<PAGE>
Page 6
As filed with the Securities and Exchange Commission on June 27, 1996
Registration No. 333-2381
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendemnt No. 1 /X/
Post-Effective Amendment No.__ / /
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 1 /X/
ITT HARTFORD MUTUAL FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
Hartford Plaza, Hartford, Connecticut 06115
(Address of Principal Executive Offices)
Registrant's Telephone Number Including Area Code: (860) 547-5000
Michael O'Halloran, Esquire
ITT Hartford Group, Inc.
Law Department
690 Asylum Avenue
Hartford, Connecticut 06115
(Name and Address of Agent for Service)
COPIES TO: Thomas Mira, Esquire
Jorden, Burt, Berenson and Johnson
1025 Thomas Jefferson Street, N.W.
Suite 400 East
Washington, D.C. 20036
Approximate Date of Proposed Public Offering: Upon this Registration Statement
being declared effective.
Pursuant to Rule 24f-2 promulgated under the Investment Company Act of 1940,
Registrant has elected to register an indefinite number of shares of its Common
Stock.
An initial fee of $500 was paid in April, 1996.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
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Page 7
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Page 8
ITT HARTFORD MUTUAL FUNDS, INC.
Cross-Reference Sheet Showing Location in each Prospectus and
Combined Statement of Additional Information of Information Required
by Items of the Registration Form
Form N-1A Item
Number and Caption Location in Prospectus
------------------ ----------------------
1. Cover Page Cover Page.
2. Synopsis Investor Expenses.
3. Condensed Financial
Information Not Applicable.
4. General Description of
Registrant Introduction to the ITT Hartford Mutual
Funds, Investment Objectives and Styles
of the Funds, Common Investment Policies
and Risk Factors.
5. Management of the Fund Management of the Funds.
6. Capital Stock and other
Securities Ownership and Capitalization of the
Company, Dividends, Capital Gains and
Taxes.
7. Purchase of Securities
Being Offered About Your Account -- How to Buy Shares,
How to Exchange Shares, Determination of
Net Asset Value, Shareholder Account
Rules and Policies
8. Redemption or Repurchase About Your Account -- How to Sell
Shares, How to Exchange Shares,
Determination of Net Asset Value,
Shareholder Account Rules and Policies.
9. Pending Legal Proceedings Not Applicable.
<PAGE>
Page 9
Form N-1A Item Location in Statement
Number and Caption of Additional Information
------------------ -------------------------
10. Cover Page Cover Page.
11. Table of Contents Cover Page.
12. General Information and
History Cover Page, General Information.
13. Investment Objectives and
Policies Investment Objectives and Policies of
the Funds, Investment Restrictions.
14. Management of the Fund Management of the Company, Investment
Advisory Arrangements; Fund Expenses.
15. Control Persons and
Principal Holders of
Securities Management of the Company.
16. Investment Advisory and
Other Services Investment Advisory Arrangements; Fund
Expenses; Distribution Arrangements;
Distribution Financing Plan; Custodian;
Transfer Agent Services; Independent
Public Accountants.
17. Brokerage Allocation and
Other Practices Portfolio and Brokerage Transactions.
18. Capital Stock and Other
Securities Ownership and Capitalization of the
Company (Prospectus).
19. Purchase Redemption and
Pricing of Securities
Being offered Determination of Net Asset Value,
Purchase and Redemption of Shares.
20. Tax Status Taxes
21. Underwriters Distribution Arrangements.
22. Calculation of
Performance Data Investment Performance.
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Page 10
23. Financial Statements Financial Statements.
<PAGE>
ITT HARTFORD MUTUAL FUNDS, INC.
PROSPECTUS-- , 1996
CLASS A AND CLASS B SHARES
ITT Hartford Mutual Funds, Inc. (the "Company") is an open-end management
investment company comprised of eight diversified investment portfolios (each a
"Fund" and together the "Funds"). The Funds, which have different investment
objectives and policies, are listed below:
<TABLE>
<CAPTION>
ITT HARTFORD FUND GOAL INVESTMENT STYLE
- ------------------------------- ---------------------------- --------------------------------------------------------------------
<S> <C> <C>
Small Company Growth of capital Equity: Invests primarily in stocks of companies with market
capitalizations of less than $2 billion; portfolio is broadly
diversified across industries.
Capital Appreciation Growth of capital Equity: Invests in small, medium, and large companies; portfolio is
comprised primarily of a blend of growth and value stocks and is
broadly diversified across industries.
International Opportunities Growth of capital International Equity: Invests primarily in large, high-quality non-
U.S. companies in established markets, and on a limited basis, in
smaller companies and emerging markets; portfolio is broadly
diversified across industries and countries.
Stock Growth of capital, income is Equity: Invests primarily in large, high quality U.S. companies;
secondary portfolio is broadly diversified across industries which are
expected to grow faster than the overall economy.
Dividend and Growth High level of income, growth Equity: Invests primarily in large, well-known U.S. companies that
of capital have historically paid above average dividends and have the ability
to sustain and potentially increase dividends; portfolio is broadly
diversified across industries.
Advisers Long-term total return Asset Allocation: Invests in a mix of stocks, bonds and money market
instruments; portfolio assets are allocated gradually among the
asset classes based upon the portfolio managers' view of the economy
and valuation of the market sectors; short term market timing is not
used.
Bond Income Strategy High level of income, total Bond: Invests primarily in investment grade bonds; up to 30% may be
return invested in the highest quality tier of the high yield rating
category.
Money Market Maximum current income Money Market: Invests in money market instruments and seeks to
consistent with preservation maintain a stable share price of $1.00.
of capital
</TABLE>
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. WHILE THE MONEY MARKET FUND SEEKS TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE, THERE CAN BE NO ASSURANCE THAT THE FUND WILL
ACHIEVE THIS GOAL.
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE FUNDS THAT A
PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING. PLEASE READ AND KEEP THIS
PROSPECTUS FOR FUTURE REFERENCE. ADDITIONAL INFORMATION ABOUT THE FUNDS HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC") IN A STATEMENT OF
ADDITIONAL INFORMATION DATED 1996 ("SAI"), WHICH IS INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS. TO OBTAIN A COPY OF THE SAI WITHOUT CHARGE, CALL
1-888-ITT-FUND (1-888-488-3863), OR WRITE TO ITT HARTFORD MUTUAL FUNDS, INC.,
P.O. BOX 8416, BOSTON, MA 02266-8416.
- --------------------------------------------------------------------------------
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY
BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
2 Hartford Mutual Funds
- --------------------------------------------------------------------------------
ITT HARTFORD MUTUAL FUNDS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investor Expenses..................................................... 3
Introduction to the ITT Hartford Mutual Funds......................... 5
Investment Objectives and Styles of the Funds......................... 5
Common Investment Policies and Risk Factors........................... 8
Performance of the Funds.............................................. 13
About Your Account.................................................... 15
How to Buy Shares................................................... 15
How to Redeem Shares................................................ 20
How to Exchange Shares.............................................. 21
Determination of Net Asset Value.................................... 22
Shareholder Account Rules and Policies.............................. 22
Investor Information Services....................................... 23
Management of the Funds............................................... 23
Dividends, Capital Gains and Taxes.................................... 26
Ownership and Capitalization of Funds................................. 26
General Information................................................... 27
</TABLE>
<PAGE>
Hartford Mutual Funds 3
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The expenses and the maximum transaction costs associated with investing in
Class A or Class B shares of each Fund and the estimated aggregate operating
expenses for each Fund are reflected in the following table.
<TABLE>
<CAPTION>
SMALL CAPITAL INTERNATIONAL
COMPANY APPRECIATION OPPORTUNITIES STOCK
FUND FUND FUND FUND
----------------- ----------------- ----------------- -----------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge on purchases
(as % of Offering Price) (1)...... 5.50% None 5.50% None 5.50% None 5.50% None
Maximum Deferred Sales Charge (2).. None 5.00% None 5.00% None 5.00% None 5.00%
Redemption Fees (3)................ None None None None None None None None
Exchange Fees (4).................. None None None None None None None None
ANNUAL OPERATING EXPENSES (AS % OF
AVERAGE NET ASSETS)
Management Fees.................... 0.85% 0.85% 0.80% 0.80% 0.85% 0.85% 0.80% 0.80%
12b-1 Distribution and Service Fees
(5)............................... 0.30% 1.00% 0.30% 1.00% 0.30% 1.00% 0.30% 1.00%
Other Expenses (6)................. 0.30% 0.30% 0.35% 0.35% 0.50% 0.50% 0.35% 0.35%
Total Operating Expenses (after
reimbursements) (6)............... 1.45% 2.15% 1.45% 2.15% 1.65% 2.35% 1.45% 2.15%
<CAPTION>
MONEY
DIVIDEND AND ADVISERS BOND INCOME MARKET
GROWTH FUND FUND STRATEGY FUND FUND
----------------- ----------------- ----------------- -------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge on purchases
(as % of Offering Price) (1)...... 5.50% None 5.50% None 4.50% None None
Maximum Deferred Sales Charge (2).. None 5.00% None 5.00% None 5.00% None
Redemption Fees (3)................ None None None None None None None
Exchange Fees (4).................. None None None None None None None
ANNUAL OPERATING EXPENSES (AS % OF
AVERAGE NET ASSETS)
Management Fees.................... 0.75% 0.75% 0.75% 0.75% 0.65% 0.65% 0.50%
12b-1 Distribution and Service Fees
(5)............................... 0.30% 1.00% 0.30% 1.00% 0.30% 1.00% 0.30%
Other Expenses (6)................. 0.35% 0.35% 0.35% 0.35% 0.30% 0.30% 0.20%
Total Operating Expenses (after
reimbursements) (6)............... 1.40% 2.10% 1.40% 2.10% 1.25% 1.95% 1.00%
</TABLE>
- ----------------------------------
(1) If you purchase Class A shares, except for Class A shares in the Money
Market Fund, you will pay a sales charge equal to the amount of your
investment multiplied by the percentage set forth in the table above.
However, a lesser or no sales charge may be imposed depending on the size
of the investment in Class A shares. Although purchases of Class A shares
of $1 million or more are not subject to an initial sales charge, they may
be subject to a contingent deferred sales charge ("CDSC") if redeemed
within 18 months of the calendar month of purchase. If you purchase Class B
shares, you do not pay an initial sales charge but you may incur a CDSC if
you redeem some or all of your Class B Shares before the end of the sixth
year after which you purchased Class B Shares. The CDSC is 5%, 4%, 3%, 3%,
2%, and 1% for redemptions occurring in years one through six respectively.
After the sixth year, the CDSC is eliminated. See "How to Buy Shares."
(2) Shares of the Money Market Fund acquired by exchange from Class A or Class
B shares of any other Fund which are subject to a CDSC may be subject to a
CDSC if redeemed. The CDSC will be assessed at a rate equal to the CDSC
rate that would be applicable to the original shares as exchanged.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by the National Association of
Securities Dealers (" NASD"). See "How To Buy Shares."
(3) An $8 charge may be imposed on redemptions of less than $50,000 requested
to be paid by wire transfer. See "Redeeming Shares by Telephone".
(4) All exchanges in excess of 12 exchanges in a 12-month period may be subject
to an exchange fee of $10 per exchange. Any exchange fee is paid directly
to the Fund from which shares have been redeemed. See "How To Exchange
Shares."
(5) Although the Class A shares of each Fund may pay Rule 12b-1 fees of up to
.35%, the 12b-1 fee for each Fund has been voluntarily capped at .30%
through July 1, 1997. This cap may be removed at any time after July 1,
1997. See "Distribution and Service Plan for Class A Shares" and
"Distribution and Service Plan for Class B Shares".
(6) ITT Hartford Group, Inc. ("ITT Hartford"), the ultimate parent company of
the Hartford Investment Management Company ("HIMCO"), has voluntarily
agreed to limit the Total Operating Expenses of the Class A shares of the
Money Market Fund and the Class A and Class B shares of each Fund,
exclusive of taxes, interest, brokerage commissions, certain distribution
fees and extraordinary expenses, until at least July 1, 1997 as follows:
Money Market Fund, 1.00%; Small Company Fund, 1.45% and 2.15%; Capital
Appreciation Fund, 1.45% and 2.15%; International Opportunities Fund, 1.65%
and 2.35%; Stock Fund, 1.45% and 2.15%; Dividend and Growth Fund, 1.45% and
2.15%; Advisers Fund, 1.45% and 2.15%; and Bond Income Strategy Fund, 1.25%
and 1.95%, respectively. This policy may be discontinued at any time after
July 1, 1997. Without such expense limitations the estimated Total
Operating Expenses for the Class A shares of the Money Market Fund and the
Class A and Class B shares of the following Funds would be: Money Market
Fund, 1.15%; Small Company Fund, 1.50% and 2.20%; International
Opportunities Fund, 1.95% and 2.65%; and Bond Income Strategy Fund, 1.30%
and 2.00%, respectively.
<PAGE>
4 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
EXPENSE EXAMPLES
An investor would have paid the following expenses at the end of the period
shown on a $1,000 investment, assuming a 5% annual return and redemption at the
end of each period.
<TABLE>
<CAPTION>
YEAR 1 YEAR 3
----------------- -----------------
CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Small Company Fund........................... $69 $72 $99 $98
Capital Appreciation Fund.................... 69 72 99 98
International Opportunities Fund............. 71 74 105 104
Stock Fund................................... 69 72 99 98
Dividend and Growth Fund..................... 69 72 99 98
Advisers Fund................................ 69 72 99 98
Bond Income Strategy Fund.................... 57 70 83 92
Money Market Fund............................ 10 N/A 30 N/A
</TABLE>
Using the same assumptions for the first table but assuming that you did not
redeem your shares at the end of each period, you would bear the following
expenses:
<TABLE>
<CAPTION>
YEAR 1 YEAR 3
----------------- -----------------
CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Small Company Fund........................... $69 $22 $99 $68
Capital Appreciation Fund.................... 69 22 99 68
International Opportunities Fund............. 71 24 105 74
Stock Fund................................... 69 22 99 68
Dividend and Growth Fund..................... 69 22 99 68
Advisers Fund................................ 69 22 99 68
Bond Income Strategy Fund.................... 57 29 83 62
Money Market Fund............................ 19 N/A 30 N/A
</TABLE>
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
<PAGE>
Hartford Mutual Funds 5
- --------------------------------------------------------------------------------
INTRODUCTION TO THE ITT HARTFORD MUTUAL FUNDS
The Company is an open-end management investment company, commonly known as
a mutual fund, which was organized as a Maryland corporation on March 21, 1996.
The Company consists of eight series, each of which is divided into Class A,
Class B and Class Y shares except the Money Market Fund which is divided into
Class A and Class Y shares. Class Y shares are offered to certain institutional
investors by a separate prospectus. Each Class may have different expenses which
may affect performance. Each Fund has different investment objectives, styles
and policies. These differences affect the types of securities in which each
Fund may invest and, therefore, the potential return of each Fund and the
associated risks. There is no assurance, however, that any Fund will meet its
investment goals. Whether an investment in a particular Fund is appropriate for
you depends on your investment goals, including the return you seek, the
expected duration of your investment and the level of risk you are willing to
bear.
The Hartford Investment Management Company ("HIMCO") is the investment
adviser to each Fund. In addition, under HIMCO's general management, Wellington
Management Company ("Wellington Management") serves as a sub-adviser to the
Small Company Fund, Capital Appreciation Fund, International Opportunities Fund,
Stock Fund, Dividend and Growth Fund and Advisers Fund.
HIMCO was incorporated in Connecticut in 1981 and is a wholly-owned indirect
subsidiary of ITT Hartford Group, Inc. ("ITT Hartford"), a Connecticut insurance
holding company with over $94 billion in assets. Wellington Management, a
Massachusetts general 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 1933. As of December 31, 1995, HIMCO and its affiliates and
Wellington Management had investment management authority with respect to
approximately $49.6 and $109.2 billion of assets, respectively, for various
clients. Since 1977, HIMCO and its affiliates have served as the investment
manager to a family of mutual funds in which variable annuity and variable life
insurance contracts issued by subsidiaries of ITT Hartford are invested. Since
1984, Wellington Management has served as sub-adviser to certain of those funds.
HIMCO and Wellington Management collectively manage over $10 billion of assets
in these mutual funds.
INVESTMENT OBJECTIVES AND INVESTMENT STYLES OF THE FUNDS
The Funds have different investment objectives and policies, as described
below. The differences among the Funds can be expected to affect the investment
return of each Fund and the degree of market and financial risk to which each
Fund is subject. Each Fund is subject to certain fundamental investment
restrictions that are enumerated in detail in the SAI and may not be changed
without shareholder approval. All other investment policies (including each
Fund's investment objective) are non-fundamental and may be changed by the Board
of Directors without shareholder approval. Stated below is the investment
objective and investment style for each Fund. For a description of each Fund's
investment policies and risk factors, see "COMMON INVESTMENT POLICIES AND RISK
FACTORS."
HARTFORD SMALL COMPANY FUND
INVESTMENT OBJECTIVE.
The Small Company Fund seeks growth of capital by investing primarily in
equity securities selected on the basis of potential for capital appreciation.
INVESTMENT STYLE.
Under normal market and economic conditions at least 65% of the Small
Company Fund's total assets are invested in equity securities of companies which
have less than $2 billion in market capitalization ("Small Capitalization
Securities"). Wellington Management identifies, through fundamental analysis,
companies that it believes have substantial near-term capital appreciation
potential regardless of industry sector. However, overall industry exposure is
monitored by Wellington Management so as to maintain broad industry
diversification. In selecting investments Wellington Management considers
securities of companies that, in its opinion, have potential for above-average
earnings growth, are undervalued in relation to their investment potential, have
business and/or fundamental financial characteristics that are misunderstood by
investors, or are relatively obscure, i.e., undiscovered by the overall
investment community. Fundamental analysis involves the assessment of a company
through such factors as its business environment, management, balance sheet,
income statement, anticipated earnings, revenues, dividends, and other related
measures of value. Up to 20% of the Small Company Fund's total assets may be
invested in securities of non-U.S. companies. Investing in Small Capitalization
Securities involves special risks. See "COMMON INVESTMENT POLICIES AND RISK
FACTORS -- Small Capitalization Securities".
<PAGE>
6 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
HARTFORD CAPITAL APPRECIATION FUND
INVESTMENT OBJECTIVE.
The Capital Appreciation Fund seeks growth of capital by investing primarily
in equity securities selected on the basis of potential for capital
appreciation.
INVESTMENT STYLE.
The Capital Appreciation Fund invests in a diversified portfolio of
primarily equity securities. Wellington Management identifies, through
fundamental analysis, companies that it believes have substantial near-term
capital appreciation potential regardless of company size or industry sector.
This approach is sometimes referred to as a "stock picking" approach and results
in having all market capitalization sectors (i.e., small, medium, and large
companies) represented. 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 for a catalyst event that will trigger stock
price appreciation. Fundamental analysis involves the assessment of a company
through such factors as its business environment, management, balance sheet,
income statement, anticipated earnings, revenues, dividends, and other related
measures of value. Up to 20% of the Capital Appreciation Fund's total assets may
be invested in securities of non-U.S. companies.
HARTFORD INTERNATIONAL OPPORTUNITIES FUND
INVESTMENT OBJECTIVE.
The International Opportunities Fund seeks growth of capital by investing
primarily in equity securities issued by non-U.S. companies.
INVESTMENT STYLE.
The International Opportunities Fund invests in a diversified portfolio of
primarily equity securities covering a broad range of countries, industries, and
companies. Securities in which the International Opportunities Fund invests are
denominated in both U.S. dollars and non-U.S. currencies (including the European
Currency Unit) and generally are traded in non-U.S. markets. Wellington
Management uses a three-pronged approach. First, Wellington Management
determines the relative attractiveness of the many countries in which the
International Opportunities Fund may invest based upon the economic and
political environment of each country. Second, Wellington Management evaluates
industries on a global basis to determine which industries offer the most value
and potential for capital appreciation given current and projected global and
local economic and market conditions. Finally, Wellington Management conducts
fundamental research on individual companies and considers companies for
inclusion in the International Opportunities Fund's portfolio that are typically
larger, high quality companies that operate in established markets. Fundamental
analysis involves the assessment of a company through such factors as its
business environment, management, balance sheet, income statement, anticipated
earnings, revenues, dividends, and other related measures of value. In analyzing
companies for investment, Wellington Management looks for, among other things, a
strong balance sheet, attractive industry dynamics, strong competitive
advantages and attractive relative value within the context of a security's
primary trading market. The International Opportunities Fund may also invest on
a limited basis in smaller companies and less developed markets. The
International Opportunities Fund anticipates that, under normal market
conditions, it will diversify its investments in at least three countries other
than the United States. The International Opportunities Fund will be subject to
certain risks because it invests primarily in securities issued by non-U.S.
companies.
HARTFORD STOCK FUND
INVESTMENT OBJECTIVE.
The Stock Fund seeks long-term growth of capital, with income as a secondary
consideration, by investing primarily in equity securities.
INVESTMENT STYLE.
Under normal market and economic conditions at least 65% of the Stock Fund's
total assets are invested in equity securities. The Stock Fund invests in a
diversified portfolio of primarily equity securities using a two-tiered
investment approach. First, under what is sometimes referred to as a "top down"
approach, Wellington Management analyzes the macro economic and investment
environment. This includes an evaluation of economic conditions, U.S. fiscal and
monetary policy, demographic trends, and investor sentiment. Through top down
analysis, Wellington Management anticipates secular and cyclical changes and
identifies industries and economic sectors that are expected to grow faster than
the overall economy. Second, top down analysis is followed by what is sometimes
referred to as a "bottom up" approach, which is the use of fundamental analysis
to identify specific securities for purchase or sale. The Stock Fund's portfolio
emphasizes high-quality growth companies. The key characteristics of
high-quality growth companies include a leadership position within an industry,
a strong balance sheet, a high return on equity, sustainable or increasing
dividends, a strong management team, and a globally competitive position.
Fundamental analysis involves the assessment of a company through such factors
as its business environment, management, balance sheet, income statement,
anticipated earnings, revenues, dividends, and other related measures of value.
Up to 20% of the Stock Fund's total assets may be invested in securities of
non-U.S. companies.
<PAGE>
HARTFORD MUTUAL FUNDS 7
- --------------------------------------------------------------------------------
HARTFORD DIVIDEND AND GROWTH FUND
INVESTMENT OBJECTIVE.
The Dividend and Growth Fund seeks a high level of current income consistent
with growth of capital by investing primarily in equity securities.
INVESTMENT STYLE.
The Dividend and Growth Fund invests in a diversified portfolio of primarily
equity securities that typically have above average income yield and whose
prospects for capital appreciation are considered favorable by Wellington
Management. Under normal market and economic conditions at least 65% of the
Dividend and Growth Fund's total assets are invested in dividend paying equity
securities. Wellington Management uses fundamental analysis to evaluate a
security for purchase or sale by the Dividend and Growth Fund. Fundamental
analysis involves the assessment of a company through such factors as its
business environment, management, balance sheet, income statement, anticipated
earnings, revenues, dividends, and other related measures of value. As a key
component of the fundamental analysis done for the Dividend and Growth Fund,
Wellington Management evaluates a company's ability to sustain and potentially
increase its dividend. The Dividend and Growth Fund's portfolio will be broadly
diversified by industry and company. Up to 20% of the Dividend and Growth Fund's
total assets may be invested in securities of non-U.S. companies.
HARTFORD ADVISERS FUND
INVESTMENT OBJECTIVE.
The Advisers Fund seeks maximum long-term total rate of return by investing
in common stocks and other equity securities, bonds and other debt securities
and money market instruments.
INVESTMENT STYLE.
The Advisers Fund seeks to achieve its objective through the active
allocation of its assets among the asset categories of equity securities, debt
securities and money market instruments based upon Wellington Management's
judgment of the projected investment environment for financial assets, relative
fundamental values and attractiveness of each asset category, and expected
future returns of each asset category. Wellington Management bases its asset
allocation decisions on fundamental analysis and does not attempt to make
short-term market timing decisions among asset categories. As a result, shifts
in asset allocation are expected to be gradual and continuous and the Advisers
Fund will normally have some portion of its assets invested in each asset
category. The Advisers Fund does not have percentage limitations on the amount
that may be allocated to each asset category. The Advisers Fund's investments in
equity securities and securities that are convertible into equity securities
will be substantially similar to the investments permitted for the Stock Fund.
See "HARTFORD STOCK FUND." The debt securities in which the Advisers Fund may
invest include securities issued or guaranteed by the U.S. Government and its
agencies or instrumentalities, securities rated investment grade, or if unrated,
are deemed by Wellington Management to be of comparable quality, and with
respect to 5% of the Advisers Fund's assets, securities rated below investment
grade which are known as high yield-high risk securities or junk bonds. The
money market instruments in which the Adviser's Fund may invest are described
under "COMMON INVESTMENT POLICIES AND RISK FACTORS -- Money Market Instruments
and Temporary Investment Strategies." Up to 20% of the Advisers Fund's total
assets may be invested in securities of non-U.S. companies.
HARTFORD BOND INCOME STRATEGY FUND
INVESTMENT OBJECTIVE.
The Bond Income Strategy Fund seeks a high level of current income,
consistent with a competitive total return, as compared to bond funds with
similar investment objectives and policies, by investing primarily in debt
securities.
INVESTMENT STYLE.
The Bond Income Strategy Fund will have a diversified portfolio of
investments in fixed-income securities. Under normal circumstances at least 70%
of the Bond Income Strategy Fund's portfolio will be invested in investment
grade bond-type securities. Up to 30% of the Bond Income Strategy Fund may be
invested in the highest category of below investment grade bonds ("Ba" by
Moody's Investors Service, Inc. ("Moody's") or "BB" by Standard and Poors
Corporation ("S&P")). Securities rated below investment grade are commonly
referred to as "high yield-high risk securities" or "junk bonds". No investments
will be made in debt securities rated below "Ba" or "BB", or if unrated,
determined to be of comparable quality by HIMCO. Investments in securities rated
in the highest category below investment grade may offer an attractive
risk/reward trade-off and investment in this sector may enhance the current
yield and total return of the Bond Income Strategy Fund over time. Investing in
securities within this rating category combined with the investment grade
portion of the portfolio is designed to provide investors with both a high level
of current income and attractive relative total returns.
The Bond Income Strategy Fund will invest at least 65% of its total assets
in bonds and debt securities with a maturity of at least one year. The Bond
Income Strategy Fund may invest up to 15% of its total assets in preferred
stocks, convertible securities, and securities carrying warrants to purchase
equity securities. The Bond Income Strategy 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
<PAGE>
8 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
acquired with debt securities. Up to 30% of the Bond Income Strategy Fund's
total assets may be invested in securities of non-U.S. companies.
HARTFORD MONEY MARKET FUND
INVESTMENT OBJECTIVE.
The Money Market Fund seeks maximum current income consistent with liquidity
and preservation of capital.
INVESTMENT POLICIES.
The Money Market Fund seeks to maintain a stable net asset value of $1.00
per share; however, there can be no assurance that the Fund will achieve this
goal. The Money Market Fund's portfolio will consist entirely of cash, cash
equivalents and high quality debt securities as permitted under Rule 2a-7 of the
Investment Company Act of 1940 (the "1940 Act"). Each investment will have an
effective maturity date of 397 days or less computed in accordance with Rule
2a-7. The average maturity of the portfolio will vary according to HIMCO's
appraisal of money market conditions and will not exceed 90 days. All securities
purchased by the Money Market Fund will be U.S. dollar denominated.
COMMON INVESTMENT POLICIES AND RISK FACTORS
MONEY MARKET INSTRUMENTS AND TEMPORARY INVESTMENT STRATEGIES
In addition to the Money Market Fund which may invest in cash, cash
equivalents and money market instruments at any time, all other Funds may hold
cash or cash equivalents and invest in high quality money market instruments
under appropriate circumstances as determined by HIMCO or Wellington Management.
Such Funds may invest up to 100% of their assets in cash, cash equivalents or
money market instruments only for temporary defensive purposes. In addition, the
Advisers Fund may invest some or all of its assets in such instruments when
Wellington Management expects returns on such instruments to be attractive
relative to investments in equity and debt securities.
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.
REPURCHASE AGREEMENTS
Each Fund is permitted to enter into fully collateralized 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 a Fund to the seller.
The resale price would be in excess of the purchase price, reflecting an agreed
upon market interest rate. Delays or losses could result if the other party to
the agreement defaults or becomes insolvent. The Company's Board of Directors
has established standards for evaluation of the creditworthiness of the banks
and securities dealers with which the Funds may engage in repurchase agreements
and monitors on a quarterly basis HIMCO'S and Wellington Management's compliance
with such standards. Presently, each Fund may enter into repurchase agreements
only with commercial banks with at least $500 million in capital and $1 billion
in assets or with recognized government securities dealers with a minimum net
capital of $100 million.
REVERSE REPURCHASE AGREEMENTS
Each Fund may also enter into reverse repurchase agreements. Reverse
repurchase agreements involve sales by a Fund of portfolio assets concurrently
with an agreement by a 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 a Fund is obligated to repurchase may decline below the
repurchase price. A reverse repurchase agreement may be viewed as a
collateralized borrowing by a Fund. Borrowing magnifies the potential for gain
or loss on the portfolio securities of a Fund and, therefore, increases the
possibility of fluctuation in a Fund's net asset value. A Fund will establish a
segregated account with the Company's custodian bank in which a Fund will
maintain cash, cash equivalents or other high quality debt securities equal in
value to a Fund's obligations in respect of reverse repurchase agreements.
DEBT SECURITIES
Each 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) debt securities issued or guaranteed by U.S.
corporations or other issuers (including foreign governments or corporations);
(3) asset-backed securities and mortgage-related securities, including
collateralized mortgage obligations ("CMO's"); 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 non-U.S.
issuers. In addition, the Advisers Fund, International Opportunities Fund and
the Bond Income Strategy Fund are permitted to invest in Brady Bonds, which are
debt
<PAGE>
HARTFORD MUTUAL FUNDS 9
- --------------------------------------------------------------------------------
securities issued under the framework of the Brady Plan, an initiative announced
by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for
debtor nations to restructure their outstanding external commercial bank debt.
See "Non-U.S. Securities" in the SAI.
INVESTMENT GRADE DEBT SECURITIES
Each Fund is permitted to invest in debt securities rated within the four
highest rating categories (i.e., Aaa, Aa, A or Baa by Moody's or AAA, AA, A or
BBB by S&P), or, if unrated, securities of comparable quality as determined by
HIMCO 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 a Fund is authorized to invest in a certain
rating category, the 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, HIMCO 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 (i.e., "Baa" by
Moody's and "BBB" by S&P), and unrated securities of comparable quality (as
determined by HIMCO or Wellington Management) are viewed as having 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.
HIGH YIELD-HIGH RISK DEBT SECURITIES
The Small Company Fund, Capital Appreciation Fund, International
Opportunities Fund, Stock Fund, Dividend and Growth Fund and Advisers Fund each
may invest up to 5% of its assets in high yield debt securities (i.e., rated as
low as "C" by Moody's or "CC" by S&P, and unrated securities of comparable
quality as determined by Wellington Management). The Bond Income Strategy Fund
may invest up to 30% of its assets in securities rated in the highest level
below investment grade ("Ba" by Moody's or "BB" by S&P) or if unrated,
determined to be of comparable quality by HIMCO. Securities rated below
investment grade are commonly referred to as "high yield-high risk securities"
or "junk bonds". Each rating category has within it different gradations or
sub-categories. If a Fund is authorized to invest in a certain rating category,
the 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, HIMCO 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. Securities in the
rating categories below "Baa" as determined by Moody's and "BBB" as determined
by S&P are considered to be of poor standing and predominantly speculative. The
rating services' descriptions of securities are set forth in the SAI. High
yield-high risk securities are considered speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligations. Accordingly, it is possible that these types of
factors could, in certain instances, reduce the value of securities held by a
Fund with a commensurate effect on the value of the Fund's shares.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
The Advisers Fund and the Bond Income Strategy Fund may invest in
mortgage-backed securities and the Advisers Fund, Bond Income Strategy Fund and
Money Market Fund may invest in asset-backed securities. Mortgage-backed
securities represent a participation in, or are secured by, mortgage loans and
include securities issued or guaranteed by the U.S. Government or one of its
agencies or instrumentalities; securities issued by private issuers that
represent an interest in, or are collateralized by, mortgage-backed securities
issued or guaranteed by the U.S. Government or one or its agencies or
instrumentalities; or securities issued by private issuers that represent an
interest in or are collateralized by mortgage loans or mortgage-backed
securities without a government guarantee but usually having some form of
private credit enhancement. Asset-backed securities are structured like
mortgage-backed securities, but instead of mortgage loans or interests in
mortgage loans, the underlying assets may include motor vehicle installment
sales or installment loan contracts, leases of various types of real and
personal property, and receivables from credit card agreements.
Due to the risk of prepayment, especially when interest rates decline,
mortgage-backed and asset-backed securities are less effective than other types
of securities as a means of "locking in" attractive long-term interest rates
and, as a result, may have less potential for capital appreciation during
periods of declining interest rates than other securities of comparable
maturities. The ability of an issuer of asset-backed securities to enforce its
security interest in the underlying assets may be limited.
EQUITY SECURITIES
All Funds except the Money Market Fund and Bond Income Strategy Fund may
invest in equity securities including common stocks, preferred stocks,
convertible preferred stock and rights to acquire such securities. In addition,
these Funds may invest in securities such as bonds, debentures and corporate
notes which are convertible into common stock at the option of the holder.
SMALL CAPITALIZATION SECURITIES
All Funds except the Money Market Fund and Bond Income Strategy Fund may
invest in equity securities which
<PAGE>
10 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
have less than $2 billion in market capitalization ("Small Capitalization
Securities"). The issuers of Small Capitalization Securities tend to be
companies which are smaller or newer than those listed on the New York or
American Stock Exchanges. As a result, Small Capitalization Securities are
primarily traded in the over-the counter market, although they may also be
listed for trading on the New York or American Stock Exchanges. 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. 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.
NON-U.S. SECURITIES
Under normal circumstances the International Opportunities Fund intends to
invest at least 65% of its assets in securities issued by non-U.S. companies
("non-U.S. securities"). In addition, the International Opportunities Fund may
invest in commingled pools offered by non-U.S. banks. Each other Fund is
permitted to invest up to 20% of its assets, and the Money Market Fund and Bond
Income Strategy Fund are permitted to invest up to 25% and 30% of their assets,
in non-U.S. securities. The Bond Income Strategy Fund intends to purchase
securities denominated in U.S. dollars, or if not so denominated, to use
currency transactions to reflect U.S. dollar valuation at the time of purchase
or while the security is held by the Fund. Each Fund except the Money Market
Fund and the Bond Income Strategy Fund may invest in 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
non-U.S. securities. ADRs are traded on a U.S. securities exchange, or in an
over-the-counter market, and are denominated in U.S. dollars. GDRs are
certificates issued globally and evidence a similar ownership arrangement. GDRs
are traded on non-U.S. securities exchanges and are denominated in non-U.S.
currencies. The value of an ADR or a GDR will fluctuate with the value of the
underlying security, will reflect any changes in exchange rates and otherwise
will involve risks associated with investing in non-U.S. securities.
When selecting non-U.S. securities HIMCO or Wellington Management will
evaluate the economic and political climate and the principal securities markets
of the country in which the company is located. Investing in non-U.S. securities
involves considerations and potential risks not typically associated with
investing in securities issued by U.S. companies. Less information may be
available about non-U.S. companies than about U.S. companies and non-U.S.
companies generally are not subject to uniform accounting, auditing and
financial reporting standards or to other regulatory practices and requirements
comparable to those applicable to U.S. companies. The values of non-U.S.
securities are affected by changes in currency rates or exchange control
regulations, restrictions or prohibitions on the repatriation of non-U.S.
currencies, application of non-U.S. tax laws, including withholding taxes,
changes in governmental administration or economic or monetary policy (in the
U.S. or outside the U.S.) or changed circumstances in dealings between nations.
Costs are also incurred in connection with conversions between various
currencies. See the SAI for additional risk disclosure concerning non-U.S.
securities.
CURRENCY TRANSACTIONS
Each Fund, except the Money Market Fund, may engage in currency transactions
to hedge the value of portfolio securities denominated in particular currencies
against fluctuations in relative value. Currency transactions include forward
currency contracts, 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 a 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 Fund's underlying securities.
Further, the Funds may enter into currency transactions only with counterparties
that HIMCO or Wellington Management deem to be creditworthy.
The 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 related options and futures contracts.
OPTIONS AND FUTURES CONTRACTS
Each Fund, except the Money Market Fund, may employ certain hedging, income
enhancement and risk management techniques involving options and futures
contracts, though such techniques may result in losses to the Fund. The Funds
may write covered call options or purchase put and call options on individual
securities, write covered put and call options and purchase put and call options
on foreign currencies, aggregates of equity and debt securities, indices of
prices of equity and debt securities and other
<PAGE>
HARTFORD MUTUAL FUNDS 11
- --------------------------------------------------------------------------------
financial indices, and 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.
A Fund may write covered options only. "Covered" means that, so long as a
Fund is obligated as the writer of an option, it will own either the underlying
securities or currency or an option to purchase or sell the same underlying
securities or currency having an expiration date not earlier than the expiration
date of the covered option and an exercise price equal to or less than the
exercise price of the covered option, or will establish or maintain with its
custodian for the term of the option a "segregated account" consisting of cash,
U.S. Government securities or other liquid, high grade debt obligations having a
value equal to the fluctuating market value of the optioned securities or
currencies. A Fund receives a premium from writing a call or put option, which
increases the Fund's return if the option expires unexercised or is closed out
at a net profit.
To hedge against fluctuations in currency exchange rates, these Funds may
purchase or sell foreign currency futures contracts, and write put and call
options and purchase put and call options on such futures contracts. To the
extent that a Fund enters into futures contracts, options on futures contracts
and options on foreign currencies that are traded on an exchange regulated by
the Commodities Futures Trading Commission ("CFTC"), in each case that are not
for BONA FIDE hedging purposes (as defined by the CFTC), the aggregate initial
margin and premiums required to establish those non-hedging positions may not
exceed 5% of the liquidation value of Fund's portfolio, after taking into
account the unrealized profits and unrealized losses on any such contracts the
Fund has entered into.
A Fund's 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 HIMCO 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 a
Fund invests; (4) lack of assurance that a liquid secondary market will exist
for any particular option, futures contract, option thereon or forward contract
at any particular time, which may affect a Fund's ability to establish or close
out a position; (5) possible impediments to effective portfolio management or
the ability to meet current obligations caused by the segregation of a large
percentage of a Fund's assets to cover its obligations; and (6) the possible
need to defer closing out certain options, futures contracts, options thereon
and forward contracts in order to continue to qualify for the beneficial tax
treatment afforded "regulated investment companies" under the Internal Revenue
Code (the "Code"). See the SAI for additional information on options and futures
contracts. Options and futures contracts are commonly known as "derivative"
securities.
SWAP AGREEMENTS
Each Fund, except the Money Market Fund, may enter into interest rate swaps,
currency swaps, equity swaps and other types of swap agreements such as caps,
collars, and floors. In a typical interest rate swap, one party agrees to make
regular payments equal to a floating interest rate multiplied by a "notional
principal amount," in return for payments equal to a fixed rate multiplied by
the same amount, for a specified period of time. If a swap agreement provides
for payments in different currencies, the parties might agree to exchange the
notional principal amount as well. Swaps may also depend on other prices or
rates, such as the value of an index or mortgage prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specified interest rate exceeds an
agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
Swap agreements will tend to shift a Fund's investment exposure from one
type of investment to another. For example, if a Fund agreed to exchange
floating rate payments for fixed rate payments, the swap agreement would tend to
decrease the Fund's exposure to rising interest rates. Caps and floors have an
effect similar to buying or writing options. Depending on how they are used,
swap agreements may increase or decrease the overall volatility of a Fund's
investments and its share price and yield. Swap agreements are commonly known as
"derivative" securities.
The successful utilization of hedging and risk management transactions
requires skills different from those needed in the selection of a Fund's
portfolio securities and depends on HIMCO's or Wellington Management's ability
to predict correctly the direction and degree of movement in interest rates.
