date June 3, 1987)
Accumulation Unit value at beginning of
period................................. $ 2.848 $ 2.353 $ 1.738 $ 1.735 $ 1.605 $ 1.522 $ 1.190 $ 1.255
Accumulation Unit value at end of
period................................. $ 3.745 $ 2.848 $ 2.353 $ 1.738 $ 1.735 $ 1.605 $ 1.522 $ 1.190
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 5,415 4,378 3,153 2,376 1,862 1,437 871 595
CALVERT SOCIAL BALANCED PORTFOLIO
SUB-ACCOUNT
(Inception Date January 25, 1990)
Accumulation Unit value at beginning of
period................................. $ 2.021 $ 1.817 $ 1.417 $ 1.483 $ 1.391 $ 1.308 $ 1.138 $ 1.106
Accumulation Unit value at end of
period................................. $ 2.396 $ 2.021 $ 1.817 $ 1.417 $ 1.483 $ 1.391 $ 1.308 $ 1.138
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 1,291 1,193 923 693 498 317 187 94
INTERNATIONAL OPPORTUNITIES FUND
SUB-ACCOUNT
(Inception Date July 2, 1990)
Accumulation Unit value at beginning of
period................................. $ 1.483 $ 1.329 $ 1.181 $ 1.220 $ 0.924 $ 0.979 $ 0.877 $ 1.000
Accumulation Unit value at end of
period................................. $ 1.469 $ 1.483 $ 1.329 $ 1.181 $ 1.220 $ 0.924 $ 0.979 $ 0.877
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 5,864 5,996 4,520 3,640 1,495 553 220 52
DIVIDEND AND GROWTH FUND SUB-ACCOUNT
(Inception Date May 1, 1995)
Accumulation Unit value at beginning of
period................................. $ 1.490 $ 1.223 $ 1.000 -- -- -- -- --
Accumulation Unit value at end of
period................................. $ 1.993 $ 1.490 $ 1.223 -- -- -- -- --
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 6,877 3,874 558 -- -- -- -- --
AMS/AMERICAN CENTURY VP ADVANTAGE FUND
SUB-ACCOUNT
(Inception Date May 1, 1995)
Accumulation Unit value at beginning of
period................................. $ 1.134 $ 1.051 $ 1.000 -- -- -- -- --
Accumulation Unit value at end of
period................................. $ 1.264 $ 1.134 $ 1.051 -- -- -- -- --
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 189 144 36 -- -- -- -- --
AMS/AMERICAN CENTURY VP CAPITAL
APPRECIATION FUND SUB-ACCOUNT
(Inception Date May 1, 1995)
Accumulation Unit value at beginning of
period................................. $ 1.021 $ 1.081 $ 1.000 -- -- -- -- --
Accumulation Unit value at end of
period................................. $ 0.976 $ 1.021 $ 1.081 -- -- -- -- --
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 1,520 1,108 634 -- -- -- -- --
<CAPTION>
1989 1988
------- -------
INDEX FUND SUB-ACCOUNT
<S> <C> <C>
(Inception Date June 3, 1987)
Accumulation Unit value at beginning of
period................................. $ 0.975 $ 0.850
Accumulation Unit value at end of
period................................. $ 1.255 $ 0.975
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 275 116
CALVERT SOCIAL BALANCED PORTFOLIO
SUB-ACCOUNT
(Inception Date January 25, 1990)
Accumulation Unit value at beginning of
period................................. $ 1.000 --
Accumulation Unit value at end of
period................................. $ 1.106
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 18 --
INTERNATIONAL OPPORTUNITIES FUND
SUB-ACCOUNT
(Inception Date July 2, 1990)
Accumulation Unit value at beginning of
period................................. -- --
Accumulation Unit value at end of
period................................. -- --
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... -- --
DIVIDEND AND GROWTH FUND SUB-ACCOUNT
(Inception Date May 1, 1995)
Accumulation Unit value at beginning of
period................................. -- --
Accumulation Unit value at end of
period................................. -- --
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... -- --
AMS/AMERICAN CENTURY VP ADVANTAGE FUND
SUB-ACCOUNT
(Inception Date May 1, 1995)
Accumulation Unit value at beginning of
period................................. -- --
Accumulation Unit value at end of
period................................. -- --
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... -- --
AMS/AMERICAN CENTURY VP CAPITAL
APPRECIATION FUND SUB-ACCOUNT
(Inception Date May 1, 1995)
Accumulation Unit value at beginning of
period................................. -- --
Accumulation Unit value at end of
period................................. -- --
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... -- --
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- ------- ------- ------- ------- -------
AMS/FIDELITY VIP OVERSEAS FUND
SUB-ACCOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Inception Date May 1, 1995)
Accumulation Unit value at beginning of
period................................. $ 1.152 $ 1.030 $ 1.000 -- -- -- -- --
Accumulation Unit value at end of
period................................. $ 1.269 $ 1.152 $ 1.030 -- -- -- -- --
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 1,563 921 181 -- -- -- -- --
AMS/FIDELITY VIP II ASSET MANAGER FUND
SUB-ACCOUNT
(Inception Date May 1, 1995)
Accumulation Unit value at beginning of
period................................. $ 1.230 $ 1.087 $ 1.000 -- -- -- -- --
Accumulation Unit value at end of
period................................. $ 1.466 $ 1.230 $ 1.087 -- -- -- -- --
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 2,172 1,491 312 -- -- -- -- --
AMS/FIDELITY VIP II CONTRAFUND FUND
SUB-ACCOUNT
(Inception Date May 1, 1995)
Accumulation Unit value at beginning of
period................................. $ 1.316 $ 1.099 $ 1.000 -- -- -- -- --
Accumulation Unit value at end of
period................................. $ 1.613 $ 1.316 $ 1.099 -- -- -- -- --
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 7,407 5,069 1,808 -- -- -- -- --
AMS/FIDELITY VIP GROWTH FUND SUB-ACCOUNT
(Inception Date May 1, 1995)
Accumulation Unit value at beginning of
period................................. $ 1.215 $ 1.073 $ 1.000 -- -- -- -- --
Accumulation Unit value at end of
period................................. $ 1.482 $ 1.215 $ 1.073 -- -- -- -- --
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... 7,393 5,773 2,055 -- -- -- -- --
<CAPTION>
1989 1988
------- -------
AMS/FIDELITY VIP OVERSEAS FUND
SUB-ACCOUNT
<S> <C> <C>
(Inception Date May 1, 1995)
Accumulation Unit value at beginning of
period................................. -- --
Accumulation Unit value at end of
period................................. -- --
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... -- --
AMS/FIDELITY VIP II ASSET MANAGER FUND
SUB-ACCOUNT
(Inception Date May 1, 1995)
Accumulation Unit value at beginning of
period................................. -- --
Accumulation Unit value at end of
period................................. -- --
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... -- --
AMS/FIDELITY VIP II CONTRAFUND FUND
SUB-ACCOUNT
(Inception Date May 1, 1995)
Accumulation Unit value at beginning of
period................................. -- --
Accumulation Unit value at end of
period................................. -- --
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... -- --
AMS/FIDELITY VIP GROWTH FUND SUB-ACCOUNT
(Inception Date May 1, 1995)
Accumulation Unit value at beginning of
period................................. -- --
Accumulation Unit value at end of
period................................. -- --
Number of Accumulation Units outstanding
at end of period
(in thousands)......................... -- --
</TABLE>
11
<PAGE>
PERFORMANCE RELATED INFORMATION
DC-II may advertise certain performance related information concerning its
Sub-Accounts. Performance information about a Sub-Account is based on that
Sub-Account's past performance only and is no indication of future performance.
The Advisers Fund, Bond Fund, Calvert Social Balanced Portfolio, Capital
Appreciation Fund, Dividend and Growth Fund, Index Fund, International
Opportunities Fund, Money Market Fund, Mortgage Securities Fund, Stock Fund,
AMS/American Century VP Advantage Fund, AMS/American Century VP Capital
Appreciation 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 investment return in advertisements or other
sales materials.
