<PAGE>
As filed with the Securities and Exchange Commission on April 29, 1998
Registration 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. __1___ |X|
Post-Effective Amendment No. ______ |_|
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. __1___ |X|
HARTFORD SERIES FUND, INC.
(Exact Name of Registrant as Specified in Charter)
Hartford Plaza, Hartford, Connecticut 06115
(Address of Principal Executive Offices)
Registrant's Telephone Number Including Area Code: (860) 547-5000
Michael O'Halloran, Esquire
The Hartford Financial Services Group, Inc.
Law Department
690 Asylum Avenue
Hartford, Connecticut 06115
(Name and Address of Agent for Service)
COPIES TO: Thomas Mira, Esquire
Jorden, Burt, Berenson and Johnson
1025 Thomas Jefferson Street, N.W.
Suite 400 East
Washington, D.C. 20036
Approximate Date of Proposed Public Offering
As soon as practicable after this registration statement is declared
effective.
It is proposed that this filing will become effective (check appropriate box).
<PAGE>
_____ Immediately upon filing pursuant to paragraph (b)
_____ On ________________________ pursuant to paragraph (b)(l)(v) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rue 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.
Calculation of Registration Fee Under the Securities Act of 1933
Proposed Proposed
Title of Amount Being Maximum Maximum Amount of
Securities Being Registered Offering Price Aggregate Registration
Registered Per Unit Offering Price Fee
Common Stock,
par value $.001 * *
per share
*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.
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HARTFORD SERIES FUND, INC.
Cross-Reference Sheet Showing Location in each Prospectus and
Combined Statement of Additional Information of Information Required
by Items of the Registration Form
<TABLE>
<CAPTION>
Form N-1A Item
Number and Caption Location in Prospectus
------------------ ----------------------
<S> <C>
1. Cover Page Cover Page.
2. Synopsis Not Applicable.
3. Condensed Financial Information Not Applicable.
4. General Description of Registrant Introduction to The Hartford Growth
and Income HLS Fund, Investment
Objective and Style of the Fund,
Common Investment Policies and Risk
Factors.
5. Management of the Fund Management of the Fund.
6. Capital Stock and other Securities Ownership and Capitalization of the
Fund.
7. Purchase of Securities Being Offered Purchase of Fund Shares.
8. Redemption or Repurchase Sale and Redemption of Fund Shares.
9. Pending Legal Proceedings Pending Legal Proceedings.
Form N-1A Item Location in Statement of
Number and Caption Additional Information
------------------ ----------------------
10. Cover Page Cover Page.
11. Table of Contents Cover Page.
12. General Information and History Cover Page, General Information.
13. Investment Objectives and Policies Investment Objectives and Policies of
the Fund, Investment Restrictions.
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14. Management of the Fund Advisory Arrangements; Fund Expenses.
15. Control Persons and Principal Management of the Company.
Holders of Securities
16. Investment Advisory and Other Investment Advisory Arrangements; Fund
Services Expenses; Distribution Arrangements;
Distribution Financing Plan;
Custodian; Transfer Agent Services;
Independent Public Accountants.
17. Brokerage Allocation and Other Portfolio and Brokerage Transactions.
Practices
18. Capital Stock and Other Securities Ownership and Capitalization of the
Company (Prospectus).
19. Purchase Redemption and Pricing of Determination of Net Asset Value,
Securities Being Offered Purchase and Redemption of Shares.
20. Tax Status Taxes
21. Underwriters Distribution Arrangements.
22. Calculation of Performance Data Investment Performance.
23. Financial Statements Financial Statements.
</TABLE>
<PAGE>
Hartford Growth and Income HLS Fund
PROSPECTUS -- , 1998
CLASS IA SHARES
The Hartford Growth and Income HLS Fund (the "Fund") is a separate series of
Hartford Series Fund, Inc., an open-end management investment company. The Fund
is one of thirteen affiliated diversified portfolios used as funding media for
certain variable annuity and variable life insurance separate accounts of
Hartford Life Insurance Company and Hartford Life and Annuity Insurance Company
(collectively, "The Hartford Life Insurance Companies"). The Fund's investment
goal is to seek growth of capital and current income by investing in equity
securities with earnings growth potential and steady or rising dividends. Only
the Fund is offered by this Prospectus.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Please read and retain this
Prospectus for future reference. Additional information about the Fund has been
filed with the Securities and Exchange Commission ("SEC") in a Statement of
Additional Information dated , 1998 ("SAI"), which is incorporated by
reference into this Prospectus. To obtain a copy of the SAI without charge, call
1-800-862-6668 or write to "Hartford Growth and Income HLS Fund, c/o Individual
Annuity Operations," P.O. Box 2999, Hartford, CT 06104-2999.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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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 FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER BY THE FUND 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 FUND TO MAKE SUCH OFFER.
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2 HARTFORD GROWTH AND INCOME HLS FUND
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Introduction to the Hartford Growth and Income HLS Fund............... 3
Investment Objective and Style of the Fund............................ 3
Common Investment Policies and Risk Factors........................... 3
Management of the Fund................................................ 8
Administrative Services for the Fund.................................. 9
Expenses of the Fund.................................................. 10
Performance Related Information....................................... 10
Dividends............................................................. 10
Determination of Net Asset Value...................................... 10
Purchase of Fund Shares............................................... 10
Sale and Redemption of Shares......................................... 11
Federal Income Taxes.................................................. 11
Ownership and Capitalization of the Fund.............................. 11
General Information................................................... 12
Appendix A: Description of Securities Ratings......................... 13
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HARTFORD GROWTH AND INCOME HLS FUND 3
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INTRODUCTION TO THE HARTFORD GROWTH AND INCOME HLS FUND
The Fund is a diversified series of Hartford Series Fund, Inc. (the
"Company"), an open-end management investment company which was organized as a
Maryland corporation on January 15, 1998. The Fund commenced operations on
, 1998. The Fund is made available to serve as the underlying
investment vehicle for certain variable annuity and variable life insurance
separate accounts of The Hartford Life Insurance Companies.
The Fund offers Class IA and Class IB shares. Only Class IA shares of the
Fund are offered by this Prospectus. Each Class incurs different expenses which
will affect performance. Class IB shares are offered pursuant to another
prospectus and are subject to the same expenses as the Class IA shares, but
unlike the Class IA shares they are subject to distribution fees imposed
pursuant to a distribution plan ("Distribution Plan") adopted under Rule 12b-1
of the Investment Company Act of 1940 (the "1940 Act"). Inquiries regarding
Class IB shares should be addressed to Hartford Growth and Income HLS Fund, c/o
Individual Annuity Operations, P.O. Box 2999, Hartford, CT 06104-2999 or by
calling 1-800-862-6668.
HL Investment Advisors, Inc. ("HL Advisors") is the investment manager to
the Fund. In addition, under HL Advisors' general management, Wellington
Management Company, LLP ("Wellington Management") serves as sub-adviser to the
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. As of
December 31, 1997, HL Advisors had investment management authority with respect
to approximately $24 billion of assets for various clients. As of the same date,
Wellington Management had investment management authority with respect to
approximately $175 billion of assets for various clients.
INVESTMENT OBJECTIVE AND
STYLE OF THE FUND
The Fund is subject to certain fundamental investment restrictions that are
enumerated in detail in the SAI and may not be changed without shareholder
approval. All other investment policies (including the Fund's investment
objective) are non-fundamental and may be changed by the Board of Directors
without shareholder approval. Stated below is the investment objective and
investment style for the Fund. For a description of the Fund's investment
policies and risk factors, see "Common Investment Policies and Risk Factors."
INVESTMENT OBJECTIVE.
The Growth and Income HLS Fund seeks growth of capital and current income by
investing primarily in equity securities with earnings growth potential and
steady or rising dividends.
INVESTMENT STYLE.
The Growth and Income HLS Fund invests in a diversified portfolio of
primarily equity securities that typically have steady or rising dividends and
whose prospects for capital appreciation are considered favorable by Wellington
Management. Wellington Management uses fundamental analysis to evaluate a
security for purchase or sale by the 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. Wellington Management then uses
proprietary quantitative techniques to affirm its fundamental evaluation of a
security. The quantitative techniques evaluate a security using valuation
analysis, which includes use of a dividend discount model and cash flow
analysis, combined with momentum analysis, which includes an assessment of a
company's earnings momentum and stock price momentum. The quantitative
techniques look to affirm the fundamental evaluation by identifying those
securities that are attractive from the fundamental perspective and are also
both inexpensive based on the quantitative valuation factors and timely
according to the quantitative momentum factors. The Fund's portfolio will be
broadly diversified by industry and company. Up to 20% of the Fund's total
assets may be invested in securities of non-U.S. companies.
COMMON INVESTMENT POLICIES
AND RISK FACTORS
MONEY MARKET INSTRUMENTS AND
TEMPORARY INVESTMENT STRATEGIES
The Fund may hold cash and invest in high quality money market instruments
under appropriate circumstances as determined by Wellington Management. The Fund
may invest up to 100% of its assets in cash or money market instruments only for
temporary defensive purposes.
Money market instruments include: (1) banker's acceptances; (2) obligations
of governments (whether U.S.
<PAGE>
4 HARTFORD GROWTH AND INCOME HLS FUND
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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
The 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 the 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 Fund may engage in repurchase agreements and
monitors on a quarterly basis Wellington Management's compliance with such
standards.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. Reverse
repurchase agreements involve sales by the Fund of portfolio assets concurrently
with an agreement by the 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 the Fund is obligated to repurchase may decline below
the repurchase price. A reverse repurchase agreement is viewed as a
collateralized borrowing by the Fund. Borrowing magnifies the potential for gain
or loss on the portfolio securities of the Fund and, therefore, increases the
possibility of fluctuation in the Fund's net asset value. The Fund will
establish a segregated account with the Fund's custodian bank in which the Fund
will maintain liquid assets equal in value to the Fund's obligations in respect
of reverse repurchase agreements. As a non-fundamental policy, the 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 Fund
equals more than 33 1/3% of the value of the Fund's total assets.
DEBT SECURITIES
The 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);
and (3) 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
The 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
Wellington Management. These securities are generally referred to as "investment
grade securities." Each rating category has within it different gradations or
sub-categories. If the 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, 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 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 Fund may invest up to 5% 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). 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 the 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,
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 debt 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
<PAGE>
HARTFORD GROWTH AND INCOME HLS FUND 5
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the value of securities held by the Fund with a commensurate effect on the value
of the Fund's shares.
EQUITY SECURITIES
The Fund may invest in equity securities including common stocks, preferred
stocks, convertible preferred stock and rights to acquire such securities. In
addition, the Fund may invest in securities such as bonds, debentures and
corporate notes which are convertible into common stock at the option of the
holder.
SMALL CAPITALIZATION SECURITIES
The 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 dependent 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
The Fund is permitted to invest up to 20% of its assets in non-U.S.
securities. The 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 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. The Fund may invest up to 25% of its assets in companies located in
emerging countries. Compared to the United States and other developed countries,
developing countries may have relatively unstable governments, economies based
on only a few industries, and securities markets that are less liquid and trade
a small number of securities. Prices on these exchanges tend to be volatile and,
in the past, securities in these countries have offered greater potential for
gain (as well as loss) than securities of companies located in developed
countries. See the SAI for additional risk disclosure concerning non-U.S.
securities.