Although the Funds believe that the use of the hedging and risk management
techniques described above will benefit the Funds, if HIMCO's or Wellington
Management's judgment about the direction or extent of
<PAGE>
12 HARTFORD MUTUAL FUNDS
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the movement in interest rates is incorrect, a Fund's overall performance would
be worse than if it had not entered into any such transactions.
ILLIQUID SECURITIES
Each Fund is permitted to invest up to 15% of its net assets in illiquid
securities except the Money Market Fund which may invest up to 10% of its net
assets in such securities. "Illiquid Securities" are securities that may not be
sold or disposed of in the ordinary course of business within seven days at
approximately the price used to determine a Fund's net asset value. Each Fund
may purchase certain restricted securities commonly known as Rule 144A
securities that can be resold to institutions and which may be determined to be
liquid pursuant to policies and guidelines of the Board of Directors.
Under current interpretations of the SEC Staff, the following securities may
be considered illiquid: (1) repurchase agreements maturing in more than seven
days; (2) certain restricted securities (securities whose public resale is
subject to legal or contractual restrictions); (3) options, with respect to
specific securities, not traded on a national securities exchange that are not
readily marketable; and (4) any other securities in which a Fund may invest that
are not readily marketable.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
Each 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 Funds generally
purchase securities on a when-issued basis with the intention of acquiring the
securities, the Funds may sell the securities before the settlement date if
HIMCO or Wellington Management deems it advisable. At the time a Fund makes the
commitment to purchase securities on a when-issued basis, the Fund will record
the transaction and thereafter reflect the value, each day, of such security in
determining net asset value. At the time of delivery of the securities, the
value may be more or less than the purchase price.
OTHER INVESTMENT COMPANIES
Each Fund is permitted to invest in other investment companies. Securities
in certain countries are currently accessible to the Funds only through such
investments. The investment in other investment companies is limited in amount
by the 1940 Act, and will involve the indirect payment of a portion of the
expenses, including advisory fees, of such other investment companies. A Fund
will not purchase a security if, as a result, (1) more than 10% of the Fund's
assets would be invested in securities of other investment companies, (2) such
purchase would result in more than 3% of the total outstanding voting securities
of any one such investment company being held by the Fund or (3) more than 5% of
the Fund's assets would be invested in any one such investment company.
PORTFOLIO SECURITIES LENDING
Each Fund may lend its portfolio securities to broker/ dealers and other
institutions as a means of earning interest income. Delays or losses could
result if a borrower of portfolio securities becomes bankrupt or defaults on its
obligation to return the loaned securities. A Fund may lend securities only if:
(1) the loan is fully secured by appropriate collateral at all times as
determined by HIMCO; and (2) the value of all loaned securities of the Fund is
not more than 33 1/3% of the Fund's total assets.
OTHER RISK FACTORS
As mutual funds that primarily invest in equity and/or debt securities, each
Fund is subject to market risk, i.e., the possibility that equity and/or debt
prices in general will decline over short or even extended periods of time. The
financial markets tend to be cyclical, with periods when security prices
generally rise and periods when security prices generally decline. The value of
the debt securities in which the Funds invest will tend to increase when
interest rates are falling and to decrease when interest rates are rising.
No Fund should be considered to be a complete investment program in and of
itself. Each prospective purchaser should take into account his or her own
investment objectives as well as his or her other investments when considering
the purchase of shares of any Fund.
There can be no assurance that the investment objectives of the Funds will
be met. In addition, the risk inherent in investing in the Funds is common to
any security -- the net asset value will fluctuate in response to changes in
economic conditions, interest rates and the market's perception of the
underlying portfolio securities held by each Fund.
In pursuit of a Fund's investment objective, HIMCO and Wellington Management
attempt to select appropriate individual securities for inclusion in a Fund's
portfolio. In addition, HIMCO and Wellington Management attempt to successfully
forecast market trends and increase investments in the types of securities best
suited to take advantage of such trends. Thus, the investor is dependent on
HIMCO or Wellington Management's success not only in selecting individual
securities, but also in identifying the appropriate mix of securities consistent
with a Fund's investment objective.
<PAGE>
HARTFORD MUTUAL FUNDS 13
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PERFORMANCE OF THE FUNDS
Because the Funds are being offered to the public for the first time, as of
the date of this Prospectus they do not have any prior operating history or
performance. However, the Capital Appreciation Fund, International Opportunities
Fund, Stock Fund, Dividend and Growth Fund, Advisers Fund and Money Market Fund
are modeled after existing funds (the "Insurance Funds") that are managed by
HIMCO or Wellington Management and have investment objectives and policies
substantially similar to the corresponding Funds. The Insurance Funds are used
as investment vehicles for the assets of variable annuity and variable life
insurance contracts issued by ITT Hartford affiliates.
Below you will find information about the performance of the Insurance
Funds. Although the six comparable Funds discussed above have substantially
similar investment objectives and policies, the same investment adviser and sub-
adviser and the same portfolio managers as the Insurance Funds, you should not
assume that the Funds offered by this Prospectus will have the same future
performance as the Insurance Funds. For example, any Fund's future performance
may be greater or less than the performance of the corresponding Insurance Fund
due to, among other things, differences in expenses and cash flows between a
Fund and the corresponding Insurance Fund.
The investment characteristics of each Fund listed below will closely
resemble the investment characteristics of the corresponding Insurance Fund.
Depending on the Fund involved, similarity of investment characteristics may
involve factors such as industry diversification, country diversification,
portfolio beta, portfolio quality, average maturity of fixed-income assets,
equity/non-equity mixes, and individual holdings.
Certain Funds do have differences from their corresponding Insurance Fund
none of which HIMCO or Wellington Management believe would cause a significant
change in investment results. Investors may note the following differences:
1. The Capital Appreciation Fund, Stock Fund and
Advisers Fund may each invest up to 15% of their assets in illiquid
securities. The corresponding Insurance Fund may invest only 10% of its
assets in illiquid securities.
2. The Dividend and Growth Fund, the Stock Fund and
the Advisers Fund may invest 5% of their assets in debt securities that are
rated below investment grade by Moody's or S&P (or are of comparable quality
as determined by Wellington Management). Their corresponding Insurance Funds
may not invest any of their assets in debt securities rated below investment
grade.
3. The International Opportunities Fund may invest 5%
of its assets in debt securities rated below investment grade by Moody's or
S&P, or of comparable quality as determined by Wellington Management, and
must invest in a minimum of three countries (not including the United
States). The corresponding Insurance Fund may invest 15% of its assets in
debt securities rated below investment grade and must invest in a minimum of
five countries (including the United States.)
4. Each Fund may borrow money in amounts not to
exceed 33 1/3% of the value of its total assets. The Insurance Funds'
International Opportunities Fund, Dividend and Growth Fund and each other
corresponding fund borrow up to 20%, 15% and 5% of their respective assets.
The table below sets forth each Fund, and its corresponding Insurance Fund,
its inception date and asset size as of December 31, 1995:
<TABLE>
<CAPTION>
CORRESPONDING INSURANCE FUND
FUND (INCEPTION DATE AND ASSET SIZE)
----------------------------------------------------------------------------
<S> <C>
Capital Appreciation........... Hartford Capital Appreciation Fund, Inc.
(April 2, 1984) $2,204,105,364
International Opportunities.... Hartford International Opportunities Fund,
Inc. (July 2, 1990) $688,685,636
Stock.......................... Hartford Stock Fund, Inc. (August 31, 1977)
$1,881,501,503
Dividend and Growth............ Hartford Dividend and Growth Fund, Inc.
(March 8, 1994) $276,245,852
Advisers....................... Hartford Advisers Fund, Inc. (March 31, 1983)
$4,275,088,899
Money Market................... HVA Money Market Fund, Inc. (June 30, 1980)
$364,013,082
</TABLE>
The following four tables show the average annualized total returns for the
Insurance Funds for the one, three, five and ten year (or life of the Insurance
Fund, if shorter) periods ended December 31, 1995. These figures are based on
the actual gross investment performance of the Insurance Funds. From the gross
investment performance figures, the maximum Total Fund Operating Expenses
reflected in the fee table on page are deducted to arrive at the net return.
The first table for each Class shown
<PAGE>
14 Hartford Mutual Funds
- --------------------------------------------------------------------------------
reflects a deduction for the maximum applicable sales charge, while the second
table for each Class shown reflects no deduction for sales charges. Performance
figures will be lower when sales charges are taken into effect.
ASSUMING CLASS A SHARE TOTAL FUND OPERATING EXPENSES AND THE MAXIMUM INITIAL
SALES LOAD APPLICABLE TO CLASS A SHARES.
<TABLE>
<CAPTION>
10 YEARS
INSURANCE FUND OR SINCE
(INCEPTION DATE) 1 YEAR 3 YEARS 5 YEARS INCEPTION
------- ------- ------- ---------
<S> <C> <C> <C> <C>
Hartford Capital Appreciation Fund, Inc..................... 22.06% 14.20% 21.58% 14.23%
(April 2, 1984)
Hartford International Opportunities Fund, Inc.............. 6.8% 11.36% 8.13% 4.89%
(July 2, 1990)
Hartford Stock Fund, Inc.................................... 25.45% 11.37% 13.24% 11.82%
(August 31, 1977)
Hartford Dividend and Growth Fund, Inc...................... 27.91% N/A N/A 15.44%
(March 8, 1994)
Hartford Advisers Fund, Inc................................. 20.25% 8.93% 10.71% 10.53%
(March 31, 1983)
HVA Money Market Fund, Inc.................................. 5.15% 3.69% 3.94% 5.52%
(June 30, 1980)
</TABLE>
ASSUMING CLASS A SHARE TOTAL FUND OPERATING EXPENSES WITH NO INITIAL SALES LOAD
<TABLE>
<CAPTION>
10 YEARS
INSURANCE FUND OR SINCE
(INCEPTION DATE) 1 YEAR 3 YEARS 5 YEARS INCEPTION
------- ------- ------- ---------
<S> <C> <C> <C> <C>
Hartford Capital Appreciation Fund, Inc..................... 29.17% 16.38% 22.97% 14.88%
(April 2, 1984)
Hartford International Opportunities Fund, Inc.............. 13.05% 13.48% 9.36% 5.97%
(July 2, 1990)
Hartford Stock Fund, Inc.................................... 32.75% 13.49% 14.53% 12.45%
(August 31, 1977)
Hartford Dividend and Growth Fund, Inc...................... 35.36% N/A N/A 19.10%
(March 8, 1994)
Hartford Advisers Fund, Inc................................. 27.25% 11.00% 11.97% 11.16%
(March 31, 1983)
HVA Money Market Fund, Inc.................................. 5.15% 3.69% 3.84% 5.52%
(June 30, 1980)
</TABLE>
ASSUMING CLASS B SHARE TOTAL FUND OPERATING EXPENSES AND REDEMPTION AT THE END
OF THE APPLICABLE TIME PERIOD.
<TABLE>
<CAPTION>
10 YEARS
INSURANCE FUND OR SINCE
(INCEPTION DATE) 1 YEAR 3 YEARS 5 YEARS INCEPTION
------- ------- ------- ---------
<S> <C> <C> <C> <C>
Hartford Capital Appreciation Fund, Inc..................... 23.28% 14.82% 21.94% 14.09%
(April 2, 1984)
Hartford International Opportunities Fund, Inc.............. 7.27% 11.90% 8.31% 5.09%
(July 2, 1990)
Hartford Stock Fund, Inc.................................... 26.85% 11.91% 13.50% 11.67%
(August 31, 1977)
Hartford Dividend and Growth Fund, Inc...................... 29.44% N/A N/A 16.33%
(March 8, 1994)
Hartford Advisers Fund, Inc................................. 21.38% 9.40% 10.93% 10.39%
(March 31, 1983)
HVA Money Market Fund, Inc.................................. N/A N/A N/A N/A
(June 30, 1980)
</TABLE>
ASSUMING CLASS B SHARE TOTAL FUND OPERATING EXPENSES AND NO REDEMPTION AT THE
END OF THE APPLICABLE TIME PERIOD.
<TABLE>
<CAPTION>
10 YEARS
INSURANCE FUND OR SINCE
(INCEPTION DATE) 1 YEAR 3 YEARS 5 YEARS INCEPTION
------- ------- ------- ---------
<S> <C> <C> <C> <C>
Hartford Capital Appreciation Fund, Inc..................... 28.28% 15.57% 22.12% 14.09%
(April 2, 1984)
Hartford International Opportunities Fund, Inc.............. 12.27% 12.70% 8.60% 5.23%
(July 2, 1990)
Hartford Stock Fund, Inc.................................... 31.85% 12.70% 13.74% 11.67%
(August 31, 1977)
Hartford Dividend and Growth Fund, Inc...................... 34.44% N/A N/A 18.27%
(March 8, 1994)
Hartford Advisers Fund, Inc................................. 26.38% 10.23% 11.20% 10.39%
(March 31, 1983)
HVA Money Market Fund, Inc.................................. N/A N/A N/A N/A
(June 30, 1980)
</TABLE>
<PAGE>
HARTFORD MUTUAL FUNDS 15
- --------------------------------------------------------------------------------
CERTAIN INFORMATION ABOUT PERFORMANCE
From time to time, a Fund's yield and total return may be included in
advertisements, sales literature, or shareholder reports. In addition, the
Company may advertise the effective yield of the Money Market Fund. All figures
are based upon historical earnings and are not intended to indicate future
performance.
The "yield" of a Fund refers to the annualized net income generated by an
investment in that Fund over a specified 30-day period (7-day period for the
Money Market Fund). The effective yield is calculated similarly, but, when
annualized, the income earned by an investment in that Fund is assumed to be
reinvested. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment.
The "total return" of a Fund refers to the average annual rate of return of
an investment in the Fund. This figure is computed by calculating the percentage
change in the value of an investment of $1,000, assuming reinvestment of all
income dividends and capital gain distributions, to the end of a specified
period. "Total return" quotations reflect the performance of the Fund and
include the effect of capital changes.
Further information about the performance of the Funds will be contained in
the Funds' annual reports to shareholders, which you may obtain without charge
by writing to the Funds' address or calling the telephone number set forth on
the cover page of this Prospectus.
ABOUT YOUR ACCOUNT
HOW TO BUY SHARES
You may purchase shares from any broker-dealer that has a selling agreement
with Hartford Securities Distribution Company, Inc. (the "Distributor"). In
addition, an account may be opened for the purchase of shares of a Fund by
mailing to the ITT Hartford Mutual Funds, Inc., P.O. Box 8416, Boston, MA
02266-8416, a completed account application and a check, payable to the
appropriate Fund. Or you may telephone 1-888-ITT-FUND (1-888-488-3863) to obtain
the number of an account to which you can wire or electronically transfer funds
and then send in a completed application.
Purchase orders for all Funds are accepted only on a regular business day as
defined below. Orders for shares received by Boston Financial Data Services,
Inc., (the "Transfer Agent") on any business day prior to the close of trading
on the New York Stock Exchange ("NYSE") (normally 4:00 p.m. Eastern Time) will
receive that day's offering price. Orders received by the Transfer Agent after
such time but prior to the close of business on the next business day will
receive the next business day's offering price which is net asset value plus any
applicable sales charge. If you purchase shares through a broker-dealer, your
broker is responsible for forwarding payment promptly to the Transfer Agent.
With respect to shares of the Money Market Fund, orders shall not be deemed
received until the Transfer Agent receives Federal funds. A "business day" is
any day on which the NYSE is open for business. It is anticipated that the NYSE
will be closed Saturdays and Sundays and on days on which the NYSE observes New
Year's Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
Each Fund and the Distributor or Transfer Agent reserves the right to reject
any order for the purchase of a Fund's shares. The Company reserves the right to
cancel any purchase order for which payment has not been received by the fifth
business day following the placement of the order.
If the Transfer Agent deems it appropriate, additional documentation or
verification of authority may be required and an order will not be deemed
received unless and until such additional documentation of verification is
received by the Transfer Agent.
Your initial purchase amount for each Fund must be at least $1,000, except
for purchases made by employees of ITT Hartford, Wellington Management and
broker-dealer wholesalers and their affiliates and investors using periodic
investment plans, for which the minimum may be waived, and except for
participants in tax qualified retirement plans for which the minimum is $50.
There is a $100 minimum amount for subsequent purchases except as referenced
above.
For an initial purchase of shares by wire, you must first telephone the
Transfer Agent at 1-888-ITT-FUND (1-888-488-3863) between the hours of 8:00 A.M.
and 4:00 P.M. (Eastern Time) on a regular business day as defined above to
receive an account number. The following information will be requested: your
name, address, tax identification number, dividend distribution election, amount
being wired and the wiring bank. Instructions should then be given by you to
your bank to transfer funds by wire to: ABA #011000028, State Street Bank &
Trust Company, Boston, MA, Account #: 9905-205-2, FBO: ITT Hartford Funds, Fund
Name and Class, Shareholder Account Number, Shareholder Name. If you arrange for
receipt by the Transfer Agent of federal funds prior to the close of trading
(currently 4:00 P.M., Eastern Time) of the NYSE on a regular business day as
defined above, you will receive that day's offering price. Your bank may charge
for these services. Presently there is no fee for receipt by the Transfer Agent
of Federal funds wired, but the right to charge for this service is reserved.
<PAGE>
16 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
Each Fund except the Money Market Fund offers investors three different
classes of shares -- Class A, Class B and Class Y. The Money Market Fund offers
Class A and Class Y shares only. Class A and Class B shares are offered by this
prospectus. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will likely
have different share prices. All share purchase orders that fail to specify a
class will be invested in Class A shares.
PURCHASES OF CLASS A SHARES.
Class A shares are sold subject to an initial sales load the amount of which
decreases as the amount of funds invested increases. In addition, the initial
sales load is waived entirely for investments in excess of $1 million and for
certain categories of investors (as described below). Any portion of any
applicable sales charge may be retained by the Distributor or allocated to your
broker-dealer as commission. There is no initial sales charge for shares of the
Money Market Fund. The current sales charge rates and commissions paid to
dealers and brokers are as follows:
SMALL COMPANY FUND, CAPITAL APPRECIATION FUND, INTERNATIONAL OPPORTUNITIES FUND,
STOCK FUND, DIVIDEND AND GROWTH FUND,
AND ADVISERS FUND
<TABLE>
<CAPTION>
FRONT-END FRONT-END
SALES CHARGE SALES CHARGE
AS A AS A COMMISSION AS
PERCENTAGE PERCENTAGE PERCENTAGE OF
OF OFFERING OF AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
- -------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
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................................ 0% 0% 0%
</TABLE>
THE BOND INCOME STRATEGY FUND
<TABLE>
<CAPTION>
FRONT-END FRONT-END
SALES CHARGE SALES CHARGE
AS A AS A COMMISSION AS
PERCENTAGE PERCENTAGE PERCENTAGE OF
OF OFFERING OF AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
- -------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
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................................ 0% 0% 0%
</TABLE>
The Distributor reserves the right to remit the entire amount of the sales
commission to broker-dealers. The Distributor may pay dealers of record
commissions on purchases over $1 million an amount equal to the sum of 1.0% of
the first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of share
purchases over $5 million.
The Distributor may provide promotional incentives including cash
compensation in excess of the applicable sales charge to certain broker-dealers
whose representatives have sold or are expected to sell significant amounts of
shares of one or more of the Funds. Other programs may provide, subject to
certain conditions, additional compensation to broker-dealers based on a
combination of aggregate shares sold and increases of assets under management.
All of the above payments will be made by the Distributor or its affiliates out
of their own assets. These programs will not change the price an investor will
pay for shares or the amount that a Fund will receive from such sale.
CLASS A CONTINGENT DEFERRED SALES CHARGE.
There is no initial sales charge on purchases of Class A shares of any one
or more of the Funds aggregating $1 million, on Class A shares purchased through
certain employer-sponsored tax qualified retirement plans and in certain
instances as described below. However, if you redeem such Class A shares within
18 months of purchase, a contingent deferred sales charge (called the "Class A
contingent deferred sales charge") will be deducted from the redemption
proceeds. That sales charge will be equal to 1.0% of the aggregate net asset
value of the lesser of (1) the redeemed shares at the time of redemption (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the redeemed shares.
In determining whether a contingent deferred sales charge is payable, the
Fund will first redeem shares that are not subject to the sales charge,
including shares purchased by reinvestment of dividends and capital gains, and
then will
<PAGE>
HARTFORD MUTUAL FUNDS 17
- --------------------------------------------------------------------------------
redeem other shares in the order that you purchased them. The Class A contingent
deferred sales charge is waived in certain cases described in "Waivers of Class
A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges of such
shares under the Fund's Exchange Privilege (described below). However, if the
Class A shares acquired by exchange are redeemed within 18 months of purchase of
the exchanged shares (i.e. the Class A shares purchased without an initial sales
charge), the Class A contingent deferred sales charge will apply.
REDUCED SALES CHARGES FOR CLASS A SHARE PURCHASES.
You may be eligible to buy Class A shares at reduced sales charge rates in
one or more of the following ways:
COMBINED PURCHASES.
You may aggregate purchases of shares of the Funds with the purchases of the
other persons listed below to achieve discounts in the applicable sales charges.
The sales charge applicable to a current purchase of Class A shares of each Fund
by a person listed below is determined by adding the value of Class A shares to
be purchased to the aggregate value (at current net asset value) of all shares
of any of the other Funds in the Company and shares of the Money Market Fund
previously purchased and then owned. In addition, if you own an ITT Hartford
Director variable annuity or variable life contract ("Qualified Contracts") the
current cash value of such contract will be aggregated with your shares to
determine your sales charge. The Transfer Agent must be notified by you or your
broker-dealer each time a qualifying purchase is made.
Qualifying investments include those by you, your spouse and your children
under the age of 21, if all parties are purchasing Class A shares for their own
account(s), which may include tax qualified plans, such as an IRA, or by a
company solely controlled by such individuals as defined in the 1940 Act.
Reduced sales charges also apply to purchases by a trustee or other fiduciary if
the investment is for a single trust, estate or single fiduciary account,
including pension, profit-sharing or other employee benefit trust created
pursuant to a plan qualified under the Code. Reduced sales charges apply to
combined purchases by qualified employee benefit plans of a single corporation,
or of corporations affiliated with each other in accordance with the 1940 Act.
Purchases made for nominee or street name accounts (securities held in the name
of a broker or another nominee such as a bank trust department instead of the
customer) may not be aggregated with those made for other accounts and may not
be aggregated with other nominee or street name accounts unless otherwise
qualified as described above.
RIGHTS OF ACCUMULATION.
The sales charge for new purchases of Class A shares of a Fund will be
determined by aggregating the net asset value of all the Funds and current value
of Qualified Contracts owned by the shareholder at the time of the new purchase.
The rules listed under Combined Purchases may apply. You must identify on the
account application all accounts to be linked for Rights of Accumulation.
LETTER OF INTENT.
You may reduce your sales charge on all investments by meeting the terms of
a letter of intent, a non-binding commitment to invest a certain amount within a
13-month period. Your existing holdings in the Company may also be combined with
the investment commitment set forth in the letter of intent to further reduce
your sales charge. Up to 5% of the letter amount will be held in escrow to cover
additional sales charges which may be due if your total investments over the
letter period are not sufficient to qualify for a sales charge reduction. See
SAI and the account application for further details.
WAIVERS OF CLASS A INITIAL SALES CHARGES.
No sales charge is imposed on sales of Class A shares to certain investors.
However, in order for the following sales charge waivers to be effective, the
Transfer Agent must be notified of the waiver when the purchase order is placed.
The Transfer Agent may require evidence of your qualification for the waiver. No
sales charge is imposed on the following investors: (1) any purchase of $1
million or more in the Funds, (2) present or former officers, directors and
employees (and their parents, spouses and dependent children) of the Company,
ITT Corporation, ITT Industries, HIMCO, Wellington Management, Transfer Agent
and their affiliates, and retirement plans established by them for their
employees if purchased directly through the Transfer Agent, (3) any participant
in a tax qualified retirement plan provided that the total initial amount
invested by the plan totals $500,000 or more, the plan has 50 or more employees
eligible to participate at the time of purchase, or the plan certifies that it
will have projected annual contributions of $200,000 or more; (4) dealers,
brokers and wholesalers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for their
employees; (5) employees and registered representatives (and their parents,
spouses and dependent children) of dealers, brokers and wholesalers described
above or financial institutions that have entered into sales arrangements with
such dealers or brokers (and are identified to the Distributor) or with the
Distributor; the purchaser must certify to the Distributor at the time of
purchase that the purchase is for the purchaser's own account (or for the
benefit of such employee's parents, spouse or minor children); (6) one or more
members of a group of at least 100 persons (and persons who are retirees from
such group) engaged in a common business, profession, civic or charitable
endeavor or other activity, and the spouses and minor dependent children of such
persons pursuant to a marketing program between the Distributor and such group;
or (7) dealers, brokers, registered investment advisers or third party
administrators or consultants that
<PAGE>
18 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
have entered into an agreement with the Distributor providing specifically for
the use of shares of the Fund in particular investment products made available
to their clients. The Class A Contingent Deferred Sales Charge may apply to
categories 1, 3, 6 and 7 above.
Additionally, no sales charge is imposed on shares that are (a) issued in
plans of reorganization, such as mergers, asset acquisitions and exchange
offers, to which the Fund is a party, (b) purchased by the reinvestment of loan
repayments by a participant in retirement plans, (c) purchased by the
reinvestment of dividends or other distributions reinvested from a Fund, or (d)
purchased and paid for with the proceeds of shares redeemed in the prior 60 days
from a mutual fund on which an initial sales charge or contingent deferred sales
charge was paid (other than a fund managed by HIMCO or any of its affiliates).
WAIVER OF CLASS A CONTINGENT DEFERRED SALES CHARGE.
The Class A contingent deferred sales charge is also waived if shares are
redeemed, and the Transfer Agent is notified, in the following cases: (1) for
retirement distributions or loans to participants or beneficiaries from
qualified retirement plans, deferred compensation plans or other employee
benefit plans, (2) to return excess contributions made to employer sponsored tax
qualified retirement plans, (3) to make Systematic Withdrawal Plan payments that
are limited to no more than 10% of the original account value annually, (4)
involuntary redemptions of shares by operation of law or under the procedures
set forth in the Company's Articles of Incorporation or adopted by the Board of
Directors, (5) in connection with retirement plans: (i) following the death or
disability (as defined in the Code) of the participant or beneficiary (the death
or disability must have occurred after the account was established); (ii)
hardship withdrawals; (iii) distributions pursuant to a Qualified Domestic
Relations Order, as defined in the Code; (iv) minimum distributions as required
by section 401(a)(9) of the Code; (v) substantially equal periodic payments as
described in Section 72(t) of the Code, and (vi) separation from service, or (6)
for investors described under items 2, 4 and 5 above under "Waiver of Class A
Contingent Deferred Sales Charge."
DISTRIBUTION AND SERVICE PLAN FOR CLASS A SHARES.
The Fund has adopted a Distribution and Service Plan for Class A shares to
compensate the Distributor for the distribution of Class A shares and servicing
the accounts of Class A shareholders. The Plan provides for periodic payments to
brokers who provide services to accounts that hold Class A shares and for
promotional and other sales related costs. The Distributor is compensated at an
annual rate that may not exceed 0.35% of the average daily net asset value of
Class A shares of the Fund some or all of which may be remitted to brokers. Up
to .25% of the fee may be used for shareholder servicing expenses with the
remainder used for distribution expenses. The Rule 12b-1 fee for each Fund has
been voluntarily capped at .30% through July 1, 1997. The cap may be removed at
any time after such date.
PURCHASES OF CLASS B SHARES.
Class B shares are sold at net asset value per share without an initial
sales charge. However, if Class B shares are redeemed within 6 years of their
purchase, a contingent deferred sales charge will be deducted from the
redemption proceeds. That sales charge will not apply to shares purchased by the
reinvestment of dividends or capital gains distributions and may be waived under
certain circumstances. The charge will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original purchase
price. The contingent deferred sales charge is not imposed on the amount of your
account value represented by the increase in net asset value over the initial
purchase price (including increases due to the reinvestment of dividends and
capital gains distributions). The Class B contingent deferred sales charge is
paid to the Distributor to reimburse expenses incurred in providing
distribution-related services to the Fund in connection with the sale of Class B
shares and some or all of the charge may be remitted to brokers. Because in most
cases it is more advantageous for an investor to purchase Class A shares for
amounts in excess of $500,000, orders for amounts of $500,000 or greater will be
considered purchases of Class A shares or declined.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 6 years, and (3) shares held the longest during the 6-year period.
The amount of the contingent deferred sales charge will depend on the number
of years since you invested and the dollar amount being redeemed, according to
the following schedule:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A %
REDEMPTION DURING: OF NET ASSET VALUE
- ---------------------------------------------- -----------------------
<S> <C>
1st year after purchase....................... 5.0%
2nd year after purchase....................... 4.0%
3rd year after purchase....................... 3.0%
4th year after purchase....................... 3.0%
5th year after purchase....................... 2.0%
6th year after purchase....................... 1.0%
7th year after purchase....................... None
</TABLE>
In the table, a "year" is a 12-month period. All purchases are considered to
have been made on the first regular business day of the month in which the
purchase was made.
WAIVERS OF CLASS B SALES CHARGE.
The Class B contingent deferred sales charge will be waived if the
shareholder requests it for any of the following
<PAGE>
HARTFORD MUTUAL FUNDS 19
- --------------------------------------------------------------------------------
redemptions: (1) to make distributions under a Systematic Withdrawal Plan for no
more than 10% of the account value annually (measured from the date the Transfer
Agent receives the request), (2) redemptions from accounts following the death
or disability of the shareholder (the disability must have occurred after the
account was established and you must provide evidence of a determination of
disability by the Social Security Administration), (3) redemptions made to
effect distributions from an Individual Retirement Account either before or
after age 59 1/2, as long as the distributions are based on your life expectancy
or the joint-and-last survivor life expectancy of you and your beneficiary and
such distributions are free from penalty under the Code, (4) redemptions made to
effect mandatory distributions under the Code after age 70 1/2 from a tax-
deferred retirement plan, (5) redemptions made to effect distributions to
participants or beneficiaries from certain employer-sponsored retirement plans,
including those qualified under Section 401(a) of the Code, custodial accounts
under Section 403(b)(7) of the Code and deferred compensation plans under
Section 457 of the Code. The waiver also applies to certain returns of excess
contributions made to these plans. In all cases, the distributions must be free
from penalty under the Code. The contingent deferred sales charge is also waived
on Class B shares in the following cases: (i) shares issued in plans of
reorganization to which the Fund is a party; or (ii) shares redeemed in
involuntary redemptions as described below.
AUTOMATIC CONVERSION OF CLASS B SHARES.
96 months after you purchase Class B shares, those shares will automatically
convert to Class A shares. This conversion feature relieves Class B shareholders
of the higher asset-based sales charge that otherwise applies to Class B shares
under the Class B Distribution and Service Plan, described below. The conversion
is based on the relative net asset value of the two classes, and no sales load
or other charge is imposed. When Class B shares convert, any other Class B
shares that were acquired by the reinvestment of dividends and distributions on
the converted shares will also convert to Class A shares. Under Section 1036 of
the Code, the automatic conversion of Class B shares will not result in a gain
or loss to the Fund or to affected shareholders. For purposes of this conversion
feature, any time during which an investor holds shares of the Money Market Fund
which were acquired by exchanging Class B shares, will not be counted towards
the 96 month holding period.
DISTRIBUTION AND SERVICE PLAN FOR CLASS B SHARES.
The Fund has adopted a Distribution and Service Plan for Class B shares to
compensate the Distributor for the distribution of Class B shares and servicing
accounts of Class B shareholders. Some or all of this fee may be reallowed to
broker-dealers for distribution and or shareholder account services. Under the
Plan, the Fund pays the Distributor 1.00% of the average daily net assets of
Class B shares that are outstanding for 8 years or less, 0.25% of which is
intended as a fee for services provided to existing shareholders with the
remainder used for distribution expenses.
SPECIAL INVESTMENT PROGRAMS AND PRIVILEGES
One easy way to pursue your financial goals is to invest money regularly.
The Company offers convenient services that let you transfer money into your
account, or between accounts, automatically. While regular investment plans do
not guarantee a profit and will not protect you against loss in a declining
market, they can be an excellent way to invest for retirement, a home,
educational expenses and other long-term financial goals. Certain restrictions
apply. These privileges may be selected at the time of your initial investment
or at a later date. Please call 1-888-ITT-FUND (1-888-488-3863) for more
information and application forms for any of the privileges described below.
ELECTRONIC TRANSFERS THROUGH AUTOMATED CLEARING HOUSE ("ACH") allow you to
initiate a purchase or redemption for as little as $100 or as much as $50,000
between your bank account and fund account using the ACH network. Sales charges
and initial purchase minimums apply.
AUTOMATIC INVESTMENT PLANS let you make regular monthly or quarterly
investments through an automatic withdrawal from your bank account ($50 minimum
per Fund) and you can enroll when you establish your account. Sales charges will
apply.
DOLLAR COST AVERAGING INVESTMENT PROGRAMS ("DCA") let you set up monthly or
quarterly exchanges in amounts of $100 or more from one Fund to the same class
of shares of any other Fund except for the Money Market Fund where investors may
dollar cost average into either Class A or Class B shares. Sales charges may
apply where a shareholder invests in the Money Market Fund and then seeks to
exchange into a Fund where sales charges are applicable. Use of DCA permits the
purchase of shares of a Fund on a scheduled basis which protects the investor
from the risk of making all or substantially all of an investment prior to a
significant market decline. All shareholder accounts involved in a DCA Program
must have identical registrations.
AUTOMATIC DIVIDEND DIVERSIFICATION ("ADD") lets you automatically reinvest
dividends and capital gain distributions paid by one Fund into shares of the
same class of another Fund. The number of shares purchased through ADD will be
determined by using the net asset value of the Fund in which dividends will be
reinvested next computed after the dividend payment is made. All shareholder
accounts involved in an ADD program must have identical registrations.
EXCHANGE PRIVILEGE. You may exchange your shares of a Fund for shares of
the same class of any other Fund or for shares of the Money Market. In the case
of exchanges from the Money Market Fund to Class A shares of another Fund,
<PAGE>
20 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
sales charges will apply unless you paid an initial sales charge earlier. You
should consider the differences in investment objectives and expenses of a Fund
as described in this prospectus before making an exchange. Shares are normally
redeemed from one Fund and purchased from the other Fund in the exchange
transaction on the same regular business day on which the Transfer Agent
receives an exchange request that is in proper form by the close of the NYSE
that day.
Exchanges are taxable transactions and may be subject to special tax rules
about which you should consult your own tax adviser. For complete policies and
restrictions governing exchanges, including fees and circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see "How to
Exchange Shares."
SYSTEMATIC WITHDRAWAL PLANS let you set up monthly, quarterly, semi-annual
or annual redemptions from any account with a value of $5,000 or more. You may
direct the Company to make regular payments in fixed dollar amounts of $50 or
more, or in an amount equal to the value of a fixed number of shares (5 shares
or more). Payments can be directed to the shareholder or to someone other than
the registered owners(s) of the account. If this privilege is requested when the
account is established, no signature guarantee is needed. If this privilege is
added to an existing account and payments are directed to someone other than the
registered owners(s) of the account, a signature guarantee is required on the
Systematic Withdrawal Plan application. The Company reserves the right to
institute a charge for this service. Systematic Withdrawal Plans for Class B
shares of a Fund and for Class A shares subject to a CDSC are permitted only for
payments that are no more than 10% of the account value annually (measured from
the date the Transfer Agent receives the request).
Maintaining a Systematic Withdrawal Plan at the same time regular additional
investments are being made into Class A shares of any Fund except the Money
Market Fund, is not recommended because a sales charge will be imposed on the
new shares at the same time shares are being redeemed to make the periodic
payments under the Systematic Withdrawal Plan.
REINVESTMENT PRIVILEGE. If you redeem some or all of your Fund shares, you
have up to 90 days to reinvest all or part of the redemption proceeds in Class A
shares of the Fund without paying a sales charge. This privilege applies only to
redemptions of Class A shares on which an initial or deferred sales charge was
paid or to redemptions of Class A and Class B shares of the Fund that you
purchased by reinvesting dividends or distributions. You must be sure to ask the
Transfer Agent for this privilege when you send your payment.
RETIREMENT PLANS. Fund shares are available as an investment for your
retirement plans. If you participate in a plan sponsored by your employer, the
plan trustee or administrator must make the purchase of shares for your
retirement plan account. A number of different retirement plans can be used by
individuals and employers including IRAs, 403(b) Custodial Plans, SEPs, SEPIRAs,
401(k) and 457 plans. Please call the Transfer Agent for the Company's plan
documents, which contain important information and applications.
HOW TO REDEEM SHARES
You can arrange to take money out of your account on any regular business
day by redeeming some or all of your shares. Your shares will be sold at the
next net asset value calculated after your order is received in good order and
accepted by the Transfer Agent. The Fund offers you a number of ways to sell
your shares: in writing, by using the Fund's Checkwriting privilege (for Money
Market Fund only), by telephone, by bank transfer (ACH) or by wire transfer. You
can also set up Systematic Withdrawal Plans to redeem shares on a regular basis,
as described above. IF YOU HAVE QUESTIONS ABOUT ANY OF THESE PROCEDURES, AND
ESPECIALLY IF YOU ARE REDEEMING SHARES IN A SPECIAL SITUATION, SUCH AS DUE TO
THE DEATH OF THE OWNER, OR FROM A RETIREMENT PLAN, PLEASE CALL THE TRANSFER
AGENT FIRST, AT 1-888-ITT-FUND (1-888-488-3863) FOR ASSISTANCE.
RETIREMENT ACCOUNTS.
If you hold Fund shares through a retirement account, call the Transfer
Agent in advance for additional information and any necessary forms. There are
special income tax withholding requirements for distributions from retirement
plans and you must submit a withholding form with your request to avoid delay.
If your retirement plan account is held for you by your employer, you must
arrange for the distribution request to be sent by the plan administrator or
trustee.
CERTAIN REQUESTS REQUIRE A SIGNATURE GUARANTEE.
To protect you and the Company from fraud, certain redemption requests must
be in writing and must include a signature guarantee in the following situations
(there may be other situations also requiring a signature guarantee in the
discretion of the Fund or Transfer Agent):
- You wish to redeem more than $50,000 worth of shares and receive a check
- A redemption check is not payable to all shareholders listed on the
account statement
- A redemption check is not sent to the address of record on your statement
- Shares are being transferred to a Fund account with a different owner or
name
- Shares are redeemed by someone other than the owners (such as an Executor)
<PAGE>
HARTFORD MUTUAL FUNDS 21
- --------------------------------------------------------------------------------
REDEEMING SHARES BY MAIL.
Write a "letter of instruction" that includes:
Your name
The Fund's name
Your Fund account number (from your account statement)
The dollar amount or number of shares to be redeemed
Any special payment instructions
The signatures of all registered owners exactly as the account is
registered, and
Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell
shares.
USE THE FOLLOWING ADDRESS FOR REQUESTS BY MAIL:
ITT Hartford Mutual Funds, Inc.
P.O. Box 8416
Boston, MA 02266-8416
SEND COURIER OR EXPRESS MAIL REQUESTS TO:
Boston Financial Data Services
Attn.: ITT Hartford Mutual Funds, Inc.
Two Heritage Drive
Quincy, MA 02171
REDEEMING SHARES BY TELEPHONE.
You may also redeem shares by telephone by calling 1-888-ITT-FUND
(1-888-488-3863). To receive the redemption price on a regular business day,
your call must be received by the Transfer Agent by the close of the NYSE that
day, which is normally 4:00 P.M., Eastern Time. Shares held in tax-qualified
retirement plans may not be redeemed by telephone. You may have a check sent to
the address on the account statement, or, if you have linked your Fund account
to your bank account, you may have the proceeds wired to that bank account.
TELEPHONE REDEMPTIONS PAID BY CHECK. Up to $50,000 may be redeemed by
telephone once in any 7-day period. The check must be payable to all owners of
record of the shares and must be sent to the address on the account. This
service is not available within 30 days of changing the address on an account.