When a Sub-Account advertises its standardized total return, total return
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 investments in the
Sub-Account at the beginning of the relevant period to the value of the
investments at the end of such 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, expense risk and administrative
charge and the Annual Maintenance Fee.
The Bond Fund, Mortgage Securities Fund and AMS/American Century VP
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 such period. The resulting figure reflects the recurring charges,
including the Annual Maintenance Fee and the mortality, expense risk and
administrative charge, on the Separate Account level.
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 such 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 Maintenance Fee and the mortality, expense risk and
administrative charge.
Total return at the Separate Account level includes all Contract charges,
i.e., contingent deferred sales charges, mortality, expense risk and
administrative charges, and the Annual Maintenance Fee and, therefore, is 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, therefore, is lower than yield at the Fund level,
with no comparable charges.
12
<PAGE>
INTRODUCTION
This Prospectus has been designed to provide you with the information
necessary to make a decision on purchasing a Contract offered by Hartford in
DC-II, or an interest therein, which Contract will be issued in conjunction with
a Tax Sheltered Annuity plan or an Individual Retirement Annuity plan
established by an Employer for the benefit of its employees. This Prospectus
describes only the elements of the Contract pertaining to the variable portion
of such Contract. The Contracts may contain a General Account option which is
not described in this Prospectus. Please read the Glossary of Special Terms
(pages 3 and 4) prior to reading this Prospectus to familiarize yourself with
the terms used herein.
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. A Contract may provide a General Account option. The Contracts
are issued to Employers or to a trustee or custodian of an Employer's plan to
allow the employees of such Employer/Contractholder to participate in a Tax
Sheltered Annuity or an Individual Retirement Annuity.
During the Accumulation Period under a Contract, Contributions submitted by
the Contractholder are used to purchase variable account interests. Subject to
the deductions described hereinafter, Contributions allocated to purchase
variable account interests may be invested in selected Sub-Accounts.
WHO CAN BUY THE CONTRACTS?
The group variable annuity Contracts offered under this Prospectus are
offered for use in connection with Annuity purchase plans adopted in accordance
with Section 403(b) of the Code 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 in connection with Individual Retirement
Annuity plans. A 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?
The Separate Account is organized as a unit investment trust and has been
registered as such with the Commission under the Investment Company Act of 1940,
as amended. Registration of the Separate Account with the Commission does not
involve supervision by the Commission of the management or investment practices
or policies of the Separate Account or of Hartford. However, Hartford 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 are held for the benefit of the Contractholders and the persons
entitled to payments under, the 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 may conduct. Therefore, you will not
be affected by the rate of return of the General Account, nor by the investment
performance of any of Hartford's other separate accounts.
Contributions under the Contract 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 therefore will 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.
13
<PAGE>
HARTFORD DOES NOT GUARANTEE THE INVESTMENT RESULTS OF THE SUB-ACCOUNTS OR
ANY 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
FUND IS SUBJECT TO ITS OWN SET OF RISKS. THESE RISKS ARE MORE FULLY DESCRIBED IN
THE FUND PROSPECTUSES ACCOMPANYING THIS PROSPECTUS.
Hartford reserves the right, subject to compliance with applicable 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 in the event of changes in applicable law or
interpretations of law. Current law requires that Participants receive notice of
any such substitution and approval thereof by the Commission. Hartford also
reserves the right, subject to compliance with applicable law, to offer
additional Sub-Accounts with differing investment objectives, and to make
existing Sub-Account options unavailable under the Contracts in the future. 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
and not described in this Prospectus.
Hartford may offer additional Separate Account options from time to time
under the Contracts. Such new options will be subject to the charges, fees, and
or transfer restrictions for the Contracts then in effect.
OPERATION OF THE CONTRACTS
HOW ARE CONTRIBUTIONS CREDITED?
A group contract is issued to an Employer adopting a Plan and will cover all
present and future Participants in such Plan. The Contracts provide for variable
(Separate Account) Contributions and allocations to the General Account during
the Accumulation Period.
The number of Accumulation Units in each Sub-Account to be credited to a
Participant's Individual Account is determined by dividing the portion of the
Contributions being credited to each Sub-Account by the value of an Accumulation
Unit in that Sub-Account on the applicable Valuation Day.
Initial contributions are priced for crediting to a Participant's Individual
Account within two business days after receipt by Hartford at its Administrative
Office of a properly completed application and the initial Contribution. If an
application or any other necessary information (collectively, the "application")
is incomplete when received by Hartford, the initial Contribution will be
credited to the Participant's Individual Account not later that two business
days after the application is made complete. However, if an incomplete
application is not made complete within five business days of the date on which
such incomplete application was initially received by Hartford, the initial
Contribution will be returned immediately, unless you have been informed of the
delay and request that the Contribution not be returned.
Subsequent Contributions properly designated for a Participant's Individual
Account are priced for crediting to such Participant's Individual Account on the
Valuation Day that the Contribution is received by Hartford at its
Administrative Office, or at another designated location.
The number of Accumulation Units in a Sub-Account 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
underlying Fund shares.
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?
Yes. However, the minimum Contribution that may be made at any one time on
behalf of a Participant during the Accumulation Period under a contract is $30,
unless the Employer's Plan provides otherwise. If the Plan adopted by the
Contract Owner so provides, the Contract permits the allocation of
Contributions, in multiples of 10%, among the Sub-Accounts. The minimum amount
that may be allocated to any Sub-Account shall not be less than $10. Such
changes must be requested in the form and manner prescribed by Hartford.
14
<PAGE>
MAY I MAKE CHANGES IN MY SUB-ACCOUNT ALLOCATIONS?
The Contract permits the allocation of Contributions, in multiples of 10%,
among the 16 Sub-Accounts. There is no minimum amount that may be allocated to
any one Sub-Account. Such changes must be requested in the form and manner
prescribed by Hartford.
MAY I TRANSFER ASSETS BETWEEN SUB-ACCOUNTS/THE GENERAL ACCOUNT?
During the Accumulation Period a Participant may transfer the value of his
or her Individual Account allocations from one or more Sub-Accounts or the
General Account to one or more other Sub-Accounts, the General Account or to any
combination thereof.
Amounts allocated to the General Account, or amounts previously allocated to
the General Account during the three month period immediately preceding the date
such transfer is requested, may not be transferred to any Sub-Account which
Hartford considers to be a competing fixed income Sub-Account. Hartford 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's Contract Year.
Currently there is no transfer charge for the first 12 transfers per
Participant's Contract Year. A fee of $5.00 may be assessed for each transfer in
excess of 12 per Participant's Contract Year. No two transfers may occur on
consecutive Valuation Days.
Additionally, with respect to a Participant's Individual Account, the right
to transfer moneys between Sub-Accounts is subject to modification if Hartford
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, requiring 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 or Participant at any
one time. Such restrictions may be applied in any manner reasonably designed to
prevent any use of the transfer right which Hartford considers to be to
disadvantageous to other Contractholders and 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 to Hartford or by calling Hartford at 1-800-771-3051.
Any transfers or changes made in writing will be effected as of the date the
request is received by Hartford at its Administrative Office. Transfers or
changes initiated by telephone may not be permitted in some states. The policy
of Hartford 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 will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine; otherwise, Hartford may be
liable for any losses due to unauthorized or fraudulent instructions. The
procedures Hartford 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 made by
telephone are recorded.
MAY I SYSTEMATICALLY TRANSFER ASSETS TO THE SUB-ACCOUNTS?
If, during the Accumulation Period, the portion of your Contract values held
under the General Account option is at least $5,000, or the value of your
Accumulation Units held under the Money Market Fund Sub-Account is at least
$5,000, you may choose to have a specified dollar amount transferred from either
the General Account or the Money Market Fund Sub-Account (whichever meets the
applicable minimum value) to other Sub-Accounts at monthly, quarterly,
semi-annual or annual intervals. This is known as Dollar Cost Averaging. The
main objective of a Dollar Cost Averaging program is to minimize the impact of
short term price fluctuations. Since the same dollar amount is transferred to
other Sub-Accounts at set intervals, more Accumulation Units are purchased in a
Sub-Account if the value per Accumulation Unit is low and fewer Accumulation
Units are purchased if the value per Accumulation Unit is high. Therefore, a
lower average cost per Accumulation Unit may be achieved over the long term. A
Dollar Cost Averaging program allows investors to take advantage of market
fluctuations. However, it is important to understand that Dollar Cost Averaging
does not assure a profit or protect against a loss in declining markets.