CURRENCY TRANSACTIONS
The 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 the 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 Fund may enter into currency transactions only with counterparties
that Wellington Management deems to be creditworthy.
The Fund 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.
<PAGE>
6 HARTFORD GROWTH AND INCOME HLS FUND
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OPTIONS AND FUTURES CONTRACTS
The 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 Fund 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.
The Fund may write covered options only. "Covered" means that, so long as
the Fund is obligated as the writer of an option, it will own either the
underlying securities or currency or an option to purchase or sell the same
underlying securities or currency having an expiration date not earlier than the
expiration date of the covered option and an exercise price equal to or less
than the exercise price of the covered option, or will establish or maintain
with its custodian for the term of the option a "segregated account" consisting
of cash, U.S. Government securities or other liquid, high grade debt obligations
having a value equal to the fluctuating market value of the optioned securities
or currencies. The 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, the 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. To the
extent that the 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 the Fund's portfolio, after taking into
account the unrealized profits and unrealized losses on any such contracts the
Fund has entered into.
The 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 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 the 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 the 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 the 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
The 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 the Fund's investment exposure from one
type of investment to another. For example, if the 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 the Fund's
investments and its share price and yield. Swap agreements are commonly known as
"derivative" securities. Because swap agreements are privately negotiated
transactions rather than publicly traded, they may be considered to be illiquid
securities.
<PAGE>
HARTFORD GROWTH AND INCOME HLS FUND 7
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The successful utilization of hedging and risk management transactions
requires skills different from those needed in the selection of the Fund's
portfolio securities and depends on Wellington Management's ability to predict
correctly the direction and degree of movement in interest rates. Although the
Fund believes that the use of the hedging and risk management techniques
described above will benefit the Fund, if Wellington Management's judgment about
the direction or extent of the movement in interest rates is incorrect, the
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
The Fund is permitted to invest in illiquid securities. The maximum
percentage of illiquid securities which may be purchased by the Fund is 15% of
its 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 the Fund's net asset value. The 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 the Fund may invest that are not readily marketable.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
The 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 Fund generally
purchases securities on a when-issued basis with the intention of acquiring the
securities, the Fund may sell the securities before the settlement date if
Wellington Management deems it advisable. At the time the 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
The Fund is permitted to invest in other investment companies. Securities in
certain countries are currently accessible to the Fund only through such
investments. The investment in other investment companies is limited in amount
and will involve the indirect payment of a portion of the expenses, including
advisory fees, of such other investment companies. The 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
The 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. The 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, the
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 Fund invests will tend to
increase when interest rates are falling and to decrease when interest rates are
rising.
The Fund should not 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 the Fund.
There can be no assurance that the investment objectives of the Fund will be
met. In addition, the risk inherent in investing in the Fund is common to any
security -- the net asset value will fluctuate in response to changes in
economic conditions, interest rates and the market's perception of the
underlying portfolio securities held by the Fund.
<PAGE>
8 HARTFORD GROWTH AND INCOME HLS FUND
- --------------------------------------------------------------------------------
In pursuit of a Fund's investment objective, Wellington Management attempts
to select appropriate individual securities for inclusion in the Fund's
portfolio. In addition, Wellington Management attempts 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 Wellington
Management's success not only in selecting individual securities, but also in
identifying the appropriate mix of securities consistent with the Fund's
investment objective.
The services provided to the Fund by Hartford Life, HL Advisors, HIMCO,
Wellington Management and other service providers, depend on the smooth
functioning of their computer systems. Many computer software systems in use
today cannot distinguish the year 2000 from the year 1900 because of the way
dates are encoded and calculated. That failure could have a negative impact on
the handling of securities trades, pricing and account services. Hartford Life,
HL Advisors, HIMCO, Wellington Management and other service providers have been
actively working on necessary changes to their computer systems to deal with the
year 2000 issue and expect that their systems will be adapted in time for that
event.
INVESTMENT LIMITATIONS
The Fund has adopted certain limitations in an attempt to reduce its
exposure to specific situations. Some of these limitations are that the 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 the Fund's total assets (although for purposes of
this restriction reverse repurchase agreements are not considered
borrowings, as a non-fundamental operating policy, the Fund will limit
combined borrowings and reverse repurchase transactions to 33 1/3% of the
value of the Fund's total assets);
(c) with respect to 75% of the value of the 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 the Fund's shareholders.
MANAGEMENT OF THE FUND
The Fund's Board of Directors manages the business and affairs of the 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 the Fund pursuant to a written
agreement entered into between HL Advisors and the Fund. Pursuant to such
agreement HL Advisors has overall investment supervisory responsibility for the
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 Fund. HL Advisors
has contracted with Wellington Management for the provision of day to day
investment management services to the Fund. The Fund pays a fee to HL Advisors,
a portion of which may be used to compensate Wellington Management.
For services rendered to the Fund, 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 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, 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. In addition to the Fund, HL Advisors is the investment
manager to twelve other mutual funds. A wholly-owned subsidiary of HL Investment
Advisors, Hartford Investment Financial Services Company, serves as investment
adviser to several other Hartford Life-sponsored mutual funds. 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: Joseph H. Gareau is a Director and
<PAGE>
HARTFORD GROWTH AND INCOME HLS FUND 9
- --------------------------------------------------------------------------------
the President of HL Advisors; Andrew W. Kohnke is a Managing Director and a
Director of HL Advisors; and C. Michael O'Halloran is a Director, Secretary and
General Counsel of HL Advisors.
INVESTMENT SUB-ADVISORY AND OTHER SERVICES
Wellington Management serves as sub-adviser to the Fund pursuant to a
written contract entered into between HL Advisors and Wellington Management.
In connection with the services provided to the Funds, Wellington Management
makes all determinations with respect to the purchase and sale of portfolio
securities (subject to the terms and conditions of the investment objectives,
policies and restrictions of the Fund and to the general supervision of the
Fund's Boards of Directors and HL Advisors) and places, in the name of the Fund,
all orders for execution of the Fund's portfolio transactions. In conjunction
with such activities, Wellington Management regularly furnishes reports to the
Fund's Boards of Directors concerning economic forecasts, investment strategy,
portfolio activity and performance of the Fund.
Wellington Management charges a quarterly fee to HL Advisors. The Fund does
not pay Wellington Management's fee nor any part thereof, nor does the Fund 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 the 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>
Wellington Management has agreed to waive 100% of its sub-advisory fee until
shareholder assets (excluding assets contributed by HL Advisors or its
affiliates) reach $50 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 September 30, 1997, Wellington Management held
discretionary management authority with respect to approximately $169 billion of
client assets. Wellington Management, 75 State Street, Boston, MA 02109, is a
Massachusetts limited liability partnership, of which the following persons are
managing partners: Robert W. Doran, Duncan M. McFarland and John R. Ryan.
PORTFOLIO MANAGER
James A. Rullo, CFA and Vice President of Wellington Management, serves as
portfolio manager to the Fund. Prior to joining Wellington Management in 1994 as
a quantitative analyst and portfolio manager, Mr. Rullo was a portfolio manager
with PanAgora Asset Management from 1991 to 1994 and prior to that with The
Boston Company from 1987.
PORTFOLIO TURNOVER
The Fund may sell a portfolio investment soon after its acquisition if
Wellington Management believes that such a disposition is in the Fund's best
interest. A high rate of portfolio turnover involves correspondingly greater
brokerage commission expenses and other transaction costs, which must be
ultimately borne by a Fund's shareholders. High portfolio turnover may result in
the realization of substantial capital gains; distributions derived from such
gains may be treated as ordinary income for Federal income tax purposes.
Although it is not possible to predict future portfolio turnover rates
accurately, and such rates may vary from year to year, it is anticipated that
the Fund's portfolio turnover rate will not exceed 100%.
BROKERAGE COMMISSIONS
Although the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. prohibit its members from seeking orders for the
execution of investment company portfolio transactions on the basis of their
sales of investment company shares, under such rules, sales of investment
company shares may be considered in selecting brokers to effect portfolio
transactions. Accordingly, some portfolio transactions are, subject to such
Rules and to obtaining best prices and executions, effected through dealers who
sell shares of the Fund. 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 FUND
An Administrative Services Agreement between the Fund and Hartford Life
provides that Hartford Life will manage the business affairs and provide
administrative services to the Fund. Under the terms of this Agreement, Hartford
Life will provide the following: administrative personnel, services, equipment
and facilities and office space for proper operation of the Fund. Hartford Life
has also agreed to arrange for the provision of additional
<PAGE>
10 HARTFORD GROWTH AND INCOME HLS FUND
- --------------------------------------------------------------------------------
services necessary for the proper operation of the Fund, although the Fund pays
for these services directly. See "Expenses of the Fund." As compensation for the
services to be performed by Hartford Life, the 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 FUND
The 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 the 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 the 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 the 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 the 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 the Fund's shareholders and other miscellaneous expenses related
directly to the Fund's operations and interest.
PERFORMANCE RELATED INFORMATION
The Fund may advertise certain performance related information. Performance
information about the Fund is based on the Fund's past performance only and is
no indication of future performance.
The Fund may include its total return in advertisements or other sales
material. When the 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).
DIVIDENDS
The shareholders of the Fund shall be entitled to receive such dividends as
may be declared by the Fund's Board of Directors, from time to time based upon
the investment performance of the assets making up the Fund's portfolio. The
policy with respect to the Fund is to pay dividends from net investment income
and to make distributions of realized capital gains, if any, at least once each
year.
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 the 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 the Fund are valued primarily on the basis
of market quotations. If quotations are not readily available, assets are valued
by a method that the Board of Directors believes accurately reflects fair value.
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 the Fund, 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 vehicle
for variable annuity and variable life insurance separate accounts of The
Hartford Life Insurance Companies. Shares of the Fund are sold by Hartford
Securities Distribution Company, Inc. (the "Distributor") 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
<PAGE>
HARTFORD GROWTH AND INCOME HLS FUND 11
- --------------------------------------------------------------------------------
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.
The Fund offers investors two different classes of shares -- Class IA and
Class IB. Class IA shares are offered by this Prospectus. Class IB shares are
offered by a separate prospectus in connection with a variable annuity product.
The different classes of shares represent investments in the same portfolio of
securities but are subject to different expenses and will likely have different
share prices.
SALE AND REDEMPTION
OF SHARES
The shares of the 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 Fund. 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
the Fund of securities owned by it is not reasonably practicable, or (b) it is
not reasonably practicable for the 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 Fund.
FEDERAL INCOME TAXES
The Fund has elected and intends to qualify under Subchapter M of the Code.
The Fund intends to distribute all of its net income and gains to shareholders.
Such distributions are taxable income and capital gains. The Fund will inform
shareholders of the amount and nature of such income and gains. The 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. The 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 Fund's shares by the insurer,
reference should be made to the section entitled "Federal Tax Considerations" in
the appropriate separate account prospectus.
If eligible, the 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 FUND
CAPITAL STOCK
As of the date of this prospectus, the authorized capital stock of the Fund
consists of 3 billion shares at a par value of $.001 per share.