TELEPHONE REDEMPTIONS THROUGH BANK-LINKED ACCOUNTS. If you have selected
the option on your account application, you may link your Fund account to your
bank account. There are no dollar limits on telephone redemption proceeds sent
to a bank-linked account. Normally the ACH wire to your bank is initiated on the
business day after the redemption.
CHECKWRITING. (MONEY MARKET FUND ONLY) To be able to write checks against
your Fund account, you may request that privilege on your account Application or
you can contact the Transfer Agent for signature cards. Signature cards must be
signed by all owners of the account and returned to the Transfer Agent.
Shareholders with joint accounts can elect in writing to have checks paid over
the signature of one owner. Checks must be written for at least $100. Checks
cannot be paid if they are written for more than your account value. You may not
write a check that would require the Fund to redeem shares that were purchased
by check or through the Automatic Investment Plan payments within the prior 15
days. Checks should not be used if you have changed your Fund account number.
You cannot close your account by writing a check.
REDEEMING SHARES THROUGH YOUR BROKER. The Distributor has made arrangements
to redeem Fund shares from brokers on behalf of their customers. Brokers may
charge for that service. The Distributor, acting as agent for the Fund, stands
ready to redeem each Fund's shares upon orders from brokers at the offering
price next determined after receipt of the order.
The Transfer Agent may delay forwarding a check or processing a payment via
bank linked account for recently purchased shares, but only until the purchase
payment has cleared. That delay may be as much as 15 days from the date the
shares were purchased.
You may be charged a fee of up to $8 for wire transfers of redemption
proceeds of less than $50,000, which will be deducted from such proceeds. There
is no fee for ACH transfers.
HOW TO EXCHANGE SHARES
In most cases, shares of a Fund may be exchanged for shares of the same
class of other Funds and for shares of the Money Market Fund at net asset value
per share at the time of exchange. However, a sales charge may apply to an
exchange from the Money Market Fund (see below). Exchanges of shares involve a
redemption of the shares of the Fund you own and a purchase of shares of the
other Fund. Exchanges may be requested in writing or by telephone.
For written exchange requests you should submit a ITT Hartford Mutual Funds
exchange request form, signed by all owners of the account. Send the form to the
Transfer Agent at the addresses listed in "How to Sell Shares."
For telephone exchange requests you should call 1-888-ITT-FUND
(1-888-488-3863). Telephone exchanges may be made only between accounts that are
registered with the same names and address.
All exchanges are subject to the following restrictions:
The Fund you are exchanging into must be registered for sale in your state.
<PAGE>
22 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
You may exchange only between Funds that are registered in the same name,
address and taxpayer identification number.
You may only exchange for shares of the same class of another Fund or for
shares of the Money Market Fund.
If you wish to make more than 12 exchanges in a 12-month period, an exchange
fee of $10 per exchange will be charged. Any exchange fees will be paid directly
to the Fund from which shares have been redeemed. Exchanges made pursuant to the
Dollar Cost Averaging Program are not subject to this fee or limitation. The
minimum amount you may exchange from one Fund into another is $500 or the entire
balance if less.
Exchanges of shares of the Money Market Fund for shares of any other Fund
which carry a front-end sales charge are subject to the sales charge applicable
to such other Fund. Shares of the Money Market Fund acquired by exchange of
shares of another Fund on which a front-end sales charge was previously paid or
which are subject to a CDSC are exchanged at net asset value. However, shares of
the Money Market Fund acquired through an exchange of shares which are subject
to a CDSC will continue to be subject to a CDSC upon redemption. The rate of
this charge will be the rate in effect for the original shares at the time of
exchange without counting the time such shares were held as Money Market Fund
shares. Investors who initially purchased Class A shares of the Bond Income
Strategy Fund, have held such shares for less than six months and exchange
shares of the Bond Income Strategy Fund for Class A shares of any other Fund
except the Money Market Fund, must pay the difference between the Bond Income
Strategy Fund sales charge and the sales charge of the Fund shares being
acquired.
In addition to exchanges into and out of the Money Market Fund, you may
exchange your shares of other Funds for shares of the same class of any other
Fund without the imposition of a sales charge. With respect to Class B shares,
if you exchange such shares for Class B shares of another Fund, the CDSC will be
calculated based on the date on which you acquired the original Class B shares.
Each Fund reserves the right to refuse or delay exchanges by any person or
group if, in HIMCO's or Wellington Management's judgment, a Fund would be unable
to invest the money effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
Your exchanges may be restricted or refused if a Fund receives or
anticipates simultaneous orders affecting significant portions of the Fund's
assets. In particular, a pattern of exchanges that coincides with a "market
timing" strategy may be disruptive to the Fund.
Although a Fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. Each
Fund reserves the right to terminate or modify the exchange privilege in the
future.
Shares are normally redeemed from one Fund and purchased from the other fund
in the exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request that is in proper form by the close
of the NYSE that day.
DETERMINATION OF NET ASSET VALUE
THE NET ASSET VALUE PER SHARE is determined for each class of shares for
each Fund as of the close of the NYSE (normally 4:00 p.m. Eastern Time) on each
regular business day (as previously defined) by dividing the value of the Fund's
net assets attributable to a class by the number of shares of that class
outstanding. The assets of each Fund (except the Money Market Fund) are valued
primarily on the basis of market quotations. If quotations are not readily
available, assets are valued by a method that the Board of Directors believes
accurately reflects fair value. The assets of the Money Market Fund are valued
at their amortized cost pursuant to procedures established by the Board of
Directors. Foreign 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 current exchange rates. With respect to all
Funds, short-term investments that will mature in 60 days or less are also
valued at amortized cost, which approximates market value.
SHAREHOLDER ACCOUNT RULES AND POLICIES
THE OFFERING OF SHARES may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be suspended
by the Board of Directors or HIMCO at any time the Board or HIMCO believes it is
in the Fund's best interest to do so.
TELEPHONE TRANSACTION PRIVILEGES for purchases, redemptions or exchanges may
be modified, suspended or terminated by a Fund at any time. If an account has
more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges apply to each owner of the
account and the dealer representative of record for the account unless and until
the Transfer Agent receives cancellation instructions from an owner of the
account.
THE TRANSFER AGENT WILL RECORD ANY TELEPHONE CALLS to verify data concerning
transactions and has adopted other procedures to confirm that telephone
instructions are genuine. If the Company does not use reasonable procedures the
Company may be liable for losses due to unauthorized transactions, but otherwise
the Company will not be liable for losses or expenses arising out of telephone
instructions
<PAGE>
Hartford Mutual Funds 23
- --------------------------------------------------------------------------------
reasonably believed to be genuine. If you are unable to reach the Transfer Agent
during periods of unusual market activity, you may not be able to complete a
telephone transaction and should consider placing your order by mail.
PURCHASE, REDEMPTION OR EXCHANGE REQUESTS will not be honored until the
Transfer Agent receives all required documents in proper form.
SHARE CERTIFICATES will not be issued for the Company's shares.
BROKERS THAT CAN PERFORM ACCOUNT TRANSACTIONS FOR THEIR CLIENTS through the
National Securities Clearing Corporation are responsible for obtaining their
clients' permission to perform those transactions and are responsible to their
clients who are shareholders of a Fund if the dealer performs any transaction
erroneously or improperly.
ALL OF YOUR PURCHASES MUST BE MADE IN U.S. DOLLARS and checks must be drawn
on U.S. banks and made payable to ITT Hartford Funds, or in the case of a
retirement account, to the custodian or trustee. You may not purchase shares
with a third party check.
PAYMENT FOR REDEEMED SHARES is forwarded ordinarily by check or through the
bank-linked service (as elected by the shareholder) within 7 calendar days after
the business day on which the Transfer Agent receives redemption instructions in
proper form. Payment will be forwarded within 3 business days for accounts
registered in the name of a broker-dealer. Redemptions may be suspended or
payment dates postponed when the NYSE is closed (other than weekends or
holidays), when trading is restricted or as permitted by the Securities and
Exchange Commission. THE TRANSFER AGENT MAY DELAY FORWARDING A CHECK OR
PROCESSING A PAYMENT VIA BANK LINKED ACCOUNT FOR RECENTLY PURCHASED SHARES, BUT
ONLY UNTIL THE PURCHASE PAYMENT HAS CLEARED. THAT DELAY MAY BE AS MUCH AS 15
CALENDAR DAYS FROM THE DATE THE SHARES WERE PURCHASED. THAT DELAY MAY BE AVOIDED
IF YOU PURCHASE SHARES BY CERTIFIED CHECK. IF THE PURCHASE PAYMENT DOES NOT
CLEAR, YOUR PURCHASE WILL BE CANCELED AND YOU COULD BE LIABLE FOR ANY LOSSES OR
FEES THE FUND OR ITS TRANSFER AGENT HAVE INCURRED.
INVOLUNTARY REDEMPTIONS OF SMALL ACCOUNTS may be made by the Fund if the
account value has fallen below $1,000 as a result of shareholder action such as
a redemption or transfer and at least 30 days notice has been given to the
shareholder.
UNDER UNUSUAL CIRCUMSTANCES shares of a Fund may be redeemed "in kind,"
which means that the redemption proceeds will be paid with securities from the
Fund's portfolio. Please refer to "Purchase and Redemption of Shares" in the
Statement of Additional Information for more details.
"BACKUP WITHHOLDING" of Federal income tax may be applied at the rate of 31%
from dividends, distributions and redemption proceeds (including exchanges) if
you fail to furnish the Fund a certified Social Security or Employer
Identification Number when you sign your application, or if you violate Internal
Revenue Service regulations on tax reporting of income.
THE COMPANY DOES NOT CHARGE A TRANSACTION FEE, but if your broker handles
your redemption, they may charge a fee. That fee can be avoided by redeeming
your Fund shares directly through the Transfer Agent. Under the circumstances
described in "How To Buy Shares," you may be subject to a contingent deferred
sales charge when redeeming certain Class A or Class B shares.
INVESTOR INFORMATION SERVICES
The Fund provides 24-hour information services via a toll-free number on
fund yields and prices, dividends, account balances, and your latest transaction
as well as the ability to request prospectuses, account and tax forms, duplicate
statements and checks.
In addition, telephone representatives are available during normal business
hours (8:00 A.M. to 6:00 P.M. Eastern Time) to provide the information and
services you need.
Confirmation statements will be generated after every transaction (except
reinvestments, automatic investments and automatic payroll investments) that
affect your account balance or your account registration. Quarterly consolidated
account statements will be sent for all accounts. It is the responsibility of
the shareholder to review the accuracy of transactions and to notify the
transfer agent of any errors within 15 days of the date of the confirmation.
Financial reports will be generated for the Fund every six months.
Call 1-888-ITT-FUND (1-888-488-3863) if you need additional copies of
financial reports or historical account information. There may be a small charge
for historical account information for prior years.
MANAGEMENT OF THE FUNDS
MANAGEMENT SERVICES
HIMCO serves as investment adviser to each Fund pursuant to an Investment
Advisory Agreement dated , 1996. HIMCO has overall investment
supervisory responsibility for each Fund and is responsible for the day to day
investment decisions with respect to the assets of the Bond Fund and the Money
Market Fund. In addition, HIMCO will provide administrative personnel, services,
<PAGE>
24 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
equipment and facilities and office space for proper operation of the Company.
HIMCO has contracted with Wellington Management for the provision of day to day
investment management services to the Small Company Fund, Capital Appreciation
Fund, International Opportunities Fund, Stock Fund, Dividend and Growth Fund and
Advisers Fund in accordance with each Fund's investment objective and policies.
Each Fund pays a fee to HIMCO, a portion of which may be used to compensate
Wellington Management.
MANAGEMENT FEES
MONEY MARKET FUND.
The Money Market Fund pays a monthly management fee to HIMCO which is based
on a stated percentage of the Fund's average daily net asset value as follows:
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------- -------------
<S> <C>
First $500,000,000................................ 0.50%
Next $500,000,000................................. 0.45%
Amount Over $1 Billion............................ 0.40%
</TABLE>
BOND INCOME STRATEGY FUND.
The Bond Income Strategy Fund pays a monthly management fee to HIMCO which
is based on a stated percentage of the Fund's average daily net asset value as
follows:
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------- -------------
<S> <C>
First $500,000,000................................ 0.65%
Next $500,000,000................................. 0.55%
Amount Over $1 Billion............................ 0.50%
</TABLE>
SMALL COMPANY FUND AND INTERNATIONAL OPPORTUNITIES FUND.
The Small Company Fund and International Opportunities Fund each pay a
monthly management fee to HIMCO which is based on a stated percentage of the
Fund's average daily net asset value as follows:
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------- -------------
<S> <C>
First $500,000,000................................ 0.85%
Next $500,000,000................................. 0.75%
Amount Over $1 Billion............................ 0.70%
</TABLE>
CAPITAL APPRECIATION FUND AND STOCK FUND.
The Capital Appreciation Fund and Stock Fund each pay a monthly management
fee to HIMCO which is based on a stated percentage of the Fund's average daily
net asset value as follows:
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------- -------------
<S> <C>
First $500,000,000................................ 0.80%
Next $500,000,000................................. 0.70%
Amount Over $1 Billion............................ 0.65%
</TABLE>
DIVIDEND AND GROWTH FUND AND ADVISERS FUND.
The Dividend and Growth Fund and Advisers Fund each pay a monthly management
fee to HIMCO which is based on a stated percentage of the Fund's average daily
net asset value as follows:
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------- -------------
<S> <C>
First $500,000,000................................ 0.75%
Next $500,000,000................................. 0.65%
Amount Over $1 Billion............................ 0.60%
</TABLE>
HIMCO, Hartford Plaza, Hartford, Connecticut 06115, is an indirect
wholly-owned subsidiary of ITT Hartford and was organized under the laws of
Connecticut in 1981. ITT Hartford is a holding company for various insurance
related subsidiaries including Hartford Fire Insurance Company, one of the
largest insurance carriers in the United States. HIMCO also serves as investment
adviser to several other SEC registered funds sponsored by ITT Hartford
affiliates and which are primarily available through the purchase of variable
annuity or variable life contracts.
Certain officers of the Funds are also officers and directors of HIMCO;
Joseph H. Gareau, President and a Director of the Company, is a Director and the
President of HIMCO; Andrew W. Kohnke, Vice President of the Company, is a
Managing Director and Director of HIMCO; J. Richard Garrett, Vice President and
Treasurer of the Company, is the Treasurer of HIMCO; and Charles M. O'Halloran,
Vice President, Secretary and General Counsel of the Company, is a Director,
Secretary and General Counsel of HIMCO.
INVESTMENT SUB-ADVISORY SERVICES
Wellington Management serves as sub-adviser to the Small Company Fund,
Capital Appreciation Fund, International Opportunities Fund, Stock Fund,
Dividend and Growth Fund, and Advisers Fund pursuant to a sub-advisory
agreement, dated as of [ ] 1996.
In connection with its service as sub-adviser to these Funds, Wellington
Management makes all determinations with respect to the purchase and sale of
portfolio securities (subject to the terms and conditions of the investment
objectives, policies and restrictions of these Funds and to the general
supervision of the Company's Board of Directors and HIMCO) and places, in the
name of the Funds, all orders for execution of these Funds' portfolio
transactions. In conjunction with such activities, Wellington Management
regularly furnishes reports to the Company's Board of Directors concerning
economic forecasts, investment strategy, portfolio activity and performance of
the Funds.
For services rendered to these Funds, Wellington Management charges a
quarterly fee to HIMCO. The Funds will not pay Wellington Management's fee nor
any part thereof, nor will the Funds have any obligation or responsibility to do
so. Wellington Management has agreed to waive a portion of its fees during the
start-up phase of the Funds as described in the SAI. Wellington Management's
quarterly fee is based upon the following annual rates as applied to
<PAGE>
HARTFORD MUTUAL FUNDS 25
- --------------------------------------------------------------------------------
the average of the calculated daily net asset value of each Fund that it
advises:
SMALL COMPANY FUND, CAPITAL APPRECIATION FUND AND INTERNATIONAL OPPORTUNITIES
FUND.
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------- -------------
<S> <C>
First $50,000,000................................. 0.40%
Next $100,000,000................................. 0.30%
Next $350,000,000................................. 0.25%
Next $500,000,000................................. 0.20%
Over $1 Billion................................... 0.175%
</TABLE>
DIVIDEND AND GROWTH FUND, STOCK FUND AND ADVISERS FUND.
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------- -------------
<S> <C>
First $50,000,000................................. 0.325%
Next $100,000,000................................. 0.25%
Next $350,000,000................................. 0.20%
Next $500,000,000................................. 0.15%
Over $1 Billion................................... 0.125%
</TABLE>
Wellington Management is a professional investment counseling firm which
provides investment 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 1933. As of June 30, 1996, Wellington Management held
discretionary management authority with respect to approximately $ billion of
client assets. Wellington Management, 75 State Street, Boston, MA 02109, is a
Massachusetts general partnership, of which the following persons are managing
partners: Robert W. Doran, Duncan M. McFarland, and John R. Ryan.
PORTFOLIO MANAGERS
Kenneth L. Abrams, Senior Vice President of Wellington Management, serves as
portfolio manager to the Small Company Fund. Mr. Abrams has been an emerging
company research analyst with Wellington Management since 1986 and, in addition,
has been a portfolio manager with Wellington Management since 1990.
Saul J. Pannell, Senior Vice President of Wellington Management, serves as
portfolio manager to the Capital Appreciation Fund. Mr. Pannell has been a
portfolio manager with Wellington Management since 1979.
The International Opportunities Fund is managed by Wellington Management's
Global Equity Strategy Group, headed by Trond Skramstad, Senior Vice President
of Wellington Management. The Global Equity Strategy Group is comprised of
global portfolio managers and senior investment professionals. No person or
persons is primarily responsible for making recommendations to or within the
Global Equity Strategy Group. Prior to joining Wellington Management in 1993,
Mr. Skramstad was a global equity portfolio manager at Scudder, Stevens & Clark
since 1990.
Rand L. Alexander, Senior Vice President of Wellington Management, serves as
portfolio manager to the Stock Fund. Mr. Alexander has been a portfolio manager
with Wellington Management since 1990.
Laurie A. Gabriel, CFA and Senior Vice President of Wellington Management,
serves as portfolio manager to the Dividend and Growth Fund. Ms. Gabriel joined
Wellington Management in 1976. She has been a quantitative research analyst with
Wellington Management since 1986, and took on portfolio management
responsibilities in 1987.
The Advisers Fund is managed by Paul D. Kaplan, Senior Vice President of
Wellington Management, and Rand L. Alexander. Mr. Kaplan has been a portfolio
manager with Wellington Management since 1982 and manages the fixed income
component of the Advisers Fund. Rand L. Alexander, who is portfolio manager to
the Stock Fund, manages the equity component of the Advisers Fund.
The Bond Income Strategy Fund is managed by Alison D. Granger. Ms. Granger,
a Senior Vice President of HIMCO and Assistant Vice President of Hartford Life
Insurance Company, joined ITT Hartford in 1993 as a senior corporate bond
trader. She became Director of Trading in 1994 and a portfolio manager in 1995.
Prior to joining ITT Hartford, Ms. Granger was a corporate bond portfolio
manager at The Home Insurance Company and Axe-Houghton Management. Ms. Granger
has over sixteen years of experience with fixed income investments.
PORTFOLIO TURNOVER
Each Fund may sell a portfolio investment soon after its acquisition if
HIMCO and/or Wellington Management believe that such a disposition is in the
Fund's best interest. A high rate of portfolio turnover involves correspondingly
greater brokerage commission expenses and other transaction costs, which must be
ultimately borne by a Fund's shareholders. High portfolio turnover may result in
the realization of substantial capital gains; distributions derived from such
gains may be treated as ordinary income for Federal income tax purposes.
Although it is not possible to predict future portfolio turnover rates
accurately, and such rates may vary from year to year, it is anticipated that
each Fund's portfolio turnover rate will not exceed 100% except the Bond Income
Strategy Fund which is estimated to be approximately 200%.
BROKERAGE COMMISSIONS
Although the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. prohibit its members from seeking orders for the
execution of investment
<PAGE>
26 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
company portfolio transactions on the basis of their sales of investment company
shares, under such Rules, sales of investment company shares may be considered
in selecting brokers to effect portfolio transactions. Accordingly, some
portfolio transactions are, subject to such Rules and to obtaining best prices
and executions, effected through dealers who sell shares of the Company. HIMCO
or Wellington Management may also select an affiliated broker-dealer to execute
transactions for the Company, provided that the commissions, fees or other
remuneration paid to such affiliated broker are reasonable and fair as compared
to that paid to non-affiliated brokers for comparable transactions.
DIVIDENDS, CAPITAL GAINS
AND TAXES
DIVIDENDS.
Each Fund intends to distribute substantially all of its net income and
capital gains to shareholders no less frequently than once a year. Normally,
dividends from net investment income of the Small Company Fund, Capital
Appreciation Fund, International Opportunities Fund, and Stock Fund will be
declared and paid annually; dividends from the net investment income of the
Dividend and Growth Fund and Advisers Fund will be declared and paid
semi-annually; dividends from the net investment income of the Bond Income
Strategy Fund will be declared and paid monthly and dividends from net
investment income of the Money Market Fund will be declared daily and paid
monthly. Dividends from the Money Market Fund are not paid on shares until the
day following the date on which the shares are issued. Unless shareholders
specify otherwise, all dividends and distributions will be automatically
reinvested in additional full or fractional shares of each Fund.
DISTRIBUTION OPTIONS.
When you open your account, specify on your application how you want to
receive your distributions. For ITT Hartford Mutual Funds retirement accounts,
all distributions are reinvested. For other accounts, you have five options:
REINVEST ALL DISTRIBUTIONS IN THE FUND. You can elect to reinvest all
dividends and long term capital gains distributions in additional shares of the
Fund.
REINVEST INCOME DIVIDENDS ONLY. You can elect to reinvest investment income
dividends in a Fund while receiving capital gains distributions by check or sent
to your bank account.
REINVEST CAPITAL GAINS ONLY. You can elect to reinvest capital gains in the
Fund while receiving dividends by check or sent to your bank account.
RECEIVE ALL DISTRIBUTIONS IN CASH. You can elect to receive a check for all
dividends and long-term capital gain distributions or have them sent to your
bank.
REINVEST YOUR DISTRIBUTIONS IN ANOTHER ITT HARTFORD MUTUAL FUNDS
ACCOUNT. You can reinvest all distributions in another ITT Hartford Mutual
Funds account you have established.
TAXES.
If your account is not a tax-deferred retirement account, you should be
aware of the following tax implications of investing in the Fund. Long term
capital gains are taxable as long term capital gains when distributed to
shareholders. It does not matter how long you hold your shares. Dividends paid
from short term capital gains and net investment income are taxable as ordinary
income. Distributions are subject to federal income tax and may be subject to
state or local taxes. Your distributions are taxable when paid, whether you
reinvest them in additional shares or take them in cash. Every year the Fund
will send you and the IRS a statement showing the amount of each taxable
distribution you received in the previous year.
"BUYING A DIVIDEND". When a fund goes ex-dividend, its share price is
reduced by the amount of the distribution. If you buy shares on or just before
the ex-dividend date, or just before the Fund declares a capital gains
distribution, you will pay the full price for the shares and then receive a
portion of the price back as a taxable dividend or capital gain.
TAXES ON TRANSACTIONS. Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. A capital gain or loss is the
difference between the price you paid for the shares and the price you received
when you sold them.
RETURNS OF CAPITAL. In certain cases distributions made by the Fund may be
considered a non-taxable return of capital to shareholders. If that occurs, it
will be identified in notices to shareholders. A non-taxable return of capital
may reduce your tax basis in your Fund shares.
This information is only a summary of certain federal tax information about
your investment. More information is contained in the SAI, and in addition you
should consult with your tax adviser about the effect of an investment in the
Fund on your particular tax situation.
OWNERSHIP AND CAPITALIZATION OF THE COMPANY
CAPITAL STOCK
As of the date of this Prospectus, the authorized capital stock of the
Company consisted of the following shares of a par value of $.001 per share:
Small Company Fund,
<PAGE>
HARTFORD MUTUAL FUNDS 27
- --------------------------------------------------------------------------------
300 million; Capital Appreciation Fund, 300 million; International Opportunities
Fund, 300 million; Stock Fund, 300 million; Dividend and Growth Fund, 300
million; Advisers Fund, 400 million; Bond Income Strategy Fund, 300 million; and
Money Market Fund, 800 million.
The Board of Directors is authorized, without further shareholder approval,
to authorize additional shares and to classify and reclassify the Funds into one
or more classes. Accordingly, the Directors have authorized the issuance of
three classes of shares of each of the Funds (except the Money Market Fund),
designated as Class A, Class B and Class Y shares. Class A and Class Y shares
have been authorized for the Money Market Fund. The shares of each class
represent an interest in the same portfolio of investments of the respective
Funds and have equal rights as to voting, redemption, dividends and liquidation.
However, each class bears different sales charges, distribution and transfer
agency fees and related expenses, different exchange privileges and each class
has exclusive voting rights with respect to its respective Rule 12b-1 plan.
VOTING
Each shareholder is entitled to one vote for each share of the Funds held
upon all matters submitted to the shareholders generally. Annual meetings of
shareholders will not be held except as required by the Investment Company Act
of 1940 and other applicable law.
GENERAL INFORMATION
REPORTS TO SHAREHOLDERS
The Funds will issue unaudited semiannual reports showing current
investments in each Fund and other information and annual financial statements
examined by independent auditors for the Funds.
DISTRIBUTOR
Hartford Securities Distribution Company, Inc., P.O. Box 2999, Hartford, CT
06104-2999 serves as distributor to the Company.
TRANSFER AGENT
Boston Financial Data Services, Inc., Two Heritage Drive, Quincy, MA. 02171
serves as transfer agent to the Company.
CUSTODIAN
State Street Bank and Trust Company serves as custodian of each Funds'
assets.
CLASS Y SHARES
The Company also offers Class Y Shares which are available only to the
following types of institutional investors: (i) Tax qualified retirement plans
which have (A) at least $10 million in plan assets, (B) 750 or more employees
eligible to participate at the time of purchase, or (C) which certify that they
will have projected annual contributions of $2.5 million or more, (ii) Banks and
insurance companies which are not affiliated with HIMCO purchasing shares for
their own account; (iii) investment companies not affiliated with HIMCO; (iv)
Tax-qualified retirement plans of HIMCO, Wellington Management or broker-dealer
wholesalers and their affiliates.
Class Y shares are available to eligible institutional investors at net
asset value without the imposition of an initial or deferred sales charge and
are not subject to ongoing distribution fees imposed under a plan adopted
pursuant to Rule 12b-1 under the 1940 Act. The minimum initial investment in
Class Y shares is $1,000,000, but this requirement may be waived at the
discretion of the Fund's officers.
The Systematic Withdrawal Plan, Dollar Cost Averaging Plan, Automatic
Dividend Diversification Plan and Automatic Investment Plan are not available
for Class Y shares.
If you are considering a purchase of Class Y shares of a Fund, please call
the Transfer Agent, at 1-888-ITT-FUND (1-888-488-3863) to obtain information
about eligibility.
REQUESTS FOR INFORMATION
This Prospectus does not contain all the information included in the
Registration Statement filed with the SEC. The Registration Statement, including
the exhibits filed therewith, may be examined at the SEC's office in Washington,
D.C. Statements contained in the Prospectus as to the contents of any contract
or other document referred to herein are not necessarily complete, and, in each
instance, reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part, each such statement being qualified, in all respects by such reference.
For additional information, write to ITT Hartford Mutual Funds, Inc., P.O.
Box 8416, Boston, MA. 02266-8416, or call 1-888-ITT-FUND (1-888-488-3863).
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN
<PAGE>
28 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUNDS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER BY THE FUNDS TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL FOR THE FUNDS TO MAKE SUCH OFFER.
<PAGE>
ITT HARTFORD MUTUAL FUNDS, INC.
PROSPECTUS-- , 1996
CLASS Y SHARES
ITT Hartford Mutual Funds, Inc. (the "Company") is an open-end management
investment company comprised of eight diversified investment portfolios (each a
"Fund" and together the "Funds"). The Funds, which have different investment
objectives and policies, are listed below:
<TABLE>
<CAPTION>
ITT HARTFORD FUND GOAL INVESTMENT STYLE
- ------------------------------- ---------------------------- --------------------------------------------------------------------
<S> <C> <C>
Small Company Growth of capital Equity: Invests primarily in stocks of companies with market
capitalizations of less than $2 billion; portfolio is broadly
diversified across industries.
Capital Appreciation Growth of capital Equity: Invests in small, medium, and large companies; portfolio is
comprised primarily of a blend of growth and value stocks and is
broadly diversified across industries.
International Opportunities Growth of capital International Equity: Invests primarily in large, high-quality non-
U.S. companies in established markets, and on a limited basis, in
smaller companies and emerging markets; portfolio is broadly
diversified across industries and countries.
Stock Growth of capital, income is Equity: Invests primarily in large, high quality U.S. companies;
secondary portfolio is broadly diversified across industries which are
expected to grow faster than the overall economy.
Dividend and Growth High level of income, growth Equity: Invests primarily in large, well-known U.S. companies that
of capital have historically paid above average dividends and have the ability
to sustain and potentially increase dividends; portfolio is broadly
diversified across industries.
Advisers Long-term total return Asset Allocation: Invests in a mix of stocks, bonds and money market
instruments; portfolio assets are allocated gradually among the
asset classes based upon the portfolio managers' view of the economy
and valuation of the market sectors; short term market timing is not
used.
Bond Income Strategy High level of income, total Bond: Invests primarily in investment grade bonds; up to 30% may be
return invested in the highest quality tier of the high yield rating
category.
Money Market Maximum current income Money Market: Invests in money market instruments and seeks to
consistent with preservation maintain a stable share price of $1.00.
of capital
</TABLE>
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. WHILE THE MONEY MARKET FUND SEEKS TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE, THERE CAN BE NO ASSURANCE THAT THE FUND WILL
ACHIEVE THIS GOAL.
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE FUNDS THAT A
PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING. PLEASE READ AND KEEP THIS
PROSPECTUS FOR FUTURE REFERENCE. ADDITIONAL INFORMATION ABOUT THE FUNDS HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC") IN A STATEMENT OF
ADDITIONAL INFORMATION DATED , 1996 ("SAI"), WHICH IS INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS. TO OBTAIN A COPY OF THE SAI WITHOUT CHARGE, CALL
1-888-ITT-FUND (1-888-488-3863), OR WRITE TO ITT HARTFORD MUTUAL FUNDS, INC.,
P.O. BOX 8416, BOSTON, MA 02266-8416.
- --------------------------------------------------------------------------------
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY
BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
2 Hartford Mutual Funds
- --------------------------------------------------------------------------------
ITT HARTFORD MUTUAL FUNDS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investor Expenses..................................................... 3
Introduction to the ITT Hartford Mutual Funds......................... 4
Investment Objectives and Styles of the Funds......................... 4
Common Investment Policies and Risk Factors........................... 7
Performance of the Funds.............................................. 12
About Your Account.................................................... 13
How to Buy Shares................................................... 13
How to Redeem Shares................................................ 14
How to Exchange Shares.............................................. 15
Determination of Net Asset Value.................................... 16
Shareholder Account Rules and Policies.............................. 16
Investor Information Services....................................... 16
Management of the Funds............................................... 17
Dividends, Capital Gains and Taxes.................................... 19
Ownership and Capitalization of Funds................................. 20
General Information................................................... 20
</TABLE>
<PAGE>
Hartford Mutual Funds 3
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The expenses and the maximum transaction costs associated with investing in
Class Y shares of each Fund and the estimated aggregate operating expenses for
each Fund are reflected in the following table.
<TABLE>
<CAPTION>
SMALL CAPITAL INTERNATIONAL
COMPANY APPRECIATION OPPORTUNITIES STOCK DIVIDEND AND ADVISERS
FUND FUND FUND FUND GROWTH FUND FUND
------- ------------- ------------- -------- ------------- -----------
CLASS Y CLASS Y CLASS Y CLASS Y CLASS Y CLASS Y
------- ------------- ------------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge on purchases
(as % of Offering Price).......... None None None None None None
Maximum Deferred Sales Charge...... None None None None None None
Redemption Fees (1)................ None None None None None None
Exchange Fees...................... None None None None None None
ANNUAL OPERATING EXPENSES
(AS % OF AVERAGE NET ASSETS)
Management Fees.................... 0.85% 0.80% 0.85% 0.80% 0.75% 0.75%
12b-1 Distribution and Service
Fees.............................. None None None None None None
Other Expenses (2)................. 0.15% 0.20% 0.35% 0.20% 0.20% 0.20%
Total Operating Expenses (after
reimbursements) (2)............... 1.00% 1.00% 1.20% 1.00% 0.95% 0.95%
<CAPTION>
MONEY
BOND INCOME MARKET
STRATEGY FUND FUND
--------------- --------
CLASS Y CLASS Y
--------------- --------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge on purchases
(as % of Offering Price).......... None None
Maximum Deferred Sales Charge...... None None
Redemption Fees (1)................ None None
Exchange Fees...................... None None
ANNUAL OPERATING EXPENSES
(AS % OF AVERAGE NET ASSETS)
Management Fees.................... 0.65% 0.50%
12b-1 Distribution and Service
Fees.............................. None None
Other Expenses (2)................. 0.15% 0.05%
Total Operating Expenses (after
reimbursements) (2)............... 0.80% 0.55%
</TABLE>
- ------------------------------
(1) An $8 charge may be imposed on redemptions of less than $50,000 requested
to be paid by wire transfer. See "Redeeming Shares by Telephone".
(2) ITT Hartford Group, Inc. ("ITT Hartford"), the ultimate parent company of
the Hartford Investment Management Company ("HIMCO"), has voluntarily
agreed to limit the Total Operating Expenses of each Fund, exclusive of
taxes, interest, brokerage commissions and extraordinary expenses, until at
least July 1, 1997, as follows: Small Company Fund, 1.00%; Capital
Appreciation Fund, 1.00%, International Opportunities Fund, 1.20%, Stock
Fund, 1.00%, Dividend and Growth Fund, 1.00%; Advisers Fund, 1.00%; Bond
Income Strategy Fund, .80% and Money Market Fund, .55%. This policy may be
discontinued at any time after July 1, 1997. Without such expense
limitations the estimated Total Operating Expenses of the following Funds
would be: Small Company Fund, 1.05%, International Opportunities Fund,
1.50%; Bond Income Strategy Fund, .85%; and Money Market Fund, .70%.
EXPENSE EXAMPLES
An investor would have paid the following expenses at the end of the period
shown on a $1,000 investment, assuming a 5% annual return and redemption at the
end of each period.
<TABLE>
<CAPTION>
YEAR 1 YEAR 3
------- -------
CLASS Y CLASS Y
------- -------
<S> <C> <C>
Small Company Fund........................... $10 $32
Capital Appreciation Fund.................... 10 32
International Opportunities Fund............. 12 38
Stock Fund................................... 10 32
Dividend and Growth Fund..................... 10 32
Advisers Fund................................ 10 32
Bond Income Strategy Fund.................... 8 26
Money Market Fund............................ 6 18
</TABLE>
<PAGE>
4 Hartford Mutual Funds
- --------------------------------------------------------------------------------
INTRODUCTION TO THE ITT HARTFORD MUTUAL FUNDS
The Company is an open-end management investment company, commonly known as
a mutual fund, which was organized as a Maryland corporation on March 21, 1996.
The Company consists of eight series, each of which is divided into Class A,
Class B and Class Y shares except the Money Market Fund which is divided into
Class A and Class Y shares. Each Class may have different expenses which may
affect performance. Each Fund has different investment objectives, styles and
policies. These differences affect the types of securities in which each Fund
may invest and, therefore, the potential return of each Fund and the associated
risks. There is no assurance, however, that any Fund will meet its investment
goals. Whether an investment in a particular Fund is appropriate for you depends
on your investment goals, including the return you seek, the expected duration
of your investment and the level of risk you are willing to bear.
The Hartford Investment Management Company ("HIMCO") is the investment
adviser to each Fund. In addition, under HIMCO's general management, Wellington
Management Company ("Wellington Management") serves as a sub-adviser to the
Small Company Fund, Capital Appreciation Fund, International Opportunities Fund,
Stock Fund, Dividend and Growth Fund and Advisers Fund.
HIMCO was incorporated in Connecticut in 1981 and is a wholly-owned indirect
subsidiary of ITT Hartford Group, Inc. ("ITT Hartford"), a Connecticut insurance
holding company with over $94 billion in assets. Wellington Management, a
Massachusetts general 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 1933. As of December 31, 1995, HIMCO and its affiliates and
Wellington Management had investment management authority with respect to
approximately $49.6 and $109.2 billion of assets, respectively, for various
clients. Since 1977, HIMCO and its affiliates have served as the investment
manager to a family of mutual funds in which variable annuity and variable life
insurance contracts issued by subsidiaries of ITT Hartford are invested. Since
1984, Wellington Management has served as sub-adviser to certain of those funds.
HIMCO and Wellington Management collectively manage over $10 billion of assets
in these mutual funds.
INVESTMENT OBJECTIVES AND INVESTMENT STYLES OF THE FUNDS
The Funds have different investment objectives and policies, as described
below. The differences among the Funds can be expected to affect the investment
return of each Fund and the degree of market and financial risk to which each
Fund is subject. Each Fund is subject to certain fundamental investment
restrictions that are enumerated in detail in the SAI and may not be changed
without shareholder approval. All other investment policies (including each
Fund's investment objective) are non-fundamental and may be changed by the Board
of Directors without shareholder approval. Stated below is the investment
objective and investment style for each Fund. For a description of each Fund's
investment policies and risk factors, see "COMMON INVESTMENT POLICIES AND RISK
FACTORS."
HARTFORD SMALL COMPANY FUND
INVESTMENT OBJECTIVE.
The Small Company Fund seeks growth of capital by investing primarily in
equity securities selected on the basis of potential for capital appreciation.
INVESTMENT STYLE.
Under normal market and economic conditions at least 65% of the Small
Company Fund's total assets are invested in equity securities of companies which
have less than $2 billion in market capitalization ("Small Capitalization
Securities"). Wellington Management identifies, through fundamental analysis,
companies that it believes have substantial near-term capital appreciation
potential regardless of industry sector. However, overall industry exposure is
monitored by Wellington Management so as to maintain broad industry
diversification. In selecting investments Wellington Management considers
securities of companies that, in its opinion, have potential for above-average
earnings growth, are undervalued in relation to their investment potential, have
business and/or fundamental financial characteristics that are misunderstood by
investors, or are relatively obscure, i.e., undiscovered by the overall
investment community. Fundamental analysis involves the assessment of a company
through such factors as its business environment, management, balance sheet,
income statement, anticipated earnings, revenues, dividends, and other related
measures of value. Up to 20% of the Small Company Fund's total assets may be
invested in securities of non-U.S. companies. Investing in Small Capitalization
Securities involves special risks. See "COMMON INVESTMENT POLICIES AND RISK
FACTORS -- Small Capitalization Securities".
<PAGE>
HARTFORD MUTUAL FUNDS 5
- --------------------------------------------------------------------------------
HARTFORD CAPITAL APPRECIATION FUND
INVESTMENT OBJECTIVE.
The Capital Appreciation Fund seeks growth of capital by investing primarily
in equity securities selected on the basis of potential for capital
appreciation.
INVESTMENT STYLE.
The Capital Appreciation Fund invests in a diversified portfolio of
primarily equity securities. Wellington Management identifies, through
fundamental analysis, companies that it believes have substantial near-term
capital appreciation potential regardless of company size or industry sector.
This approach is sometimes referred to as a "stock picking" approach and results
in having all market capitalization sectors (i.e., small, medium, and large
companies) represented. 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 for a catalyst event that will trigger stock
price appreciation. Fundamental analysis involves the assessment of a company
through such factors as its business environment, management, balance sheet,
income statement, anticipated earnings, revenues, dividends, and other related
measures of value. Up to 20% of the Capital Appreciation Fund's total assets may
be invested in securities of non-U.S. companies.
