<PAGE>
As filed with the Securities and Exchange Commission on June 20, 1997
Registration No. 333-02381
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 3 /x/
--------
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 5 /x/
-------
THE 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
The Hartford Financial Services 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
The Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Section (a)(1) of Rule 24f-2 under the
Investment Company Act of 1940. The Registrant has filed the Rule 24f-2 Notice
for its fiscal year ended December 31, 1996 with the Securities and Exchange
Commission on February 26, 1997.
It is proposed that this filing will become effective (check appropriate box).
Immediately upon filing pursuant to paragraph (b)
On (date) pursuant to paragraph (b) or
60 days after filing pursuant to paragraph (a), or
X On August 22, 1997 pursuant to paragraph (a) of Rule 485.
<PAGE>
THE 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 The
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.
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.
<PAGE>
Form N-1A Item
Number and Caption Location in Prospectus
------------------ ----------------------
14. Management of the Fund Management of the Company,
Investment Advisory
Arrangements; Fund Expenses.
15. Control Persons and Principal Management of the Company.
Holders of Securities
16. Investment Advisory and Other Investment Advisory
Services Arrangements; Fund Expenses;
Distribution Arrangements;
Distribution Financing Plan;
Custodian; Transfer Agent
Services; Independent Public
Accountants.
17. Brokerage Allocation and Other Portfolio and Brokerage
Practices Transactions.
18. Capital Stock and Other Securities Ownership and Capitalization
of the Company (Prospectus).
19. Purchase Redemption and Pricing of Determination of Net Asset
Securities Being Offered Value, Purchase and Redemption
of Shares.
20. Tax Status Taxes
21. Underwriters Distribution Arrangements.
22. Calculation of Performance Data Investment Performance.
23. Financial Statements Financial Statements.
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC.
PROSPECTUS--AUGUST 22, 1997
CLASS A AND CLASS B SHARES
The 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 AUGUST 22, 1997 ("SAI"), WHICH IS INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS. TO OBTAIN A COPY OF THE SAI WITHOUT CHARGE, CALL
1-888-843-7824, OR WRITE TO THE 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 The Hartford Mutual Funds, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investor Expenses..................................................... 3
Financial Highlights.................................................. 5
Introduction to The Hartford Mutual Funds............................. 6
Investment Objectives and Investment Styles of the Funds.............. 6
Common Investment Policies and Risk Factors........................... 9
Performance of the Funds.............................................. 14
About Your Account.................................................... 17
How to Buy Shares................................................... 17
Special Investment Programs and Privileges.......................... 21
How to Redeem Shares................................................ 22
How to Exchange Shares.............................................. 23
Determination of Net Asset Value.................................... 24
Shareholder Account Rules and Policies.............................. 24
Investor Information Services....................................... 25
Management of the Funds............................................... 25
Dividends, Capital Gains and Taxes.................................... 28
Ownership and Capitalization of the Company........................... 29
General Information................................................... 29
Appendix.............................................................. 31
</TABLE>
<PAGE>
The Hartford Mutual Funds, Inc. 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
(after waiver) (5)................ 0.30% 1.00% 0.30% 1.00% 0.30% 1.00% 0.30% 1.00%
Other Expenses (after
reimbursements) (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>
DIVIDEND AND ADVISERS BOND INCOME MONEY MARKET
GROWTH FUND FUND STRATEGY 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 4.50% None None 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.................... 0.75% 0.75% 0.75% 0.75% 0.65% 0.65% 0.50% 0.50%
12b-1 Distribution and Service Fees
(after waiver) (5)................ 0.30% 1.00% 0.30% 1.00% 0.30% 1.00% 0.30% 1.00%
Other Expenses (after
reimbursements) (6)............... 0.35% 0.35% 0.35% 0.35% 0.30% 0.30% 0.20% 0.20%
Total Operating Expenses (after
reimbursements) (6)............... 1.40% 2.10% 1.40% 2.10% 1.25% 1.95% 1.00% 1.70%
</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 Rule 12b-1 fee for Class A shares is 0.35%, Hartford
Securities Distribution Company, Inc. (the "Distributor") has voluntarily
agreed to waive 0.05% of such fee through December 31, 1997. This waiver
may be discontinued at any time after such date. See "Distribution and
Service Plan for Class A Shares" and "Distribution and Service Plan for
Class B Shares".
(6) The Hartford Financial Services Group, Inc. ("The Hartford"), the ultimate
parent company of the Hartford Investment Financial Services Company
("HIFSCO"), has voluntarily agreed to limit the Total Operating Expenses of
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 December 31, 1997. This policy may be discontinued
at any time after such date. In the absence of such an agreement, the
estimated Other Expenses for the Class A and Class B shares of the
following Funds would be: Money Market Fund, 0.52% and 0.80%; Small Company
Fund, 0.61% and 0.82%; Capital Appreciation Fund, 0.52% and 0.59%;
International Opportunities Fund, 0.94% and 1.11%; Stock Fund, 0.55% and
0.65%; Dividend and Growth Fund, 0.55% and 0.66%; Advisers Fund, 0.46% and
0.59%; and Bond Income Strategy Fund, 0.48% and 0.78%; respectively, and
the Total Operating Expenses of such Funds would be: Money Market Fund,
1.32% and 2.30%; Small Company Fund, 1.76% and 2.67%; Capital Appreciation
Fund, 1.62% and 2.39%; International Opportunities Fund, 2.09% and 2.96%;
Stock Fund, 1.65% and 2.45%; Dividend and Growth Fund, 1.60% and 2.41%;
Advisers Fund, 1.51% and 2.34%; and Bond Income Strategy Fund, 1.43% and
2.43%, respectively.
<PAGE>
4 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 67 32 84
</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 10 17 54
</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>
THE HARTFORD MUTUAL FUNDS, INC. 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following table which contains financial information from each Fund's
commencement of operations on July 22, 1996 through December 31, 1996 has been
audited by Arthur Andersen LLP, independent public accountants, whose report is
included in the Statement of Additional Information incorporated by reference
into this prospectus. (1)
<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>
Net asset value at beginning of
period............................ $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
-------- -------- -------- -------- -------- -------- -------- --------
Income from investment
operations........................ (0.02) (0.02) (0.03) (0.02) 0.02 (0.01) 0.02 0.00
Net realized and unrealized
gain/(loss)....................... 1.42 1.39 3.80 3.75 0.79 0.80 1.53 1.52
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment operations... 1.40 1.37 3.77 3.73 0.81 0.79 1.55 1.52
-------- -------- -------- -------- -------- -------- -------- --------
DISTRIBUTIONS:
Dividends from net investment
income............................ 0.00 0.00 0.00 0.00 (0.06) (0.07) (0.02) (0.02)
Distributions from net realized
gains............................. (0.72) (0.72) (0.41) (0.41) (0.03) (0.03) 0.00 0.00
-------- -------- -------- -------- -------- -------- -------- --------
Total distributions................ (0.72) (0.72) (0.41) (0.41) (0.09) (0.10) (0.02) (0.02)
-------- -------- -------- -------- -------- -------- -------- --------
Change in net asset value.......... 0.68 0.65 3.36 3.32 0.72 0.69 1.53 1.50
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period..... $10.68 $10.65 $13.36 $13.32 $10.72 $10.69 $11.53 $11.50
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Total Return (2)................... 14.11% 13.81% 37.75% 37.35% 8.14% 7.86% 15.50% 15.20%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)........................ $4,673 $ 241 $9,028 $ 889 $4,294 $ 163 $6,273 $1,254
Average net assets during the
period (in thousands)............. 3,845 66 4,978 215 3,407 36 4,047 277
Ratio of expenses to average net
assets (3)........................ 4.24% 20.03% 4.10% 9.05% 5.35% 32.61% 3.96% 7.76%
Ratio of expenses to average net
assets net of reimbursements
(3)............................... 1.45% 2.15% 1.45% 2.15% 1.65% 2.35% 1.45% 2.15%
Ratio of net investment income
(loss) to average net assets
(3)............................... -0.60% -1.30% -0.70% -1.53% 0.51% -0.86% 0.71% -0.12%
Portfolio turnover rate............ 69.92% 149.99% 21.51% 11.87%
Average brokerage commission rate
($)............................... 0.0313 0.0381 0.0175 0.0281
<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>
Net asset value at beginning of
period............................ $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $ 1.00
-------- -------- -------- -------- -------- -------- --------
Income from investment
operations........................ 0.07 0.01 0.09 0.02 0.26 0.20 0.02
Net realized and unrealized
gain/(loss)....................... 1.46 1.48 1.07 1.11 0.31 0.34 0.00
-------- -------- -------- -------- -------- -------- --------
Total from investment operations... 1.53 1.49 1.16 1.13 0.57 0.54 0.02
-------- -------- -------- -------- -------- -------- --------
DISTRIBUTIONS:
Dividends from net investment
income............................ (0.06) (0.07) (0.08) (0.08) (0.25) (0.23) (0.02)
Distributions from net realized
gains............................. (0.02) (0.02) 0.00 0.00 (0.06) (0.06) 0.00
-------- -------- -------- -------- -------- -------- --------
Total distributions................ (0.08) (0.09) (0.08) (0.08) (0.31) (0.29) (0.02)
-------- -------- -------- -------- -------- -------- --------
Change in net asset value.......... 1.45 1.40 1.08 1.05 0.26 0.25 0.00
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period..... $11.45 $11.40 $11.08 $11.05 $10.26 $10.25 $ 1.00
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Total Return (2)................... 15.29% 14.82% 11.56% 11.28% 5.73% 5.38% 2.01%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)........................ $6,083 $ 730 $14,347 $1,499 $10,925 $ 124 $10,754
Average net assets during the
period (in thousands)............. 4,032 119 11,384 325 10,402 49 10,339
Ratio of expenses to average net
assets (3)........................ 4.12% 12.97% 2.94% 6.71% 2.72% 22.36% 2.70%
Ratio of expenses to average net
assets net of reimbursements
(3)............................... 1.40% 2.10% 1.40% 2.10% 1.25% 1.95% 1.00%
Ratio of net investment income
(loss) to average net assets
(3)............................... 1.95% 0.82% 2.13% 1.24% 5.72% 5.22% 4.49%
Portfolio turnover rate............ 29.80% 19.75% 75.52% NA
Average brokerage commission rate
($)............................... 0.0306 0.0297 NA NA
</TABLE>
- ----------------------------------
(1) The Funds were initially seeded on July 1, 1996 and became effective and
open for investment on July 22, 1996. The performance results reflect
activity since the Funds were opened for investment on July 22, 1996.
(2) Does not include sales charges and is not annualized.
(3) Annualized.
<PAGE>
6 The Hartford Mutual Funds, Inc.
- --------------------------------------------------------------------------------
- -------------------------------------------
INTRODUCTION TO THE
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. 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.
Hartford Investment Financial Services Company ("HIFSCO") is the investment
manager to each Fund. In addition, under HIFSCO's general management, Wellington
Management Company, LLP ("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. In addition, under
HIFSCO's general management, The Hartford Investment Management Company
("HIMCO") provides day to day investment management services for the Bond Income
Strategy Fund and Money Market Fund.
HIFSCO is a majority-owned indirect subsidiary of The Hartford Financial
Services Group, Inc. ("The Hartford"), a Connecticut insurance holding company
with over $100 billion in assets. Wellington Management, a Massachusetts limited
liability partnership, is a professional investment counseling firm that
provides services to investment companies, employee benefit plans, endowments,
foundations and other institutions and individuals. Wellington Management and
its predecessor organizations have provided investment advisory services since
1928. HIMCO is a professional money management firm that provides services to
investment companies, employee benefit plans and its affiliated insurance
companies. HIMCO is a wholly-owned subsidiary of The Hartford. As of March 31,
1997, HIFSCO, HIMCO and their affiliates had investment management authority
with respect to approximately $47.5 billion of assets for various clients. As of
the same date, Wellington Management had investment management authority with
respect to approximately $136 billion of assets for various clients. HIMCO and
its affiliates also serve as the investment manager to a family of mutual funds
in which variable annuity and variable life insurance contracts issued by
subsidiaries of The Hartford are invested. Since 1984, Wellington Management has
served as sub-adviser to certain of those funds. HIMCO and Wellington Management
collectively manage over $17 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."
- ---------------------------------------------------
THE 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
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC. 7
- --------------------------------------------------------------------------------
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".
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THE 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.
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THE 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.
- ---------------------------------------------------
THE 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 stocks. 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
<PAGE>
8 THE HARTFORD MUTUAL FUNDS, INC.
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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.
- ---------------------------------------------------
THE 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.
- ---------------------------------------------------
THE 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.
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THE 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 securities rated 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")), or securities which, if unrated, are determined
by HIMCO to be of comparable quality. 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" and "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.
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC. 9
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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
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.
- ---------------------------------------------------
THE 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.
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.
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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 is 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. As a non-
fundamental policy, a Fund will not enter into reverse repurchase transactions
if the combination of all borrowings from banks and the value of all reverse
repurchase agreements for the particular Fund equals more than 33 1/3% of the
value of the Fund's total assets.
- ---------------------------------------------------
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
<PAGE>
10 THE HARTFORD MUTUAL FUNDS, INC.
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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 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.
Up to 25% of the value of the Bond Income Strategy Fund's total assets may
be applied to mortgage dollar roll transactions. In a mortgage dollar roll a
fund sells mortgage-backed securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC. 11
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(same type, coupon and maturity) securities on a specified future date. The Fund
will engage in "covered rolls" or, if not covered, the Fund will establish a
segregated account with the Company's custodian consisting of cash, U.S.
Government securities and other liquid, high quality debt securities. A "covered
roll" is a specific type of dollar roll for which there is an offsetting cash
position or a cash equivalent security position which matures on or before the
forward settlement date of the dollar roll transaction.
- ---------------------------------------------------
EQUITY SECURITIES
All Funds except the Money Market Fund and Bond Income Strategy Fund may
invest all or a portion of their assets 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. 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 acquired with debt securities.
- ---------------------------------------------------
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"). 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. Although the International Opportunities Fund will focus on
companies that operate in established markets, from time to time the Fund may
invest up to 25% of its assets in companies located in emerging countries.
Compared to the United States and other developed countries, developing
countries may have relatively, unstable governments, economies based on only a
few industries, and securities markets that are less liquid and trade a small
number of securities. Prices on these exchanges tend to be volatile and, in the
past, securities in these countries have offered greater potential for gain (as
well as loss) than securities of companies located in developed countries. 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
<PAGE>
12 THE HARTFORD MUTUAL FUNDS, INC.
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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 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.
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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
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC. 13
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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 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. These activities are commonly used when
managing derivative investments.
- ---------------------------------------------------
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 HIFSCO or 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.
<PAGE>
14 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
- ---------------------------------------------------
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. One or more of the Funds may
experience high portfolio turnover (i.e. over 100%). See Portfolio Turnover.
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.
- ---------------------------------------------------
INVESTMENT LIMITATIONS
The Funds have adopted certain limitations in an attempt to reduce their
exposure to specific situations. Some of these limitations are that each Fund
will not:
(a) invest more than 25% of its assets in any one industry;
(b) borrow money, except from banks, and then only in
amounts not exceeding 33 1/3% of the value of a Fund's total assets
(although for purposes of this restriction reverse repurchase agreements are
not considered borrowings, as a non-fundamental operating policy each Fund
will limit combined borrowings and reverse repurchase transactions to
33 1/3% of the value of a Fund's total assets);
(c) with respect to 75% of the value of each Fund's total
assets, purchase the securities of any issuer (other than cash, cash items
or securities issued or guaranteed by the U.S. Government, its agencies,
instrumentalities or authorities) if:
(1) 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
(2) such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by the Fund.
These investment restrictions are considered at the time investment
securities are purchased. The limitations described above, except as noted under
(b), and those listed under Fundamental Restrictions of the Funds in the SAI,
are considered fundamental and as such can only be changed with the approval of
a majority of each Fund's shareholders.
- ---------------------------------------------------
PERFORMANCE OF THE FUNDS
The figures set forth below reflect each Fund's total return for the period
from July 22, 1996 to May 31, 1997. These figures are based on the actual
performance of the Funds. The Hartford has voluntarily agreed to limit certain
Fund expenses. Without this agreement total return figures would have been
lower. Past performance is not necessarily indicative and is no guarantee of
future performance of the Funds.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
------------------------ ------------------------
WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES
CHARGE CHARGE(1) CHARGE CHARGE(1)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Small Company Fund............... 12.07% 18.59% 12.97% 17.97%
Capital Appreciation Fund........ 62.52% 71.98% 66.07% 71.07%
International Opportunities
Fund............................ 7.06% 13.29% 7.70% 12.70%
Stock Fund....................... 26.38% 33.74% 27.84% 32.84%
Dividend and Growth Fund......... 22.46% 29.59% 23.72% 28.72%
Advisers Fund.................... 15.89% 22.64% 16.96% 21.96%
Bond Income Strategy Fund........ 3.16% 8.02% 2.30% 7.30%
Money Market Fund................ 4.81% 3.93% N/A N/A
</TABLE>
- ------------------------
(1)Certain persons may purchase Class A Shares that are not subject to the Class
A Initial Sales Charge (see "Waiver of Class A Initial Sales Charge" in this
Prospectus) and certain other persons may purchase Class A Shares subject to
less than the maximum Initial Sales Charge (see "Reduced Sales Charges for Class
A Share Purchases" in this Prospectus).
- ----------------------------------------------------------------
PRIOR PERFORMANCE OF SIMILAR FUNDS
Because the Funds commenced operations in July, 1996 they have limited
operating history and 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
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC. 15
- --------------------------------------------------------------------------------
investment vehicles for the assets of variable annuity and variable life
insurance contracts issued by The 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 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 that 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.
The table below sets forth each Fund, and its corresponding Insurance Fund,
its inception date and asset size as of May 31, 1997:
<TABLE>
<CAPTION>
CORRESPONDING INSURANCE FUND
FUND (INCEPTION DATE AND ASSET SIZE)
----------------------------------------------------------------------------
<S> <C>
Capital Appreciation........... Hartford Capital Appreciation Fund, Inc.
(April 2, 1984) $3,912,463,337
International Opportunities.... Hartford International Opportunities Fund,
Inc. (July 2, 1990)
$1,106,676,929
Stock.......................... Hartford Stock Fund, Inc. (August 31, 1977)
$3,750,158,241
Dividend and Growth............ Hartford Dividend and Growth Fund, Inc.
(March 8, 1994) $1,296,582,453
Advisers....................... Hartford Advisers Fund, Inc. (March 31, 1983)
$6,883,289,357
Money Market................... HVA Money Market Fund, Inc. (June 30, 1980)
$576,812,977
</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 May 31, 1997. 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 3 are deducted to arrive at the net return.
The first table for each Class shown 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.
<PAGE>
16 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
- ---------------------------------------------------
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..................... 8.73% 18.95% 17.53% 14.71%
(April 2, 1984)
Hartford International Opportunities Fund, Inc.............. 3.32% 7.60% 8.50% 6.32%
(July 2, 1990)
Hartford Stock Fund, Inc.................................... 21.25% 20.94% 16.23% 12.34%
(August 31, 1977)
Hartford Dividend and Growth Fund, Inc...................... 19.65% 21.19% N/A 19.73%
(March 8, 1994)
Hartford Advisers Fund, Inc................................. 14.92% 15.28% 12.19% 10.90%
(March 31, 1983)
HVA Money Market Fund, Inc.................................. 4.54% 4.63% 3.84% 5.31%
(June 30, 1980)
</TABLE>
- ---------------------------------------------------
ASSUMING CLASS A SHARE TOTAL FUND OPERATING
EXPENSES WITH NO INITIAL SALES LOAD(1)
<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..................... 15.06% 21.22% 18.87% 15.36%
(April 2, 1984)
Hartford International Opportunities Fund, Inc.............. 9.33% 9.65% 9.74% 7.19%
(July 2, 1990)
Hartford Stock Fund, Inc.................................... 28.31% 23.24% 17.56% 12.97%
(August 31, 1977)
Hartford Dividend and Growth Fund, Inc...................... 26.62% 23.50% N/A 21.84%
(March 8, 1994)
Hartford Advisers Fund, Inc................................. 21.61% 17.48% 13.47% 11.53%
(March 31, 1983)
HVA Money Market Fund, Inc.................................. 4.54% 4.63% 3.84% 5.31%
(June 30, 1980)
</TABLE>
- ------------------------
(1)Certain persons may purchase Class A Shares that are not subject to the Class
A Initial Sales Charge (see "Waiver of Class A Initial Sales Charge" in this
Prospectus) and certain other persons may purchase Class A Shares subject to
less than the maximum Initial Sales Charge (see "Reduced Sales Charges for Class
A Share Purchases" in this Prospectus).
- ---------------------------------------------------
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..................... 9.26% 19.68% 17.83% 14.56%
(April 2, 1984)
Hartford International Opportunities Fund, Inc.............. 3.57% 8.03% 8.69% 6.44%
(July 2, 1990)
Hartford Stock Fund, Inc.................................... 22.41% 21.71% 16.52% 12.18%
(August 31, 1977)
Hartford Dividend and Growth Fund, Inc...................... 20.73% 21.96% N/A 20.38%
(March 8, 1994)
Hartford Advisers Fund, Inc................................. 15.76% 15.92% 12.42% 10.75%
(March 31, 1983)
HVA Money Market Fund, Inc.................................. -1.19% 2.97% 2.75% 4.58%
(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..................... 14.26% 20.37% 18.04% 14.56%
(April 2, 1984)
Hartford International Opportunities Fund, Inc.............. 8.57% 8.88% 8.97% 6.44%
(July 2, 1990)
Hartford Stock Fund, Inc.................................... 27.41% 22.38% 16.73% 12.18%
(August 31, 1977)
Hartford Dividend and Growth Fund, Inc...................... 25.73% 22.63% N/A 20.99%
(March 8, 1994)
Hartford Advisers Fund, Inc................................. 20.76% 16.66% 12.67% 10.75%
(March 31, 1983)
HVA Money Market Fund, Inc.................................. 3.81% 3.90% 3.11% 4.58%
(June 30, 1980)
</TABLE>
<PAGE>
The Hartford Mutual Funds, Inc. 17
- --------------------------------------------------------------------------------
- -------------------------------------------
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 Hartford Mutual Funds, Inc., P.O. Box 8416, Boston, MA
02266-8416, a completed account application and a check, payable to The Hartford
Mutual Funds. Or you may telephone 1-888-843-7824 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 The 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 employer-sponsored tax qualified retirement plans for which the
minimum is $250. There is a $100 minimum amount for subsequent purchases ($25
for participants in employer-sponsored tax qualified retirement plans) except as
referenced above.
For an initial purchase of shares by wire, you must first telephone the
Transfer Agent at 1-888-843-7824 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: The 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 offers investors three different classes of shares -- Class A,
Class B and Class Y. Class A and Class B
<PAGE>
18 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
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, except for the Money Market Fund, 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 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 up 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. In addition, the distributor may provide compensation
to dealers of record for shares purchased without a sales charge under
circumstances described in "Waiver of Class A Initial Sales Charge."
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 initial 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 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:
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC. 19
- --------------------------------------------------------------------------------
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 previously purchased and then owned. In
addition, if you are a natural owner of a Hartford Director variable annuity or
variable life contract ("Qualified Contracts"), and you notify your broker that
you own one or more Qualified Contracts, the current account 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 and members of your family, 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
account value of Qualified Contracts assuming proper notification as discussed
under "Combined Purchases" above) 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
the SAI and the account application for further details.
WAIVER OF CLASS A INITIAL SALES CHARGE.
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 families) of the Company, The Hartford, 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 plan provided that the
total initial amount invested by the plan totals $500,000 or more, or the plan
has 100 or more employees eligible to participate at the time of purchase; (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 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
<PAGE>
20 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
mutual fund on which an initial sales charge or contingent deferred sales charge
was paid.
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 12% 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
Initial 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 December 31, 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.
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 redemptions: (1) to make
distributions under a Systematic Withdrawal Plan for no more than 12% 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 a
shareholder or settlor of a living trust (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
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC. 21
- --------------------------------------------------------------------------------
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.
Ninety-six 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.
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 1-888-843-7824 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. 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. In the case of exchanges from the Money Market
Fund to Class A shares of another Fund, 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
<PAGE>
22 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
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
12% 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 180 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 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, SEPIRAs,
SIMPLE IRAs, 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 Class A
shares of the 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 1-888-843-7824 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)
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.
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC. 23
- --------------------------------------------------------------------------------
USE THE FOLLOWING ADDRESS FOR REQUESTS BY MAIL:
The Hartford Mutual Funds, Inc.
P.O. Box 8416
Boston, MA 02266-8416
SEND COURIER OR EXPRESS MAIL REQUESTS TO:
Boston Financial Data Services
Attn.: The Hartford Mutual Funds, Inc.
Two Heritage Drive
Quincy, MA 02171
REDEEMING SHARES BY TELEPHONE.
You may also redeem shares by telephone by calling 1-888-843-7824. 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. (CLASS A SHARES OF THE 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 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 The 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 1-888-843-7824. 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 for shares of the same class of another 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 Class A shares of the Money Market Fund for
shares of any other Fund which carry a
<PAGE>
24 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
front-end sales charge are subject to the sales charge applicable to such other
Fund. Class A 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, Class A 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.
Except as noted above, 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 HIFSCO at any time the Board or HIFSCO 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 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.
<PAGE>
The Hartford Mutual Funds, Inc. 25
- --------------------------------------------------------------------------------
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 The Hartford Mutual Funds, or in the case of a
retirement account, to the custodian or trustee. You may not purchase shares
with a third party check.
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, prices and account balances.
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 1-888-843-7824 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
Hartford Investment Financial Services Company ("HIFSCO") serves as
investment manager to each Fund pursuant to an investment management agreement
dated July 22, 1996. As of March 31, 1997, HIFSCO and its affiliates held
discretionary management authority with respect to approximately $47.5 billion
of client assets. HIFSCO also provides administrative personnel, services,
equipment and facilities and office space for the proper operation of the
Company. HIFSCO 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. In addition, HIFSCO has contracted with HIMCO for the
provision of day to day investment management and other services for the Bond
Income Strategy Fund and Money Market Fund. Each Fund pays a fee to HIFSCO, a
portion of which may be used to compensate Wellington Management or HIMCO.
<PAGE>
26 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
- ---------------------------------------------------
MANAGEMENT FEES
MONEY MARKET FUND.
The Money Market Fund pays a monthly management fee to HIFSCO 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 HIFSCO 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 HIFSCO 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 HIFSCO 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 HIFSCO 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>
HIFSCO, Hartford Plaza, Hartford, Connecticut 06115, is an indirect majority
owned subsidiary of The Hartford and was organized under the laws of Delaware in
1996. The 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. HL Investment Advisors, Inc. an
affiliate of HIFSCO, serves as investment manager to several other SEC
registered funds sponsored by The 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 HIFSCO
and/or HIMCO; Lowndes A. Smith, Chairman of the Board of the Company, is a
Director and President of HIFSCO; Joseph H. Gareau, President and a Director of
the Company, is a Director and Executive Vice President of HIFSCO and a Director
and President of HIMCO; Thomas M. Marra, Vice President of the Company is a
Director and Executive Vice President of HIFSCO; Peter W. Cummins, Vice
President of the Company is a Director and Vice President of HIFSCO; Andrew W.
Kohnke, Vice President of the Company, is a Director and Vice President of
HIFSCO and a Managing Director and a Director of HIMCO; George R. Jay, Treasurer
and Controller of the Company is Controller of HIFSCO; Charles M. O'Halloran,
Vice President and Secretary of the Company, is a Director, Secretary and
General Counsel of HIMCO and Kevin J. Carr, Assistant Secretary and Counsel of
the Company is Secretary and Counsel of HIFSCO.
- ---------------------------------------------------
INVESTMENT SUB-ADVISORY AND OTHER 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 July 22, 1996. In addition, HIMCO provides day to day
investment management and other services to HIFSCO on behalf of the Bond Income
Strategy Fund and Money Market Fund pursuant to an investment services agreement
dated March 3, 1997.
In connection with the services provided to the Funds, Wellington Management
and HIMCO make 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 HIFSCO) and places, in the
name of the Funds, all orders for execution of these Funds' portfolio
transactions. In conjunction with such activities, Wellington Management and
HIMCO regularly furnish 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 HIFSCO. The Funds will not pay Wellington Management's fee nor
any part
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC. 27
- --------------------------------------------------------------------------------
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>
ANNUAL
NET ASSET VALUE 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>
ANNUAL
NET ASSET VALUE 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 1928. As of March 31, 1997, Wellington Management held
discretionary management authority with respect to approximately $136 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.
HIMCO is a professional money management firm which provides services to
investment companies, employee benefit plans and its affiliated insurance
company accounts. HIMCO was incorporated in 1996 and is a wholly owned
subsidiary of The Hartford. As a corporate affiliate of HIFSCO, HIMCO is
reimbursed by HIFSCO for the costs it incurs in providing such services.
- ---------------------------------------------------
PORTFOLIO MANAGERS
Mark S. Waterhouse, Vice President of Wellington Management Company, LLP,
serves as portfolio manager to the Small Company Fund. Prior to joining
Wellington Management in 1995, Mr. Waterhouse was a portfolio manager with the
Pioneer Group. He was previously a financial analyst at GTE Service Corporation
from 1984.
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, joined The 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 The Hartford, Ms. Granger was a corporate bond
portfolio manager at The Home Insurance Company and Axe-Houghton Management. Ms.
Granger holds a CFA and has over fifteen 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
<PAGE>
28 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
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 quarterly;
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 The 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 HARTFORD MUTUAL FUNDS ACCOUNT. You
can reinvest all distributions in another 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.