The minimum amount that may be transferred to any one Sub-Account at a
transfer interval is $100. The transfer date will be the monthly, quarterly,
semi-annual or annual anniversary, as applicable, of your first transfer under
your initial Dollar Cost Averaging election. The first transfer will commence
within five business
15
<PAGE>
days after Hartford receives your initial election, either on an appropriate
election form in good order or by telephone, subject to the telephone transfer
procedures detailed above. The amount transferred will be allocated to the
Sub-Accounts that you specify, in the proportions that you specify on the
appropriate election form provided by Hartford or over our recorded telephone
line. You may allocate amounts to a maximum of five Sub-Accounts. If, on any
transfer date, your General Account value or the value of your Accumulation
Units under the Money Market Fund Sub-Account, as applicable, is less than the
amount you have elected to have transferred under your Dollar Cost Averaging
program, your Dollar Cost Averaging program will end.
You may cancel your Dollar Cost Averaging election by notice in writing to
Hartford or by calling us at 1-800-528-9009 and giving notice to a Hartford
representative on our recorded telephone line.
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 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 and each Participant's Individual Account will be considered to be
inactive 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 "Payment of Benefits -- How can a Contract be
redeemed or surrendered?" on page 18).
MAY I ASSIGN OR TRANSFER THE CONTRACT?
The Contract 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
$25 non-refundable loan processing fee (except as otherwise required by
statute). The loan proceeds and the loan processing fee will be deducted from
the General Account on the date that the loan proceeds are disbursed. Loans
against a Participant's Individual Account 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 amount of a loan may not exceed the lesser of (a) 50% of the value of
the Participant's Individual Account, or (b) $50,000, reduced by the highest
outstanding balance of any loan to such Participant during the 12-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 shall determine the
interest rate to be charged on all loans issued during such quarter. The
interest rate shall reflect current market interest rates and the prevailing
interest rate levels under the Contract. The maximum interest rate shall not
exceed the current guaranteed interest rate for the General Account plus 2%.
Monthly loan payments (except for the initial loan payment) are due and payable
at the Administrative Office of Hartford 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. The
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.
Prepayment of the outstanding loan balance is prohibited during the first 12
months following disbursement of the loan proceeds, except upon termination of
employment. Thereafter, 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 one to five years (in 12 month increments) from the last
business day of the first month in which the loan amount is distributed. Loan
balances which remain unpaid after a specified period will be treated as a
distribution from the Participant's Individual Account which is subject to
taxation (see "Federal Tax Considerations," page 29).
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 on the Participant's Individual Account is likely to be. Also, if not
repaid, the outstanding loan balance will reduce the death benefit otherwise
payable to the Beneficiary.
16
<PAGE>
HOW DO I KNOW WHAT MY INDIVIDUAL 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 Accumulation Units credited to the Participant's Individual
Account by the current Accumulation Unit value for the Sub-Account(s). There is
no assurance that the value in the Sub-Accounts will equal or exceed the
Contributions made to such Sub-Accounts.
The value of the Accumulation Units in DC-II which represent an interest in
the appropriate Fund shares that are held under the Contract was 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 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, minus the amount of
any charges assessed during the Valuation Period then ended.
Participants should refer to the prospectuses for 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, as described in this Prospectus.
HOW ARE THE UNDERLYING FUND SHARES VALUED?
The shares of a 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 prospectuses for the Funds accompanying this Prospectus.
PAYMENT OF BENEFITS
WHAT WOULD MY BENEFICIARY RECEIVE AS DEATH PROCEEDS?
Each Contract provides 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 such Participant's Individual Account,
determined as of the date on which written proof of the death of such
Participant is received by Hartford, or (b) 100% of total Contributions made to
the Participant's Individual Account, reduced by any prior partial withdrawals
or outstanding loan indebtedness.
The death 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, 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 with respect to variable annuities then being issued by
Hartford; provided that any such option must provide that a death benefit will
be distributed within five years of the Participant's death; or, if the death
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. Each 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 and within one year after the
Participant's death by written notice to Hartford at its offices in Hartford,
Connecticut. Benefit proceeds due upon a Participant's death may be applied to
provide
17
<PAGE>
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 investment results
of the Funds. No election to provide Annuity payments will become operative
unless the initial Annuity payment is at least $20, on either a variable or
fixed basis, or $20 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 "Payment of Benefits -- How are Contributions made
to establish my Annuity account?" on 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 A CONTRACT MADE AFTER DECEMBER 31,
1988 AND ANY INCREASES IN THE CASH VALUE THEREOF AFTER DECEMBER 31, 1988 MAY NOT
BE DISTRIBUTED UNLESS THE CONTRACTHOLDER/PARTICIPANT 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 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.
Upon termination of Contributions for a Participant prior to the selected
Annuity Commencement Date, 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 "Payment of Benefits -- What are the available
Annuity options under the Contracts?" on page 20.) At any time in the interim
between such termination of Contributions and the Annuity Commencement Date, the
Participant may surrender his or her Individual Account for a lump sum cash
settlement in accordance with item (3), below.
(2) To elect Annuity payments immediately. The values in the Participant's
Individual Account may be applied, subject to Contract provisions, to provide
for Fixed Annuity or Variable Annuity payments, or a combination thereof,
commencing immediately, under the selected Annuity option under the Contract.
(See "Payment of Benefits -- What are the available Annuity options under the
Contracts?" on page 20).
(3) To surrender the Participant's Individual Account for a lump sum cash
settlement, in which event the Annual Maintenance Fee and any applicable
contingent deferred sales charges will be deducted. (See "Charges Under the
Contracts -- How are the charges under the Contracts made?" 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 at its Administrative
Office. Payment will normally be made as soon as possible but not later than
seven days after the written request is received by Hartford.
(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
"Charges Under the Contracts -- How are the charges under the Contracts made?"
on page 23). If the contingent deferred sales charge has been experience rated
(see "Charges Under the Contracts -- Experience Rating of the 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. The Participant's Individual Account remains subject to the
Annual Maintenance 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 his or her Individual Account allocations from one or more
Sub-Accounts or the General Account to any other Sub-Account, the General
18
<PAGE>
Account or to any combination thereof, subject to certain restrictions (see
"Operation of the Contracts," page 14). For a complete description of the
restrictions and limitations of this option (5), see "Payment of Benefits --
Systematic Withdrawal Option," page 21.
CAN PAYMENT OF THE REDEMPTION OR SURRENDER VALUE EVER BE POSTPONED BEYOND THE
SEVEN DAY PERIOD?
Yes. Payment of the redemption or surrender value 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 which makes valuation of the
amounts or disposal of securities not reasonably practicable.
MAY I SURRENDER MY ANNUITY BENEFIT ONCE ANNUITY PAYMENTS HAVE STARTED?
Except with respect to Annuity 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 Annuity Option 5 will be subject to contingent
deferred sales charges, if applicable. (See "Charges Under the Contracts -- How
are the charges under the Contracts made?" on page 23.)
CAN A CONTRACT BE SUSPENDED BY A CONTRACTHOLDER?
A Contractholder may suspend a Contract by giving written notice to Hartford
at its Administrative Office at least 90 days prior to the effective date of
such suspension. A Contract will be suspended automatically on its anniversary
if the Contractholder fails to agree to any modification of the Contract (see
"Payment of Benefits -- Can a Contract be modified?" on page 22), which
modifications would have become effective on or before that anniversary. Upon
suspension of the Contract, Contributions to Participants' Individual Accounts
will continue to be accepted by Hartford 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 Annuity or Variable Annuity benefits.
HOW DO I ELECT AN ANNUITY COMMENCEMENT DATE AND FORM OF ANNUITY?
