<PAGE>
As filed with the Securities and Exchange Commission on April 28, 2000
File No. 2-81647
File No. 811-03659
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
-----
Pre-Effective Amendment No. / /
---- -----
Post-Effective Amendment No. 23 / X /
---- -----
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / X /
-----
Amendment No. 23 / X /
---- -----
HARTFORD ADVISERS HLS FUND, INC.
(Exact Name of Registrant as Specified in Charter)
P. O. Box 2999, Hartford, Connecticut 06104-2999
(Address of Principal Executive Offices)
Registrant's Telephone Number including Area Code: (860) 297-6443
Kevin J. Carr, Esquire
The Hartford Financial Services Group, Inc.
Investment Law Unit
55 Farmington Avenue
Hartford, Connecticut 06105
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
Upon this amendment to the Registration Statement being declared
effective.
<PAGE>
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b) of Rule 485
---
X on MAY 1, 2000 pursuant to paragraph (b) of Rule 485
---
60 days after filing pursuant to paragraph (a)(1) of Rule 485
---
on __________ pursuant to paragraph (a)(1) of Rule 485
---
75 days after filing pursuant to paragraph (a)(2) of Rule 485
---
on __________ pursuant to paragraph (a)(2) of Rule 485
---
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
previously elected to register an indefinite number of shares of its Common
Stock.
The Rule 24f-2 Notice for the Registrant's most recent fiscal year was filed
on March 9, 2000.
<PAGE>
HARTFORD HLS FUNDS
FOR USE WITH THE HARTFORD
VARIABLE INSURANCE PRODUCTS
AND CERTAIN QUALIFIED
RETIREMENT PLANS
CLASS IA SHARES
PROSPECTUS
EFFECTIVE MAY 1, 2000
<PAGE>
[THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
HARTFORD HLS FUNDS
CLASS IA SHARES
PROSPECTUS
MAY 1, 2000
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SECTOR FUNDS
GLOBAL HEALTH HLS FUND
GLOBAL TECHNOLOGY HLS FUND
STOCK FUNDS
CAPITAL APPRECIATION HLS FUND
DIVIDEND AND GROWTH HLS FUND
GLOBAL LEADERS HLS FUND
GROWTH AND INCOME HLS FUND
INDEX HLS FUND
INTERNATIONAL OPPORTUNITIES HLS FUND
MIDCAP HLS FUND
SMALL COMPANY HLS FUND
STOCK HLS FUND
ASSET ALLOCATION FUNDS
ADVISERS HLS FUND
INTERNATIONAL ADVISERS HLS FUND
BOND FUNDS
BOND HLS FUND
HIGH YIELD HLS FUND
MORTGAGE SECURITIES HLS FUND
MONEY MARKET FUND
MONEY MARKET HLS FUND
HARTFORD HLS MUTUAL FUNDS
C/O INDIVIDUAL ANNUITY SERVICES
P.O. BOX 5085
HARTFORD, CT 06102-5085
<PAGE>
INTRODUCTION
- ------------------------------------------------------------
The Hartford HLS Funds is a family of seventeen mutual funds (each a "fund" and
together the "funds") which serve as underlying investment options for certain
variable annuity and variable life insurance separate accounts of Hartford Life
Insurance Company and its affiliates ("Hartford Life") and certain qualified
retirement plans. Contractholders of variable annuity products and policyholders
of variable life insurance products may choose the funds permitted in the
accompanying variable insurance product prospectus. In addition, participants in
certain qualified retirement plans may choose the funds permitted in their
plans. Each fund offers two classes of shares: Class IA shares offered in this
prospectus and Class IB shares offered pursuant to another prospectus. Each
fund, except the Global Health HLS Fund and Global Technology HLS Fund, is a
diversified fund. The Global Health HLS Fund and Global Technology HLS Fund are
non-diversified funds, which are sometimes known as "sector funds." Information
on each fund, including risk factors for investing in diversified versus
non-diversified funds, can be found on the pages following this summary.
HARTFORD LIFE ALSO SPONSORS A FAMILY OF MUTUAL FUNDS KNOWN AS THE HARTFORD
MUTUAL FUNDS, INC. WHICH ARE OFFERED DIRECTLY TO THE PUBLIC (THE "RETAIL
FUNDS"). THE RETAIL FUNDS ARE SEPARATE FUNDS AND SHOULD NOT BE CONFUSED WITH THE
HARTFORD HLS FUND INVESTMENT OPTIONS OFFERED IN THIS PROSPECTUS.
The investment manager to each fund is HL Investment Advisors, LLC ("HL
Advisors"). The day-to-day portfolio management of the funds is provided by two
investment sub-advisers -- Wellington Management Company, LLP ("Wellington
Management") and Hartford Investment Management Company ("HIMCO"). Information
regarding HL Advisors, Wellington Management and HIMCO is included under
"Management of the Funds" in this prospectus.
Please note that mutual funds are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Because you could lose money by investing in these funds, be sure to
read all risk disclosures carefully before investing.
2 HARTFORD HLS MUTUAL FUNDS
<PAGE>
CONTENTS PAGE
- ------------------------------------------------------------
<TABLE>
<S> <C> <C>
A summary of each fund's goals, Hartford Global Health HLS Fund 4
strategies, risks, performance and Hartford Global Technology HLS Fund 6
fees. Hartford Capital Appreciation HLS Fund 8
Hartford Dividend and Growth HLS Fund 10
Hartford Global Leaders HLS Fund 12
Hartford Growth and Income HLS Fund 14
Hartford Index HLS Fund 16
Hartford International Opportunities HLS Fund 18
Hartford MidCap HLS Fund 20
Hartford Small Company HLS Fund 22
Hartford Stock HLS Fund 24
Hartford Advisers HLS Fund 26
Hartford International Advisers HLS Fund 28
Hartford Bond HLS Fund 30
Hartford High Yield HLS Fund 32
Hartford Mortgage Securities HLS Fund 34
Hartford Money Market HLS Fund 36
Other investment strategies and investment 38
Further information on the matters 38
funds. Management of the funds
Purchase of fund shares 39
Sale and redemption of shares 40
Determination of net asset value 40
Dividends and distributions 40
Exchange privileges 40
Federal income taxes 41
Brokerage commissions 41
Performance related information 41
Distributor, Custodian and Transfer Agent 41
Financial highlights 42
For more information back cover
</TABLE>
HARTFORD HLS MUTUAL FUNDS 3
<PAGE>
HARTFORD GLOBAL HEALTH HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Global Health HLS Fund seeks long-term capital
appreciation by investing at least 80% of its total assets in the equity
securities of health care companies worldwide.
INVESTMENT STRATEGY. The focus of the fund's investment process is stock
selection through fundamental analysis. The fund's approach to investing in the
health care sector is based on in-depth understanding of medical science,
regulatory developments, reimbursement policy trends, and individual company
business franchises. The portfolio will exploit favorable macro trends for the
health care sector including demographics.
The portfolio will also seek to invest in health care companies that benefit
from the trend toward global consolidation, the biotechnology revolution and
advances in software, integrated circuits and biocompatible materials.
Fundamental research is focused on direct contact with company management,
suppliers and competitors.
Investments in the portfolio will be allocated across the major subsectors of
the health care sector, which include pharmaceuticals, medical products, managed
health care and health information services. Wellington Management may favor
certain subsectors at times based upon the relative attractiveness of stocks
within these subsectors, near term macroeconomic factors and the availability of
such stocks at attractive prices. Some representation is typically maintained in
each major subsector of the health care sector.
Stocks considered for purchase in the portfolio typically share the following
attributes:
- The company's business franchise is temporarily mispriced
- The company has under-appreciated new product pipelines
- The company has opportunities due to changes in reimbursement policy (for
example, the privatization of health care services abroad)
- The company is a target of opportunity due to industry consolidation
Stocks will be considered for sale from the portfolio when:
- Target prices are achieved
- Wellington Management's fundamental expectations are not met
- A company's prospects become less appealing
Wellington Management seeks growth companies with attractive entry valuations,
defined as those stocks where the price is not already fully exploited by other
investors. Accordingly, Wellington Management seeks to be early, not late in
recognizing opportunity.
The portfolio will be relatively concentrated both with regard to position size
and the health care sector. The fund may invest in companies of any size
capitalization. The portfolio will be close to fully invested; cash balances
normally will not exceed 10% of total assets. Market timing will not be a
significant source of performance. Annual portfolio turnover is expected to be
100% or less.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. Because the fund
concentrates on small, medium and large companies, its performance may be more
volatile than that of a fund that invests primarily in larger companies. You
could lose money as a result of your investment.
Stocks of small or mid-sized companies may be more risky than stocks of larger
companies. These companies may be young and have more limited operating or
business history. Because these businesses frequently rely on narrower product
lines and niche markets, they can suffer from isolated business setbacks.
The fund's investments are focused in the health care sector. This means that
the fund may have greater market fluctuation and price volatility than a fund
which invests in a more broadly diversified portfolio of securities across
sectors. Financial, business and economic factors may have a greater impact on a
fund of this kind than on a broadly diversified fund.
Health care products and services are generally subject to government
regulation, and changes in laws or regulations could adversely impact the market
value of securities and the fund's overall performance. Government regulation
could have a significant, adverse impact on the price and availability of a
company's products and services.
Lawsuits and regulatory proceedings which may be brought against the issuers of
securities could also adversely impact the market value of securities and the
fund's overall performance.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund's management strategy will influence performance significantly. If the
managers' stock selection strategy doesn't perform as expected, the fund could
underperform its peers or lose money.
The fund expects to trade securities very actively, which will likely increase
its transaction costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. Because the fund has been in operation for less than one year
no performance history has been provided.
4 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD GLOBAL HEALTH HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IA
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.85%
Distribution and service (12b-1) fees None
Other expenses 0.25%
Total operating expenses 1.10%
</TABLE>
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IA shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IA
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $113
Year 3 $352
Year 5 $609
Year 10 $1,346
</TABLE>
[SIDE NOTE]
SUB-ADVISER
The fund is managed by Wellington Management using a team of its global industry
analysts that specialize in the health care sector
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 5
<PAGE>
HARTFORD GLOBAL TECHNOLOGY HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Global Technology HLS Fund seeks long-term
capital appreciation by investing at least 80% of its total assets in the equity
securities of technology companies worldwide.
INVESTMENT STRATEGY. The focus of the fund's investment process is stock
selection through fundamental analysis. The fund's approach to investing in the
technology sector is based on analyzing the competitive outlook for various
subsectors of the technology sector, identifying those subsectors likely to
benefit from the current and expected future environment, and identifying
individual opportunities.
Wellington Management's evaluation of technology companies rests on its solid
knowledge of the overall competitive environment, including supply and demand
characteristics, secular trends, existing product evaluations, and new product
developments within the technology industry. Fundamental research is focused on
direct contact with company management, suppliers and competitors.
Asset allocation within the portfolio reflects Wellington Management's opinion
of the relative attractiveness of stocks within the subsectors of the technology
sector, near term macroeconomic events that may detract or enhance the
subsector's attractiveness, and the number of underdeveloped opportunities in
each subsector. Opportunities dictate the magnitude and frequency of changes in
asset allocation across the major subsectors of the technology sector, including
computer software, computer hardware, semiconductors and equipment,
communications equipment and internet and news media. Some representation is
typically maintained in each major subsector of the technology sector.
Stocks considered for purchase in the portfolio typically share the following
attributes:
- A positive change in operating results is anticipated
- Unrecognized or undervalued capabilities are present
- The quality of management indicates that these factors will be converted
to shareholder value
Stocks will be considered for sale from the portfolio when:
- Target prices are achieved
- Earnings and/or return expectations are reduced due to fundamental
changes in the company's operating outlook
- More attractive value in a comparable company is available.
The portfolio will be relatively concentrated both with regard to position size
and the technology sector. The fund may invest in companies of any size
capitalization. The portfolio will be close to fully invested; cash balances
normally will not exceed 10% of total assets. Market timing will not be a
significant source of performance. Annual portfolio turnover is expected to be
high and will exceed 100%.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. Because the fund
concentrates on small, medium and large companies, its performance may be more
volatile than that of a fund that invests primarily in larger companies. You
could lose money as a result of your investment.
Stocks of small or mid-sized companies may be more risky than stocks of larger
companies. These companies may be young and have more limited operating or
business history. Because these businesses frequently rely on narrower product
lines and niche markets, they can suffer from isolated business setbacks.
The fund's investments are focused in the technology sector. This means that the
fund may have greater market fluctuation and price volatility than a fund which
invests in a more broadly diversified portfolio of securities across sectors.
Financial, business and economic factors may have a greater impact on a fund of
this kind than on a broadly diversified fund. Competition in the sector may
cause technology companies to cut prices significantly, which can adversely
affect the profitability of companies that make up the fund's portfolio. In
addition, because of rapid technological developments, products or services
which are offered by technology companies may become obsolete or may be produced
for a relatively short time, which could adversely affect the price of the
issuers' securities. This means that the fund's returns may be more volatile
than the returns of a fund which is not subject to these risk factors.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund's management strategy will influence performance significantly. If the
managers' stock selection strategy doesn't perform as expected, the fund could
underperform its peers or lose money.
The fund expects to trade securities very actively, which will likely increase
its transaction costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. Because the fund has been in operation for less than one year
no performance history has been provided.
6 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD GLOBAL TECHNOLOGY HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IA
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.85%
Distribution and service (12b-1) fees None
Other expenses 0.25%
Total operating expenses 1.10%
</TABLE>
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IA shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IA
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 113
Year 3 $ 352
Year 5 $ 609
Year 10 $1,346
</TABLE>
[SIDE NOTE]
SUB-ADVISER
The fund is managed by Wellington Management using a team of its global industry
analysts that specialize in the technology sector
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 7
<PAGE>
HARTFORD CAPITAL APPRECIATION HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Capital Appreciation HLS Fund seeks growth of
capital by investing primarily in stocks selected on the basis of potential for
capital appreciation.
INVESTMENT STRATEGY. The fund normally invests at least 65% of its total assets
in common stocks of small, medium and large companies. The fund may invest up to
20% of its total assets in securities of non-U.S. issuers.
Through fundamental analysis, Wellington Management identifies companies that it
believes have substantial near-term capital appreciation potential regardless of
company size or industry. This strategy is sometimes referred to as a "stock
picking" approach. Small and medium sized companies are selected primarily on
the basis of dynamic earnings growth potential. Larger companies are selected
primarily based on the expectation of a significant event that Wellington
Management believes will trigger an increase in the stock price.
In analyzing a prospective investment Wellington Management looks at a number of
factors, such as business environment, management, balance sheet, income
statement, anticipated earnings, revenues, dividends and other related measures
of value.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. Because the fund
concentrates on small, medium and large companies, its performance may be more
volatile than that of a fund that invests primarily in larger companies. You
could lose money as a result of your investment.
Stocks of small or mid-sized companies may be more risky than stocks of larger
companies. These companies may be young and have more limited operating or
business history. Because these businesses frequently rely on narrower product
lines and niche markets, they can suffer from isolated business setbacks.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund's management strategy will influence performance significantly. If the
managers' stock selection strategy doesn't perform as expected, the fund could
underperform its peers or lose money.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows how the fund's total return has varied from
year to year, while the table shows how the fund's performance over time
compares to that of a broad-based market index. These figures do not include the
effect of sales charges or other fees which may be applied at the variable life
insurance, variable annuity or qualified retirement plan product level. Any such
additional sales charges or other fees will lower the fund's performance. All
figures assume that all dividends and distributions were reinvested. Keep in
mind that past performance does not indicate future results.
CLASS IA TOTAL RETURNS BY CALENDAR YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
90 -10.90%
91 53.99%
92 16.98%
93 20.80%
94 2.50%
95 30.25%
96 20.70%
97 22.34%
98 15.48%
99 37.46%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
24.99%, (1ST QUARTER, 1991) AND THE LOWEST QUARTERLY RETURN WAS -24.47% (3RD
QUARTER, 1990).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (APRIL 2, 1984)
<S> <C> <C> <C> <C>
Class IA 37.46% 25.01% 19.76% 18.74%
Index 21.04% 28.53% 18.19% 18.56%
</TABLE>
INDEX: The S&P 500 Index is a market capitalization weighted price index
composed of 500 widely held common stocks.
8 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD CAPITAL APPRECIATION HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IA
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.64%
Distribution and service (12b-1) fees None
Other expenses 0.02%
Total operating expenses 0.66%
</TABLE>
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IA shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IA
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $68
Year 3 $212
Year 5 $369
Year 10 $825
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGER
Saul J. Pannell
- - Senior Vice President of Wellington Management
- - Manager of the fund since 1991
- - Joined Wellington Management in 1979
- - Investment professional since 1974
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 9
<PAGE>
HARTFORD DIVIDEND AND GROWTH HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Dividend and Growth HLS Fund seeks a high level
of current income consistent with growth of capital by investing primarily in
stocks.
INVESTMENT STRATEGY. The fund invests primarily in a diversified portfolio of
common stocks that typically have above average income yields and whose
prospects for capital appreciation are considered favorable by Wellington
Management. Under normal market and economic conditions at least 65% of the
fund's total assets are invested in dividend-paying equity securities. The fund
may invest up to 20% of its total assets in securities of non-U.S. issuers. The
fund tends to focus on securities of larger, well-established companies.
Wellington Management uses fundamental analysis to evaluate a security for
purchase or sale by the fund. Fundamental analysis of a company involves the
assessment of such factors as its business environment, management, balance
sheet, income statement, anticipated earnings, revenues and dividends.
As a key component of its fundamental analysis, Wellington Management evaluates
a company's ability to sustain and potentially increase its dividend payments.
The fund's portfolio is broadly diversified by industry and company.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. You could lose money
as a result of your investment.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund's management strategy will influence performance significantly. If the
fund's stock selection strategy doesn't perform as expected, the fund could
underperform its peers or lose money.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows how the fund's total return has varied from
year to year, while the table shows how the fund's performance over time
compares to that of a broad-based market index. These figures do not include the
effect of sales charges or other fees which may be applied at the variable life
insurance, variable annuity or qualified retirement plan product level. Any such
additional sales charges or other fees will lower the fund's performance. All
figures assume that all dividends and distributions were reinvested. Keep in
mind that past performance does not indicate future results.
CLASS IA TOTAL RETURNS BY CALENDAR YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
95 36.37%
96 22.91%
97 31.89%
98 16.42%
99 5.31%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
16.29%, (2ND QUARTER, 1997) AND THE LOWEST QUARTERLY RETURN WAS -8.06% (3RD
QUARTER, 1999).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS (MARCH 9, 1994)
<S> <C> <C> <C>
Class IA 5.31% 22.07% 19.10%
Index 21.04% 28.53% 24.24%
</TABLE>
INDEX: The S&P 500 Index is a market capitalization weighted price index
composed of 500 widely held common stocks.
