<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1997
FILE NO. _________
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. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. __________ [ ]
HARTFORD MIDCAP FUND, INC.
(Exact Name of Registrant as Specified in Charter)
P.O. Box 2999, Hartford, Connecticut 06104-2999
(Address of Principal Executive Offices)
Registrant's Telephone Number including Area Code: (860) 547-5000
C. Michael O'Halloran, Esquire
P.O. Box 2999, Hartford, Connecticut 06104-2999
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon a practicable after this registration statement is declared
effective.
It is proposed that this filing will become effective (check appropriate box)
___ immediately upon filing pursuant to paragraph (b) of Rule 485
___ on pursuant to paragraph (b)(1)(v) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on pursuant to paragraph (a) (1) of Rule 485
___ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
___ on pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum Amount of
Title of Securities Amount Being Offering Aggregate Registration
Being Registered Registered Price Per Unit Offering Price Fee
<S> <C> <C> <C> <C>
Common Stock,
par value * *
$.10 per share
</TABLE>
* Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant hereby elects to register an indefinite number of shares of its
Common Stock. No initial fee is required.
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
HARTFORD MUTUAL FUNDS
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(a)
<TABLE>
<CAPTION>
N-1A ITEM NO. PROSPECTUS LOCATION
- ------------- ---------------------
<S> <C>
PART A
1. Cover Page Cover Page
2. Synopsis Not applicable
3. Condensed Financial Information Fund Expenses; Financial Highlights
4. General Description of Registrant The Funds; Investment Objectives and
Policies of the Funds Common Investment
Policies and Risk Factors
5. Management of the Fund Management of the Funds; Administrative
Services for the Funds; Expenses of the Funds
5A. Management's Discussion of Fund
Performance Annual Report to Shareholders
6. Capital Stock and Other Securities Ownership and Capitalization of the Funds;
Dividends; Federal Income Taxes; General
Information
7. Purchase of Securities Being Offered Net Asset Value; Purchase of Fund Shares
8. Redemption or Repurchase Sale and Redemption of Shares
9. Pending Legal Proceedings General Information-Pending Legal Proceedings
PART B STATEMENT OF ADDITIONAL INFORMATION LOCATION
--------------------------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not applicable
13. Investment Objectives and Policies Investment Objectives of the Funds; Investment
Restriction of the Funds
14. Management of the Fund Management of the Fund
15. Control Persons and Principal Holders
of Securities Control Persons and Principal Holders of
Securities
16. Investment Advisory and Other Services Management of the Fund
17. Brokerage Allocation and Other Practices Portfolio Brokerage
18. Capital Stock and Other Securities Ownership and Capitalization of the Funds
(Prospectus)
19. Purchase, Redemption and Pricing of
Securities Being Offered Purchase of Fund Shares (Prospectus)
20. Tax Status Federal Income Taxes (Prospectus)
21. Underwriters Sale and Redemption of Fund Shares
(Prospectus)
22. Calculation of Performance Data Performance Comparisons
23. Financial Statements Financial Statements
</TABLE>
PART C
Information required to be set forth in PART C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.
<PAGE>
Hartford Mutual Funds
P.O. BOX 2999
HARTFORD, CT 06104-2999
PROSPECTUS -- MAY 1, 1997
The Hartford Mutual Funds is a family of funds comprised of thirteen separate
diversified open-end management investment companies (each a "Fund" and together
the "Funds"). The Funds serve as the underlying investment vehicles for certain
variable annuity and variable life insurance separate accounts of Hartford Life
Insurance Company and ITT Hartford Life and Annuity Insurance Company
(collectively, the "The Hartford Life Insurance Companies"). The Funds, which
have different investment objectives and policies, are described below.
<TABLE>
<CAPTION>
STOCK FUNDS GOAL INVESTMENT STYLE
--------------------------- ------------------------------ ------------------------------------------------------------
<S> <C> <C>
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.
Dividend and Growth High level of income, growth Equity: Invests primarily in large, well-known U.S.
of capital companies that have historically paid above average
dividends and have the ability to sustain and potentially
increase dividends; portfolio is broadly diversified across
industries.
Index To track general stock market Equity: Seeks investment results which approximate the price
performance and yield performance of publicly-traded common stocks in
the aggregate; attempts to approximate the capital
performance and the dividend income of the Standard & Poor's
500 Composite Stock Index.
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.
MidCap Growth of capital Equity: Invests primarily in high quality U.S. companies
with market capitalizations between $1 billion and $6
billion; portfolio is broadly diversified across industries
which are expected to grow faster than the overall economy.
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.
Stock Growth of capital, income is Equity: Invests primarily in large, high quality U.S.
secondary companies; portfolio is broadly diversified across
industries which are expected to grow faster than the
overall economy.
<CAPTION>
ASSET ALLOCATION FUNDS GOAL INVESTMENT STYLE
--------------------------- ------------------------------ ------------------------------------------------------------
<S> <C> <C>
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
manager's view of the economy and valuation of the market
sectors; short-term market timing is not used.
International Advisers Long-term total return International Asset Allocation: Invests in a mix of stocks,
bonds and money market instruments; portfolio assets are
diversified among at least five countries and are allocated
gradually among the asset classes based upon the portfolio
manager's view of the economy and valuation of the market
sectors; short term market timing is not used.
<CAPTION>
BOND FUNDS GOAL INVESTMENT STYLE
--------------------------- ------------------------------ ------------------------------------------------------------
<S> <C> <C>
Bond High level of income, total Bond: Invests primarily in investment grade bonds; up to 20%
return may be invested in the highest quality tier of the high
yield rating category.
Mortgage Securities Maximum current income Mortgage-Related Securities: Invests primarily in high
consistent with preservation quality mortgage-related securities, including securities
of principal issued or guaranteed by government agencies,
instrumentalities or sponsored corporations.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET FUNDS GOAL INVESTMENT STYLE
--------------------------- ------------------------------ ------------------------------------------------------------
Money Market Maximum current income Money Market: Invests in short-term money market
consistent with preservation instruments.
of capital
<S> <C> <C>
U.S. Government Maximum current income Money Market: Invests in short-term money market instruments
Money Market consistent with preservation issued or guaranteed by U.S. government agencies or
of capital instrumentalities.
</TABLE>
AN INVESTMENT IN EITHER OF THE MONEY MARKET FUNDS IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. WHILE EACH MONEY MARKET FUND SEEKS TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE, THERE CAN BE NO ASSURANCE
THAT EITHER OF THE MONEY MARKET FUNDS WILL ACHIEVE THIS GOAL.
- --------------------------------------------------------------------------------
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT A FUND THAT A
PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING. PLEASE READ AND RETAIN THIS
PROSPECTUS FOR FUTURE REFERENCE. ADDITIONAL INFORMATION ABOUT THE FUNDS HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN A STATEMENT OF ADDITIONAL
INFORMATION DATED MAY 1, 1997 ("SAI"), WHICH HAS BEEN INCORPORATED BY REFERENCE
INTO THIS PROSPECTUS. TO OBTAIN A COPY WITHOUT CHARGE CALL 1-800-862-6668 OR
WRITE TO "HARTFORD FAMILY OF FUNDS, C/O INDIVIDUAL ANNUITY OPERATIONS," P.O. BOX
2999, HARTFORD, CT 06104-2999.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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>
2 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HARTFORD MUTUAL FUNDS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Financial Highlights.................................................. 3
Introduction to the Hartford Mutual Funds............................. 15
Investment Objectives and Styles of the Funds......................... 15
Common Investment Policies and Risk Factors........................... 20
Management of the Funds............................................... 26
Administrative Services for the Funds................................. 28
Expenses of the Funds................................................. 28
Performance Related Information....................................... 29
Dividends............................................................. 29
Determination of Net Asset Value...................................... 29
Purchase of Fund Shares............................................... 30
Sale and Redemption of Shares......................................... 30
Federal Income Taxes.................................................. 30
Ownership and Capitalization of the Funds............................. 30
General Information................................................... 31
Appendix A: Description of Securities Ratings......................... 32
Appendix B: Credit Quality Distribution............................... 34
</TABLE>
There is the possibility that an individual Fund may be held liable for a
misstatement, inaccuracy or incomplete disclosure in this Prospectus concerning
the other Fund(s).
Additional information about the performance of each Fund, including
Management's Discussion and Analysis of Results, is contained in the Funds'
annual and semi-annual reports to shareholders, which may be obtained without
charge by calling 1-800-862-6668.
<PAGE>
HARTFORD CAPITAL APPRECIATION FUND, INC. 3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following information, insofar as it relates to each of the five years
in the period ended December 31, 1996, has been audited by Arthur Andersen LLP,
independent public accountants, whose report thereon is included in the
Statement of Additional Information, which is incorporated by reference to this
prospectus.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
----------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
---------- ---------- --------- --------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
AT BEGINNING
OF PERIOD...... $ 3.490 $ 2.860 $ 3.052 $ 2.634 $ 2.607 $ 1.709 $ 2.020 $ 1.678 $ 1.341 $ 1.482
NET INVESTMENT
INCOME......... 0.022 0.030 0.011 0.003 0.008 $ 0.021 $ 0.029 $ 0.023 $ 0.015 $ 0.025
NET REALIZED AND
UNREALIZED
GAINS (LOSSES)
ON
INVESTMENTS.... 0.655 0.785 0.070 0.526 0.388 0.898 (0.246) 0.376 0.337 (0.075)
---------- ---------- --------- --------- --------- -------- -------- -------- -------- --------
TOTAL FROM
INVESTMENT
OPERATIONS..... 0.677 0.815 0.081 0.529 0.396 0.919 (0.217) 0.399 0.352 (0.050)
DIVIDENDS FROM
NET INVESTMENT
INCOME......... (0.025) (0.030) (0.011) (0.003) (0.008) (0.021) (0.029) (0.023) (0.015) (0.025)
DISTRIBUTION
FROM NET
REALIZED GAINS
ON
SECURITIES..... (0.228) (0.155) (0.262) (0.108) (0.361) 0.000 (0.065) (0.034) 0.000 (0.066)
RETURN OF
CAPITAL........ 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
---------- ---------- --------- --------- --------- -------- -------- -------- -------- --------
TOTAL FROM
DISTRIBUTIONS... (0.253) (0.185) (0.273) (0.111) (0.369) (0.021) (0.094) (0.057) (0.015) (0.091)
---------- ---------- --------- --------- --------- -------- -------- -------- -------- --------
NET INCREASE
(DECREASE) IN
NET ASSETS..... 0.424 0.630 (0.192) 0.418 0.027 0.898 (0.311) 0.342 0.337 (0.141)
NET ASSET VALUE
AT END OF
PERIOD......... $ 3.914 $ 3.490 $ 2.860 $ 3.052 $ 2.634 $ 2.607 $ 1.709 $ 2.020 $ 1.678 $ 1.341
---------- ---------- --------- --------- --------- -------- -------- -------- -------- --------
---------- ---------- --------- --------- --------- -------- -------- -------- -------- --------
TOTAL RETURN.... 20.70% 30.25% 2.50% 20.80% 16.98% 53.99% (10.90)% 24.11% 26.37% (4.31)%
NET ASSETS (IN
THOUSANDS)..... 3,386,670 2,157,892 1,158,644 778,904 300,373 158,046 56,032 59,922 34,226 26,123
RATIO OF
OPERATING
EXPENSES TO
AVERAGE NET
ASSETS......... 0.65% 0.68% 0.72% 0.76% 0.87% 0.92% 0.96% 0.94% 0.97% 1.01%
RATIO OF NET
INVESTMENT
INCOME TO
AVERAGE NET
ASSETS......... 0.60% 0.95% 0.40% 0.12% 0.36% 0.92% 1.58% 1.25% 0.91% 1.27%
PORTFOLIO
TURNOVER
RATE........... 85.4% 78.6% 73.3% 91.4% 100.3% 107.2% 51.8% 35.0% 48.9% 68.7%
AVERAGE
COMMISSION
RATE*.......... 0.06650
</TABLE>
- ------------------------
* Not required for years prior to 1996.
<PAGE>
4 HARTFORD DIVIDEND & GROWTH FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP,
independent public accountants, whose report thereon is included in the
Statement of Additional Information, which is incorporated by reference to this
prospectus.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING
THROUGHOUT THE INDICATED PERIOD)
-----------------------------------
YEAR YEAR
ENDED ENDED 03/08/94-
12/31/96 12/31/95 12/31/94(A)
--------- --------- -----------
<S> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD............ $ 1.371 $ 0.994 $ 1.000
NET INVESTMENT INCOME............................. 0.034 0.033 0.024
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS...................................... 0.258 0.323 (0.005)
--------- --------- -----------
TOTAL FROM INVESTMENT OPERATIONS.................. 0.292 0.356 0.019
DIVIDENDS FROM NET INVESTMENT INCOME.............. (0.034) (0.033) (0.024)
DISTRIBUTION FROM NET REALIZED GAINS ON
SECURITIES....................................... (0.028) 0.000 (0.001)
RETURN OF CAPITAL................................. 0.000 0.000 0.000
--------- --------- -----------
TOTAL FROM DISTRIBUTIONS.......................... (0.062) (0.033) (0.025)
--------- --------- -----------
NET INCREASE (DECREASE) IN NET ASSETS............. 0.230 0.323 (0.006)
NET ASSET VALUE AT END OF PERIOD.................. $ 1.547 $ 1.817 $ 0.994
--------- --------- -----------
--------- --------- -----------
TOTAL RETURN...................................... 22.91% 36.37% 1.96%
NET ASSETS (IN THOUSANDS)......................... 879,980 265,070 55,066
RATIO OF OPERATING EXPENSES TO AVERAGE NET
ASSETS........................................... 0.73% 0.77% 0.83%*
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS........................................... 2.52% 2.91% 3.52%*
PORTFOLIO TURNOVER RATE........................... 56.9% 41.4% 27.8%
AVERAGE COMMISSION RATE**......................... 0.07150
</TABLE>
- ------------------------
(a) The Fund was declared effective by the Securities and Exchange Commission
on March 8, 1994.
* Annualized. Management fees were waived until assets (excluding assets
contributed by companies affiliated with HL Advisors) reached $20 million.
The ratio of operating expenses to average net assets would have been higher
if management fees were not waived. The ratio of net investment income to
average net assets would have been lower if management fees were not waived.
** Not required for years prior to 1996.
<PAGE>
HARTFORD INDEX FUND, INC. 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following information, insofar as it relates to each of the five years
in the period ended December 31, 1996, has been audited by Arthur Andersen LLP,
independent public accountants, whose report thereon is included in the
Statement of Additional Information, which is incorporated by reference to this
prospectus.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
----------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
--------- --------- --------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING
OF PERIOD............... $ 2.028 $ 1.522 $ 1.546 $ 1.450 $ 1.390 $ 1.134 $ 1.220 $ 0.960 $ 0.854
NET INVESTMENT INCOME.... 0.044 0.044 0.038 0.035 0.033 0.036 0.037 0.029 0.030
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON
INVESTMENTS............. 0.393 0.507 (0.024) 0.096 0.060 0.294 (0.086) 0.260 0.106
--------- --------- --------- --------- -------- -------- -------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS.............. 0.437 0.551 0.014 0.131 0.093 0.330 (0.049) 0.289 0.136
DIVIDENDS FROM NET
INVESTMENT INCOME....... (0.044) (0.044) (0.038) (0.035) (0.033) (0.036) (0.037) (0.029) (0.030)
DISTRIBUTION FROM NET
REALIZED GAINS ON
SECURITIES.............. (0.039) (0.001) 0.000 0.000 0.000 (0.038) 0.000 0.000 0.000
RETURN OF CAPITAL........ 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
--------- --------- --------- --------- -------- -------- -------- -------- --------
TOTAL FROM
DISTRIBUTIONS........... (0.083) (0.045) (0.038) (0.035) (0.033) (0.074) (0.037) (0.029) (0.030)
--------- --------- --------- --------- -------- -------- -------- -------- --------
NET INCREASE (DECREASE)
IN NET ASSETS........... 0.354 0.506 (0.024) 0.096 0.060 0.256 (0.086) 0.260 0.106
NET ASSET VALUE AT END
OF PERIOD............... $ 2.382 $ 2.028 $ 1.522 $ 1.546 $ 1.450 $ 1.390 $ 1.134 $ 1.220 $ 0.960
--------- --------- --------- --------- -------- -------- -------- -------- --------
--------- --------- --------- --------- -------- -------- -------- -------- --------
TOTAL RETURN............. 22.09% 36.55% 0.94% 9.12% 6.82% 29.53% (3.99)% 30.47% 16.35%
NET ASSETS (IN
THOUSANDS).............. 621,065 318,253 157,660 140,396 82,335 47,770 26,641 19,456 10,050
RATIO OF OPERATING
EXPENSES TO AVERAGE NET
ASSETS.................. 0.39% 0.39% 0.45% 0.49% 0.60% 0.67% 0.91% 1.10% 1.23%
RATIO OF NET INVESTMENT
INCOME TO AVERAGE NET
ASSETS.................. 2.07% 2.46% 2.50% 2.36% 2.48% 2.89% 3.27% 2.60% 3.29%
PORTFOLIO TURNOVER
RATE.................... 19.3% 1.5% 1.8% 0.8% 1.2% 6.7% 25.5% 12.9% 20.9%
AVERAGE COMMISSION
RATE**.................. 0.05000
<CAPTION>
05/01/87-
12/31/87(A)
-----------
<S> <C>
NET ASSET VALUE AT
BEGINNING
OF PERIOD............... $ 1.000
NET INVESTMENT INCOME.... 0.016
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON
INVESTMENTS............. (0.144)
-----------
TOTAL FROM INVESTMENT
OPERATIONS.............. (0.128)
DIVIDENDS FROM NET
INVESTMENT INCOME....... (0.016)
DISTRIBUTION FROM NET
REALIZED GAINS ON
SECURITIES.............. (0.002)
RETURN OF CAPITAL........ 0.000
-----------
TOTAL FROM
DISTRIBUTIONS........... (0.018)
-----------
NET INCREASE (DECREASE)
IN NET ASSETS........... (0.146)
NET ASSET VALUE AT END
OF PERIOD............... $ 0.854
-----------
-----------
TOTAL RETURN............. (12.91)%
NET ASSETS (IN
THOUSANDS).............. 7,212
RATIO OF OPERATING
EXPENSES TO AVERAGE NET
ASSETS.................. 1.35%*
RATIO OF NET INVESTMENT
INCOME TO AVERAGE NET
ASSETS.................. 2.39%*
PORTFOLIO TURNOVER
RATE.................... 1.9%
AVERAGE COMMISSION
RATE**..................
</TABLE>
- ------------------------------
(a) The Fund was declared effective by the Securities and Exchange Commission
on May 1, 1987.
* Annualized.
** Not required for years prior to 1996.
<PAGE>
6 HARTFORD INTERNATIONAL OPPORTUNITIES FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following information, insofar as it relates to each of the five years
in the period ended December 31, 1996, has been audited by Arthur Andersen LLP,
independent public accountants, whose report thereon is included in the
Statement of Additional Information, which is incorporated by reference to this
prospectus.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
---------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED 07/02/90-
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90(A)
--------- --------- --------- --------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING
OF PERIOD.................... $ 1.306 $ 1.176 $ 1.215 $ 0.917 $ 0.973 $ 0.871 $ 1.000
NET INVESTMENT INCOME......... 0.023 0.020 0.016 0.009 0.013 0.011 0.015
NET REALIZED AND UNREALIZED
GAINS (LOSSES) ON
INVESTMENTS.................. 0.140 0.141 (0.039) 0.298 (0.056) 0.102 (0.129)
--------- --------- --------- --------- -------- -------- -----------
TOTAL FROM INVESTMENT
OPERATIONS................... 0.163 0.161 (0.023) 0.307 (0.043) 0.113 (0.114)
DIVIDENDS FROM NET INVESTMENT
INCOME....................... (0.025) (0.020) (0.016) (0.009) (0.013) (0.011) (0.015)
DISTRIBUTION FROM NET REALIZED
GAINS ON SECURITIES.......... (0.037) (0.011) 0.000 0.000 0.000 0.000 0.000
RETURN OF CAPITAL............. 0.000 0.000 0.000 0.000 0.000 0.000 0.000
--------- --------- --------- --------- -------- -------- -----------
TOTAL FROM DISTRIBUTIONS...... (0.062) (0.031) (0.016) (0.009) (0.013) (0.011) (0.015)
--------- --------- --------- --------- -------- -------- -----------
NET INCREASE (DECREASE) IN NET
ASSETS....................... 0.101 0.130 (0.039) 0.298 (0.056) 0.102 (0.129)
NET ASSET VALUE AT END OF
PERIOD....................... $ 1.407 $ 1.306 $ 1.176 $ 1.215 $ 0.917 $ 0.973 $ 0.871
--------- --------- --------- --------- -------- -------- -----------
--------- --------- --------- --------- -------- -------- -----------
TOTAL RETURN.................. 12.91% 13.93% (1.94)% 33.73% (4.43)% 13.00% (11.76)%
NET ASSETS (IN THOUSANDS)..... 996,543 686,475 563,765 281,608 47,560 22,854 9,352
RATIO OF OPERATING EXPENSES TO
AVERAGE NET ASSETS........... 0.79% 0.86% 0.85% 1.00% 1.23% 1.24% 1.04%*
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS........ 1.74% 1.60% 1.42% 0.84% 1.40% 1.17% 2.65%*
PORTFOLIO TURNOVER RATE....... 70.0% 55.6% 46.4% 31.8% 25.1% 24.7% 3.0%
AVERAGE COMMISSION RATE**..... n/a
</TABLE>
- ------------------------------
(a) The Fund was declared effective by the Securities and Exchange Commission
on July 2, 1990.
* Annualized.
** Not required for years prior to 1996.
<PAGE>
HARTFORD SMALL COMPANY FUND, INC. 7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP,
independent public accountants, whose report thereon is included in the
Statement of Additional Information, which is incorporated by reference to this
prospectus.
<TABLE>
<CAPTION>
(FOR A SHARE
OUTSTANDING THROUGHOUT
THE INDICATED PERIOD)
----------------------
08/09/96-
12/31/96(A)
----------------------
<S> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD............ $ 1.000
NET INVESTMENT INCOME............................. 0.002
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS...................................... 0.069
-------
TOTAL FROM INVESTMENT OPERATIONS.................. 0.071
DIVIDENDS FROM NET INVESTMENT INCOME.............. (0.002)
DISTRIBUTION FROM NET REALIZED GAINS ON
SECURITIES....................................... 0.000
RETURN OF CAPITAL................................. 0.000
-------
TOTAL FROM DISTRIBUTIONS.......................... (0.002)
-------
NET INCREASE (DECREASE) IN NET ASSETS............. 0.069
NET ASSET VALUE AT END OF PERIOD.................. $ 1.069
-------
-------
TOTAL RETURN...................................... 18.12%*
NET ASSETS (IN THOUSANDS)......................... 42,812
RATIO OF OPERATING EXPENSES TO AVERAGE NET
ASSETS........................................... 0.72%*
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS........................................... 0.31%*
PORTFOLIO TURNOVER RATE........................... 31.8%
AVERAGE COMMISSION RATE........................... 0.02900
</TABLE>
- ------------------------------
(a) The Fund was declared effective by the Securities and Exchange Commission
on August 9, 1996.
* Annualized. Management fees were waived until assets (excluding assets
contributed by companies affiliated with HL Advisors) reached $20 million.
The ratio of operating expenses to average net assets would have been higher
if management fees were not waived. The ratio of net investment income to
average net assets would have been lower if management fees were not waived.
<PAGE>
8 HARTFORD STOCK FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following information, insofar as it relates to each of the five years
in the period ended December 31, 1996, has been audited by Arthur Andersen LLP,
independent public accountants, whose report thereon is included in the
Statement of Additional Information, which is incorporated by reference to this
prospectus.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
--------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
---------- ---------- ----------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
AT BEGINNING
OF PERIOD..... $ 3.527 $ 2.801 $ 3.099 $ 2.965 $ 2.927 $ 2.452 $ 2.775 $ 2.304 $ 1.977 $ 2.177
NET INVESTMENT
INCOME........ 0.060 0.070 0.061 0.053 0.051 $ 0.059 $ 0.070 $ 0.065 $ 0.045 $ 0.045
NET REALIZED
AND UNREALIZED
GAINS (LOSSES)
ON
INVESTMENTS... 0.763 0.840 (0.111) 0.339 0.219 0.532 (0.179) 0.522 0.327 0.084
---------- ---------- ----------- --------- --------- --------- --------- --------- --------- ---------
TOTAL FROM
INVESTMENT
OPERATIONS.... 0.823 0.910 (0.050) 0.392 0.270 0.591 (0.109) 0.587 0.372 0.129
DIVIDENDS FROM
NET INVESTMENT
INCOME........ (0.059) (0.070) (0.061) (0.053) (0.051) (0.059) (0.070) (0.065) (0.045) (0.045)
DISTRIBUTION
FROM NET
REALIZED GAINS
ON
SECURITIES.... (0.148) (0.114) (0.187) (0.205) (0.181) (0.057) (0.144) (0.051) 0.000 (0.284)
RETURN OF
CAPITAL....... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
---------- ---------- ----------- --------- --------- --------- --------- --------- --------- ---------
TOTAL FROM
DISTRIBUTIONS... (0.207) (0.184) (0.248) (0.258) (0.232) (0.116) (0.214) (0.116) (0.045) (0.329)
---------- ---------- ----------- --------- --------- --------- --------- --------- --------- ---------
NET INCREASE
(DECREASE) IN
NET ASSETS.... 0.616 0.726 (0.298) 0.134 0.038 0.475 (0.323) 0.471 0.327 (0.200)
NET ASSET VALUE
AT END OF
PERIOD........ $ 4.143 $ 3.527 $ 2.801 $ 3.099 $ 2.965 $ 2.927 $ 2.452 $ 2.775 $ 2.304 $ 1.977
---------- ---------- ----------- --------- --------- --------- --------- --------- --------- ---------
---------- ---------- ----------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN... 24.33% 34.10% (1.89)% 14.34% 10.04% 24.58% (3.87)% 26.02% 19.00% 5.41%
NET ASSETS (IN
THOUSANDS).... 2,994,209 1,876,884 1,163,158 968,425 569,903 406,489 257,553 266,756 187,511 170,319
RATIO OF
OPERATING
EXPENSES TO
AVERAGE NET
ASSETS........ 0.46% 0.48% 0.50% 0.53% 0.57% 0.60% 0.66% 0.64% 0.65% 0.65%
RATIO OF NET
INVESTMENT
INCOME TO
AVERAGE NET
ASSETS........ 1.59% 2.23% 2.17% 1.86% 1.90% 2.14% 2.76% 2.31% 2.08% 1.83%
PORTFOLIO
TURNOVER
RATE.......... 42.3% 52.9% 63.8% 69.0% 69.8% 24.3% 20.2% 24.4% 22.9% 27.0%
AVERAGE
COMMISSION
RATE*......... 0.04900
</TABLE>
- ------------------------------
* Not required for years prior to 1996.
<PAGE>
HARTFORD ADVISERS FUND, INC. 9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following information, insofar as it relates to each of the five years
in the period ended December 31, 1996, has been audited by Arthur Andersen LLP,
independent public accountants, whose report thereon is included in the
Statement of Additional Information, which is incorporated by reference to this
prospectus.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
---------- ---------- ---------- ---------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
AT BEGINNING
OF PERIOD..... $ 1.958 $ 1.600 $ 1.752 $ 1.676 $ 1.649 $ 1.436 $ 1.543 $ 1.332 $ 1.213 $ 1.227
NET INVESTMENT
INCOME........ 0.059 0.064 0.054 0.050 0.059 $ 0.063 $ 0.074 $ 0.062 $ 0.051 $ 0.051
NET REALIZED
AND UNREALIZED
GAINS (LOSSES)
ON
INVESTMENTS... 0.255 0.377 (0.100) 0.145 0.070 0.223 (0.059) 0.221 0.119 0.025
---------- ---------- ---------- ---------- --------- --------- --------- --------- --------- ---------
TOTAL FROM
INVESTMENT
OPERATIONS.... 0.314 0.441 (0.046) 0.195 0.129 0.286 0.015 0.283 0.170 0.076
DIVIDENDS FROM
NET INVESTMENT
INCOME........ (0.059) (0.064) (0.054) (0.050) (0.059) (0.063) (0.074) (0.062) (0.051) (0.051)
DISTRIBUTION
FROM NET
REALIZED GAINS
ON
SECURITIES.... (0.044) (0.019) (0.052) (0.069) (0.043) (0.010) (0.048) (0.010) 0.000 (0.039)
RETURN OF
CAPITAL....... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
---------- ---------- ---------- ---------- --------- --------- --------- --------- --------- ---------
TOTAL FROM
DISTRIBUTIONS... (0.103) (0.083) (0.106) (0.119) (0.102) (0.073) (0.122) (0.072) (0.051) (0.090)
---------- ---------- ---------- ---------- --------- --------- --------- --------- --------- ---------
NET INCREASE
(DECREASE) IN
NET ASSETS.... 0.211 0.358 (0.152) 0.076 0.027 0.213 (0.107) 0.211 0.119 (0.014)
NET ASSET VALUE
AT END OF
PERIOD........ $ 2.169 $ 1.958 $ 1.600 $ 1.752 $ 1.676 $ 1.649 $ 1.436 $ 1.543 $ 1.332 $ 1.213
---------- ---------- ---------- ---------- --------- --------- --------- --------- --------- ---------
---------- ---------- ---------- ---------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN... 16.62% 28.34% (2.74)% 12.25% 8.30% 20.33% 1.26% 21.72% 14.24% 6.08%
NET ASSETS (IN
THOUSANDS).... 5,879,529 4,262,769 3,034,034 2,426,550 985,747 631,424 416,839 371,917 264,750 239,704
RATIO OF
OPERATING
EXPENSES TO
AVERAGE NET
ASSETS........ 0.63% 0.65% 0.65% 0.69% 0.78% 0.81% 0.89% 0.89% 0.90% 0.91%
RATIO OF NET
INVESTMENT
INCOME TO
AVERAGE NET
ASSETS........ 2.92% 3.57% 3.34% 3.07% 3.55% 4.13% 4.65% 4.14% 3.93% 4.00%
PORTFOLIO
TURNOVER
RATE.......... 53.8% 63.5% 60.0% 55.3% 72.8% 42.1% 35.7% 33.5% 30.9% 28.3%
AVERAGE
COMMISSION
RATE*......... 0.04870
</TABLE>
- ----------------------------------
* Not required for years prior to 1996.