A Participant selects an Annuity Commencement Date (usually between his or
her 50th birthday and the date on which he attains age 70 1/2) and an Annuity
option. Generally, the Annuity Commencement Date may not be deferred beyond the
date on which the Participant attains age 70 1/2 (unless the Participant has not
retired from service with the Contractholder/Employer) 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 generally will 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 Annuity or Variable Annuity basis, or a combination thereof. If a
Participant does not elect otherwise, Hartford reserves the right to begin
Annuity payments under Option 2 with 120 monthly payments certain at the time
the Participant attains age 65. However, Hartford is not responsible for
monitoring any required minimum distributions.
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. No election may be made which results in
a first payment of less than $20. At any time Annuity payments are or become
less than $20, Hartford reserves the right to change the frequency of payment to
intervals that will result in payments of at least $20.
19
<PAGE>
HOW ARE CONTRIBUTIONS MADE TO ESTABLISH MY ANNUITY ACCOUNT?
During the Annuity Period, Contract values are applied to establish a Fixed
Annuity and/or a Variable Annuity.
WHAT ARE THE AVAILABLE ANNUITY OPTIONS UNDER THE CONTRACTS?
OPTION 1: LIFE ANNUITY
Option 1 is an Annuity payable during the lifetime of the Annuitant and
terminating with the last monthly payment preceding the death of the Annuitant.
Option 1 offers the maximum level of monthly payments of any of the other
Annuity options (Options 2-4) under the Contracts, since there is no guarantee
of a minimum number of payments nor a provision for a death benefit payable to a
Beneficiary.
Under Option 1, it would be possible for an Annuitant to receive only one
Annuity payment if the Annuitant dies prior to the due date of the second
Annuity payment, two Annuity payments if the Annuitant dies prior to the due
date of the third Annuity payment, etc.
*OPTION 2: LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN
Option 2 is an Annuity payable monthly during the lifetime of an Annuitant.
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 designated, unless other provisions have been made and
approved by Hartford.
*OPTION 3: UNIT REFUND LIFE ANNUITY
Option 3 is an Annuity payable monthly during the lifetime of the Annuitant
and will terminate with the last payment due prior to the death of the
Annuitant, except that an additional Annuity payment will be made to the
Beneficiary if (a) exceeds (b), where:
(i) the total amount applied under Option 3 at the Annuity
(a) = Commencement Date, divided by (ii) the Annuity Unit value at the
Annuity Commencement Date; and
--------------------------------------------------------------------
(i) the number of Annuity Units represented by each monthly Annuity
(b) = payment made, multiplied by (ii) the number of monthly Annuity
payments made
The amount of the additional Annuity 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.
OPTION 4: JOINT AND LAST SURVIVOR ANNUITY
Option 4 is an Annuity payable monthly during the joint lifetime of the
Annuitant and a designated second person (a "contingent annuitant"), ceasing
with the last Annuity payment prior to the death of the survivor. At the
Annuitant's death, payments will continue to be made to the contingent
annuitant, if living, for the remainder of such contingent annuitant's life. At
the time 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 Option 4 for the Annuitant and the contingent
annuitant, in the event of their common or simultaneous death, to receive only
one Annuity payment in the event of death prior to the due date for the second
Annuity payment and so on.
*OPTION 5: DESIGNATED (FIXED) PERIOD ANNUITY
Option 5 is for an Annuity payable monthly for the number of years selected.
Under the Contracts, the minimum number of Annuity payment years is five.
In the event of the Annuitant's death prior to the end of the designated
Annuity payment period, any then-remaining Annuity payments will be paid to the
Beneficiary, unless other provisions have been made and approved by Hartford.
Option 5 does not involve life contingencies and therefore has no mortality
guarantee.
Surrenders are subject to the limitations set forth in the Contracts and any
applicable contingent deferred sales charges (see "Charges Under the Contracts
- -- How are the charges under the Contracts made?" on page 23).
Other Annuity options may be made available from time to time with respect
to the Contracts.
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<PAGE>
* OPTIONS 2, 3 AND 5 ARE AVAILABLE ONLY IF THE GUARANTEED ANNUITY 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.
- --------------------------------------------------------------------------------
UNDER ANY OF THE ANNUITY OPTIONS DESCRIBED ABOVE, EXCEPT OPTION 5 (ON A VARIABLE
BASIS), NO SURRENDERS ARE PERMITTED ONCE ANNUITY PAYMENTS COMMENCE.
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWAL OPTION
If permitted by IRS regulations and the terms of the Employer's plan, a
Participant can make withdrawals while allowing his or her 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 who have a minimum Individual Account balance of $10,000 at the
time they elect the Systematic Withdrawal Option ("SWO"). The maximum payment
amount is 1.5% monthly, 4.5% quarterly, 9.0% semi-annually or 18.0% annually of
the value of the Participant's Individual Account at the time the SWO is
elected. Payments are limited to 18.0% of the Participant's Individual Account
annually. The minimum payment amount is $100. SWO payments generally are taxable
as ordinary income and, if made prior to age 59 1/2, an IRS tax penalty may
apply. Any contingent deferred sales charge otherwise applicable 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 there is an
outstanding loan amount.
A Participant can change the terms of a SWO as often as four times in each
calendar year, can terminate the SWO at any time, and can elect one of the five
available Annuity options or a partial or full lump sum withdrawal. If a partial
or full lump sum withdrawal is elected within 12 months of a SWO payment, the
contingent deferred sales charge that was previously waived, if any, will be
deducted from the Participant's Individual Account upon withdrawal. SWO payments
will be deducted on a pro rata basis from the General Account and each
Sub-Account to which the Participant's Individual Account is allocated.
Hartford is not responsible for determining a withdrawal amount that
satisfies the Minimum Distribution Requirements under the Code. Participants may
be required to change their SWO payment amount to comply with the Minimum
Distribution Requirements. Participants should consult a tax adviser to
determine whether the amount of their SWO payments meet IRS Minimum Distribution
Requirements. For a discussion of the Minimum Distribution Requirements
applicable to Participants over age 70 1/2 see "Federal Tax Considerations,"
page 29.
The SWO may only be elected pursuant to an election on a form provided by
Hartford. Election of the SWO does not affect Participants' other rights under
the Contracts.
HOW ARE VARIABLE ANNUITY PAYMENTS DETERMINED?
Variable Annuity payments are made monthly on a date selected by the
Annuitant. When Annuity payments are to commence, the value of the Contract is
determined by multiplying (1) the Accumulation Unit value credited to each
Sub-Account in which the Contract is invested no earlier than the close of
business on the fifth business day preceding the date on which the initial
scheduled Annuity payment is to be made, by (2) the number of Accumulation Units
credited to each such Sub-Account as of the date the Annuity Period is to
commence.
The initial monthly Annuity Payment is determined by multiplying (1) the
value (expressed in thousands of dollars) of a Sub-Account, minus any applicable
Premium Taxes, by (2) the amount of the initial monthly Annuity payment per
$1,000 on Contract value as set forth in the Annuity tables contained in the
Contracts. Such tables are derived from the 1983a Individual Annuity Mortality
Table, and have an assumed interest rate ("A.I.R.") of 4.00% or 5.00% per year.
With respect to Fixed Annuities only, the current A.I.R. will be applied if it
is higher than the rate set forth in the Annuity tables contained in the
Contracts.
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<PAGE>
Subsequent Variable Annuity payments will be level if the net investment
rate remains constant and equal to the A.I.R. Variable Annuity payments will
vary up or down in proportion to the variation of the Sub-Accounts' net
investment rate from the A.I.R. A higher A.I.R. may produce a higher initial
Variable Annuity payment but more slowly rising and more rapidly falling
subsequent Variable Annuity payments than would a lower A.I.R.
In order to determine the number of Annuity Units represented by the initial
Annuity payment, the initial monthly Annuity payment, calculated as described
above, is divided by the Annuity Value for the appropriate Sub-Account as of the
close of business on the fifth business day preceding the date on which the
payment is scheduled to be made. The number of Annuity Units remains fixed
during the Annuity Period.