10 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD DIVIDEND AND GROWTH HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IA
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.65%
Distribution and service (12b-1) fees None
Other expenses 0.03%
Total operating expenses 0.68%
</TABLE>
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IA shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IA
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 70
Year 3 $ 218
Year 5 $ 380
Year 10 $ 849
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGER
Laurie A. Gabriel, CFA
- - Senior Vice President and Managing Partner of Wellington Management
- - Manager of the fund since inception (1994)
- - Joined Wellington Management in 1976
- - Investment professional since 1976
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 11
<PAGE>
HARTFORD GLOBAL LEADERS HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Global Leaders HLS Fund seeks growth of capital
by investing primarily in stocks issued by companies worldwide.
INVESTMENT STRATEGY. The fund invests primarily in a diversified portfolio of
common stocks covering a broad range of countries, industries and companies.
Securities in which the fund invests are denominated in both U.S. dollars and
non-U.S. currencies and may trade in both U.S. and non-U.S. markets.
Under normal market and economic conditions, the fund invests at least 65% of
its total assets in common stocks of high-quality growth companies worldwide.
These companies must, in the opinion of Wellington Management, be leaders in
their respective industries as indicated by an established market presence and
strong global, regional or country competitive positions. Under normal market
and economic conditions, the fund will diversify its investments in securities
of issuers among at least five countries, which may include the United States.
There are no limits on the amount of the fund's assets that may be invested in
each country.
The fund uses a two-tiered investment strategy:
- Using what is sometimes referred to as a "top down" approach, Wellington
Management analyzes the global macro-economic and investment
environments. This includes an evaluation of U.S. and non-U.S. economic
and political conditions, fiscal and monetary policies, demographic
trends and investor sentiment. Through top down analysis, Wellington
Management anticipates trends and changes in the markets and economy to
identify companies which offer significant potential for capital
appreciation given current and projected global and local economic and
market conditions.
- Top down analysis is followed by what is sometimes referred to as a
"bottom up" approach, which is the use of fundamental analysis to
identify specific securities for purchase or sale. Fundamental analysis
involves the assessment of a company through such factors as its business
environment, management, balance sheet, income statements, anticipated
earnings, revenues and other related measures of value.
The fund emphasizes high-quality growth companies. The key characteristics of
high-quality growth companies include a strong balance sheet, a high return on
equity, a strong management team, and attractive relative value within the
context of the global marketplace or a security's primary trading market.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. You could lose money
as a result of your investment.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund's management strategy will influence performance significantly. If the
fund invests in countries or regions that experience economic downturns,
performance could suffer. Similarly, if certain investments or industries don't
perform as expected, or if the managers' stock selection strategy doesn't
perform as expected, the fund could underperform its peers or lose money.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows the fund's total return for the first full
calendar year of the fund's operation, while the table shows how the fund's
performance over the same time period and since inception compares to that of a
broad-based market index. These figures do not include the effect of sales
charges or other fees which may be applied at the variable life insurance,
variable annuity or qualified retirement plan product level. Any such additional
sales charges or other fees will lower the fund's performance. All figures
assume that all dividends and distributions were reinvested. Keep in mind that
past performance does not indicate future results.
CLASS IA TOTAL RETURN FOR CALENDAR YEAR 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
99 50.37%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
32.82%, (4TH QUARTER, 1999) AND THE LOWEST QUARTERLY RETURN WAS -0.29% (3RD
QUARTER, 1999).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (SEPTEMBER 30, 1998)
<S> <C> <C>
Class IA 50.37% 72.77%
Index 24.95% 39.22%
</TABLE>
INDEX: The Morgan Stanley Capital International World Index is a broad based
unmanaged market capitalization weighted total return index which measures the
performance of 23 developed-country global stock markets, including the United
States, Canada, Europe, Australia, New Zealand and the Far East.
12 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD GLOBAL LEADERS HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IA
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.74%
Distribution and service (12b-1) fees None
Other expenses 0.12%
Total operating expenses 0.86%
</TABLE>
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IA shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IA
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 88
Year 3 $ 275
Year 5 $ 479
Year 10 $1,064
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGERS
Rand L. Alexander
- - Senior Vice President of Wellington Management
- - Co-manager of the fund since inception (1998)
- - Joined Wellington Management in 1990
- - Investment professional since 1976
Andrew S. Offit
- - Vice President of Wellington Management
- - Co-manager of the fund since inception (1998)
- - Joined Wellington Management in 1997
- - Investment professional since 1987
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 13
<PAGE>
HARTFORD GROWTH AND INCOME HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Growth and Income HLS Fund seeks growth of
capital and current income by investing primarily in stocks with earnings growth
potential and steady or rising dividends.
INVESTMENT STRATEGY. The fund invests primarily in a diversified portfolio of
common stocks that typically have steady or rising dividends and whose prospects
for capital appreciation are considered favorable by Wellington Management. The
fund may invest up to 20% of its total assets in securities of non-U.S. issuers.
Wellington Management uses fundamental analysis to evaluate a security for
purchase or sale by the fund. Fundamental analysis of a company involves the
assessment of such factors as its business environment, management, balance
sheet, income statement, anticipated earnings, revenues, dividends and other
related measures of value.
Wellington Management then complements its fundamental research with an
internally-developed analytical approach. This analytical approach consists of
both valuation and timeliness measures. Valuation factors focus on future
dividend growth and cash flow to determine the relative attractiveness of
different stocks in different industries. Timeliness focuses on stocks with
favorable earnings and stock price momentum to assess the appropriate time for
purchase.
The fund's portfolio is broadly diversified by industry and company.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. You could lose money
as a result of your investment.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund's management strategy will influence performance significantly. If the
fund's stock selection strategy doesn't perform as expected, the fund could
underperform its peers or lose money.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows the fund's total return for the first full
calendar year of the fund's operation, while the table shows how the fund's
performance over the same time period and since inception compares to that of a
broad-based market index. These figures do not include the effect of sales
charges or other fees which may be applied at the variable life insurance,
variable annuity or qualified retirement plan product level. Any such additional
sales charges or other fees will lower the fund's performance. All figures
assume that all dividends and distributions were reinvested. Keep in mind that
past performance does not indicate future results.
CLASS IA TOTAL RETURN FOR CALENDAR YEAR 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
99 21.82%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
15.65%, (4TH QUARTER, 1999) AND THE LOWEST QUARTERLY RETURN WAS -6.23% (3RD
QUARTER, 1999).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (MAY 29, 1998)
<S> <C> <C>
Class IA 21.82% 26.31%
Index 21.04% 22.19%
</TABLE>
INDEX: The S&P 500 Index is a market capitalization weighted price index
composed of 500 widely held common stocks.
14 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD GROWTH AND INCOME HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IA
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.78%
Distribution and service (12b-1) fees None
Other expenses 0.04%
Total operating expenses 0.82%
</TABLE>
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IA shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IA
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 84
Year 3 $ 263
Year 5 $ 457
Year 10 $1,017
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGER
James A. Rullo, CFA
- - Senior Vice President of Wellington Management
- - Manager of the fund since inception (1998)
- - Joined Wellington Management in 1994
- - Investment professional since 1987
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 15
<PAGE>
HARTFORD INDEX HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Index HLS Fund seeks to provide investment
results which approximate the price and yield performance of publicly traded
common stocks in the aggregate.
INVESTMENT STRATEGY. The fund uses the Standard & Poor's 500 Composite Stock
Price Index (the "Index") as its standard performance comparison because it
represents a significant proportion of the total market value of all common
stocks, is well known to investors and, in the opinion of the management of the
fund, is representative of the performance of publicly-traded common stocks.
Therefore, the fund attempts to approximate the capital performance and dividend
income of the Index.
The portfolio manager generally invests in no fewer than 495 stocks. HIMCO
selects stocks for the fund's portfolio after taking into account their
individual weights in the Index. Temporary cash balances may be invested in
short-term money market instruments.
The Index is comprised of 500 selected common stocks, most of which are listed
on the New York Stock Exchange. Standard & Poor's Corporation ("S&P")(1) chooses
the stocks to be included in the Index on a proprietary basis. The weightings of
stocks in the Index are based on each stock's relative total market value, that
is, its market price per share times the number of shares outstanding. Because
of this weighting, as of December 31, 1999, approximately 50 percent of the
Index was composed of the thirty-four largest companies, the five largest being
Microsoft Corporation, General Electric Company, Cisco Systems, Inc. WalMart
Stores, Inc. and Exxon Mobil Corporation.
HIMCO does not attempt to "manage" the fund's portfolio in the traditional
sense, using economic, financial and market analysis, nor does the adverse
financial situation of a company directly result in its elimination from the
fund's portfolio unless, of course, the company is removed from the Index. From
time to time administrative adjustments may be made in the fund's portfolio
because of mergers, changes in the composition of the Index and similar reasons.
The fund's ability to approximate the performance of the Index will depend to
some extent on the size of cash flows into and out of the fund. Investment
changes to accommodate these cash flows will be made to maintain the similarity
of the fund's portfolio to the Index, to the maximum practicable extent.
The fund's portfolio is broadly diversified by industry and company.
(1) "Standard & Poor's"-Registered Trademark-, "S&P"-Registered Trademark-,
"S&P 500"-Registered Trademark-, "Standard & Poor's 500", and "500" are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed for
use by Hartford Life Insurance Company.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. You could lose money
as a result of your investment.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
Large-capitalization stocks as a group could fall out of favor with the market,
causing the fund to underperform funds that focus on small- or medium-
capitalization stocks.
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows how the fund's total return has varied from
year to year, while the table shows how the fund's performance over time
compares to that of a broad-based market index. These figures do not include the
effect of sales charges or other fees which may be applied at the variable life
insurance, variable annuity or qualified retirement plan product level. Any such
additional sales charges or other fees will lower the fund's performance. All
figures assume that all dividends and distributions were reinvested. Keep in
mind that past performance does not indicate future results.
CLASS IA TOTAL RETURNS BY CALENDAR YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
90 -3.99%
91 29.53%
92 6.82%
93 9.12%
94 0.94%
95 36.55%
96 22.09%
97 32.61%
98 28.06%
99 20.49%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
21.17%, (4TH QUARTER, 1998) AND THE LOWEST QUARTERLY RETURN WAS -14.08% (3RD
QUARTER, 1990).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (MAY 1, 1987)
<S> <C> <C> <C> <C>
Class IA 20.49% 27.82% 17.43% 16.01%
Index 21.04% 28.53% 18.19% 16.79%
</TABLE>
INDEX: The S&P 500 Index is a market capitalization weighted price index
composed of 500 widely held common stocks.
16 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD INDEX HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IA
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.40%
Distribution and service (12b-1) fees None
Other expenses 0.03%
Total operating expenses 0.43%
</TABLE>
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IA shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IA
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 44
Year 3 $138
Year 5 $241
Year 10 $543
</TABLE>
[SIDE NOTE]
SUB-ADVISER
HIMCO
PORTFOLIO MANAGER
Rodger K. Metzger
- - Vice President of HIMCO
- - Manager of the fund since 1987
- - Joined HIMCO in 1987
- - Investment professional since 1987
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 17
<PAGE>
HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford International Opportunities HLS Fund seeks growth
of capital by investing primarily in stocks issued by non-U.S. companies.
INVESTMENT STRATEGY. The fund normally invests at least 65% of its assets in
stocks issued by non-U.S. companies which trade in foreign markets that are
generally considered to be well established. Under normal market conditions the
fund diversifies its investments among at least three countries other than the
United States. The securities in which the fund invests are denominated in both
U.S. dollars and non-U.S. currencies and generally are traded in non-U.S.
markets.
Wellington Management uses a three-pronged investment strategy:
- Wellington Management determines the relative attractiveness of the many
countries in which the fund may invest based upon its analysis of the
economic and political environment of each country.
- Wellington Management also evaluates industries on a global basis to
determine which industries offer the most potential for capital
appreciation given current and projected global and local economic and
market conditions.
- Wellington Management conducts fundamental research on individual
companies to identify securities for purchase or sale. Fundamental
analysis of a company involves the assessment of such factors as its
business environment, management, balance sheet, income statement,
anticipated earnings, revenues, dividends, and other related measures of
value.
In analyzing companies for investment, Wellington Management considers companies
for inclusion in the fund's portfolio that are typically larger, high-quality
companies that operate in established markets. Characteristics of high-quality
growth companies include a strong balance sheet, attractive industry trends,
strong competitive advantages and attractive relative value within the context
of a security's primary trading market.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. You could lose money
as a result of your investment.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund's management strategy will influence performance significantly. If the
fund invests in countries or regions that experience economic downturns,
performance could suffer. Similarly, if certain investments or industries don't
perform as expected, or if the managers' stock selection strategy doesn't
perform as expected, the fund could underperform its peers or lose money.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows how the fund's total return has varied from
year to year, while the table shows how the fund's performance over time
compares to that of a broad-based market index. These figures do not include the
effect of sales charges or other fees which may be applied at the variable life
insurance, variable annuity or qualified retirement plan product level. Any such
additional sales charges or other fees will lower the fund's performance. All
figures assume that all dividends and distributions were reinvested. Keep in
mind that past performance does not indicate future results.
CLASS IA TOTAL RETURNS BY CALENDAR YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
91 13.00%
92 -4.43%
93 33.73%
94 -1.94%
95 13.93%
96 12.93%
97 0.34%
98 13.16%
99 39.86%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
22.16%, (4TH QUARTER, 1999) AND THE LOWEST QUARTERLY RETURN WAS -16.98% (3RD
QUARTER, 1998).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS (JULY 2, 1990)
<S> <C> <C> <C>
Class IA 39.86% 15.36% 10.36%
Index 31.02% 16.01% 10.41%*
</TABLE>
INDEX: The Morgan Stanley Europe, Australia, Far East GDP ("EAFE GDP") Index
is an unmanaged index of stocks of companies representing stock markets in
Europe, Australia, New Zealand and the Far East.
* Index inception performance from 6/30/90
18 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IA
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.69%
Distribution and service (12b-1) fees None
Other expenses 0.09%
Total operating expenses 0.78%
</TABLE>
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IA shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IA
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 80
Year 3 $250
Year 5 $435
Year 10 $969
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGERS
Trond Skramstad
- - Senior Vice President of Wellington Management
- - Manager of the fund since 1994
- - Joined Wellington Management in 1993
- - Investment professional since 1990
Andrew S. Offit
- - Vice President of Wellington Management
- - Associate Manager of the fund since 1997
- - Joined Wellington Management in 1997
- - Investment professional since 1987
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 19
<PAGE>
HARTFORD MIDCAP HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford MidCap HLS Fund seeks long-term growth of capital
by investing primarily in stocks selected on the basis of potential for capital
appreciation.
INVESTMENT STRATEGY. The fund normally invests at least 65% of its total assets
in common stocks of companies with market capitalizations within the range
represented by the Standard & Poor's MidCap 400 Index. As of December 31, 1999
this range was between approximately $165 million and $37 billion and the
average market capitalization was $2.3 billion. The fund may invest up to 20% of
its total assets in securities of non-U.S. issuers.
The fund uses a two-tiered investment strategy:
- Using what is sometimes referred to as a "top down" approach, Wellington
Management analyzes the general economic and investment environment. This
includes an evaluation of economic conditions, U.S. fiscal and monetary
policy, and demographic trends. Through top down analysis, Wellington
Management anticipates trends and changes in markets and the economy
overall and identifies industries and sectors that are expected to
outperform.
- Top down analysis is followed by what is sometimes referred to as a
"bottom up" approach, which is the use of fundamental analysis to
identify specific securities for purchase or sale. Fundamental analysis
involves the assessment of a company through such factors as its business
environment, management, balance sheet, income statement, anticipated
earnings, revenues, and other related measures of value.
The fund favors high-quality growth companies. The key characteristics of
high-quality growth companies include a leadership position within an industry,
a strong balance sheet, a high return on equity, and a strong management team.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. Because the fund
concentrates on mid-sized companies, its performance may be more volatile than
that of a fund that invests primarily in larger companies. You could lose money
as a result of your investment.
Stocks of mid-sized companies may be more risky than stocks of larger companies.
These companies may be young and have more limited operating or business
history. Because these businesses frequently rely on narrower product lines and
niche markets, they can suffer from isolated business setbacks.
The fund's management strategy will influence performance significantly.
Mid-sized company stocks as a group could fall out of favor with the market,
causing the fund to underperform funds that focus on other types of stocks.
Similarly, if the managers' stock selection strategy doesn't perform as
expected, the fund could underperform its peers or lose money.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows how the fund's total return has varied from
year to year, while the table shows how the fund's performance over time
compares to that of a broad-based market index. These figures do not include the
effect of sales charges or other fees which may be applied at the variable life
insurance, variable annuity or qualified retirement plan product level. Any such
additional sales charges or other fees will lower the fund's performance. All
figures assume that all dividends and distributions were reinvested. Keep in
mind that past performance does not indicate future results.
CLASS IA TOTAL RETURNS BY CALENDAR YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
98 26.57%
99 51.81%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
30.49%, (4TH QUARTER, 1999) AND THE LOWEST QUARTERLY RETURN WAS -16.15% (3RD
QUARTER, 1998).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (JULY 14, 1997)
<S> <C> <C>
Class IA 51.81% 37.35%
Index 14.73% 17.96%
</TABLE>
INDEX: The S&P MidCap 400 Index is an unmanaged index of common stocks of
companies chosen by Standard & Poor's designed to represent price movements in
the midcap U.S. equity market.
20 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD MIDCAP HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IA
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.76%
Distribution and service (12b-1) fees None
Other expenses 0.03%
Total operating expenses 0.79%
</TABLE>
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IA shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IA
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 81
Year 3 $253
Year 5 $440
Year 10 $981
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGER
Phillip H. Perelmuter
- - Senior Vice President of Wellington Management
- - Manager of the fund since inception (1997)
- - Joined Wellington Management in 1995
- - Investment professional since 1983
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 21
<PAGE>
HARTFORD SMALL COMPANY HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Small Company HLS Fund seeks growth of capital by
investing primarily in stocks selected on the basis of potential for capital
appreciation.
INVESTMENT STRATEGY. The fund normally invests at least 65% of its total assets
in common stocks of companies with market capitalizations within the range
represented by the Russell 2000 Index. As of December 31, 1999 this range was
between approximately $10 million and $13 billion, and the average market
capitalization was $664 million. The fund may invest up to 20% of its total
assets in securities of non-U.S. issuers.
Through fundamental analysis Wellington Management identifies companies that it
believes have substantial potential for near-term capital appreciation.
