Document/Exhibit Description Pages Size
1: 485BPOS The Hartford Mutual Funds, Inc. 127 622K
2: EX-99.A(VIII) Articles Supplementary Dated March 10, 2004 6 22K
3: EX-99.D(X) Form of Amendment Number 9 to Inv. Mgmt. Agreement 1 9K
4: EX-99.E(XII) Form of Amendment Number 9 to Principal Und. 1 8K
Agrmt
5: EX-99.G(XI) Form of 11th Amendment to Custodian Contract 1 8K
6: EX-99.H(IV) Form of Amendment No.3 to Transfer & 1 7K
Serv.Agreemt.
7: EX-99.H(V) Share Purchase Agreement 4 16K
8: EX-99.I Opinion and Consent of Counsel 1 9K
9: EX-99.J Consent of Independent Auditors 1 7K
10: EX-99.M Amended and Restated Rule 12B-1 7 35K
11: EX-99.N Multiple Class Plan Pursuant to Rule 18F-3 4 18K
As filed with the Securities and Exchange Commission on May 19, 2004
File Nos. 333-02381/811-07589
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
----
Post-Effective Amendment No. 35 [X]
----
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 37 [X]
THE HARTFORD MUTUAL FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
P. O. Box 2999, Hartford, Connecticut 06104-2999
(Address of Principal Executive Offices)
Registrant's Telephone Number including Area Code: (860) 297-6443
Kevin J. Carr, Esquire
Investment Law Unit
The Hartford Financial Services Group, Inc.
55 Farmington Avenue
Hartford, Connecticut 06105
(Name and Address of Agent for Service)
Copy to:
John V. O'Hanlon, Esquire
Dechert LLP
200 Clarendon Street, 27th Floor
Boston, Massachusetts 02116-5021
It is proposed that this filing will become effective (check appropriate box):
X immediately upon filing pursuant to paragraph (b) of Rule 485
-----
on (Date) pursuant to paragraph (b) of Rule 485
-----
60 days after filing pursuant to paragraph (a)(1) of Rule 485
-----
on (Date) pursuant to paragraph (a)(1) of Rule 485
-----
75 days after filing pursuant to paragraph (a)(2) of Rule 485
-----
on (Date) pursuant to paragraph (a)(2) of Rule 485
-----
If appropriate, check the following box:
This post-effective amendment designates a new effective date
______ for a previously filed post-effective amendment.
This post-effective amendment contains the prospectus and statement of
additional information relating to The Hartford Aggressive Growth Allocation
Fund, The Hartford Growth Allocation Fund, The Hartford Balanced Allocation
Fund, The Hartford Conservative Allocation Fund and The Hartford Income
Allocation Fund, five new series of the registrant established by the Directors
of the registrant at a meeting held on November 4, 2003 (the "Funds"). The
post-effective amendment contains one prospectus and one statement of additional
information (each applicable to Class A, Class B and Class C Shares) for the
Funds. The registrant currently has thirty other series of shares (each with
multiple classes) each registered under the Securities Act of 1933 which are
offered through other prospectuses and another statement of additional
information not included in this post-effective amendment. This post-effective
amendment is not intended to update or amend such other prospectuses or
statement of additional information.
THE HARTFORD MUTUAL FUNDS
CLASS A, CLASS B AND CLASS C SHARES
PROSPECTUS
MAY 19, 2004
[Enlarge/Download Table]
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND THE HARTFORD AGGRESSIVE GROWTH ALLOCATION FUND
EXCHANGE COMMISSION HAS NOT APPROVED OR THE HARTFORD GROWTH ALLOCATION FUND
DISAPPROVED THESE SECURITIES OR PASSED UPON THE THE HARTFORD BALANCED ALLOCATION FUND
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION THE HARTFORD CONSERVATIVE ALLOCATION FUND
TO THE CONTRARY IS A CRIMINAL OFFENSE. THE HARTFORD INCOME ALLOCATION FUND
THE HARTFORD MUTUAL FUNDS
P.O. BOX 64387
ST. PAUL, MN 55164-0387
[THIS PAGE IS INTENTIONALLY LEFT BLANK]
CONTENTS
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[Enlarge/Download Table]
Introduction Introduction 1
A summary of each fund's The Hartford Aggressive Growth Allocation Fund 2
goals, principal strategies, The Hartford Growth Allocation Fund 5
main risks, performance and The Hartford Balanced Allocation Fund 8
expenses The Hartford Conservative Allocation Fund 11
The Hartford Income Allocation Fund 14
Description of other Investment strategies and investment matters 17
investment strategies and
investment risks
Investment manager and Management of the funds 28
management fee information
Information on your account About your account 29
Choosing a share class 29
How sales charges are calculated 29
Sales charge reductions and waivers 30
Opening an account 32
Buying shares 33
Selling shares 34
Transaction policies 36
Dividends and account policies 38
Additional investor services 39
Further information on the Financial highlights 40
funds Privacy policy 41
For more information back cover
INTRODUCTION
--------------------------------------------------------------------------------
Each fund described in this prospectus has its own investment strategy and
risk/reward profile. This prospectus relates to the Class A, B and C shares of
the funds.
Each fund is a diversified open-end fund and a series of The Hartford Mutual
Funds, Inc. Each fund is a "fund of funds," and diversifies its assets by
investing in the Class Y shares of several other Hartford Mutual Funds (as
listed below under "Principal Investment Strategy" for each fund, the
"Underlying Funds").
Information on each fund, including risk factors, can be found on the pages
following this introduction.
The investment manager to each fund is Hartford Investment Financial Services,
LLC ("HIFSCO"). As the investment manager, HIFSCO administers the asset
allocation program for each fund. HIFSCO is also the investment manager to each
of the Underlying Funds. The day-to-day portfolio management of the Underlying
Funds is provided by an investment sub-adviser -- either Wellington Management
Company, LLP ("Wellington Management") or Hartford Investment Management Company
("Hartford Investment Management"). Information regarding HIFSCO, Wellington
Management and Hartford Investment Management is included under the section
entitled "Management of the Funds" in this prospectus.
Mutual funds are not bank deposits and are not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Because
you could lose money by investing in these funds, be sure to read all risk
disclosures carefully before investing.
THE HARTFORD MUTUAL FUNDS 1
THE HARTFORD AGGRESSIVE GROWTH ALLOCATION FUND
--------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Aggressive Growth Allocation Fund seeks long-term
capital appreciation.
PRINCIPAL INVESTMENT STRATEGY. The fund seeks its goal through investment in a
combination of domestic and international equity funds, with a greater focus on
small cap and international funds relative to the other funds. (See below for a
definition of "small cap.") It does this by investing in a combination of other
Hartford mutual funds -- the Underlying Funds -- through the implementation of a
strategic asset allocation recommendation provided by Ibbotson Associates, Inc.
("Ibbotson"). Ibbotson serves as a consultant to HIFSCO with respect to
selecting the Underlying Funds and the fund's asset allocations among the
Underlying Funds.
In seeking the fund's investment objective, HIFSCO's investment strategies
include:
- Allocating the fund's assets among Class Y shares of Underlying Funds
(both domestic and international equity funds) based on the fund's
investment objective and on recommendations of Ibbotson for selecting
which Underlying Funds to invest in and determining the appropriate
allocation to each Underlying Fund.
- Under normal market conditions, allocating the fund's investments in the
Underlying Funds generally to achieve 100% of assets in equity funds,
although this percentage may vary from time to time.
- Regularly reviewing and adjusting the allocations to favor investments
in those Underlying Funds that HIFSCO believes will provide the most
favorable outlook for achieving the fund's investment goal.
The Underlying Funds in which the fund currently may invest are listed below.
HIFSCO may change the asset allocation among the Underlying Funds, or may invest
in other Underlying Funds, from time to time if it believes that doing so would
better enable the fund to pursue its investment goal.
UNDERLYING FUNDS
DOMESTIC EQUITY FUNDS
The Hartford Capital Appreciation Fund
The Hartford Disciplined Equity Fund
The Hartford Dividend and Growth Fund
The Hartford Growth Fund
The Hartford Growth Opportunities Fund
The Hartford Small Company Fund
The Hartford SmallCap Growth Fund
The Hartford Value Fund
The Hartford Value Opportunities Fund
INTERNATIONAL EQUITY FUNDS
The Hartford Global Leaders Fund
The Hartford International Capital Appreciation Fund
The fund intends to be fully invested at all times. However, the fund, like
other mutual funds, may maintain liquidity reserves for cash awaiting investment
or held to meet redemptions.
The Underlying Funds in which the fund invests use a broad array of investment
strategies and securities. The Underlying Funds may invest in many types of
instruments, among them common stocks of companies of many sizes, money market
instruments and others. The fund will invest in Underlying Funds that have a
growth, value or blend investment orientation. The Underlying Funds may invest
in securities of domestic and/or foreign companies. The Hartford Small Company
Fund and the Hartford SmallCap Growth Fund, two of the Underlying Funds in which
the fund may invest, define small capitalization companies as companies with
market capitalizations within the collective range of the Russell 2000 and S&P
SmallCap 600 Indices. As of December 31, 2003, this range was between
approximately $7.3 million and $4.9 billion. For further details, please refer
to the section "Summary Comparison of the Funds" and "Investment Goal and
Principal Investment Strategies of the Underlying Funds."
--------------------------------------------------------------------------------
MAIN RISKS. The fund's investment performance and its ability to achieve its
investment goal is directly related to the performance of the Underlying Funds
in which it invests. Each Underlying Fund's performance, in turn, depends on the
particular securities in which that Underlying Fund invests. Accordingly, the
fund is subject to the same risks as the Underlying Funds in direct proportion
to the allocation of its assets among the Underlying Funds. These risks include,
among others, stock fund risk, foreign investment risk and value investing risk.
The fund is also subject to manager allocation risk. You could lose money as a
result of your investment.
As with most stock funds, the value of your investment may go down in response
to overall stock market movements and trends. In addition, growth stocks may be
more volatile than other stocks because they are more sensitive to investor
perceptions of the issuing company's growth potential.
2 THE HARTFORD MUTUAL FUNDS
THE HARTFORD AGGRESSIVE GROWTH ALLOCATION FUND
--------------------------------------------------------------------------------
Foreign investments may be more risky than domestic investments. Investments in
securities of foreign issuers and non-dollar securities may be affected by
fluctuations in currency exchange rates, incomplete or inaccurate financial
information on companies, social upheavals and political actions ranging from
tax code changes to governmental collapse.
Because the fund, through an Underlying Fund, may invest in small, medium and
large companies, its performance may be more volatile than that of a fund that
invests primarily in larger companies. Stocks of small or mid-sized companies
may be more risky than stocks of larger companies. These companies may be young
and have more limited operating or business history. Because these businesses
frequently rely on narrow product lines and niche markets, they can suffer
severely from isolated business setbacks. Small or mid-sized company stocks as a
group could fall out of favor with the market, causing the fund to underperform
funds that focus on other types of stocks.
Following a value orientation towards investing entails special risks.
Overlooked or otherwise undervalued securities entail a significant risk of
never attaining their potential value.
Manager allocation risk refers to the possibility that HIFSCO could allocate
assets in a manner that results in the fund underperforming its peers.
THE HARTFORD MUTUAL FUNDS 3
THE HARTFORD AGGRESSIVE GROWTH ALLOCATION FUND
--------------------------------------------------------------------------------
PAST PERFORMANCE. Because the fund has been in operation for less than one full
calendar year, no performance history has been provided.
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. The fund will indirectly bear a pro rata
share of fees and expenses incurred by the Underlying Funds in which the fund is
invested. The fund's pro rata portion of the cumulative expenses charged by the
Underlying Funds is listed in the table below and is calculated as a percentage
of the fund's average net assets. The pro rata portion of the cumulative
expenses may be higher or lower depending on the allocation of the fund's assets
among the Underlying Funds and the actual expenses of the Underlying Funds.
[Download Table]
CLASS A CLASS B CLASS C
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge as a percentage of
offering price (load) 5.50% 5.00% 2.00%
Maximum load imposed on purchases as a
percentage of offering price 5.50% None 1.00%
Maximum deferred sales charge (load) (as a
percentage of purchase price or redemption
proceeds, whichever is less) None(1) 5.00%(5) 1.00%(6)
Exchange fees None None None
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the
fund's assets)
Management fees 0.20% 0.20% 0.20%
Distribution and service (12b-1) fees 0.25%(2) 1.00% 1.00%
Other expenses(3) 0.40% 0.45% 0.32%
Underlying Fund fees and expenses(3) 1.04% 1.04% 1.04%
Total annual operating expenses(4) 1.89%(2) 2.69% 2.56%
(1) A contingent deferred sales charge of 1.00% may apply on certain redemptions
of Class A shares that were purchased without a front-end sales charge. See
"About Your Account: How Sales Charges are Calculated."
(2) The Rule 12b-1 plan applicable to Class A shares of the fund provides for
payment of a Rule 12b-1 fee of up to 0.35%; however, the board of the fund
has currently authorized Rule 12b-1 payments of only up to 0.25%.
(3) Estimated.
(4) HIFSCO has voluntarily agreed to limit the total operating expenses of the
Class A, Class B and Class C shares of the fund, exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, to 1.65%, 2.30%
and 2.30%, respectively. This policy may be discontinued at any time.
(5) Imposed on redemptions within 1 year of purchase. This fee is reduced
incrementally over a 6 year period. See "About Your Account: How Sales
Charges are Calculated."
(6) Imposed on redemptions within 1 year of purchase. See "About Your Account:
How Sales Charges are Calculated."
EXAMPLE. These examples are intended to help you compare the cost of investing
in the fund with the cost of investing in other mutual funds. The examples
assume that you invest $10,000 in the fund for the time periods indicated. The
examples also assume that your investment has a 5% return each year, that the
fund's operating expenses remain the same, including the same Underlying Fund
fees and expenses as listed in the fee table, and that you reinvest all
dividends and distributions. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
You would pay the following expenses if you redeemed your shares at the end of
each period:
[Download Table]
EXPENSES (WITH REDEMPTION) CLASS A CLASS B CLASS C
Year 1 $ 731 $ 772 $457
Year 3 $1,111 $1,135 $889
You would pay the following expenses if you did not redeem your shares:
[Download Table]
EXPENSES (WITHOUT REDEMPTION) CLASS A CLASS B CLASS C
Year 1 $ 731 $272 $357
Year 3 $1,111 $835 $889
4 THE HARTFORD MUTUAL FUNDS
THE HARTFORD GROWTH ALLOCATION FUND
--------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Growth Allocation Fund seeks long-term capital
appreciation.
PRINCIPAL INVESTMENT STRATEGY. The fund seeks its goal through investment in a
combination of domestic and international equity funds, with a small portion of
assets in fixed income funds. It does this by investing in a combination of
other Hartford mutual funds -- the Underlying Funds -- through the
implementation of a strategic asset allocation recommendation provided by
Ibbotson. Ibbotson serves as a consultant to HIFSCO with respect to selecting
the Underlying Funds and the fund's asset allocations among the Underlying
Funds.
In seeking the fund's investment objective, HIFSCO's investment strategies
include:
- Allocating the fund's assets among Class Y shares of Underlying Funds
based on the fund's investment objective and on recommendations of
Ibbotson for selecting which Underlying Funds to invest in and
determining the appropriate allocation to each Underlying Fund.
- Under normal market conditions, adjusting the fund's investments in the
Underlying Funds generally to achieve 80% of assets in equity funds and
20% of assets in fixed income funds, although this percentage may vary
from time to time. The equity component will comprise domestic and
international equity funds, while the fixed income component will
comprise income funds investing in several asset classes of varying
credit quality.
- Regularly reviewing and adjusting the allocations to favor investments
in those Underlying Funds that HIFSCO believes will provide the most
favorable outlook for achieving the fund's investment goal.
The Underlying Funds in which the fund currently may invest are listed below.
HIFSCO may change the asset allocation among the Underlying Funds, or may invest
in other Underlying Funds, from time to time if it believes that doing so would
better enable the fund to pursue its investment goal.
UNDERLYING FUNDS
DOMESTIC EQUITY FUNDS
The Hartford Capital Appreciation Fund
The Hartford Disciplined Equity Fund
The Hartford Dividend and Growth Fund
The Hartford Growth Fund
The Hartford Growth Opportunities Fund
The Hartford MidCap Value Fund
The Hartford Small Company Fund
The Hartford SmallCap Growth Fund
The Hartford Value Fund
The Hartford Value Opportunities Fund
INTERNATIONAL EQUITY FUNDS
The Hartford Global Leaders Fund
The Hartford International Capital Appreciation Fund
FIXED INCOME FUNDS
The Hartford Inflation Plus Fund
The Hartford Short Duration Fund
The Hartford Total Return Bond Fund
The fund intends to be fully invested at all times. However, the fund, like
other mutual funds, may maintain liquidity reserves for cash awaiting investment
or held to meet redemptions.
The Underlying Funds in which the fund invests use a broad array of investment
strategies and securities. The Underlying Funds may invest in many types of
instruments, among them common stocks of companies of many sizes, corporate
bonds of varying credit quality, money market instruments and others. The fund
will invest in Underlying Funds that have a growth, value or blend investment
orientation. The Underlying Funds may invest in securities of domestic and/or
foreign companies. The Underlying Funds may also invest in debt securities,
primarily of U.S. issuers. The debt securities may include government and
corporate securities with a variety of maturities and qualities that range from
investment grade to below investment grade, and unrated securities determined to
be of comparable quality by HIFSCO. For further details, please refer to the
section "Summary Comparison of the Funds" and "Investment Goal and Principal
Investment Strategies of the Underlying Funds."
--------------------------------------------------------------------------------
MAIN RISKS. The fund's investment performance and its ability to achieve its
investment goal is directly related to the performance of the Underlying Funds
in which it invests. Each Underlying Fund's performance, in turn, depends on the
particular securities in which that Underlying Fund invests. Accordingly, the
fund is subject to the same risks as the Underlying Funds in direct proportion
to the allocation of its assets among the Underlying Funds. These risks include,
among others, stock fund risk, foreign investment risk, value investing risk,
interest rate risk and credit risk. The fund is also subject to manager
allocation risk. You could lose money as a result of your investment.
As with most stock funds, the value of your investment may go down in response
to overall stock market movements and trends. In addition, growth stocks may be
more volatile than other stocks
THE HARTFORD MUTUAL FUNDS 5
THE HARTFORD GROWTH ALLOCATION FUND
--------------------------------------------------------------------------------
because they are more sensitive to investor perceptions of the issuing company's
growth potential.
Foreign investments may be more risky than domestic investments. Investments in
securities of foreign issuers and non-dollar securities may be affected by
fluctuations in currency exchange rates, incomplete or inaccurate financial
information on companies, social upheavals and political actions ranging from
tax code changes to governmental collapse.
Following a value orientation towards investing entails special risks.
Overlooked or otherwise undervalued securities entail a significant risk of
never attaining their potential value.
Because the fund, through an Underlying Fund, may invest in small and mid-sized
companies, its performance may be more volatile than that of a fund that invests
primarily in larger companies. Stocks of small or mid-sized companies may be
more risky than stocks of larger companies. These companies may be young and
have more limited operating or business history. Because these businesses
frequently rely on narrow product lines and niche markets, they can suffer
severely from isolated business setbacks. Small or mid-sized company stocks as a
group could fall out of favor with the market, causing the fund to underperform
funds that focus on other types of stocks.
Interest rate risk refers to the possibility that your investment may go down in
value when interest rates rise. When interest rates rise, bond prices fall;
generally, the longer a bond's maturity, the more sensitive it is to this risk.
Credit risk refers to the possibility that the issuing company may not be able
to pay interest and principal when due. In addition, the fund could lose money
if any bonds it owns, through the Underlying Funds, are downgraded in credit
rating or go into default.
Income risk is the potential for a decline in the fund's income due to falling
interest rates.
The fund, through an Underlying Fund, is subject to the possibility that, under
certain circumstances, especially during periods of falling interest rates, a
bond issuer will "call" -- or repay -- its bonds before their maturity date. The
fund, through an Underlying Fund, may then be forced to invest the unanticipated
proceeds at lower interest rates, resulting in a decline in the fund's income.
Manager allocation risk refers to the possibility that HIFSCO could allocate
assets in a manner that results in the fund underperforming its peers.
6 THE HARTFORD MUTUAL FUNDS
THE HARTFORD GROWTH ALLOCATION FUND
--------------------------------------------------------------------------------
PAST PERFORMANCE. Because the fund has been in operation for less than one full
calendar year, no performance history has been provided.
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. The fund will indirectly bear a pro rata
share of fees and expenses incurred by the Underlying Funds in which the fund is
invested. The fund's pro rata portion of the cumulative expenses charged by the
Underlying Funds is listed in the table below and is calculated as a percentage
of the fund's average net assets. The pro rata portion of the cumulative
expenses may be higher or lower depending on the allocation of the fund's assets
among the Underlying Funds and the actual expenses of the Underlying Funds.
[Download Table]
CLASS A CLASS B CLASS C
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge as a percentage of
offering price (load) 5.50% 5.00% 2.00%
Maximum load imposed on purchases as a
percentage of offering price 5.50% None 1.00%
Maximum deferred sales charge (load) (as a
percentage of purchase price or redemption
proceeds, whichever is less) None(1) 5.00%(5) 1.00%(6)
Exchange fees None None None
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the
fund's assets)
Management fees 0.20% 0.20% 0.20%
Distribution and service (12b-1) fees 0.25%(2) 1.00% 1.00%
Other expenses(3) 0.40% 0.45% 0.32%
Underlying Fund fees and expenses(3) 0.97% 0.97% 0.97%
Total annual operating expenses(4) 1.82%(2) 2.62% 2.49%
(1) A contingent deferred sales charge of 1.00% may apply on certain redemptions
of Class A shares that were purchased without a front-end sales charge. See
"About Your Account: How Sales Charges are Calculated."
(2) The Rule 12b-1 plan applicable to Class A shares of the fund provides for
payment of a Rule 12b-1 fee of up to 0.35%; however, the board of the fund
has currently authorized Rule 12b-1 payments of only up to 0.25%.
(3) Estimated.
(4) HIFSCO has voluntarily agreed to limit the total operating expenses of the
Class A, Class B and Class C shares of the fund, exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, to 1.55%, 2.20%
and 2.20%, respectively. This policy may be discontinued at any time.
(5) Imposed on redemptions within 1 year of purchase. This fee is reduced
incrementally over a 6 year period. See "About Your Account: How Sales
Charges are Calculated."
(6) Imposed on redemptions within 1 year of purchase. See "About Your Account:
How Sales Charges are Calculated."
EXAMPLE. These examples are intended to help you compare the cost of investing
in the fund with the cost of investing in other mutual funds. The examples
assume that you invest $10,000 in the fund for the time periods indicated. The
examples also assume that your investment has a 5% return each year, that the
fund's operating expenses remain the same, including the same Underlying Fund
fees and expenses as listed in the fee table, and that you reinvest all
dividends and distributions. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
You would pay the following expenses if you redeemed your shares at the end of
each period:
[Download Table]
EXPENSES (WITH REDEMPTION) CLASS A CLASS B CLASS C
Year 1 $ 725 $ 765 $450
Year 3 $1,091 $1,114 $868
You would pay the following expenses if you did not redeem your shares:
[Download Table]
EXPENSES (WITHOUT REDEMPTION) CLASS A CLASS B CLASS C
Year 1 $ 725 $265 $350
Year 3 $1,091 $814 $868
THE HARTFORD MUTUAL FUNDS 7
THE HARTFORD BALANCED ALLOCATION FUND
--------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Balanced Allocation Fund seeks long-term capital
appreciation and income.
PRINCIPAL INVESTMENT STRATEGY. The fund seeks its goal through investment in a
combination of domestic and international equity funds and fixed income funds.
It does this by investing in a combination of other Hartford mutual funds -- the
Underlying Funds -- through the implementation of a strategic asset allocation
recommendation provided by Ibbotson. Ibbotson serves as a consultant to HIFSCO
with respect to selecting the Underlying Funds and the fund's asset allocations
among the Underlying Funds.
In seeking the fund's investment objective, HIFSCO's investment strategies
include:
- Allocating the fund's assets among Class Y shares of Underlying Funds
based on the fund's investment objective and on recommendations of
Ibbotson for selecting which Underlying Funds to invest in and
determining the appropriate allocation to each Underlying Fund.
- Under normal market conditions, adjusting the fund's investments in the
Underlying Funds generally to achieve 60% of assets in equity funds and
40% of assets in fixed income funds, although this percentage may vary
from time to time. The equity component will comprise domestic and
international equity funds, while the fixed income component will
comprise income funds investing in several asset classes of varying
credit quality.
- Regularly reviewing and adjusting the allocations to favor investments
in those Underlying Funds that HIFSCO believes will provide the most
favorable outlook for achieving the fund's investment goal.
The Underlying Funds in which the fund currently may invest are listed below.
HIFSCO may change the asset allocation among the Underlying Funds, or may invest
in other Underlying Funds, from time to time if it believes that doing so would
better enable the fund to pursue its investment goal.
UNDERLYING FUNDS
DOMESTIC EQUITY FUNDS
The Hartford Capital Appreciation Fund
The Hartford Disciplined Equity Fund
The Hartford Dividend and Growth Fund
The Hartford Growth Fund
The Hartford MidCap Value Fund
The Hartford Small Company Fund
The Hartford Stock Fund
The Hartford Value Fund
The Hartford Value Opportunities Fund
INTERNATIONAL EQUITY FUNDS
The Hartford Global Leaders Fund
The Hartford International Capital Appreciation Fund
FIXED INCOME AND MONEY MARKET FUNDS
The Hartford High Yield Fund
The Hartford Inflation Plus Fund
The Hartford Money Market Fund
The Hartford Short Duration Fund
The Hartford Total Return Bond Fund
The fund intends to be fully invested at all times. However, the fund, like
other mutual funds, may maintain liquidity reserves for cash awaiting investment
or held to meet redemptions.
The Underlying Funds in which the fund invests use a broad array of investment
strategies and securities. The Underlying Funds may invest in many types of
instruments, among them common stocks of companies of many sizes, corporate
bonds of varying credit quality, money market instruments and others. The fund
will invest in Underlying Funds that have a growth, value or blend investment
orientation. The Underlying Funds may invest in securities of domestic and/or
foreign companies. The Underlying Funds may also invest in debt securities,
primarily of U.S. issuers. The debt securities may include government, corporate
and asset-backed securities with a variety of maturities and qualities that
range from investment grade to below investment grade, and unrated securities
determined to be of comparable quality by HIFSCO. For further details, please
refer to the section "Summary Comparison of the Funds" and "Investment Goal and
Principal Investment Strategies of the Underlying Funds."
--------------------------------------------------------------------------------
MAIN RISKS. The fund's investment performance and its ability to achieve its
investment goal is directly related to the performance of the Underlying Funds
in which it invests. Each Underlying Fund's performance, in turn, depends on the
particular securities in which that Underlying Fund invests. Accordingly, the
fund is subject to the same risks as the Underlying Funds in direct proportion
to the allocation of its assets among the Underlying Funds. These risks include,
among others, stock fund risk, foreign investment risk, value investing risk,
interest rate risk and credit risk. The fund is also subject to manager
allocation risk. You could lose money as a result of your investment.
As with most stock funds, the value of your investment may go down in response
to overall stock market movements and trends.
8 THE HARTFORD MUTUAL FUNDS
THE HARTFORD BALANCED ALLOCATION FUND
--------------------------------------------------------------------------------
Foreign investments may be more risky than domestic investments. Investments in
securities of foreign issuers and non-dollar securities may be affected by
fluctuations in currency exchange rates, incomplete or inaccurate financial
information on companies, social upheavals and political actions ranging from
tax code changes to governmental collapse.
Following a value orientation towards investing entails special risks.
Overlooked or otherwise undervalued securities entail a significant risk of
never attaining their potential value.
Because the fund, through an Underlying Fund, may invest in small and mid-sized
companies, its performance may be more volatile than that of a fund that invests
primarily in larger companies. Stocks of small or mid-sized companies may be
more risky than stocks of larger companies. These companies may be young and
have more limited operating or business history. Because these businesses
frequently rely on narrow product lines and niche markets, they can suffer
severely from isolated business setbacks. Small or mid-sized company stocks as a
group could fall out of favor with the market, causing the fund to underperform
funds that focus on other types of stocks.
Interest rate risk refers to the possibility that your investment may go down in
value when interest rates rise. When interest rates rise, bond prices fall;
generally, the longer a bond's maturity, the more sensitive it is to this risk.
Credit risk refers to the possibility that the issuing company may not be able
to pay interest and principal when due. In addition, the fund could lose money
if any bonds it owns, through the Underlying Funds, are downgraded in credit
rating or go into default.
Income risk is the potential for a decline in the fund's income due to falling
interest rates.
The fund, through an Underlying Fund, is subject to the possibility that, under
certain circumstances, especially during periods of falling interest rates, a
bond issuer will "call" -- or repay -- its bonds before their maturity date. The
fund, through an Underlying Fund, may then be forced to invest the unanticipated
proceeds at lower interest rates, resulting in a decline in the fund's income.
Because the fund, through an Underlying Fund, may invest in mortgage- and
asset-backed securities, it is subject to prepayment risk and extension risk.
Similar to call risk, prepayment risk is the risk that falling interest rates
could cause faster than expected prepayments of the mortgages and loans
underlying the fund's mortgage- and asset-backed securities. These prepayments
pass through to the fund, which must reinvest them at a time when interest rates
on new mortgage- and asset-backed investments are falling, reducing the fund's
income. Extension risk is the risk that rising interest rates could cause
mortgage and loan prepayments to slow, which could increase the interest rate
sensitivity of the fund's mortgage- and asset-backed securities.
Manager allocation risk refers to the possibility that HIFSCO could allocate
assets in a manner that results in the fund underperforming its peers.
THE HARTFORD MUTUAL FUNDS 9
THE HARTFORD BALANCED ALLOCATION FUND
--------------------------------------------------------------------------------
PAST PERFORMANCE. Because the fund has been in operation for less than one full
calendar year, no performance history has been provided.
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. The fund will indirectly bear a pro rata
share of fees and expenses incurred by the Underlying Funds in which the fund is
invested. The fund's pro rata portion of the cumulative expenses charged by the
Underlying Funds is listed in the table below and is calculated as a percentage
of the fund's average net assets. The pro rata portion of the cumulative
expenses may be higher or lower depending on the allocation of the fund's assets
among the Underlying Funds and the actual expenses of the Underlying Funds.
[Download Table]
CLASS A CLASS B CLASS C
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge as a percentage of
offering price (load) 5.50% 5.00% 2.00%
Maximum load imposed on purchases as a
percentage of offering price 5.50% None 1.00%
Maximum deferred sales charge (load) (as a
percentage of purchase price or redemption
proceeds, whichever is less) None(1) 5.00%(5) 1.00%(6)
Exchange fees None None None
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the
fund's assets)
Management fees 0.20% 0.20% 0.20%
Distribution and service (12b-1) fees 0.25%(2) 1.00% 1.00%
Other expenses(3) 0.40% 0.45% 0.32%
Underlying Fund fees and expenses(3) 0.90% 0.90% 0.90%
Total annual operating expenses(4) 1.75%(2) 2.55% 2.42%
(1) A contingent deferred sales charge of 1.00% may apply on certain redemptions
of Class A shares that were purchased without a front-end sales charge. See
"About Your Account: How Sales Charges are Calculated."
(2) The Rule 12b-1 plan applicable to Class A shares of the fund provides for
payment of a Rule 12b-1 fee of up to 0.35%; however, the board of the fund
has currently authorized Rule 12b-1 payments of only up to 0.25%.
(3) Estimated.
(4) HIFSCO has voluntarily agreed to limit the total operating expenses of the
Class A, Class B and Class C shares of the fund, exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, to 1.45%, 2.15%
and 2.15%, respectively. This policy may be discontinued at any time.
(5) Imposed on redemptions within 1 year of purchase. This fee is reduced
incrementally over a 6 year period. See "About Your Account: How Sales
Charges are Calculated."
(6) Imposed on redemptions within 1 year of purchase. See "About Your Account:
How Sales Charges are Calculated."
EXAMPLE. These examples are intended to help you compare the cost of investing
in the fund with the cost of investing in other mutual funds. The examples
assume that you invest $10,000 in the fund for the time periods indicated. The
examples also assume that your investment has a 5% return each year, that the
fund's operating expenses remain the same, including the same Underlying Fund
fees and expenses as listed in the fee table, and that you reinvest all
dividends and distributions. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
You would pay the following expenses if you redeemed your shares at the end of
each period:
[Download Table]
EXPENSES (WITH REDEMPTION) CLASS A CLASS B CLASS C
Year 1 $ 718 $ 758 $443
Year 3 $1,071 $1,094 $847
You would pay the following expenses if you did not redeem your shares:
[Download Table]
EXPENSES (WITHOUT REDEMPTION) CLASS A CLASS B CLASS C
Year 1 $ 718 $ 258 $343
Year 3 $1,071 $ 794 $847
10 THE HARTFORD MUTUAL FUNDS
THE HARTFORD CONSERVATIVE ALLOCATION FUND
--------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Conservative Allocation Fund seeks current income
and long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY. The fund seeks its goal through investment in a
combination of funds, primarily made up of fixed income funds, with a smaller
allocation to equity funds. The equity fund allocation is intended to add
diversification and enhance returns. It does this by investing in a combination
of other Hartford mutual funds -- the Underlying Funds -- through the
implementation of a strategic asset allocation recommendation provided by
Ibbotson. Ibbotson serves as a consultant to HIFSCO with respect to selecting
the Underlying Funds and the fund's asset allocations among the Underlying
Funds.
In seeking the fund's investment objective, HIFSCO's investment strategies
include:
- Allocating the fund's assets among Class Y shares of Underlying Funds
based on the fund's investment objective and on recommendations of
Ibbotson for selecting which Underlying Funds to invest in and
determining the appropriate allocation to each Underlying Fund.
- Under normal market conditions, adjusting the fund's investments in the
Underlying Funds generally to achieve 60% of assets in fixed income
funds and 40% of assets in equity funds, although this percentage may
vary from time to time. The fixed income component will comprise income
funds investing in several asset classes of varying credit quality,
while the equity component will comprise domestic and international
equity funds.
- Regularly reviewing and adjusting the allocations to favor investments
in those Underlying Funds that HIFSCO believes will provide the most
favorable outlook for achieving the fund's investment goal.
The Underlying Funds in which the fund currently may invest are listed below.
HIFSCO may change the asset allocation among the Underlying Funds, or may invest
in other Underlying Funds, from time to time if it believes that doing so would
better enable the fund to pursue its investment goal.
UNDERLYING FUNDS
DOMESTIC EQUITY FUNDS
The Hartford Capital Appreciation Fund
The Hartford Growth Fund
The Hartford MidCap Value Fund
The Hartford Stock Fund
The Hartford Value Opportunities Fund
INTERNATIONAL EQUITY FUNDS
The Hartford Global Leaders Fund
The Hartford International Capital Appreciation Fund
FIXED INCOME AND MONEY MARKET FUNDS
The Hartford High Yield Fund
The Hartford Inflation Plus Fund
The Hartford Money Market Fund
The Hartford Short Duration Fund
The Hartford Total Return Bond Fund
The fund intends to be fully invested at all times. However, the fund, like
other mutual funds, may maintain liquidity reserves for cash awaiting investment
or held to meet redemptions.
The Underlying Funds in which the fund invests use a broad array of investment
strategies and securities. The Underlying Funds may invest in many types of
instruments, among them common stocks of companies of many sizes, corporate
bonds of varying credit quality, money market instruments and others. The
Underlying Funds may invest in debt securities, primarily of U.S. issuers. The
debt securities may include government, corporate and asset-backed securities
with a variety of maturities and qualities that range from investment grade to
below investment grade, and unrated securities determined to be of comparable
quality by HIFSCO. The fund will invest in Underlying Funds that have a growth,
value or blend investment orientation. The Underlying Funds may invest primarily
in securities of domestic companies. For further details, please refer to the
section "Summary Comparison of the Funds" and "Investment Goal and Principal
Investment Strategies of the Underlying Funds."
--------------------------------------------------------------------------------
MAIN RISKS. The fund's investment performance and its ability to achieve its
investment goal is directly related to the performance of the Underlying Funds
in which it invests. Each Underlying Fund's performance, in turn, depends on the
particular securities in which that Underlying Fund invests. Accordingly, the
fund is subject to the same risks as the Underlying Funds in direct proportion
to the allocation of its assets among the Underlying Funds. These risks include,
among others, interest rate risk, credit risk, stock fund risk and foreign
investment risk. The fund is also subject to manager allocation risk. You could
lose money as a result of your investment.
Interest rate risk refers to the possibility that your investment may go down in
value when interest rates rise. When interest rates rise, bond prices fall;
generally, the longer a bond's maturity, the more sensitive it is to this risk.
THE HARTFORD MUTUAL FUNDS 11
THE HARTFORD CONSERVATIVE ALLOCATION FUND
--------------------------------------------------------------------------------
Credit risk refers to the possibility that the issuing company may not be able
to pay interest and principal when due. In general, lower-rated bonds have
higher credit risks. High yield bond prices can fall on bad news about the
economy, an industry or a company. In addition, the fund could lose money if any
bonds it owns, through the Underlying Funds, are downgraded in credit rating or
go into default.
Income risk is the potential for a decline in the fund's income due to falling
interest rates.
Any U.S. government or other guarantees on portfolio securities do not apply to
the market value or current yield of the portfolio's securities or to the value
of the fund's shares.
The fund, through an Underlying Fund, is subject to the possibility that, under
certain circumstances, especially during periods of falling interest rates, a
bond issuer will "call" -- or repay -- its bonds before their maturity date. The
fund, through an Underlying Fund, may then be forced to invest the unanticipated
proceeds at lower interest rates, resulting in a decline in the fund's income.
Because the fund, through an Underlying Fund, may invest in mortgage- and
asset-backed securities, it is subject to prepayment risk and extension risk.
Similar to call risk, prepayment risk is the risk that falling interest rates
could cause faster than expected prepayments of the mortgages and loans
underlying the fund's mortgage- and asset-backed securities. These prepayments
pass through to the fund, which must reinvest them at a time when interest rates
on new mortgage- and asset-backed investments are falling, reducing the fund's
income. Extension risk is the risk that rising interest rates could cause
mortgage and loan prepayments to slow, which could increase the interest rate
sensitivity of the fund's mortgage- and asset-backed securities.
As with most stock funds, the value of your investment may go down in response
to overall stock market movements and trends.
Foreign investments may be more risky than domestic investments. Investments in
securities of foreign issuers and non-dollar securities may be affected by
fluctuations in currency exchange rates, incomplete or inaccurate financial
information on companies, social upheavals and political actions ranging from
tax code changes to governmental collapse.
Manager allocation risk refers to the possibility that HIFSCO could allocate
assets in a manner that results in the fund underperforming its peers.
12 THE HARTFORD MUTUAL FUNDS
THE HARTFORD CONSERVATIVE ALLOCATION FUND
--------------------------------------------------------------------------------
PAST PERFORMANCE. Because the fund has been in operation for less than one full
calendar year, no performance history has been provided.
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. The fund will indirectly bear a pro rata
share of fees and expenses incurred by the Underlying Funds in which the fund is
invested. The fund's pro rata portion of the cumulative expenses charged by the
Underlying Funds is listed in the table below and is calculated as a percentage
of the fund's average net assets. The pro rata portion of the cumulative
expenses may be higher or lower depending on the allocation of the fund's assets
among the Underlying Funds and the actual expenses of the Underlying Funds.
[Download Table]
CLASS A CLASS B CLASS C
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge as a percentage of
offering price (load) 5.50% 5.00% 2.00%
Maximum load imposed on purchases as a
percentage of offering price 5.50% None 1.00%
Maximum deferred sales charge (load) (as a
percentage of purchase price or redemption
proceeds, whichever is less) None(1) 5.00%(5) 1.00%(6)
Exchange fees None None None
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the
fund's assets)
Management fees 0.20% 0.20% 0.20%
Distribution and service (12b-1) fees 0.25%(2) 1.00% 1.00%
Other expenses(3) 0.40% 0.45% 0.32%
Underlying Fund fees and expenses(3) 0.83% 0.83% 0.83%
Total annual operating expenses(4) 1.68%(2) 2.48% 2.35%
(1) A contingent deferred sales charge of 1.00% may apply on certain redemptions
of Class A shares that were purchased without a front-end sales charge. See
"About Your Account: How Sales Charges are Calculated."
(2) The Rule 12b-1 plan applicable to Class A shares of the fund provides for
payment of a Rule 12b-1 fee of up to 0.35%; however, the board of the fund
has currently authorized Rule 12b-1 payments of only up to 0.25%.
(3) Estimated.
(4) HIFSCO has voluntarily agreed to limit the total operating expenses of the
Class A, Class B and Class C shares of the fund, exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, to 1.40%, 2.05%
and 2.05%, respectively. This policy may be discontinued at any time.
(5) Imposed on redemptions within 1 year of purchase. This fee is reduced
incrementally over a 6 year period. See "About Your Account: How Sales
Charges are Calculated."
(6) Imposed on redemptions within 1 year of purchase. See "About Your Account:
How Sales Charges are Calculated."
EXAMPLE. These examples are intended to help you compare the cost of investing
in the fund with the cost of investing in other mutual funds. The examples
assume that you invest $10,000 in the fund for the time periods indicated. The
examples also assume that your investment has a 5% return each year, that the
fund's operating expenses remain the same, including the same Underlying Fund
fees and expenses as listed in the fee table, and that you reinvest all
dividends and distributions. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
You would pay the following expenses if you redeemed your shares at the end of
each period:
[Download Table]
EXPENSES (WITH REDEMPTION) CLASS A CLASS B CLASS C
Year 1 $ 711 $ 751 $436
Year 3 $1,050 $1,073 $826
You would pay the following expenses if you did not redeem your shares:
[Download Table]
EXPENSES (WITHOUT REDEMPTION) CLASS A CLASS B CLASS C
Year 1 $ 711 $ 251 $336
Year 3 $1,050 $ 773 $826
THE HARTFORD MUTUAL FUNDS 13
THE HARTFORD INCOME ALLOCATION FUND
--------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Income Allocation Fund seeks current income and,
as a secondary objective, capital preservation.
PRINCIPAL INVESTMENT STRATEGY. The fund seeks its goals through investment in a
combination of fixed income funds. It does this by investing in a combination of
other Hartford mutual funds -- the Underlying Funds -- through the
implementation of a strategic asset allocation recommendation provided by
Ibbotson. Ibbotson serves as a consultant to HIFSCO with respect to selecting
the Underlying Funds and the fund's asset allocations among the Underlying
Funds.
In seeking the fund's investment objective, HIFSCO's investment strategies
include:
- Allocating the fund's assets among Class Y shares of Underlying Funds
based on the fund's investment objective and on recommendations of
Ibbotson for selecting which Underlying Funds to invest in and
determining the appropriate allocation to each Underlying Fund.