The Board of Directors is authorized, without further shareholder approval,
to authorize additional shares and to classify and reclassify the Fund into one
or more classes. Accordingly, the Directors have authorized the issuance of two
classes of shares of the Fund designated as Class IA and Class IB shares. The
shares of each class represent an interest in the same portfolio of investments
of the Fund and have equal rights as to voting, redemption, and liquidation.
However, each class bears different expenses and therefore the net asset values
of the two classes and any dividends declared may differ between the two
classes.
VOTING
Each shareholder shall be entitled to one vote for each share of the Fund
held upon all matters submitted to the shareholders generally. Class specific
issues, such as a modification to a Rule 12b-1 plan that could materially
increase fees, will be voted on only by the affected class. With respect to the
Fund's 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 Fund as
investment vehicles. This position is consistent with the policy of the SEC
staff.
<PAGE>
12 HARTFORD GROWTH AND INCOME HLS FUND
- --------------------------------------------------------------------------------
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 the
Fund, the shareholders of the 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.
GENERAL INFORMATION
REPORTS TO SHAREHOLDERS
The Fund will issue unaudited semiannual reports showing current investments
in the Fund and other information and annual financial statements examined by
independent auditors for the Fund.
DISTRIBUTOR
Hartford Securities Distribution Company, Inc., P.O. Box 2999, Hartford, CT
06104-2999 serves as distributor to the Fund.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, serves as
custodian of the Fund's assets.
TRANSFER AND DIVIDEND DISBURSING AGENTS
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 material pending legal
proceedings involving the Fund, HL Advisors 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 Growth and Income HLS Fund,
c/o Individual Annuity Operations, P.O. Box 2999, Hartford, CT 06104-2999.
<PAGE>
HARTFORD GROWTH AND INCOME HLS FUND 13
- --------------------------------------------------------------------------------
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>
14 HARTFORD GROWTH AND INCOME HLS FUND
- --------------------------------------------------------------------------------
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 Growth and Income HLS Fund
PROSPECTUS -- , 1998
CLASS IB SHARES
The Hartford Growth and Income HLS Fund (the "Fund") is a separate series of
Hartford Series Fund, Inc., an open-end management investment company. The Fund
is one of thirteen affiliated diversified portfolios used as funding media for
certain variable annuity and variable life insurance separate accounts of
Hartford Life Insurance Company and Hartford Life and Annuity Insurance Company
(collectively, "The Hartford Life Insurance Companies"). The Fund's investment
goal is to seek growth of capital and current income by investing in equity
securities with earnings growth potential and steady or rising dividends. Only
the Fund is offered by this Prospectus.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Please read and retain this
Prospectus for future reference. Additional information about the Fund has been
filed with the Securities and Exchange Commission ("SEC") in a Statement of
Additional Information dated , 1998 ("SAI"), which is incorporated by
reference into this Prospectus. To obtain a copy of the SAI without charge, call
1-800-862-6668 or write to "Hartford Growth and Income HLS Fund, 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 FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER BY THE FUND 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 FUND TO MAKE SUCH OFFER.
- --------------------------------------------------------------------------------
<PAGE>
2 HARTFORD GROWTH AND INCOME HLS FUND
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Introduction to the Hartford Growth and Income HLS Fund............... 3
Investment Objective and Style of the Fund............................ 3
Common Investment Policies and Risk Factors........................... 4
Management of the Fund................................................ 8
Administrative Services for the Fund.................................. 10
Expenses of the Fund.................................................. 10
Performance Related Information....................................... 10
Dividends............................................................. 10
Determination of Net Asset Value...................................... 10
Purchase of Fund Shares............................................... 11
Sale and Redemption of Shares......................................... 11
Federal Income Taxes.................................................. 12
Ownership and Capitalization of the Fund.............................. 12
General Information................................................... 13
Appendix A: Description of Securities Ratings......................... 14
</TABLE>
<PAGE>
HARTFORD GROWTH AND INCOME HLS FUND 3
- --------------------------------------------------------------------------------
INTRODUCTION TO THE HARTFORD
GROWTH AND INCOME HLS FUND
The Fund is a diversified series of Hartford Series Fund, Inc. (the
"Company"), an open-end management investment company which was organized as a
Maryland corporation on January 15, 1998. The Fund commenced operations on
, 1998. The Fund is made available to serve as the underlying
investment vehicle for certain variable annuity and variable life insurance
separate accounts of The Hartford Life Insurance Companies.
The Fund offers Class IA and Class IB shares. Only Class IB shares of the
Fund are offered by this Prospectus. Each Class incurs different expenses which
will affect performance. Class IA shares are offered pursuant to another
prospectus and are subject to the same expenses as the Class IB shares, but
unlike the Class IB shares they are not subject to distribution fees imposed
pursuant to a distribution plan ("Distribution Plan") adopted under Rule 12b-1
of the Investment Company Act of 1940 (the "1940 Act"). Inquiries regarding
Class IA shares should be addressed to Hartford Growth and Income HLS Fund, c/o
Individual Annuity Operations, P.O. Box 2999, Hartford, CT 06104-2999 or by
calling 1-800-862-6668.
HL Investment Advisors, Inc. ("HL Advisors") is the investment manager to
the Fund. In addition, under HL Advisors' general management, Wellington
Management Company, LLP ("Wellington Management") serves as sub-adviser to the
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. As of
December 31, 1997, HL Advisors had investment management authority with respect
to approximately $24 billion of assets for various clients. As of the same date,
Wellington Management had investment management authority with respect to
approximately $175 billion of assets for various clients.
INVESTMENT OBJECTIVE AND
STYLE OF THE FUND
The Fund is subject to certain fundamental investment restrictions that are
enumerated in detail in the SAI and may not be changed without shareholder
approval. All other investment policies (including the Fund's investment
objective) are non-fundamental and may be changed by the Board of Directors
without shareholder approval. Stated below is the investment objective and
investment style for the Fund. For a description of the Fund's investment
policies and risk factors, see "Common Investment Policies and Risk Factors."
INVESTMENT OBJECTIVE.
The Growth and Income HLS Fund seeks growth of capital and current income by
investing primarily in equity securities with earnings growth potential and
steady or rising dividends.
INVESTMENT STYLE.
The Growth and Income HLS Fund invests in a diversified portfolio of
primarily equity securities that typically have steady or rising dividends and
whose prospects for capital appreciation are considered favorable by Wellington
Management. Wellington Management uses fundamental analysis to evaluate a
security for purchase or sale by the 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. Wellington Management then uses
proprietary quantitative techniques to affirm its fundamental evaluation of a
security. The quantitative techniques evaluate a security using valuation
analysis, which includes use of a dividend discount model and cash flow
analysis, combined with momentum analysis, which includes an assessment of a
company's earnings momentum and stock price momentum. The quantitative
techniques look to affirm the fundamental evaluation by identifying those
securities that are attractive from the fundamental perspective and are also
both inexpensive based on the quantitative valuation factors and timely
according to the quantitative momentum factors. The Fund's portfolio will be
broadly diversified by industry and company. Up to 20% of the Fund's total
assets may be invested in securities of non-U.S. companies.
<PAGE>
4 HARTFORD GROWTH AND INCOME HLS FUND
- --------------------------------------------------------------------------------
COMMON INVESTMENT POLICIES AND RISK FACTORS
MONEY MARKET INSTRUMENTS AND TEMPORARY INVESTMENT STRATEGIES
The Fund may hold cash and invest in high quality money market instruments
under appropriate circumstances as determined by Wellington Management. The Fund
may invest up to 100% of its assets in cash or money market instruments only for
temporary defensive purposes.
Money market instruments include: (1) banker's acceptances; (2) obligations
of governments (whether U.S. or non-U.S.) and their agencies and
instrumentalities; (3) short-term corporate obligations, including commercial
paper, notes, and bonds; (4) other short-term debt obligations; (5) obligations
of U.S. banks, non-U.S. branches of U.S. banks (Eurodollars), U.S. branches and
agencies of non-U.S. banks (Yankee dollars), and non-U.S. branches of non-U.S.
banks; (6) asset-backed securities; and (7) repurchase agreements.
REPURCHASE AGREEMENTS
The 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 the 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 Fund may engage in repurchase agreements and
monitors on a quarterly basis Wellington Management's compliance with such
standards.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. Reverse
repurchase agreements involve sales by the Fund of portfolio assets concurrently
with an agreement by the 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 the Fund is obligated to repurchase may decline below
the repurchase price. A reverse repurchase agreement is viewed as a
collateralized borrowing by the Fund. Borrowing magnifies the potential for gain
or loss on the portfolio securities of the Fund and, therefore, increases the
possibility of fluctuation in the Fund's net asset value. The Fund will
establish a segregated account with the Fund's custodian bank in which the Fund
will maintain liquid assets equal in value to the Fund's obligations in respect
of reverse repurchase agreements. As a non-fundamental policy, the 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 Fund
equals more than 33 1/3% of the value of the Fund's total assets.
DEBT SECURITIES
The 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);
and (3) 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
The 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
Wellington Management. These securities are generally referred to as "investment
grade securities." Each rating category has within it different gradations or
sub-categories. If the 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, 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 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 Fund may invest up to 5% 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). 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 the Fund is authorized to invest in a certain
rating category, the Fund
<PAGE>
HARTFORD GROWTH AND INCOME HLS FUND 5
- --------------------------------------------------------------------------------
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, 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 debt 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 the
Fund with a commensurate effect on the value of the Fund's shares.
EQUITY SECURITIES
The Fund may invest in equity securities including common stocks, preferred
stocks, convertible preferred stock and rights to acquire such securities. In
addition, the Fund may invest in securities such as bonds, debentures and
corporate notes which are convertible into common stock at the option of the
holder.
SMALL CAPITALIZATION SECURITIES
The 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 dependent 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
The Fund is permitted to invest up to 20% of its assets in non-U.S.
securities. The 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 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. The Fund may invest up to 25% of its assets in companies located in
emerging countries. Compared to the United States and other developed countries,
developing countries may have relatively unstable governments, economies based
on only a few industries, and securities markets that are less liquid and trade
a small number of securities. Prices on these exchanges tend to be volatile and,
in the past, securities in these countries have offered greater potential for
gain (as well as loss) than securities of companies located in developed
countries. See the SAI for additional risk disclosure concerning non-U.S.
securities.
CURRENCY TRANSACTIONS
The 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."
<PAGE>
6 HARTFORD GROWTH AND INCOME HLS FUND
- --------------------------------------------------------------------------------
The use of currency transactions to protect the value of the 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 Fund may enter into currency transactions only with counterparties
that Wellington Management deems to be creditworthy.
The Fund 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
The 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 Fund 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.
The Fund may write covered options only. "Covered" means that, so long as
the Fund is obligated as the writer of an option, it will own either the
underlying securities or currency or an option to purchase or sell the same
underlying securities or currency having an expiration date not earlier than the
expiration date of the covered option and an exercise price equal to or less
than the exercise price of the covered option, or will establish or maintain
with its custodian for the term of the option a "segregated account" consisting
of cash, U.S. Government securities or other liquid, high grade debt obligations
having a value equal to the fluctuating market value of the optioned securities
or currencies. The 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, the 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. To the
extent that the 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 the Fund's portfolio, after taking into
account the unrealized profits and unrealized losses on any such contracts the
Fund has entered into.