Wellington Management selects securities of companies that, in its opinion:
- have potential for above-average earnings growth,
- are undervalued in relation to their investment potential,
- have positive business and/or fundamental financial characteristics that
are overlooked or misunderstood by investors, or
- are relatively obscure and undiscovered by the overall investment
community.
Fundamental analysis of a company involves the assessment of such factors as its
business environment, management, balance sheet, income statement, anticipated
earnings, revenues, dividends, and other related measures of value.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. Because the fund
concentrates on small companies, its performance may be more volatile than that
of a fund that invests primarily in larger companies. You could lose money as a
result of your investment.
Stocks of smaller companies may be more risky than stocks of larger companies.
Many of these companies are young and have limited operating or business
history. Because these businesses frequently rely on narrow product lines and
niche markets, they can suffer severely from isolated business setbacks.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund's management strategy will influence performance significantly. Small
company stocks as a group could fall out of favor with the market, causing the
fund to underperform funds that focus on other types of stocks. Similarly, if
the managers' stock selection strategy doesn't perform as expected, the fund
could underperform its peers or lose money.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows how the fund's total return has varied from
year to year, while the table shows how the fund's performance over time
compares to that of a broad-based market index. These figures do not include the
effect of sales charges or other fees which may be applied at the variable life
insurance, variable annuity or qualified retirement plan product level. Any such
additional sales charges or other fees will lower the fund's performance. All
figures assume that all dividends and distributions were reinvested. Keep in
mind that past performance does not indicate future results.
CLASS IA TOTAL RETURNS BY CALENDAR YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
97 18.38%
98 11.62%
99 65.83%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
35.93%, (4TH QUARTER, 1999) AND THE LOWEST QUARTERLY RETURN WAS -19.71% (3RD
QUARTER, 1998).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (AUGUST 9, 1996)
<S> <C> <C>
Class IA 65.83% 28.59%
Index 21.26% 15.10%
</TABLE>
INDEX: The Russell 2000 Index is a broad based unmanaged index comprised of
2,000 of the smallest U.S. domiciled company common stocks (on the basis of
capitalization) that are traded in the United States on the New York Stock
Exchange, American Stock Exchange and NASDAQ.
22 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD SMALL COMPANY HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IA
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.75%
Distribution and service (12b-1) fees None
Other expenses 0.03%
Total operating expenses 0.78%
</TABLE>
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IA shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IA
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 80
Year 3 $250
Year 5 $435
Year 10 $969
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGER
Steven C. Angeli
- - Vice President of Wellington Management
- - Manager of the fund since January 1, 2000
- - Joined Wellington Management in 1994
- - Investment professional since 1990
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 23
<PAGE>
HARTFORD STOCK HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Stock HLS Fund seeks long-term growth of capital,
with income as a secondary consideration, by investing primarily in stocks.
INVESTMENT STRATEGY. The fund normally invests at least 65% of the fund's total
assets in the common stocks of high-quality growth companies. Many of the
companies in which the fund invests have a history of paying dividends and are
expected to continue paying dividends in the future. The fund may invest up to
20% of its total assets in securities of non-U.S. issuers. The fund invests in a
diversified portfolio of primarily equity securities using a two-tiered
investment strategy:
- Using what is sometimes referred to as a "top down" approach, Wellington
Management analyzes the general economic and investment environment. This
includes an evaluation of economic conditions, U.S. fiscal and monetary
policy, demographic trends, and investor sentiment. Through top down
analysis, Wellington Management anticipates trends and changes in markets
in the economy overall and identifies industries and sectors that are
expected to outperform.
- Top down analysis is followed by what is sometimes referred to as a
"bottom up" approach, which is the use of fundamental analysis to
identify specific securities for purchase or sale. Fundamental analysis
of a company involves the assessment of such factors as its business
environment, management, balance sheet, income statement, anticipated
earnings, revenues, dividends, and other related measures of value.
The key characteristics of high-quality growth companies favored by the fund
include a leadership position within an industry, a strong balance sheet, a high
return on equity, sustainable or increasing dividends, a strong management team
and a globally competitive position.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. You could lose money
as a result of your investment.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund's management strategy will influence performance significantly.
Large-capitalization stocks as a group could fall out of favor with the market,
causing the fund to underperform funds that focus on small- or
medium-capitalization stocks. Similarly, if the managers' stock selection
strategy doesn't perform as expected, the fund could underperform its peers or
lose money.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows how the fund's total return has varied from
year to year, while the table shows how the fund's performance over time
compares to that of a broad-based market index. These figures do not include the
effect of sales charges or other fees which may be applied at the variable life
insurance, variable annuity or qualified retirement plan product level. Any such
additional sales charges or other fees will lower the fund's performance. All
figures assume that all dividends and distributions were reinvested. Keep in
mind that past performance does not indicate future results.
CLASS IA TOTAL RETURNS BY CALENDAR YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
90 -3.87%
91 24.58%
92 10.04%
93 14.34%
94 -1.80%
95 34.10%
96 24.37%
97 31.38%
98 33.47%
99 19.78%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
22.17%, (4TH QUARTER, 1998) AND THE LOWEST QUARTERLY RETURN WAS -17.22% (3RD
QUARTER, 1990).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (AUGUST 31, 1977)
<S> <C> <C> <C> <C>
Class IA 19.78% 28.49% 17.88% 16.28%
Index 21.04% 28.53% 18.19% 17.07%
</TABLE>
INDEX: The S&P 500 Index is a market capitalization weighted price index
composed of 500 widely held common stocks.
24 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD STOCK HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IA
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.46%
Distribution and service (12b-1) fees None
Other expenses 0.02%
Total operating expenses 0.48%
</TABLE>
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IA shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IA
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 49
Year 3 $154
Year 5 $269
Year 10 $605
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGERS
Rand L. Alexander
- - Senior Vice President of Wellington Management
- - Manager of the fund since 1992
- - Joined Wellington Management in 1990
- - Investment professional since 1976
Philip H. Perelmuter
- - Senior Vice President of Wellington Management
- - Associate Manager of the fund since 1995
- - Joined Wellington Management in 1995
- - Investment professional since 1983
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 25
<PAGE>
HARTFORD ADVISERS HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Advisers HLS Fund seeks maximum long-term total
return.
INVESTMENT STRATEGY. The fund allocates its assets among three categories:
- stocks,
- debt securities, and
- money market instruments.
The fund favors stocks issued by high-quality growth companies. The key
characteristics of high-quality growth companies include a leadership position
within an industry, a strong balance sheet, a high return on equity, sustainable
or increasing dividends, a strong management team and a globally competitive
position.
The debt securities (other than money market instruments) in which the fund
primarily invests include securities issued or guaranteed by the U.S. Government
and its agencies or instrumentalities and securities rated investment grade
(rated at least BBB by Standard & Poor's Corporation or Baa by Moody's Investors
Service, Inc., or if unrated, securities deemed by Wellington Management to be
of comparable quality). The fund is not restricted to any specific maturity
term.
Asset allocation decisions are based on Wellington Management's judgment of the
projected investment environment for financial assets, relative fundamental
values, the attractiveness of each asset category, and expected future returns
of each asset category. Wellington Management does not attempt to engage in
short-term market timing among asset categories. As a result, shifts in asset
allocation are expected to be gradual and continuous and the fund will normally
have some portion of its assets invested in each asset category. There is no
limit on the amount of fund assets that may be allocated to each asset category
and the allocation is in Wellington Management's discretion.
The fund may invest up to 20% of its total assets in securities of non-U.S.
issuers.
- --------------------------------------------------------------------------------
MAIN RISKS. This fund has stock market risk, interest rate risk, manager
allocation risk, credit risk and prepayment risk. You could lose money as a
result of your investment.
Stock market risk means the stocks held by the fund may decline in value due to
the activities and financial prospects of individual companies or to general
market and economic conditions.
Interest rate risk refers to the possibility that your investment may go down in
value when interest rates rise.
Credit risk refers to the possibility that the issuing company may not be able
to pay interest and principal when due.
Manager allocation risk refers to the possibility that the portfolio managers
could allocate assets in a manner that results in the fund underperforming its
peers.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows how the fund's total return has varied from
year to year, while the table shows how the fund's performance over time
compares to that of a broad-based market index. These figures do not include the
effect of sales charges or other fees which may be applied at the variable life
insurance, variable annuity or qualified retirement plan product level. Any such
additional sales charges or other fees will lower the fund's performance. All
figures assume that all dividends and distributions were reinvested. Keep in
mind that past performance does not indicate future results.
CLASS IA TOTAL RETURNS BY CALENDAR YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
90 1.26%
91 20.33%
92 8.30%
93 12.25%
94 -2.74%
95 28.34%
96 16.59%
97 24.51%
98 24.66%
99 10.59%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
13.92%, (2ND QUARTER, 1997) AND THE LOWEST QUARTERLY RETURN WAS -9.25% (3RD
QUARTER, 1990).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (MARCH 31, 1983)
<S> <C> <C> <C> <C>
Class IA 10.59% 20.76% 13.98% 13.70%
S&P 500 Index 21.04% 28.53% 18.19% 18.41%
LGCB Index -2.15% 7.61% 7.65% 7.43%
</TABLE>
INDICES: The S&P 500 Index is a market capitalization weighted price index
composed of 500 widely held common stocks.
The Lehman Brothers Government/Corporate Bond Index ("LGCB") is a broad based
unmanaged, market-value-weighted index of all debt obligations of the U.S.
Treasury and U.S. Government agencies (excluding mortgaged-backed securities)
and of all publicly-issued fixed-rate, nonconvertible, investment grade
domestic corporate debt.
26 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD ADVISERS HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IA
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.63%
Distribution and service (12b-1) fees None
Other expenses 0.02%
Total operating expenses 0.65%
</TABLE>
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IA shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IA
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 67
Year 3 $209
Year 5 $363
Year 10 $812
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGERS
Paul D. Kaplan
- - Senior Vice President of Wellington Management
- - Co-manager of the fund since 1987
- - Joined Wellington Management in 1982
- - Investment professional since 1974
Rand L. Alexander
- - Senior Vice President of Wellington Management
- - Co-manager of the fund since 1992
- - Joined Wellington Management in 1990
- - Investment professional since 1976
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 27
<PAGE>
HARTFORD INTERNATIONAL ADVISERS HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford International Advisers HLS Fund seeks maximum
long-term total rate of return.
INVESTMENT STRATEGY. The fund actively allocates its assets among three
categories:
- stocks
- debt securities and
- money market instruments.
Securities in which the fund invests primarily will be denominated in non-U.S.
currencies and will be traded in non-U.S. markets.
The fund consists of a diversified portfolio of securities covering a broad
range of countries, industries, and companies. The fund anticipates that, under
normal market conditions, it will diversify its investments in at least three
countries other than the United States.
The fund's investments in equity securities are substantially similar to the
equity securities investments permitted for the Hartford International
Opportunities HLS Fund.
Debt securities (other than money market instruments) in which the fund may
invest include investment grade securities assigned within the four highest bond
rating categories by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Corporation ("S&P"), or, if unrated, which are determined by Wellington
Management to be of comparable quality. In addition, the fund may invest up to
15% of its total assets in high yield-high risk securities, commonly known as
"junk bonds." Such securities may be rated as low as "C" by Moody's and by S&P,
or, if unrated, are of comparable quality as determined by Wellington
Management.
Asset allocation decisions are based upon Wellington Management's judgment of
the projected investment environment for financial assets, relative fundamental
values and attractiveness of each asset category. Wellington Management does not
attempt to make short-term market timing decisions among asset categories and
asset allocation is in Wellington Management's discretion. As a result, shifts
in asset allocation are expected to be gradual and continuous and the fund will
normally have some portion of its assets invested in each asset category. There
is no limit on the amount of fund assets that may be allocated to each asset
category.
- --------------------------------------------------------------------------------
MAIN RISKS. This fund has stock market risk, interest rate risk, manager
allocation risk, credit risk and prepayment risk. You could lose money as a
result of your investment.
Stock market risk means the stocks held by the fund may decline in value due to
the activities and financial prospects of individual companies or to general
market and economic conditions.
Interest rate risk refers to the possibility that your investment may go down in
value when interest rates rise.
Credit risk refers to the possibility that the issuing company may not be able
to pay interest and principal when due.
Manager allocation risk refers to the possibility that the portfolio managers
could allocate assets in a manner that results in the fund underperforming its
peers.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows how the fund's total return has varied from
year to year, while the table shows how the fund's performance over time
compares to that of a broad-based market index. These figures do not include the
effect of sales charges or other fees which may be applied at the variable life
insurance, variable annuity or qualified retirement plan product level. Any such
additional sales charges or other fees will lower the fund's performance. All
figures assume that all dividends and distributions were reinvested. Keep in
mind that past performance does not indicate future results.
CLASS IA TOTAL RETURNS BY CALENDAR YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
96 12.25%
97 5.52%
98 13.35%
99 23.16%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
13.17%, (4TH QUARTER, 1999) AND THE LOWEST QUARTERLY RETURN WAS -9.05% (3RD
QUARTER, 1998).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (MARCH 1, 1995)
<S> <C> <C>
Class IA 23.16% 14.28%
EAFE GDP Index 31.02% 17.23%
Salomon Index (ex-U.S.) 18.00% 13.47%*
</TABLE>
INDICES: The Morgan Stanley Europe, Australia, Far East GDP ("EAFE GDP") Index
is an unmanaged index of stocks of companies representing stock markets in
Europe, Australia, New Zealand and the Far East.
Salomon Smith Barney World Government Bond ("Salomon") Index is a
market-capitalization weighted index of government bonds representing 18
government bond markets of Europe, Australia, North America and the Far East
and the ex-U.S. Index excludes the United States.
*Index inception performance is from 2/28/95
28 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD INTERNATIONAL ADVISERS HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IA
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.76%
Distribution and service (12b-1) fees None
Other expenses 0.09%
Total operating expenses 0.85%
</TABLE>
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IA shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IA
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 87
Year 3 $ 272
Year 5 $ 473
Year 10 $1,052
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGERS
Trond Skramstad
- - Senior Vice President of Wellington Management
- - Manager of the equity component of the fund since inception (1995)
- - Joined Wellington Management in 1993
- - Investment professional since 1990
Andrew S. Offit
- - Vice President of Wellington Management
- - Associate Manager of the equity component of the fund since 1997
- - Joined Wellington Management in 1997
- - Investment professional since 1987
Robert L. Evans
- - Senior Vice President of Wellington Management
- - Manager of the debt component of the fund since inception (1995)
- - Joined Wellington Management in 1995
- - Investment professional since 1985
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 29
<PAGE>
HARTFORD BOND HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Bond HLS Fund seeks a high level of current
income, consistent with a competitive total return, as compared to bond funds
with similar investment objectives and policies, by investing primarily in debt
securities.
INVESTMENT STRATEGY. Debt securities in which the fund invests include
(1) securities issued or guaranteed as to principal or interest by the U.S.
Government, its agencies or instrumentalities; (2) non-convertible debt
securities issued or guaranteed by U.S. corporations or other issuers (including
foreign governments or corporations); (3) asset-backed and mortgage-related
securities; and (4) securities issued or guaranteed as to principal or interest
by a sovereign government or one of its agencies or political subdivisions,
supranational entities such as development banks, non-U.S. corporations, banks
or bank holding companies, or other non-U.S. issuers.
The fund normally invests at least 80% of its portfolio in investment grade debt
securities. The fund may invest up to 20% of its total assets in securities
rated in the highest category of below investment grade bonds, or securities
which, if unrated, are determined by HIMCO to be of comparable quality. Debt
securities rated below investment grade are commonly referred to as "high
yield-high risk securities" or "junk bonds".
The fund invests at least 65% of its total assets in debt securities with a
maturity of at least one year. Although the fund does not have a maximum
maturity term restriction, the fund tends to have an average maturity within the
intermediate-term range which is typically defined as between 5 to 10 years.
The fund may invest up to 15% of its total assets in preferred stocks,
convertible securities, and securities accompanied by warrants to purchase
equity securities. The fund will not invest in common stocks directly, but may
retain, for reasonable periods of time, common stocks acquired upon conversion
of debt securities or upon exercise of warrants acquired with debt securities.
The fund may invest up to 30% of its total assets in debt securities of non-U.S.
issuers and up to 10% of its total assets in securities denominated in foreign
currencies.
The fund uses what is sometimes referred to as a top-down analysis to determine
which industries may benefit from current and future changes in the economy. The
fund then selects individual securities from selected industries that, from a
yield perspective, appear to be attractive. The portfolio manager assesses such
factors as a company's business environment, balance sheet, income statement,
anticipated earnings and management team.
- --------------------------------------------------------------------------------
MAIN RISKS. The major factors affecting this fund's performance are interest
rates and credit risk. You could lose money as a result of your investment.
When interest rates rise, bond prices fall; generally the longer the fund's
maturity, the more sensitive it is to this risk.
The fund could lose money if any bonds it owns are downgraded in credit rating
or go into default. In general, lower-rated bonds have higher credit risks. If
certain sectors or investments don't perform as the manager expects, the fund
could underperform its peers or lose money.
High yield bonds and foreign securities may make the fund more sensitive to
market or economic shifts in the U.S. and abroad.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows how the fund's total return has varied from
year to year, while the table shows how the fund's performance over time
compares to that of a broad-based market index. These figures do not include the
effect of sales charges or other fees which may be applied at the variable life
insurance, variable annuity or qualified retirement plan product level. Any such
additional sales charges or other fees will lower the fund's performance. All
figures assume that all dividends and distributions were reinvested. Keep in
mind that past performance does not indicate future results.
CLASS IA TOTAL RETURNS BY CALENDAR YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
90 8.39%
91 16.43%
92 5.53%
93 10.24%
94 -3.95%
95 18.49%
96 3.52%
97 11.35%
98 8.15%
99 -2.02%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
6.40%, (2ND QUARTER, 1995) AND THE LOWEST QUARTERLY RETURN WAS -3.40% (1ST
QUARTER, 1994).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (AUGUST 31, 1977)
<S> <C> <C> <C> <C>
Class IA -2.02% 7.68% 7.40% 8.52%
Index -2.15% 7.61% 7.65% 9.01%
</TABLE>
INDEX: The Lehman Brothers Government/Corporate Bond Index is a broad based
unmanaged, market-value-weighted index of all debt obligations of the U.S.
Treasury and U.S. Government agencies (excluding mortgaged-backed securities)
and of all publicly-issued fixed-rate, nonconvertible, investment grade
domestic corporate debt.