<PAGE>
10 HARTFORD INTERNATIONAL ADVISERS FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP,
independent public accountants, whose report thereon is included in the
Statement of Additional Information, which is incorporated by reference to this
prospectus.
<TABLE>
<CAPTION>
(FOR A SHARE
OUTSTANDING THROUGHOUT
THE INDICATED PERIOD)
---------------------------
YEAR
ENDED 03/01/95-
12/31/96 12/31/95(A)
---------- ------------
<S> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD............ $ 1.109 $ 1.000
NET INVESTMENT INCOME............................. 0.040 0.030
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS...................................... 0.093 0.126
-------- -------
TOTAL FROM INVESTMENT OPERATIONS.................. 0.133 0.156
DIVIDENDS FROM NET INVESTMENT INCOME.............. (0.051) (0.030)
DISTRIBUTION FROM NET REALIZED GAINS ON
SECURITIES....................................... (0.024) (0.017)
RETURN OF CAPITAL................................. 0.000 0.000
-------- -------
TOTAL FROM DISTRIBUTIONS.......................... (0.075) (0.047)
-------- -------
NET INCREASE (DECREASE) IN NET ASSETS............. 0.058 0.109
NET ASSET VALUE AT END OF PERIOD.................. $ 1.167 $ 1.109
-------- -------
-------- -------
TOTAL RETURN...................................... 12.25% 15.84%
NET ASSETS (IN THOUSANDS)......................... 104,486 31,264
RATIO OF OPERATING EXPENSES TO AVERAGE NET
ASSETS........................................... 0.96% 0.65%*
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS........................................... 3.24% 3.36%*
PORTFOLIO TURNOVER RATE........................... 95.2% 47.2%
AVERAGE COMMISSION RATE**......................... 0.00640
</TABLE>
- ------------------------------
(a) The Fund was declared effective by the Securities and Exchange Commission
on March 1, 1995.
* Annualized. Management fees were waived until assets (excluding assets
contributed by companies affiliated with HL Advisors) reached $20 million.
The ratio of operating expenses to average net assets would have been higher
if management fees were not waived. The ratio of net investment income to
average net assets would have been lower if management fees were not waived.
** Not required for years prior to 1996.
<PAGE>
HARTFORD BOND FUND, INC. 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following information, insofar as it relates to each of the five years
in the period ended December 31, 1996, has been audited by Arthur Andersen LLP,
independent public accountants, whose report thereon is included in the
Statement of Additional Information, which is incorporated by reference to this
prospectus.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
--------- --------- --------- --------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING
OF PERIOD............... $ 1.028 $ 0.926 $ 1.044 $ 1.024 $ 1.061 $ 0.979 $ 0.976 $ 0.945 $ 0.952 $ 1.033
NET INVESTMENT INCOME.... 0.064 0.064 0.060 0.062 0.074 $ 0.072 $ 0.075 $ 0.079 $ 0.077 $ 0.080
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON
INVESTMENTS............. (0.029) 0.102 (0.100) 0.039 (0.019) 0.082 0.003 0.031 (0.007) (0.081)
--------- --------- --------- --------- -------- -------- -------- -------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS.............. 0.035 0.166 (0.040) 0.101 0.055 0.154 0.078 0.110 0.070 (0.001)
DIVIDENDS FROM NET
INVESTMENT
INCOME.................. (0.063) (0.064) (0.060) (0.062) (0.074) (0.072) (0.075) (0.079) (0.077) (0.080)
DISTRIBUTION FROM NET
REALIZED GAINS ON
SECURITIES.............. 0.000 0.000 (0.018) (0.019) (0.018) 0.000 0.000 0.000 0.000 0.000
RETURN OF CAPITAL........ 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
--------- --------- --------- --------- -------- -------- -------- -------- -------- --------
TOTAL FROM
DISTRIBUTIONS........... (0.063) (0.064) (0.078) (0.081) (0.092) (0.072) (0.075) (0.079) (0.077) (0.080)
--------- --------- --------- --------- -------- -------- -------- -------- -------- --------
NET INCREASE (DECREASE)
IN NET ASSETS........... (0.028) 0.102 (0.118) 0.020 (0.037) 0.082 0.003 0.031 (0.007) (0.081)
NET ASSET VALUE AT END OF
PERIOD.................. $ 1.000 $ 1.028 $ 0.926 $ 1.044 $ 1.024 $ 1.061 $ 0.979 $ 0.976 $ 0.945 $ 0.952
--------- --------- --------- --------- -------- -------- -------- -------- -------- --------
--------- --------- --------- --------- -------- -------- -------- -------- -------- --------
TOTAL RETURN............. 3.54% 18.49% (3.95)% 10.24% 5.53% 16.43% 8.39% 12.10% 7.60% (0.01)%
NET ASSETS (IN
THOUSANDS).............. 402,548 342,495 247,458 239,602 128,538 97,377 70,915 61,602 54,215 50,037
RATIO OF OPERATING
EXPENSES TO AVERAGE NET
ASSETS.................. 0.52% 0.53% 0.55% 0.57% 0.64% 0.66% 0.67% 0.67% 0.69% 0.69%
RATIO OF NET INVESTMENT
INCOME TO AVERAGE NET
ASSETS.................. 6.37% 6.51% 6.23% 5.93% 7.21% 7.29% 7.82% 8.09% 8.12% 8.15%
PORTFOLIO TURNOVER
RATE.................... 212.0% 215.0% 328.8% 494.3% 434.1% 337.0% 161.6% 225.0% 230.3% 53.3%
CURRENT YIELD*........... 6.25% 6.46% 7.19% 4.93% 6.48% 6.62% 8.17% 7.92% 9.15% 8.67%
</TABLE>
- ------------------------------
* The yield information will fluctuate and publication of yield may not provide
a basis for comparison with bank deposits, other investments which are insured
and/or pay a fixed yield for a stated period of time, or other investment
companies. In addition, information may be of limited use for comparative
purposes because it does not reflect charges imposed at the Separate Account
level which, if included, would decrease the yield.
<PAGE>
12 HARTFORD MORTGAGE SECURITIES FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following information, insofar as it relates to each of the five years
in the period ended December 31, 1996, has been audited by Arthur Andersen LLP,
independent public accountants, whose report thereon is included in the
Statement of Additional Information, which is incorporated by reference to this
prospectus.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
---------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
--------- --------- --------- --------- --------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING
OF PERIOD.............. $ 1.071 $ 0.984 $ 1.075 $ 1.079 $ 1.115 $ 1.054 $ 1.045 $ 1.006 $ 1.011 $ 1.087
NET INVESTMENT INCOME... 0.069 0.068 0.068 0.071 0.086 $ 0.088 $ 0.087 $ 0.088 $ 0.087 $ 0.093
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON
INVESTMENTS............ (0.018) 0.087 (0.086) (0.004) (0.036) 0.061 0.009 0.039 (0.005) (0.067)
--------- --------- --------- --------- --------- --------- -------- -------- -------- ---------
TOTAL FROM INVESTMENT
OPERATIONS............. 0.051 0.155 (0.018) 0.067 0.050 0.149 0.096 0.127 0.082 0.026
DIVIDENDS FROM NET
INVESTMENT INCOME...... (0.066) (0.068) (0.068) (0.071) (0.086) (0.088) (0.087) (0.088) (0.087) (0.093)
DISTRIBUTION FROM NET
REALIZED GAINS ON
SECURITIES............. 0.000 0.000 (0.005) 0.000 0.000 0.000 0.000 0.000 0.000 (0.009)
RETURN OF CAPITAL....... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
--------- --------- --------- --------- --------- --------- -------- -------- -------- ---------
TOTAL FROM
DISTRIBUTIONS.......... (0.066) (0.068) (0.073) (0.071) (0.086) (0.088) (0.087) (0.088) (0.087) (0.102)
--------- --------- --------- --------- --------- --------- -------- -------- -------- ---------
NET INCREASE (DECREASE)
IN NET ASSETS.......... (0.015) 0.087 (0.091) (0.004) (0.036) 0.061 0.009 0.039 (0.005) (0.076)
NET ASSET VALUE AT END
OF PERIOD.............. $ 1.056 $ 1.071 $ 0.984 $ 1.075 $ 1.079 $ 1.115 $ 1.054 $ 1.045 $ 1.006 $ 1.011
--------- --------- --------- --------- --------- --------- -------- -------- -------- ---------
--------- --------- --------- --------- --------- --------- -------- -------- -------- ---------
TOTAL RETURN............ 4.99% 16.17% (1.61)% 6.31% 4.64% 14.71% 9.70% 13.13% 8.38% 2.64%
NET ASSETS (IN
THOUSANDS)............. 325,495 327,565 304,147 365,198 258,711 162,484 105,620 85,908 85,075 84,075
RATIO OF OPERATING
EXPENSES TO AVERAGE NET
ASSETS................. 0.45% 0.47% 0.48% 0.49% 0.56% 0.58% 0.58% 0.58% 0.60% 0.61%
RATIO OF NET INVESTMENT
INCOME TO AVERAGE NET
ASSETS................. 6.67% 6.50% 6.65% 6.49% 7.96% 8.25% 8.42% 8.64% 8.56% 9.02%
PORTFOLIO TURNOVER
RATE................... 200.0% 489.4% 365.7% 183.4% 277.2% 152.2% 85.6% 91.3% 185.0% 143.6%
CURRENT YIELD*.......... 6.67% 6.90% 7.84% 5.73% 7.51% 8.16% 8.21% 8.28% 9.12% 9.41%
</TABLE>
- ------------------------------
* The yield information will fluctuate and publication of yield may not provide
a basis for comparison with bank deposits, other investments which are
insured and/or pay a fixed yield for a stated period of time, or other
investment companies. In addition, information may be of limited use for
comparative purposes because it does not reflect charges imposed at the
Separate Account level which, if included, would decrease the yield.
<PAGE>
HVA MONEY MARKET FUND, INC. 13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following information, insofar as it relates to each of the five years
in the period ended December 31, 1996, has been audited by Arthur Andersen LLP,
independent public accountants, whose report thereon is included in the
Statement of Additional Information, which is incorporated by reference to this
prospectus.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF
PERIOD............... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
NET INVESTMENT
INCOME............... 0.050 0.056 0.039 0.029 0.036 $ 0.059 $ 0.078 $ 0.088 $ 0.071 $ 0.063
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON
INVESTMENTS.......... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS........... 0.050 0.056 0.039 0.029 0.036 0.059 0.078 0.088 0.071 0.063
DIVIDENDS FROM NET
INVESTMENT INCOME.... (0.050) (0.056) (0.039) (0.029) (0.036) (0.059) (0.078) (0.088) (0.071) (0.063)
DISTRIBUTION FROM NET
REALIZED GAINS ON
SECURITIES........... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
RETURN OF CAPITAL..... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL FROM
DISTRIBUTIONS........ (0.050) (0.056) (0.039) (0.029) (0.036) (0.059) (0.078) (0.088) (0.071) (0.063)
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
NET INCREASE
(DECREASE) IN NET
ASSETS............... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
NET ASSET VALUE AT END
OF
PERIOD............... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN.......... 5.09% 5.74% 3.95% 2.94% 3.63% 6.01% 8.09% 9.10% 7.40% 6.49%
NET ASSETS (IN
THOUSANDS)........... 542,586 339,709 321,465 234,088 190,246 177,483 194,462 129,808 127,346 104,002
RATIO OF OPERATING
EXPENSES TO AVERAGE
NET ASSETS........... 0.44% 0.45% 0.47% 0.48% 0.53% 0.54% 0.57% 0.58% 0.58% 0.58%
RATIO OF NET
INVESTMENT INCOME TO
AVERAGE NET ASSETS... 5.04% 5.57% 3.99% 2.91% 3.60% 5.88% 7.80% 8.75% 7.19% 6.36%
PORTFOLIO TURNOVER
RATE................. -- -- -- -- -- -- -- -- -- --
CURRENT YIELD*........ 5.1% 5.40% 5.43% 2.89% 3.09% 4.66% 7.73% 8.21% 8.49% 7.17%
EFFECTIVE YIELD*...... 5.23% 5.54% 5.58% 2.93% 3.14% 4.79% 8.03% 8.55% 8.85% 7.43%
</TABLE>
- ------------------------------
* The yield information will fluctuate and publication of yield may not provide
a basis for comparison with bank deposits, other investments which are
insured and/or pay a fixed yield for a stated period of time, or other
investment companies. In addition, information may be of limited use for
comparative purposes because it does not reflect charges imposed at the
Separate Account level which, if included, would decrease the yield.
<PAGE>
14 HARTFORD U.S. GOVERNMENT MONEY MARKET FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following information, insofar as it relates to each of the five years
in the period ended December 31, 1996, has been audited by Arthur Andersen LLP,
independent public accountants, whose report thereon is included in the
Statement of Additional Information, which is incorporated by reference to this
prospectus.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
--------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
----------- -------- ----------- ----------- -------- -------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET
VALUE AT
BEGINNING OF
PERIOD....... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
NET INVESTMENT
INCOME....... 0.048 0.054 0.036 0.027 0.032 $ 0.055 $ 0.073 $ 0.081 $ 0.067 $ 0.056
NET REALIZED
AND
UNREALIZED
GAINS
(LOSSES) ON
INVESTMENTS... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
----------- -------- ----------- ----------- -------- -------- -------- ----------- ----------- -----------
TOTAL FROM
INVESTMENT
OPERATIONS... 0.048 0.054 0.036 0.027 0.032 0.055 0.073 0.081 0.067 0.056
DIVIDENDS FROM
NET
INVESTMENT
INCOME....... (0.048) (0.054) (0.036) (0.027) (0.032) (0.055) (0.073) (0.081) (0.067) (0.056)
DISTRIBUTION
FROM NET
REALIZED
GAINS ON
SECURITIES... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
RETURN OF
CAPITAL...... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
----------- -------- ----------- ----------- -------- -------- -------- ----------- ----------- -----------
TOTAL FROM
DISTRI
BUTIONS...... (0.048) (0.054) (0.036) (0.027) (0.032) (0.055) (0.073) (0.081) (0.067) (0.056)
----------- -------- ----------- ----------- -------- -------- -------- ----------- ----------- -----------
NET INCREASE
(DECREASE) IN
NET ASSETS... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
NET ASSET
VALUE AT END
OF
PERIOD....... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- -------- ----------- ----------- -------- -------- -------- ----------- ----------- -----------
----------- -------- ----------- ----------- -------- -------- -------- ----------- ----------- -----------
TOTAL
RETURN....... 4.87% 5.52% 3.67% 2.68% 3.22% 5.61% 7.52% 8.43% 6.92% 5.75%
NET ASSETS (IN
THOUSANDS)... 11.730 10,070 9,619 9,449 10,525 11,257 10,496 7,814 7,262 5,688
RATIO OF
OPERATING
EXPENSES TO
AVERAGE NET
ASSETS....... 0.58% 0.57% 0.58% 0.58% 0.75% 0.73% 0.73% 0.77% 0.75% 0.66%
RATIO OF NET
INVESTMENT
INCOME TO
AVERAGE NET
ASSETS....... 4.77% 5.38% 3.63% 2.65% 3.19% 5.48% 7.29% 8.14% 6.76% 5.57%
PORTFOLIO
TURNOVER
RATE......... -- -- -- -- -- -- -- -- -- --
CURRENT
YIELD*....... 4.88% 5.47% 5.14% 2.67% 2.69% 4.24% 7.59% 7.53% 8.27% 6.17%
EFFECTIVE
YIELD*....... 4.995% 5.62% 5.27% 2.71% 2.72% 4.31% 7.88% 7.82% 8.62% 6.36%
</TABLE>
- ------------------------------
* The yield information will fluctuate and publication of yield may not provide
a basis for comparison with bank deposits, other investments which are
insured and/or pay a fixed yield for a stated period of time, or other
investment companies. In addition, information may be of limited use for
comparative purposes because it does not reflect charges imposed at the
Separate Account level which, if included, would decrease the yield.
<PAGE>
HARTFORD MUTUAL FUNDS 15
- --------------------------------------------------------------------------------
- -------------------------------------------
INTRODUCTION TO THE
HARTFORD MUTUAL FUNDS
The Funds are made available to serve as the underlying investment vehicles
for certain variable annuity and variable life insurance separate accounts of
The Hartford Life Insurance Companies. Each Fund is an open-end management
investment company, commonly known as a mutual fund, organized as a Maryland
corporation. 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.
HL Investment Advisors, Inc. ("HL Advisors") is the investment manager to
each Fund. In addition, under HL Advisors' general management, Wellington
Management Company, LLP ("Wellington Management") serves as sub-adviser to the
Capital Appreciation Fund, Dividend and Growth Fund, International Advisers
Fund, International Opportunities Fund, MidCap Fund, Small Company Fund, Stock
Fund, and Advisers Fund. In addition, under HL Advisors' general management, the
Hartford Investment Management Company ("HIMCO") provides investment management
services for the Index Fund, Bond Fund, Mortgage Securities Fund, U.S.
Government Money Market Fund and HVA Money Market Fund.
HL Advisors was incorporated in Connecticut in 1981 and 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
was incorporated in 1996 and is a wholly-owned subsidiary of The Hartford. As of
December 31, 1996, HL Advisors, HIMCO and their affiliates had investment
management authority with respect to approximately $47 billion of assets for
various clients. As of the same date, Wellington Management had investment
management authority with respect to approximately $133 billion of assets for
various clients.
- ---------------------------------------------------
INVESTMENT OBJECTIVES AND
STYLES OF THE FUNDS
The Funds have different investment objectives and policies, as described
below. The differences in objectives and policies among the Funds can be
expected to affect the return of each Fund and the degree of market and
financial risk to which each Fund is subject. For more information about the
investment strategies employed by the Funds, see "Common Investment Policies and
Risk Factors." The investment objective of each Fund and certain other
investment restrictions enumerated in detail in the SAI are considered
fundamental and cannot be changed without the affirmative vote of a majority of
the outstanding voting securities of the particular Fund. All other policies not
specifically designated as fundamental are nonfundamental and may be changed by
the Board of Directors of the particular Fund. See the SAI for a complete
listing of investment restrictions. Stated below is the investment objective and
investment style for each Fund. For a description of each Fund's investment
policies and risk factors, see "Common Investment Policies and Risk Factors."
- ---------------------------------------------------
HARTFORD CAPITAL APPRECIATION FUND, INC.
Hartford Capital Appreciation Fund, Inc. (the "Capital Appreciation Fund")
was incorporated in 1983 under Maryland law.
INVESTMENT OBJECTIVE.
The Capital Appreciation Fund seeks growth of capital by investing in
securities selected solely on the basis of potential for capital appreciation;
income, if any, is an incidental consideration.
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
<PAGE>
16 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
Fund's total assets may be invested in securities of non-U.S. companies.
- ---------------------------------------------------
HARTFORD DIVIDEND AND GROWTH FUND, INC.
Hartford Dividend and Growth Fund, Inc. (the "Dividend and Growth Fund") was
incorporated in 1993 under Maryland law.
INVESTMENT OBJECTIVE.
The Dividend and Growth Fund seeks a high level of current income consistent
with growth of capital and reasonable investment risk.
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 is broadly
diversified by industry and company. Up to 20% of the Dividend and Growth Fund's
total assets may be invested in securities of non-U.S. companies.
- ---------------------------------------------------
HARTFORD INDEX FUND, INC.
Hartford Index Fund, Inc. (the "Index Fund") was incorporated in 1983 under
Maryland law.
INVESTMENT OBJECTIVE.
The Index Fund seeks to provide investment results which approximate the
price and yield performance of publicly-traded common stocks in the aggregate.
INVESTMENT STYLE.
The Index Fund uses the Standard & Poor's 500 Composite Stock Price Index
(the "Index") as its standard performance comparison because it represents a
significant proportion of the total market value of all common stocks, is well
known to investors and, in the opinion of the management of the Index Fund, is
representative of the performance of publicly-traded common stocks. Therefore,
the Index Fund attempts to approximate the capital performance and dividend
income of the Index.
The Index Fund generally invests in no fewer than 499 stocks. HIMCO selects
stocks for the Index Fund's portfolio after taking into account their individual
weights in the Index. Temporary cash balances, normally not expected to exceed
2% of the Index Fund's net assets, may be invested in short-term money market
instruments.
The Index is comprised of 500 selected common stocks, most of which are
listed on the New York Stock Exchange. Standard & Poor's Corporation ("S&P")
chooses the stocks to be included in the Index on a proprietary basis. The
weightings of stocks in the Index are based on each stock's relative total
market value, that is, its market price per share times the number of shares
outstanding. Because of this weighting, as of December 31, 1996, approximately
fifty percent of the Index was composed of the fifty-six largest companies, the
five largest being General Electric Co., Coca-Cola Company, Exxon Corp., Intel
Corp. and Microsoft Corp.
No attempt is made to "manage" the Index Fund's portfolio in the traditional
sense, using economic, financial and market analysis, nor will the adverse
financial situation of a company directly result in its elimination from the
Index Fund's portfolio unless, of course, the company is removed from the Index.
From time to time administrative adjustments may be made in the Index Fund's
portfolio because of mergers, changes in the composition of the Index and
similar reasons.
The Index Fund's ability to approximate the performance of the Index will
depend to some extent on the size of cash flows into and out of the Index Fund.
Investment changes to accommodate these cash flows will be made to maintain the
similarity of the Index Fund's portfolio to the Index, to the maximum
practicable extent.
"Standard & Poor's-Registered Trademark-", "S&P-Registered Trademark-", "S&P
500-Registered Trademark-", "Standard & Poor's 500", and "500" are trademarks of
The McGraw-Hill Companies, Inc. and have been licensed for use by Hartford Life
Insurance Company. The Index Fund is not sponsored, endorsed, sold or promoted
by S&P. S&P makes no representation or warranty, express or implied, to the
shareholders of the Index Fund regarding the advisability of investing in
securities generally or in the Index Fund particularly or the ability of the S&P
500 Index to track general stock market performance. S&P's only relationship to
Hartford Life Insurance Company is the licensing of certain trademarks and trade
names of S&P and of the S&P 500 Index which is determined, composed and
calculated by S&P without regard to the Index Fund or Hartford Life Insurance
Company. S&P has no obligation to take the needs of the Index Fund or its
shareholders, or Hartford Life Insurance Company, into consideration in
determining, composing or calculating the S&P 500 Index. S&P is not responsible
for and has not participated in the determination of the net asset value of the
Index Fund or the timing of the issuance or sale of shares in the Index Fund.
S&P has
<PAGE>
HARTFORD MUTUAL FUNDS 17
- --------------------------------------------------------------------------------
no obligation or liability in connection with the administration, marketing or
trading of the Index Fund.
In addition, S&P does not guarantee the accuracy and/ or the completeness of
the S&P 500 Index or any data included therein and S&P shall have no liability
for any errors, omissions, or interruptions therein. S&P makes no warranty,
express or implied, as to results to be obtained by the Index Fund, its
shareholders or any other person or entity from the use of the S&P 500 Index or
any data included therein. S&P makes no express or implied warranties, and
expressly disclaims all warranties of merchantability or fitness for a
particular purpose or use with respect to the S&P 500 Index or any data included
therein. Without limiting any of the foregoing, in no event shall S&P have any
liability for any special, punitive, indirect, or consequential damages
(including lost profits), even if notified of the possibility of such damages.
- ---------------------------------------------------
HARTFORD INTERNATIONAL OPPORTUNITIES
FUND, INC.
Hartford International Opportunities Fund, Inc. (the "International
Opportunities Fund") was incorporated in 1990 under Maryland law.
INVESTMENT OBJECTIVE.
The International Opportunities Fund seeks long-term total rate of return
consistent with prudent investment risk through investment 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. Under normal market
conditions, at least 65% of the International Opportunities Fund's total assets
are invested in equity securities issued by non-U.S. companies. Wellington
Management uses a three-pronged approach. First, Wellington Management
determines the relative attractiveness of the many countries in which the
International Opportunities Fund may invest based upon the economic and
political environment of each country. Second, Wellington Management evaluates
industries on a global basis to determine which industries offer the most value
and potential for capital appreciation given current and projected global and
local economic and market conditions. Finally, Wellington Management conducts
fundamental research on individual companies and considers companies for
inclusion in the International Opportunities Fund's portfolio that are typically
larger, high quality companies that operate in established markets. Fundamental
analysis involves the assessment of a company through such factors as its
business environment, management, balance sheet, income statement, anticipated
earnings, revenues, dividends, and other related measures of value. In analyzing
companies for investment, Wellington Management looks for, among other things, a
strong balance sheet, attractive industry dynamics, strong competitive
advantages and attractive relative value within the context of a security's
primary trading market. The International Opportunities Fund may also invest on
a limited basis in smaller companies and less developed markets. The
International Opportunities Fund anticipates that, under normal market
conditions, it will diversify its investments in at least three countries other
than the United States. The International Opportunities Fund will be subject to
certain risks because it invests primarily in securities issued by non-U.S.
companies.
- ---------------------------------------------------
HARTFORD MIDCAP FUND, INC.
Hartford MidCap Fund, Inc. (the "MidCap Fund") was incorporated in 1997
under Maryland law.
INVESTMENT OBJECTIVE.
The MidCap Fund seeks to achieve long-term capital growth through capital
appreciation by investing primarily in equity securities.
INVESTMENT STYLE.
The MidCap Fund seeks to achieve its objective by investing in a diversified
portfolio of primarily equity securities and securities convertible into equity
securities. Under normal market and economic conditions at least 65% of the
MidCap Fund's total assets are invested in equity securities of companies with
market capitalizations between $1 billion and $6 billion. The MidCap Fund uses 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, and demographic trends. 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 MidCap Fund's portfolio emphasizes
high-quality growth companies. The key characteristics of high quality companies
include a leadership position within an industry, a strong balance sheet, a high
return on equity, and a strong management team. Fundamental analysis involves
the assessment of a company through such factors as its business environment,
management, balance sheet, income statement, anticipated earnings, revenues, and
other related measures of value. Up to 20% of the MidCap
<PAGE>
18 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
Fund's total assets may be invested in securities of non-U.S. companies.
- ---------------------------------------------------
HARTFORD SMALL COMPANY FUND, INC.
Hartford Small Company Fund, Inc. (the "Small Company Fund") was
incorporated in 1996 under Maryland law.
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."
- ---------------------------------------------------
HARTFORD STOCK FUND, INC.
Hartford Stock Fund, Inc. (the "Stock Fund") was incorporated in 1976 under
Maryland law.
INVESTMENT OBJECTIVE.
The Stock Fund seeks long-term capital growth primarily through capital
appreciation, with income a secondary consideration, by investing in primarily
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.
- ---------------------------------------------------
HARTFORD ADVISERS FUND, INC.
Hartford Advisers Fund, Inc. (the "Advisers Fund") was incorporated in 1982
under Maryland law.
INVESTMENT OBJECTIVE.
The Advisers Fund seeks maximum long-term total rate of return consistent
with prudent investment risk by investing in common stock and other equity
securities, bonds and other debt securities, and money market instruments.
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
<PAGE>
HARTFORD MUTUAL FUNDS 19
- --------------------------------------------------------------------------------
Fund." The debt securities in which the Advisers Fund may invest include
securities issued or guaranteed by the U.S. Government and its agencies or
instrumentalities, securities rated investment grade, or if unrated, are deemed
by Wellington Management to be of comparable quality, and with respect to 5% of
the Advisers Fund's assets, securities rated below investment grade which are
known as high yield-high risk securities or junk bonds. The money market
instruments in which the Adviser's Fund may invest are described under "Common
Investment Policies and Risk Factors -- Money Market Instruments and Temporary
Investment Strategies." Up to 20% of the Advisers Fund's total assets may be
invested in securities of non-U.S. companies.
- ---------------------------------------------------
HARTFORD INTERNATIONAL ADVISERS FUND, INC.
Hartford International Advisers Fund, Inc. (the "International Advisers
Fund") was incorporated in 1994 under Maryland law.
INVESTMENT OBJECTIVE.