The 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 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 the 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 the 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 the 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
The 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-
<PAGE>
HARTFORD GROWTH AND INCOME HLS FUND 7
- --------------------------------------------------------------------------------
upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
Swap agreements will tend to shift the Fund's investment exposure from one
type of investment to another. For example, if the 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 the Fund's
investments and its share price and yield. Swap agreements are commonly known as
"derivative" securities. Because swap agreements are privately negotiated
transactions rather than publicly traded, they may be considered to be illiquid
securities.
The successful utilization of hedging and risk management transactions
requires skills different from those needed in the selection of the Fund's
portfolio securities and depends on Wellington Management's ability to predict
correctly the direction and degree of movement in interest rates. Although the
Fund believes that the use of the hedging and risk management techniques
described above will benefit the Fund, if Wellington Management's judgment about
the direction or extent of the movement in interest rates is incorrect, the
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
The Fund is permitted to invest in illiquid securities. The maximum
percentage of illiquid securities which may be purchased by the Fund is 15% of
its 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 the Fund's net asset value. The 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 the Fund may invest that are not readily marketable.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
The 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 Fund generally
purchases securities on a when-issued basis with the intention of acquiring the
securities, the Fund may sell the securities before the settlement date if
Wellington Management deems it advisable. At the time the 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
The Fund is permitted to invest in other investment companies. Securities in
certain countries are currently accessible to the Fund only through such
investments. The investment in other investment companies is limited in amount
and will involve the indirect payment of a portion of the expenses, including
advisory fees, of such other investment companies. The 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
The 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. The 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, the
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.
<PAGE>
8 HARTFORD GROWTH AND INCOME HLS FUND
- --------------------------------------------------------------------------------
The value of the debt securities in which the Fund invests will tend to
increase when interest rates are falling and to decrease when interest rates are
rising.
The Fund should not 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 the Fund.
There can be no assurance that the investment objectives of the Fund will be
met. In addition, the risk inherent in investing in the Fund is common to any
security -- the net asset value will fluctuate in response to changes in
economic conditions, interest rates and the market's perception of the
underlying portfolio securities held by the Fund.
In pursuit of a Fund's investment objective, Wellington Management attempts
to select appropriate individual securities for inclusion in the Fund's
portfolio. In addition, Wellington Management attempts 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 Wellington
Management's success not only in selecting individual securities, but also in
identifying the appropriate mix of securities consistent with the Fund's
investment objective.
The services provided to the Fund by Hartford Life, HL Advisors, HIMCO,
Wellington Management and other service providers, depend on the smooth
functioning of their computer systems. Many computer software systems in use
today cannot distinguish the year 2000 from the year 1900 because of the way
dates are encoded and calculated. That failure could have a negative impact on
the handling of securities trades, pricing and account services. Hartford Life,
HL Advisors, HIMCO, Wellington Management and other service providers have been
actively working on necessary changes to their computer systems to deal with the
year 2000 issue and expect that their systems will be adapted in time for that
event.
INVESTMENT LIMITATIONS
The Fund has adopted certain limitations in an attempt to reduce its
exposure to specific situations. Some of these limitations are that the 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 the Fund's total assets (although for purposes of
this restriction reverse repurchase agreements are not considered
borrowings, as a non-fundamental operating policy, the Fund will limit
combined borrowings and reverse repurchase transactions to 33 1/3% of the
value of the Fund's total assets);
(c) with respect to 75% of the value of the 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 the Fund's shareholders.
MANAGEMENT OF THE FUND
The Fund's Board of Directors manages the business and affairs of the 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 the Fund pursuant to a written
agreement entered into between HL Advisors and the Fund. Pursuant to such
agreement HL Advisors has overall investment supervisory responsibility for the
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 Fund. HL Advisors
has contracted with Wellington Management for the provision of day to day
investment management services to the Fund. The Fund pays a fee to HL Advisors,
a portion of which may be used to compensate Wellington Management.
For services rendered to the Fund, 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 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>
<PAGE>
HARTFORD GROWTH AND INCOME HLS FUND 9
- --------------------------------------------------------------------------------
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. In addition to the Fund, HL Advisors is the investment
manager to twelve other mutual funds. A wholly-owned subsidiary of HL Investment
Advisors, Hartford Investment Financial Services Company, serves as investment
adviser to several other Hartford Life-sponsored mutual funds. 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: Joseph H. Gareau is a Director and the President of HL Advisors;
Andrew W. Kohnke is a Managing Director and a Director of HL Advisors; and C.
Michael O'Halloran is a Director, Secretary and General Counsel of HL Advisors.
INVESTMENT SUB-ADVISORY AND OTHER SERVICES
Wellington Management serves as sub-adviser to the Fund pursuant to a
written contract entered into between HL Advisors and Wellington Management.
In connection with the services provided to the Funds, Wellington Management
makes all determinations with respect to the purchase and sale of portfolio
securities (subject to the terms and conditions of the investment objectives,
policies and restrictions of the Fund and to the general supervision of the
Fund's Boards of Directors and HL Advisors) and places, in the name of the Fund,
all orders for execution of the Fund's portfolio transactions. In conjunction
with such activities, Wellington Management regularly furnishes reports to the
Fund's Boards of Directors concerning economic forecasts, investment strategy,
portfolio activity and performance of the Fund.
Wellington Management charges a quarterly fee to HL Advisors. The Fund does
not pay Wellington Management's fee nor any part thereof, nor does the Fund 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 the 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>
Wellington Management has agreed to waive 100% of its sub-advisory fee until
shareholder assets (excluding assets contributed by HL Advisors or its
affiliates) reach $50 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, 1997, Wellington Management held
discretionary management authority with respect to approximately $175 billion of
client assets. Wellington Management, 75 State Street, Boston, MA 02109, is a
Massachusetts limited liability partnership, of which the following persons are
managing partners: Robert W. Doran, Duncan M. McFarland and John R. Ryan.
PORTFOLIO MANAGER
James A. Rullo, CFA and Vice President of Wellington Management, serves as
portfolio manager to the Fund. Prior to joining Wellington Management in 1994 as
a quantitative analyst and portfolio manager, Mr. Rullo was a portfolio manager
with PanAgora Asset Management from 1991 to 1994 and prior to that with The
Boston Company from 1987.
PORTFOLIO TURNOVER
The Fund may sell a portfolio investment soon after its acquisition if
Wellington Management believes that such a disposition is in the Fund's best
interest. A high rate of portfolio turnover involves correspondingly greater
brokerage commission expenses and other transaction costs, which must be
ultimately borne by a Fund's shareholders. High portfolio turnover may result in
the realization of substantial capital gains; distributions derived from such
gains may be treated as ordinary income for Federal income tax purposes.
Although it is not possible to predict future portfolio turnover rates
accurately, and such rates may vary from year to year, it is anticipated that
the Fund's portfolio turnover rate will not exceed 100%.
BROKERAGE COMMISSIONS
Although the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. prohibit its members from seeking orders for the
execution of investment company portfolio transactions on the basis of their
sales of investment company shares, under such rules, sales of investment
company shares may be considered in selecting brokers to effect portfolio
transactions. Accordingly, some portfolio transactions are, subject to such
Rules and to obtaining best prices and executions, effected through dealers who
sell shares of the Fund. 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.
<PAGE>
10 HARTFORD GROWTH AND INCOME HLS FUND
- --------------------------------------------------------------------------------
ADMINISTRATIVE SERVICES
FOR THE FUND
An Administrative Services Agreement between the Fund and Hartford Life
provides that Hartford Life will manage the business affairs and provide
administrative services to the Fund. Under the terms of this Agreement, Hartford
Life will provide the following: administrative personnel, services, equipment
and facilities and office space for proper operation of the Fund. Hartford Life
has also agreed to arrange for the provision of additional services necessary
for the proper operation of the Fund, although the Fund pays for these services
directly. See "Expenses of the Fund." As compensation for the services to be
performed by Hartford Life, the 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 FUND
The 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 the 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 the 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 the 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 the 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 the Fund's shareholders and other miscellaneous expenses related
directly to the Fund's operations and interest. As discussed in greater detail
below, under "Sale and Redemption of Shares", the Class IB shares may pay for
certain distribution related expenses in connection with activities primarily
intended to result in the sale of Class IB shares.
PERFORMANCE RELATED INFORMATION
The Fund may advertise certain performance related information. Performance
information about the Fund is based on the Fund's past performance only and is
no indication of future performance.
The Fund may include its total return in advertisements or other sales
material. When the 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).
DIVIDENDS
The shareholders of the Fund shall be entitled to receive such dividends as
may be declared by the Fund's Board of Directors, from time to time based upon
the investment performance of the assets making up the Fund's portfolio. The
policy with respect to the Fund is to pay dividends from net investment income
and to make distributions of realized capital gains, if any, at least once each
year.
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 the 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 the Fund are valued primarily on the basis
of market quotations. If quotations are not readily available, assets are valued
by a method that the Board of Directors believes accurately reflects fair value.
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 the Fund, short-term
investments that will mature in 60 days or less are also valued at amortized
cost, which approximates market value.
<PAGE>
HARTFORD GROWTH AND INCOME HLS FUND 11
- --------------------------------------------------------------------------------
PURCHASE OF FUND SHARES
Fund shares are made available to serve as the underlying investment vehicle
for variable annuity and variable life insurance separate accounts of The
Hartford Life Insurance Companies. Shares of the Fund are sold by Hartford
Securities Distribution Company, Inc. (the "Distributor") 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.
The Fund offers investors two different classes of shares -- Class IA and
Class IB. Class IB shares are offered by this Prospectus. Class IA shares are
offered by a separate prospectus in connection with other variable insurance
products. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will likely
have different share prices.
SALE AND REDEMPTION
OF SHARES
The shares of the 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 the Fund's 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 Fund. 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 the Fund of securities owned by it is not reasonably
practicable, or (b) it is not reasonably practicable for the 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 Fund.
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the
1940 Act for the Class IB shares. Pursuant to the Distribution Plan, the Fund
compensates the Distributor from assets attributable to the Class IB shares for
services rendered and expenses borne in connection with activities primarily
intended to result in the sale of the Class IB shares. It is anticipated that a
portion of the amounts received by the Distributor will be used to defray
various costs incurred or paid by the Distributor in connection with the
printing and mailing of Fund prospectuses, statements of additional information,
any supplements thereto and shareholder reports and holding seminars and sales
meetings with wholesale and retail sales personnel designed to promote the
distribution of Class IB shares. The Distributor may also use a portion of the
amounts received to provide compensation to financial intermediaries and
third-party broker-dealers for their services in connection with the
distribution of Class IB shares.
Although the Distribution Plan provides that the Fund may pay annually up to
0.25% of the average daily net assets of the Fund attributable to its Class IB
shares for activities primarily intended to result in the sale of Class IB
shares, the Distributor has voluntarily agreed to waive .07% of the fee. This
waiver may be withdrawn at any time after notice to shareholders. Under the
terms of the Distribution Plan and the principal underwriting agreement, the
Fund is authorized to make payments monthly to the Distributor which may be used
to pay or reimburse entities providing distribution and shareholder servicing
with respect to the Class IB shares for such entities' fees or expenses incurred
or paid in that regard.