30 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD BOND HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IA
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.49%
Distribution and service (12b-1) fees None
Other expenses 0.03%
Total operating expenses 0.52%
</TABLE>
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IA shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IA
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 53
Year 3 $167
Year 5 $291
Year 10 $654
</TABLE>
[SIDE NOTE]
SUB-ADVISER
HIMCO
PORTFOLIO MANAGER
Alison D. Granger, CFA
- - Senior Vice President of HIMCO
- - Manager of the fund since 1996
- - Joined HIMCO in 1993
- - Investment professional since 1981
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 31
<PAGE>
HARTFORD HIGH YIELD HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford High Yield HLS Fund seeks high current income by
investing in non-investment grade debt securities. Growth of capital is a
secondary objective.
INVESTMENT STRATEGY. The fund normally invests at least 65%, and may invest up
to 100%, of its portfolio in non-investment grade debt securities (securities
rated "Ba" or lower by Moody's Investors Service, Inc. ("Moody's") or "BB" or
lower by Standard and Poor's Corporation ("S&P"), or securities which, if
unrated, are determined by HIMCO to be of comparable quality). Debt securities
rated below investment grade are commonly referred to as "high yield-high risk
securities" or "junk bonds". The fund will invest no more than 10% of total
assets in securities rated below B3 by Moody's or B- by S&P, or, if unrated,
determined to be of comparable quality by HIMCO. The fund may invest in bonds of
any maturity although the fund tends to have an average maturity within the
intermediate-term range which is typically defined as between 5 to 10 years.
The fund may invest up to 15% of its total assets in preferred stocks,
convertible securities, and securities carrying warrants to purchase equity
securities. The fund will not invest in common stocks directly, but may retain,
for reasonable periods of time, common stocks acquired upon conversion of debt
securities or upon exercise of warrants acquired with debt securities. The fund
may invest up to 30% of its total assets in securities of non-U.S. issuers and
up to 10% of its total assets in securities denominated in foreign currencies.
To achieve its goal of high current income, the fund uses what is sometimes
referred to as a top-down analysis to determine which industries may benefit
from current and future changes in the economy. The fund then selects individual
securities within selected industries that appear from a yield perspective to be
attractive. The fund assesses such factors as the company's business
environment, balance sheet, income statement, anticipated earnings and
management team.
The fund seeks its secondary goal of capital growth, when consistent with its
primary objective of high current income, by investing in securities that the
portfolio manager expects to appreciate in value as a result of declines in
long-term interest rates or favorable developments affecting the business or
prospects of the issuer which may improve the issuer's financial condition and
credit rating.
- --------------------------------------------------------------------------------
MAIN RISKS. The major factors affecting this fund's performance are interest
rates and credit risk. You could lose money as a result of your investment.
When interest rates rise, bond prices fall; generally the longer a bond's
maturity, the more sensitive it is to this risk.
Credit risk depends largely on the perceived financial health of bond issuers.
In general, lower-rated bonds have higher credit risks. High yield bond prices
can fall on bad news about the economy, an industry or a company. Share price,
yield and total return may fluctuate more than with less aggressive bond funds.
The fund could lose money if any bonds it owns are downgraded in credit rating
or go into default. If certain industries or investments don't perform as the
fund expects, it could underperform its peers or lose money.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
High yield bonds and foreign securities may make the fund more sensitive to
market or economic shifts in the U.S. and abroad.
In a down market some of the fund's investments could become harder to value.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows the fund's total return for the first full
calendar year of the fund's operation, while the table shows how the fund's
performance over the same time period and since inception compares to that of a
broad-based market index. These figures do not include the effect of sales
charges or other fees which may be applied at the variable life insurance,
variable annuity or qualified retirement plan product level. Any such additional
sales charges or other fees will lower the fund's performance. All figures
assume that all dividends and distributions were reinvested. Keep in mind that
past performance does not indicate future results.
CLASS IA TOTAL RETURN FOR CALENDAR YEAR 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
99 4.70%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
3.14%, (1ST QUARTER, 1999) AND THE LOWEST QUARTERLY RETURN WAS -0.97% (3RD
QUARTER, 1999).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (SEPTEMBER 30, 1998)
<S> <C> <C>
Class IA 4.70% 6.78%
Index 2.39% 3.63%
</TABLE>
INDEX: The Lehman Brothers High Yield Corporate Index is a broad-based
market-value-weighted index that tracks the total return performance of
non-investment grade, fixed-rate, publicly placed, dollar denominated and
nonconvertible debt registered with the SEC.
32 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD HIGH YIELD HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IA
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.66%
Distribution and service (12b-1) fees None
Other expenses 0.06%
Total operating expenses 0.72%
</TABLE>
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IA shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IA
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 74
Year 3 $231
Year 5 $402
Year 10 $897
</TABLE>
[SIDE NOTE]
SUB-ADVISER
HIMCO
PORTFOLIO MANAGER
Alison D. Granger, CFA
- - Senior Vice President of HIMCO
- - Manager of the fund since inception (1998)
- - Joined HIMCO in 1993
- - Investment professional since 1981
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 33
<PAGE>
HARTFORD MORTGAGE SECURITIES HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Mortgage Securities HLS Fund seeks maximum
current income consistent with safety of principal and maintenance of liquidity
by investing primarily in mortgage-related securities.
INVESTMENT STRATEGY. The fund normally invests at least 65% of its total assets
in high quality mortgage-related securities either (i) issued by U.S. Government
agencies, instrumentalities or sponsored corporations, or (ii) rated A or better
by Moody's or S&P or, if not rated, which are of equivalent investment quality
as determined by HIMCO. These U. S. Government agencies, instrumentalities or
sponsored corporations may include the Government National Mortgage Association,
the Federal National Mortgage Association and the Federal Home Loan Mortgage
Corporation.
At times the fund may invest in mortgage-related securities not meeting the
foregoing investment quality standards when HIMCO deems such investments to be
consistent with the fund's investment objective; however, no such investments
will be made in excess of 20% of the value of the fund's total assets. Such
investments will be considered mortgage-related securities for purposes of the
investment strategy that the fund invest at least 65% of its total assets in
mortgage-related securities.
In addition, the fund may invest in mortgage-related securities known as
collateralized mortgage obligations, including residential and commercial
mortgage-backed securities which are issued by governmental agencies or private
entities.
The fund may also purchase asset-backed securities.
- --------------------------------------------------------------------------------
MAIN RISKS. The primary risks of this fund are interest rate risk, credit risk,
prepayment risk, and manager risk. You could lose money as a result of your
investment.
Interest rate risk refers to the possibility that your investment may go down in
value when interest rates rise.
Credit risk refers to the possibility that the issuing company may not be able
to pay interest and principal when due.
Prepayment risk refers to the possibility that any mortgage securities held by
the fund may be adversely affected by changes in prepayment rates on the
underlying mortgages. If prepayments increase as a result of lower interest
rates the fund may have to invest a portion of its assets at lower rates.
The fund's management strategy will influence performance significantly.
Mortgage securities as a group could fall out of favor with the market, causing
the fund to underperform funds that focus on other categories. Similarly, if the
managers' selection strategy doesn't perform as expected, the fund could
underperform its peers or lose money.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows how the fund's total return has varied from
year to year, while the table shows how the fund's performance over time
compares to that of a broad-based market index. These figures do not include the
effect of sales charges or other fees which may be applied at the variable life
insurance, variable annuity or qualified retirement plan product level. Any such
additional sales charges or other fees will lower the fund's performance. All
figures assume that all dividends and distributions were reinvested. Keep in
mind that past performance does not indicate future results.
CLASS IA TOTAL RETURNS BY CALENDAR YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
90 9.70%
91 14.71%
92 4.64%
93 6.31%
94 -1.61%
95 16.17%
96 5.07%
97 9.01%
98 6.72%
99 1.52%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
5.66%, (3RD QUARTER, 1991) AND THE LOWEST QUARTERLY RETURN WAS -2.13 (1ST
QUARTER, 1994).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (JANUARY 1, 1985)
<S> <C> <C> <C> <C>
Class IA 1.52% 7.59% 7.10% 8.39%
Index 1.86% 7.98% 7.78% 9.55%
</TABLE>
INDEX: Lehman Mortgage-Backed Securities Index is an index of mortgage backed
pass-through securities of the Government National Mortgage Association,
Federal National Mortgage Association and Federal Home Loan Mortgage
Corporation.
34 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD MORTGAGE SECURITIES HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IA
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.45%
Distribution and service (12b-1) fees None
Other expenses 0.03%
Total operating expenses 0.48%
</TABLE>
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IA shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IA
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 49
Year 3 $154
Year 5 $269
Year 10 $605
</TABLE>
[SIDE NOTE]
SUB-ADVISER
HIMCO
PORTFOLIO MANAGER
Peter P. Perrotti
- - Senior Vice President of HIMCO
- - Manager of the fund since May 1, 1999
- - Joined HIMCO in 1990
- - Investment professional since 1989
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 35
<PAGE>
HARTFORD MONEY MARKET HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Money Market HLS Fund seeks maximum current
income consistent with liquidity and preservation of capital.
INVESTMENT STRATEGY. The fund seeks to maintain a stable share price of $1.00.
The fund focuses on specific short-term U.S. dollar denominated money market
instruments which are rated in the first two investment tiers by at least one
nationally recognized statistical rating organization, or if unrated, determined
to be of comparable quality by HIMCO. Money market instruments include
(1) banker's acceptances; (2) obligations of governments (whether U.S. or
non-U.S.) and their agencies and instrumentalities; (3) short-term corporate
obligations, including commercial paper, notes, and bonds; (4) other short-term
debt obligations; (5) obligations of U.S. banks, non-U.S. branches of U.S. banks
(Eurodollars), U.S. branches and agencies of non-U.S. banks (Yankee dollars),
and non-U.S. branches of non-U.S. banks; (6) asset-backed securities; and
(7) repurchase agreements.
The fund purchases securities which it believes offer attractive returns
relative to the risks undertaken. In addition, the portfolio manager adjusts the
average maturity of the portfolio in anticipation of interest rate changes.
- --------------------------------------------------------------------------------
MAIN RISKS. The primary risks of this fund are interest rate risk, credit risk
and manager risk.
A rise in interest rates could cause a fall in the values of the fund's
securities. Credit risk refers to the risk that a security's credit rating could
be downgraded affecting the value and, potentially the likelihood of repayment,
of the fund's securities. Manager risk refers to the risk that if the manager
does not effectively implement the fund's investment goal and style, the fund
could underperform its peers.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, there is a risk that
the fund's share price could fall below $1.00, which would make your shares
worth less than what you paid for them.
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows how the fund's total return has varied from
year to year, while the table shows how the fund's performance over time
compares to that of a broad-based market index. These figures do not include the
effect of sales charges or other fees which may be applied at the variable life
insurance, variable annuity or qualified retirement plan product level. Any such
additional sales charges or other fees will lower the fund's performance. All
figures assume that all dividends and distributions were reinvested. Keep in
mind that past performance does not indicate future results.
CLASS IA TOTAL RETURNS BY CALENDAR YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
90 8.09%
91 6.01%
92 3.63%
93 2.94%
94 3.95%
95 5.74%
96 5.18%
97 5.31%
98 5.25%
99 4.89%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
1.99%, (2ND QUARTER, 1990) AND THE LOWEST QUARTERLY RETURN WAS 0.72% (1ST
QUARTER, 1994).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (JUNE 30, 1980)
<S> <C> <C> <C> <C>
Class IA 4.89% 5.28% 5.10% 7.38%
Index 4.79% 5.19% 5.04% N/A
</TABLE>
INDEX: 60-Day Treasury Bill Index, an unmanaged index of short-term treasury
bills.
Current 7-day yield as of December 31, 1999: 5.34%
Effective 7-day yield (which indicates the effect of daily compounding) as of
December 31, 1999: 5.49%
Please call 1-800-862-6668 for the most recent current and effective yield
information.
36 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD MONEY MARKET HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IA
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.45%
Distribution and service (12b-1) fees None
Other expenses 0.02%
Total operating expenses 0.47%
</TABLE>
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IA shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IA
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 48
Year 3 $151
Year 5 $264
Year 10 $592
</TABLE>
[SIDE NOTE]
SUB-ADVISER
HIMCO
PORTFOLIO MANAGER
William H. Davison, Jr.
- - Senior Vice President of HIMCO
- - Manager of the fund since 1992
- - Joined HIMCO in 1990
- - Investment professional since 1981
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 37
<PAGE>
FURTHER INFORMATION ON THE FUNDS
- --------------------------------------------------------------------------------
OTHER INVESTMENT STRATEGIES AND INVESTMENT MATTERS
USE OF MONEY MARKET INVESTMENTS FOR TEMPORARY DEFENSIVE PURPOSES
From time to time, as part of its primary investment strategy, each fund (other
than the Money Market fund) may invest some or all of its assets in high quality
money market securities for temporary defensive purposes in response to adverse
market, economic or political conditions. To the extent a fund is in a defensive
position, the fund may lose the benefit of upswings and limit its ability to
meet its investment objective.
USE OF OPTIONS, FUTURES AND OTHER DERIVATIVES
Each fund (other than the Money Market fund) may purchase and sell options,
enter into futures contracts or utilize other derivatives with respect to
stocks, bonds, groups of securities (such as financial indices), foreign
currencies or interest rates. These techniques, which are incidental to each
fund's primary strategy, permit a fund to gain exposure to a particular
security, group of securities, interest rate or index, and thereby have the
potential for a fund to earn returns that are similar to those which would be
earned by direct investments in those securities or instruments. These
techniques are also used to manage risk by hedging a fund's portfolio
investments. Hedging techniques may not always be available to the funds; and it
may not always be feasible for a fund to use hedging techniques even when they
are available.
Derivatives have risks, however. If the issuer of the derivative instrument does
not pay the amount due, a fund could lose money on the instrument. In addition,
the underlying security or investment on which the derivative is based, and the
derivative itself, may not perform the way the manager expected. As a result,
the use of these techniques may result in losses to a fund or increase
volatility in a fund's performance.
ABOUT EACH FUND'S INVESTMENT GOAL
Each fund's investment goal may be changed only with approval of the
shareholders of the fund. A fund may not be able to achieve its goal.
EXPENSE CONSEQUENCES OF PORTFOLIO TRADING PRACTICES
At times each fund (other than the Money Market fund) may engage in short-term
trading, which could produce higher brokerage expenses for a fund and thus
lowering a fund's performance.
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
Each fund may invest in various securities and engage in various investment
techniques which are not the principal focus of the fund and therefore are not
described in this prospectus. These securities and techniques, together with
their risks are discussed in the fund's Statement of Additional Information
which may be obtained free of charge by contacting the fund (see back cover for
address and phone number).
MANAGEMENT OF THE FUNDS
THE INVESTMENT ADVISER
HL Investment Advisors, LLC ("HL Advisors") is the investment adviser to each
fund. As investment adviser, HL Advisors is responsible for supervising the
activities of the investment sub-advisers described below. In addition, Hartford
Life serves as the administrator of each fund. HL Advisors and Hartford Life are
majority-owned indirect subsidiaries of The Hartford Financial Services Group,
Inc. ("The Hartford"), a Connecticut financial services company with over $165
billion in assets. As of December 31, 1999 HL Advisors had over $40 billion in
assets under management. HL Advisors is principally located at 200 Hopmeadow
Street, Simsbury, Connecticut 06070.
THE INVESTMENT SUB-ADVISERS
Wellington Management Company, LLP ("Wellington Management") is the investment
sub-adviser to the Global Health HLS Fund, Global Technology HLS Fund, Advisers
HLS Fund, Capital Appreciation HLS Fund, Dividend and Growth HLS Fund, Global
Leaders HLS Fund, Growth and Income HLS Fund, International Advisers HLS Fund,
International Opportunities HLS Fund, MidCap HLS Fund, Small Company HLS Fund
and Stock HLS Fund.
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, 1999
38 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FURTHER INFORMATION ON THE FUNDS
- --------------------------------------------------------------------------------
Wellington Management had investment management authority over approximately
$235 billion in assets. Wellington Management is principally located at 75 State
Street, Boston, Massachusetts 02109.
The Hartford Investment Management Company ("HIMCO-Registered Trademark-") is
the investment sub-adviser to the High Yield HLS Fund, Index HLS Fund, Bond HLS
Fund, Mortgage Securities HLS Fund and Money Market HLS Fund. HIMCO is a
professional money management firm that provides services to investment
companies, employee benefit plans and insurance companies. HIMCO is a
wholly-owned subsidiary of The Hartford. As of December 31, 1999 HIMCO and its
wholly-owned subsidiary had investment management authority over approximately
$59 billion in assets. HIMCO is principally located at 55 Farmington Avenue,
Hartford, Connecticut 06105.
MANAGEMENT FEES
Each Fund pays a monthly advisory fee and administration fee to HL Advisors and
Hartford Life based on a stated percentage of the fund's average daily net asset
value as follows:
INDEX FUND
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- --------------- -----------
<S> <C>
All Assets 0.400%
</TABLE>
MONEY MARKET FUND AND MORTGAGE SECURITIES FUND
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- --------------- -----------
<S> <C>
All Assets 0.450%
</TABLE>
BOND FUND AND STOCK FUND
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- --------------- -----------
<S> <C>
First $250,000,000 0.525%
Next $250,000,000 0.500%
Next $500,000,000 0.475%
Amount Over $1 Billion 0.450%
</TABLE>
ADVISERS FUND, CAPITAL APPRECIATION FUND, DIVIDEND AND GROWTH FUND, GLOBAL
LEADERS FUND, GROWTH AND INCOME FUND, HIGH YIELD FUND, INTERNATIONAL ADVISERS
FUND, INTERNATIONAL OPPORTUNITIES FUND, MIDCAP FUND AND SMALL COMPANY FUND
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- --------------- -----------
<S> <C>
First $250,000,000 0.775%
Next $250,000,000 0.725%
Next $500,000,000 0.675%
Amount Over $1 Billion 0.625%
</TABLE>
GLOBAL HEALTH FUND AND GLOBAL TECHNOLOGY FUND
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- --------------- -----------
<S> <C>
First $250,000,000 0.850%
Next $250,000,000 0.800%
Amount Over $500,000,000 0.750%
</TABLE>
For the year ended December 31, 1999, the investment advisory fees and
administrative fees paid to HL Advisors and Hartford Life, expressed as a
percentage of net assets, were as follows:
<TABLE>
<CAPTION>
FUND NAME ANNUAL RATE
- --------- -----------
<S> <C>
Hartford Advisers HLS Fund 0.63%
Hartford Bond HLS Fund 0.49%
Hartford Capital Appreciation HLS Fund 0.64%
Hartford Dividend and Growth HLS Fund 0.65%
Hartford Global Health HLS Fund(1) --
Hartford Global Leaders HLS Fund 0.74%
Hartford Global Technology HLS Fund(1) --
Hartford Growth and Income HLS Fund 0.78%
Hartford High Yield HLS Fund 0.66%
Hartford Index HLS Fund 0.40%
Hartford International Advisers HLS Fund 0.76%
Hartford International Opportunities HLS Fund 0.69%
Hartford MidCap HLS Fund 0.76%
Hartford Money Market HLS Fund 0.45%
Hartford Mortgage Securities HLS Fund 0.45%
Hartford Small Company HLS Fund 0.75%
Hartford Stock HLS Fund 0.46%
(1)Fund commenced operations in 2000.