- Under normal market conditions, allocating the fund's investments in the
Underlying Funds generally to achieve 100% of assets in fixed income
funds. The fixed income funds in which the fund may invest will comprise
income funds investing in several asset classes of varying credit
quality.
- Regularly reviewing and adjusting the allocations to favor investments
in those Underlying Funds that HIFSCO believes will provide the most
favorable outlook for achieving the fund's investment goal.
The Underlying Funds in which the fund currently may invest are listed below.
HIFSCO may change the asset allocation among the Underlying Funds, or may invest
in other Underlying Funds, from time to time if it believes that doing so would
better enable the fund to pursue its investment goal.
UNDERLYING FUNDS
FIXED INCOME AND MONEY MARKET FUNDS
The Hartford High Yield Fund
The Hartford Inflation Plus Fund
The Hartford Money Market Fund
The Hartford Short Duration Fund
The Hartford Total Return Bond Fund
The fund intends to be fully invested at all times. However, the fund, like
other mutual funds, may maintain liquidity reserves for cash awaiting investment
or held to meet redemptions.
The Underlying Funds in which the fund invests use a broad array of investment
strategies and securities. The Underlying Funds may invest in many types of
instruments, among them corporate bonds of varying credit quality, money market
instruments and others. The Underlying Funds may invest in debt securities,
primarily of U.S. issuers. The debt securities may include government, corporate
and asset-backed securities with a variety of maturities and qualities that
range from investment grade to below investment grade, and unrated securities
determined to be of comparable quality by HIFSCO. For further details, please
refer to the section "Summary Comparison of the Funds" and "Investment Goal and
Principal Investment Strategies of the Underlying Funds."
--------------------------------------------------------------------------------
MAIN RISKS. The fund's investment performance and its ability to achieve its
investment goal is directly related to the performance of the Underlying Funds
in which it invests. Each Underlying Fund's performance, in turn, depends on the
particular securities in which that Underlying Fund invests. Accordingly, the
fund is subject to the same risks as the Underlying Funds in direct proportion
to the allocation of its assets among the Underlying Funds. These risks include,
among others, interest rate risk, credit risk, and foreign investment risk. The
fund is also subject to manager allocation risk. You could lose money as a
result of your investment.
Interest rate risk refers to the possibility that your investment may go down in
value when interest rates rise. When interest rates rise, bond prices fall;
generally, the longer a bond's maturity, the more sensitive it is to this risk.
Credit risk refers to the possibility that the issuing company may not be able
to pay interest and principal when due. In general, lower-rated bonds have
higher credit risks. High yield bond prices can fall on bad news about the
economy, an industry or a company. In addition, the fund could lose money if any
bonds it owns, through the Underlying Funds, are downgraded in credit rating or
go into default.
Income risk is the potential for a decline in the fund's income due to falling
interest rates.
Any U.S. government or other guarantees on portfolio securities do not apply to
the market value or current yield of the portfolio's securities or to the value
of the fund's shares.
The fund, through an Underlying Fund, is subject to the possibility that, under
certain circumstances, especially during periods of falling interest rates, a
bond issuer will "call" -- or repay -- its bonds before their maturity date. The
fund, through an
14 THE HARTFORD MUTUAL FUNDS
THE HARTFORD INCOME ALLOCATION FUND
--------------------------------------------------------------------------------
Underlying Fund, may then be forced to invest the unanticipated proceeds at
lower interest rates, resulting in a decline in the fund's income.
Because the fund, through an Underlying Fund, may invest in mortgage- and
asset-backed securities, it is subject to prepayment risk and extension risk.
Similar to call risk, prepayment risk is the risk that falling interest rates
could cause faster than expected prepayments of the mortgages and loans
underlying the fund's mortgage- and asset-backed securities. These prepayments
pass through to the fund, which must reinvest them at a time when interest rates
on new mortgage- and asset-backed investments are falling, reducing the fund's
income. Extension risk is the risk that rising interest rates could cause
mortgage and loan prepayments to slow, which could increase the interest rate
sensitivity of the fund's mortgage- and asset-backed securities.
Foreign investments may be more risky than domestic investments. Investments in
securities of foreign issuers and non-dollar securities may be affected by
fluctuations in currency exchange rates, incomplete or inaccurate financial
information on companies, social upheavals and political actions ranging from
tax code changes to governmental collapse.
Manager allocation risk refers to the possibility that HIFSCO could allocate
assets in a manner that results in the fund underperforming its peers.
THE HARTFORD MUTUAL FUNDS 15
THE HARTFORD INCOME ALLOCATION FUND
--------------------------------------------------------------------------------
PAST PERFORMANCE. Because the fund has been in operation for less than one full
calendar year, no performance history has been provided.
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. The fund will indirectly bear a pro rata
share of fees and expenses incurred by the Underlying Funds in which the fund is
invested. The fund's pro rata portion of the cumulative expenses charged by the
Underlying Funds is listed in the table below and is calculated as a percentage
of the fund's average net assets. The pro rata portion of the cumulative
expenses may be higher or lower depending on the allocation of the fund's assets
among the Underlying Funds and the actual expenses of the Underlying Funds.
[Download Table]
CLASS A CLASS B CLASS C
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge as a percentage of
offering price (load) 4.50% 5.00% 2.00%
Maximum load imposed on purchases as a
percentage of offering price 4.50% None 1.00%
Maximum deferred sales charge (load) (as a
percentage of purchase price or redemption
proceeds, whichever is less) None(1) 5.00%(5) 1.00%(6)
Exchange fees None None None
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the
fund's assets)
Management fees 0.20% 0.20% 0.20%
Distribution and service (12b-1) fees 0.25%(2) 1.00% 1.00%
Other expenses(3) 0.40% 0.45% 0.32%
Underlying Fund fees and expenses(3) 0.71% 0.71% 0.71%
Total annual operating expenses(4) 1.56%(2) 2.36% 2.23%
(1) A contingent deferred sales charge of 1.00% may apply on certain redemptions
of Class A shares that were purchased without a front-end sales charge. See
"About Your Account: How Sales Charges are Calculated."
(2) The Rule 12b-1 plan applicable to Class A shares of the fund provides for
payment of a Rule 12b-1 fee of up to 0.35%; however, the board of the fund
has currently authorized Rule 12b-1 payments of only up to 0.25%.
(3) Estimated.
(4) HIFSCO has voluntarily agreed to limit the total operating expenses of the
Class A, Class B and Class C shares of the fund, exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, to 1.25%, 1.95%
and 1.95%, respectively. This policy may be discontinued at any time.
(5) Imposed on redemptions within 1 year of purchase. This fee is reduced
incrementally over a 6 year period. See "About Your Account: How Sales
Charges are Calculated."
(6) Imposed on redemptions within 1 year of purchase. See "About Your Account:
How Sales Charges are Calculated."
EXAMPLE. These examples are intended to help you compare the cost of investing
in the fund with the cost of investing in other mutual funds. The examples
assume that you invest $10,000 in the fund for the time periods indicated. The
examples also assume that your investment has a 5% return each year, that the
fund's operating expenses remain the same, including the same Underlying Fund
fees and expenses as listed in the fee table, and that you reinvest all
dividends and distributions. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
You would pay the following expenses if you redeemed your shares at the end of
each period:
[Download Table]
EXPENSES (WITH REDEMPTION) CLASS A CLASS B CLASS C
Year 1 $602 $ 739 $424
Year 3 $920 $1,036 $790
You would pay the following expenses if you did not redeem your shares:
[Download Table]
EXPENSES (WITHOUT REDEMPTION) CLASS A CLASS B CLASS C
Year 1 $602 $239 $324
Year 3 $920 $736 $790
16 THE HARTFORD MUTUAL FUNDS
INVESTMENT STRATEGIES AND INVESTMENT MATTERS
--------------------------------------------------------------------------------
SUMMARY COMPARISON OF THE FUNDS
HIFSCO invests each fund's assets in a combination of other Hartford mutual
funds: domestic and international equity funds and fixed income funds
(Underlying Funds). The funds differ primarily due to their asset allocations
among these fund types. HIFSCO intends to manage each fund according to its
asset allocation strategy, and does not intend to trade actively among the
Underlying Funds or intend to attempt to capture short-term market
opportunities. However, HIFSCO may modify the asset allocation strategy for any
fund and modify the selection of Underlying Funds for any fund from time to time
if it believes that doing so would better enable the fund to pursue its
investment goal.
INVESTMENT GOAL AND PRINCIPAL INVESTMENT STRATEGIES OF THE UNDERLYING FUNDS
The investment goal (or objective) and principal investment strategies of each
Underlying Fund are described in this section. Further information about the
Underlying Funds is contained in the Prospectus and the Statement of Additional
Information of the Underlying Funds. Because each fund invests in the Underlying
Funds, investors in each fund will be affected by the Underlying Funds'
investment strategies in direct proportion to the amount of assets each fund
allocates to the Underlying Fund pursuing such strategies. To request a copy of
a Prospectus for an Underlying Fund, contact The Hartford Mutual Funds at
1-888-843-7824.
Each of the following Underlying Funds has an investment goal (or objective)
that may be changed without approval of the shareholders of the Underlying Fund.
An Underlying Fund may not be able to achieve its goal.
THE HARTFORD CAPITAL APPRECIATION FUND
INVESTMENT GOAL. The Hartford Capital Appreciation Fund seeks growth of
capital.
PRINCIPAL INVESTMENT STRATEGY. The fund seeks its goal by investing primarily
in stocks selected on the basis of potential for capital appreciation. The fund
normally invests at least 65% of its total assets in common stocks of small,
medium and large companies. The fund may invest up to 35% of its total assets in
securities of foreign issuers and non-dollar securities, including emerging
market securities.
Through fundamental analysis, Wellington Management identifies companies that it
believes have substantial near-term capital appreciation potential regardless of
company size or industry. This strategy is sometimes referred to as a "stock
picking" approach. Small and medium sized companies are selected primarily on
the basis of dynamic earnings growth potential. Larger companies are selected
primarily based on the expectation of a significant event that Wellington
Management believes will trigger an increase in the stock price.
In analyzing a prospective investment, Wellington Management looks at a number
of factors, such as business environment, management quality, balance sheet,
income statement, anticipated earnings, revenues and dividends and other related
measures or indicators of value.
THE HARTFORD DISCIPLINED EQUITY FUND
INVESTMENT GOAL. The Hartford Disciplined Equity Fund seeks growth of capital
and current income.
PRINCIPAL INVESTMENT STRATEGY. Under normal circumstances, the fund invests at
least 80% of its assets in equity securities. The fund invests primarily in a
diversified portfolio of common stocks that typically have steady or rising
dividends and whose prospects for capital appreciation are considered favorable
by Wellington Management. The fund may invest in a broad range of market
capitalizations, but tends to focus on large capitalization companies with
market capitalizations similar to those of companies in the S&P 500 Index. The
fund's portfolio is broadly diversified by industry and company. The fund may
invest up to 20% of its total assets in securities of foreign issuers and non-
dollar securities.
Wellington Management uses fundamental analysis to evaluate a security for
purchase or sale by the fund. Fundamental analysis of a company involves the
assessment of such factors as its business environment, management quality,
balance sheet, income statement, anticipated earnings, revenues and dividends
and other related measures or indicators of value.
Wellington Management then complements its fundamental research with an
internally-developed analytical approach. This analytical approach consists of
both valuation and timeliness measures. Valuation factors focus on future
dividend growth and cash flow to determine the relative attractiveness of
different stocks in different industries. Timeliness focuses on stocks with
favorable earnings and stock
THE HARTFORD MUTUAL FUNDS 17
INVESTMENT STRATEGIES AND INVESTMENT MATTERS
--------------------------------------------------------------------------------
price momentum to assess the appropriate time for purchase.
THE HARTFORD DIVIDEND AND GROWTH FUND
INVESTMENT GOAL. The Hartford Dividend and Growth Fund seeks a high level of
current income consistent with growth of capital.
PRINCIPAL INVESTMENT STRATEGY. The fund invests primarily in a diversified
portfolio of common stocks that typically have above average income yields and
whose prospects for capital appreciation are considered favorable by Wellington
Management. Under normal market and economic conditions at least 65% of the
fund's total assets are invested in dividend-paying equity securities. The fund
may invest up to 20% of its total assets in securities of foreign issuers and
non-dollar securities. The fund tends to focus on securities of larger,
well-established companies with market capitalizations similar to those of
companies in the S&P 500 Index. The fund's portfolio is broadly diversified by
industry and company. As a key component of its fundamental analysis, Wellington
Management evaluates a company's ability to sustain and potentially increase its
dividend payments. The fund also favors securities that appear to be undervalued
in the marketplace.
Wellington Management uses fundamental analysis to evaluate a security for
purchase or sale by the fund. Fundamental analysis of a company involves the
assessment of such factors as its business environment, management quality,
balance sheet, income statement, anticipated earnings, revenues and dividends
and other related measures or indicators of value.
THE HARTFORD GLOBAL LEADERS FUND
INVESTMENT GOAL. The Hartford Global Leaders Fund seeks growth of capital.
PRINCIPAL INVESTMENT STRATEGY. The fund seeks its goal by investing primarily
in stocks issued by companies worldwide. The fund invests primarily in a
diversified portfolio of common stocks covering a broad range of countries,
industries and companies. Securities in which the fund invests are denominated
in both U.S. dollars and foreign currencies and may trade in both U.S. and
foreign markets.
Under normal market and economic conditions, the fund invests at least 65% of
its total assets in common stocks of high-quality growth companies worldwide.
These companies must, in the opinion of Wellington Management, be leaders in
their respective industries as indicated by an established market presence and
strong global, regional or country competitive positions. Under normal market
and economic conditions, the fund will diversify its investments in securities
of issuers among at least five countries, which may include the United States.
There are no limits on the amount of the fund's assets that may be invested in
each country. The fund may invest in a broad range of market capitalizations,
but tends to focus on large capitalization companies with market capitalizations
similar to those of companies in the S&P 500 Index.
The fund uses a two-tiered investment strategy:
- Using what is sometimes referred to as a "top down" approach, Wellington
Management analyzes the global macro-economic and investment
environments. This includes an evaluation of U.S. and non-U.S. economic
and political conditions, fiscal and monetary policies, demographic
trends and investor sentiment. Through top down analysis, Wellington
Management anticipates trends and changes in the markets and economy to
identify companies which offer significant potential for capital
appreciation given current and projected global and local economic and
market conditions.
- Top down analysis is followed by what is sometimes referred to as a
"bottom up" approach, which is the use of fundamental analysis to
identify specific securities for purchase or sale. Fundamental analysis
of a company involves the assessment of such factors as its business
environment, management quality, balance sheet, income statement,
anticipated earnings, revenues and dividends and other related measures
or indicators of value.
The fund emphasizes high-quality growth companies. The key characteristics of
high-quality growth companies include a strong balance sheet, a high return on
equity, a strong management team, and attractive relative value within the
context of the global marketplace or a security's primary trading market.
For its most recent fiscal year, the fund's annual portfolio turnover rate
exceeded 300%.
THE HARTFORD GROWTH FUND
INVESTMENT GOAL. The Hartford Growth Fund seeks long-term capital appreciation.
18 THE HARTFORD MUTUAL FUNDS
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PRINCIPAL INVESTMENT STRATEGY. Under normal circumstances, the fund invests at
least 65% of its total assets in equity securities of growth companies. The key
characteristics of growth companies favored by the fund include a leadership
position within the industry, a strong balance sheet, a high return on equity,
accelerating earnings, growth in earnings per share, unrecognized or undervalued
assets and a strong management team. The fund may invest in companies with a
broad range of market capitalizations, but tends to focus on large
capitalization companies with market capitalizations similar to those of
companies in the S&P 500 Index. The fund may invest up to 20% of its total
assets in securities of foreign issuers and non-dollar securities.
The fund uses a two-tiered investment strategy:
- Using what is sometimes referred to as a "top down" approach, Wellington
Management analyzes the general economic and investment environment.
This includes an evaluation of economic conditions, U.S. fiscal and
monetary policy, demographic trends and investor sentiment. Through this
top down analysis, Wellington Management anticipates trends and changes
in various markets and in the economy overall and identifies industries
and sectors that are expected to outperform.
- Concurrent with top down analysis, Wellington Management utilizes what
is sometimes referred to as a "bottom up" approach, which is the use of
fundamental analysis to identify specific securities for purchase or
sale. Fundamental analysis of a company involves the assessment of such
factors as its business environment, management quality, balance sheet,
income statement, anticipated earnings, revenues and dividends and other
related measures or indicators of value.
THE HARTFORD GROWTH OPPORTUNITIES FUND
INVESTMENT GOAL. The Hartford Growth Opportunities Fund seeks short- and
long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY. Under normal circumstances, the fund invests
primarily in a diversified portfolio of common stocks covering a broad range of
industries, companies and market capitalizations that Wellington Management
believes have superior growth potential. The fund may invest up to 20% of its
total assets in foreign issuers and non-dollar securities.
Wellington Management uses fundamental analysis to identify high quality growth
companies for purchase or sale by the fund. Fundamental analysis of a company
involves the assessment of such factors as its business environment, management
quality, balance sheet, income statement, anticipated earnings, revenues and
dividends and other related measures or indicators of value.
THE HARTFORD HIGH YIELD FUND
INVESTMENT GOAL. The Hartford High Yield Fund seeks high current income. Growth
of capital is a secondary objective.
PRINCIPAL INVESTMENT STRATEGY. The fund normally invests at least 80%, and may
invest up to 100%, of its assets in non-investment grade debt securities
(securities rated "Ba" or lower by Moody's Investors Service, Inc. ("Moody's")
or "BB" or lower by Standard & Poor's Corporation ("S&P"), or securities which,
if unrated, are determined by Hartford Investment Management to be of comparable
quality). Debt securities rated below investment grade are commonly referred to
as "high yield-high risk securities" or "junk bonds". The fund will invest no
more than 10% of its total assets in securities rated below "B3" by Moody's or
"B-" by S&P, or, if unrated, determined to be of comparable quality by Hartford
Investment Management. The fund may invest in bonds of any maturity although the
fund tends to have an average maturity within the intermediate-term range, which
is typically defined as between approximately 5 to 10 years.
The fund may invest up to 15% of its total assets in preferred stocks,
convertible securities, and securities carrying warrants to purchase equity
securities. The fund will not invest in common stocks directly, but may retain,
for reasonable periods of time, common stocks acquired upon conversion of debt
securities or upon exercise of warrants acquired with debt securities. The fund
may invest up to 30% of its total assets in securities of foreign issuers and up
to 10% of its total assets in non-dollar securities.
To achieve its goal of high current income, Hartford Investment Management uses
what is sometimes referred to as a top-down analysis to determine which
industries may benefit from current and future changes in the economy. Hartford
Investment Management then selects individual securities within selected
industries that appear from a yield perspective to be attractive. Hartford
Investment Management assesses such factors as the company's business
environment, balance sheet, income statement, anticipated earnings and
management team.
THE HARTFORD MUTUAL FUNDS 19
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The fund seeks its secondary goal of capital growth, when consistent with its
primary objective of high current income, by investing in securities that
Hartford Investment Management expects to appreciate in value as a result of
declines in long-term interest rates or favorable developments affecting the
business or prospects of the issuer which may improve the issuer's financial
condition and credit rating.
THE HARTFORD INFLATION PLUS FUND
INVESTMENT GOAL. The Hartford Inflation Plus Fund seeks a total return that
exceeds the rate of inflation over an economic cycle.
PRINCIPAL INVESTMENT STRATEGY. The fund pursues its objective by investing,
under normal circumstances, at least 65% of its net assets in U.S.
dollar-denominated inflation-protected debt securities issued by the U.S.
Treasury. The fund may also invest in inflation-protected debt securities issued
by U.S. Government agencies and instrumentalities other than the U.S. Treasury
and by other entities such as corporations and foreign governments.
Inflation-protected debt securities are fixed income securities whose principal
value is periodically adjusted according to the rate of inflation. If the index
measuring inflation falls, the principal value of inflation-protected debt
securities will be adjusted downward, and consequently the interest payable on
these securities (calculated with respect to the smaller principal amount) will
be reduced. Repayment of the original bond principal upon maturity (as adjusted
for inflation) is guaranteed in the case of U.S. Treasury inflation-protected
debt securities. For bonds that do not provide a similar guarantee, the adjusted
principal value of the bond repaid at maturity may be less than the original
principal.
The fund invests, under normal circumstances, at least 80% of its net assets in
securities of "investment grade" quality. This means securities that are rated
at the time of purchase within the four highest categories assigned by Moody's
("Aaa", "Aa", "A" or "Baa") or S&P ("AAA", "AA", "A" or "BBB") or are unrated
securities that are judged by Hartford Investment Management to be of comparable
quality to securities rated within these four highest categories. The fund may
invest up to 20% of its net assets in non-investment grade debt securities
(securities rated "Ba" or lower by Moody's or "BB" or lower by S&P, or
securities which, if unrated, are determined by Hartford Investment Management
to be of comparable quality). Debt securities rated below investment grade are
commonly referred to as "junk bonds". The fund will maintain an average credit
quality of at least "Aa3" by Moody's.
In addition to its investments in U.S. dollar-denominated inflation-protected
debt securities issued by the U.S. Treasury, the fund will opportunistically
invest up to 35% of its net assets in other sectors, including, but not limited
to, nominal treasury securities, corporate bonds, asset-backed securities,
mortgage-related securities and commercial mortgage-backed securities. The fund
may invest up to 35% of its net assets in securities of foreign issuers and
non-dollar securities, including inflation-protected securities of foreign
issuers. Such inflation-protected securities of foreign issuers are generally
indexed to the inflation rates in their respective economies. The fund may also
utilize securities lending arrangements and reverse repurchase transactions. The
fund may utilize derivatives to manage portfolio risk and to replicate
securities the fund could buy but that are not currently available in the
market.
There is no limit on the maturity of debt securities held by the fund or the
average maturity of the fund's portfolio.
Hartford Investment Management uses what is sometimes referred to as a top-down
analysis to determine which sectors may benefit or be harmed from current and
future changes in the economy and inflation. Hartford Investment Management then
selects individual securities to buy or sell from selected issuers that, from a
real yield perspective, appear either attractive or unattractive. Hartford
Investment Management will select issues by assessing such factors as security
structure, break even inflation rates, a company's business environment, balance
sheet, income statement, anticipated earnings and management team.
THE HARTFORD INTERNATIONAL CAPITAL APPRECIATION FUND
INVESTMENT GOAL. The Hartford International Capital Appreciation Fund seeks
capital appreciation.
PRINCIPAL INVESTMENT STRATEGY. Under normal circumstances, the fund invests at
least 65% of its assets in equity securities of foreign issuers, including
non-dollar securities. Under normal circumstances, the fund diversifies its
investments among at least five countries. There are no limits on the amount of
the fund's assets that may be invested in each country. Although some
consideration is given to ensuring country diversification, allocation of
investments among countries is primarily the result of sector and security
selection. The fund may invest up to 25% of its total assets in securities of
20 THE HARTFORD MUTUAL FUNDS
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issuers in countries with emerging economies or emerging securities markets.
The fund's investment strategy is to invest in high quality growth companies in
various sectors around the world. The fund's investment approach is two-tiered:
"top-down" analysis and "bottom-up" security selection. In a "top-down"
analysis, economic data is examined to identify sectors and industries that are
expected to grow faster than average over the next twelve to eighteen months. In
addition, long-term, broad themes are identified that are based on demographic
trends, technological changes, and political and social developments around the
world. Through "bottom-up" security selection, the portfolio manager identifies
high quality growth companies with market capitalizations above $2 billion. The
key characteristics of high quality growth companies are:
- strong earnings and revenue growth or the potential for strong earnings
and revenue growth
- good management teams
- strong balance sheets
- attractive relative valuations within a global or regional market or the
security's primary trading market
For its most recent fiscal year, the fund's annual portfolio turnover rate
exceeded 200%.
THE HARTFORD MIDCAP VALUE FUND
INVESTMENT GOAL. The Hartford MidCap Value Fund seeks long-term capital
appreciation.
PRINCIPAL INVESTMENT STRATEGY. Under normal circumstances, the fund invests at
least 80% of its assets in mid-capitalization companies. The fund defines
mid-capitalization companies as companies with market capitalizations within the
collective range of the Russell Midcap and S&P MidCap 400 Indices. As of
December 31, 2003, this range was between approximately $209.9 million and $17.0
billion. The fund may invest up to 20% of its total assets in securities of
foreign issuers and non-dollar securities.
The fund's investment strategy employs a contrarian approach to stock selection,
favoring securities that appear to be undervalued in the marketplace. The
approach demands an emphasis on extensive research to identify stocks of
companies whose fundamentals are not adequately reflected in the market price of
their securities. Valuation techniques are a key component of the fund's
investment approach. A stock's value is evaluated on three primary criteria: its
issuer's earnings power, growth potential and price-to-earnings ratio. Stocks
are selected whose issuers have the most compelling blend of the following
attributes:
- high fundamental investment value
- strong management team
- strong industry position
THE HARTFORD MONEY MARKET FUND
INVESTMENT GOAL. The Hartford Money Market Fund seeks maximum current income
consistent with liquidity and preservation of capital.
PRINCIPAL INVESTMENT STRATEGY. The fund seeks to maintain a stable share price
of $1.00. The fund focuses on specific short-term U.S. dollar denominated money
market instruments which are rated in the first two investment tiers by at least
one nationally recognized statistical rating organization, or if unrated,
determined to be of comparable quality by Hartford Investment Management. Money
market instruments include (1) banker's acceptances; (2) obligations of
governments (whether U.S. or non-U.S.) and their agencies and instrumentalities;
(3) short-term corporate obligations, including commercial paper, notes, and
bonds; (4) other short-term debt obligations; (5) obligations of U.S. banks,
non-U.S. branches of U.S. banks (Eurodollars), U.S. branches and agencies of
non-U.S. banks (Yankee dollars), and non-U.S. branches of non-U.S. banks; (6)
asset-backed securities; and (7) repurchase agreements.
The fund may invest up to 100% of its total assets in securities of foreign
issuers.
The fund purchases securities which Hartford Investment Management believes
offer attractive returns relative to the risks undertaken. In addition, Hartford
Investment Management adjusts the average maturity of the portfolio in
anticipation of interest rate changes.
THE HARTFORD SHORT DURATION FUND
INVESTMENT GOAL. The Hartford Short Duration Fund seeks to provide a high level
of income.
PRINCIPAL INVESTMENT STRATEGY. The fund seeks its goal by normally investing
only in securities of "investment grade" quality. This means securities that are
rated at the time of purchase within the four
THE HARTFORD MUTUAL FUNDS 21
INVESTMENT STRATEGIES AND INVESTMENT MATTERS
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highest categories assigned by Moody's ("Aaa", "Aa", "A" or "Baa") or S&P
("AAA", "AA", "A" or "BBB") or are unrated securities that are judged by
Hartford Investment Management to be of comparable quality to securities rated
within these four highest categories. The fund will maintain an average credit
quality of at least "Baa3" by Moody's and a dollar weighted average duration and
average maturity of less than 3 years. Duration is a measure of the sensitivity
of a fixed income security's price to changes in interest rates. The measure
incorporates a bond's yield, coupon and final maturity. The longer a security's
duration, the more sensitive it will generally be to changes in interest rates.
Similarly, a fund with a longer average duration will generally be more
sensitive to changes in interest rates than a fund with a shorter average
duration.
In addition to U.S. dollar denominated corporate issues, the fund may also
invest in commercial mortgage-backed securities, asset-backed securities,
mortgage-related securities and securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities. Cash securities in which the
fund may invest include commercial paper and repurchase agreements.
The fund may invest up to 25% of its total assets in securities of foreign
issuers.
Hartford Investment Management uses what is sometimes referred to as a top-down
analysis to determine which sectors or industries may benefit or be harmed from
current and future changes in the economy. Hartford Investment Management then
selects individual securities to buy or sell from selected sectors and
industries that, from a yield perspective, appear either attractive or
unattractive. For individual securities, Hartford Investment Management assesses
such factors as a company's business environment, balance sheet, income
statement, anticipated earnings and management team, and security structure.
THE HARTFORD SMALL COMPANY FUND
INVESTMENT GOAL. The Hartford Small Company Fund seeks growth of capital.
PRINCIPAL INVESTMENT STRATEGY. The fund seeks its goal by investing primarily
in stocks selected on the basis of potential for capital appreciation. Under
normal circumstances, the fund invests at least 80% of its assets in common
stocks of small capitalization companies. The fund defines small capitalization
companies as companies with market capitalizations within the collective range
of the Russell 2000 and S&P SmallCap 600 Indices. As of December 31, 2003, this
range was between approximately $7.3 million and $4.9 billion. The fund may
invest up to 20% of its total assets in securities of foreign issuers and
non-dollar securities.
Through fundamental analysis Wellington Management identifies companies that it
believes have substantial potential for near-term capital appreciation.
Wellington Management selects securities of companies that, in its opinion:
- have potential for above-average earnings growth,
- are undervalued in relation to their investment potential,
- have positive business and/or fundamental financial characteristics that
are overlooked or misunderstood by investors, or
- are relatively obscure and undiscovered by the overall investment
community.
Fundamental analysis of a company involves the assessment of such factors as its
business environment, management quality, balance sheet, income statement,
anticipated earnings, revenues and dividends and other related measures or
indicators of value.
THE HARTFORD SMALLCAP GROWTH FUND
INVESTMENT GOAL. The Hartford SmallCap Growth Fund seeks to maximize short-and
long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY. Under normal circumstances, the fund invests at
least 80% of its assets in common stocks of small capitalization companies that
Wellington Management believes have superior growth potential. The fund defines
small capitalization companies as companies with market capitalizations within
the collective range of the Russell 2000 and S&P SmallCap 600 Indices. As of
December 31, 2003, this range was between approximately $7.3 million and $4.9
billion. The fund's portfolio is diversified by industry and company. The fund
may invest up to 20% of its total assets in securities of foreign issuers and
non-dollar securities.
Wellington Management uses fundamental analysis to evaluate a security for
purchase or sale by the fund. Fundamental analysis of a company involves the
assessment of such factors as its business environment, management quality,
balance sheet, income statement, anticipated earnings, revenues and
22 THE HARTFORD MUTUAL FUNDS
INVESTMENT STRATEGIES AND INVESTMENT MATTERS
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dividends and other related measures or indicators of value.
Wellington Management then complements its fundamental research with an
internally-developed analytical approach. This analytical approach consists of
both valuation and timeliness measures. Valuation factors focus on future
dividend growth and cash flow to determine the relative attractiveness of
different stocks in different industries. Timeliness focuses on stocks with
favorable earnings and stock price momentum to assess the appropriate time for
purchase.
The fund's portfolio is constructed stock by stock, an investment approach
Wellington Management refers to as "bottom up." However, in constructing the
fund's portfolio Wellington Management analyzes and monitors different sources
of active risk including stock-specific risk, industry risk and style risk. The
goal of this analysis is to ensure that the portfolio remains well-diversified,
and does not take large industry and style bets relative to the fund's market
benchmark as an unintended consequence of bottom-up stock picking.
THE HARTFORD STOCK FUND
INVESTMENT GOAL. The Hartford Stock Fund seeks long-term growth of capital,
with income as a secondary consideration.
PRINCIPAL INVESTMENT STRATEGY. The fund normally invests at least 80% of the
fund's assets in the common stocks of high-quality companies. The key
characteristics of high-quality companies favored by the fund include a
leadership position within an industry, a strong balance sheet, a high return on
equity, sustainable or increasing dividends, a strong management team and a
globally competitive position. Many of the companies in which the fund invests
have a history of paying dividends and are expected to continue paying dividends
in the future. The fund may invest up to 20% of its total assets in securities
of foreign issuers and non-dollar securities. The fund may invest in a broad
range of market capitalizations, but tends to focus on large capitalization
companies with market capitalizations similar to those of companies in the S&P
500 Index. The fund invests in a diversified portfolio of primarily equity
securities using a two-tiered investment strategy:
- Using what is sometimes referred to as a "top down" approach, Wellington
Management analyzes the general economic and investment environment.
This includes an evaluation of economic conditions, U.S. fiscal and
monetary policy, demographic trends, and investor sentiment. Through top
down analysis, Wellington Management anticipates trends and changes in
markets in the economy overall and identifies industries and sectors
that are expected to outperform.
- Top down analysis is followed by what is sometimes referred to as a
"bottom up" approach, which is the use of fundamental analysis to
identify specific securities for purchase or sale. Fundamental analysis
of a company involves the assessment of such factors as its business
environment, management quality, balance sheet, income statement,
anticipated earnings, revenues and dividends and other related measures
or indicators of value.
THE HARTFORD TOTAL RETURN BOND FUND
INVESTMENT GOAL. The Hartford Total Return Bond Fund seeks a competitive total
return, with income as a secondary objective.
PRINCIPAL INVESTMENT STRATEGY. Under normal circumstances, the fund invests at
least 80% of its assets in bonds. Bonds in which the fund invests include (1)
securities issued or guaranteed as to principal or interest by the U.S.
Government, its agencies or instrumentalities; (2) non-convertible debt
securities issued or guaranteed by U.S. corporations or other issuers (including
foreign governments or corporations); (3) asset-backed and mortgage-related
securities; and (4) securities issued or guaranteed as to principal or interest
by a sovereign government or one of its agencies or political subdivisions,
supranational entities such as development banks, non-U.S. corporations, banks
or bank holding companies, or other foreign issuers. The fund normally invests
at least 70% of its portfolio in investment grade debt securities. The fund may
invest up to 30% of its total assets in securities rated in the highest category
of below investment grade bonds (securities rated "Ba" by Moody's or "BB" by
S&P) or securities which, if unrated, are determined by Hartford Investment
Management to be of comparable quality. Securities rated below investment grade
are commonly referred to as "junk bonds".
The fund invests at least 65% of its total assets in debt securities with a
maturity of at least one year. There is no other limit on the maturity of bonds
held by the fund or the average maturity of the fund's portfolio. The fund may
invest up to 15% of its total assets in preferred stocks, convertible
securities, and securities accompanied by warrants to
THE HARTFORD MUTUAL FUNDS 23
INVESTMENT STRATEGIES AND INVESTMENT MATTERS
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purchase equity securities. The fund will not invest in common stocks directly,
but may retain, for reasonable periods of time, common stocks acquired upon
conversion of debt securities or upon exercise of warrants acquired with debt
securities. The fund may invest up to 30% of its total assets in debt securities
of foreign issuers and up to 10% of its total assets in non-dollar securities.
Hartford Investment Management uses what is sometimes referred to as a top-down
analysis to determine which industries may benefit from current and future
changes in the economy. Hartford Investment Management then selects individual
securities from selected industries that, from a total return perspective,
appear to be attractive. Hartford Investment Management assesses such factors as
a company's business environment, balance sheet, income statement, anticipated
earnings and management team.
For its most recent fiscal year, the fund's annual portfolio turnover rate
exceeded 190%.
THE HARTFORD VALUE FUND
INVESTMENT GOAL. The Hartford Value Fund seeks long-term total return.
PRINCIPAL INVESTMENT STRATEGY. Under normal circumstances, the fund invests at
least 80% of its assets in equity securities of companies with market
capitalizations above $3 billion. The fund may invest up to 20% of its total
assets in the securities of foreign issuers and non-dollar securities.
The fund's investment approach is based on the fundamental analysis of companies
with market capitalizations above $3 billion and estimated below-average
price-to-earnings ratios. Fundamental analysis of a company involves the
assessment of such factors as its business environment, management quality,
balance sheet, income statement, anticipated earnings, revenues and dividends
and other related measures or indicators of value. The typical purchase
candidate may be characterized as an overlooked company with sound fundamentals.
Holdings are frequently in viable, growing businesses with good financial
strength in industries that are temporarily out of favor and under-researched by
institutions, but provide the potential for above-average total returns and
which sell at estimated below-average price-to-earnings multiples. Portfolio
construction is driven primarily by security selection. Market timing is not
employed, and limited consideration is given to economic analysis in
establishing sector and industry weightings. The portfolio employs what is often
called a "bottom up" approach, which is the use of fundamental analysis to
select specific securities from a variety of industries.
THE HARTFORD VALUE OPPORTUNITIES FUND
INVESTMENT GOAL. The Hartford Value Opportunities Fund seeks short- and
long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY. Under normal circumstances, the fund invests
primarily in equity securities of companies covering a broad range of industries
and market capitalizations, focusing on securities that Wellington Management
believes are undervalued and have the potential for appreciation. The fund may
invest up to 20% of its total assets in securities of foreign issuers and non-
dollar securities.
The fund's investment strategy employs a contrarian approach to stock selection,
favoring securities that appear to be undervalued in the marketplace. The
approach demands an emphasis on extensive research to identify stocks of
companies whose fundamentals are not adequately reflected in the market price of
their securities. Valuation techniques are a key component of the fund's
investment approach. A stock's value is evaluated on three primary criteria: its
price-to-earnings ratio, issuer's earnings power and growth potential. Stocks
are selected whose issuers have the most compelling blend of the following
attributes:
- high fundamental investment value,
- strong management team, and
- strong industry position.
INVESTMENT RISKS GENERALLY
Many factors affect each fund's performance. Each fund's share price changes
daily based on the performance of the Underlying Funds in which it invests. The
ability of each fund to meet its investment goal (or objective) is directly
related to its target asset allocation among the Underlying Funds and the
ability of those Underlying Funds to meet their investment goals (or
objectives). There is no assurance that a fund will achieve its investment goal
(or objective), and investors should not consider any one fund alone to be a
complete investment program. As with all mutual funds, there is a risk that an
investor could lose money by investing in a fund.
In pursuing the investment goals (or objectives), each of the Underlying Funds
is permitted a wide range of investment techniques. The Underlying
24 THE HARTFORD MUTUAL FUNDS
INVESTMENT STRATEGIES AND INVESTMENT MATTERS
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Funds' risks are determined by the nature of the securities held and the
portfolio management strategies used by the Underlying Funds. Further
information about the Underlying Funds is contained in the prospectuses of such
funds. Because each fund invests in the Underlying Funds, the Underlying Funds'
portfolio management strategies and the attendant risks will affect shareholders
of each fund in direct proportion to the amount of assets the fund allocates to
each Underlying Fund.
The different types of securities, investments, and investment techniques used
by each Underlying Fund, in which a fund may invest, all have attendant risks of
varying degrees. For example, with respect to equity securities, in which all
funds, except for Income Allocation Fund, may invest (through certain Underlying
Funds) as part of their principal investment strategy, there can be no assurance
of capital appreciation and an investment in any stock is subject to, among
other risks, the risk that the stock market as a whole may decline, thereby
depressing the stock's price (market risk), or the risk that the price of a
particular issuer's stock may decline due to its financial results (financial
risk). With respect to debt securities, in which all funds, except for
Aggressive Growth Allocation Fund, may invest (through certain Underlying Funds)
as part of their principal investment strategy, there exists, among other risks,
the risk that the issuer of a security may not be able to meet its obligations
on interest or principal payments at the time required by the instrument (credit
risk, a type of financial risk). In addition, the value of debt instruments and
other income-bearing securities generally rises and falls inversely with
prevailing current interest rates (interest rate risk, a type of market risk).
Securities issued by U.S. Government agencies or government-sponsored
enterprises may not be guaranteed by the U.S. Treasury. As described below, an
investment in certain of the funds, through certain of the Underlying Funds,
entails special additional risks.
USE OF MONEY MARKET INVESTMENTS FOR TEMPORARY DEFENSIVE PURPOSES
From time to time, as part of its principal investment strategy, each fund may
invest some or all of its assets in high quality money market securities for
temporary defensive purposes in response to adverse market, economic or
political conditions. To the extent a fund is in a defensive position, the fund
may lose the benefit of upswings and limit its ability to meet its investment
objective.
USE OF OPTIONS, FUTURES AND OTHER DERIVATIVES
Although not a principal investment strategy, each fund, through certain of the
Underlying Funds, may purchase and sell options, enter into futures contracts
and/or utilize other derivative contracts and securities with respect to stocks,
bonds, groups of securities (such as financial indices), foreign currencies or
interest rates. These techniques permit a fund, through an Underlying Fund, to
gain exposure to a particular security, group of securities, interest rate or
index, and thereby have the potential for a fund to earn returns that are
similar to those which would be earned by direct investments in those securities
or instruments.
These techniques are also used to manage risk by hedging an Underlying Fund's
portfolio investments. Hedging techniques may not always be available to the
Underlying Funds, and it may not always be feasible for an Underlying Fund to
use hedging techniques even when they are available.
Derivatives have risks, however. If the issuer of the derivative instrument does
not pay the amount due, a fund, through an Underlying Fund, could lose money on
the instrument. In addition, the underlying security or investment on which the
derivative is based, or the derivative itself, may not perform the way the
Underlying Fund's manager expected. As a result, the use of these techniques may
result in losses to an Underlying Fund or increase volatility in an Underlying
Fund's performance, and therefore may result in losses to a fund or increase
volatility in a fund. Some derivatives are sophisticated instruments that
typically involve a small investment of cash relative to the magnitude of risks
assumed. Derivative securities are subject to market risk, which could be
significant for those that have a leveraging effect.
FOREIGN INVESTMENTS
The funds, through certain of the Underlying Funds, may invest in securities of
foreign issuers and non-dollar securities as part of their principal investment
strategy. Investments in the securities of foreign issuers or investments in
non-dollar securities involve significant risks that are not typically
associated with investing in U.S. dollar-denominated securities or securities of
domestic issuers. Such investments may be affected by changes in currency rates,
changes in foreign or U.S. laws or restrictions applicable to such investments
and in exchange control regulations. Some foreign stock markets (and other
securities markets) may have substantially less volume than, for example, the
New York Stock Exchange (or other
THE HARTFORD MUTUAL FUNDS 25
INVESTMENT STRATEGIES AND INVESTMENT MATTERS
--------------------------------------------------------------------------------
domestic markets) and securities of some foreign issuers may be less liquid than
securities of comparable domestic issuers. Commissions and dealer mark-ups on
transactions in foreign investments may be higher than for similar transactions
in the United States. In addition, clearance and settlement procedures may be
different in foreign countries and, in certain markets, on certain occasions,
such procedures have been unable to keep pace with the volume of securities
transactions, thus making it difficult to execute such transactions. The
inability of an Underlying Fund to make intended investments due to settlement
problems could cause it to miss attractive investment opportunities. Inability
to dispose of portfolio securities or other investments due to settlement
problems could result either in losses to the fund, through an Underlying Fund,
due to subsequent declines in value of the portfolio investment or, if the
Underlying Fund has entered into a contract to sell the investment, could result
in possible liability to the purchaser.
Foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
companies, and there may be less publicly available information about a foreign
issuer than about a domestic one. In addition, there is generally less
government regulation of stock exchanges, brokers, and listed and unlisted
issuers in foreign countries than in the United States. Furthermore, with
respect to certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, imposition of withholding taxes on dividend or interest
payments, limitations on the removal of cash or other assets of a fund, through
an Underlying Fund, or political or social instability or diplomatic
developments which could affect investments in those countries. Individual
foreign economies also may differ favorably or unfavorably from the U.S. economy
in such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
INVESTMENTS IN EMERGING MARKETS
The funds, through certain of the Underlying Funds, may invest in emerging
markets, but not as part of their principal investment strategy. The securities
markets of Asian, Latin American, Eastern European, African and other emerging
countries are less liquid, are especially subject to greater price volatility,
have smaller market capitalizations, have less government regulation and are not
subject to as extensive and frequent accounting, financial and other reporting
requirements as the securities markets of more developed countries. Further,
investment in equity securities of issuers located in Russia and certain other
emerging countries involves risk of loss resulting from problems in share
registration and custody and substantial economic and political disruptions. The
funds, through certain of the Underlying Funds, may also utilize derivative
instruments, such as equity linked securities, to gain exposure to certain
emerging markets, but not as a principal investment strategy. These risks are
not normally associated with investments in more developed countries.
SMALL CAPITALIZATION COMPANIES
Aggressive Growth Allocation Fund, Growth Allocation Fund, Balanced Allocation
Fund and Conservative Allocation Fund, through certain of the Underlying Funds,
may invest in securities of small capitalization companies, but not as part of
their principal investment strategy. Historically, small market capitalization
stocks and stocks of recently organized companies have been more volatile in
price than the larger market capitalization stocks often included in the S&P 500
Index. As a result, investing in the securities of such companies involves
greater risk and the possibility of greater portfolio price volatility. Among
the reasons for the greater price volatility of these small company and
unseasoned stocks are the less certain growth prospects of smaller firms and the
lower degree of liquidity in the markets for such stocks. Small company stocks
are frequently thinly traded and may have to be sold at a discount from current
market prices or sold in small lots over an extended period of time. Small
companies also often have limited product lines, markets or financial resources;
may depend on or use a few key personnel for management; and may be susceptible
to losses and risks of bankruptcy. The transaction costs associated with small
company stocks are often higher than those of larger capitalization companies.
ABOUT EACH FUND'S INVESTMENT GOAL
Each fund's investment goal (or objective) may be changed without approval of
the shareholders of the fund. A fund may not be able to achieve its goal.
CONSEQUENCES OF PORTFOLIO TRADING PRACTICES
The funds may, at times, engage in short-term trading. Short-term trading could
produce higher brokerage expenses for a fund and higher taxable distributions to
the fund's shareholders, and
26 THE HARTFORD MUTUAL FUNDS
INVESTMENT STRATEGIES AND INVESTMENT MATTERS
--------------------------------------------------------------------------------
therefore could adversely affect the fund's performance. The funds are not
managed to achieve a particular tax result for shareholders. Shareholders should
consult their own tax adviser for individual tax advice.
TERMS USED IN THIS PROSPECTUS
Equity Securities: Equity securities include common stock, preferred stock,
securities convertible into common or preferred stock and warrants or rights to
acquire common stock, including options.
Foreign issuers: Foreign issuers include (1) companies organized outside the
United States; (2) foreign governments and agencies or instrumentalities of
foreign governments; and (3) issuers whose economic fortunes and risks are
primarily linked with markets outside the United States. Certain companies
organized outside the United States may not be deemed to be foreign issuers if
the issuer's economic fortunes and risks are primarily linked with U.S. markets.
Non-Dollar Securities: Securities denominated or quoted in foreign currency or
paying income in foreign currency.
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
Each fund, through an Underlying Fund, may invest in various securities and
engage in various investment techniques which are not the principal focus of the
fund and therefore are not described in this prospectus. These securities and
techniques, together with their risks, are discussed in the funds' Statement of
Additional Information ("SAI") which may be obtained free of charge by
contacting the funds (see back cover for address and phone number).
THE HARTFORD MUTUAL FUNDS 27
MANAGEMENT OF THE FUNDS
--------------------------------------------------------------------------------
THE INVESTMENT MANAGER
Hartford Investment Financial Services, LLC ("HIFSCO") is the investment manager
to each fund and to each Underlying Fund. HIFSCO is a wholly-owned indirect
subsidiary of The Hartford Financial Services Group, Inc. ("The Hartford"), a
Connecticut financial services company with over $225.9 billion in assets as of
December 31, 2003. At the same time, HIFSCO had over $20.8 billion in assets
under management. HIFSCO is responsible for the management of each fund,
administers the asset allocation program for each fund and supervises the
activities of the investment sub-advisers to each of the Underlying Funds
described below. HIFSCO is principally located at 200 Hopmeadow Street,
Simsbury, Connecticut 06089. Ibbotson serves as a consultant to HIFSCO with
respect to selecting the Underlying Funds and each fund's asset allocations
among the Underlying Funds. Ibbotson, one of the premier firms in designing
asset allocation-based investment strategies, is principally located at 225
North Michigan Avenue, Suite 700, Chicago, Illinois 60601.
THE INVESTMENT SUB-ADVISERS
The funds do not have a sub-adviser.
Wellington Management Company, LLP is the investment sub-adviser to each of the
Underlying Funds, other than those subadvised by Hartford Investment Management.
Wellington Management, a Massachusetts limited liability partnership, is a
professional investment counseling firm that provides services to investment
companies, employee benefit plans, endowments, foundations and other
institutions and individuals. Wellington Management and its predecessor
organizations have provided investment advisory services since 1928. As of
December 31, 2003, Wellington Management had investment management authority
over approximately $394 billion in assets. Wellington Management is principally
located at 75 State Street, Boston, Massachusetts 02109.
Hartford Investment Management Company ("Hartford Investment Management") is the
investment sub-adviser to the following Underlying Funds: High Yield Fund,
Inflation Plus Fund, Money Market Fund, Short Duration Fund and Total Return
Bond Fund. Hartford Investment Management is a professional money management
firm that provides services to investment companies, employee benefit plans and
insurance companies. Hartford Investment Management is a wholly-owned subsidiary
of The Hartford. As of December 31, 2003, Hartford Investment Management had
investment management authority over approximately $32.4 billion in assets.
Hartford Investment Management is principally located at 55 Farmington Avenue,
Hartford, Connecticut 06105.
MANAGEMENT FEES
Each fund pays a monthly management fee to HIFSCO based on a stated percentage
of the fund's average daily net asset value. Each fund's annual management fee
rate is 0.20% of its average daily net assets.
Because each fund will not have commenced operations until May 28, 2004,
information is not available regarding fees paid by the funds to HIFSCO.
PORTFOLIO MANAGERS OF THE FUNDS
The following persons have had primary responsibility for the day-to-day
management of each fund since its commencement of operations on May 28, 2004.
AGGRESSIVE GROWTH ALLOCATION FUND, GROWTH ALLOCATION FUND, BALANCED ALLOCATION
FUND, CONSERVATIVE ALLOCATION FUND AND INCOME ALLOCATION FUND The funds are
co-managed by William H. Davison, Jr. and Christopher Hanlon.
William H. Davison, Jr., Managing Director of Hartford Investment Management,
has served as co-portfolio manager of the funds since their commencement of
operations on May 28, 2004. Mr. Davison, an investment professional since 1981,
joined Hartford Investment Management in 1990 and has been involved in credit
analysis and portfolio management since that time.
Christopher Hanlon, Senior Vice President of Hartford Investment Management, has
served as co-portfolio manager of the funds since their commencement of
operations on May 28, 2004. Mr. Hanlon joined Hartford Investment Management in
1988 and has been an investment professional involved in trading and portfolio
management since that time.
28 THE HARTFORD MUTUAL FUNDS
ABOUT YOUR ACCOUNT
--------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
Each share class has its own cost structure, allowing you to choose the one that
best meets your needs. Your financial representative can help you decide. For
actual past expenses of each share class, see the fund-by-fund information
earlier in this prospectus.
Each class has adopted a Rule 12b-1 plan which allows the class to pay
distribution fees for the sale and distribution of its shares and for providing
services to shareholders. Because these fees are paid out of a fund's assets on
an ongoing basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges.
Generally, it is more advantageous for an investor that is considering an
investment in Class B shares of more than $250,000 or an investment in Class C
shares of more than $1,000,000 to invest in Class A shares instead.
CLASS A
- Front-end sales charges, as described under the subheading "How Sales Charges
are Calculated".
- Distribution and service (12b-1) fees of 0.25%.(1)
(1) The Rule 12b-1 plan applicable to Class A shares of each fund provides for
payment of a Rule 12b-1 fee of up to 0.35%; however, the board of the funds
has currently authorized Rule 12b-1 payments of only up to 0.25%.
CLASS B
- No front-end sales charge; all your money goes to work for you right away.
- Distribution and service (12b-1) fees of 1.00%.
- A deferred sales charge, as described on the following page.
- Automatic conversion to Class A shares after eight years, thus reducing future
annual expenses.
CLASS C
- 1% front-end sales charge.
- Distribution and service (12b-1) fees of 1.00%.
- A 1% contingent deferred sales charge on shares sold within one year of
purchase.
- No automatic conversion to Class A shares, so annual expenses continue at the
Class C level throughout the life of your investment.
HOW SALES CHARGES ARE CALCULATED
CLASS A sales charges and commissions paid to dealers for the funds are listed
below. The offering price includes the front-end sales load.
ALL FUNDS, EXCEPT FOR INCOME ALLOCATION FUND
[Download Table]
DEALER
AS A % OF AS A % COMMISSION AS
OFFERING OF NET PERCENTAGE OF
YOUR INVESTMENT PRICE INVESTMENT OFFERING PRICE
Less than $50,000 5.50% 5.82% 4.75%
$ 50,000 -- $ 99,999 4.50% 4.71% 4.00%
$100,000 -- $249,999 3.50% 3.63% 3.00%
$250,000 -- $499,999 2.50% 2.56% 2.00%
$500,000 -- $999,999 2.00% 2.04% 1.75%
$1 million or more(1) 0% 0% 0%
INCOME ALLOCATION FUND
[Download Table]
DEALER
AS A % OF AS A % COMMISSION AS
OFFERING OF NET PERCENTAGE OF
YOUR INVESTMENT PRICE INVESTMENT OFFERING PRICE
Less than $50,000 4.50% 4.71% 3.75%
$ 50,000 -- $ 99,999 4.00% 4.17% 3.50%
$100,000 -- $249,999 3.50% 3.63% 3.00%
$250,000 -- $499,999 2.50% 2.56% 2.00%
$500,000 -- $999,999 2.00% 2.04% 1.75%
$1 million or more(1) 0% 0% 0%
(1) Investments of $1 million or more in Class A shares may be made with no
front-end sales charge. However, there is a contingent deferred sales charge
(CDSC) of 1% on any shares sold within 18 months of purchase. For purposes
of this CDSC, all purchases made during a calendar month are counted as
having been made on the first day of that month. The CDSC is based on the
lesser of the original purchase cost or the current market value of the
shares being sold and is not charged on shares you acquired by reinvesting
your dividends and distributions. To keep your CDSC as low as possible, each
time you place a request to sell shares we will first sell any shares in
your account that are not subject to a CDSC.
The distributor may pay up to the entire amount of the sales commission to
particular broker-dealers. The distributor may pay dealers of record commissions
on purchases over $1 million an amount of up to 1.00% of the first $4 million,
plus 0.50% of the next $6 million, plus 0.25% of share purchases over $10
million. This commission schedule may also apply to certain sales of Class A
shares made to investors which qualify under any of the last five
THE HARTFORD MUTUAL FUNDS 29
ABOUT YOUR ACCOUNT
--------------------------------------------------------------------------------
categories listed under "Waivers for Certain Investors".
CLASS B shares are offered at their net asset value per share, without any
initial sales charge. However, you may be charged a contingent deferred sales
charge (CDSC) on shares you sell within a certain time after you bought them, as
described in the tables below. There is no CDSC on shares acquired through
reinvestment of dividends and capital gains distributions. The CDSC is based on
the original purchase cost or the current market value of the shares being sold,
whichever is less. The CDSCs are as follows:
[Download Table]
YEARS AFTER
PURCHASE CDSC
1st year 5.00%
2nd year 4.00%
3rd year 3.00%
4th year 3.00%
5th year 2.00%
6th year 1.00%
CLASS C sales charges for all funds, regardless of the amount that is being
purchased, are as follows:
FRONT-END SALES CHARGE
[Download Table]
DEALER
COMMISSION
AS A % OF AS A % AS PERCENTAGE
OFFERING OF NET OF OFFERING
PRICE INVESTMENT PRICE
1.01% 1.00%
1.00%
[Download Table]
YEARS AFTER
PURCHASE CDSC
1st year 1.00%
After 1 year None
For purposes of Class B and Class C CDSCs, all purchases made during a calendar
month are counted as having been made on the first day of that month. To
determine whether a CDSC applies the fund redeems shares in the following order:
(1) shares representing an increase over the original purchase cost, (2) shares
acquired through reinvestment of dividends and capital gains distributions, (3)
Class B shares held for over 6 years or Class C shares held over 1 year, and (4)
Class B shares held the longest during the six-year period.
Although the funds do not charge a transaction fee, you may be charged a fee by
brokers for the purchase or sale of the funds' shares through that broker. This
transaction fee is separate from any sales charge that the funds may apply.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES There are several ways you can combine
multiple purchases of Class A shares of the funds to take advantage of the
breakpoints in the sales charge schedule. The first three ways can be combined
in any manner:
- ACCUMULATION PRIVILEGE -- lets you add the value of any shares of the funds
(including The Hartford Money Market Fund, which, like the other Hartford
Mutual Funds not discussed herein, is offered through a separate prospectus)
you or members of your family already own to the amount of your next Class A
investment for purposes of calculating the sales charge. In addition, if you
are a natural person who owns certain annuities or variable life insurance
products that are issued by entities associated with The Hartford, the current
account value of your contract or policy will be included. The eligible
annuity and life insurance products are discussed in the funds' SAI.
Participants in retirement plans receive breakpoints at the plan level. You
must notify your broker, and your broker must notify the funds, that you are
eligible for this privilege each time you make a purchase.
- LETTER OF INTENT -- lets you purchase Class A shares of a fund over a 13-month
period and receive the same sales charge as if all shares had been purchased
at once.
- COMBINATION PRIVILEGE -- lets you combine Class A shares of multiple Hartford
Mutual Funds for purposes of calculating the sales charge.
CDSC WAIVERS As long as the transfer agent is notified at the time you sell,
the CDSC for each share class will generally be waived in the following cases:
- to make Systematic Withdrawal Plan payments that are limited annually to no
more than 12% of the value of the account at the time the plan is initiated,
- because of shareholder death or disability,
- because of the death or disability of the grantor of a living trust,
- under reorganization, liquidation, merger or acquisition transactions
involving other investment companies,
- for retirement plans under the following circumstances:
(1) to return excess contributions,
(2) hardship withdrawals as defined in the plan,
30 THE HARTFORD MUTUAL FUNDS
ABOUT YOUR ACCOUNT
--------------------------------------------------------------------------------
(3) under a Qualified Domestic Relations Order as defined in the Internal
Revenue Code,
(4) to meet minimum distribution requirements under the Internal Revenue
Code,
(5) to make "substantially equal payments" as described in Section 72(t) of
the Internal Revenue Code, and
(6) after separation from service.
REINSTATEMENT PRIVILEGE If you sell shares of a fund, you may reinvest some or
all of the proceeds in the same share class of any fund within 180 days without
a sales charge, as long as the transfer agent is notified before you invest. If
you paid a CDSC when you sold your shares, you will be credited with the amount
of the CDSC. All accounts involved must have the same registration.
WAIVERS FOR CERTAIN INVESTORS Class A shares may be offered without front-end
sales charges to the following individuals and institutions:
- selling brokers and their employees and sales representatives,
- financial representatives utilizing fund shares in fee-based investment
products under a signed agreement with the funds,
- present or former officers, directors and employees (and their families) of
the funds, The Hartford, Wellington Management, the transfer agent, and their
affiliates,
- retirement or welfare benefit plans investing in fund shares through group
variable funding agreements issued by Hartford Life Insurance Company,
- individuals purchasing shares with the proceeds from an eligible rollover
distribution from a Hartford Life Insurance Company variable annuity contract
or funding agreement within a 457, 403(b) or governmental 401 plan,
- participants in certain retirement plans with at least 100 participants or
$500,000 in plan assets,
- participants in retirement plans where Hartford Life Insurance Company or an
affiliate is the plan administrator,
- one or more members of a group (including spouses and dependent children) of
at least 100 persons engaged, or previously engaged in a common business,
profession, civic or charitable endeavor or other activity (1% CDSC applies if
redeemed within 18 months).
The 1% CDSC indicated above also may be waived where the distributor does not
compensate the broker for the sale.
CLASS C shares may be purchased without a front-end sales charge when purchased
through a broker-dealer that has entered into an agreement with the distributor
to waive this charge. See the SAI for a listing of those broker-dealer firms
that have entered into such agreements.
ADDITIONAL COMPENSATION TO BROKER-DEALERS, FINANCIAL INSTITUTIONS AND OTHER
PERSONS ("FINANCIAL INTERMEDIARIES") In addition to the commissions (which may
be paid or reallowed to Financial Intermediaries from an applicable sales charge
and/or advanced to Financial Intermediaries) and Rule 12b-1 fees described above
and in the SAI, the distributor and its affiliates pay, out of their own assets,
significant additional compensation to Financial Intermediaries (who may or may
not be affiliates of the distributor) in connection with the sale and
distribution of the funds' shares ("Additional Payments") based on a number of
factors described in the funds' SAI. This additional compensation is not paid
directly by you.
With the exception of certain compensation arrangements specifically discussed
in the SAI and "Negotiated Additional Amounts" defined below, these Additional
Payments, which are generally based on average net assets (or on aged assets) of
the funds attributable to a particular Financial Intermediary, on sales of the
funds' shares attributable to a particular Financial Intermediary, and/or on
reimbursement of ticket charges, may, but are normally not expected to, exceed,
in the aggregate, 0.40% of the average net assets of the funds attributable to a
particular Financial Intermediary. Please refer to the SAI for a listing of
Financial Intermediaries to whom the distributor makes such Additional Payments.
Separate Additional Payments may also be made in connection with the sale and
distribution of the funds' shares in such forms as, among others, "due
diligence" payments and "marketing support" fees ("Negotiated Additional
Amounts"), as discussed in greater detail in the SAI. These Negotiated
Additional Amounts paid to Financial Intermediaries in connection with the sale
and distribution of the funds' shares may also pertain to the sale and
distribution of other investment products distributed by affiliates of the
distributor. Because the Funds will not have commenced operations until May 28,
2004, there is no information regarding Additional Payments, including
Negotiated Additional Amounts, paid by the distributor or its affiliates to
Financial Intermediaries.
THE HARTFORD MUTUAL FUNDS 31
ABOUT YOUR ACCOUNT
--------------------------------------------------------------------------------
OPENING AN ACCOUNT
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the
government fight the funding of terrorism and money laundering activities,
Federal law requires all financial institutions to obtain, verify, and record
information that identifies each person who opens an account. What this means
for you: when you open an account, you will be asked to provide your name,
address, date of birth, social security number and other information that
identifies you. You may also be asked to show your driver's license or other
identifying documents. The information you provide may also be validated through
various public databases. If a fund is not able to adequately identify you
within the timeframes set forth in the law, your shares may be automatically
redeemed. If the net asset value per share has decreased since your purchase,
you will lose money as a result of this redemption. You may also incur any
applicable sales charge.
NOTE FOR RETIREMENT PLAN PARTICIPANTS AND INVESTORS WHOSE SHARES ARE HELD BY
FINANCIAL REPRESENTATIVES: If you hold your shares through a retirement plan or
if your shares are held with a financial representative you will need to make
transactions through the retirement plan administrator or your financial
representative. Some of the services and programs described in this prospectus
may not be available or may differ in such circumstances. In addition, some of
the funds offered in this prospectus may not be available in your retirement
plan. You should check with your retirement plan administrator or financial
representative for further details.
1 Read this prospectus carefully.
2 Determine how much you want to invest. The minimum initial investment for each
fund is as follows:
- non-retirement accounts: $1,000 per fund
- retirement accounts: $1,000 per fund
- Automatic Investment Plans: $50 to open; you must invest at least $50 in
each fund per month
- subsequent investments: $50 per fund
Minimum investment amounts may be waived for certain retirement accounts
including IRAs and present or former officers, directors and employees and their
families of The Hartford, Wellington Management and their affiliates.
3 Complete the appropriate parts of the account application including any
privileges desired. By applying for privileges now, you can avoid the delay
and inconvenience of having to file an additional application if you want to
add privileges later. If you have questions and you hold the shares through a
financial representative or retirement plan, please contact your financial
representative or plan administrator. If you hold the shares directly with the
fund, please call the transfer agent at the number shown below.
4 Make your initial investment selection. You, your financial representative or
plan administrator can initiate any purchase, exchange or sale of shares.
[Download Table]
ADDRESS: PHONE NUMBER:
THE HARTFORD MUTUAL FUNDS 1-888-843-7824
P.O. BOX 64387
ST. PAUL, MN 55164-0387 OR CONTACT YOUR FINANCIAL REPRESENTATIVE OR PLAN
ADMINISTRATOR FOR INSTRUCTIONS AND ASSISTANCE.
32 THE HARTFORD MUTUAL FUNDS
BUYING SHARES
[Enlarge/Download Table]
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
BY CHECK
- Make out a check for the investment amount, - Make out a check for the investment amount,
[CHECK payable to "The Hartford Mutual Funds". payable to "The Hartford Mutual Funds".
GRAPHIC] - Deliver the check and your completed - Fill out the detachable investment slip from an
application to your financial representative, account statement. If no slip is available,
plan administrator or mail to the address include a note specifying the fund name, your
listed below. share class, your account number and the
name(s) in which the account is registered.
- Deliver the check and your investment slip or
note to your financial representative, plan
administrator or mail to the address listed
below.
BY EXCHANGE
- Call your financial representative, plan - Call your financial representative, plan
[ARROW administrator or the transfer agent at the administrator or the transfer agent at the
GRAPHIC] number below to request an exchange. The number below to request an exchange. The
minimum exchange amount is $500 per fund. minimum exchange amount is $500 per fund.
BY WIRE
- Deliver your completed application to your - Instruct your bank to wire the amount of your
[WIRE financial representative, or mail it to the investment to:
GRAPHIC] address below. U.S. Bank National Association
- Obtain your account number by calling your ABA #091000022, credit account no:
financial representative or the phone number 1-702-2514-1341
below. The Hartford Mutual Funds Purchase Account
- Instruct your bank to wire the amount of your For further credit to: (your name)
investment to: Hartford Mutual Funds Account Number:
U.S. Bank National Association (your account number)
ABA #091000022, credit account no: Specify the fund name, your share class, your
1-702-2514-1341 account number and the name(s) in which the
The Hartford Mutual Funds Purchase Account account is registered. Your bank may charge a
For further credit to: (your name) fee to wire funds.
Hartford Mutual Funds Account Number:
(your account number)
Specify the fund name, your choice of share
class, the new account number and the name(s)
in which the account is registered. Your bank
may charge a fee to wire funds.
BY PHONE
- See "By Wire" and "By Exchange" - Verify that your bank or credit union is a
[PHONE member of the Automated Clearing House (ACH)
GRAPHIC] system.
- Complete the "Telephone Exchanges and Telephone
Redemption" and "Bank Account or Credit Union
Information" sections on your account
application.
- Call the transfer agent at the number below to
verify that these features are in place on your
account.
- Tell the transfer agent representative the fund
name, your share class, your account number,
the name(s) in which the account is registered
and the amount of your investment.
To open or add to an account using the Automatic Investment Plan, see "Additional Investor Services".
[Download Table]
ADDRESS: PHONE NUMBER:
THE HARTFORD MUTUAL FUNDS 1-888-843-7824
P.O. BOX 64387
ST. PAUL, MN 55164-0387 OR CONTACT YOUR FINANCIAL REPRESENTATIVE OR PLAN
ADMINISTRATOR FOR INSTRUCTIONS AND ASSISTANCE.
THE HARTFORD MUTUAL FUNDS 33
SELLING SHARES
[Download Table]
BY LETTER
- Write a letter of instruction or complete a power of
[LETTER attorney indicating the fund name, your share class, your
GRAPHIC] account number, the name(s) in which the account is
registered and the dollar value or number of shares you
wish to sell.
- Include all signatures and any additional documents that
may be required (see next page).
- Mail the materials to the address below or to your plan
administrator.
- A check will be mailed to the name(s) and address in which
the account is registered, or otherwise according to your
letter of instruction. Overnight delivery may be requested
for a nominal fee (currently $10) which will be deducted
from redemption proceeds.
BY PHONE
- Restricted to sales of up to $50,000 in any 7-day period.
[PHONE - To place your order with a representative, call the
GRAPHIC] transfer agent at the number below between 8 A.M. and 7
P.M. Eastern Time (between 7 A.M. and 6 P.M. Central Time)
Monday through Thursday and between 8 A.M. and 6 P.M.
Eastern Time (between 7 A.M. and 5 P.M. Central Time) on
Friday. Orders received after 4 P.M. Eastern Time (3 P.M.
Central Time) will receive the next business day's
offering price.
- For automated service 24 hours a day using your touch-tone
phone, call the number below.
BY WIRE OR ELECTRONIC FUNDS TRANSFER (EFT)
- Fill out the "Telephone Exchanges and Telephone
[COMPUTER Redemption" and "Bank Account or Credit Union Information"
GRAPHIC] sections of your new account application.
- Call the transfer agent to verify that the telephone
redemption privilege is in place on an account, or to
request the forms to add it to an existing account.
- Generally, amounts of $1,000 or more will be wired on the
next business day. Your bank may charge a fee for this
service.
- Amounts of less than $1,000 may be sent by EFT or by
check. Funds from EFT transactions are generally available
by the second business day. Your bank may charge a fee for
this service.
- Phone requests are limited to amounts up to $50,000 in a
7-day period.
BY EXCHANGE
- Obtain a current prospectus for the fund into which you
[ARROW are exchanging by calling your financial representative or
GRAPHIC] the transfer agent at the number below.
- Call your financial representative or the transfer agent
to request an exchange.
To sell shares through a systematic withdrawal plan, see "Additional
Investor Services".
[Download Table]
ADDRESS: PHONE NUMBER:
THE HARTFORD MUTUAL FUNDS 1-888-843-7824
P.O. BOX 64387
ST. PAUL, MN 55164-0387 OR CONTACT YOUR FINANCIAL REPRESENTATIVE OR PLAN
ADMINISTRATOR FOR INSTRUCTIONS AND ASSISTANCE.
34 THE HARTFORD MUTUAL FUNDS
SELLING SHARES IN WRITING
[Download Table]
BY LETTER
In certain circumstances, you will need to make your request to sell
shares in writing. You may need to include additional items with your
request, as shown in the table below. You may also need to include a
signature guarantee, which protects you against fraudulent orders. You
will need a signature guarantee if:
- your address of record has changed within the past 30 days
[LETTER - you are selling more than $50,000 worth of shares
GRAPHIC] - you are requesting payment other than by a check mailed to
the address of record and payable to the registered
owner(s)
Please note that a notary public CANNOT provide a signature guarantee.
Please check with a representative of your bank or other financial
institution about obtaining a signature guarantee.
REQUIREMENTS FOR WRITTEN REQUESTS BY SELLER
OWNERS OF INDIVIDUAL, JOINT, SOLE PROPRIETORSHIP, UGMA/UTMA (CUSTODIAL
ACCOUNTS FOR MINORS) OR GENERAL PARTNER ACCOUNTS.
- Letter of instruction.
- On the letter, the signatures and titles of all persons
authorized to sign for the account, exactly as the account
is registered.
- Signature guarantee if applicable (see above).
OWNERS OF CORPORATE OR ASSOCIATION ACCOUNTS.
- Letter of instruction.
- Corporate resolution, certified within the past twelve
months.
- On the letter and the resolution, the signature of the
person(s) authorized to sign for the account.
- Signature guarantee if applicable (see above).
OWNERS OR TRUSTEES OF TRUST ACCOUNTS.
- Letter of instruction.
- On the letter, the signature(s) of the trustee(s).
- Provide a copy of the trust document certified within the
past twelve months.
- Signature guarantee if applicable (see above).
JOINT TENANCY SHAREHOLDERS WHOSE CO-TENANTS ARE DECEASED.
- Letter of instruction signed by surviving tenant.
- Copy of death certificate.
- Signature guarantee if applicable (see above).
EXECUTORS OF SHAREHOLDER ESTATES.
- Letter of instruction signed by executor.
- Copy of order appointing executor, certified within the
past twelve months.
- Signature guarantee if applicable (see above).
ADMINISTRATORS, CONSERVATORS, GUARDIANS AND OTHER SELLERS OR ACCOUNT
TYPES NOT LISTED ABOVE.
- Call 1-888-843-7824 for instructions.
[Download Table]
ADDRESS: PHONE NUMBER:
THE HARTFORD MUTUAL FUNDS 1-888-843-7824
P.O. BOX 64387
ST. PAUL, MN 55164-0387 OR CONTACT YOUR FINANCIAL REPRESENTATIVE OR PLAN
ADMINISTRATOR FOR INSTRUCTIONS AND ASSISTANCE.
THE HARTFORD MUTUAL FUNDS 35
TRANSACTION POLICIES
--------------------------------------------------------------------------------
VALUATION OF SHARES
The net asset value per share (NAV) for each fund and class is determined each
business day at the close of regular trading on the New York Stock Exchange
("NYSE") (typically 4 p.m. Eastern Time). The assets of each fund consist
primarily of shares of the Underlying Funds, which are valued at their
respective NAVs. Except for the Underlying Fund which is a money market fund,
the Underlying Funds use market prices in valuing portfolio securities, but may
use fair value estimates, as determined under procedures established by the
Underlying Funds' applicable Board of Directors, if reliable market prices are
unavailable. Fair value pricing may be used by an Underlying Fund when current
market values are unavailable or when an event occurs after the close of the
exchange on which the Underlying Fund's portfolio securities are principally
traded that is likely to have changed the value of the securities. The use of
fair value pricing by an Underlying Fund may cause the net asset value of its
shares to differ significantly from the net asset value that would be calculated
using current market values. Securities of foreign issuers and non-dollar
securities are valued on the basis of quotations from the primary market in
which they are traded, and are translated from the local currency into U.S.
dollars using prevailing exchange rates. Debt securities (other than short-term
obligations) held by each fund, through an Underlying Fund (other than the
Underlying Fund which is a money market fund), are valued on the basis of
valuations furnished by an unaffiliated pricing service which determines
valuations for normal institutional size trading units of debt securities.
Securities for which prices are not available from an independent pricing
service, but where an active market exists, are valued using market quotations
obtained from one or more dealers that make markets in the securities or from
the widely-used quotation system in accordance with procedures established by
each Underlying Funds' applicable Board of Directors. Short-term investments
with a maturity of more than 60 days when purchased are valued based on market
quotations until the remaining days to maturity become less than 61 days. The
assets of the Underlying Fund which is a money market fund, and investments of
the other Underlying Funds that will mature in 60 days or less, are valued at
amortized cost, which approximates market value.
Certain funds, through an Underlying Fund, may invest in securities primarily
traded in foreign securities markets. Foreign securities markets may trade on
days when a fund and an Underlying Fund do not compute their net asset value or
may close (generating closing prices) at times before or after the NYSE.
Consequently, the net asset value of the fund and the value of its shares may
change on days, or at times, when an investor cannot redeem the fund's shares.
BUY AND SELL PRICES
When you buy shares, you pay the NAV plus any applicable sales charges. When you
sell shares, you receive the NAV less any applicable sales charges.
EXECUTION OF REQUESTS
Each fund is open on those days when the New York Stock Exchange is open,
typically Monday through Friday. Buy and sell requests are executed at the next
NAV to be calculated after your request is received, if your order is complete
(has all required information), by the transfer agent or authorized
broker-dealers and third-party administrators.
At times of peak activity, it may be difficult to place requests by phone.
During these times, consider sending your request in writing.
In unusual circumstances, any fund may temporarily suspend the processing of
sell requests, or may postpone payment of redemption proceeds for up to three
business days or longer, as allowed by federal securities laws.
REQUESTS IN "GOOD ORDER"
All purchase and redemption requests must be received by the funds in "good
order". This means that your request must include:
- The fund name and account number.
- The amount of the transaction (in dollars or shares).
- Signatures of all owners exactly as registered on the account (for mail
requests).
- Signature guarantees (if required).
- Any supporting legal documentation that may be required.
TELEPHONE TRANSACTIONS
For your protection, telephone requests may be recorded in order to verify their
accuracy. Also for your protection, telephone transactions are not permitted on
accounts whose names or addresses have changed within the past 30 days. Proceeds
from telephone transactions can only be mailed to the address of record.
36 THE HARTFORD MUTUAL FUNDS
TRANSACTION POLICIES
--------------------------------------------------------------------------------
EXCHANGES
You may exchange shares of one fund for shares of the same class of any other
fund. The registration for both accounts involved must be identical. You may be
subject to tax liability or sales charges as a result of your exchange. The
funds reserve the right to amend or terminate the exchange privilege at any
time, for any reason.
RIGHT TO REJECT OR RESTRICT PURCHASE AND EXCHANGE ORDERS
The funds are intended to be long-term investment vehicles and are not designed
to provide investors with a means of speculating on short-term market movements.
Because excessive account transactions can disrupt the management of the funds,
negatively affect the funds' performance and increase transaction costs for all
shareholders, the funds limit account activity as follows:
- you may make no more than two substantive exchanges out of the same fund in
any 90 day period (excluding automatic programs);
- the funds may refuse a share purchase at any time, for any reason;
- the funds may revoke an investor's exchange privilege at any time, for any
reason.
"Substantive" means a dollar amount that the funds determine, in their sole
discretion, could adversely affect the management of the funds.
Some investors purchase or sell shares of the funds through financial
intermediaries and omnibus accounts that aggregate the orders of several
investors and forward the aggregate orders to the funds. Because the funds
receive aggregate purchase and sales orders from the financial intermediaries
and omnibus accounts, the funds cannot always know or reasonably detect
excessive trading by investors that enter orders through these intermediaries or
omnibus accounts.
CERTIFICATED SHARES
Shares are electronically recorded and therefore share certificates are not
issued.
SMALL ACCOUNTS (NON-RETIREMENT ONLY)
If the total value of your account is less than $1,000 (for any reason), you may
be asked to purchase more shares within 30 days. If you do not take action
within this time, your fund may close out your account and mail you the
proceeds. You will not be charged a CDSC if your account is closed for this
reason.
SALES IN ADVANCE OF PURCHASE PAYMENTS
When you place a request to sell shares for which the purchase money has not yet
been collected, the request will be executed in a timely fashion, but the fund
will not release the proceeds to you until your purchase payment clears. This
may take up to 10 calendar days after the purchase.
SPECIAL REDEMPTIONS
Although it would not normally do so, each fund has the right to pay the
redemption price of shares of the fund in whole or in part in portfolio
securities. When the shareholder sells portfolio securities received in this
fashion, a brokerage charge would be incurred. Any such securities would be
valued for the purposes of making such payment at the same value as used in
determining net asset value. The funds, however, always redeem shares solely in
cash up to the lesser of $250,000 or 1% of the net asset value of the applicable
fund during any 90 day period for any one account.
PAYMENT REQUIREMENTS
All of your purchases must be made in U.S. dollars and checks must be drawn on
U.S. banks and made payable to The Hartford Mutual Funds, or in the case of a
retirement account, to the custodian or trustee. You may not purchase shares
with a third party check.
If your check does not clear, your purchase will be canceled and you will be
liable for any losses or fees that the funds or HIFSCO has incurred.
Certain broker-dealers and financial institutions may enter confirmed purchase
orders with the funds on behalf of customers, by phone or other electronic
means, with payment to follow within the customary settlement period (generally
within three business days). If payment is not received by that time, the order
will be canceled and the broker-dealer or financial institution will be held
liable for the resulting fees or losses.
THE HARTFORD MUTUAL FUNDS 37
TRANSACTION POLICIES
--------------------------------------------------------------------------------
DIVIDENDS AND ACCOUNT POLICIES
ACCOUNT STATEMENTS In general, you will receive account statements as follows:
- after every transaction (except certain automatic payment and redemption
arrangements and dividend or distribution reinvestment) that affects your
account balances
- after any changes of name or address of the registered owner(s)
- in all other circumstances, every quarter during which there is activity in
your account, and at least annually
Every year you should also receive, if applicable, a Form 1099-DIV tax
information statement.
If, however, you are a participant in an employer-sponsored retirement plan or
you hold your shares in the name of your broker, you will receive statements
from your plan administrator or broker pursuant to their policies.
DIVIDENDS AND DISTRIBUTIONS Each fund intends to distribute substantially all
of its net income and capital gains to shareholders at least once a year. Except
as noted below, dividends from net investment income of the funds are normally
declared and paid annually. Dividends from the net investment income of the
Balanced Allocation Fund and Conservative Allocation Fund are declared and paid
quarterly. Dividends from the net investment income of the Income Allocation
Fund are declared and paid monthly. Unless shareholders specify otherwise, all
dividends and distributions received from a fund are automatically reinvested in
additional full or fractional shares of that fund.
If you elect to receive monthly/quarterly dividends in cash, you will only
receive a check if the dividend amount exceeds $10. If the dividend is $10 or
less, the amount will automatically be reinvested in the same fund. If you would
like to receive cash dividends, regardless of the amount, you can establish an
electronic funds transfer to your bank. Please call the fund for assistance in
establishing electronic funds transfer transactions at 1-888-843-7824.
TAXABILITY OF DIVIDENDS Dividends and distributions you receive from a fund,
whether reinvested or taken as cash, are generally considered taxable.
Distributions from a fund's long-term capital gains are taxable as long-term
capital gains, regardless of how long you held your shares. Distributions from
short-term capital gains and from ordinary income (other than certain qualified
dividend income) are generally taxable as ordinary income. Distributions
received by a fund from an Underlying Fund generally will be treated as ordinary
income of the fund, if paid from the Underlying Fund's ordinary income or
short-term capital gains. Distributions paid from an Underlying Fund's long-term
capital gains, however, generally will be treated by a fund as long-term capital
gains. A portion of dividends from ordinary income may qualify for the
dividends-received deduction for corporations. Distributions from certain
qualified dividend income generally are taxable to individuals at the same rates
that apply to long-term capital gains, if certain holding period and other
requirements are met. Some dividends paid in January may be taxable as if they
had been paid the previous December.
The Form 1099 that is mailed to you every January details your dividends and
distributions and their federal tax category, although you should verify your
tax liability with your tax professional.
TAXABILITY OF TRANSACTIONS Unless your shares are held in a qualified
retirement account, any time you sell or exchange shares, it is considered a
taxable event for you. You may have a capital gain or a loss on the transaction
which will be long-term or short-term, depending upon how long you held your
shares. You are responsible for any tax liabilities generated by your
transactions.
A fund may be required to withhold U.S. federal income tax at the rate of 28% of
all taxable distributions payable to you if you fail to provide the fund with
your correct taxpayer identification number or to make required certifications,
or if you have been notified by the IRS that you are subject to backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against your U.S. federal income tax liability.
INFLATION-PROTECTED DEBT SECURITIES Periodic adjustments for inflation to the
principal amount of an inflation-protected debt security may give rise to
original issue discount, which will be includable in a fund's gross income. Due
to original issue discount, a fund may be required to make annual distributions
to shareholders that exceed the cash received, which may cause the fund, through
an Underlying Fund, to liquidate certain investments when it is not advantageous
to do so. Also, if the principal value of an inflation-protected debt security
is adjusted downward due to deflation, amounts previously distributed in the
taxable year may be characterized in some circumstances as return of capital.
Distributions from a fund may also be subject to state, local and foreign taxes.
You should consult your own tax adviser regarding the particular tax
consequences of an investment in a fund.
38 THE HARTFORD MUTUAL FUNDS
TRANSACTION POLICIES
--------------------------------------------------------------------------------
ADDITIONAL INVESTOR SERVICES
ELECTRONIC TRANSFERS THROUGH AUTOMATED CLEARING HOUSE (ACH) allow you to
initiate a purchase or redemption for as little as $50 per fund or as much as
$50,000 per fund between your bank account and fund account using the ACH
network. Sales charges and initial purchase minimums apply.
AUTOMATIC INVESTMENT PLAN (AIP) lets you set up regular investments from your
paycheck or bank account to the fund(s) of your choice. You determine the
frequency and amount of your investments, and you can terminate your program at
any time. To establish:
- Complete the appropriate parts of your account application.
- If you are using AIP to open an account, make out a check ($50 minimum per
fund) for your first investment amount payable to "The Hartford Mutual Funds."
Deliver your check and application to your financial representative or the
transfer agent.
SYSTEMATIC WITHDRAWAL PLAN may be used for routine bill payments or periodic
withdrawals from your account. To establish:
- Make sure you have at least $5,000 worth of shares in your account and that
the amount per transaction is $50 or more per fund.
- Make sure you are not planning to invest more money in this account (buying
shares during a period when you are also selling shares of the same fund is
not advantageous to you, because of sales charges).
- SPECIFY THE PAYEE(S). The payee may be yourself or any other party and there
is no limit to the number of payees you may have. A signature guarantee is
required if the payee is someone other than the registered owner.
- Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
- FILL OUT THE RELEVANT PART OF THE ACCOUNT APPLICATION. To add a systematic
withdrawal plan to an existing account, contact your financial representative
or the transfer agent.
DOLLAR COST AVERAGING PROGRAMS (DCA) let you set up monthly or quarterly
exchanges from one fund to the same class of shares of another fund. To
establish:
- Fill out the relevant part of the account application.
- Be sure that the amount is for $50 or more per fund.
- Be sure that the accounts involved have identical registrations.
AUTOMATIC DIVIDEND DIVERSIFICATION (ADD) lets you automatically reinvest
dividends and capital gains distributions paid by one fund into the same class
of another fund. To establish:
- Fill out the relevant portion of the account application.
- Be sure that the accounts involved have identical registrations.
RETIREMENT PLANS The Hartford Mutual Funds offer a range of retirement plans,
including traditional and Roth IRAs, SIMPLE plans, SEPs and 401(k) plans. Using
these plans, you can invest in any fund offered by The Hartford Mutual Funds.
Minimum investment amounts may apply. To find out more, call 1-888-843-7824.
DUPLICATE ACCOUNT STATEMENTS You may request copies of annual account summaries
by calling 1-888-843-7824. A $20 fee will be charged for account summaries older
than the preceding year.