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC. 29
- --------------------------------------------------------------------------------
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 designated as Class A, Class B and
Class Y shares. 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 plans which have
(A) at least $10 million in plan assets or (B) 750 or more employees eligible to
participate at the time of purchase, (ii) Banks and insurance companies
purchasing shares for their own account; (iii) investment companies; (iv)
Tax-qualified retirement plans of The Hartford, 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 1-888-843-7824 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
<PAGE>
30 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
of which this Prospectus forms a part, each such statement being qualified, in
all respects by such reference.
For additional information, write to The Hartford Mutual Funds, Inc., P.O.
Box 8416, Boston, MA. 02266-8416, or call 1-888-843-7824.
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>
THE HARTFORD MUTUAL FUNDS, INC. 31
- --------------------------------------------------------------------------------
- ---------------------------------------------------
APPENDIX
- --------------------------------
CREDIT QUALITY DISTRIBUTION
BOND INCOME STRATEGY FUND
The average quality distribution of the portfolio of the Hartford Bond
Income Strategy Fund during the year ended December 31, 1996 as assigned by
Moody's Investors Services, Inc. ("Moody's") and Standard & Poor's Corporation
("Standard & Poors"), was as follows:
<TABLE>
<CAPTION>
QUALITY
DISTRIBUTION QUALITY
AS DISTRIBUTION AS
ASSIGNED BY PERCENTAGE OF ASSIGNED BY PERCENTAGE OF
MOODY'S PORTFOLIO STANDARD & POORS PORTFOLIO
- ------------- ------------- ---------------- -------------
<S> <C> <C> <C>
Aaa 53.18% AAA 53.18%
Aa 8.27% AA 5.51%
A 9.93% A 16.57%
Baa 3.89% BBB 3.69%
Ba 23.83% BB 16.21%
B .90% B 3.78%
Unrated 0.0% Unrated 1.06%
------------- -------------
Total 100.0% Total 100.0%
</TABLE>
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC.
PROSPECTUS--AUGUST 22, 1997
CLASS Y SHARES
The 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 AUGUST 22, 1997, ("SAI"), WHICH IS INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS. TO OBTAIN A COPY OF THE SAI WITHOUT CHARGE, CALL
1-888-843-7824, OR WRITE TO THE 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 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investor Expenses..................................................... 3
Financial Highlights.................................................. 4
Introduction to The Hartford Mutual Funds............................. 5
Investment Objectives and Investment 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
Special Investment Programs and Privileges.......................... 15
How to Redeem Shares................................................ 16
How to Exchange Shares.............................................. 17
Determination of Net Asset Value.................................... 17
Shareholder Account Rules and Policies.............................. 17
Investor Information Services....................................... 18
Management of the Funds............................................... 18
Dividends, Capital Gains and Taxes.................................... 21
Ownership and Capitalization of the Company........................... 22
General Information................................................... 22
Appendix.............................................................. 23
</TABLE>
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC. 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 (after
reimbursements) (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 (after
reimbursements) (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) The Hartford Financial Services Group, Inc. ("The Hartford"), the ultimate
parent company of Hartford Investment Financial Services Company
("HIFSCO"), has voluntarily agreed to limit the Total Operating Expenses of
each Fund, exclusive of taxes, interest, brokerage commissions and
extraordinary expenses, until at least December 31, 1997. This policy may
be discontinued at any time after such date. In the absence of such an
agreement, the estimated Other Expenses of the following Funds would be:
Money Market Fund, 0.84%; Small Company Fund, 0.70%; Capital Appreciation
Fund, 0.52%; International Opportunities Fund, 1.00%; Stock Fund, 0.70%;
Dividend and Growth Fund, 0.58%; Advisers Fund, 0.35%; and Bond Income
Strategy Fund, 0.76%; respectively, and the Total Opearting Expenses of
such Funds would be: Money Market Fund, 1.34%; Small Company Fund, 1.55%;
Capital Appreciation Fund, 1.32%; International Opportunities Fund, 1.85%;
Stock Fund, 1.50%; Dividend and Growth Fund, 1.33%; Advisers Fund, 1.10%;
and Bond Income Strategy Fund, 1.41%, respectively.
- --------------------------------------------------------------------------------
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 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following table which contains financial information from each Fund's
commencement of operations on July 22, 1996 though December 31, 1996 has been
audited by Arthur Andersen LLP, independent public accountants, whose report is
included in the Statement of Additional Information incorporated by reference
into this prospectus. (1)
<TABLE>
<CAPTION>
SMALL CAPITAL INTERNATIONAL
COMPANY APPRECIATION OPPORTUNITIES STOCK DIVIDEND AND ADVISERS BOND INCOME
FUND FUND FUND FUND GROWTH FUND FUND STRATEGY FUND
---------- -------------- --------------- ---------- ------------- ---------- --------------
CLASS Y CLASS Y CLASS Y CLASS Y CLASS Y CLASS Y CLASS Y
---------- -------------- --------------- ---------- ------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period..... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
---------- ------- --------------- ---------- ------------- ---------- --------------
Income from investment
operations.............. (0.00) 0.00 0.00 0.01 0.02 0.03 0.28
Net realized and
unrealized
gain/(loss)............. 1.43 3.79 0.84 1.57 1.53 1.16 0.31
---------- ------- --------------- ---------- ------------- ---------- --------------
Total from investment
operations.............. 1.42 3.79 0.84 1.58 1.55 1.19 0.59
---------- ------- --------------- ---------- ------------- ---------- --------------
DISTRIBUTIONS:
Dividends from net
investment income....... 0.00 0.00 (0.08) (0.03) (0.07) (0.09) (0.26)
Distributions from net
realized gains.......... (0.72) (0.41) (0.03) 0.00 (0.02) 0.00 (0.06)
---------- ------- --------------- ---------- ------------- ---------- --------------
Total distributions...... (0.72) (0.41) (0.11) (0.03) (0.09) (0.09) (0.32)
---------- ------- --------------- ---------- ------------- ---------- --------------
Change in net asset
value................... 0.71 3.38 0.73 1.55 1.46 1.10 0.27
---------- ------- --------------- ---------- ------------- ---------- --------------
Net asset value, end of
period.................. $ 10.71 $ 13.38 $ 10.73 $ 11.55 $ 11.46 $ 11.10 $ 10.27
---------- ------- --------------- ---------- ------------- ---------- --------------
---------- ------- --------------- ---------- ------------- ---------- --------------
Total Return (2)......... 14.41% 37.95% 8.36% 15.80% 15.49% 11.88% 5.95%
RATIOS AND SUPPLEMENTAL
DATA:
Net assets, end of period
(in thousands).......... $ 72 $ 107 $ 64 $ 44 $ 36 $ 34 $ 5
Average net assets during
the period (in
thousands).............. 8 10 8 7 7 6 5
Ratio of expenses to
average net assets
(3)..................... 115.33% 93.64% 126.52% 133.50% 141.53% 144.82% 185.34%
Ratio of expenses to
average net assets net
of reimbursements (3)... 1.00% 1.00% 1.20% 1.00% 0.95% 0.95% 0.80%
Ratio of net investment
income (loss) to average
net assets (3).......... 0.03% 0.04% 0.57% 1.37% 2.41% 2.75% 6.17%
Portfolio turnover
rate.................... 69.92% 149.99% 21.51% 11.87% 29,80% 19.75% 75.52%
Average brokerage
commission rate ($)..... 0.0313 0.0381 0.0175 0.0281 0.0306 0.0297 NA
<CAPTION>
MONEY
MARKET
FUND
-----------
CLASS Y
-----------
<S> <C>
Net asset value at
beginning of period..... $ 1.00
-----------
Income from investment
operations.............. 0.02
Net realized and
unrealized
gain/(loss)............. 0.00
-----------
Total from investment
operations.............. 0.02
-----------
DISTRIBUTIONS:
Dividends from net
investment income....... (0.02)
Distributions from net
realized gains.......... 0.00
-----------
Total distributions...... (0.02)
-----------
Change in net asset
value................... 0.00
-----------
Net asset value, end of
period.................. $ 1.00
-----------
-----------
Total Return (2)......... 2.34%
RATIOS AND SUPPLEMENTAL
DATA:
Net assets, end of period
(in thousands).......... $ 0.3
Average net assets during
the period (in
thousands).............. 0.3
Ratio of expenses to
average net assets
(3)..................... 3496.38%
Ratio of expenses to
average net assets net
of reimbursements (3)... 0.55%
Ratio of net investment
income (loss) to average
net assets (3).......... 4.56%
Portfolio turnover
rate.................... NA
Average brokerage
commission rate ($)..... NA
</TABLE>
- ----------------------------------
(1) The Funds were initially seeded on July 1, 1996 and became effective and
open for invesemtnt on July 22, 1996. The performance results reflect
activity since the Funds were opened for investment on July 22, 1996.
(2) Does not include sales charges and is not annualized.
(3) Annualized.
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC. 5
- --------------------------------------------------------------------------------
- -------------------------------------------
INTRODUCTION TO THE
THE 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. 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.
Hartford Investment Financial Services Company ("HIFSCO") is the investment
manager to each Fund. In addition, under HIFSCO's general management, Wellington
Management Company, LLP ("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. In addition, under
HIFSCO's general management, The Hartford Investment Management Company
("HIMCO") provides day to day investment management services for the Bond Income
Strategy Fund and Money Market Fund.
HIFSCO is a majority-owned indirect subsidiary of The Hartford Financial
Services Group, Inc. ("The Hartford"), a Connecticut insurance holding company
with over $100 billion in assets. Wellington Management, a Massachusetts limited
liability partnership, is a professional investment counseling firm that
provides services to investment companies, employee benefit plans, endowments,
foundations and other institutions and individuals. Wellington Management and
its predecessor organizations have provided investment advisory services since
1928. HIMCO is a professional money management firm that provides services to
investment companies, employee benefit plans and its affiliated insurance
companies. HIMCO is a wholly-owned subsidiary of The Hartford. As of March 31,
1997, HIFSCO, HIMCO and their affiliates had investment management authority
with respect to approximately $47.5 billion of assets for various clients. As of
the same date, Wellington Management had investment management authority with
respect to approximately $136 billion of assets for various clients.
- ---------------------------------------------------
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."
- ---------------------------------------------------
THE 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 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
- ---------------------------------------------------
THE 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.
- ---------------------------------------------------
THE 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.
- ---------------------------------------------------
THE 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 stocks. 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>
THE HARTFORD MUTUAL FUNDS, INC. 7
- --------------------------------------------------------------------------------
- ---------------------------------------------------
THE 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.
- ---------------------------------------------------
THE 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.
- ---------------------------------------------------
THE 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 securities rated 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")), or securities which, if unrated, are determined
by HIMCO to be of comparable quality. 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" and "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
<PAGE>
8 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
reasonable periods of time, common stocks acquired upon conversion of debt
securities or upon exercise of warrants 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.
- ---------------------------------------------------
THE 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.
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.
- ---------------------------------------------------
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 is 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. As a non-
fundamental policy, a Fund will not enter into reverse repurchase transactions
if the combination of all borrowings from banks and the value of all reverse
repurchase agreements for the particular Fund equals more than 33 1/3% of the
value of the Fund's total assets.
- ---------------------------------------------------
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
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC. 9
- --------------------------------------------------------------------------------
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. 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.
Up to 25% of the value of the Bond Income Strategy Fund's total assets may
be applied to mortgage dollar roll transactions. In a mortgage dollar roll a
fund sells mortgage-backed securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same type, coupon
and maturity) securities on a specified future date. The Fund will engage in
"covered rolls" or, if not covered, the Fund will establish a segregated account
with the Company's custodian consisting of cash, U.S. Government securities and
other liquid, high quality debt securities. A "covered roll" is a specific type
of dollar roll for
<PAGE>
10 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
which there is an offsetting cash position or a cash equivalent security
position which matures on or before the forward settlement date of the dollar
roll transaction.
- ---------------------------------------------------
EQUITY SECURITIES
All Funds except the Money Market Fund and Bond Income Strategy Fund may
invest all or a portion of their assets 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. 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 acquired with debt securities.
- ---------------------------------------------------
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"). 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. Although the International Opportunities Fund will focus on
companies that operate in established markets, from time to time the Fund may
invest up to 25% of its assets in companies located in emerging countries.
Compared to the United States and other developed countries, developing
countries may have relatively unstable governments, economies based on only a
few industries, and securities markets that are less liquid and trade a small
number of securities. Prices on these exchanges tend to be volatile and, in the
past, securities in these countries have offered greater potential for gain (as
well as loss) than securities of companies located in developed countries. 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
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC. 11
- --------------------------------------------------------------------------------
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 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
<PAGE>
12 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
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 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. These activities are commonly used when
managing derivative investments.
- ---------------------------------------------------
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
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC. 13
- --------------------------------------------------------------------------------
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. One or more of the Funds may
experience high portfolio turnover (i.e. over 100%). See Portfolio Turnover.
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.
- ---------------------------------------------------
INVESTMENT LIMITATIONS
The Funds have adopted certain limitations in an attempt to reduce their
exposure to specific situations. Some of these limitations are that each Fund
will not:
(a) invest more than 25% of its assets in any one industry;
(b) borrow money, except from banks, and then only in amounts not exceeding
33 1/3% of the value of a Fund's total assets (although for purposes of this
restriction reverse repurchase agreements are not considered borrowings, as
a non-fundamental operating policy, each Fund will limit combined borrowings
and reverse repurchase transactions to 33 1/3% of the value of a Fund's
total assets);
(c) with respect to 75% of the value of each Fund's total assets, purchase the
securities of any issuer (other than cash, cash items or securities issued
or guaranteed by the U.S. Government, its agencies, instrumentalities or
authorities) if:
(1) 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
(2) such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by the Fund.
These investment restrictions are considered at the time investment
securities are purchased. The limitations described above, except as noted under
(b), and those listed under Fundamental Restrictions of the Funds, in the SAI,
are considered fundamental and as such can only be changed with the approval of
a majority of each Fund's shareholders.
- ---------------------------------------------------
PERFORMANCE OF THE FUNDS
The figures set forth below reflect total return quotations for the Funds
for the period from July 22, 1996 (inception) to May 31, 1997. The Hartford has
voluntarily agreed to limit certain Fund expenses. Without this agreement total
return figures would have been lower. These figures are based on the actual
performance of the Funds. Past performance is not necessarily indicative and is
no guarantee of future performance of the Funds.
<TABLE>
<CAPTION>
CLASS Y
SHARES
---------
<S> <C>
Small Company Fund.................................... 19.11%
Capital Appreciation Fund............................. 72.69%
International Opportunities Fund...................... 13.71%
Stock Fund............................................ 34.25%
Dividend and Growth Fund.............................. 30.00%
Advisers Fund......................................... 23.16%
Bond Income Strategy Fund............................. 8.48%
Money Market Fund..................................... 4.50%
</TABLE>
- ---------------------------------------------------
PRIOR PERFORMANCE OF SIMILAR FUNDS
Because the Funds commenced operations in July, 1996 they have limited
operating history and 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 The 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 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.
<PAGE>
14 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
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 that 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.
The table below sets forth each Fund, and its corresponding Insurance Fund,
its inception date and asset size as of May 31, 1997:
<TABLE>
<CAPTION>
CORRESPONDING INSURANCE FUND
FUND (INCEPTION DATE AND ASSET SIZE)
----------------------------------------------------------------------------
<S> <C>
Capital Appreciation........... Hartford Capital Appreciation Fund, Inc.
(April 2, 1984)
$3,912,463,337
International Opportunities.... Hartford International Opportunities Fund,
Inc.
(July 2, 1990)
$1,106,676,929
Stock.......................... Hartford Stock Fund, Inc.
(August 31, 1977)
$3,750,158,241
Dividend and Growth............ Hartford Dividend and Growth Fund, Inc.
(March 8, 1994)
$1,296,582,453
Advisers....................... Hartford Advisers Fund, Inc.
(March 31, 1983)
$6,883,289,357
Money Market................... HVA Money Market Fund, Inc.
(June 30, 1980)
$576,812,977
</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 May 31, 1997. 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 3 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..................... 15.58% 21.76% 19.40% 15.88%
(April 2, 1984)
Hartford International Opportunities Fund, Inc.............. 9.82% 10.14% 10.23% 7.67%
(July 2, 1990)
Hartford Stock Fund, Inc.................................... 28.89% 23.80% 18.09% 13.48%
(August 31, 1977)
Hartford Dividend and Growth Fund, Inc...................... 27.19% 24.05% N/A 22.40%
(March 8, 1994)
Hartford Advisers Fund, Inc................................. 22.16% 18.01% 13.98% 12.03%
(March 31, 1983)
HVA Money Market Fund, Inc.................................. 5.01% 5.11% 4.30% 5.79%
(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.
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC. 15
- --------------------------------------------------------------------------------
- -------------------------------------------
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 Hartford Mutual Funds, Inc., Institutional Services, P.O. Box
8416, Boston, MA 02266-8416, a completed account application and a check,
payable to The Hartford Mutual Funds. Or you may telephone 1-888-843-7824 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 plans which have (A) at
least $10 million in plan assets, or (B) have 750 or more employees eligible to
participate at the time of purchase, (ii) banks and insurance companies
purchasing shares for their own account; (iii) investment companies; (iv)
tax-qualified retirement plans of The Hartford, 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 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 1-888-843-7824 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: The 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 offers investors three different classes of shares -- Class A,
Class B and Class Y. 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, except for the Money
Market Fund, 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
<PAGE>
16 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
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 1-888-843-7824.
- ---------------------------------------------------
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 1-888-843-7824 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)
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:
The 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.: The 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 1-888-843-7824. 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.
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC. 17
- --------------------------------------------------------------------------------
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 The 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 1-888-843-7824. 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.
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 HIFSCO at any time the Board or HIFSCO 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.
<PAGE>
18 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
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 The Hartford Mutual Funds, or in the case of a
retirement account, to the custodian or trustee. You may not purchase shares
with a third party check.
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.
"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, prices and account balances.
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 1-888-843-7824 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
Hartford Investment Financial Services Company ("HIFSCO") serves as
investment manager to each Fund pursuant to an investment management agreement
dated July 22, 1996. As of March 31, 1997, HIFSCO and its affiliates held
discretionary management authority with respect to approximately $47.5 billion
of client assets. HIFSCO also provides administrative personnel, services,
equipment and facilities and office space for the proper operation of the
Company. HIFSCO 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. In addition, HIFSCO has contracted with HIMCO for the
provision of day to day investment management and other services for the Bond
Income Strategy Fund and Money Market Fund. Each Fund pays a fee to HIFSCO, a
portion of which may be used to compensate Wellington Management or HIMCO.
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC. 19
- --------------------------------------------------------------------------------
- ---------------------------------------------------
MANAGEMENT FEES
MONEY MARKET FUND.
The Money Market Fund pays a monthly management fee to HIFSCO 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 HIFSCO 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 HIFSCO 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 HIFSCO 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 HIFSCO 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>
HIFSCO, Hartford Plaza, Hartford, Connecticut 06115, is an indirect
majority-owned subsidiary of The Hartford and was organized under the laws of
Delaware in 1996. The 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. HL Investment Advisors, Inc.,
an affiliate of HIFSCO, serves as investment manager to several other SEC
registered funds sponsored by The 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 HIFSCO
and/or HIMCO; Lowndes A. Smith, Chairman of the Board of the Company, is a
Director and President of HIFSCO; Joseph H. Gareau, President and a Director of
the Company, is a Director and Executive Vice President of HIFSCO and a Director
and President of HIMCO; Thomas M. Marra, Vice President of the Company is a
Director and Executive Vice President of HIFSCO; Peter W. Cummins, Vice
President of the Company is a Director and Vice President of HIFSCO; Andrew W.
Kohnke, Vice President of the Company, is a Director and Vice President of
HIFSCO and a Managing Director and a Director of HIMCO; George R. Jay, Treasurer
and Controller of the Company is Controller of HIFSCO; Charles M. O'Halloran,
Vice President and Secretary of the Company, is a Director, Secretary and
General Counsel of HIMCO and Kevin J. Carr, Assistant Secretary and Counsel of
the Company is Secretary and Counsel of HIFSCO.
- ---------------------------------------------------
INVESTMENT SUB-ADVISORY AND OTHER 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 July 22, 1996. In addition, HIMCO provides day to day
investment management and other services to HIFSCO on behalf of the Bond Income
Strategy Fund and Money Market Fund pursuant to an investment services agreement
dated March 3, 1997.
In connection with the services provided to Funds, Wellington Management and
HIMCO make 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 HIFSCO) and places, in the name of the Funds,
all orders for execution of these Funds' portfolio transactions. In conjunction
with such activities, Wellington Management and HIMCO regularly furnish 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 HIFSCO. The Funds will not pay Wellington Management's fee nor
any part
<PAGE>
20 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
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 1928. As of March 31, 1997, Wellington Management held
discretionary management authority with respect to approximately $136 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.
HIMCO is a professional money management firm which provides services to
investment companies, employee benefit plans and its affiliated insurance
company accounts. HIMCO was incorporated in 1996 and is a wholly owned
subsidiary of The Hartford. As a corporate affiliate of HIFSCO, HIMCO is
reimbursed by HIFSCO for the costs it incurs in providing such services.
- ---------------------------------------------------
PORTFOLIO MANAGERS
Mark S. Waterhouse, Vice President of Wellington Management Company, LLP,
serves as portfolio manager to the Small Company Fund. Prior to joining
Wellington Management in 1995, Mr. Waterhouse was a portfolio manager with the
Pioneer Group. He was previously a financial analyst at GTE Service Corporation
from 1984.
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, joined The 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 The Hartford, Ms. Granger was a corporate bond
portfolio manager at The Home Insurance Company and Axe-Houghton Management. Ms.
Granger holds a CFA and has over fifteen 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
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC. 21
- --------------------------------------------------------------------------------
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 quarterly;
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 The Hartford Mutual Funds retirement accounts,
all distributions are reinvested. For other accounts, you have four 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.
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.
<PAGE>
22 THE HARTFORD MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
- ---------------------------------------------------
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, designated as Class A, Class B and
Class Y shares. 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.
- ---------------------------------------------------
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
1-888-843-7824 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 The Hartford Mutual Funds, Inc., P.O.
Box 8416, Boston, MA. 02266-8416, or call 1-888-843-7824.
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>
THE HARTFORD MUTUAL FUNDS, INC. 23
- --------------------------------------------------------------------------------
- ---------------------------------------------------
APPENDIX
- --------------------------------
CREDIT QUALITY DISTRIBUTION
BOND INCOME STRATEGY FUND
The average quality distribution of the portfolio of the Hartford Bond
Income Strategy Fund during the year ended December 31, 1996 as assigned by
Moody's Investors Services, Inc. ("Moody's") and Standard & Poor's Corporation
("Standard & Poors"), was as follows:
<TABLE>
<CAPTION>
QUALITY
DISTRIBUTION QUALITY
AS DISTRIBUTION AS
ASSIGNED BY PERCENTAGE OF ASSIGNED BY PERCENTAGE OF
MOODY'S PORTFOLIO STANDARD & POORS PORTFOLIO
- ------------- ------------- ---------------- -------------
<S> <C> <C> <C>
Aaa 53.18% AAA 53.18%
Aa 8.27% AA 5.51%
A 9.93% A 16.57%
Baa 3.89% BBB 3.69%
Ba 23.83% BB 16.21%
B .90% B 3.78%
Unrated 0.0% Unrated 1.06%
------------- -------------
Total 100.0% Total 100.0%
</TABLE>
<PAGE>
PART B
THE HARTFORD MUTUAL FUNDS, INC. (the "Company")
THE HARTFORD SMALL COMPANY FUND
THE HARTFORD CAPITAL APPRECIATION FUND
THE HARTFORD INTERNATIONAL OPPORTUNITIES FUND
THE HARTFORD STOCK FUND
THE HARTFORD DIVIDEND AND GROWTH FUND
THE HARTFORD ADVISERS FUND
THE HARTFORD BOND INCOME STRATEGY FUND
THE HARTFORD MONEY MARKET FUND
CLASS A, CLASS B AND CLASS Y SHARES
P.O. Box 8416
Boston, MA 02266-8416
1-888-843-7824
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: The Hartford Mutual Funds, Inc.,
P.O. Box 8416, Boston, MA 02266-8416 or call the number listed above.
Date of Prospectus: August 22, 1997
Date of Statement of Additional Information: August 22, 1997
<PAGE>
TABLE OF CONTENTS PAGE
GENERAL INFORMATION...................................................... -1-
INVESTMENT OBJECTIVES AND POLICIES....................................... -1-
MANAGEMENT OF THE COMPANY............................................... -17-
INVESTMENT ADVISORY ARRANGEMENTS........................................ -27-
FUND EXPENSES........................................................... -30-
DISTRIBUTION ARRANGEMENTS............................................... -30-
DISTRIBUTION FINANCING PLANS............................................ -31-
PORTFOLIO TRANSACTIONS AND BROKERAGE.................................... -33-
DETERMINATION OF NET ASSET VALUE........................................ -35-
PURCHASE AND REDEMPTION OF SHARES....................................... -36-
INVESTMENT PERFORMANCE.................................................. -38-
TAXES................................................................... -47-
CUSTODIAN............................................................... -51-
TRANSFER AGENT SERVICES................................................. -51-
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS................................ -51-
OTHER INFORMATION....................................................... -51-
FINANCIAL STATEMENTS.................................................... -51-
APPENDIX................................................................ -52-
<PAGE>
GENERAL INFORMATION
The 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. Hartford Investment Financial Services Company ("HIFSCO") is the
investment manager to each Fund. HIFSCO is an indirect majority owned
subsidiary of The Hartford Financial Services Group, Inc., ("The Hartford")
an insurance holding company with over $100 billion in assets. In addition,
Wellington Management Company ("Wellington Management") and The Hartford
Investment Management Company ("HIMCO") provide the day-to-day investment
management 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
-1-
<PAGE>
this restriction, reverse repurchase agreements, mortgage dollar rolls, short
sales against the box, futures contracts, options on futures contracts,
securities or indices, when 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
-2-
<PAGE>
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.
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.
-3-
<PAGE>
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 HIFSCO, 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 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.
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)
-4-
<PAGE>
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. 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 is 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. A Fund
will not enter into reverse repurchase transactions if the combination of all
borrowings from banks and the value of all reverse repurchase agreements for
the particular Fund equals more than 33-1/3% of the value the Fund's total
assets.
-5-
<PAGE>
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
-6-
<PAGE>
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. 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.
-7-
<PAGE>
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 on the underlying mortgages. When the holder
reinvests the payments and any unscheduled prepayments of principal it
receives,s,t 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."
Up to 25% of the value of the Bond Income Strategy Fund's total assets may
be applied to mortgage dollar roll transactions. In a mortgage dollar roll a
fund sells mortgage-backed securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same type,
coupon and maturity) securities on a specified future date. The Fund will
engage in "covered rolls" or, if not covered, the Fund will establish a
segregated account with the Company's custodian consisting of cash, U.S.
Government securities and other liquid, high quality debt securities. A
"covered roll" is a specific type of dollar roll for which there is an
offsetting cash position or a cash equivalent security position which matures
on or before the forward settlement date of the dollar roll transaction.
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 all or a portion of their assets 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. 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
-8-
<PAGE>
acquired upon conversion of debt securities or upon exercise of warrants
acquired with debt securities.
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"). 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
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 certrticates 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
-9-
<PAGE>
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.
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.
Although the International Opportunities Fund will focus on companies that
operate in established markets, from time to time the Fund may invest up to
25% of its assets in companies located in emerging countries. Compared to the
United States and other developed countries, developing countries may have
relatively unstable governments, economies based on only a few industries,
and securities markets that are less liquid and trade a small number of
securities. Prices on these exchanges tend to be volatile and, in the past,
securities in these countries have offered greater potential for gain (as
well as loss) than securities of companies located in developed countries.
CURRENCY TRANSACTIONS
Each 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
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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 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
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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 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
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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
dayaythe 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
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
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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.
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
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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 the swap
agreement or would have paid the purchase price of the interest rate floor.
These activities are commonly used when managing derivative investments.
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
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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 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
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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 69)
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 (1988-1989), and served as Vice
President-Client Services of Wright Investors' Service, Bridgeport,
Connecticut (1989-1990). Mr. Biernat presently is consulting to
organizations on financial matters, with the majority of time spent with T.O.
Richardson & Co., Farmington, Connecticut.
WINIFRED ELLEN COLEMAN (age 64)
Director
27 Buckingham Lane
West Hartford, CT 06117
Ms. Coleman has served as President of Saint Joseph College since 1991. She
is a Director of LeMoyne College and St. Francis Hospital.
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JOSEPH HARRY GAREAU* (age 50)
Director and President
P.O. Box 2999
Hartford, CT 06104-2999
Mr. Gareau has served as Executive Vice President and Chief Investment
Officer of The Hartford since April, 1993. Formerly, he served as Senior
Vice President and Chief Investment Officer/Property-Casualty Division
(September, 1992 - April, 1993) and Vice President (October, 1987 -
September, 1992). Mr. Gareau is also a Director and the President of HIMCO,
a Director and Executive Vice President of HIFSCO and a Director of Hartford
Fire Insurance Company .
WILLIAM ATCHISON O'NEILL (age 67)
Director
Box 360
East Hampton, CT 06424
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 64)
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 and Chief Executive
Officer of Corcap, Inc. from 1988-1992. In addition, Mr. Pryor is a Director
of Pryor & Clark Company, Corcap, Inc., the Wiremold Company, Hoosier
Magnetics, Inc., Infodata Systems, Inc., Pacific Scientific Corporation and
Fibralock, Inc.
LOWNDES ANDREW SMITH* (age 57)
Director and Chairman
P.O. Box 2999
Hartford, CT 06104-2999
Mr. Smith has served as President of The Hartford Life Insurance Companies
since January, 1989. He was formerly Senior Vice President and Group
Comptroller of The Hartford Insurance Group from 1987-1989. He has been a
Director of Connecticut Children's Medical Center since 1993 and a Director
of American Counsel of Life Insurance since 1990. Mr. Smith is also President
and a Director of HIFSCO.