The Annuity Unit value on a given day is determined by multiplying the
Annuity Unit value for the preceding day by the product of (1) the net
investment factor (see "Operation of the Contracts -- How is the Accumulation
Unit value determined?" on page 17) for such given day and (2) a factor to
neutralize the A.I.R. The Annuity Unit value used to calculate the dollar amount
of Annuity payments is based on an Annuity Unit value determined as of the close
of business on a day not more than five business days prior to the Annuity
payment date.
The dollar amount of Annuity payments subsequent to the initial Annuity
payment is determined by multiplying (1) the fixed number of Annuity Units, as
discussed above, by (2) the then-current Annuity Unit value.
The following is an illustration of how variable Annuity payments are
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 Annuity 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. Assumed Annuity Unit value for second month equal to...... 2.897
7. Second monthly Annuity payment (6 x 5).................... $ 794.35
8. Assumed Annuity Unit value for third month equal to....... 3.415
9. Third monthly Annuity payment (8 x 5)..................... $ 936.39
</TABLE>
The above figures illustrate the calculation of Variable Annuity payments
under a hypothetical Contract. They have no bearing on the actual Annuity
payment history under the Contracts funded by DC-II.
CAN A CONTRACT BE MODIFIED?
Subject to any federal and state regulatory restrictions, the Contracts may
be modified at any time by written agreement between the Contractholder and
Hartford. No such 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 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. Additionally, the limitations on the deductions
for the mortality, expense risks and administrative undertakings and the Annual
Maintenance Fee will continue to apply in all Contract Years (see "Charges Under
the Contracts," page 23).
Hartford reserves the right to modify the Contracts at any time, if such
modification, in Hartford's opinion, (a) is necessary to make the Contract or
DC-II comply with any law or regulation issued by a governmental agency to which
Hartford is subject; or (b) 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 (c) is necessary to reflect a
change in the operation of DC-II or the Sub-Account(s); or (d) provides
additional Separate
22
<PAGE>
Account options; or (e) withdraws Separate Account options. In the event of any
such modification Hartford will provide notice to the Contractholder or to the
payee(s) during the Annuity period. Hartford may also make appropriate
endorsement in the Contract to reflect such modification.
CHARGES UNDER THE CONTRACTS
HOW ARE THE CHARGES UNDER THE CONTRACTS MADE?
There is no deduction for sales expenses at the time Contributions are
allocated to a Participant's Individual Account. However, a contingent deferred
sales charge may be assessed against a Participant's Individual Account in the
event of a withdrawal from the Participant's Individual Account. 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 the
Contracts," page 25). In no event will such charge ever exceed 8.50% when
applied as a percentage against the sum of all Contributions to a Participant's
Individual Account.
The contingent deferred sales charge is a percentage of the amount
surrendered and equals:
<TABLE>
<CAPTION>
CONTRACT YEAR MAXIMUM
OF WITHDRAWAL CHARGE
- ---------------------------------------------------------- -------------
<S> <C>
1 through 5............................................... 5%
6......................................................... 4%
7......................................................... 3%
8......................................................... 2%
9......................................................... 1%
10 or more................................................ 0%
</TABLE>
If you request a certain dollar amount to be withdrawn from your Individual
Account, the contingent deferred sales charge will be deducted from the amount
withdrawn and the balance will be paid to you.
For example: You request a full surrender of your Individual Account, the
value of your Individual Account is $1,000 and the applicable sales load is 5%.
The amount of $1,000 will be surrendered from the applicable Sub-Accounts and
you will receive $950 (i.e., the $1,000 total withdrawal less the 5% sales
charge).
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. For 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, consisting of a $52.63 sales charge ($1,052.63 x
5%), plus the $1,000 you requested).
WHAT DO THE SALES CHARGES COVER?
The contingent deferred sales charges, when applicable, will be used to
reimburse Hartford for 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, the cost of the excess
distribution expenses will be borne by Hartford from its general assets,
including surplus or possible profit from mortality and expense risk charges.
WHAT IS THE MORTALITY, EXPENSE RISK AND ADMINISTRATIVE CHARGE?
Although Variable Annuity payments made under the Contracts will vary in
accordance with the investment performance of the underlying Funds, the payments
will not be affected by (a) Hartford's actual mortality experience among
Annuitants before or after their retirements or (b) Hartford'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.
In providing an expense undertaking, Hartford assumes the risk that the
deductions for contingent deferred sales charges, and the Annual Maintenance Fee
under the Contracts may be insufficient to cover actual future costs.
23
<PAGE>
The mortality undertaking provided by Hartford under the Contracts, assuming
the selection of one of the forms of Annuity options is to make monthly Annuity
payments (determined in accordance with the Annuity tables and other provisions
contained in the Contracts) regardless of how long all Annuitants may live and
regardless of how long all Annuitants as a group may live. This undertaking
assures a Contractholder 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
a Participant from the risk of outliving the funds accumulated for his or her
benefit under a Contract.
The mortality undertaking is based on Hartford's present actuarial
determination of expected mortality rates among all Annuitants. If actual
experience among Annuitants deviates from Hartford's actuarial determination of
expected mortality rates among Annuitants because, as a group, their longevity
is longer than anticipated, Hartford must provide amounts from its general funds
to fulfill its Contract obligations. In that event, a loss will result to
Hartford. Conversely, if longevity among Annuitants is lower than anticipated, a
gain will result to Hartford. Hartford also assumes the liability for payment of
the Minimum Death Benefit provided under a Contract.
The administrative undertaking provided by Hartford assures the
Contractholder that administration of the Contract will be provided throughout
the entire life of the Contract.
For assuming these risks Hartford currently applies a charge equal to 1.25%
(estimated at .85% for mortality, .15% for expense risk and .25% for
administrative undertakings) of the average daily net assets of DC-II. The rate
charged for the mortality, expense risk and administrative undertakings under
the Contracts may be reduced (see "-- Experience Rating of the Contracts," page
25) and may be periodically increased by Hartford 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 Maintenance Fee will be deducted from the value of each
Participant's Individual Account under a Contract. The maximum Annual
Maintenance Fee is $30 per year, but such fee may be reduced or waived (see "--
Experience Rating of the Contracts," page 25).
The Annual Maintenance Fee will be deducted on the last business day of each
Participant's Contract Year; provided, however, that if a full redemption of the
value of a Participant's Individual Account is redeemed is made at any time
prior to the last business day of the applicable Participant's Contract Year,
then the Annual Maintenance Fee will be deducted from the proceeds of such
redemption. No deduction for the Annual Maintenance Fee will be made during the
Annuity Period under a Contract. The Annual Maintenance Fee will be deducted on
a pro rata basis from the value of the Sub-Accounts chosen with respect to a
Participant's Individual Account.
IS THERE EVER A TIME WHEN THE SALES CHARGES OR THE ANNUAL MAINTENANCE FEE DOES
NOT APPLY?
The contingent deferred sales charge and Annual Maintenance Fee will not be
deducted from a Participant's Individual Account under a Contract in the event
of the Participant's: (a) death, (b) disability, within the meaning of Code
section 72(m)(7) (provided that any such disability would entitle the
Participant to receive social security disability benefits), (c) 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, (d) separation from service with the Employer on or after the
Participant Contract Year 5 for Participants age 59 1/2 or older, (e) 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 in the event that 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 foregoing events may not apply to
Participants under an Individual Retirement Annuity.
In the event a Participant is otherwise eligible to make a withdrawal from
his or her Individual Account under the terms of the Employer's plan, such
Participant may withdraw, on a non-cumulative basis, each Participant Contract
Year after the first Participant Contract Year up to 10% of the value of his or
her Individual Account, without application of a contingent deferred sales
charge. The minimum amount that can be withdrawn under this provision is $250.