The Distribution Plan is of a type known as a "compensation" plan because
payments are made for services rendered to the Fund with respect to Class IB
shares regardless of the level of expenditures by the Distributor. The Directors
will, however, take into account such expenditures for purposes of reviewing
operations under the Distribution Plan and in connection with their annual
consideration of the Plan's renewal. The Distributor has indicated that it
expects its expenditures to include, without limitation: (a) the printing and
mailing of Fund prospectuses, statements of additional information, any
supplements thereto and shareholder reports for prospective contract owners of
variable insurance products with respect to the Class IB shares of the Fund; (b)
those relating to the development, preparation, printing and mailing of
advertisements, sales literature and other promotional materials describing and/
or relating to the Class IB shares of the Fund; (c) holding seminars and sales
meetings designed to promote the distribution of Fund Class IB shares; (d)
obtaining information and providing explanations to wholesale and retail
distributors of contracts regarding Fund investment objectives and policies and
other information about the Fund, including the performance of the Fund; (e)
training sales personnel regarding the Class IB shares of the Fund; and (f)
financing
<PAGE>
12 HARTFORD GROWTH AND INCOME HLS FUND
- --------------------------------------------------------------------------------
any other activity that the Distributor determines is primarily intended to
result in the sale of Class IB shares.
FEDERAL INCOME TAXES
The Fund has elected and intends to qualify under Subchapter M of the Code.
The Fund intends to distribute all of its net income and gains to shareholders.
Such distributions are taxable income and capital gains. The Fund will inform
shareholders of the amount and nature of such income and gains. The 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. The 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 Fund's shares by the insurer,
reference should be made to the section entitled "Federal Tax Considerations" in
the appropriate separate account prospectus.
If eligible, the 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 FUND
CAPITAL STOCK
As of the date of this prospectus, the authorized capital stock of the Fund
consists of 3 billion shares at a par value of $.001 per share.
The Board of Directors is authorized, without further shareholder approval,
to authorize additional shares and to classify and reclassify the Fund into one
or more classes. Accordingly, the Directors have authorized the issuance of two
classes of shares of the Fund designated as Class IA and Class IB shares. The
shares of each class represent an interest in the same portfolio of investments
of the Fund and have equal rights as to voting, redemption, and liquidation.
However, each class bears different expenses and therefore the net asset values
of the two classes and any dividends declared may differ between the two
classes.
VOTING
Under the Fund's multi-class system, shares of each class of the Fund
represent an equal pro rata interest in the Fund and, generally, shall have
identical voting, dividend, liquidation, and other rights, preferences, powers,
restrictions, limitations, qualifications and terms and conditions, except that:
(a) each class shall have a different designation; (b) each class of shares
shall bear its "Class Expenses;" (c) each class shall have exclusive voting
rights on any matter submitted to shareholders that relates solely to its
distribution arrangements; (d) each class shall have separate voting rights on
any matter submitted to shareholders in which the interests of one class differ
from the interests of any other class; (e) each class may have separate exchange
privileges, although exchange privileges are not currently contemplated; and (f)
each class may have different conversion features, although a conversion feature
is not currently contemplated. Expenses currently designated as "Class Expenses"
by the Fund's Board of Directors under the plan pursuant to Rule 18f-3 are
currently limited to payments made to the Distributor for the Class IB shares,
pursuant to the Distribution Plan for the Class IB shares adopted pursuant to
Rule 12b-1 under the 1940 Act. Each shareholder shall be entitled to one vote
for each share of the Fund held upon all matters submitted to the shareholders
generally. Class specific issues, such as a modification to a Rule 12b-1 plan
that could materially increase fees, will be voted on only by the affected
class. With respect to the Fund's 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 Fund 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 the
Fund, the shareholders of the 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>
HARTFORD GROWTH AND INCOME HLS FUND 13
- --------------------------------------------------------------------------------
GENERAL INFORMATION
REPORTS TO SHAREHOLDERS
The Fund will issue unaudited semiannual reports showing current investments
in the Fund and other information and annual financial statements examined by
independent auditors for the Fund.
DISTRIBUTOR
Hartford Securities Distribution Company, Inc., P.O. Box 2999, Hartford, CT
06104-2999 serves as distributor to the Fund.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, serves as
custodian of the Fund's assets.
TRANSFER AND DIVIDEND DISBURSING AGENTS
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 material pending legal
proceedings involving the Fund, HL Advisors 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 Growth and Income HLS Fund,"
c/o Individual Annuity Operations, P.O. Box 2999, Hartford, CT 06104-2999.
<PAGE>
14 HARTFORD GROWTH AND INCOME HLS FUND
- --------------------------------------------------------------------------------
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>
HARTFORD GROWTH AND INCOME HLS FUND 15
- --------------------------------------------------------------------------------
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>
PART B
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD GROWTH AND INCOME HLS FUND
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 Growth and Income HLS
Fund, c/o Individual Annuity Operations, P.O. Box 2999, Hartford, CT
06104-2999 or call 1-800-862-6668.
Date of Prospectus:___________________________, 1998
Date of Statement of Additional Information:__________________________,
1998
<PAGE>
TABLE OF CONTENTS PAGE
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-1-
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . . . .-1-
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
Other Information about the Fund . . . . . . . . . . . . . . . . . . . . . -18-
Investment Management Arrangements . . . . . . . . . . . . . . . . . . . . -19-
Fund Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
Distribution Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . -22-
Portfolio Transactions and Brokerage . . . . . . . . . . . . . . . . . . . -22-
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . -23-
Purchase and Redemption of Shares. . . . . . . . . . . . . . . . . . . . . -23-
Investment Performance . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
Transfer Agent Services. . . . . . . . . . . . . . . . . . . . . . . . . . -31-
Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . -31-
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
<PAGE>
GENERAL INFORMATION
The Hartford Growth and Income HLS Fund (the "Fund") is a separate series
of Hartford Series Fund, Inc. (the "Company"), an open-end management
investment company. The Fund is one of thirteen affiliated diversified
portfolios used as funding media for certain variable annuity and variable
life insurance separate accounts of Hartford Life Insurance Company and
Hartford Life and Annuity Insurance Company (collectively, "The Hartford Life
Insurance Companies"). This SAI relates only to the Hartford Growth and
Income HLS Fund. HL Investment Advisors, Inc. ("HL Advisors") is the
investment manager to the 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") is sub-adviser
to the Fund.
INVESTMENT OBJECTIVE AND POLICIES
A. FUNDAMENTAL RESTRICTIONS OF THE FUND
The Fund has adopted the following fundamental investment restrictions
which may not be changed without approval of a majority of the 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 the 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 the Fund are set forth in the Prospectus. Set forth below are the
fundamental investment policies applicable to the Fund followed by the
non-fundamental policies applicable to the Fund.
The 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, and the following
practices when a segregated account has been established to cover such
transactions or when an offsetting position has been established by the Fund
are not deemed to be issuances of senior securities: 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 the Fund's investment policies, and reverse repurchase agreements and
mortgage dollar rolls.
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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. Although 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 are not subject to this restriction, in most cases a
segregated account will be set up to cover such transactions.
3. Act as an underwriter for securities of other issuers.
4. Purchase or sell real estate, except that the 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 the 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 the 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, the Fund will operate as a "diversified" fund within the
meaning of the 1940 Act. This means that with respect to 75% of the Fund's
total assets, the Fund will not purchase securities of an issuer (other than
cash, cash items or securities issued or guaranteed by the U.S. Government,
its agencies, instrumentalities or authorities), if
(a) such purchase would cause more than 5% of the Fund's total assets
taken at market value to be invested in the securities of such
issuer; or
(b) such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by the Fund.
If a percentage restriction on investment or utilization of assets as set
forth above is adhered to at the time an investment is made, a later change in
percentage resulting from changes in the
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values of the 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 Fund in certain states, the
Board of Directors may, in its sole discretion, adopt restrictions or
investment policies 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 the 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 FUND.
The following restrictions are designated as non-fundamental and may be
changed by the Board of Directors without the approval of shareholders.
The Fund may not:
1. Purchase securities on margin or make short sales of securities,
except that the 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 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.
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 the Fund's total assets.
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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 the Fund's assets will not be
considered a violation of the restriction.
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
The Fund may hold cash or cash equivalents and invest in high quality money
market instruments under appropriate circumstances as determined by Wellington
Management. The Fund may invest up to 100% of its assets in cash, cash
equivalents or money market instruments only for temporary defensive purposes.
Money market instruments include: (1) banker's acceptances; (2)
obligations of governments (whether U.S. or non-U.S.) and their agencies and
instrumentalities; (3) short-term corporate obligations, including commercial
paper, notes, and bonds; (4) other short-term debt obligations; (5) obligations
of U.S. banks, non-U.S. branches of U.S. banks (Eurodollars), U.S. branches and
agencies of non-U.S. banks (Yankee dollars), and non-U.S. branches of non-U.S.
banks; (6) asset-backed securities; and (7) repurchase agreements.
REPURCHASE AGREEMENTS
The 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 Wellington Management's compliance with such standards. Presently, the
Fund may
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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.
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 the 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
The Fund may also enter into reverse repurchase agreements. Reverse
repurchase agreements involve sales by the Fund of portfolio assets
concurrently with an agreement by the 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 the Fund is obligated to
repurchase may decline below the repurchase price. A reverse repurchase
agreement is viewed as a collateralized borrowing by the Fund. Borrowing
magnifies the potential for gain or loss on the portfolio securities of the
Fund and, therefore, increases the possibility of fluctuation in the Fund's
net asset value. The Fund will establish a segregated account with the Fund's
custodian bank in which the Fund will maintain liquid assets equal in value
to the Fund's obligations in respect of reverse repurchase agreements. The
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 Fund equals more than 33-1/3% of the value the Fund's
total assets.
DEBT SECURITIES
The 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); and (3) 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
The 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,
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securities of comparable quality as determined by Wellington Management).
These securities are generally referred to as "investment grade securities."
Each rating category has within it different gradations or sub-categories.
If the 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, 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
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
The Fund may invest up to 5% 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). Securities rated
below investment grade are commonly referred to as "high yield-high risk
securities" or "junk bonds". Each rating category has within it different
gradations or sub-categories. For instance the "Ba" rating for Moody's
includes "Ba3", "Ba2" and "Ba1". Likewise the S&P rating category of "BB"
includes "BB+", "BB" and "BB-". If the 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 the Fund with a commensurate effect on the value of the
Fund's shares. If a security is downgraded to a rating category which does
not qualify for investment, 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.
EQUITY SECURITIES
The Fund may invest in equity securities which include common stocks,
preferred stocks (including convertible preferred stock) and rights to
acquire such securities. In addition, the Fund may invest in securities such
as bonds, debentures and corporate notes which are convertible into common
stock at the option of the holder.