</TABLE>
PURCHASE OF FUND SHARES
Fund shares are made available to serve as the underlying investment options for
variable annuity and variable life insurance separate accounts of Hartford Life
and for certain qualified retirement plans. Shares of the funds are sold by
Hartford Securities Distribution Company, Inc. (the "Distributor") at their net
asset value as defined under Determination of Net Asset Value.
The funds offer 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. The different classes of shares represent investments in
the same portfolio of securities but are subject to different expenses and will
have different share prices and performance.
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 Hartford Life 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
HARTFORD HLS MUTUAL FUNDS 39
<PAGE>
FURTHER INFORMATION ON THE FUNDS
- --------------------------------------------------------------------------------
what action, if any, should be taken in response thereto. If the Board of
Directors of a fund were to conclude that separate funds should be established
for variable life and variable annuity separate accounts, the variable life and
variable annuity contract holders would not bear any expenses attendant to the
establishment of such separate funds.
SALE AND REDEMPTION OF SHARES
The Class IA shares of each fund are sold and redeemed by the fund at their net
asset value next determined after receipt of a purchase or redemption order in
good order in writing at its home office, P.O. Box 5085, Hartford, CT
06102-5085. The value of shares redeemed may be more or less than original cost,
depending upon the market value of the portfolio securities at the time of
redemption. Payment for shares redeemed will be made within seven days after the
redemption request is received in proper form by the funds. However, the right
to redeem fund shares may be suspended or payment therefor postponed for any
period during which: (1) trading on the NYSE is closed for other than weekends
and holidays; (2) an emergency exists, as determined by the SEC, as a result of
which (a) disposal by a fund of securities owned by it is not reasonably
practicable, or (b) it is not reasonably practicable for a fund to determine
fairly the value of its net assets; or (3) the SEC by order so permits for the
protection of stockholders of the funds.
DETERMINATION OF NET ASSET VALUE
The net asset value per share is determined for each fund as of the close of the
New York Stock Exchange ("NYSE") (normally 4:00 p.m. Eastern Time) on each
business day that the NYSE is open. The net asset value is determined by
dividing the value of the fund's net assets attributable to a class of shares by
the number of shares outstanding for that class. Except for the Money Market
Fund, the funds use market prices in valuing portfolio securities, but may use
fair value estimates, as determined by HL Advisors under the direction of the
Board of Directors, if reliable market prices are not available. Fair value
pricing may be used by a fund when current market values are unavailable or when
an event occurs after the close of the exchange on which the fund's portfolio
securities are principally traded that is likely to have changed the value of
the securities. The use of fair value pricing by a fund may cause the net asset
value of its shares to differ significantly from the net asset value that would
be calculated using current market values. The Money Market Fund's assets and
debt securities with remaining maturities of 60 days or less are valued at
amortized cost.
The assets of the Money Market Fund are valued at their amortized cost pursuant
to procedures established by the Board of Directors. Foreign securities are
valued on the basis of quotations from the primary market in which they are
traded, and are translated from the local currency into U.S. dollars using
current exchange rates. With respect to all funds, short-term investments that
will mature in 60 days or less are also valued at amortized cost, which
approximates market value.
Trading on many foreign securities markets is completed at various times before
the close of the NYSE or on days the NYSE is not open for business.
Consequently, the calculation of a fund's net asset value may take place at a
time that is different than when prices are determined for certain foreign
funds. As a result, events affecting the values of foreign portfolio securities
that occur after the close of the NYSE will not be reflected in a fund's
calculation of net asset value.
DIVIDENDS AND DISTRIBUTIONS
The shareholders of each fund are entitled to receive such dividends and
distributions as may be declared by each fund's Board of Directors, from time to
time based upon the investment performance of the assets making up that fund's
portfolio. The current policy for each fund, except the Money Market Fund, is to
pay dividends from net investment income and to make distributions of realized
capital gains, if any, at least once each year. The Money Market Fund declares
dividends on a daily basis and pays them monthly.
Such dividends and distributions will be automatically invested in additional
full or fractional shares monthly on the last business day of each month at the
per share net asset value on that date. Provision is also made to pay such
dividends and distributions in cash if requested. Such dividends and
distributions will be in cash or in full or fractional shares of the fund at net
asset value.
EXCHANGE PRIVILEGES
Contractholders and policyholders may exchange shares in each fund as indicated
by the accompanying insurance product prospectus. The funds are intended to be
long-term investment vehicles and are not designed to provide investors with a
means of speculating on short-term market movements. Investors who engage in
excessive account activity generate additional costs which are borne by all of
the funds' shareholders. In order to minimize such costs, the funds reserve the
right to reject any purchase request that is reasonably deemed to be disruptive
to efficient portfolio management, either because of the timing of the
investment or previous excessive trading by the contractholder/policyholder.
40 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FURTHER INFORMATION ON THE FUNDS
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXES
Each fund has elected and intends to continue qualifying under Subchapter M of
the Internal Revenue Code of 1986, as amended. Each fund intends to distribute
all of its net income and gains to shareholders. Because the shares are
purchased only through products that defer taxes, these distributions generally
will not be considered taxable income to you at the time of distribution. When
appropriate each fund will inform contractholders or policyholders of the amount
and nature of such income and gains.
Each fund may be subject to a 4% nondeductible excise tax as well as an income
tax measured with respect to certain undistributed amounts of income and capital
gain. Each fund expects to make such additional distributions of net investment
income as are necessary to avoid the application of these taxes. For a
discussion of the tax implications of a purchase or sale of the funds' shares by
the insurer, reference should be made to the section entitled "Federal Tax
Considerations" in the appropriate insurance product prospectus.
If eligible, each fund may make an election to pass through to its shareholder,
Hartford Life, a credit for any foreign taxes paid during the year. If such an
election is made, the pass-through of the foreign tax credit will result in
additional taxable income and income tax to Hartford Life. 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 Hartford
Life.
BROKERAGE COMMISSIONS
Although the rules of the National Association of Securities Dealers, Inc.
prohibit its members from seeking orders for the execution of investment company
portfolio transactions on the basis of their sales of investment company shares,
under such rules, sales of investment company shares may be considered in
selecting brokers to effect portfolio transactions. Accordingly, some portfolio
transactions are, subject to such rules and to obtaining best prices and
executions, effected through dealers who sell shares of the funds.
PERFORMANCE RELATED INFORMATION
The funds may advertise performance related information. Performance information
about a fund is based on the fund's past performance only and is no indication
of future performance.
Each fund may include its total return in advertisements or other sales
material. When a fund advertises its total return, it will usually be calculated
for one year, five years, and ten years or some other relevant period if the
fund has not been in existence for at least ten years. Total return is measured
by comparing the value of an investment in the fund at the beginning of the
relevant period to the value of the investment at the end of the period
(assuming immediate reinvestment of any dividends or capital gains
distributions).
The Money Market Fund may advertise yield and effective yield. The yield of each
of those funds is based upon the income earned by the fund over a seven-day
period and then annualized, i.e. the income earned in the period is assumed to
be earned every seven days over a 52-week period and stated as a percentage of
the investment. Effective yield is calculated similarly but when annualized, the
income earned by the investment is assumed to be reinvested in fund shares and
thus compounded in the course of a 52-week period.
The funds are offered exclusively through variable insurance products and to
certain qualified retirement plans. Performance information presented for the
funds should not be compared directly with performance information of other
insurance products or retirement plans without taking into account charges and
expenses payable with respect to these insurance products or retirement plans.
Such charges and expenses are not reflected in the funds' performance
information and will reduce an investor's return under the insurance products or
retirement plans.
DISTRIBUTOR, CUSTODIAN AND TRANSFER AGENT
Hartford Securities Distribution Company, Inc., 200 Hopmeadow Street, Simsbury,
CT 06089, serves as distributor to the funds.
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, serves as custodian of each fund's assets.
Hartford Life Insurance Company, 200 Hopmeadow Street, Simsbury, CT 06089,
serves as Transfer and Dividend Disbursing Agent for the funds.
HARTFORD HLS MUTUAL FUNDS 41
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD CAPITAL APPRECIATION HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IA shares for the past five years. Certain information
reflects financial results for a single fund share. The total returns in the
table represent the rate that an investor in Class IA shares would have earned
or lost on an investment in each fund (assuming reinvestment of all dividends
and distributions). This information has been audited by Arthur Andersen LLP,
whose report, along with each fund's financial statements and financial
highlights, are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IA - PERIOD ENDED:
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $4.759 $4.410 $3.914 $3.490 $2.860
Net investment income (loss) 0.023 0.025 0.020 0.022 0.030
Net realized and unrealized gain (loss) on investments 1.643 0.525 0.794 0.655 0.785
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.666 0.550 0.814 0.677 0.815
Less distributions:
Dividends from net investment income (0.018) (0.026) (0.022) (0.025) (0.030)
Distributions from net realized gain on investments (0.312) (0.175) (0.296) (0.228) (0.155)
Return of capital 0.000 0.000 0.000 0.000 0.000
---------- ---------- ---------- ---------- ----------
Total from distributions (0.330) (0.201) (0.318) (0.253) (0.185)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value 1.336 0.349 0.496 0.424 0.630
Net asset value, end of period $6.095 $4.759 $4.410 $3.914 $3.490
---------- ---------- ---------- ---------- ----------
TOTAL RETURN 37.46% 15.48% 22.34% 20.70% 30.25%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $7,963,003 $5,807,480 $4,802,992 $3,386,670 $2,157,892
Ratio of expenses to average net assets 0.66% 0.64% 0.64% 0.65% 0.68%
Ratio of net investment income (loss) to average net assets 0.46% 0.59% 0.44% 0.60% 0.95%
Portfolio turnover rate 66.40% 51.20% 57.60% 85.40% 78.60%
</TABLE>
42 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD DIVIDEND AND GROWTH HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IA shares for the past five years. Certain information
reflects financial results for a single fund share. The total returns in the
table represent the rate that an investor in Class IA shares would have earned
or lost on an investment in each fund (assuming reinvestment of all dividends
and distributions). This information has been audited by Arthur Andersen LLP,
whose report, along with each fund's financial statements and financial
highlights, are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IA - PERIOD ENDED:
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $2.160 $1.952 $1.547 $1.317 $0.994
Net investment income (loss) 0.034 0.033 0.035 0.034 0.033
Net realized and unrealized gain (loss) on investments 0.075 0.280 0.445 0.258 0.323
---------- ---------- ---------- -------- --------
Total from investment operations 0.109 0.313 0.480 0.292 0.356
Less distributions:
Dividends from net investment income (0.035) (0.035) (0.031) (0.034) (0.033)
Distributions from net realized gain on investments (0.085) (0.070) (0.044) (0.028) 0.000
Return of capital 0.000 0.000 0.000 0.000 0.000
---------- ---------- ---------- -------- --------
Total from distributions (0.120) (0.105) (0.075) (0.062) (0.033)
---------- ---------- ---------- -------- --------
Net increase (decrease) in net asset value (0.011) 0.208 0.405 0.230 0.323
Net asset value, end of period $2.149 $2.160 $1.952 $1.547 $1.317
---------- ---------- ---------- -------- --------
TOTAL RETURN 5.31% 16.42% 31.89% 22.91% 36.37%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $3,207,733 $3,031,293 $1,994,653 $879,980 $265,070
Ratio of expenses to average net assets 0.68% 0.66% 0.68% 0.73% 0.77%
Ratio of net investment income (loss) to average net assets 1.60% 1.81% 2.21% 2.52% 2.91%
Portfolio turnover rate 55.90% 48.20% 34.20% 56.90% 41.40%
</TABLE>
HARTFORD HLS MUTUAL FUNDS 43
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD GLOBAL LEADERS HLS FUND
These tables are intended to help you understand each fund's financial
performance of the Class IA shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IA shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IA - PERIOD ENDED:
12/31/99 9/30/98-12/31/98 a
----------- -------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $1.285 $1.00
Net investment income (loss) 0.003 0.001
Net realized and unrealized gain (loss) on investments 0.642 0.318
------- -------
Total from investment operations 0.645 0.319
Less distributions:
Dividends from net investment income (0.003) (0.002)
Distributions from net realized gain on investments (0.014) (0.032)
Return of capital 0.000 0.000
------- -------
Total from distributions (0.017) (0.034)
------- -------
Net increase (decrease) in net asset value 0.628 0.285
Net asset value, end of period $1.913 $1.285
------- -------
TOTAL RETURN 50.37% 31.88% bd
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $179,675 $5,761
Ratio of expenses to average net assets 0.86% 0.89% c
Ratio of net investment income (loss) to average net assets 0.54% d 1.46% cd
Portfolio turnover rate 207.40% 47.90%
</TABLE>
a The fund was declared effective by the Securities and Exchange Commission
on September 30, 1998.
b Not annualized.
c Annualized.
d Management fees were waived until assets (excluding assets contributed by
companies affiliated with HL Advisors) reached $20 million. The total
return and ratio of net investment income to average net assets would have
been lower if management fees were not waived.
44 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD GROWTH AND INCOME HLS FUND
These tables are intended to help you understand each fund's financial
performance of the Class IA shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IA shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IA - PERIOD ENDED:
12/31/99 5/29/98-12/31/98 a
----------- -------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $1.186 $1.000
Net investment income (loss) 0.004 0.005
Net realized and unrealized gain (loss) on investments 0.255 0.185
-------- -------
Total from investment operations 0.259 0.190
Less distributions:
Dividends from net investment income (0.004) (0.004)
Distributions from net realized gain on investments (0.009) 0.000
Return of capital 0.000 0.000
-------- -------
Total from distributions (0.013) (0.004)
-------- -------
Net increase (decrease) in net asset value 0.246 0.186
Net asset value, end of period $1.432 $1.186
-------- -------
TOTAL RETURN 21.82% 19.05% bd
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $201,857 $25,312
Ratio of expenses to average net assets 0.82% 0.28% c
Ratio of net investment income (loss) to average net assets 0.63% 1.42% cd
Portfolio turnover rate 53.80% 29.60%
</TABLE>
a The fund was declared effective by the Securities and Exchange Commission
on May 29, 1998.
b Not annualized.
c Annualized.
d Management fees were waived until assets (excluding assets contributed by
companies affiliated with HL Advisors) reached $20 million. The total
return and ratio of net investment income to average net assets would have
been lower if management fees were not waived.
HARTFORD HLS MUTUAL FUNDS 45
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD INDEX HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IA shares for the past five years. Certain information
reflects financial results for a single fund share. The total returns in the
table represent the rate that an investor in Class IA shares would have earned
or lost on an investment in each fund (assuming reinvestment of all dividends
and distributions). This information has been audited by Arthur Andersen LLP,
whose report, along with each fund's financial statements and financial
highlights, are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IA - PERIOD ENDED:
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $3.570 $2.878 $2.382 $2.028 $1.522
Net investment income (loss) 0.034 0.032 0.035 0.044 0.044
Net realized and unrealized gain (loss) on investments 0.685 0.759 0.692 0.393 0.507
---------- ---------- ---------- -------- --------
Total from investment operations 0.719 0.791 0.727 0.437 0.551
Less distributions:
Dividends from net investment income (0.040) (0.027) (0.035) (0.044) (0.044)
Distributions from net realized gain on investments (0.060) (0.072) (0.196) (0.039) (0.001)
Return of capital 0.000 0.000 0.000 0.000 0.000
---------- ---------- ---------- -------- --------
Total from distributions (0.100) (0.099) (0.231) (0.083) (0.045)
---------- ---------- ---------- -------- --------
Net increase (decrease) in net asset value 0.619 0.692 0.496 0.354 0.506
Net asset value, end of period $4.189 $3.570 $2.878 $2.382 $2.028
---------- ---------- ---------- -------- --------
TOTAL RETURN 20.49% 28.06% 32.61% 22.09% 36.55%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $2,581,436 $1,846,117 $1,123,455 $621,065 $318,253
Ratio of expenses to average net assets 0.43% 0.40% 0.39% 0.39% 0.39%
Ratio of net investment income (loss) to average net assets 0.95% 1.21% 1.52% 2.07% 2.46%
Portfolio turnover rate 2.80% 4.50% 5.70% 19.30% 1.50%
</TABLE>
46 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IA shares for the past five years. Certain information
reflects financial results for a single fund share. The total returns in the
table represent the rate that an investor in Class IA shares would have earned
or lost on an investment in each fund (assuming reinvestment of all dividends
and distributions). This information has been audited by Arthur Andersen LLP,
whose report, along with each fund's financial statements and financial
highlights, are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IA - PERIOD ENDED:
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $1.355 $1.294 $1.407 $1.306 $1.176
Net investment income (loss) 0.019 0.021 0.022 0.023 0.020
Net realized and unrealized gain (loss) on investments 0.520 0.147 (0.019) 0.140 0.141
---------- ---------- ---------- -------- --------
Total from investment operations 0.539 0.168 0.003 0.163 0.161
Less distributions:
Dividends from net investment income (0.018) (0.019) (0.012) (0.025) (0.020)
Distributions from net realized gain on investments 0.000 (0.088) (0.104) (0.037) (0.011)
Return of capital 0.000 0.000 0.000 0.000 0.000
---------- ---------- ---------- -------- --------
Total from distributions (0.018) (0.107) (0.116) (0.062) (0.031)
---------- ---------- ---------- -------- --------
Net increase (decrease) in net asset value 0.521 0.061 (0.113) 0.101 0.130
Net asset value, end of period $1.876 $1.355 $1.294 $1.407 $1.306
---------- ---------- ---------- -------- --------
TOTAL RETURN 39.86% 13.16% 0.34% 12.93% 13.93%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $1,574,836 $1,196,694 $1,092,946 $996,543 $686,475
Ratio of expenses to average net assets 0.78% 0.77% 0.77% 0.79% 0.86%
Ratio of net investment income (loss) to average net assets 1.20% 1.51% 1.48% 1.74% 1.60%
Portfolio turnover rate 133.20% 157.40% 72.70% 70.00% 55.60%
</TABLE>
HARTFORD HLS MUTUAL FUNDS 47
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD MIDCAP HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IA shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IA shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IA - PERIOD ENDED:
7/15/97-
12/31/99 12/31/98 12/31/97 a
--------- --------- -----------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $1.439 $1.137 $1.000
Net investment income (loss) 0.000 (0.001) 0.001
Net realized and unrealized gain (loss) on investments 0.725 0.303 0.137
-------- -------- -------
Total from investment operations 0.725 0.302 0.138
Less distributions:
Dividends from net investment income 0.000 (0.000) (0.001)
Distributions from net realized gain on investments (0.111) 0.000 0.000
Return of capital 0.000 0.000 0.000
-------- -------- -------
Total from distributions (0.111) (0.000) (0.001)
-------- -------- -------
Net increase (decrease) in net asset value 0.614 0.302 0.137
Net asset value, end of period $2.053 $1.439 $1.137
-------- -------- -------
TOTAL RETURN 51.81% 26.57% 13.81% bc
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $672,678 $143,494 $27,589
Ratio of expenses to average net assets 0.79% 0.79% 0.46% c
Ratio of net investment income (loss) to average net assets (0.15%) (0.15%) 0.45% c
Portfolio turnover rate 120.70% 134.10% 46.10%
</TABLE>
a The Fund was declared effective by the Securities and Exchange Commission
on July 15, 1997.
b Not annualized.
c Annualized. Management fees were waived until assets (excluding assets
contributed by companies affiliated with HL Advisors) reached $20 million.