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JOHN KELLEY SPRINGER (age 66)
Director
55 Farmington Avenue
Hartford, CT 06105
Mr. Springer has served as Chief Executive Officer of Connecticut Health
System, Inc. since September, 1989. Formerly, he served as the Chief
Executive Officer of Hartford Hospital, Hartford, Connecticut (June, 1971 -
August, 1989). Director of Hartford Hospital, Connecticut Health System,
Inc., Medspan, Hospital Research and Development Institute, and CHS
Insurance Ltd. (Chairman).
PETER CUMMINS (age 60)
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 The Hartford Financial Services Group, Inc. -
Life Companies since 1989.
JOHN PHILLIP GINNETTI (age 51)
Vice President
P.O. Box 2999
Hartford, CT 06104-2999
Mr. Ginnetti has served as Executive Vice President and Director of Asset
Management Services, a division of The Hartford Financial Services Group,
Inc. - 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 The Hartford Financial Services Group, Inc. - Life Companies.
ANDREW WILLIAM KOHNKE (age 39)
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 The Hartford Financial Services Group, Inc. -
Life Companies. Mr. Kohnke is also a Director and Managing Director of HIMCO
and a Director and Vice President of HIFSCO.
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THOMAS MICHAEL MARRA (age 39)
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 The Hartford Financial Services Group, Inc. - Life Companies,
since 1980. Mr. Marra is also a Director and Executive Vice President of
HIFSCO.
CHARLES MINER O'HALLORAN (age 50)
Vice President and Secretary
Hartford Plaza
Hartford, CT 06115
Mr. O'Halloran has served as a Vice President since December, 1994, Senior
Associate General Counsel since 1988 and Corporate Secretary since 1996 of
The Hartford Financial Services Group, Inc. Mr. O'Halloran is also a
Director, Secretary and General Counsel of HIMCO and a Director of HIFSCO.
GEORGE RICHARD JAY (age 45)
Controller and Treasurer
P.O. Box 2999
Hartford, CT 06104-2999
Mr. Jay has served as Secretary and Director, Life and Equity Accounting and
Financial Control, of The Hartford Financial Services Group, Inc. - Life
Companies since 1987 and is a Director of HIFSCO.
KEVIN J. CARR (age 43)
Assistant Secretary and Counsel
Hartford Plaza
Hartford, CT 06115
Mr. Carr has served as Counsel since November 1996 and Associate Counsel
since November 1995, of The Hartford Financial Services Group, Inc. Formerly
he served as Counsel of Connecticut Mutual Life Insurance Company from March
1995 to November 1995, Associate Counsel of 440 Financial Group of Worcester
from 1994 to 1995 and Corporate Counsel-General Manager of Parker Media, a
Hartford-based publishing company, from 1990-1994. Mr. Carr is also Counsel
and Secretary of HIFSCO.
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JAMES CUBANSKI (age 36)
Assistant Secretary
Hartford Plaza
Hartford, CT 06115
Mr. Cubanski has served as Director of Tax Administration of The Hartford
Financial Services Group, Inc. 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).
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.
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
MidCap 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 The Hartford and its
affiliates. Each of the Directors and principal officers affiliated with the
Fund who is also an affiliated person of HIFSCO, HIMCO or Wellington
Management is named above, together with the capacity in which such person is
affiliated with the Fund, HIFSCO, 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 The
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:
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JOSEPH A. WINIFRED E. WILLIAM A. MILLARD H. JOHN K.
BIERNAT COLEMAN O'NEILL PRYOR SPRINGER
COMPENSATION
RECEIVED FROM
COMPANY $6,100 $6,100 $6,100 $6,100 $6,100
PENSION OR RETIREMENT
BENEFITS ACCRUED AS
FUND EXPENSE $0 $0 $0 $0 $0
TOTAL COMPENSATION
FROM COMPANY AND
COMPLEX PAID TO
DIRECTORS* $23,250 $20,250 $23,250 $23,250 $23,250
* As of December 31, 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 1996 fiscal year.
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 designated in each instance as Class A, Class B and Class Y shares.
As of May 31, 1997, the following persons held an interest in the
following Funds equal to 5% or more of such Fund's outstanding shares:
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CLASS A CLASS B CLASS Y
SMALL COMPANY FUND
Hartford Investment Management Company
Hartford, CT 53.34%
Bankers Trust Company, Trustee
ITT Hartford Investment & Savings Plan
Jersey City, NJ 91.81%
Wellington Retirement & Pension Plan
Boston, MA 5.00%
State Street Bank & Trust
Cust for The IRA of Gregory W. Rose
Atlanta, GA 7.83%
Lawing Family LP, A Partnership
Cornelius, NC 5.33%
Piper Jaffray as Custodian
FBO William T. Fredrick IRA
Minneapolis, MN 5.21%
CAPITAL APPRECIATION FUND
Hartford Investment Management Company
Hartford, CT 15.64%
Bankers Trust Company, Trustee
ITT Hartford Investment & Savings Plan
Jersey City, NJ 82.23%
Wellington Retirement & Pension Plan
Boston, MA 13.90%
INTERNATIONAL OPPORTUNITIES FUND
Hartford Investment Management Company
Hartford, CT 48.11%
Bankers Trust Company, Trustee
ITT Hartford Investment & Savings Plan
Jersey City, NJ 96.63%
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CLASS A CLASS B CLASS Y
Ace Supply Co., Inc.
Pro Shar Pl Tr U/A dtd 2/21/79
Minneapolis, MN 13.38%
BHC Securities Inc.
FAO 74498361
Philadelphia, PA 6.47%
STOCK FUND
Hartford Investment Management Company,
Hartford, CT 23.59%
Wellington Management Company LLP
Boston, MA 58.50%
Planco Inc. Profit Sharing Trust
Planco Inc. Employees Discretion dtd 9/27/94
Paoli, PA 31.05%
Planco Inc. Profit Sharing Trust
Planco Inc. Employees Ongoing dtd 9/27/94
Paoli, PA 6.49%
DIVIDEND AND GROWTH FUND
Hartford Investment Management Company
Hartford, CT 23.90%
Bankers Trust Company, Trustee
ITT Hartford Investment & Savings Plan
Jersey City, NJ 96.91%
ADVISERS FUND
Hartford Investment Management Company
Hartford, CT 40.24%
Bankers Trust Company, Trustee
ITT Hartford Investment & Savings Plan
Jersey City, NJ 99.29%
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CLASS A CLASS B CLASS Y
BOND INCOME STRATEGY FUND
Hartford Investment Management Company
Hartford, CT 94.13%
Bankers Trust Company, Trustee
ITT Hartford Investment & Savings Plan
Jersey City, NJ 99.42%
Donaldson Lufkin Jenrette Securities Corp Inc.
Jersey City, NJ 15.16%
Edward D. Jones & Co. F/A/O
Edward D. Jones & Co. Custodian
FBO Romie A. Lane IRA
Maryland Heights, MO 7.76%
Edward D. Jones & Co. F/A/O
Edward D. Jones & Co. Custodian
FBO Charles E. Garrison IRA
Maryland Heights, MO 6.98%
Edward D. Jones & Co. F/A/O
Edward D. Jones & Co. Custodian
FBO Sammy L. Hanks IRA
Maryland Heights, MO 6.93%
Edward D. Jones & Co. F/A/O
Edward D. Jones & Co. Custodian
FBO John L. Vernon IRA
Maryland Heights, MO 5.39%
MONEY MARKET FUND
Hartford Investment Management Company
Hartford, CT 44.89%
Bankers Trust Company, Trustee
ITT Hartford Investment & Savings Plan
Jersey City, NJ 99.98%
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
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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 25% 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, 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
management agreement with Hartford Investment Financial Services Company
("HIFSCO"). The investment management agreement provides that HIFSCO,
subject to the supervision and approval of the Company's Board of Directors,
is responsible for the management of each Fund. In addition, HIFSCO will
provide administrative personnel, services, equipment and facilities and
office space for proper operation of the Company. Although HIFSCO has agreed
to arrange for the provision of additional services necessary for the proper
operation of the Company, each Fund pays for these services directly.
With respect to the Small Company Fund, Capital Appreciation Fund,
International Opportunities Fund, Stock Fund, Dividend and Growth Fund and
Advisers Fund, HIFSCO 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 HIFSCO, is responsible for (among
other things) the day-to-day investment and reinvestment of the assets of
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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. With respect to the Bond Income Strategy Fund and Money Market
Fund, HIFSCO has entered into an investment services agreement with The
Hartford Investment Management Company ("HIMCO") for the provision of the day
to day investment management services for the Bond Income Strategy Fund and
Money Market Fund.
As provided by the investment management agreement, each Fund pays HIFSCO
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. HIFSCO, not any Fund, pays the subadvisory fees of
Wellington Management as set forth in the Prospectus. With respect to each
Fund, Wellington Management will waive 100% of its fees until the assets of
the Fund reach $100 million, and, thereafter, 50% of its fees until the
assets of the Fund reach $500 million, and, thereafter, 25% of its fees until
the assets of the Fund reach $1 billion. As a corporate affiliate of HIFSCO,
HIMCO is reimbursed by HIFSCO for the cost it incurs in providing investment
management services.
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 The
Hartford and its affiliates.
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.
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From inception date (July 22, 1996) through December 31,1996 each Fund has
paid the following advisory fees:
FUND NAME ADVISORY FEES AS OF 12/31/96
Small Company Fund $ 14,746
Capital Appreciation Fund $ 18,419
International Opportunities Fund $ 12,988
Stock Fund $ 15,357
Dividend and Growth Fund $ 13,810
Advisers Fund $ 38,897
Bond Income Strategy Fund $ 30,076
Money Market Fund $ 22,884
Until at least December 31, 1997 HIFSCO or an affiliate of The 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 management agreement, subadvisory investment
agreement and investment services agreement, neither HIFSCO, Wellington
Management nor HIMCO 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 HIFSCO, 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 HIFSCO to the fullest extent permitted by law against
any and all loss, damage, judgment, fines, amounts paid in settlement and
attorneys' fees incurred by HIFSCO 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.
HIFSCO and HIMCO are principally located at 200 Hopmeadow Street, Simsbury
Connecticut and maintain a mailing address of P.O. Box 2999, Hartford,
Connecticut 06104. As of March 31, 1997, HIFSCO, HIMCO and their affiliates
had approximately $47.5 billion in assets under management. HIMCO is a
wholly-owned subsidiary, and HIFSCO is a majority-owned indirect subsidiary,
of The Hartford Financial Services Group, Inc.
Wellington Management Company, LLP, 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
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1928. As of March 31, 1997, Wellington Management had investment management
authority with respect to approximately $136 billion in assets. Wellington
Management is a Massachusetts Limited Liability Partnership. The three
managing general partners of Wellington are Robert W. Doran, Duncan M.
McFarland and John R. Ryan.
The investment management agreement, subadvisory investment agreement and
investment services 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 management 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, or by HIFSCO upon written notice to Wellington
Management, and by Wellington Management upon 90 days' written notice to
HIFSCO (with respect to that Fund only). The investment services 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, by HIFSCO upon 60 days' notice to HIMCO and by HIMCO
upon 90 days' written notice to HIFSCO (with respect to that Fund only). The
subadvisory investment agreement and investment services agreement terminate
automatically upon the termination of the corresponding investment advisory
agreement.
HIFSCO 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
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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, 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.
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 The Hartford.
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.
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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
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
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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).
From inception date of the Funds, July 22, 1996 through December 31, 1996,
the following 12b-1 fees were paid to the Funds:
FUND NAME 12B-1 FEES (7/23/96 - 12/31/96)
CLASS A SHARES CLASS B SHARES
Small Company Fund $5,144 $299
Capital Appreciation Fund $6,681 $977
International Opportunities Fund $4,561 $167
Stock Fund $5,429 $1,275
Dividend and Growth Fund $5,408 $544
Advisers Fund $15,237 $1,479
Bond Income Strategy Fund $13,898 $225
Money Market Fund $13,818 N/A
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 and HIFSCO, 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
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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 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.
From inception date of the Funds, July 22, 1996, through December 31,
1996, the brokerage commissions paid were as follows:
FUND NAME BROKERAGE COMMISSIONS
Small Company Fund $8,264
Capital Appreciation Fund $20,709
International Opportunities Fund $65,362
Stock Fund $4,039
Dividend and Growth Fund $5,471
Advisers Fund $6,412
Bond Income Strategy Fund N/A
Money Market Fund N/A
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
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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 The Hartford, in
the manner described in the Funds' 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: Debt securities
(other than short-term obligations) are valued on the basis of valuations
furnished by an unaffiliated pricing service which determines valuations for
normal institutional size trading units of debt securities. Short-term
securities held in the Money Market Fund are valued at amortized cost or
original cost plus accrued interest receivable, both of which approximate
market value. All other Funds' short-term investments with a maturity of 60
days or less when purchased are valued at amortized cost, which approximates
market value. Short-term investments with a maturity of more than 60 days
when purchased are valued based on market quotations until the remaining days
to maturity become less than 61 days. From such time until maturity, the
investments are valued at amortized cost.
Equity securities are valued at the last sales price reported on principal
securities exchanges (domestic or foreign). If no sale took place on such day
and in the case of certain equity securities traded over-the-counter, then
such securities are valued at the mean between the bid and asked prices.
Securities quoted in foreign currencies are translated into U.S. dollars at
the exchange rate at the end of the reporting period. Options are valued at
the last sales price; if no sale took place on such day, then options are
valued at the mean between the bid and asked prices. Securities for which
market quotations are not readily available and all other assets are
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valued in good faith at fair value by, or under guidelines established by,
the Funds' Board of Directors.
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 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.
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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 account value of the Director variable
annuity or variable life contracts issued by affiliates of The Hartford. For
purposes of the rights of accumulation program, the purchaser may include all
shares owned by family members. A family member is a spouse, parent,
grandparent, child, grandchild, brother, sister, step-family members and
in-laws. Acceptance of the purchase order is subject to confirmation of
qualification. The rights of accumulation may be amended or terminated at any
time as to subsequent purchases. The Transfer Agent must be notified by you
or your broker each time a qualifying purchase is made.
LETTER OF INTENT. Any person may qualify for a reduced sales charge on
purchases of Class A shares made within a thirteen-month period pursuant to a
Letter of Intent (LOI). Class A shares acquired through the reinvestment of
distributions do not constitute purchases for purposes of the LOI. A Class A
shareholder may include, as an accumulation credit towards the completion of
such LOI, the value of all shares of all Funds of the Company owned by the
shareholder. Such value is determined based on the public offering price on
the date of the LOI. During the term of an LOI, 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. The Letter of
Intent may be backdated up to 90 days. Additional information about the terms
of the Letter of Intent are available from your registered representative or
from BFDS at 1-888-843-7824.
SYSTEMATIC WITHDRAWAL PLAN. The Systematic Withdrawal Plan ("SWP") is
designed to provide a convenient method of receiving fixed payments at
regular intervals only from Class A shares 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
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are permitted only for redemptions limited to no more than 12% 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.
For the seven-day period ending December 31, 1996, the Money Market Fund's
annualized yield for Class A and Class Y shares was 4.48% and 5.23%
respectively. For the same period, the effective yield for Class A and Class
Y shares was 4.58% and 5.27% respectively.
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:
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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
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.
The charts below set forth certain performance information for the Class A,
Class B and Class Y shares of each Fund, adjusted to reflect the maximum
sales charge and the account fees of each Class. Past performance is no
guarantee and is not necessarily indicative of future performance of the
shares. The actual annual returns for the shares may vary significantly from
the past and future performance. Investment returns and the value of the
shares will fluctuate in response to market and economic conditions as well
as other factors and shares, when redeemed,
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<PAGE>
may be worth more or less than their original cost. Total returns are based
on capital changes plus reinvestment of all distributions for the time
periods noted in the charts below. Total return of the shares would have been
lower without the expense limitation effected by HIFSCO.
VALUE OF A $1,000 INVESTMENT IN THE CLASS A, CLASS B AND CLASS Y SHARES OF
THE SMALL COMPANY FUND:
INVESTMENT PERIOD INVESTMENT DATE TOTAL RETURN TOTAL RETURN
LIFE OF ACCOUNT TO NOT
12/31/96 7/22/96* NOT ANNUALIZED ANNUALIZED
(EXCLUDING (INCLUDING
SALES CHARGE) SALES CHARGE)
Class A Shares 14.11% 7.83%
Class B Shares 13.81% 8.81%
Class Y Shares 14.41% 14.41%
*Date of Inception
VALUE OF A $1,000 INVESTMENT IN THE CLASS A, CLASS B AND CLASS Y SHARES OF
THE CAPITAL APPRECIATION FUND:
INVESTMENT PERIOD INVESTMENT DATE TOTAL RETURN TOTAL RETURN
LIFE OF ACCOUNT TO NOT
12/31/96 7/22/96* NOT ANNUALIZED ANNUALIZED
(EXCLUDING (INCLUDING
SALES CHARGE) SALES CHARGE)
Class A Shares 37.75% 30.17%
Class B Shares 37.35% 32.35%
Class Y Shares 37.95% 37.95%
*Date of Inception
VALUE OF A $1,000 INVESTMENT IN THE CLASS A, CLASS B AND CLASS Y SHARES OF
THE INTERNATIONAL OPPORTUNITIES FUND:
INVESTMENT PERIOD INVESTMENT DATE TOTAL RETURN TOTAL RETURN
LIFE OF ACCOUNT TO NOT
12/31/96 7/22/96* NOT ANNUALIZED ANNUALIZED
(EXCLUDING (INCLUDING
SALES CHARGE) SALES CHARGE)
Class A Shares 8.14% 2.20%
Class B Shares 7.86% 2.86%
Class Y Shares 8.36% 8.36%
*Date of Inception
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VALUE OF A $1,000 INVESTMENT IN THE CLASS A, CLASS B AND CLASS Y SHARES OF
THE STOCK FUND:
INVESTMENT PERIOD INVESTMENT DATE TOTAL RETURN TOTAL RETURN
LIFE OF ACCOUNT TO NOT
12/31/96 7/22/96* NOT ANNUALIZED ANNUALIZED
(EXCLUDING (INCLUDING
SALES CHARGE) SALES CHARGE)
Class A Shares 15.50% 9.15%
Class B Shares 15.20% 10.20%
Class Y Shares 15.80% 15.80%
*Date of Inception
VALUE OF A $1,000 INVESTMENT IN THE CLASS A, CLASS B AND CLASS Y SHARES OF
THE DIVIDEND AND GROWTH FUND:
INVESTMENT PERIOD INVESTMENT DATE TOTAL RETURN TOTAL RETURN
LIFE OF ACCOUNT TO NOT
12/31/96 7/22/96* NOT ANNUALIZED ANNUALIZED
(EXCLUDING (INCLUDING
SALES CHARGE) SALES CHARGE)
Class A Shares 15.29% 8.95%
Class B Shares 14.82% 9.82%
Class Y Shares 15.49% 15.49%
*Date of Inception
VALUE OF A $1,000 INVESTMENT IN THE CLASS A, CLASS B AND CLASS Y SHARES OF
THE ADVISERS FUND:
INVESTMENT PERIOD INVESTMENT DATE TOTAL RETURN TOTAL RETURN
LIFE OF ACCOUNT TO NOT
12/31/96 7/22/96* NOT ANNUALIZED ANNUALIZED
(EXCLUDING (INCLUDING
SALES CHARGE) SALES CHARGE)
Class A Shares 11.56% 5.43%
Class B Shares 11.28% 6.28%
Class Y Shares 11.88% 11.88%
*Date of Inception
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VALUE OF A $1,000 INVESTMENT IN THE CLASS A, CLASS B AND CLASS Y SHARES OF
THE BOND INCOME STRATEGY FUND:
INVESTMENT PERIOD INVESTMENT DATE TOTAL RETURN TOTAL RETURN
LIFE OF ACCOUNT TO NOT
12/31/96 7/22/96* NOT ANNUALIZED ANNUALIZED
(EXCLUDING (INCLUDING
SALES CHARGE) SALES CHARGE)
Class A Shares 5.73% .97%
Class B Shares 5.38% .38%
Class Y Shares 5.95% 5.95%
*Date of Inception
VALUE OF A $1,000 INVESTMENT IN THE CLASS A AND CLASS Y SHARES OF THE MONEY
MARKET FUND:
INVESTMENT PERIOD INVESTMENT DATE TOTAL RETURN TOTAL RETURN
LIFE OF ACCOUNT TO NOT
12/31/96 7/22/96* NOT ANNUALIZED ANNUALIZED
(EXCLUDING (INCLUDING
SALES CHARGE) SALES CHARGE)
Class A Shares 2.01% 2.01%
Class B Shares N/A N/A
Class Y Shares 2.34% 2.34%
*Date of Inception
Each Fund may also publish its distribution rate and/or its effective
distribution rate. A Fund's distribution rate is computed by dividing the most
recent monthly distribution per share annualized, by the current net asset value
per share. A Fund's effective distribution rate is computed by dividing the
distribution rate by the ratio used to annualize the most recent monthly
distribution and reinvesting the resulting amount for a full year on the basis
of such ratio. The effective distribution rate will be higher than the
distribution rate because of the compounding effect of the assumed reinvestment.
A Fund's yield is calculated using a standardized formula, the income component
of which is computed from the yields to maturity of all debt obligations held by
the Fund based on prescribed methods (with all purchases and sales of securities
during such period included in the income calculation on a settlement date
basis), whereas the distribution rate is based on a Fund's last monthly
distribution. A Fund's monthly distribution tends to be relatively stable and
may be more or less than the amount of net investment income and short- term
capital gain actually earned by the Fund during the month (see "Dividends,
Capital Gains and Taxes" in the Funds' Prospectus).
Other data that may be advertised or published about each Fund include the
average portfolio quality, the average portfolio maturity and the average
portfolio duration.
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<PAGE>
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:
2 { { ((a-b) / cd) + 1}6 - 1 }
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
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.
For the thirty-day period ended December 31, 1996, the Bond Income Strategy
Fund's 30-day yield for Class A, Class B and Class Y was 5.27%, 4.83% and 5.96%,
respectively.
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.
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<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
Financial Planning
Financial Times
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
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Round the Table
Service
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 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.
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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
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
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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.
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
-49-
<PAGE>
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
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
-50-
<PAGE>
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.
TRANSFER AGENT SERVICES
Boston Financial Data Services, Two Heritage Drive, Quincy, MA 0217, is
the transfer agent for each Fund.
INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements as of December 31, 1996, included in this
registration statement, have been audited by Arthur Andersen LLP, independent
public accountants, as stated in their report appearing herein.
OTHER INFORMATION
The Hartford has granted the Company the right to use the name, "The
Hartford" or "Hartford", and has reserved the right to withdraw its consent to
the use of such name by the
-51-
<PAGE>
Company and the Funds at any time, or to grant the use of such name to any
other company.
FINANCIAL STATEMENTS
The Company's and each Fund's financial statements as of December 31,
1996, together with the notes thereto, are included in this SAI.
-52-
<PAGE>
APPENDIX
The rating information which follows describes how the rating
services mentioned presently rate the described securities. No reliance is made
upon the rating firms as "experts" as that term is defined for securities
purposes. Rather, reliance on this information is on the basis that such
ratings have become generally accepted in the investment business.
RATING OF BONDS
MOODY'S INVESTORS SERVICE, Inc. ("MOODY'S")
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long term risks appear somewhat larger than in
Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
<PAGE>
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.
<PAGE>
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 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:
<PAGE>
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on
debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime
rating categories.
STANDARD & POOR'S
The relative strength or weakness of the following factors
determines whether the issuer's commercial paper is rated A-1 or A-2.
- Liquidity ratios are adequate to meet cash requirements.
Liquidity ratios are basically as follows, broken down by the type
of issuer:
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.
<PAGE>
- 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>
- --------------------------------------------------------------------------------
ITT HARTFORD MONEY MARKET FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- --------------
<C> <S> <C>
COMMERCIAL PAPER -- 85.8%
Abbey National North America
$ 300,000 5.32% due 03/11/97............... $ 296,941
American Home Products Corp.
300,000 5.33% due 01/24/97............... 298,978
Aristar, Inc.
300,000 5.42% due 02/07/97............... 298,329
AT&T Corp.
300,000 5.35% due 03/03/97............... 297,280
Bankers Trust Corp.
300,000 5.29% due 05/30/97............... 293,432
BFCE U.S. Finance Corp.
300,000 5.36% due 01/07/97............... 299,732
Bradford & Bingley Building Society
300,000 5.32% due 04/14/97............... 295,434
Countrywide Home Loan
300,000 5.44% due 01/13/97............... 299,456
Daimler Benz N.A. Corp.
300,000 5.36% due 02/18/97............... 297,856
Eksportfinans A/S
300,000 5.32% due 03/24/97............... 296,365
Electronic Data Systems Corp.
300,000 5.43% due 03/21/97............... 296,425
Finova Capital Corp.
300,000 5.38% due 02/07/97............... 298,341
Ford Motor Credit Corp.
300,000 5.33% due 02/18/97............... 297,868
General Electric Capital Corp.
300,000 5.33% due 01/17/97............... 299,289
Goldman Sachs Group Limited
Partnership
300,000 5.31% due 03/03/97............... 297,301
Johnson Controls, Inc.
300,000 5.37% due 01/23/97............... 299,015
MCI Communications
300,000 5.30% due 02/20/97............... 297,792
Merrill Lynch & Co., Inc.
300,000 5.44% due 01/21/97............... 299,093
National Fuel Gas
300,000 5.38% due 01/06/97............... 299,776
National Rural Utilities
300,000 5.45% due 03/05/97............... 297,139
Nationwide Building Society
300,000 5.63% due 02/27/97............... 297,326
New York Times Co.
300,000 5.33% due 01/21/97............... 299,112
Nordbanken North America
300,000 5.38% due 02/28/97............... 297,400
NYNEX Corp.
300,000 5.43% due 03/18/97............... 296,561
Pacific Dunlop Ltd.
300,000 5.50% due 01/03/97............... 299,908
Sanwa Business Credit Corp.
300,000 5.40% due 01/15/97............... 299,370
Sears Roebuck Acceptance Corp.
300,000 5.32% due 03/19/97............... 296,586
Sharp Electronics Corp.
300,000 5.27% due 03/21/97............... 296,531
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- --------------
<C> <S> <C>
Svenska Handelsbanken, Inc.
$ 300,000 5.42% due 03/24/97............... $ 296,296
Tambrands, Inc.
300,000 5.52% due 02/11/97............... 298,114
Westpac Capital Corp.
300,000 5.60% due 02/18/97............... 297,760
--------------
Total commercial paper............. $ 9,230,806
--------------
--------------
NON-CONVERTIBLE CORPORATE NOTES -- 5.6%
General Motor Acceptance Corp.
300,000 5.72% due 04/11/97............... $ 300,166
Wells Fargo
300,000 5.59% due 09/05/97............... 300,157
--------------
Total non-convertible corporate
notes............................ $ 600,323
--------------
--------------
REPURCHASE AGREEMENT -- 8.6%
922,000 Interest in $108,163,000 joint
repurchase agreement dated
12/31/96 with State Street Bank
6.70% due 01/02/97; maturity
amount $922,343 (Collateralized
by $53,860,000 U.S. Treasury Note
7.5% due 02/15/05 and $54,303,000
U.S. Treasury Note 8.875% due
08/15/17)........................ $ 922,000
--------------
--------------
DIVERSIFICATION OF ASSETS:
Total commercial paper (cost $9,230,806)..... 85.8 % $ 9,230,806
Total non-convertible corporate notes (cost
$600,323).................................. 5.6 600,323
Total repurchase agreement (cost $922,000)... 8.6 922,000
------ ------------
Total investment in securities
(Identified cost $10,753,129).............. 100.0 $ 10,753,129
Excess of cash, receivables and other assets
over liabilities........................... 0.0 772
------ ------------
Net assets (applicable to $1.00 per share
based on 10,753,901 shares outstanding).... 100.0 % $ 10,753,901
------ ------------
------ ------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $.001 per share; authorized
800,000,000 shares; outstanding 10,753,901
shares............................................. $ 10,754
Paid in surplus...................................... 10,743,147
------------
Total net assets..................................... $ 10,753,901
------------
------------
Class A
Shares of beneficial interest outstanding, $.001
par value; 800,000,000 authorized (Net assets
$10,753,621)....................................... 10,753,621
------------
------------
Net asset value and offering price per
share..................................... $ 1.00
-----
-----
Class Y
Shares of beneficial interest outstanding,
$.001 par value; 800,000,000 authorized
(Net assets $280).......................... 280
-----
-----
Net asset value and offering price per
share.................................... $ 1.00
-----
-----
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
1
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD BOND INCOME STRATEGY FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- -------------
<C> <S> <C>
U.S. TREAURIES & FEDERAL AGENCIES -- 41.5%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- 17.0%
Pass-Throughs
$ 1,954,266 6.00% due 05/01/11 -
07/01/11.................... $ 1,879,150
-------------
U.S. TREASURY BONDS -- 5.3%
150,000 6.00% due 02/15/26......... 136,453
108,000 6.75% due 08/15/26......... 108,743
185,000 6.875% due 08/15/25......... 188,527
50,000 8.125% due 08/15/19......... 57,781
80,000 8.75% due 05/15/17......... 97,550
-------------
589,054
-------------
U.S. TREASURY NOTES -- 19.2%
500,000 5.00% due 01/31/98......... 495,000
250,000 5.875% due 10/31/98......... 249,688
500,000 6.25% due 06/30/98......... 502,344
50,000 6.875% due 05/15/06......... 51,547
400,000 6.875% due 08/31/99......... 408,250
100,000 7.00% due 07/15/06......... 103,906
300,000 7.50% due 10/31/99......... 311,156
-------------
2,121,891
-------------
Total U.S. treasuries &
Federal agencies............ $ 4,590,095
-------------
-------------
CORPORATE BONDS -- 37.7%
CABLE -- 2.7%
Lenfest Communications, Inc.