The International Advisers Fund seeks maximum long-term total rate of return
consistent with prudent investment risk.
INVESTMENT STYLE.
The International 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
International Advisers Fund will normally have some portion of its assets
invested in each asset category. The International Advisers Fund does not have
percentage limitations on the amount that may be allocated to each asset
category. The International Advisers Fund's investments in equity securities are
substantially similar to the equity securities investments permitted for the
International Opportunities Fund. See "Hartford International Opportunities
Fund, Inc. -- Investment Style."
The International Advisers Fund consists of a diversified portfolio of
securities covering a broad range of countries, industries, and companies. The
International Advisers Fund anticipates that, under normal market conditions, it
will diversify its investments in at least three countries other than the United
States.
Securities in which the International Advisers Fund invests are denominated
in both U.S. dollars and non-U.S. currencies (including the European Currency
Unit) and generally are traded on non-U.S. markets.
Debt securities in which the International Advisers Fund may invest include
investment grade, non-convertible debt securities assigned within the four
highest bond rating categories by Moody's Investors Service, Inc. ("Moody's") or
S&P, or, if unrated, which are determined by Wellington Management to be of
comparable quality. In addition, the International Advisers Fund may invest up
to 15% of its total assets in high yield-high risk securities, commonly known as
"junk bonds." Such securities may be rated as low as "C" by Moody's and by S&P,
or, if unrated, are of comparable quality as determined by Wellington
Management.
- ---------------------------------------------------
HARTFORD BOND FUND, INC.
Hartford Bond Fund, Inc. (the "Bond Fund") was incorporated in 1982 under
Maryland law.
INVESTMENT OBJECTIVE.
The Bond Fund seeks maximum current income consistent with preservation of
capital by investing primarily in fixed-income securities.
INVESTMENT STYLE.
The Bond Fund is comprised of a diversified portfolio of fixed-income
securities. Under normal circumstances at least 80% of the Bond Fund's portfolio
is invested in investment grade bond-type securities. Up to 20% of the Bond Fund
may be invested in securities rated in the highest category of below investment
grade bonds ("Ba" by Moody's or "BB" by 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 are 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 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 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 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 Fund will
not invest in common stocks directly, but may retain, for reasonable periods of
time, common stocks
<PAGE>
20 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
acquired upon conversion of debt securities or upon exercise of warrants
acquired with debt securities. Under normal circumstances, up to 20% of the Bond
Fund's total assets may be invested in securities of non-U.S. companies.
- ---------------------------------------------------
HARTFORD MORTGAGE SECURITIES FUND, INC.
Hartford Mortgage Securities Fund, Inc. (the "Mortgage Securities Fund") was
incorporated in 1984 under Maryland law.
INVESTMENT OBJECTIVE.
The Mortgage Securities Fund seeks maximum current income consistent with
safety of principal and maintenance of liquidity by investing primarily in
mortgage-related securities, including securities issued by the Government
National Mortgage Association.
INVESTMENT STYLE.
The Mortgage Securities Fund seeks to achieve its objective by investing,
under normal circumstances, at least 65% of its total assets in high quality
mortgage-related securities either (i) issued by U.S. Government agencies,
instrumentalities or sponsored corporations or (ii) rated A or better by Moody's
or S&P or, if not rated, which are of equivalent investment quality as
determined by HIMCO. At times the Mortgage Securities Fund may invest in
mortgage-related securities not meeting the foregoing investment quality
standards when HIMCO deems such investments to be consistent with the Fund's
investment objective; however, no such investments will be made in excess of 20%
of the value of the Fund's total assets. Such investments will be considered
mortgage-related securities for purposes of the policy that the Fund invest at
least 65% of the value of its total assets in mortgage-related securities,
including securities issued by the GNMA.
- ---------------------------------------------------
HARTFORD U.S. GOVERNMENT MONEY MARKET
FUND, INC.
Hartford U.S. Government Money Market Fund, Inc. (the "U.S. Government Money
Market Fund") was incorporated in 1982 under Maryland law.
INVESTMENT OBJECTIVE.
The U.S. Government Money Market Fund seeks maximum current income
consistent with preservation of capital.
INVESTMENT STYLE.
The U.S. Government 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 U.S. Government 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 U.S. Government Money Market
Fund will be U.S. dollar denominated.
The U.S. Government Money Market Fund seeks to achieve its objective by
investing in short-term, marketable obligations issued or guaranteed by the U.S.
Government or by agencies or instrumentalities of the U.S. Government, whether
or not they are guaranteed by the full faith and credit of the U.S. Government.
- ---------------------------------------------------
HVA MONEY MARKET FUND, INC.
HVA Money Market Fund, Inc. (the "Money Market Fund") was incorporated in
1982 under Maryland law.
INVESTMENT OBJECTIVE.
The Money Market Fund seeks maximum current income consistent with liquidity
and preservation of capital.
INVESTMENT STYLE.
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 and the U.S. Government 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.
<PAGE>
HARTFORD MUTUAL FUNDS 21
- --------------------------------------------------------------------------------
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 Fund's Board of Directors has
established standards for evaluation of the creditworthiness of the banks and
securities dealers with which the Funds may engage in repurchase agreements and
monitors on a quarterly basis HIMCO'S and Wellington Management's compliance
with such standards. Presently, each Fund may enter into repurchase agreements
only with commercial banks with at least $500 million in capital and $1 billion
in assets or with recognized government securities dealers with a minimum net
capital of $100 million.
- ---------------------------------------------------
REVERSE REPURCHASE AGREEMENTS
Each Fund may also enter into reverse repurchase agreements. Reverse
repurchase agreements involve sales by a Fund of portfolio assets concurrently
with an agreement by a Fund to repurchase the same assets at a later date at a
fixed price. Reverse repurchase agreements carry the risk that the market value
of the securities which a Fund is obligated to repurchase may decline below the
repurchase price. A reverse repurchase agreement 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 Fund's custodian bank in which a Fund will maintain liquid
assets 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 (International Opportunities Fund,
International Advisers Fund, Advisers Fund, Bond Fund, Mortgage Securities Fund
and Money Market Fund only); (4) mortgage-related securities, including
collateralized mortgage obligations ("CMO's") (International Opportunities Fund,
International Advisers Fund, Advisers Fund, Bond Fund and Mortgage Securities
Fund only); and (5) 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 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 Capital Appreciation Fund, Advisers Fund, MidCap Fund, Advisers Fund and
International Opportunities Fund may invest up to 5% of their assets and the
International Advisers Fund may invest up to 15% of its assets in high yield
debt securities (i.e., rated as low as "C" by Moody's or S&P, and unrated
securities of comparable quality as determined by Wellington Management). The
Bond Fund may invest up to 20% of its assets in securities rated in the highest
level below investment grade ("Ba" by
<PAGE>
22 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
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 Appendix A. 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, International Advisers Fund, International Opportunities
Fund, Bond Fund and Mortgage Securities Fund may invest in mortgage-backed
securities and the Advisers Fund, International Advisers Fund, International
Opportunities Fund, Bond Fund, Mortgage Securities Fund and Money Market Fund
may invest in asset-backed securities. Mortgage-backed securities represent a
participation in, or are secured by, mortgage loans and include securities
issued or guaranteed by the U.S. Government or one of its agencies or
instrumentalities; securities issued by private issuers that represent an
interest in, or are collateralized by, mortgage-backed securities issued or
guaranteed by the U.S. Government or one or its agencies or instrumentalities;
or securities issued by private issuers that represent an interest in or are
collateralized by mortgage loans or mortgage-backed securities without a
government guarantee but usually having some form of private credit enhancement.
Asset-backed securities are structured like mortgage-backed securities, but
instead of mortgage loans or interests in mortgage loans, the underlying assets
may include motor vehicle installment sales or installment loan contracts,
leases of various types of real and personal property, and receivables from
credit card agreements.
Due to the risk of prepayment, especially when interest rates decline,
mortgage-backed and asset-backed securities are less effective than other types
of securities as a means of "locking in" attractive long-term interest rates
and, as a result, may have less potential for capital appreciation during
periods of declining interest rates than other securities of comparable
maturities. The ability of an issuer of asset-backed securities to enforce its
security interest in the underlying assets may be limited.
- ---------------------------------------------------
EQUITY SECURITIES
All Funds except the Bond Fund, Mortgage Securities Fund, U.S. Government
Money Market Fund and Money Market Fund may invest in equity securities
including common stocks, preferred stocks, convertible preferred stock and
rights to acquire such securities. In addition, these Funds may invest in
securities such as bonds, debentures and corporate notes which are convertible
into common stock at the option of the holder. The Bond 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 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 Bond Fund, Mortgage Securities Fund, U.S. Government
Money Market Fund and Money Market Fund may invest in equity securities
(including securities issued in initial public offerings) of companies 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 and may have less historical data with
respect to operations and management. 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. In
addition, companies whose securities are offered in initial public offerings may
be more dependant on a limited number of key employees. Because securities
issued in initial public offerings are being offered to the public for the first
time, the market for such securities may be inefficient and less liquid.
- ---------------------------------------------------
NON-U.S. SECURITIES
Under normal circumstances the International Opportunities Fund and
International Advisers Fund intend to invest at least 65% of their assets in
securities issued by non-U.S. companies ("non-U.S. securities"). In addition,
the International Opportunities Fund and International Advisers Fund may invest
in commingled pools offered by non-U.S. banks. Each other Fund, except the
Mortgage Securities Fund and the U.S. Government Money Market Fund, is permitted
to invest up to 20% of its assets, and the Money Market Fund is permitted to
invest up to 25% of its assets, in non-U.S. securities. The Bond Fund intends to
purchase securities denominated in U.S. dollars, or if not so
<PAGE>
HARTFORD MUTUAL FUNDS 23
- --------------------------------------------------------------------------------
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 Bond Fund, U.S. Government Money Market Fund and Money Market 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 and International
Advisers Fund will focus on companies that operate in established markets, from
time to time the Funds may invest up to 25% of their 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 Index Fund, Mortgage Securities Fund, U.S. Government
Money Market Fund and Money Market Fund, may engage in currency transactions to
hedge the value of portfolio securities denominated in particular currencies
against fluctuations in relative value. Currency transactions include forward
currency contracts, currency swaps, exchange-listed and over-the-counter ("OTC")
currency futures contracts and options thereon and exchange listed and OTC
options on currencies.
Forward currency contracts involve a privately negotiated obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. Currency swaps are agreements to exchange
cash flows based on the notional difference between or among two or more
currencies. See "Swap Agreements."
The use of currency transactions to protect the value of a Fund's assets
against a decline in the value of a currency does not eliminate potential losses
arising from fluctuations in the value of the Fund's underlying securities.
Further, the Funds may enter into currency transactions only with counterparties
that HIMCO or Wellington Management deem to be creditworthy.
The Funds may also enter into options and futures contracts relative to
foreign currency to hedge against fluctuations in foreign currency rates. See
"Options and Futures Contracts" for a discussion of risk factors relating to
foreign currency transactions including related options and futures contracts.
- ---------------------------------------------------
OPTIONS AND FUTURES CONTRACTS
Each Fund, except the U.S. Government Money Market Fund and Money Market
Fund, may employ certain hedging, income enhancement and risk management
techniques involving options and futures contracts, though such techniques may
also 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"
<PAGE>
24 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
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 of 1986, as amended (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 Index Fund, U.S. Government Money Market Fund and
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. 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 in illiquid securities. The maximum
percentage of illiquid securities which may
<PAGE>
HARTFORD MUTUAL FUNDS 25
- --------------------------------------------------------------------------------
be purchased by each Fund is 15% except for the U.S. Government Money Market
Fund and Money Market Fund for which the limit is 10% of their net assets.
"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 Securities and Exchange Commission
("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, except the Index Fund, U.S. Government Money Market Fund and
Money Market 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 HL Advisors; and (2) the value of all loaned securities of the
Fund is not more than 33 1/3% of the Fund's total assets.
- ---------------------------------------------------
OTHER RISK FACTORS
As mutual funds that primarily invest in equity and/or debt securities, each
Fund is subject to market risk, i.e., the possibility that equity and/or debt
prices in general will decline over short or even extended periods of time. The
financial markets tend to be cyclical, with periods when security prices
generally rise and periods when security prices generally decline.
The value of the debt securities in which the Funds invest will tend to
increase when interest rates are falling and to decrease when interest rates are
rising.
No Fund should be considered to be a complete investment program in and of
itself. Each prospective purchaser should take into account his or her own
investment objectives as well as his or her other investments when considering
the purchase of shares of any investment company.
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 of each Fund.
In pursuit of a Fund's investment objective, HIMCO and Wellington Management
attempt to select appropriate individual securities for inclusion in a Fund's
portfolio. In addition, HIMCO and Wellington Management attempt to successfully
forecast market trends and increase investments in the types of securities best
suited to take advantage of such trends. Thus, the investor is dependent on
HIMCO's or Wellington Management's success not only in selecting individual
securities, but also in identifying the appropriate mix of securities consistent
with a Fund's investment objective.
<PAGE>
26 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
- -------------------------------------------
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.
- ---------------------------------------------------
MANAGEMENT OF THE FUNDS
Each Fund's Board of Directors manages the business and affairs of that Fund
and takes action on all matters not reserved for the shareholders, including the
annual election of officers of the Fund who carry out all orders and resolutions
of the Board of Directors and carry out functions relating to the day to day
management of the affairs of the Fund.
- ---------------------------------------------------
MANAGEMENT SERVICES
HL Advisors serves as investment manager to each Fund pursuant to written
agreements entered into between HL Advisors and each Fund. Pursuant to such
agreements HL Advisors has overall investment supervisory responsibility for
each Fund. In addition, Hartford Life Insurance Company ("Hartford Life"), an
affiliate of HL Advisors, provides administrative personnel, services, equipment
and facilities and office space for proper operation of the Funds. HL Advisors
has contracted with Wellington Management for the provision of day to day
investment management services to the Capital Appreciation Fund, Dividend and
Growth Fund, International Opportunities Fund, MidCap Fund, Small Company Fund,
Stock Fund, Advisers Fund, and International Advisers Fund. In addition, HL
Advisors has contracted with HIMCO for the provision of day to day investment
management and other services for the Bond Fund, Index Fund, Mortgage Securities
Fund, U.S. Government Money Market Fund and Money Market Fund. Each Fund pays a
fee to HL Advisors, a portion of which may be used to compensate Wellington
Management or HIMCO.
For services rendered to the Funds, HL Advisors charges a monthly fee based
on the following annual rates as applied to the average of the calculated daily
net asset value of the Funds.
INDEX FUND
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- ------------------------------------------- -----------
<S> <C>
All Assets 0.20%
</TABLE>
MORTGAGE SECURITIES FUND, MONEY MARKET FUND AND U.S. GOVERNMENT MONEY MARKET
FUND
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- ------------------------------------------- -----------
<S> <C>
All Assets 0.25%
</TABLE>
BOND FUND AND STOCK FUND
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- ------------------------------------------- -----------
<S> <C>
First $250,000,000 0.325%
Next $250,000,000 0.300%
Next $500,000,000 0.275%
Amount Over $1 Billion 0.250%
</TABLE>
CAPITAL APPRECIATION FUND, DIVIDEND AND GROWTH FUND, INTERNATIONAL OPPORTUNITIES
FUND, MIDCAP FUND, SMALL COMPANY FUND, ADVISERS FUND AND INTERNATIONAL ADVISERS
FUND
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- ------------------------------------------- -----------
<S> <C>
First $250,000,000 0.575%
Next $250,000,000 0.525%
Next $500,000,000 0.475%
Amount Over $1 Billion 0.425%
</TABLE>
HL Advisors has agreed to waive its fees for MidCap Fund until the assets of
this Fund (excluding assets contributed by companies affiliated with HL
Advisors) first reach $20 million.
Under the terms of the Investment Management Agreements, HL Advisors,
subject to the supervision of the
<PAGE>
HARTFORD MUTUAL FUNDS 27
- --------------------------------------------------------------------------------
Funds' Board of Directors, provides investment management supervision to each
Fund in accordance with the Funds' investment objectives, policies and
restrictions.
For 1996, the management fees (advisory and administrative fees) for each
Fund as a percentage of average net assets were as follows:
<TABLE>
<CAPTION>
% OF ASSETS
-----------
<S> <C>
Capital Appreciation Fund .63%
Dividend and Growth Fund .71%
Index Fund .37%
International Opportunities Fund .69%
Small Company Fund1 .58%
Stock Fund .44%
Advisers Fund .62%
International Advisers Fund .75%
Bond Fund .49%
Mortgage Securities Fund .42%
Money Market Fund .42%
U.S. Government Money Market Fund .42%
</TABLE>
1 Portion of management fee waived in 1996
HL Advisors, Hartford Plaza, Hartford, Connecticut 06115, is a wholly-owned
subsidiary of Hartford Life and was organized under the laws of the State of
Connecticut in 1981. A wholly-owned subsidiary of HL Investment Advisors,
Hartford Investment Financial Services Company, serves as investment adviser to
several other Hartford Life-sponsored funds which are also registered with the
SEC. Hartford Life is a majority owned subsidiary of Hartford Fire Insurance
Company, one of the largest multiple lines insurance carriers in the United
States. Hartford Fire Insurance Company is a subsidiary of The Hartford
Financial Services Group, Inc.
Certain officers of the Funds are also officers and/or directors of HL
Advisors and HIMCO: Joseph H. Gareau is a Director and the President of HL
Advisors and HIMCO; Andrew W. Kohnke is a Managing Director and a Director of HL
Advisors and HIMCO; and C. Michael O'Halloran is a Director, Secretary and
General Counsel of HL Advisors and HIMCO.
- ---------------------------------------------------
INVESTMENT SUB-ADVISORY AND OTHER SERVICES
Wellington Management serves as sub-adviser to the Capital Appreciation
Fund, Dividend and Growth Fund, International Opportunities Fund, MidCap Fund,
Small Company Fund, Stock Fund, Advisers Fund, and International Advisers Fund
pursuant to written contracts entered into between HL Advisors and Wellington
Management. In addition, HIMCO provides day-to-day investment management
services to HL Advisors on behalf of the Index Fund, Mortgage Securities Fund,
Bond Fund, U.S. Government Money Market Fund and HVA Money Market Fund pursuant
to written agreements between HL Advisors and HIMCO.
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 the Funds and to the general
supervision of the Fund's Boards of Directors and HL Advisors) 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 Fund's Boards of Directors concerning
economic forecasts, investment strategy, portfolio activity and performance of
the Funds.
For services rendered to the Wellington Management-advised Funds, Wellington
Management charges a quarterly fee to HL Advisors. The Funds do not pay
Wellington Management's fee nor any part thereof, nor do the Funds have any
obligation or responsibility to do so. 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.
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 0.250%
Next $350,000,000 0.200%
Amount Over $500,000,000 0.150%
</TABLE>
CAPITAL APPRECIATION FUND, INTERNATIONAL OPPORTUNITIES FUND, MIDCAP FUND, SMALL
COMPANY FUND AND INTERNATIONAL ADVISERS FUND
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- ------------------------------------------- -----------
<S> <C>
First $50,000,000 0.400%
Next $100,000,000 0.300%
Next $350,000,000 0.250%
Amount Over $500,000,000 0.200%
</TABLE>
Wellington Management has agreed to waive its fees for the MidCap Fund until
the assets of the Fund (excluding assets contributed by companies affiliated
with HL Advisors) first reach $20 million.
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 December 31, 1996, Wellington Management held
discretionary management authority with respect to approximately $133 billion of
client assets. Wellington Management, 75 State Street, Boston, MA 02109, is a
Massachusetts limited liability partnership, of which the following
<PAGE>
28 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
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 HL Advisors, HIMCO is
reimbursed by HL Advisors for the costs it incurs in providing such services.
- ---------------------------------------------------
PORTFOLIO MANAGERS
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.
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 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.
Phillip H. Perelmuter, Vice President of Wellington Management, serves as
portfolio manager to the MidCap Fund. Mr. Perelmuter joined Wellington
Management in 1995 as Associate Portfolio Manager of the Stock Fund and the
Advisers Fund. Prior to joining Wellington Management, Mr. Perelmuter was Vice
President of Institutional Equity Sales at CS First Boston Corporation
(1988-1995), and a financial consultant at Merrill Lynch & Company (1983-1986).
Mr. Perelmuter has over ten years of experience in the investment industry.
Kenneth L. Abrams, Senior Vice President of Wellington Management, serves as
portfolio manager to the Small Company Fund. Mr. Abrams has been an emerging
company research analyst with Wellington Management since 1986 and has been a
portfolio manager with Wellington Management 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.
Paul D. Kaplan, Senior Vice President of Wellington Management, serves as
portfolio manager to the Advisers Fund. Mr. Kaplan manages the fixed income
component of the Advisers Fund. He has been a portfolio manager with Wellington
Management since 1982. Rand L. Alexander, who is portfolio manager to the Stock
Fund, manages the equity component of the Advisers Fund.
The equity component of the International Advisers Fund is managed by
Wellington Management's Global Equity Strategy Group, headed by Trond Skramstad.
The debt component of the International Advisers Fund is managed by Robert
Evans, Vice President of Wellington Management. Prior to joining Wellington
Management as a portfolio manager in 1995, Mr. Evans was a Senior Global Fixed
Income Portfolio Manager with Pacific Investment Management Company from 1991
through 1994, and in the Global Fixed Income Department of Lehman Brothers
International in London, England and New York City, New York from 1985 through
1990.
The Bond 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 sixteen years of experience with fixed income
investments.
The Mortgage Securities Fund is managed by Timothy J. Wilhide. Mr. Wilhide
is a Portfolio Manager and Senior Vice President of HIMCO. He has seventeen
years of experience in the fixed income markets. Prior to joining The Hartford
in June 1994, Mr. Wilhide was vice president and fixed income manager for J.P.
Morgan & Co. He received his B.A. from Gannon University and his MBA from the
University of Delaware.
- ---------------------------------------------------
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. For the fiscal year ended December 31, 1996, the portfolio
turnover rate of each Fund was below 100% except for the Bond Fund and Mortgage
Securities Fund which were 212% and 201% respectively. The portfolio turnover
rate for the MidCap Fund is expected to be less than 100%. 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.
<PAGE>
HARTFORD MUTUAL FUNDS 29
- --------------------------------------------------------------------------------
- ---------------------------------------------------
BROKERAGE COMMISSIONS
Although the rules 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 Fund. HIMCO or
Wellington Management may also select an affiliated broker-dealer to execute
transactions for the Fund, 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.
- ---------------------------------------------------
ADMINISTRATIVE SERVICES
FOR THE FUNDS
An Administrative Services Agreement between each Fund and Hartford Life
provides that Hartford Life will manage the business affairs and provide
administrative services to each Fund. Under the terms of these Agreements,
Hartford Life will provide the following: administrative personnel, services,
equipment and facilities and office space for proper operation of the Funds.
Hartford Life has also agreed to arrange for the provision of additional
services necessary for the proper operation of the Funds, although the Funds pay
for these services directly. See "Expenses of the Funds." As compensation for
the services to be performed by Hartford Life, each Fund pays to Hartford Life,
as promptly as possible after the last day of each month, a monthly fee equal to
the annual rate of .175% of the average daily net assets of the Fund.
- ---------------------------------------------------
EXPENSES OF THE FUNDS
Each Fund assumes and pays the following costs and expenses: interest;
taxes; brokerage charges (which may be to affiliated broker-dealers); costs of
preparing, printing and filing any amendments or supplements to the registration
forms of each Fund and its securities; all federal and state registration,
qualification and filing costs and fees, (except the initial costs and fees,
which will be borne by Hartford Life), issuance and redemption expenses,
transfer agency and dividend and distribution disbursing agency costs and
expenses; custodian fees and expenses; accounting, auditing and legal expenses;
fidelity bond and other insurance premiums; fees and salaries of directors,
officers and employees of each Fund other than those who are also officers of
Hartford Life or its affiliates; industry membership dues; all annual and
semiannual reports and prospectuses mailed to each Fund's shareholders as well
as all quarterly, annual and any other periodic report required to be filed with
the SEC or with any state; any notices required by a federal or state regulatory
authority, and any proxy solicitation materials directed to each Fund's
shareholders as well as all printing, mailing and tabulation costs incurred in
connection therewith, and any expenses incurred in connection with the holding
of meetings of each Fund's shareholders and other miscellaneous expenses related
directly to the Funds' operations and interest.
The total expenses of each Fund including administrative and investment
advisory fees for 1996 as a percentage of the Funds' average net assets were as
follows:
<TABLE>
<CAPTION>
% OF ASSETS
-----------
<S> <C>
Capital Appreciation Fund .65%
Dividend and Growth Fund .73%
Index Fund .39%
International Opportunities Fund .79%
Small Company Fund .72%
Stock Fund .46%
Advisers Fund .63%
International Advisers Fund .96%
Bond Fund .52%
Mortgage Securities Fund .45%
Money Market Fund .44%
U.S. Government Money Market Fund .58%
</TABLE>
- ---------------------------------------------------
PERFORMANCE RELATED
INFORMATION
The Funds may advertise certain performance related information. Performance
information about a Fund is based on the Fund's past performance only and is no
indication of future performance.
Each Fund may include its total return in advertisements or other sales
material. When a Fund advertises its total return, it will usually be calculated
for one year, five years, and ten years or some other relevant periods if the
Fund has not been in existence for at least ten years. Total return is measured
by comparing the value of an investment in the Fund at the beginning of the
relevant period to the value of the investment at the end of the period
(assuming immediate reinvestment of any dividends or capital gains
distributions).
The U.S. Government Money Market Fund and the Money Market Fund may
advertise yield and effective yield. The yield of each of those Funds is based
upon the income earned by the Fund over a seven-day period and then annualized,
i.e. the income earned in the period is assumed to be
<PAGE>
30 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
earned every seven days over a 52-week period and stated as a percentage of the
investment. Effective yield is calculated similarly but when annualized, the
income earned by the investment is assumed to be reinvested in Fund shares and
thus compounded in the course of a 52-week period.
- ---------------------------------------------------
DIVIDENDS
The shareholders of each Fund shall be entitled to receive such dividends as
may be declared by each Fund's Board of Directors, from time to time based upon
the investment performance of the assets making up that Fund's portfolio. The
policy with respect to each Fund, except the U.S. Government Money Market Fund
and the Money Market Fund, is to pay dividends from net investment income and to
make distributions of realized capital gains, if any, at least once each year.
The U.S. Government Money Market Fund and the Money Market Fund declare
dividends on a daily basis and pay them monthly.
Such dividends and distributions will be automatically invested in
additional full or fractional shares monthly on the last business day of each
month at the per share net asset value on that date. Provision is also made to
pay such dividends and distributions in cash if requested. Such dividends and
distributions will be in cash or in full or fractional shares of the Fund at net
asset value.
- ---------------------------------------------------
DETERMINATION OF
NET ASSET VALUE
The net asset value per share is determined 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 by the number
of shares outstanding. The assets of each Fund (except the money market funds)
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 and
the U.S. Government 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.
- ---------------------------------------------------
PURCHASE OF FUND SHARES
Fund shares are made available to serve as the underlying investment
vehicles for variable annuity and variable life insurance separate accounts of
The Hartford Life Insurance Companies. Shares of the Funds are sold on a no-load
basis at their net asset values. See "Determination of Net Asset Value" and
"Sale and Redemption of Shares."
It is conceivable that in the future it may be disadvantageous for variable
annuity separate accounts and variable life insurance separate accounts to
invest in the Funds simultaneously. Although The Hartford Life Insurance
Companies and the Funds do not currently foresee any such disadvantages either
to variable annuity contract owners or variable life insurance policy owners,
each Fund's Board of Directors intends to monitor events in order to identify
any material conflicts between such contract owners and policy owners and to
determine what action, if any, should be taken in response thereto. If the Board
of Directors of a Fund were to conclude that separate funds should be
established for variable life and variable annuity separate accounts, the
variable life and variable annuity contract holders would not bear any expenses
attendant to the establishment of such separate funds.
- ---------------------------------------------------
SALE AND REDEMPTION
OF SHARES
The shares of each Fund are sold and redeemed by the Fund at their net asset
value next determined after receipt of a purchase or redemption order in good
order in writing at its home office, P.O. Box 2999, Hartford, CT 06104-2999. The
value of shares redeemed may be more or less than original cost, depending upon
the market value of the portfolio securities at the time of redemption. Payment
for shares redeemed will be made within seven days after the redemption request
is received in proper form by the Funds. However, the right to redeem Fund
shares may be suspended or payment therefor postponed for any period during
which: (1) trading on the NYSE is closed for other than weekends and holidays;
(2) an emergency exists, as determined by the SEC, as a result of which (a)
disposal by a Fund of securities owned by it is not reasonably practicable, or
(b) it is not reasonably practicable for a Fund to determine fairly the value of
its net assets; or (3) the SEC by order so permits for the protection of
stockholders of the Funds.
<PAGE>
HARTFORD MUTUAL FUNDS 31
- --------------------------------------------------------------------------------
- ---------------------------------------------------
FEDERAL INCOME TAXES
Each Fund has elected and intends to qualify under Subchapter M of the Code.
Each Fund intends to distribute all of its net income and gains to shareholders.