DUPLICATE COPIES OF MATERIALS TO HOUSEHOLDS. Generally the funds will mail only
one copy of each prospectus, annual and semi-annual report to shareholders
having the same last name and address on the funds' records. The consolidation
of these mailings, called householding, benefits the funds through reduced
mailing expenses.
If you want to receive multiple copies of these materials, you may call us at
1-888-843-7824. You may also notify us in writing. Individual copies of
prospectuses and reports will be sent to you commencing within 30 days after we
receive your request to stop householding.
THE HARTFORD MUTUAL FUNDS 39
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Because each fund will not have commenced operations until May 28, 2004, no
financial highlight information is available for any fund.
40 THE HARTFORD MUTUAL FUNDS
PRIVACY POLICY AND PRACTICES OF
THE HARTFORD FINANCIAL SERVICES GROUP, INC. AND ITS AFFILIATES
(HEREIN CALLED "WE, OUR, AND US")
This Privacy Policy applies to our United States Operations
We value your trust. We are committed to the responsible:
a) management;
b) use; and
c) protection;
of PERSONAL INFORMATION.
This notice describes how we collect, disclose, and protect PERSONAL
INFORMATION.
We collect PERSONAL INFORMATION to:
a) service your TRANSACTIONS with us; and
b) support our business functions.
We may obtain PERSONAL INFORMATION from:
a) YOU;
b) your TRANSACTIONS with us; and
c) third parties such as a consumer-reporting agency.
Based on the type of product or service YOU apply for or get from us, PERSONAL
INFORMATION such as:
a) your name;
b) your address;
c) your income;
d) your payment; or
e) your credit history;
may be gathered from sources such as applications, TRANSACTIONS, and consumer
reports.
To serve YOU and service our business, we may share certain PERSONAL
INFORMATION. We will share PERSONAL INFORMATION, only as allowed by law, with
affiliates such as:
a) our insurance companies;
b) our employee agents;
c) our brokerage firms; and
d) our administrators.
As allowed by law, we may share PERSONAL FINANCIAL INFORMATION with our
affiliates to:
a) market our products; or
b) market our services;
to YOU without providing YOU with an option to prevent these disclosures.
We may also share PERSONAL INFORMATION, only as allowed by law, with
unaffiliated third parties including:
a) independent agents;
b) brokerage firms;
c) insurance companies;
d) administrators; and
e) service providers;
who help us serve YOU and service our business.
When allowed by law, we may share certain PERSONAL FINANCIAL INFORMATION with
other unaffiliated third parties who assist us by performing services or
functions such as:
a) taking surveys;
b) marketing our products or services; or
c) offering financial products or services under a joint agreement between us
and one or more financial institutions.
We will not sell or share your PERSONAL FINANCIAL INFORMATION with anyone for
purposes unrelated to our business functions without offering YOU the
opportunity to:
a) "opt-out;" or
b) "opt-in;"
as required by law.
We only disclose PERSONAL HEALTH INFORMATION with:
a) your proper written authorization; or
b) as otherwise allowed or required by law.
Our employees have access to PERSONAL INFORMATION in the course of doing their
jobs, such as:
a) underwriting policies;
b) paying claims;
c) developing new products; or
d) advising customers of our products and services.
We use manual and electronic security procedures to maintain:
a) the confidentiality; and
b) the integrity of;
PERSONAL INFORMATION that we have. We use these procedures to guard against
unauthorized access.
Some techniques we use to protect PERSONAL INFORMATION include:
a) secured files;
b) user authentication;
c) encryption;
d) firewall technology; and
e) the use of detection software.
We are responsible for and must:
a) identify information to be protected;
b) provide an adequate level of protection for that data;
c) grant access to protected data only to those people who must use it in the
performance of their job-related duties.
Employees who violate our Privacy Policy will be subject to discipline, which
may include ending their employment with us.
THE HARTFORD MUTUAL FUNDS 41
PRIVACY POLICY AND PRACTICES OF
THE HARTFORD FINANCIAL SERVICES GROUP, INC. AND ITS AFFILIATES
(HEREIN CALLED "WE, OUR, AND US") (CONTINUED)
At the start of our business relationship, we will give YOU a copy of our
current Privacy Policy.
We will also give YOU a copy of our current Privacy Policy once a year if YOU
maintain a continuing business relationship with us.
We will continue to follow our Privacy Policy regarding PERSONAL INFORMATION
even when a business relationship no longer exists between us.
As used in this Privacy Notice:
APPLICATION means your request for our product or service.
PERSONAL FINANCIAL INFORMATION means financial information such as:
a) credit history;
b) income;
c) financial benefits; or
d) policy or claim information.
PERSONAL HEALTH INFORMATION means health information such as:
a) your medical records; or
b) information about your illness, disability or injury.
PERSONAL INFORMATION means information that identifies YOU personally and is not
otherwise available to the public. It includes:
a) PERSONAL FINANCIAL INFORMATION; and
b) PERSONAL HEALTH INFORMATION.
TRANSACTION means your business dealings with us, such as:
a) your APPLICATION;
b) your request for us to pay a claim; and
c) your request for us to take an action on your account.
YOU means an individual who has given us PERSONAL INFORMATION in conjunction
with:
a) asking about;
b) applying for; or
c) obtaining;
a financial product or service from us if the product or service is used mainly
for personal, family, or household purposes.
This Privacy Policy is being provided on behalf of the following affiliates of
The Hartford Financial Services Group, Inc.:
American Maturity Life Insurance Company; Capstone Risk Management, LLC; First
State Insurance Company; Hart Life Insurance Company; Hartford Accident &
Indemnity Company; Hartford Administrative Services Company; Hartford Casualty
Insurance Company; Hartford Equity Sales Company, Inc.; Hartford Fire Insurance
Company; Hartford HLS Series Fund II, Inc.; Hartford Insurance Company of
Illinois; Hartford Insurance Company of the Midwest; Hartford Insurance Company
of the Southeast; Hartford International Life Reassurance Corporation; Hartford
Investment Financial Services, LLC; Hartford Investment Management Company;
Hartford Life & Accident Insurance Company; Hartford Life and Annuity Insurance
Company; Hartford Life Insurance Company; Hartford Lloyd's Insurance Company;
Hartford Securities Distribution Company, Inc.; Hartford Series Fund, Inc.;
Hartford Specialty Company; Hartford Underwriters Insurance Company; Hartford-
Comprehensive Employee Benefit Service Company; International Corporate
Marketing Group, LLC; New England Insurance Company; Nutmeg Insurance Agency,
Inc.; Nutmeg Insurance Company; Nutmeg Life Insurance Company; Omni General
Agency, Inc.; Omni Indemnity Company; Omni Insurance Company; P2P Link, LLC;
Pacific Insurance Company, Limited; Planco Financial Services, Inc.; Property
and Casualty Insurance Company of Hartford; Sentinel Insurance Company, Ltd.;
Servus Life Insurance Company; Specialty Risk Services, Inc.; The Hartford
Income Shares Fund, Inc.; The Hartford Mutual Funds II, Inc.; The Hartford
Mutual Funds, Inc.; Trumbull Insurance Company; Trumbull Services, L.L.C.; Twin
City Fire Insurance Company; Woodbury Financial Services, Inc.
42 THE HARTFORD MUTUAL FUNDS
[THIS PAGE IS INTENTIONALLY LEFT BLANK]
[THIS PAGE IS INTENTIONALLY LEFT BLANK]
FOR MORE INFORMATION
--------------------------------------------------------------------------------
Two documents are available that offer further information on The Hartford
Mutual Funds:
ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS
Additional information about each fund will be contained in the financial
statements and portfolio holdings in the fund's annual and semi-annual reports.
In the fund's annual report you will also find a discussion of the market
conditions and investment strategies that will have significantly affected that
fund's performance during the last fiscal year, as well as the auditor's report.
Because each fund will not have commenced operations until May 28, 2004, the
funds have not yet delivered an annual or semi-annual report.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information on the funds.
A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference into (which means it is legally a part of) this
prospectus.
To request a free copy of the current SAI or for shareholder inquiries or other
information about the funds, please contact the funds at:
BY MAIL:
The Hartford Mutual Funds
P.O. Box 64387
St. Paul, MN 55164-0387
(For overnight mail)
The Hartford Mutual Funds
500 Bielenberg Drive
Woodbury, MN 55125-1400
BY PHONE:
1-888-843-7824
ON THE INTERNET:
www.hartfordinvestor.com
Or you may view or obtain these documents from the SEC:
IN PERSON:
at the SEC's Public Reference Room in Washington, DC
Information on the operation of the SEC's public reference room may be obtained
by calling 1-202-942-8090.
BY MAIL:
Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-0102
Requests which are made by mail require the payment of a duplicating fee to the
SEC to obtain a document.
ON THE INTERNET OR BY E-MAIL:
Internet: (on the EDGAR Database on the SEC's internet site) www.sec.gov
E-Mail: publicinfo@sec.gov
Requests which are made by e-mail require the payment of a duplicating fee to
the SEC to obtain a document.
SEC FILE NUMBER:
The Hartford Mutual Funds, Inc. 811-07589
STATEMENT OF ADDITIONAL INFORMATION
THE HARTFORD MUTUAL FUNDS, INC.
CLASS A, CLASS B AND CLASS C SHARES
THE HARTFORD AGGRESSIVE GROWTH ALLOCATION FUND
THE HARTFORD GROWTH ALLOCATION FUND
THE HARTFORD BALANCED ALLOCATION FUND
THE HARTFORD CONSERVATIVE ALLOCATION FUND
THE HARTFORD INCOME ALLOCATION FUND
P.O. Box 64387
St. Paul, MN 55164-0387
This Statement of Additional Information ("SAI") is not a prospectus but should
be read in conjunction with the prospectus for the Funds. A free copy of the
prospectus is available upon request by writing to: The Hartford Mutual Funds,
P. O. Box 64387, St. Paul, MN 55164-0387, or by calling 1-888-843-7824.
Date of Prospectus: May 19, 2004
Date of Statement of Additional Information: May 19, 2004
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TABLE OF CONTENTS PAGE
GENERAL INFORMATION................................................................1
INVESTMENT OBJECTIVES AND POLICIES.................................................2
FUND MANAGEMENT...................................................................19
INVESTMENT MANAGEMENT ARRANGEMENTS................................................30
PORTFOLIO TRANSACTIONS AND BROKERAGE..............................................31
FUND EXPENSES.....................................................................32
DISTRIBUTION ARRANGEMENTS.........................................................33
PURCHASE AND REDEMPTION OF SHARES.................................................37
DETERMINATION OF NET ASSET VALUE..................................................40
CAPITALIZATION AND VOTING RIGHTS..................................................41
INVESTMENT PERFORMANCE............................................................42
TAXES.............................................................................49
PRINCIPAL UNDERWRITER.............................................................53
CUSTODIAN.........................................................................53
TRANSFER AGENT....................................................................53
INDEPENDENT AUDITORS..............................................................53
OTHER INFORMATION.................................................................53
PROXY VOTING POLICIES AND PROCEDURES..............................................53
FINANCIAL STATEMENTS..............................................................54
APPENDIX.........................................................................A-1
GENERAL INFORMATION
The Hartford Mutual Funds, Inc. (the "Company") is an open-end
management investment company consisting of thirty-five separate investment
portfolios or mutual funds. This SAI relates to all of the funds listed on the
front cover page (each, a "Fund" and together, the "Funds"). The Company was
organized as a Maryland corporation on March 21, 1996. The Company issues
separate series of shares of stock for each Fund representing a fractional
undivided interest in that Fund. Each Fund issues shares in three different
classes: Class A, Class B and Class C. Class A, Class B and Class C shares are
offered through one prospectus describing those classes. This SAI relates to
Class A, Class B and Class C shares. Each Fund is a diversified fund. Each Fund
is a "fund of funds," and diversifies its assets by investing, at present, in
the Class Y shares of several other Hartford Mutual Funds (as listed below and
as identified under sub-heading "D. Investment Objectives of the Funds," the
"Underlying Funds").
Hartford Investment Financial Services, LLC ("HIFSCO") is the
investment manager and principal underwriter to each Fund. HIFSCO is an indirect
wholly-owned subsidiary of The Hartford Financial Services Group, Inc. ("The
Hartford"), a Connecticut financial services company with over $225.9 billion in
assets as of December 31, 2003. HIFSCO is also the investment manager to each of
the Underlying Funds. In addition, Wellington Management Company LLP
("Wellington Management") and Hartford Investment Management Company ("Hartford
Investment Management") are sub-advisers to the Underlying Funds and provide the
day-to-day investment management of the Underlying Funds. Hartford Investment
Management is a wholly-owned subsidiary of The Hartford.
The commencement of operations date for each Fund is May 28, 2004.
The Underlying Funds in which the Funds currently invest began
operations on the following dates indicated below:
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The Hartford Capital Appreciation Fund July 22, 1996
The Hartford Disciplined Equity Fund April 30, 1998
The Hartford Dividend and Growth Fund July 22, 1996
The Hartford Global Leaders Fund September 30, 1998
The Hartford Growth Fund June 8, 1949
The Hartford Growth Opportunities Fund March 31, 1963
The Hartford High Yield Fund September 30, 1998
The Hartford Inflation Plus Fund October 31, 2002
The Hartford International Capital Appreciation Fund April 30, 2001
The Hartford MidCap Value Fund April 30, 2001
The Hartford Money Market Fund July 22, 1996
The Hartford Short Duration Fund October 31, 2002
The Hartford Small Company Fund July 22, 1996
The Hartford SmallCap Growth Fund January 4, 1988
The Hartford Stock Fund July 22, 1996
The Hartford Total Return Bond Fund July 22, 1996
The Hartford Value Fund April 30, 2001
The Hartford Value Opportunities Fund January 2, 1996
The Hartford also sponsors a family of mutual funds that are primarily
used as investment options for variable annuity contracts and variable life
insurance contracts issued by Hartford Life Insurance Company ("Hartford Life")
and its affiliates, for other insurance companies, and for certain retirement
plans. HL Investment Advisors, LLC ("HL Advisors"), an affiliate of The
Hartford, is the investment adviser to that family of funds.
INVESTMENT OBJECTIVES AND POLICIES
With respect to percentage restrictions on investments described in
this SAI or in the prospectus, if such percentage restrictions are adhered to at
the time of investment, a later increase or decrease in such percentage
resulting from a change in values of securities or amount of net assets is not a
violation of any of such restrictions.
A. FUNDAMENTAL RESTRICTIONS OF THE FUNDS
Each Fund has adopted the following fundamental investment restrictions
which may not be changed without approval of a majority of the applicable Fund's
outstanding voting securities. Under the Investment Company Act of 1940, as
amended (the "1940 Act"), and as used in the prospectuses and this SAI, a
"majority of the outstanding voting securities" means the approval of the lesser
of (1) the holders of 67% or more of the outstanding shares of a Fund (or a
class of the outstanding shares of a Fund) represented at a meeting if the
holders of more than 50% of the outstanding shares of the Fund (or class) are
present in person or by proxy or (2) the holders of more than 50% of the
outstanding shares of the Fund (or of the class).
Each Fund has elected to be classified as a diversified series of an
open-end management investment company.
The investment objective and principal investment strategies of each
Fund are set forth in the prospectus. Set forth below are the fundamental
investment restrictions and policies applicable to each Fund followed by the
principal non-fundamental restrictions and policies applicable to each Fund.
Each Fund will not:
1. Borrow money or issue any class of senior securities, except
to the extent consistent with the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder, or as may otherwise be permitted from
time to time by regulatory authority.
2. Purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the Fund's total assets
would be invested in the securities of companies whose principal business
activities are in the same industry; except that the Fund may invest more than
25% of its assets in any one Underlying Fund.
3. Make loans, except to the extent consistent with the
Investment Company Act of 1940, as amended, and the rules and regulations
thereunder, or as may otherwise be permitted from time to time by regulatory
authority.
4. Act as an underwriter of securities of other issuers, except
to the extent that, in connection with the disposition of portfolio securities,
the Fund may be deemed an underwriter under applicable laws.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments, although it may purchase
securities secured by real estate or interests therein, or securities issued by
companies which invest in real estate or interests therein.
6. Purchase or sell commodities or commodities contracts, except
that the Fund may purchase or sell financial futures contracts, options on
financial futures contracts and futures contracts, forward contracts, and
options with respect to foreign currencies, and may enter into swap transactions
or other financial transactions of any kind.
With respect to investment restriction number 2, in accordance with
each Fund's investment program as set forth in the prospectus, a Fund may invest
more than 25% of its assets in any one Underlying Fund. Each Fund treats the
assets of the Underlying Funds in which it invests as its own for purposes of
this restriction. Each of the Underlying Funds will not concentrate more than
25% of its total assets in any one industry.
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For each Fund, if the above percentage restrictions are adhered to at
the time of investment, a later increase or decrease in such percentage
resulting from a change in values of securities or amount of net assets is not a
violation of any of the foregoing restrictions.
Notwithstanding the foregoing investment restrictions, the Underlying
Funds in which the Funds may invest have adopted certain investment restrictions
that may be more or less restrictive than those listed above, thereby permitting
a Fund to engage indirectly in investment strategies that may be prohibited
under the investment restrictions listed above. The investment restrictions of
each Underlying Fund are set forth in the SAI for the Underlying Funds.
B. NON-FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE FUNDS
The following restrictions are designated as non-fundamental and may be
changed by the board of directors without the approval of shareholders.
Each Fund may not:
1. Pledge, mortgage or hypothecate its assets, except to the
extent required to secure permitted borrowings. This investment restriction
shall not apply to any required segregated account, securities lending
arrangements, reverse repurchase agreements or other assets in escrow and
collateral arrangements with respect to margin for futures contracts and related
options.
2. Purchase any securities on margin (except that a Fund may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of portfolio securities). The deposit or payment by a Fund
of initial or maintenance margin in connection with futures contracts or related
options transactions is not considered the purchase of a security on margin.
3. Purchase securities while outstanding borrowings exceed 5% of
the Fund's total assets, except for temporary or emergency purposes. Reverse
repurchase agreements, dollar rolls, securities lending, or other investments or
transactions described in the Fund's registration statement are not deemed to be
borrowings for purposes of this restriction.
4. Sell securities short except for short sales against the box.
5. Invest more than 15% of the Fund's net assets in illiquid
securities.
6. Enter into a stock index futures contract (by exercise of any
option or otherwise) or acquire any options thereon, if immediately thereafter,
the total of the initial margin deposits required with respect to all open
futures positions, at the time such positions were established, plus the sum of
the premiums paid for all unexpired options on stock index futures contracts
would exceed 5% of the value of the Fund's total assets.
For each Fund, if the above percentage restrictions are adhered to at
the time of investment, a later increase or decrease in such percentage
resulting from a change in values of securities or amount of net assets is not a
violation of any of the foregoing restrictions.
Notwithstanding the foregoing investment restrictions, the Underlying
Funds in which the Funds may invest have adopted certain investment restrictions
that may be more or less restrictive than those listed above, thereby permitting
a Fund to engage indirectly in investment strategies that may be prohibited
under the investment restrictions listed above. The investment restrictions of
each Underlying Fund are set forth in the SAI for the Underlying Funds.
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C. NON-FUNDAMENTAL TAX RESTRICTIONS OF THE FUNDS
Each Fund must:
1. Maintain its assets so that, at the close of each quarter of
its taxable year,
(a) at least 50 percent of the fair market value of its
total assets is comprised of cash, cash items, U.S.
Government securities, securities of other regulated
investment companies and other securities limited in
respect of any one issuer to no more than 5 percent
of the fair market value of the Fund's total assets
and 10 percent of the outstanding voting securities
of such issuer,
(b) no more than 25 percent of the fair market value of
its total assets is invested in the securities of any
one issuer (other than U.S. Government securities and
securities of other regulated investment companies)
or of two or more issuers controlled by the Fund and
engaged in the same, similar, or related trades or
businesses.
These tax-related limitations are subject to cure provisions under
applicable tax laws and may be changed by the board of directors to the extent
appropriate in light of changes to applicable tax law requirements.
D. INVESTMENT OBJECTIVES OF THE FUNDS
The Funds are professionally managed funds which allocate their assets
in a combination of other Hartford Mutual Funds: domestic and international
funds and fixed income funds (Underlying Funds). The Funds differ primarily due
to their asset allocation among these fund types.
The investment objectives of the Funds are as follows:
Aggressive Growth Allocation Fund: the Fund seeks long-term capital
appreciation. The Fund seeks its goal through investment in a combination of
domestic and international equity funds, with a greater focus on small cap and
international funds relative to the other Funds.
Growth Allocation Fund: the Fund seeks long-term capital appreciation.
The Fund seeks its goal through investment in a combination of domestic and
international equity funds, with a small portion of assets in fixed income
funds.
Balanced Allocation Fund: the Fund seeks long-term capital appreciation
and income. The Fund seeks its goal through investment in a combination of
domestic and international equity funds and fixed income funds.
Conservative Allocation Fund: the Fund seeks current income and
long-term capital appreciation. The Fund seeks its goal through investment in a
combination of funds, primarily made up of fixed income funds, with a smaller
allocation to equity funds.
Income Allocation Fund: the Fund seeks current income and, as a
secondary objective, capital preservation. The Fund seeks its goals through
investment in a combination of fixed income funds.
Each Fund's investment performance and its ability to achieve its
investment objective is directly related to the performance of the Underlying
Funds in which it invests. Because each Fund invests in the Underlying Funds,
investors in each Fund will be affected by the Underlying Funds' investment
strategies in direct proportion to the amount of assets the Fund allocates to
the Underlying Fund pursuing such strategies. The investment objectives and
principal investment strategies of the Underlying Funds are described in the
Funds' prospectus as well as the prospectus of the Underlying Funds. To request
a copy of the prospectus for an Underlying Fund, contact The Hartford Mutual
Funds at 1-888-843-7824.
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The following is a list of the Underlying Funds in which the Funds may
invest.
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AGGRESSIVE GROWTH GROWTH BALANCED
ALLOCATION FUND ALLOCATION FUND ALLOCATION FUND
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Hartford Capital Appreciation Fund Hartford Capital Appreciation Fund Hartford Capital Appreciation Fund
Hartford Disciplined Equity Fund Hartford Disciplined Equity Fund Hartford Disciplined Equity Fund
Hartford Dividend and Growth Fund Hartford Dividend and Growth Fund Hartford Dividend and Growth Fund
Hartford Global Leaders Fund Hartford Global Leaders Fund Hartford Global Leaders Fund
Hartford Growth Fund Hartford Growth Fund Hartford Growth Fund
Hartford Growth Opportunities Fund Hartford Growth Opportunities Fund Hartford High Yield Fund
Hartford International Capital Hartford Inflation Plus Fund Hartford Inflation Plus Fund
Appreciation Fund
Hartford Small Company Fund Hartford International Capital Hartford International Capital
Appreciation Fund Appreciation Fund
Hartford SmallCap Growth Fund Hartford MidCap Value Fund
Hartford Value Fund Hartford MidCap Value Fund Hartford Money Market Fund
Hartford Value Opportunities Fund Hartford Short Duration Fund Hartford Short Duration Fund
Hartford Small Company Fund Hartford Small Company Fund
Hartford SmallCap Growth Fund Hartford Stock Fund
Hartford Total Return Bond Fund Hartford Total Return Bond Fund
Hartford Value Fund Hartford Value Fund
Hartford Value Opportunities Fund Hartford Value Opportunities Fund
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CONSERVATIVE INCOME
ALLOCATION FUND ALLOCATION FUND
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Hartford Capital Appreciation Fund Hartford High Yield Fund
Hartford Global Leaders Fund Hartford Inflation Plus Fund
Hartford Growth Fund Hartford Money Market Fund
Hartford High Yield Fund Hartford Short Duration Fund
Hartford Inflation Plus Fund Hartford Total Return Bond Fund
Hartford International Capital
Appreciation Fund
Hartford MidCap Value Fund
Hartford Money Market Fund
Hartford Short Duration Fund
Hartford Stock Fund
Hartford Total Return Bond Fund
Hartford Value Opportunities Fund
E. MISCELLANEOUS INVESTMENT STRATEGIES AND RISKS OF THE UNDERLYING FUNDS
The principal investment strategies for each Fund are discussed in the
Fund's prospectus. As stated above, because each Fund invests in the Underlying
Funds, investors in each Fund will be affected by the Underlying Funds'
investment strategies in direct proportion to the amount of assets the Fund
allocates to the Underlying Fund pursuing such strategies. Accordingly, each
Fund is subject to the same risks as the Underlying Funds in direct proportion
to the allocation of its assets among the Underlying Funds. The principal
investment strategies of the Underlying Funds are described in the Funds'
prospectus as well as the prospectus of the Underlying Funds. A further
description of certain investment strategies used by various Underlying Funds is
set forth below. The percentage limits described in the sections below are based
on market value and are determined as of the time securities are purchased.
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Certain descriptions in the prospectuses of the Funds and the
Underlying Funds and in this SAI of a particular investment practice or
technique in which the Underlying Funds may engage or a financial instrument
which the Underlying Funds may purchase are meant to describe the spectrum of
investments that an Underlying Fund's subadviser, in its discretion, might, but
is not required to, use in managing the Underlying Fund's portfolio assets in
accordance with the Underlying Fund's investment objective, policies and
restrictions. The subadviser, in its discretion, may employ such practice,
technique or instrument for one or more Underlying Funds, but not for all
Underlying Funds for which it serves as subadviser. It is possible that certain
types of financial instruments or techniques may not be available, permissible
or effective for their intended purposes in all markets.
MONEY MARKET INSTRUMENTS AND TEMPORARY INVESTMENT STRATEGIES In
addition to the Money Market Fund, which may hold cash and invest in money
market instruments at any time, all other Underlying Funds may hold cash and
invest in high quality money market instruments under appropriate circumstances
as determined by Hartford Investment Management or Wellington Management,
subject to the overall supervision of HIFSCO. The Underlying Funds may invest up
to 100% of their total assets in cash or money market instruments only for
temporary defensive purposes.
Money market instruments include, but are not limited to: (1) banker's
acceptances; (2) obligations of governments (whether U.S. or foreign) and their
agencies and instrumentalities; (3) short-term corporate obligations, including
commercial paper, notes, and bonds; (4) other short-term debt obligations; (5)
obligations of U.S. banks, foreign branches of U.S. banks (Eurodollars), U.S.
branches and agencies of foreign banks (Yankee dollars), and foreign branches of
foreign banks; (6) asset-backed securities; and (7) repurchase agreements.
REPURCHASE AGREEMENTS A repurchase agreement is an agreement by which
the seller of a security agrees to repurchase the security sold at a mutually
agreed upon time and price. It may also be viewed as the loan of money by an
Underlying Fund to the seller. The resale price by the Underlying Fund would be
in excess of the purchase price, reflecting an agreed upon market interest rate.
Each Underlying Fund is permitted to enter into fully collateralized
repurchase agreements. The Company's board of directors has delegated to
Hartford Investment Management and Wellington Management the responsibility of
evaluating the creditworthiness of the banks and securities dealers with which
the Underlying Funds will engage in repurchase agreements.
Hartford Investment Management or Wellington Management will monitor
such transactions to ensure that the value of underlying collateral will be at
least equal at all times to the total amount of the repurchase obligation,
including the accrued interest. If the seller defaults, an Underlying Fund could
realize a loss on the sale of the underlying security to the extent that the
proceeds of sale including accrued interest are less than the resale price
provided in the agreement including interest. In the event the seller commences
bankruptcy proceedings, a court may characterize the transaction as a loan. If
an Underlying Fund has not perfected a security interest in the security, the
Underlying Fund may be required to return the security to the seller's estate
and be treated as an unsecured creditor. As an unsecured creditor, the
Underlying Fund could lose some or all of the principal and interest involved in
the transaction.
REVERSE REPURCHASE AGREEMENTS Each Underlying Fund may also enter into
reverse repurchase agreements. Reverse repurchase agreements involve sales by an
Underlying Fund of portfolio assets concurrently with an agreement by an
Underlying Fund to repurchase the same assets at a later date at a fixed price.
Reverse repurchase agreements carry the risk that the market value of the
securities which an Underlying Fund is obligated to repurchase may decline below
the repurchase price. A reverse repurchase agreement is viewed as a
collateralized borrowing by an Underlying Fund. Borrowing magnifies the
potential for gain or loss on the portfolio securities of an Underlying Fund
and, therefore, increases the possibility of fluctuation in an Underlying Fund's
net asset value.
INFLATION-PROTECTED DEBT SECURITIES Each Underlying Fund may invest in
inflation-protected debt securities. Inflation-protected debt securities are
fixed income securities whose principal value is periodically adjusted according
to the rate of inflation. Two structures are common. The U.S. Treasury and some
other issuers use a structure that accrues inflation into the principal value of
the security. Most other issuers pay out the inflation accruals as part of a
semiannual coupon.
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If the periodic adjustment rate measuring inflation falls, the
principal value of inflation-protected debt securities will be adjusted
downward, and consequently the interest payable on these securities (calculated
with respect to a smaller principal amount) will be reduced. Repayment of the
original security principal upon maturity (as adjusted for inflation) is
guaranteed in the case of U.S. Treasury inflation-protected debt securities,
even during a period of deflation. However, the current market value of the
securities is not guaranteed, and will fluctuate. The Underlying Funds may also
invest in other inflation related securities which may or may not provide a
similar guarantee. If a guarantee of principal is not provided, the adjusted
principal value of the security repaid at maturity may be less than the original
principal.
While these securities are expected to be protected from long-term
inflationary trends, short-term increases in inflation may lead to decline in
value. If interest rates rise due to reasons other than inflation (for example,
due to changes in currency exchange rates), investors in these securities may
not be protected to the extent that the increase is not reflected in the
security's inflation measure.
The periodic adjustment of U.S. inflation-protected debt securities is
tied to the Consumer Price Index for Urban Consumers ("CPI-U"), which is
calculated monthly by the U.S. Bureau of Labor Statistics. The CPI-U is an index
of changes in the cost of living, made up of components such as housing, food,
transportation and energy. Inflation-protected debt securities issued by a
foreign government are generally adjusted to reflect a comparable inflation
index, calculated by that government. There can be no assurance that the CPI-U
or any foreign inflation index will accurately measure the real rate of
inflation in the prices of goods and services. Moreover, there can be no
assurance that the rate of inflation in a foreign country will be correlated to
the rate of inflation in the United States.
Any increase in the principal amount of an inflation-protected debt
security will be considered taxable ordinary income, even though investors do
not receive their principal until maturity.
DEBT SECURITIES Each Underlying Fund is permitted to invest in debt
securities including: (1) securities issued or guaranteed as to principal or
interest by the U.S. Government, its agencies or instrumentalities, (2)
non-convertible debt securities issued or guaranteed by U.S. corporations or
other issuers (including foreign issuers), (3) asset-backed securities, (4)
mortgage-related securities, including collateralized mortgage obligations
("CMO's"), (5) securities issued or guaranteed as to principal or interest by a
foreign issuer, including supranational entities such as development banks,
non-U.S. corporations, banks or bank holding companies, or other foreign
issuers, and (6) commercial mortgage-backed securities.
INVESTMENT GRADE DEBT SECURITIES The Money Market Fund is permitted to
invest only in high quality, short term instruments as determined by Rule 2a-7
under the 1940 Act. Each of the other Underlying Funds is permitted to invest in
debt securities rated within the four highest rating categories (e.g., "Aaa",
"Aa", "A" or "Baa" by Moody's Investors Service, Inc. ("Moody's") or "AAA",
"AA", "A" or "BBB" by Standard and Poor's Corporation ("S&P") (or, if unrated,
securities of comparable quality as determined by Hartford Investment Management
or Wellington Management). These securities are generally referred to as
"investment grade securities." Each rating category has within it different
gradations or sub-categories. If an Underlying Fund is authorized to invest in a
certain rating category, the Underlying Fund is also permitted to invest in any
of the sub-categories or gradations within that rating category. If a security
is downgraded to a rating category which does not qualify for investment,
Hartford Investment Management or Wellington Management will use its discretion
on whether to hold or sell based upon its opinion on the best method to maximize
value for shareholders over the long term. Debt securities carrying the fourth
highest rating (e.g., "Baa" by Moody's and "BBB" by S&P), and unrated securities
of comparable quality (as determined by Hartford Investment Management or
Wellington Management) are viewed to have adequate capacity for payment of
principal and interest, but do involve a higher degree of risk than that
associated with investments in debt securities in the higher rating categories
and such securities lack outstanding investment characteristics and do have
speculative characteristics. To the extent that an Underlying Fund invests in
higher-grade securities, the Underlying Fund may not be able to avail itself of
opportunities for higher income which may be available at lower grades.
HIGH YIELD-HIGH RISK DEBT SECURITIES The Total Return Bond Fund is
permitted to invest up to 30% of its total assets in securities rated in the
highest level below investment grade (e.g., "Ba" for Moody's or "BB" by S&P), or
if unrated, securities determined to be of comparable quality by Hartford
Investment Management. The
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Inflation Plus Fund is permitted to invest up to 20% of its net assets in fixed
income securities rated "Ba" or lower by Moody's, "BB" or lower by S&P or "BB"
or lower by Fitch or of comparable quality if not rated. Although the High Yield
Fund is permitted to invest up to 100% of its total assets in securities rated
below investment grade, no more than 10% of total assets will be invested in
securities rated below "B3" by Moody's or "B-" by S&P, or if unrated, determined
to be of comparable quality by Hartford Investment Management. Each of the other
Underlying Funds, except Money Market Fund and Short Duration Fund, is permitted
to invest up to 5% of its total assets in fixed income securities rated as low
as "C" by Moody's or "CC" by S&P or of comparable quality if not rated.
Securities rated below investment grade are commonly referred to as
"high yield-high risk debt securities" or "junk bonds". Each rating category has
within it different gradations or sub-categories. For instance the "Ba" rating
for Moody's includes "Ba3", "Ba2" and "Ba1". Likewise the S&P rating category of
"BB" includes "BB+", "BB" and "BB-". If an Underlying Fund is authorized to
invest in a certain rating category, the Underlying Fund is also permitted to
invest in any of the sub-categories or gradations within that rating category.
Descriptions of the debt securities ratings system, including their speculative
characteristics attributable to each ratings category, are set forth as an
appendix to this SAI. These securities generally entail greater risk (including
the possibility of default or bankruptcy of the issuer), involve greater
volatility of price and risk to principal and income, and may be less liquid
than securities in higher rating categories. Securities in the highest category
below investment grade are considered to be of poor standing and predominantly
speculative. These securities are considered speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligations. Accordingly, it is possible that these types of
factors could, in certain instances, reduce the value of securities held by an
Underlying Fund with a commensurate effect on the value of the Underlying Fund's
shares. If a security is downgraded to a rating category which does not qualify
for investment, Hartford Investment Management or Wellington Management will use
its discretion on whether to hold or sell based upon its opinion on the best
method to maximize value for shareholders over the long term.
MORTGAGE-RELATED SECURITIES The mortgage-related securities in which
each Underlying Fund may invest include interests in pools of mortgage loans
made by lenders such as savings and loan institutions, mortgage bankers,
commercial banks and others. Pools of mortgage loans are assembled for sale to
investors (such as the Underlying Funds) by various governmental,
government-related and private organizations. The Underlying Funds may also
invest in similar mortgage-related securities which provide funds for
multi-family residences or commercial real estate properties. When interest
rates rise, mortgage prepayment rates tend to decline, thus lengthening the life
of a mortgage-related security and increasing the price volatility of that
security, affecting the price volatility of an Underlying Fund's shares.
The value of these securities may be significantly affected by interest
rates, the market's perception of the issuers and the creditworthiness of the
parties involved. These securities may also be subject to prepayment risk and
the risk that the underlying loans may not be repaid. The yield characteristics
of the mortgage securities differ from those of traditional debt securities.
Among the major differences are that interest and principal payments are made
more frequently on mortgage securities, usually monthly, and that principal may
be prepaid at any time because the underlying mortgage loans or other assets
generally permit prepayment at any time. The risks associated with prepayment
and the rate at which prepayment may occur are influenced by a variety of
economic, geographic, demographic, social and other factors including interest
rate levels, changes in housing needs, net equity built by mortgagors in the
mortgaged properties, job transfers, and unemployment rates. If an Underlying
Fund purchases these securities at a premium, a prepayment rate that is faster
than expected will reduce yield to maturity, while a prepayment rate that is
slower than expected will have the opposite effect of increasing yield to
maturity. Conversely, if an Underlying Fund purchases these securities at a
discount, faster than expected prepayments will increase, while slower than
expected prepayments will reduce, yield to maturity. Amounts available for
reinvestment are likely to be greater during a period of declining interest
rates and, as a result, are likely to be reinvested at lower interest rates than
during a period of rising interest rates. Accelerated prepayments on securities
purchased by an Underlying Fund at a premium also impose a risk of loss of
principal because the premium may not have been fully amortized at the time the
principal is repaid in full.
The mortgage securities in which an Underlying Fund invests differ from
conventional bonds in that principal is paid back over the life of the mortgage
securities rather than at maturity. As a result, the holder of the mortgage
securities (e.g., an Underlying Fund) receives monthly scheduled payments of
principal and interest, and may receive unscheduled principal payments
representing prepayments on the underlying mortgages. When the
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holder reinvests the payments and any unscheduled prepayments of principal it
receives, it may receive a rate of interest which is lower than the rate on the
existing mortgage securities. For this reason, mortgage securities are less
effective than other types of U.S. Government securities as a means of "locking
in" long-term interest rates.
Mortgage-related securities may be composed of one or more classes and
may be structured either as pass-through securities or collateralized debt
obligations. Multiple-class mortgage-related securities are referred to herein
as "CMOs." Some CMOs are directly supported by other CMOs, which in turn are
supported by mortgage pools. Investors typically receive payments out of the
interest and principal on the underlying mortgages. The portions of these
payments that investors receive, as well as the priority of their rights to
receive payments, are determined by the specific terms of the CMO class. CMOs
involve special risk and evaluating them requires special knowledge.
CMO classes may be specially structured in a manner that provides any
of a wide variety of investment characteristics, such as yield, effective
maturity and interest rate sensitivity. As market conditions change, however,
and particularly during periods of rapid or unanticipated changes in market
interest rates, the attractiveness of the CMO classes and the ability of the
structure to provide the anticipated investment characteristics may be
significantly reduced. These changes can result in volatility in the market
value, and in some instances reduced liquidity, of the CMO class.
Certain classes of CMOs and other mortgage-related securities are
structured in a manner that makes them extremely sensitive to changes in
prepayment rates. Interest-only ("IO") and principal-only ("PO") classes are
examples of this. IOs are entitled to receive all or a portion of the interest,
but none (or only a nominal amount) of the principal payments, from the
underlying mortgage assets. If the mortgage assets underlying an IO experience
greater than anticipated principal prepayments, then the total amount of
interest payments allocable to the IO class, and therefore the yield to
investors, generally will be reduced. In some instances, an investor in an IO
may fail to recoup all of his or her initial investment, even if the security is
government issued or guaranteed or is rated AAA or the equivalent. Conversely,
PO classes are entitled to receive all or a portion of the principal payments,
but none of the interest, from the underlying mortgage assets. PO classes are
purchased at substantial discounts from par, and the yield to investors will be
reduced if principal payments are slower than expected. Some IOs and POs, as
well as other CMO classes, are structured to have special protections, however,
normally are effective only within certain ranges of prepayment rates and thus
will not protect investors in all circumstances. Inverse floating rate CMO
classes also may be extremely volatile. These classes pay interest at a rate
that decreases when a specified index of market rates increases.
ASSET-BACKED SECURITIES Each Underlying Fund may invest in asset-backed
securities. The securitization techniques used for asset-backed securities are
similar to those used for mortgage-related securities. The collateral for these
securities has included home equity loans, automobile and credit card
receivables, boat loans, computer leases, airplane leases, mobile home loans,
recreational vehicle loans and hospital accounts receivables. The Underlying
Funds may invest in these and other types of asset-backed securities that may be
developed in the future. These securities may be subject to the risk of
prepayment or default. Not all asset-backed securities have the benefit of a
security interest in the underlying asset. Credit card receivables are generally
unsecured and the debtors are entitled to the protection of a number of state
and federal consumer credit laws, many of which give such debtors the right to
set off certain amounts owed, thereby reducing the balance due. The ability of
an issuer of asset-backed securities to enforce its security interest in the
underlying securities may be limited, and recoveries on repossessed collateral
may not, in some cases, be available to support payments on these securities.
MUNICIPAL SECURITIES Money Market Fund may invest in municipal
securities. Municipal securities include primarily debt obligations of the
states, their agencies, universities, boards, authorities and political
subdivisions (for example, cities, towns, counties, school districts,
authorities and commissions) issued to obtain funds for various public purposes,
including the construction or improvement of a wide range of public facilities
such as airports, bridges, highways, hospitals, housing, jails, mass
transportation, nursing homes, parks, public buildings, recreational facilities,
school facilities, streets and water and sewer works. Other public purposes for
which municipal securities may be issued include the refunding of outstanding
obligations, the anticipation of taxes or state aids, the payment of judgments,
the funding of student loans, community redevelopment, district heating, the
purchase of street maintenance and firefighting equipment, or any authorized
corporate purpose of the issuer except for the payment of current expenses.
Certain types of industrial development bonds may be issued by or on behalf of
public corporations to finance privately operated housing facilities, air or
water pollution control facilities and
9
certain local facilities for water supply, gas, electricity or sewage or solid
waste disposal. In addition, structured securities, such as tobacco bonds, may
be issued by municipal entities to securitize future payment streams. Such
obligations are included within the term municipal securities if the interest
payable thereon is, in the opinion of bond counsel, exempt from federal income
taxation. Certain types of industrial development bonds, the proceeds of which
are used for the construction, equipment, repair or improvement of privately
operated industrial, commercial or office facilities constitute municipal
securities, although current federal income tax laws place substantial
limitations on the size of such issues.
The two principal classifications of municipal securities are general
obligation bonds and limited obligation (or revenue) bonds. General obligation
bonds are obligations involving credit of an issuer possessing taxing power and
are payable from the issuer's general unrestricted revenues and not from any
particular fund or revenue source. The characteristics and methods of
enforcement of general obligation bonds vary according to the law applicable to
the particular issuer. Limited obligation bonds are payable only from the
revenues derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a specific revenue source, such as the user of the
facility. Industrial development bonds are in most cases limited obligation
bonds payable solely from specific revenues of the project to be financed,
pledged to their payment. The credit quality of industrial development bonds is
usually directly related to the credit standing of the user of the facilities
(or the credit standing of a third-party guarantor or other credit enhancement
participant, if any). There are, of course, variations in the quality of
municipal securities, both within a particular classification and between
classifications, depending on various factors. (See Appendix.)
The yields on municipal securities are dependent on a variety of
factors, including general money market conditions, the financial condition of
the issuer, general conditions of the municipal securities market, the size of a
particular offering, the maturity of the obligation and the rating of the issue.