100,000 8.38% due 11/01/05.......... $ 96,625
Rogers Cablesystems of America
100,000 10.00% due 12/01/07......... 105,500
Tele-Communications, Inc.
100,000 9.25% due 01/15/23.......... 96,386
-------------
298,511
-------------
CELLULAR COMMUNICATIONS --
0.9%
Rogers Cantel, Inc.
100,000 9.38% due 06/01/08.......... 104,750
-------------
CONSUMER SERVICES -- 1.0%
ADT Operations
100,000 9.25% due 08/01/03.......... 106,625
-------------
ENERGY & SERVICES -- 0.9%
Cal Energy Co.
100,000 9.50% due 09/15/06.......... 103,250
-------------
FINANCIAL SERVICES -- 12.4%
American Reinsurance*
100,000 7.45% due 12/15/26.......... 99,599
Citicorp
250,000 7.13% due 05/15/06.......... 251,231
First Nationwide*
100,000 10.63% due 10/01/03......... 108,000
Ford Motor Credit Co.
250,000 6.13% due 01/09/06.......... 233,939
Lehman Brothers, Inc.
175,000 7.36% due 12/15/03.......... 176,972
Massachusetts Mutual Life
Insurance Co.
250,000 7.63% due 11/15/23.......... 250,190
Phoenix Home Life Insurance
Co.
250,000 6.95% due 12/01/06.......... 246,222
-------------
1,366,153
-------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- -------------
<C> <S> <C>
GAMING -- 2.7%
Grand Casinos
$ 200,000 10.13% due 12/01/03......... $ 202,000
Trump Atlantic
100,000 11.25% due 05/01/06......... 99,000
-------------
301,000
-------------
INDUSTRIAL -- 4.7%
Buckeye Cellulos
100,000 8.50% due 12/15/05.......... 100,250
Freeport-McMoran, Inc.
100,000 8.75% due 02/15/04.......... 103,903
Newport News*
100,000 8.63% due 12/01/06.......... 102,250
Owens-Illinois, Inc.
100,000 11.00% due 12/01/03......... 111,500
U.S. Home Corp.
100,000 7.95% due 03/01/01.......... 97,616
-------------
515,519
-------------
MEDIA & SERVICES -- 1.8%
Turner Broadcasting Senior
Note
100,000 7.40% due 02/01/04.......... 99,501
Viacom, Inc.
100,000 6.75% due 01/15/03.......... 95,716
-------------
195,217
-------------
RETAIL -- 2.8%
K Mart Corp.
100,000 7.84% due 01/02/02.......... 93,442
K Mart Corp.
125,000 7.95% due 02/01/23.......... 102,500
Stop and Shop Companies, Inc.
100,000 9.75% due 02/01/02.......... 111,603
-------------
307,545
-------------
TECHNOLOGY -- 0.8%
Digital Equipment Corp.
100,000 7.75% due 04/01/23.......... 87,563
-------------
TRANSPORTATION -- 0.9%
Continental Airlines*
100,000 9.50% due 12/15/01.......... 101,375
-------------
UTILITIES -- 6.1%
El Paso Electric Co.
100,000 8.90% due 02/01/06.......... 105,500
Niagara Mohawk First Mortgage
100,000 7.75% due 05/15/06.......... 93,582
Pacific Gas and Electric Co.
250,000 7.25% due 03/01/26.......... 240,937
Public Service Electric & Gas,
MBIA-Insured
250,000 6.75% due 01/01/16.......... 235,492
-------------
675,511
-------------
Total corporate bonds......... $ 4,163,019
-------------
-------------
FOREIGN/YANKEE BONDS & NOTES -- 11.2%
Abbey-Global
250,000 6.69% due 10/17/05.......... $ 248,072
Societe Generale
250,000 9.88% due 07/15/03.......... 287,200
Southern Investments UK PLC
250,000 6.80% due 12/01/06.......... 244,707
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
2
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- -------------
<C> <S> <C>
FOREIGN/YANKEE BONDS & NOTES -- (CONTINUED)
Banco Nacional Com Ext
$ 125,000 7.25% due 02/02/04.......... $ 111,688
KFW International Finance,
Inc.
250,000 7.00% due 03/01/13.......... 249,729
Quebec Province
100,000 7.13% due 02/09/24.......... 95,504
-------------
Total foreign/yankee bonds &
notes....................... $ 1,236,900
-------------
-------------
SUPRANATIONALS -- 4.4%
Interamerican Development Bank
450,000 8.50% due 05/01/01.......... $ 486,054
-------------
-------------
ENHANCED EQUIPMENT TRUST CERTIFICATES -- 1.0%
Norwest Airlines Corp. Trust
95,077 11.30% due 06/21/14......... $ 115,741
-------------
-------------
SHORT-TERM SECURITIES -- 1.5%
COMMERCIAL PAPER -- 0.9%
Houston Lighting & Power
100,000 6.00% due 01/03/97.......... $ 99,967
-------------
REPURCHASE AGREEMENT -- 0.6%
69,000 Interest in $108,163,000 joint
repurchase agreement dated
12/31/96 with State Street
Bank 6.70% due 01/02/97;
maturity amount $69,026
(Collaterlized by
$53,860,000 U.S. Treasury
Note 7.5% due 02/15/05 and
$54,303,000 U.S. Treasury
Note 8.875% due 08/15/17)... 69,000
-------------
Total short-term securities... $ 168,967
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
------------
<S> <C> <C>
DIVERSIFICATION OF ASSETS:
Total U.S. treasuries & Federal agencies
(cost $4,528,776).......................... 41.5% $ 4,590,095
Total corporate bonds (cost $4,084,597)...... 37.7 4,163,019
Total foreign/yankee bonds & notes (cost
$1,223,381)................................ 11.2 1,236,900
Total supranationals (cost $478,556)......... 4.4 486,054
Total enhanced equipment trust certificates
(cost $117,223)............................ 1.0 115,741
Total short-term securities (cost
$168,967).................................. 1.5 168,967
------ ------------
Total investment in securities
(Identified cost $10,601,500).............. 97.3 10,760,776
Excess of cash, receivables and other assets
over liabilities........................... 2.7 293,358
------ ------------
Net assets................................... 100.0% $ 11,054,134
------ ------------
------ ------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $.001 per share; authorized
300,000,000 shares; outstanding 1,076,989 shares... $ 1,077
Paid in surplus...................................... 10,786,181
Accumulated undistributed net investment income...... 10,290
Accumulated undistributed net realized gain on
investments........................................ 97,310
Unrealized appreciation of investments............... 159,276
------------
Net assets at value.................................. $ 11,054,134
------------
------------
Class A
Net asset value per share ($10,925,338
DIVIDED BY 1,064,430 shares
outstanding)............................... $ 10.26
------
------
Maximum offering price per share ($10.26
DIVIDED BY 95.5%)......................... $ 10.74
------
------
Class B
Net asset value per share ($123,606
DIVIDED BY 12,054 shares outstanding)..... $ 10.25
------
------
Class Y
Net asset value per share ($5,190
DIVIDED BY 505 shares outstanding)........ $ 10.27
------
------
</TABLE>
* Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
3
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD ADVISERS FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
-------- ------------
<C> <S> <C>
COMMON STOCKS -- 59.8%
AEROSPACE & DEFENSE -- 2.3%
2,200 Boeing Co..................... $ 234,025
2,000 United Technologies Corp...... 132,000
------------
366,025
------------
BUSINESS SERVICES -- 0.5%
1,300 Fluor Corp.................... 81,575
------------
COMMUNICATIONS EQUIPMENT --
1.0%
*1,000 Cisco Systems, Inc............ 63,625
1,000 General Motors Corp. Class
H........................... 56,250
777 Lucent Technologies, Inc...... 35,936
------------
155,811
------------
COMPUTERS & OFFICE
EQUIPMENT -- 2.9%
*3,200 Adaptec, Inc.................. 128,000
1,200 International Business
Machines Corp............... 181,200
3,000 Xerox Corp.................... 157,875
------------
467,075
------------
CONSUMER DURABLES -- 0.6%
2,000 Goodyear Tire & Rubber Co..... 102,750
------------
CONSUMER NON-DURABLES -- 3.3%
800 Colgate Palmolive Co.......... 73,800
800 Gillette Co................... 62,200
1,000 Kimberly-Clark Corp........... 95,250
1,600 NIKE, Inc. Class B............ 95,600
1,900 Proctor & Gamble Co........... 204,250
------------
531,100
------------
CONSUMER SERVICES -- 2.0%
5,000 McDonalds Corp................ 226,250
*4,000 Mirage Resorts, Inc........... 86,500
------------
312,750
------------
ELECTRONICS -- 3.4%
3,800 General Electric Co........... 375,725
1,200 Intel Corp.................... 157,125
------------
532,850
------------
ENERGY & SERVICES -- 5.9%
1,800 Amoco Corp.................... 144,900
1,500 Chevron Corp.................. 97,500
2,000 Exxon Corp.................... 196,000
1,200 Royal Dutch Petroleum Co...... 204,900
1,100 Schlumberger Ltd.............. 109,862
3,016 Union Pacific Resources Group,
Inc......................... 88,218
2,200 Unocal Corp................... 89,375
------------
930,755
------------
FINANCIAL SERVICES -- 10.6%
2,000 Ace Ltd....................... 120,250
2,600 Allstate Corp................. 150,475
2,900 American Express Co........... 163,850
1,000 American International Group,
Inc......................... 108,250
2,200 Associates First Capital
Corp........................ 97,075
2,400 Citicorp...................... 247,200
1,600 First Bank System, Inc........ 109,200
800 Marsh & McLennan.............. 83,200
2,000 Merrill Lynch & Co., Inc...... 163,000
1,500 NationsBank Corp.............. 146,625
<CAPTION>
MARKET
SHARES VALUE
-------- ------------
<C> <S> <C>
FINANCIAL SERVICES --
(CONTINUED)
1,600 State Street Boston Corp...... $ 103,200
4,100 Travelers Group, Inc. (The)... 186,038
------------
1,678,363
------------
FOOD, BEVERAGE & TOBACCO --
1.4%
1,600 Kellogg Co.................... 105,000
3,000 Sara Lee Corp................. 111,750
------------
216,750
------------
HEALTH CARE -- 9.1%
2,600 Abbott Laboratories........... 131,950
2,200 American Home Products
Corp........................ 128,975
1,000 Bristol-Myers Squibb Co....... 108,750
2,000 Columbia/HCA Healthcare
Corp........................ 81,500
3,000 Johnson & Johnson............. 149,250
2,100 Merck & Co., Inc.............. 166,425
1,100 Pfizer, Inc................... 91,162
2,200 Pharmacia & Upjohn, Inc....... 87,175
1,700 SmithKline Beecham PLC ADR.... 115,600
2,000 Tenet Healthcare, Corp........ 43,750
2,000 United HealthCare Corp........ 90,000
*2,500 Vencor, Inc................... 79,063
2,200 Warner-Lambert Co............. 165,000
------------
1,438,600
------------
INDUSTRIAL MATERIALS -- 3.6%
1,400 Aluminum Company of America... 89,250
1,600 Crown Cork and Seal, Inc...... 87,000
1,600 Dow Chemical Co............... 125,400
800 du Pont (E.I.) de Nemours &
Co.......................... 75,500
1,000 International Paper Co........ 40,375
2,300 Phelps Dodge Corp............. 155,250
------------
572,775
------------
MANUFACTURING -- 1.1%
1,200 Caterpillar, Inc.............. 90,300
1,000 Minnesota Mining &
Manufacturing Co............ 82,875
------------
173,175
------------
MEDIA & SERVICES -- 2.6%
2,500 Gannett Co., Inc.............. 187,188
4,400 Gaylord Entertainment Class
A........................... 100,650
3,800 Viacom, Inc. Class B.......... 132,525
------------
420,363
------------
RETAIL -- 3.5%
2,000 Home Depot, Inc. (The)........ 100,250
*2,800 Saks Holding, Inc............. 75,600
2,100 Sears, Roebuck & Co........... 96,862
*3,000 Toys "R" Us, Inc.............. 90,000
8,800 Wal-Mart Stores, Inc.......... 201,300
------------
564,012
------------
SOFTWARE & SERVICES -- 3.3%
1,400 Computer Sciences Corp........ 114,975
2,200 Electronic Data Systems
Corp........................ 95,150
2,800 First Data Corp............... 102,200
*2,000 Microsoft Corp................ 165,250
*1,200 Oracle Systems Corp........... 50,100
------------
527,675
------------
TRANSPORTATION -- 1.4%
5,800 Southwest Airlines Co......... 128,325
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
4
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
-------- ------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
TRANSPORTATION -- (CONTINUED)
1,600 Union Pacific Corp............ $ 96,200
------------
224,525
------------
UTILITIES -- 1.3%
2,900 SBC Communications, Inc....... 150,075
1,300 Texas Utilities Co............ 52,975
------------
203,050
------------
Total common stocks........... $ 9,499,979
------------
------------
<CAPTION>
PRINCIPAL
AMOUNT
--------
<C> <S> <C>
U.S. TREASURIES & FEDERAL AGENCIES -- 32.6%
FEDERAL HOME LOAN MORTGAGE
CORPORATION -- 1.4%
$236,659 6.50% due 5/01/26........... $ 226,232
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 1.4%
226,808 6.50% due 04/15/26.......... 216,390
------------
U.S. TREASURY BOND -- 4.7%
700,000 7.25% due 5/15/16........... 739,156
------------
U.S. TREASURY NOTES -- 25.1%
300,000 5.125% due 04/30/98......... 296,906
500,000 5.75% due 08/15/03......... 485,000
500,000 5.875% due 10/31/98......... 499,375
850,000 6.25% due 05/31/00......... 853,719
700,000 6.375% due 08/15/02......... 704,594
400,000 6.50% due 10/15/06......... 402,250
700,000 7.50% due 02/15/05......... 748,782
------------
3,990,626
------------
Total U.S. treasuries &
Federal agencies............ $ 5,172,404
------------
------------
SHORT-TERM SECURITIES -- 5.1%
REPURCHASE AGREEMENTS -- 5.1%
191,000 Interest in $399,594,000 joint
repurchase agreement dated
12/31/96 with State Street
Bank 6.7693% due 01/02/97;
maturity amount $191,072
(Collateralized by
$218,212,000 U.S. Treasury
Note 6.25% due 06/30/98 and
$280,160,000 U.S. Treasury
Strip (principal) 0% due
05/15/19) $ 191,000
624,000 Interest in $300,000,000 joint
repurchase agreement dated
12/31/96 with First Boston
6.75% due 01/02/97; maturity
amount $624,234
(Collateralized by
$301,035,000 U.S. Treasury
Note 6.25% due 10/31/01) 624,000
------------
Total short-term securities... $ 815,000
------------
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
-----------
<S> <C> <C>
DIVERSIFICATION OF ASSETS:
Total common stocks (cost $8,511,537)........ 59.8% $ 9,499,979
Total U.S. treasuries & Federal agencies
(cost $5,129,366).......................... 32.6 5,172,404
Total short-term securities (cost
$815,000).................................. 5.1 815,000
------ -----------
Total investment in securities
(Identified cost $14,455,903).............. 97.5 15,487,383
Excess of cash, receivables and other assets
over liabilities........................... 2.5 391,846
------ -----------
Net assets................................... 100.0% $15,879,229
------ -----------
------ -----------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $.001 per share; authorized
400,000,000 shares; outstanding 1,433,297 shares... $ 1,433
Paid in surplus...................................... 14,810,376
Accumulated undistributed net investment income...... 1,776
Accumulated undistributed net realized gain on
investments........................................ 34,164
Unrealized appreciation of investments............... 1,031,480
-----------
Net assets at value.................................. $15,879,229
-----------
-----------
Class A
Net asset value per share ($14,346,717
DIVIDED BY 1,294,601 shares
outstanding)............................... $ 11.08
------
------
Maximum offering price per share ($11.08
DIVIDED BY 94.5%)......................... $ 11.72
------
------
Class B
Net asset value per share ($1,498,526
DIVIDED BY 135,633 shares outstanding).... $ 11.05
------
------
Class Y
Net asset value per share ($33,986
DIVIDED BY 3,063 shares outstanding)...... $ 11.10
------
------
</TABLE>
* Non-income producing.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
5
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD DIVIDEND AND GROWTH FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- -------------
<C> <S> <C>
COMMON STOCKS -- 94.0%
AEROSPACE & DEFENSE -- 3.0%
1,500 Northrop Grumman Corp......... $ 124,125
1,900 Sundstrand Corp............... 80,750
-------------
204,875
-------------
BUSINESS SERVICES -- 0.5%
1,300 Browning Ferris Industries,
Inc......................... 34,125
-------------
COMPUTERS & OFFICE
EQUIPMENT -- 1.2%
1,500 Xerox Corp.................... 78,938
-------------
CONSUMER DURABLES -- 3.8%
2,900 Ford Motor Co................. 92,437
1,400 Goodyear Tire & Rubber Co..... 71,925
1,800 ITT Industries, Inc........... 44,100
1,800 Smith (A.O.) Corp............. 53,775
-------------
262,237
-------------
CONSUMER NON-DURABLES -- 4.7%
1,500 Avon Products................. 85,687
1,300 Colgate Palmolive Co.......... 119,925
1,200 Kimberly-Clark Corp........... 114,300
-------------
319,912
-------------
CONSUMER SERVICES -- 0.6%
500 Eastman Kodak................. 40,125
-------------
ELECTRONICS -- 2.6%
1,800 General Electric Co........... 177,975
-------------
ENERGY & SERVICES -- 13.1%
2,200 Ashland, Inc.................. 96,525
2,300 Chevron Corp.................. 149,500
1,300 Cinergy Corp.................. 43,387
1,700 Exxon Corp.................... 166,600
2,000 Pennzoil Co................... 113,000
2,400 Phillips Petroleum............ 106,200
2,400 Sun Company, Inc.............. 58,500
338 Union Pacific Resources
Group....................... 9,887
1,900 Unocal Corp................... 77,188
3,100 USX-Marathon Group............ 74,013
-------------
894,800
-------------
FINANCIAL SERVICES -- 18.2%
2,100 Allstate Corp................. 121,538
2,200 American Express Co........... 124,300
3,100 Bancorp Hawaii, Inc........... 130,200
900 Bank of Boston Corp........... 57,825
600 CIGNA Corp.................... 81,975
2,600 Citicorp...................... 267,800
3,200 First Bank System, Inc........ 218,400
2,700 First Union Corp.............. 199,800
800 Wachovia Corp................. 45,200
-------------
1,247,038
-------------
FOOD, BEVERAGE & TOBACCO --
8.4%
6,900 Flowers Industries, Inc....... 148,350
1,900 General Mills, Inc............ 120,412
900 Interstate Bakeries........... 44,212
700 Kellogg Co.................... 45,938
1,900 Philip Morris Companies,
Inc......................... 213,988
-------------
572,900
-------------
<CAPTION>
SHARES MARKET
----------- VALUE
-------------
<C> <S> <C>
HEALTH CARE -- 9.9%
1,700 American Home Products
Corp........................ $ 99,662
1,500 Bard (C.R.), Inc.............. 42,000
1,000 Bristol-Myers Squibb Co....... 108,750
1,600 Merck & Co., Inc.............. 126,800
4,400 Pharmacia & Upjohn, Inc....... 174,350
1,700 Warner-Lambert Co............. 127,500
-------------
679,062
-------------
INDUSTRIAL MATERIALS -- 3.9%
700 Calgon Carbon Corp............ 8,575
300 Crompton & Knowles Corp....... 5,775
200 Dow Chemical Co............... 15,675
400 du Pont (E.I.) de Nemours &
Co.......................... 37,750
500 Eastman Chemical Co........... 27,625
200 Georgia Gulf Corp............. 5,375
100 Grace (W.R.) & Co............. 5,175
2,000 International Paper Co........ 80,750
400 Lubrizol Corp................. 12,400
200 Nalco Chemical Co............. 7,225
1,300 Weyerhaeuser Co............... 61,587
-------------
267,912
-------------
MANUFACTURING -- 1.3%
1,100 Minnesota Mining &
Manufacturing Co............ 91,162
-------------
MEDIA & SERVICES -- 1.3%
100 ACNielson Corp................ 1,513
500 Cognizant Corp................ 16,500
1,000 Gannett Co., Inc.............. 74,875
-------------
92,888
-------------
REAL ESTATE -- 1.0%
1,300 Patriot American
Hospitality................. 56,062
200 Starwood Lodging Trust........ 11,025
-------------
67,087
-------------
RETAIL -- 2.9%
2,500 Mercantile Stores, Inc........ 123,438
1,600 Sears, Roebuck & Co........... 73,800
-------------
197,238
-------------
TRANSPORTATION -- 1.1%
1,300 Union Pacific Corp............ 78,163
-------------
UTILITIES -- 16.5%
1,400 Ameritech Corp................ 84,875
2,300 BellSouth Corp................ 92,863
500 Carolina Power and Lighting... 18,250
200 Comsat Corp................... 4,925
1,700 DPL, Inc...................... 41,650
1,400 DQE, Inc...................... 40,600
3,000 Edison International.......... 59,625
400 Equitable Resources........... 11,900
2,000 Frontier Corp................. 45,250
2,200 GTE Corp...................... 100,100
1,000 Illinova Corp................. 27,500
1,400 NE Electric System............ 48,825
1,200 NIPSCO Industries, Inc........ 47,550
1,100 NYNEX Corp.................... 52,937
1,500 Pacific Enterprises........... 45,562
2,400 Pacific Gas & Electric Co..... 50,400
2,400 Pinnacle West Capital Corp.... 76,200
1,000 Public Service Co. of
Colorado.................... 38,875
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
6
<PAGE>
<TABLE>
<CAPTION>
SHARES MARKET
----------- VALUE
-------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
UTILITIES -- (CONTINUED)
1,700 SBC Communications, Inc....... $ 87,975
700 Scana Corp.................... 18,725
1,900 Texas Utilities Co............ 77,425
2,600 The Southern Co............... 58,825
-------------
1,130,837
-------------
Total common stocks........... $ 6,437,274
-------------
-------------
CONVERTIBLE PREFERRED STOCKS -- 2.6%
AEROSPACE & DEFENSE -- 1.2%
1,500 Lorel Space &
Communications*............. $ 84,000
-------------
MEDIA & SERVICES -- 1.4%
2,000 American Radio*............... 92,000
-------------
Total convertible preferred
stocks...................... $ 176,0000
-------------
-------------
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<C> <S> <C>
SHORT-TERM SECURITIES -- 3.7%
REPURCHASE AGREEMENTS
$ 183,000 Interest in $399,594,000 joint
repurchase agreement dated
12/31/96 with State Street
Bank 6.7693% due 01/02/97
maturity amount $183,069
(Collateralized by
$218,212,000 U.S. Treasury
Note 6.25% due 06/30/98 and
$280,160,000 U.S. Treasury
Strip (principal) 0% due
05/15/19)................... $ 183,000
74,000 Interest in $300,000,000 joint
repurchase agreement dated
12/31/96 with First Boston
6.75% due 01/02/97; maturity
amount $74,028
(Collateralized by
$301,035,000 U.S. Treasury
Note 6.25% due 10/31/01).... 74,000
-------------
Total short-term securities... $ 257,000
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
-----------
<S> <C> <C>
DIVERSIFICATION OF ASSETS:
Total common stocks (cost $5,970,422)........ 94.0% $ 6,437,274
Total convertible preferred stocks (cost
$184,650).................................. 2.6 176,000
Total short-term securities (cost
$257,000).................................. 3.7 257,000
-------- -----------
Total investment in securities
(Identified cost $6,412,072)............... 100.3 6,870,274
Excess of liabilities over cash, receivables
and other assets........................... (0.3) (21,991)
-------- -----------
Net assets................................... 100.0% $ 6,848,283
-------- -----------
-------- -----------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital Stock, par value $.001 per share; authorized
300,000,000 shares; outstanding 598,562 shares....... $ 599
Paid in surplus........................................ 6,366,039
Distribution in excess of net investment income........ (1,060)
Accumulated undistributed net realized gain on
investments.......................................... 24,503
Unrealized appreciation of investments................. 458,202
-----------
Net assets at value.................................... $ 6,848,283
-----------
-----------
Class A
Net asset value per share ($6,082,738
DIVIDED BY 531,428 shares outstanding).... $ 11.45
-----------
-----------
Maximum offering price per share ($11.45
DIVIDED BY 94.5%)......................... $ 12.12
-----------
-----------
Class B
Net asset value per share ($729,524
DIVIDED BY 63,991 shares outstanding)..... $ 11.40
-----------
-----------
Class Y
Net asset value per share ($36,021
DIVIDED BY 3,143 shares outstanding)...... $ 11.46
-----------
-----------
</TABLE>
* Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
7
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD STOCK FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- ---------------
<C> <S> <C>
COMMON STOCKS -- 89.2%
AEROSPACE & DEFENSE -- 3.7%
1,600 Boeing Co..................... $ 170,200
1,700 United Technologies Corp...... 112,200
---------------
282,400
---------------
BUSINESS SERVICES -- 0.8%
1,000 Fluor Corp.................... 62,750
---------------
COMMUNICATION EQUIPMENT --
1.6%
*600 Cisco Systems, Inc............ 38,175
1,200 General Motors Corp. Class
H........................... 67,500
388 Lucent Technologies........... 17,945
---------------
123,620
---------------
COMPUTERS & OFFICE EQUIPMENT
-- 3.6%
*1,600 Adaptec, Inc.................. 64,000
600 International Business
Machines Corp............... 90,600
2,200 Xerox Corp.................... 115,775
---------------
270,375
---------------
CONSUMER DURABLES -- 0.8%
1,200 Goodyear Tire & Rubber Co..... 61,650
---------------
CONSUMER NON-DURABLES -- 5.4%
700 Colgate Palmolive Co.......... 64,575
900 Gillette Co................... 69,975
800 Kimberly-Clark Corp........... 76,200
1,000 NIKE, Inc. Class B............ 59,750
1,300 Proctor & Gamble.............. 139,750
---------------
410,250
---------------
CONSUMER SERVICES -- 3.2%
4,000 McDonalds Corp................ 181,000
*3,000 Mirage Resorts, Inc........... 64,875
---------------
245,875
---------------
ELECTRONICS -- 5.0%
3,000 General Electric Co........... 296,625
600 Intel Corp.................... 78,563
---------------
375,188
---------------
ENERGY & SERVICES -- 8.8%
1,000 Amoco Corp.................... 80,500
1,600 Chevron Corp.................. 104,000
1,100 Exxon Corp.................... 107,800
1,000 Royal Dutch Petroleum Co...... 170,750
800 Schlumberger Ltd.............. 79,900
2,000 Union Pacific Resources Group,
Inc......................... 58,500
1,600 Unocal Corp................... 65,000
---------------
666,450
---------------
FINANCIAL SERVICES -- 15.1%
1,200 Ace Ltd....................... 72,150
1,800 Allstate Corp................. 104,175
1,800 American Express Co........... 101,700
700 American International Group,
Inc......................... 75,775
1,000 Associates First Capital
Corp........................ 44,125
1,700 Citicorp...................... 175,100
1,300 First Bank System, Inc........ 88,725
700 Marsh & McLennan Cos., Inc.... 72,800
1,300 Merrill Lynch & Co., Inc...... 105,950
1,000 NationsBank Corp.............. 97,750
1,200 State Street Boston Corp...... 77,400
<CAPTION>
SHARES MARKET
----------- VALUE
---------------
<C> <S> <C>
FINANCIAL SERVICES --
(CONTINUED)
2,766 Travelers Group, Inc. (The)... $ 125,507
---------------
1,141,157
---------------
FOOD, BEVERAGE & TOBACCO --
2.1%
1,000 Kellogg Co.................... 65,625
2,400 Sara Lee Corp................. 89,400
---------------
155,025
---------------
HEALTH CARE -- 14.2%
2,000 Abbott Laboratories........... 101,500
1,800 American Home Products
Corp........................ 105,525
700 Bristol-Myers Squibb Co....... 76,125
2,000 Columbia/HCA Healthcare
Corp........................ 81,500
2,400 Johnson & Johnson............. 119,400
1,300 Merck & Co., Inc.............. 103,025
1,200 Pfizer, Inc................... 99,450
1,600 Pharmacia & Upjohn, Inc....... 63,400
1,100 SmithKline Beecham PLC ADR.... 74,800
1,400 Tenet Healthcare Corp......... 30,625
1,600 United HealthCare Corp........ 72,000
*1,300 Vencor, Inc................... 41,112
1,400 Warner-Lambert Co............. 105,000
---------------
1,073,462
---------------
INDUSTRIAL MATERIALS -- 4.5%
700 Aluminum Company of America... 44,625
1,200 Crown Cork & Seal, Inc........ 65,250
900 Dow Chemical Co............... 70,537
500 du Pont (E.I.) de Nemours &
Co.......................... 47,187
500 International Paper Co........ 20,188
1,400 Phelps Dodge Corp............. 94,500
---------------
342,287
---------------
MANUFACTURING -- 2.1%
1,000 Caterpillar, Inc.............. 75,250
1,000 Minnesota Mining &
Manufacturing Co............ 82,875
---------------
158,125
---------------
MEDIA & SERVICES -- 4.1%
1,800 Gannett Co., Inc.............. 134,775
3,000 Gaylord Entertainment Class
A........................... 68,625
3,000 Viacom, Inc. Class B.......... 104,625
---------------
308,025
---------------
RETAIL -- 5.5%
1,400 Home Depot, Inc. (The)........ 70,175
*2,100 Saks Holding, Inc............. 56,700
1,400 Sears, Roebuck & Co........... 64,575
*2,200 Toys "R" Us, Inc.............. 66,000
7,000 Wal-Mart Stores, Inc.......... 160,125
---------------
417,575
---------------
SOFTWARE & SERVICES -- 4.4%
700 Computer Sciences Corp........ 57,488
2,000 Electronic Data Systems
Corp........................ 86,500
2,200 First Data Corp............... 80,300
*1,000 Microsoft Corp................ 82,625
*600 Oracle Systems Corp........... 25,050
---------------
331,963
---------------
TRANSPORTATION -- 2.0%
3,500 Southwest Airlines Co......... 77,438
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
8
<PAGE>
<TABLE>
<CAPTION>
SHARES MARKET
----------- VALUE
---------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
TRANSPORTATION -- (CONTINUED)
1,200 Union Pacific Corp............ $ 72,150
---------------
149,588
---------------
UTILITIES -- 2.3%
1,800 SBC Communications, Inc....... 93,150
2,000 Texas Utilities Co............ 81,500
---------------
174,650
---------------
Total common stocks........... $ 6,750,415
---------------
---------------
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<C> <S> <C>
SHORT-TERM SECURITIES -- 7.9%
REPURCHASE AGREEMENTS
$ 366,000 Interest in $399,594,000 joint
repurchase agreement dated
12/31/96 with State Street
Bank 6.7693% due 01/02/97;
maturity amount $366,138
(Collateralized by
$218,212,000 U.S. Treasury
Note 6.25% due 06/30/98 and
$280,160,000 U.S. Treasury
Strip (principal) 0% due
05/15/19)................... $ 366,000
235,000 Interest in $300,000,000 joint
repurchase agreement dated
12/31/96 with First Boston
6.75% due 01/02/97; maturity
amount $235,088
(Collateralized by
$301,035,000 U.S. Treasury
Note 6.25% due 10/31/01).... 235,000
---------------
Total short-term securities... $ 601,000
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
------------
<S> <C> <C>
DIVERSIFICATION OF ASSETS:
Total common stocks (cost $6,260,567)........ 89.2% $ 6,750,415
Total short-term securities (cost
$601,000).................................. 7.9 601,000
------ ------------
Total investment in securities
(Identified cost $6,861,567)............... 97.1 7,351,415
Excess of cash, receivables and other assets
over liabilities........................... 2.9 219,929
------ ------------
Net assets................................... 100.0% $ 7,571,344
------ ------------
------ ------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $.001 per share; authorized
300,000,000 shares; outstanding 656,761 shares..... $ 657
Paid in surplus...................................... 7,073,235
Accumulated undistributed net realized gain on
investments........................................ 7,604
Unrealized appreciation of investments............... 489,848
------------
Net assets at value.................................. $ 7,571,344
------------
------------
Class A
Net asset value per share ($6,273,141
DIVIDED BY 543,879 shares outstanding).... $ 11.53
---------
---------
Maximum offering price per share ($11.53
DIVIDED BY 94.5%)......................... $ 12.20
---------
---------
Class B
Net asset value per share ($1,253,759
DIVIDED BY 109,034 shares outstanding).... $ 11.50
---------
---------
Class Y
Net asset value per share ($44,444
DIVIDED BY 3,848 shares outstanding)...... $ 11.55
---------
---------
* Non-income producing.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
9
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD CAPITAL APPRECIATION FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------- -----------
<C> <S> <C>
COMMON STOCKS -- 95.3%
AEROSPACE & DEFENSE -- 3.1%
1,000 Precision Castparts Corp...... $ 49,625
*11,700 Wyman-Gordon Co............... 260,325
-----------
309,950
-----------
BUSINESS SERVICES -- 4.1%
6,400 Allegiance Corp............... 176,800
*20,000 National Media Corp........... 140,000
*3,200 XLConnect Solutions, Inc...... 92,000
-----------
408,800
-----------
COMMUNICATION EQUIPMENT --
8.6%
*5,000 Geotel Communications Corp.... 65,000
*6,100 Gilat Satellite Network....... 150,212
*2,700 Oak Industries, Inc........... 62,100
*9,000 Proxim, Inc................... 207,000
40,000 Scitex Corp................... 380,000
-----------
864,312
-----------
COMPUTERS & OFFICE
EQUIPMENT -- 1.8%
*4,600 Adaptec, Inc.................. 184,000
-----------
CONSUMER SERVICES -- 4.1%
3,150 Harman International
Industries, Inc............. 175,219
*11,000 Mirage Resorts, Inc........... 237,875
-----------
413,094
-----------
ELECTRONICS -- 7.6%
*16,800 DSP Communications, Inc....... 325,500
*2,900 Solectron Corp................ 154,788
4,400 Texas Instruments............. 280,500
-----------
760,788
-----------
ENERGY & SERVICES -- 3.8%
*12,000 Forasol-Foramer N.V........... 235,500
*6,700 J Ray McDermott S A........... 147,400
-----------
382,900
-----------
FINANCIAL SERVICES -- 7.3%
2,000 Ace Ltd....................... 120,250
4,200 First USA, Inc................ 145,425
*15,000 Matrix Capital Corp........... 238,125
*5,600 RAC Financial Group Inc....... 118,300
4,000 United Cos. Financial Corp.... 106,500
-----------
728,600
-----------
HEALTH CARE -- 9.3%
*8,500 Genzyme Corp.................. 184,875
*8,500 IDX Systems Corp.............. 243,312
*27,300 Novacare, Inc................. 300,300
*8,200 Superior Consultant
Holdings.................... 202,950
-----------
931,437
-----------
INDUSTRIAL MATERIALS -- 6.3%
18,000 Avenor, Inc................... 266,588
*7,000 Titanium Metals Corp.......... 230,125
*3,700 UCAR International, Inc....... 139,213
-----------
635,926
-----------
MANUFACTURING -- 1.8%
10,000 Wabash National Corp.......... 183,750
-----------
<CAPTION>
SHARES MARKET
------- VALUE
-----------
<C> <S> <C>
MEDIA & SERVICES -- 7.4%
*15,000 National Education Corp....... $ 228,750
*27,340 TCI Satellite Entertainment
Group Class A............... 269,983
*16,400 Tele-Communications, Inc.