24
<PAGE>
EXPERIENCE RATING OF THE CONTRACTS
Hartford may apply experience credits under a Contract based on investment,
administrative, mortality or other factors, including, but not limited to (1)
the total number of Participants, (2) the sum of all Participants' Individual
Account values, (3) the allocation of Contract values between the General
Account and the Separate Account under the Contract, (4) present or anticipated
levels of Contributions, distributions, transfers, administrative expenses or
commissions, and (5) whether Hartford is the exclusive annuity Contract
provider. Experience credits may be applied, either prospectively or
retrospectively, as a reduction in the deduction for mortality, expense risk and
administrative undertakings, a reduction in the term or amount of any applicable
contingent deferred sales charges, an increase in the rate of interest credited
under the Contract, a reduction in the amount of the Annual Maintenance Fee, a
reduction in the amount of the Transfer Fee, or any combination of the
foregoing. Hartford may apply and allocate experience credits in such manner as
Hartford deems appropriate. Any such credit will not be unfairly discriminatory
against any person, including the affected Contract Owners or Participants.
Experience credits may not be available in all states. Participants in Contracts
receiving experience credits will receive notification regarding such credits.
Experience credits may be discontinued at Hartford's sole discretion, in the
even of a change in applicable factors.
HOW MUCH ARE THE DEDUCTIONS FOR PREMIUM TAXES ON THE CONTRACTS?
A deduction is made for Premium Taxes, if applicable, imposed by states or
other governmental entities. Certain states impose a Premium Tax, ranging up to
3.50%. With respect to any Contract subject to a Premium Taxes, Hartford will
pay such taxes when imposed by the applicable taxing authorities. Hartford, in
its sole discretion, will deduct Premium Taxes from Contributions when received,
from 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 prospectuses for the Funds
accompanying this Prospectus
ARE THERE ANY OTHER DEDUCTIONS?
Participants may transfer Individual Account values between or among
Sub-Accounts up to 12 times per Participant Contract Year. Such transfers may be
subject to a Transfer Fee of $5 for each transfer in excess of 12 made in a
Participant Contract Year.
HARTFORD LIFE INSURANCE COMPANY
AND THE FUNDS
WHAT IS HARTFORD?
Hartford Life Insurance Company ("Hartford") is a stock life insurance
company engaged in the business of writing life insurance, both individual and
group, in all states of the United States and the District of Columbia. Hartford
was originally incorporated under the laws of Massachusetts on June 5, 1902, and
was subsequently redomiciled to Connecticut. Its offices are located in
Simsbury, Connecticut; however, its mailing address is P.O. Box 2999, Hartford,
CT 06104-2999. Hartford is ultimately controlled by The Hartford Financial
Services Group, Inc., one of the largest financial service providers in the
United States.
HARTFORD RATINGS
<TABLE>
<CAPTION>
EFFECTIVE
DATE OF
RATING AGENCY RATING RATING BASIS OF RATING
-------------------------------------------------- --------- ---------- ----------------------------------------
<S> <C> <C> <C>
A.M. Best and Company, Inc........................ 9/9/97 A+ Financial soundness and operating
performance.
Standard & Poor's................................. 1/23/98 AA Insurer financial strength
Duff & Phelps..................................... 1/23/98 AA+ Claims paying ability
</TABLE>
25
<PAGE>
WHAT ARE THE FUNDS?
The assets of each Sub-Account of the Separate Account are invested
exclusively in one of the Funds. The investment objectives of each of the Funds
are summarized below. There is no guarantee that any Fund will achieve its
stated objectives.
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 Statement of Additional Information, which may be ordered from
Hartford, and in the prospectuses for the Funds accompanying this Prospectus.
All such prospectuses should be read in conjunction with this Prospectus before
investing.
THESE FUNDS MAY NOT BE AVAILABLE IN ALL STATES.
HARTFORD FUNDS
HARTFORD ADVISERS FUND
Seeks maximum long-term total rate of return by investing in common stocks
and other equity securities, bonds and other debt securities, and money market
instruments.
HARTFORD BOND FUND
Seeks maximum current income consistent with preservation of capital by
investing primarily in fixed-income securities. Up to 20% of the total assets of
this Fund may be invested in debt securities rated in the highest category below
investment grade ("Ba" by Moody's Investor Services, Inc. or "BB" by Standard &
Poor's) or, if unrated, are determined to be of comparable quality by the Fund's
investment adviser. Securities rated below investment grade are commonly
referred to as "high yield-high risk securities" or "junk bonds." For more
information concerning the risks associated with investing in such securities,
please refer to the section in the accompanying prospectus for the Hartford
Funds entitled "Hartford Bond Fund, Inc. -- Investment Policies."
HARTFORD CAPITAL APPRECIATION FUND
Seeks growth of capital by investing in equity securities selected solely on
the basis of potential for capital.
HARTFORD DIVIDEND AND GROWTH FUND
Seeks a high level of current income consistent with growth of capital and
reasonable investment risk.
HARTFORD INDEX FUND
Seeks 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
Seeks growth of capital by investing primarily in equity securities issued
by non-U.S. companies.
HARTFORD MORTGAGE SECURITIES FUND
Seeks maximum current income consistent with safety of principal and
maintenance of liquidity by investing primarily in mortgage-related securities,
including securities issued by the Government National Mortgage Association.
*"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 AND
STANDARD & POOR'S MAKES NO REPRESENTATION REGARDING THE ADVISABILITY OF
INVESTING IN THE INDEX FUND.
26
<PAGE>
HARTFORD STOCK FUND
Seeks long-term growth of capital by investing primarily in equity
securities.
HARTFORD MONEY MARKET FUND
Seeks maximum current income consistent with liquidity and preservation of
capital.
CALVERT FUND
CALVERT SOCIAL BALANCED PORTFOLIO
Seeks to achieve a total return above the rate of inflation through an
actively managed, nondiversified portfolio of common and preferred stocks,
bonds, and money market instruments which offer income and capital growth
opportunity and which satisfy the social criteria established for the Portfolio.
AMERICAN CENTURY VP FUNDS
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. AMERICAN CENTURY VP ADVANTAGE
Seeks capital growth over time by investing primarily three types of
securities. The fund's investment manager intends to invest approximately (i)
20% of the fund's assets in securities of the United States government and its
agencies and instrumentalities and repurchase agreements collateralized by such
securities with a weighted average maturity of six months or less, i.e., cash or
cash equivalents, (ii) 40% of the fund's assets in fixed income securities of
the United States government and its agencies and instrumentalities with a
weighted average maturity of three to 10 years and (iii) 40% of the fund's
assets in equity securities that are considered by management to have
better-than-average prospects for appreciation. As described in greater detail
in this Prospectus, assets will be purchased or sold, as the case may be, as is
necessary in response to changes in market value to maintain the asset mix of
the fund's portfolio at approximately 60% cash, cash equivalents and fixed
income securities and 40% equity securities
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. AMERICAN CENTURY VP CAPITAL
APPRECIATION
Seeks capital growth over time by investing properly in common stocks that
are considered by management to have better-than-average prospects for
appreciation.
FIDELITY FUNDS
AMS/FIDELITY INVESTMENTS VIP II ASSET MANAGER PORTFOLIO
Seeks high total return with reduced risk over the long term by allocating
its assets among stocks, bonds, and short-term money market instruments.
AMS/FIDELITY INVESTMENTS VIP GROWTH PORTFOLIO
Seeks capital appreciation primarily through purchase of common stocks,
although its investments are not restricted to any one type of security.
AMS/FIDELITY INVESTMENTS VIP II CONTRAFUND PORTFOLIO
Seeks long term capital appreciation through purchase of equity securities
of domestic or foreign companies whose value FMR believes is not fully
recognized by the public.
AMS/FIDELITY INVESTMENTS VIP OVERSEAS PORTFOLIO
Seeks long term capital appreciation by investing primarily in foreign
securities of issuers whose principal business activities are outside of the
United States.
The Hartford Funds are organized as corporations under the laws of Maryland
and are registered as diversified open-end management companies under the
Investment Company Act of 1940. The Calvert Social Balanced Portfolio is a
series of Calvert Variable Series, Inc., which is an open-end management
investment company. The American Century VP Advantage and American Century VP
Capital Appreciation Funds ("American Century VP Funds") are separate series of
shares issued by American Century Variable Portfolios, Inc. ("ACVP"), a
corporation organized under the laws of the state of Maryland. ACVP is a
registered,
27
<PAGE>
diversified, open-ended management investment company, registered 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 VIP Growth Portfolio and VIP
Overseas Portfolio are portfolios of the Variable Insurance Products Fund. The
VIP II Asset Manager Portfolio and VIP II Contrafund Portfolio are portfolios 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.