SMALL CAPITALIZATION SECURITIES
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The 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 dependent 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
The 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,
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 Fund may invest have
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historically experienced, and may continue to experience, high rates of
inflation, high interest rates, exchange rate trade difficulties and
unemployment. Some of these countries are also characterized by political
uncertainty or instability. Additional factors which may influence the
ability or willingness to service debt include, but are not limited to, a
country's cash flow situation, the availability of sufficient foreign
exchange on the date a payment is due, the relative size of its debt service
burden to the economy as a whole, and its government's policy towards the
IMF, the World Bank and other international agencies.
From time to time 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
The 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 the 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 Fund may enter into currency transactions only with
counterparties that Wellington Management deems to be creditworthy.
The Fund 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 Fund, for cash flow management, and,
to a lesser extent, to enhance returns, the Fund may employ certain hedging,
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income enhancement and risk management techniques, including the purchase and
sale of options, futures and options on futures involving equity and debt
securities and foreign currencies, aggregates of equity and debt securities,
indices of prices of equity and debt securities and other financial indices.
The Fund's ability to engage in these practices may be limited by tax
considerations and certain other legal considerations.
The 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 Fund 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 Fund holds in its portfolio
or that it intends to purchase. For example, if the 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 the 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, the 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.
The Fund may write covered options only. "Covered" means that, so long as
the 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. The 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, the 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, the Fund may use foreign currency futures contracts when
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it anticipates a general weakening of the foreign currency exchange rate that
could adversely affect the market values of the Fund's foreign securities
holdings. In this case, the sale of futures contracts on the underlying
currency may reduce the risk of a reduction in market value caused by foreign
currency variations and, by so doing, provide an alternative to the
liquidation of securities positions in the Fund and resulting transaction
costs. When the Fund anticipates a significant foreign exchange rate increase
while intending to invest in a non-U.S. security, the Fund may purchase a
foreign currency futures contract to hedge against a rise in foreign exchange
rates pending completion of the anticipated transaction. Such a purchase of a
futures contract would serve as a temporary measure to protect the Fund
against any rise in the foreign exchange rate that may add additional costs
to acquiring the non-U.S. security position. The Fund similarly may use
futures contracts on equity and debt securities to hedge against fluctuations
in the value of securities it owns or expects to acquire.
The Fund also may purchase call or put options on foreign currency futures
contracts to obtain a fixed foreign exchange rate at limited risk. The 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. The 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. The 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 the 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 the Fund writes a covered option on an
index, the 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 the 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 the Fund's
assets at risk to 5%.
Although the 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
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be subject were such strategies not employed. Such risks include: (1)
dependence on the ability of 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 the 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 the 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 the
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 the Fund would
have been in a better position had it not used such a strategy at all.
SWAP AGREEMENTS
The 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 the Fund's investment exposure from one
type of investment to another. For example, if the 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
the Fund's investments and its share price and yield.
The Fund will usually enter into interest rate swaps on a net basis, i.e.,
where the two parties make net payments with the Fund receiving or paying, as
the case may be, only the net amount of
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the two payments. The net amount of the excess, if any, of the 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 the 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 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, the
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 the Fund will be able to enter into interest rate swaps or to
purchase interest rate caps, collars or floors at prices or on terms
Wellington Management, as appropriate, believes are advantageous to the Fund.
In addition, although the terms of interest rate swaps, caps, collars and
floors may provide for termination, there can be no assurance that the 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. Because interest rate
swaps, caps, collars and floors are privately negotiated transactions rather
than publicly traded they may be considered to be illiquid securities.
The successful utilization of hedging and risk management transactions
requires skills different from those needed in the selection of the Fund's
portfolio securities and depends on Wellington Management's ability to
predict correctly the direction and degree of movements in interest rates.
Although the Fund believes that use of the hedging and risk management
techniques described above will benefit the Fund, if Wellington Management's
judgment about the direction or extent of the movement in interest rates is
incorrect, the Fund's overall performance would be worse than if it had not
entered into any such transactions. For example, if the 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, the 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
The Fund is permitted to invest in illiquid securities. No illiquid
securities will be acquired if upon the purchase more than 15% of the 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
-12-
<PAGE>
business within seven days at approximately the price used to determine the
Fund's net asset value. The 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. The Fund may not be able to sell illiquid securities
when 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 the 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 the Fund may invest that are not
readily marketable.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
The 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 Fund
generally purchases securities on a when-issued basis with the intention of
acquiring the securities, the Fund may sell the securities before the
settlement date if Wellington Management deems it advisable. At the time the
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. The 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 the
Fund will segregate securities sold on a delayed-delivery basis.
OTHER INVESTMENT COMPANIES
The Fund is permitted to invest in other investment companies. Securities
in certain countries are currently accessible to the Fund only through such
investments. The investment in other investment companies is limited in
amount and will involve the indirect payment of a portion of the expenses,
including advisory fees, of such other investment companies. The Fund will
not purchase a security of an investment company if, as a result, (1) more
than 10% of the Fund's assets would be invested in securities of other
investment companies, (2) such purchase would result in more than 3% of the
total outstanding voting securities of any one such investment company being
-13-
<PAGE>
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
The Fund 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 Fund. While
the securities are on loan the borrower will pay the 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
Fund 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 the Fund is not more than 33-1/3% of the Fund's total assets
taken at the time of the loan.
MANAGEMENT OF THE FUND
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 70)
Director
30 Hurdle Fence Drive
Avon, CT 06001
Mr. Biernat served as Senior Vice President and Treasurer of United
Technologies Corporation from 1984 until March, 1987, when he retired. He
subsequently served as Executive Vice President of Boston Security
Counselors, Inc., Hartford, Connecticut (1988-1989), and served as Vice
President-Client Services of Wright Investors' Service, Bridgeport,
Connecticut (1989-1990). Mr. Biernat presently is consulting to organizations
on financial matters, with the majority of time spent with T.O. Richardson &
Co., Farmington, Connecticut.
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<PAGE>
WINIFRED ELLEN COLEMAN (age 65)
Director
27 Buckingham Lane
West Hartford, CT 06117
Ms. Coleman has served as President of Saint Joseph College since 1991. She
is a Director of LeMoyne College and St. Francis Hospital.
JOSEPH HARRY GAREAU* (age 50)
Director and President
P.O. Box 2999
Hartford, CT 06104-2999
Mr. Gareau has served as Executive Vice President and Chief Investment
Officer of The Hartford since April, 1993. Formerly, he served as Senior Vice
President and Chief Investment Officer/Property-Casualty Division (September,
1992 - April, 1993) and Vice President (October, 1987 - September, 1992). Mr.
Gareau is also a Director and the President of The Hartford Investment
Management Company ("HIMCO"), a Hartford affiliated registered investment
adviser, a Director and Executive Vice President of Hartford Investment
Financial Services Company ("HIFSCO"), a Hartford affiliated registered
investment adviser, and a Director of Hartford Fire Insurance Company.
WILLIAM ATCHISON O'NEILL (age 67)
Director
Box 360
East Hampton, CT 06424
The Honorable William A. O'Neill served as Governor of the State of Connecticut
from 1980 until 1991. He is presently retired.
MILLARD HANDLEY PRYOR, JR. (age 64)
Director
695 Bloomfield Avenue
Bloomfield, CT 06002
Mr. Pryor has served as Managing Director of Pryor & Clark Company, Hartford,
Connecticut, since June, 1992. He served as Chairman and Chief Executive
Officer of Corcap, Inc. from 1988-1992. In addition, Mr. Pryor is a Director
of Pryor & Clark Company, Corcap, Inc., the Wiremold Company, Hoosier
Magnetics, Inc., Infodata Systems, Inc., Pacific Scientific Corporation and
Fibralock, Inc.
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<PAGE>
LOWNDES ANDREW SMITH* (age 58)
Director and Chairman
P.O. Box 2999
Hartford, CT 06104-2999
Mr. Smith has served as President of The Hartford Life Insurance Companies
since January, 1989. He was formerly Senior Vice President and Group
Comptroller of The Hartford Insurance Group from 1987-1989. He has been a
Director of Connecticut Children's Medical Center since 1993 and a Director
of American Counsel of Life Insurance since 1990. Mr. Smith is also President
and a Director of HIFSCO.
JOHN KELLEY SPRINGER (age 66)
Director
225 Asylum Avenue
Hartford, CT 06103
Mr. Springer currently serves as Chairman of Medspan, Inc. From 1989 to 1997
he served as Chief Executive Officer of Connecticut Health System, Inc.
Formerly, he served as the Chief Executive Officer of Hartford Hospital,
Hartford, Connecticut (June, 1971 - August, 1989). He is also a Director of
Hartford Hospital, Connecticut Health System, Inc., Hospital Research and
Development Institute, and CHS Insurance Ltd. (Chairman).
PETER CUMMINS (age 60)
Vice President
Hartford Plaza
Hartford, CT 06115
Mr. Cummins has served as Senior Vice President since 1997 and Vice President
since 1989 of sales and marketing of the Individual Life and Annuity Division
of The Hartford Financial Services Group, Inc. - Life Companies. He is also
a Director and Vice President of HIFSCO.
-16-
<PAGE>
JOHN PHILLIP GINNETTI (age 52)
Vice President
P.O. Box 2999
Hartford, CT 06104-2999
Mr. Ginnetti has served as Executive Vice President and Director of Asset
Management Services, a division of The Hartford Financial Services Group,
Inc. - Life Companies, since 1994. From 1988 to 1994 he served as Senior Vice
President and Director of the Individual Life and Annuities Division, also a
division of The Hartford Financial Services Group, Inc. - Life Companies.
ANDREW WILLIAM KOHNKE (age 39)
Vice President
P.O. Box 2999
Hartford, CT 06104-2999
Mr. Kohnke has served as a Vice President since 1992, and as an Investment
Manager since 1983, of The Hartford Financial Services Group, Inc. Mr. Kohnke
is also a Director and Managing Director of HIMCO and a Director and Vice
President of HIFSCO.
THOMAS MICHAEL MARRA (age 39)
Vice President
P.O. Box 2999
Hartford, CT 06104-2999
Mr. Marra has served as an Executive Vice President since 1996, as Senior
Vice President since 1994, and as Director of the Individual Life and Annuity
Division of The Hartford Financial Services Group, Inc. - Life Companies,
since 1980. Mr. Marra is also a Director and Executive Vice President of
HIFSCO.
CHARLES MINER O'HALLORAN (age 50)
Vice President and Secretary
Hartford Plaza
Hartford, CT 06115
Mr. O'Halloran has served as Senior Vice President since January, 1998,
Corporate Secretary since 1996, Vice President since 1994 and Senior
Associate General Counsel since 1988 of The Hartford Financial Services
Group, Inc. Mr. O'Halloran is also a Director, Secretary and General Counsel
of HIMCO and a Director of HIFSCO.
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<PAGE>
GEORGE RICHARD JAY (age 45)
Controller and Treasurer
P.O. Box 2999
Hartford, CT 06104-2999
Mr. Jay has served as Secretary and Director, Life and Equity Accounting and
Financial Control, of The Hartford Financial Services Group, Inc. - Life
Companies since 1987 and is a Director of HIFSCO.