Class A..................... 214,225
*600 Univision Communication Class
A........................... 22,200
-----------
735,158
-----------
RETAIL -- 1.5%
*800 Delia's, Inc.................. 15,900
*9,900 Urban Outfitters, Inc......... 128,700
-----------
144,600
-----------
SOFTWARE & SERVICES -- 18.9%
*9,800 BA Merchant Services, Inc.
Class A..................... 175,175
*5,000 BBN Corp...................... 112,500
*4,700 Cadence Design System......... 186,825
*3,300 DST Systems, Inc.............. 103,537
*10,500 Forrester Research, Inc....... 270,375
*8,500 IKOS Systems, Inc............. 170,000
*5,000 Macromedia, Inc............... 90,000
*1,800 Parametric Technology Corp.... 92,475
*11,500 Peerless Systems Corp......... 195,500
*9,300 Puma Technology, Inc.......... 160,425
*10,400 Pure Atria Corp............... 257,400
*5,000 Rogue Wave Software........... 78,750
*250 Sanchez Computer Associates... 1,969
-----------
1,894,931
-----------
UTILITIES -- 9.7%
*10,000 Calpine Corp.................. 200,000
*8,000 Telecel-Communicacoes......... 510,145
*10,000 Worldcom, Inc................. 260,625
-----------
970,770
-----------
Total common stocks........... $ 9,549,016
-----------
-----------
<CAPTION>
PRINCIPAL
AMOUNT
-------
<C> <S> <C>
SHORT-TERM SECURITIES -- 1.1%
REPURCHASE AGREEMENTS -- 1.1%
$21,000 Interest in $399,594,000 joint
repurchase agreement dated
12/31/96 with State Street
Bank 6.7693% due 01/02/97;
maturity amount $21,008
(Collateralized by
$218,212,000 U.S. Treasury
Note 6.25% due 06/30/98 and
$280,160,000 U.S. Treasury
Strip (principal) 0% due
05/15/19)................... $ 21,000
95,000 Interest in $300,000,000 joint
repurchase agreement dated
12/31/96 with First Boston
6.75% due 01/02/97; maturity
amount $95,036
(Collateralized by
$301,035,000 U.S. Treasury
Note 6.25% due 10/31/01).... 95,000
-----------
Total short-term securities... $ 116,000
-----------
-----------
DIVERSIFICATION OF ASSETS:
Total common stocks (cost $8,705,982)........ 95.3 % $ 9,549,016
Total short-term securities (cost
$116,000).................................. 1.1 116,000
------ ------------
Total investment in securities
(Identified cost $8,821,982)............... 96.4 9,665,016
Excess of cash, receivables and other assets
over liabilities........................... 3.6 359,568
------ ------------
Net assets................................... 100.0 % $ 10,024,584
------ ------------
------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
10
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF SHAREHOLDERS' EQUITY:
<S> <C> <C>
Capital stock, par value $.001 per share; authorized
300,000,000 shares; outstanding 750,636 shares..... $ 751
Paid in surplus...................................... 8,754,357
Accumulated undistributed net realized gain on
investments........................................ 426,258
Unrealized appreciation of investments............... 843,034
Unrealized appreciation on foreign currency
translation of other assets and liabilities........ 184
------------
Net assets at value.................................. $ 10,024,584
------------
------------
Class A
Net asset value per share ($9,028,258
DIVIDED BY 675,875 shares outstanding).... $ 13.36
------
------
Maximum offering price per share ($13.36
DIVIDED BY 94.5%)......................... $ 14.14
------
------
Class B
Net asset value per share ($889,033
DIVIDED BY 66,745 shares outstanding)..... $ 13.32
------
------
Class Y
Net asset value per share ($107,293
DIVIDED BY 8,016 shares outstanding)...... $ 13.38
------
------
</TABLE>
* Non-income producing.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
11
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD SMALL COMPANY FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- --------------
<C> <S> <C>
COMMON STOCKS -- 93.5%
AEROSPACE & DEFENSE -- 1.1%
*2,000 Gulfstream Aerospace Corp.......... $ 48,500
*200 Rohr, Inc.......................... 4,525
--------------
53,025
--------------
BUSINESS SERVICES -- 4.2%
*4,900 Borg-Warner Security Corp.......... 52,675
*10,900 Intelligent Electronics, Inc....... 87,200
*400 Lason, Inc......................... 8,200
*2,400 Tetra Technologies, Inc............ 60,600
--------------
208,675
--------------
COMMUNICATION EQUIPMENT -- 7.6%
*1,800 Fore Systems, Inc.................. 59,175
*2,600 Gilat Satellite Networks Ltd....... 64,025
*1,600 Kronos, Inc........................ 51,200
*2,600 Natural Microsystems Corp.......... 81,900
*1,500 Oak Industries, Inc................ 34,500
3,300 Scitex Corp........................ 31,350
*1,200 Videoserver, Inc................... 51,000
*300 West Teleservices Corp............. 6,825
--------------
379,975
--------------
COMPUTERS & OFFICE EQUIPMENT --
2.4%
*1,700 Affiliated Computer Services Class
A................................ 50,575
*2,400 Caere Corp......................... 27,600
*3,600 Diamond Multimedia Systems......... 42,750
--------------
120,925
--------------
CONSUMER NON-DURABLES -- 3.2%
2,400 Ethan Allen, Inc................... 92,400
2,400 First Brands Corp.................. 68,100
--------------
160,500
--------------
CONSUMER SERVICES -- 5.0%
*2,200 Brinker International, Inc......... 35,200
*2,800 Golden Bear Golf, Inc.............. 31,500
*400 PJ America, Inc.................... 7,200
*1,200 Planet Hollywood International,
Inc.............................. 23,700
*3,000 Prime Hospitality Corp............. 48,375
*5,200 Rally's Hamburgers, Inc............ 23,725
*6,700 Tyco Toys, Inc..................... 78,725
--------------
248,425
--------------
ELECTRONICS -- 4.0%
*2,500 Actel Corp......................... 59,375
*3,000 Conductus, Inc..................... 19,500
2,400 Dallas Semiconductor Corp.......... 55,200
*600 Etec Systems, Inc.................. 22,950
*2,500 Gemstar International Group Ltd.... 43,750
--------------
200,775
--------------
ENERGY & SERVICES -- 1.6%
*2,000 Falcon Drilling Co., Inc........... 78,500
--------------
FINANCIAL SERVICES -- 11.2%
1,100 Bancorp Hawaii, Inc................ 46,200
525 Conseco, Inc....................... 33,484
1,400 Frontier Insurance Group, Inc...... 53,550
*2,400 Imperial Bancorp................... 54,900
*3,400 Imperial Credit Industries......... 71,400
1,400 Legg Mason, Inc.................... 53,900
1,200 MMI Companies, Inc................. 38,700
<CAPTION>
SHARES MARKET
----------- VALUE
--------------
<C> <S> <C>
FINANCIAL SERVICES -- (CONTINUED)
*2,200 Prepaid Legal Services, Inc........ $ 40,150
1,200 Reinsurance Group of America....... 56,550
2,400 Resource Bancshares Mortgage
Group............................ 34,200
3,400 Westcorp........................... 74,375
--------------
557,409
--------------
FOOD, BEVERAGE & TOBACCO -- 1.2%
*1,600 Robert Mondavi Corp. Class B....... 58,400
--------------
HEALTH CARE -- 17.4%
*2,000 Alliance Pharmaceuticals Corp...... 27,250
*3,300 Amylin Pharmaceuticals, Inc........ 42,900
*2,100 Apria Healthcare Group, Inc........ 39,375
*1,800 FHP International Corp............. 66,825
*2,200 Genesis Health Ventures, Inc....... 68,475
*1,800 IDX Systems Corp................... 51,525
*1,800 Isomedix, Inc...................... 23,400
3,800 Kinetic Concepts, Inc.............. 46,550
*2,200 Ligand Pharmaceuticals Class B..... 32,725
*2,900 Magainin Pharmaceuticals, Inc...... 27,912
*3,000 Magellan Health Services, Inc...... 67,125
2,200 Mckesson Corp...................... 123,200
*2,400 Medpartners, Inc................... 50,400
*5,400 NABI, Inc.......................... 47,250
*3,000 Physio-Control International
Corp............................. 67,500
*2,700 Vencor, Inc........................ 85,388
--------------
867,800
--------------
INDUSTRIAL MATERIALS -- 1.0%
*1,400 UCAR International Inc............. 52,675
--------------
MANUFACTURING -- 2.2%
1,800 Memtec Ltd. ADR.................... 59,175
3,500 NN Ball & Roller, Inc.............. 53,375
--------------
112,550
--------------
MEDIA & SERVICES -- 7.7%
*4,800 American Telecasting, Inc.......... 27,600
*2,520 Home Shopping Network.............. 59,850
*2,000 International Cabletel, Inc........ 50,500
*6,600 Iwerks Entertainment, Inc.......... 33,000
*100 Metro Networks, Inc................ 2,525
*4,200 Pegasus Communications Corp........ 57,750
*2,700 Peoples Choice TV Corp............. 16,537
*4,900 Playboy Enterprises Class B........ 47,775
*7,300 Valuevision International, Inc.
Class A.......................... 39,238
*3,400 Western Wireless Corp. Class A..... 47,175
--------------
381,950
--------------
REAL ESTATE -- 0.9%
*2,700 Castle & Cooke, Inc................ 42,863
--------------
RETAIL -- 6.2%
*2,100 Bed & Bath Beyond, Inc............. 50,925
*2,500 Gymboree Corp...................... 57,187
1,200 Mercantile Stores, Inc............. 59,250
*1,500 Saks Holding, Inc.................. 40,500
*7,900 Sports and Recreation, Inc......... 61,225
*3,300 Urban Outfitters, Inc.............. 42,900
--------------
311,987
--------------
SOFTWARE & SERVICES -- 10.6%
*400 BA Merchant Services, Inc. Class
A................................ 7,150
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
12
<PAGE>
<TABLE>
<CAPTION>
SHARES MARKET
----------- VALUE
--------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
SOFTWARE & SERVICES -- (CONTINUED)
*1,600 Bisys Group, Inc................... $ 59,300
*3,050 Boole & Babbage, Inc............... 76,250
*500 Desktop Data, Inc.................. 9,625
*2,100 DST Systems, Inc................... 65,887
*3,100 IKOS Systems, Inc.................. 62,000
*400 Information Management Resources... 8,450
*2,900 Macromedia, Inc.................... 52,200
*2,400 Mercury Interactive Corp........... 31,200
*3,300 Premenos Technology Corp........... 28,463
*900 Puma Technology, Inc............... 15,525
*1,374 Sterling Commerce, Inc............. 48,434
*2,100 Sterling Software, Inc............. 66,412
--------------
530,896
--------------
TRANSPORTATION -- 2.9%
2,800 Air Express International Corp..... 90,300
*2,300 Swift Transportation Co., Inc...... 54,050
--------------
144,350
--------------
UTILITIES -- 3.1%
*2,000 McLeod, Inc. Class A............... 51,000
*16,900 Peoples Telephone Co., Inc......... 53,869
*6,100 Trescom International, Inc......... 48,800
--------------
153,669
--------------
Total common stocks................ $ 4,665,349
--------------
--------------
PREFERRED STOCK -- 0.6%
MEDIA & SERVICES -- 0.6%
1,100 AMC Entertainment, Inc............. $ 29,700
--------------
--------------
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<C> <S> <C>
SHORT-TERM SECURITIES -- 4.9%
REPURCHASE AGREEMENTS -- 4.9%
$ 25,000 Interest in $399,594,000 joint
repurchase agreement dated
12/31/96 with State Street Bank
6.7693% due 01/02/97; maturity
amount $25,009 (Collateralized by
$218,212,000 U.S. Treasury Note
6.25% due 06/30/98 and
$280,160,000 U.S. Treasury Strip
(principal) 0% due 05/15/19)..... $ 25,000
218,000 Interest in $300,000,000 joint
repurchase agreement dated
12/31/96 with First Boston 6.75%
due 01/02/97; maturity amount
$218,082 (Collateralized by
$301,035,000 U.S. Treasury Note
6.25% due 10/31/01).............. 218,000
--------------
Total short-term securities........ $ 243,000
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
------------
<S> <C> <C>
DIVERSIFICATION OF ASSETS:
Total common stocks (cost $4,503,678)........ 93.5% $ 4,665,349
Total preferred stock (cost $39,099)......... 0.6 29,700
Total short-term securities (cost
$243,000).................................. 4.9 243,000
------ ------------
Total investment in securities
(Identified cost $4,785,777)............... 99.0 4,938,049
Excess of cash, receivables and other assets
over liabilities........................... 1.0 48,976
------ ------------
Net assets................................... 100.0% $ 4,987,025
------ ------------
------ ------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $.001 per share; authorized
300,000,000 shares; outstanding 466,902 shares..... $ 466
Paid in surplus...................................... 4,833,336
Accumulated undistributed net realized gain on
investments........................................ 951
Unrealized appreciation of investments............... 152,272
------------
Net assets at value.................................. $ 4,987,025
------------
------------
Class A
Net asset value per share ($4,673,328
DIVIDED BY 437,487 shares outstanding).... $ 10.68
------
------
Maximun offering price per share ($10.68
DIVIDED BY 94.5%)......................... $ 11.30
------
------
Class B
Net asset value per share ($241,355
DIVIDED BY 22,659 shares outstanding)..... $ 10.65
------
------
Class Y
Net asset value per share ($72,342
DIVIDED BY 6,756 shares outstanding)...... $ 10.71
------
------
</TABLE>
* Non-income producing.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
13
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD INTERNATIONAL OPPORTUNITIES FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
-------- ------------
<C> <S> <C>
COMMON STOCKS -- 84.1%
ARGENTINA -- 0.8%
1,900 Perezcompanc SA B............. $ 13,359
1,000 YPF Sociedad Anonima Sponsored
ADR......................... 25,250
------------
38,609
------------
AUSTRALIA -- 3.5%
3,500 Amcor Ltd..................... 22,489
10,235 Boral Ltd..................... 29,103
2,785 Broken Hill Proprietary Co.
Ltd......................... 39,639
15,559 Goodman Fielder Ltd........... 19,278
10,000 Pioneer International Ltd..... 29,785
1,000 Qantas Air Ltd. ADR***........ 16,679
------------
156,973
------------
AUSTRIA -- 0.7%
300 OMV AG........................ 33,793
------------
BELGIUM -- 0.6%
*300 Credit Communal Holding***.... 27,342
------------
BRAZIL -- 0.9%
1,000 Electrobras On ADR............ 17,900
90,000 Petroleo Brasileiro........... 14,335
160,000 Telecomunic Brasileiras....... 11,471
------------
43,706
------------
CANADA -- 1.1%
1,500 Canadian Pacific Ltd.......... 39,750
900 Canwest Global Communication
Corp........................ 9,225
------------
48,975
------------
CHILE -- 0.8%
1,000 Banco Santander Chile ADR..... 15,000
750 Enersis SA ADR................ 20,813
------------
35,813
------------
DENMARK -- 2.4%
1,300 TeleDanmark B ADR............. 35,425
1,400 Unidanmark A Registered....... 72,386
------------
107,811
------------
FINLAND -- 1.7%
*5,000 Merita Bank Ltd. A............ 15,513
4,000 Metsa-Serla Oy B.............. 29,941
1,400 Rauma Oy...................... 29,464
------------
74,918
------------
FRANCE -- 7.2%
330 Accor SA...................... 41,704
1,150 Assurances Generales de
France...................... 37,052
900 Banque Nationale de
Paris***.................... 34,762
300 Credit Commercial de France... 13,850
525 Havas SA...................... 36,759
100 Peugeot SA.................... 11,234
450 Remy Cointreau................ 12,724
1,500 Rhone-Poulenc................. 51,041
170 Saint Gobain.................. 24,002
200 Societe Generale.............. 21,582
200 Societe Nationale Elf
Acquitaine.................. 18,170
300 Total SA...................... 24,352
------------
327,232
------------
<CAPTION>
SHARES MARKET
-------- VALUE
------------
<C> <S> <C>
GERMANY -- 4.6%
750 Daimler-Benz AG............... $ 51,343
85 Degussa AG.................... 38,608
270 Hornbach Holding Pref
(Non-voting)................ 19,272
70 Karstadt AG................... 23,256
40 Mannesmann AG................. 17,188
2,800 Metallgesellschaft AG......... 57,086
------------
206,753
------------
HONG KONG -- 3.3%
3,000 Citic Pacific Ltd............. 17,414
5,000 Hutchison Whampoa Ltd......... 39,270
6,000 Lai Sun Development........... 9,076
1,000 New World Development Co.
Ltd......................... 6,755
2,000 Sun Hung Kai Properties....... 24,499
4,000 Swire Pacific Ltd............. 38,138
50,000 Tingyi Holding Corp........... 13,090
------------
148,242
------------
INDIA -- 0.3%
800 State Bank of India GDR....... 14,200
------------
INDONESIA -- 0.9%
17,000 Bank Negara Indonesa BNI...... 8,995
300 Indosat ADR................... 8,212
20,000 Kalbe Farma - Foreign
Registered.................. 22,857
------------
40,064
------------
IRELAND -- 0.6%
10,000 Jefferson Smurfit Group....... 29,691
------------
ITALY -- 2.3%
2,500 Arnoldo Mondadori Editore
S.p.A....................... 20,306
14,000 Banca Commerciale Italiana
S.p.A....................... 25,412
5,000 Fiat S.p.A.................... 15,094
6,600 Stet S.p.A.................... 29,951
5,000 Telecom Italia S.p.A.......... 12,956
------------
103,719
------------
JAPAN -- 17.8%
1,100 Canon Sales Co., Inc.......... 24,451
1,000 Chudenko Corp................. 28,776
2,000 Chugai Pharmaceutical Co...... 16,714
3,000 Dai Nippon Printing Co........ 52,468
1,000 Danto Corp.................... 9,735
1,000 Fuji Machine Manufacturing
Co.......................... 26,449
2,000 JGC Corp...................... 14,974
1,000 Kyudenko Corp................. 10,338
1,000 Mabuchi Motor Co.............. 50,228
1,000 Maruichi Steel Tube........... 17,231
3,000 Matsushita Electric Industrial
Co.......................... 48,850
3,000 Mitsubishi Heavy Industries... 23,779
1,000 Murata Manufacturing Co....... 33,170
4,000 NGK Spark Plug................ 43,767
2,000 Nippon Express Co............. 13,681
120 Nippon Television Network
Corp........................ 36,185
1,000 Nomura Securities Co.......... 14,991
3,000 Onward Kashiyama Co. Ltd...... 42,130
2,000 Sakura Bank................... 14,267
1,000 Sankyo Co., Ltd............... 28,259
2,000 Sanwa Bank Ltd................ 27,225
2,000 Seventy-Seven Bank............ 16,369
3,000 Sumitomo Realty &
Development................. 18,868
3,000 Toda Construction Co.......... 22,745
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
14
<PAGE>
<TABLE>
<CAPTION>
SHARES MARKET
-------- VALUE
------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
JAPAN -- (CONTINUED)
2,000 Tokio Marine & Fire Insurance
Co.......................... $ 18,782
5,000 Toyo Ink Manfacturing Co.
Ltd......................... 20,462
1,000 Toyota Motor Corp............. 28,690
900 World Co...................... 37,219
5,000 Yamato Kogyo Co. Ltd.......... 46,093
1,000 Yamazaki Baking Co. Ltd....... 15,939
------------
802,835
------------
LUXEMBOURG -- 0.3%
1,750 Quilmes Industrial ADR........ 15,969
------------
MALAYSIA -- 1.5%
9,000 Land & General Holdings
Berhad...................... 21,560
10,000 MBF Capital Berhad............ 16,235
2,000 Resort World Berhad........... 9,107
5,000 Sime Darby Berhad............. 19,699
------------
66,601
------------
MEXICO -- 1.8%
1,900 Cemex SA - CPO................ 6,818
2,600 Cemex SA De C.V............... 9,330
5,500 FEMSA SA Series B............. 18,725
3,750 Grupo Carso SA Series A1...... 19,531
*50,000 Grupo Financiero Bancomer
Series B.................... 20,008
1,000 Transportation Maritima A
ADR......................... 4,625
------------
79,037
------------
NETHERLANDS -- 3.4%
250 Akzo Nobel NV................. 34,109
1,200 Ing Groep NV.................. 43,151
917 KLM........................... 25,765
1,000 Polygram NV................... 50,875
------------
153,900
------------
NEW ZEALAND -- 0.7%
7,964 Air New Zealand Ltd. B........ 21,607
5,000 Carter Holt Harvey Ltd........ 11,340
------------
32,947
------------
NORWAY -- 2.2%
4,060 Fokus Bank.................... 27,913
2,500 Nycomed ASA Series A.......... 38,173
1,950 Saga Petroleum ASA Series A... 32,524
------------
98,610
------------
PHILIPPINES -- 0.6%
250 Philippine Long Distance
ADR......................... 12,750
15,000 Pilipino Telephone............ 12,690
------------
25,440
------------
PORTUGAL -- 0.1%
100 Telecel Communicacoes***...... 6,377
------------
SINGAPORE -- 2.8%
3,000 Development Bank of
Singapore................... 40,534
5,000 Far East Levingston
Shipbuilding................ 26,093
5,000 Keppel Corp................... 38,962
6,000 Straits Steamship Land........ 19,216
------------
124,805
------------
SOUTH KOREA -- 0.6%
750 Korea Electric Power Corp.
ADR......................... 15,375
<CAPTION>
SHARES MARKET
-------- VALUE
------------
<C> <S> <C>
SOUTH KOREA -- (CONTINUED)
500 Pohang Iron & Steel ADR....... $ 10,125
------------
25,500
------------
SPAIN -- 2.7%
200 Acerinox SA................... 28,845
400 Empresa Nacional de
Electricidad................ 28,414
500 Empresa Nacional de
Electricidad ADR............ 35,000
1,200 Telefonica De Espana SA....... 27,815
------------
120,074
------------
SWEDEN -- 1.2%
500 BT Industries AB***........... 9,300
1,160 Pharmacia & Upjohn, Inc.
SDR......................... 47,484
------------
56,784
------------
SWITZERLAND -- 2.2%
10 Cie Financ Richemont AG....... 14,001
25 Nestle SA..................... 26,755
55 Sulzer AG - Part Certified.... 29,329
15 Sulzer AG - Registered........ 8,636
25 Swissair - Registered......... 20,164
------------
98,885
------------
THAILAND -- 1.0%
18,900 Bangkok Metropolitan Bank..... 7,371
2,000 Land & House Co., Ltd......... 14,587
1,300 Siam City Cement Public Co.,
Ltd......................... 6,794
2,000 Siam Commercial............... 14,508
------------
43,260
------------
UNITED KINGDOM -- 13.3%
1,550 Allied Irish Banks PLC........ 10,385
500 Amersham International PLC.... 9,840
3,350 Associated British Foods...... 27,776
1,000 Bank of Ireland............... 9,130
7,000 Bank of Scotland.............. 36,955
2,625 Boc Group PLC................. 39,239
3,000 Boots Company PLC............. 30,932
10,000 British Gas PLC............... 38,419
3,000 British Telecom Co. PLC....... 20,253
2,000 BTR........................... 9,720
19,000 Cookson Group PLC............. 76,735
4,320 De la Rue PLC................. 42,324
5,000 National Grid Group PLC....... 16,728
7,000 Northern Foods PLC............ 24,497
3,851 Powergen PLC.................. 37,729
6,730 Rank Group PLC................ 50,157
2,900 Reckitt & Colman PLC.......... 35,930
2,538 Royal & Sun Alliance
Insurance................... 19,306
2,000 Royal Bank of Scotland........ 19,286
7,050 Sainsbury (J) PLC............. 46,811
------------
602,152
------------
VENEZUELA -- 0.2%
400 Cia Anonima Telef De Venezuela
ADR......................... 11,250
------------
Total common stocks........... $ 3,802,267
------------
------------
PREFERRED STOCKS -- 0.8%
FINLAND -- 0.6%
500 Nokia Corp. ADR............... $ 28,813
------------
BRAZIL -- 0.2%
12,800 Cervejaria Brahma 6,997
------------
Total preferred stocks........ $ 35,180
------------
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
15
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD INTERNATIONAL OPPORTUNITIES FUND, INC.