The ratio of operating expenses to average net assets would have been
higher if management fees were not waived. The total return and ratio of
net investment income to average net assets would have been lower if
management fees were not waived.
48 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD SMALL COMPANY HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IA shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IA shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IA - PERIOD ENDED:
12/31/99 12/31/98 12/31/97 8/9/96-12/31/96 a
--------- --------- --------- ------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $1.321 $1.202 $1.069 $1.000
Net investment income (loss) (0.005) (0.002) 0.001 0.002
Net realized and unrealized gain (loss) on investments 0.875 0.141 0.195 0.069
-------- -------- -------- ------
Total from investment operations 0.870 0.139 0.196 0.071
Less distributions:
Dividends from net investment income 0.000 0.000 (0.001) (0.002)
Distributions from net realized gain on investments (0.003) (0.020) (0.062) 0.000
Return of capital 0.000 0.000 0.000 0.000
-------- -------- -------- ------
Total from distributions (0.003) (0.020) (0.063) (0.002)
-------- -------- -------- ------
Net increase (decrease) in net asset value 0.867 0.119 0.133 0.069
Net asset value, end of period $2.188 $1.321 $1.202 $1.069
-------- -------- -------- ------
TOTAL RETURN 65.83% 11.62% 18.38% 7.15% bc
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $757,302 $350,734 $210,769 $42,812
Ratio of expenses to average net assets 0.78% 0.77% 0.77% 0.72% c
Ratio of net investment income (loss) to average net assets (0.45%) (0.24%) 0.08% 0.31% c
Portfolio turnover rate 181.30% 235.70% 222.20% 31.80%
</TABLE>
a The Fund was declared effective by the Securities and Exchange Commission
on August 9, 1996.
b Not annualized.
c Annualized. Management fees were waived until assets (excluding assets
contributed by companies affiliated with HL Advisors) reached $20 million.
The ratio of operating expenses to average net assets would have been
higher if management fees were not waived. The total return and ratio of
net investment income to average net assets would have been lower if
management fees were not waived.
HARTFORD HLS MUTUAL FUNDS 49
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD STOCK HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IA shares for the past five years. Certain information
reflects financial results for a single fund share. The total returns in the
table represent the rate that an investor in Class IA shares would have earned
or lost on an investment in each fund (assuming reinvestment of all dividends
and distributions). This information has been audited by Arthur Andersen LLP,
whose report, along with each fund's financial statements and financial
highlights, are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IA - PERIOD ENDED:
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $6.562 $5.123 $4.143 $3.527 $2.801
Net investment income (loss) 0.050 0.051 0.050 0.060 0.070
Net realized and unrealized gain (loss) on investments 1.143 1.622 1.196 0.763 0.840
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.193 1.673 1.246 0.823 0.910
Less distributions:
Dividends from net investment income (0.049) (0.050) (0.049) (0.059) (0.070)
Distributions from net realized gain on investments (0.559) (0.184) (0.217) (0.148) (0.114)
Return of capital 0.000 0.000 0.000 0.000 0.000
---------- ---------- ---------- ---------- ----------
Total from distributions (0.608) (0.234) (0.266) (0.207) (0.184)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value 0.585 1.439 0.980 0.616 0.726
Net asset value, end of period $7.147 $6.562 $5.123 $4.143 $3.527
---------- ---------- ---------- ---------- ----------
TOTAL RETURN 19.78% 33.47% 31.38% 24.37% 34.10%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $9,400,385 $7,183,046 $4,713,322 $2,994,209 $1,876,884
Ratio of expenses to average net assets 0.48% 0.46% 0.45% 0.46% 0.48%
Ratio of net investment income (loss) to average net assets 0.80% 0.95% 1.11% 1.59% 2.23%
Portfolio turnover rate 38.50% 27.10% 31.60% 42.30% 52.90%
</TABLE>
50 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD ADVISERS HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IA shares for the past five years. Certain information
reflects financial results for a single fund share. The total returns in the
table represent the rate that an investor in Class IA shares would have earned
or lost on an investment in each fund (assuming reinvestment of all dividends
and distributions). This information has been audited by Arthur Andersen LLP,
whose report, along with each fund's financial statements and financial
highlights, are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IA - PERIOD ENDED:
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $2.985 $2.527 $2.169 $1.958 $1.600
Net investment income (loss) 0.068 0.061 0.056 0.059 0.064
Net realized and unrealized gain (loss) on investments 0.221 0.546 0.455 0.255 0.377
---------- ---------- ---------- ---------- ----------
Total from investment operations 0.289 0.607 0.511 0.314 0.441
Less distributions:
Dividends from net investment income (0.063) (0.060) (0.055) (0.059) (0.064)
Distributions from net realized gain on investments (0.246) (0.089) (0.098) (0.044) (0.019)
Return of capital 0.000 0.000 0.000 0.000 0.000
---------- ---------- ---------- ---------- ----------
Total from distributions (0.309) (0.149) (0.153) (0.103) (0.083)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value (0.020) 0.458 0.358 0.211 0.358
Net asset value, end of period $2.965 $2.985 $2.527 $2.169 $1.958
---------- ---------- ---------- ---------- ----------
TOTAL RETURN 10.59% 24.66% 24.51% 16.59% 28.34%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $14,082,895 $11,805,411 $8,283,912 $5,879,529 $4,262,769
Ratio of expenses to average net assets 0.65% 0.63% 0.63% 0.63% 0.65%
Ratio of net investment income (loss) to average net assets 2.46% 2.40% 2.44% 2.92% 3.57%
Portfolio turnover rate 38.40% 36.70% 36.10% 53.80% 63.50%
</TABLE>
HARTFORD HLS MUTUAL FUNDS 51
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD INTERNATIONAL ADVISERS HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IA shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IA shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IA - PERIOD ENDED:
3/1/95-
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 a
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $1.155 $1.175 $1.167 $1.109 $1.000
Net investment income (loss) 0.040 0.064 0.056 0.040 0.030
Net realized and unrealized gain (loss) on investments 0.227 0.082 0.006 0.093 0.126
-------- -------- -------- -------- -------
Total from investment operations 0.267 0.146 0.062 0.133 0.156
Less distributions:
Dividends from net investment income (0.025) (0.039) (0.050) (0.051) (0.030)
Distributions from net realized gain on investments 0.000 (0.032) (0.004) (0.024) (0.017)
Return of capital 0.000 (0.089) 0.000 0.000 0.000
-------- -------- -------- -------- -------
Total from distributions (0.025) (0.166) (0.054) (0.075) (0.047)
-------- -------- -------- -------- -------
Net increase (decrease) in net asset value 0.242 (0.020) 0.008 0.058 0.109
Net asset value, end of period $1.397 $1.155 $1.175 $1.167 $1.109
-------- -------- -------- -------- -------
TOTAL RETURN 23.16% 13.35% 5.52% 12.25% 13.24% bc
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $396,147 $285,853 $207,582 $104,486 $31,264
Ratio of expenses to average net assets 0.85% 0.86% 0.87% 0.96% 0.65% c
Ratio of net investment income (loss) to average net assets 2.59% 2.77% 3.08% 3.24% 3.36% c
Portfolio turnover rate 141.50% 161.10% 162.50% 95.20% 47.20%
</TABLE>
a The Fund was declared effective by the Securities and Exchange Commission
on March 1, 1995.
b Not annualized.
c Annualized. Management fees were waived until assets (excluding assets
contributed by companies affiliated with HL Advisors) reached $20 million.
The ratio of operating expenses to average net assets would have been
higher if management fees were not waived. The total return and ratio of
net investment income to average net assets would have been lower if
management fees were not waived.
52 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD BOND HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IA shares for the past five years. Certain information
reflects financial results for a single fund share. The total returns in the
table represent the rate that an investor in Class IA shares would have earned
or lost on an investment in each fund (assuming reinvestment of all dividends
and distributions). This information has been audited by Arthur Andersen LLP,
whose report, along with each fund's financial statements and financial
highlights, are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IA - PERIOD ENDED:
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $1.081 $1.050 $1.000 $1.028 $0.926
Net investment income (loss) 0.062 0.053 0.063 0.064 0.064
Net realized and unrealized gain (loss) on investments (0.084) 0.032 0.047 (0.029) 0.102
-------- -------- ------- -------- --------
Total from investment operations (0.022) 0.085 0.110 0.035 0.166
Less distributions:
Dividends from net investment income (0.058) (0.054) (0.060) (0.063) (0.064)
Distributions from net realized gain on investments (0.007) 0.000 0.000 0.000 0.000
Return of capital 0.000 0.000 0.000 0.000 0.000
-------- -------- ------- -------- --------
Total from distributions (0.065) (0.054) (0.060) (0.063) (0.064)
-------- -------- ------- -------- --------
Net increase (decrease) in net asset value (0.087) 0.031 0.050 (0.028) 0.102
Net asset value, end of period $0.994 $1.081 $1.050 $1.000 $1.028
-------- -------- ------- -------- --------
TOTAL RETURN (2.02%) 8.15% 11.35% 3.52% 18.49%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $978,861 $902,480 $552,870 $402,548 $342,495
Ratio of expenses to average net assets 0.52% 0.50% 0.51% 0.52% 0.53%
Ratio of net investment income (loss) to average net assets 6.09% 5.86% 6.58% 6.37% 6.51%
Portfolio turnover rate 110.70% 122.30% 112.90% a 212.00% 215.00%
Current Yield b 7.02% 5.92% 6.34% 6.25% 6.46%
</TABLE>
a Excluding mortgage dollar rolls
b The yield information will fluctuate and publication of yield may not
provide a basis for comparison with bank deposits, other investments which
are insured and/or pay a fixed yield for a stated period of time, or other
investment companies. In addition, information may be of limited use for
comparative purposes because it does not reflect charges imposed at the
Separate Account level which, if included, would decrease the yield. This
figure has not been audited.
HARTFORD HLS MUTUAL FUNDS 53
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD HIGH YIELD HLS FUND
These tables are intended to help you understand each fund's financial
performance of the Class IA shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IA shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IA - PERIOD ENDED:
12/31/99 9/30/98-12/31/98 a
----------- -------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $1.017 $1.00
Net investment income (loss) 0.060 0.019
Net realized and unrealized gain (loss) on investments (0.013) 0.017
------- ------
Total from investment operations 0.047 0.036
Less distributions:
Dividends from net investment income (0.059) (0.019)
Distributions from net realized gain on investments 0.000 0.000
Return of capital 0.000 0.000
------- ------
Total from distributions (0.059) (0.019)
------- ------
Net increase (decrease) in net asset value (0.012) 0.017
Net asset value, end of period $1.005 $1.017
------- ------
TOTAL RETURN 4.70% 3.68% bd
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $52,731 $14,482
Ratio of expenses to average net assets 0.72% 0.35% c
Ratio of net investment income (loss) to average net assets 8.36% 8.04% cd
Portfolio turnover rate 46.90% 15.40%
Current Yield e 9.65% 8.90%
</TABLE>
a The fund was declared effective by the Securities and Exchange Commission
on September 30, 1998.
b Not annualized.
c Annualized.
d Management fees were waived until assets (excluding assets contributed by
companies affiliated with HL Advisors) reached $20 million. The total
return and ratio of net investment income to average net assets would have
been lower if management fees were not waived.
e The yield information will fluctuate and publication of yield may not
provide a basis for comparison with bank deposits, other investments which
are insured and/or pay a fixed yield for a stated period of time, or other
investment companies. In addition, information may be of limited use for
comparative purposes because it does not reflect charges imposed at the
Separate Account level which, if included, would decrease the yield. This
figure has not been audited.
54 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD MORTGAGE SECURITIES HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IA shares for the past five years. Certain information
reflects financial results for a single fund share. The total returns in the
table represent the rate that an investor in Class IA shares would have earned
or lost on an investment in each fund (assuming reinvestment of all dividends
and distributions). This information has been audited by Arthur Andersen LLP,
whose report, along with each fund's financial statements and financial
highlights, are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IA - PERIOD ENDED:
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $1.085 $1.084 $1.056 $1.071 $0.984
Net investment income (loss) 0.068 0.067 0.071 0.069 0.068
Net realized and unrealized gain (loss) on investments (0.052) 0.006 0.022 (0.018) 0.087
-------- -------- ------- -------- --------
Total from investment operations 0.016 0.073 0.093 0.051 0.155
Less distributions:
Dividends from net investment income (0.062) (0.067) (0.065) (0.066) (0.068)
Distributions from net realized gain on investments 0.000 (0.003) 0.000 0.000 0.000
Return of capital 0.000 (0.002) 0.000 0.000 0.000
-------- -------- ------- -------- --------
Total from distributions (0.062) (0.072) (0.065) (0.066) (0.068)
-------- -------- ------- -------- --------
Net increase (decrease) in net asset value (0.046) 0.001 0.028 (0.015) 0.087
Net asset value, end of period $1.039 $1.085 $1.084 $1.056 $1.071
-------- -------- ------- -------- --------
TOTAL RETURN 1.52% 6.72% 9.01% 5.07% 16.17%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $339,767 $356,834 $325,702 $325,495 $327,565
Ratio of expenses to average net assets 0.48% 0.46% 0.45% 0.45% 0.47%
Ratio of net investment income (loss) to average net assets 5.98% 6.18% 6.60% 6.67% 6.50%
Portfolio turnover rate 472.00% 207.80% 46.50% a 201.00% 489.40%
Current Yield b 6.83% 6.15% 6.66% 6.67% 6.90%
</TABLE>
a Excluding mortgage dollar rolls
b The yield information will fluctuate and publication of yield may not
provide a basis for comparison with bank deposits, other investments which
are insured and/or pay a fixed yield for a stated period of time, or other
investment companies. In addition, information may be of limited use for
comparative purposes because it does not reflect charges imposed at the
Separate Account level which, if included, would decrease the yield. This
figure has not been audited.
HARTFORD HLS MUTUAL FUNDS 55
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD MONEY MARKET HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IA shares for the past five years. Certain information
reflects financial results for a single fund share. The total returns in the
table represent the rate that an investor in Class IA shares would have earned
or lost on an investment in each fund (assuming reinvestment of all dividends
and distributions). This information has been audited by Arthur Andersen LLP,
whose report, along with each fund's financial statements and financial
highlights, are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IA - PERIOD ENDED:
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $1.000 $1.000 $1.000 $1.000 $1.000
Net investment income (loss) 0.070 0.051 0.049 0.050 0.056
Net realized and unrealized gain (loss) on investments 0.000 0.000 0.000 0.000 0.000
---------- -------- -------- -------- --------
Total from investment operations 0.070 0.051 0.049 0.050 0.056
Less distributions:
Dividends from net investment income (0.070) (0.051) (0.049) (0.050) (0.056)
Distributions from net realized gain on investments 0.000 0.000 0.000 0.000 0.000
Return of capital 0.000 0.000 0.000 0.000 0.000
---------- -------- -------- -------- --------
Total from distributions (0.070) (0.051) (0.049) (0.050) (0.056)
---------- -------- -------- -------- --------
Net increase (decrease) in net asset value 0.000 0.000 0.000 0.000 0.000
Net asset value, end of period $1.000 $1.000 $1.000 $1.000 $1.000
---------- -------- -------- -------- --------
TOTAL RETURN 4.89% 5.25% 5.31% 5.18% 5.74%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $1,257,436 $872,486 $612,480 $542,586 $339,709
Ratio of expenses to average net assets 0.47% 0.45% 0.44% 0.44% 0.45%
Ratio of net investment income (loss) to average net assets 4.81% 5.12% 5.21% 5.04% 5.57%
Portfolio turnover rate
--- --- --- --- ---
Current Yield a 5.34% 4.79% 5.36% 5.10% 5.40%
Effective Yield a 5.49% 4.90% 5.50% 5.23% 5.54%
</TABLE>
a The yield information will fluctuate and publication of yield may not
provide a basis for comparison with bank deposits, other investments which
are insured and/or pay a fixed yield for a stated period of time, or other
investment companies. In addition, information may be of limited use for
comparative purposes because it does not reflect charges imposed at the
Separate Account level which, if included, would decrease the yield. These
figures have not been audited.
56 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
Two documents are available that offer further information on the Hartford HLS
Funds:
ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS
Additional information on the funds is contained in the financial statements and
portfolio holdings of the funds' annual and semiannual report. In the fund's
annual report you will find a discussion of the market conditions and investment
strategies that significantly affected performance during the last fiscal year,
and the auditor's report.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information on all aspects of the funds.
A current SAI and annual report have been filed with the Securities and Exchange
Commission and are incorporated by reference into (are legally a part of) this
prospectus.
To request a free copy of the current annual/ semiannual report or the SAI,
please contact the funds at:
BY MAIL:
Hartford HLS Funds
c/o Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
BY PHONE:
1-800-862-6668
ON THE INTERNET:
http://invest.hartfordlife.com
Or you may view or obtain these documents from the SEC:
IN PERSON:
at the SEC's Public Reference Room in Washington, DC
Information on the operation of the SEC's public reference room may be obtained
by calling 1-202-942-8090.
BY MAIL:
Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-6009
(duplicating fee required)
ON THE INTERNET OR BY E-MAIL:
INTERNET:
www.sec.gov
E-MAIL:
[email protected]
Requests which are made by e-mail require the payment of a duplicating fee to
the SEC to obtain a document.