HARTFORD INTERNATIONAL OPPORTUNITIES FUND
INVESTMENT OBJECTIVE.
The International Opportunities Fund seeks growth of capital by investing
primarily in equity securities issued by non-U.S. companies.
INVESTMENT STYLE.
The International Opportunities Fund invests in a diversified portfolio of
primarily equity securities covering a broad range of countries, industries, and
companies. Securities in which the International Opportunities Fund invests are
denominated in both U.S. dollars and non-U.S. currencies (including the European
Currency Unit) and generally are traded in non-U.S. markets. Wellington
Management uses a three-pronged approach. First, Wellington Management
determines the relative attractiveness of the many countries in which the
International Opportunities Fund may invest based upon the economic and
political environment of each country. Second, Wellington Management evaluates
industries on a global basis to determine which industries offer the most value
and potential for capital appreciation given current and projected global and
local economic and market conditions. Finally, Wellington Management conducts
fundamental research on individual companies and considers companies for
inclusion in the International Opportunities Fund's portfolio that are typically
larger, high quality companies that operate in established markets. Fundamental
analysis involves the assessment of a company through such factors as its
business environment, management, balance sheet, income statement, anticipated
earnings, revenues, dividends, and other related measures of value. In analyzing
companies for investment, Wellington Management looks for, among other things, a
strong balance sheet, attractive industry dynamics, strong competitive
advantages and attractive relative value within the context of a security's
primary trading market. The International Opportunities Fund may also invest on
a limited basis in smaller companies and less developed markets. The
International Opportunities Fund anticipates that, under normal market
conditions, it will diversify its investments in at least three countries other
than the United States. The International Opportunities Fund will be subject to
certain risks because it invests primarily in securities issued by non-U.S.
companies.
HARTFORD STOCK FUND
INVESTMENT OBJECTIVE.
The Stock Fund seeks long-term growth of capital, with income as a secondary
consideration, by investing primarily in equity securities.
INVESTMENT STYLE.
Under normal market and economic conditions at least 65% of the Stock Fund's
total assets are invested in equity securities. The Stock Fund invests in a
diversified portfolio of primarily equity securities using a two-tiered
investment approach. First, under what is sometimes referred to as a "top down"
approach, Wellington Management analyzes the macro economic and investment
environment. This includes an evaluation of economic conditions, U.S. fiscal and
monetary policy, demographic trends, and investor sentiment. Through top down
analysis, Wellington Management anticipates secular and cyclical changes and
identifies industries and economic sectors that are expected to grow faster than
the overall economy. Second, top down analysis is followed by what is sometimes
referred to as a "bottom up" approach, which is the use of fundamental analysis
to identify specific securities for purchase or sale. The Stock Fund's portfolio
emphasizes high-quality growth companies. The key characteristics of
high-quality growth companies include a leadership position within an industry,
a strong balance sheet, a high return on equity, sustainable or increasing
dividends, a strong management team, and a globally competitive position.
Fundamental analysis involves the assessment of a company through such factors
as its business environment, management, balance sheet, income statement,
anticipated earnings, revenues, dividends, and other related measures of value.
Up to 20% of the Stock Fund's total assets may be invested in securities of
non-U.S. companies.
<PAGE>
6 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
HARTFORD DIVIDEND AND GROWTH FUND
INVESTMENT OBJECTIVE.
The Dividend and Growth Fund seeks a high level of current income consistent
with growth of capital by investing primarily in equity securities.
INVESTMENT STYLE.
The Dividend and Growth Fund invests in a diversified portfolio of primarily
equity securities that typically have above average income yield and whose
prospects for capital appreciation are considered favorable by Wellington
Management. Under normal market and economic conditions at least 65% of the
Dividend and Growth Fund's total assets are invested in dividend paying equity
securities. Wellington Management uses fundamental analysis to evaluate a
security for purchase or sale by the Dividend and Growth Fund. Fundamental
analysis involves the assessment of a company through such factors as its
business environment, management, balance sheet, income statement, anticipated
earnings, revenues, dividends, and other related measures of value. As a key
component of the fundamental analysis done for the Dividend and Growth Fund,
Wellington Management evaluates a company's ability to sustain and potentially
increase its dividend. The Dividend and Growth Fund's portfolio will be broadly
diversified by industry and company. Up to 20% of the Dividend and Growth Fund's
total assets may be invested in securities of non-U.S. companies.
HARTFORD ADVISERS FUND
INVESTMENT OBJECTIVE.
The Advisers Fund seeks maximum long-term total rate of return by investing
in common stocks and other equity securities, bonds and other debt securities
and money market instruments.
INVESTMENT STYLE.
The Advisers Fund seeks to achieve its objective through the active
allocation of its assets among the asset categories of equity securities, debt
securities and money market instruments based upon Wellington Management's
judgment of the projected investment environment for financial assets, relative
fundamental values and attractiveness of each asset category, and expected
future returns of each asset category. Wellington Management bases its asset
allocation decisions on fundamental analysis and does not attempt to make
short-term market timing decisions among asset categories. As a result, shifts
in asset allocation are expected to be gradual and continuous and the Advisers
Fund will normally have some portion of its assets invested in each asset
category. The Advisers Fund does not have percentage limitations on the amount
that may be allocated to each asset category. The Advisers Fund's investments in
equity securities and securities that are convertible into equity securities
will be substantially similar to the investments permitted for the Stock Fund.
See "HARTFORD STOCK FUND." The debt securities in which the Advisers Fund may
invest include securities issued or guaranteed by the U.S. Government and its
agencies or instrumentalities, securities rated investment grade, or if unrated,
are deemed by Wellington Management to be of comparable quality, and with
respect to 5% of the Advisers Fund's assets, securities rated below investment
grade which are known as high yield-high risk securities or junk bonds. The
money market instruments in which the Adviser's Fund may invest are described
under "COMMON INVESTMENT POLICIES AND RISK FACTORS -- Money Market Instruments
and Temporary Investment Strategies." Up to 20% of the Advisers Fund's total
assets may be invested in securities of non-U.S. companies.
HARTFORD BOND INCOME STRATEGY FUND
INVESTMENT OBJECTIVE.
The Bond Income Strategy Fund seeks a high level of current income,
consistent with a competitive total return, as compared to bond funds with
similar investment objectives and policies, by investing primarily in debt
securities.
INVESTMENT STYLE.
The Bond Income Strategy Fund will have a diversified portfolio of
investments in fixed-income securities. Under normal circumstances at least 70%
of the Bond Income Strategy Fund's portfolio will be invested in investment
grade bond-type securities. Up to 30% of the Bond Income Strategy Fund may be
invested in the highest category of below investment grade bonds ("Ba" by
Moody's Investors Service, Inc. ("Moody's") or "BB" by Standard and Poors
Corporation ("S&P")). Securities rated below investment grade are commonly
referred to as "high yield-high risk securities" or "junk bonds". No investments
will be made in debt securities rated below "Ba" or "BB", or if unrated,
determined to be of comparable quality by HIMCO. Investments in securities rated
in the highest category below investment grade may offer an attractive
risk/reward trade-off and investment in this sector may enhance the current
yield and total return of the Bond Income Strategy Fund over time. Investing in
securities within this rating category combined with the investment grade
portion of the portfolio is designed to provide investors with both a high level
of current income and attractive relative total returns.
The Bond Income Strategy Fund will invest at least 65% of its total assets
in bonds and debt securities with a maturity of at least one year. The Bond
Income Strategy Fund may invest up to 15% of its total assets in preferred
stocks, convertible securities, and securities carrying warrants to purchase
equity securities. The Bond Income Strategy 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
<PAGE>
HARTFORD MUTUAL FUNDS 7
- --------------------------------------------------------------------------------
acquired with debt securities. Up to 30% of the Bond Income Strategy Fund's
total assets may be invested in securities of non-U.S. companies.
HARTFORD MONEY MARKET FUND
INVESTMENT OBJECTIVE.
The Money Market Fund seeks maximum current income consistent with liquidity
and preservation of capital.
INVESTMENT POLICIES.
The Money Market Fund seeks to maintain a stable net asset value of $1.00
per share; however, there can be no assurance that the Fund will achieve this
goal. The Money Market Fund's portfolio will consist entirely of cash, cash
equivalents and high quality debt securities as permitted under Rule 2a-7 of the
Investment Company Act of 1940 (the "1940 Act"). Each investment will have an
effective maturity date of 397 days or less computed in accordance with Rule
2a-7. The average maturity of the portfolio will vary according to HIMCO's
appraisal of money market conditions and will not exceed 90 days. All securities
purchased by the Money Market Fund will be U.S. dollar denominated.
COMMON INVESTMENT POLICIES AND RISK FACTORS
MONEY MARKET INSTRUMENTS AND TEMPORARY INVESTMENT STRATEGIES
In addition to the Money Market Fund which may invest in cash, cash
equivalents and money market instruments at any time, all other Funds may hold
cash or cash equivalents and invest in high quality money market instruments
under appropriate circumstances as determined by HIMCO or Wellington Management.
Such Funds may invest up to 100% of their assets in cash, cash equivalents or
money market instruments only for temporary defensive purposes. In addition, the
Advisers Fund may invest some or all of its assets in such instruments when
Wellington Management expects returns on such instruments to be attractive
relative to investments in equity and debt securities.
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.
REPURCHASE AGREEMENTS
Each Fund is permitted to enter into fully collateralized 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 a Fund to the seller.
The resale price would be in excess of the purchase price, reflecting an agreed
upon market interest rate. Delays or losses could result if the other party to
the agreement defaults or becomes insolvent. The Company's Board of Directors
has established standards for evaluation of the creditworthiness of the banks
and securities dealers with which the Funds may engage in repurchase agreements
and monitors on a quarterly basis HIMCO'S and Wellington Management's compliance
with such standards. Presently, each Fund may enter into repurchase agreements
only with commercial banks with at least $500 million in capital and $1 billion
in assets or with recognized government securities dealers with a minimum net
capital of $100 million.
REVERSE REPURCHASE AGREEMENTS
Each Fund may also enter into reverse repurchase agreements. Reverse
repurchase agreements involve sales by a Fund of portfolio assets concurrently
with an agreement by a 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 a Fund is obligated to repurchase may decline below the
repurchase price. A reverse repurchase agreement may be viewed as a
collateralized borrowing by a Fund. Borrowing magnifies the potential for gain
or loss on the portfolio securities of a Fund and, therefore, increases the
possibility of fluctuation in a Fund's net asset value. A Fund will establish a
segregated account with the Company's custodian bank in which a Fund will
maintain cash, cash equivalents or other high quality debt securities equal in
value to a Fund's obligations in respect of reverse repurchase agreements.
DEBT SECURITIES
Each 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) debt securities issued or guaranteed by U.S.
corporations or other issuers (including foreign governments or corporations);
(3) asset-backed securities and mortgage-related securities, including
collateralized mortgage obligations ("CMO's"); 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 non-U.S.
issuers. In addition, the Advisers Fund, International Opportunities Fund and
the Bond Income Strategy Fund are permitted to invest in Brady Bonds, which are
debt
<PAGE>
8 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
securities issued under the framework of the Brady Plan, an initiative announced
by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for
debtor nations to restructure their outstanding external commercial bank debt.
See "Non-U.S. Securities" in the SAI.
INVESTMENT GRADE DEBT SECURITIES
Each Fund is permitted to invest in debt securities rated within the four
highest rating categories (i.e., Aaa, Aa, A or Baa by Moody's or AAA, AA, A or
BBB by S&P), or, if unrated, securities of comparable quality as determined by
HIMCO 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 a Fund is authorized to invest in a certain
rating category, the 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, HIMCO 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 (i.e., "Baa" by
Moody's and "BBB" by S&P, and unrated securities of comparable quality (as
determined by HIMCO or Wellington Management) are viewed as having 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.
HIGH YIELD-HIGH RISK DEBT SECURITIES
The Small Company Fund, Capital Appreciation Fund, International
Opportunities Fund, Stock Fund, Dividend and Growth Fund and Advisers Fund each
may invest up to 5% of its assets in high yield debt securities (i.e., rated as
low as "C" by Moody's or "CC" by S&P, and unrated securities of comparable
quality as determined by Wellington Management). The Bond Income Strategy Fund
may invest up to 30% of its assets in securities rated in the highest level
below investment grade ("Ba" by Moody's or "BB" by S&P) or if unrated,
determined to be of comparable quality by HIMCO. Securities rated below
investment grade are commonly referred to as "high yield-high risk securities"
or "junk bonds". Each rating category has within it different gradations or
sub-categories. If a Fund is authorized to invest in a certain rating category,
the 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, HIMCO 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. Securities in the
rating categories below "Baa" as determined by Moody's and "BBB" as determined
by S&P are considered to be of poor standing and predominantly speculative. The
rating services' descriptions of securities are set forth in the SAI. High
yield-high risk securities are considered speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligations. Accordingly, it is possible that these types of
factors could, in certain instances, reduce the value of securities held by a
Fund with a commensurate effect on the value of the Fund's shares.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
The Advisers Fund and the Bond Income Strategy Fund may invest in
mortgage-backed securities and the Advisers Fund, Bond Income Strategy Fund and
Money Market Fund may invest in asset-backed securities. Mortgage-backed
securities represent a participation in, or are secured by, mortgage loans and
include securities issued or guaranteed by the U.S. Government or one of its
agencies or instrumentalities; securities issued by private issuers that
represent an interest in, or are collateralized by, mortgage-backed securities
issued or guaranteed by the U.S. Government or one or its agencies or
instrumentalities; or securities issued by private issuers that represent an
interest in or are collateralized by mortgage loans or mortgage-backed
securities without a government guarantee but usually having some form of
private credit enhancement. Asset-backed securities are structured like
mortgage-backed securities, but instead of mortgage loans or interests in
mortgage loans, the underlying assets may include motor vehicle installment
sales or installment loan contracts, leases of various types of real and
personal property, and receivables from credit card agreements.
Due to the risk of prepayment, especially when interest rates decline,
mortgage-backed and asset-backed securities are less effective than other types
of securities as a means of "locking in" attractive long-term interest rates
and, as a result, may have less potential for capital appreciation during
periods of declining interest rates than other securities of comparable
maturities. The ability of an issuer of asset-backed securities to enforce its
security interest in the underlying assets may be limited.
EQUITY SECURITIES
All Funds except the Money Market Fund and Bond Income Strategy Fund may
invest in equity securities including common stocks, preferred stocks,
convertible preferred stock and rights to acquire such securities. In addition,
these Funds may invest in securities such as bonds, debentures and corporate
notes which are convertible into common stock at the option of the holder.
SMALL CAPITALIZATION SECURITIES
All Funds except the Money Market Fund and Bond Income Strategy Fund may
invest in equity securities which
<PAGE>
HARTFORD MUTUAL FUNDS 9
- --------------------------------------------------------------------------------
have less than $2 billion in market capitalization ("Small Capitalization
Securities"). The issuers of Small Capitalization Securities tend to be
companies which are smaller or newer than those listed on the New York or
American Stock Exchanges. As a result, Small Capitalization Securities are
primarily traded in the over-the counter market, although they may also be
listed for trading on the New York or American Stock Exchanges. 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. 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.
NON-U.S. SECURITIES
Under normal circumstances the International Opportunities Fund intends to
invest at least 65% of its assets in securities issued by non-U.S. companies
("non-U.S. securities"). In addition, the International Opportunities Fund may
invest in commingled pools offered by non-U.S. banks. Each other Fund is
permitted to invest up to 20% of its assets, and the Money Market Fund and Bond
Income Strategy Fund are permitted to invest up to 25% and 30% of their assets,
in non-U.S. securities. The Bond Income Strategy Fund intends to purchase
securities denominated in U.S. dollars, or if not so denominated, to use
currency transactions to reflect U.S. dollar valuation at the time of purchase
or while the security is held by the Fund. Each Fund except the Money Market
Fund and the Bond Income Strategy Fund may invest in 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
non-U.S. securities. ADRs are traded on a U.S. securities exchange, or in an
over-the-counter market, and are denominated in U.S. dollars. GDRs are
certificates issued globally and evidence a similar ownership arrangement. GDRs
are traded on non-U.S. securities exchanges and are denominated in non-U.S.
currencies. The value of an ADR or a GDR will fluctuate with the value of the
underlying security, will reflect any changes in exchange rates and otherwise
will involve risks associated with investing in non-U.S. securities.
When selecting non-U.S. securities HIMCO or Wellington Management will
evaluate the economic and political climate and the principal securities markets
of the country in which the company is located. Investing in non-U.S. securities
involves considerations and potential risks not typically associated with
investing in securities issued by U.S. companies. Less information may be
available about non-U.S. companies than about U.S. companies and non-U.S.
companies generally are not subject to uniform accounting, auditing and
financial reporting standards or to other regulatory practices and requirements
comparable to those applicable to U.S. companies. The values of non-U.S.
securities are affected by changes in currency rates or exchange control
regulations, restrictions or prohibitions on the repatriation of non-U.S.
currencies, application of non-U.S. tax laws, including withholding taxes,
changes in governmental administration or economic or monetary policy (in the
U.S. or outside the U.S.) or changed circumstances in dealings between nations.
Costs are also incurred in connection with conversions between various
currencies. See the SAI for additional risk disclosure concerning non-U.S.
securities.
CURRENCY TRANSACTIONS
Each Fund, except the Money Market Fund, may engage in currency transactions
to hedge the value of portfolio securities denominated in particular currencies
against fluctuations in relative value. Currency transactions include forward
currency contracts, 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 a 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 Fund's underlying securities.
Further, the Funds may enter into currency transactions only with counterparties
that HIMCO or Wellington Management deem to be creditworthy.
The 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 related options and futures contracts.
OPTIONS AND FUTURES CONTRACTS
Each Fund, except the Money Market Fund, may employ certain hedging, income
enhancement and risk management techniques involving options and futures
contracts, though such techniques may result in losses to the Fund. The Funds
may write covered call options or purchase put and call options on individual
securities, write covered put and call options and purchase put and call options
on foreign currencies, aggregates of equity and debt securities, indices of
prices of equity and debt securities and other
<PAGE>
10 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
financial indices, and 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.
A Fund may write covered options only. "Covered" means that, so long as a
Fund is obligated as the writer of an option, it will own either the underlying
securities or currency or an option to purchase or sell the same underlying
securities or currency having an expiration date not earlier than the expiration
date of the covered option and an exercise price equal to or less than the
exercise price of the covered option, or will establish or maintain with its
custodian for the term of the option a "segregated account" consisting of cash,
U.S. Government securities or other liquid, high grade debt obligations having a
value equal to the fluctuating market value of the optioned securities or
currencies. A Fund receives a premium from writing a call or put option, which
increases the Fund's return if the option expires unexercised or is closed out
at a net profit.
To hedge against fluctuations in currency exchange rates, these Funds may
purchase or sell foreign currency futures contracts, and write put and call
options and purchase put and call options on such futures contracts. To the
extent that a Fund enters into futures contracts, options on futures contracts
and options on foreign currencies that are traded on an exchange regulated by
the Commodities Futures Trading Commission ("CFTC"), in each case that are not
for BONA FIDE hedging purposes (as defined by the CFTC), the aggregate initial
margin and premiums required to establish those non-hedging positions may not
exceed 5% of the liquidation value of Fund's portfolio, after taking into
account the unrealized profits and unrealized losses on any such contracts the
Fund has entered into.
A Fund's 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 HIMCO 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 a
Fund invests; (4) lack of assurance that a liquid secondary market will exist
for any particular option, futures contract, option thereon or forward contract
at any particular time, which may affect a Fund's ability to establish or close
out a position; (5) possible impediments to effective portfolio management or
the ability to meet current obligations caused by the segregation of a large
percentage of a Fund's assets to cover its obligations; and (6) the possible
need to defer closing out certain options, futures contracts, options thereon
and forward contracts in order to continue to qualify for the beneficial tax
treatment afforded "regulated investment companies" under the Internal Revenue
Code (the "Code"). See the SAI for additional information on options and futures
contracts. Options and futures contracts are commonly known as "derivative"
securities.
SWAP AGREEMENTS
Each Fund, except the Money Market Fund, may enter into interest rate swaps,
currency swaps, equity swaps and other types of swap agreements such as caps,
collars, and floors. In a typical interest rate swap, one party agrees to make
regular payments equal to a floating interest rate multiplied by a "notional
principal amount," in return for payments equal to a fixed rate multiplied by
the same amount, for a specified period of time. If a swap agreement provides
for payments in different currencies, the parties might agree to exchange the
notional principal amount as well. Swaps may also depend on other prices or
rates, such as the value of an index or mortgage prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specified interest rate exceeds an
agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
Swap agreements will tend to shift a Fund's investment exposure from one
type of investment to another. For example, if a Fund agreed to exchange
floating rate payments for fixed rate payments, the swap agreement would tend to
decrease the Fund's exposure to rising interest rates. Caps and floors have an
effect similar to buying or writing options. Depending on how they are used,
swap agreements may increase or decrease the overall volatility of a Fund's
investments and its share price and yield. Swap agreements are commonly known as
"derivative" securities.
The successful utilization of hedging and risk management transactions
requires skills different from those needed in the selection of a Fund's
portfolio securities and depends on HIMCO's or Wellington Management's ability
to predict correctly the direction and degree of movement in interest rates.
Although the Funds believe that the use of the hedging and risk management
techniques described above will benefit the Funds, if HIMCO's or Wellington
Management's judgment about the direction or extent of
<PAGE>
HARTFORD MUTUAL FUNDS 11
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the movement in interest rates is incorrect, a Fund's overall performance would
be worse than if it had not entered into any such transactions.
ILLIQUID SECURITIES
Each Fund is permitted to invest up to 15% of its net assets in illiquid
securities except the Money Market Fund which may invest up to 10% of its net
assets in such securities. "Illiquid Securities" are securities that may not be
sold or disposed of in the ordinary course of business within seven days at
approximately the price used to determine a Fund's net asset value. Each Fund
may purchase, certain restricted securities commonly known as Rule 144A
securities that can be resold to institutions and which may be determined to be
liquid pursuant to policies and guidelines of the Board of Directors.
Under current interpretations of the SEC Staff, the following securities may
be considered illiquid: (1) repurchase agreements maturing in more than seven
days; (2) certain restricted securities (securities whose public resale is
subject to legal or contractual restrictions); (3) options, with respect to
specific securities, not traded on a national securities exchange that are not
readily marketable; and (4) any other securities in which a Fund may invest that
are not readily marketable.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
Each 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 Funds generally
purchase securities on a when-issued basis with the intention of acquiring the
securities, the Funds may sell the securities before the settlement date if
HIMCO or Wellington Management deems it advisable. At the time a Fund makes the
commitment to purchase securities on a when-issued basis, the Fund will record
the transaction and thereafter reflect the value, each day, of such security in
determining net asset value. At the time of delivery of the securities, the
value may be more or less than the purchase price.
OTHER INVESTMENT COMPANIES
Each Fund is permitted to invest in other investment companies. Securities
in certain countries are currently accessible to the Funds only through such
investments. The investment in other investment companies is limited in amount
by the 1940 Act, and will involve the indirect payment of a portion of the
expenses, including advisory fees, of such other investment companies. A Fund
will not purchase a security if, as a result, (1) more than 10% of the Fund's
assets would be invested in securities of other investment companies, (2) such
purchase would result in more than 3% of the total outstanding voting securities
of any one such investment company being held by the Fund or (3) more than 5% of
the Fund's assets would be invested in any one such investment company.
PORTFOLIO SECURITIES LENDING
Each Fund may lend its portfolio securities to broker/ dealers and other
institutions as a means of earning interest income. Delays or losses could
result if a borrower of portfolio securities becomes bankrupt or defaults on its
obligation to return the loaned securities. A Fund may lend securities only if:
(1) the loan is fully secured by appropriate collateral at all times as
determined by HIMCO; and (2) the value of all loaned securities of the Fund is
not more than 33 1/3% of the Fund's total assets.
OTHER RISK FACTORS
As mutual funds that primarily invest in equity and/or debt securities, each
Fund is subject to market risk, i.e., the possibility that equity and/or debt
prices in general will decline over short or even extended periods of time. The
financial markets tend to be cyclical, with periods when security prices
generally rise and periods when security prices generally decline. The value of
the debt securities in which the Funds invest will tend to increase when
interest rates are falling and to decrease when interest rates are rising.
No Fund should be considered to be a complete investment program in and of
itself. Each prospective purchaser should take into account his or her own
investment objectives as well as his or her other investments when considering
the purchase of shares of any Fund.
There can be no assurance that the investment objectives of the Funds will
be met. In addition, the risk inherent in investing in the Funds is common to
any security -- the net asset value will fluctuate in response to changes in
economic conditions, interest rates and the market's perception of the
underlying portfolio securities held by each Fund.
In pursuit of a Fund's investment objective, HIMCO and Wellington Management
attempt to select appropriate individual securities for inclusion in a Fund's
portfolio. In addition, HIMCO and Wellington Management attempt to successfully
forecast market trends and increase investments in the types of securities best
suited to take advantage of such trends. Thus, the investor is dependent on
HIMCO or Wellington Management's success not only in selecting individual
securities, but also in identifying the appropriate mix of securities consistent
with a Fund's investment objective.
<PAGE>
12 HARTFORD MUTUAL FUNDS
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PERFORMANCE OF THE FUNDS
Because the Funds are being offered to the public for the first time, as of
the date of this Prospectus they do not have any prior operating history or
performance. However, the Capital Appreciation Fund, International Opportunities
Fund, Stock Fund, Dividend and Growth Fund, Advisers Fund and Money Market Fund
are modeled after existing funds (the "Insurance Funds") that are managed by
HIMCO or Wellington Management and have investment objectives and policies
substantially similar to the corresponding Funds. The Insurance Funds are used
as investment vehicles for the assets of variable annuity and variable life
insurance contracts issued by ITT Hartford affiliates.
Below you will find information about the performance of the Insurance
Funds. Although the six comparable Funds discussed above have substantially
similar investment objectives and policies, the same investment adviser and sub-
adviser and the same portfolio managers as the Insurance Funds, you should not
assume that the Funds offered by this Prospectus will have the same future
performance as the Insurance Funds. For example, any Fund's future performance
may be greater or less than the performance of the corresponding Insurance Fund
due to, among other things, differences in expenses and cash flows between a
Fund and the corresponding Insurance Fund.
The investment characteristics of each Fund listed below will closely
resemble the investment characteristics of the corresponding Insurance Fund.
Depending on the Fund involved, similarity of investment characteristics may
involve factors such as industry diversification, country diversification,
portfolio beta, portfolio quality, average maturity of fixed-income assets,
equity/non-equity mixes, and individual holdings.
Certain Funds do have differences from their corresponding Insurance Fund
none of which HIMCO or Wellington Management believe would cause a significant
change in investment results. Investors may note the following differences:
1. The Capital Appreciation Fund, Stock Fund and Advisers Fund may each
invest up to 15% of their assets in illiquid securities. The corresponding
Insurance Fund may invest only 10% of its assets in illiquid securities.
2. The Dividend and Growth Fund, the Stock Fund and the Advisers Fund
may invest 5% of their assets in debt securities that are rated below
investment grade by Moody's or S&P (or are of comparable quality as
determined by Wellington Management). Their corresponding Insurance Funds
may not invest any of their assets in debt securities rated below investment
grade.
3. The International Opportunities Fund may invest 5% of its assets in
debt securities rated below investment grade by Moody's or S&P, or of
comparable quality as determined by Wellington Management, and must invest
in a minimum of three countries (not including the United States). The
corresponding Insurance Fund may invest 15% of its assets in debt securities
rated below investment grade and must invest in a minimum of five countries
(including the United States.)
4. Each Fund may borrow money in amounts not to exceed 33 1/3% of the
value of its total assets. The Insurance Funds' International Opportunities
Fund, Dividend and Growth Fund and each other corresponding fund can borrow
up to 20%, 15% and 5% of their respective assets.
The table below sets forth each Fund, and its corresponding Insurance Fund,
its inception date and asset size as of December 31, 1995:
<TABLE>
<CAPTION>
CORRESPONDING INSURANCE FUND
FUND (INCEPTION DATE AND ASSET SIZE)
----------------------------------------------------------------------------
<S> <C>
Capital Appreciation........... Hartford Capital Appreciation Fund, Inc.
(April 2, 1984)
$2,204,105,364
International Opportunities.... Hartford International Opportunities Fund,
Inc.
(July 2, 1990)
$688,685,636
Stock.......................... Hartford Stock Fund, Inc.
(August 31, 1977)
$1,881,501,503
Dividend and Growth............ Hartford Dividend and Growth Fund, Inc.
(March 8, 1994)
$276,245,852
Advisers....................... Hartford Advisers Fund, Inc.
(March 31, 1983)
$4,275,088,899
Money Market................... HVA Money Market Fund, Inc.
(June 30, 1980)
$364,013,082
</TABLE>
The following table shows the average annualized total returns for the
Insurance Funds for the one, three, five and ten year (or life of the Insurance
Fund, if shorter) periods ended December 31, 1995. These figures are based on
the actual gross investment performance of the Insurance Funds. From the gross
investment performance figures, the
<PAGE>
HARTFORD MUTUAL FUNDS 13
- --------------------------------------------------------------------------------
maximum Total Fund Operating Expenses reflected in the fee table on page are
deducted to arrive at the net return.
<TABLE>
<CAPTION>
10 YEARS
INSURANCE FUND OR SINCE
(INCEPTION DATE) 1 YEAR 3 YEARS 5 YEARS INCEPTION
------- ------- ------- ---------
<S> <C> <C> <C> <C>
Hartford Capital Appreciation Fund, Inc..................... 29.74% 16.89% 23.51% 15.39%
(April 2, 1984)
Hartford International Opportunities Fund, Inc.............. 13.56% 13.99% 9.85% 6.45%
(July 2, 1990)
Hartford Stock Fund, Inc.................................... 33.34% 13.99% 15.04% 12.95%
(August 31, 1977)
Hartford Dividend and Growth Fund, Inc...................... 35.95% N/A N/A 19.63%
(March 8, 1994)
Hartford Advisers Fund, Inc................................. 27.81% 11.50% 12.47% 11.65%
(March 31, 1983)
HVA Money Market Fund, Inc.................................. 5.62% 4.16% 4.41% 6.00%
(June 30, 1980)
</TABLE>
CERTAIN INFORMATION ABOUT PERFORMANCE
From time to time, a Fund's yield and total return may be included in
advertisements, sales literature, or shareholder reports. In addition, the
Company may advertise the effective yield of the Money Market Fund. All figures
are based upon historical earnings and are not intended to indicate future
performance.
The "yield" of a Fund refers to the annualized net income generated by an
investment in that Fund over a specified 30-day period (7-day period for the
Money Market Fund). The effective yield is calculated similarly, but, when
annualized, the income earned by an investment in that Fund is assumed to be
reinvested. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment.
The "total return" of a Fund refers to the average annual rate of return of
an investment in the Fund. This figure is computed by calculating the percentage
change in the value of an investment of $1,000, assuming reinvestment of all
income dividends and capital gain distributions, to the end of a specified
period. "Total return" quotations reflect the performance of the Fund and
include the effect of capital changes.
Further information about the performance of the Funds will be contained in
the Funds' annual reports to shareholders, which you may obtain without charge
by writing to the Funds' address or calling the telephone number set forth on
the cover page of this Prospectus.
ABOUT YOUR ACCOUNT
HOW TO BUY SHARES
You may purchase shares from any broker-dealer that has a selling agreement
with Hartford Securities Distribution Company, Inc. (the "Distributor"). In
addition, an account may be opened for the purchase of shares of a Fund by
mailing to the ITT Hartford Mutual Funds, Inc., Institutional Services, P.O. Box
8416, Boston, MA 02266-8416, a completed account application and a check,
payable to the appropriate Fund. Or you may telephone 1-888-ITT-FUND
(1-888-488-3863) to obtain the number of an account to which you can wire or
electronically transfer funds and then send in a completed application.
In order to buy Class Y shares you must qualify as one of the following
types of institutional investors: (i) tax qualified retirement plans which have
(A) at least $10 million in plan assets, (B) have 750 or more employees eligible
to participate at the time of purchase, or (C) certify that they will have
projected annual contributions of $2.5 million or more, (ii) banks and insurance
companies which are not affiliated with HIMCO purchasing shares for their own
account; (iii) investment companies not affiliated with HIMCO; (iv)
tax-qualified retirement plans of HIMCO, Wellington Management or broker-dealer
wholesalers and their affiliates.
Purchase orders for all Funds are accepted only on a regular business day as
defined below. Orders for shares received by Boston Financial Data Services,
Inc., (the "Transfer Agent") on any business day prior to the close of trading
on the New York Stock Exchange ("NYSE") (normally 4:00 p.m. Eastern Time) will
receive that day's offering price. Orders received by the Transfer Agent after
such time but prior to the close of business on the next business day will
receive the next business day's offering price which is net asset value plus any
applicable sales charge. If you purchase shares through a broker-dealer your
broker is responsible for forwarding payment promptly to the Transfer Agent.
With respect to shares of the Money Market Fund, orders shall not be deemed
received until the Transfer Agent has received Federal funds. A "business day"
is any day on which the NYSE is open for business. It is anticipated that the
NYSE will be closed Saturdays and Sundays and on days on which the NYSE observes
New Year's Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Each Fund and the Distributor or Transfer Agent reserves the right to reject
any order for the purchase of a Fund's shares. The Company reserves the right to
cancel any
<PAGE>
14 Hartford Mutual Funds
- --------------------------------------------------------------------------------
purchase order for which payment has not been received by the fifth business day
following the placement of the order.
If the Transfer Agent deems it appropriate, additional documentation or
verification of authority may be required and an order will not be deemed
received unless and until such additional documentation of verification is
received by the Transfer Agent.
Your initial purchase amount must be at least $1,000,000. However, the
minimum may be waived at the discretion of the Company's officers.
For an initial purchase of shares by wire, you must first telephone the
Transfer Agent at 1-888-ITT-FUND (1-888-488-3863) between the hours of 8:00 A.M.
and 4:00 P.M. (Eastern Time) on a regular business day as defined above to
receive an account number. The following information will be requested: your
name, address, tax identification number, dividend distribution election, amount
being wired and the wiring bank. Instructions should then be given by you to
your bank to transfer funds by wire to: ABA #011000028, State Street Bank &
Trust Company, Boston, MA, Account #: 9905-205-2, FBO: ITT Hartford Funds, Fund
Name and Class, Shareholder Account Number, Shareholder Name. If you arrange for
receipt by the Transfer Agent of federal funds prior to the close of trading
(currently 4:00 P.M., Eastern Time) of the NYSE on a regular business day as
defined above, you will receive that day's offering price. Your bank may charge
for these services. Presently there is no fee for receipt by the Transfer Agent
of Federal funds wired, but the right to charge for this service is reserved.
Each Fund except the Money Market Fund offers investors three different
classes of shares -- Class A, Class B and Class Y. The Money Market Fund offers
Class A and Class Y shares only. Class Y shares are offered by this prospectus.
The different classes of shares represent investments in the same portfolio of
securities but are subject to different expenses and will likely have different
share prices.
The Distributor may provide promotional incentives including cash
compensation to certain broker-dealers whose representatives have sold or are
expected to sell significant amounts of shares of one or more of the Funds.
Other programs may provide, subject to certain conditions, additional
compensation to broker-dealers based on a combination of aggregate shares sold
and increases of assets under management. All of the above payments will be made
by the Distributor or its affiliates out of their own assets. These programs
will not change the price an investor will pay for shares or the amount that a
Fund will receive from such sale.
SPECIAL INVESTMENT PROGRAMS AND PRIVILEGES
EXCHANGE PRIVILEGE. You may exchange your shares of a Fund for shares of
the same class of any other Fund. You should consider the differences in
investment objectives and expenses of a Fund as described in this prospectus
before making an exchange. Shares are normally redeemed from one Fund and
purchased from the other Fund in the exchange transaction on the same regular
business day on which the Transfer Agent receives an exchange request that is in
proper form by the close of the NYSE that day.
Exchanges are taxable transactions and may be subject to special tax rules
about which you should consult your own tax adviser. For complete policies and
restrictions governing exchanges, including fees and circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see "How to
Exchange Shares."
Details on all institutional shareholder services may be obtained by calling
the Transfer Agent at 1-888-ITT-FUND (1-888-488-3863).
HOW TO REDEEM SHARES
Shares may be redeemed on any regular business day. Your shares will be sold
at the next net asset value calculated after your order is received in good
order and accepted by the Transfer Agent. The Fund offers you a number of ways
to sell your shares: in writing, by telephone, by electronic funds transfer
through the Automated Clearing House ("ACH") or by wire transfer. There are
special income tax withholding requirements for distributions from retirement
plans and you must submit a withholding form with your request to avoid delay.
PLEASE CALL THE TRANSFER AGENT FIRST, AT 1-888-ITT-FUND (1-888-488-3863) FOR
ASSISTANCE.
CERTAIN REQUESTS REQUIRE A SIGNATURE GUARANTEE.
To protect you and the Company from fraud, certain redemption requests must
be in writing and must include a signature guarantee in the following situations
(there may be other situations also requiring a signature guarantee in the
discretion of the Fund or Transfer Agent):
- You wish to redeem more than $50,000 worth of shares and receive a check
- A redemption check is not payable to all shareholders listed on the
account statement
- A redemption check is not sent to the address of record on your statement
- Shares are being transferred to a Fund account with a different owner or
name
- Shares are redeemed by someone other than the owners (such as an Executor)
<PAGE>
HARTFORD MUTUAL FUNDS 15
- --------------------------------------------------------------------------------
REDEEMING SHARES BY MAIL.
Write a "letter of instruction" that includes:
Your name
The Fund's name
Your Fund account number (from your account statement)
The dollar amount or number of shares to be redeemed
Any special payment instructions
The signatures of all registered owners exactly as the account is
registered, and
Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell
shares.
USE THE FOLLOWING ADDRESS FOR REQUESTS BY MAIL:
ITT Hartford Mutual Funds, Inc.
Institutional Services
P.O. Box 8416
Boston, MA 02266-8416
SEND COURIER OR EXPRESS MAIL REQUESTS TO:
Boston Financial Data Services
Attn.: ITT Hartford Mutual Funds, Inc.
Institutional Services
Two Heritage Drive
Quincy, MA 02171
REDEEMING SHARES BY TELEPHONE.
You may also redeem shares by telephone by calling 1-888-ITT-FUND
(1-888-488-3863). To receive the redemption price on a regular business day,
your call must be received by the Transfer Agent by the close of the NYSE that
day, which is normally 4:00 P.M., Eastern Time. Shares held in tax-qualified
retirement plans may not be redeemed by telephone. You may have a check sent to
the address on the account statement, or, you may use electronic funds transfer
to your assigned bank account through ACH.
TELEPHONE REDEMPTIONS PAID BY CHECK. Up to $50,000 may be redeemed by
telephone once in any 7-day period. The check must be payable to all owners of
record of the shares and must be sent to the address on the account. This
service is not available within 30 days of changing the address on an account.
TELEPHONE REDEMPTIONS THROUGH ELECTRONIC FUNDS TRANSFER. If you have
selected the option on your account application, you may use electronic funds
transfer to your assigned bank account. Normally the electronic funds transfer
is initiated on the business day after the redemption.
REDEEMING SHARES THROUGH YOUR BROKER. The Distributor has made arrangements
to redeem Fund shares from brokers on behalf of their customers. Brokers may
charge for that service. The Distributor, acting as agent for the Fund, stands
ready to redeem each Fund's shares upon orders from brokers at the offering
price next determined after receipt of the order.
The Transfer Agent may delay forwarding a check or processing a payment for
recently purchased shares, but only until the purchase payment has cleared. That
delay may be as much as 15 days from the date the shares were purchased.
You may be charged a fee of up to $8 for wire transfers of redemption
proceeds of less than $50,000, which will be deducted from such proceeds. There
is no fee for ACH transfers.
HOW TO EXCHANGE SHARES
Class Y shares of a Fund may be exchanged for Class Y shares of another Fund
at net asset value per share at the time of exchange. Exchanges of shares
involve a redemption of the shares of the Fund you own and a purchase of shares
of the other Fund. Exchanges may be requested in writing or by telephone.