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
-------- ------------
<C> <S> <C>
SHORT-TERM SECURITIES -- 16.1%
U.S. TREASURY BILL -- 0.6%
$ 25,000 4.85% due 03/20/97.......... $ 24,737
------------
REPURCHASE AGREEMENTS -- 15.5%
462,000 Interest in $399,594,000 joint
repurchase agreement dated
12/31/96 with State Street
Bank 6.7693% due 01/02/97;
maturity amount $462,174
(Collateralized by
$218,212,000 U.S. Treasury
Note 6.25% due 06/30/98 and
$280,160,000 U.S. Treasury
Strip (principal) 0% due
05/15/19)................... 462,000
239,000 Interest in $300,000,000 joint
repurchase agreement dated
12/31/96 with First Boston
6.75% due 01/02/97; maturity
amount $239,090
(Collateralized by
$301,035,000 U.S. Treasury
Note 6.25% due 10/31/01) 239,000
------------
701,000
------------
Total short-term securities... $ 725,737
------------
------------
DIVERSIFICATION OF ASSETS:
Total common stocks (cost $3,592,139)........ 84.1 % $ 3,802,267
Total preferred stocks (cost $24,941)........ 0.8 35,810
Total short-term securities (cost
$725,737).................................. 16.1 725,737
------ ------------
Total investment in securities
(Identified cost $4,342,817)............... 101.0 4,563,814
Excess of liabilities over cash, receivables
and other assets........................... (1.0 ) (43,650)
------ ------------
Net assets................................... 100.0 % $ 4,520,164
------ ------------
------ ------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $.001 per share; authorized
300,000,000 shares; outstanding 421,612 shares..... $ 422
Paid in surplus...................................... 4,273,202
Distribution in excess of net investment income...... (1,737)
Accumulated undistributed net realized gain on
investments........................................ 20,733
Unrealized appreciation of investments............... 220,997
Unrealized appreciation of futures contracts......... 6,073
Unrealized appreciation of forward foreign currency
contracts (Note 2)................................. 538
Unrealized depreciation on translation of other
assets and liabilities in foreign currencies....... (64)
------------
Net assets at value.................................. $ 4,520,164
------------
------------
Class A
Net asset value per share ($4,293,981
DIVIDED BY 400,474 shares outstanding).... $10.72
------
------
Maximun offering price per share ($10.72
DIVIDED BY 94.5%)......................... $11.34
------
------
Class B
Net asset value per share ($162,526
DIVIDED BY 15,207 shares outstanding)..... $10.69
------
------
Class Y
Net asset value per share ($63,657
DIVIDED BY 5,931 shares outstanding)...... $10.73
------
------
</TABLE>
* Non-income producing.
** The Fund had 1 March TSE 35 Index futures contract, 1 March MATIF CAC 40
Index futures contract, 1 March ALL ORDS Index futures contract, 2 January
IBEX futures contracts, 1 January OMX Stock Index futures contract and 1
March DTB DAX Index futures contract open as of December 31, 1996. These
contracts had a market value of $129,156 as of December 31, 1996.
*** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
FORWARD FOREIGN CURRENCY CONTRACTS -- NOTE 2 -- OUTSTANDING AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
AGGREGATE DELIVERY UNREALIZED
DESCRIPTION TOTAL VALUE FACE VALUE DATE APPRECIATION
- ------------------------------ ----------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
Spanish Peseta (Buy) $ 9,921 $ 9,816 01/17/97 $ 105
Spanish Peseta (Buy) 38,904 38,471 01/24/97 433
-----
$ 538
-----
-----
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
16
<PAGE>
ITT HARTFORD MUTUAL FUNDS, INC.
STATEMENT OF OPERATIONS,
STATEMENT OF CHANGES IN NET ASSETS,
NOTES TO FINANCIAL STATEMENTS,
FINANCIAL HIGHLIGHTS
AND REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD MUTUAL FUNDS, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JULY 1, 1996 (INCEPTION) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
ITT HARTFORD
ITT HARTFORD BOND INCOME
MONEY STRATEGY
MARKET FUND FUND
------------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ -- $ --
Interest............... 252,103 323,463
Less: foreign tax
withheld.............. -- --
------------- ------------
Total investment
income.............. 252,103 323,463
------------- ------------
EXPENSES:
Investment advisory
fees.................. 22,884 30,076
Transfer agent fees.... 15,988 13,214
Distribution fees
Class A.............. 13,818 13,898
Class B.............. -- 225
Custodian fees and
expenses.............. 1,607 1,518
Accounting services.... 27,218 27,525
Registration fees...... 38,949 39,058
Board of directors
fees.................. 3,812 3,812
Audit fees............. 18,721 18,931
Legal fees............. 8,974 9,075
Amortization of
deferred
organizational
costs................. 2,186 3,276
Other expenses......... 6,676 7,149
------------- ------------
Total expenses
(before waivers and
reimbursements)..... 160,833 167,757
Expense waivers and
reimbursements........ (114,934) (109,635)
------------- ------------
Total expenses, net.... 45,899 58,122
------------- ------------
Net investment income
(loss)................ 206,204 265,341
------------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on
investments........... -- 159,623
Net realized gain on
forward foreign
currency contracts.... -- --
Net realized gain on
futures contracts..... -- --
Net realized loss on
foreign currency
transactions.......... -- --
Net unrealized
appreciation of
investments........... -- 159,276
Net unrealized
appreciation
(depreciation) on
translation of other
assets and liabilities
in foreign
currencies............ -- --
Net unrealized
appreciation of
futures contracts..... -- --
Unrealized appreciation
of forward foreign
currency contracts.... -- --
------------- ------------
Net realized and
unrealized gain on
investments........... -- 318,899
------------- ------------
Net increase in net
assets resulting from
operations............ $ 206,204 $ 584,240
------------- ------------
------------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
18
<PAGE>
<TABLE>
<CAPTION>
ITT HARTFORD
ITT HARTFORD CAPITAL ITT HARTFORD ITT HARTFORD
ITT HARTFORD DIVIDEND AND ITT HARTFORD APPRECIATION SMALL INTERNATIONAL
ADVISERS FUND GROWTH FUND STOCK FUND FUND COMPANY FUND OPPORTUNITIES FUND
------------- ------------ ------------ --------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 59,991 $ 54,426 $ 32,800 $ 4,927 $ 5,710 $ 23,276
Interest............... 123,816 7,178 8,813 10,866 9,153 12,398
Less: foreign tax
withheld.............. (419) (37) (209) (37) (18) (2,757)
------------- ------------ ------------ --------------- ------------ --------
Total investment
income.............. 183,388 61,567 41,404 15,756 14,845 32,917
------------- ------------ ------------ --------------- ------------ --------
EXPENSES:
Investment advisory
fees.................. 38,897 13,810 15,357 18,419 14,746 12,988
Transfer agent fees.... 21,188 20,023 16,748 26,397 18,411 11,378
Distribution fees
Class A.............. 15,237 5,408 5,429 6,681 5,144 4,561
Class B.............. 1,479 544 1,275 977 299 167
Custodian fees and
expenses.............. 2,413 2,378 2,416 2,061 2,914 22,894
Accounting services.... 30,841 10,945 11,403 13,697 10,316 9,086
Registration fees...... 39,808 32,383 32,464 34,476 32,431 31,209
Board of directors
fees.................. 3,812 3,812 3,812 3,812 3,812 3,812
Audit fees............. 21,212 7,528 7,843 9,421 7,095 6,249
Legal fees............. 10,169 3,609 3,760 4,516 3,401 2,996
Amortization of
deferred
organizational
costs................. 3,276 3,276 3,276 3,276 3,276 3,276
Other expenses......... 9,116 3,550 3,861 4,556 2,943 2,918
------------- ------------ ------------ --------------- ------------ --------
Total expenses
(before waivers and
reimbursements)..... 197,448 107,266 107,644 128,289 104,788 111,534
Expense waivers and
reimbursements........ (123,622) (81,036) (78,838) (94,120) (79,380) (86,164)
------------- ------------ ------------ --------------- ------------ --------
Total expenses, net.... 73,826 26,230 28,806 34,169 25,408 25,370
------------- ------------ ------------ --------------- ------------ --------
Net investment income
(loss)................ 109,562 35,337 12,598 (18,413) (10,563) 7,547
------------- ------------ ------------ --------------- ------------ --------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on
investments........... 34,690 34,697 8,296 734,669 323,041 32,945
Net realized gain on
forward foreign
currency contracts.... -- -- -- -- -- 15,163
Net realized gain on
futures contracts..... -- -- -- -- -- 2,960
Net realized loss on
foreign currency
transactions.......... -- -- -- -- -- (834)
Net unrealized
appreciation of
investments........... 1,031,480 458,202 489,848 843,034 152,272 220,997
Net unrealized
appreciation
(depreciation) on
translation of other
assets and liabilities
in foreign
currencies............ -- -- -- 184 -- (64)
Net unrealized
appreciation of
futures contracts..... -- -- -- -- -- 6,073
Unrealized appreciation
of forward foreign
currency contracts.... -- -- -- -- -- 538
------------- ------------ ------------ --------------- ------------ --------
Net realized and
unrealized gain on
investments........... 1,066,170 492,899 498,144 1,577,887 475,313 277,778
------------- ------------ ------------ --------------- ------------ --------
Net increase in net
assets resulting from
operations............ $1,175,732 $ 528,236 $ 510,742 $1,559,474 $ 464,750 $ 285,325
------------- ------------ ------------ --------------- ------------ --------
------------- ------------ ------------ --------------- ------------ --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
19
<PAGE>
- --------------------------------------------------------------------------------
ITT Hartford Mutual Funds, Inc.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM JULY 1, 1996 (INCEPTION) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
ITT HARTFORD
ITT HARTFORD BOND INCOME
MONEY STRATEGY
MARKET FUND FUND
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 206,204 $ 265,341
Net realized gain...... -- 159,623
Net unrealized
appreciation of
investments........... -- 159,276
------------- ------------
Net increase in net
assets resulting from
operations............ 206,204 584,240
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income
Class A.............. (206,198) (255,221)
Class B.............. -- (1,518)
Class Y.............. (6) (129)
From net realized gain
on investments
Class A.............. -- (59,781)
Class B.............. -- (686)
Class Y.............. -- (29)
CAPITAL SHARE
TRANSACTIONS:
Class A.............. 10,753,621 10,658,828
Class B.............. -- 123,373
Class Y.............. 280 5,057
------------- ------------
Net increase in net
assets................ 10,753,901 11,054,134
NET ASSETS:
Beginning of period.... -- --
End of period.......... $ 10,753,901 $11,054,134
------------- ------------
------------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
20
<PAGE>
<TABLE>
<CAPTION>
ITT HARTFORD
ITT HARTFORD CAPITAL ITT HARTFORD ITT HARTFORD
ITT HARTFORD DIVIDEND AND ITT HARTFORD APPRECIATION SMALL INTERNATIONAL
ADVISERS FUND GROWTH FUND STOCK FUND FUND COMPANY FUND OPPORTUNITIES FUND
------------- ------------ ------------ --------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 109,562 $ 35,337 $ 12,598 $ (18,413) $ (10,563) $ 7,547
Net realized gain...... 34,690 34,697 8,296 734,669 323,041 50,234
Net unrealized
appreciation of
investments........... 1,031,480 458,202 489,848 843,218 152,272 227,544
------------- ------------ ------------ --------------- ------------ ------------------
Net increase in net
assets resulting from
operations............ 1,175,732 528,236 510,742 1,559,474 464,750 285,325
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income
Class A.............. (98,048) (32,275) (10,931) -- -- (25,685)
Class B.............. (9,994) (3,872) (2,242) -- -- (963)
Class Y.............. (270) (226) (117) -- -- (446)
From net realized gain
on investments
Class A.............. -- (9,096) -- (261,732) (292,131) (11,118)
Class B.............. -- (1,043) -- (25,075) (14,827) (408)
Class Y.............. -- (55) -- (3,191) (4,569) (165)
CAPITAL SHARE
TRANSACTIONS:
Class A.............. 13,268,744 5,603,131 5,779,861 7,789,947 4,503,579 4,049,578
Class B.............. 1,509,188 727,849 1,249,897 858,773 255,112 160,933
Class Y.............. 33,877 35,634 44,134 106,388 75,111 63,113
------------- ------------ ------------ --------------- ------------ ------------------
Net increase in net
assets................ 15,879,229 6,848,283 7,571,344 10,024,584 4,987,025 4,520,164
NET ASSETS:
Beginning of period.... -- -- -- -- -- --
End of period.......... $15,879,229 $6,848,283 $ 7,571,344 $10,024,584 $ 4,987,025 $4,520,164
------------- ------------ ------------ --------------- ------------ ------------------
------------- ------------ ------------ --------------- ------------ ------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
21
<PAGE>
- --------------------------------------------------------------------------------
ITT Hartford Mutual Funds, Inc.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION:
ITT Hartford Mutual Funds, Inc. (the Company) is an open-end management
investment company comprised of eight diversified portfolios (each a "Fund"
or together the "Funds"). The Company was organized under the laws of the
State of Maryland and was registered with the Securities and Exchange
Commission (SEC) under the Investment Company Act of 1940, as amended, as a
diversified open-end management investment company.
The Funds and their investment objectives are listed below:
<TABLE>
<S> <C>
ITT Hartford Money Market Fund Seeks maximum current income consistent with liquidity and
(Money Market Fund) preservation of capital.
ITT Hartford Bond Income Strategy Fund Seeks a high level of current income consistent with a
(Bond Income Strategy Fund) competitive total return, as compared to bond funds with
similar investment objectives and policies, by investing
primarily in debt securities.
ITT Hartford Advisers Fund (Advisers Seeks maximum long-term total rate of return by investing in
Fund) common stocks and other equity securities, bonds and other
debt securities and money market instruments.
ITT Hartford Dividend and Growth Fund Seeks a high level of current income consistent with growth
(Dividend and Growth Fund) of capital by investing primarily in equity securities.
ITT Hartford Stock Fund (Stock Fund) Seeks long-term growth of capital with income a secondary
consideration by investing primarily in equity securities.
ITT Hartford Capital Appreciation Fund Seeks growth of capital by investing primarily in equity
(Capital Appreciation Fund) securities selected on the basis of potential for capital
appreciation.
ITT Hartford Small Company Fund Seeks growth of capital by investing primarily in equity
(Small Company Fund) securities selected on the basis of potential for capital
appreciation.
ITT Hartford International Seeks growth of capital by investing primarily in equity
Opportunities Fund (International securities issued by non-U.S. companies.
Opportunities Fund)
</TABLE>
The Company consists of eight series of portfolios, each of which is divided
into Class A, Class B and Class Y shares except for the Money Market Fund,
which is divided into Class A and Class Y shares. Class A shares are sold
with a front-end load sales charge of up to 5.50%. Class B shares are sold
with a contingent deferred sales charge which declines from 5.00% of net
asset value to zero depending on the period of time the shares are held.
Class Y shares are sold to certain institutional investors without a sales
charge. All classes of shares have identical voting, dividend, liquidation
and other rights and the same terms and conditions, except that each class
may have different expenses which may affect performance.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the Funds,
which are in accordance with generally accepted accounting principles in the
investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Security gains and
losses are determined on the basis of identified cost.
b) SECURITY VALUATION--Debt securities (other than short-term obligations)
are valued on the basis of valuations furnished by an unaffiliated
pricing service which determines valuations for normal institutional size
trading units of debt securities. Mortgage securities are valued at the
bid price. Short-term securities held in the Money Market Fund are valued
at amortized cost or original cost plus accrued interest receivable, both
of which approximate market value. In the Bond Income Strategy, Advisers,
Dividend and Growth, Stock, Capital Appreciation, Small Company and
International Opportunities Funds, short-term investments purchased with
a maturity of 60 days or less are valued at amortized cost, which
approximates market value. Short-term investments purchased with a
maturity of greater than 60 days are valued based on market quotations
until the remaining days to maturity become less than 61 days. From that
time until maturity, the investments are valued at amortized cost.
22
<PAGE>
Equity securities are valued at the last sales price reported on the
principal securities markets on which such securities are traded
(domestic or foreign). If no sale occurred on such day and in the case of
certain equity securities traded over-the-counter, then such securities
are valued at the mean between the bid and asked prices. Securities
quoted in foreign currencies are translated into U.S. dollars at the
prevailing exchange rate at the end of each business day. Options are
valued at the last sales price; if no sale occurred on such day, then
options are valued at the mean between the bid and asked prices.
Securities for which market quotations are not readily available and all
other assets are valued in good faith at fair value by a person
designated by the Funds' Board of Directors.
c) FOREIGN CURRENCY TRANSACTIONS--The accounting records of the Funds are
maintained in U.S. dollars. All assets and liabilities initially
expressed in foreign currencies are converted into U.S. dollars at the
prevailing exchange rates. Purchases and sales of investment securities,
dividends and interest income and certain expenses are translated at the
rates of exchange prevailing on the respective dates of such
transactions.
The Funds do not isolate that portion of the results of operations
resulting from changes in the foreign exchange rates on investments from
the fluctuations arising from changes in the market prices of securities
held. Such fluctuations are included with the net realized and unrealized
gain (loss) on investments in the accompanying financial statements.
Net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales of foreign currencies, and the difference
between asset and liability amounts initially stated in foreign
currencies and the U.S. dollar value of the amounts actually received or
paid. Net unrealized foreign exchange gains or losses arise from changes
in the value of portfolio securities and other assets and liabilities at
the end of the reporting period, resulting from changes in the exchange
rates.
d) 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. At the time the Funds enter into a
repurchase agreement, the value of the underlying collateral
security(ies), including accrued interest receivable, will be equal to or
exceed the value of the repurchase agreement and, in the case of
repurchase agreements exceeding one day, the value of the underlying
security(ies), including accrued interest receivable, is required during
the term of the agreement to be equal to or exceed the value of the
repurchase agreement. Securities which serve to collateralize the
repurchase agreement are held by each Fund's custodian in book entry or
physical form in the custodial account of the Fund. Repurchase agreements
are valued at cost plus accrued interest receivable.
In June 1996, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 125, ACCOUNTING
FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF
LIABILITIES. This Statement provides consistent standards for
distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. Under the provisions of SFAS No.
125, transfers of certain financial assets, such as repurchase
agreements, are required to be accounted for as sales if control, as
defined, over those assets has been surrendered by the transferor. The
Statement also requires collateral under repurchase agreements and
securities lending transactions to be separately classified by the debtor
and recognized as an asset by the creditor in the respective financial
statements if certain conditions are met. SFAS No. 125 is effective for
transfers of financial assets occurring after December 31, 1996, except
for certain transfers for which the effective date has been delayed to
January 1, 1998 by SFAS No. 127, DEFERRAL OF THE EFFECTIVE DATE OF
CERTAIN PROVISIONS OF FASB STATEMENT NO. 125, issued by the FASB in
December 1996. Management does not believe the adoption of this new
accounting standard will have a material impact on the financial position
or future results of operations of the Funds.
e) JOINT TRADING ACCOUNT--Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Funds may transfer uninvested
cash balances into a joint trading account managed by Hartford Investment
Management Company (HIMCO) or Wellington Management Company (Wellington).
These balances may be invested in one or more repurchase agreements
and/or short-term money market instruments.
f) FUTURES, OPTIONS ON FUTURES AND OPTIONS TRANSACTIONS--The Funds enter
into futures contracts to retain their cash balances and yet be exposed
to the market, thereby providing the liquidity necessary to accommodate
redemptions while at the same time providing shareholders the investment
return of a fully invested portfolio. A futures contract is an agreement
between two parties to buy and sell a security at a predetermined price
on a future date. When the Funds enter into such contracts, they are
required to deposit with their broker an amount of "initial margin" of
cash or U.S.
23
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD MUTUAL FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
Treasury Bills. Subsequent payments, called maintenance margin, to and
from the broker, are made on a daily basis as the price of the underlying
debt security fluctuates, making the long and short positions in the
futures contract more or less valuable (i.e., mark-to-market) and
resulting in an unrealized gain or loss to the Funds. The market value of
a traded futures contract is the last sale price. In the absence of a
last sale price, the last offering price. In the absence of either of
these prices, fair value is determined according to procedures
established by the Funds' Board of Directors. The variation margin on
futures contracts is included in the excess of cash, receivables and
other assets over liabilities or the excess of liabilities over cash,
receivables and other assets, as applicable, in each Fund's Statement of
Net Assets.
At any time prior to expiration of the futures contract, the Funds may
close the position by taking an opposite position which would operate to
terminate the position in the futures contract. A final determination of
maintenance margin is then made, additional cash is required to be paid
by or released to the Funds and the Funds realize a gain or loss.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's Statement of Net Assets as an investment and
subsequently "marked-to-market" to reflect the current market value of
the option purchased as of the end of the reporting period. If an option
which the Fund has purchased expires on its stipulated expiration date,
the Fund realizes a loss in the amount of the cost of the option. If the
Fund enters into a closing transaction, it realizes a gain or loss,
depending upon whether the proceeds from the sale are greater or less
than the cost of the option. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security and the
proceeds from such sale will be decreased by the premium originally paid.
If the Fund exercises a call option, the cost of the security which the
Fund purchases upon exercise of the option will be increased by the
premium originally paid.
g) FEDERAL INCOME TAXES--For Federal income tax purposes, the Funds intend
to continue to qualify as regulated investment companies under Subchapter
M of the Internal Revenue Code by distributing substantially all of their
taxable income and net realized capital gains to their shareholders or
otherwise complying with the requirements for regulated investment
companies. Accordingly, no provision for Federal income taxes has been
made in the accompanying financial statements.
h) FUND SHARE VALUATION AND DIVIDEND DISTRIBUTIONS TO SHAREHOLDERS--Orders
for the Funds' shares are executed in accordance with the investment
instructions of the shareholders. Dividend income is accrued as of the
ex-dividend date. Interest income and expenses are accrued on a daily
basis. The net asset value of each Fund's shares is determined as of the
close of each business day of the New York Stock Exchange (the Exchange).
Orders for the purchase of a Fund's shares received prior to the close of
the Exchange on any day on which the Fund is open for business are priced
at the per-share net asset value determined as of the close of the
Exchange. Orders received after the close of the Exchange, or on a day on
which the Exchange and/or the Fund is not open for business, are priced
at the next determined per-share net asset value.
Each Fund intends to distribute substantially all of its net investment
income and realized capital gains to shareholders no less frequently than
once a year. Normally, dividends from net investment income of the Stock,
Capital Appreciation, Small Company and International Opportunities Funds
will be declared and paid annually; dividends from net investment income
of the Advisers and Dividend and Growth Funds 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.
i) FORWARD FOREIGN CURRENCY CONTRACTS--As of December 31, 1996, the
International Opportunities Fund had entered into forward foreign
currency exchange contracts that obligate the Fund to repurchase
currencies at specified future dates. The Fund enters into forward
foreign currency contracts to manage currency exchange rate risk.
Forward contracts involve elements of market risk in excess of the amount
reflected in the Statement of Net Assets. The Fund bears the risk of an
unfavorable change in the foreign exchange rate underlying the forward
contract.
j) ORGANIZATIONAL COSTS--Costs incurred by the Funds in connection with
their organization and public offering of shares have been deferred and
are being amortized on a straight-line basis over five years. The
unamortized deferred
24
<PAGE>
organizational costs of each Fund as of December 31, 1996 are included in
the excess of cash, receivables and other assets over liabilities or the
excess of liabilities over cash, receivables and other assets, as
applicable, in each Fund's Statement of Net Assets.
k) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported
amounts of income and expenses during the period. Operating results in
the future could vary from the amounts derived from management's
estimates.
3. EXPENSES:
a) INVESTMENT MANAGEMENT AND ADVISORY AGREEMENTS--HIMCO, a wholly-owned
subsidiary of Hartford Life Insurance Company (HL), serves as investment
adviser to each Fund pursuant to an Investment Advisory Agreement dated
July 22, 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 Income Strategy and the Money
Market Funds. In addition, HIMCO provides administrative personnel,
services, equipment and facilities and office space for the operation of
the Company. HIMCO has contracted with Wellington for the provision of
day-to-day management services to the Advisers, Dividend and Growth,
Stock, Capital Appreciation, Small Company and International
Opportunities Funds in accordance with each Fund's investment objectives
and policies. Each Fund pays a fee to HIMCO, a portion of which may be
used to compensate Wellington.
The schedule below reflects the rates of compensation paid to HIMCO for
services rendered:
<TABLE>
<CAPTION>
MONEY MARKET FUND
AVERAGE DAILY NET ASSETS ANNUAL FEE
- ------------------------------------ ------------
<S> <C>
On first $500 million .50%
On next $500 million .45%
Over $1 billion .40%
<CAPTION>
BOND INCOME STRATEGY FUND
AVERAGE DAILY NET ASSETS ANNUAL FEE
- ------------------------------------ ------------
<S> <C>
On first $500 million .65%
On next $500 million .55%
Over $1 billion .50%
<CAPTION>
ADVISERS AND
DIVIDEND AND GROWTH FUNDS
AVERAGE DAILY NET ASSETS ANNUAL FEE
- ------------------------------------ ------------
<S> <C>
On first $500 million .75%
On next $500 million .65%
Over $1 billion .60%
<CAPTION>
STOCK AND
CAPITAL APPRECIATION FUNDS
AVERAGE DAILY NET ASSETS ANNUAL FEE
- ------------------------------------ ------------
<S> <C>
On first $500 million .80%
On next $500 million .70%
Over $1 billion .65%
</TABLE>
25
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD MUTUAL FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
SMALL COMPANY AND
INTERNATIONAL OPPORTUNITIES FUNDS
AVERAGE DAILY NET ASSETS ANNUAL FEE
- ------------------------------------ ------------
<S> <C>
On first $500 million .85%
On next $500 million .75%
Over $1 billion .70%
</TABLE>
b) DISTRIBUTION AND SERVICE PLANS FOR CLASS A AND B SHARES--Hartford
Securities Distribution Company, Inc. (HSD, or the Distributor), a
wholly-owned subsidiary of HL, is the principal underwriter and
distributor of the Funds. HSD is solely engaged in distribution
activities which include marketing, distribution and clearing of shares
through broker/dealers, financing distribution costs, supervising the
activities of the transfer agent and maintaining financial books and
records.
The Funds have adopted Distribution and Service Plans to compensate the
Distributor for the distribution of Class A and Class B shares and
servicing the accounts of Class A and Class B shareholders. The Class A
plan provides for periodic payments to broker-dealers 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 each Fund, some or all of which may be remitted to
broker-dealers. Up to 0.25% of the fee may be used for shareholder
servicing expenses with the remainder used for distribution expenses. The
Class A Rule 12b-1 fee for each Fund has been voluntarily capped at 0.30%
through July 1, 1997. The cap may be removed at any time after this date.
Some or all of the 12b-1 fee for Class B shares may be paid 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.
c) OPERATING EXPENSES--Allocable expenses incurred by the Funds are
allocated to each Fund in proportion to the average daily net assets of
each Fund, except where the allocation of certain expenses is more fairly
made directly to the Fund. ITT Hartford Group, Inc. (ITT Hartford), the
ultimate parent of HIMCO, has voluntarily agreed to limit the total
operating expenses of the Class A and Class Y shares of the Money Market
Fund and Class A, B and Y shares of all other Funds, exclusive of taxes,
interest, brokerage commissions, certain distribution expenses and
extraordinary expenses, until at least July 1, 1997 as follows:
<TABLE>
<CAPTION>
FUND CLASS A CLASS B CLASS Y
----------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Money Market Fund........................ 1.00% N/A 0.55%
Bond Income Strategy Fund................ 1.25% 1.95% 0.80%
Advisers Fund............................ 1.40% 2.10% 0.95%
Dividend and Growth Fund................. 1.40% 2.10% 0.95%
Stock Fund............................... 1.45% 2.15% 1.00%
Capital Appreciation Fund................ 1.45% 2.15% 1.00%
Small Company Fund....................... 1.45% 2.15% 1.00%
International Opportunities Fund......... 1.65% 2.35% 1.20%
</TABLE>
Such voluntary and temporary fee waivers and expense limitation
arrangements may be terminated by ITT Hartford at any time without
notice.
d) OTHER RELATED PARTY TRANSACTIONS--ITT Hartford and its subsidiaries
provide facilities and office equipment, as well as perform certain other
services, including fund accounting and financial reporting, to the
Funds. Certain officers of the Funds are directors and/or officers of
HIMCO, HSD and/or ITT Hartford or its subsidiaries. No officer of the
Funds receives any compensation directly from the Funds.