The ratings of the various rating agencies represent their opinions as to the
quality of the municipal securities which they undertake to rate. It should be
emphasized, however, that ratings are general, not absolute, standards of
quality. Consequently, municipal securities of the same maturity, interest rate
and rating may have different yields, while municipal securities of the same
maturity and interest rate with different ratings may have the same yield.
For the purpose of diversification under the 1940 Act, the
identification of the issuer of a municipal security depends on the terms and
conditions of the security. If a state or a political subdivision of such state
pledges its full faith and credit to payment of a security, the state or the
political subdivision, respectively, will be deemed the sole issuer of the
security. If the assets and revenues of an agency, authority or instrumentality
of the state or a political subdivision are separate from those of the state or
political subdivision and the security is backed only by the assets and revenues
of the agency, authority or instrumentality, such agency, authority or
instrumentality will be deemed to be the sole issuer. Moreover, if the security
is backed only by revenues of an enterprise or specific projects of the state, a
political subdivision or agency, authority or instrumentality, such as utility
revenue bonds, and the full faith and credit of the governmental unit is not
pledged to the payment thereof, such enterprise or projects will be deemed the
sole issuer. Similarly, in the case of an industrial development bond, if that
bond is backed only by certain revenues to be received from the non-governmental
user of the project financed by the bond, then such non-governmental user will
be deemed to be the sole issuer. If, however, in any of the above cases, the
state, the political subdivision or some other entity guarantees a security, and
the value of all securities issued or guaranteed by the guarantor and owned by
the Money Market Fund exceeds 10% of the value of the Fund's total assets, the
guarantee will be considered a separate security and will be treated as an issue
of the guarantor.
INVERSE FLOATERS The Money Market Fund may invest in inverse floaters.
Inverse floaters are debt instruments with a floating rate of interest that
bears an inverse relationship to changes in short-term market interest rates.
Investments in this type of security involve special risks as compared to
investments in, for example, a fixed rate municipal security. The Money Market
Fund could lose money and its net asset value could decline if movements in
interest rates are incorrectly anticipated. Moreover, the markets for securities
of this type may be less developed and may have less liquidity than the markets
for more traditional municipal securities.
EQUITY SECURITIES Each Underlying Fund, except the High Yield Fund,
Inflation Plus Fund, Short Duration Fund and Total Return Bond Fund, as
described below, and except the Money Market Fund, may invest in equity
securities. Equity securities include common stock, preferred stock, securities
convertible into common or preferred stock and warrants or rights to acquire
common stock, including options. In addition, these Underlying Funds may invest
in securities such as bonds, debentures and corporate notes which are
convertible into common
10
stock at the option of the holder. The High Yield Fund and Total Return Bond
Fund may each invest up to 15% of its total assets in preferred stocks,
convertible securities, and securities carrying warrants to purchase equity
securities. The High Yield Fund, Inflation Plus Fund, Short Duration Fund and
Total Return Bond Fund will not invest in common stocks directly, but may
retain, for reasonable periods of time, common stocks acquired upon conversion
of debt securities or upon exercise of warrants acquired with debt securities.
Equity securities are subject to financial and market risks and can be expected
to fluctuate in value.
SMALL CAPITALIZATION SECURITIES Each Underlying Fund, except the
Inflation Plus Fund, Money Market Fund and Short Duration Fund, may invest in
equity securities (including securities issued in initial public offerings) of
companies with smaller market capitalizations. Because the issuers of small
capitalization securities tend to be smaller or less well-established companies,
they may have limited product lines, market share or financial resources, may
have less historical data with respect to operations and management and may be
more dependent on a limited number of key employees. As a result, Small
capitalization securities are often less marketable and experience a higher
level of price volatility than securities of larger or more well-established
companies. Small capitalization securities may be more likely to be offered in
initial public offerings. Because securities issued in initial public offerings
are being offered to the public for the first time, the market for such
securities may be inefficient and less liquid.
FOREIGN ISSUERS AND NON-DOLLAR SECURITIES Foreign issuers include (1)
companies organized outside of the United States, (2) foreign governments and
agencies or instrumentalities of foreign governments and (3) issuers whose
economic fortunes and risks are primarily linked with markets outside the United
States. Certain companies organized outside the United States may not be deemed
to be foreign issuers if the issuer's economic fortunes and risks are primarily
linked with U.S. markets. Non-dollar securities are securities denominated or
quoted in foreign currency or paying income in foreign currency.
Many of the Underlying Funds are permitted to invest a portion of their
assets in securities of foreign issuers and non-dollar securities, including
American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs").
ADRs are certificates issued by a U.S. bank or trust company and represent the
right to receive securities of a foreign issuer deposited in a domestic bank or
non-U.S. branch of a U.S. bank. ADRs are traded on a U.S. securities exchange,
or in an over-the-counter market, and are denominated in U.S. dollars. GDRs are
certificates issued globally and evidence a similar ownership arrangement. GDRs
are traded on foreign securities exchanges and are denominated in foreign
currencies. The value of an ADR or a GDR will fluctuate with the value of the
underlying security, will reflect any changes in exchange rates and otherwise
will involve risks associated with investing in foreign securities. When
selecting securities of foreign issuers and non-dollar securities, Hartford
Investment Management or Wellington Management will evaluate the economic and
political climate and the principal securities MARKETS of the country in which
an issuer is located.
Underlying Funds that are permitted to invest in securities of foreign
issuers and non-dollar securities may invest in debt exchangeable for common
stock, debt or equity linked notes and similar linked securities (e.g.,
zero-strike warrants ("LNs")), which are derivative securities typically issued
by a financial institution or special purpose entity the performance of which
depends on the performance of a corresponding foreign security or index. Upon
redemption or maturity, the principal amount or redemption amount is payable
based on the price level of the linked security or index at the time of
redemption or maturity, or is exchanged for corresponding shares of common
stock. LNs are generally subject to the same risks as direct holdings of
securities of foreign issuers and non-dollar securities, including currency risk
and the risk that the amount payable at maturity or redemption will be less than
the principal amount of a note because the price of the linked security or index
has declined. Moreover, LNs are subject to counterparty risk, which is the risk
that the company issuing an LN may fail to pay the full amount due at maturity
or redemption. An Underlying Fund may also have difficulty disposing of LNs
because there may be restrictions on redemptions and there may be no market or
only a thin trading market in such securities.
The Inflation Plus Fund may invest up to 35% of its net assets in the
securities of foreign issuers and non-dollar securities. The Capital
Appreciation Fund may invest up to 35% of its total assets in the securities of
foreign issuers and non-dollar securities. The Disciplined Equity, Dividend and
Growth, Growth, Growth Opportunities, MidCap Value, Small Company, SmallCap
Growth, Stock, Value and Value Opportunities Funds each may invest up to 20% of
their total assets in the securities of foreign issuers and non-dollar
securities. The Short Duration Fund may invest up to 25% of its total assets in
the securities of foreign issuers. The Money Market Fund may invest up to
11
100% of its total assets (provided such assets are U.S. dollar denominated) and
the High Yield and Total Return Bond Funds are permitted to invest up to 30% of
their total assets in the securities of foreign issuers. The Global Leaders and
International Capital Appreciation Funds each may invest 100% of their total
assets in the securities of foreign issuers and non-dollar securities. Each of
the High Yield Fund and Total Return Bond Fund may also invest up to 10% of
their total assets in non-dollar securities.
The Global Leaders Fund invests in at least five countries, one of
which is the United States; however, the Fund has no limit on the amount of
assets that must be invested in each country. Under normal circumstances, the
International Capital Appreciation Fund invests in at least five countries;
however, the Fund has no limit on the amount of assets that must be invested in
each country.
Investing in securities of foreign issuers involves considerations and
potential risks not typically associated with investing in obligations issued by
U.S. issuers. Less information may be available about foreign issuers compared
with U.S. issuers. For example, foreign issuers generally are not subject to
uniform accounting, auditing and financial reporting standards or to other
regulatory practices and requirements comparable to those applicable to U.S.
issuers. In addition, the values of non-dollar securities are affected by
changes in currency rates or exchange control regulations, restrictions or
prohibition on the repatriation of foreign currencies, application of foreign
tax laws, including withholding taxes, changes in government administration or
economic or monetary policy (in the U.S. or outside the U.S.) or changed
circumstances in dealings between nations. Costs are also incurred in connection
with conversions between various currencies.
Investing in foreign government debt securities exposes an Underlying
Fund to the direct or indirect consequences of political, social or economic
changes in the developing and emerging countries that issue the securities. The
ability and willingness of sovereign obligors in developing and emerging
countries or the governmental authorities that control repayment of their
external debt to pay principal and interest on such debt when due may depend on
general economic, social and political conditions within the relevant country.
Countries such as those in which the Underlying Funds may invest have
historically experienced, and may continue to experience, high rates of
inflation, high interest rates, exchange rate trade difficulties and
unemployment. Some of these countries are also characterized by political
uncertainty or instability. Additional factors which may influence the ability
or willingness to service debt include, but are not limited to, a country's cash
flow situation, the availability of sufficient foreign exchange on the date a
payment is due, the relative size of its debt service burden to the economy as a
whole, and its government's policy towards the IMF, the World Bank and other
international agencies.
From time to time, each of the Global Leaders Fund and International
Capital Appreciation Fund may invest up to 25% of its total assets and each of
the High Yield Fund and Total Return Bond Fund may invest up to 30% of its total
assets and Capital Appreciation Fund may invest up to 35% of its total assets in
securities of issuers located in countries with emerging economies or securities
markets. Compared to the United States and other developed countries, developing
countries may have relatively unstable governments, economies based on only a
few industries, and securities markets that are less liquid and trade a small
number of securities. Prices in these markets tend to be volatile and, in the
past, securities in these countries have offered greater potential for gain (as
well as loss) than securities of companies located in developed countries.
CURRENCY TRANSACTIONS Each Underlying Fund, except the Money Market
Fund and Short Duration Fund, may engage in currency transactions to hedge,
directly or indirectly, the value of portfolio securities denominated in
particular currencies against fluctuations in relative value. Currency
transactions include forward currency contracts, currency swaps, exchange-listed
and over-the-counter ("OTC") currency futures contracts and options thereon and
exchange listed and OTC options on currencies.
Forward currency contracts involve a privately negotiated obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. Currency swaps are agreements to exchange
cash flows based on the notional difference between or among two or more
currencies. See "Swap Agreements."
The use of currency transactions to protect the value of an Underlying
Fund's assets against a decline in the value of a currency does not eliminate
potential losses arising from fluctuations in the value of the Underlying
12
Fund's underlying securities. Further, the Underlying Funds may enter into
currency transactions only with counterparties that Hartford Investment
Management or Wellington Management deems to be creditworthy.
The Underlying Funds may also enter into options and futures contracts
relative to foreign currency to hedge against fluctuations in foreign currency
rates. See "Options and Futures Contracts" for a discussion of risk factors
relating to foreign currency transactions including options and futures
contracts related thereto.
OPTIONS AND FUTURES CONTRACTS In seeking to protect against the effect
of changes in equity market values, currency exchange rates or interest rates
that are adverse to the present or prospective position of the Underlying Funds,
for cash flow management, and, to a lesser extent, to enhance returns, each
Underlying Fund, except the Money Market Fund, may employ certain hedging,
income enhancement and risk management techniques, including the purchase and
sale of options contracts, futures contracts and options on futures contracts,
any of which may involve equity and debt securities and foreign currencies,
aggregates of equity and debt securities, indices of prices of equity and debt
securities and other financial indices or instruments. Each Underlying Fund,
except Money Market Fund, may also invest in futures contracts and options
thereon with respect to interest rates and may enter into options on swap
agreements. An Underlying Fund's ability to engage in these practices may be
limited by tax considerations and certain other legal considerations.
An Underlying Fund may write covered options and purchase put and call
options on individual securities as a partial hedge against an adverse movement
in the security and in circumstances consistent with the objective and policies
of the Underlying Fund. This strategy limits potential capital appreciation in
the portfolio securities subject to the put or call option.
The Underlying Funds may also write covered put and call options and
purchase put and call options on foreign currencies to hedge against the risk of
foreign exchange rate fluctuations on non-dollar securities they hold or intend
to purchase. For example, if an Underlying Fund enters into a contract to
purchase non-dollar securities, it could effectively establish the maximum U.S.
dollar cost of the securities by purchasing call options on the appropriate
currency. Similarly, if an Underlying Fund held non-dollar securities and
anticipated a decline in the value of that currency against the U.S. dollar, the
Underlying Fund could hedge against such a decline by purchasing a put option on
the foreign currency involved.
Aggregates are composites of equity or debt securities that are not
tied to a commonly known index. An index is a measure of the value of a group of
securities or other interests. An index assigns relative values to the
securities included in that index, and the index fluctuates with changes in the
market value of those securities. An Underlying Fund may purchase put and call
options and write covered put and call options on aggregates of equity and debt
securities, and may enter into futures contracts and options thereon for the
purchase or sale of aggregates of equity and debt securities, indices of equity
and debt securities and other financial indices or instruments.
The Underlying Funds may write covered straddles consisting of a
combination of a call and a put written on the same underlying security. A
straddle will be covered when sufficient assets are deposited to meet the
Underlying Funds' immediate obligations. The Underlying Funds may use the same
liquid assets to cover both the call and put options where the exercise price of
the call and put are the same, or the exercise price of the call is higher than
that of the put. In such cases, the Underlying Funds will also segregate or
designate on their books liquid assets equivalent to the amount, if any, by
which the put is "in the money."
The Underlying Funds may write or purchase put and call swap options. A
swap option is a contract that gives a counterparty the right (but not the
obligation) in return for payment of a premium, to enter into a new swap
agreement or to shorten, extend, cancel or otherwise modify an existing swap
agreement, at some designated future time on specified terms.
An Underlying Fund may only write covered options. See "Asset Coverage"
below.
A futures contract is an agreement between two parties to buy and sell
a security or financial instrument for a set price on a future date. These
contracts are traded on exchanges, so that, in most cases, either party can
close out its position on the exchange for cash, without delivering the security
or financial instrument. An option on a futures
13
contract gives the holder of the option the right to buy or sell a position in a
futures contract to the writer of the option, at a specified price and on or
before a specified expiration date.
Each Underlying Fund (except the Money Market Fund) may invest in
futures contracts and options thereon ("futures options") with respect to, but
not limited to, equity and debt securities and foreign currencies, aggregates of
equity and debt securities, interest rates, and indices of prices of equity and
debt securities and other financial indices or instruments.
An Underlying Fund may purchase or sell foreign currency futures
contracts, and write put and call options and purchase put and call options on
such futures contracts. For example, an Underlying Fund may use foreign currency
futures contracts when it anticipates a general weakening of the foreign
currency exchange rate that could adversely affect the market values of the
Underlying Fund's non-dollar securities holdings. In this case, the sale of
futures contracts on the underlying currency may reduce the risk of a reduction
in market value caused by foreign currency variations and, by so doing, provide
an alternative to the liquidation of securities positions in the Underlying Fund
and resulting transaction costs. When the Underlying Fund anticipates a
significant foreign exchange rate increase while intending to invest in a
non-dollar security, the Underlying Fund may purchase a foreign currency futures
contract to hedge or partially hedge against a rise in foreign exchange rates
pending completion of the anticipated transaction. Such a purchase of a futures
contract would serve as a temporary measure to protect the Underlying Fund
against any rise in the foreign exchange rate that may add additional costs to
acquiring the non-dollar security.
An Underlying Fund similarly may use futures contracts on equity and
debt securities to hedge against fluctuations in the value of securities it owns
or expects to acquire. Futures contracts on individual securities are regulated
as both securities and as futures contracts, and are subject to higher margin
requirements than other kinds of futures contracts. Because these contracts
relate to the securities of a single issuer, they can be expected to be subject
to greater price volatility than futures contracts that relate to a diversified
group of securities represented in an aggregate or an index. The volume,
breadth, efficiency and other attributes may be limited. An Underlying Fund's
use of these kind of futures contracts will depend to a large degree on how this
market develops.
The Underlying Funds may purchase call or put options on foreign
currency futures contracts to obtain a fixed foreign exchange rate at limited
risk. An Underlying Fund may purchase a call option on a foreign currency
futures contract to hedge against a rise in the foreign exchange rate while
intending to invest in a non-dollar security of the same currency. An Underlying
Fund may purchase put options on foreign currency futures contracts to hedge
against a decline in the foreign exchange rate or the value of its non-dollar
securities. An Underlying Fund may write a call option on a foreign currency
futures contract as a partial hedge against the effects of declining foreign
exchange rates on the value of non-dollar securities and in circumstances
consistent with the Underlying Fund's investment objectives and policies.
The Underlying Funds may write covered straddles consisting of a call
and a put written on the same underlying futures contract. A straddle will be
covered when sufficient assets are deposited to meet the Underlying Funds'
immediate obligations. An Underlying Fund may use the same liquid assets to
cover both the call and put options where the exercise price of the call and put
are the same, or the exercise price of the call is higher than that of the put.
In such cases, the Underlying Funds will also segregate or designate on their
books liquid assets equivalent to the amount, if any, by which the put is "in
the money."
Options on indices are settled in cash, not in delivery of securities.
The exercising holder of an index option receives, instead of a security, cash
equal to the difference between the closing price of the securities index and
the exercise price of the option.
To the extent that an Underlying Fund enters into futures contracts,
options on futures contracts and options on foreign currencies that are traded
on an exchange regulated by the Commodities Futures Trading Commission ("CFTC"),
in each case that are not for "bona fide hedging" purposes (as defined by
regulations of the CFTC), the aggregate initial margin and premiums required to
establish those positions may not exceed 5% of the Underlying Fund's net asset
value, after taking into account the unrealized gains and unrealized losses on
any such contracts. However, options which are currently exercisable may be
excluded in computing the 5% limit.
14
Although any one Underlying Fund may not employ all or any of the
foregoing strategies, its use of options, futures and options thereon and
forward currency contracts (as described under "Currency Transactions") would
involve certain investment risks and transaction costs to which it might not be
subject were such strategies not employed. Such risks include: (1) dependence on
the ability of Hartford Investment Management or Wellington Management to
predict movements in the prices of individual securities, fluctuations in the
general securities markets or market sections and movements in interest rates
and currency markets, (2) imperfect correlation between movements in the price
of the securities or currencies hedged or used for cover, (3) the fact that
skills and techniques needed to trade options, futures contracts and options
thereon or to use forward currency contracts are different from those needed to
select the securities in which an Underlying Fund invests, (4) lack of assurance
that a liquid secondary market will exist for any particular option, futures
contract, option thereon or forward contract at any particular time, which may
affect an Underlying Fund's ability to establish or close out a position, (5)
possible impediments to effective portfolio management or the ability to meet
current obligations caused by the segregation of a large percentage of an
Underlying Fund's assets to cover its obligations, and (6) the possible need to
defer closing out certain options, futures contracts, options thereon and
forward contracts in order to continue to qualify as a "regulated investment
company" for tax purposes. In the event that the anticipated change in the price
of the securities or currencies that are the subject of such a strategy does not
occur, an Underlying Fund may have been in a better position had it not used
such a strategy.
SWAP AGREEMENTS Each Underlying Fund, except the Money Market Fund, may
enter into currency swaps (except Short Duration Fund), interest rate swaps,
swaps on specific securities, and other types of swap agreements such as caps,
collars, floors and credit derivatives and options thereon. In a typical
interest rate swap, one party agrees to make regular payments equal to a
floating interest rate multiplied by a "notional principal amount," in return
for payments equal to a fixed rate multiplied by the same amount, for a
specified period of time. If a swap agreement provides for payments in different
currencies, the parties might agree to exchange the notional principal amount as
well. Swaps may also depend on other prices or rates, such as the value of an
index or mortgage prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains the
right to receive payments to the extent that a specified interest rate exceeds
an agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
Each Underlying Fund may enter into event linked swaps, including
credit default swaps. The credit default swap market allows an Underlying Fund
to manage credit risk through buying and selling credit protection on specific
names or a basket of names. The transactions are documented through swap
documents. A "buyer" of credit protection agrees to pay a counterparty to assume
the credit risk of an issuer upon the occurrence of certain events. The "seller"
of credit protection receives a premium and agrees to assume the credit risk of
an issuer upon the occurrence of certain events.
Swap agreements will tend to shift an Underlying Fund's investment
exposure from one type of investment to another. For example, if an Underlying
Fund agreed to exchange floating rate payments for fixed rate payments, the swap
agreement would tend to decrease the Underlying Fund's exposure to rising
interest rates. Caps and floors have an effect similar to buying or writing
options. Depending on how they are used, swap agreements may increase or
decrease the overall volatility of an Underlying Fund's investments and its
share price and yield.
The Underlying Funds usually enter into interest rate swaps on a net
basis. The net amount of the excess, if any, of an Underlying Fund's obligations
over its entitlement with respect to each interest rate swap will be covered by
an amount consisting of designated liquid assets having an aggregate net asset
value at least equal to the accrued excess. If an Underlying Fund enters into a
swap on other than a net basis, the Underlying Fund will designate the full
amount of the Underlying Fund's obligations under each such swap. The Underlying
Fund may enter into swaps, caps, collars and floors with member banks of the
Federal Reserve System, members of the New York Stock Exchange or other entities
determined by Hartford Investment Management or Wellington Management to be
creditworthy. If a default occurs by the other party to such transaction, an
Underlying Fund will have contractual remedies pursuant to the agreements
related to the transaction but such remedies may be subject to bankruptcy and
insolvency laws which could affect such Underlying Fund's rights as a creditor.
15
The swap market has grown substantially in recent years with a large
number of banks and financial services firms acting both as principals and as
agents utilizing standardized swap documentation. As a result, the swap market
has become relatively liquid. Caps, collars and floors are more recent
innovations and they are less liquid than swaps. There can be no assurance,
however, that an Underlying Fund will be able to enter into interest rate swaps
or to purchase interest rate caps, collars or floors at prices or on terms
Hartford Investment Management or Wellington Management, as appropriate,
believes are advantageous to such Underlying Fund. In addition, although the
terms of interest rate swaps, caps, collars and floors may provide for
termination, there can be no assurance that an Underlying Fund will be able to
terminate an interest rate swap or to sell or offset interest rate caps, collars
or floors that it has purchased. Interest rate swaps, caps, collars and floors
are considered by the Securities and Exchange Commission ("SEC") to be illiquid.
The successful utilization of hedging and risk management transactions
requires skills different from those needed in the selection of an Underlying
Fund's portfolio securities and depends on Hartford Investment Management's or
Wellington Management's ability to predict correctly the direction and degree of
movements in interest rates. Although the Underlying Funds believe that use of
the hedging and risk management techniques described above will benefit the
Underlying Funds, if Hartford Investment Management's or Wellington Management's
judgment about the direction or extent of the movement in interest rates is
incorrect, an Underlying Fund's overall performance would be worse than if it
had not entered into any such transactions. For example, if an Underlying Fund
had purchased an interest rate swap or an interest rate floor to hedge against
its expectation that interest rates would decline but instead interest rates
rose, such Underlying Fund would lose part or all of the benefit of the
increased payments it would receive as a result of the rising interest rates
because it would have to pay amounts to its counterparties under the swap
agreement or would have paid the purchase price of the interest rate floor.
ILLIQUID INVESTMENTS Each Underlying Fund is permitted to invest in
illiquid securities or other illiquid investments. An Underlying Fund will not,
however, acquire illiquid securities or investments if 15% of its net assets
(10% for each of the Inflation Plus Fund and Money Market Fund) would consist of
such securities or investments. Illiquid investments are ones that may not be
sold or disposed of in the ordinary course of business within seven days at
approximately the price used to determine an Underlying Fund's net asset value.
An Underlying Fund may not be able to sell illiquid securities or other
investments when Hartford Investment Management or Wellington Management
considers it desirable to do so or may have to sell such securities or other
investments at a price that is lower than the price that could be obtained if
the securities or other investments were more liquid. A sale of illiquid
securities or investments may require more time and may result in higher dealer
discounts and other selling expenses than does the sale of those that are
liquid. Illiquid securities also may be more difficult to value due to the lack
of reliable market quotations for such securities or investments, and
investments in them may have an adverse impact on an Underlying Fund's net asset
value. In addition, issuers of restricted securities may not be subject to the
disclosure requirements and other investor protection requirements that would be
applicable if their securities were publicly traded. Each Underlying Fund may
purchase certain restricted securities (known as Rule 144A securities) that can
be resold to institutions and which may be determined to be liquid pursuant to
policies and guidelines established by the respective Company's board of
directors.
Under current interpretations of the SEC Staff, the following types of
investments in which an Underlying Fund may invest are considered illiquid: (1)
repurchase agreements maturing in more than seven days, (2) certain restricted
securities (securities whose public resale is subject to legal or contractual
restrictions), (3) option contracts, with respect to specific securities, not
traded on a national securities exchange that are not readily marketable, and
(4) any other securities or investments in which an Underlying Fund may invest
that are not readily marketable.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES Each Underlying Fund is
permitted to purchase or sell securities on a when-issued or delayed-delivery
basis. When-issued or delayed-delivery transactions arise when securities are
purchased or sold with payment and delivery taking place in the future in order
to secure what is considered to be an advantageous price and yield at the time
of entering into the transaction. While the Underlying Funds generally purchase
securities on a when-issued basis with the intention of acquiring the
securities, the Underlying Funds may sell the securities before the settlement
date if Hartford Investment Management or Wellington Management deems it
advisable. Distributions attributable to any gains realized on such a sale would
be
16
taxable to shareholders. At the time an Underlying Fund makes the commitment to
purchase securities on a when-issued basis, it records the transaction and
thereafter reflects the value, each day, of the security in determining the net
asset value of the Underlying Fund. At the time of delivery of the securities,
the value may be more or less than the purchase price.
DOLLAR ROLLS In connection with their ability to purchase securities on
a when-issued or forward commitment basis, High Yield Fund, Inflation Plus Fund,
Short Duration Fund and Total Return Bond Fund may enter into "dollar rolls" in
which an Underlying Fund sells securities for delivery in the current month and
simultaneously contracts with the same counterparty to repurchase similar (same
type, coupon and maturity) but not identical securities on a specified future
date. The Underlying Fund gives up the right to receive principal and interest
paid on the securities sold. However, the Underlying Fund would benefit to the
extent of any difference between the price received for the securities sold and
the lower forward price for the future purchase plus any fee income received.
Unless such benefits exceed the income and capital appreciation that would have
been realized on the securities sold as part of the dollar roll, the use of this
technique will diminish the investment performance of the Underlying Fund
compared with what such performance would have been without the use of dollar
rolls. The benefits derived from the use of dollar rolls may depend, among other
things, upon the ability of Hartford Investment Management or Wellington
Management, as appropriate, to predict interest rates correctly. There is no
assurance that dollar rolls can be successfully employed. In addition, the use
of dollar rolls by an Underlying Fund while remaining substantially fully
invested increases the amount of the Underlying Fund's assets that are subject
to market risk to an amount that is greater than the Underlying Fund's net asset
value, which could result in increased volatility of the price of the Underlying
Fund's shares. Moreover, the entry into dollar rolls involves potential risks
that are different from those related to the securities underlying the
transactions. For example, if the counterparty becomes insolvent, an Underlying
Fund's right to purchase from the counterparty may be restricted. Also, the
value of the underlying security may change adversely before an Underlying Fund
is able to purchase them, or an Underlying Fund may be required to purchase
securities in connection with a dollar roll at a higher price than may be
otherwise available on the open market. Further, because the counterparty may
deliver a similar, not identical, security, an Underlying Fund may be required
to buy a security under the dollar roll that may be of less value than an
identical security would have been.
REITS Each Underlying Fund may invest in real estate investment trusts
("REITs"), which are pooled investment vehicles that invest primarily in
income-producing real estate or real estate related loans or interests. Like
regulated investment companies such as the Underlying Funds, REITs are not taxed
on income distributed to shareholders provided they comply with several
requirements of the Internal Revenue Code of 1986, as amended (the "Code"). By
investing in a REIT, an Underlying Fund will indirectly bear its proportionate
share of any expenses paid by the REIT in addition to the expenses of the
Underlying Fund.
Investing in REITs involves certain risks. A REIT may be affected by
changes in the value of the underlying property owned by such REIT or by the
quality of any credit extended by the REIT. REITs are dependent on management
skills, are not diversified (except to the extent the Code requires), and are
subject to the risks of financing projects. REITs are subject to heavy cash flow
dependency, default by borrowers, self-liquidation, the possibilities of failing
to qualify for the exemption from tax for distributed income under the Code and
failing to maintain their exemptions from the 1940 Act. REITs are also subject
to interest rate risks.
LENDING PORTFOLIO SECURITIES Subject to its investment restrictions,
each of the Underlying Funds may lend its portfolio securities to broker-dealers
and other institutions as a means of earning interest income. The borrower is
required to deposit as collateral and maintain in a segregated account, liquid
securities that at all times will be at least equal to 100% of the market value
of the loaned securities. Subject to guidelines approved by the Board, the
Underlying Funds may use or invest any cash collateral at their own risk and for
their own benefit. While the securities are on loan, the borrower will pay the
respective Underlying Fund any income accruing thereon.
Delays or losses could result if a borrower of portfolio securities
becomes bankrupt or defaults on its obligation to return the loaned securities.
The Underlying Funds may lend securities only if: (1) each loan is fully secured
by appropriate collateral at all times, and (2) the value of all securities
loaned by an Underlying Fund is not more than 33.33% of the Underlying Fund's
total assets taken at the time of the loan (including collateral received in
connection with any loans).
17
ASSET COVERAGE To the extent required by SEC guidelines, an Underlying
Fund will only engage in transactions that expose it to an obligation to another
party if it owns either (1) an offsetting position for the same type of
financial asset, or (2) cash or liquid securities, designated on the Underlying
Fund's books or held in a segregated account, with a value sufficient at all
times to cover its potential obligations not covered as provided in (1). Assets
used as offsetting positions, designated on the Underlying Fund's books, or held
in a segregated account cannot be sold while the position(s) requiring cover is
open unless replaced with other appropriate assets. As a result, the commitment
of a large portion of assets to be used as offsetting positions or to be
designated or segregated in such a manner could impede portfolio management or
the ability to meet redemption requests or other current obligations.
BORROWING Each Underlying Fund may borrow money to the extent set forth
under its investment restrictions. The Underlying Funds do not intend to borrow
for leverage purposes, except as may be set forth under its investment
restrictions. Interest paid on borrowings will decrease the net earnings of an
Underlying Fund and will not be available for investment.
18
FUND MANAGEMENT
The Company has a board of directors, who elect officers who are
responsible for the day-to-day operations of the Funds and who execute policies
formulated by the directors. If the interests of a Fund and an Underlying Fund
were to diverge, a conflict of interest could arise and affect how the Directors
fulfill their fiduciary duties to the affected Funds. HIFSCO has structured the
Funds to avoid these potential conflicts, although there may be situations where
a conflict of interest is unavoidable. In such instances, HIFSCO and the
Directors would take reasonable steps to minimize and, if possible, eliminate
the conflict.
The following tables set forth various information about the directors
and officers of the Company. The first table relates to those directors who are
deemed not to be "interested persons" of the Company, as that term is defined in
the 1940 Act (i.e., "non-interested directors"), while the second table provides
information about the Company's "interested" directors and the Company's
officers.
NON-INTERESTED DIRECTORS
[Enlarge/Download Table]
NUMBER OF
TERM OF PORTFOLIOS
POSITION OFFICE* IN FUND OTHER
HELD WITH AND LENGTH COMPLEX DIRECTORSHIPS
THE OF TIME PRINCIPAL OCCUPATION(S) OVERSEEN HELD BY
NAME, AGE AND ADDRESS COMPANY SERVED DURING PAST 5 YEARS BY DIRECTOR DIRECTOR
--------------------------- ----------- ---------- ----------------------------------- ------------ ---------------
LYNN S. BIRDSONG Director Since 2003 From 1979 to 2002, Mr. Birdsong was 77 N/A
(age 57) a managing director of Zurich
c/o Hartford Mutual Funds Scudder Investments, an investment
P.O. Box 2999 management firm. In 2003, Mr.
Hartford, CT 06104-2999 Birdsong became an independent
director of the Atlantic Whitehall
Funds and The Japan Fund; during
his employment with Scudder, he was
an interested director of The Japan
Fund. Since 1981, Mr. Birdsong has
been a partner in Birdsong Company,
an advertising specialty firm. He
is also a Director of The Hartford
Mutual Funds II, Inc., The Hartford
Income Shares Fund, Inc., Hartford
Series Fund, Inc. and Hartford HLS
Series Fund II, Inc.
19
NON-INTERESTED DIRECTORS
[Enlarge/Download Table]
NUMBER OF
TERM OF PORTFOLIOS
POSITION OFFICE* IN FUND OTHER
HELD WITH AND LENGTH COMPLEX DIRECTORSHIPS
THE OF TIME PRINCIPAL OCCUPATION(S) OVERSEEN HELD BY
NAME, AGE AND ADDRESS COMPANY SERVED DURING PAST 5 YEARS BY DIRECTOR DIRECTOR
--------------------------- ----------- ---------- ----------------------------------- ------------ ---------------
WINIFRED E. COLEMAN Director Since 1996 Ms. Coleman has served as President 77 N/A
(age 71) of Saint Joseph College since 1991
c/o Hartford Mutual Funds and President of Cashel House, Ltd.
P.O. Box 2999 (retail) since 1985. She is also a
Hartford, CT 06104-2999 Director of The Hartford Mutual
Funds II, Inc., The Hartford Income
Shares Fund, Inc., Hartford Series
Fund, Inc. and Hartford HLS Series
Fund II, Inc.
DR. ROBERT M. GAVIN Director Since 2002 Dr. Gavin is an educational 77 N/A
(age 63) consultant. Prior to September 1,
c/o Hartford Mutual Funds 2001, he was President of Cranbrook
P.O. Box 2999 Education Community; and prior to
Hartford, CT 06104-2999 July 1996, he was President of
Macalester College, St. Paul,
Minnesota. He is also a Director of
The Hartford Mutual Funds II, Inc.,
The Hartford Income Shares Fund,
Inc., Hartford Series Fund, Inc.
and Hartford HLS Series Fund II,
Inc.
DUANE E. HILL Director Since 2001 Mr. Hill is Partner Emeritus and a 77 N/A
(age 58) founding partner of TSG Capital
c/o Hartford Mutual Funds Group, a private equity investment
P.O. Box 2999 firm that serves as sponsor and
Hartford, CT 06104-2999 lead investor in leveraged buyouts
of middle market companies. Mr.
Hill is also a Partner of TSG
Ventures L.P., a private equity
investment company that invests
primarily in minority-owned small
businesses. He is also a Director
of The Hartford Mutual Funds II,
Inc., The Hartford Income Shares
Fund, Inc., Hartford Series Fund,
Inc. and Hartford HLS Series Fund
II, Inc.
20
NON-INTERESTED DIRECTORS
[Enlarge/Download Table]
NUMBER OF
TERM OF PORTFOLIOS
POSITION OFFICE* IN FUND OTHER
HELD WITH AND LENGTH COMPLEX DIRECTORSHIPS
THE OF TIME PRINCIPAL OCCUPATION(S) OVERSEEN HELD BY
NAME, AGE AND ADDRESS COMPANY SERVED DURING PAST 5 YEARS BY DIRECTOR DIRECTOR
--------------------------- ----------- ---------- ----------------------------------- ------------ ---------------
PHILLIP O. PETERSON Director Since 2002 Mr. Peterson is a mutual fund 77 N/A
(age 59) industry consultant. He was a
c/o Hartford Mutual Funds partner of KPMG LLP until July
P.O. Box 2999 1999. In January 2004, Mr. Peterson
Hartford, CT 06104-2999 was appointed independent president
of the Strong Mutual Funds. He is
also a Director of The Hartford
Mutual Funds II, Inc., The Hartford
Income Shares Fund, Inc., Hartford
Series Fund, Inc. and Hartford HLS
Series Fund II, Inc.
MILLARD H. PRYOR, JR. Director Since 1996 Mr. Pryor has served as Managing 77 Mr. Pryor is a
(age 71) Director of Pryor & Clark Company Director of
c/o Hartford Mutual Funds (real estate investment), Hartford, Infodata
P.O. Box 2999 Connecticut, since June 1992. He is Systems, Inc.
Hartford, CT 06104-2999 also a Director of The Hartford (software
Mutual Funds II, Inc., The Hartford company) and
Income Shares Fund, Inc., Hartford CompuDyne
Series Fund, Inc. and Hartford HLS Corporation
Series Fund II, Inc. (security
products and
services).
*Term of Office: Each director may serve until his or her successor is elected
and qualifies.
21
OFFICERS AND INTERESTED DIRECTORS
[Enlarge/Download Table]
NUMBER OF
TERM OF PORTFOLIOS
POSITION OFFICE* IN FUND OTHER
HELD WITH AND LENGTH COMPLEX DIRECTORSHIPS
THE OF TIME PRINCIPAL OCCUPATION(S) OVERSEEN HELD BY
NAME, AGE AND ADDRESS COMPANY SERVED DURING PAST 5 YEARS BY DIRECTOR DIRECTOR
--------------------------- ----------- ---------- ----------------------------------- ------------ ---------------
THOMAS M. MARRA** Chairman of Since 2002 Mr. Marra is President and Chief 77 Mr. Marra is a
(age 45) the Board Operating Officer of Hartford Life, member of the
c/o Hartford Mutual Funds and Inc. He is also a member of the Board of
P.O. Box 2999 Director Board of Directors and a member of Directors of
Hartford, CT 06104-2999 the Office of the Chairman for The The Hartford
Hartford Financial Services Group, Financial
Inc. ("The Hartford"), the parent Services Group,
company of Hartford Life. Mr. Marra Inc.
was named President of Hartford
Life in 2001 and COO in 2000, and
served as Director of Hartford
Life's Investment Products Division
from 1998 to 2000. He was head of
the company's Individual Life and
Annuities Division from 1994 to
1998 after being promoted to Senior
Vice President in 1994 and to
Executive Vice President in 1996.
Mr. Marra is also a Managing Member
and President of Hartford
Investment Financial Services, LLC
("HIFSCO") and HL Investment
Advisors, LLC ("HL Advisors"). He
is also a Director and Chairman of
the Board of The Hartford Mutual
Funds II, Inc., The Hartford Income
Shares Fund, Inc., Hartford Series
Fund, Inc. and Hartford HLS Series
Fund II, Inc.
22
OFFICERS AND INTERESTED DIRECTORS
[Enlarge/Download Table]
NUMBER OF
TERM OF PORTFOLIOS
POSITION OFFICE* IN FUND OTHER
HELD WITH AND LENGTH COMPLEX DIRECTORSHIPS
THE OF TIME PRINCIPAL OCCUPATION(S) OVERSEEN HELD BY
NAME, AGE AND ADDRESS COMPANY SERVED DURING PAST 5 YEARS BY DIRECTOR DIRECTOR
--------------------------- ----------- ---------- ----------------------------------- ------------ ---------------
LOWNDES A. SMITH** Director Since 1996 Mr. Smith served as Vice Chairman 77 Mr. Smith is a
(age 64) of The Hartford from February 1997 Director of
c/o Hartford Mutual Funds to January 2002, as President and White Mountains
P.O. Box 2999 Chief Executive Officer of Hartford Insurance Group,
Hartford, CT 06104-2999 Life, Inc. from February 1997 to Ltd.
January 2002, and as President and
Chief Operating Officer of The
Hartford Life Insurance Companies
from January 1989 to January 2002.
Mr. Smith is also a Director of The
Hartford Mutual Funds II, Inc., The
Hartford Income Shares Fund, Inc.,
Hartford Series Fund, Inc. and
Hartford HLS Series Fund II, Inc.
DAVID M. ZNAMIEROWSKI** President Since 1999 Mr. Znamierowski currently serves 58 N/A
(age 43) and as President of Hartford Investment
c/o Hartford Mutual Funds Director Management Company ("Hartford
P.O. Box 2999 Investment Management"), Senior
Hartford, CT 06104-2999 Vice President for Hartford Life,
Inc., and Senior Vice President and
Chief Investment Officer for
Hartford Life Insurance Company.
Mr. Znamierowski is also a Managing
Member and Senior Vice President of
HIFSCO and HL Advisors. Mr.
Znamierowski is Group Senior Vice
President and Chief Investment
Officer for The Hartford. In
addition, he serves as President
and Director of Hartford Series
Fund, Inc. and President of The
Hartford Mutual Funds II, Inc., The
Hartford Income Shares Fund, Inc.
and Hartford HLS Series Fund II,
Inc.
23
OFFICERS AND INTERESTED DIRECTORS
[Enlarge/Download Table]
NUMBER OF
TERM OF PORTFOLIOS
POSITION OFFICE* IN FUND OTHER
HELD WITH AND LENGTH COMPLEX DIRECTORSHIPS
THE OF TIME PRINCIPAL OCCUPATION(S) OVERSEEN HELD BY
NAME, AGE AND ADDRESS COMPANY SERVED DURING PAST 5 YEARS BY DIRECTOR DIRECTOR
--------------------------- ----------- ---------- ----------------------------------- ------------ ---------------
ROBERT W. BELTZ, JR. Vice Since 2002 Mr. Beltz currently serves as Vice N/A N/A
(age 54) President President, Securities Operations of
500 Bielenberg Drive Hartford Administrative Services
Woodbury, MN 55125 Company ("HASCO"). Since December
2001, he has served as Assistant
Vice President of Hartford Life
Insurance Company. In addition, he
is a Vice President of The Hartford
Mutual Funds II, Inc., The Hartford
Income Shares Fund, Inc., Hartford
Series Fund, Inc. and Hartford HLS
Series Fund II, Inc.
KEVIN J. CARR Vice Since 1996 Mr. Carr has served as The N/A N/A
(age 49) President Hartford's Assistant General
c/o Hartford Mutual Funds and Counsel since 1999, Counsel since
P.O. Box 2999 Secretary November 1996 and Associate Counsel
Hartford, CT 06104-2999 since November 1995. Mr. Carr is
also Vice President and Assistant
Secretary of HL Advisors and HIFSCO
and Assistant Secretary of Hartford
Investment Management. He is also
Vice President and Secretary of The
Hartford Mutual Funds II, Inc., The
Hartford Income Shares Fund, Inc.,
Hartford Series Fund, Inc. and
Hartford HLS Series Fund II, Inc.