Such distributions are taxable income and capital gains. Each Fund will inform
shareholders of the amount and nature of such income and gains. Each Fund may be
subject to a 4% nondeductible excise tax as well as an income tax measured with
respect to certain undistributed amounts of income and capital gain. Each Fund
expects to make such additional distributions of net investment income as are
necessary to avoid the application of these taxes. For a discussion of the tax
implications of a purchase or sale of the Funds' shares by the insurer,
reference should be made to the section entitled "Federal Tax Considerations" in
the appropriate separate account prospectus.
If eligible, each Fund may make an election to pass through to its
shareholders, The Hartford Life Insurance Companies, a credit for any foreign
taxes paid during the year. If such election is made, the pass-through of the
foreign tax credit will result in additional taxable income and income tax to
The Hartford Life Insurance Companies. The amount of additional tax may be more
than offset by the foreign tax credits which are passed through. These foreign
tax credits may provide a benefit to The Hartford Life Insurance Companies.
- ---------------------------------------------------
OWNERSHIP AND CAPITALIZATION
OF THE FUNDS
- -------------------------------- CAPITAL STOCK
As of the date of this prospectus, the authorized capital stock of the Funds
consisted of the following shares at a par value of $.10 per share: Capital
Appreciation Fund, 2 billion; Dividend and Growth Fund, 2 billion; Index Fund, 1
billion; International Opportunities Fund, 1.5 billion; Small Company Fund, 750
million; Stock Fund, 2 billion; Advisers Fund, 5 billion; International Advisers
Fund, 750 million; Bond Fund, 800 million; Mortgage Securities Fund, 800
million; Money Market Fund, 1.3 billion; and U.S. Government Money Market Fund,
100 million.
As of December 31, 1996, HIMCO owned 3,000,000 shares (7.5%) of the Small
Company Fund.
At December 31, 1996, certain Hartford Life group pension contracts held
direct interests in shares of the Funds as follows:
<TABLE>
<CAPTION>
SHARES %
------------ ---------
<S> <C> <C>
Hartford Index Fund, Inc................ 16,432,999 6.30%
Hartford Mortgage Securities Fund,
Inc.................................... 17,408,850 5.65%
Hartford Capital Appreciation Fund,
Inc.................................... 15,519,596 1.79%
Hartford International Opportunities
Fund, Inc.............................. 7,835,802 1.11%
Hartford Advisers Fund, Inc............. 18,752,510 0.69%
Hartford Dividend & Growth Fund, Inc.... 443,556 0.08%
Hartford Small Company Fund, Inc........ 28,535 0.07%
Hartford International Advisers Fund,
Inc.................................... 27,096 0.03%
Hartford Stock Fund, Inc................ 92,167 0.01%
Hartford Bond Fund, Inc................. 47,060 0.01%
HVA Money Market Fund , Inc............. 31,633 0.01%
</TABLE>
- ---------------------------------------------------
VOTING
Each shareholder shall be entitled to one vote for each share of the Funds
held upon all matters submitted to the shareholders generally. With respect to
the Funds' shares, issued as described above under "Purchase of Fund Shares," as
well as Fund shares which are not otherwise attributable to variable annuity
contract owners or variable life policy holders, The Hartford Life Insurance
Companies shall be the shareholders of record. Each of The Hartford Life
Insurance Companies will vote all Fund shares, pro rata, according to the
written instructions of the contract owners of the variable annuity contracts
and the policy holders of the variable life contracts issued by it using the
Funds as investment vehicles. This position is consistent with the policy of the
SEC staff.
- ---------------------------------------------------
OTHER RIGHTS
Each share of Fund stock, when issued and paid for in accordance with the
terms of the offering, will be fully paid and non-assessable. Shares of Fund
stock have no pre-emptive, subscription or conversion rights and are redeemable
as set forth under "Sale and Redemption of Shares." Upon liquidation of a Fund,
the shareholders of that Fund shall be entitled to share, pro rata, in any
assets of the Fund after discharge of all liabilities and payment of the
expenses of liquidation.
<PAGE>
32 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
- ---------------------------------------------------
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.
- ---------------------------------------------------
CUSTODIAN, TRANSFER AND
DIVIDEND DISBURSING AGENTS
State Street Bank and Trust Company, Boston, Massachusetts, serves as
custodian of the Funds' assets. Hartford Life Insurance Company, P.O. Box 2999,
Hartford, Connecticut 06104-2999, serves as Transfer and Dividend Disbursing
Agent for the Funds.
- ---------------------------------------------------
PENDING LEGAL PROCEEDINGS
As of the date of this Prospectus, there are no pending legal proceedings
involving the Funds, HL Advisors, HIMCO or Wellington Management as a party.
- ---------------------------------------------------
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 "Hartford Family of Funds", c/o
Individual Annuity Operations, P.O. Box 2999, Hartford, CT 06104-2999.
<PAGE>
HARTFORD MUTUAL FUNDS 33
- --------------------------------------------------------------------------------
- ---------------------------------------------------
APPENDIX A
The rating information which follows describes how the rating services
mentioned presently rate the described securities. No reliance is made upon the
rating firms as "experts" as that term is defined for securities purposes.
Rather, reliance on this information is on the basis that such ratings have
become generally accepted in the investment business.
- ---------------------------------------------------
RATING OF BONDS
Moody's Investors Service, Inc. ("Moody's")
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever earning any
real investment standing.
Standard & 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
<PAGE>
34 HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
rating organizations) rating services and will be an eligible security under
Rule 2a-7.
MOODY'S
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating
categories.
STANDARD & POOR'S
The relative strength or weakness of the following factors determines
whether the issuer's commercial paper is rated A-1 or A-2.
- Liquidity ratios are adequate to meet cash requirements.
Liquidity ratios are basically as follows, broken down by the type of
issuer:
Industrial Company: acid test ratio, cash flow as a percent of current
liabilities, short-term debt as a percent of current liabilities, short-term
debt as a percent of current assets.
Utility: current liabilities as a percent of revenues, cash flow as a
percent of current liabilities, short-term debt as a percent of capitalization.
Finance Company: current ratio, current liabilities as a percent of net
receivables, current liabilities as a percent of total liabilities.
- The long-term senior debt rating is "A" or better; in some instances "BBB"
credits may be allowed if other factors outweigh the "BBB".
- The issuer has access to at least two additional channels of borrowing.
- Basic earnings and cash flow have an upward trend with allowances made for
unusual circumstances.
- Typically, the issuer's industry is well established and the issuer has a
strong position within its industry.
- The reliability and quality of management are unquestioned.
<PAGE>
HARTFORD MUTUAL FUNDS 35
- --------------------------------------------------------------------------------
- ---------------------------------------------------
APPENDIX B
- --------------------------------
CREDIT QUALITY DISTRIBUTION
HARTFORD BOND FUND
The average quality distribution of the portfolio of the Hartford Bond 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 52.4% AAA 52.4%
Aa 8.6% AA 7.6%
A 9.2% A 13.1%
Baa 12.6% BBB 15.0%
Ba 16.2% BB 9.6%
B 1.0% B 1.8%
Unrated 0.0% Unrated 0.6%
------------- -------------
Total 100.0% Total 100.0%
</TABLE>
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD CAPITAL APPRECIATION FUND, INC.
HARTFORD DIVIDEND AND GROWTH FUND, INC.
HARTFORD INDEX FUND, INC.
HARTFORD INTERNATIONAL OPPORTUNITIES FUND, INC.
HARTFORD MIDCAP FUND, INC.
HARTFORD SMALL COMPANY FUND, INC.
HARTFORD STOCK FUND, INC.
HARTFORD ADVISERS FUND, INC.
HARTFORD INTERNATIONAL ADVISERS FUND, INC.
HARTFORD BOND FUND, INC.
HARTFORD MORTGAGE SECURITIES FUND, INC.
HVA MONEY MARKET FUND, INC.
HARTFORD U.S. GOVERNMENT MONEY MARKET FUND, INC.
P.O. Box 2999
Hartford, CT 06104-2999
This Statement of Additional Information ("SAI") is not a prospectus but
should be read in conjunction with the prospectus. To obtain a free copy of
the prospectus send a written request to: Hartford Family of Funds, c/o
Individual Annuity Operations, P.O. Box 2999, Hartford, CT 06104-2999 or
call 1-800-862-6668.
Date of Prospectus: , 1997
Date of Statement of Additional Information: , 1997
<PAGE>
TABLE OF CONTENTS PAGE
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . -1-
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . -1-
MANAGEMENT OF THE FUNDS. . . . . . . . . . . . . . . . . . . -16-
INVESTMENT MANAGEMENT ARRANGEMENTS . . . . . . . . . . . . . -22-
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . -25-
FUND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . -26-
DISTRIBUTION ARRANGEMENTS. . . . . . . . . . . . . . . . . . -26-
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . -26-
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . -28-
PURCHASE AND REDEMPTION OF SHARES. . . . . . . . . . . . . . -29-
INVESTMENT PERFORMANCE . . . . . . . . . . . . . . . . . . . -30-
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
CUSTODIAN. . . . . . . . . . . . . . . . . . . . . . . . . . -41-
TRANSFER AGENT SERVICES. . . . . . . . . . . . . . . . . . . -42-
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . -42-
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . -42-
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . -42-
<PAGE>
GENERAL INFORMATION
The Hartford Capital Appreciation Fund, Inc., Hartford Dividend and
Growth Fund, Inc., Hartford Index Fund, Inc., Hartford International
Opportunities Fund, Inc., Hartford MidCap Fund, Inc., Hartford Small Company
Fund, Inc., Hartford Stock Fund, Inc., Hartford Advisers Fund, Inc., Hartford
International Advisers Fund, Inc., Hartford Bond Fund, Inc., Hartford Mortgage
Securities Fund, Inc., HVA Money Market Fund, Inc., and Hartford U.S.
Government Money Market Fund, Inc. are open-end management investment
companies consisting of separate diversified portfolios (each a "Fund" or
together the "Funds"). This SAI relates to all thirteen Funds. HL Investment
Advisors, Inc. ("HL Advisors") is the investment manager to each Fund. HL
Advisors 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, LLP
("Wellington Management") and The Hartford Investment Management Company
("HIMCO"), an affiliate of HL Advisors, are sub-advisers to certain 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
-1-
<PAGE>
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 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 for securities of other issuers.
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.
-2-
<PAGE>
If a percentage restriction on investment or utilization of assets as
set forth above is adhered to at the time an investment is made, a later
change in percentage resulting from changes in the values of a Fund's assets
will not be considered a violation of the restriction; provided, however,
that the asset coverage requirement applicable to borrowings under Section
18(f)(1) of the 1940 Act shall be maintained in the manner contemplated by
that Section.
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. Purchase securities on margin or make short sales of securities,
except that a Fund may obtain such short-term credit as may be necessary for
the clearance of purchases and sales of securities and except for
transactions in futures contracts and options thereon.
2. Purchase securities which are illiquid if, as a result of such
purchase, more than 15% of its net assets (10% for the Money Market Fund and
U.S. Government Money Market Fund) would consist of such securities.
3. Alone or together with any other of the Hartford Mutual Funds, make
investments for the purpose of exercising control over or management of any
issuer.
4. Mortgage, pledge, hypothecate, or in any manner transfer, as
security for indebtedness, any securities owned or held by it, except to
secure reverse repurchase agreements; however, for purposes of this
restriction, collateral arrangements with respect to transactions in futures
contracts and options thereon are not deemed to be a pledge of securities.
5. Invest more than 5% of its assets in securities of other investment
companies and will not acquire more than 3% of the total outstanding voting
securities of any one investment company, except that the Index Fund, U.S.
Government Money Market Fund and Money Market Fund will not purchase
securities of other investment companies at all.
-3-
<PAGE>
6. Purchase additional securities when money borrowed exceeds 5% of
the Fund's total assets.
7. Borrow money, engage in reverse repurchase agreements or engage in
activities which are the economic equivalent of borrowing if the combination
of such activities exceeds 33-1/3% of a 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.
ALL FUNDS
U.S. TREASURY DEPARTMENT DIVERSIFICATION REGULATIONS. The U.S. Treasury
Department has issued diversification regulations under Section 817 of the
Internal Revenue Code. If a mutual fund underlying a variable contract, other
than a pension plan contract, is not adequately diversified within the terms
of these regulations, the contract owner will have adverse income tax
consequences. These regulations provide, among other things, that a mutual
fund shall be considered adequately diversified if (i) no more than 55% of
the value of the assets in the fund is represented by any one investment;
(ii) no more than 70% of the value of the assets in the fund is represented
by any two investments; (iii) no more than 80% of the value of the assets in
the fund is represented by any three investments and (iv) no more than 90% of
the value of the total assets of the fund is represented by any four
investments. In determining whether the diversification standards are met,
each United States Government Agency or instrumentality shall be treated as a
separate issuer.
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 U.S. Government Money Market Fund and 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)
-4-
<PAGE>
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 Fund'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 Fund's
custodian bank in which a Fund will maintain liquid assets 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
(International Opportunities Fund, International Advisers Fund, Advisers
Fund, Bond Fund, Mortgage Securities Fund and Money Market Fund only); (4)
mortgage-related securities, including collateralized mortgage obligations
("CMO's") (International Opportunities Fund, International Advisers Fund,
Advisers Fund, Bond Fund and Mortgage Securities Fund only); and (5)
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 of the money market funds is permitted to invest only in high
quality, short term instruments as determined by Rule 2a-7 under the 1940
Act. Each of the other Funds 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, Advisers Fund and International
Opportunities Fund is permitted to invest up to 5%, and the International
Advisers Fund is permitted to invest up to 15%, 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 Fund is permitted to invest up to 20% 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
-6-
<PAGE>
Moody's includes "Ba3", "Ba2" and "Ba1". Likewise the S&P rating category of
"BB" includes "BB+", "BB" and "BB-". If a Fund is authorized to invest in a
certain rating category, the Fund is also permitted to invest in any of the
sub-categories or gradations within that rating category. Securities in the
highest category below investment grade are considered to be of poor standing
and predominantly speculative. 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 International Advisers
Fund, International Opportunities Fund, Advisers Fund, Bond Fund and Mortgage
Securities 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, it may receive a rate of interest which is lower than the rate on
the existing mortgage securities. For this reason, mortgage securities are
less effective than other types of U.S. Government securities as a means of
"locking in" long-term interest rates. See "Illiquid Securities."
ASSET-BACKED SECURITIES
The International Advisers Fund, International Opportunities Fund,
Advisers Fund, Bond Fund, Mortgage Securities 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 Fund, Mortgage Securities Fund, U.S.
Government Money Market Fund and Money Market Fund may invest in equity
securities which include common stocks, preferred stocks (including
convertible preferred stock) and rights to acquire such securities. In
addition, these Funds may invest in securities such as bonds, debentures and
corporate notes which are convertible into common stock at the option of the
holder. The Bond 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 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 Bond Fund, Mortgage Securities Fund,
Money Market Fund and U.S. Government Money Market Fund may invest
in equity securities (including securities issued in initial public
offerings) of companies 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 and may have less historical data with respect to operations and
management. 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. In addition,
-8-
<PAGE>
companies whose securities are offered in initial public offerings may be more
dependant on a limited number of key employees. Because securities issued in
initial public offerings are being offered to the public for the first time,
the market for such securities may be inefficient and less liquid.
NON-U.S. SECURITIES
Each Fund, except the Mortgage Securities Fund and U.S. Government Money
Market Fund, is permitted to invest a portion of its assets in non-U.S.
securities, including, in the case of permitted equity investments, American
Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs"). ADRs
are certificates issued by a U.S. bank or trust company and represent the
right to receive securities of a non-U.S. issuer deposited in a domestic bank
or non-U.S. branch of a U.S. bank. ADRs are traded on a U.S. securities
exchange, or in an over-the-counter market, and are denominated in U.S.
dollars. GDRs are certificates issued globally and evidence a similar
ownership arrangement. GDRs are traded on non-U.S. securities exchanges and
are denominated in non-U.S. currencies. The value of an ADR or a GDR will
fluctuate with the value of the underlying security, will reflect any changes
in exchange rates and otherwise will involve risks associated with investing
in non-U.S. securities. When selecting securities of non-U.S. issuers, HIMCO
or Wellington Management will evaluate the economic and political climate
and the principal securities markets of the country in which an issuer is
located.
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
-9-
<PAGE>
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 Advisers Fund and 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 Index Fund, Mortgage Securities Fund, U.S.
Government Money Market Fund and Money Market Fund, may engage in currency
transactions to hedge the value of portfolio securities denominated in
particular currencies against fluctuations in relative value. Currency
transactions include forward currency contracts, currency swaps,
exchange-listed and over-the-counter ("OTC") currency futures contracts and
options thereon and exchange listed and OTC options on currencies.
Forward currency contracts involve a privately negotiated obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. Currency swaps are agreements to
exchange cash flows based on the notional difference between or among two or
more currencies. See "Swap Agreements."
The use of currency transactions to protect the value of a Fund's assets
against a decline in the value of a currency does not eliminate potential
losses arising from fluctuations in the value of the Fund's underlying
securities. Further, the Funds may enter into currency transactions only with
counterparties that HIMCO or Wellington Management deems to be creditworthy.
The Funds may also enter into options and futures contracts relative to
foreign currency to hedge against fluctuations in foreign currency rates. See
"Options and Futures Contracts" for a discussion of risk factors relating to
foreign currency transactions including options and futures contracts related
thereto.
OPTIONS AND FUTURES CONTRACTS
In seeking to protect against the effect of changes in equity market
values, currency exchange rates or interest rates that are adverse to the
present or prospective position of the Funds, for cash flow management, and,
to a lesser extent, to enhance returns, each Fund, except the U.S. Government
Money Market Fund and Money Market Fund, may employ certain hedging, income
-10-
<PAGE>
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 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
-11-
<PAGE>
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 while intending to invest
in a non-U.S. security of the same currency. A Fund may purchase put options
on foreign currency futures contracts to hedge against a decline in the
foreign exchange rate or the value of its non-U.S. securities. A Fund may
write a call option on a foreign currency futures contract as a partial hedge
against the effects of declining foreign exchange rates on the value of
non-U.S. securities and in circumstances consistent with a Fund's investment
objectives and policies.
Options on indexes are settled in cash, not in delivery of securities.
The exercising holder of an index option receives, instead of a security,
cash equal to the difference between the closing price of the securities
index and the exercise price of the option. When a Fund writes a covered
option on an index, a Fund will be required to deposit and maintain with a
custodian cash or high-grade, liquid short-term debt securities equal in
value to the aggregate exercise price of a put or call option pursuant to the
requirements and the rules of the applicable exchange. If, at the close of
business on any day, the market value of the deposited securities falls below
the contract price, the Fund will deposit with the custodian cash or
high-grade, liquid short-term debt securities equal in value to the
deficiency.
To the extent that a Fund enters into futures contracts, options on
futures contracts and options on foreign currencies that are traded on an
exchange regulated by the Commodities Futures Trading Commission ("CFTC"), in
each case that are not for "BONA FIDE hedging" purposes (as defined by
regulations of the CFTC), the aggregate initial margin and premiums
required to establish those positions may not exceed 5% of the liquidation
value of the Fund's portfolio, after taking into account the unrealized
profits and unrealized losses on any such contracts the Fund has entered
into. However, the "in-the-money" amount of such options may be excluded in
computing the 5% limit. Adoption of this guideline will not limit the
percentage of a Fund's assets at risk to 5%.
Although any one Fund may not employ all or any of the foregoing
strategies, its use of options, futures and options thereon and forward
currency contracts (as described under "Currency Transactions") would involve
certain investment risks and transaction costs to which it might not
-12-
<PAGE>
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 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 Index Fund, U.S. Government Money Market Fund and
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.
-13-
<PAGE>
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 Fund's
custodian in a segregated account. If a Fund enters into a swap on other than
a net basis, the Fund will maintain in the segregated account the full amount
of the Fund's obligations under each such swap. The Fund may enter into
swaps, caps, collars and floors with member banks of the Federal Reserve
System, members of the New York Stock Exchange or other entities determined
by HIMCO or Wellington Management, pursuant to procedures adopted and
reviewed on an ongoing basis by the Board of Directors, to be creditworthy.
If a default occurs by the other party to such transaction, a Fund will have
contractual remedies pursuant to the agreements related to the transaction
but such remedies may be subject to bankruptcy and insolvency laws which
could affect such Fund's rights as a creditor.
The swap market has grown substantially in recent years with a large
number of banks and financial services firms acting both as principals and as
agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps, collars and floors are more recent
innovations and they are less liquid than swaps. There can be no assurance,
however, that a Fund will be able to enter into interest rate swaps or to
purchase interest rate caps, collars or floors at prices or on terms HIMCO or
Wellington Management, as appropriate, believes are advantageous to such
Fund. In addition, although the terms of interest rate swaps, caps, collars
and floors may provide for termination, there can be no assurance that a Fund
will be able to terminate an interest rate swap or to sell or offset interest
rate caps, collars or floors that it has purchased. Interest rate swaps,
caps, collars and floors are considered by the SEC to be illiquid securities.
The successful utilization of hedging and risk management transactions
requires skills different from those needed in the selection of a Fund's
portfolio securities and depends on HIMCO's or Wellington Management's ability
to predict correctly the direction and degree of movements in interest rates.
Although the Funds believe that use of the hedging and risk management
techniques described above will benefit the Funds, if HIMCO's or Wellington
Management's judgment about the direction or extent of the movement in
interest rates is incorrect, a Fund's overall performance would be worse than
if it had not entered into any such transactions. For example, if a Fund had
purchased an interest rate swap or an interest rate floor to hedge against its
expectation that interest rates would decline but instead interest rates rose,
such Fund would lose part or all of the benefit of the increased payments it
would receive as a result of the rising interest rates because it would have
to pay amounts to its counterparties under 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 the U.S.
Government Money Market Fund's or Money
-14-
<PAGE>
Market Fund's net assets or 15% of each other Fund's net assets would consist
of such securities. "Illiquid Securities" are securities that may not be sold
or disposed of in the ordinary course of business within seven days at
approximately the price used to determine a Fund's net asset value. Each Fund
may purchase certain restricted securities commonly known as Rule 144A
securities that can be resold to institutions and which may be determined to
be liquid pursuant to policies and guidelines of the Board of Directors. A
Fund may not be able to sell illiquid securities when HIMCO or Wellington
Management considers it desirable to do so or may have to sell such securities
at a price that is lower than the price that could be obtained if the
securities were more liquid. A sale of illiquid securities may require more
time and may result in higher dealer discounts and other selling expenses than
does the sale of securities that are not illiquid. Illiquid securities also
may be more difficult to value due to the unavailability of reliable market
quotations for such securities, and investment in illiquid securities may have
an adverse impact on net asset value.
Under current interpretations of the SEC Staff, the following types of
securities in which a Fund may invest will be considered illiquid: (1)
repurchase agreements maturing in more than seven days; (2) certain
restricted securities (securities whose public resale is subject to legal or
contractual restrictions); (3) options, with respect to specific securities,
not traded on a national securities exchange that are not readily marketable;
and (4) any other securities in which a Fund may invest that are not readily
marketable.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
Each Fund is permitted to purchase or sell securities on a when-issued
or delayed-delivery basis. When-issued or delayed-delivery transactions arise
when securities are purchased or sold with payment and delivery taking place
in the future in order to secure what is considered to be an advantageous
price and yield at the time of entering into the transaction. While the Funds
generally purchase securities on a when-issued basis with the intention of
acquiring the securities, the Funds may sell the securities before the
settlement date if HIMCO or Wellington Management deems it advisable. At the
time a Fund makes the commitment to purchase securities on a when-issued
basis, the Fund will record the transaction and thereafter reflect the value,
each day, of such security in determining the net asset value of the Fund. At
the time of delivery of the securities, the value may be more or less than
the purchase price. A Fund will maintain, in a segregated account, cash, U.S.
Government securities or other liquid, high-grade debt obligations having a
value equal to or greater than the Fund's purchase commitments; likewise a
Fund will segregate securities sold on a delayed-delivery basis.
OTHER INVESTMENT COMPANIES
Each Fund, except the Index Fund, U.S. Government Money Market Fund and
Money Market 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. Under the 1940 Act, a Fund will not purchase a security of an
investment company if, as a result, (1) more than
-15-
<PAGE>
10% of the Fund's assets would be invested in securities of other investment
companies, (2) such purchase would result in more than 3% of the total
outstanding voting securities of any one such investment company being held by
the Fund; or (3) more than 5% of the Fund's assets would be invested in any
one such investment company.
PORTFOLIO SECURITIES LENDING
Each of the Funds may lend its portfolio securities to broker/dealers
and other institutions as a means of earning interest income. The borrower
will be required to deposit as collateral, cash, cash equivalents, U.S.
government securities or other high quality liquid debt securities that at
all times will be at least equal to 100% of the market value of the loaned
securities and such amount will be maintained in a segregated account of the
respective Fund. While the securities are on loan the borrower will pay the
respective Fund any income accruing thereon.
Delays or losses could result if a borrower of portfolio securities
becomes bankrupt or defaults on its obligation to return the loaned
securities. The Funds may lend securities only if: (1) the loan is fully
secured by appropriate collateral at all times; and (2) the value of all
loaned securities of any Fund is not more than 33-1/3% of the Fund's total
assets taken at the time of the loan.
MANAGEMENT OF THE FUNDS
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 Fund, 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 Fund
- ---------------------------------------------
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, and served as Vice President-Client
Services of Wright Investors' Service, Bridgeport, Connecticut. Mr. Biernat
presently is consulting to organizations on financial matters, with the
majority of time spent with T.O. Richardson & Co., Farmington, Connecticut.
-16-
<PAGE>
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.
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 1993. Formerly, he served as Senior Vice
President (September, 1992 - April, 1993) and Vice President (October, 1987 -
September, 1992). Mr. Gareau is also a Director and the President of HL
Advisors and HIMCO.
WILLIAM ATCHISON O'NEILL (age 66)
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 of the Board of Lydall,
Inc. from 1985 until October, 1991 and formerly served as President and Chief
Executive Officer.
LOWNDES ANDREW SMITH* (age 57)
Director and Chairman
P.O. Box 2999
Hartford, CT 06104-2999
Mr. Smith has served as President, Chief Operating Officer, and Director of
The Hartford Life Companies, and as a Director of The Hartford since
November, 1989.
-17-
<PAGE>
JOHN KELLEY SPRINGER (age 65)
Director
55 Farmington Avenue
Hartford, CT 06105
Mr. Springer has served as Chief Executive Officer of Connecticut Health
System, Inc., a hospital holding company, since 1989. Formerly, he served as
the Chief Executive Officer of Hartford Hospital, Hartford, Connecticut.
PETER CUMMINS (age 58)
Vice President
Hartford Plaza
Hartford, CT 06115
Mr. Cummins has been Vice President of sales and marketing of the Individual
Life and Annuity Division of The Hartford 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 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
Life Companies.
ANDREW WILLIAM KOHNKE (age 38)
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 Hartford Life Companies. Mr. Kohnke is also a
Director and Managing Director of HL Advisors and HIMCO.
-18-
<PAGE>
THOMAS MICHAEL MARRA (age 38)
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 Life Companies, since 1980.
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, and as
Senior Associate General Counsel since 1988 and Corporate Secretary since
1996 of The Hartford. Mr. O'Halloran is also a Director, Secretary and
General Counsel of HL Advisors and HIMCO.
GEORGE RICHARD JAY (age 45)
Treasurer and Controller
P.O. Box 2999
Hartford, CT 06104-2999
Mr. Jay has served as Secretary and Director, Life and Equity Accounting and
Financial Control, of The Hartford Life Companies since 1987.
KEVIN J. CARR (age 42)
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. 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.
-19-
<PAGE>
JAMES CUBANSKI (age 36)
Assistant Secretary
Hartford Plaza
Hartford, CT 06115
Mr. Cubanski has served as Director of Tax Administration of The Hartford
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
Fund. Each Committee is made up of those directors who are not "interested
persons" of the Fund.
All Board members and officers of the Fund are also board members and
officers of ITT Hartford Mutual Funds, Inc., an open-end management
investment company comprised of eight separate funds, whose shares are sold
to the general public. Each of the Directors and principal officers
affiliated with the Fund who is also an affiliated person of HL Advisors,
HIMCO or Wellington Management is named above, together with the capacity in
which such person is affiliated with the Fund, HL Advisors, HIMCO or
Wellington Management.
COMPENSATION OF OFFICERS AND DIRECTORS. The Funds pay no salaries or
compensation to any officer or director affiliated with The Hartford. The
chart below sets forth the fees paid by the Fund to the non-interested
Directors and certain other information as of December 31, 1996:
<TABLE>
<CAPTION>
JOSEPH A. WINIFRED E. WILLIAM A. MILLARD H. JOHN K.
BIERNAT COLEMAN O'NEILL PRYOR SPRINGER
<S> <C> <C> <C> <C> <C>
COMPENSATION
RECEIVED FROM THE FUNDS $18,000 $18,000 $18,000 $18,000 $18,000
PENSION OR RETIREMENT
BENEFITS ACCRUED AS
FUND EXPENSE $0 $0 $0 $0 $0
TOTAL COMPENSATION
FROM THE FUNDS AND
COMPLEX PAID TO
DIRECTORS* $23,250 $20,250 $23,250 $23,250 $23,250
</TABLE>
*As of December 31, 1996, there were twenty-one funds in the Complex
(including the Funds).