26
<PAGE>
4. AFFILIATE HOLDINGS:
a) As of December 31, 1996, HIMCO had ownership of shares in the Funds as
follows:
<TABLE>
<CAPTION>
FUND CLASS A CLASS B CLASS Y
- ------------------------------------------------------------------------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Money Market Fund.......................................................................... 10,210,019 N/A 128
Bond Income Strategy Fund.................................................................. 1,031,000 488 490
Advisers Fund.............................................................................. 1,007,370 479 479
Dividend and Growth Fund................................................................... 302,557 478 479
Stock Fund................................................................................. 301,006 476 476
Capital Appreciation Fund.................................................................. 309,810 490 490
Small Company Fund......................................................................... 321,031 508 507
International Opportunities Fund........................................................... 303,122 479 480
</TABLE>
5. INVESTMENT TRANSACTIONS:
For the period from July 1, 1996 (inception) to December 31, 1996,
investment transactions (excluding short-term investments) were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS FROM
FUND PURCHASES SALES
- -------------------------------------------------------------------------------------- ---------------- ------------------
<S> <C> <C>
Bond Income Strategy Fund............................................................. $ 16,658,804 $ 6,387,439
Advisers Fund......................................................................... 15,498,768 1,893,363
Dividend and Growth Fund.............................................................. 7,171,445 1,051,071
Stock Fund............................................................................ 6,684,137 431,866
Capital Appreciation Fund............................................................. 14,701,916 6,730,604
Small Company Fund.................................................................... 6,423,566 2,203,829
International Opportunities Fund...................................................... 4,161,383 577,089
</TABLE>
6. TAX COST AND UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS:
As of December 31, 1996, the aggregate gross unrealized appreciation and
depreciation on all investments, based on cost for federal income tax
purposes, was as follows:
<TABLE>
<CAPTION>
TAX UNREALIZED UNREALIZED NET UNREALIZED
FUND COST APPRECIATION DEPRECIATION APPRECIATION
- ------------------------------------------------------------------ ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Bond Income Strategy Fund......................................... $ 10,601,500 $ 190,409 $ (31,133) $ 159,276
Advisers Fund..................................................... 14,456,044 1,180,775 (149,436) 1,031,339
Dividend and Growth Fund.......................................... 6,418,218 530,811 (78,755) 452,056
Stock Fund........................................................ 6,861,567 596,342 (106,495) 489,847
Capital Appreciation Fund......................................... 8,821,982 1,186,092 (343,058) 843,034
Small Company Fund................................................ 4,786,372 454,968 (303,291) 151,677
International Opportunities Fund.................................. 4,342,817 362,745 (141,748) 220,997
</TABLE>
7. CAPITAL SHARE TRANSACTIONS:
The following information is for the period from July 1, 1996 (inception) to
December 31, 1996:
<TABLE>
<CAPTION>
MONEY BOND INCOME DIVIDEND AND
MARKET FUND STRATEGY FUND ADVISERS FUND GROWTH FUND
----------------------- ---------------------- ---------------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- ----------- --------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold.................... 10,742,496 $10,742,496 1,033,915 $10,347,528 1,286,188 $13,174,231 528,490 $5,568,935
Shares issued on reinvestment
of distributions.............. 206,091 206,091 30,839 314,647 8,674 97,406 3,550 41,188
Shares redeemed................ (194,966) (194,966) (324) (3,347) (261) (2,893) (612) (6,992)
---------- ----------- --------- ----------- --------- ----------- ------- ----------
Net increase................... 10,753,621 $10,753,621 1,064,430 $10,658,828 1,294,601 $13,268,744 531,428 $5,603,131
---------- ----------- --------- ----------- --------- ----------- ------- ----------
---------- ----------- --------- ----------- --------- ----------- ------- ----------
</TABLE>
27
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD MUTUAL FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
CAPITAL SMALL COMPANY INTERNATIONAL
STOCK FUND APPRECIATION FUND FUND OPPORTUNITIES FUND
----------------------- ---------------------- ---------------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- ----------- --------- ----------- ------- ----------
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold.................... 544,300 $ 5,784,608 658,540 $ 7,560,478 410,929 $ 4,223,877 397,759 $4,020,902
Shares issued on reinvestment
of distributions.............. 927 10,897 19,716 260,446 27,530 290,714 3,456 36,538
Shares redeemed................ (1,348) (15,644) (2,381) (30,977) (972) (11,012) (741) (7,862)
---------- ----------- --------- ----------- --------- ----------- ------- ----------
Net increase................... 543,879 $ 5,779,861 675,875 $ 7,789,947 437,487 $ 4,503,579 400,474 $4,049,578
---------- ----------- --------- ----------- --------- ----------- ------- ----------
---------- ----------- --------- ----------- --------- ----------- ------- ----------
<CAPTION>
MONEY BOND INCOME DIVIDEND AND
MARKET FUND STRATEGY FUND ADVISERS FUND GROWTH FUND
----------------------- ---------------------- ---------------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- ----------- --------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B
Shares sold.................... -- $ -- 12,400 $ 126,990 135,067 $ 1,502,853 63,586 $ 723,176
Shares issued on reinvestment
of distributions.............. -- -- 215 2,203 890 9,972 405 4,673
Shares redeemed................ -- -- (561) (5,820) (324) (3,637) -- --
---------- ----------- --------- ----------- --------- ----------- ------- ----------
Net increase................... -- $ -- 12,054 $ 123,373 135,633 $ 1,509,188 63,991 $ 727,849
---------- ----------- --------- ----------- --------- ----------- ------- ----------
---------- ----------- --------- ----------- --------- ----------- ------- ----------
<CAPTION>
CAPITAL INTERNATIONAL
STOCK FUND APPRECIATION FUND SMALL COMPANY FUND OPPORTUNITIES FUND
----------------------- ---------------------- ---------------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- ----------- --------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B
Shares sold.................... 109,160 $ 1,251,332 64,875 $ 834,147 22,152 $ 250,555 15,077 $ 159,562
Shares issued on reinvestment
of distributions.............. 189 2,215 1,881 24,777 1,387 14,601 130 1,371
Shares redeemed................ (315) (3,650) (11) (151) (880) (10,044) -- --
---------- ----------- --------- ----------- --------- ----------- ------- ----------
Net increase................... 109,034 $ 1,249,897 66,745 $ 858,773 22,659 $ 255,112 15,207 $ 160,933
---------- ----------- --------- ----------- --------- ----------- ------- ----------
---------- ----------- --------- ----------- --------- ----------- ------- ----------
<CAPTION>
MONEY BOND INCOME DIVIDEND AND
MARKET FUND STRATEGY FUND ADVISERS FUND GROWTH FUND
----------------------- ---------------------- ---------------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- ----------- --------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS Y
Shares sold.................... 276 $ 276 490 $ 4,900 3,039 $ 33,608 3,119 $ 35,353
Shares issued on reinvestment
of distributions.............. 4 4 15 157 24 269 24 281
Shares redeemed................ -- -- -- -- -- -- -- --
---------- ----------- --------- ----------- --------- ----------- ------- ----------
Net increase................... 280 $ 280 505 $ 5,057 3,063 $ 33,877 3,143 $ 35,634
---------- ----------- --------- ----------- --------- ----------- ------- ----------
---------- ----------- --------- ----------- --------- ----------- ------- ----------
<CAPTION>
CAPITAL INTERNATIONAL
STOCK FUND APPRECIATION FUND SMALL COMPANY FUND OPPORTUNITIES FUND
----------------------- ---------------------- ---------------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- ----------- --------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS Y
Shares sold.................... 3,838 $ 44,018 7,775 $ 103,199 6,324 $ 70,546 5,873 $ 62,502
Shares issued on reinvestment
of distributions.............. 10 116 241 3,189 432 4,565 58 611
Shares redeemed................ -- -- -- -- -- -- -- --
---------- ----------- --------- ----------- --------- ----------- ------- ----------
Net increase................... 3,848 $ 44,134 8,016 $ 106,388 6,756 $ 75,111 5,931 $ 63,113
---------- ----------- --------- ----------- --------- ----------- ------- ----------
---------- ----------- --------- ----------- --------- ----------- ------- ----------
</TABLE>
28
<PAGE>
8. RECLASSIFICATION OF CAPITAL ACCOUNTS:
In accordance with AICPA Statement of Position 93-2, DETERMINATION,
DISCLOSURE AND FINANCIAL STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN AND
RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES, several
reclassifications have been recorded in the Funds' capital accounts. These
reclassifications had no impact on the net asset value of the Funds and are
designed generally to present accumulated undistributed (distribution in
excess of) net investment income and net realized gain on investments on a
tax basis which is considered to be more informative to the shareholder. As
of December 31, 1996, the Funds recorded the following reclassifications to
increase (decrease) the accounts listed below:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED ACCUMULATED
(DISTRIBUTION UNDISTRIBUTED
IN EXCESS OF) NET REALIZED
NET INVESTMENT GAIN ON PAID IN
INCOME INVESTMENTS SURPLUS
-------------- ------------- -------
<S> <C> <C> <C>
Bond Income Strategy Fund..................................................... $ 1,817 $ (1,817) $--
Advisers Fund................................................................. 526 (526) --
Dividend and Growth Fund...................................................... (24) -- 24
Stock Fund.................................................................... 692 (692) --
Capital Appreciation Fund..................................................... 18,413 (18,413) --
Small Company Fund............................................................ 10,563 (10,563) --
International Opportunities Fund.............................................. 17,810 (17,810) --
</TABLE>
29
<PAGE>
- --------------------------------------------------------------------------------
ITT Hartford Mututal Funds, Inc.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
NET REALIZED
AND DISTRIBUTIONS
NET ASSET UNREALIZED DIVIDENDS FROM NET
VALUE AT NET GAIN (LOSS) TOTAL FROM FROM NET REALIZED
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT GAIN ON
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME INVESTMENTS
--------- ---------- ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
ITT HARTFORD MONEY MARKET
FUND
July 1, 1996 to
December 31, 1996
Class A................ $1.00 $ 0.02 $ 0.00 $ 0.02 $(0.02) $ 0.00
Class Y................ 1.00 0.02 0.00 0.02 (0.02) 0.00
ITT HARTFORD BOND INCOME
STRATEGY FUND
July 1, 1996 to
December 31, 1996
Class A................ 10.00 0.26 0.31 0.57 (0.25) (0.06)
Class B................ 10.00 0.20 0.34 0.54 (0.23) (0.06)
Class Y................ 10.00 0.28 0.31 0.59 (0.26) (0.06)
ITT HARTFORD ADVISERS
FUND
July 1, 1996 to
December 31, 1996
Class A................ 10.00 0.09 1.07 1.16 (0.08) 0.00
Class B................ 10.00 0.02 1.11 1.13 (0.08) 0.00
Class Y................ 10.00 0.03 1.16 1.19 (0.09) 0.00
ITT HARTFORD DIVIDEND AND
GROWTH FUND
July 1, 1996 to
December 31, 1996
Class A................ 10.00 0.07 1.46 1.53 (0.06) (0.02)
Class B................ 10.00 0.01 1.48 1.49 (0.07) (0.02)
Class Y................ 10.00 0.02 1.53 1.55 (0.07) (0.02)
ITT HARTFORD STOCK FUND
July 1, 1996 to
December 31, 1996
Class A................ 10.00 0.02 1.53 1.55 (0.02) 0.00
Class B................ 10.00 0.00 1.52 1.52 (0.02) 0.00
Class Y................ 10.00 0.01 1.57 1.58 (0.03) 0.00
ITT HARTFORD CAPITAL
APPRECIATION FUND
July 1, 1996 to
December 31, 1996
Class A................ 10.00 (0.03) 3.80 3.77 0.00 (0.41)
Class B................ 10.00 (0.02) 3.75 3.73 0.00 (0.41)
Class Y................ 10.00 0.00 3.79 3.79 0.00 (0.41)
ITT HARTFORD SMALL
COMPANY FUND
July 1, 1996 to
December 31, 1996
Class A................ 10.00 (0.02) 1.42 1.40 0.00 (0.72)
Class B................ 10.00 (0.02) 1.39 1.37 0.00 (0.72)
Class Y................ 10.00 0.00 1.43 1.43 0.00 (0.72)
ITT HARTFORD
INTERNATIONAL
OPPPORTUNITIES FUND
July 1, 1996 to
December 31, 1996
Class A................ 10.00 0.02 0.79 0.81 (0.06) (0.03)
Class B................ 10.00 (0.01) 0.80 0.79 (0.07) (0.03)
Class Y................ 10.00 0.00 0.84 0.84 (0.08) (0.03)
</TABLE>
(a) Annualized.
(b) Does not include sales charges.
(c) The portfolio turnover rate and the average commission rate paid are
calculated at the Fund level and are non-class specific.
(d) Not annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
30
<PAGE>
<TABLE>
<CAPTION>
AVERAGE NET
NET ASSETS ASSETS
NET ASSET AT END OF DURING THE RATIO OF
CHANGE IN VALUE AT PERIOD PERIOD EXPENSES TO
TOTAL NET ASSET END TOTAL (IN (IN AVERAGE
DISTRIBUTIONS VALUE OF PERIOD RETURN(B)(D) THOUSANDS) THOUSANDS) NET ASSETS(A)
---------- ------------ --------- ------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
ITT HARTFORD MONEY MARKET
FUND
July 1, 1996 to
December 31, 1996
Class A................ $(0.02) $ 0.00 $1.00 2.01% $10,754 $10,339 2.70%
Class Y................ (0.02) 0.00 1.00 2.34 0.3 0.3 3496.38
ITT HARTFORD BOND INCOME
STRATEGY FUND
July 1, 1996 to
December 31, 1996
Class A................ (0.31) 0.26 10.26 5.73 10,925 10,402 2.72
Class B................ (0.29) 0.25 10.25 5.38 124 49 22.36
Class Y................ (0.32) 0.27 10.27 5.95 5 5 185.34
ITT HARTFORD ADVISERS
FUND
July 1, 1996 to
December 31, 1996
Class A................ (0.08) 1.08 11.08 11.56 14,347 11,384 2.94
Class B................ (0.08) 1.05 11.05 11.28 1,499 325 6.71
Class Y................ (0.09) 1.10 11.10 11.88 34 6 144.82
ITT HARTFORD DIVIDEND AND
GROWTH FUND
July 1, 1996 to
December 31, 1996
Class A................ (0.08) 1.45 11.45 15.29 6,083 4,032 4.12
Class B................ (0.09) 1.40 11.40 14.82 730 119 12.97
Class Y................ (0.09) 1.46 11.46 15.49 36 7 141.53
ITT HARTFORD STOCK FUND
July 1, 1996 to
December 31, 1996
Class A................ (0.02) 1.53 11.53 15.50 6,273 4,047 3.96
Class B................ (0.02) 1.50 11.50 15.20 1,254 277 7.76
Class Y................ (0.03) 1.55 11.55 15.80 44 7 133.50
ITT HARTFORD CAPITAL
APPRECIATION FUND
July 1, 1996 to
December 31, 1996
Class A................ (0.41) 3.36 13.36 37.75 9,028 4,978 4.10
Class B................ (0.41) 3.32 13.32 37.35 889 215 9.05
Class Y................ (0.41) 3.38 13.38 37.95 107 10 93.64
ITT HARTFORD SMALL
COMPANY FUND
July 1, 1996 to
December 31, 1996
Class A................ (0.72) 0.68 10.68 14.11 4,673 3,845 4.24
Class B................ (0.72) 0.65 10.65 13.81 241 66 20.03
Class Y................ (0.72) 0.71 10.71 14.41 72 8 115.33
ITT HARTFORD
INTERNATIONAL
OPPPORTUNITIES FUND
July 1, 1996 to
December 31, 1996
Class A................ (0.09) 0.72 10.72 8.14 4,294 3,407 5.35
Class B................ (0.10) 0.69 10.69 7.86 163 36 32.61
Class Y................ (0.11) 0.73 10.73 8.36 64 8 126.52
<CAPTION>
RATIO OF RATIO OF
EXPENSES TO NET
AVERAGE INVESTMENT AVERAGE
NET ASSETS INCOME (LOSS) PORTFOLIO COMMISSION
AFTER WAIVERS AND TO AVERAGE TURNOVER RATE
REIMBURSEMENTS(A) NET ASSETS(A) RATE(C) PAID(C)
----------------- ------------- --------- ----------
<S> <C> <C> <C> <C>
ITT HARTFORD MONEY MARKET
FUND
July 1, 1996 to
December 31, 1996
Class A................ 1.00% 4.49% N/A N/A
Class Y................ 0.55 4.56
ITT HARTFORD BOND INCOME
STRATEGY FUND
July 1, 1996 to
December 31, 1996
Class A................ 1.25 5.72 75.52% N/A
Class B................ 1.95 5.22
Class Y................ 0.80 6.17
ITT HARTFORD ADVISERS
FUND
July 1, 1996 to
December 31, 1996
Class A................ 1.40 2.13 19.75 $0.0297
Class B................ 2.10 1.24
Class Y................ 0.95 2.75
ITT HARTFORD DIVIDEND AND
GROWTH FUND
July 1, 1996 to
December 31, 1996
Class A................ 1.40 1.95 29.80 0.0306
Class B................ 2.10 0.82
Class Y................ 0.95 2.41
ITT HARTFORD STOCK FUND
July 1, 1996 to
December 31, 1996
Class A................ 1.45 0.71 11.87 0.0281
Class B................ 2.15 (0.12)
Class Y................ 1.00 1.37
ITT HARTFORD CAPITAL
APPRECIATION FUND
July 1, 1996 to
December 31, 1996
Class A................ 1.45 (0.70) 149.99 0.0381
Class B................ 2.15 (1.53)
Class Y................ 1.00 0.04
ITT HARTFORD SMALL
COMPANY FUND
July 1, 1996 to
December 31, 1996
Class A................ 1.45 (0.60) 69.92 0.0313
Class B................ 2.15 (1.30)
Class Y................ 1.00 0.03
ITT HARTFORD
INTERNATIONAL
OPPPORTUNITIES FUND
July 1, 1996 to
December 31, 1996
Class A................ 1.65 0.51 21.51 0.0175
Class B................ 2.35 (0.86)
Class Y................ 1.20 0.57
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
31
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF
ITT HARTFORD MUTUAL FUNDS, INC.:
We have audited the accompanying statements of net assets of ITT Hartford Mutual
Funds, Inc. (a Maryland Corporation) (consisting of ITT Hartford Money Market,
ITT Hartford Bond Income Strategy, ITT Hartford Advisers, ITT Hartford Dividend
and Growth, ITT Hartford Stock, ITT Hartford Capital Appreciation, ITT Hartford
Small Company and ITT Hartford International Opportunities Funds) (the Funds) as
of December 31, 1996, and the related statements of operations and changes in
net assets and the financial highlights for the period from July 1, 1996
(inception) to December 31, 1996. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1996, by
correspondence with the custodian bank. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds comprising ITT Hartford Mutual Funds, Inc. as of
December 31, 1996, and the results of their operations, the changes in their net
assets and the financial highlights for the period from July 1, 1996 (inception)
to December 31, 1996, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 14, 1997
32
<PAGE>
THE HARTFORD MUTUAL FUNDS, INC.
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements.
In Part A: With respect to each Fund, financial highlights for the
period from July 22, 1996 (commencement of operations)
through December 31, 1996.
In Part B: With respect to each Fund: Statement of Net Assets as of
December 31, 1996, Statement of Operations for the period
from July 22, 1996 (commencement of operations) through
December 31, 1996; Statement of Changes in Net Assets for
the period from July 22, 1996 (commencement of operations)
through December 31, 1996.
(b) Exhibits
1. Articles of Incorporation(a)
2. By-Laws(a)
3. Not Applicable
5. Form of Investment Advisory Agreement(a)
5.1 Form of Subadvisory Agreement
5.2 Investment Management Agreement with Hartford Investment
Financial Services Company
5.3 Investment Subadvisory Agreement with Wellington Management LLP
5.4 Investment Services Agreement with Hartford Investment Management
Company
6. Form of Principal Underwriting Agreement(a)
6.1 Form of Dealer Agreement with the Distributor(b)
7. Not Applicable
8. Form of Custodian Agreement(b)
9. Form of Transfer Agency and Service Agreement(b)
10. Opinion and Consent of Counsel(c)
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(a)
15.1 Form of Rule 12b-1 Distribution Plan for Class B Shares(a)
16. Schedule of Computation for Performance Calculations(d)
17. Not Applicable
18. Form of Rule 18f-3 Plan(a)
19. Powers of Attorney(b)
27. Financial Data Schedules
- ------------------------------
(a) Filed with Registrant's Initial Registration Statement on April 9,
1996.
(b) Filed with Registrant's Pre-Effective Amendment Number 1 on June 27,
1996.
(c) To be filed with Registrant's Rule 24f-2 Notice.
(d) Filed with Registrant's Post-Effective Amendment Number 2 on
January 22, 1997.
<PAGE>
Item 25. Persons Controlled by or Under Common Control with Registrant.
Inapplicable
Item 26. Number of Record Holders by Class of Securities as of May 31,
1997.
FUND NAME CLASS A CLASS B CLASS Y
The Hartford Small Company Fund 838 159 45
The Hartford Capital Appreciation Fund 3,454 1,042 87
The Hartford International Opportunities Fund 764 130 46
The Hartford Stock Fund 1,744 613 38
The Hartford Dividend and Growth Fund 1,721 536 37
The Hartford Advisors Fund 1,797 589 25
The Hartford Bond Income Strategy Fund 155 50 8
The Hartford Money Market Fund 860 N/A 7
---- ---- --
Total Number of Record Holders by Class 11,333 3,119 293
--------------------------------------- ----- ----- ---
--------------------------------------- ----- ----- ---
Item 27. Indemnification.
Reference is made to Article V of the Articles of Incorporation filed
with Registrant's Initial Registration Statement on April 9, 1996.
Item 28. Business and Other Connections of Investment Adviser.
All of the information required by this item is set forth in Schedules D
of Forms ADV, as amended, for HIFSCO (File No. 801-53584), Wellington Management
(File No. 801-15908) and HIMCO (File No. 801-53542).
Item 29. Principal Underwriters
Hartford Securities Distribution Company, Inc. ("HSD") is an indirect
wholly owned subsidiary of The Hartford Financial Services 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 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.
<PAGE>
The Directors and principal officers of HSD and their position with the
Registrant are as follows:
Position or Office
Name* HSD with Registrant
----- ------- ------------------
Peter Cummins Vice-President Vice President
Lynda Godkin Secretary None
John P. Ginnetti Executive Vice Vice President
President
George Jay Controller & Controller & Treasurer
Fin. Principal
Stephen T. Joyce Asst. Secretary None
Glen J. Kvadus Asst. Secretary None
Thomas M. Marra Exec. Vice-Pres. Vice President
Paul Eugene Olson Supv. Registered None
Principal
Edward M. Ryan, (Jr.) Asst. Secretary None
Lowndes A. Smith President Chairman
Donald W. Waggaman, Jr. Treasurer None
* 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 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 Companies, 200
Hopmeadow Street, Simsbury, CT 06089.
Item 31. Management Services
Not Applicable
Item 32. Undertakings.
(a) Not applicable
(b) Not applicable
(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.
<PAGE>
(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>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the Registrant
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 19th day of June, 1997.
THE 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.
SIGNATURE TITLE DATE
- --------- ----- ----
* President June 19, 1997
- -------------- --------------
Joseph H. Gareau (Chief Executive Officer
& Director)
* Controller & Treasurer June 19, 1997
- -------------- --------------
George R. Jay (Chief Accounting Officer and
Chief Financial Officer)
* Director June 19, 1997
- -------------- --------------
Joseph A. Biernat
* Director June 19, 1997
- -------------- --------------
Winifred E. Coleman
* Director June 19, 1997
- -------------- --------------
William A. O'Neill
* Director June 19, 1997
- -------------- --------------
Millard H. Pryor, Jr.
<PAGE>
* Director June 19, 1997
- -------------- --------------
Lowndes A. Smith
* Director June 19, 1997
- -------------- --------------
John K. Springer
/s/ Kevin J. Carr June 19, 1997
- -----------------------------
* By Kevin J. Carr
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
Exhibit No. Page No.
- ----------- --------
5.2 Investment Management Agreement with Hartford
Investment Financial Services Company
5.3 Investment Subadvisory Agreement with
Wellington Management Company LLP
5.4 Investment Services Agreement with The
Hartford Investment Management Company
11 Consent of Independent Public Accountants
27 Financial Data Schedules
<PAGE>
EXHIBIT 5.2
INVESTMENT MANAGEMENT AGREEMENT WITH
HARTFORD INVESTMENT FINANCIAL SERVICES COMPANY
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
This Agreement is made by and between Hartford Investment Financial
Services Company, a Delaware corporation ( "HIFSCO") and ITT Hartford Mutual
Funds, Inc., a Maryland corporation (the "Company") whereby HIFSCO will act as
investment manager to each series of the Company as listed on Attachment A (each
a "Portfolio" and together the "Portfolios") and any future series as agreed to
between HIFSCO and the Company.
WHEREAS, the Company and HIFSCO wish to enter into an agreement setting
forth the services to be performed by HIFSCO for each Portfolio of the Company
and the terms and conditions under which such services will be performed.
NOW, THEREFORE, in consideration of the promises and the mutual agreements
herein contained, the parties hereto agree as follows:
1. GENERAL PROVISION.
The Company hereby employs HIFSCO and HIFSCO hereby undertakes to act
as the investment manager of the Company and to each Portfolio and to
perform for the Company such other duties and functions as are
hereinafter set forth and such other duties as may be necessary or
appropriate in connection with its services as investment manager.
HIFSCO shall, in all matters, give to the Company and its Board of
Directors the benefit of its best judgment, effort, advice and
recommendations and shall, at all times conform to, and use its best
efforts to enable the Company to conform to (i) the provisions of the
Investment Company Act of 1940 (the "Investment Company Act") and any
rules or regulations thereunder, (ii) any other applicable provisions
of state or federal law; (iii) the provisions of the Articles of
Incorporation and By-Laws of the Company as amended from time to time;
(iv) policies and determinations of the Board of Directors of the
Company; (v) the fundamental policies and investment restrictions of
the Company and Portfolios as reflected in the Company's registration
statement under the Investment Company Act or as such policies may,
from time to time, be amended by the Company's shareholders, and (vi)
the Prospectus and Statement of Additional Information of the Company
in effect from time to time. The appropriate officers and employees
of HIFSCO shall be available upon reasonable notice for consultation
with any of the Directors and officers of the Company with respect to
any matters dealing with the business and affairs of the Company
including the valuation of any of each Portfolios' securities which
are either not registered for public sale or not being traded on any
securities market.
2. INVESTMENT MANAGEMENT SERVICES
(a) HIFSCO shall, subject to the direction and control by the
Company's Board of Directors, (i) regularly provide investment
advice and recommendations to each
<PAGE>
Portfolio with respect to its
investments, investment policies and the purchase and sale of
securities; (ii) supervise continuously the investment program of
each Portfolio and the composition of its portfolio securities
and determine what securities shall be purchased or sold by each
Portfolio; and (iii) arrange, subject to the provisions of
paragraph 5 hereof, for the purchase of securities and other
investments for each Portfolio and the sale of securities and
other investments held in each Portfolio.
(b) HIFSCO shall provide such economic and statistical data relating
to each Portfolio and such information concerning important
economic, political and other developments as HIFSCO shall deem
appropriate or as shall be requested by the Company's Board of
Directors.
3. ADMINISTRATIVE SERVICES.
In addition to the performance of investment advisory services HIFSCO
shall perform the following services in connection with the
management of the Company:
(a) assist in the supervision of all aspects of the Company's
operation, including the coordination of all matters relating to
the functions of the custodian, transfer agent or other
shareholder servicing agents ( if any), accountants, attorneys
and other parties performing services or operational functions
for the Company;
(b) provide the Company with the services of persons, who may be
HIFSCO's officers or employees, competent to serve as officers of
the Company and to perform such administrative and clerical
functions as are necessary in order to provide effective
administration for the Company, including the preparation and
maintenance of required reports, books and records of the
Company; and
(c) provide the Company with adequate office space and related
services necessary for its operations as contemplated in this
Agreement.
4. SUB-ADVISERS AND SUB-CONTRACTORS.
HIFSCO, upon approval of the Board of Directors and shareholders where
appropriate, may engage one or more investment advisers which are
either registered as such or specifically exempt from registration
under the Investment Advisers Act of 1940, to act as sub-advisers to
provide, with respect to existing and future Portfolios of the
Company, some or all of the services set forth in Sections 2 and 5 of
this Agreement. In addition, HIFSCO may subcontract for any of the
administrative services listed in Section 3.
5. BROKERAGE TRANSACTIONS.
2
<PAGE>
When placing orders for the purchase or sale of a Portfolio's
securities, HIFSCO or any subadviser approved in accordance with
Section 4 of this Agreement, shall use its best efforts to obtain the
best net security price available for a Portfolio. Subject to and in
accordance with any directions which the Board of Directors may issue
from time to time, HIFSCO or the subadviser, if applicable, may also
be authorized to effect individual securities transactions at
commission rates in excess of the minimum commission rates available,
if HIFSCO or the subadviser, if applicable, determines in good faith
that such amount of commission is reasonable in relation to the value
of the brokerage or research services provided by such broker or
dealer, viewed in terms of either that particular transaction or
HIFSCO's or the subadviser's overall responsibilities with respect to
a Portfolio and other advisory clients. The execution of such
transactions shall not be deemed to represent an unlawful act or
breach of any duty created by this Agreement or otherwise. HIFSCO or
the subadviser will promptly communicate to the Board of Directors
such information relating to portfolio transactions as the Board may
reasonably request.
6. EXPENSES.
Expenses to be paid by the Company, include, but are not limited to
(i) interest and taxes; (ii) brokerage commissions; (iii) premium for
fidelity and other insurance coverage requisite to the Company's
operations; (iv) the fees and expenses of its non-interested
directors; (v) legal, audit and fund accounting expenses; (vi)
custodian and transfer agent fees and expenses; (vii) expenses
incident to the redemption of its shares; (viii) fees and expenses
related to the registration under federal and state securities laws of
shares of the Company for public sale; (ix) expenses of printing and
mailing prospectuses, reports, notices and proxy material to
shareholders of the Company; (x) all other expenses incidental to
holding meetings of the Company's shareholders; and (xi) such
extraordinary non-recurring expenses as may arise, including
litigation affecting the Company and any obligation which the Company
may have to indemnify its officers and Directors with respect thereto.
Any officer or employee of HIFSCO or of any entity controlling,
controlled by or under common control with HIFSCO, who may also serve
as officers, directors or employees of the Company shall not receive
any compensation from the Company for their services.
7. COMPENSATION OF HIFSCO.
As compensation for the services rendered by HIFSCO, each Portfolio
shall pay to HIFSCO as promptly as possible after the last day of each
month during the term of this Agreement, a fee accrued daily and paid
monthly, based upon the following annual rates and upon the calculated
daily net asset value of the Portfolio:
MONEY MARKET FUND.