24
OFFICERS AND INTERESTED DIRECTORS
[Enlarge/Download Table]
NUMBER OF
TERM OF PORTFOLIOS
POSITION OFFICE* IN FUND OTHER
HELD WITH AND LENGTH COMPLEX DIRECTORSHIPS
THE OF TIME PRINCIPAL OCCUPATION(S) OVERSEEN HELD BY
NAME, AGE AND ADDRESS COMPANY SERVED DURING PAST 5 YEARS BY DIRECTOR DIRECTOR
--------------------------- ----------- ---------- ----------------------------------- ------------ ---------------
WILLIAM H. DAVISON, JR. Vice Since 2002 Mr. Davison is a Managing Director N/A N/A
(age 47) President and Director of the Funds
c/o Hartford Mutual Funds Management Group of Hartford
P.O. Box 2999 Investment Management. Mr. Davison
Hartford, CT 06104-2999 is a Senior Vice President of
HIFSCO and HL Advisors. In
addition, he serves as a Vice
President of The Hartford Mutual
Funds II, Inc., The Hartford Income
Shares Fund, Inc., Hartford Series
Fund, Inc. and Hartford HLS Series
Fund II, Inc.
TAMARA L. FAGELY Vice Ms. Fagely has been Vice President N/A N/A
(age 45) President, of HASCO since 1998. Prior to 1998,
500 Bielenberg Drive Controller she was Second Vice President of
Woodbury, MN 55125 and HASCO. Since December 2001, she has
Treasurer served as Assistant Vice President
of Hartford Life Insurance Company.
In addition, she is Controller of
HIFSCO and Vice President,
Controller and Treasurer of The
Hartford Mutual Funds II, Inc. and
The Hartford Income Shares Fund,
Inc. and Vice President of Hartford
Series Fund, Inc. and Hartford HLS
Series Fund II, Inc.
BRUCE FERRIS Vice Since 2002 Mr. Ferris serves as Senior Vice N/A N/A
(age 48) President President and a Director of Sales
c/o Hartford Mutual Funds and Marketing in the Investment
P.O. Box 2999 Products Division of Hartford Life
Hartford, CT 06104-2999 Insurance Company. He is also a
Managing Member of HL Advisors. In
addition, Mr. Ferris is Vice
President of The Hartford Mutual
Funds II, Inc., The Hartford Income
Shares Fund, Inc., Hartford Series
Fund, Inc. and Hartford HLS Series
Fund II, Inc.
25
OFFICERS AND INTERESTED DIRECTORS
[Enlarge/Download Table]
NUMBER OF
TERM OF PORTFOLIOS
POSITION OFFICE* IN FUND OTHER
HELD WITH AND LENGTH COMPLEX DIRECTORSHIPS
THE OF TIME PRINCIPAL OCCUPATION(S) OVERSEEN HELD BY
NAME, AGE AND ADDRESS COMPANY SERVED DURING PAST 5 YEARS BY DIRECTOR DIRECTOR
--------------------------- ----------- ---------- ----------------------------------- ------------ ---------------
MARY JANE FORTIN Vice Since 2003 Ms. Fortin is Senior Vice President N/A N/A
(age 39) President and Director of Mutual Funds and 529
c/o Hartford Mutual Funds Programs for Hartford Life. In
P.O. Box 2999 addition, she is a Vice President of
Hartford, CT 06104-2999 The Hartford Mutual Funds II, Inc.,
The Hartford Income Shares Fund,
Inc., Hartford Series Fund, Inc. and
Hartford HLS Series Fund II, Inc.
Previously, Ms. Fortin served as
Senior Vice President and Chief
Accounting Officer of Hartford Life.
She joined Hartford Life in 1997.
GEORGE R. JAY Vice Since 1996 Mr. Jay serves as Assistant Vice N/A N/A
(age 52) President President of Hartford Life
c/o Hartford Mutual Funds Insurance Company's Equity Products
P.O. Box 2999 Department. He is also Controller
of HL Advisors and Vice President,
Hartford, CT 06104-2999 Controller and Treasurer of
Hartford Series Fund, Inc. and
Hartford HLS Series Fund II, Inc.
In addition, he is Vice President
of The Hartford Mutual Funds II,
Inc. and The Hartford Income Shares
Fund, Inc.
STEPHEN T. JOYCE Vice Since 2000 Mr. Joyce currently serves as N/A N/A
(age 45) President Senior Vice President and Director
c/o Hartford Mutual Funds of the Institutional Products Group
P. O. Box 2999 for Hartford Life Insurance
Company. Mr. Joyce is also a Senior
Hartford, CT 06104-2999 Vice President of HL Advisors and a
Vice President of The Hartford
Mutual Funds II, Inc., The Hartford
Income Shares Fund, Inc., Hartford
Series Fund, Inc. and Hartford HLS
Series Fund II, Inc. Previously, he
served as Vice President
(1997-1999) and Assistant Vice
President (1994-1997) of Hartford
Life Insurance Company.
26
OFFICERS AND INTERESTED DIRECTORS
[Enlarge/Download Table]
NUMBER OF
TERM OF PORTFOLIOS
POSITION OFFICE* IN FUND OTHER
HELD WITH AND LENGTH COMPLEX DIRECTORSHIPS
THE OF TIME PRINCIPAL OCCUPATION(S) OVERSEEN HELD BY
NAME, AGE AND ADDRESS COMPANY SERVED DURING PAST 5 YEARS BY DIRECTOR DIRECTOR
--------------------------- ----------- ---------- ----------------------------------- ------------ ---------------
DAVID N. LEVENSON Vice Since 2000 Mr. Levenson serves as Senior Vice N/A N/A
(age 37) President President of Hartford Life
c/o Hartford Mutual Funds Insurance Company's Retail Product
P.O. Box 2999 Management Group and is responsible
Hartford, CT 06104-2999 for all retail product management
and profitability. Mr. Levenson is
also a Senior Vice President of
HIFSCO. In addition, he serves as
Vice President of The Hartford
Mutual Funds II, Inc., The Hartford
Income Shares Fund, Inc., Hartford
Series Fund, Inc. and Hartford HLS
Series Fund II, Inc. Mr. Levenson
joined The Hartford in 1995.
JOHN C. WALTERS Vice Since 2000 Mr. Walters serves as Executive N/A N/A
(age 45) President Vice President and Director of the
c/o Hartford Mutual Funds Investment Products Division of
P.O. Box 2999 Hartford Life Insurance Company.
Hartford, CT 06104-2999 Mr. Walters is also a Managing
Member and Executive Vice President
of HIFSCO and HL Advisors. In
addition, he is a Vice President of
The Hartford Mutual Funds II, Inc.,
The Hartford Income Shares Fund,
Inc., Hartford Series Fund, Inc.
and Hartford HLS Series Fund II,
Inc. Previously, Mr. Walters was
with First Union Securities.
*Term of Office: Each officer and director may serve until his or her successor
is elected and qualifies.
**"Interested person", as defined in the 1940 Act, of the Company because of the
person's affiliation with, or equity ownership of, HIFSCO, Hartford Investment
Management or affiliated companies.
STANDING COMMITTEES. The board of directors has established an
Audit Committee, a Nominating Committee and a Litigation Committee for
the Company. The Audit Committee and the Nominating Committee are each
made up of those directors who are not "interested persons" of the
Company. The Litigation Committee is made up of the following members
of the board of directors of the Company: Robert M. Gavin, Lynn S.
Birdsong and Duane E. Hill. The Audit Committee (i) oversees the Funds'
accounting and financial reporting policies and practices, its internal
controls and, as appropriate, the internal controls of certain service
providers, (ii) oversees the quality and objectivity of the Funds'
financial statements and the independent audit thereof, and (iii) acts
as a liaison between the Funds' independent auditors and the full board
of directors. The Nominating Committee screens and selects candidates
to the board of directors. Any recommendations for nominees should be
directed to the Secretary of the Company, who will then forward them to
the Nominating Committee. The Nominating Committee will
27
consider nominees recommended by shareholders if the Committee is
considering other nominees at the time of the recommendation and if the
nominee meets the Committee's criteria. The Litigation Committee
manages any legal actions that are brought by, on behalf of or against
the Funds, the board of directors of the Company and/or the members
thereof that are not "interested persons" of the Funds as defined in
the 1940 Act. The Audit Committee and Nominating Committee each met two
times during the fiscal year ended October 31, 2003.
All directors and officers of the Company, except for David
Znamierowski, are also directors and officers of four other registered
investment companies in the fund complex, which is comprised of those
investment companies for which HIFSCO or HL Investment Advisors, LLC
serves as investment adviser. In addition to being a director and
officer of the Company, Mr. Znamierowski is also a director of one
other registered investment company in the fund complex and an officer
of four other registered investment companies in the fund complex.
The following table discloses the dollar range of equity
securities beneficially owned by each director as of December 31, 2003
(i) in each Fund and (ii) on an aggregate basis in any registered
investment companies overseen by the director within the same family of
investment companies.
NON-INTERESTED DIRECTORS
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AGGREGATE DOLLAR RANGE
OF EQUITY SECURITIES IN
ALL REGISTERED INVESTMENT
COMPANIES OVERSEEN
DOLLAR RANGE OF EQUITY SECURITIES BY DIRECTOR IN FAMILY OF
NAME OF DIRECTOR IN THE FUND INVESTMENT COMPANIES
Lynn S. Birdsong None None
Winifred Ellen Coleman None Over $100,000
Dr. Robert M. Gavin None Over $100,000
Duane E. Hill None None
Phillip O. Peterson None $10,001-$50,000
Millard Handley Pryor, Jr. None $50,001-$100,000
[Enlarge/Download Table]
AGGREGATE DOLLAR RANGE
OF EQUITY SECURITIES IN
ALL REGISTERED INVESTMENT
COMPANIES OVERSEEN
DOLLAR RANGE OF EQUITY SECURITIES BY DIRECTOR IN FAMILY OF
NAME OF DIRECTOR IN THE FUND INVESTMENT COMPANIES
Thomas M. Marra None Over $100,000
Lowndes Andrew Smith None Over $100,000
David Mark Znamierowski None $10,001-$50,000
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COMPENSATION OF OFFICERS AND DIRECTORS The Company does not pay salaries
or compensation to any of its officers or directors who are employed by The
Hartford. The chart below sets forth the compensation paid by the Company to the
following directors for the fiscal year ended October 31, 2003 and certain other
information.
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Pension Or
Aggregate Retirement Total Compensation
Compensation Benefits Accrued Estimated Annual From the Company
From the As Part Of Fund Benefits Upon And Fund Complex
Name of Person, Position Company Expenses Retirement Paid To Directors*
Lynn S. Birdsong, Director** $ 9,994 $0 $0 $44,500
Winifred E. Coleman, Director $17,517 $0 $0 $78,000
Dr. Robert M. Gavin, Director $17,517 $0 $0 $78,000
Duane E. Hill, Director $17,517 $0 $0 $78,000
Phillip O. Peterson, Director $17,292 $0 $0 $77,000
Millard H. Pryor, Jr., Director $17,517 $0 $0 $78,000
Lowndes A. Smith, Director $16,843 $0 $0 $75,000
John K. Springer, Director*** $ 8,758 $0 $0 $39,010
*As of October 31, 2003, five registered investment companies in the
Complex paid compensation to the directors.
**Newly elected director on May 13, 2003.
***Retired from the Board of the Company, effective May 14, 2003.
The sales load for Class A shares of the Funds is waived for present and
former officers, directors and employees of the Company, The Hartford,
Wellington Management, the transfer agent and their affiliates. Such waiver is
designed to provide an incentive for individuals that are involved and
affiliated with the Funds and their operations to invest in the Funds.
The Company's Articles of Incorporation provide that the Company to the
full extent permitted by Maryland law and the federal securities laws shall
indemnify the directors and officers of the Company. The Articles of
Incorporation do not authorize the Company to indemnify any director or officer
against any liability to which he or she would otherwise be subject by reason of
or for willful misfeasance, bad faith, gross negligence or reckless disregard of
such person's duties.
As of May 19, 2004, the officers and directors of the Company did not
beneficially own any class of any shares of the Funds to which this SAI relates.
As of that date, no person held any interest in such Funds equal to 5% or more
of outstanding shares of any class.
Control is defined by the 1940 Act as the beneficial ownership, either
directly or through one or more controlled companies, of more than 25 percent of
the voting securities of a fund. A control person may be able to
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take actions regarding a fund it controls without the consent or approval of
other shareholders. As of May 19, 2004, there were no control persons of any
Fund.
INVESTMENT MANAGEMENT ARRANGEMENTS
The Company, on behalf of each Fund, has entered into an investment
management agreement with HIFSCO. The investment management agreements provide
that HIFSCO, subject to the supervision and approval of the Company's board of
directors, is responsible for the management of each Fund. In addition, HIFSCO
provides administrative services to the Company, including, personnel, services,
equipment and facilities and office space for proper operation of the Companies.
Although HIFSCO has agreed to arrange for the provision of additional services
necessary for the proper operation of the Company, each Fund pays for these
services directly.
As the investment manager, HIFSCO administers the asset allocation program
for each Fund. Ibbotson Associates, Inc. ("Ibbotson"), 225 North Michigan
Avenue, Suite 700, Chicago, Illinois 60601, serves as a consultant to HIFSCO in
the creation and maintenance of the asset allocation programs for the Funds
pursuant to an agreement dated December 11, 2003 between HIFSCO and Ibbotson.
Ibbotson provides recommendations to HIFSCO concerning the selection of
Underlying Funds to implement in the asset allocation program and determining
the appropriate allocations among the Underlying Funds for each Fund based on
the investment objectives of the Funds.
As provided by the investment management agreements, each Fund pays HIFSCO
an investment management fee, which is accrued daily and paid monthly, equal on
an annual basis to 0.20% of each Fund's average daily net assets. HIFSCO, not
any Fund, pays a consultant fee to Ibbotson. As a consultant fee, HIFSCO paid a
one time payment of $100,000 to Ibbotson. In addition, HIFSCO pays a fee, which
is paid quarterly, equal on an annual basis to a stated percentage of each
Fund's average daily net assets. HIFSCO has agreed to pay Ibbotson a minimum
annual consultant fee of $100,000. The consultant fee rates are as follows:
All Funds
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Average Daily Net Assets Annual Rate
------------------------------- -----------
First $500,000,000 0.05%
$500,000,001 - $1,000,000,000 0.04%
$1,000,000,001 - $2,000,000,000 0.03%
Amount Over $2,000,000,000 0.025%
Because the Funds will not have commenced operations until May 28, 2004,
there is no advisory fee information available for any of the Funds.
HIFSCO has voluntarily agreed to limit the expenses of each class of each
of the Funds by reimbursing each of the Funds when total fund operating expenses
of the class exceed the following percentages (this policy may be discontinued
at any time):
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FUND NAME CLASS A CLASS B CLASS C
--------- ------- ------- -------
Aggressive Growth Allocation Fund 1.65% 2.30% 2.30%
Growth Allocation Fund 1.55% 2.20% 2.20%
Balanced Allocation Fund 1.45% 2.15% 2.15%
Conservative Allocation Fund 1.40% 2.05% 2.05%
Income Allocation Fund 1.25% 1.95% 1.95%
Pursuant to the investment management agreement, HIFSCO is not liable to
the Funds or their shareholders for an error of judgment or mistake of law or
for a loss suffered by the Funds in connection with the matters to which the
agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of HIFSCO in the performance of its duties or
from its reckless disregard of the obligations and duties under the agreement.
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HIFSCO, whose business address is 200 Hopmeadow Street, Simsbury,
Connecticut 06089, was organized in 1995. As of December 31, 2003, HIFSCO had
approximately $20.8 billion of assets under management.
At a meeting of the Board of Directors on November 4, 2003, the Board
unanimously voted to approve the investment management agreement. In this
regard, the Board of Directors considered the following material factors
relating to the agreement. The Board reviewed the quality of the services to be
provided to the Funds by HIFSCO. The Board also reviewed the investment
management fees to be paid to HIFSCO. In this connection, the Board reviewed
comparative information prepared by a third party consultant on investment
management fees paid and expenses incurred by similarly situated funds. The
Board reviewed materials indicating that the management fees to be paid to
HIFSCO were lower than the average advisory fees incurred by similarly situated
funds, and equal to the median advisory fees incurred by similarly situated
funds. The Board also reviewed materials comparing the aggregate expenses for
each Fund to those of similarly situated funds. The Board also considered the
fact that all of the Funds have the same management fee rate. The Board also
considered the high quality of the services to be performed for each Fund by
HIFSCO, which includes its extensive research capabilities. The Board also
considered the strong long term experience of HIFSCO, the compliance structure
and systems established by HIFSCO, the financial viability of HIFSCO and
HIFSCO's control over the investment expenses such as transaction costs.
Additionally, the Board noted that HIFSCO would provide bonus shares to
investors enrolled in the DCA program, providing those investors with an
enhanced return. Finally, the Board noted the fact that the use of Ibbotson to
assist HIFSCO in the maintenance of the asset allocation programs for the Funds
would help avoid the conflicts of interest inherent in fund-of-funds type
products.
The Board considered other benefits to HIFSCO or its affiliates from the
investment management agreement with the Funds. Specifically, the Board reviewed
information noting that Hartford Life, Inc. may receive a set fee for fund
accounting and related services. The Board also reviewed the fact that HASCO,
the Funds' transfer agent, will receive transfer agency compensation from the
Funds. Finally, the Board reviewed information regarding the cost to provide
advisory services to the Funds. Based upon its review, the Board concluded that
it is in the best interests of the Funds and their shareholders for the Board to
approve the investment management agreement for the Funds.
In arriving at their decision to approve the investment management
agreement, the board of directors of the Company did not assign relative weights
to the factors discussed above or deem any one or group of them to be
controlling in and of themselves.
The investment management agreement continues in effect for two years from
initial approval and from year to year thereafter if approved annually by a vote
of a majority of the directors of the Company, including a majority of the
directors who are not parties to the agreement or interested persons of any
party to the agreement, cast in person at a meeting called for the purpose of
voting on such approval, or by holders of a majority of the applicable Fund's
outstanding voting securities. The agreement automatically terminates upon
assignment as defined under the 1940 Act. The investment management agreement
may be terminated without penalty on 60 days' notice at the option of either
party to the agreement or by vote of the holders of a majority of the
outstanding voting securities of the applicable Fund.
Each Fund and HIFSCO have each adopted a code of ethics designed to
protect the interests of each Fund's shareholders. Under each code of ethics,
investment personnel are permitted to trade securities for their own account,
including securities that may be purchased or held by a Fund, subject to a
number of restrictions. Each code of ethics has been filed with the SEC and may
be viewed by the public.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Company has no obligation to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities (normally, shares of
the Underlying Funds). Each Fund will not incur any commissions or sales charges
when it invests in the Underlying Funds.
Subject to any policy established by the boards of directors of the
Underlying Funds and HIFSCO, the sub-advisers to the Underlying Funds are
primarily responsible for the investment decisions of an Underlying Fund
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and the placing of its portfolio transactions. In placing orders, it is the
policy of each Underlying Fund to obtain the most favorable net results, taking
into account various factors, including price, dealer spread or commission, if
any, size of the transaction and difficulty of execution. While the sub-advisers
to the Underlying Funds generally seek reasonably competitive spreads or
commissions, the Underlying Funds do not necessarily pay the lowest possible
spread or commission. Upon instructions from HIFSCO, the sub-advisers to the
Underlying Funds may direct certain brokerage transactions to broker/dealers
that pay for certain services used by the Underlying Funds.
The sub-advisers to the Underlying Funds generally deal directly with the
dealers who make a market in the securities involved (unless better prices and
execution are available elsewhere) if the securities are traded primarily in the
over-the-counter market. Such dealers usually act as principals for their own
account. On occasion, securities may be purchased directly from the issuer. In
addition, the sub-advisers to the Underlying Funds may effect certain "riskless
principal" transactions through certain dealers in the over-the-counter market
under which "commissions" are paid on such transactions. Bonds and money market
securities are generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes. Portfolio securities in the
Money Market Fund normally are purchased directly from, or sold directly to, the
issuer, an underwriter or market maker for the securities. There usually are no
brokerage commissions paid by the Money Market Fund for such purchases or sales.
While the sub-advisers to the Underlying Funds seek to obtain the most
favorable net results in effecting transactions in an Underlying Fund's
portfolio securities, broker-dealers who provide investment research to the
sub-advisers may receive orders for transactions from the sub-advisers. Such
research services ordinarily consist of assessments and analyses of the business
or prospects of a company, industry, or economic sector. If, in the judgment of
the sub-advisers to the Underlying Funds, an Underlying Fund will be benefited
by such research services, the sub-advisers are authorized to pay spreads or
commissions to brokers or dealers furnishing such services which are in excess
of spreads or commissions which another broker or dealer may charge for the same
transaction. Information so received is in addition to and not in lieu of the
services required that the sub-advisers to the Underlying Funds must perform
under their respective investment subadvisory agreements. The expenses of the
sub-advisers to the Underlying Funds are not necessarily reduced as a result of
the receipt of such information. The sub-advisers to the Underlying Funds may
use such research in providing investment advice to portfolios other than those
for which the transactions are made. Similarly, the Underlying Funds may benefit
from such research obtained by the sub-advisers to the Underlying Funds for
portfolio transactions for other clients.
Investment decisions for the Underlying Funds are made independently from
those of any other clients that are managed by the sub-advisers to the
Underlying Funds or their affiliates. If, however, accounts managed by the
sub-advisers to the Underlying Funds are simultaneously engaged in the purchase
of the same security, then, as authorized by the Underlying Funds' boards of
directors, available securities may be allocated to each Underlying Fund or
other client account and may be averaged as to price in a manner determined by
the sub-advisers to be fair and equitable. Such allocation and pricing may
affect the amount of brokerage commissions paid by each Underlying Fund. In some
cases, this system might adversely affect the price paid by an Underlying Fund
(for example, during periods of rapidly rising or falling interest rates) or
limit the size of the position obtainable for an Underlying Fund (for example,
in the case of a small issue). Likewise, if accounts managed by the sub-advisers
to the Underlying Funds are simultaneously engaged in the sale of the same
security, the same process may be followed with similar consequences.
Accounts managed by the sub-advisers to the Underlying Funds (or their
affiliates) may hold securities held by an Underlying Fund. Because of different
investment objectives or other factors, a particular security may be purchased
by the sub-advisers to the Underlying Funds for one client when one or more
other clients are selling the same security.
For information regarding brokerage commissions paid by the Underlying
Funds, refer to the SAI for the Underlying Funds.
FUND EXPENSES
EXPENSES OF THE FUNDS Each Fund pays its own expenses including, without
limitation: (1) expenses of maintaining the Fund and continuing its existence,
(2) registration of the Fund under the 1940 Act, (3) auditing,
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accounting and legal expenses, (4) taxes and interest, (5) governmental fees,
(6) expenses of issue, sale, repurchase and redemption of Fund shares, (7)
expenses of registering and qualifying the Fund and its shares under federal and
state securities laws and of preparing and printing prospectuses for such
purposes and for distributing the same to shareholders and investors, and fees
and expenses of registering and maintaining registrations of the Fund and of the
Fund's principal underwriter, if any, as broker-dealer or agent under state
securities laws, (8) expenses of reports and notices to shareholders and of
meetings of shareholders and proxy solicitations therefor, (9) expenses of
reports to governmental officers and commissions, (10) insurance expenses, (11)
association membership dues, (12) fees, expenses and disbursements of custodians
for all services to the Fund, (13) fees, expenses and disbursements of transfer
agents, dividend disbursing agents, shareholder servicing agents and registrars
for all services to the Fund, (14) expenses for servicing shareholder accounts,
(15) any direct charges to shareholders approved by the directors of the Fund,
(16) compensation and expenses of directors of the Fund who are not "interested
persons" of the Fund, and (17) such nonrecurring items as may arise, including
expenses incurred in connection with litigation, proceedings and claims and the
obligation of the Fund to indemnify its directors and officers with respect
thereto.
Each Fund, as a shareholder of the Underlying Funds, also indirectly bears
its pro rata share of the advisory fees charged to, and expenses of operating,
the Underlying Funds in which it invests. Each Fund's expense ratios, as
disclosed in the Funds' prospectus, may be higher or lower depending on the
allocation of the Fund's assets among the Underlying Funds and the actual
expenses of the Underlying Funds.
DISTRIBUTION ARRANGEMENTS
GENERAL
Hartford Investment Financial Services, LLC ("HIFSCO") serves as the
principal underwriter for each Fund pursuant to an Underwriting Agreement
initially approved by the board of directors of the Company. HIFSCO is a
registered broker-dealer and member of the NASD. Shares of each Fund are
continuously offered and sold by selected broker-dealers who have selling
agreements with HIFSCO. Except as discussed below under Distribution Plans,
HIFSCO bears all the expenses of providing services pursuant to the Underwriting
Agreement including the payment of the expenses relating to the distribution of
prospectuses for sales purposes as well as any advertising or sales literature.
The Underwriting Agreement continues in effect for two years from initial
approval and for successive one-year periods thereafter, provided that each such
continuance is specifically approved (1) by the vote of a majority of the
directors of the Company, including a majority of the directors who are not
parties to the Underwriting Agreement or interested persons (as defined in the
1940 Act) of any such party, or (2) by the vote of a majority of the outstanding
voting securities of a Fund. HIFSCO is not obligated to sell any specific amount
of shares of any Fund.
HIFSCO is authorized by the Company to receive purchase and redemption
orders on behalf of the Funds. HIFSCO is authorized to designate other
intermediaries to receive purchase or redemption orders on the Funds' behalf. In
these circumstances a Fund is deemed to have received a redemption or purchase
order when an authorized broker or, if applicable, a broker's authorized
designee receives the order. Such orders are priced at the applicable Fund's net
asset value next computed, including any applicable sales charges, after they
are received by the authorized brokers or the broker's authorized designee and
accepted by the Company.
In addition to the commissions (reallowed and/or advanced) and Rule 12b-1
fees described in this SAI and in the Funds' prospectus, HIFSCO and its
affiliates pay, out of their own assets, significant additional compensation to
broker-dealers, financial institutions and other persons ("Financial
Intermediaries") in connection with the sale and distribution of the Funds'
shares ("Additional Payments"). Certain Additional Payments are generally based
on average net assets (or on aged assets) of the Funds attributable to a
particular Financial Intermediary, on sales of the Funds' shares attributable to
a particular Financial Intermediary, and/or on reimbursement of ticket charges.
Such Additional Payments are generally made for the placement of the Funds on a
Financial Intermediary's list of mutual funds available for purchase by its
customers and/or for including the Funds within a group of mutual funds that
receive special marketing focus. Separate Additional Payments may take the form
of, among others: (1) "due diligence" payments for a Financial Intermediary's
examination of the Funds and payments for providing extra employee training and
information relating to the Funds and (2) "marketing support" fees for providing
assistance in promoting the sale of the Funds' shares ("Negotiated Additional
Amounts"). Subject to NASD regulations, HIFSCO and its affiliates may contribute
Negotiated Additional Amounts to various non-cash and cash incentive
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arrangements to promote the sale of shares, as well as sponsor various
educational programs, sales contests and/or promotions in which participants may
receive prizes such as travel awards, merchandise and cash and/or investment
research pertaining to particular securities and other financial instruments or
to the securities and financial markets generally, educational information and
related support materials and hardware and/or software. HIFSCO and its
affiliates may also pay for the travel expenses, meals, lodging and
entertainment of Financial Intermediaries and their salespersons and guests in
connection with education, sales and promotional programs, subject to applicable
NASD regulations. These programs, which may be different for different Financial
Intermediaries, will not change the price an investor will pay for shares or the
amount that a fund will receive from such sale.
As of March 1, 2004, HIFSCO has entered into arrangements to make
Additional Payments that are generally based on average net assets (or on aged
assets) of the Funds attributable to a particular Financial Intermediary, on
sales of the Funds' shares attributable to a particular Financial Intermediary,
and/or on reimbursement of ticket charges to A. G. Edwards & Sons, Inc., Advest,
Inc., Banc of America Investment Services, Inc., Centaurus Financial, Inc.,
Charles Schwab & Co., Inc., Citicorp Investment Services, Citigroup Global
Markets, Inc., Colonial Brokerage, Inc., Commerce Capital Markets, Inc.,
Commonwealth Financial Network, CUSO Financial Services, L.P., Edward D. Jones &
Co., L.P., Ferris, Baker Watts Incorporated, FFP Securities, Inc., Fidelity
Investments, Fifth Third Securities, Inc., Frost Brokerage Services, Inc.,
Harbour Investments, Inc., Investment Professionals, Inc., J.J.B. Hilliard, W.L.
Lyons, Inc., Janney Montgomery Scott LLC, Jefferson Pilot Securities
Corporation, Linsco/Private Ledger Corp., Main Street Management Company,
Merrill Lynch Pierce Fenner & Smith, Morgan Keegan & Company, Inc., Mutual
Service Corporation, NCF Financial Services, Inc., NEXT Financial Group, Inc.,
NFP Securities, Inc., Piper Jaffray & Co., Southtrust Securities, Inc., Stifel,
Nicolaus & Company, Incorporated, Securities America, Inc., Synovus Securities,
Inc., The Huntington Investment Company, Triad Advisors, Inc., UBS Financial
Services Inc., Wachovia Securities, LLC, WM Financial Services, Inc., and
Woodbury Financial Services, Inc. Woodbury Financial Services, Inc. is an
indirect wholly-owned subsidiary of The Hartford. HIFSCO may enter into
arrangements with other Financial Intermediaries to make such Additional
Payments. Separate Additional Payments in the form of Negotiated Additional
Amounts may also be made to the above-listed Financial Intermediaries and to
other Financial Intermediaries.
The Additional Payments to Financial Intermediaries in connection with the
sale and distribution of the Funds' shares are negotiated based on a range of
factors, including, but not limited to, reputation in the industry, ability to
attract and retain assets (including distribution of particular classes of the
Funds' shares), target markets, customer relationships and quality of service.
No one factor is determinative of the type or amount of Additional Payments to
be provided and factors are weighed in the assessment of such determination.
HIFSCO may provide additional compensation to Edward D. Jones & Co., LP ("Edward
Jones") based on sales of certain shares of the Funds attributable to Edward
Jones, on assets invested in the Funds attributable to Edward Jones, and
generally on a percentage share of the net income of HIFSCO (based on the total
amount of assets attributable to Edward Jones). In the event that the
arrangement with Edward Jones is terminated, HIFSCO may be required to pay
Edward Jones additional profit-sharing based compensation. In addition, HIFSCO
may pay Negotiated Additional Amounts to Edwards Jones in such forms as, among
others, "due diligence" payments and "marketing support" fees. Because the Funds
will not have commenced operations until May 28, 2004, there is no information
regarding Additional Payments, including Negotiated Additional Amounts, paid by
HIFSCO or its affiliates to Edward Jones.
Because the Funds will not have commenced operations until May 28, 2004,
there is no information regarding total Additional Payments, including
Negotiated Additional Amounts, paid by HIFSCO or its affiliates to Financial
Intermediaries.
Aside from Additional Payments made in connection with the sale and
distribution of the Funds' shares, HIFSCO and its affiliates, out of their own
assets, may pay compensation to Financial Intermediaries for subaccounting,
administrative and/or shareholder processing services.
COMMISSIONS TO DEALERS
Because the Funds will not have commenced operations until May 28, 2004,
there is no information regarding the aggregate dollar amount of commissions
received by HIFSCO for the sale of Fund shares.
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Generally, commissions on sales of Class A shares are reallowed to
broker-dealers as follows:
Aggressive Growth Allocation Fund, Growth Allocation Fund, Balanced Allocation
Fund and Conservative Allocation Fund
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FRONT-END SALES FRONT-END SALES
CHARGE AS A CHARGE AS A COMMISSION AS
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
Less than $50,000 5.50% 5.82% 4.75%
$50,000 or more but less than $100,000 4.50% 4.71% 4.00%
$100,000 or more but less than $250,000 3.50% 3.63% 3.00%
$250,000 or more but less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but less than $1 million 2.00% 2.04% 1.75%
$1 million or more(1) 0% 0% 0%
Income Allocation Fund
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FRONT-END SALES FRONT-END SALES
CHARGE AS A CHARGE AS A COMMISSION AS
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
AMOUNT OF PURCHASE
Less than $50,000 4.50% 4.71% 3.75%
$50,000 or more but less than $100,000 4.00% 4.17% 3.50%
$100,000 or more but less than $250,000 3.50% 3.63% 3.00%
$250,000 or more but less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but less than $1 million 2.00% 2.04% 1.75%
$1 million or more(1) 0% 0% 0%
(1) Investments of $1 million or more in Class A shares may be made with
no front-end sales charge. However, there is a contingent deferred sales
charge (CDSC) of 1% on any shares sold within 18 months of purchase. For
purposes of this CDSC, all purchases made during a calendar month are
counted as having been made on the first day of that month. The CDSC is
based on the lesser of the original purchase cost or the current market
value of the shares being sold and is not charged on shares you acquired
by reinvesting your dividends and distributions. To keep your CDSC as low
as possible, each time you place a request to sell shares we will first
sell any shares in your account that are not subject to a CDSC.
HIFSCO may pay up to the entire amount of the sales commission to
particular broker-dealers. HIFSCO also may pay dealers of record commissions on
purchases over $1 million in an amount up to the sum of 1.0% of the first $4
million, plus 0.50% of the next $6 million, plus 0.25% of share purchases over
$10 million. In addition, HIFSCO may provide compensation to dealers of record
for certain shares purchased without a sales charge.
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HIFSCO pays commissions to dealers of up to 4% of the purchase price of
Class B shares purchased through dealers and pays commissions to dealers of up
to 2% of the purchase price of Class C shares purchased through dealers. Class C
shares may be purchased without a front-end sales charge when purchased through
a broker-dealer that has entered into an agreement with the distributor to waive
this charge. As of May 5, 2004, the following firms have entered into agreements
to waive this charge: Edward Jones, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Keegan & Company, Inc., Raymond James & Associates, Inc.,
Raymond James Financial Services, UBS Financial Services Inc., RBC Dain Rauscher
Inc., Banc of America Investment Services, Inc., First Clearing, LLC, Prudential
Securities, Division of Wachovia Securities, LLC, Linsco/Private Ledger Corp.,
Piper Jaffray & Co., Robert W. Baird & Co. Incorporated, Advest, Inc., Wells
Fargo Investments, LLC, Synovus Securities, Inc., Janney Montgomery Scott LLC,
Legg Mason Wood Walker, Incorporated, Commonwealth Financial Network, People's
Securities, Inc., Davenport & Company LLC, Morgan Stanley DW Inc., First
Citizens Investors Services, Inc., Sterling Financial Investment Group, Inc., R.
Seelaus & Co., Inc. and BPU Investment Group, Inc.
HIFSCO's principal business address is 200 Hopmeadow Street, Simsbury,
Connecticut 06089. HIFSCO was organized as a Delaware corporation on December 9,
1996 and is an indirect wholly-owned subsidiary of The Hartford.
DISTRIBUTION PLANS
The Company, on behalf of the Funds, has adopted separate distribution
plans (the "Plans") for Class A, Class B and Class C shares of each Fund
pursuant to appropriate resolutions of the Company's board of directors in
accordance with the requirements of Rule 12b-1 under the 1940 Act and the
requirements of the applicable rule of the NASD regarding asset-based sales
charges.
CLASS A PLAN Pursuant to the Class A Plan, a Fund may compensate HIFSCO
for its expenditures in financing any activity primarily intended to result in
the sale of Fund shares and for maintenance and personal service provided to
existing Class A shareholders. The expenses of a Fund pursuant to the Class A
Plan are accrued on a fiscal year basis and may not exceed, with respect to the
Class A shares of each Fund, the annual rate of 0.35% of the Fund's average
daily net assets attributable to Class A shares. However, the Company's board of
directors has currently authorized Rule 12b-1 payments of only up to 0.25% of
each Fund's average daily net assets attributable to Class A shares. The entire
amount of the fee may be used for shareholder servicing expenses.
CLASS B PLAN Pursuant to the Class B Plan, a Fund may pay HIFSCO a fee of
up to 1.00% of the average daily net assets attributable to Class B shares,
0.75% of which is a fee for distribution financing activities and 0.25% of which
is for shareholder account services. HIFSCO will advance to dealers the
first-year service fee at a rate equal to 0.25% of the amount invested. As
compensation for such advance, HIFSCO may retain the service fee paid by a Fund
with respect to such shares for the first year after purchase. Dealers will
become eligible for additional service fees with respect to such shares
commencing in the thirteenth month following purchase. Brokers may from time to
time be required to meet certain other criteria in order to receive service
fees. HIFSCO or its affiliates are entitled to retain all service fees payable
under the Class B Plan for which there is no dealer of record or for which
qualification standards have not been met as partial consideration for personal
services and/or account maintenance services performed by HIFSCO or its
affiliates for shareholder accounts. The Class B Plan also provides that HIFSCO
will receive all contingent deferred sales charges attributable to Class B
shares.
CLASS C PLAN Pursuant to the Class C Plan, a Fund may pay HIFSCO a fee of
up to 1.00% of the average daily net assets attributable to Class C shares,
0.75% of which is a fee for distribution financing activities and 0.25% of which
is for shareholder account services. HIFSCO will advance to dealers the
first-year service fee at a rate equal to 0.25% of the amount invested. As
compensation for such advance, HIFSCO may retain the service fee paid by a Fund
with respect to such shares for the first year after purchase. Dealers will
become eligible for additional service fees with respect to such shares
commencing in the thirteenth month following purchase. Brokers may from time to
time be required to meet certain other criteria in order to receive service
fees. HIFSCO or its affiliates are entitled to retain all service fees payable
under the Class C Plan for which there is no dealer of record or for which
qualification standards have not been met as partial consideration for personal
services and/or account maintenance services performed by HIFSCO or its
affiliates for shareholder accounts. The Class C Plan also provides that HIFSCO
will receive all contingent deferred sales charges attributable to Class C
shares.
36
GENERAL Distribution fees paid to HIFSCO may be spent on any activities or
expenses primarily intended to result in the sale of the Company's shares
including: (a) payment of initial and ongoing commissions and other compensation
payments to brokers, dealers, financial institutions or others who sell each
Fund's shares, (b) compensation to employees of HIFSCO, (c) compensation to and
expenses, including overhead such as communications and telephone, training,
supplies, photocopying and similar types of expenses, of HIFSCO incurred in the
printing and mailing or other dissemination of all prospectuses and statements
of additional information, (d) the costs of preparation, printing and mailing of
reports used for sales literature and related expenses, i.e., advertisements and
sales literature, and (e) other distribution-related expenses and for the
provision of personal service and/or the maintenance of shareholder accounts.
These plans are considered compensation type plans which means that the Funds
pay HIFSCO the entire fee regardless of HIFSCO's expenditures. Even if HIFSCO's
actual expenditures exceed the fee payable to HIFSCO at any given time, the
Funds will not be obligated to pay more than that fee.
In accordance with the terms of the Plans, HIFSCO provides to each Fund,
for review by the Company's board of directors, a quarterly written report of
the amounts expended under the respective Plans and the purpose for which such
expenditures were made. In the board of directors' quarterly review of the
Plans, they review the level of compensation the Plans provide in considering
the continued appropriateness of the Plans.
The Plans were adopted by a majority vote of the board of directors of the
Company, including at least a majority of directors who are not, and were not at
the time they voted, interested persons of the applicable Funds as defined in
the 1940 Act and do not and did not have any direct or indirect financial
interest in the operation of the Plans, cast in person at a meeting called for
the purpose of voting on the Plans. In approving the Plans, the directors
identified and considered a number of potential benefits which the Plans may
provide including the potential to increase assets in order to benefit from
economies of scale. The board of directors of the Company believes that there is
a reasonable likelihood that the Plans will benefit each applicable Fund and its
current and future shareholders. Under their terms, the Plans remain in effect
from year to year provided such continuance is approved annually by vote of the
board of directors of the Company in the manner described above. The Plans may
not be amended to increase materially the amount to be spent for distribution
without approval of the shareholders of the Fund affected thereby, and material
amendments to the Plans must also be approved by the board of directors in the
manner described above. A Plan may be terminated at any time, without payment of
any penalty, by vote of the majority of the directors of the board who are not
interested persons of the Funds and have no direct or indirect financial
interest in the operations of the Plan, or by a vote of a "majority of the
outstanding voting securities" of the Fund affected thereby. A Plan will
automatically terminate in the event of its assignment.
Because the Funds will not have commenced operations until May 28, 2004,
there is no information regarding 12b-1 fees paid by any Fund.
PURCHASE AND REDEMPTION OF SHARES
For information regarding the purchase of Fund shares, see "About Your
Account -- Buying Shares" in the Funds' prospectus.
For a description of how a shareholder may have a Fund redeem his/her
shares, or how he/she may sell shares, see "About Your Account -- Selling
Shares" in the Funds' prospectus.
RIGHTS OF ACCUMULATION Each Fund offers to all qualifying investors rights
of accumulation under which investors are permitted to purchase Class A shares
of any Fund of the Company at the price applicable to the total of (a) the
dollar amount then being purchased plus (b) an amount equal to the then current
net asset value of the purchaser's holdings of all shares of any Fund of the
Company and the current account value of certain annuity or variable life
contracts issued by affiliates of The Hartford. These contracts currently
include variable annuities and variable life insurance products where at least
one Hartford-sponsored fund (other than a money market fund) is offered and the
following fixed annuities: CRC, Saver, Saver Bonus and Harvester. The insurance
contract must be owned by a natural person (not part of a group product). For
purposes of the rights of accumulation program, the purchaser may include all
shares owned by family members. A family member is a spouse, parent,
grandparent, child, grandchild, brother, sister, step-family members and
in-laws. Acceptance of the purchase order is subject to
37
confirmation of qualification. The rights of accumulation may be amended or
terminated at any time as to subsequent purchases. Hartford Administrative
Services Company ("HASCO"), the Companies' transfer agent, must be notified by
you or your broker each time a qualifying purchase is made.
LETTER OF INTENT Any person may qualify for a reduced sales charge on
purchases of Class A shares made within a thirteen-month period pursuant to a
Letter of Intent ("LOI"). Class A shares acquired through the reinvestment of
distributions do not constitute purchases for purposes of the LOI. A Class A
shareholder may include, as an accumulation credit towards the completion of
such LOI, the value of all shares of all Funds of the Company owned by the
shareholder. Such value is determined based on the public offering price on the
date of the LOI. During the term of an LOI, HASCO will hold shares in escrow to
secure payment of the higher sales charge applicable for shares actually
purchased if the indicated amount on the LOI is not purchased. Dividends and
capital gains will be paid on all escrowed shares and these shares will be
released when the amount indicated on the LOI has been purchased. An LOI does
not obligate the investor to buy or the Fund to sell the indicated amount of the
LOI. If a Class A shareholder exceeds the specified amount of the LOI and
reaches an amount which would qualify for a further quantity discount, a
retroactive price adjustment will be made at the time of the expiration of the
LOI. The resulting difference in offering price will purchase additional Class A
shares for the shareholder's account at the applicable offering price. If the
specified amount of the LOI is not purchased, the shareholder shall remit to
HASCO an amount equal to the difference between the sales charge paid and the
sales charge that would have been paid had the aggregate purchases been made at
a single time. If the Class A shareholder does not within twenty days after a
written request by HASCO pay such difference in sales charge, HASCO will redeem
an appropriate number of escrowed shares in order to realize such difference.