OTHER INFORMATION ABOUT THE FUND. Each Fund is a Maryland corporation with
authorized capital stock, par value $0.10 per share as follows: Capital
Appreciation Fund, 2 billion; Dividend and Growth Fund, 2 billion; Index Fund,
1 billion; International Opportunities Fund, 1.5 billion; Small Company Fund,
750 million; Stock Fund, 2 billion; Advisers Fund, 4 billion; International
Advisers Fund, 750 million; Bond Fund, 800 million; Mortgage Securities Fund,
800 million; Money Market Fund, 1.3 billion; and U.S. Government Money Market
Fund, 100 million.
-20-
<PAGE>
As of December 31, 1996, HIMCO owned 3,000,000 shares (7.5%) of the Small
Company Fund.
At December 31, 1996, certain Hartford Life group pension contracts held
direct interests in shares of the Funds as follows:
<TABLE>
<CAPTION>
SHARES %
-------- ---
<S> <C> <C>
Hartford Index Fund, Inc. 16,432,999 6.30%
Hartford Mortgage Securities Fund, Inc. 17,408,850 5.65%
Hartford Capital Appreciation Fund, Inc. 15,519,596 1.79%
Hartford International Opportunities Fund, Inc. 7,835,802 1.11%
Hartford Advisers Fund, Inc. 18,752,510 0.69%
Hartford Dividend & Growth Fund, Inc. 443,556 0.08%
Hartford Small Company Fund, Inc. 28,535 0.07%
Hartford International Advisers Fund, Inc. 27,096 0.03%
Hartford Stock Fund, Inc. 92,167 0.01%
Hartford Bond Fund, Inc. 47,060 0.01%
HVA Money Market Fund, Inc. 31,633 0.01%
</TABLE>
VOTING
Each shareholder shall be entitled to one vote for each share of the
Funds held upon all matters submitted to the shareholders generally. With
respect to the Funds' shares issued as described above under "Purchase of
Fund Shares," as well as Fund shares which are not otherwise attributable to
variable annuity contract owners or variable life policy holders, the ITT
Hartford Life Insurance Companies shall be the shareholders of record. Each
of the ITT Hartford Life Insurance Companies will vote all Fund shares, pro
rata, according to the written instructions of the contract owners of the
variable annuity contracts and the policy holders of the variable life
contracts issued by it using the Funds as investment vehicles. This position
is consistent with the policy of the SEC Staff.
OTHER RIGHTS
Each share of Fund stock, when issued and paid for in accordance with
the terms of the offering, will be fully paid and non-assessable. Shares of
Fund stock have no pre-emptive, subscription or conversion rights and are
redeemable as set forth under "Sale and Redemption of Shares." There are no
shareholder pre-emptive rights. Upon liquidation of a Fund, the shareholders
of that Fund shall be entitled to share, pro rata, in any assets of the Fund
after discharge of all liabilities and payment of the expenses of liquidation.
Each Fund's Articles of Incorporation provides that the Directors,
officers and employees of the Fund may be indemnified by the Fund to the
fullest extent permitted by Maryland law and the federal securities laws. The
Fund's Bylaws provide that the Fund shall indemnify each of its
-21-
<PAGE>
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 Fund. Neither the Articles of
Incorporation nor the Bylaws authorize the Fund 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 MANAGEMENT ARRANGEMENTS
Each Fund has entered into an investment advisory agreement with HL
Investment Advisors, Inc. ("HL Advisors"). The investment advisory agreement
provides that HL Advisors, subject to the supervision and approval of each
Fund's Board of Directors, is responsible for the management of each Fund. HL
Advisors is responsible for investment management supervision of all Funds.
HL Advisors has entered into an investment services agreement with The
Hartford Investment Management Company ("HIMCO") for services related to the
day-to-day investment and reinvestment of the assets of the Index Fund,
Mortgage Securities Fund, Bond Fund, U.S. Government Fund and Money Market
Fund. In connection with its management of the such Funds, HIMCO provides
investment research and supervision of the investments held by a Fund and
conducts a continuous program of investment and reinvestment of the Funds'
assets, in accordance with the investment objectives and policies of a Fund.
HIMCO also furnishes the Funds such statistical information, with respect to
the investments which the Funds may hold or contemplate purchasing, as the
Fund may reasonably request. HIMCO will apprise the Fund of important
developments materially affecting any of the Funds and furnish the Funds from
time to time with such information as HIMCO may believe appropriate for this
purpose. In addition, Hartford Life Insurance Company ("Hartford Life"), a
corporate affiliate of HL Advisors and HIMCO, provides administrative
services to the Funds including administrative personnel, services, equipment
and facilities and office space for proper operation of the Funds. Although
Hartford Life has agreed to arrange for the provision of additional services
necessary for the proper operation of the Fund, each Fund pays for these
services directly.
With respect to the Small Company Fund, Capital Appreciation Fund,
International Advisers Fund, International Opportunities Fund, MidCap Fund,
Stock Fund, Dividend and Growth Fund and Advisers Fund, HL Advisors has
entered into a sub-advisory 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 HL Advisors, is responsible for (among other things)
the day-to-day investment and reinvestment of the assets of such Funds and
furnishing each such Fund with advice and recommendations with respect to
investments and the purchase and sale of appropriate securities for each Fund.
-22-
<PAGE>
As provided by the investment advisory agreement, each Fund pays HL
Advisors 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. HL Advisors, not any Fund, pays the
subadvisory fees of Wellington Management as set forth in the Prospectus. HL
Advisors pays HIMCO the direct and indirect costs incurred in managing the
HIMCO-advised Funds.
No person other than HL Advisors, 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.
For the last three fiscal years, each Fund has paid the following
advisory fees to HL Advisors:
<TABLE>
<CAPTION>
FUND NAME 1996 1995 1994
- --------- ---- ---- ----
<S> <C> <C> <C>
Capital Appreciation Fund $12,519,486 $7,715,873 $4,889,579
Dividend and Growth Fund $2,968,879 $757,373 $99,465
Index Fund $945,609 $447,326 $300,556
International Opportunities $4,428,186 $3,213,660 $2,546,060
Small Company Fund $31,521 --- ---
Stock Fund $6,450,702 $4,134,925 $3,096,882
Advisers Fund $22,209,882 $16,044,763 $12,575,934
International Advisers Fund $392,271 --- ---
Bond Fund $1,152,953 $906,000 $808,161
Mortgage Securities Fund $804,297 $790,058 $827,557
Money Market Fund $1,121,482 $762,534 $704,435
U.S. Government Money Market Fund $26,505 $24,282 $23,635
</TABLE>
-23-
<PAGE>
For the last three fiscal years, each Fund has paid the following
administrative fees to Hartford Life:
<TABLE>
<CAPTION>
FUND NAME 1996 1995 1994
- --------- ---- ---- ----
<S> <C> <C> <C>
Capital Appreciation Fund $4,795,769 $2,814,856 $1,710,237
Dividend and Growth Fund $965,006 $230,541 $35,293
Index Fund $827,408 $391,411 $262,987
International Opportunities $1,493,655 $1,045,064 $810,246
Small Company Fund $13,232 --- ---
Stock Fund $4,210,075 $2,586,517 $1,888,808
Advisers Fund $8,785,932 $6,244,398 $5,001,520
International Advisers Fund $119,528 $24,683 ---
Bond Fund $636,196 $491,868 $435,417
Mortgage Securities Fund $563,008 $553,041 $579,290
Money Market Fund $784,977 $542,895 $493,104
U.S. Government Money Market Fund $18,554 $16,998 $16,545
</TABLE>
Pursuant to the investment advisory agreement, subadvisory investment
agreements and investment services agreements neither HL Advisors, HIMCO nor
Wellington Management is liable to the Funds or their shareholders for any
error of judgment or mistake of law or for any loss suffered by the Funds in
connection with the matters to which their respective agreements relate,
except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of HIMCO or Wellington Management in the performance
of their duties or from their reckless disregard of the obligations and
duties under the applicable agreement.
HL Advisors, whose principal business address is at 200 Hopmeadow Street,
Simsbury, Connecticut and whose mailing address is P.O. Box 2999, Hartford,
Connecticut 06104, was organized in 1981. As of December 31, 1996, HL Advisors
and its affiliates had over $47 billion in assets under management. HL
Advisors is a majority owned indirect subsidiary of The Hartford. HIMCO,
whose principal business and mailing addresses are the same as HL Advisors was
organized in 1996 and is a wholly-owned subsidiary of The Hartford. HIMCO is
a professional money management firm that provides services to investment
companies, employee benefit plans and its affiliated insurance companies.
Wellington Management, 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 1928. As of
December 31, 1996, Wellington Management had investment management authority
with respect to approximately $133 billion in assets. Wellington Management
is a Massachusetts Limited Liability Partnership. The three managing general
partners of Wellington Management are Robert W. Doran, Duncan M. McFarland
and John R. Ryan.
-24-
<PAGE>
The investment management agreement, subadvisory investment agreements
and investment services agreements 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 Fund 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 as defined under the 1940 Act. The investment advisory agreement
may be terminated without penalty on 60 days' notice at the option of either
party to the respective contract or by vote of the holders of a majority of
the outstanding voting securities of the applicable Fund. The subadvisory
investment agreements and investment services agreements may be terminated at
any time without the payment of any penalty by the Board of Directors, by vote
of a majority of the outstanding voting securities of the respective Fund or
by HL Advisors, upon 60 days' notice to HIMCO and Wellington Management, and
by Wellington Management or HIMCO upon 90 days' written notice to HL Advisors
(with respect to that Fund only). The subadvisory investment agreement and
investment services agreements terminate automatically upon the termination
of the corresponding investment advisory agreement.
HL Advisors may make payments from time to time from its own resources,
which may include the management fees paid by the Fund 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.
PORTFOLIO TURNOVER
For the last three fiscal years, each Fund had the following portfolio
turnover rates:
<TABLE>
<CAPTION>
FUND NAME 1996 1995 1994
--------- ---- ---- ----
<S> <C> <C> <C>
Capital Appreciation Fund 85.4% 78.6% 73.3%
Dividend and Growth Fund 56.9% 41.4% 27.8%(1)
Index Fund 19.3% 1.5% 1.8%
International Opportunities 70.0% 55.6% 46.4%
Small Company Fund(2) 31.8% N/A N/A
Stock Fund 42.3% 52.9% 63.8%
Advisers Fund 53.8% 63.5% 60.0%
International Advisers Fund 95.2% 47.2%(3) N/A
Bond Fund 212.0% 215.0% 328.8%
Mortgage Securities Fund 201.0% 489.4% 365.7%
Money Market Fund(4) N/A N/A N/A
U.S. Government Money Market Fund(4) N/A N/A N/A
</TABLE>
(1) For the period March 8, 1994 to December 31, 1994.
-25-
<PAGE>
(2) The Small Company Fund commenced operations on August 9, 1996. It is
anticipated that the portfolio turnover rate of the Small Company Fund
will not exceed 100%.
(3) For the period February 28, 1995 to December 31, 1995.
(4) Because of the short-term nature of their portfolio securities and market
conditions, no meaningful or accurate prediction can be made of the
portfolio turnover rate for the Money Market and U.S. Government Money
Market Funds.
Turnover rate is computed by determining the percentage relationship of
the lesser of purchases and sales of securities to the monthly average of the
value of securities owned for the fiscal year, exclusive of securities whose
maturities at the time of acquisition were one year or less. A high turnover
rate will result in increased brokerage expenses and the likelihood of some
short term gains which may be taxable to shareholders at ordinary income tax
rates (see "Federal Income Taxes" in the prospectus).
FUND EXPENSES
Each Fund assumes and pays the following costs and expenses: interest;
taxes; brokerage charges (which may be to affiliated broker-dealers); costs
of preparing, printing and filing any amendments or supplements to the
registration forms of each Fund and its securities; all federal and state
registration, qualification and filing costs and fees, (except the initial
costs and fees, which will be borne by Hartford Life), issuance and
redemption expenses, transfer agency and dividend and distribution disbursing
agency costs and expenses; custodian fees and expenses; accounting, auditing
and legal expenses; fidelity bond and other insurance premiums; fees and
salaries of directors, officers and employees of each Fund other than those
who are also officers of Hartford Life; industry membership dues; all annual
and semiannual reports and prospectuses mailed to each Fund's shareholders as
well as all quarterly, annual and any other periodic report required to be
filed with the SEC or with any state; any notices required by a federal or
state regulatory authority, and any proxy solicitation materials directed to
each Fund's shareholders as well as all printing, mailing and tabulation costs
incurred in connection therewith, and any expenses incurred in connection with
the holding of meetings of each Fund's shareholders and other miscellaneous
expenses related directly to the Funds' operations and interest.
DISTRIBUTION ARRANGEMENTS
Each Fund's shares are sold on a continuous basis to separate accounts
sponsored by The Hartford and its affiliates.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Funds have 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 HL Advisors and the Board
-26-
<PAGE>
of Directors, HIMCO and Wellington Management are primarily responsible for
the investment decisions of each Fund and the placing of its portfolio
transactions. In placing orders, it is the policy of each Fund to obtain the
most favorable net results, taking into account various factors, including
price, dealer spread or commission, if any, size of the transaction and
difficulty of execution. While HIMCO and Wellington Management generally seek
reasonably competitive spreads or commissions. HIMCO and Wellington Management
may direct brokerage transactions to broker/dealers who also sell The
Hartford's variable annuity and variable life insurance contracts and the sale
of such contracts 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.
While HIMCO and Wellington Management (as applicable) seek to obtain the
most favorable net results in effecting transactions in a Fund's portfolio
securities, dealers who provide supplemental investment research to HIMCO or
Wellington Management may receive orders for transactions from HIMCO or
Wellington Management. Such supplemental research services ordinarily
consist of assessments and analyses of the business or prospects of a
company, industry, or economic sector. If, in the judgment of HIMCO or
Wellington Management, a Fund will be benefited by such supplemental research
services, HIMCO and Wellington Management are authorized to pay spreads or
commissions to brokers or dealers furnishing such services which are in excess
of spreads or commissions which another broker or dealer may charge for the
same transaction. Information so received will be in addition to and not in
lieu of the services required to be performed by HIMCO and Wellington
Management under the investment advisory agreement or the sub-investment
advisory agreement. The expenses of HIMCO and Wellington Management will not
necessarily be reduced as a result of the receipt of such supplemental
information. HIMCO and Wellington Management may use such supplemental
research in providing investment advice to portfolios other than those for
which the transactions are made. Similarly, the Funds may benefit from such
research obtained by HIMCO and Wellington Management for portfolio
transactions for other clients.
Investment decisions for the Funds will be made independently from those
of any other clients that may be (or in the future may be) managed by HIMCO,
Wellington Management or their affiliates. If, however, accounts managed by
HIMCO or Wellington Management are simultaneously engaged in the purchase of
the same security, then, pursuant to general authorization of each Fund'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
-27-
<PAGE>
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).
For the last three fiscal years, each Fund has paid the following
brokerage fees:
<TABLE>
<CAPTION>
FUND NAME 1996 1995 1994
--------- ---- ---- ----
<S> <C> <C> <C>
Capital Appreciation Fund $6,257,262 $3,069,000 $2,045,000
Dividend and Growth Fund(1) $1,256,273 $303,000 $65,000
Index Fund $258,946 $66,000 $24,000
International Opportunities $3,607,685 $1,986,000 $1,940,000
Small Company Fund(2) $32,863 N/A N/A
Stock Fund $2,403,555 $1,839,000 $1,872,000
Advisers Fund $3,413,943 $2,608,000 $2,771,000
International Advisers Fund(3) $238,356 $76,000 N/A
Bond Fund(4) N/A N/A N/A
Mortgage Securities Fund(4) N/A N/A N/A
Money Market Fund(4) N/A N/A N/A
U.S. Government Money Market Fund(4) N/A N/A N/A
</TABLE>
(1) Commenced operations in 1994.
(2) Commenced operations in 1996.
(3) Commenced operations in 1995.
(4) No brokerage commissions were paid in 1994, 1995 or 1996 by the Bond
Fund, Mortgage Securities Fund, Money Market Fund or U.S. Government
Money Market Fund.
Changes in the amounts of brokerage commissions paid reflect changes in
portfolio turnover rates.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of each Fund is determined by Hartford
Life, 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 U.S. Government Money Market Fund and 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
-28-
<PAGE>
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 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 U.S. Government Money Market Fund
and 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 U.S. Government Money
Market Fund and the Money Market Fund to maintain a stable $1.00 net asset
value per share. The Fund'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 Fund) redemption of shares
in kind (i.e., portfolio securities).
PURCHASE AND REDEMPTION OF SHARES
-29-
<PAGE>
For information regarding the purchase of Fund shares, see "Purchase of
Fund 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 "Sale and Redemption of Shares" in
the Funds' Prospectus.
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.
INVESTMENT PERFORMANCE
MONEY MARKET FUNDS
In accordance with regulations prescribed by the SEC, the Fund is
required to compute the U.S. Government Money Market Fund and 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 Fund to disclose the effective yield of the
U.S. Government Money Market Fund and the Money Market Fund for the same
seven-day period, determined on a compounded basis. The effective yield is
calculated by compounding the unannualized base period return by adding one
to the base period return, raising the sum to a power equal to 365 divided by
7, and subtracting one from the result.
The yield on amounts held in the U.S. Government Money Market Fund and
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.
-30-
<PAGE>
HVA Money Market Fund
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.
Yield calculations of the Fund used for illustration purposes are based
on the consideration of a hypothetical account having a balance of exactly
one share at the beginning of a seven day period, which period will end on
the date of the most recent financial statements. The yield for the fund
during this seven day period will be the change in the value of the
hypothetical account, including dividends declared on the original share,
dividends declared on any shares purchased with dividends on that share, and
any monthly account charges or sales charges that would affect an account of
average size, but excluding any capital changes. The following is an example
of this yield calculation for the Fund based on a seven day period ending
December 31, 1996.
Example:
Assumptions:
Value of a hypothetical pre-existing account with exactly one share at
the beginning of the period: $1.000000
Value of the same account* (excluding capital changes) at the end of the
seven day period: $1.00094
*This value would include the value of any additional shares purchased
with dividends from the original share, and all dividends declared on both
the original share and any such additional shares.
Calculation:
Ending account value $1.00094
Less beginning account value 1.000000
Net change in account value $.00094
Base period return:
(adjusted change/beginning
account value)
$.001035/$1.000000 = $.001035
Current yield = $.00094 X (365/7) = 5.11%
Effective yield = (1 + .00094)365/7 - 1 = 5.24%
The current yield and effective yield information will fluctuate, and
publication of yield information may not provide a basis for comparison with
bank deposits, other investments which are insured and/or pay a fixed yield
for a stated period of time, or other investment companies. In addition, the
current yield and effective yield information may be of limited use for
comparative
-31-
<PAGE>
purposes because it does not reflect charges imposed at the Separate Account
level which, if included, would decrease the yield.
Hartford U.S. Government Money Market Fund, Inc.
The Fund's yield quotations as they appear in advertising and sales
materials are calculated by a method prescribed by the rules of the
Securities and Exchange Commission.
Yield calculations of the Fund used for illustrations purposes are based
on the consideration of a hypothetical account having a balance of exactly
one share at the beginning of a seven day period, which period will end on
the date of the most recent financial statements. The yield for the Fund
during this seven day period will be the change in the value of the
hypothetical account, including dividends declared on the original share,
dividends declared on any shares purchased with dividends on that share, and
any monthly account charges or sales charges that would affect an account of
average size, but excluding any capital changes. The following is an example
of this yield calculation for the fund based on a seven day period ending
December 31, 1996.
Example:
Assumptions:
Value of a hypothetical pre-existing account with exactly one share at
the beginning of the period: $1.000000000
Value of the same account* (excluding capital changes) at the end of the
seven day period: $1.000927.
*This value would include the value of any additional shares purchased
with dividends from the original share, and all dividends declared on both
the original share and any such additional shares.
Calculation:
Ending account value $1.000927
Less beginning account value 1.000000
Net change in account value $.000927
Base period return:
(adjusted change/beginning
account value)
$.001049/$1.000000 = $.001049
Current yield = $.000927 X (365/7) = 4.83%
Effective yield = (1 + .000927)365/7 - 1 = 4.95%
-32-
<PAGE>
The current yield and effective yield information will fluctuate, and
publication of yield information may not provide a basis for comparison with
bank deposits, other investments which are insured and/or pay a fixed yield
for a stated period of time, or other investment companies.
In addition, the current yield and effective yield information may be of
limited use for comparative purposes because it does not reflect charges
imposed at the Separate Account level which, if included, would decrease the
yield.
At any time in the future, yields and total return may be higher or
lower than past yields and there can be no assurance that any historical
results will continue.
OTHER FUNDS
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN QUOTATIONS. Average annual
total return quotations for the Funds are computed by finding the average
annual compounded rates of return that would cause a hypothetical investment
made on the first day of a designated period to equal the ending redeemable
value of such hypothetical investment on the last day of the designated period
in accordance with the following formula:
P(1+T)(n) = ERV
Where:
P = a hypothetical initial n = number of years
payment of $1,000, less ERV = ending redeemable value
the maximum sales load of the hypothetical
applicable to a Fund $1,000 initial payment
made at the beginning
of the designated
period (or fractional
portion thereof)
T = average annual total return
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.
-33-
<PAGE>
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 the Fund.
Each Fund's average annual total return quotations and yield quotations
as they may appear in the Prospectus, this SAI or in advertising are
calculated by standard methods prescribed by the SEC.
Each Fund may also publish its distribution rate and/or its effective
distribution rate. A Fund's distribution rate is computed by dividing the
most recent monthly distribution per share annualized, by the current net
asset value per share. A Fund's effective distribution rate is computed by
dividing the distribution rate by the ratio used to annualize the most recent
monthly distribution and reinvesting the resulting amount for a full year on
the basis of such ratio. The effective distribution rate will be higher than
the distribution rate because of the compounding effect of the assumed
reinvestment. A Fund's yield is calculated using a standardized formula, the
income component of which is computed from the yields to maturity of all debt
obligations held by the Fund based on prescribed methods (with all purchases
and sales of securities during such period included in the income calculation
on a settlement date basis), whereas the distribution rate is based on a
Fund's last monthly distribution. A Fund's monthly distribution tends to be
relatively stable and may be more or less than the amount of net investment
income and short-term capital gain actually earned by the Fund during the
month (see "Dividends, Capital Gains and Taxes" in the Funds' Prospectus).
Other data that may be advertised or published about each Fund include
the average portfolio quality, the average portfolio maturity and the average
portfolio duration.
STANDARDIZED YIELD QUOTATIONS. The yield of a class is computed by
dividing the class's net investment income per share during a base period of
30 days, or one month, by the maximum offering price per share of the class
on the last day of such base period in accordance with the following formula:
(a-b)
2 [( ----- +1)(6) -1]
(cd)
Where:
a = net investment income c = the average daily number of
earned during the shares of the subject class
period attributable to outstanding
the subject class
-34-
<PAGE>
b = net expenses accrued during the period that were
for the period entitled to receive dividends
attributable to the
subject class d = the maximum offering price per
share of the subject
Net investment income will be determined in accordance with rules established
by the SEC.
NON-STANDARDIZED PERFORMANCE. In addition, in order to more completely
represent a Fund's performance or more accurately compare such performance to
other measures of investment return, a Fund also may include in
advertisements, sales literature and shareholder reports other total return
performance data ("Non-Standardized Return"). Non-Standardized Return may
be quoted for the same or different periods as those for which Standardized
Return is quoted; it may consist of an aggregate or average annual percentage
rate of return, actual year-by-year rates or any combination thereof.
Non-Standardized Return may or may not take sales charges into account;
performance data calculated without taking the effect of sales charges into
account will be higher than data including the effect of such charges. All
non-standardized performance will be advertised only if the standard
performance data for the same period, as well as for the required periods, is
also presented.
GENERAL INFORMATION. From time to time, the Funds may advertise their
performance compared to similar funds using certain unmanaged indices,
reporting services and publications. Descriptions of some of the indices
which may be used are listed below.
The Standard & Poor's 500 Composite Stock Price Index is a well
diversified list of 500 companies representing the U.S. Stock Market.
The Standard & Poor's MidCap 400 Index is designed to represent price
movements in the mid cap U.S. equity market. It contains companies chosen by
the Standard & Poor's Index Committee for their size, liquidity and industry
representation. None of the companies in the S&P 400 overlap with those in
the S&P 500 Index or the S&P 600 Index. Decisions about stocks to be included
and deleted are made by the Committee which meets on a regular basis. S&P 400
stocks are market cap weighted; each stock influences the Index in proportion
to its relative market cap. REITs are not eligible for inclusion. The range
of capitalization of companies in the Index as of December 29, 1995 was $118
million to $7 billion. The inception year of the S&P MidCap 400 Index is
1982. The Index is rebalanced as needed. S&P 400 companies which merge or
are acquired are immediately replaced in the Index; other companies are
replaced when the Committee decides they are no longer representative.
The Standard and Poor's Small Cap 600 index is designed to represent
price movements in the small cap U.S. equity market. It contains companies
chosen by the Standard & Poor's Index Committee for their size, industry
characteristics, and liquidity. None of the companies in the S&P
-35-
<PAGE>
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 index are U.S. dollar denominated,
non-convertible and have at least one year remaining to maturity.
-36-
<PAGE>
The Composite Index for Hartford Advisers Fund is comprised of the S&P
500 (55%), the Lehman Government/Corporate Bond Index (35%), both mentioned
above, and 90 Day U.S. Treasury Bills (10%).
The Composite Index for the Capital Appreciation Fund is the Russell
2500 Index (60%)/S&P 500 Index (40%), both of which are mentioned above.
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 Business Week
Advertising Age Business Wire
Adviser's Magazine Business News Features
Adweek Business Month
Agent Business Marketing
American Banker Business Daily
American Agent and Broker Business Insurance
Associated Press California Broker
Barron's Changing Times
Best's Review Consumer Reports
Bloomberg Consumer Digest
Broker World Crain's
-37-
<PAGE>
Dow Jones News Service Lipper Analytical Services, Inc.
Economist MarketFacts
Entrepreneur Medical Economics
Entrepreneurial Woman Money
Financial Services Week Morningstar, Inc.
Financial World Nation's Business
Financial Planning National Underwriter
Financial Times New Choices (formerly 50 Plus)
Forbes New England Business
Fortune New York Times
Hartford Courant Pension World
Inc Pensions & Investments
Independent Business Professional Insurance Agents
Institutional Investor Professional Agent
Insurance Forum Registered Representative
Insurance Advocate Independent Reuter's
Insurance Review Investor's Rough Notes
Insurance Times Round the Table
Insurance Week Service
Insurance Product News Success
Insurance Sales The Standard
Investment Dealers Digest The Boston Globe
Investment Advisor The Washington Post
Journal of Commerce Tillinghast
Journal of Accountancy Time
Journal of the American Society U.S. News & World Report
of CLU & ChFC U.S. Banker
Kiplinger's Personal Finance United Press International
Knight-Ridder USA Today
Life Association News Value Line
Life Insurance Selling Wall Street Journal
Life Times Wiesenberger Investment
LIMRA's MarketFacts Working Woman
From time to time the Fund may publish the sales of shares of one or
more of the Funds on a gross or net basis and for various periods of time,
and compare such sales with sales similarly reported by other investment
companies.
The manner in which total return and yield are calculated is described
above. The following table sets forth the average annual total return, and
yield where applicable, for each Fund through December 31, 1996.
-38-
<PAGE>
TOTAL RETURN/YIELD
<TABLE>
<CAPTION>
10 YEARS OR
SINCE
FUND 1 YEAR 5 YEARS INCEPTION SEC 30-DAY YIELD
---- ------ ------ ------------ ----------------
<S> <C> <C> <C> <C>
Capital Appreciation 20.70% 17.89% 16.68%
Dividend and Growth 22.91% --- 20.96%
Index 22.09% 14.42% 12.82%
International Opportunities 12.93% 10.03% 7.57%
Small Company --- --- 7.15%
Stock 24.37% 15.54% 14.58%
Advisers 16.59% 12.09% 12.24%
International Advisers 11.79% --- 15.10%
Bond 8.52% 6.51% 7.64% 6.25%
Mortgage Securities 5.07% 5.96% 7.78% 6.67%
HVA Money Market 5.19% 4.29% 5.84%
U.S. Government Money Market 4.91% 4.00% 5.42%
</TABLE>
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.
-39-
<PAGE>
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
insufficient income to preserve its status as a regulated investment company
and seek to avoid becoming subject to federal income or excise tax.
-40-
<PAGE>
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.
The foregoing discussion relates solely to U.S. Federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens or residents and U.S.
domestic corporations, partnerships, trusts or estates) subject to tax under
such law. The discussion does not address special tax rules applicable to
certain classes of investors, such as tax-exempt entities, insurance
companies, and financial institutions. Dividends, capital gain
distributions, and ownership of or gains realized on the redemption
(including an exchange) of the shares of a Fund may also be subject to state
and local taxes. Shareholders should consult their own tax advisers as to
the federal, state or local tax consequences of ownership of shares of, and
receipt of distributions from, the Funds in their particular circumstances.
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 Custodian
Agreements between each Fund and State Street Bank and Trust Company.