SEC FILE NUMBERS:
Global Health HLS Fund 811-08629
Global Technology HLS Fund 811-08629
Capital Appreciation HLS Fund 811-04005
Dividend and Growth HLS Fund 811-08186
Global Leaders HLS Fund 811-08629
Growth and Income HLS Fund 811-08629
Index HLS Fund 811-05045
International Opportunities HLS Fund 811-06059
MidCap HLS Fund 811-08185
Small Company HLS Fund 811-07557
Stock HLS Fund 811-02630
Advisers HLS Fund 811-03659
International Advisers HLS Fund 811-08804
Bond HLS Fund 811-03660
High Yield HLS Fund 811-08629
Mortgage Securities HLS Fund 811-04201
Money Market HLS Fund 811-03662
<PAGE>
HARTFORD HLS FUNDS
FOR USE WITH THE HARTFORD
VARIABLE INSURANCE PRODUCTS
AND CERTAIN QUALIFIED RETIREMENT PLANS
CLASS IB SHARES
PROSPECTUS
EFFECTIVE
MAY 1,
2000
<PAGE>
[THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
HARTFORD HLS FUNDS
CLASS IB SHARES
PROSPECTUS
MAY 1, 2000
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SECTOR FUNDS
GLOBAL HEALTH HLS FUND
GLOBAL TECHNOLOGY HLS FUND
STOCK FUNDS
CAPITAL APPRECIATION HLS FUND
DIVIDEND AND GROWTH HLS FUND
GLOBAL LEADERS HLS FUND
GROWTH AND INCOME HLS FUND
INDEX HLS FUND
INTERNATIONAL OPPORTUNITIES HLS FUND
MIDCAP HLS FUND
SMALL COMPANY HLS FUND
STOCK HLS FUND
ASSET ALLOCATION FUNDS
ADVISERS HLS FUND
INTERNATIONAL ADVISERS HLS FUND
BOND FUNDS
BOND HLS FUND
HIGH YIELD HLS FUND
MORTGAGE SECURITIES HLS FUND
MONEY MARKET FUND
MONEY MARKET HLS FUND
HARTFORD HLS MUTUAL FUNDS
C/O INDIVIDUAL ANNUITY SERVICES
P.O. BOX 5085
HARTFORD, CT 06102-5085
<PAGE>
[THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
INTRODUCTION
- ------------------------------------------------------------
The Hartford HLS Funds is a family of seventeen mutual funds (each a "fund" and
together the "funds") which serve as underlying investment options for certain
variable annuity and variable life insurance separate accounts of Hartford Life
Insurance Company and its affiliates ("Hartford Life") and certain qualified
retirement plans. Contractholders of variable annuity products and policyholders
of variable life insurance products may choose the funds permitted in the
accompanying variable insurance product prospectus. In addition, participants in
certain qualified retirement plans may choose the funds permitted in their
plans. Each fund offers two classes of shares: Class IB shares offered in this
prospectus and Class IA shares offered pursuant to another prospectus. The Class
IB shares were first offered in April 1998. Class IA shares 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 pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act"). Each fund, except the Global Health HLS
Fund and Global Technology HLS Fund, is a diversified fund. The Global Health
HLS Fund and Global Technology HLS Fund are non-diversified funds, which are
sometimes known as "sector funds." Information on each fund, including risk
factors for investing in diversified versus non-diversified funds, can be found
on the pages following this summary. HARTFORD LIFE ALSO SPONSORS A FAMILY OF
MUTUAL FUNDS KNOWN AS THE HARTFORD MUTUAL FUNDS, INC. WHICH ARE OFFERED DIRECTLY
TO THE PUBLIC (THE "RETAIL FUNDS"). THE RETAIL FUNDS ARE SEPARATE FUNDS AND
SHOULD NOT BE CONFUSED WITH THE HARTFORD HLS FUND INVESTMENT OPTIONS OFFERED IN
THIS PROSPECTUS.
The investment manager to each fund is HL Investment Advisors, LLC ("HL
Advisors"). The day-to-day portfolio management of the funds is provided by two
investment sub-advisers -- Wellington Management Company, LLP ("Wellington
Management") and Hartford Investment Management Company ("HIMCO"). Information
regarding HL Advisors, Wellington Management and HIMCO is included under
"Management of the Funds" in this prospectus.
Please note that mutual funds are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Because you could lose money by investing in these funds, be sure to
read all risk disclosures carefully before investing.
2 HARTFORD HLS MUTUAL FUNDS
<PAGE>
CONTENTS PAGE
- ------------------------------------------------------------
<TABLE>
<S> <C> <C>
A summary of each fund's goals, Hartford Global Health HLS Fund 4
strategies, risks, performance and Hartford Global Technology HLS Fund 6
fees. Hartford Capital Appreciation HLS Fund 8
Hartford Dividend and Growth HLS Fund 10
Hartford Global Leaders HLS Fund 12
Hartford Growth and Income HLS Fund 14
Hartford Index HLS Fund 16
Hartford International Opportunities HLS Fund 18
Hartford MidCap HLS Fund 20
Hartford Small Company HLS Fund 22
Hartford Stock HLS Fund 24
Hartford Advisers HLS Fund 26
Hartford International Advisers HLS Fund 28
Hartford Bond HLS Fund 30
Hartford High Yield HLS Fund 32
Hartford Mortgage Securities HLS Fund 34
Hartford Money Market HLS Fund 36
Other investment strategies and investment 38
Further information on the matters 38
funds. Management of the funds
Purchase of fund shares 40
Sale and redemption of shares 40
Determination of net asset value 41
Dividends and distributions 41
Exchange privileges 41
Federal income taxes 41
Brokerage commissions 42
Performance related information 42
Distributor, Custodian and Transfer Agent 42
Financial highlights 43
For more information back cover
</TABLE>
HARTFORD HLS MUTUAL FUNDS 3
<PAGE>
HARTFORD GLOBAL HEALTH HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Global Health HLS Fund seeks long-term capital
appreciation by investing at least 80% of its total assets in the equity
securities of health care companies worldwide.
INVESTMENT STRATEGY. The focus of the fund's investment process is stock
selection through fundamental analysis. The fund's approach to investing in the
health care sector is based on in-depth understanding of medical science,
regulatory developments, reimbursement policy trends, and individual company
business franchises. The portfolio will exploit favorable macro trends for the
health care sector including demographics.
The portfolio will also seek to invest in health care companies that benefit
from the trend toward global consolidation, the biotechnology revolution and
advances in software, integrated circuits and biocompatible materials.
Fundamental research is focused on direct contact with company management,
suppliers and competitors.
Investments in the portfolio will be allocated across the major subsectors of
the health care sector, which include pharmaceuticals, medical products, managed
health care and health information services. Wellington Management may favor
certain subsectors at times based upon the relative attractiveness of stocks
within these subsectors, near term macroeconomic factors and the availability of
such stocks at attractive prices. Some representation is typically maintained in
each major subsector of the health care sector.
Stocks considered for purchase in the portfolio typically share the following
attributes:
- The company's business franchise is temporarily mispriced
- The company has under-appreciated new product pipelines
- The company has opportunities due to changes in reimbursement policy (for
example, the privatization of health care services abroad)
- The company is a target of opportunity due to industry consolidation
Stocks will be considered for sale from the portfolio when:
- Target prices are achieved
- Wellington Management's fundamental expectations are not met
- A company's prospects become less appealing
Wellington Management seeks growth companies with attractive entry valuations,
defined as those stocks where the price is not already fully exploited by other
investors. Accordingly, Wellington Management seeks to be early, not late in
recognizing opportunity.
The portfolio will be relatively concentrated both with regard to position size
and the health care sector. The fund may invest in companies of any size
capitalization. The portfolio will be close to fully invested; cash balances
normally will not exceed 10% of total assets. Market timing will not be a
significant source of performance. Annual portfolio turnover is expected to be
100% or less.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. Because the fund
concentrates on small, medium and large companies, its performance may be more
volatile than that of a fund that invests primarily in larger companies. You
could lose money as a result of your investment.
Stocks of small or mid-sized companies may be more risky than stocks of larger
companies. These companies may be young and have more limited operating or
business history. Because these businesses frequently rely on narrower product
lines and niche markets, they can suffer from isolated business setbacks.
The fund's investments are focused in the health care sector. This means that
the fund may have greater market fluctuation and price volatility than a fund
which invests in a more broadly diversified portfolio of securities across
sectors. Financial, business and economic factors may have a greater impact on a
fund of this kind than on a broadly diversified fund.
Health care products and services are generally subject to government
regulation, and changes in laws or regulations could adversely impact the market
value of securities and the fund's overall performance. Government regulation
could have a significant, adverse impact on the price and availability of a
company's products and services.
Lawsuits and regulatory proceedings which may be brought against the issuers of
securities could also adversely impact the market value of securities and the
fund's overall performance.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund's management strategy will influence performance significantly. If the
managers' stock selection strategy doesn't perform as expected, the fund could
underperform its peers or lose money.
The fund expects to trade securities very actively, which will likely increase
its transaction costs (thus lowering performance).
4 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD GLOBAL HEALTH HLS FUND
- --------------------------------------------------------------------------------
PAST PERFORMANCE. Because the fund has been in operation for less than one year
no performance history has been provided.
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IB
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.85%
Distribution and service (12b-1) fees 0.25%
Other expenses 0.25%
Total operating expenses 1.35%
Fee waiver (0.07%)
Net expenses(1) 1.28%
</TABLE>
(1)Although the Rule 12b-1 fee for Class IB shares is 0.25% of average net
assets, the fund's distributor has contractually agreed to reduce the fee to
0.18% through at least April 30, 2001. This waiver may be discontinued at any
time thereafter.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IB shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IB
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 131
Year 3 $ 423
Year 5 $ 737
Year 10 $ 1,626
</TABLE>
[SIDE NOTE]
SUB-ADVISER
The fund is managed by Wellington Management using a team of its global industry
analysts that specialize in the health care sector.
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 5
<PAGE>
HARTFORD GLOBAL TECHNOLOGY HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Global Technology HLS Fund seeks long-term
capital appreciation by investing at least 80% of its total assets in the equity
securities of technology companies worldwide.
INVESTMENT STRATEGY. The focus of the fund's investment process is stock
selection through fundamental analysis. The fund's approach to investing in the
technology sector is based on analyzing the competitive outlook for various
subsectors of the technology sector, identifying those subsectors likely to
benefit from the current and expected future environment, and identifying
individual opportunities.
Wellington Management's evaluation of technology companies rests on its solid
knowledge of the overall competitive environment, including supply and demand
characteristics, secular trends, existing product evaluations, and new product
developments within the technology sector. Fundamental research is focused on
direct contact with company management, suppliers and competitors.
Asset allocation within the portfolio reflects Wellington Management's opinion
of the relative attractiveness of stocks within the subsectors of the technology
sector, near term macroeconomic events that may detract or enhance the
subsector's attractiveness, and the number of underdeveloped opportunities in
each subsector. Opportunities dictate the magnitude and frequency of changes in
asset allocation across the major subsectors of the technology sector, including
computer software, computer hardware, semiconductors and equipment,
communications equipment and internet and news media. Some representation is
typically maintained in each major subsector of the technology sector.
Stocks considered for purchase in the portfolio typically share the following
attributes:
- A positive change in operating results is anticipated
- Unrecognized or undervalued capabilities are present
- The quality of management indicates that these factors will be converted
to shareholder value
Stocks will be considered for sale from the portfolio when:
- Target prices are achieved
- Earnings and/or return expectations are reduced due to fundamental
changes in the company's operating outlook
- More attractive value in a comparable company is available.
The portfolio will be relatively concentrated both with regard to position size
and the technology industry. The fund may invest in companies of any size
capitalization. The portfolio will be close to fully invested; cash balances
normally will not exceed 10% of total assets. Market timing will not be a
significant source of performance. Annual portfolio turnover is expected to be
high and will exceed 100%.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. Because the fund
concentrates on small, medium and large companies, its performance may be more
volatile than that of a fund that invests primarily in larger companies. You
could lose money as a result of your investment.
Stocks of small or mid-sized companies may be more risky than stocks of larger
companies. These companies may be young and have more limited operating or
business history. Because these businesses frequently rely on narrower product
lines and niche markets, they can suffer from isolated business setbacks.
The fund's investments are focused in the technology sector. This means that the
fund may have greater market fluctuation and price volatility than a fund which
invests in a more broadly diversified portfolio of securities across sectors.
Financial, business and economic factors may have a greater impact on a fund of
this kind than on a broadly diversified fund.
Competition in the sector may cause technology companies to cut prices
significantly, which can adversely affect the profitability of companies that
make up the fund's portfolio. In addition, because of rapid technological
developments, products or services which are offered by technology companies may
become obsolete or may be produced for a relatively short time, which could
adversely affect the price of the issuers' securities. This means that the
fund's returns may be more volatile than the returns of a fund which is not
subject to these risk factors.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund's management strategy will influence performance significantly. If the
managers' stock selection strategy doesn't perform as expected, the fund could
underperform its peers or lose money.
The fund expects to trade securities very actively, which will likely increase
its transaction costs (thus lowering performance).
6 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD GLOBAL TECHNOLOGY HLS FUND
- --------------------------------------------------------------------------------
PAST PERFORMANCE. Because the fund has been in operation for less than one year
no performance history has been provided.
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IB
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.85%
Distribution and service (12b-1) fees 0.25%
Other expenses 0.25%
Total operating expenses 1.35%
Fee waiver (0.07%)
Net expenses(1) 1.28%
</TABLE>
(1)Although the Rule 12b-1 fee for Class IB shares is 0.25% of average net
assets, the fund's distributor has contractually agreed to reduce the fee to
0.18% through at least April 30, 2001. This waiver may be discontinued at any
time thereafter.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IB shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IB
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 131
Year 3 $ 423
Year 5 $ 737
Year 10 $ 1,626
</TABLE>
[SIDE NOTE]
SUB-ADVISER
The fund is managed by Wellington Management using a team of its global industry
analysts that specialize in the technology sector.
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 7
<PAGE>
HARTFORD CAPITAL APPRECIATION HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Capital Appreciation HLS Fund seeks growth of
capital by investing primarily in stocks selected on the basis of potential for
capital appreciation.
INVESTMENT STRATEGY. The fund normally invests at least 65% of its total assets
in common stocks of small, medium and large companies. The fund may invest up to
20% of its total assets in securities of non-U.S. issuers.
Through fundamental analysis, Wellington Management identifies companies that it
believes have substantial near-term capital appreciation potential regardless of
company size or industry. This strategy is sometimes referred to as a "stock
picking" approach. Small and medium sized companies are selected primarily on
the basis of dynamic earnings growth potential. Larger companies are selected
primarily based on the expectation of a significant event that Wellington
Management believes will trigger an increase in the stock price.
In analyzing a prospective investment Wellington Management looks at a number of
factors, such as business environment, management, balance sheet, income
statement, anticipated earnings, revenues, dividends and other related measures
of value.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. Because the fund
concentrates on small, medium and large companies, its performance may be more
volatile than that of a fund that invests primarily in larger companies. You
could lose money as a result of your investment.
Stocks of small or mid-sized companies may be more risky than stocks of larger
companies. These companies may be young and have more limited operating or
business history. Because these businesses frequently rely on narrower product
lines and niche markets, they can suffer from isolated business setbacks.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund's management strategy will influence performance significantly. If the
managers' stock selection strategy doesn't perform as expected, the fund could
underperform its peers or lose money.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund.The bar chart shows the fund's total returns, while the table
compares the fund's average annual total returns to that of a broad measure of
market performance. Although the fund commenced operations on April 2, 1984, it
did not offer Class IB shares until April 1, 1998. Therefore, the performance
shown below prior to such date reflects the performance of Class IA shares of
the fund which is restated to reflect the 12b-1 distribution fee of 0.18% that
applies to the Class IB shares. The performance shown below after such date
reflects actual Class IB share performance.
These figures do not include the effect of sales charges or other fees which may
be applied at the variable life insurance, variable annuity or qualified
retirement plan product level. Any such additional sales charges or other fees
will lower the fund's performance. All figures assume that all dividends and
distributions were reinvested. Keep in mind that past performance does not
indicate future results.
CLASS IB TOTAL RETURNS BY CALENDAR
YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
90 -11.06%
91 53.71%
92 16.77%
93 20.58%
94 2.32%
95 30.02%
96 20.48%
97 22.12%
98 15.27%
99 37.21%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
24.93%, (1ST QUARTER, 1991) AND THE LOWEST QUARTERLY RETURN WAS -24.50% (3RD
QUARTER, 1990).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (APRIL 2, 1984)
<S> <C> <C> <C> <C>
Class IB 37.21% 24.79% 19.55% 18.52%
Index 21.04% 28.53% 18.19% 18.56%
</TABLE>
INDEX: The S&P 500 Index is a market capitalization weighted price index
composed of 500 widely held common stocks.
8 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD CAPITAL APPRECIATION HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IB
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.64%
Distribution and service (12b-1) fees 0.25%
Other expenses 0.02%
Total operating expenses 0.91%
Fee waiver (0.07%)
Net expenses(1) 0.84%
</TABLE>
(1) Although the Rule 12b-1 fee for Class IB shares is 0.25% of average net
assets, the fund's distributor has contractually agreed to reduce the fee
to 0.18% through at least April 30, 2001. This waiver may be discontinued
at any time thereafter.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IB shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IB
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 86
Year 3 $ 284
Year 5 $ 499
Year 10 $1,117
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGER
Saul J. Pannell
- - Senior Vice President of Wellington Management
- - Manager of the fund since 1991
- - Joined Wellington Management in 1979
- - Investment professional since 1974
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 9
<PAGE>
HARTFORD DIVIDEND AND GROWTH HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Dividend and Growth HLS Fund seeks a high level
of current income consistent with growth of capital by investing primarily in
stocks.
INVESTMENT STRATEGY. The fund invests primarily in a diversified portfolio of
common stocks that typically have above average income yields and whose
prospects for capital appreciation are considered favorable by Wellington
Management. Under normal market and economic conditions at least 65% of the
fund's total assets are invested in dividend-paying equity securities. The fund
may invest up to 20% of its total assets in securities of non-U.S. issuers. The
fund tends to focus on securities of larger, well-established companies.
Wellington Management uses fundamental analysis to evaluate a security for
purchase or sale by the fund. Fundamental analysis of a company involves the
assessment of such factors as its business environment, management, balance
sheet, income statement, anticipated earnings, revenues and dividends.
As a key component of its fundamental analysis, Wellington Management evaluates
a company's ability to sustain and potentially increase its dividend payments.
The fund's portfolio is broadly diversified by industry and company.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. You could lose money
as a result of your investment.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund's management strategy will influence performance significantly. If the
fund's stock selection strategy doesn't perform as expected, the fund could
underperform its peers or lose money.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows the fund's total returns, while the table
compares the fund's average annual total returns to that of a broad measure of
market performance. Although the fund commenced operations on March 9, 1994, it
did not offer Class IB shares until April 1, 1998. Therefore, the performance
shown below prior to such date reflects the performance of Class IA shares of
the fund which is restated to reflect the 12b-1 distribution fee of 0.18% that
applies to the Class IB shares. The performance shown below after such date
reflects actual Class IB share performance.