The LOI may be backdated up to 90 days. Additional information about the terms
of the LOI are available from your registered representative or from HASCO at
1-888-843-7824.
SYSTEMATIC WITHDRAWAL PLAN The Systematic Withdrawal Plan ("SWP") is
designed to provide a convenient method of receiving fixed payments at regular
intervals only from Class A shares not subject to a CDSC (except as noted below)
of a Fund deposited by the applicant under this SWP. The applicant must deposit
or purchase for deposit shares of the Fund having a total value of not less than
$5,000. Periodic checks of $50 per Fund or more will be sent to the applicant,
or any person designated by him, monthly or quarterly.
Any income dividends or capital gains distributions on shares under the
SWP will be credited to the SWP account on the payment date in full and
fractional shares at the net asset value per share in effect on the record date.
SWP payments are made from the proceeds of the redemption of shares
deposited in a SWP account. Redemptions are potentially taxable transactions to
shareholders. To the extent that such redemptions for periodic withdrawals
exceed dividend income reinvested in the SWP account, such redemptions will
reduce and may ultimately exhaust the number of shares deposited in the SWP
account. In addition, the amounts received by a shareholder cannot be considered
as an actual yield or income on his or her investment because part of such
payments may be a return of his or her capital.
The SWP may be terminated at any time (1) by written notice to the Fund or
from the Fund to the shareholder, (2) upon receipt by the Fund of appropriate
evidence of the shareholder's death, or (3) when all shares under the SWP have
been redeemed. The fees of the Fund for maintaining SWPs are paid by the Fund.
SPECIAL REDEMPTIONS Although it would not normally do so, each Fund has
the right to pay the redemption price of shares of the Fund in whole or in part
in portfolio securities as prescribed by the Company's directors. When the
shareholder sells portfolio securities received in this fashion, he/she would
incur a brokerage charge. Any such securities would be valued for the purposes
of making such payment at the same value as used in determining net asset value.
The Funds have elected to be governed by Rule 18f-1 under the 1940 Act, pursuant
to which each Fund is obligated to redeem shares solely in cash up to the lesser
of $250,000 or 1% of the net asset value of the applicable Fund during any
90-day period for any one account.
DEFERRED SALES CHARGE ON CLASS A, CLASS B AND CLASS C SHARES Investments
in Class B shares are purchased at net asset value per share without the
imposition of an initial sales charge so that the Fund will receive the full
amount of the purchase payment.
38
Class A shares which were purchased without a front-end sales charge and
which are redeemed within eighteen months of purchase, Class B shares which are
redeemed within six years of purchase, and Class C shares which are redeemed
within one year of purchase, are subject to a CDSC at the rates set forth in the
prospectus as a percentage of the dollar amount subject to the CDSC. The charge
is assessed on an amount equal to the lesser of the current market value or the
original purchase cost of the Class A, Class B or Class C shares being redeemed.
No CDSC is imposed on increases in account value above the initial purchase
prices, including all shares derived from reinvestment of dividends or capital
gains distributions.
The amount of the CDSC, if any, varies depending on the number of years
from the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for purposes of determining this number of
years from the time of any payment for the purchases of Class B shares, all
payments during a month will be aggregated and deemed to have been made on the
first day of the month.
In determining whether a CDSC applies to a redemption, the calculation is
determined in a manner that results in the lowest possible rate being charged.
To determine whether a CDSC applies, the fund redeems shares in the following
order: (1) shares representing an increase over the original purchase cost, (2)
shares acquired through reinvestment of dividends and capital gains
distributions, (3) Class B shares held for over 6 years or Class C shares held
over 1 year, and (4) Class B shares held the longest during the six-year period.
When requesting a redemption for a specific dollar amount, please indicate
if you require the proceeds to equal the dollar amount requested. If not
indicated, only the specified dollar amount will be redeemed from your account
and the proceeds will be less any applicable CDSC.
Proceeds from the CDSC are paid to the distributor and are used in whole
or in part by the Funds to defray its expenses related to providing
distribution-related services to the Fund in connection with the sale of the
Class A, Class B and Class C shares, such as the payment of compensation to
select selling brokers for selling these classes of shares. The combination of
the CDSC and the distribution and service fees facilitates the ability of the
applicable Fund to sell the Class B shares without a sales charge being
deducted, and to sell Class A shares with a 4.50% or 5.50% maximum sales charge,
as applicable, and Class C shares with a 1% initial sales charge, at the time of
the purchase.
The CDSC will be waived on redemptions of Class B and Class C shares and
of Class A shares that are subject to the CDSC in the following cases:
- to make SWP payments that are limited annually to no more than 12%
of the value of the account at the time the plan is initiated,
- because of shareholder death or disability,
- because of the death or disability of the grantor of a living trust,
- under reorganization, liquidation, merger or acquisition
transactions involving other investment companies, and
- for retirement plans under the following circumstances:
(1) to return excess contributions,
(2) hardship withdrawals as defined in the plan,
(3) under a Qualified Domestic Relations Order as defined in the
Internal Revenue Code,
(4) to meet minimum distribution requirements under the Internal
Revenue Code,
(5) to make "substantially equal payments" as described in Section
72(t) of the Internal Revenue Code, and
(6) after separation from service.
39
SUSPENSION OF REDEMPTIONS
A Fund may not suspend a shareholder's right of redemption, or postpone
payment for a redemption for more than seven days, unless the New York Stock
Exchange (NYSE) is closed for other than customary weekends or holidays, or
trading on the NYSE is restricted, or for any period during which an emergency
exists as a result of which (1) disposal by a Fund of securities owned by it is
not reasonably practicable, or (2) it is not reasonably practicable for a Fund
to fairly determine the value of its assets, or for such other periods as the
SEC may permit for the protection of investors.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of all classes of each Fund is
determined by Hartford Life in the manner described in the Funds' prospectus.
The assets of each Fund consist primarily of shares of the Underlying Funds,
which are valued at their respective net asset values. The Funds and the
Underlying Funds are closed for business and do not price their shares on the
following business holidays: New Year's Day, Martin Luther King Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
Christmas Day and other holidays observed by the NYSE. Securities held by each
Underlying Fund, other than the Money Market Fund, will be valued as follows:
debt securities (other than short-term obligations) are valued on the basis of
valuations furnished by an unaffiliated pricing service which determines
valuations for normal institutional size trading units of debt securities.
Securities for which prices are not available from an independent pricing
service, but where an active market exists, are valued using market quotations
obtained from one or more dealers that make markets in the securities or from a
widely-used quotation system in accordance with procedures established by the
Underlying Funds' applicable Board of Directors. Short-term securities held in
the Money Market Fund are valued at amortized cost, which approximates market
value. All other Underlying Funds' debt investments with a maturity of 60 days
or less are valued at amortized cost, which approximates market value.
Short-term investments with a maturity of more than 60 days when purchased are
valued based on market quotations until the remaining days to maturity become
less than 61 days. From such time until maturity, the investments are valued at
amortized cost.
Equity securities are valued at the official closing price or at the last
sales price reported on principal securities exchanges (domestic or foreign) on
which they are traded. If no sale took place on a particular day and in the case
of certain equity securities traded over-the-counter, then such securities are
valued at the mean between the bid and asked prices. For securities traded on
the NASDAQ national market system, the Underlying Funds utilize the NASDAQ
Official Closing Price which compares the last trade to the bid/ask range of a
security. If the last trade falls within the bid-ask range, then that price will
be the closing price. If the last trade is outside the bid/ask range, and falls
above the ask, the ask will be the closing price. If the last price is below the
bid, the bid will be the closing price. Securities quoted in foreign currencies
are translated into U.S. dollars at the prevailing exchange rates. Options are
valued at the last sales price; if no sale took place on a particular day, then
options are valued at the mean between the bid and asked prices. Securities for
which market quotations are not readily available and all other assets are
valued in good faith at fair value by, or under guidelines established by, the
Underlying Funds' boards of directors.
Foreign securities markets may trade on days when the Funds and the
Underlying Funds do not compute their net asset value or may close at times that
differ from the close of the NYSE. If an event that affects the value of a
security occurs after the publication of market quotations used by an Underlying
Fund to price its securities but before the close of regular trading on the
NYSE, the Underlying Funds may use fair-value estimates as determined under
procedures established by the Underlying Funds' applicable board of directors.
Under the amortized cost method of valuation, an instrument is valued at
cost and the interest payable at maturity upon the instrument is accrued as
income, on a daily basis, over the remaining life of the instrument. Neither the
amount of daily income nor the net asset value is affected by unrealized
appreciation or depreciation of the portfolio's investments assuming the
instrument's obligation is paid in full on maturity.
The amortized cost method of valuation permits the Money Market Fund, an
Underlying Fund, to maintain a stable $1.00 net asset value per share. The board
of directors of the Company periodically reviews the extent of any deviation
from the $1.00 per share value that would occur if a method of valuation based
on market prices and estimates were used. In the event such a deviation would
exceed one-half of one percent, the board of directors will
40
promptly consider any action that reasonably should be initiated to eliminate or
reduce material dilution or other unfair results to shareholders. Such action
may include selling portfolio securities prior to maturity, not declaring earned
income dividends, valuing portfolio securities on the basis of current market
prices, if available, or, if not available, at fair market value as determined
in good faith by the board of directors, and (considered highly unlikely by
management of the Company) redemption of shares in kind (i.e., portfolio
securities). In periods of declining interest rates, the indicated daily yield
on shares of the portfolio computed using amortized cost may tend to be higher
than a similar computation made using a method of valuation based upon market
prices and estimates. In periods of rising interest rates, the indicated daily
yield on shares of the portfolio computed using amortized cost may tend to be
lower than a similar computation made using a method of valuation based upon
market prices and estimates.
A Fund's maximum offering price per Class A shares is determined by adding
the maximum sales charge to the net asset value per share. A Fund's offering
price per Class C share is determined by adding the initial sales charge to the
net asset value per share. Class B shares are offered at net asset value without
the imposition of an initial sales charge.
CAPITALIZATION AND VOTING RIGHTS
The Hartford Mutual Funds, Inc. was incorporated in Maryland on March 21,
1996. The authorized capital stock of the Company consists of 13 billion shares
of common stock, par value $0.001 per share ("Common Stock"). The shares of
Common Stock are divided into thirty-five series: Advisers Fund (760,000,000
shares); Capital Appreciation Fund (620,000,000 shares); Capital Preservation
Fund (660,000,000 shares); Disciplined Equity Fund (300,000,000 shares);
Dividend and Growth Fund (500,000,000 shares); Equity Income Fund (300,000,000
shares); Focus Fund (300,000,000 shares); Focus Growth Fund (300,000,000
shares); Global Communications Fund (300,000,000 shares); Global Financial
Services Fund (300,000,000 shares); Global Health Fund (300,000,000 shares);
Global Leaders Fund (300,000,000 shares); Global Technology Fund (300,000,000
shares); High Yield Fund (300,000,000 shares); Income Fund (300,000,000 shares);
Inflation Plus Fund (400,000,000 shares); International Capital Appreciation
Fund (300,000,000 shares); International Opportunities Fund (300,000,000
shares); International Small Company Fund (300,000,000 shares); MidCap Fund
(460,000,000 shares); MidCap Value Fund (300,000,000 shares); Money Market Fund
(2,700,000,000 shares); Principal Protection Fund (300,000,000 shares); Short
Duration Fund (300,000,000 shares); Small Company Fund (300,000,000 shares);
Stock Fund (300,000,000 shares); Tax-Free California Fund (300,000,000 shares);
Tax-Free New York Fund (300,000,000 shares); Total Return Bond Fund (300,000,000
shares); Value Fund (300,000,000 shares); Aggressive Growth Allocation Fund
(300,000,000 shares); Balanced Allocation Fund (300,000,000 shares);
Conservation Allocation Fund (300,000,000 shares); Growth Allocation Fund
(300,000,000 shares); and Income Allocation Fund (300,000,000 shares).
The board of directors of the Company may reclassify authorized shares to
increase or decrease the allocation of shares among the series described above
or to add any new series to the Company. The Company's board of directors is
also authorized, from time to time and without further shareholder approval, to
authorize additional shares and to classify and reclassify existing and new
series into one or more classes. Accordingly, the directors of the Company have
authorized the issuance of four classes of shares of each of the series of the
Company (except for the Aggressive Growth Allocation Fund, Balanced Allocation
Fund, Conservative Allocation Fund, Growth Allocation Fund and Income Allocation
Fund), designated in each instance as Class A, Class B, Class C and Class Y
shares. For the Aggressive Growth Allocation Fund, Balanced Allocation Fund,
Conservative Allocation Fund, Growth Allocation Fund and Income Allocation Fund,
the directors of the Company have authorized the issuance of three classes of
shares of each of these Funds, designated in each instance as Class A, Class B
and Class C shares.
Each issued and outstanding share is entitled to participate equally in
dividends and distributions declared by the respective Fund and, upon
liquidation or dissolution, in the net assets of such Fund remaining after
satisfaction of outstanding liabilities. The shares of each series, and each
class within each series, are, when issued, fully paid and non-assessable. Such
shares have no preemptive or, for Class A and Class C shares, conversion rights
and are freely transferable.
41
As an investment company incorporated in Maryland, the Company is not
required to hold routine annual shareholder meetings. Meetings of shareholders
will be called whenever one or more of the following is required to be acted
upon by shareholders pursuant to the 1940 Act: (1) election of directors, (2)
approval of an investment management agreement or sub-advisory agreement, or (3)
ratification of the selection of the Funds' independent accountants.
Shares of common stock have equal voting rights (regardless of the net
asset value per share). Shares do not have cumulative voting rights.
Accordingly, the holders of more than 50% of the shares of the Company voting
for the election of directors can elect all of the directors if they choose to
do so, and in such an event, the holders of the remaining shares would not be
able to elect any directors. Although directors are not elected annually,
shareholders have the right to remove one or more directors. When required by
law, if the holders of 25% or more of the Company's outstanding shares request
it in writing, a meeting of the Company's shareholders will be held to approve
or disapprove the removal of director or directors.
Matters in which the interests of all the Funds of the Company are
substantially identical (such as the election of directors or the ratification
of the selection of the independent accountants) are voted on by all
shareholders of the Company without regard to the separate Funds. Matters that
affect all or several Funds, but where the interests of the Funds are not
substantially identical (such as approval of an investment management agreement)
are voted on separately by the shareholders of each Fund for their Fund. Matters
that affect only one Fund (such as a change in its fundamental policies) are
voted on separately for the Fund by the shareholders of that Fund. Likewise,
matters that affect only one class of shares of a Fund (such as approval of a
plan of distribution) are voted on separately for that class by the holders of
shares of that class.
INVESTMENT PERFORMANCE
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN QUOTATIONS Average annual total
return quotations for Class A, Class B and Class C shares are computed by
finding the average annual compounded rates of return that would cause a
hypothetical investment made on the first day of a designated period to equal
the ending redeemable value of such hypothetical investment on the last day of
the designated period in accordance with the following formula:
(n)
P(1+T) = ERV
Where:
P = a hypothetical initial n = period covered by computation
payment of $1,000, less expressed in number of years
the maximum sales load
applicable to a Fund ERV = ending redeemable value of the
hypothetical $1,000 initial payment
T = average annual total made at the beginning of the
return designated period (or fractional
portion thereof)
The computation above assumes that all dividends and distributions made by
a Fund are reinvested at net asset value during the designated period. The
average annual total return quotation is determined to the nearest 1/100 of 1%.
One of the primary methods used to measure performance is "total return."
"Total return" normally represents the percentage change in value of a class of
a Fund, or of a hypothetical investment in a class of a Fund, over any period up
to the lifetime of the class. Unless otherwise indicated, total return
calculations assume the deduction of the maximum sales charge and usually assume
the reinvestment of all dividends and capital gains distributions and are
expressed as a percentage increase or decrease from an initial value, for the
entire period or for one or more specified periods within the entire period.
Total return calculations that do not reflect the reduction of sales charges are
higher than those that do reflect such charges.
Total return percentages for periods longer than one year are usually
accompanied by total return percentages for each year within the period and/or
by the average annual compounded total return for the period. The income and
capital components of a given return may be separated and portrayed in a variety
of ways in order
42
to illustrate their relative significance. Performance may also be portrayed in
terms of cash or investment values, without percentages. Past performance cannot
guarantee any particular future result. In determining the average annual total
return (calculated as provided above), recurring fees, if any, that are charged
to all shareholder accounts are taken into consideration. For any account fees
that vary with the size of the account, the account fee used for purposes of the
above computation is assumed to be the fee that would be charged to the mean
account size of a class of the Fund.
Each Fund's average annual total return quotations and yield quotations as
they may appear in the prospectus, this SAI or in advertising are calculated by
standard methods prescribed by the SEC unless otherwise indicated.
NON-STANDARDIZED PERFORMANCE In addition, in order to more completely
represent a Fund's performance or more accurately compare such performance to
other measures of investment return, a Fund also may include in advertisements,
sales literature and shareholder reports other total return performance data
("Non-Standardized Returns"). Non-Standardized Returns are quoted for the same
or different periods as those for which Standardized Return is quoted; they may
consist of an aggregate or average annual percentage rate of return, actual
year-by-year rates or any combination thereof. Non-Standardized Returns may or
may not take sales charges into account; performance data calculated without
taking the effect of sales charges into account will be higher than data
including the effect of such charges. All non-standardized performance will be
advertised only if the standard performance data for the same period, as well as
for the required periods, is also presented.
Because the Class A, Class B and Class C shares of the Funds will not have
commenced operations until May 28, 2004, performance information is not
available for any Fund.
Each Fund may also publish its distribution rate and/or its effective
distribution rate. A Fund's distribution rate is computed by dividing the most
recent monthly distribution per share annualized, by the current net asset value
per share. A Fund's effective distribution rate is computed by dividing the
distribution rate by the ratio used to annualize the most recent monthly
distribution and reinvesting the resulting amount for a full year on the basis
of such ratio. The effective distribution rate will be higher than the
distribution rate because of the compounding effect of the assumed reinvestment.
A Fund's yield is calculated using a standardized formula, the income component
of which is computed from the yields to maturity of all debt obligations held by
the Fund based on prescribed methods (with all purchases and sales of securities
during such period included in the income calculation on a settlement date
basis), whereas the distribution rate is based on a Fund's last monthly
distribution. A Fund's monthly distribution tends to be relatively stable and
may be more or less than the amount of net investment income and short-term
capital gain actually earned by the Fund during the month (see "Dividends,
Capital Gains and Taxes" in the Funds' prospectus).
Other data that may be advertised or published about each Fund include the
average portfolio quality, the average portfolio maturity and the average
portfolio duration.
AVERAGE ANNUAL TOTAL RETURN (AFTER TAXES ON DISTRIBUTIONS) QUOTATIONS Each
Fund, when advertising average annual total return after taxes on distributions
for a class of its shares, computes such return by determining the average
annual compounded rate of return during specified periods that equates the
initial amount invested to the ending value of such investment according to the
following formula:
(n)
P(1+T) = ATV(D)
Where:
P = a hypothetical initial payment n = period covered by computation
of $1,000, less the maximum expressed in number of years
sales load applicable to a Fund
ATV(D) = ending value of the hypothetical
T = average annual total return $1,000 initial payment made at
(after taxes on distributions) the beginning of the designated
period (or fractional portion
thereof), after taxes on Fund
distributions but not after
taxes on redemption
43
The calculation for average annual total returns after taxes on
distributions is made assuming that (1) the maximum sales load (or other charges
deducted from payments) is deducted from the initial $1,000 investment; and (2)
all distributions by a Fund, less taxes due on such distributions, are
reinvested at the price stated in the prospectus on the reinvestment dates
during the period.
The ending value (variable "ATV(D)" in the formula) is determined by
assuming complete redemption of the hypothetical investment after deduction of
all non-recurring charges and the applicable sales charge at the end of the
measuring period. Each Fund assumes that the redemption has no tax consequences.
Each Fund calculates the taxes due on any distributions by applying the
applicable tax rates to each component of the distributions (i.e., ordinary
income, short-term capital gain, long-term capital gain). The taxable amount and
tax character of each distribution will be as specified by each Fund on the
dividend declaration date, unless adjusted to reflect subsequent
recharacterizations of distributions. Distributions are adjusted to reflect the
Federal tax impact of the distribution on an individual taxpayer on the
reinvestment date. The effect of applicable tax credits, such as the foreign tax
credit, are taken into account in accordance with Federal tax law. Each Fund
calculates taxes due on any distributions using the highest individual marginal
Federal income tax rates in effect on the reinvestment date. Note that the
required tax rates may vary over the measurement period. Each Fund has
disregarded any potential tax liabilities other than Federal tax liabilities
(e.g., state and local taxes); the effect of phaseouts of certain exemptions,
deductions, and credits at various income levels; and the impact of the Federal
alternative minimum tax.
AVERAGE ANNUAL TOTAL RETURN (AFTER TAXES ON DISTRIBUTIONS AND REDEMPTION
OF SHARES) QUOTATIONS Each Fund, when advertising average annual total return
after taxes on distributions and redemption for a class of its shares, computes
such return by determining the average annual compounded rate of return during
specified periods that equates the initial amount invested to the ending value
of such investment according to the following formula:
(n)
P(1+T) = ATV(DR)
Where:
P = a hypothetical initial payment of n = period covered by computation
$1,000, less the maximum sales expressed in number of years
load applicable to a Fund
ATV(DR) = ending value of the hypothetical
T = average annual total return $1,000 initial payment made at
(after taxes on distributions the beginning of the designated
and redemption) period (or fractional portion
thereof), after taxes on Fund
distributions and redemption
The calculation for average annual total returns after taxes on
distributions and redemption is made assuming that (1) the maximum sales load
(or other charges deducted from payments) is deducted from the initial $1,000
investment; and (2) all distributions by a Fund, less taxes due on such
distributions, are reinvested at the price stated in the prospectus on the
reinvestment dates during the period.
Each Fund calculates the taxes due on any distributions as described above
under "Average Annual Total Return (After Taxes on Distributions) Quotation."
The ending value (variable "ATV(DR)" in the formula) is determined by
assuming complete redemption of the hypothetical investment after deduction of
all non-recurring charges and the applicable sales charge at the end of the
measuring period. Each Fund assumes that the redemption has no tax consequences.
Each Fund calculates the capital gain or loss upon redemption by subtracting the
tax basis from the redemption proceeds (after deducting any non-recurring
charges). Each Fund separately tracks the basis of shares acquired through the
$1,000 initial hypothetical investment and each subsequent purchase through
reinvested distributions. In determining the basis for a reinvested
distribution, each Fund includes the distribution net of taxes assumed paid from
the distribution. Tax basis is adjusted for any distributions representing
returns of capital and any other tax basis adjustments that would apply to an
individual taxpayer, as permitted by applicable Federal tax law.
44
The amount and character (e.g., short-term or long-term) of capital gain
or loss upon redemption is separately determined for shares acquired through the
$1,000 initial hypothetical investment and each subsequent purchase through
reinvested distributions. Each Fund does not assume that shares acquired through
reinvestment of distributions have the same holding period as the $1,000 initial
hypothetical investment. The tax character is determined by the length of the
measurement period in the case of the $1,000 initial hypothetical investment and
the length of the period between reinvestment and the end of the measurement
period in the case of reinvested distributions.
Each Fund calculates capital gain taxes (or the benefit resulting from tax
losses) using the highest Federal individual capital gains tax rate for gains of
the appropriate character in effect on the redemption date and in accordance
with Federal tax law applicable on the redemption date. Each Fund assumes that a
shareholder has sufficient capital gains of the same character from other
investments to offset any capital losses from the redemption so that the
taxpayer may deduct the capital losses in full.
Each Fund may also quote unaveraged or cumulative total return for a class
which reflects the change in value of an investment in that class over a stated
period of time. Cumulative total returns will be calculated according to the
formula indicated above but without averaging the rate for the number of years
in the period.
STANDARDIZED YIELD QUOTATIONS The yield of a class is computed by
dividing the class's net investment income per share during a base period of 30
days, or one month, by the maximum offering price per share of the class on the
last day of such base period in accordance with the following formula:
(6)
2[((a-b)/cd + 1) - 1]
Where:
a = net investment income earned c = the average daily number of
during the period attributable shares of the subject class
to the subject class outstanding during the period
that were entitled to receive
b = net expenses accrued for the dividends
period attributable to the
subject class d = the maximum offering price per
share of the subject class on
the last day of the period
Net investment income will be determined in accordance with rules
established by the SEC. The price per share of Class A shares will include the
maximum sales charge imposed on purchases of Class A shares which decreases with
the amount of shares purchased, and the price per share of Class C shares will
include the sales charge imposed on purchases of Class C shares.
DIVIDEND YIELD QUOTATIONS Current distribution information may also be
provided for certain Funds. Distribution information for a fund will be based on
distributions for a specified period (i.e., total dividends from net investment
income), divided by a fund net asset value per share on the last day of the
period and annualized according to the following formula:
(((a/b) * 365) / c)
Where:
a = actual dividends distributed c = net asset value (NAV)
for the calendar month in calculated on the last business
question day of the month in question
b = number of days of dividend
declaration in the month in
question
The rate of current distributions does not reflect deductions for
unrealized losses from transactions in derivative instruments such as options
and futures, which may reduce total return. Current distribution rates differ
from standardized yield rates in that they represent what a Fund has declared
and paid to shareholders as of the end of a specified period rather than the
Fund's actual net investment income for that same period. Distribution rates
will exclude net realized short-term capital gains. The rate of current
distributions for a Fund should be evaluated in light
45
these differences and in light of the Fund's total return figures, which will
always accompany any calculation of the rate of current distributions.
Because the Class A, Class B and Class C shares of the Funds will not
have commenced operations until May 28, 2004, distribution rates are not
available for any Fund.
GENERAL INFORMATION From time to time, the Funds may advertise their
performance compared to similar funds using certain unmanaged indices, reporting
services and publications. Descriptions of some of the indices which may be used
are listed below.
The Goldman Sachs Health Care Index is a modified
capitalization-weighted index of selected companies covering a broad range of
healthcare and related businesses. Individual holdings are capped at 7.5% at
each semi -annual reconstitution date and must be listed on the New York Stock
Exchange, American Stock Exchange or National Association of Securities Dealers
Automated Quotation (NASDAQ) System.
The Goldman Sachs Technology Composite Index is a modified
capitalization-weighted index of selected companies covering the entire spectrum
of the technology industry. Individual holdings are capped at 8.5% at each
semi-annual reconstitution date and must be listed on the New York Stock
Exchange, American Stock Exchange or National Association of Securities Dealers
Automated Quotation (NASDAQ) System.
The Lehman Brothers U.S. Aggregate Bond Index represents securities that
are U.S. domestic, taxable, and dollar denominated. The index covers the U.S.
investment grade fixed rate bond market, with index components for government
and corporate securities, mortgage pass-through securities, asset-backed
securities and commercial-backed securities. To be eligible for inclusion a
security must meet the following rules: must have at least one year to final
maturity; must have at least $150 million of par outstanding; must be rated
investment grade by Moody's, or if no Moody's rating is available, it must be
rated at least investment grade by either S&P or Fitch; must be fixed rate and
must be publicly issued.
The Lehman Brothers Government Bond Index is a measure of the market
value of all public obligations of the U.S. Treasury; all publicly issued debt
of all agencies of the U.S. Government and all quasi-federal corporations; and
all corporate debt guaranteed by the U.S. Government. Mortgage backed
securities, bonds and foreign targeted issues are not included in the Lehman
Government Bond Index.
The Lehman Brothers Government/Credit Bond Index is a measure of the
market value of approximately 5,300 bonds with a face value currently in excess
of $1.3 trillion. To be included in the Lehman Government/Credit Bond Index, an
issue must have amounts outstanding in excess of $1 million, have at least one
year to maturity and be rated "Baa" or higher ("investment grade") by a
nationally recognized rating agency.
The Lehman Brothers High Yield BB Index is a measure of the market value
of public debt issues with a minimum par value of $100 million and rated Ba1-Ba3
by Moody's. All bonds within the index are U.S. dollar denominated,
non-convertible and have at least one year remaining to maturity.
The Lehman Brothers High Yield Corporate Index is an unmanaged
broad-based market-value-weighted index that tracks the total return performance
of non-investment grade, fixed-rate, publicly placed, dollar denominated and
nonconvertible debt registered with the SEC.
The Lehman Brothers Intermediate Government Bond Index is an unmanaged
index of government bonds with maturities of between one and ten years.
The Lehman Brothers Municipal Bond Index is an unmanaged index of
municipal bonds with maturities greater than two years.
The Lehman Brothers U.S. Government Index is an unmanaged index of
government bonds with maturities of one year or more.
46
The Lehman 1-5 Year Aggregate Index is a customized benchmark which will
include from the Lehman Aggregate all corporate, agency and treasury securities
with maturities between 1-5 years and commercial mortgage-backed securities,
asset-backed securities and mortgage-backed securities with average maturities
between 1-5 years.
The Lehman U.S. Tips Index consists of inflation-protected securities
issued by the U.S. Treasury. To be eligible for inclusion, a security must meet
the following rules: must have at least one year to final maturity; must have at
least $100 million of par outstanding; must be rated investment grade by
Moody's, or if no Moody's rating is available, it must be rated at least
investment grade by either S&P or Fitch; must be fixed rate; must be dollar
denominated and must be publicly issued.
The MSCI AC (All Country) World Free ex US Index is a broad based,
unmanaged, market capitalization-weighted, total return index that measures
performance of both developed and emerging stock markets, excluding the US. The
index is calculated to exclude companies and share classes which cannot be
freely purchased by foreigners.
The MSCI AC (All Country) World Index Free-Telecommunication Services
Index is a free float-adjusted market capitalization index of developed and
emerging market countries that is designed to measure international equity
market performance. The index is calculated to exclude companies and share
classes which cannot be freely purchased by foreigners.
The MSCI EAFE Index is a free float-adjusted market capitalization index
that is designed to measure developed market equity performance, excluding the
U.S. and Canada.
The MSCI Finance ex Real Estate Index is comprised of companies in three
industries: banks, diversified financials, and insurance. As a general rule, a
company is classified in the industry where it earns the majority of its
revenue.
The Morgan Stanley Capital International Europe, Australia, Far East GDP
Index (the "EAFE Index") is an unmanaged index which includes over 1,000
companies representing the stock markets of Europe, Australia, New Zealand and
the Far East. The EAFE Index is typically shown weighted by the market
capitalization. However, EAFE is also available weighted by Gross Domestic
Product (GDP). These weights are modified on July 1st of each year to reflect
the prior year's GDP. Indices with dividends reinvested constitute an estimate
of total return arrived at by reinvesting one twelfth of the month end yield at
every month end. The series with net dividends reinvested take into account
those dividends net of withholding taxes retained at the source of payment.
The Morgan Stanley Capital International World Index is a broad-based
unmanaged market capitalization-weighted total return index which measures the
performance of 23 developed-country global stock markets, including the United
States, Canada, Europe, Australia, New Zealand and the Far East.
The NASDAQ Composite OTC Price Index is a market value-weighted and
unmanaged index showing the changes in the aggregate market value of
approximately 3,500 stocks.
The Russell 1000 Growth Index is an unmanaged index which measures the
performance of those Russell 1000 companies with higher price-to-book ratios and
higher forecasted growth values.
The Russell 2000 Growth Index is an unmanaged index of those Russell
2000 Index growth companies with higher price-to-book ratios and higher
forecasted growth values.
The Russell 3000 Growth Index is an unmanaged index that measures the
performance of those Russell 3000 Index companies with higher price-to-book
ratios and higher forecasted growth values.
The Russell 2000 Index is a broad-based unmanaged index comprised of
2,000 of the smallest U.S. domiciled company common stocks (on the basis of
capitalization) that are traded in the United States on the New York Stock
Exchange, American Stock Exchange and Nasdaq.
47
The Russell 2500 Index is a market value-weighted, unmanaged index
showing total return (i.e., principal changes with income) in the aggregate
market value of 2,500 stocks of publicly traded companies domiciled in the
United States. The index includes stocks traded on the New York Stock Exchange
and the American Stock Exchange as well as in the over-the-counter market.
The Russell 1000 Value Index is an unmanaged index measuring the
performance of those Russell 1000 Index companies with lower price-to-book
ratios and lower forecasted growth values. (The Russell 1000 Index is an
unmanaged index that measures the performance of the 1,000 largest U.S.
companies based on total market capitalization.)
The Russell 2500 Value Index is an unmanaged index measuring the
performance of those Russell 2500 Index companies with lower price-to-book
ratios and lower forecasted growth values. (The Russell 2500 Index is an
unmanaged index that measures the performance of the 2,500 largest U.S.
companies based on total market capitalization.)
The Russell 3000 Value Index is an unmanaged index measuring the
performance of those Russell 3000 Index companies with lower price-to-book
ratios and lower forecasted growth values.
The S&P/Citigroup Broad Market Index <$2 billion Euro-Pacific is a free
float-adjusted market capitalization index that includes only those companies
with a market cap between $100 million and $2 billion.
The S&P/Citigroup Extended Market Euro-Pacific Index is a global equity
index comprised of the smallest 20% of each country's market capitalization in
the Broad Market Index. All developed countries are included except the US and
Canada.
The Standard & Poor's MidCap 400 Index is designed to represent price
movements in the mid cap U.S. equity market. It contains companies chosen by the
Standard & Poor's Index Committee for their size, liquidity and industry
representation. None of the companies in the S&P 400 overlap with those in the
S&P 500 Index or the S&P 600 Index. Decisions about stocks to be included and
deleted are made by the Committee which meets on a regular basis. S&P 400 stocks
are weighted by market capitalization; each stock influences the Index in
proportion to its relative market capitalization. REITs are not eligible for
inclusion.
The Standard & Poor's 500 Composite Stock Price Index is a
well-diversified list of 500 companies representing the U.S. stock market.
The Standard and Poor's Small Cap 600 index is designed to represent
price movements in the small cap U.S. equity market. It contains companies
chosen by the Standard & Poor's Index Committee for their size, industry
characteristics, and liquidity. None of the companies in the S&P 600 Index
overlap with the S&P 500 or the S&P 400 (MidCap Index). The S&P 600 Index is
weighted by market capitalization. REITs are not eligible for inclusion.
In addition, from time to time in reports and promotions: (1) a Fund's
performance may be compared to other groups of mutual funds tracked by: (a)
Lipper Analytical Services, a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives, and assets, (b)
Morningstar, Inc., another widely used independent research firm which ranks
mutual funds by overall performance, investment objectives, and assets, or (c)
other financial or business publications, such as Business Week, Money Magazine,
Forbes and Barron's which provide similar information; (2) the Consumer Price
Index (a measure of inflation) may be used to assess the real rate of return
from an investment in the Fund; (3) other statistics such as GNP, and net import
and export figures derived from governmental publications (e.g., The Survey of
Current Business) or other independent parties (e.g., the Investment Company
Institute), may be used to illustrate investment attributes of the Fund or the
general economic, business, investment, or financial environment in which the
Fund operates; (4) various financial, economic and market statistics developed
by brokers, dealers and other persons may be used to illustrate aspects of the
Fund's performance; (5) the effect of tax-deferred compounding on the Fund's
investment returns, or on returns in general, may be illustrated by graphs,
charts, etc. where such graphs or charts would compare, at various points in
time, the return from an investment in the Fund (or returns in general) on a
tax-deferred basis (assuming reinvestment of capital gains and dividends and
assuming one or more tax rates) with the return on a taxable basis; and (6) the
sectors or industries in which the Fund invests may be compared to relevant
indices or surveys (e.g.,
48
S&P Industry Surveys) in order to evaluate the Fund's historic performance or
current or potential value with respect to the particular industry or sector.
From time to time, in reports or promotional literature, the Funds may
discuss, or provide quotes or commentary of their current portfolio managers,
strategists, and other investment personnel, with respect to: the economy;
securities markets; portfolio securities and their issuers; investment
philosophies; strategies; techniques and criteria used in the selection of
securities to be purchased or sold for the Funds; the Funds' portfolio holdings,
including the description or graphical representation of portfolio risk and
other fundamental data; the investment research and analysis process; the
formulation of investment recommendations; and the assessment and evaluation of
credit, interest rate, market and economic risks, and similar or related
matters. The Funds may also quote or reprint all or a portion of evaluations or
descriptions of fund performance and operations appearing in various independent
publications.
From time to time, the Funds and HIFSCO also may refer to the following
information:
- The geographic and industry distribution of the Funds'
portfolios;
- To assist investors in understanding the different returns and
risk characteristics of various investments, historical returns
of various investment and published indices;
- Rankings by DALBAR Surveys, Inc. with respect to mutual fund
shareholder services;
- Allegorical stories illustrating the importance of persistent
long-term investing;
- A Fund's portfolio turnover rate and its ranking relative to
industry standards as published by Lipper(R)Inc. or Morningstar,
Inc.;
- Historical information regarding HIFSCO, the Underlying Funds'
sub-advisers and their affiliates; and
- Historical information regarding the asset size of one or more
Funds.
Each Fund's investment performance may be advertised in various
financial publications, newspapers, and magazines or other media.
From time to time the Company may publish the sales of shares of one or
more of the Funds on a gross or net basis and for various periods of time, and
compare such sales with sales similarly reported by other investment companies.
The Funds' annual and semi-annual reports also contain additional
performance information. These reports are distributed to all current
shareholders and will be made available to potential investors upon request and
without charge.
TAXES
FEDERAL TAX STATUS OF THE FUNDS
The following discussion of the federal tax status of the Funds is a general and
abbreviated summary based on tax laws and regulations in effect on the date of
this SAI. Tax law is subject to change by legislative, administrative or
judicial action.
Each Fund is treated as a separate taxpayer for federal income tax
purposes. The Company intends for each Fund to elect to be treated as a
regulated investment company under Subchapter M of Chapter 1 of the Internal
Revenue Code of 1986, as amended (the "Code"), and to qualify as a regulated
investment company each year. If a Fund: (1) continues to qualify as a regulated
investment company, and (2) distributes to its shareholders at least 90% of its
investment company taxable income (including for this purpose its net ordinary
investment income and net realized short-term capital gains) and 90% of its
tax-exempt interest income (reduced by certain expenses) (the "90% distribution
requirement") (which the Company intends each Fund to do), then under the
provisions of Subchapter M, the Fund should have little or no income taxable
under the Code. In particular, a Fund generally is not subject to federal income
tax on the portion of its investment company taxable income and net capital gain
(i.e., net long-term capital gain in excess of short-term capital loss) it
distributes to shareholders (or treats as having been distributed to
shareholders).
49
Each Fund must meet several requirements to maintain its status as a
regulated investment company. These requirements include the following: (1) at
least 90% of the Fund's gross income for each taxable year must be derived from
dividends, interest, payments with respect to loaned securities, gains from the
sale or disposition of securities (including gains from related investments in
foreign currencies), and other income (including gains from options, futures or
forward contracts) derived with respect to its business of investing in such
securities or currencies; and (2) at the close of each quarter of the Fund's
taxable year, (a) at least 50% of the value of the Fund's total assets must
consist of cash, cash items, securities of other regulated investment companies,
U.S. Government securities and other securities which, with respect to any one
issuer, do not represent more than 5% of all of the Fund's assets nor more than
10% of the outstanding voting securities of such issuer, and (b) the Fund must
not invest more than 25% of its total assets in the securities of any one issuer
(other than U.S. Government securities or the securities of other regulated
investment companies), or of any two or more issuers that are controlled by the
Fund and that are engaged in the same or similar trades or businesses or related
trades or businesses.
Each Fund generally will endeavor to distribute (or treat as deemed
distributed) to its shareholders all of its investment company taxable income
and its net capital gain, if any, for each taxable year so that it will not
incur federal income or excise taxes on its earnings.
In addition, in order to avoid a 4% nondeductible federal excise tax on
certain of its undistributed income, each Fund generally must distribute in a
timely manner the sum of (1) 98% of its ordinary income for each calendar year,
(2) 98% of its capital gain net income for the one-year period ending October 31
in that calendar year, and (3) any income not distributed in prior years (the
"excise tax avoidance requirements").
Income received by an Underlying Fund from sources within a foreign
country may be subject to withholding and other taxes imposed by that country.
If more than 50% of the value of an Underlying Fund's total assets at the close
of its taxable year consists of stock or securities of foreign corporations, the
Underlying Fund will be eligible and may elect to "pass-through" to its
shareholders, including a Fund, the amount of such foreign income and similar
taxes paid by the Underlying Fund. Pursuant to this election, the Fund would be
required to include in gross income (in addition to taxable dividends actually
received), its pro rata share of foreign income and similar taxes and to deduct
such amount in computing its taxable income or to use it as a foreign tax credit
against its U.S. federal income taxes, subject to limitations. A Fund, would
not, however, be eligible to elect to "pass-through" to its shareholders the
ability to claim a deduction or credit with respect to foreign income and
similar taxes paid by the Underlying Fund.
If for any taxable year a Fund fails to qualify as a regulated
investment company or fails to satisfy the 90% distribution requirement, then
all of its taxable income becomes subject to federal, and possibly state and
local, income tax at regular corporate rates (without any deduction for
distributions to its shareholders) and distributions to its shareholders
constitute dividend income (with such dividend income including dividends
derived from interest on tax-exempt obligations) to the extent of such Fund's
available earnings and profits.
SHAREHOLDER TAXATION
The following discussion of certain federal income tax issues of shareholders of
the Funds is a general and abbreviated summary based on tax laws and regulations
in effect on the date of this statement of additional information. Tax law is
subject to change by legislative, administrative or judicial action. The
following discussion relates solely to U.S. federal income tax law as applicable
to U.S. taxpayers (e.g., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates). The discussion does not address
special tax rules applicable to certain classes of investors, such as qualified
retirement accounts or trusts, tax-exempt entities, insurance companies, banks
and other financial institutions or to non-U.S. taxpayers. Dividends, capital
gain distributions, and ownership of or gains realized on the redemption
(including an exchange) of the shares of a Fund may also be subject to state and
local taxes. This summary does not address any federal estate tax issues that
may arise from ownership of Fund shares. Shareholders should consult their own
tax advisers as to the federal, state and local tax consequences of ownership of
shares of, and receipt of distributions from, the Funds in their particular
circumstances.
In general, as described in the prospectus, distributions from a Fund
are generally taxable to shareholders as ordinary income, qualified dividend
income, or long-term capital gains. Distributions of a Fund's investment
50
company taxable income (other than qualified dividend income) are taxable as
ordinary income to shareholders to the extent of the Fund's current or
accumulated earnings and profits, whether paid in cash or reinvested in
additional shares. An Underlying Fund may realize capital gain or loss in
connection with sales or other dispositions of its portfolio securities. Any net
capital gains may be distributed to a Fund as capital gain distributions. A Fund
may also derive capital gains and losses in connection with sales of shares of
the Underlying Funds. Distributions from net short-term capital gains are
taxable to a shareholder as ordinary income. Distributions of a Fund's net
capital gain properly designated by the Fund as "capital gain dividends" are
taxable to a shareholder as long-term capital gain regardless of the
shareholder's holding period for his or her shares and regardless of whether
paid in cash or reinvested in additional shares. To the extent that an
Underlying Fund derives dividends from domestic corporations, a portion of the
income distributions of a Fund which invests in that Underlying Fund may be
eligible for the 70% deduction for dividends received by corporations.