-41-
<PAGE>
TRANSFER AGENT SERVICES
Hartford Life Insurance Company, Hartford Plaza, Hartford, Connecticut
06115, serves as Transfer and Dividend Disbursing Agent for the Funds. The
Transfer Agent issues and redeems shares of the Funds and disburses any
dividends declared by the Funds.
INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements and financial highlights of each Fund included
in this SAI and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
OTHER INFORMATION
The Hartford has granted the Fund 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 Fund and the Funds at any time, or to grant
the use of such name to any other company.
FINANCIAL STATEMENTS
Each Fund's audited financial statements as of December 31, 1996,
together with the notes thereto and the report of Arthur Andersen LLP are
attached to this SAI.
-42-
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial statements: Not Applicable
(b) Exhibits:
(1) Articles of Incorporation
(2) By-Laws
(3) Not Applicable
(4) Share Certificate(1)
(5) Investment Management Agreement
(5.1) Investment Sub-Advisory Agreement
(6) Not Applicable
(7) Not Applicable
(8) Custodian Agreement with State Street Bank and Trust
Company
(9) Administrative Services Agreement
(9.1) Share Purchase Agreements
(10) Opinion and Consent of Counsel
(11) Not Applicable
(12) Not Applicable
(13) Subscription Agreement
(14) Not Applicable
(15) Not Applicable
(16) Schedule of Computation for Performance Quotations(a)
(17) Not Applicable
(18) Not Applicable
(19) Not Applicable
(27) Not Applicable
- ------------------------
(1)To be filed by Amendment.
<PAGE>
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Inapplicable
Item 26. NUMBER OF HOLDERS OF SECURITIES
As of April 7, 1997, the number of record holders of the Registrant's
securities were:
TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- -------------------------
Common Stock, par value $0.10 1
per share
Item 27. INDEMNIFICATION
Article EIGHTH of the Articles of Incorporation provides:
EIGHTH: (a) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative other than an action by or in the
right of the corporation) by reason of the fact that he is or was a
Director, Officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a Director or Officer of
another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not
apposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, has no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent, creates a rebuttable presumption
that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interest of
the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) The Corporation shall indemnify any person who was or is party or
is threatened to be make a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to
procure, a judgment in its favor by reason of the fact that he is or
was a Director, Officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a Director,
Officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including
attorney's fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not
apposed to the best interests of the Corporation. No indemnification
shall be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation.
(c) To the extent that a Director, Officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in subsections (a) and
(b), or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorney's fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) (unless ordered
by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the
Director, Officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b). Such determination shall be made (1) by the
Board of Directors by a majority vote of a quorum consisting of
Directors who were neither interested persons nor parties to such
action suit or proceeding, or (2) if such quorum is not obtainable, or
even if obtainable a quorum of disinterested Directors so directors,
by independent legal counsel in a written opinion.
(e) Expenses incurred in defending civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the
Board of Directors in the specific case upon receipt of an undertaking
by or on behalf of the Director, Officer, employee or agent to repay
such amount unless it shall ultimately be determined that he is
entitled to be
<PAGE>
indemnified by the Corporation as authorized in this
Article and upon meeting one of the following conditions:
(i) the indemnitee shall provide a security for his undertaking,
(ii) the investment company shall be insured against losses
arising by reason of any lawful advances, or (iii) a majority of
a quorum of the disinterested, non-party Directors of the
investment company, or an independent legal counsel in a written
opinion, shall determine, based on a review of readily available
facts (as opposed to a full trial-type inquiry), that there is
reason to believe that the indemnitee ultimately will be found
entitled to indemnification.
(f) The corporation may purchase and maintain insurance on behalf of
any person who is or was a Director, Officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as
a Director, Officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such.
(g) Anything to the contrary in the foregoing clauses (a) through (f)
notwithstanding, no Director or Officer shall be indemnified by the
Corporation and no insurance policy obtained by the Corporation will
protect or attempt to protect any such person against any liability to
the Corporation or to its security holders to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office, or in a manner inconsistent with Securities and
Exchange Commission Release 11330 under the Investment Company Act of
1940.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person in
connection with the securities being registered, the registrant
undertakes that it will, unless in the opinion of its counsel the
matter has been settled by controlling precedent submit to a court of
appropriate jurisdiction the questions whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
All of the information required by this item is set forth in Schedule
D of the Form ADV, as amended, of the Registrant's investment adviser,
HL Investment Advisors, Inc. (File No. 801-16814), and is incorporated
herein by reference.
Item 29. PRINCIPAL UNDERWRITERS
(a) Not Applicable
(b) Not Applicable
(c) Not Applicable
Item 30. LOCATION OF ACCOUNTS AND RECORDS
The Hartford Life Insurance Company
P.O. Box 2999
Hartford, CT 06104-2999
AND
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Item 31. MANAGEMENT SERVICES
Not Applicable
<PAGE>
Item 32. UNDERTAKINGS
The Registrant undertakes that it will file a post-effective
amendment, using financial statements which need not be certified,
within four to six months from the effective date of the Registrant's
1933 Act Registration Statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned thereto duly authorized, in the
City of Hartford, and State of Connecticut on the 14th day of April, 1997.
HARTFORD MIDCAP FUND, INC.
By: /S/ MICHAEL O'HALLORAN
-------------------------------------
Michael O'Halloran
Sole Director and Incorporator
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Michael O'Halloran Sole Director and April 14, 1997
- -------------------------- Incorporator
Michael O'Halloran
/s/ George R. Jay Controller April 14, 1997
- -------------------------- (Chief Accounting Officer)
George R. Jay
/s/ J. Richard Garrett Vice President April 14, 1997
- -------------------------- and Treasurer
J. Richard Garrett (Chief Financial Officer)
</TABLE>
<PAGE>
EXHIBITS INDEX
EXHIBIT NO.
- -----------
1 Articles of Incorporation
2 By-Laws
5 Investment Management Agreement
5.1 Investment Sub-Advisory Agreement
8 Custody Agreement with State Street Bank and Trust Company
9 Administrative Services Agreement
9.1 Share Purchase Agreements
10 Opinion and Consent of Counsel
13 Subscription Agreement
<PAGE>
EXHIBIT 1
ARTICLES OF INCORPORATION
OF
HARTFORD MIDCAP FUND, INC.
I, THE UNDERSIGNED, Michael O'Halloran, whose post office address is
Hartford Plaza, 690 Asylum Avenue, Hartford, CT 06115, being at least
eighteen (18) years of age, subscribe these Articles of Incorporation as the
incorporator forming a corporation under the General Laws of the State of
Maryland.
FIRST: The name of the corporation is Hartford MidCap Fund, Inc.
SECOND: The purpose for which the corporation is formed is to act as
an open-end, management investment company under the Investment Company Act
of 1940, as amended, and to effect from time to time, and to exercise and
enjoy all of the powers, rights and privileges granted to, or conferred
upon, corporations of a similar character by the General Laws of the State
of Maryland now or hereafter in force.
THIRD: The post office address of the principal office of the
Corporation in this State is c/o The Corporation Trust Incorporated, 32
South Street, Baltimore, MD 21202. The name of the resident agent of the
Corporation in this State is The Corporation Trust Incorporated, a
corporation of this State, and the post office address of the resident agent
is 32 South Street, Baltimore, MD 21202.
FOURTH: (a) The total number of shares of stock of all classes which
the Corporation shall have authority to issue is 750,000,000 shares of
Common Stock having a par value of ten cents ($0.10) per share and an
aggregate par value of $75,000,000.
(b) The rights, powers, preferences and restrictions on the
Common Stock are as follows:
(1) DIVIDEND RIGHTS - The shareholders of Common Stock shall
be entitled to receive such dividends as may be declared by
the Board of Directors from time to time based upon the
investment performance of the Common Stock.
(2) VOTING RIGHTS - The shareholders shall be entitled to
vote upon such matters as may be presented to them from time
to time. Each shareholder shall be entitled to one vote for
each share such shareholder holds.
(3) LIQUIDATION RIGHTS - Upon liquidation, the shareholders
shall be entitled to share, pro rata, in any assets of the
Corporation after discharge of all liabilities in payment of
the expenses of liquidation of the Fund.
FIFTH: (a) The shares of the Common Stock of the Corporation may be
issued to such persons and at such prices from time to time as the Board of
Directors, subject to any provisions set forth in the Corporation's Bylaws,
may determine. Such issuance shall be on a non-assessable basis. No holder
of shares of Common Stock shall have preemptive rights, and the Corporation
shall have the right to issue and sell to any person or persons any shares
of its Common Stock or any option rights exercisable for, or securities
convertible into, shares of its Common Stock without first offering such
shares, rights or securities to the holders of any shares of its Common
Stock.
(b) The shares of the Corporation's Common Stock are
redeemable by the owners thereof upon request, in accordance with and
subject to the provisions of the Investment Company Act of 1940, in the
manner set forth in the Corporation's Bylaws. In addition, the Corporation
shall have the right to redeem any shareholder's or shareholders' interest
in the Corporation's Common Stock if the value of such interest shall at any
time be less than an amount which shall be set forth in the Corporation's
Bylaws.
SIXTH: The number of Directors of the Corporation shall be one,
provided, however, that the number may be increased in accordance with the
Bylaws. The name of the Director who shall act until the first annual
meeting or until his successor is duly chosen and qualifies is:
Michael O'Halloran
<PAGE>
SEVENTH: The Corporation is expressly empowered to enter into
contracts with any person, including any firm, corporation, trust or other
form of business association or entity in which any Officer, employee,
Director or stockholder of this Corporation may be interested to the fullest
extent permitted by the General Laws of the State of Maryland and the
Investment Company Act of 1940 now or hereafter in force, subject only to
such limitations as may be set forth in the Bylaws of this Corporation.
EIGHTH: (a) The Corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that he is or was a Director,
Officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a Director or Officer of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation,
and, with respect to any criminal action or proceeding, has no reasonable
cause to believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, creates a rebuttable presumption
that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interest of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a Director,
Officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a Director, Officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action
or suit if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation. No
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation.
(c) To the extent that a Director, Officer, employee or agent
of the Corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in subsections (a) and (b), or
in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) (unless
ordered by a court) shall be made by the Corporation only as authorized in
the specific case upon a determination that indemnification of the Director,
Officer, employee or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in subsections (a) and (b).
Such determination shall be made (1) by the Board of Directors by a majority
vote of a quorum consisting of Directors who were neither interested persons
nor parties to such action, suit or proceeding, or (2) if such quorum is not
obtainable, or even if obtainable a quorum of disinterested Directors so
directs, by independent legal counsel in a written opinion.
(e) Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding as authorized by the
Board of Directors in the specific case upon receipt of an undertaking by or
on behalf of the Director, Officer, employee or agent to repay such amount
unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this Article and upon
meeting one of the following conditions: (i) the indemnitee shall provide a
security for his undertaking, (ii) the investment company shall be insured
against losses arising by reason of any lawful advances, or (iii) a majority
of a quorum of the disinterested, non-party Directors of the investment
company, or an independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe that the
indemnitee ultimately will be found entitled to indemnification.
(f) The Corporation may purchase and maintain insurance on
behalf of any person who is or was a Director, Officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
Director, Officer, employee or agent of
2
<PAGE>
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such.
(g) Anything to the contrary in the foregoing clauses (a)
through (f) notwithstanding, no Director or Officer shall be indemnified by
the Corporation and no insurance policy obtained by the Corporation will
protect or attempt to protect any such person against liability to the
Corporation or to its security holders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office, or
in a manner inconsistent with Securities and Exchange Commission Release
11330 under the Investment Company Act of 1940.
NINTH: In furtherance and or in limitation of the powers conferred by
the laws of the State of Maryland, the Board of Directors is expressly
authorized:
(a) To make, alter or repeal the Bylaws of the Corporation,
except where such power is reserved by the Bylaws to the stockholders, and
except as otherwise required by the Investment Company Act of 1940.
(b) From time to time to determine whether and to what extent
and at what times and places and under what conditions and regulations the
books and accounts of the Corporation, or any of them other than the stock
ledger, shall be open to the inspection of the stockholders, and no
stockholder shall have any right to inspect any account or book or document
of the Corporation, except as conferred by or authorized by resolution of
the Board of Directors or of the stockholders. The books of the Corporation
may be kept (subject to any provisions contained in the statutes) outside
the State of Maryland at such place or places as may be designated from time
to time by the Board of Directors or in the Bylaws of the Corporation.
(c) Without the assent or vote of the stockholders, to
authorize and issue obligations of the Corporation, secured and unsecured,
as the Board of Directors may determine, and to authorize and cause to be
executed mortgages and liens upon the property of the Corporation, real or
personal but only to the extent permitted by the Bylaws and by the
fundamental policies of the Corporation recited in its registration
statement filed pursuant to the Investment Company Act of 1940.
(d) In addition to the powers and authorities hereinbefore or
by statute expressly conferred upon it, the Board of Directors may exercise
all such powers and do all such acts and things as may be exercised or done
by the Corporation, subject, nevertheless, to the provisions of Maryland
law, of these Articles of Incorporation, and of the Bylaws of the
Corporation.
TENTH: The Corporation reserves the right to amend, alter, change or
repeal any provisions contained in these Articles of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
I, Michael O'Halloran, hereby acknowledge that I have executed the foregoing
Articles of Incorporation as my free act and deed this 1st day of April,
1997.
/s/ Michael O'Halloran
------------------------
Michael O'Halloran
3
<PAGE>
EXHIBIT 2
BYLAWS
OF
HARTFORD MIDCAP FUND, INC.
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1.1 Place of Meetings: All meetings of stockholders shall be
held at the principal office of the Corporation in the City of Hartford,
Connecticut, or at such place within the United States as from time to time
may be designated by resolution of the Board of Directors.
SECTION 1.2 Annual Meeting: Except as hereinafter otherwise provided,
the annual meeting of stockholders shall be held each year at such date and
time as shall be designated by resolution of the Board of Directors for such
business as may properly come before said meeting. Insofar as the
Corporation is registered under the Investment Company Act of 1940, the
Corporation shall not be required to hold an annual meeting of stockholders
in any year in which none of the following is required to be acted on by the
stockholders under the Investment Company Act of 1940: (a) election of
Directors; (b) approval of an investment advisory agreement; (c)
ratification of the election of independent public accountants; and (d)
approval of a distribution agreement.
SECTION 1.3 Special Meetings: Special meetings of the stockholders
entitled to vote at such meetings may be called at any time by the President
or by any three of the Directors, and shall be called at the request in
writing of the stockholders of record owning not less than twenty-five (25)
percent of the shares of the Corporation's capital stock entitled to vote at
such meeting.
SECTION 1.4 Notice of Meetings: Not less than ten (10) days before
every stockholders' meeting, notice of the time, place, and in the case of a
special meeting, the purpose, of such meeting shall be given, either by
serving such notice upon the stockholder personally or by mailing such
notice to each stockholder at his last known post office address as it
appears upon the stock book, unless he shall have filed with the Secretary
of the Corporation a written request that notices intended for him be mailed
to some other address, in which case it shall be mailed to the address
designated in such request. Except as otherwise required by law, no notice
of the time, place or purpose of any meeting of stockholders need be given
to any stockholder who attends in person or by proxy, or who, in a written
instrument executed and filed with the records of the meeting either before
or after the holding thereof, waives such notice. No notice of any adjourned
meeting of stockholders need be given.
SECTION 1.5 Record Date: The Board of Directors by resolution may fix
in advance a date, not exceeding ninety (90) days preceding the date of any
meeting of stockholders or the date for the payment of any dividend or the
date for the allotment of rights or the date when any change or conversion
or exchange of capital stock shall go into effect, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such meeting, or entitled to receive payment of any such dividend or any
such allotment of rights, or to exercise the rights in respect of any such
change or conversion or exchange of capital stock, and in such case only
such stockholders as shall be stockholders of record on the date so fixed
shall be entitled to such notice of and to vote at, such meeting, or to
receive payment of such dividend, or to receive such allotment of rights, or
to exercise such rights, as the case may be, notwithstanding any transfer of
any capital stock on the books of the Corporation after any such record date
fixed as aforesaid.
SECTION 1.6 Quorum: At all meetings of stockholders, there shall be
present, either in person or by proxy, stockholders owning a majority of the
shares entitled to vote thereat in order to constitute a quorum, but in the
absence of a quorum the stockholders present in person or by proxy at the
time and place fixed by Section l of this Article I for an annual meeting,
or designated in the notice of a special meeting, or at the time and place
of any adjournment thereof, may adjourn the meeting from time to time
without notice, other than by announcement at the meeting until a quorum
shall attend. At any such adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been transacted at
the meeting as originally noticed.
<PAGE>
SECTION 1.7 Voting: At all meetings of stockholders, the voting shall
be by voice, except that whenever a vote by the holders of the outstanding
shares of capital stock is required by law or where a stockholder present in
person or by proxy at any such meeting requests a vote by ballot, the voting
shall be by ballot, each of which shall state the name of the stockholder
voting and the number of shares voted by him, and, if such ballot is cast by
proxy, it shall also state the name of such proxy. Subject to the
provisions of the Articles of Incorporation of the Corporation, the holders
of the capital stock shall have the right to vote at any meeting of the
stockholders or at any election of the Corporation, and otherwise to
participate in any action taken by the stockholders thereof, and each such
holder shall be entitled to one vote for each share of capital stock that he
holds. The Corporation may permit the voting of fractional shares. Except
in cases in which it is by law, by the Articles of Incorporation, or by
these Bylaws otherwise provided, the votes of a majority of the shares of
capital stock of the Corporation present or represented at any meeting of
stockholders at which a quorum is present shall be sufficient to elect and
to pass any resolution.
As provided in the Investment Company Act of 1940 a
"majority" vote means the affirmative vote of the lesser of (i) more than
50% of the outstanding shares of capital stock, or (ii) 67% or more of the
shares present at a meeting if more than 50% of the outstanding shares are
represented at the meeting in person or by proxy.
SECTION 1.8 Proxies: Any stockholder entitled to vote at any meeting of
stockholders may vote either in person or by proxy, but no proxy which is
dated more than eleven (ll) months before the meeting at which it is offered
shall be accepted, unless such proxy shall on its face name a longer period
for which it is to remain in force. Every proxy shall be in writing, signed
by the stockholder or his duly authorized attorney, and dated, but need not
be sealed, witnessed, or acknowledged.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.1 Powers and Election: The Directors of the Corporation shall
have the powers as stated in the Articles of Incorporation and as provided
in these By-laws, and such as are prescribed by the laws of the State of
Maryland. They shall be residents of the United States of America and they
shall be elected to office by the stockholders of the Corporation at an
annual or a special meeting duly called for that purpose, except as
hereinafter otherwise provided for filling vacancies.
SECTION 2.2 Meetings and Notice: Regular meetings of the Board of
Directors shall be held at such times as may from time to time be fixed by
resolution of the Board, and whenever called together by the President, on
two days' notice, given to each Director. On the written request of
one-third (l/3) of the Directors, the President or Secretary shall call a
special meeting of the Board. Notice may be served personally upon each
Director, or mailed, cabled, or telegraphed to him at his present address
appearing upon the books of the Corporation. Such notice also may be
telephoned, provided that any Director so notified shall be actually reached
by telephone. Notice shall be given of special meetings as provided in the
case of regular meetings.
SECTION 2.3 Quorum: The presence of not less than two (2) of the
Directors or of one-third (l/3) of the total number of Directors, whichever
shall be greater, shall be necessary to constitute a quorum for the
transaction of business at any meeting of the Board, but a majority of the
Directors present at the time and place of any regular or special meeting,
although less than a quorum, may adjourn the same from time to time without
further notice until a quorum shall be present at which time any business
may be transacted which might have been transacted at the meeting as
originally notified.
SECTION 2.4 Place of Meetings and Office: The Board of Directors may
hold their meetings and have an office or offices within or without the
State of Maryland.
SECTION 2.5 Vacancies: Except as law or valid regulations may require
of registered investment companies, any vacancy in the Board of Directors
occurring through death, resignation, removal, increase in number, or other
cause, may be filled by a majority vote of the remaining Directors at any
regular or special meeting of the Board of Directors; provided, however,
that immediately after the filling of any vacancy at least two-thirds of the
Directors then in office shall have been elected to such office by the
stockholders at an annual or special meeting. In the event that at any time
less than a majority of the Directors in office were elected
2
<PAGE>
by the stockholders, the Board of Directors or proper officer of the
Corporation shall forthwith cause to be held as promptly as possible and in
any event within sixty (60) days a meeting of the stockholders for the
purpose of electing Directors to fill any existing vacancies in the Board of
Directors.
SECTION 2.6 Number: The Board of Directors shall be not less than one
nor more than twenty (20) in number. The number may be changed at any time
or times by an amendment to this Bylaw duly adopted by a majority of the
Board of Directors or by the stockholders at any stockholders' meeting.
SECTION 2.7 Compensation: Each Director may receive a stated fee for
his services as a Director, as may be fixed by resolution of the Board of
Directors for attendance, and the expenses of attendance, if any, at each
regular or special meeting of the Board or committee of the Board on which
he serves. Such resolution may apply to any class of Directors the Board of
Directors considers to be reasonable. Any Director receiving compensation
under these provisions shall not be barred from serving the Corporation in
any other capacity and receiving reasonable compensation for such other
services.
SECTION 2.8 Meeting by Conference Telephone: Subject to the provisions
of the Investment Company Act of 1940, as amended, and the Rules and
Regulations thereunder, members of the Board of Directors or any committee
thereof may meet by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting.
SECTION 2.9 Action Without Meeting: Except as otherwise provided by
law, any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken without a
meeting, if a written consent to such action is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
SECTION 2.10 Waiver of Notice: Whenever under the provisions of these
Bylaws or any of the laws of the State of Maryland, the stockholders or
Board of Directors are authorized to hold any meeting after notice or after
the lapse of any prescribed period of time, such meeting may be held without
notice and without such lapse of time by a written waiver of such notice
signed by every person entitled to notice.
ARTICLE III
EXECUTIVE AND OTHER COMMITTEES OF THE BOARD
SECTION 3.1 Election of Executive Committee: The Board of Directors may
elect from their number an Executive Committee of two (2) or more and may
designate a Chairman for said Committee. The Chairman of the Committee and
the members of the Executive Committee shall continue in office at the
pleasure of the Board. The Board of Directors shall fill vacancies in the
Executive Committee by election of members from the Board of Directors and
at all times it shall be the duty of the Board of Directors to keep the
membership of such committee full, if such Executive Committee has been
elected.
SECTION 3.2 Powers and Supervisions by the Board: During the intervals
between the meetings of the Board of Directors, the Executive Committee
shall possess and may exercise all of the powers of the Board of Directors
in the management and direction of the Business of the Corporation, except
as to matters wherein action of the Board of Directors is specifically
required, in such manner as the Executive Committee shall deem best for the
interests of the Corporation in all cases in which specific directions shall
not have been given by the Board of Directors. All actions of the Executive
Committee shall be reported to the Board of Directors at its next meeting
and shall be subject to revision or alteration by the Board, provided that
no rights or acts of third parties shall be affected by any such revision or
alteration.
SECTION 3.3 Other Committees: The Board of Directors may by resolution
provide for such Administrative, Standing and/or Special Committees from its
membership as it may deem desirable, and may discontinue the same at
pleasure. Each such committee shall have such powers and shall perform such
duties, not inconsistent with law, as may be assigned to it by the Board of
Directors.
3
<PAGE>
SECTION 3.4 Meetings of Board Committees: The Executive Committee and
any other committee of the Board shall meet upon such day or days and at
such hour or hours as may be designated from time to time by resolution
passed by a majority of such committee and whenever called together by its
Chairman upon notice given to each member of the Committee not later than
the day next preceding the date of the meeting. Upon the written request of
any two members of the committee, the Chairman shall call a special meeting
of the committee. The presence of at least a majority of the Executive
Committee shall be necessary to adopt any resolution. In the absence of any
member of the Executive Committee, the members thereof present at any
meeting, whether or not they constitute a quorum, may appoint a member of
the Board to act in place of the absent member.
ARTICLE IV
OFFICERS
SECTION 4.1 Election and Appointment: The Board of Directors shall elect
annually a Chairman, a President, a Secretary and a Treasurer, and may
appoint one or more Vice Presidents, a Controller, and one or more Assistant
Secretaries and Assistant Treasurers. One person may hold any two offices
except those of President and Vice President. Except for the Chairman and
the President, the Officers need not be Directors. Each of the appointed
Officers shall serve during the pleasure of the Board of Directors. Any
vacancy in any of the above offices shall be filled for the unexpired
portion of the term by the Board of Directors.
SECTION 4.2 Chairman: The Chairman shall preside at all meetings of the
shareholders and of the Board of Directors and shall have such other powers
and duties as may from time to time be prescribed by the Board of Directors.
SECTION 4.3 President: The President shall be the chief Executive
Officer of the Corporation and shall have the responsibility for the general
management of the affairs of the Corporation and for seeing that all orders
and resolutions of the Board of Directors are carried into effect. The
President may sign certificates of stock, sign and execute all contracts in
the name of the Corporation, and appoint and discharge agents and employees,
subject to the approval of the Board of Directors.
SECTION 4.4 Vice Presidents: The Vice Presidents shall perform all the
duties incidental to their offices and all such duties as may from time to
time be assigned to them respectively by the Board of Directors. The said
Vice Presidents in such order of precedence as may from time to time be
designated by the Board of Directors, shall perform all the duties of the
President in the event of his absence or disability.
SECTION 4.5 Secretary: The Secretary shall keep the minutes of the
meetings of the Board of Directors, of any committees thereof, and of the
stockholders. The Secretary shall attend to the giving and serving of all
notices of the Corporation, and may affix the seal of the Corporation to all
certificates of stock and other documents of the Corporation or to which the
Corporation is a party. The Secretary shall have charge of the certificates
book and such other books and papers as the Board may direct, shall attend
to such correspondence as may be assigned from time to time by the Board of
Directors, and shall perform all duties incidental to the office.
SECTION 4.6 Treasurer: The Treasurer shall have the custody of the
funds and securities of the Corporation and shall deposit the same in the
name of the Corporation in such banks or trust companies as the Directors
may elect. The Treasurer shall keep full and accurate accounts of receipts
and disbursements of the Corporation, and shall disburse funds of the
Corporation as may be ordered by the Board of Directors, the President or
the Vice Presidents, taking proper vouchers for such disbursements. The
Treasurer shall render to the President and the Directors at the regular
meetings of the Board, or whenever they may require it, an account of all
transactions and of the financial condition of the Corporation, and at the
regular meeting of the Board next preceding the annual stockholders meeting
a like report for the preceding year. The Treasurer shall give such bond
for the faithful performance of duties as may be required by the Board of
Directors and shall perform such other duties as the Board of Directors may
from time to time prescribe.
SECTION 4.7 Controller: The Controller shall have the supervision of
the corporate accounts and the books of the Corporation, its accounting
methods and audits, and the preparation of its financial statements of all
kinds, including tax reports and returns. The
4
<PAGE>
Controller shall have general supervision of the bookkeeping staff and shall
perform such other duties as may from time to time be prescribed by the
Board of Directors.
SECTION 4.8 Assistant Secretary: The Assistant Secretary in the
presence or at the request of the Secretary shall perform all the duties of
the Secretary, and shall perform such other duties as may from time to time
be prescribed by the Board of Directors.
SECTION 4.9 Assistant Treasurer: The Assistant Treasurer in the absence
or at the request of the Treasurer shall perform all the duties of the
Treasurer and shall perform such other duties as may from time to time be
prescribed by the Board of Directors.
SECTION 4.10 Compensation: The Board of Directors shall have power to
fix the compensation of all Officers of the Corporation. It may authorize
any Officer upon whom the power of appointing subordinate Officers may have
been conferred, to fix the compensation of such subordinate Officers.
SECTION 4.11 Removal: Any Officer of the Corporation may be removed,
with or without cause, by a vote of a majority of the entire Board of
Directors, or, except in case of an Officer elected by the Board of
Directors, by the Executive Committee or by an Officer upon whom such power
of removal may have been conferred.
ARTICLE V
CAPITAL STOCK
SECTION 5.L Certificates: Certificates of stock shall be numbered in
the order of issuance thereof and shall be signed by the President or Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation, and the seal of the
Corporation shall be affixed thereto. Facsimile signatures and seals may be
used on stock certificates in accordance with Maryland law.
SECTION 5.2 Transfers: Transfers of shares shall be made upon the books
of the Corporation only by a holder in person, or by power of attorney duly
executed and witnessed and filed with the Secretary of the Corporation or
with its duly appointed transfer agents, upon the surrender of the
certificate or certificates of such shares.
SECTION 5.3 Transfer Agents and Registrars: The Board of Directors may
by separate resolutions appoint corporate transfer agents, clerks and/or
corporate registrars to perform such duties in respect to the issuance and
transfer of the certificates of capital stock of the Corporation as such
resolution may provide.
SECTION 5.4 Holder of Record as Exclusive Owner: The Corporation shall
be entitled to treat the holder of record of any share or shares of stock as
the holder in fact thereof and accordingly shall not be bound to recognize
any equitable or other claim to, or interest in, such shares on the part of
any other persons whether or not it shall have express or other notice
thereof, save as expressly provided by the laws of the State of Maryland.