For written exchange requests you should submit a ITT Hartford Mutual Funds
exchange request form, signed by all owners of the account. Send the form to the
Transfer Agent at the addresses listed in "How to Sell Shares."
For telephone exchange requests you should call 1-888-ITT-FUND
(1-888-488-3863). Telephone exchanges may be made only between accounts that are
registered with the same names and address.
All exchanges are subject to the following restrictions:
The Fund you are exchanging into must be registered for sale in your state.
You may exchange only between Funds that are registered in the same name,
address and taxpayer identification number.
You may only exchange your Class Y shares for Class Y shares of another
Fund.
The minimum amount you may exchange from one Fund into another is $500 or
the entire balance if less.
Each Fund reserves the right to refuse or delay exchanges by any person or
group if, in HIMCO's or Wellington Management's judgment, a Fund would be unable
to invest the money effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
<PAGE>
16 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
Your exchanges may be restricted or refused if a Fund receives or
anticipates simultaneous orders affecting significant portions of the Fund's
assets. In particular, a pattern of exchanges that coincides with a "market
timing" strategy may be disruptive to the Fund.
Although a Fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. Each
Fund reserves the right to terminate or modify the exchange privilege in the
future.
Shares are normally redeemed from one Fund and purchased from the other fund
in the exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request that is in proper form by the close
of the NYSE that day.
DETERMINATION OF NET ASSET VALUE
THE NET ASSET VALUE PER SHARE is determined for each class of shares for
each Fund as of the close of the NYSE (normally 4:00 p.m. Eastern Time) on each
regular business day (as previously defined) by dividing the value of the Fund's
net assets attributable to a class by the number of shares of that class
outstanding. The assets of each Fund (except the Money Market Fund) are valued
primarily on the basis of market quotations. If quotations are not readily
available, assets are valued by a method that the Board of Directors believes
accurately reflects fair value. The assets of the Money Market Fund are valued
at their amortized cost pursuant to procedures established by the Board of
Directors. Foreign 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 current exchange rates. With respect to all
Funds, short-term investments that will mature in 60 days or less are also
valued at amortized cost, which approximates market value.
SHAREHOLDER ACCOUNT RULES AND POLICIES
THE OFFERING OF SHARES may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be suspended
by the Board of Directors or HIMCO at any time the Board or HIMCO believes it is
in the Fund's best interest to do so.
TELEPHONE TRANSACTION PRIVILEGES for purchases, redemptions or exchanges may
be modified, suspended or terminated by a Fund at any time. If an account has
more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges apply to each owner of the
account and the dealer representative of record for the account unless and until
the Transfer Agent receives cancellation instructions from an owner of the
account.
THE TRANSFER AGENT WILL RECORD ANY TELEPHONE CALLS to verify data concerning
transactions and has adopted other procedures to confirm that telephone
instructions are genuine. If the Company does not use reasonable procedures it
may be liable for losses due to unauthorized transactions, but otherwise the
Company will not be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine. If you are unable to reach the
Transfer Agent during periods of unusual market activity, you may not be able to
complete a telephone transaction and should consider placing your order by mail.
PURCHASE, REDEMPTION OR EXCHANGE REQUESTS will not be honored until the
Transfer Agent receives all required documents in proper form.
SHARE CERTIFICATES will not be issued for the Company's shares.
BROKERS THAT CAN PERFORM ACCOUNT TRANSACTIONS FOR THEIR CLIENTS through the
National Securities Clearing Corporation are responsible for obtaining their
clients' permission to perform those transactions and are responsible to their
clients who are shareholders of a Fund if the dealer performs any transaction
erroneously or improperly.
ALL OF YOUR PURCHASES MUST BE MADE IN U.S. DOLLARS and checks must be drawn
on U.S. banks and made payable to ITT Hartford Funds, or in the case of a
retirement account, to the custodian or trustee. You may not purchase shares
with a third party check.
PAYMENT FOR REDEEMED SHARES is forwarded ordinarily by check or by
electronic funds transfer (as elected by the shareholder) within 7 calendar days
after the business day on which the Transfer Agent receives redemption
instructions in proper form. Payment will be forwarded within 3 business days
for accounts registered in the name of a broker-dealer. Redemptions may be
suspended or payment dates postponed when the NYSE is closed (other than
weekends or holidays), when trading is restricted or as permitted by the
Securities and Exchange Commission. THE TRANSFER AGENT MAY DELAY FORWARDING A
CHECK OR PROCESSING A PAYMENT FOR RECENTLY PURCHASED SHARES, BUT ONLY UNTIL THE
PURCHASE PAYMENT HAS CLEARED. THAT DELAY MAY BE AS MUCH AS 15 CALENDAR DAYS FROM
THE DATE THE SHARES WERE PURCHASED. THAT DELAY MAY BE AVOIDED IF YOU PURCHASE
SHARES BY CERTIFIED CHECK. IF THE PURCHASE PAYMENT DOES NOT CLEAR, YOUR PURCHASE
WILL BE CANCELED AND YOU COULD BE LIABLE FOR ANY LOSSES OR FEES THE FUND OR ITS
TRANSFER AGENT HAVE INCURRED.
UNDER UNUSUAL CIRCUMSTANCES shares of a Fund may be redeemed "in kind,"
which means that the redemption proceeds will be paid with securities from the
Fund's portfolio. Please refer to "Purchase and Redemption of Shares" in the
Statement of Additional Information for more details.
<PAGE>
HARTFORD MUTUAL FUNDS 17
- --------------------------------------------------------------------------------
"BACKUP WITHHOLDING" of Federal income tax may be applied at the rate of 31%
from dividends, distributions and redemption proceeds (including exchanges) if
you fail to furnish the Fund a certified Social Security or Employer
Identification Number when you sign your application, or if you violate Internal
Revenue Service regulations on tax reporting of income.
THE COMPANY DOES NOT CHARGE A TRANSACTION FEE, but if your broker handles
your redemption, they may charge a fee. That fee can be avoided by redeeming
your Fund shares directly through the Transfer Agent.
INVESTOR INFORMATION SERVICES
The Fund provides 24-hour information services via a toll-free number on
fund yields and prices, dividends, account balances, and your latest transaction
as well as the ability to request prospectuses, account and tax forms, duplicate
statements and checks.
In addition, telephone representatives are available during normal business
hours (8:00 A.M. to 6:00 P.M. Eastern Time) to provide the information and
services you need.
Confirmation statements will be generated after every transaction, (except
reinvestments, automatic investments and automatic payroll investments) that
affect your account balance or your account registration. Quarterly consolidated
account statements will be sent for all accounts. It is the responsibility of
the shareholder to review the accuracy of transactions and to notify the
transfer agent of any errors within 15 days of the date of the confirmation.
Financial reports will be generated for the Fund every six months.
Call 1-888-ITT-FUND (1-888-488-3863) if you need additional copies of
financial reports or historical account information. There may be a small charge
for historical account information for prior years.
MANAGEMENT OF THE FUNDS
MANAGEMENT SERVICES
HIMCO serves as investment adviser to each Fund pursuant to an Investment
Advisory Agreement dated , 1996. HIMCO has overall investment
supervisory responsibility for each Fund and is responsible for the day to day
investment decisions with respect to the assets of the Bond Fund and the Money
Market Fund. In addition, HIMCO will provide administrative personnel, services,
equipment and facilities and office space for proper operation of the Company.
HIMCO has contracted with Wellington Management for the provision of day to day
investment management services to the Small Company Fund, Capital Appreciation
Fund, International Opportunities Fund, Stock Fund, Dividend and Growth Fund and
Advisers Fund in accordance with each Fund's investment objective and policies.
Each Fund pays a fee to HIMCO, a portion of which may be used to compensate
Wellington Management.
MANAGEMENT FEES
MONEY MARKET FUND.
The Money Market Fund pays a monthly management fee to HIMCO which is based
on a stated percentage of the Fund's average daily net asset value as follows:
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------- -------------
<S> <C>
First $500,000,000................................ 0.50%
Next $500,000,000................................. 0.45%
Amount Over $1 Billion............................ 0.40%
</TABLE>
BOND INCOME STRATEGY FUND.
The Bond Income Strategy Fund pays a monthly management fee to HIMCO which
is based on a stated percentage of the Fund's average daily net asset value as
follows:
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------- -------------
<S> <C>
First $500,000,000................................ 0.65%
Next $500,000,000................................. 0.55%
Amount Over $1 Billion............................ 0.50%
</TABLE>
SMALL COMPANY FUND AND INTERNATIONAL OPPORTUNITIES FUND.
The Small Company Fund and International Opportunities Fund each pay a
monthly management fee to HIMCO which is based on a stated percentage of the
Fund's average daily net asset value as follows:
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------- -------------
<S> <C>
First $500,000,000................................ 0.85%
Next $500,000,000................................. 0.75%
Amount Over $1 Billion............................ 0.70%
</TABLE>
CAPITAL APPRECIATION FUND AND STOCK FUND.
The Capital Appreciation Fund and Stock Fund each pay a monthly management
fee to HIMCO which is based on a stated percentage of the Fund's average daily
net asset value as follows:
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------- -------------
<S> <C>
First $500,000,000................................ 0.80%
Next $500,000,000................................. 0.70%
Amount Over $1 Billion............................ 0.65%
</TABLE>
DIVIDEND AND GROWTH FUND AND ADVISERS FUND.
The Dividend and Growth Fund and Advisers Fund each pay a monthly management
fee to HIMCO which is
<PAGE>
18 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
based on a stated percentage of the Fund's average daily net asset value as
follows:
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------- -------------
<S> <C>
First $500,000,000................................ 0.75%
Next $500,000,000................................. 0.65%
Amount Over $1 Billion............................ 0.60%
</TABLE>
HIMCO, Hartford Plaza, Hartford, Connecticut 06115, is an indirect
wholly-owned subsidiary of ITT Hartford and was organized under the laws of
Connecticut in 1981. ITT Hartford is a holding company for various insurance
related subsidiaries including Hartford Fire Insurance Company, one of the
largest insurance carriers in the United States. HIMCO also serves as investment
adviser to several other SEC registered funds sponsored by ITT Hartford
affiliates and which are primarily available through the purchase of variable
annuity or variable life contracts.
Certain officers of the Funds are also officers and directors of HIMCO;
Joseph H. Gareau, President and a Director of the Company, is a Director and the
President of HIMCO; Andrew W. Kohnke, Vice President of the Company, is a
Managing Director and Director of HIMCO; J. Richard Garrett, Vice President and
Treasurer of the Company, is the Treasurer of HIMCO; and Charles M. O'Halloran,
Vice President, Secretary and General Counsel of the Company, is a Director,
Secretary and General Counsel of HIMCO.
INVESTMENT SUB-ADVISORY SERVICES
Wellington Management serves as sub-adviser to the Small Company Fund,
Capital Appreciation Fund, International Opportunities Fund, Stock Fund,
Dividend and Growth Fund, and Advisers Fund pursuant to a sub-advisory
agreement, dated as of [ ] 1996.
In connection with its service as sub-adviser to these Funds, Wellington
Management makes all determinations with respect to the purchase and sale of
portfolio securities (subject to the terms and conditions of the investment
objectives, policies and restrictions of these Funds and to the general
supervision of the Company's Board of Directors and HIMCO) and places, in the
name of the Funds, all orders for execution of these Funds' portfolio
transactions. In conjunction with such activities, Wellington Management
regularly furnishes reports to the Company's Board of Directors concerning
economic forecasts, investment strategy, portfolio activity and performance of
the Funds.
For services rendered to these Funds, Wellington Management charges a
quarterly fee to HIMCO. The Funds will not pay Wellington Management's fee nor
any part thereof, nor will the Funds have any obligation or responsibility to do
so. Wellington Management has agreed to waive a portion of its fees during the
start-up phase of the Funds as described in the SAI. Wellington Management's
quarterly fee is based upon the following annual rates as applied to the average
of the calculated daily net asset value of each Fund that it advises:
SMALL COMPANY FUND, CAPITAL APPRECIATION FUND AND INTERNATIONAL OPPORTUNITIES
FUND.
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------- -------------
<S> <C>
First $50,000,000................................. 0.40%
Next $100,000,000................................. 0.30%
Next $350,000,000................................. 0.25%
Next $500,000,000................................. 0.20%
Over $1 Billion................................... 0.175%
</TABLE>
DIVIDEND AND GROWTH FUND, STOCK FUND AND ADVISERS FUND.
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------- -------------
<S> <C>
First $50,000,000................................. 0.325%
Next $100,000,000................................. 0.25%
Next $350,000,000................................. 0.20%
Next $500,000,000................................. 0.15%
Over $1 Billion................................... 0.125%
</TABLE>
Wellington Management is a professional investment counseling firm which
provides investment 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 1933. As of June 30, 1996, Wellington Management held
discretionary management authority with respect to approximately $ billion of
client assets. Wellington Management, 75 State Street, Boston, MA 02109, is a
Massachusetts general partnership, of which the following persons are managing
partners: Robert W. Doran, Duncan M. McFarland, and John R. Ryan.
PORTFOLIO MANAGERS
Kenneth L. Abrams, Senior Vice President of Wellington Management, serves as
portfolio manager to the Small Company Fund. Mr. Abrams has been an emerging
company research analyst with Wellington Management since 1986 and, in addition,
has been a portfolio manager with Wellington Management since 1990.
Saul J. Pannell, Senior Vice President of Wellington Management, serves as
portfolio manager to the Capital Appreciation Fund. Mr. Pannell has been a
portfolio manager with Wellington Management since 1979.
The International Opportunities Fund is managed by Wellington Management's
Global Equity Strategy Group, headed by Trond Skramstad, Senior Vice President
of Wellington Management. The Global Equity Strategy Group is comprised of
global portfolio managers and senior investment professionals. No person or
persons is primarily responsible for making recommendations to or within the
Global Equity Strategy Group. Prior to joining Wellington
<PAGE>
HARTFORD MUTUAL FUNDS 19
- --------------------------------------------------------------------------------
Management in 1993, Mr. Skramstad was a global equity portfolio manager at
Scudder, Stevens & Clark since 1990.
Rand L. Alexander, Senior Vice President of Wellington Management, serves as
portfolio manager to the Stock Fund. Mr. Alexander has been a portfolio manager
with Wellington Management since 1990.
Laurie A. Gabriel, CFA and Senior Vice President of Wellington Management,
serves as portfolio manager to the Dividend and Growth Fund. Ms. Gabriel joined
Wellington Management in 1976. She has been a quantitative research analyst with
Wellington Management since 1986, and took on portfolio management
responsibilities in 1987.
The Advisers Fund is managed by Paul D. Kaplan, Senior Vice President of
Wellington Management, and Rand L. Alexander. Mr. Kaplan has been a portfolio
manager with Wellington Management since 1982 and manages the fixed income
component of the Advisers Fund. Rand L. Alexander, who is portfolio manager to
the Stock Fund, manages the equity component of the Advisers Fund.
The Bond Income Strategy Fund is managed by Alison D. Granger. Ms. Granger,
a Senior Vice President of HIMCO and Assistant Vice President of Hartford Life
Insurance Company, joined ITT Hartford in 1993 as a senior corporate bond
trader. She became Director of Trading in 1994 and a portfolio manager in 1995.
Prior to joining ITT Hartford, Ms. Granger was a corporate bond portfolio
manager at The Home Insurance Company and Axe-Houghton Management. Ms. Granger
has over sixteen years of experience with fixed income investments.
PORTFOLIO TURNOVER
Each Fund may sell a portfolio investment soon after its acquisition if
HIMCO and /or Wellington Management believe that such a disposition is in the
Fund's best interest. A high rate of portfolio turnover involves correspondingly
greater brokerage commission expenses and other transaction costs, which must be
ultimately borne by a Fund's shareholders. High portfolio turnover may result in
the realization of substantial capital gains; distributions derived from such
gains may be treated as ordinary income for Federal income tax purposes.
Although it is not possible to predict future portfolio turnover rates
accurately, and such rates may vary from year to year, it is anticipated that
each Fund's portfolio turnover rate will not exceed 100% except the Bond Income
Strategy Fund which is estimated to be approximately 200%.
BROKERAGE COMMISSIONS
Although the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. prohibit its members from seeking orders for the
execution of investment company portfolio transactions on the basis of their
sales of investment company shares, under such Rules, sales of investment
company shares may be considered in selecting brokers to effect portfolio
transactions. Accordingly, some portfolio transactions are, subject to such
Rules and to obtaining best prices and executions, effected through dealers who
sell shares of the Company. HIMCO or Wellington Management may also select an
affiliated broker-dealer to execute transactions for the Company, provided that
the commissions, fees or other remuneration paid to such affiliated broker are
reasonable and fair as compared to that paid to non-affiliated brokers for
comparable transactions.
DIVIDENDS, CAPITAL GAINS AND TAXES
DIVIDENDS.
Each Fund intends to distribute substantially all of its net income and
capital gains to shareholders no less frequently than once a year. Normally,
dividends from net investment income of the Small Company Fund, Capital
Appreciation Fund, International Opportunities Fund, and Stock Fund will be
declared and paid annually; dividends from the net investment income of the
Dividend and Growth Fund and Advisers Fund will be declared and paid
semi-annually; dividends from the net investment income of the Bond Income
Strategy Fund will be declared and paid monthly and dividends from net
investment income of the Money Market Fund will be declared daily and paid
monthly. Dividends from the Money Market Fund are not paid on shares until the
day following the date on which the shares are issued. Unless shareholders
specify otherwise, all dividends and distributions will be automatically
reinvested in additional full or fractional shares of each Fund.
DISTRIBUTION OPTIONS.
When you open your account, specify on your application how you want to
receive your distributions. For ITT Hartford Mutual Funds retirement accounts,
all distributions are reinvested. For other accounts, you have five options:
REINVEST ALL DISTRIBUTIONS IN THE FUND. You can elect to reinvest all
dividends and long term capital gains distributions in additional shares of the
Fund.
REINVEST INCOME DIVIDENDS ONLY. You can elect to reinvest investment income
dividends in a Fund while receiving capital gains distributions by check or sent
to your bank account.
REINVEST CAPITAL GAINS ONLY. You can elect to reinvest capital gains in the
Fund while receiving dividends by check or sent to your bank account.
<PAGE>
20 HARTFORD MUTUAL FUNDS
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RECEIVE ALL DISTRIBUTIONS IN CASH. You can elect to receive a check for all
dividends and long-term capital gain distributions or have them sent to your
bank.
TAXES.
If your account is not a tax-deferred retirement account, you should be
aware of the following tax implications of investing in the Fund. Long term
capital gains are taxable as long term capital gains when distributed to
shareholders. It does not matter how long you hold your shares. Dividends paid
from short term capital gains and net investment income are taxable as ordinary
income. Distributions are subject to federal income tax and may be subject to
state or local taxes. Your distributions are taxable when paid, whether you
reinvest them in additional shares or take them in cash. Every year the Fund
will send you and the IRS a statement showing the amount of each taxable
distribution you received in the previous year.
"BUYING A DIVIDEND". When a fund goes ex-dividend, its share price is
reduced by the amount of the distribution. If you buy shares on or just before
the ex-dividend date, or just before the Fund declares a capital gains
distribution, you will pay the full price for the shares and then receive a
portion of the price back as a taxable dividend or capital gain.
TAXES ON TRANSACTIONS. Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. A capital gain or loss is the
difference between the price you paid for the shares and the price you received
when you sold them.
RETURNS OF CAPITAL. In certain cases distributions made by the Fund may be
considered a non-taxable return of capital to shareholders. If that occurs, it
will be identified in notices to shareholders. A non-taxable return of capital
may reduce your tax basis in your Fund shares.
This information is only a summary of certain federal tax information about
your investment. More information is contained in the SAI, and in addition you
should consult with your tax adviser about the effect of an investment in the
Fund on your particular tax situation.
OWNERSHIP AND CAPITALIZATION OF THE COMPANY
CAPITAL STOCK
As of the date of this Prospectus, the authorized capital stock of the
Company consisted of the following shares of a par value of $.001 per share:
Small Company Fund, 300 million; Capital Appreciation Fund, 300 million;
International Opportunities Fund, 300 million; Stock Fund, 300 million; Dividend
and Growth Fund, 300 million; Advisers Fund, 400 million; Bond Income Strategy
Fund, 300 million; and Money Market Fund, 800 million.
The Board of Directors is authorized, without further shareholder approval,
to authorize additional shares and to classify and reclassify the Funds into one
or more classes. Accordingly, the Directors have authorized the issuance of
three classes of shares of each of the Funds (except the Money Market Fund),
designated as Class A, Class B and Class Y shares. Class A and Class Y shares
have been authorized for the Money Market Fund. The shares of each class
represent an interest in the same portfolio of investments of the respective
Funds and have equal rights as to voting, redemption, dividends and liquidation.
However, each class bears different sales charges, distribution and transfer
agency fees and related expenses, different exchange privileges and each class
has exclusive voting rights with respect to its respective Rule 12b-1 plan.
VOTING
Each shareholder is entitled to one vote for each share of the Funds held
upon all matters submitted to the shareholders generally. Annual meetings of
shareholders will not be held except as required by the Investment Company Act
of 1940 and other applicable law.
GENERAL INFORMATION
REPORTS TO SHAREHOLDERS
The Funds will issue unaudited semiannual reports showing current
investments in each Fund and other information and annual financial statements
examined by independent auditors for the Funds.
DISTRIBUTOR
Hartford Securities Distribution Company, Inc., P.O. Box 2999, Hartford, CT
06104-2999 serves as distributor to the Company.
TRANSFER AGENT
Boston Financial Data Services, Inc., Two Heritage Drive, Quincy, MA. 02171,
serves as transfer agent to the Company.
CUSTODIAN
State Street Bank and Trust Company serves as custodian of each Fund's
assets.
<PAGE>
HARTFORD MUTUAL FUNDS 21
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CLASS A AND B SHARES
In addition to Class Y shares, the Company also offers Class A and Class B
shares. Class A and B shares are available to individual investors. Class A and
B shares generally have operating expenses similar to Class Y shares, except for
certain sales charges and distribution and transfer agent fees. Please call
1-888-ITT-FUND (1-888-488-3863) for additional information on the purchase of
Class A or B shares.
REQUESTS FOR INFORMATION
This Prospectus does not contain all the information included in the
Registration Statement filed with the SEC. The Registration Statement, including
the exhibits filed therewith, may be examined at the SEC's office in Washington,
D.C. Statements contained in the Prospectus as to the contents of any contract
or other document referred to herein are not necessarily complete, and, in each
instance, reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part, each such statement being qualified, in all respects by such reference.
For additional information, write to ITT Hartford Mutual Funds, Inc., P.O.
Box 8416, Boston, MA. 02266-8416, or call 1-888-ITT-FUND (1-888-488-3863).
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUNDS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER BY THE FUNDS TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL FOR THE FUNDS TO MAKE SUCH OFFER.
<PAGE>
Page 1
PART B
ITT HARTFORD MUTUAL FUNDS, INC. (the "Company")
ITT HARTFORD MONEY MARKET FUND
CLASS A AND CLASS Y SHARES ONLY
ITT HARTFORD SMALL COMPANY FUND
ITT HARTFORD CAPITAL APPRECIATION FUND
ITT HARTFORD INTERNATIONAL OPPORTUNITIES FUND
ITT HARTFORD STOCK FUND
ITT HARTFORD DIVIDEND AND GROWTH FUND
ITT HARTFORD ADVISERS FUND
ITT HARTFORD BOND INCOME STRATEGY FUND
CLASS A, CLASS B AND CLASS Y SHARES
P.O. Box 8416
Boston, MA 02266-8416
1-888-ITT-FUND (1-888-488-3863)
This Statement of Additional Information ("SAI") is not a prospectus but
should be read in conjunction with the Company's Class A and Class B prospectus
and Class Y prospectus. To obtain a free copy of either prospectus send a
written request to: ITT Hartford Mutual Funds, Inc., P.O. Box 8416, Boston, MA
02266-8416 or call the number listed above.
Date of Prospectus: _____ , 1996
Date of Statement of Additional Information: _____ , 1996
Form __-____-__
<PAGE>
Page 2
TABLE OF CONTENTS PAGE
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . .
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . .
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . .
INVESTMENT ADVISORY ARRANGEMENTS . . . . . . . . . . . . . . . . .
FUND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . .
DISTRIBUTION ARRANGEMENTS . . . . . . . . . . . . . . . . . . . .
DISTRIBUTION FINANCING PLANS . . . . . . . . . . . . . . . . . . .
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . . .
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . .
PURCHASE AND REDEMPTION OF SHARES . . . . . . . . . . . . . . . .
INVESTMENT PERFORMANCE . . . . . . . . . . . . . . . . . . . . . .
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TRANSFER AGENT SERVICES . . . . . . . . . . . . . . . . . . . . .
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . .
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
Page 3
GENERAL INFORMATION
ITT Hartford Mutual Funds, Inc. (the "Company") is an open-end management
investment company consisting of eight separate diversified portfolios (each a
"Fund" or together the "Funds"). This SAI relates to all eight Funds. The
Hartford Investment Management Company, Inc. ("HIMCO") is the investment
adviser to each Fund. HIMCO is an indirect wholly owned subsidiary of ITT
Hartford Group, Inc., ("ITT Hartford") an insurance holding company with
approximately $94 billion in assets. In addition, Wellington Management Company
("Wellington Management") is a sub-adviser to several of the Funds.
INVESTMENT OBJECTIVES AND POLICIES
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 (the
"1940 Act"), and as used in the Prospectus 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 shares of a Fund represented at a meeting if the
holders of more than 50% of the outstanding shares of the Fund are present in
person or by proxy or (2) the holders of more than 50% of the outstanding shares
of the Fund.
The investment objective, investment style and certain investment policies
of each Fund are set forth in the Prospectus. Set forth below are the
fundamental investment policies applicable to each Fund followed by the non-
fundamental policies applicable to each Fund.
Each Fund may not:
1. Issue senior securities. For purposes of this restriction, the
issuance of shares of common stock in multiple classes or series, obtaining of
short-term credits as may be necessary for the clearance of purchases and sales
of portfolio securities, short sales against the box, the purchase or sale of
permissible options and futures transactions (and the use of initial and
maintenance margin arrangements with respect to futures contracts or related
options transactions), the purchase or sale of securities on a when issued or
delayed delivery basis, permissible borrowings entered into in accordance with
a Fund's investment policies, and reverse repurchase agreements and mortgage
dollar rolls for which a segregated account has been established to cover such
transactions or for which an offsetting position has been established by the
Fund, are not deemed to be issuances of senior securities.
2. Borrow money, except from banks and then only if immediately after
each such borrowing there is asset coverage of at least 300% as defined in the
1940 Act. For purposes of the 300% asset coverage restriction, reverse
repurchase agreements, mortgage dollar rolls, short sales against the box,
futures contracts, options on futures contracts, securities or indices, when
<PAGE>
Page 4
issued and delayed delivery transactions and securities lending shall not
constitute borrowing.
3. Act as an underwriter, except to the extent that in connection with
the disposition of portfolio securities, a Fund may be deemed to be an
underwriter for purposes of the Securities Act of 1933 (the "1933 Act").
4. Purchase or sell real estate, except that a Fund may (i) acquire or
lease office space for its own use, (ii) invest in securities of issuers that
invest in real estate or interests therein, (e.g. real estate investment trusts)
(iii) invest in securities that are secured by real estate or interests therein,
(iv) purchase and sell mortgage-related securities, (v) hold and sell real
estate acquired by the Fund as a result of the ownership of securities and (vi)
invest in real estate limited partnerships.
5. Invest in commodities, except that a Fund may (i) invest in securities
of issuers that invest in commodities, and (ii) engage in permissible options
and futures transactions and forward foreign currency contracts, entered into in
accordance with the Fund's investment policies.
6. Make loans, except that a Fund (i) may lend portfolio securities in
accordance with the Fund's investment policies in amounts up to 33 1/3% of the
Fund's total assets taken at market value, (ii) enter into fully collateralized
repurchase agreements, and (iii) purchase debt obligations in which the Fund may
invest consistent with its investment policies.
7. Purchase the securities of issuers conducting their principal activity
in the same industry if, immediately after such purchase, the value of its
investments in such industry would exceed 25% of its total assets taken at
market value at the time of such investment. This limitation does not apply to
investments in obligations issued or guaranteed by the U.S. Government or any of
its agencies, instrumentalities or authorities.
In addition, each Fund will operate as a "diversified" fund within the
meaning of the 1940 Act. This means that with respect to 75% of a Fund's
total assets, a Fund will not purchase securities of an issuer (other than cash,
cash items or securities issued or guaranteed by the U.S. Government, its
agencies, instrumentalities or authorities), if
(a) such purchase would cause more than 5% of the Fund's total assets
taken at market value to be invested in the securities of such issuer;
or
(b) such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by the Fund.
If a percentage restriction on investment or utilization of assets as set
forth above is adhered to at the time an investment is made, a later change in
percentage resulting from changes in the values of a Fund's assets will not be
considered a violation of the restriction; provided, however, that the asset
coverage requirement applicable to borrowings under Section 18(f)(1) of the 1940
Act shall be maintained in the manner contemplated by that Section.
<PAGE>
Page 5
In order to permit the sale of shares of the Funds in certain states, the
Board of Directors may, in its sole discretion, adopt restrictions on investment
policy more restrictive than those described above. Should the Board of
Directors determine that any such more restrictive policy is no longer in the
best interest of a Fund and its shareholders, the Fund may cease offering shares
in the state involved and the Board of Directors may revoke such restrictive
policy. Moreover, if the states involved shall no longer require any such
restrictive policy, the Board of Directors may, in its sole discretion, revoke
such policy.
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 or securities lending arrangements.
The deposit of underlying securities and other assets in escrow and collateral
arrangements with respect to margin for futures contracts and related options is
not deemed to be a pledge or other encumbrance.
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) or make short sales of securities (except short sales
against the box) or maintain a short position. 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 which are illiquid if, as a result of any such
purchase, more than 15% of its net assets (10% for the Money Market Fund) would
consist of such securities.
4. Purchase securities while outstanding borrowings exceed 5% of a Fund's
total assets.
5. Purchase interests in oil, gas, or other mineral exploration programs
or mineral leases; however, this policy will not prohibit the acquisition of
securities of companies engaged in the production or transmission of oil, gas,
or other minerals.
6. Invest for the purpose of exercising control over or management of any
company.
7. To the Company's knowledge, purchase or retain securities of an
issuer if one or more of the directors or officers of the Company or directors
or officers of HIMCO or Wellington Management or any investment management
subsidiary of HIMCO or Wellington Management individually owns beneficially
more than 0.5% and together own beneficially more than 5% of the securities of
such issuer.
8. Invest more than 5% of total assets in securities of any issuer which,
together with its
<PAGE>
Page 6
predecessors, has been in operation for less than three years.
9. Invest in real estate limited partnership interests except interests
in Real Estate Investment Trusts.
10. Purchase warrants of any issuer, if, as a result of such purchase,
more than 2% of the value of the Fund's total assets would be invested in
warrants which are not listed on an exchange or more than 5% of the value of the
total assets of the Fund would be invested in warrants generally, whether or
not so listed. For purposes of this restriction, warrants are to be valued at
the lesser of cost or market, but warrants acquired by the Fund in units with or
attached to debt securities shall be deemed to be without value.
11. Write covered call options with respect to more than 25% of the value
of its total assets; invest more than 25% of its total assets in protective put
options; or invest more than 5% of its total assets in options other than
protective put or covered call options. The aggregate value of premiums paid on
all options held by the Fund at any time will not exceed 20% of the Fund's
total assets.
If a percentage restriction on investment or utilization of assets as set
forth above is adhered to at the time an investment is made, a later change in
percentage resulting from changes in the values of a Fund's assets will not be
considered a violation of the restriction.
MISCELLANEOUS INVESTMENT PRACTICES
A further description of certain of the policies described in the Prospectus is
set forth below.
MONEY MARKET INSTRUMENTS AND TEMPORARY INVESTMENT STRATEGIES
In addition to the Money Market Fund which may invest in cash, cash
equivalents and money market instruments at any time, all other Funds may hold
cash or cash equivalents and invest in high quality money market instruments
under appropriate circumstances as determined by HIMCO or Wellington Management.
Such Funds may invest up to 100% of their assets in cash, cash equivalents or
money market instruments only for temporary defensive purposes. In addition,
the Advisers Fund may invest some or all of its assets in such instruments when
Wellington Management expects returns on such instruments to be attractive
relative to investments in equity and debt securities.
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.
REPURCHASE AGREEMENTS
<PAGE>
Page 7
Each Fund is permitted to enter into fully collateralized repurchase
agreements. The Company's Board of Directors has established standards for
evaluation of the creditworthiness of the banks and securities dealers with
which the Funds will engage in repurchase agreements and monitors on a quarterly
basis HIMCO and Wellington Management's compliance with such standards.
Presently, each Fund may enter into repurchase agreements only with commercial
banks with at least $1 billion in assets or with recognized government
securities dealers with a minimum net capital of $100 million.
HIMCO 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, the 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.
A repurchase agreement is an agreement by which the seller of a security
agrees to repurchase the security sold at a mutually agreed upon time and price.
It may also be viewed as the loan of money by a Fund to the seller. The resale
price would be in excess of the purchase price, reflecting an agreed upon market
interest rate.
REVERSE REPURCHASE AGREEMENTS
Each Fund may also enter into reverse repurchase agreements. Reverse
repurchase agreements involve sales by a Fund of portfolio assets concurrently
with an agreement by a 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 a Fund is obligated to repurchase may decline below the
repurchase price. A reverse repurchase agreement may be viewed as a
collateralized borrowing by a Fund. Borrowing magnifies the potential for gain
or loss on the portfolio securities of a Fund and, therefore, increases the
possibility of fluctuation in a Fund's net asset value. A Fund will establish a
segregated account with the Company's custodian bank in which a Fund will
maintain cash, cash equivalents, U.S. government securities or other high
quality debt securities equal in value to a Fund's obligations in respect of
reverse repurchase agreements.
<PAGE>
Page 8
DEBT SECURITIES
Each 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 governments or corporations); (3) asset-backed securities and mortgage-
related securities, including collateralized mortgage obligations ("CMO's")
(Advisers Fund and Bond Income Strategy Fund only); 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 non-U.S.
issuers.
INVESTMENT GRADE DEBT SECURITIES
Each Fund is permitted to invest in debt securities rated within the four
highest rating categories (i.e., Aaa, Aa, A or Baa by Moody's or AAA, AA, A or
BBB by S&P) (or, if unrated, securities of comparable quality as determined by
HIMCO 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 a Fund is authorized to invest in a certain
rating category, the 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, HIMCO 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 (i.e., "Baa" by
Moody's and "BBB" by S&P), and unrated securities of comparable quality (as
determined by HIMCO 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.
HIGH YIELD-HIGH RISK SECURITIES
Each of the Capital Appreciation Fund, Dividend and Growth Fund,
International Opportunities Fund, Small Company Fund, Stock Fund, and Advisers
Fund is permitted to invest up to 5% of its assets in securities rated as low as
"C" by Moody's or "CC" by S&P or of comparable quality if not rated. The Bond
Income Strategy Fund is permitted to invest up to 30% of its assets in
securities rated in the highest level below investment grade (i.e., "Ba" for
Moody's or "BB" by S&P), or if unrated, securities determined to be of
comparable quality by HIMCO. Securities rated below investment grade are
commonly referred to as "high yield-high risk 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 a Fund is
authorized to invest in a certain rating category, the Fund is also permitted to
invest in any of the sub-categories or gradations within that rating category.
Securities in the highest category below investment grade are considered to be
of poor standing and predominantly speculative.
<PAGE>
Page 9
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 are considered speculative with respect
to the issuer's capacity to pay interest and repay principal in accordance with
the terms of the obligations. Accordingly, it is possible that these types of
factors could, in certain instances, reduce the value of securities held by a
Fund with a commensurate effect on the value of a Fund's shares. If a security
is downgraded to a rating category which does not qualify for investment, HIMCO
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 the Advisers Fund and the Bond
Income Strategy 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 Funds) by various governmental, government-related and
private organizations. These Funds may also invest in similar mortgage-related
securities which provide funds for multi-family residences or commercial real
estate properties.
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. 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.
Evaluating the risks associated with prepayment and determining the rate at
which prepayment is 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 a 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 a 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 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 a 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 each 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
(i.e., a Fund) receives monthly scheduled payments of principal and interest,
and may receive unscheduled principal payments representing prepayments
<PAGE>
Page 10
on the underlying mortgages. When the 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. See
"Illiquid Securities."
ASSET-BACKED SECURITIES
The Advisers Fund, the Bond Income Strategy Fund and the Money Market Fund
may invest in asset-backed securities. The securitization techniques used for
asset-backed securities are similar to those used for mortgage-related
securities. The collateral for these securities has included home equity loans,
automobile and credit card receivables, boat loans, computer leases, airplane
leases, mobile home loans, recreational vehicle loans and hospital accounts
receivables. These 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. The ability of an issuer of asset-backed
securities to enforce its security interest in the underlying securities may be
limited.
EQUITY SECURITIES
Each Fund except the Bond Income Strategy Fund and Money Market Fund may
invest in equity securities which include common stocks, preferred stocks
(including convertible preferred stock) and rights to acquire such securities.
In addition, these Funds may invest in securities such as bonds, debentures and
corporate notes which are convertible into common stock at the option of the
holder.
SMALL CAPITALIZATION SECURITIES
All Funds except the Money Market Fund and Bond Income Strategy Fund may
invest in equity securities which have less than $2 billion in market
capitalization ("Small Capitalization Securities"). The issuers of Small
Capitalization Securities tend to be companies which are smaller or newer than
those listed on the New York or American Stock Exchanges. As a result, Small
Capitalization Securities are primarily traded on the over-the counter market,
although they may also be listed for trading on the New York or American Stock
Exchanges. 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. 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.
<PAGE>
Page 11
NON-U.S. SECURITIES
Each Fund is permitted to invest a portion of its assets in non-U.S.
securities, including, in the case of permitted equity investments, 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 non-U.S. issuer deposited in a domestic bank or non-U.S.
branch of a U.S. bank. ADRs are traded on a U.S. securities exchange, or in an
over-the-counter market, and are denominated in U.S. dollars. GDRs are
certificates issued globally and evidence a similar ownership arrangement. GDRs
are traded on non-U.S. securities exchanges and are denominated in non-U.S.
currencies. The value of an ADR or a GDR will fluctuate with the value of the
underlying security, will reflect any changes in exchange rates and otherwise
will involve risks associated with investing in non-U.S. securities. When
selecting securities of non-U.S. issuers, HIMCO or Wellington Management will
evaluate the economic and political climate and the principal securities
markets of the country in which an issuer is located.
The Advisers Fund, International Opportunities Fund and the Bond Income
Strategy Fund are permitted to invest in Brady Bonds, which are debt securities
issued under the framework of the Brady Plan, an initiative announced by former
U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor
nations to restructure their outstanding external commercial bank debt. In
restructuring its external debt under the Brady Plan framework, a debtor nation
negotiates with its existing bank lenders as well as multinational institutions
such as the World Bank and the International Monetary Fund ("IMF"). The Brady
Plan framework, as it has developed, contemplates the exchange of commercial
bank debt for newly issued bonds ("Brady Bonds"). Brady Bonds may also be
issued in respect of new money being advanced by existing lenders in connection
with debt restructuring. Agreements implemented under the Brady Plan to date
are designed to achieve debt and debt-service reduction through specific options
negotiated by a debtor nation with its creditors. As a result, the financial
packages offered by each country differ. Brady Bonds issued to date may be
purchased and sold in the secondary markets through U.S. securities dealers and
other financial institutions and are generally maintained through European
securities depositories. See also "High Yield-High Risk Securities."
Investing in securities issued by non-U.S. companies involves
considerations and potential risks not typically associated with investing in
obligations issued by U.S. companies. Less information may be available about
non-U.S. companies than about U.S. companies and non-U.S. companies generally
are not subject to uniform accounting, auditing and financial reporting
standards or to other regulatory practices and requirements comparable to those
applicable to U.S. companies. The values of non-U.S. securities are affected by
changes in currency rates or exchange control regulations, restrictions or
prohibition on the repatriation of non-U.S. currencies, application of non-U.S.
tax laws, including withholding taxes, changes in governmental administration or
economic or monetary policy (in the U.S. or outside the U.S.) or changed
circumstances in dealings between nations. Costs are also incurred in connection
with conversions between various currencies.