Shareholders will be informed of the portion of dividends which so qualify. The
dividends-received deduction is reduced to the extent the shares held by the
Underlying Fund with respect to which the dividends are received are treated as
debt-financed under federal income tax law and is eliminated if either those
shares or the shares of the Underlying Fund or the Fund are deemed to have been
held by the Underlying Fund, the Fund or the shareholders, as the case may be,
for less than 46 days during the 90-day period beginning 45 days before the
shares become ex-dividend. Properly designated distributions of qualified
dividend income generally are taxable to individual shareholders at the same
rates that apply to long-term capital gains, if certain holding period and other
requirements are met. Dividend distributions will not be eligible for the
reduced rates applicable to qualified dividend income unless, among other
things, the shares held by the Underlying Fund with respect to which dividends
are paid, the shares of the Underlying Fund, and the shares of the Fund are
deemed to have been held by the Underlying Fund, the Fund, and the shareholders,
respectively, for more than 60 days during the 121-day period beginning 60 days
before the shares become ex-dividend. Distributions, if any, in excess of
earnings and profits usually constitute a return of capital, which first reduces
an investor's tax basis in the Fund's shares and thereafter (after such basis is
reduced to zero) generally gives rise to capital gains. Shareholders electing to
receive distributions in the form of additional shares have a cost basis for
federal income tax purposes in each share so received equal to the amount of
cash they would have received had they elected to receive the distribution in
cash. For a summary of the tax rates applicable to capital gains, including
capital gain dividends, see the discussion below.
At the Company's option, the Company may cause a Fund to retain some or
all of its net capital gain for a tax year, but may designate the retained
amount as a "deemed distribution." In that case, among other consequences, the
Fund pays tax on the retained amount for the benefit of its shareholders, the
shareholders are required to report their share of the deemed distribution on
their tax returns as if it had been distributed to them, and the shareholders
may report a credit for the tax paid thereon by the Fund. The amount of the
deemed distribution net of such tax is added to the shareholder's cost basis for
his or her shares. Since the Company expects each Fund to pay tax on any
retained net capital gain at its regular corporate capital gain tax rate, and
since that rate is in excess of the maximum rate currently payable by
individuals on long-term capital gain, the amount of tax that individual
shareholders are treated as having paid will exceed the amount of tax that such
shareholders would be required to pay on the retained net capital gain. A
shareholder that is not subject to U.S. federal income tax or tax on long-term
capital gain should be able to file a return on the appropriate form or a claim
for refund that allows such shareholder to recover the taxes paid by the Fund on
his or her behalf. In the event that the Company chooses this option on behalf
of a Fund, the Company must provide written notice to the shareholders prior to
the expiration of 60 days after the close of the relevant tax year.
Any dividend declared by a Fund in October, November, or December of any
calendar year, payable to shareholders of record on a specified date in such a
month and actually paid during January of the following year, is treated as if
it had been received by the shareholders on December 31 of the year in which the
dividend was declared.
An investor should consider the tax implications of buying shares just
prior to a distribution (other than an exempt-interest dividend, described
below). Even if the price of the shares includes the amount of the forthcoming
distribution, the shareholder generally will be taxed upon receipt of the
distribution and is not entitled to offset the distribution against the tax
basis in his or her shares. In addition, an investor should be aware that, at
the time he or she purchases shares of a Fund, a portion of the purchase price
is often attributable to realized or unrealized appreciation in the Fund's
portfolio or undistributed taxable income of the Fund. Subsequent distributions
from such appreciation or income may be taxable to such investor even if the net
asset value of the investor's shares is, as
51
a result of the distributions, reduced below the investor's cost for such
shares, and the distributions in reality represent a return of a portion of the
purchase price.
A shareholder generally recognizes taxable gain or loss on a sale or
redemption (including by exercise of the exchange privilege) of his or her
shares. The amount of the gain or loss is measured by the difference between the
shareholder's adjusted tax basis in his or her shares and the amount of the
proceeds received in exchange for such shares. Any gain or loss arising from
(or, in the case of distributions in excess of earnings and profits, treated as
arising from) the sale or redemption of shares generally is a capital gain or
loss if such shares are held as capital assets. This capital gain or loss
normally is treated as a long-term capital gain or loss if the shareholder has
held his or her shares for more than one year at the time of such sale or
redemption; otherwise, it is classified as short-term capital gain or loss. If,
however, a shareholder receives a capital gain dividend with respect to any
share of a Fund, and if the share is sold before it has been held by the
shareholder for at least six months, then any loss on the sale or exchange of
the share, to the extent of the capital gain dividend, is treated as a long-term
capital loss.
In addition, all or a portion of any loss realized upon a taxable
disposition of shares may be disallowed if other shares of the same Fund are
purchased (including any purchase through a reinvestment of distributions from
the Fund) within 30 days before or after the disposition. In such a case, the
basis of the shares acquired will be adjusted to reflect the disallowed loss.
Also, if a shareholder who incurred a sales charge on the acquisition of shares
of a Fund sells his or her shares within 90 days of purchase and subsequently
acquires shares of the same or another Fund of the Company on which a sales
charge normally is imposed without paying such sales charge in accordance with
the exchange privilege described in the prospectus, such shareholder will not be
entitled to include the amount of the sales charge in his or her basis in the
shares sold for purposes of determining gain or loss. In these cases, any gain
on the disposition of the shares of the Fund is increased, or loss decreased, by
the amount of the sales charge paid when the shares were acquired, and that
amount will increase the adjusted basis of the shares of the Fund subsequently
acquired.
In general, non-corporate shareholders currently are subject to a
maximum federal income tax rate of 15% on their net long-term capital gain (the
excess of net long-term capital gain over net short-term capital loss) for a
taxable year (including a long-term capital gain derived from an investment in
the shares) and certain qualified dividend income, while other income may be
taxed at rates as high as 35%. Corporate taxpayers currently are subject to
federal income tax on net capital gain at the maximum 35% rate also applied to
ordinary income. Tax rates imposed by states and local jurisdictions on capital
gain and ordinary income may differ. Non-corporate shareholders with net capital
losses for a year (i.e., capital losses in excess of capital gains) generally
may deduct up to $3,000 of such losses against their ordinary income each year;
any net capital losses of a non-corporate shareholder in excess of $3,000
generally may be carried forward and used in subsequent years as provided in the
Code. Corporate shareholders generally may not deduct any net capital losses for
a year, but may carry back such losses for three years or carry forward such
losses for five years.
Each Fund sends to each of its shareholders, as promptly as possible
after the end of each calendar year, a notice detailing, on a per share and per
distribution basis, the amounts includible in such shareholder's taxable income
for such year as ordinary income and as long-term capital gain. In addition, the
federal tax status of each year's distributions generally is reported to the
IRS. Distributions may also be subject to additional state, local, and foreign
taxes depending on a shareholder's particular situation.
A Fund may be required to withhold U.S. federal income tax at a rate of
28% ("backup withholding") from all taxable distributions payable to (1) any
shareholder who fails to furnish the Company with its correct taxpayer
identification number or a certificate that the shareholder is exempt from
backup withholding, and (2) any shareholder with respect to whom the IRS
notifies the Company that the shareholder has failed to properly report certain
interest and dividend income to the IRS and to respond to notices to that
effect. An individual's taxpayer identification number is his or her social
security number. The 28% backup withholding tax is not an additional tax and may
be credited against a taxpayer's regular federal income tax liability.
TAXATION OF THE UNDERLYING FUNDS
Each Underlying Fund intends to qualify annually and elects to be
treated as a regulated investment company under Subchapter M of the Code. In any
year in which an Underlying Fund qualifies as a regulated
52
investment company and timely distributes all of its taxable income, the Fund
generally will not pay any federal income or excise tax.
PRINCIPAL UNDERWRITER
HIFSCO, the investment manager of each Fund, also serves as the
principal underwriter. HIFSCO is located at 200 Hopmeadow Street, Simsbury,
Connecticut 06089.
CUSTODIAN
Portfolio securities of each Fund are held pursuant to a separate
Custody Agreement between the Company and State Street Bank and Trust Company,
225 Franklin Street, Boston, Massachusetts 02110.
TRANSFER AGENT
Hartford Administrative Services Company ("HASCO"), 500 Bielenberg
Drive, Woodbury, Minnesota 55125, is the transfer agent for each Fund. As
transfer agent, HASCO, among other things, receives and processes purchase and
redemption orders, effects transfers of shares, prepares and transmits payments
for dividends and distributions, and maintains records of account. For its
services, HASCO is paid a fee based on assets or number of accounts, depending
on the class of shares.
INDEPENDENT AUDITORS
The financial statements and the financial highlights will be audited by
Ernst & Young LLP, independent auditors to the Funds. The principal business
address of Ernst & Young LLP is 220 South Sixth Street, Suite 1400, Minneapolis,
Minnesota 55402.
OTHER INFORMATION
The Hartford has granted the Company the right to use the name, "The
Hartford" or "Hartford", and has reserved the right to withdraw its consent to
the use of such name by the Company and the Funds at any time, or to grant the
use of such name to any other company.
PROXY VOTING POLICIES AND PROCEDURES
The Funds have granted to HIFSCO the authority to vote proxies on their
behalf with respect to the assets managed by HIFSCO. HIFSCO votes proxies in
what it believes are the best economic interests of its clients and in
accordance with its Proxy Policies and Procedures. HIFSCO's Proxy Committee is
responsible for the review and approval of the firm's Proxy Policies and
Procedures. Day-to-day administration of the proxy voting process at HIFSCO is
the responsibility of the portfolio manager of the relevant client account.
HIFSCO personnel evaluate all proxies and vote proxies based on their assessment
of the merits of each proposal. Absent a material conflict of interest, the
applicable portfolio manager has the authority to determine the final vote for
securities held in the account for which he or she serves as the designated
manager.
HIFSCO votes proxies solicited by an investment company in the same
proportion as the vote of the investment company's other shareholders (sometimes
called "mirror" or "echo" voting).
HIFSCO maintains procedures designed to identify and address material
conflicts of interest in voting proxies. Proxy votes for which an apparent
conflict of interest is identified are reviewed by the Proxy Committee to
resolve the conflict and direct the vote.
HIFSCO may be unable to vote or may determine not to vote a proxy on
behalf of a Fund due to, for example, the existence of securities lending
arrangements, lack of adequate information, and untimely receipt of proxy
materials.
53
FINANCIAL STATEMENTS
An annual report for the Funds will be available once the Funds have
completed their first annual period.
54
APPENDIX
The rating information which follows describes how the rating services
mentioned presently rate the described securities. No reliance is made upon the
rating firms as "experts" as that term is defined for securities purposes.
Rather, reliance on this information is on the basis that such ratings have
become generally accepted in the investment business.
RATING OF BONDS
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
earning any real investment standing.
STANDARD AND POOR'S CORPORATION ("STANDARD & POOR'S")
AAA - Bonds rated AAA are the highest grade obligations. Capacity to pay
interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from AAA issues only in small degree.
A-1
A - Bonds rated A have a very strong capacity to pay interest and repay
principal although they are somewhat more susceptible to adverse effects of
changes in circumstances and economic conditions than debt in the highest rated
categories.
BBB - Bonds rated BBB and regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category then in higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC, and C is regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions.
RATING OF COMMERCIAL PAPER
MOODY'S
Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on
debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating
categories.
STANDARD & POOR'S
The relative strength or weakness of the following factors determines
whether the issuer's commercial paper is rated A-1 or A-2.
- Liquidity ratios are adequate to meet cash requirements.
Liquidity ratios are basically as follows, broken down by the type of
issuer:
A-2
Industrial Company: acid test ratio, cash flow as a percent of
current liabilities, short-term debt as a percent of current
liabilities, short-term debt as a percent of current assets.
Utility: current liabilities as a percent of revenues, cash flow
as a percent of current liabilities, short-term debt as a
percent of capitalization.
Finance Company: current ratio, current liabilities as a percent
of net receivables, current liabilities as a percent of total
liabilities.
- The long-term senior debt rating is "A" or better; in some
instances "BBB" credits may be allowed if other factors outweigh
the "BBB".
- The issuer has access to at least two additional channels of
borrowing.
- Basic earnings and cash flow have an upward trend with
allowances made for unusual circumstances.
- Typically, the issuer's industry is well established and the
issuer has a strong position within its industry.
- The reliability and quality of management are unquestioned.
RATING OF TAX EXEMPT BONDS
STANDARD & POOR'S RATINGS SERVICES. Its ratings for municipal debt have
the following definitions:
Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in a small degree.
Debt rated "A" has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Debt rated "BB", "B", "CCC" and "CC" is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
Debt rated "B" has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or ""BB" rating.
A-3
Debt rated "CCC" has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The "CCC" rating category is
also used to debt subordinated to senior debt that is assigned an actual or
implied "B" or "B-" rating.
The rating "CC" is typically applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" rating.
The rating "C" is typically applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
The rating "CI" is reserved for income bonds on which no interest is
being paid.
Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
The ratings from "AA" to "CCC" may be modified by the addition of a plus
or minus sign to show relative standing within the major categories.
"NR" indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy.
BOND INVESTMENT QUALITY STANDARDS: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated in the top
four categories (AAA, A, BBB, commonly known as "Investment Grade" ratings) are
generally regarded as eligible for bank investment. In addition, the legal
investment laws of various states impose certain rating or other standards for
obligations eligible for investment by savings banks, trust companies, insurance
companies, and fiduciaries generally.
MOODY'S INVESTORS SERVICE, INC.: Its ratings for municipal bonds include
the following:
Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Bonds which are rated "Aa" are judged to be of high qualify by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make long-term risk appear somewhat larger than in Aaa securities.
Bonds which are rated "A" possess many favorable attributes and are to
be considered as upper medium grate obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Bonds which are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
A-4
Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
Bonds which are rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Bonds which are rated "Ca" represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
Bonds which are rated "C" are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
RATING OF MUNICIPAL NOTES AND OTHER SHORT-TERM LOANS
STANDARD & POOR'S RATINGS SERVICES. A Standard & Poor's note rating
reflects the liquidity concerns and market access risks unique to notes. Notes
due in three years or less will likely receive a note rating. Notes maturing
beyond three years will most likely receive a long-term debt rating.
Note rating symbols are as follows:
SP-1 - Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
will be given a plus (+) designation.
SP-2 - Satisfactory capacity to pay principal and interest.
SP-3 - Speculative capacity to pay principal and interest.
MOODY'S INVESTORS SERVICES. Moody's ratings for state and municipal
notes and other short-term loans are designated Moody's Investment Grade (MIG).
This distinction is in recognition of the differences between short-term credit
risk and long-term risk. Factors affecting the liquidity of the borrower and
short-term cyclical elements are critical in short-term ratings, while other
factors of major importance in bond risk may be less important over the short
run. In the case of variable rate demand obligations, two ratings are assigned:
one representing an evaluation of the degree of risk associated with scheduled
principal and interest payments, and the other representing an evaluation of the
degree of risk associated with the demand feature. The short-term rating
assigned to the demand feature of variable rate demand obligations is designated
as VMIG. Moody's ratings for short-term loans have the following definitions:
MIG-1/VMIG-1. This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support,
or demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2. This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
MIG-3/VMIG-3. This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable strength
of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG-4/VMIG-4. This designation denotes adequate quality. Protection
commonly regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is specific
risk.
A-5
RATING OF TAX-EXEMPT DEMAND BONDS
Standard & Poor's assigns "dual" ratings to all long-term debt issues
that have as part of their provisions a demand or double feature.
The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols are used to denote the put
option (for example, "AAA/A-1+"). For the newer "demand notes", Standard &
Poor's note rating symbols, combined with the commercial paper symbols, are used
(for example, "SP-1+/A-1+").
INTERNATIONAL LONG-TERM CREDIT RATINGS
FITCH, INC.
The following ratings scale applies to foreign currency and local
currency ratings.
INVESTMENT GRADE
AAA
Highest credit quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong capacity for
timely payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.
AA
Very high credit quality. "AA" ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.
A
High credit quality. "A" ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.
BBB
Good credit quality. "BBB" ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
SPECULATIVE GRADE
BB
Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time; however, business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this category are not
investment grade.
B
Highly speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC, C
High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon sustained, favorable business or
economic developments. A "CC" rating indicates that default of some kind appears
probable. "C" ratings signal imminent default.
A-6
DDD, DD, D
Default. The ratings of obligations in this category are based on their
prospects for achieving partial or full recovery in a reorganization or
liquidation of the obligor. While expected recovery values are highly
speculative and cannot be estimated with any precision, the following serve as
general guidelines. "DDD" obligations have the highest potential for recovery,
around 90% - 100% of outstanding amounts and accrued interest. "DD" indicates
potential recoveries in the range of 50% - 90% and "D" the lowest recovery
potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy a
higher portion of their outstanding obligations, while entities rated "D" have a
poor prospect of repaying all obligations.
INTERNATIONAL SHORT-TERM CREDIT RATINGS
FITCH, INC.
The following ratings scale applies to foreign currency and local
currency ratings. A Short-term rating has a time horizon of less than 12 months
for most obligations, or up to three years for US public finance securities, and
thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.
F1
Highest credit quality. Indicates the strongest capacity for timely
payment of financial commitments; may have an added "+" to denote any
exceptionally strong credit feature.
F2
Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as in the case
of the higher ratings.
F3
Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could result in a
reduction to non-investment grade.
B
Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in financial and
economic conditions.
C
High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D
Default. Denotes actual or imminent payment default.
NOTES TO LONG-TERM AND SHORT-TERM RATINGS: "+" or "-" may be appended to a
rating to denote relative status within major rating categories. Such suffixes
are not added to the "AAA" Long-term rating category, to categories below "CCC",
or to Short-term ratings other than "F1".
"NR" indicates that Fitch Ratings does not rate the issuer or issue in question.
"Withdrawn": A rating is withdrawn when Fitch Ratings deems the amount of
information available to be inadequate for rating purposes, or when an
obligation matures, is called, or refinanced.
Rating Watch: Ratings are placed on Rating Watch to notify investors that there
is a reasonable probability of a rating change and the likely direction of such
change. These are designated as "Positive", indicating a potential
A-7
upgrade, "Negative", for a potential downgrade, or "Evolving", if ratings may
be raised, lowered or maintained. Rating Watch is typically resolved over a
relatively short period.
A Rating Overlook indicates the direction a rating is likely to move
over a one to two-year period. Outlooks may be positive, stable or negative. A
positive or negative Rating Outlook does not imply a rating change is
inevitable. Similarly, ratings for which outlooks are "stable" could be upgraded
or downgraded before an outlook moves to positive or negative if circumstances
warrant such an action. Occasionally, Fitch Ratings may be unable to identify
the fundamental trend. In these cases, the Rating Outlook may be described as
evolving.
A-8
PART C
OTHER INFORMATION
Item 22. Exhibits
a.(i) Articles of Incorporation dated March 19, 1996 (incorporated by
reference to Initial Registration Statement filed on April 9,
1996)
a.(ii) Articles Supplementary dated August 30, 2002 (incorporated by
reference to Post-Effective Amendment #23 filed on October 25,
2002)
a.(iii) Articles Supplementary dated September 12, 2002 (incorporated by
reference to Post-Effective Amendment #23 filed on October 25,
2002)
a.(iv) Articles of Amendment to the Articles of Incorporation
(incorporated by reference to Post-Effective Amendment #24 filed
on December 16, 2002)
a.(v) Articles Supplementary dated June 10, 2003 (incorporated by
reference to Post-Effective Amendment #27 filed on August 19,
2003)
a.(vi) Articles of Amendment dated June 10, 2003 (incorporated by
reference to Post-Effective Amendment #27 filed on August 19,
2003)
a.(vii) Articles Supplementary dated August 26, 2003 (incorporated by
reference to Post-Effective Amendment #28 filed on December 15,
2003)
a.(viii) Articles Supplementary dated March 10, 2004 (filed herewith)
b. By-Laws adopted January 24, 1996, last amended May 13, 2003
(incorporated by reference to Post-Effective Amendment #27 filed
on August 19, 2003)
c. Not Applicable
d.(i) Investment Management Agreement with Hartford Investment
Financial Services Company dated March 3, 1997 (incorporated by
reference to Post-Effective Amendment #3 filed on June 20, 1997)
d.(ii) Amendment Number 1 to Investment Management Agreement
(incorporated by reference to Post-Effective Amendment #25 filed
on February 28, 2003)
d.(iii) Amendment Number 2 to Investment Management Agreement
(incorporated by reference to Post-Effective Amendment #25 filed
on February 28, 2003)
d.(iv) Amendment Number 3 to Investment Management Agreement
(incorporated by reference to Post-Effective Amendment #25 filed
on February 28, 2003)
d.(v) Amendment Number 4 to Investment Management Agreement
(incorporated by reference to Post-Effective Amendment #25 filed
on February 28, 2003)
d.(vi) Amendment Number 5 to Investment Management Agreement
(incorporated by reference to Post-Effective Amendment #25 filed
on February 28, 2003)
d.(vii) Amendment Number 6 to Investment Management Agreement
(incorporated by reference to Post-Effective Amendment #25 filed
on February 28, 2003)
d.(viii) Amendment Number 7 to Investment Management Agreement
(incorporated by reference to Post-Effective Amendment #25 filed
on February 28, 2003)
d.(ix) Amendment Number 8 to Investment Management Agreement
(incorporated by reference to Post-Effective Amendment #28 filed
on December 15, 2003)
d.(x) Form of Amendment Number 9 to Investment Management Agreement
(filed herewith)
d.(xi) Investment Sub-Advisory Agreement with Wellington Management
Company, LLP dated March 3, 1997 (incorporated by reference to
Post-Effective Amendment #3 filed on June 20, 1997)
d.(xii) Amendment Number 1 to Investment Sub-Advisory Agreement with
Wellington Management Company, LLP (incorporated by reference to
Post-Effective Amendment #25 filed on February 28, 2003)
d.(xiii) Amendment Number 2 to Investment Sub-Advisory Agreement with
Wellington Management Company, LLP (incorporated by reference to
Post-Effective Amendment #25 filed on February 28, 2003)
d.(xiv) Amendment Number 3 to Investment Sub-Advisory Agreement with
Wellington Management Company, LLP (incorporated by reference to
Post-Effective Amendment #25 filed on February 28, 2003)
d.(xv) Amendment Number 4 to Investment Sub-Advisory Agreement with
Wellington Management Company, LLP (incorporated by reference to
Post-Effective Amendment #25 filed on February 28, 2003)
d.(xvi) Amendment Number 5 to Investment Sub-Advisory Agreement with
Wellington Management Company, LLP (incorporated by reference to
Post-Effective Amendment #25 filed on February 28, 2003)
d.(xvii) Amendment Number 6 to Investment Sub-Advisory Agreement with
Wellington Management Company, LLP (incorporated by reference to
Post-Effective Amendment #25 filed on February 28, 2003)
d.(xviii) Amendment Number 7 to Sub-Advisory Agreement with Wellington
Management Company, LLP (incorporated by reference to
Post-Effective Amendment #28 filed on December 15, 2003)
d.(xix) Investment Services Agreement with Hartford Investment Management
Company dated as of March 3, 1997 (incorporated by reference to
Post-Effective Amendment #3 filed on June 20, 1997)
d.(xx) Amendment Number 1 to Investment Services Agreement with Hartford
Investment Management Company (incorporated by reference to
Post-Effective Amendment #25 filed on February 28, 2003)
d.(xxi) Amendment Number 2 to Investment Services Agreement with Hartford
Investment Management Company (incorporated by reference to
Post-Effective Amendment #25 filed on February 28, 2003)
e.(i) Principal Underwriting Agreement (incorporated by reference to
Post-Effective Amendment #25 filed on February 28, 2003)
e.(ii) Form of Dealer Agreement with the Distributor (incorporated by
reference to Pre-Effective Amendment #1 filed on June 27, 1996)
e.(iii) Amendment Number 1 to Principal Underwriting Agreement
(incorporated by reference to Post-Effective Amendment #25 filed
on February 28, 2003)
e.(iv) Amendment Number 2 to Principal Underwriting Agreement
(incorporated by reference to Post-Effective Amendment #25 filed
on February 28, 2003)
e.(v) Amendment Number 3 to Principal Underwriting Agreement
(incorporated by reference to Post-Effective Amendment #25 filed
on February 28, 2003)
e.(vi) Assignment of Principal Underwriting Agreement from Hartford
Securities Distribution Company, Inc. to Hartford Investment
Financial Services Company dated November 1, 1998 (incorporated
by reference to Post-Effective Amendment #20 filed on February
15, 2002)
e.(vii) Amendment Number 4 to Principal Underwriting Agreement
(incorporated by reference to Post-Effective Amendment #25 filed
on February 28, 2003)
e.(viii) Amendment Number 5 to Principal Underwriting Agreement
(incorporated by reference to Post-Effective Amendment #25 filed
on February 28, 2003)
e.(ix) Amendment Number 6 to Principal Underwriting Agreement
(incorporated by reference to Post-Effective Amendment #25 filed
on February 28, 2003)
e.(x) Amendment Number 7 to Principal Underwriting Agreement
(incorporated by reference to Post-Effective Amendment #25 filed
on February 28, 2003)
e.(xi) Amendment Number 8 to Principal Underwriting Agreement
(incorporated by reference to Post-Effective Amendment #28 filed
on December 15, 2003)
e.(xii) Form of Amendment Number 9 to Principal Underwriting Agreement
(filed herewith)
f. Not Applicable
g.(i) Custodian Agreement (incorporated by reference to Post-Effective
Amendment #25 filed on February 28, 2003)
g.(ii) Amendment Number 1 to Custodian Agreement (incorporated by
reference to Post-Effective Amendment #25 filed on February 28,
2003)
g.(iii) Amendment Number 2 to Custodian Agreement (incorporated by
reference to Post-Effective Amendment #25 filed on February 28,
2003)
g.(iv) Amendment Number 3 to Custodian Agreement (incorporated by
reference to Post-Effective Amendment #25 filed on February 28,
2003)
g.(v) Letter Amendment to Custodian Agreement (incorporated by
reference to Post-Effective Amendment #25 filed on February 28,
2003)
g.(vi) Letter Amendment to Custodian Agreement (incorporated by
reference to Post-Effective Amendment #25 filed on February 28,
2003)
g.(vii) Letter Amendment to Custodian Agreement (incorporated by
reference to Post-Effective Amendment #25 filed on February 28,
2003)
g.(viii) Amendment Number 4 to Custodian Agreement (incorporated by
reference to Post-Effective Amendment #24 filed on December 16,
2002)
g.(ix) Letter Amendment to Custodian Agreement (incorporated by
reference to Post-Effective Amendment #28 filed on December 15,
2003)
g.(x) Tenth Amendment to Custodian Contract (incorporated by reference
to Post-Effective Amendment #29 filed on January 29, 2004)
g.(xi) Form of Eleventh Amendment to Custodian Contract (filed herewith)
g.(xii) Remote Services Agreement - State Street Bank and Trust Company
(incorporated by reference to Post-Effective Amendment #26 filed
on June 6, 2003)
h.(i) Transfer Agency and Service Agreement between The Hartford Mutual
Funds, Inc. and Hartford Administrative Services Company dated
November 1, 2001 (incorporated by reference to Post-Effective
Amendment #20 filed on February 15, 2002)
h.(ii) Amendment Number 1 to Transfer Agency and Service Agreement
(incorporated by reference to Post-Effective Amendment #25 filed
on February 28, 2003)
h.(iii) Amendment Number 2 to Transfer Agency and Service Agreement
(incorporated by reference to Post-Effective Amendment #28 filed
on December 15, 2003)
h.(iv) Form of Amendment Number 3 to Transfer Agency and Service
Agreement (filed herewith)
h.(v) Share Purchase Agreement (filed herewith)
i. Opinion and Consent of Counsel (filed herewith)
j. Consent of Independent Auditors (filed herewith)
k. Not Applicable
l. Not Applicable
m. Amended and Restated Rule 12b-1 Distribution Plan for Class A,
Class B and Class C Shares (filed herewith)
n. Multiple Class Plan Pursuant to Rule 18f-3 (filed herewith)
o. Not Applicable
p.(i) Code of Ethics of HL Investment Advisors, LLC, Hartford
Investment Financial Services, LLC and The Hartford-Sponsored
Mutual Funds (incorporated by reference to Post-Effective
Amendment #24 filed on December 16, 2002)
p.(ii) Code of Ethics of Hartford Investment Management Company and
Hartford Investment Services, Inc. (incorporated by reference to
Post-Effective Amendment #28 filed on December 15, 2003)
p.(iii) Code of Ethics of Wellington Management Company, LLP
(incorporated by reference to Post-Effective Amendment #30 filed
on February 27, 2004)
q.(i) Power of Attorney (incorporated by reference to Post-Effective
Amendment #28 filed on December 15, 2003)
q.(ii) Certified copy of Board Resolution (incorporated by reference to
Post-Effective Amendment #24 filed on December 16, 2002)
Item 23. Persons controlled by or under Common Control with Registrant
As of March 31, 2004, any persons directly or indirectly under
common control with The Hartford Mutual Funds, Inc. are
affiliates of, and are controlled by, The Hartford Financial
Services Group, Inc., a Maryland corporation. Information about
all such persons is incorporated herein by reference to the Form
10-K of The Hartford Financial Services Group, Inc. filed on
February 27, 2004.
In addition, subsidiaries of The Hartford Financial Services
Group, Inc., beneficially owned as of March 31, 2004 more than
25% of the following funds:
The Hartford Global Communications Fund
The Hartford Global Financial Services Fund
The Hartford Income Fund
The Hartford Tax-Free California Fund
The Hartford Tax-Free New York Fund
Item 24. Indemnification
Article V of the Registrant's Articles of Incorporation dated
March 19, 1996 and incorporated herein by reference to
Registrant's initial registration statement on April 9, 1996
provides in effect that the Registrant will indemnify its
officers and directors under certain circumstances. However, in
accordance with Section 17(h) and 17(i) of the Investment Company
Act of 1940 and its own terms, Article V does not protect any
person against liability to the Registrant or its shareholders to
which such Director would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
The rights of indemnification contained in Article V are not
exclusive to any other rights to which any officer, director or
employee seeking indemnification may be entitled.
Subsection (b) of Section 2-418 of the General Corporation Law of
Maryland permits a corporation to indemnify any person who was or
is party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that
he is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of
another corporation or enterprise, against reasonable expenses
(including attorneys' fees), judgments, penalties, fines and
amounts paid in settlement actually incurred by him in connection
with such action, suit or proceeding unless it is proved that:
(i) the act or omission of the person was material to the cause
of action adjudicated in the proceeding and was committed in bad
faith or was the result of active and deliberate dishonesty; (ii)
the person actually received an improper personal benefit of
money, property or services; or (iii) with respect to any
criminal action or proceeding, the person had reasonable cause to
believe his act or omission was unlawful.
Indemnification under subsection (b) of Section 2-418 may not be
made by a corporation unless authorized for a specific proceeding
after a determination has been made that indemnification is
permissible in the circumstances because the party to be
indemnified has met the standard of conduct set forth in
subsection (b). This determination shall be made (i) by the Board
of Directors by a majority vote of a quorum consisting of
directors not, at the time, parties to the proceeding, or, if
such quorum cannot be obtained, then by a majority vote of a
committee of the Board consisting solely of two or more directors
not, at the time, parties to such proceeding an who were duly
designated to act in the matter by a majority vote of the full
Board in which the designated directors who are parties may
participate; (ii) by special legal counsel selected by the Board
of Directors or a committee of the Board by vote as set forth in
subparagraph (i), or, if the requisite quorum of the full Board
cannot be obtained therefor and the committee cannot be
established, by a majority vote of the full Board in which any
director who is a party may participate; or (iii) by the
stockholders (except that shares held by directors who are
parties to the specific proceeding may not be voted). A court of
appropriate jurisdiction may also order indemnification if the
court determines that a person seeking indemnification is
entitled to reimbursement under subsection (b).
Section 2-418 further provides that indemnification provided for
by Section 2-418 shall not be deemed exclusive of any rights to
which the indemnified party may be entitled; and permits a
corporation to purchase and maintain insurance on behalf of a
director, officer, employee or agent of the corporation against
any liability asserted against or incurred by such person in any
such capacity or arising out of such person's status as such
whether or not the corporation would have the power to indemnify
such person against such liabilities under Section 2-418.
Insofar as indemnification for liability arising under the
Securities Act of 1933, as amended (the "Act") may be permitted
to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person in connection with the securities being
registered), the Registrant undertakes that it will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by it is
against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 25. Business and Other Connections of Investment Adviser
Hartford Investment Financial Services, LLC serves as investment
adviser to the funds included in this Registration Statement.
[Enlarge/Download Table]
Position with Hartford Investment
Name Financial Services, LLC Other Business
---- ----------------------- --------------
Thomas M. Marra President and Chief Executive President and Chief Operating Officer
Officer and Manager of Hartford Life, Inc. ("HL, Inc. ")(1)
John C. Walters Executive Vice President and Executive Vice President of Hartford
Manager Life Insurance Company ("HLIC")(2)
Walter E. Watkins, Jr. Chief Compliance Officer Chief Compliance Officer of HL
Investment Advisors, LLC(3)
David N. Levenson Senior Vice President Senior Vice President of HLIC
Christine H. Repasy Senior Vice President, General Senior Vice President and General
Counsel and Corporate Secretary Counsel of HL, Inc.
David M. Znamierowski Senior Vice President of Hartford Investment
President-Investments and Manager Management Company ("Hartford
Investment Management")(4)
David A. Carlson Senior Vice President and Deputy Senior Vice President and Deputy Chief
Chief Financial Officer Financial Officer of HL, Inc.
William H. Davison, Jr. Senior Vice President Managing Director of Hartford
Investment Management
Christopher Hanlon Senior Vice President Senior Vice President of Hartford
Investment Management
Tamara L. Fagely Controller Vice President of Hartford
Administrative Services Company
("HASCO")(5)
Kevin J. Carr Vice President and Assistant Assistant General Counsel of The
Secretary Hartford Financial Services Group, Inc.
("The Hartford")(6)
Mary Jane Fortin Vice President Senior Vice President of HL Inc.
Robert W. Beltz, Jr. Assistant Vice President Vice President, Securities Operations
John N. Giamalis Treasurer Vice President and Treasurer of HL Inc.
Todd G. Picken Assistant Treasurer Assistant Treasurer of HLIC
Dawn M. Cormier Assistant Secretary Assistant Secretary of HL Inc.
[Download Table]
Position with Hartford Investment
Name Financial Services, LLC Other Business
---- ----------------------- --------------
Sarah J. Harding Assistant Secretary Assistant Secretary of HLIC
Diane E. Tatelman Assistant Secretary Assistant Secretary of HL Inc.
(1) The principal business address for HL, Inc. is 200 Hopmeadow
Street, Simsbury, CT 06089.
(2) The principal business address for HLIC is 200 Hopmeadow Street,
Simsbury, CT 06089.
(3) The principal business address for HL Investment Advisors, LLC
is 200 Hopmeadow Street, Simsbury, CT 06089.
(4) The principal business address for Hartford Investment
Management is 55 Farmington Avenue, Hartford, CT 06105.
(5) The principal business address for HASCO is 500 Bielenberg
Drive, Woodbury, MN 55125.
(6) The principal business address for The Hartford is Hartford
Plaza, Hartford, CT 06115.
Item 26. Principal Underwriters
Hartford Investment Financial Services, LLC ("HIFSCO") is an indirect
wholly owned subsidiary of The Hartford Financial Services Group, Inc. HIFSCO is
also the principal underwriter for The Hartford Mutual Funds II, Inc.
The directors and principal officers of HIFSCO and their position with
the Registrant are set forth below:
[Enlarge/Download Table]
Name and Principal Business Position and Offices with
Address Positions and Offices with Underwriter Registrant
------- -------------------------------------- ----------
Thomas M. Marra(1) President and Chief Executive Officer Chairman of the Board and
and Manager Director
John C. Walters(1) Executive Vice President and Manager Vice President
Walter E. Watkins, Jr.(1) Chief Compliance Officer None
David N. Levenson(1) Senior Vice President Vice President
Christine H. Repasy(1) Senior Vice President, General None
Counse(l) and Corporate Secretary
David M. Znamierowski(2) Senior Vice President-Investments and President and Director
Manager
William H. Davison, Jr.(2) Senior Vice President Vice President
David A. Carlson(1) Senior Vice President and Deputy Chief
Financial Officer None
Christopher Hanlon(2) Senior Vice President None
Mary Jane Fortin(1) Vice President Vice President
Tamara L. Fagely(1) Controller Vice President, Controller
and Treasurer
John N. Giamalis(3) Treasurer None
Todd G. Picken(3) Assistant Treasurer None
Kevin J. Carr(2) Vice President and Assistant Secretary Vice President and Secretary
Robert W. Beltz, Jr.(4) Assistant Vice President Vice President
Dawn Marie Cormier(1) Assistant Secretary None
Sarah J. Harding(1) Assistant Secretary None
Diane E. Tatelman(1) Assistant Secretary None
(1) The principal business address is 200 Hopmeadow Street,
Simsbury, CT 06089.
(2) The principal business address is 55 Farmington Avenue,
Hartford, CT 06105.
(3) The principal business address is 690 Asylum Avenue, Hartford,
CT 06115.
(4) The principal business address is 500 Bielenberg Drive,
Woodbury, MN 55125.
Item 27. Location of Accounts and Records
Books or other documents required to be maintained by the Registrant by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are maintained by the Registrant's custodian, State Street Bank and
Trust Company, 225 Franklin Street, Boston, MA 02110 and the Registrant's
transfer agent, Hartford Administrative Services Company, 500 Bielenberg Drive,
Woodbury, Minnesota 55125. Registrant's financial ledgers and other corporate
records are maintained at its offices at the Hartford Life Insurance Companies,
200 Hopmeadow Street, Simsbury, CT 06089.
Item 28. Management Services
Not Applicable
Item 29. Undertakings
Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement on Form N-1A
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Hartford, State of Connecticut, on the
19th day of May, 2004.
THE HARTFORD MUTUAL FUNDS, INC.
By: *
____________________________
David M. Znamierowski
Its: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
[Download Table]
SIGNATURE TITLE DATE
--------- ----- ----
* President May 19, 2004
___________________________ (Chief Executive Officer)
David M. Znamierowski & Director
* Controller & Treasurer May 19, 2004
___________________________ (Chief Accounting Officer &
Tamara L. Fagely Chief Financial Officer)
* Director May 19, 2004
___________________________
Lynn S. Birdsong
* Director May 19, 2004
___________________________
Winifred E. Coleman
* Director May 19, 2004
___________________________
Robert M. Gavin, Jr.
* Director May 19, 2004
___________________________
Duane E. Hill
* Chairman of the Board
___________________________ and Director May 19, 2004
Thomas M. Marra
* Director May 19, 2004
___________________________
Phillip O. Peterson
* Director May 19, 2004
___________________________
Millard H. Pryor, Jr.
* Director May 19, 2004
___________________________
Lowndes A. Smith
/s/ Kevin J. Carr May 19, 2004
---------------------------
* By Kevin J. Carr
Attorney-in-fact
EXHIBIT INDEX
Exhibit No.
a.(viii) Articles Supplementary dated March 10, 2004
d.(x) Form of Amendment Number 9 to Investment Management Agreement
e.(xii) Form of Amendment Number 9 to Principal Underwriting Agreement
g.(xi) Form of Eleventh Amendment to Custodian Contract
h.(iv) Form of Amendment Number 3 to Transfer Agency and Service
Agreement
h.(v) Share Purchase Agreement
i. Opinion and Consent of Counsel
j. Consent of Independent Auditors
m. Amended and Restated Rule 12b-1 Distribution Plan for Class A,
Class B and Class C Shares
n. Multiple Class Plan Pursuant to Rule 18f-3
Dates Referenced Herein and Documents Incorporated by Reference
| Referenced-On Page |
|---|
| This ‘485BPOS’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| | 5/28/04 | | 33 | | 98 |
| Filed on / Effective on: | | 5/19/04 | | 1 | | 126 | | | 497 |
| | 5/5/04 | | 88 |
| | 3/31/04 | | 120 |
| | 3/10/04 | | 115 | | 127 |
| | 3/1/04 | | 86 |
| | 2/27/04 | | 119 | | 120 | | | 485BPOS |
| | 1/29/04 | | 118 | | | | | 485APOS |
| | 12/31/03 | | 7 | | 83 |
| | 12/15/03 | | 115 | | 120 | | | 485APOS |
| | 12/11/03 | | 82 |
| | 11/4/03 | | 3 | | 83 |
| | 10/31/03 | | 80 | | 81 | | | 24F-2NT, 24F-2NT/A, N-CSR, NSAR-B, NSAR-B/A |
| | 8/26/03 | | 115 |
| | 8/19/03 | | 115 | | | | | 485BXT |
| | 6/10/03 | | 115 |
| | 6/6/03 | | 119 | | | | | 485APOS |
| | 5/14/03 | | 81 |
| | 5/13/03 | | 81 | | 115 |
| | 2/28/03 | | 115 | | 119 | | | 485BPOS |
| | 12/16/02 | | 115 | | 120 | | | 485APOS |
| | 10/31/02 | | 53 | | | | | 24F-2NT, N-30D, NSAR-B, NSAR-B/A |
| | 10/25/02 | | 115 | | | | | 485BPOS, 497 |
| | 9/12/02 | | 115 |
| | 8/30/02 | | 115 | | | | | 497 |
| | 2/15/02 | | 117 | | 119 | | | 485BPOS |
| | 11/1/01 | | 119 |
| | 4/30/01 | | 53 | | | | | 485BPOS, N-1A, N-30D, NSAR-A |
| | 11/1/98 | | 117 |
| | 9/30/98 | | 53 |
| | 4/30/98 | | 53 |
| | 6/20/97 | | 115 | | 117 | | | 485A24F |
| | 3/3/97 | | 115 | | 117 | | | NSAR-B |
| | 12/9/96 | | 88 |
| | 7/22/96 | | 53 |
| | 6/27/96 | | 117 | | | | | N-1A EL/A |
| | 4/9/96 | | 115 | | 120 | | | N-1A EL, N-8A |
| | 3/21/96 | | 53 | | 93 |
| | 3/19/96 | | 115 | | 120 |
| | 1/24/96 | | 115 |
| | 1/2/96 | | 53 |
| List all Filings |
13 Subsequent Filings that Reference this Filing
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