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 and the Funds do not
currently foresee any such disadvantages either to variable annuity
Contractholders or to variable life insurance policy owners, the Boards of
Directors of the Funds intend 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 such
Boards of Directors were to conclude that separate funds should be established
for variable life insurance and variable annuity separate accounts, the variable
annuity Contractholders would not bear any expenses attendant to the
establishment of such separate funds, but variable annuity Contractholders and
variable life insurance policy owners would no longer have the economics of
scale resulting from a larger combined fund.
Shares of Calvert Social Balanced Portfolio, a series of Calvert Variable
Series, Inc. which is unaffiliated with Hartford, are offered to other separate
accounts which are not affiliated with the Separate Account. Hartford and the
Board of Trustees of Calvert Variable Series, Inc. 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 American Century VP Funds and the Fidelity Funds are offered
to other separate accounts which are not affiliated with the Separate Account.
Hartford reserves the right, subject to compliance with applicable laws, 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 in the event of any changes in applicable laws
or interpretations of such laws. Current law requires that Hartford notify you
of any such substitution and approval thereof by the Commission. Hartford also
reserves the right, subject to compliance with applicable laws, to offer
additional Funds with differing investment objectives.
The Advisers Fund Sub-Account was not available under Contracts issued prior
to May 2, 1983. The Capital Appreciation Fund Sub-Account was not available
under Contracts issued prior to May 1, 1984. The Mortgage Securities Fund
Sub-Account was not available under Contracts issued prior to January 15, 1985.
The Index Fund Sub-Account was not available under Contracts issued prior to May
1, 1987. A Contractholder may make written request to Hartford that Funds not
available prior to the issue date of a Contract be made available for investment
under the Contract.
INVESTMENT ADVISERS
HARTFORD FUNDS
HL Investment Advisors, Inc. ("HL Advisors") serves as the investment
adviser to each of the Hartford Funds.
Wellington Management Company, LLP serves as investment sub-adviser for
Hartford Advisers Fund, Hartford Capital Appreciation Fund, Hartford Dividend
and Growth Fund, Hartford International Opportunities Fund and Hartford Stock
Fund. Additionally, The Hartford Investment Management Company, Inc., ("HIMCO")
serves as investment sub-adviser for Hartford Bond Fund, Hartford Index Fund,
Hartford Mortgage Securities Fund and Hartford Money Market Fund.
CALVERT SOCIAL BALANCED PORTFOLIO
Calvert Asset Management Company serves as investment adviser and manages
the fixed-income portion of the Calvert Social Balanced Portfolio. The
sub-advisor to the portfolio is NCM Capital Management Group, Inc. ("NCM"). NCM
manages the equity portion of the Portfolio.
28
<PAGE>
AMERICAN CENTURY VP FUNDS
The American Century VP Funds are managed by American Century Investment
Management, Inc., whose principal business address is American Century Tower,
4500 Main Street, Kansas City, MO 64111. ACIM has been providing investment
advisory services to investment companies and institutional investors since it
was founded in 1958.
FIDELITY FUNDS
The Fidelity Funds are managed by Fidelity Management & Research Company
("FMR"), whose principal business address is 82 Devonshire Street, Boston,
Massachusetts. FMR, one of America's largest investment management
organizations, is composed of a number of different companies which provide a
variety of financial services and products. FMR, founded in 1946, is the
original Fidelity company. It provides investment research and portfolio
management services to a number of mutual funds and other clients. Various
Fidelity companies perform certain activities required to operate Variable
Insurance Products Fund and Variable Insurance Products Fund II.
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's understanding of existing federal income tax laws as they are
currently interpreted.
B. HARTFORD AND SEPARATE ACCOUNT TWO
Separate Account Two is taxed as part of Hartford which is taxed as a life
insurance company in accordance with the Internal Revenue Code of 1986, as
amended (the "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 RETIREMENT 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 applicable limits, distributions prior to age 59 1/2 (subject to
certain exceptions), distributions which do not conform to applicable
commencement and minimum distribution rules, and certain other transactions with
respect to tax-qualified plans. Therefore, this summary does not attempt to
provide more than general information about the tax rules associated with use of
the Contract by a tax-qualified retirement plan. Contract owners, plan
participants and beneficiaries are cautioned that the rights and benefits of any
person to benefits may be controlled by the terms and conditions of the
tax-qualified retirement plan itself, regardless of the terms and conditions of
a Contract, but that Hartford is not bound by the terms and conditions of such
plans to the extent such terms conflict with a Contract, unless Hartford
specifically consents to be bound. Additionally, some tax-qualified retirement
plans are subject to distribution and other requirements which are not
incorporated into Hartford's administrative procedures. Contract 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, Contract owners, participants and
beneficiaries are encouraged to consult their own tax advisers as to specific
tax consequences.
29
<PAGE>
1. TAX-QUALIFIED PENSION OR PROFIT-SHARING 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 to participate and the time when distributions must commence.
Employers intending to use these contracts in connection with tax-qualified
pension or profit-sharing plans should seek competent tax and other legal
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, as
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 contributions may not exceed the lesser of $10,000
(indexed) or 20% of an employee's "includable compensation" for such
employee's most recent full year of employment, subject to other adjustments.
Special provisions under the Code 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 (and in the case of hardship, any income
attributable to such contributions may not be distributed). Generally,
the above restrictions do not apply to distributions attributable to cash
values or other amounts held under a Section 403(b) contract as of
December 31, 1988.
3. DEFERRED COMPENSATION PLANS UNDER SECTION 457
Employees and independent contractors performing services for eligible
employers may have contributions made to an Eligible 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 Eligible
Deferred Compensation Plans maintained by a State or other tax-exempt
organization. For these purposes, the term "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. Generally, the limitation is 33 1/3% of
includable compensation (typically 25% of gross compensation) or, for 1998,
$8,000 (indexed), whichever is less. Such a 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 an Eligible Deferred Compensation
Plan should understand that his or her rights and benefits are governed
strictly by the terms of the plan and that the employer is the legal owner of
any contract issued with respect to the plan. 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 or her plan for any charges in regard to
participating therein other than those disclosed in this Prospectus.
Participants should also be aware that effective August 20, 1996, the Small
Business Job Protection Act of 1996 requires that all assets and income of an
Eligible Deferred Compensation Plan established by a governmental employer
which is a State, a political subdivision of a State, or any agency or
instrumentality of a State or political subdivision of a State, must be held
in trust (or under certain specified annuity contracts or custodial accounts)
for the exclusive benefit of participants and their beneficiaries. Special
transition rules apply to such Eligible governmental Deferred Compensation
Plans already in existence on August 20, 1996, and provide that such plans
need not establish a trust before January 1, 1999. However, this requirement
of a trust does not apply to amounts under an Eligible Deferred Compensation
Plan of a tax-exempt (non-governmental) organization and such amounts will be
subject to the claims of such tax-exempt employer's general creditors.
In general, distributions from an Eligible Deferred Compensation Plan are
prohibited under Section 457 of the Code unless made after the participating
employee attains age 70 1/2, separates from service, dies, 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.
30
<PAGE>
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 tax-qualified plan before the Participant attains age
59 1/2 are generally subject to an additional penalty 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, for
eligible medical expenses and distributions in the form of a life annuity
and, except in the case of an IRA, certain distributions after separation
from service after age 55. For these purposes, a life annuity means 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).
In addition, effective for distributions made from an IRA after December
31, 1997, there is no such penalty tax on distributions that do not exceed
the amount of certain qualifying higher education expenses, as defined by
Section 72(t)(7) of the Code, or which are qualified first-time homebuyer
distributions meeting the requirements of Section 72(t)(8) of the Code.