<PAGE>
Page 12
Investing in non-U.S. sovereign debt will expose a Fund to the direct or
indirect consequences of political, social or economic changes in the developing
and emerging countries that issue the securities. The ability and willingness of
sovereign obligers in developing and emerging countries or the governmental
authorities that control repayment of their external debt to pay principal and
interest on such debt when due may depend on general economic and political
conditions within the relevant country. Countries such as those in which the
Funds may invest have historically experienced, and may continue to experience,
high rates of inflation, high interest rates, exchange rate trade difficulties
and unemployment. Some of these countries are also characterized by political
uncertainty or instability. Additional factors which may influence the ability
or willingness to service debt include, but are not limited to, a country's cash
flow situation, the availability of sufficient foreign exchange on the date a
payment is due, the relative size of its debt service burden to the economy as a
whole, and its government's policy towards the IMF, the World Bank and other
international agencies.
CURRENCY TRANSACTIONS
Each Fund, except the Money Market Fund, may engage in currency
transactions to hedge the value of portfolio securities denominated in
particular currencies against fluctuations in relative value. Currency
transactions include forward currency contracts, 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 a 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 Fund's underlying securities.
Further, the Funds may enter into currency transactions only with counterparties
that HIMCO or Wellington Management deems to be creditworthy.
The 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 Funds, for cash flow management, and, to
a lesser extent, to enhance returns, each Fund, except the Money Market Fund,
may employ certain hedging, income enhancement and risk management techniques,
including the purchase and sale of options, futures and options on
<PAGE>
Page 13
futures involving equity and debt securities and foreign currencies, aggregates
of equity and debt securities, indices of prices of equity and debt securities
and other financial indices. A Fund's ability to engage in these practices may
be limited by tax considerations and certain other legal considerations.
A 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
Fund. This strategy limits potential capital appreciation in the portfolio
securities subject to the put or call option.
The Funds may also write covered put and call options and purchase put and
call options on foreign currencies to hedge against the risk of foreign exchange
fluctuations on foreign securities the particular Fund holds in its portfolio or
that it intends to purchase. For example, if a Fund enters into a contract to
purchase securities denominated in foreign currency, it could effectively
establish the maximum U.S. dollar cost of the securities by purchasing call
options on that foreign currency. Similarly, if a Fund held securities
denominated in a foreign currency and anticipated a decline in the value of that
currency against the U.S. dollar, the Fund could hedge against such a decline by
purchasing a put option on the foreign currency involved.
In addition, a 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, all for the purpose of protecting against potential changes
in the market value of portfolio securities or in interest rates. Aggregates
are composites of equity or debt securities that are not tied to a commonly
known index. An index is a measure of the value of a group of securities or
other interests. An index assigns relative values to the securities included in
that index, and the index fluctuates with changes in the market value of those
securities.
A Fund may write covered options only. "Covered" means that, so long as a
Fund is obligated as the writer of a call option on particular securities or
currency, it will own either the underlying securities or currency or an option
to purchase the same underlying securities or currency having an expiration date
not earlier than the expiration date of the covered option and an exercise price
equal to or less than the exercise price of the covered option, or will
establish or maintain with its custodian for the term of the option a segregated
account consisting of cash, U.S. Government securities or other liquid, high
grade debt obligations having a value equal to the fluctuating market value of
the optioned securities or currencies. A Fund will cover any put option it
writes on particular securities or currency by maintaining a segregated account
with its custodian as described above.
To hedge against fluctuations in currency exchange rates, a 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, a Fund may use foreign currency futures contracts when it anticipates a
general weakening of the foreign currency exchange rate that could adversely
affect the market values of the Fund's foreign securities holdings. In this
case, the sale of futures contracts on the underlying currency may reduce the
risk of a reduction in
<PAGE>
Page 14
market value caused by foreign currency variations and, by so doing, provide an
alternative to the liquidation of securities positions in the Fund and resulting
transaction costs. When the Fund anticipates a significant foreign exchange
rate increase while intending to invest in a non-U.S. security, the Fund may
purchase a foreign currency futures contract to hedge against a rise in foreign
exchange rates pending completion of the anticipated transaction. Such a
purchase of a futures contract would serve as a temporary measure to protect the
Fund against any rise in the foreign exchange rate that may add additional costs
to acquiring the non-U.S. security position. The Fund similarly may use futures
contracts on equity and debt securities to hedge against fluctuations in the
value of securities it owns or expects to acquire.
The Funds also may purchase call or put options on foreign currency futures
contracts to obtain a fixed foreign exchange rate at limited risk. A Fund may
purchase a call option on a foreign currency futures contract to hedge against a
rise in the foreign exchange rate while intending to invest in a non-U.S.
security of the same currency. A Fund may purchase put options on foreign
currency futures contracts to hedge against a decline in the foreign exchange
rate or the value of its non-U.S. securities. A Fund may write a call option on
a foreign currency futures contract as a partial hedge against the effects of
declining foreign exchange rates on the value of non-U.S. securities and in
circumstances consistent with a Fund's investment objectives and policies.
Options on indexes 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. When a Fund writes a covered option on an index, a
Fund will be required to deposit and maintain with a custodian cash or high-
grade, liquid short-term debt securities equal in value to the aggregate
exercise price of a put or call option pursuant to the requirements and the
rules of the applicable exchange. If, at the close of business on any day, the
market value of the deposited securities falls below the contract price, the
Fund will deposit with the custodian cash or high-grade, liquid short-term debt
securities equal in value to the deficiency.
To the extent that a Fund enters into futures contracts, options on futures
contracts and options on foreign currencies that are traded on an exchange
regulated by the 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 liquidation value of the Fund's portfolio,
after taking into account the unrealized profits and unrealized losses on any
such contracts the Fund has entered into. However, the "in-the-money" amount of
such options may be excluded in computing the 5% limit. Adoption of this
guideline will not limit the percentage of a Fund's assets at risk to 5%.
Although any one Fund may not employ all or any of the foregoing
strategies, its use of options, futures and options thereon and forward currency
contracts (as described under "Currency Transactions") would involve certain
investment risks and transaction costs to which it might not be subject were
such strategies not employed. Such risks include: (1) dependence on the ability
of HIMCO or Wellington Management to predict movements in the
<PAGE>
Page 15
prices of individual securities, fluctuations in the general securities markets
or market sections and movements in interest rates and currency markets; (2)
imperfect correlation between movements in the price of the securities or
currencies hedged or used for cover; (3) the fact that skills and techniques
needed to trade options, futures contracts and options thereon or to use forward
currency contracts are different from those needed to select the securities in
which a Fund invests; (4) lack of assurance that a liquid secondary market will
exist for any particular option, futures contract, option thereon or forward
contract at any particular time, which may affect a Fund's ability to establish
or close out a position; (5) possible impediments to effective portfolio
management or the ability to meet current obligations caused by the segregation
of a large percentage of a Fund's assets to cover its obligations; and (6) the
possible need to defer closing out certain options, futures contracts, options
thereon and forward contracts in order to continue to qualify for the beneficial
tax treatment afforded "regulated investment companies" under the Code. In the
event that the anticipated change in the price of the securities or currencies
that are the subject of such a strategy does not occur, it may be that a Fund
would have been in a better position had it not used such a strategy at all.
SWAP AGREEMENTS
Each Fund, except the Money Market Fund, may enter into interest rate
swaps, currency swaps, and other types of swap agreements such as caps, collars,
and floors. In a typical interest rate swap, one party agrees to make regular
payments equal to a floating interest rate multiplied by a "notional principal
amount," in return for payments equal to a fixed rate multiplied by the same
amount, for a specified period of time. If a swap agreement provides for
payments in different currencies, the parties might agree to exchange the
notional principal amount as well. Swaps may also depend on other prices or
rates, such as the value of an index or mortgage prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specified interest rate exceeds an
agreed-upon level, while the seller of an interest rate floor is obligated
to make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
<PAGE>
Page 16
Swap agreements will tend to shift a Fund's investment exposure from one
type of investment to another. For example, if a Fund agreed to exchange
floating rate payments for fixed rate payments, the swap agreement would tend to
decrease the Fund's exposure to rising interest rates. Caps and floors have an
effect similar to buying or writing options. Depending on how they are used,
swap agreements may increase or decrease the overall volatility of a
Fund's investments and its share price and yield.
The Funds will usually enter into interest rate swaps on a net basis, i.e.,
where the two parties make net payments with a Fund receiving or paying, as the
case may be, only the net amount of the two payments. The net amount of the
excess, if any, of a Fund's obligations over its entitlement with respect to
each interest rate swap will be U.S. Government Securities or other liquid high
grade debt obligations having an aggregate net asset value at least equal to the
accrued excess will be maintained by the Company's custodian in a segregated
account. If a Fund enters into a swap on other than a net basis, the Fund will
maintain in the segregated account the full amount of the Fund's obligations
under each such swap. The 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 HIMCO or Wellington Management,
pursuant to procedures adopted and reviewed on an ongoing basis by the Board of
Directors, to be creditworthy. If a default occurs by the other party to such
transaction, a 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 Fund's rights as a creditor.
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 a
Fund will be able to enter into interest rate swaps or to purchase interest rate
caps, collars or floors at prices or on terms HIMCO or Wellington Management, as
appropriate, believes are advantageous to such Fund. In addition, although the
terms of interest rate swaps, caps, collars and floors may provide for
termination, there can be no assurance that a 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 SEC to be illiquid securities.
The successful utilization of hedging and risk management transactions
requires skills different from those needed in the selection of a Fund's
portfolio securities and depends on HIMCO's or Wellington Management's ability
to predict correctly the direction and degree of movements in interest rates.
Although the Funds believe that use of the hedging and risk management
techniques described above will benefit the Funds, if HIMCO's or Wellington
Management's judgment about the direction or extent of the movement in interest
rates is incorrect, a Fund's overall performance would be worse than if it had
not entered into any such transactions. For example, if a 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 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
<PAGE>
Page 16
the swap agreement or would have paid the purchase price of the interest rate
floor.
ILLIQUID SECURITIES
Each Fund is permitted to invest in illiquid securities. No illiquid
securities will be acquired if upon the purchase more than 10% of Money Market
Fund's net assets or 15% of each other Fund's net assets would consist of such
securities. "Illiquid Securities" are securities that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price used to determine a Fund's net asset value. Each Fund
may purchase certain restricted securities commonly known as Rule 144A
securities that can be resold to institutions and which may be determined to be
liquid pursuant to policies and guidelines of the Board of Directors. A Fund may
not be able to sell illiquid securities when HIMCO or Wellington Management
considers it desirable to do so or may have to sell such securities at a price
that is lower than the price that could be obtained if the securities were more
liquid. A sale of illiquid securities may require more time and may result in
higher dealer discounts and other selling expenses than does the sale of
securities that are not illiquid. Illiquid securities also may be more difficult
to value due to the unavailability of reliable market quotations for such
securities, and investment in illiquid securities may have an adverse impact on
net asset value.
Under current interpretations of the SEC Staff, the following types of
securities in which a Fund may invest will be considered illiquid: (1)
repurchase agreements maturing in more than seven days; (2) certain restricted
securities (securities whose public resale is subject to legal or contractual
restrictions); (3) options, with respect to specific securities, not traded on a
national securities exchange that are not readily marketable; and (4) any other
securities in which a Fund may invest that are not readily marketable.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
Each 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 Funds generally
purchase securities on a when-issued basis with the intention of acquiring the
securities, the Funds may sell the securities before the settlement date if
HIMCO or Wellington Management deems it advisable. At the time a Fund makes the
commitment to purchase securities on a when-issued basis, the Fund will record
the transaction and thereafter reflect the value, each day, of such security in
determining the net asset value of the Fund. At the time of delivery of the
securities, the value may be more or less than the purchase price. A Fund will
maintain, in a segregated account, cash, U.S. Government securities or other
liquid, high-grade debt obligations having a value equal to or greater than the
Fund's purchase commitments; likewise a Fund will segregate securities sold
on a delayed-delivery basis.
OTHER INVESTMENT COMPANIES
Each Fund is permitted to invest in other investment companies. The
investment companies
<PAGE>
Page 17
in which a Fund would invest may or may not be registered under the 1940 Act.
Securities in certain countries are currently accessible to the Funds only
through such investments. The investment in other investment companies is
limited in amount by the 1940 Act, and will involve the indirect payment of a
portion of the expenses, including advisory fees, of such other investment
companies. Under the 1940 Act, a Fund will not purchase a security of an
investment company if, as a result, (1) more than 10% of the Fund's assets would
be invested in securities of other investment companies, (2) such purchase would
result in more than 3% of the total outstanding voting securities of any one
such investment company being held by the Fund; or (3) more than 5% of the
Fund's assets would be invested in any one such investment company.
PORTFOLIO SECURITIES LENDING
Each of the Funds may lend its portfolio securities to broker/dealers and
other institutions as a means of earning interest income. The borrower will be
required to deposit as collateral, cash, cash equivalents, U.S. government
securities or other high quality liquid debt securities that at all times will
be at least equal to 100% of the market value of the loaned securities and such
amount will be maintained in a segregated account of the respective Fund. While
the securities are on loan the borrower will pay the respective 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
Funds may lend securities only if: (1) the loan is fully secured by appropriate
collateral at all times; and (2) the value of all loaned securities of any Fund
is not more than 33 1/3% of the Fund's total assets taken at the time of the
loan.
MANAGEMENT OF THE COMPANY
The directors and officers of the Fund and their principal business occupations
for the last five years are set forth below. Those directors who are deemed to
be "interested persons" of the Company, as that term is defined in the 1940 Act
are indicated by an asterisk next to their respective names.
Name, Address, Age and Position with the Company
- ------------------------------------------------
JOSEPH ANTHONY BIERNAT (age 68)
Director
30 Hurdle Fence Drive
Avon, CT 06001
Mr. Biernat served as Senior Vice President and Treasurer of United Technologies
Corporation from 1984 until March, 1987, when he retired. He subsequently served
as Executive Vice President of Boston Security Counselors, Inc., Hartford,
Connecticut, and served as Vice President-Client Services of Wright Investors'
Service, Bridgeport, Connecticut. Mr. Biernat presently is consulting to
organizations on financial matters, with the majority of time spent with T.O.
Richardson & Co., Farmington, Connecticut.
<PAGE>
Page 19
WINIFRED ELLEN COLEMAN (age 63)
Director
27 Buckingham Lane
West Hartford, CT 06117
Ms. Coleman has served as President of Saint Joseph College since 1991.
JAMES CUBANSKI (age 36)
Assistant Secretary
Hartford Plaza
Hartford, CT 06115
Mr. Cubanski has served as Director of Tax Administration of ITT Hartford
Insurance Group since July, 1995. Formerly he served as Director of Federal Tax
Administration (July, 1993 - July, 1995) and Manager of Federal Taxes (February,
1991 - July, 1993).
PETER CUMMINS (age 58)
Vice President
Hartford Plaza
Hartford, CT 06115
Mr. Cummins has been Vice President of sales and marketing of the Individual
Life and Annuity Division of ITT Hartford Insurance Group-Life Companies since
1989.
JOSEPH HARRY GAREAU* (age 48)
Director and President
P.O. Box 2999
Hartford, CT 06104-2999
Mr. Gareau has served as Executive Vice President and Chief Investment Officer
of ITT Hartford Insurance Group since 1993. Formerly, he served as Senior Vice
President (September, 1992 - April, 1993) and Vice President (October, 1987 -
September, 1992). Mr. Gareau is also a Director and the President of HIMCO.
JAMES RICHARD GARRETT (age 50)
Vice President and Treasurer
Hartford Plaza
Hartford, CT 06115
Mr. Garrett has served as a Vice President of ITT Hartford Insurance Group since
1989 and as Treasurer since 1983. Mr. Garrett is also the Treasurer of HIMCO.
JOHN PHILLIP GINNETTI (51)
Vice President
P.O. Box 2999
Hartford, CT 06104-2999
<PAGE>
Page 20
Mr. Ginnetti has served as Executive Vice President and Director of Asset
Management Services, a division of ITT Hartford Insurance Group-Life Companies,
since 1994. From 1988 to 1994 he served as Senior Vice President and Director of
the Individual Life and Annuities Division, also a division of ITT Hartford
Insurance Group-Life Companies.
GEORGE RICHARD JAY (age 43)
Controller
P.O. Box 2999
Hartford, CT 06104-2999
Mr. Jay has served as Secretary and Director, Life and Equity Accounting and
Financial Control, of ITT Hartford Insurance Group-Life Companies since 1987.
ANDREW WILLIAM KOHNKE (age 37)
Vice President
P.O. Box 2999
Hartford, CT 06104-2999
Mr. Kohnke has served as a Vice President since 1992, and as an Investment
Manager since 1983, of the ITT Hartford Insurance Group-Life Companies. Mr.
Kohnke is also a Director and Managing Director of HIMCO.
THOMAS MICHAEL MARRA (age 37)
Vice President
P.O. Box 2999
Hartford, CT 06104-2999
Mr. Marra has served as a Executive Vice President since 1996, as Senior Vice
President since 1994, and as Director of the Individual Life and Annuity
Division of ITT Hartford Insurance Group-Life Companies, since 1980.
CHARLES MINER O'HALLORAN (49)
Vice President, Secretary and General Counsel
Hartford Plaza
Hartford, CT 06115
Mr. O'Halloran has served as a Vice President since December, 1994, and as
Senior Associate General Counsel since 1988 and Corporate Secretary since 1996
of ITT Hartford Insurance Group. Mr. O'Halloran is also a Director, Secretary
and General Counsel of HIMCO.
WILLIAM ATCHISON O'NEILL (age 65)
Director
Box 360
East Hampton, CT 06424
<PAGE>
Page 21
The Honorable William A. O'Neill served as Governor of the State of Connecticut
from 1980 until 1991. He is presently retired.
MILLARD HANDLEY PRYOR, JR. (age 62)
Director
90 State House Square
Hartford, CT 06103
Mr. Pryor has served as Managing Director of Pryor & Clark Company, Hartford,
Connecticut, since June, 1992. He served as Chairman of the Board of Lydall,
Inc. from 1985 until October, 1991 and formerly served as President and Chief
Executive Officer.
LOWNDES ANDREW SMITH* (age 56)
Director and Chairman
P.O. Box 2999
Hartford, CT 06104-2999
Mr. Smith has served as President, Chief Operating Officer, and Director of ITT
Hartford Insurance Group-Life Companies, and as a Director of ITT Hartford
Insurance Group, since November, 1989.
JOHN KELLEY SPRINGER (age 64)
Director
55 Farmington Avenue
Hartford, CT 06105
Mr. Springer has served as Chief Executive Officer of Connecticut Health System,
Inc., a hospital holding company, since 1989. Formerly, he served as the Chief
Executive Officer of Hartford Hospital, Hartford, Connecticut.
An Audit Committee and Nominating Committee have been appointed for the
Company. Each Committee is made up of those directors who are not "interested
persons" of the Company.
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All Board members and officers of the Fund are also board members and
officers of the following registered investment companies: Hartford Capital
Appreciation Fund, Inc., Hartford Dividend and Growth Fund, Inc., Hartford Stock
Fund, Inc., Hartford Index Fund, Inc., Hartford Advisers Fund, Inc., Hartford
Mortgage Securities Fund, Inc., Hartford Bond Income Strategy Fund, Inc.,
Hartford International Opportunities Fund, Inc., Hartford International Advisers
Fund, Inc., Hartford U.S. Government Money Market Fund, Inc., HVA Money Market
Fund, Inc. and the Hartford Small Company Fund, Inc. Shares of each of these
investment companies are offered to and may only be purchased by holders of
variable annuity and variable life insurance contracts issued by ITT Hartford
and its affiliates. In addition, each Board member and officer serves in a
similar capacity for the Hartford Money Market Fund, Inc. a money market fund
sold directly to the public although its shareholders are predominantly
representatives of ITT Hartford (or its affiliates) who use that Fund as a sweep
account. Each of the Directors and principal officers affiliated with the Fund
who is also an affiliated person of HIMCO or Wellington Management is named
above, together with the capacity in which such person is affiliated with the
Fund, HIMCO or Wellington Management.
COMPENSATION OF OFFICERS AND DIRECTORS. The Company pays no salaries or
compensation to any of its officers or directors affiliated with ITT Hartford.
The chart below sets forth the fees paid or expected to be paid by the Company
to the non-interested Directors and certain other information:
<TABLE>
<CAPTION>
JOSEPH A. WINIFRED E. WILLIAM A. MILLARD H. JOHN K.
BIERNAT COLEMAN O'NEILL PRYOR SPRINGER
<S> <C> <C> <C> <C> <C>
COMPENSATION
RECEIVED FROM
COMPANY* $5,250 $5,250 $5,250 $5,250 $5,250
PENSION OR RETIREMENT
BENEFITS ACCRUED AS
FUND EXPENSE* $0 $0 $0 $0 $0
TOTAL COMPENSATION
FROM COMPANY AND
COMPLEX PAID TO
DIRECTORS** $23,250 $18,750 $23,250 $21,250 $21,250
</TABLE>
- ------------
* Estimated for current fiscal year.
** As of June 30, 1996, there were twenty-one funds in the Complex (including
the Funds). The total compensation paid per Complex is comprised of the
amount paid to each Director during the 1995 fiscal year plus the estimated
compensation paid to each Director from the Company as of 1996 fiscal year
end.
<PAGE>
Page 23
OTHER INFORMATION ABOUT THE COMPANY. The Company was incorporated in Maryland on
March 21, 1996. The authorized capital stock of the Company consists of 3
billion shares of common stock, par value $0.001 per share (Common Stock). The
shares of Common Stock are divided into eight series: Small Company Fund
(300,000,000 shares); Capital Appreciation Fund (300,000,000 shares);
International Opportunities Fund (300,000,000 shares); Stock Fund (300,000,000
shares); Dividend and Growth Fund (300,000,000 shares); Advisers Fund
(400,000,000 shares); Bond Income Strategy Fund (300,000,000) and Money Market
Fund (800,000,000 shares). The Board of Directors 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 Fund. The 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 have authorized the
issuance of three classes of shares of each of the Funds, except for the Money
Market Fund, designated in each instance as Class A, Class B and Class Y shares.
The Directors have authorized only two classes of shares for the Money Market
Fund - Class A and Class Y shares.
No person owns of record or beneficially 5% or more of the shares outstanding
of the Company or any Fund except ITT Hartford and its affiliates which owned
100% of the Funds' outstanding shares as of the date of this prospectus.
The shares of the Funds are entitled to vote separately to approve investment
advisory agreements or changes in investment restrictions, but shareholders of
all series vote together in the election and selection of Directors and
accountants. Shares of a Fund vote together as a class on matters that affect
the Fund in substantially the same manner. Matters pertaining only to one or
more Funds will be voted upon only by those Funds. As to matters affecting a
single class, shares of such class will vote separately. Shares of the Funds do
not have cumulative voting rights. The Company and the Funds do not intend to
hold annual meetings of shareholders unless required to do so by the 1940 Act or
the Maryland statutes under which the Company is organized. Although Directors
are not elected annually by the shareholders, shareholders have under certain
circumstances the right to remove one or more Directors. If required by
applicable law, a meeting will be held to vote on the removal of a Director or
Directors of the Company if requested in writing by the holders of not less than
10% of the Company's outstanding shares. Each Fund's shares are fully paid, and
nonassessable and, when issued, have no preference, preemptive, conversion or
similar rights and are freely transferable.
The Company's Articles of Incorporation provide that the Directors, officers
and employees of the Company may be indemnified by the Company to the fullest
extent permitted by Maryland law and the federal securities laws . The Company's
Bylaws provide that the Fund shall indemnify each of its Directors, officers and
employees against liabilities and expenses reasonably incurred by them, in
connection with, or resulting from, any claim, action, suit or proceeding,
threatened against or otherwise involving such Director, officer or employee,
directly or indirectly, by reason of being or having been a Director, officer or
employee of the Company. Neither the Articles of Incorporation nor the Bylaws
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,
<PAGE>
Page 24
bad faith, gross negligence or reckless disregard of such person's duties.
INVESTMENT ADVISORY ARRANGEMENTS
The Company, on behalf of each Fund, has entered into an investment advisory
agreement with the Hartford Investment Management Company, Inc. ("HIMCO"). The
investment advisory agreement provides that HIMCO, subject to the supervision
and approval of the Company's Board of Directors, is responsible for the
management of each Fund. HIMCO is responsible for the day-to-day investment and
reinvestment of the assets of the Bond Income Strategy Fund and Money Market
Fund. In connection with its management of the Bond Income Strategy Fund and
Money Market Fund, HIMCO provides investment research and supervision of the
investments held by a Fund and conducts a continuous program of investment and
reinvestment of the Funds' assets, in accordance with the investment objectives
and policies of a Fund. HIMCO also furnishes the Funds such statistical
information, with respect to the investments which the Funds may hold or
contemplate purchasing, as the Fund may reasonably request. HIMCO will apprise
the Fund of important developments materially affecting any of the Funds and
furnish the Funds from time to time with such information as HIMCO may believe
appropriate for this purpose. In addition, HIMCO will provide administrative
personnel, services, equipment and facilities and office space for proper
operation of the Company. Although HIMCO 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.
With respect to the Small Company Fund, Capital Appreciation Fund,
International Opportunities Fund, Stock Fund, Dividend and Growth Fund and
Advisers Fund, HIMCO has entered into a subadvisory investment management
agreement with Wellington Management Company ("Wellington Management"). Under
the sub-advisory agreement, Wellington Management, subject to the general
supervision of the Board of Directors and HIMCO, is responsible for (among other
things) the day-to-day investment and reinvestment of the assets of such Funds
and furnishing each such Fund with advice and recommendations with respect to
investments and the purchase and sale of appropriate securities for each Fund.
As provided by the investment advisory agreement, each Fund pays HIMCO an
investment management fee, which is accrued daily and paid monthly, equal on an
annual basis to a stated percentage of the respective Fund's average daily net
asset value. HIMCO, not any Fund, pays the subadvisory fees of Wellington
Management as set forth in the Prospectus. Wellington Management will waive 100%
of its fees until the assets of each Fund reach $100 million, and, thereafter,
50% of its fees until the assets of each Fund reach $500 million, and,
thereafter, 25% of its fees until the assets of each Fund reach $1 billion.
No person other than HIMCO or Wellington Management and their directors and
employees regularly furnishes advice to the Funds with respect to the
desirability of the Funds investing in, purchasing or selling securities. HIMCO
and Wellington Management may from time to time receive statistical or other
information regarding general economic factors and trends, from ITT Hartford and
its affiliates.
<PAGE>
Page 25
Securities held by any Fund may also be held by other funds and other clients
for which HIMCO, Wellington Management or their respective affiliates provide
investment advice. Because of different investment objectives or other factors,
a particular security may be bought by HIMCO or Wellington Management for one or
more clients when one or more clients are selling the same security. If
purchases or sales of securities arise for consideration at or about the same
time for any Fund or client accounts (including other funds) for which HIMCO or
Wellington Management act as an investment adviser, (including the Funds
described herein) transactions in such securities will be made, insofar as
feasible, for the respective funds and other client accounts in a manner deemed
equitable to all. To the extent that transactions on behalf of more than one
client of HIMCO, Wellington Management or their respective affiliates during the
same period may increase the demand for securities being purchased or the supply
of securities being sold, there may be an adverse effect on price.
Because the Company commenced operations in June, 1996, no Fund has paid
any advisory fees to date.
Until at least July 1, 1997 HIMCO or an affiliate of ITT Hartford has
voluntarily and temporarily agreed to limit the expenses of each of the Funds by
reimbursing each Fund after a certain level of total expenses has been incurred.
The reimbursement details are disclosed in the fee table under Investor Expenses
in the Prospectuses.
Pursuant to the investment advisory agreement and the subadvisory investment
agreement neither HIMCO nor Wellington Management is liable to the Funds or
their shareholders for any error of judgment or mistake of law or for any loss
suffered by the Funds in connection with the matters to which their respective
agreements relate, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of HIMCO or Wellington Management in the
performance of their duties or from their reckless disregard of the obligations
and duties under the applicable agreement. Wellington Management has agreed to
indemnify HIMCO to the fullest extent permitted by law against any and all loss,
damage, judgment, fines, amounts paid in settlement and attorneys' fees incurred
by HIMCO to the extent resulting in whole or in part from any of Wellington
Management's acts or omissions related to the performance of its duties as set
forth specifically in the respective subadvisory investment agreement or
otherwise from Wellington Management's willful misfeasance, bad faith or gross
negligence.
HIMCO, whose principal business address is at 690 Asylum Avenue, Hartford,
Connecticut and whose mailing address is P.O. Box 2999, Hartford, Connecticut
06104, was organized in 1981. HIMCO and its affiliates have over $49.6 billion
in assets under management. HIMCO is a wholly owned indirect subsidiary of ITT
Hartford Group, Inc.
Wellington Management Company, 75 State Street, Boston, MA 02109, 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 1933. As of June
30, 1996, Wellington Management had investment management authority with respect
to approximately $_____ billion in assets. Wellington Management is a
Massachusetts General
<PAGE>
Page 26
Partnership. The three managing general partners of Wellington are Robert W.
Doran, Duncan M. McFarland and John R. Ryan.
The investment management agreement and subadvisory investment agreement
continue 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 an
agreement or interested persons of any party to the contract, 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 contract
automatically terminates upon assignment. The investment advisory agreement may
be terminated without penalty on 60 days' notice at the option of either party
to the respective contract or by vote of the holders of a majority of the
outstanding voting securities of the applicable Fund. The subadvisory investment
agreement may be terminated at any time without the payment of any penalty by
the Board of Directors or by vote of a majority of the outstanding voting
securities of the respective Fund upon 60 days' notice to HIMCO and Wellington
Management, by HIMCO upon written notice to Wellington Management and by
Wellington Management upon 90 days' written notice to HIMCO (with respect to
that Fund only). The subadvisory investment agreement terminates automatically
upon the termination of the corresponding investment advisory agreement.
HIMCO may make payments from time to time from its own resources, which may
include the management fees paid by the Company to compensate broker dealers,
depository institutions, or other persons for providing distribution assistance
and administrative services and to otherwise promote the sale of shares of the
Funds including paying for the preparation, printing and distribution of
prospectuses and sales literature or other promotional activities.
FUND EXPENSES
EXPENSES OF THE FUNDS. Each Fund pays its own expenses including, without
limitation: (i) expenses of maintaining the Fund and continuing its existence,
(ii) registration of the Fund under the Investment Company Act, (iii) auditing,
accounting and legal expenses, (iv) taxes and interest, (v) governmental fees,
(vi) expenses of issue, sale, repurchase and redemption of Fund shares, (vii)
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, (viii) expenses of reports and notices to shareholders and of
meetings of shareholders and proxy solicitations therefor, (ix) expenses of
reports to governmental officers and commissions, (x) insurance expenses, (xi)
association membership dues, (xii) fees, expenses and disbursements of
custodians for all services to the Fund, (xiii) fees, expenses and disbursements
of transfer agents, dividend disbursing agents, shareholder servicing agents and
registrars for all services to the Fund, (xiv) expenses for servicing
shareholder accounts, (xv) any direct charges to shareholders approved by the
Directors of the Fund, (xvi) compensation and expenses of Directors of the Fund
who are not "interested persons" of the Fund, and (xvii) such nonrecurring items
as may arise, including expenses incurred in connection with litigation,
<PAGE>
Page 27
proceedings and claims and the obligation of the Fund to indemnify its Directors
and officers with respect thereto.
DISTRIBUTION ARRANGEMENTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as the
principal underwriter for each Fund pursuant to an Underwriting Agreement
initially approved by the Board of Directors of the Company. HSD is a registered
broker-dealer and member of the National Association of Securities Dealers, Inc.
(NASD). Shares of each Fund will be continuously offered and will be sold by
selected broker-dealers who have executed selling agreements with HSD. HSD 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 Fund bears the expenses of registering its shares with the SEC and
qualifying them with state regulatory authorities. 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 (i) 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 of any such party, (as the term interested
person is defined in the 1940 Act); or (ii) by the vote of a majority of the
outstanding voting securities of a Fund. HSD is not obligated to sell any
specific amount of shares of any Fund.
Because the Company commenced operations in June, 1996, no compensation has
been paid to HSD to date in connection with the Funds.
HSD's principal business address is at Hartford Plaza, Hartford, Connecticut
06104 and its mailing address is at P.O. Box 2999, Hartford, Connecticut 06104.
HSD was organized as a Connecticut Corporation on August 24, 1994, and is an
indirect wholly-owned subsidiary of ITT Hartford.
<PAGE>
Page 28
DISTRIBUTION FINANCING PLANS
The Company has adopted separate distribution plans (the "Plans") for Class A
and Class B 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 HSD 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. Up to .25% of the fee may be used for
shareholder servicing expenses with the remainder used for distribution
expenses. All or any portion of this fee may be remitted to brokers who provide
distribution or shareholder account services.
CLASS B PLAN
Pursuant to the Class B Plan, a Fund may pay HSD a fee of up to 1.00% of the
average daily net assets attributable to Class B shares, .75% of which is a fee
for distribution financing activities and .25% of which is for shareholder
account services. All or any portion of such fees may be remitted to brokers who
assist in the distribution of Class B shares or provide maintenance and personal
services to existing Class B shareholders. HSD 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, HSD 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. HSD 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 HSD or its affiliates
for shareholder accounts.
The purpose of the 0.75% fee representing distribution payments to HSD under
the Class B Plan is to compensate HSD for its distribution services to the Fund.
HSD pays commissions to brokers as well as expenses of printing prospectuses and
reports used for sales purposes, expenses with respect to the preparation and
printing of sales literature and other distribution related expenses, including
without limitation, the cost necessary to provide distribution-related services,
or personnel, travel, office expenses and equipment. The Class B Plan also
provides that HSD will receive all contingent deferred sales charges
attributable to Class B shares.
GENERAL
<PAGE>
Page 29
In accordance with the terms of the Plans, HSD 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 will 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,
including at least a majority of Directors who are not, and were not at the time
they voted, interested persons of the Fund 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. The Board of Directors
believes that there is a reasonable likelihood that the Plans will benefit each
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 Directors 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 who are not interested
persons of the Fund 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" (as defined in the 1940 Act) of the Fund affected thereby. A Plan
will automatically terminate in the event of its assignment (as defined in the
1940 Act).
During the fiscal year ended December 31, 1995, neither the Class A Plan nor
the Class B Plans were in effect as neither Class had shares outstanding.
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. Subject to any policy
established by the Board of Directors, HIMCO and Wellington Management are
primarily responsible for the investment decisions of each Fund and the placing
of its portfolio transactions. In placing orders, it is the policy of each 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 HIMCO and Wellington Management generally
seek reasonably competitive spreads or commissions, the Funds will not
necessarily be paying the lowest possible spread or commission. HIMCO and
Wellington Management may direct brokerage transactions to broker/dealers who
also sell shares of the Funds and the sale of shares of a Fund may be taken into
account by HIMCO and Wellington Management when allocating brokerage
transactions.
HIMCO and Wellington Management will generally deal directly with the dealers
who make a market in the securities involved (unless better prices and execution
are available elsewhere) if the
<PAGE>
Page 30
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. 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 will be no
brokerage commissions paid by the Money Market Fund for such purchases or sales.
Because the Funds commenced operations in 1996 no brokerage commissions were
paid over the last three fiscal years.
While HIMCO and Wellington Management (as applicable) seek to obtain the most
favorable net results in effecting transactions in a Fund's portfolio
securities, dealers who provide supplemental investment research to HIMCO or
Wellington Management may receive orders for transactions from HIMCO or
Wellington Management. Such supplemental 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 HIMCO or Wellington Management, a Fund
will be benefited by such supplemental research services, HIMCO and Wellington
Management 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 will be in addition to and not in lieu of the services required to be
performed by HIMCO and Wellington Management under the investment advisory
agreement or the sub-investment advisory agreement. The expenses of HIMCO and
Wellington Management will not necessarily be reduced as a result of the receipt
of such supplemental information. HIMCO and Wellington Management may use such
supplemental research in providing investment advice to portfolios other than
those for which the transactions are made. Similarly, the Funds may benefit from
such research obtained by HIMCO and Wellington Management for portfolio
transactions for other clients.
Investment decisions for the Funds will be made independently from those of
any other clients that may be (or in the future may be) managed by HIMCO,
Wellington Management or their affiliates. If, however, accounts managed by
HIMCO or Wellington Management are simultaneously engaged in the purchase of the
same security, then, pursuant to general authorization of the Company's Board of
Directors, available securities may be allocated to each Fund or other client
account and may be averaged as to price in whatever manner HIMCO or Wellington
Management deems to be fair. Such allocation and pricing may affect the amount
of brokerage commissions paid by each Fund. In some cases, this system might
adversely affect the price paid by a Fund (for example, during periods of
rapidly rising or falling interest rates) or limit the size of the position
obtainable for a Fund (for example, in the case of a small issue).
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of each Fund is determined by Hartford Life
Insurance Company, ("Hartford Life") an affiliate of ITT Hartford, in the manner
described in the Funds'
<PAGE>
Page 31
Prospectus. The Funds will be closed for business and will not price their
shares on the following business holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Securities held by each Fund other than the Money Market Fund
will be valued as follows: portfolio securities which are traded on stock
exchanges are valued at the last sale price on the principal exchange as of the
close of business on the day the securities are being valued, or, lacking any
sales, at the mean between the bid and asked prices. Securities traded in the
over-the-counter market and included in the National Market System are valued at
the mean between the bid and asked prices which may be based on valuations
furnished by a pricing service or from independent securities dealers.
Otherwise, over-the-counter securities are valued at the mean between the bid
and asked prices or yield equivalent as obtained from one or more dealers that
make markets in the securities. Portfolio securities which are traded both in
the over-the-counter market and on an exchange are valued according to the
broadest and most representative market, and it is expected that for debt
securities this ordinarily will be the over-the-counter market. Securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith by or under procedures or guidelines
established by of the Board of Directors, including valuations furnished by
pricing services retained by Hartford Life.
The net asset value per share of the Money Market Fund is determined by using
the amortized cost method of valuing its portfolio instruments. 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. 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. For all Funds,
securities with remaining maturities of less than 60 days are valued at
amortized cost, which approximates market value.
The amortized cost method of valuation permits the Money Market Fund to
maintain a stable $1.00 net asset value per share. The Company's Board of
Directors 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 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).
A Fund's maximum offering price per Class A share is determined by adding the
maximum
<PAGE>
Page 32
sales charge to the net asset value per share. Class B, Class Y shares and Money
Market Fund shares are offered at net asset value without the imposition of an
initial sales charge.
PURCHASE AND REDEMPTION OF SHARES
For information regarding the purchase of Fund shares, see "About Your
Account--How to Buy 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- - How to Redeem 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 Funds 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 Funds of the
Company and the current cash value of the Director variable annuity or variable
life contracts issued by affiliates of ITT Hartford. Acceptance of the purchase
order is subject to confirmation of qualification. The rights of accumulation
may be amended or terminated at any time as to subsequent purchases.
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, Boston Financial Data Services, Inc.
("BFDS"), the Company's transfer agent 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 BFDS 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 BFDS
pay such difference in sales charge, BFDS will redeem an appropriate number of
escrowed shares in order to realize such difference. Additional information
about the terms of the Letter of Intent are available from your registered
representative or from BFDS at 1- 888-ITT-FUND (1-888-488-3836).
<PAGE>
Page 33
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 and Money Market Fund 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 or more
will be sent to the applicant, or any person designated by him, monthly or
quarterly. SWP's for Class B shares of a Fund and Money Market Fund shares
subject to a CDSC are permitted only for redemptions limited to no more than 10%
of the original value of the account per year.
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 Directors. When the shareholder sells
portfolio securities received in this fashion, he 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
of 1% of the net asset value of the applicable Fund during any 90 day period for
any one account.
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
Securities and Exchange Commission may permit for the protection of investors.