Net Asset Value Annual Rate
--------------- -----------
3
<PAGE>
First $500,000,000 0.50%
Next $500,000,000 0.45%
Amount Over $1 Billion 0.40%
THE BOND INCOME STRATEGY FUND.
Net Asset Value Annual Rate
--------------- -----------
First $500,000,000 0.65%
Next $500,000,000 0.55%
Amount Over $1 Billion 0.50%
SMALL COMPANY FUND AND INTERNATIONAL OPPORTUNITIES FUND.
Net Asset Value Annual Rate
--------------- -----------
First $500,000,000 0.85%
Next $500,000,000 0.75%
Amount Over $1 Billion 0.70%
CAPITAL APPRECIATION FUND AND STOCK FUND.
Net Asset Value Annual Rate
--------------- -----------
First $500,000,000 0.80%
Next $500,000,000 0.70%
Amount Over $1 Billion 0.65%
DIVIDEND AND GROWTH FUND AND ADVISERS FUND.
Net Asset Value Annual Rate
--------------- -----------
First $500,000,000 0.75%
Next $500,000,000 0.65%
Amount Over $1 Billion 0.60%
HIFSCO, or an affiliate of HIFSCO, may agree to subsidize any of the
Portfolios to any level that HIFSCO, or any such affiliate, may specify.
Any such undertaking may be modified or discontinued at any time.
If it is necessary to calculate the fee for a period of time which is less
than a month, then the fee shall be (i) calculated at the annual rates
provided above but prorated for the number of days elapsed in the month in
question as a percentage of the total number of days in such month, (ii)
based upon the average of the Portfolio's daily net asset value for the
period in question, and (iii) paid within a reasonable time after the close
of such period.
4
<PAGE>
8.LIABILITY OF HIFSCO.
HIFSCO shall not be liable for any loss or losses sustained by reason
of any investment including the purchase, holding or sale of any
security, or with respect to the administration of the Company, as
long as HIFSCO shall have acted in good faith and with due care;
provided, however, that no provision in this Agreement shall be deemed
to protect HIFSCO against any liability to the Company or its
shareholders by reason of its willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement.
9. DURATION OF AGREEMENT.
(a) This Agreement shall be effective on March 3, 1997 and shall
continue in effect through July 22, 1998. This Agreement, unless
sooner terminated in accordance with 9(b) below, shall continue
in effect from year to year thereafter provided that its
continuance is specifically approved at least annually (1) by a
vote of a majority of the members of the Board of Directors of
the Company or by a vote of a majority of the outstanding voting
securities of each Portfolio, and (2) in either event, by the
vote of a majority of the members of the Company's Board of
Directors who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for
the purpose of voting on this Agreement.
(b) This Agreement (1) may be terminated at any time without the
payment of any penalty either by a vote of a majority of the
members of the Board of Directors of the Company or by a vote of
a majority of the Portfolio's outstanding voting securities, on
sixty days' prior written notice to HIFSCO; (2) shall immediately
terminate in the event of its assignment and (3) may be
terminated by HIFSCO on sixty days' prior written notice to the
Portfolio, but such termination will not be effective until the
Portfolio shall have contracted with one or more persons to serve
as a successor investment adviser for the Portfolio and such
person(s) shall have assumed such position.
(c) As used in this Agreement, the terms "assignment", "interested
person" and "vote of majority of the Company's outstanding voting
securities" shall have the meanings set forth for such terms in
the 1940 Act, as amended.
5
<PAGE>
(d) Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the other party
to this Agreement to whom such notice is to be given at such
party's current address.
10. OTHER ACTIVITIES.
Nothing in this Agreement shall limit or restrict the right of any
director, officer, or employee of HIFSCO to engage in any other
business or to devote his or her time and attention in part to the
management or other aspects of any other business, whether of a
similar nature or a dissimilar nature, nor to limit or restrict the
right of HIFSCO to engage in any other business or to render services
of any kind to any other corporation, firm individual or association.
11. ADDITIONAL SERIES.
The amendment of this Agreement for the sole purpose of adding one or
more Portfolios shall not be deemed an amendment affecting an already
existing Portfolio and requiring the approval of shareholders of that
Portfolio.
12. INVALID PROVISIONS.
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13. GOVERNING LAW.
To the extent that federal securities laws do not apply, this
Agreement and all performance hereunder shall be governed by the laws
of the State of Connecticut which apply to contracts made and to be
performed in the State of Connecticut.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the 3rd day of March, 1997.
HARTFORD INVESTMENT FINANCIAL
SERVICES COMPANY
/s/ Joseph H. Gareau
----------------------------------
By: Joseph H. Gareau
Title: Executive Vice President
ITT HARTFORD MUTUAL FUNDS, INC.
on behalf of:
ITT Hartford Small Company Fund
ITT Hartford Capital Appreciation Fund
ITT Hartford International Opportunities Fund
ITT Hartford Dividend and Growth Fund
ITT Hartford Stock Fund
ITT Hartford Advisers Fund
ITT Hartford Bond Income Strategy Fund
ITT Hartford Money Market Fund
/s/ Andrew W. Kohnke
----------------------------------
By: Andrew W. Kohnke
Title: Vice President
7
<PAGE>
ATTACHMENT A
The following series of the ITT Hartford Mutual Funds, Inc. are made a part of
this agreement:
ITT Hartford Small Company Fund
ITT Hartford Capital Appreciation Fund
ITT Hartford International Opportunities Fund
ITT Hartford Dividend and Growth Fund
ITT Hartford Stock Fund
ITT Hartford Advisers Fund
ITT Hartford Bond Income Strategy Fund
ITT Hartford Money Market Fund
Dated: March 3, 1997
<PAGE>
EXHIBIT 5.3
INVESTMENT SUBADVISORY AGREEMENT WITH
WELLINGTON MANAGEMENT COMPANY LLP
<PAGE>
INVESTMENT SUB-ADVISORY AGREEMENT
This Investment Sub-Advisory Agreement is made by and between Hartford
Investment Financial Services Company, a Delaware corporation ("HIFSCO") and
Wellington Management Company, LLP, a Massachusetts partnership ("Wellington
Management").
WHEREAS, HIFSCO has entered into an agreement for the provision of
investment management services to the ITT Hartford Mutual Funds, Inc. (the
"Company") currently comprised of the ITT Hartford Small Company Fund, ITT
Hartford Capital Appreciation Fund, ITT Hartford International Opportunities
Fund, ITT Hartford Dividend and Growth Fund, ITT Hartford Stock Fund, ITT
Hartford Advisers Fund, ITT Hartford Bond Income Strategy Fund and ITT Hartford
Money Market Fund, and
WHEREAS, HIFSCO wishes to engage the services of Wellington Management
Company as Sub-Adviser to the ITT Hartford Small Company Fund, ITT Hartford
Capital Appreciation Fund, ITT Hartford International Opportunities Fund, ITT
Hartford Dividend and Growth Fund, ITT Hartford Stock Fund and ITT Hartford
Advisers Fund (each a "Portfolio" and together the "Portfolios"), and
WHEREAS, Wellington Management is willing to perform advisory services on
behalf of the Portfolios upon the terms and conditions and for the compensation
hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and mutual agreements
herein contained, the parties hereto agree as follows:
1. HIFSCO hereby employs Wellington Management to serve as Sub-Adviser with
respect to the assets of the Portfolios and to perform the services
hereinafter set forth subject to the terms and conditions of the investment
objectives, policies and restrictions of each Portfolio, and Wellington
Management hereby accepts such employment and agrees during such period to
assume the obligations herein set forth for the compensation herein
provided.
2. Wellington Management shall evaluate and implement an investment program
appropriate for each Portfolio which program shall be amended and updated
from time to time as financial and other economic conditions change as
determined by HIFSCO and Wellington Management.
3. Wellington Management, in consultation with HIFSCO when appropriate, will
make all determinations with respect to the investment of the assets of the
Portfolios and the purchase or sale of portfolio securities, and shall take
such
<PAGE>
steps as may be necessary to implement the same. Such determinations and
services shall include advising the Company's Board of Directors of the
manner in which voting rights, rights to consent to corporate action, and
any other non-investment decisions pertaining to a Portfolio's securities
should be exercised.
4. Wellington Management will regularly furnish reports with respect to the
Portfolios at periodic meetings of the Company's Board of Directors and at
such other times as may be reasonably requested by the Company's Board of
Directors, which reports shall include Wellington Management's economic
outlook and investment strategy and a discussion of the portfolio activity
and the performance of the Portfolios since the last report. Copies of all
such reports shall be furnished to HIFSCO for examination and review within
a reasonable time prior to the presentation of such reports to the
Company's Board of Directors.
5. Wellington Management shall manage each Portfolio in conformity with the
Company's Articles of Incorporation and By-laws, each as amended from time
to time, and the Investment Company Act of 1940, as amended, other
applicable laws, and to the investment objectives, policies and
restrictions of each Portfolio as set forth in the Portfolios' prospectus
and statement of additional information, or any investment guidelines or
other instructions received in writing from HIFSCO, and subject further to
such policies and instructions as the Board of Directors or HIFSCO may from
time to time establish and deliver to Wellington Management.
In addition, Wellington Management will cause the Portfolios to comply with
the requirements of (a) Section 851(b)(2) of the Internal Revenue Code of
1986, as amended (the "Code") regarding derivation of income from specified
investment activities; (b) Section 851(b)(3) of the Code regarding the
limitation of gains from the disposition of securities and certain other
investments held less than three months; and (c) Section 851(b)(4) of the
Code regarding diversification of the Portfolios' assets.
6. Wellington Management will select the brokers or dealers that will execute
the purchases and sales of portfolio securities for the Portfolios and
place, in the name of each Portfolio or its nominees, all such orders.
When placing such orders, Wellington Management shall use its best efforts
to obtain the best net security price available for each Portfolio. Subject
to and in accordance with any directions that the Board of Directors may
issue from time to time, Wellington Management may also be authorized to
effect individual securities transactions at commission rates in excess of
the minimum commission rates
2
<PAGE>
available, if Wellington Management determines in good faith that such
amount of commission is reasonable in relation to the value of the
brokerage or research services provided by such broker or dealer, viewed in
terms of either that particular transaction or Wellington Management's
overall responsibilities with respect to the Portfolios and Wellington
Management's other advisory clients. The execution of such transactions
shall not be deemed to represent an unlawful act or breach of any duty
created by this Agreement or otherwise. Wellington Management will promptly
communicate to the Board of Directors such information relating to
portfolio transactions as they may reasonably request.
7. (a) As compensation for the performance of the services by Wellington
Management hereunder, HIFSCO shall pay to Wellington Management, as
promptly as possible after the last day of each calendar year quarter, a
fee accrued daily and paid quarterly, based upon the following annual rates
and calculated based upon the average daily net asset values of each of the
Portfolios as follows:
ITT HARTFORD SMALL COMPANY FUND, ITT HARTFORD CAPITAL APPRECIATION
FUND AND ITT HARTFORD INTERNATIONAL OPPORTUNITIES FUND.
NET ASSET VALUE ANNUAL RATE
--------------- -----------
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%
ITT HARTFORD DIVIDEND AND GROWTH FUND, ITT HARTFORD STOCK FUND AND
ITT HARTFORD ADVISERS FUND.
NET ASSET VALUE ANNUAL RATE
--------------- -----------
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%
Wellington Management may waive all or a portion of its fees from
time to time as agreed between the parties.
3
<PAGE>
If it is necessary to calculate the fee for a period of time which is
not a calendar quarter, then the fee shall be (i) calculated at the
annual rates provided above but prorated for the number of days
elapsed in the period in question, as a percentage of the total number
of days in such period, (ii) based upon the average of each
Portfolio's daily net asset value for the period in question, and
(iii) paid within a reasonable time after the close of such period.
(b) Wellington Management will bear all expenses in connection with the
performance of its services under this Agreement.
(c) Wellington Management will not be entitled to receive any payment for
the performance of its services hereunder from the Portfolios.
(d) Wellington Management agrees to notify HIFSCO of any change in
Wellington Management's personnel that are directly involved in the
management of the Portfolios within a reasonable time following the
occurrence of such change.
8. Wellington Management shall not be liable for any loss or losses sustained
by reason of any investment including the purchase, holding or sale of any
security as long as Wellington Management shall have acted in good faith
and with due care; provided, however, that no provision in this Agreement
shall be deemed to protect Wellington Management, and Wellington Management
shall indemnify HIFSCO, for any and all loss, damage, judgment, fine or
award paid in settlement and attorney's fees related to Wellington
Managements' willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
9. (a) This Agreement shall become effective on March 3, 1997 and shall
continue in effect through July 22, 1998. This Agreement, unless
sooner terminated in accordance with 9(b) below, shall continue in
effect from year to year thereafter provided that its continuance is
specifically approved at least annually (1) by a vote of the majority
of the members of the Board of Directors of the Company or by a vote
of a majority of the outstanding voting securities of each Portfolio,
and (2) in either event, by the vote of a majority of the members of
the Company's Board of Directors who are not parties to this Agreement
or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on this Agreement.
4
<PAGE>
(b) This Agreement (1) may be terminated with respect to each Portfolio at
any time without the payment of any penalty either by vote of the
members of the Board of Directors of the Company or by a vote of a
majority of any Portfolio's outstanding voting securities, or by
HIFSCO on written notice to Wellington Management, (2) shall
immediately terminate in the event of its assignment, (3) may be
terminated by Wellington Management on ninety days' prior written
notice to HIFSCO, but such termination will not be effective until
HIFSCO shall have contracted with one or more persons to serve as a
successor Sub-Adviser for the Portfolio (or HIFSCO or an affiliate of
HIFSCO agrees to manage the Portfolio) and such person(s) shall have
assumed such position, and (4) will terminate automatically upon
termination of the advisory agreement between HIFSCO and the Company
of even date herewith.
(c) As used in this Agreement, the terms "assignment," "interested
parties" and "vote of a majority of the Company's outstanding voting
securities" shall have the meanings set forth for such terms in the
Investment Company Act of 1940, as amended.
(d) Any notice under this Agreement shall be given in writing, addressed
and delivered, or mailed postpaid, to the other party or parties at
the current office address provided by each party.
10. Nothing in this Agreement shall limit or restrict the right of any partner,
officer, or employee of Wellington Management to engage in any business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature, nor to limit or restrict the right of Wellington Management to
engage in any other business or to render services of any kind to any other
corporation, firm, individual or association.
11. HIFSCO agrees that neither it nor any affiliate of HIFSCO will use
Wellington Management's name or refer to Wellington Management or
Wellington Management's clients in marketing and promotional materials
without prior notification to and authorization by Wellington Management,
such authorization not to be unreasonably withheld.
12. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby.
5
<PAGE>
13. The amendment of this Agreement for the sole purpose of adding one or more
Portfolios shall not be deemed an amendment affecting an already existing
Portfolio and requiring the approval of shareholders of that Portfolio.
14. To the extent that federal securities laws do not apply, this Agreement and
all performance hereunder shall be governed by the laws of the State of
Connecticut which apply to contracts made and to be performed in the State
of Connecticut.
[The remainder of this page is left blank intentionally.]
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the 3rd day of March, 1997.
HARTFORD INVESTMENT FINANCIAL
SERVICES COMPANY
By: /s/ Joseph H. Gareau
-------------------------------------
Name: Joseph H. Gareau
Title: Executive Vice President
WELLINGTON MANAGEMENT COMPANY, LLP
By: /s/ Robert W. Doran
-------------------------------------
Name: Robert W. Doran
Title: Chairman
7
<PAGE>
EXHIBIT 5.4
INVESTMENT SERVICES AGREEMENT WITH
HARTFORD INVESTMENT MANAGEMENT COMPANY
<PAGE>
INVESTMENT SERVICES AGREEMENT
This investment services agreement made by and between Hartford Investment
Financial Services Company, a Delaware corporation ("HIFSCO") and The Hartford
Investment Management Company, a Delaware corporation ("HIMCO").
WHEREAS, HIFSCO has entered into an agreement for the provision of
investment management services (the "Principal Advisory Contract") to the ITT
Hartford Mutual Funds, Inc. (the "Company") currently comprised of the ITT
Hartford Small Company Fund, ITT Hartford Capital Appreciation Fund, ITT
Hartford International Opportunities Fund, ITT Hartford Dividend and Growth
Fund, ITT Hartford Stock Fund, ITT Hartford Advisers Fund, ITT Hartford Bond
Income Strategy Fund and ITT Hartford Money Market Fund, and
WHEREAS, HIFSCO wishes to engage HIMCO to provide investment management
services to the ITT Hartford Bond Income Strategy Fund and ITT Hartford Money
Market Fund (each a "Portfolio" and together the "Portfolios"), and
WHEREAS, HIMCO is willing to perform such services on behalf of the
Portfolios upon the terms and conditions and for the compensation hereinafter
set forth.
NOW, THEREFORE, in consideration of the promises and mutual agreements
herein contained, the parties hereto agree as follows:
1. HIFSCO hereby employs HIMCO to provide investment management services with
respect to the assets of the Portfolios and to perform the services
hereinafter set forth subject to the terms and conditions of the investment
objectives, policies and restrictions of each Portfolio, and HIMCO hereby
accepts such employment and agrees during such period to assume the
obligations herein set forth for the compensation herein provided.
2. HIMCO shall evaluate and implement an investment program appropriate for
each Portfolio which shall be amended and updated from time to time as
financial and other economic conditions change as determined by HIFSCO and
HIMCO.
3. HIMCO, in consultation with HIFSCO when appropriate, will make all
determinations with respect to the investment of the assets of the
Portfolios and the purchase or sale of portfolio securities, and shall take
such steps as may be necessary to implement the same. Such determinations
and services shall include advising the Company's Board of Directors of the
manner in which voting rights, rights to consent to corporate action, and
any other
<PAGE>
non-investment decisions pertaining to a Portfolio's securities should be
exercised.
4. HIMCO will regularly furnish reports with respect to the Portfolios at
periodic meetings of the Company's Board of Directors and at such other
times as may be reasonably requested by the Company's Board of Directors,
which reports shall include HIMCO's economic outlook and investment
strategy and a discussion of the portfolio activity and the performance of
the Portfolios since the last report. Copies of all such reports shall be
furnished to HIFSCO for examination and review within a reasonable time
prior to the presentation of such reports to the Company's Board of
Directors.
5. HIMCO shall manage each Portfolio in conformity with the Company's Articles
of Incorporation and By-laws, each as amended from time to time, and the
Investment Company Act of 1940, as amended, other applicable laws, and to
the investment objectives, policies and restrictions of each Portfolio as
set forth in the Portfolios' prospectus and statement of additional
information, or any investment guidelines or other instructions received in
writing from HIFSCO, and subject further to such policies and instructions
as the Board of Directors of HIFSCO may from time to time establish and
deliver to HIMCO.
6. HIMCO will select the brokers or dealers that will execute the purchases
and sales of portfolio securities for the Portfolios and place, in the name
of each Portfolio or its nominees, all such orders. When placing such
orders, HIMCO shall use its best efforts to obtain the best net security
price available for each Portfolio. Subject to and in accordance with any
directions that the Board of Directors may issue from time to time, HIMCO
may also be authorized to effect individual securities transactions at
commission rates in excess of the minimum commission rates available, if
HIMCO determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage or research services
provided by such broker or dealer, viewed in terms of either that
particular transaction or HIMCO's overall responsibilities with respect to
the Portfolios and HIMCO's other advisory clients. The execution of such
transactions shall not be deemed to represent an unlawful act or breach of
any duty created by this Agreement or otherwise. HIMCO will promptly
communicate to the Board of Directors such information relating to
portfolio transactions as they may reasonably request.
7. As compensation for the performance of the services by HIMCO hereunder,
HIFSCO shall, as promptly as possible after the last day of each calendar
2
<PAGE>
year quarter, pay HIMCO the equivalent of all direct and indirect expenses
incurred in the performance of its duties under this Agreement.
8. HIMCO shall not be liable for any loss or losses sustained by reason of any
investment including the purchase, holding or sale of any security as long
as HIMCO shall have acted in good faith and with due care; provided,
however, that no provision in this Agreement shall be deemed to protect
HIMCO against any liability to the Company or its shareholders by reason of
its willful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of its obligations and
duties under this Agreement.
9. (a) This Agreement shall become effective on March 3, 1997, shall continue
in effect for the same term as the Principal Advisory Contract and
shall be submitted to the Company's Board of Directors for reapproval
at the same time as the Principal Advisory Contract. This Agreement,
unless sooner terminated in accordance with 9(b) below, shall continue
in effect from year to year thereafter provided that its continuance
is specifically approved at least annually (1) by a vote of the
majority of the members of the Board of Directors of the Company or by
a vote of a majority of the outstanding voting securities of each
Portfolio, and (2) in either event, by the vote of a majority of the
members of the Company's Board of Directors who are not parties to
this Agreement or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on this Agreement.
(b) This Agreement (1) may be terminated with respect to each Portfolio at
any time without the payment of any penalty either by vote of the
members of the Board of Directors of the Company or by a vote of a
majority of any Portfolio's outstanding voting securities, or by
HIFSCO on sixty days' prior written notice to HIMCO, (2) shall
immediately terminate in the event of its assignment, (3) may be
terminated by HIMCO on sixty days' prior written notice to HIFSCO, but
such termination will not be effective until HIFSCO shall have
contracted with one or more persons to serve as a successor to HIMCO
for the Portfolio (or HIMCO or an affiliate of HIMCO agrees to manage
the Portfolio) and such person(s) shall have assumed such position,
and (4) will terminate automatically upon termination of the
investment management agreement between HIFSCO and the Company of even
date herewith.
3
<PAGE>
(c) As used in this Agreement, the terms "assignment," "interested
parties" and "vote of a majority of the Company's outstanding voting
securities" shall have the meanings set forth for such terms in the
Investment Company Act of 1940, as amended.
(d) Any notice under this Agreement shall be given in writing, addressed
and delivered, or mailed postpaid, to the other party or parties at
the current office address provided by each party.
10. Nothing in this Agreement shall limit or restrict the right of any partner,
officer, or employee of HIMCO to engage in any business or to devote his or
her time and attention in part to the management or other aspects of any
other business, whether of a similar nature or a dissimilar nature, nor to
limit or restrict the right of HIMCO to engage in any other business or to
render services of any kind to any other corporation, firm, individual or
association.
11. It is the intention of the parties hereto that by this Agreement HIMCO
shall provide HIFSCO with such investment management and advisory services
as may be required by HIFSCO in managing and advising the Portfolios
pursuant to the terms of the Principal Advisory Contract. No provision of
this Agreement shall be construed or interpreted to grant HIMCO any right
or authority not granted to HIFSCO under the Principal Advisory Contract,
or to impose on HIMCO any duty or obligation not otherwise imposed on
HIFSCO under the Principal Advisory Contract.
12. HIFSCO agrees that neither it nor any affiliate of HIFSCO will use HIMCO's
name or refer to HIMCO or HIMCO's clients in marketing and promotional
materials without prior notification to and authorization by HIMCO, such
authorization not to be unreasonably withheld.
13. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby.
14. The amendment of this Agreement for the sole purpose of adding one or more
Portfolios shall not be deemed an amendment affecting an already existing
Portfolio and requiring the approval of shareholders of that Portfolio.
15. To the extent that federal securities laws do not apply, this Agreement and
all performance hereunder shall be governed by the laws of the State of
4
<PAGE>
Connecticut which apply to contracts made and to be performed in the State
of Connecticut.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the 3rd day of March, 1997.
HARTFORD INVESTMENT FINANCIAL
SERVICES COMPANY
/s/ Joseph H. Gareau
----------------------------------
By: Joseph H. Gareau
Title: Executive Vice President
THE HARTFORD INVESTMENT
MANAGEMENT COMPANY
/s/ Andrew W. Kohnke
----------------------------------
By: Andrew W. Kohnke
Title: Managing Director
5
<PAGE>
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
Registration Statement (Registration File No. 333-2381) on Form N-1A for ITT
Hartford Mutual Funds, Inc.
ARTHUR ANDERSEN LLP
Hartford, CT
June 17, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001006415
<NAME> HARTFORD MUTUAL FUNDS
<SERIES>
<NUMBER> 01
<NAME> THE HARTFORD SMALL COMPANY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 4,785,777
<INVESTMENTS-AT-VALUE> 4,938,049
<RECEIVABLES> 61,847
<ASSETS-OTHER> 916
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,000,812
<PAYABLE-FOR-SECURITIES> 7,511
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,276
<TOTAL-LIABILITIES> 13,787
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 466
<SHARES-COMMON-STOCK> 466,902
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 951
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 152,272
<NET-ASSETS> 4,987,025
<DIVIDEND-INCOME> 5,710
<INTEREST-INCOME> 9,135
<OTHER-INCOME> 0
<EXPENSES-NET> 25,408
<NET-INVESTMENT-INCOME> (10,563)
<REALIZED-GAINS-CURRENT> 323,041
<APPREC-INCREASE-CURRENT> 152,272
<NET-CHANGE-FROM-OPS> 464,750
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (311,527)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 439,405
<NUMBER-OF-SHARES-REDEEMED> 1,852
<SHARES-REINVESTED> 29,349
<NET-CHANGE-IN-ASSETS> 4,987,025
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<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14,746
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 104,788
<AVERAGE-NET-ASSETS> 3,918,781
<PER-SHARE-NAV-BEGIN> 10,000
<PER-SHARE-NII> (0.020)
<PER-SHARE-GAIN-APPREC> 1.420
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.720)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.680
<EXPENSE-RATIO> 1.450
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001006415
<NAME> HARTFORD MUTUAL FUNDS
<SERIES>
<NUMBER> 02
<NAME> THE HARTFORD CAPITAL APPRECIATION FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 8,821,982
<INVESTMENTS-AT-VALUE> 9,665,016
<RECEIVABLES> 640,905
<ASSETS-OTHER> 999
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,306,920
<PAYABLE-FOR-SECURITIES> 263,874
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,461
<TOTAL-LIABILITIES> 282,335
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 751
<SHARES-COMMON-STOCK> 750,636
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 426,258
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 843,218
<NET-ASSETS> 10,024,584
<DIVIDEND-INCOME> 4,890
<INTEREST-INCOME> 10,866
<OTHER-INCOME> 0
<EXPENSES-NET> 34,169
<NET-INVESTMENT-INCOME> (18,413)
<REALIZED-GAINS-CURRENT> 734,669
<APPREC-INCREASE-CURRENT> 843,218
<NET-CHANGE-FROM-OPS> 1,559,474
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (289,998)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 731,190
<NUMBER-OF-SHARES-REDEEMED> 2,392
<SHARES-REINVESTED> 21,838
<NET-CHANGE-IN-ASSETS> 4,987,025
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 18,419
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 128,289
<AVERAGE-NET-ASSETS> 5,203,207
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.030)
<PER-SHARE-GAIN-APPREC> 3.80
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.410)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.360
<EXPENSE-RATIO> 1.450
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001006415
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<SERIES>
<NUMBER> 03
<NAME> THE HARTFORD INTERNATIONAL OPPORTUNITIES FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
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<INVESTMENTS-AT-VALUE> 4,563,814
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<SHARES-COMMON-STOCK> 421,612
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1,737)
<ACCUMULATED-NET-GAINS> 20,733
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 4,520,164
<DIVIDEND-INCOME> 23,276
<INTEREST-INCOME> 9,641
<OTHER-INCOME> 0
<EXPENSES-NET> 25,370
<NET-INVESTMENT-INCOME> 7,547
<REALIZED-GAINS-CURRENT> 50,234
<APPREC-INCREASE-CURRENT> 227,544
<NET-CHANGE-FROM-OPS> 285,325
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (27,094)
<DISTRIBUTIONS-OF-GAINS> (11,691)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 418,709
<NUMBER-OF-SHARES-REDEEMED> 741
<SHARES-REINVESTED> 3,644
<NET-CHANGE-IN-ASSETS> 4,520,164
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 111,534
<AVERAGE-NET-ASSETS> 3,451,413
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.020
<PER-SHARE-GAIN-APPREC> 0.790
<PER-SHARE-DIVIDEND> (0.060)
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<EXPENSE-RATIO> 1.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001006415
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<SERIES>
<NUMBER> 04
<NAME> THE HARTFORD STOCK FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 6,861,567
<INVESTMENTS-AT-VALUE> 7,351,415
<RECEIVABLES> 226,250
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<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 6,576
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 657
<SHARES-COMMON-STOCK> 656,761
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,604
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 489,848
<NET-ASSETS> 7,571,344
<DIVIDEND-INCOME> 32,591
<INTEREST-INCOME> 8,813
<OTHER-INCOME> 0
<EXPENSES-NET> 28,806
<NET-INVESTMENT-INCOME> 12,598
<REALIZED-GAINS-CURRENT> 8,296
<APPREC-INCREASE-CURRENT> 489,848
<NET-CHANGE-FROM-OPS> 510,742
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (13,290)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 657,298
<NUMBER-OF-SHARES-REDEEMED> 1,663
<SHARES-REINVESTED> 1,126
<NET-CHANGE-IN-ASSETS> 7,571,344
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15,357
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 107,644
<AVERAGE-NET-ASSETS> 4,331,642
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.020
<PER-SHARE-GAIN-APPREC> 1.530
<PER-SHARE-DIVIDEND> (0.020)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.53
<EXPENSE-RATIO> 1.450
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001006415
<NAME> HARTFORD FUNDS
<SERIES>
<NUMBER> 05
<NAME> THE HARTFORD DIVIDEND AND GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
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<NAME> THE HARTFORD ADVISERS FUND
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<NAME> HARTFORD MUTUAL FUNDS
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<NAME> THE HARTFORD BOND FUND
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<CIK> 0001006415
<NAME> HARTFORD MUTUAL FUNDS
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<NAME> THE HARTFORD MONEY MARKET FUND
<S> <C>
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