SECTION 5.5 Lost Certificates: If a certificate of stock be lost or
destroyed, another may be issued into stead upon sworn proof of such loss or
destruction, and upon the giving of a satisfactory bond of indemnity in an
amount satisfactory to the Board of Directors or Executive Committee.
ARTICLE VI
CONTRACTS, BORROWINGS, CHECKS, DEPOSITS, CUSTODY, ETC.
SECTION 6.L Contracts, etc., How Executed: The Board of Directors, or
the Executive Committee, except as in these Bylaws otherwise provided, may
authorize any Officer or Officers, agent or agents, to enter into any
contract or execute and deliver any instrument in the name of and on behalf
of the Corporation, and such authority may be general or confined to
specific instances; and, unless so authorized by the Board of Directors or
by the provisions of these Bylaws, no Officer, agent or employee shall have
any power or authority to bind the Corporation by any contract or engagement
or to pledge its credit or to render it liable pecuniarily for any purpose
or to any account.
5
<PAGE>
SECTION 6.2 Borrowings by the Corporation: In accordance with the
provisions of the Investment Company Act of 1940, and the Corporation's
prospectus and statement of additional information, the Corporation may
borrow up to a maximum of 33-1/3 percent of the value of the total assets of
the Fund at the date of borrowing.
SECTION 6.3 Deposits: All Funds of the Corporation shall be deposited
from time to time to the credit of the Corporation in such banks, trust
companies or other depositories as the Board of Directors or any individual
designated by the Board of Directors may select; and for the purpose of such
deposit the President or Vice President, or the Treasurer or the Secretary,
or any other Officer or agent to whom such power may be delegated by the
Board of Directors, may endorse, assign and deliver checks, drafts and other
orders for the payment of money which are payable to the order of the
Corporation.
SECTION 6.4 Custodian: The securities and other investments owned by
the Corporation shall be held by a custodian which shall be a bank or trust
company regulated by federal or state authority having not less than
$5,000,000 aggregate capital, surplus and undivided profits provided such a
custodian can be found ready and willing to act. Upon the resignation or
inability to serve of the custodian, the Officers and Directors shall use
their best efforts to obtain a successor custodian and shall require that
the securities and other investments owned by the Corporation be delivered
directly to such successor custodian.
SECTION 6.5 Checks, Drafts, Etc.: All checks, notes, drafts and other
instruments in writing for the payment of money shall be signed only by such
Officer or Officers as shall be designated from time to time by resolution
of the Board of Directors.
ARTICLE VII
DIVIDENDS
SECTION 7.L Declaration of Dividends: Dividends upon the capital stock
of the Corporation may be declared by the Board of Directors at any regular
or special meeting out of the surplus or net profits of the Corporation,
subject, however, to the provisions of the Articles of Incorporation.
SECTION 7.2 Reserves: The Board of Directors shall in its own
discretion have the right to set apart out of the earnings of the
Corporation reserve and surplus funds to be held for the purpose of the
Corporation, and may invest and reinvest the same in the same way and
subject to the same restrictions as are provided for the investment and
reinvestment of the capital of the Corporation. When, and only when, the
Board of Directors shall decide that it is advisable or necessary to pay
dividends out of the reserve and surplus funds, shall such funds be subject
to the payment of dividends.
ARTICLE VIII
SEAL
SECTION 8.1 The seal of the Corporation shall be in the form of a
circle, shall bear the name of the Corporation, the year and state of its
incorporation, and the word "Seal".
ARTICLE IX
FISCAL YEAR AND FINANCIAL REPORTS
SECTION 9.1 Fiscal Year: The fiscal year of the Corporation shall end
on December 31 of each year.
SECTION 9.2 Financial Statements: The Directors shall submit to
stockholders financial reports not less often than semiannually of the
operations of the Corporation, based at least annually upon an audit by
independent public accountants, prepared in accordance with generally
accepted accounting principles.
6
<PAGE>
ARTICLE X
CONSTRUCTION AND INTERPRETATION
SECTION 10.1 The Bylaws shall be construed and interpreted to further the
operation of the Corporation as a registered open-end management-type
investment company under the Investment Company Act of 1940, as amended and
in effect from time to time.
ARTICLE XI
AMENDMENTS
SECTION 11.1 Except as otherwise required, the Bylaws of the Corporation
may be amended, altered, repealed, or added to at any regular meeting of the
stockholders or at any special meeting of the stockholders, called for that
purpose, by affirmative vote of the majority of the stock issued and
outstanding and entitled to vote; or (except as to Section 6.2 of Article
VI), by a majority of the Directors, as the case may be.
7
<PAGE>
EXHIBIT 5
INVESTMENT MANAGEMENT AGREEMENT
This Agreement made by and between Hartford MidCap Fund, Inc., a Maryland
corporation (the "Fund") and HL Investment Advisors, Inc., a Connecticut
corporation (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an agreement setting
forth the services to be performed by the Manager for the Fund and 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. The Fund hereby employs the Manager to serve as investment adviser to
the Fund. Subject to the supervision and control of the Fund's Board
of Directors, the Manager will provide investment management
supervision to the Fund, as hereinafter generally described, in
accordance with the Fund's investment objectives, investment policies
and investment restrictions as they shall exist from time to time. The
Manager shall:
(a) Engage, subject to consultation with the Fund's Board of
Directors, the services of one or more firms to serve as
sub-investment adviser to the Fund (the "Sub-Investment
Adviser").
(b) Review from time to time the investment policies and
restrictions of the Fund in the light of the Fund's
performance and otherwise and, if the Manager concludes after
consultation with the Fund's Sub-Investment Adviser that any
changes therein are appropriate, recommend such changes to the
Fund's Board of Directors for its consideration.
(c) Supervise the investment program prepared for the Fund by the
Sub-Investment Adviser and submitted to the Manager as well as
any changes therein.
(d) Monitor on a continuing basis the performance of the Fund's
portfolio securities.
(e) Provide, or arrange for the provision of, such economic and
statistical data relating to the Fund and its portfolio as the
Manager shall determine or as may be requested by the Fund's
Board of Directors.
(f) Provide the Fund's Board of Directors with such information
concerning important economic and political developments as
the Manager shall deem appropriate or as shall be requested by
the Fund's Board of Directors.
2. As compensation for the services rendered by the Manager, the Fund
shall pay to the Manager 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 Fund:
ASSETS ANNUAL FEE
On First $250 million .575%
On Next $250 million .525%
On Next $500 million .475%
Over $1 billion .425%
The Manager shall waive its fees until the Fund's assets (excluding
assets contributed by companies affiliated with the Manager) reach $20
million.
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 Fund's daily net asset
value on the close of business for the period in question, and (iii)
paid within a reasonable time after the close of such period.
<PAGE>
3. The Manager will pay and will be solely responsible for the payment of
the fees of the Sub-Investment Adviser for the performance of its
services.
4. The Manager 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 the Manager shall have acted in good faith and
with due care; provided, however, that the Manager shall be liable for
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.
5. (a) This Agreement shall be effective on
, 1997 and shall continue in effect for a period of two
years from that date. This Agreement, unless sooner terminated
in accordance with 5(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 Fund
or by a vote of a majority of the outstanding voting
securities of the Fund, and (2) in either event, by the vote
of a majority of the members of the Fund'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 Fund or by a vote of
a majority of the Fund's outstanding voting securities, on
sixty days' prior written notice to the Manager; (2) shall
immediately terminate in the event of its assignment and (3)
may be terminated by the Manager on sixty days' prior written
notice to the Fund, but such termination will not be effective
until the Fund shall have contracted with one or more persons
to serve as a successor Manager for the Fund 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 Fund'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 to this Agreement to whom such notice is to be given at
such party's current address.
6. Nothing in this Agreement shall limit or restrict the right of any
director, officer, or employee of the Manager 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 the Manager to engage in any other business or to render
services of any kind to any other corporation, firm individual or
association.
7. 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day of , 1997.
HARTFORD MIDCAP FUND, INC.
By:
---------------------------------
Joseph H. Gareau, President
HL INVESTMENT ADVISORS, INC.
By:
---------------------------------
Andrew W. Kohnke, Managing Director
2
<PAGE>
EXHIBIT 5.1
INVESTMENT SUB-ADVISORY AGREEMENT
This investment sub-advisory agreement made by and between HL
INVESTMENT ADVISORS, INC., a Connecticut corporation (the "Manager") and
Wellington Management Company, LLP, a limited liability partnership
("Wellington Management" or "Sub-Adviser").
WITNESSETH
WHEREAS, The Manager has entered into an agreement for the provision of
investment management services to Hartford MidCap Fund, Inc. (the "Fund") by
the Manager, and
WHEREAS, The Manager wishes to engage the services of Wellington
Management Company as Sub-Adviser of the Fund, and
WHEREAS, Wellington Management is willing to perform advisory services
on behalf of the Fund 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. The Manager hereby employs Wellington Management to serve as Sub-Adviser
with respect to the assets of the Fund under the management of the Manager
and to perform the services hereinafter set forth subject to the terms and
conditions of the investment objectives, policies and restrictions of the
Fund, 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 provide an investment program to the Manager
for utilization by the Manager in rendering services to the Fund which
program shall be amended and updated from time to time as financial and
other economic conditions change.
3. Wellington Management will make all determinations with respect to the
investment of the assets of the Fund 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 Fund'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
the Fund's portfolio securities should be exercised.
4. Wellington Management will regularly furnish reports to the Fund at
periodic meetings of the Fund's Board of Directors and at such other times
as may be reasonably requested by the Fund'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 Fund since the last report. Copies of all such reports
shall be furnished to the Manager for examination and review within a
reasonable time prior to the presentation of such reports to the Fund's
Board of Directors.
5. Wellington Management will select the brokers or dealers that will execute
the purchases and sales of portfolio securities for the Fund and place, in
the name of the Fund 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 the Fund. 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 available, if Wellington Management 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 Wellington
Management's overall responsibilities with respect to the Fund 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.
6. (a) As compensation for the performance of the services by Wellington
Management hereunder, the Manager 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 the Fund:
<PAGE>
ASSETS ANNUAL FEE
On First $50 million .400%
On Next $100 million .300%
On Next $350 million .250%
Over $500 million .200%
Wellington Management shall waive its fees until the Fund's assets
(excluding assets contributed by companies affiliated with the
Manager) reach $20 million.
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 the Fund's
daily net asset value on the close of business 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 the agreement.
(c) Wellington Management will not be entitled to receive any payment for
the performance of its services hereunder from the Fund.
(d) Wellington Management agrees to notify the Manager of any change in
Wellington Management's general partners within a reasonable time
following the occurrence of such change.
7. 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
Wellington Management shall be liable for 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.
8. (a) This agreement shall become effective on
, 1997 and shall continue in effect for a period of two years
from that date. This agreement, unless sooner terminated in
accordance with 8(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 Fund or by a vote of a
majority of the outstanding voting securities of the Fund, and(2)
in either event, by the vote of a majority of the members of the
Fund'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 vote of the members of the Board
of Directors of the Fund or by a vote of a majority of the Fund's
outstanding voting securities, or by the Manager on sixty days'
prior 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 the Manager, but such termination will not be effective
until the Fund or the Manager shall have contracted with one or
more persons to serve as a successor Sub-Adviser for the Fund and
such person(s) shall have assumed such position, and (4) will
terminate automatically upon termination of the investment
management agreement between the Manager and the Fund of even
date herewith.
(c) As used in this agreement, the terms "assignment," "interested
parties" and "vote of a majority of the Fund'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 of such party or
parties.
9. 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
2
<PAGE>
other business or to render services of any kind to any other
corporation, firm, individual or association.
10. The Manager agrees that neither it nor any affiliate of the Manager 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.
11. 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.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed on the day of , 1997.
HL INVESTMENT ADVISORS, INC.
---------------------------------
By: Andrew W. Kohnke
Title: Managing Director
WELLINGTON MANAGEMENT COMPANY, LLP
---------------------------------
By: Duncan M. McFarland
Title: President
3
<PAGE>
EXHIBIT 8
CUSTODIAN CONTRACT
Between
HARTFORD MIDCAP FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
PAGE
1. Employment of Custodian and Property to be
Held By It. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. Duties of the Custodian with Respect to Property of
the Fund Held by the Custodian in the United States . . . . . . . . . .1
2.1 Holding Securities. . . . . . . . . . . . . . . . . . . . . . .1
2.2 Delivery of Securities. . . . . . . . . . . . . . . . . . . . .2
2.3 Registration of Securities. . . . . . . . . . . . . . . . . . .4
2.4 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . .4
2.5 Availability of Federal Funds . . . . . . . . . . . . . . . . .4
2.6 Collection of Income. . . . . . . . . . . . . . . . . . . . . .4
2.7 Payment of Fund Monies. . . . . . . . . . . . . . . . . . . . .5
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased . . . . . . . . . . . . . . . .6
2.9 Appointment of Agents . . . . . . . . . . . . . . . . . . . . .6
2.10 Deposit of Securities in U.S. Securities System . . . . . . . .6
2.11 Fund Assets Held in the Custodian's Direct
Paper System. . . . . . . . . . . . . . . . . . . . . . . . . .8
2.12 Segregated Account. . . . . . . . . . . . . . . . . . . . . . .8
2.13 Ownership Certificates for Tax Purposes . . . . . . . . . . . .9
2.14 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
2.15 Communications Relating to Fund
Portfolio Securities. . . . . . . . . . . . . . . . . . . . . .9
2.16 Reports to Fund by Independent Public
Accountants . . . . . . . . . . . . . . . . . . . . . . . . . .9
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States. . . . . . . . . . . . . . 10
3.1 Appointment of Foreign Sub-Custodians . . . . . . . . . . . . 10
3.2 Assets to be Held . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Foreign Securities Systems. . . . . . . . . . . . . . . . . . 10
3.4 Holding Securities. . . . . . . . . . . . . . . . . . . . . . 10
3.5 Agreements with Foreign Banking Institutions. . . . . . . . . 11
3.6 Access of Independent Accountants of the Fund . . . . . . . . 11
3.7 Reports by Custodian. . . . . . . . . . . . . . . . . . . . . 11
3.8 Transactions in Foreign Custody Account . . . . . . . . . . . 11
3.9 Liability of Foreign Sub-Custodians . . . . . . . . . . . . . 12
3.10 Liability of Custodian. . . . . . . . . . . . . . . . . . . . 12
3.11 Reimbursement for Advances. . . . . . . . . . . . . . . . . . 12
3.12 Monitoring Responsibilities . . . . . . . . . . . . . . . . . 13
3.13 Branches of U.S. Banks. . . . . . . . . . . . . . . . . . . . 13
3.14 Tax Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4. Payments for Repurchases or Redemptions and Sales
of Shares of the Fund . . . . . . . . . . . . . . . . . . . . . . . . 13
5. Proper Instructions . . . . . . . . . . . . . . . . . . . . . . . . . 14
6. Actions Permitted Without Express Authority . . . . . . . . . . . . . 14
7. Evidence of Authority . . . . . . . . . . . . . . . . . . . . . . . . 15
8. Duties of Custodian with Respect to the Books of
Account and Calculations of Net Asset Value and
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10. Opinion of Fund's Independent Accountant. . . . . . . . . . . . . . . 15
11. Compensation of Custodian . . . . . . . . . . . . . . . . . . . . . . 16
12. Responsibility of Custodian . . . . . . . . . . . . . . . . . . . . . 16
<PAGE>
13. Effective Period, Termination and Amendment . . . . . . . . . . . . . 17
14. Successor Custodian . . . . . . . . . . . . . . . . . . . . . . . . . 18
15. Interpretive and Additional Provisions. . . . . . . . . . . . . . . . 18
16. Massachusetts Law to Apply. . . . . . . . . . . . . . . . . . . . . . 19
17. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
18. Shareholder Communications Election . . . . . . . . . . . . . . . . . 19
<PAGE>
CUSTODIAN CONTRACT
This Contract between Hartford MidCap Fund, Inc., a corporation
organized and existing under the laws of the State of Maryland, having its
principal place of business at 690 Asylum Avenue, Hartford Plaza, Hartford,
Connecticut 06115 hereinafter called the "Fund", and State Street Bank and
Trust Company, a Massachusetts trust company, having its principal place of
business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter
called the "Custodian",
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of its assets,
including securities it desires to be held in places within the United
States ("domestic securities") and securities it desires to be held outside
the United States ("foreign securities") pursuant to the provisions of the
Articles of Incorporation. The Fund agrees to deliver to the Custodian all
securities and cash owned by it, and all payments of income, payments of
principal or capital distributions received by it with respect to all
securities owned by the Fund from time to time, and the cash consideration
received by it for such new or treasury shares of capital stock, $0.10 par
value, ("Shares") of the Fund as may be issued or sold from time to time.
The Custodian shall not be responsible for any property of the Fund held or
received by the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall from time to time employ one or more sub-custodians
located in the United States, but only in accordance with an applicable vote
by the Board of Directors of the Fund, and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of
any actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as
sub-custodians for the Fund's securities and other assets the foreign
banking institutions and foreign securities depositories designated in
Schedule "A" hereto but only in accordance with the provisions of Article 3.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE
CUSTODIAN IN THE UNITED STATES
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property, to be held by it in the
United States, including all domestic investments owned by the Fund, other
than (a) securities which are maintained pursuant to Section 2.10 in a
clearing agency which acts as a securities depository or in a book-entry
system authorized by the U.S. Department of the Treasury and certain
federal agencies (each, a "U.S. Securities System") and (b) commercial
paper of an issuer for which the Custodian acts as issuing and paying agent
("Direct Paper") which is deposited and/or maintained in the Direct Paper
System of the Custodian (the "Direct Paper System") pursuant to Section
2.11.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
domestic securities owned by the Fund held by the Custodian or in a U.S.
Securities System account of the Custodian or in the Custodian's Direct
Paper book-entry system account ("Direct Paper System Account") only upon
receipt of Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a U.S. Securities System,
in accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name
of the Fund or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.9 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or
for exchange for a
<PAGE>
different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of
units; PROVIDED that, in any such case, the new securities
are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Fund, to
the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom;
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered
to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Fund, BUT ONLY against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund,
which may be in the form of cash or obligations issued by the
United States government, its agencies or instrumentalities,
except that in connection with any loans for which collateral is
to be credited to the Custodian's account in the book-entry
system authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the
delivery of securities owned by the Fund prior to the receipt of
such collateral;
11) For delivery as security in connection with any borrowings by
the Fund requiring a pledge of assets by the Fund, BUT ONLY
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered
under the Securities Exchange Act of 1934 (the "Exchange Act")
and a member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by the Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind,
as may be described from time to time in the Fund's currently
effective prospectus and statement of additional information
("prospectus"), in satisfaction of requests by holders of Shares
for repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon receipt
of, in addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors or of the Executive
Committee signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, specifying the securities
to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom
delivery of such securities shall be made.
2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the Fund
or in the name of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Fund, UNLESS
the Fund has authorized in writing the appointment of a
2
<PAGE>
nominee to be used in common with other registered investment companies
having the same investment adviser as the Fund, or in the name or nominee
name of any agent appointed pursuant to Section 2.9 or in the name or
nominee name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of the Fund under the terms
of this Contract shall be in "street name" or other good delivery form. If,
however, the Fund directs the Custodian to maintain securities in
"street name", the Custodian shall utilize its best efforts only to timely
collect income due the Fund on such securities and to notify the Fund on a
best efforts basis only of relevant corporate actions including, without
limitation, pendency of calls, maturities, tender or exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of the Fund, subject
only to draft or order by the Custodian acting pursuant to the terms of
this Contract, and shall hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for the account of the
Fund, other than cash maintained by the Fund in a bank account established
and used in accordance with Rule 17f-3 under the Investment Company Act of
1940. Funds held by the Custodian for the Fund may be deposited by it to
its credit as Custodian in the Banking Department of the Custodian or in
such other banks or trust companies as it may in its discretion deem
necessary or desirable; PROVIDED, however, that every such bank or trust
company shall be qualified to act as a custodian under the Investment
Company Act of 1940 and that each such bank or trust company and the funds
to be deposited with each such bank or trust company shall be approved by
vote of a majority of the Board of Directors of the Fund. Such funds shall
be deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund
and the Custodian, the Custodian shall, upon the receipt of Proper
Instructions, make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and the Custodian in the
amount of checks received in payment for Shares of the Fund which are
deposited into the Fund's account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to United States registered securities held hereunder to which
the Fund shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and
other payments with respect to United States bearer securities if, on the
date of payment by the issuer, such securities are held by the Custodian or
its agent thereof and shall credit such income, as collected, to the Fund's
custodian account. Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons and other income
items requiring presentation as and when they become due and shall collect
interest when due on securities held hereunder. Income due the Fund on
United States securities loaned pursuant to the provisions of Section 2.2
(10) shall be the responsibility of the Fund. The Custodian will have no
duty or responsibility in connection therewith, other than to provide the
Fund with such information or data as may be necessary to assist the Fund
in arranging for the timely delivery to the Custodian of the income to
which the Fund is properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions, which
may be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out monies of the Fund in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of the
Fund but only (a) against the delivery of such securities, or
evidence of title to such options, futures contracts or options
on futures contracts, to the Custodian (or any bank, banking
firm or trust company doing business in the United States or
abroad which is qualified under the Investment Company Act of
1940, as amended, to act as a custodian and has been designated
by the Custodian as its agent for this purpose) registered in
the name of the Fund or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or in proper form
for transfer; (b) in the case of a purchase effected through a
U.S. Securities System, in accordance with the conditions set
forth in Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.11; (d) in the case of
repurchase agreements entered into between the Fund and the
Custodian, or another bank, or a broker-dealer which is a member
of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the Fund
of securities owned by the Custodian
3
<PAGE>
along with written evidence of the agreement by the Custodian
to repurchase such securities from the Fund or (e) for transfer
to a time deposit account of the Fund in any bank, whether
domestic or foreign; such transfer may be effected prior to
receipt of a confirmation from a broker and/or the applicable
bank pursuant to Proper Instructions from the Fund as defined
in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Fund as
set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for
the account of the Fund: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors or of the Executive
Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary, specifying
the amount of such payment, setting forth the purpose for which
such payment is to be made, declaring such purpose to be a
proper purpose, and naming the person or persons to whom such
payment is to be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and every
case where payment for purchase of domestic securities for the account of
the Fund is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Fund to
so pay in advance, the Custodian shall be absolutely liable to the Fund for
such securities to the same extent as if the securities had been received
by the Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of 1940,
as amended, to act as a custodian, as its agent to carry out such of the
provisions of this Article 2 as the Custodian may from time to time direct;
PROVIDED, however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
2.10 DEPOSIT OF SECURITIES IN U.S. SECURITIES SYSTEMS. The Custodian may
deposit and/or maintain domestic securities owned by the Fund in a clearing
agency registered with the Securities and Exchange Commission under Section
17A of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S. Department
of the Treasury and certain federal agencies, collectively referred to
herein as "U.S. Securities System" in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules and regulations,
if any, and subject to the following provisions:
1) The Custodian may keep domestic securities of the Fund in a U.S.
Securities System provided that such securities are represented
in an account ("Account") of the Custodian in the U.S.
Securities System which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
2) The records of the Custodian with respect to domestic securities
of the Fund which are maintained in a U.S. Securities System
shall identify by book-entry those securities belonging to the
Fund;
3) The Custodian shall pay for domestic securities purchased for
the account of the Fund upon (i) receipt of advice from the U.S.
Securities System that such securities have been transferred to
the Account, and (ii) the making of an entry on the records of
the Custodian to reflect such payment and transfer for the
account of the Fund.
4
<PAGE>
The Custodian shall transfer domestic securities sold for
the account of the Fund upon (i) receipt of advice from
the U.S. Securities System that payment for such securities
has been transferred to the Account, and (ii) the making
of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the Fund. Copies
of all advices from the U.S. Securities System of transfers of
domestic securities for the account of the Fund shall identify
the Fund, be maintained for the Fund by the Custodian and be
provided to the Fund at its request. Upon request, the Custodian
shall furnish the Fund confirmation of each transfer to or from
the account of the Fund in the form of a written advice or
notice and shall furnish to the Fund copies of daily transaction
sheets reflecting each day's transactions in the U.S. Securities
System for the account of the Fund.
4) The Custodian shall provide the Fund with any report obtained by
the Custodian on the U.S. Securities System's accounting system,
internal accounting control and procedures for safeguarding
domestic securities deposited in the U.S. Securities System;
5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 13 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the U.S. Securities System by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their
employees or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the Fund has
not been made whole for any such loss or damage.
2.11 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The
Custodian may deposit and/or maintain securities owned by the Fund in the
Direct Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions;
2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for
customers;
3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for the account
of the Fund upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to
the account of the Fund. The Custodian shall transfer
securities sold for the account of the Fund upon the making of
an entry on the records of the Custodian to reflect such
transfer and receipt of payment for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's transaction in
the U.S. Securities System for the account of the Fund;
6) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may reasonably
request from time to time;
2.12 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for
and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained in an
account by the Custodian pursuant to Section 2.10 hereof, (i) in accordance
with the provisions of any agreement among the Fund, the Custodian and a
5
<PAGE>
broker-dealer registered under the Exchange Act and a member of the NASD
(or any futures commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract market), or
of any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund, (ii) for purposes
of segregating cash or government securities in connection with options
purchased, sold or written by the Fund or commodity futures contracts or
options thereon purchased or sold by the Fund, (iii) for the purposes of
compliance by the Fund with the procedures required by Investment Company
Act Release No. 10666, or any subsequent release or releases of the
Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and (iv) for other
proper corporate purposes, BUT ONLY, in the case of clause (iv), upon
receipt of, in addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors or of the Executive Committee signed
by an officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated account
and declaring such purposes to be proper corporate purposes.
2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of the Fund held by it and in connection
with transfers of such securities.
2.14 PROXIES. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in the
name of the Fund or a nominee of the Fund, all proxies, without indication
of the manner in which such proxies are to be voted, and shall promptly
deliver to the Fund such proxies, all proxy soliciting materials and all
notices relating to such securities.
2.15 COMMUNICATIONS RELATING TO FUND PORTFOLIO SECURITIES. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund all written information (including, without limitation, pendency of
calls and maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put options
written by the Fund and the maturity of futures contracts purchased or sold
by the Fund) received by the Custodian from issuers of the domestic
securities being held for the Fund. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund all written
information received by the Custodian from issuers of the domestic
securities whose tender or exchange is sought and from the party (or his
agents) making the tender or exchange offer. If the Fund desires to take
action with respect to any tender offer, exchange offer or any other
similar transaction, the Fund shall notify the Custodian at least three
business days prior to the date on which the Custodian is to take such
action.
2.16 REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS The Custodian shall
provide the Fund, at such times as the Fund may reasonably require, with
reports by independent public accountants on the accounting system,
internal accounting control and procedures for safeguarding securities,
futures contracts and options on futures contracts, including domestic
securities deposited and/or maintained in a U.S. Securities System,
relating to the services provided by the Custodian under this Contract;
such reports shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there
are no such inadequacies, the reports shall so state.
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE
OF THE UNITED STATES
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Fund's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories designated
on Schedule A hereto ("foreign sub-custodians"). Upon receipt of "Proper
Instructions", as defined in Section 5 of this Contract, together with a
certified resolution of the Fund's Board of Directors, the Custodian and
the Fund may agree to amend Schedule A hereto from time to time to
designate additional foreign banking institutions and foreign securities
depositories to act as sub-custodian. Upon receipt of Proper Instructions,
the Fund may instruct the Custodian to cease the employment of any one or
more such sub-custodians for maintaining custody of the Fund's assets.
6
<PAGE>
3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash equivalents in
such amounts as the Custodian or the Fund may determine to be reasonably
necessary to effect the Fund's foreign securities transactions. The
Custodian shall identify on its books as belonging to the Fund, the foreign
securities of the Fund held by each foreign sub-custodian.
3.3 FOREIGN SECURITIES SYSTEMS. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Fund shall be
maintained in a clearing agency which acts as a securities depository or in
a book-entry system for the central handling of securities located outside
the United States (each, a "Foreign Securities System") only through
arrangements implemented by the foreign banking institutions serving as
sub-custodians pursuant to the terms hereof (Foreign Securities Systems and
U.S. Securities Systems are collectively referred to herein as the
"Securities System"). Where possible, such arrangements shall include
entry into agreements containing the provisions set forth in Section 3.5
hereof.
3.4 HOLDING SECURITIES. The Custodian may hold securities and other non-
cash property for all of its customers, including the Fund, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, PROVIDED HOWEVER, that (i) the
records of the Custodian with respect to securities and other non-cash
property of the Fund which are maintained in such account shall identify by
book-entry those securities and other non-cash property belonging to the
Fund and (ii) the Custodian shall require that securities and other non-
cash property so held by the foreign sub-custodian be held separately from
any assets of the foreign sub-custodian or of others.
3.5 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall provide that: (a) the Fund's assets will
not be subject to any right, charge, security interest, lien or claim of
any kind in favor of the foreign banking institution or its creditors or
agent, except a claim of payment for their safe custody or administration;
(b) beneficial ownership of the Fund's assets will be freely transferable
without the payment of money or value other than for custody or
administration; (c) adequate records will be maintained identifying the
assets as belonging to the Fund; (d) officers of or auditors employed by,
or other representatives of the Custodian, including to the extent
permitted under applicable law the independent public accountants for the
Fund, will be given access to the books and records of the foreign banking
institution relating to its actions under its agreement with the Custodian;
and (e) assets of the Fund held by the foreign sub-custodian will be
subject only to the instructions of the Custodian or its agents.