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INVESTMENT PERFORMANCE
MONEY MARKET FUND
In accordance with regulations prescribed by the SEC, the Company is required
to compute the Money Market Fund's current annualized yield for a seven-day
period in a manner which does not take into consideration any realized or
unrealized gains or losses on its portfolio securities. This current annualized
yield is computed by determining the net change (exclusive of realized gains and
losses on the sale of securities and unrealized appreciation and depreciation)
in the value of a hypothetical account having a balance of one share of the
Money Market Fund at the beginning of such seven-day period, dividing such net
change in account value by the value of the account at the beginning of the
period to determine the base period return and annualizing this quotient on a
365- day basis.
The SEC also permits the Company to disclose the effective yield of the Money
Market Fund for the same seven-day period, determined on a compounded basis. The
effective yield is calculated by compounding the unannualized base period return
by adding one to the base period return, raising the sum to a power equal to 365
divided by 7, and subtracting one from the result.
The yield on amounts held in the Money Market Fund normally will fluctuate on
a daily basis. Therefore, the disclosed yield for any given past period is not
an indication or representation of future yields or rates of return. The Money
Market Fund's actual yield is affected by changes in interest rates on money
market securities, average portfolio maturity of the Money Market Fund, the
types and quality of portfolio securities held by the Money Market Fund, and its
operating expenses.
OTHER FUNDS
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN QUOTATIONS. Average annual total
return quotations for Class A, Class B and Class Y 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:
P(1+T) n = ERV
Where: P = a hypothetical initial payment of $1,000, less the
maximum sales load applicable to a Fund
T = average annual total return
n = number of years
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Page 35
ERV = ending redeemable value of the hypothetical $1,000
initial payment made at the beginning of the
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" will normally represent 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 will assume the deduction of the maximum sales charge and usually
assume the reinvestment of all dividends and capital gains distributions and
will be 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 will be higher than those that do reflect such charges.
Total return percentages for periods longer than one year will usually be
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 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.
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
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Page 36
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.
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 +1) -1]
---
(cd)
Where: a = net investment income earned during the period
attributable to the subject class
b = net expenses accrued for the period attributable to the
subject class
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c = the average daily number of shares of the subject class
outstanding during the period that were entitled to
receive dividends
d = the maximum offering price per share of the subject
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.
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 Return"). Non-Standardized Return may be quoted for the same
or different periods as those for which Standardized Return is quoted; it may
consist of an aggregate or average annual percentage rate of return, actual
year-by-year rates or any combination thereof. Non-Standardized Return 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.
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 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 & Poors Index Committee for their size, industry characteristics,
and liquidity. None of the companies in the S&P 600 overlap with the S&P 500 or
the S&P 400 (MidCap Index). The S&P 600 is weighted by market capitalization.
REITs are not eligible for inclusion.
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 Lehman 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
<PAGE>
Page 38
Index.
The Lehman Government/Corporate 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/Corporate Index, an issue must
have amounts outstanding in excess of $1 million, have at least one year to
maturity and be rated "Baa" or higher ("investment grade") by a nationally
recognized rating agency.
The Russell 2000 Index represents the bottom two thirds of the largest 3000
publicly traded companies domiciled in the U.S. Russell uses total market
capitalization to sort its universe to determine the companies that are included
in the Index. Only common stocks are included in the Index. REITs are eligible
for inclusion.
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 Morgan Stanley Capital International EAFE 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 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.
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 (measure for 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 form 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 to 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
<PAGE>
Page 39
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., S&P Industry Surveys) in order to evaluate the Fund's
historical performance or current or potential value with respect to the
particular industry or sector.
Each Fund's investment performance may be advertised in various financial
publications, newspapers, magazines including the following:
Across the Board
Advertising Age
Adviser's Magazine
Adweek
Agent
American Banker
American Agent and Broker
Associated Press
Barron's
Best's Review
Bloomberg
Broker World
Business Week
Business Wire
Business News Features
Business Month
Business Marketing
Business Daily
Business Insurance
California Broker
Changing Times
Consumer Reports
Consumer Digest
Crain's
Dow Jones News Service
Economist
Entrepreneur
Entrepreneurial Woman
Financial Services Week
Financial World
Financial Planning
Financial Times
<PAGE>
Page 40
Forbes
Fortune
Hartford Courant
Inc
Independent Business
Institutional Investor
Insurance Forum
Insurance Advocate Independent
Insurance Review Investor's
Insurance Times
Insurance Week
Insurance Product News
Insurance Sales
Investment Dealers Digest
Investment Advisor
Journal of Commerce
Journal of Accountancy
Journal of the American Society
of CLU & ChFC
Kiplinger's Personal Finance
Knight-Ridder
Life Association News
Life Insurance Selling
Life Times
LIMRA's MarketFacts
Lipper Analytical Services, Inc.
MarketFacts
Medical Economics
Money
Morningstar, Inc.
Nation's Business
National Underwriter
New Choices (formerly 50 Plus
New England Business
New York Times
Pension World
Pensions & Investments
Professional Insurance Agents
Professional Agent
Registered Representative
Reuter's
Rough Notes
Round the Table
Service
<PAGE>
Page 41
Success
The Standard
The Boston Globe
The Washington Post
Tillinghast
Time
U.S. News & World Report
U.S. Banker
United Press International
USA Today
Value Line
Wall Street Journal
Wiesenberger Investment
Working Woman
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.
TAXES
Each Fund is treated as a separate entity for accounting and tax purposes.
Each Fund has qualified and elected or intends to qualify and elect to be
treated as a "regulated investment company" under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and intends to continue to so
qualify in the future. As such and by complying with the applicable provisions
of the Code regarding the sources of its income, the timing of its
distributions, and the diversification of its assets, each Fund will not be
subject to federal income tax on taxable income (including net short-term and
long-term capital gains) which is distributed to shareholders at least annually
in accordance with the timing requirements of the Code.
Each Fund will be subject to a 4% non-deductible federal excise tax on
certain amounts not distributed (and not treated as having been distributed) on
a timely basis in accordance with
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Page 42
annual minimum distribution requirements. Each Fund intends under normal
circumstances to avoid liability for such tax by satisfying such distribution
requirements.
If a Fund acquires stock in certain non-U.S. corporations that receive at
least 75% of their annual gross income from passive sources (such as interest,
dividends, rents, royalties or capital gain) or hold at least 50% of their
assets in investments producing such passive income ("passive foreign investment
companies"), that Fund could be subject to federal income tax and additional
interest charges on "excess distributions" received from such companies or gain
from the sale of stock in such companies, even if all income or gain actually
received by the Fund is timely distributed to its shareholders. The Fund would
not be able to pass through to its shareholders any credit or deduction for such
a tax. Certain elections may, if available, ameliorate these adverse tax
consequences, but any such election would require the applicable Fund to
recognize taxable income or gain without the concurrent receipt of cash. Any
Fund that is permitted to acquire stock in foreign corporations may limit and/or
manage its holdings in passive foreign investment companies to minimize its tax
liability or maximize its return from these investments.
Foreign exchange gains and losses realized by a Fund in connection with
certain transactions involving foreign currency-denominated debt securities,
certain foreign currency futures and options, foreign currency forward
contracts, foreign currencies, or payables or receivables denominated in a
foreign currency are subject to Section 988 of the Code, which generally causes
such gains and losses to be treated as ordinary income and losses and may affect
the amount, timing and character of distributions to shareholders. Any such
transactions that are not directly related to a Fund's investment in stock or
securities, possibly including speculative currency positions or currency
derivatives not used for hedging purposes, may increase the amount of gain it is
deemed to recognize from the sale of certain investments held for less than
three months, which gain is limited under the Code to less than 30% of its
annual gross income, and could under future Treasury regulations produce income
not among the types of "qualifying income" from which the Fund must derive at
least 90% of its annual gross income.
Some Funds may be subject to withholding and other taxes imposed by foreign
countries with respect to their investments in foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. The Funds anticipate that they generally will not qualify to pass such
foreign taxes and any associated tax deductions or credits through to their
shareholders, who therefore generally will not report such amounts on their own
tax returns.
For Federal income tax purposes, each Fund is permitted to carry forward a
net capital loss in any year to offset its own capital gains, if any, during the
eight years following the year of the loss. To the extent subsequent capital
gains are offset by such losses, they would not result in federal income tax
liability to the applicable Fund and would not be distributed as such to
shareholders.
Each Fund that invests in certain PIKs, zero coupon securities or certain
deferred interest securities (and, in general, any other securities with
original issue discount or with market discount if the Fund elects to include
market discount in income currently) must accrue income on such investments
prior to the receipt of the corresponding cash payments. However, each Fund
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Page 43
must distribute, at least annually, all or substantially all of its net income,
including such accrued income, to shareholders to qualify as a regulated
investment company under the Code and avoid federal income and excise taxes.
Therefore, a Fund may have to dispose of its portfolio securities under
disadvantageous circumstances to generate cash, or may have to leverage itself
by borrowing the cash, to satisfy distribution requirements.
Investment in debt obligations that are at risk of or in default presents
special tax issues for any Fund that may hold such obligations. Tax rules are
not entirely clear about issues such as when the Fund may cease to accrue
interest, original issue discount, or market discount, when and to what extent
deductions may be taken for bad debts or worthless securities, how payments
received on obligations in default should be allocated between principal and
income, and whether exchanges of debt obligations in a workout context are
taxable. These and other issues will be addressed by any Fund that may hold such
obligations in order to reduce the risk of distributing insufficient income to
preserve its status as a regulated investment company and seek to avoid becoming
subject to federal income or excise tax.
Limitations imposed by the Code on regulated investment companies like the
Funds may restrict a Fund's ability to enter into futures, options, and forward
transactions.
Certain options, futures and forward foreign currency transactions undertaken
by a Fund may cause the Fund to recognize gains or losses from marking to market
even though its positions have not been sold or terminated and affect the
character as long-term or short-term (or, in the case of certain currency
forwards, options and futures, as ordinary income or loss) and timing of some
capital gains and losses realized by the Fund. Also, certain of a Fund's losses
on its transactions involving options, futures or forward contracts and/or
offsetting portfolio positions may be deferred rather than being taken into
account currently in calculating the Fund's taxable income. Certain of the
applicable tax rules may be modified if a Fund is eligible and chooses to make
one or more of certain tax elections that may be available. These transactions
may therefore affect the amount, timing and character of a Fund's distributions
to shareholders. The Funds will take into account the special tax rules
(including consideration of available elections) applicable to options, futures
or forward contracts in order to minimize any potential adverse tax
consequences.
The federal income tax rules applicable to interest rate swaps, caps and
floors are unclear in certain respects, and a Fund may be required to account
for these transactions in a manner that, in certain circumstances, may limit the
degree to which it may utilize these transactions.
Distributions from a Fund's current or accumulated earnings and profits
("E&P"), as computed for federal income tax purposes, will be taxable as
described in the Funds' prospectus whether taken in shares or in cash.
Distributions, if any, in excess of E&P will constitute a return of capital,
which will first reduce an investor's tax basis in a Fund's shares and
thereafter (after such basis is reduced to zero) will generally give rise to
capital gains. Shareholders electing to receive distributions in the form of
additional shares will 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 distributions in cash, divided by the number of shares
received.
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At the time of an investor's purchase of shares of a Fund (other than Money
Market 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. Consequently, 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 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.
Upon a redemption of shares of a Fund, other than Money Market Fund,
(including by exercise of the exchange privilege) a shareholder may realize a
taxable gain or loss depending upon his basis in his shares. Such gain or loss
will be treated as capital gain or loss if the shares are capital assets in the
shareholder's hands and will be long-term or short-term, depending upon the
shareholder's tax holding period for the shares. A sales charge paid in
purchasing shares of a Fund cannot be taken into account for purposes of
determining gain or loss on the redemption or exchange of such shares within 90
days after their purchase to the extent shares of the Fund are subsequently
acquired without payment of a sales charge pursuant to the reinvestment or
exchange privilege. Such disregarded load will result in an increase in the
shareholder's tax basis in the shares subsequently acquired. Also, any loss
realized on a redemption or exchange will be disallowed to the extent the shares
disposed of are replaced with shares of the same Fund within a period of 61 days
beginning 30 days before and ending 30 days after the shares are disposed of,
such as pursuant to an election to reinvest dividends or capital gain
distributions automatically. In such a case, the basis of the shares acquired
will be adjusted to reflect the disallowed loss. Any loss realized upon the
redemption of shares with a tax holding period of six months or less will be
treated as a long-term capital loss to the extent of any amounts treated as
distributions of long-term capital gain with respect to such shares.
For purposes of the dividends received deduction available to corporations,
dividends received by a Fund, if any, from U.S. domestic corporations in respect
of the stock of such corporations held by the Fund, for federal income tax
purposes, for at least 46 days (91 days in the case of certain preferred stock)
and distributed and designated by the Fund may be treated as qualifying
dividends. Corporate shareholders must meet the minimum holding period
requirement stated above (46 or 91 days) with respect to their shares of the
applicable Fund in order to qualify for the deduction and, if they borrow to
acquire such shares, may be denied a portion of the dividends received
deduction. The entire qualifying dividend, including the otherwise deductible
amount, will be included in determining the excess (if any) of a corporate
shareholder's adjusted current earnings over its alternative minimum taxable
income, which may increase its alternative minimum tax liability. Additionally,
any corporate shareholder should consult its tax adviser regarding the
possibility that its basis in its shares may be reduced, for federal income tax
purposes, by reason of "extraordinary dividends" received with respect to the
shares, for the purpose of computing its gain or loss on redemption or other
disposition of the shares.
Different tax treatment, including penalties on certain excess contributions
and deferrals, certain pre-retirement and post-retirement distributions and
certain prohibited transactions, is accorded to shareholder accounts maintained
as qualified retirement plans. Shareholders should
<PAGE>
Page 45
consult their tax advisers for more information.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies, and financial
institutions. 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. Shareholders should consult their own
tax advisers as to the federal, state or local tax consequences of ownership of
shares of, and receipt of distributions from, the Funds in their particular
circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which their
investment in a Fund is effectively connected will be subject to U.S. Federal
income tax treatment that is different from that described above. These
investors may be subject to non-resident alien withholding tax at the rate of
30% (or a lower rate under an applicable tax treaty) on amounts treated as
ordinary dividends from a Fund and, unless an effective IRS Form W-8 or
authorized substitute is on file, to 31% backup withholding on certain other
payments from the Fund. Non-U.S. investors should consult their tax advisers
regarding such treatment and the application of foreign taxes to an investment
in any Fund.
STATE AND LOCAL. Each Fund may be subject to state or local taxes in
jurisdictions in which such Fund may be deemed to be doing business. In
addition, in those states or localities which have income tax laws, the
treatment of such Fund and its shareholders under such laws may differ from
their treatment under federal income tax laws, and investment in such Fund may
have different tax consequences for shareholders than would direct investment in
such Fund's portfolio securities. Shareholders should consult their own tax
advisers concerning these matters.
CUSTODIAN
Portfolio securities of each Fund are held pursuant to a Custodian Agreement
between the Company and State Street Bank and Trust Company.
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Page 46
TRANSFER AGENT SERVICES
Boston Financial Data Services, Two Heritage Drive, Quincy, MA 0217, is the
transfer agent for each Fund.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Arthur Andersen LLP, has been selected as the independent certified public
accountants of the Fund to provide audit services and assistance and
consultation with respect to the preparation of filings with the SEC.
OTHER INFORMATION
ITT Hartford has granted the Company the right to use the name, "ITT
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.
FINANCIAL STATEMENTS
The Company and each Fund's audited financial statements as of _________,
1996, together with the notes thereto and the report of Arthur Andersen LLP, are
attached to this SAI.
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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
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Page 48
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 - Bonds rated A have a very strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the considerable
investment strength but are not entirely free from adverse effects of changes in
circumstances and economic conditions than debt in the highest rated categories.
BBB - Bonds rated BBB and regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category then in higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC, and C is regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions.
RATING OF COMMERCIAL PAPER
Purchases of corporate debt securities used for short-term investment,
generally called commercial paper, will be limited to the top two grades of
Moody's, Standard & Poor's, Duff & Phelps, Fitch Investor Services and Thomson
Bank Watch
<PAGE>
Page 49
or other NRSROs (nationally recognized statistical rating organizations)
rating services and will be an eligible security under Rule 2a-7.
MOODY'S
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers 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.
<PAGE>
Page 50
Liquidity ratios are basically as follows, broken down by the type of
issuer:
Industrial Company: acid test ratio, cash flow as a percent of current
liabilities, short-term debt as a percent of current liabilities,
short-term debt as a percent of current assets.
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.
<PAGE>
Page 12
ITT HARTFORD MUTUAL FUNDS, INC.
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
<TABLE>
<S> <C> <C>
(a) Financial Statements.
To be filed by amendment.
(b) Exhibits
1. Articles of Incorporation*
2. By-Laws*
3. Not Applicable
5. Form of Investment Advisory Agreement*
5.1 Form of Subadvisory Agreement*
6. Form of Principal Underwriting Agreement*
6.1 Form of Dealer Agreement with the Distributor
7. Not Applicable
8. Form of Custodian Agreement
9. Form of Transfer Agency and Service Agreement
10. Opinion and Consent of Counsel*
11. Consent of Independent Public Accountants**
12. Not Applicable
13. Not Applicable
14. Not Applicable
15. Form of Rule 12b-1 Distribution Plan for Class A Shares.*
15.1 Form of Rule 12b-1 Distribution Plan for Class B Shares*
</TABLE>
<PAGE>
Page 13
<TABLE>
<S> <C> <C>
16. Not Applicable
17. Not Applicable
18. Form of Rule 18f-3 Plan*
19. Powers of Attorney
* Filed with Registrant's initial Registration Statement on
April 9, 1996.
** To be filed by amendment.
</TABLE>
Item 25. Persons Controlled by or Under Common Control with Registrant.
Inapplicable
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class as of June 10, 1996
-------------- ----------------------
<S> <C>
ITT Hartford Capital Appreciation Fund 1
ITT Hartford Dividend and Growth Fund 1
ITT Hartford International Opportunity Fund 1
ITT Hartford Small Company Fund 1
ITT Hartford Stock Fund 1
ITT Hartford Advisers Fund 1
ITT Hartford Bond Income Strategy Fund 1
ITT Hartford Money Market Fund 1
Total Holders of Securities 1
-
</TABLE>
Item 27. Indemnification.
Reference is made to Article V of the Articles of Incorporation filed
herewith.
Item 28. Business and Other Connections of Investment Adviser
All of the information required by this item is set forth in
Schedule D of Form ADV, as amended, of the Registrant's investment adviser,
HIMCO (File No. 801-16814).
<PAGE>
Page 14
<PAGE>
Page 15
Item 29. Principal Underwriters
Hartford Securities Distribution Company, Inc. ("HSD") is an indirect
wholly owned subsidiary of ITT Hartford Group, Inc. HSD is the principal
underwriter for the following registered investment companies: Hartford Life
Insurance Company - DC Variable Account I; Hartford Life Insurance Company -
Separate Account Two (DC Variable Account II); Hartford Life Insurance Company -
Separate Account Two (Variable Account "A"); Hartford Life Insurance Company -
Separate Account Two (QP Variable Account); Hartford Life Insurance Company -
Separate Account Two (NQ Variable Account); Hartford Life Insurance Company -
Putnam Capital Manager Trust Separate Account; Hartford Life Insurance Company -
Separate Account Two; Hartford Money Market Fund, Inc.; Hartford Life Insurance
Company - Separate Account Three; ITT Hartford Life and Annuity Insurance
Company - Separate Account Three; Hartford Life Insurance Company - Separate
Account Five; ITT Hartford Life and Annuity Insurance Company - Separate Account
One; ITT Hartford Life and Annuity Insurance Company - Putnam Capital Manager
Trust Separate Account Two.
The Directors and principal officers of HSD and their position with the
Registrant are as follows:
<TABLE>
<CAPTION>
Position or Office
With
Name* HSD Registrant
----- ------------ ------------------
<S> <C> <C>
Peter Cummins Vice-President Vice President
Bruce D. Gardner Secretary None
John P. Ginneti Executive Vice Vice President
President
George Jay Comptroller & Controller
Fin. Principal
Stephen T. Joyce Asst. Secretary None
Glen J. Kvadus Asst. Secretary None
Thomas M. Marra Senior Vice-Pres. Vice President
Paul Eugene Olson Supv. Registered None
Principal
Edward M. Ryan, (Jr.) Asst. Secretary None
Lownes A. Smith President President
Donald W. Waggaman, Jr. Treasurer None
</TABLE>
* Principal business address is P.O. Box 2999, Hartford, CT 01604-2999
Item 30. 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
<PAGE>
Page 16
Registrant's custodian, State Street Bank and Trust Company, 224 Franklin
Street, Boston, MA 02110 and the Registrant's transfer agent, Boston Financial
Data Services, Inc., Two Heritage Drive, Quincy, MA 02171. Registrant's
financial ledgers and other corporate records are maintained at its offices at
The Hartford Life Insurance Company, 690 Asylum Ave., Hartford Plaza, Hartford,
CT 06115.
Item 31. Management Services
Not Applicable
Item 32. Undertakings.
(a) Not applicable
(b) The Registrant undertakes to file a post-effective amendment to
the Registration Statement within four to six months from the
effective date of this Registration Statement.
(c) The Company will furnish each person to whom a prospectus is
delivered with a copy of the Company's latest annual report to
shareholders, upon request and without charge.
(d) The Registrant undertakes to comply with Section 16(c) of the
Investment Company Act of 1940, as amended, as it relates to the
assistance to be rendered to shareholders with respect to the call of
a meeting to replace a director.
<PAGE>
Page 17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the Registrant
certifies that it has 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 20th day of June, 1996.
ITT HARTFORD MUTUAL FUNDS, INC.
By: *
------------------------------------------
Joseph H. Gareau
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
* President June 20, 1996
- -----------------------
Joseph H. Gareau (Chief Executive Officer
& Director)
* Controller June 20, 1996
- -----------------------
George R. Jay (Chief Accounting Officer)
* Vice President & Treasurer June 20, 1996
- -----------------------
J. Richard Garrett (Chief Financial Officer)
* Director June 20, 1996
- -----------------------
Joseph A. Biernat
* Director June 20, 1996
- -----------------------
Winifred E. Coleman
* Director June 20, 1996
- -----------------------
William A. O'Neill
</TABLE>
<PAGE>
Page 18
<TABLE>
<CAPTION>
<S> <C> <C>
* Director June 20, 1996
- -----------------------
Millard H. Pryor, Jr.
* Director June 20, 1996
- -----------------------
Lowndes A. Smith
* Director June 20, 1996
- -----------------------
John K. Springer
/s/ Michael O'Halloran June 20, 1996
- -----------------------
* By Michael O'Halloran
Attorney-in-fact
</TABLE>
<PAGE>
Page 19
EXHIBIT INDEX
- -------------
Exhibit No. PAGE NO.
- ----------- --------
6.1 Form of Dealer Agreement with Distributor
8 Form of Custody Agreement
9 Form of Transfer Agency Agreement
19 Powers of Attorney
<PAGE>
Page 20
EXHIBIT 6.1
ITT HARTFORD MUTUAL FUNDS, INC.
SELLING GROUP AGREEMENT
Broker-Dealer Name Hartford Securities Distribution Company, Inc. ("HSD")
Address STREET ADDRESS
200 Hopmeadow Street
Simsbury, CT 06089
MAILING ADDRESS
P.O. Box 2999
Hartford, CT 06104-2999
Gentlemen:
As Principal Underwriter and exclusive Selling Agent for the shares of ITT
Hartford Mutual Funds, Inc. (the "Company") comprised of the separate series (to
which, additional series may be added by the Company from time to time and to
which this Agreement may relate if mutually agreed upon by the parties) listed
on Appendix "A" hereto and referred to collectively as the "Funds" or
individually as the "Fund," we understand that you are a member in good standing
of the National Association of Securities Dealers, Inc. (the "NASD"), and, on
the basis of such understanding, invite you to become a member of the Selling
Group to distribute shares of the Funds on the following terms.
1. REGULATION: You agree to comply with all applicable provisions of the
Investment Company Act of 1940 (the "1940 Act"), as amended, the Securities
Act of 1933, as amended, the Securities and Exchange Act of 1934, as
amended, and all the rules and regulations of the Securities and Exchange
Commission, state securities ("blue sky") laws and the NASD. The NASD
Rules of Fair Practice are incorporated herein as if set forth in full.
2. ORDERS: An order for shares of any Fund received from you will be
confirmed only at the appropriate offering price applicable to that order,
as described in the Company's then current Prospectus. The procedure
relating to orders and the handling thereof will be subject to instructions
released by us from time to time. Orders should be transmitted to our
office or other offices authorized by us for this purpose. The
broker/dealer or his customer may, however, mail a completed application
with a check payable to the Fund directly to Boston Financial Data
Services, Inc., the Fund's shareholder servicing agent ("Transfer Agent")
in Boston, Massachusetts or by such other method as may be described in the
Company's then current Prospectus. All orders are subject to acceptance at
the Transfer Agent's office in Boston, Massachusetts. We as agent for the
Funds reserve the right in our sole discretion to reject any order. The
minimum initial investment for each Fund is set forth in the Company's then
current Prospectus.
3. SUITABILITY AND MULTIPLE CLASSES OF SHARES: The Funds are offered in more
than one class of shares in accordance with the Prospectus. Purchase of a
class of shares are subject to our compliance standards. You are
responsible for determining whether a Fund, and which class of the Fund's
shares, is suitable for your client. Certain investors that are affiliated
with us and with you (and their families) may have special purchase rights.
Refer to the currently effective Prospectus for the Company.
4. CONCESSIONS:
(a) Any sales charges and dealers' concessions will be as set forth in the
current Prospectus of the Company or as might otherwise be agreed to
by the parties.
<PAGE>
Page 21
(b) Where payment is due hereunder, we agree to send payment for dealers'
concessions and payments made in accordance with a Fund's Plan of
Distribution pursuant to Rule 12b-1 under the 1940 Act, as amended, to
your address as it appears on our records. You must notify us of
address changes and promptly negotiate such payments. Any such
payments that remain outstanding for 12 months shall be void and the
obligation represented thereby shall be extinguished.
(c) With respect to Class B shares of Funds which impose a Contingent
Deferred Sales Charge ("CDSC"), we agree to compensate selling firms
at a specified rate as disclosed in Appendix A on purchase payments
only for those shares which are subject to a CDSC at the time of
investment. You understand that any Class B CDSC deducted from
redemption proceeds shall be the property of HSD.
(d) We reserve the right to reclaim any commission payment from a
broker/dealer if we later determine a CDSC waiver applied at the time
of investment.
(e) We reserve the right to modify all CDSC waivers at any time. We will
promptly notify each member of the Selling Group of any modification
thereto.
(f) You are responsible for applying the correct sales charge to your
customers, as detailed in the current Prospectus.
5. REMITTANCE: Remittance by dealers should be made by check or wire, payable
to the appropriate Fund (not to us) and sent to the Company's Transfer
Agent. Payments must be received promptly pursuant to Article III, Section
26(m) of the NASD Rules, otherwise the right is reserved, without notice,
to cancel the sale. In such event you will be held responsible for any
loss to the Fund, or to us, including the loss of profit resulting from
your failure to make payment.
6. SELLING GROUP ACTIVITIES: In addition to purchasing shares of any Fund
through us as Selling Agent, you will purchase such shares only from your
customers, in which case you shall pay the applicable net asset value
determined in accordance with the Company's then current Prospectus and
Statement of Additional Information, less any applicable CDSC, if such Fund
imposes a CDSC (including Class A CDSCs).
(a) Shares of any Fund may be liquidated by sale thereof to such Fund or
to us as Agent for such Fund at the applicable net asset value, less
any applicable CDSC, determined in the manner described in the then
current Prospectus and Statement of Additional Information of the
Company. If delivery is not made within ten (10) days from the date
of the transaction, the right is reserved, without notice, to cancel
the transaction, in which event you will be held responsible for any
loss to the Fund, or to us, including loss of profit resulting from
your failure to make payment.
(b) In no event shall you withhold placing orders so as to profit from
such withholding by a change in the net asset value from that used in
determining the price to your customer, or otherwise. You shall make
no purchases except for the purpose of covering orders received by you
and then such purchases must be made only at the applicable public
offering price described in the Company's then current Prospectus
(less your concession), provided, however, that the foregoing does not
prevent the purchase of shares of a Fund by you for your own bona fide
investment. All sales to your customers shall be at the applicable
public offering prices determined in accordance with the Company's
then current Prospectus.
7. SHAREHOLDER COMMUNICATION: You agree to furnish the following shareholder
communications material to your customers after receipt from us of
sufficient quantities to allow mailing thereof to all of your customers who
are beneficial owners of any Fund's shares:
<PAGE>
Page 22
(a) All proxy or information statements prepared for circulation to
shareholders of record;
(b) Annual reports;
(c) Semi-annual reports; and
(d) All updated prospectus, supplements, and amendments thereto.
8. REFUND OF SALES CHARGE: If the shares of any Fund confirmed to you
hereunder are repurchased by such Fund, or by us as Agent for such Fund, or
are tendered for liquidation to such Fund, within seven (7) business days
after such confirmation of your original order, then you shall forthwith
repay to such Fund the full dealer concession allowed to you on the sale of
such Fund shares. We shall notify you of such repurchase or redemption
within ten (10) days from the day on which the redemption order is
delivered to us or to such Fund.
9. STATEMENTS/REPRESENTATIONS: No person is authorized to make any statements
or representations relating to the shares of any Fund, except those
contained in its then current Prospectus and Statement of Additional
Information which you agree to deliver to investors in accordance with
applicable regulations and in such information as we may supply or
authorize as Supplemental Information to such Prospectus and Statement of
Additional Information (i.e., advertisements and sales literature).
You shall not allow unauthorized statements or information designated by us
as "Not For Use With The Public" to be distributed directly or indirectly
to an investor. You shall deliver to us for prior approval (such approval
not to be unreasonably withheld) any Supplemental Information prepared by
you for use with the public.
In ordering shares of any Fund you shall rely solely and conclusively on
the representations contained in its then current Prospectus, Statement of
Additional Information, and Supplemental Information, if any, additional
copies of which are and will be available on request. In no transaction
shall you have any authority whatever to act as agent for any Fund, or for
us, or for any other distributor. Nothing in this Agreement shall
constitute either of us the agent of the other, or shall constitute you or
any Fund the agent of the other.
10. WARRANTIES: We represent and warrant that:
(a) the Funds, the Prospectus and Statement of Additional Information, and
all Supplemental Information distributed by us to you for distribution
to the public will comply with all applicable state and federal laws,
rules, and regulations; and
(b) the Funds may legally be sold in every United States jurisdiction,
unless you are notified to the contrary.
We agree to indemnify you and hold you harmless against every loss,
cost, damage or expense (including reasonable attorney's fees and
expenses) incurred by you as a result of our breach of the foregoing
representations and warranties if you notify us promptly after
commencement of any action brought against you for which you may seek
indemnity.
11. PRICING ERRORS: With respect to any pricing errors relating to
transactions entered into by you on behalf of your customers, you agree to
use your best efforts in cooperating with us to resolve and remedy such
errors upon receipt of notice from us. We will adjust transactions in
accordance with procedures established by the Company and we will notify
you of such adjustments.
12. MODIFICATION AND TERMINATION: We reserve the right, in our discretion and
without notice to you or to any distributor, to suspend sales, to withdraw
any offering, to change the offering prices or to modify or
<PAGE>
Page 23
cancel this Agreement (including the provision for Plan payments pursuant
to a Plan of Distribution described in Section 4) which shall be construed
in accordance with the laws of the State of Connecticut. This Agreement
may be canceled at any time by you upon thirty (30) days written notice.
We may terminate this Agreement for failure to comply with its terms upon
mailing notice to you. This Agreement will automatically terminate without
notice if you are expelled or suspended from the NASD.
13. INVESTORS ACCOUNT INSTRUCTIONS: If any investor's account is established
without the investor signing the application form, the dealer represents
that the instructions relating to the registration (including the
investor's tax identification number) and selected options furnished to the
Fund (whether on the application form, in some other document, or orally)
are in accordance with the investor's instructions, and the dealer agrees
to indemnify the Fund, its Transfer Agent, and us for any loss or liability
resulting from acting upon such instructions. We agree to hold harmless
and indemnify you for any loss or liability arising out of our negligence
in processing such instructions.
14. LIABILITY: Nothing contained herein shall be deemed to protect you against
any liability to us, the Company or the Company's shareholders to which you
would otherwise be subject by reason of negligence, willful misfeasance, or
bad faith in the performance of your duties hereunder, or by reason of your
reckless disregard of your obligations and duties hereunder.
15. ACCEPTANCE OF TERMS: If the foregoing completely expresses the terms of
the Agreement between us, please so signify by executing, in the space
provided, the annexed duplicate of this Agreement and return it to us,
retaining the original copy for your own files. This Agreement shall
become effective upon the earliest of our receipt of a signed copy hereof
or the first order placed by you for any of the Funds' shares after the
date below, which order shall constitute acceptance of this Agreement.
This Agreement shall supersede all prior Selling Group Agreements relating
to the shares of any of the Funds. All amendments to this Agreement,
including any changes made pursuant to Appendix A, shall take effect as of
the date of the first order placed by you for any of the Fund's shares
after the date set forth in the notice of amendment sent to you by the
undersigned.
HARTFORD SECURITIES DISTRIBUTION COMPANY, INC.
BY:
---------------------------
Name:
Title:
Please execute this Selling Group Agreement below and return it to us at the
address set forth above.
------------------------------
(Dealer's Name)
------------------------------
(Street Address)
--------------------------------------------------------------------------
(City) (State) (Zip Code)
------------------------------
(Telephone No.)
<PAGE>
Page 24
BY:
------------------------------
(Authorized Signature)
------------------------------
(Name and Title)
[ ] Please indicate if you intend to execute a Networking Agreement to
allow use of the National Securities Clearing Corporation system.
[ ] Please indicate if you intend to execute an Account Aggregation
Agreement.
<PAGE>
Page 25
APPENDIX A
The following series of ITT Hartford Mutual Funds, Inc. are subject to this
Agreement:
ITT Hartford Small Company Fund
ITT Hartford Capital Appreciation Fund
ITT Hartford International Opportunities Fund
ITT Hartford Stock Fund
ITT Hartford Dividend and Growth Fund
ITT Hartford Advisers Fund
ITT Hartford Bond Income Strategy Fund
ITT Hartford Money Market Fund
SALES OF CLASS B SHARES SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE
The compensation on purchase payments of Class B shares subject to the
contingent deferred sales charge shall be 3.75% of purchases made plus an
additional 0.25% payable according to the Distribution and Service Plan adopted
for Class B shares. Such payment is only on Class B shares subject to a
contingent deferred sales charge at the time of investment.
<PAGE>
Page 26
EXHIBIT 8
CUSTODIAN CONTRACT
Between
ITT HARTFORD MUTUAL FUNDS, INC.
and
STATE STREET BANK AND TRUST COMPANY
GlobalSeriesCorp
21N
<PAGE>
Page 28
TABLE OF CONTENTS
Page
----
1. Employment of Custodian and Property to be Held By
It 1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States 2
2.1 Holding Securities 2
2.2 Delivery of Securities 2
2.3 Registration of Securities 4
2.4 Bank Accounts 5
2.5 Availability of Federal Funds 5
2.6 Collection of Income 5
2.7 Payment of Fund Monies 6
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased 7
2.9 Appointment of Agents 7
2.10 Deposit of Fund Assets in U.S. Securities System 7
2.11 Fund Assets Held in the Custodian's Direct
Paper System 9
2.12 Segregated Account 9
2.13 Ownership Certificates for Tax Purposes 10
2.14 Proxies 10
2.15 Communications Relating to Portfolio Securities 10
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States 11
3.1 Appointment of Foreign Sub-Custodians 11
3.2 Assets to be Held 11
3.3 Foreign Securities Systems 11
3.4 Holding Securities 11
3.5 Agreements with Foreign Banking Institutions 12
3.6 Access of Independent Accountants of the Fund 12
3.7 Reports by Custodian 12
3.8 Transactions in Foreign Custody Account 12
3.9 Liability of Foreign Sub-Custodians 13
3.10 Liability of Custodian 13
3.11 Reimbursement for Advances 13
3.12 Monitoring Responsibilities 14
3.13 Branches of U.S. Banks 14
3.14 Tax Law 14
<PAGE>
Page 29
4. Payments for Sales or Repurchase or Redemptions
of Shares of the Fund 14
5. Proper Instructions 15
6. Actions Permitted Without Express Authority 15
7. Evidence of Authority 16
8. Duties of Custodian With Respect to the Books of Account and Calculation
of Net Asset Value and Net Income 16
9. Records 16
10. Opinion of Fund's Independent Accountants 17
11. Reports to Fund by Independent Public Accountants 17
12. Compensation of Custodian 17
13. Responsibility of Custodian 17
14. Effective Period, Termination and Amendment 19
15. Successor Custodian 19
16. Interpretive and Additional Provisions 20
17. Additional Funds 20
18. Massachusetts Law to Apply 21
19. Prior Contracts 21
20. Shareholder Communications 21
<PAGE>
Page 30
CUSTODIAN CONTRACT
This Contract between ITT Hartford Mutual Funds, Inc., a corporation
organized and existing under the laws of the State of Maryland, having its
principal place of business at 690 Asylum Avenue, Hartford Plaza, Hartford,
Connecticut 06115 hereinafter called the "Fund", and State Street Bank and Trust
Company, a Massachusetts trust company, having its principal place of business
at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in eight series, the
ITT Hartford Small Company Fund, ITT Hartford Capital Appreciation Fund, ITT
Hartford International Opportunities Fund, ITT Hartford Stock Fund, ITT Hartford
Dividend and Growth Fund, ITT Hartford Advisers Fund, ITT Hartford Bond Income
Fund and ITT Hartford Money Market Fund (such series together with all other
series subsequently established by the Fund and made subject to this Contract in
accordance with paragraph 17, being herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of the
Portfolios of the Fund, including securities which the Fund, on behalf of the
applicable Portfolio desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Articles of
Incorporation. The Fund on behalf of the Portfolio(s) agrees to deliver to the
Custodian all securities and cash of the Portfolios, and all payments of income,
payments of principal or capital distributions received by it with respect to
all securities owned by the Portfolio(s) from time to time, and the cash
consideration received by it for such new or treasury shares of capital stock of
the Fund representing interests in the Portfolios, ("Shares") as may be issued
or sold from time to time. The Custodian shall not be responsible for any
property of a Portfolio held or received by the Portfolio and not delivered to
the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Directors of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on
<PAGE>
Page 31
behalf of the applicable Portfolio(s) the foreign banking institutions and
foreign securities depositories designated in Schedule A hereto but only in
accordance with the provisions of Article 3.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE
CUSTODIAN IN THE UNITED STATES
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate for
the account of each Portfolio all non-cash property, to be held by it in
the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository or
in a book-entry system authorized by the U.S. Department of the Treasury
and certain federal agencies (each, a "U.S. Securities System") and (b)
commercial paper of an issuer for which State Street Bank and Trust Company
acts as issuing and paying agent ("Direct Paper") which is deposited and/or
maintained in the Direct Paper System of the Custodian (the "Direct Paper
System") pursuant to Section 2.11.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver domestic
securities owned by a Portfolio held by the Custodian or in a U.S.
Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only upon
receipt of Proper Instructions from the Fund on behalf of the applicable
Portfolio, which may be continuing instructions when deemed appropriate by
the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a U.S. Securities System,
in accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name
of the Portfolio or into the name of any nominee or nominees of
the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.9 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or for
exchange for a
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different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
PROVIDED that, in any such case, the new securities are to be
delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall have
no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Portfolio, BUT ONLY against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund on
behalf of the Portfolio, which may be in the form of cash or
obligations issued by the United States government, its agencies
or instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's account
in the book-entry system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or responsible
for the delivery of securities owned by the Portfolio prior to
the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the
Fund on behalf of the Portfolio requiring a pledge of assets by
the Fund on behalf of the Portfolio, BUT ONLY against receipt of
amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of
1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio of
the Fund;
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13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account
deposits in connection with transactions by the Portfolio of the
Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind,
as may be described from time to time in the currently effective
prospectus and statement of additional information of the Fund,
related to the Portfolio ("Prospectus"), in satisfaction of
requests by holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon receipt of,
in addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the
Board of Directors or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities of the Portfolio
to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom
delivery of such securities shall be made.