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 tax-qualified retirement plan generally must
be distributed, or begin to be distributed, not later than April 1 of the
calendar year following the later of (i) the calendar year in which the
individual attains age 70 1/2 or (ii) the calendar year in which the
individual retires from service with the employer sponsoring the plan
("required beginning date"). However, the required beginning date for an
individual who is a five (5) percent owner (as defined in the Code), or who
is the owner of an IRA, is April 1 of the calendar year following the
calendar year in which the individual attains age 70 1/2. The entire
interest of the Participant must be distributed beginning no later than the
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 individual's 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. FEDERAL INCOME TAX WITHHOLDING.
In general, distributions from IRAs and plans described in Section 457 of
the Code are subject to regular wage withholding rules. Periodic
distributions from other tax-qualified retirement plans that are made for a
specified period of 10 or more years or for the life or life expectancy of
the participant (or the joint lives or life expectancies of the participant
and beneficiary) are generally subject to federal income tax withholding as
if the recipient were married claiming three exemptions. 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.
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Other distributions from such other tax-qualified retirement 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; or
3) direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to another
eligible retirement plan under Code section 401(a)(31).
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 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 monitors the diversification of investments in the separate
accounts and tests for diversification as required by the Code. Hartford 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 certain 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 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 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
the gross income of a non-natural person, unless the non-natural person is
holding as an agent for a natural person. There are additional
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exceptions to this general rule of inclusion for (i) certain annuities held by a
structured settlement company, (ii) certain annuities held by an employer with
respect to a terminated pension plan and (iii) certain immediate annuities. 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 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 adviser
regarding U.S., state, and foreign taxation with respect to an annuity purchase.
MISCELLANEOUS
WHAT ARE MY VOTING RIGHTS?
Hartford shall notify Contractholders of any Fund shareholders' meeting if
the shares held for the Contractholders' accounts through DC-II may be voted at
such meetings. Hartford shall also send proxy materials and a form of
instruction by means of which a Contractholder can instruct Hartford 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 shall arrange
for the handling and tallying of proxies received from Contractholders. Hartford
shall have no right, except as hereinafter provided, to vote any Fund shares
held by it which may be registered in its name or the names of its nominees.
Hartford will, however, vote the Fund shares held by it in accordance with the
instructions received from 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
that Hartford 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 a Contractholder gives no instructions or leaves the manner of
voting discretionary, Hartford will vote such shares of the appropriate Fund,
including any Fund shares it may own, 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 or her individual
participation under such Contract.
A Contractholder or Participant, as appropriate, is entitled to one full or
fractional vote for each full or fractional Accumulation Unit 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 his or her 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 which are funded by, and provide benefits which vary in
accordance with the investment experience of, the Separate Account are sold.
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 registered with the Commission under the Securities Exchange Act of 1934 as a
Broker-Dealer and is a member of the NASD.
HSD is an affiliate of Hartford. Hartford's parent company indirectly owns
100% of HSD. The principal business address of HSD is the same as that of
Hartford.
The securities will be sold by salespersons of HSD who represent Hartford as
insurance and Variable Annuity agents and who are registered representatives of
broker-dealers which have entered into distribution agreements with HSD.
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Compensation up to a maximum of 5% of Contributions and 0.25% annually on
Participants' Individual Account Values will be paid by Hartford to registered
representatives for the sale of Contracts. Sales compensation may be reduced.
Broker-dealers or financial institutions are compensated according to a
schedule set forth by HSD and any applicable rules or regulations for variable
insurance compensation. Compensation is generally based on premium payments made
by policyholders or contract owners. This compensation is usually paid from the
sales charges described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services proviced. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or contract
owners to purchase, hold or surrender variable insurance products.
WHO IS THE CUSTODIAN OF THE SEPARATE ACCOUNT'S ASSETS?
Hartford is the custodian of the assets of the Separate Account, including
those assets held in DC II.
ARE THERE ANY MATERIAL LEGAL PROCEEDINGS AFFECTING THE SEPARATE ACCOUNT?
There are no material legal proceedings pending to which the Separate
Account is a party. 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, General Counsel, Hartford Life Insurance
Company, P.O. Box 2999, Hartford, CT 06104-2999.
Hartford may, in its sole discretion, elect not to exercise a right or
reservation specified in the Contract. Such election shall not constitute a
waiver of the right to exercise such right or reservation at any subsequent
time.
YEAR 2000
The Year 2000 issue relates to the ability or inability of computer systems
to properly process information and data containing or related to dates
beginning with the year 2000 and beyond. The Year 2000 issue exists because,
historically, many computer systems that are in use today were developed years
ago when a year was identified using a two-digit field rather than a four-digit
field. As information and data containing or related to the century date are
introduced to computer hardware, software and other systems, date sensitive
systems may recognize the year 2000 as 1900, or not at all, which may result in
computer systems processing information incorrectly. This, in turn, may
significantly and adversely affect the integrity and reliability of information
databases and may result in a wide variety of adverse consequences to a company.
In addition, Year 2000 problems that occur with third parties with which a
company does business, such as suppliers, computer vendors and others, may also
adversely affect any given company.
As an insurance and financial services company, Hartford has thousands of
individual and business customers that have purchased or invested in insurance
policies, annuities, mutual funds and other financial products. Nearly all of
these policies and products contain date sensitive data, such as policy
expiration dates, birth dates, premium payments dates and the like. In addition,
Hartford has business relationships with numerous third parties that affect
virtually all aspects of its business, including, without limitation, suppliers,
computer hardware and software vendors, insurance agents and brokers, securities
broker-dealers and other distributors of financial products.
Beginning in 1990, Hartford began working on making its computer systems
Year 2000 ready, either by installing new programs or by replacing systems. In
January 1998, Hartford commenced a company-wide program to further identify,
assess and remediate the impact of Year 2000 problems in all of Hartford's
business segments. Hartford currently anticipates that this internal program
will be substantially completed by the end of 1998, and testing of computer
systems will continue through 1999.
In addition, as part of its Year 2000 program, Hartford is identifying third
parties with which it has significant business relations in order to attempt to
assess any potential impact on Hartford as a result of such third-party Year
2000 issues and remediation plans. Hartford currently anticipates that it will
substantially complete this evaluation by the end of 1998, and will conduct
systems testing with certain third parties through 1999. Hartford does not have
control over these third parties and, as a result, Hartford cannot currently
determine to what extent future operating results may be adversely affected by
the failure of these third parties
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to successfully address their Year 2000 issues. Hartford will continue to assess
Year 2000 risk exposures related to its own operations and its third-party
relationships and is in the process of developing contingency plans.
The costs of addressing the Year 2000 issue that have been incurred through
the six months ended June 30, 1998 have not been material to Hartford's
financial condition or results of operations. Hartford will continue to incur
costs related to its Year 2000 efforts and does not anticipate that the costs to
be incurred will be material to its financial condition or results of
operations.
ARE YOU RELYING ON ANY EXPERTS AS TO ANY PORTION OF THIS PROSPECTUS?
The audited financial statements and financial statement 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 giving said reports. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
HOW MAY I GET ADDITIONAL INFORMATION?
Your inquiries will be answered by calling your sales representative or by
writing to Hartford at its Administrative Office.
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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...................................
CALCULATION OF YIELD AND RETURN.............................
PERFORMANCE COMPARISONS.....................................
FINANCIAL STATEMENTS........................................
</TABLE>
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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. separated from service
c. died, or
d. become disabled.
Distributions of post December 31, 1988 Contributions (excluding any income
thereon) may also be made if you have experienced a financial hardship. Also
there may be a 10% penalty tax for distributions made prior to age 59 1/2
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: AMS Service Center Administration
P.O. Box 2999
Hartford, CT 06104-2999
Name of Contractholder/Participant _____________________________________________
Address ________________________________________________________________________
City or Plan/School District ___________________________________________________
Date ___________________________________________________________________________
<PAGE>
To obtain a Statement of Additional
Information, complete the form below and mail to:
Hartford Life Insurance Company
Attn: AMS Service Center Administration
P.O. Box 2999
Hartford, CT 06104-2999
Please send a Statement of Additional
Information for Separate Account Two (DC Variable
Account II) (Form HV-2025-2) to me at the
following address:
_________________________________________
Name
_________________________________________
Address
_________________________________________
City/State Zip Code