3.6 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books and
records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the performance
of such foreign banking institution under its agreement with the Custodian.
3.7 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the securities
and other assets of the Fund held by foreign sub-custodians, including but
not limited to an identification of entities having possession of the
Fund's securities and other assets and advices or notifications of any
transfers of securities to or from each custodial account maintained by a
foreign banking institution for the Custodian on behalf of the Fund
indicating, as to securities acquired for the Fund, the identity of the
entity having physical possession of such securities.
3.8 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Except as otherwise
provided in paragraph (b) of this Section 3.8, the provision of Sections
2.2 and 2.7 of this Contract shall apply, MUTATIS MUTANDIS to the foreign
securities of the Fund held outside the United States by foreign
sub-custodians. (b) Notwithstanding any provision of this Contract to the
contrary, settlement and payment for securities received for the account of
the Fund and delivery of securities maintained for the account of the Fund
may be effected in accordance with the customary established securities
trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivering securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a receipt with
the expectation of receiving later payment for such securities from such
purchaser or dealer. (c) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such entity's nominee
7
<PAGE>
to the same extent as set forth in Section 2.3 of this Contract, and the
Fund agrees to hold any such nominee harmless from any liability as a
holder of record of such securities.
3.9 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care in
the performance of its duties and to indemnify, and hold harmless, the
Custodian and each Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to
any claims against a foreign banking institution as a consequence of any
such loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
3.10 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set forth
with respect to sub-custodians generally in this Contract and, regardless
of whether assets are maintained in the custody of a foreign banking
institution, a foreign securities depository or a branch of a U.S. bank as
contemplated by paragraph 3.13 hereof, the Custodian shall not be liable
for any loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism or any loss where the sub-custodian has otherwise exercised
reasonable care. Notwithstanding the foregoing provisions of this
paragraph 3.10, in delegating custody duties to State Street London Ltd.,
the Custodian shall not be relieved of any responsibility to the Fund for
any loss due to such delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization, insurrection,
civil strife or armed hostilities) or (b) other losses (excluding a
bankruptcy or insolvency of State Street London Ltd. not caused by
political risk) due to Acts of God, nuclear incident or other losses under
circumstances where the Custodian and State Street London Ltd. have
exercised reasonable care.
3.11 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to
advance cash or securities for any purpose including the purchase or sale
of foreign exchange or of contracts for foreign exchange, or in the event
that the Custodian or its nominee shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall
be security therefor and should the Fund fail to repay the Custodian
promptly, the Custodian shall be entitled to utilize available cash and to
dispose of the Fund assets to the extent necessary to obtain reimbursement.
3.12 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection with
the initial approval of this Contract. In addition, the Custodian will
promptly inform the Fund in the event that the Custodian learns of a
material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the case
of any foreign sub-custodian not the subject of an exemptive order from the
Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity has declined below
$200 million (in each case computed in accordance with generally accepted
U.S. accounting principles).
3.13 BRANCHES OF U.S. BANKS. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of the
Fund assets are maintained in a foreign branch of a banking institution
which is a "bank" as defined by Section 2(a)(5) of the Investment Company
Act of 1940 meeting the qualification set forth in Section 26(a) of said
Act. The appointment of any such branch as a sub-custodian shall be
governed by paragraph 1 of this Contract. (b) Cash held for the Fund in
the United Kingdom shall be maintained in an interest bearing account
established for the Fund with the Custodian's London branch, which account
shall be subject to the direction of the Custodian, State Street London
Ltd. or both.
3.14 TAX LAW. The Custodian shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or any
state or political subdivision thereof. It shall be the responsibility of
the Fund to notify the Custodian of the obligations imposed on the
8
<PAGE>
Fund or the Custodian as custodian of the Fund by the tax law of
jurisdictions other than those mentioned in the above sentence,
including responsibility for withholding and other taxes, assessments or
other governmental charges, certifications and governmental reporting.
The sole responsibility of the Custodian with regard to such tax law shall
be to use reasonable efforts to assist the Fund with respect to any claim
for exemption or refund under the tax law of jurisdictions for which the
Fund has provided such information.
4. PAYMENTS FOR REPURCHASES OR REDEMPTIONS AND SALES OF SHARES OF THE FUND
From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation and any applicable votes of the
Board of Directors of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a
request for redemption or repurchase of their Shares. In connection with
the redemption or repurchase of Shares of the Fund, the Custodian is
authorized upon receipt of instructions from the Transfer Agent to wire
funds to or through a commercial bank designated by the redeeming
shareholders. In connection with the redemption or repurchase of Shares of
the Fund, the Custodian shall honor checks drawn on the Custodian by a
holder of Shares, which checks have been furnished by the Fund to the holder
of Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
The Custodian shall receive from the distributor for the Fund's Shares
or from the Transfer Agent of the Fund and deposit into the Fund's account
such payments as are received for Shares of the Fund issued or sold from
time to time by the Fund. The Custodian will provide timely notification to
the Fund and the Transfer Agent of any receipt by it of payments for Shares
of the Fund.
5. PROPER INSTRUCTIONS
Proper Instructions as used herein means a writing signed or initialled
by one or more person or persons as the Board of Directors shall have from
time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific statement
of the purpose for which such action is requested. Oral instructions will
be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with
respect to the transaction involved. The Fund shall cause all oral
instructions to be confirmed in writing. Upon receipt of a certificate of
the Secretary or an Assistant Secretary as to the authorization by the Board
of Directors of the Fund accompanied by a detailed description of procedures
approved by the Board of Directors, Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Board of Directors and the Custodian are satisfied
that such procedures afford adequate safeguards for the Fund's assets. For
purposes of this Section, Proper Instructions shall include instructions
received by the Custodian pursuant to any three-party agreement which
requires a segregated asset account in accordance with Section 2.12.
6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under
this Contract, PROVIDED that all such payments shall be
accounted for to the Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property of
the Fund except as otherwise directed by the Board of Directors
of the Fund.
7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed
by it to be genuine and to have been properly executed by or on behalf of
the Fund. The Custodian may receive and accept a certified copy of a vote
of the Board of Directors of the Fund as conclusive evidence (a) of the
authority of any person to act in accordance with such vote or (b) of any
determination or of any action by the Board of Directors pursuant to the
Articles of Incorporation as described in such vote, and such vote may be
considered as in full force and effect until receipt by the Custodian of
written notice to the contrary.
9
<PAGE>
8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION
OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Directors of the Fund to
keep the books of account of the Fund and/or compute the net asset value per
share of the outstanding shares of the Fund or, if directed in writing to do
so by the Fund, shall itself keep such books of account and/or compute such
net asset value per share. If so directed, the Custodian shall also
calculate daily the net income of the Fund as described in the Fund's
currently effective prospectus and shall advise the Fund and the Transfer
Agent daily of the total amounts of such net income and, if instructed in
writing by an officer of the Fund to do so, shall advise the Transfer Agent
periodically of the division of such net income among its various
components. The calculations of the net asset value per share and the daily
income of the Fund shall be made at the time or times described from time to
time in the Fund's currently effective prospectus.
9. RECORDS
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet
the obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder. All such records shall be the property of the Fund and shall at
all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The
Custodian shall, at the Fund's request, supply the Fund with a tabulation of
securities owned by the Fund and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as shall be agreed
upon between the Fund and the Custodian, include certificate numbers in such
tabulations.
10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A, and Form N-SAR or
other annual reports to the Securities and Exchange Commission and with
respect to any other requirements of such Commission.
11. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between
the Fund and the Custodian.
12. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in
acting upon any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the proper party
or parties, including any futures commission merchant acting pursuant to the
terms of a three-party futures or options agreement. The Custodian shall be
held to the exercise of reasonable care in carrying out the provisions of
this Contract, but shall be kept indemnified by and shall be without
liability to the Fund for any action taken or omitted by it in good faith
without negligence. It shall be entitled to rely on and may act upon advice
of counsel (who may be counsel for the Fund) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to
such advice.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or
agent, the Custodian shall be without liability to the Fund for any loss,
liability, claim or expense resulting from or caused by; (i) events or
circumstances beyond the reasonable control of the Custodian or any
sub-custodian or Securities System or any agent or nominee of any of the
foregoing, including, without limitation, nationalization or expropriation,
imposition of currency controls or restrictions, the interruption,
suspension or restriction of trading on or the closure of any securities
market, power or other mechanical or technological failures or
interruptions, computer viruses or communications disruptions, acts of war
or terrorism, riots, revolutions, work stoppages, natural disasters or other
similar events or acts; (ii) errors by the Fund or the Investment Advisor in
their instructions to the Custodian provided such instructions have been in
accordance with this Contract; (iii) the
10
<PAGE>
insolvency of or acts or omissions by a Securities System; (iv) any delay or
failure of any broker, agent or intermediary, central bank or other
commercially prevalent payment or clearing system to deliver to the
Custodian's sub-custodian or agent securities purchased or in the remittance
or payment made in connection with securities sold; (v) any delay or failure
of any company, corporation, or other body in charge of registering or
transferring securities in the name of the Custodian, the Fund, the
Custodian's sub-custodians, nominees or agents or any consequential losses
arising out of such delay or failure to transfer such securities including
non-receipt of bonus, dividends and rights and other accretions or benefits;
(vi) delays or inability to perform its duties due to any disorder in market
infrastructure with respect to any particular security or Securities System;
and (vii) any provision of any present or future law or regulation or order
of the United States of America, or any state thereof, or any other country,
or political subdivision thereof or of any court of competent jurisdiction.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution to the same extent as set forth with respect to
sub-custodians generally in this Contract.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may,
in the opinion of the Custodian, result in the Custodian or its nominee
assigned to the Fund being liable for the payment of money or incurring
liability of some other form, the Fund, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the Custodian in
an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not
limited to securities settlements, foreign exchange contracts and assumed
settlement) or in the event that the Custodian or its nominee shall incur or
be assessed any taxes, charges, expenses, assessments, claims or liabilities
in connection with the performance of this Contract, except such as may
arise from its or its nominee's own negligent action, negligent failure to
act or willful misconduct, any property at any time held for the account of
the Fund shall be security therefor and should the Fund fail to repay the
Custodian promptly, the Custodian shall be entitled to utilize available
cash and to dispose of the Fund assets to the extent necessary to obtain
reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
13. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided,
may be amended at any time by mutual agreement of the parties hereto and may
be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect
not sooner than thirty (30) days after the date of such delivery or mailing;
PROVIDED, however that the Custodian shall not act under Section 2.10 hereof
in the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Directors of the Fund has approved the
initial use of a particular U.S. Securities System, as required by Rule
17f-4 under the Investment Company Act of 1940, as amended and that the
Custodian shall not act under Section 2.11 hereof in the absence of receipt
of an initial certificate of the Secretary or an Assistant Secretary that
the Board of Directors has approved the initial use of the Direct Paper
System; PROVIDED FURTHER, however, that the Fund shall not amend or
terminate this Contract in contravention of any applicable federal or state
regulations, or any provision of the Articles of Incorporation, and further
provided, that the Fund may at any time by action of its Board of Directors
(i) substitute another bank or trust company for the Custodian by giving
notice as described above to the Custodian, or (ii) immediately terminate
this Contract in the event of the appointment of a conservator or receiver
for the Custodian by the Comptroller of the Currency or upon the happening
of a like event at the direction of an appropriate regulatory agency or
court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
14. SUCCESSOR CUSTODIAN
If a successor custodian shall be appointed by the Board of Directors
of the Fund, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed and in the
form for transfer, all securities then held by it hereunder and shall
transfer to an account of the successor custodian all of the Fund's
securities held in a Securities System.
11
<PAGE>
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer
such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered
to the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or
trust company, which is a "bank" as defined in the Investment Company Act of
1940, doing business in Boston, Massachusetts, of its own selection, having
an aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and
other properties held by the Custodian and all instruments held by the
Custodian relative thereto and all other property held by it under this
Contract and to transfer to an account of such successor custodian all of
the Fund's securities held in any Securities System. Thereafter, such bank
or trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or
of the Board of Directors to appoint a successor custodian, the Custodian
shall be entitled to fair compensation for its services during such period
as the Custodian retains possession of such securities, funds and other
properties and the provisions of this Contract relating to the duties and
obligations of the Custodian shall remain in full force and effect.
15. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and
the Fund may from time to time agree on such provisions interpretive of or
in addition to the provisions of this Contract as may in their joint opinion
be consistent with the general tenor of this Contract. Any such
interpretive or additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, PROVIDED that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations or any provision of the Articles of Incorporation of the Fund.
No interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
16. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.
17. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody
of the Fund's assets.
18. SHAREHOLDER COMMUNICATIONS ELECTION
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply
with the rule, the Custodian needs the Fund to indicate whether it
authorizes the Custodian to provide the Fund's name, address, and share
position to requesting companies whose securities the Fund owns. If the
Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian "yes"
or does not check either "yes" or "no" below, the Custodian is required by
the rule to treat the Fund as consenting to disclosure of this information
for all securities owned by the Fund or any funds or accounts established by
the Fund. For the Fund's protection, the Rule prohibits the requesting
company from using the Fund's name and address for any purpose other than
corporate communications. Please indicate below whether the Fund consents
or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [X] The Custodian is not authorized to release the Fund's name,
address, and share positions.
12
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed as of the day of
, 1997.
ATTEST HARTFORD MIDCAP FUND, INC.
By
- -------------------------- -------------------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
By
- -------------------------- -------------------------------
Mark J. Bowler
Senior Vice President
<PAGE>
Schedule A
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Directors of Hartford MidCap
Fund, Inc. for use as sub-custodians for the Fund's securities and other
assets:
(Insert banks and securities depositories)
<PAGE>
EXHIBIT 9
ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT, made as of the day of , 1997
by and between HARTFORD LIFE INSURANCE COMPANY ("HL"), an insurance
company organized and existing under the laws of the State of Connecticut,
and HARTFORD MIDCAP FUND, INC. (the "Fund"), an open-end, diversified
management investment company organized under the laws of the State of
Maryland.
W I T N E S S E T H:
WHEREAS, the Fund desires that HL provide administrative services to the
Fund upon the terms and conditions hereinafter set forth in this Agreement;
and
WHEREAS, HL wishes to provide such services for the consideration and upon
the terms and conditions hereinafter set forth in this Agreement;
NOW THEREFORE, in consideration of the promises and the mutual agreements
herein contained, the parties hereto agree as follows:
1. HL shall arrange for and furnish at its own cost and without expense to
the Fund the following personnel, services, equipment and facilities:
(a) Office space and all necessary office facilities and equipment for
the proper operation of the Fund;
(b) All personnel necessary for the proper operation of the Fund, including
clerical and other office personnel. In this respect HL shall provide from
among its officers, directors and employees persons to serve as directors,
officers and employees of the Fund and to pay the salaries of all such
persons, provided, however, that anything herein to the contrary
notwithstanding, all expenses incurred by any such director, officer or
employee of the Fund in the proper performance of his or her duties as such
shall be reimbursed by the Fund to such person; and
(c) The costs of preparation, printing and mailing of all sales literature
and prospectuses with respect to the Fund's shares other than required
annual mailings of prospectuses to shareholders.
2. HL shall also furnish to the Fund such other administrative services as are
necessary for the efficient operation of the Fund. Notwithstanding this
commitment, however, the Fund shall assume and pay the following costs and
expenses:
(a) Interest, taxes, and brokerage charges;
(b) The costs of preparing, printing and filing any post-effective
amendments or supplements to the registration forms of the Fund and its
securities, the annual mailings of prospectuses to shareholders, and all
federal and state registration, qualification and filing costs and fees
with respect to the Fund and its securities;
(c) Issuance and redemption expenses;
(d) Transfer agency and dividend and distribution disbursing agency costs
and expenses;
(e) Custodian fees and expenses;
(f) Auditing and legal expenses;
(g) Fidelity bond premiums;
<PAGE>
(h) Fees and salaries of directors, officers and employees of the Fund who
are not "interested persons" of HL as that term is defined in the
Investment Company Act of 1940, as amended;
(i) The costs of all annual and semiannual reports mailed to Fund
shareholders, as well as all quarterly, annual and any other periodic
reports required to be filed with the Securities and Exchange Commission or
with any state; any notices required by federal or state regulatory
authorities; and any proxy solicitation materials directed to Fund
shareholders; as well as all printing and mailing costs incurred in
connection with the above; and
(j) Any expenses incurred in connection with the holding of the annual and
all special meetings of the Fund's shareholders.
3. As compensation for the services to be performed by HL hereunder, the Fund
will pay to HL, as promptly as possible after the last day of each month, a
monthly fee equal to the annual rate of .175% of the average daily net
assets of the Fund.
4. Nothing in this Agreement shall limit or restrict the right of any
director, officer or employee of HL to engage in any other business or to
devote his time and attention in part to the management or other aspects of
any other business, whether of a similar nature or dissimilar nature, nor
to limit the right of HL to engage in any other business or to render
services of any kind to any other corporation, firm, individual or
association.
5. In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of the obligations and duties of HL hereunder, HL shall
not be subject to liabilities to the Fund or to any shareholder for any act
or omission in the course of, or connected with, rendering services
hereunder.
6. (a) This Agreement shall become effective on the date and year first above
written and shall continue in effect indefinitely unless terminated in
accordance with its terms.
(b) This Agreement (i) may be terminated at any time without the payment of
any penalty either by vote of the members of the Fund's Board of Directors
or by vote of the majority in interest of the Fund's shareholders on sixty
days' prior written notice to HL, (ii) shall immediately terminate in the
event of its assignment, and (iii) may be terminated by HL on sixty days'
prior written notice to the Fund.
(c) As used in this section, the term "assignment" shall have the meaning
set forth for such term in the Investment Company Act of 1940, as amended.
(d) Any notice under this section shall be given in writing, addressed and
delivered, or mailed First Class Mail Post-paid, to the other party at
the current office of such other party.
7. 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.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
HARTFORD MIDCAP FUND, INC.
By:
----------------------------------------
Joseph H. Gareau
President
HARTFORD LIFE INSURANCE COMPANY
By:
----------------------------------------
Thomas M. Marra
Executive Vice President
<PAGE>
EXHIBIT 9.1
HARTFORD MIDCAP FUND, INC.
SHARE PURCHASE AGREEMENT
HARTFORD LIFE INSURANCE COMPANY ("HL"), a Connecticut Corporation, as
Sponsor-Depositor, now and in the future, of certain unit investment trusts, and
issuer of certain annuity contracts (the "Contracts") issued with respect to
such unit investment trusts hereby agrees as of the day of
, 1997 with HARTFORD MIDCAP FUND, INC. (the "Fund"), an open-end,
diversified, management investment company, to an arrangement whereby Fund
shares shall be made available to serve as the underlying investment media for
the Contracts, subject to the following provisions:
1. Fund shares shall be purchased at the net asset value applicable to each
order as established in accordance with the provisions of the then
currently-effective prospectus of the Fund. Fund shares shall be ordered in
such quantity and at such times as determined by HL (or its successor) to
be necessary to meet the requirements of the Contracts. Confirmations of
Fund share purchases will be sent directly to HL by the Fund. All Fund
share purchases shall be maintained in a book share account in the name of
HL. Payment for shares shall be made directly to the Fund by HL and payment
for redemption shall be made directly to HL by the Fund, all within the
applicable time periods allowed for settlement of securities transactions.
If payment is not received by the Fund within such period, the Fund may,
without notice, cancel the order and hold HL responsible for any loss
suffered by the Fund resulting from such failure to receive timely payment.
Notice shall be furnished promptly to HL by the Fund of any dividend or
distribution payable on Fund shares.
2. (a)The Fund represents that its shares are registered under the Securities
Act of 1933, as amended, and that all appropriate federal and state
registration provisions have been complied with as to such shares and that
such shares may properly be made available for the purposes of this
Agreement. The Fund shall bear the cost of any such registration, as well
as the expense of any taxes assessed upon the issuance or transfer of Fund
shares pursuant to this Agreement.
(b) The Fund shall supply to HL, in a timely manner and in a sufficient
number to allow distribution by HL to each owner of or participant under a
Contract (i) annual and semiannual reports of the Fund's condition, and
(ii) any other shareholder notice, report or document required by law to be
delivered to shareholders. The Fund shall bear the cost of preparing and
supplying the foregoing materials and HL shall bear the cost of any
distribution thereof.
3. HL shall not make any representation concerning Fund shares except those
contained in the then current prospectus of the Fund and in printed
information subsequently issued by the Fund as information supplemental to
the prospectus.
4. This Agreement shall terminate as to new Contracts:
(a) At the option of HL or the Fund upon six months' advance notice to the
other;
(b) At the option of HL if Fund shares are not available for any reason to
meet the requirements of the Contracts but then only as to those new
Contracts, the terms of which require the periodic payments to be invested
in whole or in part in that particular Series;
(c) At the option of HL, upon institution of formal proceedings against the
Fund by the Securities and Exchange Commission or any other regulatory
body;
<PAGE>
(d) Upon assignment of this Agreement, unless made with the written consent
of the other party to this Agreement;
(e) If Fund shares are not registered, issued or sold in conformance with
applicable federal or state law or if such laws preclude the use of Fund
shares as the underlying investment media of the Contracts. Prompt notice
shall be given to HL in the event the conditions of this provision occur.
Notice of termination hereunder shall be given promptly by the party
desiring to terminate to the other party to this Agreement.
5. Termination as the result of any cause listed in the preceding paragraph
shall not affect the Fund's obligation to furnish Fund shares in connection
with Contracts then in force for which the shares of the Fund serve or may
serve as the underlying investment media, unless further sale of Fund
shares is proscribed by the Securities and Exchange Commission or other
regulatory body, or if Fund shares of the requisite Series are no longer
available.
6. This Agreement shall supersede any prior agreement between the parties
hereto relating to the same subject matter.
7. Each notice required by this Agreement shall be given in writing as
follows:
IF TO THE FUND:
Hartford MidCap Fund, Inc.
P.O. Box 2999
Hartford, Connecticut 06104-2999
IF TO HL:
Hartford Life Insurance Company
P.O. Box 2999
Hartford, Connecticut 06104-2999
8. This Agreement shall be construed in accordance with the laws of the State
of Connecticut.
Dated: , 1997
HARTFORD MIDCAP FUND, INC.
By:
---------------------------------
Joseph H. Gareau
President
HARTFORD LIFE INSURANCE COMPANY
By:
---------------------------------
Thomas M. Marra
Executive Vice President
<PAGE>
HARTFORD MIDCAP FUND, INC.
SHARE PURCHASE AGREEMENT
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY ("ITT Hartford"), a
Connecticut Corporation, as Sponsor-Depositor, now and in the future, of certain
unit investment trusts, and issuer of certain annuity contracts (the
"Contracts") issued with respect to such unit investment trusts hereby agrees as
the day of , 1997 with HARTFORD MIDCAP
FUND, INC. (the "Fund"), an open-end, diversified, management investment company
to an arrangement whereby Fund shares shall be made available to serve as the
underlying investment media for the Contracts, subject to the following
provisions:
1. Fund shares shall be purchased at the net asset value applicable to each
order as established in accordance with the provisions of the then
currently-effective prospectus of the Fund. Fund shares shall be ordered in
such quantity and at such times as determined by ITT Hartford (or its
successor) to be necessary to meet the requirements of the Contracts.
Confirmations of Fund share purchases will be sent directly to ITT Hartford
by the Fund. All Fund share purchases shall be maintained in a book share
account in the name of ITT Hartford. Payment for shares shall be made
directly to the Fund by ITT Hartford and payment for redemption shall be
made directly to ITT Hartford by the Fund, all within the applicable time
periods allowed for settlement of securities transactions. If payment is
not received by the Fund within such period, the Fund may, without notice,
cancel the order and hold ITT Hartford responsible for any loss suffered by
the Fund resulting from such failure to receive timely payment.
Notice shall be furnished promptly to ITT Hartford by the Fund of any
dividend or distribution payable on Fund shares.
2. (a) The Fund represents that its shares are registered under the Securities
Act of 1933, as amended, and that all appropriate federal and state
registration provisions have been complied with as to such shares and that
such shares may properly be made available for the purposes of this
Agreement. The Fund shall bear the cost of any such registration, as well
as the expense of any taxes assessed upon the issuance or transfer of Fund
shares pursuant to this Agreement.
(b) The Fund shall supply to ITT Hartford, in a timely manner and in a
sufficient number to allow distribution by ITT Hartford to each owner of or
participant under a Contract (i) annual and semiannual reports of the
Fund's condition, and (ii) any other shareholder notice, report or document
required by law to be delivered to shareholders. The Fund shall bear the
cost of preparing and supplying the foregoing materials and ITT Hartford
shall bear the cost of any distribution thereof.
3. ITT Hartford shall not make any representation concerning Fund shares
except those contained in the then current prospectus of the Fund and in
printed information subsequently issued by the Fund as information
supplemental to the prospectus.
4. This Agreement shall terminate as to new Contracts:
(a) At the option of ITT Hartford or the Fund upon six months' advance
notice to the other;
(b) At the option of ITT Hartford if Fund shares are not available for any
reason to meet the requirements of the Contracts but then only as to those
new Contracts, the terms of which require the periodic payments to be
invested in whole or in part in that particular Series;
(c) At the option of ITT Hartford, upon institution of formal proceedings
against the Fund by the Securities and Exchange Commission or any other
regulatory body;
<PAGE>
(d) Upon assignment of this Agreement, unless made with the written consent
of the other party to this Agreement;
(e) If Fund shares are not registered, issued or sold in conformance with
applicable federal or state law or if such laws preclude the use of Fund
shares as the underlying investment media of the Contracts. Prompt notice
shall be given to ITT Hartford in the event the conditions of this
provision occur.
Notice of termination hereunder shall be given promptly by the party
desiring to terminate to the other party to this Agreement.
5. Termination as the result of any cause listed in the preceding paragraph
shall not affect the Fund's obligation to furnish Fund shares in connection
with Contracts then in force for which the shares of the Fund serve or may
serve as the underlying investment media, unless further sale of Fund
shares is proscribed by the Securities and Exchange Commission or other
regulatory body, or if Fund shares of the requisite Series are no longer
available.
6. This Agreement shall supersede any prior agreement between the parties
hereto relating to the same subject matter.
7. Each notice required by this Agreement shall be given in writing as
follows:
IF TO THE FUND:
Hartford MidCap Fund, Inc.
P.O. Box 2999
Hartford, Connecticut 06104-2999
IF TO ITT HARTFORD:
ITT Hartford Life and Annuity Insurance Company
P.O. Box 2999
Hartford, Connecticut 06104-2999
8. This Agreement shall be construed in accordance with the laws of the State
of Connecticut.
Dated: , 1997
HARTFORD MIDCAP FUND, INC.
By:
---------------------------------
Joseph H. Gareau
President
ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY
By:
---------------------------------
Thomas M. Marra
Senior Vice President
<PAGE>
EXHIBIT 10
ITT Hartford Group, Inc.
Hartford Plaza
Hartford, CT 06115
April 14, 1997
Hartford MidCap Fund, Inc.
Hartford Plaza
Hartford, CT 06115
Gentlemen:
I have examined the Articles of Incorporation of Hartford MidCap Fund, Inc.
(the "Fund"); the By-Laws of the Fund, documents evidencing various
pertinent corporate proceedings, and such other things considered to be
material to determine the legality of the sale of the authorized but unissued
shares of the Fund's common stock. Based upon my examination, it is my
opinion that the Fund is a validly organized and existing Maryland
corporation and it is legally authorized to issue up to 750,000,000 shares of
common stock of a par value of ten cents (10CENTS) per share, at prices
determined as described in the Fund's Prospectus, when such shares are
properly registered under all applicable federal and state securities laws.
Based upon the foregoing, it is my opinion that the Fund's shares of common
stock, when issued for cash consideration as described in the Fund's
prospectus, will be validly issued, fully paid and nonassessable.
I hereby consent to the inclusion of this Opinion as an Exhibit to the Fund's
Registration Statement on Form N-1A.
Very truly yours,
/s/ Kevin J. Carr
Kevin J. Carr
Counsel
<PAGE>
EXHIBIT 13
SUBSCRIPTION AGREEMENT
The undersigned, Hartford Life Insurance Company ("HLIC"), desires to
purchase, and Hartford MidCap Fund, Inc. (the "Fund"), desires to sell, shares
of Common Stock of the Fund. Therefore, HLIC hereby agrees to purchase, and the
Fund agrees to sell to HLIC, one thousand (1,000) shares of Common Stock of the
Fund, par value $.10 per share, for $1.00 per share, for an aggregate purchase
price of $1,000, payable in cash. HLIC represents to the Fund that HLIC is
purchasing such shares for investment purposes without any present intention of
redeeming or selling such shares.
Dated: , 1997
----------------------
Hartford MidCap Fund, Inc. Hartford Life Insurance Company
By: By:
-------------------------------- --------------------------------
J. Richard Garrett Michael O'Halloran
Its Vice President and Treasurer Its Vice President