KEVIN J. CARR (age 43)
Assistant Secretary and Counsel
Hartford Plaza
Hartford, CT 06115
Mr. Carr has served as Counsel since November 1996 and Associate Counsel
since November 1995, of The Hartford Financial Services Group, Inc. Formerly
he served as Counsel of Connecticut Mutual Life Insurance Company from March
1995 to November 1995, Associate Counsel of 440 Financial Group of Worcester
from 1994 to 1995 and Corporate Counsel-General Manager of Parker Media, a
Hartford-based publishing company, from 1990-1994. Mr. Carr is also an
Assistant Secretary of HIFSCO.
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 The Hartford Mutual Funds, Inc., an open-end management
investment company comprised of nine 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 or Wellington
Management is named above, together with the capacity in which such person is
affiliated with the Fund, HL Advisors 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, 1997:
<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
FUND $0 $0 $0 $0 $0
PENSION OR
RETIREMENT BENEFITS
ACCRUED AS FUND
EXPENSE $0 $0 $0 $0 $0
TOTAL COMPENSATION
FROM THE FUND AND
COMPLEX PAID TO
DIRECTORS* $23,250 $23,250 $23,250 $23,250 $23,250
</TABLE>
*As of December 31, 1997, there were twenty-one funds in the Complex.
-18-
<PAGE>
OTHER INFORMATION ABOUT THE FUND
The Fund is a diversified series of the Hartford Series Fund, Inc., an
open-end investment company which was organized as a Maryland corporation on
January 15, 1998. The authorized capital stock of the Fund consists of 3
billion shares of common stock, par value $0.001 per share (Common Stock).
The Directors have authorized the issuance of two classes of shares of the
Fund designated in each instance as Class IA and Class IB shares.
The shares of the Fund are entitled to vote separately to approve
investment advisory agreements or changes in investment restrictions, but
shareholders of all series of the Company vote together in the election and
selection of Directors and accountants. Shares of the Fund vote together as a
class on matters that affect the Fund in substantially the same manner. As
to matters affecting a single class, shares of such class will vote
separately. Shares of the Fund do not have cumulative voting rights. The
Company and the Fund do not intend to hold annual meetings of shareholders
unless required to do so by the 1940 Act or the Maryland statutes under which
the Company is organized. Although Directors are not elected annually by the
shareholders, shareholders have under certain circumstances the right to
remove one or more Directors. If required by applicable law, a meeting will
be held to vote on the removal of a Director or Directors of the Company if
requested in writing by the holders of not less than 25% of the Company's
outstanding shares. The Fund's shares are fully paid, and nonassessable and,
when issued, have no preference, preemptive, conversion or similar rights and
are freely transferable. With respect to the Fund's 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 Fund as investment
vehicles. This position is consistent with the policy of the SEC Staff.
The Company's Articles of Incorporation provide that the Directors,
officers and employees of the Company may be indemnified by the Company to
the fullest extent permitted by Maryland law and the federal securities laws.
The Company's Bylaws provide that the Fund shall indemnify each of its
Directors, officers and employees against liabilities and expenses reasonably
incurred by them, in connection with, or resulting from, any claim, action,
suit or proceeding, threatened against or otherwise involving such Director,
officer or employee, directly or indirectly, by reason of being or having
been a Director, officer or employee of the Company. Neither the Articles of
Incorporation nor the Bylaws authorize the Company to indemnify any Director
or officer against any liability to
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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
The 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 the
Fund's Board of Directors, is responsible for the management of the Fund. HL
Advisors is responsible for investment management supervision of the Fund.
Hartford Life Insurance Company ("Hartford Life"), a corporate affiliate of
HL Advisors, provides administrative services to the Fund including
administrative personnel, services, equipment and facilities and office space
for proper operation of the Fund. Although Hartford Life has agreed to
arrange for the provision of additional services necessary for the proper
operation of the Fund, the Fund pays for these services directly.
With respect to the 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 the Fund and furnishing the Fund
with advice and recommendations with respect to investments and the purchase
and sale of appropriate securities for the Fund.
As provided by the investment advisory agreement, the 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 Fund's average daily net
asset value. HL Advisors, not the Fund, pays the subadvisory fees of
Wellington Management as set forth in the Prospectus.
No person other than HL Advisors or Wellington Management and their
directors and employees regularly furnishes advice to the Fund with respect
to the desirability of the Fund investing in, purchasing or selling
securities. 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 the Fund may also be held by other funds and other
clients for which Wellington Management or its respective affiliates provide
investment advice. Because of different investment objectives or other
factors, a particular security may be bought by 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
Wellington Management act as an investment adviser, (including the Fund
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.
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<PAGE>
To the extent that transactions on behalf of more than one client of
Wellington Management or its 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.
Pursuant to the investment advisory agreement, subadvisory investment
agreements and investment services agreements neither HL Advisors nor
Wellington Management is liable to the Fund or its shareholders for any error
of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which its agreements relate, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part
of Wellington Management in the performance of its duties or from its
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, 1997, HL
Advisors had over $24 billion in assets under management. HL Advisors is a
majority owned indirect subsidiary of The Hartford.
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, 1997,
Wellington Management had investment management authority with respect to
approximately $175 billion in assets. Wellington Management is a
Massachusetts Limited Liability Partnership. The three managing partners of
Wellington Management are Robert W. Doran, Duncan M. McFarland and John R.
Ryan.
The investment management agreement and subadvisory investment agreement
continue in effect for two years from initial approval and from year to year
thereafter if approved annually by a vote of a majority of the Directors of
the 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 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 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
Fund or by HL Advisors, upon 60 days' notice to Wellington Management, and by
Wellington Management upon 90 days' written notice to HL Advisors (with
respect to the Fund only). The subadvisory investment agreement and
investment services agreement terminate automatically upon the termination of
the corresponding investment advisory agreement.
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<PAGE>
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 Fund including paying for the preparation, printing and
distribution of prospectuses and sales literature or other promotional
activities.
FUND EXPENSES
The 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 the 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 the Fund other than those
who are also officers of Hartford Life; industry membership dues; all annual
and semiannual reports and prospectuses mailed to the 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
the 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 the Fund's shareholders and other
miscellaneous expenses related directly to the Fund's operations and
interest. Pursuant to the Rule 12b-1 plan adopted for the Class IB shares,
the Class IB shares may pay for certain distribution related expenses in
connection with activities primarily intended to result in the sale of Class
IB shares.
DISTRIBUTION ARRANGEMENTS
The Fund's shares are sold on a continuous basis by Hartford Securities
Distribution Company (the "Distributor") to separate accounts sponsored by
The Hartford and its affiliates.
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<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Fund has no obligation to deal with any dealer or group of dealers in
the execution of transactions in portfolio securities. Subject to any policy
established by HL Advisors and the Board of Directors, Wellington Management
is primarily responsible for the investment decisions of the Fund and the
placing of its portfolio transactions. In placing orders, it is the policy
of the 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 Wellington Management
generally seeks reasonably competitive spreads or commissions. 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 Wellington Management
when allocating brokerage transactions.
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.
While Wellington Management seek to obtain the most favorable net results
in effecting transactions in the Fund's portfolio securities, dealers who
provide supplemental investment research to Wellington Management may receive
orders for transactions from 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 Wellington Management, the Fund will be benefited by such
supplemental research services, Wellington Management is 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 Wellington
Management under the investment advisory agreement or the sub-investment
advisory agreement. The expenses of Wellington Management will not
necessarily be reduced as a result of the receipt of such supplemental
information. Wellington Management may use such supplemental research in
providing investment advice to portfolios other than those for which the
transactions are made. Similarly, the Fund may benefit from such research
obtained by Wellington Management for portfolio transactions for other
clients.
Investment decisions for the Fund will be made independently from those of
any other clients that may be (or in the future may be) managed by Wellington
Management or its affiliates. If, however, accounts managed by Wellington
Management are simultaneously engaged in the purchase of the same security,
then, pursuant to general authorization of the Fund's Board of Directors,
available securities may be allocated to the Fund or other client account and
may be averaged as to price in whatever manner Wellington Management deems to
be fair. Such allocation and pricing may affect the amount of brokerage
commissions paid by the Fund. In some cases, this system
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<PAGE>
might adversely affect the price paid by the Fund (for example, during
periods of rapidly rising or falling interest rates) or limit the size of the
position obtainable for the Fund (for example, in the case of a small issue).
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is determined by Hartford
Life, in the manner described in the Fund's Prospectus. The Fund will be
closed for business and will not price its shares on the following business
holidays: New Year's Day, Martin Luther King Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Securities held by the 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.
The Fund's short-term investments with a maturity of 60 days or less when
purchased are valued at amortized cost, which approximates market value.
Short-term investments with a maturity of more than 60 days when purchased
are valued based on market quotations until the remaining days to maturity
become less than 61 days. From such time until maturity, the investments are
valued at amortized cost.
Equity securities are valued at the last sales price reported on principal
securities exchanges (domestic or foreign). If no sale took place on such
day and in the case of certain equity securities traded over-the-counter,
then such securities are valued at the mean between the bid and asked prices.
Securities quoted in foreign currencies are translated into U.S. dollars at
the exchange rate at the end of the reporting period. Options are valued at
the last sales price; if no sale took place on such day, then options are
valued at the mean between the bid and asked prices. Securities for which
market quotations are not readily available and all other assets are valued
in good faith at fair value by, or under guidelines established by, the
Fund's Board of Directors.
PURCHASE AND REDEMPTION OF SHARES
For information regarding the purchase of Fund shares, see "Purchase of
Fund Shares" in the Fund's Prospectus.
For a description of how a shareholder may have the Fund redeem his/her
shares, or how he/she may sell shares, see "Sale and Redemption of Shares" in
the Fund's Prospectus.
SUSPENSION OF REDEMPTIONS
The 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 the Fund of securities
owned by it is not reasonably practicable, or (2) it is not reasonably
practicable for the Fund to fairly
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<PAGE>
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
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN QUOTATIONS. Average annual total
return quotations for the Fund are computed by finding the average annual
compounded rates of return that would cause a hypothetical investment made on
the first day of a designated period to equal the ending redeemable value of
such hypothetical investment on the last day of the designated period in
accordance with the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial payment of n = number of years
$1,000, less the maximum sales
load applicable to the Fund
T = average annual total return ERV = ending redeemable value of
the hypothetical $1,000
initial payment made at the
beginning of the designated
period (or fractional
portion thereof)
The computation above assumes that all dividends and distributions made by
the 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 the Fund, or of a hypothetical investment in a class of the 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.
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<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.
The Fund's average annual total return quotations and yield quotations as
they may appear in the Prospectus, this SAI or in advertising are calculated
by standard methods prescribed by the SEC.
The Fund may also publish its distribution rate and/or its effective
distribution rate. The Fund's distribution rate is computed by dividing the
most recent monthly distribution per share annualized, by the current net
asset value per share. The 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. The 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 the Fund's last monthly distribution. The 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
Fund's Prospectus).
Other data that may be advertised or published about the 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 (6)
2[(--------- +1) -1]
cd
Where:
a = net investment income earned c = the average daily number of shares
during the period attributable of the subject class outstanding
to the subject class during the period that were
entitled to receive dividends
b = net expenses accrued for d = the maximum offering price per
the period attributable share of the subjectNet investment
to the subject class income will be determined in
accordance with rules established
by the SEC.