2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, UNLESS the Fund has authorized in
writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent appointed pursuant
to Section 2.9 or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities accepted by the Custodian
on behalf of the Portfolio under the terms of this Contract shall be in
"street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio of
the Fund, subject only to draft or order by the Custodian acting pursuant
to the terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for the
account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for a
Portfolio may be deposited by it
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to its credit as Custodian in the Banking Department of the Custodian or in
such other banks or trust companies as it may in its discretion deem
necessary or desirable; PROVIDED, however, that every such bank or trust
company shall be qualified to act as a custodian under the Investment
Company Act of 1940 and that each such bank or trust company and the funds
to be deposited with each such bank or trust company shall on behalf of
each applicable Portfolio be approved by vote of a majority of the Board of
Directors of the Fund. Such funds shall be deposited by the Custodian in
its capacity as Custodian and shall be withdrawable by the Custodian only
in that capacity.
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund on
behalf of each applicable Portfolio and the Custodian, the Custodian shall,
upon the receipt of Proper Instructions from the Fund on behalf of a
Portfolio, make federal funds available to such Portfolio as of specified
times agreed upon from time to time by the Fund and the Custodian in the
amount of checks received in payment for Shares of such Portfolio which are
deposited into the Portfolio's account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which each
Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and
other payments with respect to bearer domestic securities if, on the date
of payment by the issuer, such securities are held by the Custodian or its
agent thereof and shall credit such income, as collected, to such
Portfolio's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder. Income
due each Portfolio on securities loaned pursuant to the provisions of
Section 2.2 (10) shall be the responsibility of the Fund. The Custodian
will have no duty or responsibility in connection therewith, other than to
provide the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian of
the income to which the Portfolio is properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the Fund
on behalf of the applicable Portfolio, which may be continuing instructions
when deemed appropriate by the parties, the Custodian shall pay out monies
of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of the
Portfolio but only (a) against the delivery of such securities or
evidence of title to such options, futures contracts or options
on futures contracts to the Custodian (or any bank, banking firm
or trust company doing business in the United States or abroad
which is qualified under the Investment Company Act of 1940, as
amended, to act as a custodian and has been designated by the
Custodian as its agent for this purpose) registered in the name
of the Portfolio or in the name of a nominee of the Custodian
referred to in Section
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2.3 hereof or in proper form for transfer; (b) in the case of a
purchase effected through a U.S. Securities System, in accordance
with the conditions set forth in Section 2.10 hereof; (c) in the
case of a purchase involving the Direct Paper System, in
accordance with the conditions set forth in Section 2.11; (d) in
the case of repurchase agreements entered into between the Fund
on behalf of the Portfolio and the Custodian, or another bank, or
a broker-dealer which is a member of NASD, (i) against delivery
of the securities either in certificate form or through an entry
crediting the Custodian's account at the Federal Reserve Bank
with such securities or (ii) against delivery of the receipt
evidencing purchase by the Portfolio of securities owned by the
Custodian along with written evidence of the agreement by the
Custodian to repurchase such securities from the Portfolio or (e)
for transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be effected prior
to receipt of a confirmation from a broker and/or the applicable
bank pursuant to Proper Instructions from the Fund as defined in
Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating expenses
of the Fund whether or not such expenses are to be in whole or
part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
Portfolio, a certified copy of a resolution of the Board of
Directors or of the Executive Committee of the Fund signed by an
officer of the Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and every
case where payment for purchase of domestic securities for the account of a
Portfolio is made by the Custodian in
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advance of receipt of the securities purchased in the absence of specific
written instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by the
Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of 1940,
as amended, to act as a custodian, as its agent to carry out such of the
provisions of this Article 2 as the Custodian may from time to time direct;
PROVIDED, however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
2.10 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a clearing
agency registered with the Securities and Exchange Commission under Section
17A of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S. Department
of the Treasury and certain federal agencies, collectively referred to
herein as "U.S. Securities System" in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules and regulations,
if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are represented
in an account ("Account") of the Custodian in the U.S. Securities
System which shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the account
of the Portfolio upon (i) receipt of advice from the U.S.
Securities System that such securities have been transferred to
the Account, and (ii) the making of an entry on the records of
the Custodian to reflect such payment and transfer for the
account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon (i) receipt
of advice from the U.S. Securities System that payment for such
securities has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the Portfolio.
Copies of all advices from the U.S. Securities System of
transfers of securities for the account of the Portfolio shall
identify the Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its request. Upon
request, the Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account of
the Portfolio in the form of a written advice or notice and shall
furnish to the Fund on behalf of the
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Portfolio copies of daily transaction sheets reflecting each
day's transactions in the U.S. Securities System for the account
of the Portfolio.
4) The Custodian shall provide the Fund for the Portfolio with any
report obtained by the Custodian on the U.S. Securities System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from
use of the U.S. Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents
or of any of its or their employees or from failure of the
Custodian or any such agent to enforce effectively such rights as
it may have against the U.S. Securities System; at the election
of the Fund, it shall be entitled to be subrogated to the rights
of the Custodian with respect to any claim against the U.S.
Securities System or any other person which the Custodian may
have as a consequence of any such loss or damage if and to the
extent that the Portfolio has not been made whole for any such
loss or damage.
2.11 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian may
deposit and/or maintain securities owned by a Portfolio in the Direct Paper
System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the
Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the account
of the Portfolio upon the making of an entry on the records of
the Custodian to reflect such payment and transfer of securities
to the account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon the making
of an entry on the records of the Custodian to reflect such
transfer and receipt of payment for the account of the Portfolio;
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5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the U.S.
Securities System for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio
with any report on its system of internal accounting control as
the Fund may reasonably request from time to time.
2.12 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio establish
and maintain a segregated account or accounts for and on behalf of each
such Portfolio, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by the
Custodian pursuant to Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by
the Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased or
sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act Release
No. 10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, BUT ONLY, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the applicable
Portfolio, a certified copy of a resolution of the Board of Directors or of
the Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
2.14 PROXIES. The Custodian shall, with respect to the domestic securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
the Portfolio or a nominee of the Portfolio, all
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proxies, without indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Portfolio such proxies, all proxy
soliciting materials and all notices relating to such securities.
2.15 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund for each
Portfolio all written information (including, without limitation, pendency
of calls and maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian
from issuers of the securities being held for the Portfolio. With respect
to tender or exchange offers, the Custodian shall transmit promptly to the
Portfolio all written information received by the Custodian from issuers of
the securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Portfolio desires
to take action with respect to any tender offer, exchange offer or any
other similar transaction, the Portfolio shall notify the Custodian at
least three business days prior to the date on which the Custodian is to
take such action.
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE
OF THE UNITED STATES
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Portfolio's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories designated
on Schedule A hereto ("foreign sub-custodians"). Upon receipt of "Proper
Instructions", as defined in Section 5 of this Contract, together with a
certified resolution of the Fund's Board of Directors, the Custodian and
the Fund may agree to amend Schedule A hereto from time to time to
designate additional foreign banking institutions and foreign securities
depositories to act as sub-custodian. Upon receipt of Proper Instructions,
the Fund may instruct the Custodian to cease the employment of any one or
more such sub-custodians for maintaining custody of the Portfolio's assets.
3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash equivalents in
such amounts as the Custodian or the Fund may determine to be reasonably
necessary to effect the Portfolio's foreign securities transactions. The
Custodian shall identify on its books as belonging to the Fund, the foreign
securities of the Fund held by each foreign sub-custodian.
3.3 FOREIGN SECURITIES SYSTEMS. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Portfolios shall be
maintained in a clearing agency which acts as a securities depository or in
a book-entry system for the central handling of securities located outside
of the United States (each a "Foreign Securities System") only through
arrangements implemented by the foreign banking institutions serving as
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sub-custodians pursuant to the terms hereof (Foreign Securities Systems and
U.S. Securities Systems are collectively referred to herein as the
"Securities Systems"). Where possible, such arrangements shall include
entry into agreements containing the provisions set forth in Section 3.5
hereof.
3.4 HOLDING SECURITIES. The Custodian may hold securities and other non-cash
property for all of its customers, including the Fund, with a foreign sub-
custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to securities and other non-cash
property of the Fund which are maintained in such account shall identify by
book-entry those securities and other non-cash property belonging to the
Fund and (ii) the Custodian shall require that securities and other non-
cash property so held by the foreign sub-custodian be held separately from
any assets of the foreign sub-custodian or of others.
3.5 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall provide that: (a) the assets of each
Portfolio will not be subject to any right, charge, security interest, lien
or claim of any kind in favor of the foreign banking institution or its
creditors or agent, except a claim of payment for their safe custody or
administration; (b) beneficial ownership for the assets of each Portfolio
will be freely transferable without the payment of money or value other
than for custody or administration; (c) adequate records will be maintained
identifying the assets as belonging to each applicable Portfolio; (d)
officers of or auditors employed by, or other representatives of the
Custodian, including to the extent permitted under applicable law the
independent public accountants for the Fund, will be given access to the
books and records of the foreign banking institution relating to its
actions under its agreement with the Custodian; and (e) assets of the
Portfolios held by the foreign sub-custodian will be subject only to the
instructions of the Custodian or its agents.
3.6 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the Fund,
the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign sub-custodian insofar
as such books and records relate to the performance of such foreign banking
institution under its agreement with the Custodian.
3.7 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the securities and
other assets of the Portfolio(s) held by foreign sub-custodians, including
but not limited to an identification of entities having possession of the
Portfolio(s) securities and other assets and advices or notifications of
any transfers of securities to or from each custodial account maintained by
a foreign banking institution for the Custodian on behalf of each
applicable Portfolio indicating, as to securities acquired for a Portfolio,
the identity of the entity having physical possession of such securities.
3.8 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Except as otherwise provided
in paragraph (b) of this Section 3.8, the provision of Sections 2.2 and 2.7
of this Contract shall apply,
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MUTATIS MUTANDIS to the foreign securities of the Fund held outside the
United States by foreign sub-custodians. (b) Notwithstanding any provision
of this Contract to the contrary, settlement and payment for securities
received for the account of each applicable Portfolio and delivery of
securities maintained for the account of each applicable Portfolio may be
effected in accordance with the customary established securities trading or
securities processing practices and procedures in the jurisdiction or
market in which the transaction occurs, including, without limitation,
delivering securities to the purchaser thereof or to a dealer therefor (or
an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer. (c) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such entity's nominee to the
same extent as set forth in Section 2.3 of this Contract, and the Fund
agrees to hold any such nominee harmless from any liability as a holder of
record of such securities.
3.9 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which the
Custodian employs a foreign banking institution as a foreign sub-custodian
shall require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the
Custodian and each Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to
any claims against a foreign banking institution as a consequence of any
such loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
3.10 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set forth
with respect to sub-custodians generally in this Contract and, regardless
of whether assets are maintained in the custody of a foreign banking
institution, a foreign securities depository or a branch of a U.S. bank as
contemplated by paragraph 3.13 hereof, the Custodian shall not be liable
for any loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism or any loss where the sub-custodian has otherwise exercised
reasonable care. Notwithstanding the foregoing provisions of this
paragraph 3.10, in delegating custody duties to State Street London Ltd.,
the Custodian shall not be relieved of any responsibility to the Fund for
any loss due to such delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization, insurrection,
civil strife or armed hostilities) or (b) other losses (excluding a
bankruptcy or insolvency of State Street London Ltd. not caused by
political risk) due to Acts of God, nuclear incident or other losses under
circumstances where the Custodian and State Street London Ltd. have
exercised reasonable care.
3.11 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to advance
cash or securities for any purpose for the benefit of a Portfolio including
the purchase or sale of foreign exchange or of contracts for foreign
exchange, or in the event that the Custodian
<PAGE>
Page 42
or its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of
this Contract, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any
property at any time held for the account of the applicable Portfolio shall
be security therefor and should the Fund fail to repay the Custodian
promptly, the Custodian shall be entitled to utilize available cash and to
dispose of such Portfolios assets to the extent necessary to obtain
reimbursement.
3.12 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to the
Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection with
the initial approval of this Contract. In addition, the Custodian will
promptly inform the Fund in the event that the Custodian learns of a
material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the case
of any foreign sub-custodian not the subject of an exemptive order from the
Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity has declined below
$200 million (in each case computed in accordance with generally accepted
U.S. accounting principles).
3.13 BRANCHES OF U.S. BANKS. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of the
Portfolios assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract. (b) Cash
held for each Portfolio of the Fund in the United Kingdom shall be
maintained in an interest bearing account established for the Fund with the
Custodian's London branch, which account shall be subject to the direction
of the Custodian, State Street London Ltd. or both.
3.14 TAX LAW. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or any
state or political subdivision thereof. It shall be the responsibility of
the Fund to notify the Custodian of the obligations imposed on the Fund or
the Custodian as custodian of the Fund by the tax law of jurisdictions
other than those mentioned in the above sentence, including responsibility
for withholding and other taxes, assessments or other governmental charges,
certifications and governmental reporting. The sole responsibility of the
Custodian with regard to such tax law shall be to use reasonable efforts to
assist the Fund with respect to any claim for exemption or refund under the
tax law of jurisdictions for which the Fund has provided such information.
4. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent
<PAGE>
Page 43
of the Fund and deposit into the account of the appropriate Portfolio such
payments as are received for Shares of that Portfolio issued or sold from time
to time by the Fund. The Custodian will provide timely notification to the Fund
on behalf of each such Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation and any applicable votes of the
Board of Directors of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt
of instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the
redemption or repurchase of Shares of the Fund, the Custodian shall honor checks
drawn on the Custodian by a holder of Shares, which checks have been furnished
by the Fund to the holder of Shares, when presented to the Custodian in
accordance with such procedures and controls as are mutually agreed upon from
time to time between the Fund and the Custodian.
5. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Contract means a writing signed
or initialed by one or more person or persons as the Board of Directors shall
have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Directors of the
Fund accompanied by a detailed description of procedures approved by the Board
of Directors, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Directors and the Custodian are satisfied that such procedures afford adequate
safeguards for the Portfolios' assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three-party agreement which requires a segregated asset account in
accordance with Section 2.12.
6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under
this Contract, PROVIDED that all such payments shall be accounted
for to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
<PAGE>
Page 44
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Portfolio
except as otherwise directed by the Board of Directors of the
Fund.
7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote of the Board of
Directors of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Directors pursuant to the Articles of Incorporation as described
in such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION OF
NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Directors of the Fund to keep the
books of account of each Portfolio and/or compute the net asset value per share
of the outstanding shares of each Portfolio or, if directed in writing to do so
by the Fund on behalf of the Portfolio, shall itself keep such books of account
and/or compute such net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of the Portfolio as described in the
Fund's currently effective prospectus related to such Portfolio and shall advise
the Fund and the Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Fund to do so, shall advise
the Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per share and the
daily income of each Portfolio shall be made at the time or times described from
time to time in the Fund's currently effective prospectus related to such
Portfolio.
9. RECORDS
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company Act
of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the
<PAGE>
Page 45
Fund with a tabulation of securities owned by each Portfolio and held by the
Custodian and shall, when requested to do so by the Fund and for such
compensation as shall be agreed upon between the Fund and the Custodian, include
certificate numbers in such tabulations.
10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
11. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this Contract;
such reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
12. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund on
behalf of each applicable Portfolio and the Custodian.
13. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled
to rely on and may act upon advice of counsel (who may be counsel for the Fund)
on all matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without
<PAGE>
Page 46
liability to the Fund for any loss, liability, claim or expense resulting from
or caused by; (i) events or circumstances beyond the reasonable control of the
Custodian or any sub-custodian or Securities System or any agent or nominee of
any of the foregoing, including, without limitation, nationalization or
expropriation, imposition of currency controls or restrictions, the
interruption, suspension or restriction of trading on or the closure of any
securities market, power or other mechanical or technological failures or
interruptions, computer viruses or communications disruptions, acts of war or
terrorism, riots, revolutions, work stoppages, natural disasters or other
similar events or acts; (ii) errors by the Fund or the Investment Advisor in
their instructions to the Custodian provided such instructions have been in
accordance with this Contract; (iii) the insolvency of or acts or omissions by a
Securities System; (iv) any delay or failure of any broker, agent or
intermediary, central bank or other commercially prevalent payment or clearing
system to deliver to the Custodian's sub-custodian or agent securities purchased
or in the remittance or payment made in connection with securities sold; (v) any
delay or failure of any company, corporation, or other body in charge or
registering or transferring securities in the name of the Custodian, the Fund,
the Custodian's sub-custodians, nominees or agents or any consequential losses
arising out of such delay or failure to transfer such securities including non-
receipt of bonus, dividends and rights and other accretions or benefits; (vi)
delays or inability to perform its duties due to any disorder in market
infrastructure with respect to any particular security or Securities System; and
(vii) any provision of any present or future law or regulation or order of the
United States of America, or any state thereof, or any other country, or
political subdivision thereof or of any court of competent jurisdiction.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution to the same extent as set forth with respect to sub-
custodians generally in this Contract.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not
limited to securities settlements, foreign exchange contracts and assumed
settlement) or in the event that the Custodian or its nominee shall incur or
be assessed any taxes, charges, expenses, assessments, claims or liabilities
in connection with the performance of this Contract, except such as may arise
from its or its nominee's own negligent action, negligent failure to act or
willful misconduct, any property at any time held for the account of the
applicable Portfolio shall be security therefor and should the Fund fail to
repay the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolio's assets to the extent
necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
14. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
<PAGE>
Page 47
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; PROVIDED, however that the
Custodian shall not with respect to a Portfolio act under Section 2.10 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Directors of the Fund has approved the
initial use of a particular Securities System by such Portfolio, as required by
Rule 17f-4 under the Investment Company Act of 1940, as amended and that the
Custodian shall not with respect to a Portfolio act under Section 2.11 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Directors has approved the initial use of
the Direct Paper System by such Portfolio; PROVIDED FURTHER, however, that the
Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Articles of
Incorporation, and further provided, that the Fund on behalf of one or more of
the Portfolios may at any time by action of its Board of Directors (i)
substitute another bank or trust company for the Custodian by giving notice as
described above to the Custodian, or (ii) immediately terminate this Contract in
the event of the appointment of a conservator or receiver for the Custodian by
the Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
15. SUCCESSOR CUSTODIAN
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Directors of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable
<PAGE>
Page 48
Portfolio and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract on behalf of each applicable
Portfolio and to transfer to an account of such successor custodian all of the
securities of each such Portfolio held in any Securities System. Thereafter,
such bank or trust company shall be the successor of the Custodian under this
Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, PROVIDED that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Articles of Incorporation of the Fund.
No interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
17. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to the ITT Hartford Small Company Fund, ITT Hartford Capital
Appreciation Fund, ITT Hartford International Opportunities Fund, ITT Hartford
Stock Fund, ITT Hartford Dividend and Growth Fund, ITT Hartford Advisers Fund,
ITT Hartford Bond Income Fund and ITT Hartford Money Market Fund with respect to
which it desires to have the Custodian render services as custodian under the
terms hereof, it shall so notify the Custodian in writing, and if the Custodian
agrees in writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
18. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios and the Custodian
relating to the custody of the Fund's assets.
<PAGE>
Page 49
20. SHAREHOLDER COMMUNICATIONS
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether the Fund authorizes
the Custodian to provide the Fund's name, address, and share position to
requesting companies whose stock the Fund owns. If the Fund tells the Custodian
"no", the Custodian will not provide this information to requesting companies.
If the Fund tells the Custodian "yes" or do not check either "yes" or "no"
below, the Custodian is required by the rule to treat the Fund as consenting to
disclosure of this information for all securities owned by the Fund or any funds
or accounts established by the Fund. For the Fund's protection, the Rule
prohibits the requesting company from using the Fund's name and address for any
purpose other than corporate communications. Please indicate below whether the
Fund consent or object by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [ ] The Custodian is not authorized to release the Fund's name,
address, and share positions.
<PAGE>
Page 50
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the day of ,
1996.
ATTEST ITT HARTFORD MUTUAL FUNDS, INC.
By
- ----------------------------------- ------------------------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
By
- ----------------------------------- ------------------------------------
Executive Vice President
<PAGE>
Page 51
SCHEDULE A
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Directors of ITT Hartford
Mutual Funds, Inc. for use as sub-custodians for the Fund's securities and other
assets:
(Insert banks and securities depositories)
Certified:
- -------------------------
Fund's Authorized Officer
Date:
--------------------
<PAGE>
EXHIBIT 9
TRANSFER AGENCY AND SERVICE AGREEMENT
between
ITT HARTFORD MUTUAL FUNDS, INC.
and
STATE STREET BANK AND TRUST COMPANY
1G - Domestic Corp/Series
<PAGE>
TABLE OF CONTENTS
Page
----
1. Terms of Appointment; Duties of the Bank 1
2. Fees and Expenses 3
3. Representations and Warranties of the Bank 4
4. Representations and Warranties of the Fund 4
5. Data Access and Proprietary Information 5
6. Indemnification 6
7. Standard of Care 8
8. Covenants of the Fund and the Bank 8
9. Termination of Agreement 9
10. Additional Funds 9
11. Assignment 9
12. Amendment 10
13. Massachusetts Law to Apply 10
14. Force Majeure 10
15. Consequential Damages 10
16. Merger of Agreement 10
17. Counterparts 10
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the day of , 1996, by and between ITT
HARTFORD MUTUAL FUNDS, INC., a Maryland corporation, having its principal office
and place of business at 690 Asylum Avenue, Hartford Plaza, Hartford,
Connecticut 06115 (the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company having its principal office and place of business at
225 Franklin Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund intends to initially offer shares in eight series, the ITT
Hartford Small Company Fund, ITT Hartford Capital Appreciation Fund, ITT
Hartford International Opportunities Fund, ITT Hartford Stock Fund, ITT Hartford
Dividend and Growth Fund, ITT Hartford Advisers Fund, ITT Hartford Bond Income
Fund and ITT Hartford Money Market Fund (each such series, together with all
other series subsequently established by the Fund and made subject to this
Agreement in accordance with Article 10, being herein referred to as a
"Portfolio", and collectively as the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank as its
transfer agent, dividend disbursing agent, custodian of certain retirement plans
and agent in connection with certain other activities, and the Bank desires to
accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
l. TERMS OF APPOINTMENT; DUTIES OF THE BANK
1.1 Subject to the terms and conditions set forth in this Agreement, the Fund,
on behalf of the Portfolios, hereby employs and appoints the Bank to act
as, and the Bank agrees to act as its transfer agent for the Fund's
authorized and issued shares of its common stock, $ par value,
("Shares"), dividend disbursing agent, custodian of certain retirement
plans and agent in connection with any accumulation, open-account or
similar plans provided to the shareholders of each of the respective
Portfolios of the Fund ("Shareholders") and set out in the currently
effective prospectus and statement of additional information ("prospectus")
of the Fund on behalf of the applicable Portfolio, including without
limitation any periodic investment plan or periodic withdrawal program.
1.2 The Bank agrees that it will perform the following services:
<PAGE>
(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios, as
applicable and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate
documentation thereof to the Custodian of the Fund authorized
pursuant to the Articles of Incorporation of the Fund (the
"Custodian");
(ii) Pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the appropriate
Shareholder account;
(iii) Receive for acceptance redemption requests and
redemption directions and deliver the appropriate documentation
thereof to the Custodian;
(iv) In respect to the transactions in items (i), (ii)
and (iii) above, the Bank shall execute transactions directly
with broker-dealers authorized by the Fund who shall thereby be
deemed to be acting on behalf of the Fund;
(v) At the appropriate time as and when it receives
monies paid to it by the Custodian with respect to any
redemption, pay over or cause to be paid over in the appropriate
manner such monies as instructed by the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the applicable
Portfolio;
(viii) Issue replacement certificates for those
certificates alleged to have been lost, stolen or destroyed upon
receipt by the Bank of indemnification satisfactory to the Bank
and protecting the Bank and the Fund, and the Bank at its option,
may issue replacement certificates in place of mutilated stock
certificates upon presentation thereof and without such
indemnity;
<PAGE>
(ix) Maintain records of account for and advise the Fund
and its Shareholders as to the foregoing; and
(x) Record the issuance of shares of the Fund and
maintain pursuant to SEC Rule 17Ad-10(e) a record of the total
number of shares of the Fund which are authorized, based upon
data provided to it by the Fund, and issued and outstanding. The
Bank shall also provide the Fund on a regular basis with the
total number of shares which are authorized and issued and
outstanding and shall have no obligation, when recording the
issuance of shares, to monitor the issuance of such shares or to
take cognizance of any laws relating to the issue or sale of such
shares, which functions shall be the sole responsibility of the
Fund.
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall: (i)
perform the customary services of a transfer agent, dividend
disbursing agent, custodian of certain retirement plans and, as
relevant, agent in connection with accumulation, open-account or
similar plans (including without limitation any periodic investment
plan or periodic withdrawal program), including but not limited to:
maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing proxies, mailing Shareholder reports and prospectuses
to current Shareholders, withholding taxes on U.S. resident and
non-resident alien accounts, preparing and filing U.S. Treasury
Department Forms 1099 and other appropriate forms required with
respect to dividends and distributions by federal authorities for all
Shareholders, preparing and mailing confirmation forms and statements
of account to Shareholders for all purchases and redemptions of Shares
and other confirmable transactions in Shareholder accounts, preparing
and mailing activity statements for Shareholders, and providing
Shareholder account information and (ii) provide a system which will
enable the Fund to monitor the total number of Shares sold in each
State.
(c) In addition, the Fund shall (i) identify to the Bank in writing
those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of
transactions for each State on the system prior to activation and
thereafter monitor the daily activity for each State. The
responsibility of the Bank for the Fund's blue sky State registration
status is solely limited to the initial establishment of transactions
subject to blue sky compliance by the Fund and the reporting of such
transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services in
<PAGE>
Section 1 may be established from time to time by agreement between
the Fund on behalf of each Portfolio and the Bank per the attached
service responsibility schedule. The Bank may at times perform only a
portion of these services and the Fund or its agent may perform these
services on the Fund's behalf.
(e) The Bank shall provide additional services on behalf of the Fund
(i.e., escheatment services) which may be agreed upon in writing
between the Fund and the Bank.
2. FEES AND EXPENSES
2.1 For the performance by the Bank pursuant to this Agreement, the Fund agrees
on behalf of each of the Portfolios to pay the Bank an annual maintenance
fee for each Shareholder account as set out in the initial fee schedule
attached hereto. Such fees and out-of-pocket expenses and advances
identified under Section 2.2 below may be changed from time to time subject
to mutual written agreement between the Fund and the Bank.
2.2 In addition to the fee paid under Section 2.1 above, the Fund agrees on
behalf of each of the Portfolios to reimburse the Bank for out-of-pocket
expenses, including but not limited to confirmation production, postage,
forms, telephone, microfilm, microfiche, tabulating proxies, records
storage, or advances incurred by the Bank for the items set out in the fee
schedule attached hereto. In addition, any other expenses incurred by the
Bank at the request or with the consent of the Fund, will be reimbursed by
the Fund on behalf of the applicable Portfolio.
2.3 The Fund agrees on behalf of each of the Portfolios to pay all fees and
reimbursable expenses within five days following the receipt of the
respective billing notice. Postage for mailing of dividends, proxies, Fund
reports and other mailings to all shareholder accounts shall be advanced to
the Bank by the Fund at least seven (7) days prior to the mailing date of
such materials.
3. REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in good standing
under the laws of the Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in the Commonwealth of
Massachusetts.
3.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter
<PAGE>
into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Bank that:
4.1 It is a corporation duly organized and existing and in good standing under
the laws of the State of Maryland.
4.2 It is empowered under applicable laws and by its Articles of Incorporation
and By-Laws to enter into and perform this Agreement.
4.3 All corporate proceedings required by said Articles of Incorporation and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.4 It is an open-end and diversified management investment company registered
under the Investment Company Act of 1940, as amended.
4.5 A registration statement under the Securities Act of 1933, as amended on
behalf of each of the Portfolios is currently effective and will remain
effective, and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of the Fund being
offered for sale.
5. DATA ACCESS AND PROPRIETARY INFORMATION
5.1 The Fund acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by the Bank as part of the Fund's ability to
access certain Fund-related data ("Customer Data") maintained by the Bank
on data bases under the control and ownership of the Bank ("Data Access
Services") constitute copyrighted, trade secret, or other proprietary
information (collectively, "Proprietary Information") of substantial value
to the Bank or other third party. In no event shall Proprietary Information
be deemed Customer Data. The Fund agrees to treat all Proprietary
Information as proprietary to the Bank and further agrees that it shall not
divulge any Proprietary Information to any person or organization except as
may be provided hereunder. Without limiting the foregoing, the Fund agrees
for itself and its employees and agents:
<PAGE>
(a) to access Customer Data solely from locations as may be
designated in writing by the Bank and solely in accordance with the
Bank's applicable user documentation;
(b) to refrain from copying or duplicating in any way the Proprietary
Information;
(c) to refrain from obtaining unauthorized access to any portion of
the Proprietary Information, and if such access is inadvertently
obtained, to inform in a timely manner of such fact and dispose of
such information in accordance with the Bank's instructions;
(d) to refrain from causing or allowing the data acquired hereunder
from being retransmitted to any other computer facility or other
location, except with the prior written consent of the Bank;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to
protect at the Bank's expense the rights of the Bank in Proprietary
Information at common law, under federal copyright law and under other
federal or state law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 5. The obligations of this Section shall
survive any earlier termination of this Agreement.
5.2 If the Fund notifies the Bank that any of the Data Access Services do not
operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely manner
to correct such failure. Organizations from which the Bank may obtain
certain data included in the Data Access Services are solely responsible
for the contents of such data and the Fund agrees to make no claim against
the Bank arising out of the contents of such third-party data, including,
but not limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL
COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH
ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS
ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
5.3 If the transactions available to the Fund include the ability to originate
electronic instructions to the Bank in order to (i) effect the transfer or
movement
<PAGE>
of cash or Shares or (ii) transmit Shareholder information or other
information, then in such event the Bank shall be entitled to rely on the
validity and authenticity of such instruction without undertaking any
further inquiry as long as such instruction is undertaken in conformity
with security procedures established by the Bank from time to time.
6. INDEMNIFICATION
6.1 The Bank shall not be responsible for, and the Fund shall on behalf of the
applicable Portfolio indemnify and hold the Bank harmless from and against,
any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors required
to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful misconduct
which arise out of the breach of any representation or warranty of the
Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or services which
(i) are received by the Bank or its agents or subcontractors, and (ii)
have been prepared, maintained or performed by the Fund or any other
person or firm on behalf of the Fund including but not limited to any
previous transfer agent or registrar.
(d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Fund on behalf
of the applicable Portfolio.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state
or in violation of any stop order or other determination or ruling by
any federal agency or any state with respect to the offer or sale of
such Shares in such state.
(f) The negotiation and processing by the Bank of checks not made
payable to the order of the Bank, the Fund, the Fund's management
company, transfer agent or distributor or the retirement account
custodian or trustee for a plan account investing in Shares, which
checks are tendered to the Bank for the purchase of Shares (i.e.,
checks made payable to prospective or existing Shareholders, such
<PAGE>
checks are commonly known as "third party checks").
6.2 At any time the Bank may apply to any officer of the Fund for instructions,
and may consult with legal counsel with respect to any matter arising in
connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be
liable and shall be indemnified by the Fund on behalf of the applicable
Portfolio for any action taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel. The Bank, its agents and
subcontractors shall be protected and indemnified in acting upon any paper
or document furnished by or on behalf of the Fund, reasonably believed to
be genuine and to have been signed by the proper person or persons, or upon
any instruction, information, data, records or documents provided the Bank
or its agents or subcontractors by machine readable input, telex, CRT data
entry or other similar means authorized by the Fund, and shall not be held
to have notice of any change of authority of any person, until receipt of
written notice thereof from the Fund. The Bank, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or former registrar, or of a
co-transfer agent or co-registrar.
6.3 In order that the indemnification provisions contained in this Section 6
shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Bank, the Bank shall promptly notify the Fund of
such assertion, and shall keep the Fund advised with respect to all
developments concerning such claim. The Fund shall have the option to
participate with the Bank in the defense of such claim or to defend against
said claim in its own name or in the name of the Bank. The Bank shall in
no case confess any claim or make any compromise in any case in which the
Fund may be required to indemnify the Bank except with the Fund's prior
written consent.
7. STANDARD OF CARE
The Bank shall at all times act in good faith and agrees to use its best
efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement, but assumes no responsibility and shall not
be liable for loss or damage due to errors unless said errors are caused by
its negligence, bad faith, or willful misconduct or that of its employees.
8. COVENANTS OF THE FUND AND THE BANK
8.1 The Fund shall on behalf of each of the Portfolios promptly furnish to the
Bank the following:
<PAGE>
(a) A certified copy of the resolution of the Board of Directors of
the Fund authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the Articles of Incorporation and By-Laws of the Fund
and all amendments thereto.
8.2 The Bank hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of stock certificates,
check forms and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such certificates, forms
and devices.
8.3 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such Section and Rules, and will be
surrendered promptly to the Fund on and in accordance with its request.
8.4 The Bank and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement
shall remain confidential, and shall not be voluntarily disclosed to any
other person, except as may be required by law.
8.5 In case of any requests or demands for the inspection of the Shareholder
records of the Fund, the Bank will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the Shareholder
records to such person.
9. TERMINATION OF AGREEMENT
9.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.
9.2 Should the Fund exercise its right to terminate, all out-of-pocket expenses
associated with the movement of records and material will be borne by the
Fund on behalf of the applicable Portfolio(s). Additionally, the Bank
reserves the right to charge for any other reasonable expenses associated
with such termination and/or a charge equivalent to the average of three
(3) months' fees.
<PAGE>
10. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to the ITT Hartford Small Company Fund, ITT Hartford Capital
Appreciation Fund, ITT Hartford International Opportunities Fund, ITT
Hartford Stock Fund, ITT Hartford Dividend and Growth Fund, ITT Hartford
Advisers Fund, ITT Hartford Bond Income Fund and ITT Hartford Money Market
Fund with respect to which it desires to have the Bank render services as
transfer agent under the terms hereof, it shall so notify the Bank in
writing, and if the Bank agrees in writing to provide such services, such
series of Shares shall become a Portfolio hereunder.
11. ASSIGNMENT
11.1 Except as provided in Section 11.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
11.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
11.3 The Bank may, without further consent on the part of the Fund, subcontract
for the performance hereof with (i) Boston Financial Data Services, Inc., a
Massachusetts corporation ("BFDS") which is duly registered as a transfer
agent pursuant to Section 17A(c)(2) of the Securities Exchange Act of 1934,
as amended ("Section 17A(c)(2)"), (ii) a BFDS subsidiary duly registered
as a transfer agent pursuant to Section 17A(c)(2) or (iii) a BFDS
affiliate; provided, however, that the Bank shall be as fully responsible
to the Fund for the acts and omissions of any subcontractor as it is for
its own acts and omissions.
12. AMENDMENT
This Agreement may be amended or modified by a written agreement executed
by both parties and authorized or approved by a resolution of the Board of
Directors of the Fund.
13. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts.
14. FORCE MAJEURE
In the event either party is unable to perform its obligations under the
terms of
<PAGE>
this Agreement because of acts of God, strikes, equipment or transmission
failure or damage reasonably beyond its control, or other causes reasonably
beyond its control, such party shall not be liable for damages to the other
for any damages resulting from such failure to perform or otherwise from
such causes.
15. CONSEQUENTIAL DAMAGES
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
16. MERGER OF AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
17. COUNTERPARTS
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
ITT HARTFORD MUTUAL FUNDS, INC.
BY:______________________________________________
ATTEST:
_______________________________
STATE STREET BANK AND TRUST COMPANY
BY:______________________________________________
Executive Vice President
ATTEST:
_______________________________
<PAGE>
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
Responsibility
Service Performed --------------
- ----------------- Bank Fund
---- ----
1. Receives orders for the purchase
of Shares. X
2. Issue Shares and hold Shares in
Shareholders accounts. X
3. Receive redemption requests. X X
4. Effect transactions 1-3 above
directly with broker-dealers. X
5. Pay over monies to redeeming
Shareholders. X
6. Effect transfers of Shares. X
7. Prepare and transmit dividends
and distributions. X
8. Issue Replacement Certificates. N/A
9. Reporting of abandoned property. X
10. Maintain records of account. X
11. Maintain and keep a current and
accurate control book for each
issue of securities. X
12. Mail proxies. X
13. Mail Shareholder reports. X X
14. Mail prospectuses to current
Shareholders. X X
15. Withhold taxes on U.S. resident
and non-resident alien accounts.
X
<PAGE>
Service Performed Responsibility
- ----------------- Bank Fund
---- ----
16. Prepare and file U.S. Treasury
Department forms. X
17. Prepare and mail account and
confirmation statements for
Shareholders. X
18. Provide Shareholder account
information. X X
19. Blue sky reporting. X
* Such services are more fully described in Section 1.2 (a), (b) and (c) of
the Agreement.
ITT HARTFORD MUTUAL FUNDS, INC.
BY:_______________________________________________
ATTEST:
______________________________
STATE STREET BANK AND TRUST COMPANY
BY:_______________________________________________
Executive Vice President
ATTEST:
______________________________
<PAGE>
Page 70
EXHIBIT 19
ITT HARTFORD MUTUAL FUNDS, INC.,
COMPRISED OF THE FOLLOWING SERIES:
ITT HARTFORD SMALL COMPANY FUND, ITT HARTFORD CAPITAL APPRECIATION FUND,
ITT HARTFORD INTERNATIONAL OPPORTUNITIES FUND, ITT HARTFORD STOCK FUND, ITT
HARTFORD DIVIDEND AND GROWTH FUND, ITT HARTFORD ADVISERS FUND, ITT HARTFORD
BOND INCOME STRATEGY FUND AND ITT HARTFORD MONEY MARKET FUND
POWER OF ATTORNEY
-----------------
Joseph A. Biernat Millard H. Pryor, Jr.
Charles M. O'Halloran J. Richard Garrett
Winifred E. Coleman Lowndes A. Smith
William A. O'Neill George R. Jay
Joseph H. Gareau John K. Springer
do hereby jointly and severally authorize Lynda Godkin, Allison MacInnis, Kevin
J. Carr, Charles M. O'Halloran or Scott K. Richardson, to sign as their agent
any Securities Act of 1933 and/or Investment Company Act of 1940 Registration
Statement, pre-effective amendment or post-effective amendment and any
Application for Exemption Relief or other filings with the Securities and
Exchange Commission relating to each above-described Series of the ITT Hartford
Mutual Funds, Inc.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for the
purpose herein set forth.
/s/ Joseph A. Biernat (SEAL) Dated: April 24, 1996
- -------------------------
Joseph A. Biernat
/s/ Winifred E. Coleman (SEAL) Dated: April 24, 1996
- -------------------------
Winifred E. Coleman
/s/ Joseph H. Gareau (SEAL) Dated: April 24, 1996
- -------------------------
Joseph H. Gareau
/s/ J. Richard Garrett (SEAL) Dated: April 24, 1996
- -------------------------
J. Richard Garrett
<PAGE>
Page 71
/s/ George R. Jay (SEAL) Dated: April 24, 1996
- ------------------------
George R. Jay
/s/ Charles M. O'Halloran (SEAL) Dated: April 24, 1996
- -------------------------
Charles M. O'Halloran
/s/ William A. O'Neill (SEAL) Dated: April 24, 1996
- ------------------------
William A. O'Neill
/s/ Millard H. Pryor, Jr. (SEAL) Dated: April 24, 1996
- ------------------------
Millard H. Pryor, Jr.
/s/ Lowndes A. Smith (SEAL) Dated: April 24, 1996
- ------------------------
Lowndes A. Smith
/s/ John K. Springer (SEAL) Dated: April 24, 1996
- ------------------------
John K. Springer