-26-
<PAGE>
NON-STANDARDIZED PERFORMANCE. In addition, in order to more completely
represent the Fund's performance or more accurately compare such performance
to other measures of investment return, the 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 Fund may advertise its
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.
In addition, from time to time in reports and promotions: (1) the 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
-27-
<PAGE>
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.
The Fund's investment performance may be advertised in various financial
publications, newspapers, magazines including the following:
Across the Board Inc
Advertising Age Independent Business
Adviser's Magazine Institutional Investor
Adweek Insurance Forum
Agent Insurance Advocate Independent
American Banker Insurance Review Investor's
American Agent and Broker Insurance Times
Associated Press Insurance Week
Barron's Insurance Product News
Best's Review Insurance Sales
Bloomberg Investment Dealers Digest
Broker World Investment Advisor
Business Week Journal of Commerce
Business Wire Journal of Accountancy
Business News Features Journal of the American Society
Business Month of CLU & ChFC
Business Marketing Kiplinger's Personal Finance
Business Daily Knight-Ridder
Business Insurance Life Association News
California Broker Life Insurance Selling
Changing Times Life Times
Consumer Reports LIMRA's MarketFacts
Consumer Digest Lipper Analytical Services, Inc.
Crain's MarketFacts
Dow Jones News Service Medical Economics
Economist Money
Entrepreneur Morningstar, Inc.
Entrepreneurial Woman Nation's Business
Financial Services Week National Underwriter
Financial World New Choices (formerly 50 Plus)
Financial Planning New England Business
Financial Times New York Times
Forbes Pension World
Fortune Pensions & Investments
Hartford Courant Professional Insurance Agents
-28-
<PAGE>
Professional Agent Reuter's
Registered Representative Rough Notes
Round the Table U.S. News & World Report
Service U.S. Banker
Success United Press International
The Standard USA Today
The Boston Globe Value Line
The Washington Post Wall Street Journal
Tillinghast Wiesenberger Investment
Time 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.
TAXES
The Fund is treated as a separate entity for accounting and tax purposes.
The 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, the 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.
The 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. The Fund intends under normal circumstances to avoid liability
for such tax by satisfying such distribution requirements.
If the 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"), the 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 Fund to recognize taxable income or gain without the concurrent
receipt of cash. Any Fund that is permitted to acquire stock in foreign
-29-
<PAGE>
corporations may limit and/or manage its holdings in passive foreign
investment companies to minimize its tax liability or maximize its return
from these investments.
Foreign exchange gains and losses realized by the 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 the 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.
The Fund 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 Fund anticipates that it generally will not qualify to pass
such foreign taxes and any associated tax deductions or credits through to
its shareholders, who therefore generally will not report such amounts on
their own tax returns.
For Federal income tax purposes, the 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 Fund and would not be distributed as such to
shareholders.
The 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, the 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, the 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
-30-
<PAGE>
Fund that may hold such obligations in order to reduce the risk of
distributing insufficient income to preserve its status as a regulated
investment company and seek to avoid becoming subject to federal income or
excise tax.
Limitations imposed by the Code on regulated investment companies like the
Fund may restrict the Fund's ability to enter into futures, options, and
forward transactions.
Certain options, futures and forward foreign currency transactions
undertaken by the 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 the 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 the
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 the Fund's distributions to shareholders. The Fund
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 the 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 the 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 Fund in its particular circumstances.
STATE AND LOCAL. The Fund may be subject to state or local taxes in
jurisdictions in which the Fund may be deemed to be doing business. In
addition, in those states or localities which have income tax laws, the
treatment of the Fund and its shareholders under such laws may differ from
their treatment under federal income tax laws, and investment in the Fund may
have different tax consequences for shareholders than would direct investment
in the Fund's portfolio securities. Shareholders should consult their own
tax advisers concerning these matters.
-31-
<PAGE>
CUSTODIAN
Portfolio securities of the Fund are held pursuant to Custodian Agreements
between the Fund and State Street Bank and Trust Company.
DISTRIBUTOR
Hartford Securities Distribution Company, 200 Hopmeadow Street, Simsbury,
Connecticut 06070, acts as the Fund's Distributor.
TRANSFER AGENT SERVICES
Hartford Life Insurance Company, Hartford Plaza, Hartford, Connecticut
06115, serves as Transfer and Dividend Disbursing Agent for the Fund. The
Transfer Agent issues and redeems shares of the Fund and disburses any
dividends declared by the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, has been selected as the independent certified public
accountants of the Fund to provide audit services and assistance and
consultation with respect to the preparation of filings with the SEC.
OTHER INFORMATION
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 at any time, or to grant the use of such name to any
other company.
-32-
<PAGE>
HARTFORD SERIES FUND, INC.
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements.
In Part A: Not Applicable
In Part B: Not Applicable
(b) Exhibits
1. Articles of Incorporation(a)
2. By-Laws(a)
3. Not Applicable
5. Form of Investment Management Agreement(a)
5.1 Form of Sub-Advisory Agreement(a)
6. Form of Principal Underwriting Agreement(a)
7. Not Applicable
8. Form of Custodian Agreement(a)
9. Not Applicable
10. Opinion and Consent of Counsel(a)
11. Not Applicable
12. Not Applicable
13. Share Purchase Agreement(a)
14. Not Applicable
15. Form of Rule 12b-1 Plan(a)
16. Schedule of Computation for Performance Quotations(b)
17. Not Applicable
18. Form of Multi-Class Plan Pursuant to Rule 18f-3(a)
19. Powers of Attorney(a)
27. Not Applicable
Item 25. Persons Controlled by or Under Common Control with Registrant.
Inapplicable
- --------
(a) Previously filed with Initial Registration Statement on
February 2, 1998.
(b) To be filed by Amendment.
<PAGE>
Item 26. Number of Record Holders by Class of Securities as of March 31, 1998.
Fund Name Class IA Class IB
Hartford Growth and Income HLS Fund 0 0
Total Number of Record Holders by Class 0 0
=======================================
Item 27. Indemnification.
Reference is made to Article V of the Articles of Incorporation filed
herewith.
Item 28. Business and Other Connections of Investment Adviser.
Position with HL
Investment
Name Advisors, Inc. Other Business
- ---- ---------------- --------------
Joseph H. Gareau President Executive Vice President and
Director of Hartford Investment
Financial Services Company(1)
("HIFSCO"); President and
Director of The Hartford
Investment Management Company(2)
("HIMCO")
Andrew W. Kohnke Managing Director Vice President and Director of
and Director HIFSCO; Managing Director and
Director of HIMCO
Bruce J. MacLean Managing Director Managing Director and Director
and Director of HIMCO
Donald E. Waggaman, Jr. Managing Director Managing Director and Director
and Director of HIMCO
Charles M. O'Halloran Director Senior Vice President and
Corporate Secretary of The
Hartford Financial Services
Group, Inc.(3) ("The Hartford");
Director of HIFSCO and HIMCO
Edmund V. Mahoney Chief Compliance Vice President of HIMCO
Officer
(1) The principal business address for HIFSCO is 200 Hopmeadow Street,
Simsbury, CT 06070.
(2) The principal business address for HIMCO is 55 Farmington Avenue,
Hartford, CT 06105.
(3) The principal business address for The Hartford is Hartford Plaza,
Hartford, CT 06115.
Item 29. Principal Underwriters
Hartford Securities Distribution Company, Inc. ("HSD") is an indirect
wholly owned subsidiary of The Hartford Financial Services Group, Inc. HSD is
the principal underwriter for the following registered investment companies:
Hartford Life Insurance Company - DC Variable Account I; Hartford Life Insurance
Company - Separate Account Two (DC Variable Account II); Hartford Life Insurance
Company - Separate Account Two (Variable Account "A"); Hartford Life Insurance
Company - Separate Account Two (QP Variable Account); Hartford Life Insurance
Company - Separate Account Two (NQ Variable Account); Hartford Life Insurance
Company - Putnam Capital Manager Trust Separate Account; Hartford Life Insurance
Company - Separate Account Two; Hartford Life Insurance Company - Separate
Account Three; ITT Hartford Life and Annuity Insurance Company - Separate
Account Three; Hartford Life Insurance Company - Separate Account Five; ITT
Hartford Life and Annuity Insurance Company - Separate Account One; ITT Hartford
Life and Annuity Insurance Company - Putnam Capital Manager Trust Separate
Account Two.
The Directors and principal officers of HSD and their position with the
Registrant are as follows:
Position or Office
Name* HSD with Registrant
----- --- ---------------
Peter Cummins Senior Vice-President Vice President
Lynda Godkin Senior Vice President, None
General Counsel and
Corporate Secretary
John P. Ginnetti Executive Vice Vice President
President
<PAGE>
George Jay Controller & Fin. Controller & Treasurer
Principal
Stephen T. Joyce Asst. Secretary None
Glen J. Kvadus Asst. Secretary None
Thomas M. Marra Exec. Vice-Pres. Vice President
Paul Eugene Olson Supv. Registered None
Principal
Edward M. Ryan, Jr. Asst. Secretary None
Lowndes A. Smith President and CEO Chairman
Donald W. Waggaman, Jr. Treasurer None
o Principal business address is P.O. Box 2999, Hartford, CT 01604-2999
Item 30. Location of Accounts and Records.
Books or other documents required to be maintained by the Registrant by
Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder are maintained by the Registrant's custodian, State Street Bank and
Trust Company, 224 Franklin Street, Boston, MA 02110 and by Hartford Life
Insurance Companies, 200 Hopmeadow Street, Simsbury, CT 06089.
Item 31. Management Services
Not Applicable
Item 32. Undertakings.
(a) Not Applicable
(b) The Company 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 registration statement.
(c) The Company will furnish each person to whom a prospectus is
delivered with a copy of the Company's latest annual report to
shareholders, upon request and without charge.
(d) The Registrant undertakes to comply with Section 16(c) of the
Investment Company Act of 1940, as amended, as it relates to the
assistance to be rendered to shareholders with respect to the call
of a meeting to replace a director.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the Registrant
has caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Hartford, State of
Connecticut, on the 27th day of April, 1998.
HARTFORD SERIES FUND, INC.
By: *
------------------------
Joseph H. Gareau
Its: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
* President April 27, 1998
- ---------------------- (Chief Executive Officer
Joseph H. Gareau & Director)
* Controller & Treasurer April 27, 1998
- ---------------------- (Chief Accounting Officer
George R. Jay and Chief Financial
Officer)
* Director April 27, 1998
- ----------------------
Joseph A. Biernat
* Director April 27, 1998
- ----------------------
Winifred E. Coleman
* Director April 27, 1998
- ----------------------
William A. O'Neill
* Director April 27, 1998
- ----------------------
Millard H. Pryor, Jr.
* Director April 27, 1998
- ----------------------
Lowndes A. Smith
* Director April 27, 1998
- ----------------------
John K. Springer
Part C - Page 15
<PAGE>
/s/ Kevin J. Carr April 27, 1998
- ----------------------
*By: Kevin J. Carr
Attorney-in-fact