These figures do not include the effect of sales charges or other fees which may
be applied at the variable life insurance, variable annuity or qualified
retirement plan product level. Any such additional sales charges or other fees
will lower the fund's performance. All figures assume that all dividends and
distributions were reinvested. Keep in mind that past performance does not
indicate future results.
CLASS IB TOTAL RETURNS BY CALENDAR
YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
95 36.12%
96 22.69%
97 31.65%
98 16.21%
99 5.12%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
16.24%, (2ND QUARTER, 1997) AND THE LOWEST QUARTERLY RETURN WAS -8.10% (3RD
QUARTER, 1999).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS (MARCH 9, 1994)
<S> <C> <C> <C>
Class IB 5.12% 21.85% 18.88%
Index 21.04% 28.53% 24.25%
</TABLE>
INDEX: The S&P 500 Index is a market capitalization weighted price index
composed of 500 widely held common stocks.
10 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD DIVIDEND AND GROWTH HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IB
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.65%
Distribution and service (12b-1) fees 0.25%
Other expenses 0.03%
Total operating expenses 0.93%
Fee waiver (0.07%)
Net expenses(1) 0.86%
</TABLE>
(1) Although the Rule 12b-1 fee for Class IB shares is 0.25% of average net
assets, the fund's distributor has contractually agreed to reduce the fee
to 0.18% through at least April 30, 2001. This waiver may be discontinued
at any time thereafter.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IB shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IB
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 88
Year 3 $ 291
Year 5 $ 510
Year 10 $1,141
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGER
Laurie A. Gabriel, CFA
- - Senior Vice President and Managing Partner of Wellington Management
- - Manager of the fund since inception (1994)
- - Joined Wellington Management in 1976
- - Investment professional since 1976
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 11
<PAGE>
HARTFORD GLOBAL LEADERS HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Global Leaders HLS Fund seeks growth of capital
by investing primarily in stocks issued by companies worldwide.
INVESTMENT STRATEGY. The fund invests primarily in a diversified portfolio of
common stocks covering a broad range of countries, industries and companies.
Securities in which the fund invests are denominated in both U.S. dollars and
non-U.S. currencies and may trade in both U.S. and non-U.S. markets.
Under normal market and economic conditions, the fund invests at least 65% of
its total assets in common stocks of high-quality growth companies worldwide.
These companies must, in the opinion of Wellington Management, be leaders in
their respective industries as indicated by an established market presence and
strong global, regional or country competitive positions. Under normal market
and economic conditions, the fund will diversify its investments in securities
of issuers among at least five countries, which may include the United States.
There are no limits on the amount of the fund's assets that may be invested in
each country.
The fund uses a two-tiered investment strategy:
- Using what is sometimes referred to as a "top down" approach, Wellington
Management analyzes the global macro-economic and investment
environments. This includes an evaluation of U.S. and non-U.S. economic
and political conditions, fiscal and monetary policies, demographic
trends and investor sentiment. Through top down analysis, Wellington
Management anticipates trends and changes in the markets and economy to
identify companies which offer significant potential for capital
appreciation given current and projected global and local economic and
market conditions.
- Top down analysis is followed by what is sometimes referred to as a
"bottom up" approach, which is the use of fundamental analysis to
identify specific securities for purchase or sale. Fundamental analysis
involves the assessment of a company through such factors as its business
environment, management, balance sheet, income statements, anticipated
earnings, revenues and other related measures of value.
The fund emphasizes high-quality growth companies. The key characteristics of
high-quality growth companies include a strong balance sheet, a high return on
equity, a strong management team, and attractive relative value within the
context of the global marketplace or a security's primary trading market.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. You could lose money
as a result of your investment.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund's management strategy will influence performance significantly. If the
fund invests in countries or regions that experience economic downturns,
performance could suffer. Similarly, if certain investments or industries don't
perform as expected, or if the managers' stock selection strategy doesn't
perform as expected, the fund could underperform its peers or lose money.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows the fund's Class IB shares' total return for
the first full calendar year of operation, while the table shows how the fund's
Class IB shares' performance over the same period and since inception compares
to that of a broad-based market index. These figures do not include the effect
of sales charges or other fees which may be applied at the variable life
insurance, variable annuity or qualified retirement plan product level. Any such
additional sales charges or other fees will lower the fund's performance. All
figures assume that all dividends and distributions were reinvested. Keep in
mind that past performance does not indicate future results.
CLASS IB TOTAL RETURN FOR CALENDAR YEAR 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
99 50.10%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
32.76%, (4TH QUARTER, 1999) AND THE LOWEST QUARTERLY RETURN WAS -0.33% (3RD
QUARTER, 1999).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (SEPTEMBER 30, 1998)
<S> <C> <C>
Class IB 50.10% 72.46%
Index 24.94% 39.22%
</TABLE>
>INDEX: The Morgan Stanley Capital International World Index is a broad based
unmanaged market capitalization weighted total return index which measures the
performance of 23 developed-country global stock markets, including the United
States, Canada, Europe, Australia, New Zealand and the Far East.
12 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD GLOBAL LEADERS HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IB
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.74%
Distribution and service (12b-1) fees 0.25%
Other expenses 0.12%
Total operating expenses 1.11%
Fee waiver (0.07%)
Net expenses(1) 1.04%
</TABLE>
(1) Although the Rule 12b-1 fee for Class IB shares is 0.25% of average net
assets, the fund's distributor has contractually agreed to reduce the fee
to 0.18% through at least April 30, 2001. This waiver may be discontinued
at any time thereafter.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IB shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IB
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 107
Year 3 $ 348
Year 5 $ 608
Year 10 $1,351
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGERS
Rand L. Alexander
- - Senior Vice President of Wellington Management
- - Co-manager of the fund since inception (1998)
- - Joined Wellington Management in 1990
- - Investment professional since 1976
Andrew S. Offit
- - Vice President of Wellington Management
- - Co-manager of the fund since inception (1998)
- - Joined Wellington Management in 1997
- - Investment professional since 1987
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 13
<PAGE>
HARTFORD GROWTH AND INCOME HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Growth and Income HLS Fund seeks growth of
capital and current income by investing primarily in stocks with earnings growth
potential and steady or rising dividends.
INVESTMENT STRATEGY. The fund invests primarily in a diversified portfolio of
common stocks that typically have steady or rising dividends and whose prospects
for capital appreciation are considered favorable by Wellington Management. The
fund may invest up to 20% of its total assets in securities of non-U.S. issuers.
Wellington Management uses fundamental analysis to evaluate a security for
purchase or sale by the fund. Fundamental analysis of a company involves the
assessment of such factors as its business environment, management, balance
sheet, income statement, anticipated earnings, revenues, dividends and other
related measures of value.
Wellington Management then complements its fundamental research with an
internally-developed analytical approach. This analytical approach consists of
both valuation and timeliness measures. Valuation factors focus on future
dividend growth and cash flow to determine the relative attractiveness of
different stocks in different industries. Timeliness focuses on stocks with
favorable earnings and stock price momentum to assess the appropriate time for
purchase.
The fund's portfolio is broadly diversified by industry and company.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. You could lose money
as a result of your investment.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund's management strategy will influence performance significantly. If the
fund's stock selection strategy doesn't perform as expected, the fund could
underperform its peers or lose money.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows the fund's Class IB shares' total return for
the first full calendar year of operation, while the table shows how the fund's
Class IB shares' performance over the same period and since inception compares
to that of a broad-based market index. These figures do not include the effect
of sales charges or other fees which may be applied at the variable life
insurance, variable annuity or qualified retirement plan product level. Any such
additional sales charges or other fees will lower the fund's performance. All
figures assume that all dividends and distributions were reinvested. Keep in
mind that past performance does not indicate future results.
CLASS IB TOTAL RETURN FOR CALENDAR YEAR 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
99 21.61%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
15.60%, (4TH QUARTER, 1999) AND THE LOWEST QUARTERLY RETURN WAS -6.27% (3RD
QUARTER, 1999).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (MAY 29, 1998)
<S> <C> <C>
Class IB 21.61% 26.08%
Index 21.04% 22.19%
</TABLE>
INDEX: The S&P 500 Index is a market capitalization weighted price index
composed of 500 widely held common stocks.
14 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD GROWTH AND INCOME HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IB
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.78%
Distribution and service (12b-1) fees 0.25%
Other expenses 0.04%
Total operating expenses 1.07%
Fee waiver (0.07%)
Net expenses(1) 1.00%
</TABLE>
(1) Although the Rule 12b-1 fee for Class IB shares is 0.25% of average net
assets, the fund's distributor has contractually agreed to reduce the fee
to 0.18% through at least April 30, 2001. This waiver may be discontinued
at any time thereafter.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IB shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IB
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 103
Year 3 $ 335
Year 5 $ 586
Year 10 $1,305
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGER
James A. Rullo, CFA
- - Senior Vice President of Wellington Management
- - Manager of the fund since inception (1998)
- - Joined Wellington Management in 1994
- - Investment professional since 1987
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 15
<PAGE>
HARTFORD INDEX HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Index HLS Fund seeks to provide investment
results which approximate the price and yield performance of publicly traded
common stocks in the aggregate.
INVESTMENT STRATEGY. The fund uses the Standard & Poor's 500 Composite Stock
Price Index (the "Index") as its standard performance comparison because it
represents a significant proportion of the total market value of all common
stocks, is well known to investors and, in the opinion of the management of the
fund, is representative of the performance of publicly-traded common stocks.
Therefore, the fund attempts to approximate the capital performance and dividend
income of the Index.
The portfolio manager generally invests in no fewer than 495 stocks. HIMCO
selects stocks for the fund's portfolio after taking into account their
individual weights in the Index. Temporary cash balances may be invested in
short-term money market instruments.
The Index is comprised of 500 selected common stocks, most of which are listed
on the New York Stock Exchange. Standard & Poor's Corporation ("S&P")(1) chooses
the stocks to be included in the Index on a proprietary basis. The weightings of
stocks in the Index are based on each stock's relative total market value, that
is, its market price per share times the number of shares outstanding. Because
of this weighting, as of December 31, 1999, approximately 50 percent of the
Index was composed of the thirty-four largest companies, the five largest being
Microsoft Corporation, General Electric Company, Cisco Systems, Inc. WalMart
Stores, Inc. and Exxon Mobil Corporation.
HIMCO does not attempt to "manage" the fund's portfolio in the traditional
sense, using economic, financial and market analysis, nor does the adverse
financial situation of a company directly result in its elimination from the
fund's portfolio unless, of course, the company is removed from the Index. From
time to time administrative adjustments may be made in the fund's portfolio
because of mergers, changes in the composition of the Index and similar reasons.
The fund's ability to approximate the performance of the Index will depend to
some extent on the size of cash flows into and out of the fund. Investment
changes to accommodate these cash flows will be made to maintain the similarity
of the fund's portfolio to the Index, to the maximum practicable extent.
The fund's portfolio is broadly diversified by industry and company.
(1)"Standard & Poor's"-Registered Trademark-, "S&P"-Registered Trademark-, "S&P
500"-Registered Trademark-, "Standard & Poor's 500", and "500" are trademarks of
The McGraw-Hill Companies, Inc. and have been licensed for use by Hartford Life
Insurance Company.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. You could lose money
as a result of your investment.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
Large-capitalization stocks as a group could fall out of favor with the market,
causing the fund to underperform funds that focus on small- or medium-
capitalization stocks.
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows the fund's total returns, while the table
compares the fund's average annual total returns to that of a broad measure of
market performance. Although the fund commenced operations on May 1, 1987,
Class IB shares of the fund do not have a full calendar year of performance
history. Therefore, the performance shown below reflects the performance of
Class IA shares of the fund which is restated to reflect the 12b-1 distribution
fee of 0.18% that applies to the Class IB shares.
These figures do not include the effect of sales charges or other fees which may
be applied at the variable life insurance, variable annuity or qualified
retirement plan product level. Any such additional sales charges or other fees
will lower the fund's performance. All figures assume that all dividends and
distributions were reinvested. Keep in mind that past performance does not
indicate future results.
CLASS IB TOTAL RETURNS BY CALENDAR
YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
90 -4.16%
91 29.30%
92 6.63%
93 8.92%
94 0.76%
95 36.30%
96 21.87%
97 32.37%
98 27.83%
99 20.27%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
21.12%, (4TH QUARTER, 1998) AND THE LOWEST QUARTERLY RETURN WAS -14.12% (3RD
QUARTER, 1990).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (MAY 1, 1987)
<S> <C> <C> <C> <C>
Class IB 20.27% 27.59% 17.22% 15.80%
Index 21.04% 28.54% 18.19% 16.79%
</TABLE>
INDEX: The S&P 500 Index is a market capitalization weighted price index
composed of 500 widely held common stocks.
16 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD INDEX HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IB
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.40%
Distribution and service (12b-1) fees 0.25%
Other expenses 0.03%
Total operating expenses 0.68%
Fee waiver (0.07%)
Net expenses(1) 0.61%
</TABLE>
(1) Although the Rule 12b-1 fee for Class IB shares is 0.25% of average net
assets, the fund's distributor has contractually agreed to reduce the fee
to 0.18% through at least April 30, 2001. This waiver may be discontinued
at any time thereafter.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IB shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IB
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 63
Year 3 $211
Year 5 $373
Year 10 $842
</TABLE>
[SIDE NOTE]
SUB-ADVISER
HIMCO
PORTFOLIO MANAGER
Rodger K. Metzger
- - Vice President of HIMCO
- - Manager of the fund since 1987
- - Joined HIMCO in 1987
- - Investment professional since 1987
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 17
<PAGE>
HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford International Opportunities HLS Fund seeks growth
of capital by investing primarily in stocks issued by non-U.S. companies.
INVESTMENT STRATEGY. The fund normally invests at least 65% of its assets in
stocks issued by non-U.S. companies which trade in foreign markets that are
generally considered to be well established. Under normal market conditions the
fund diversifies its investments among at least three countries other than the
United States. The securities in which the fund invests are denominated in both
U.S. dollars and non-U.S. currencies and generally are traded in non-U.S.
markets.
Wellington Management uses a three-pronged investment strategy:
- Wellington Management determines the relative attractiveness of the many
countries in which the fund may invest based upon its analysis of the
economic and political environment of each country.
- Wellington Management also evaluates industries on a global basis to
determine which industries offer the most potential for capital
appreciation given current and projected global and local economic and
market conditions.
- Wellington Management conducts fundamental research on individual
companies to identify securities for purchase or sale. Fundamental
analysis of a company involves the assessment of such factors as its
business environment, management, balance sheet, income statement,
anticipated earnings, revenues, dividends, and other related measures of
value.
In analyzing companies for investment, Wellington Management considers companies
for inclusion in the fund's portfolio that are typically larger, high-quality
companies that operate in established markets. Characteristics of high-quality
growth companies include a strong balance sheet, attractive industry trends,
strong competitive advantages and attractive relative value within the context
of a security's primary trading market.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. You could lose money
as a result of your investment.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund's management strategy will influence performance significantly. If the
fund invests in countries or regions that experience economic downturns,
performance could suffer. Similarly, if certain investments or industries don't
perform as expected, or if the managers' stock selection strategy doesn't
perform as expected, the fund could underperform its peers or lose money.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund.The bar chart shows the fund's total returns, while the table
compares the fund's average annual total returns to that of a broad measure of
market performance. Although the fund commenced operations on July 2, 1990, it
did not offer Class IB shares until April 1, 1998. Therefore, the performance
shown below prior to such date reflects the performance of Class IA shares of
the fund which is restated to reflect the 12b-1 distribution fee of 0.18% that
applies to the Class IB shares. The performance shown below after such date
reflects actual Class IB share performance.
These figures do not include the effect of sales charges or other fees which may
be applied at the variable life insurance, variable annuity or qualified
retirement plan product level. Any such additional sales charges or other fees
will lower the fund's performance. All figures assume that all dividends and
distributions were reinvested. Keep in mind that past performance does not
indicate future results.
CLASS IB TOTAL RETURNS BY CALENDAR YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
91 12.80%
92 -4.60%
93 33.49%
94 -2.12%
95 13.73%
96 12.73%
97 0.16%
98 12.96%
99 39.60%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
22.11%, (4TH QUARTER, 1999) AND THE LOWEST QUARTERLY RETURN WAS -17.02% (3RD
QUARTER, 1998).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS (JULY 2, 1990)
<S> <C> <C> <C>
Class IB 39.60% 15.15% 10.17%
Index 31.02% 16.01% 10.41%*
</TABLE>
INDEX: The Morgan Stanley Europe, Australia, Far East GDP ("EAFE GDP") Index
is an unmanaged index of stocks of companies representing stock markets in
Europe, Australia, New Zealand and the Far East.
* Index inception performance from 6/30/90
18 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IB
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.69%
Distribution and service (12b-1) fees 0.25%
Other expenses 0.09%
Total operating expenses 1.03%
Fee waiver (0.07%)
Net expenses(1) 0.96%
</TABLE>
(1) Although the Rule 12b-1 fee for Class IB shares is 0.25% of average net
assets, the fund's distributor has contractually agreed to reduce the fee
to 0.18% through at least April 30, 2001. This waiver may be discontinued
at any time thereafter.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IB shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IB
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 98
Year 3 $ 322
Year 5 $ 564
Year 10 $1,258
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGERS
Trond Skramstad
- - Senior Vice President of Wellington Management
- - Manager of the fund since 1994
- - Joined Wellington Management in 1993
- - Investment professional since 1990
Andrew S. Offit
- - Vice President of Wellington Management
- - Associate Manager of the fund since 1997
- - Joined Wellington Management in 1997
- - Investment professional since 1987
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 19
<PAGE>
HARTFORD MIDCAP HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford MidCap HLS Fund seeks long-term growth of capital
by investing primarily in stocks selected on the basis of potential for capital
appreciation.
INVESTMENT STRATEGY. The fund normally invests at least 65% of its total assets
in common stocks of companies with market capitalizations within the range
represented by the Standard & Poor's MidCap 400 Index. As of December 31, 1999
this range was between approximately $165 million and $37 billion and the
average market capitalization was $2.3 billion. The fund may invest up to 20% of
its total assets in securities of non-U.S. issuers.
The fund uses a two-tiered investment strategy:
- Using what is sometimes referred to as a "top down" approach, Wellington
Management analyzes the general economic and investment environment. This
includes an evaluation of economic conditions, U.S. fiscal and monetary
policy, and demographic trends. Through top down analysis, Wellington
Management anticipates trends and changes in markets and the economy
overall and identifies industries and sectors that are expected to
outperform.
- Top down analysis is followed by what is sometimes referred to as a
"bottom up" approach, which is the use of fundamental analysis to
identify specific securities for purchase or sale. Fundamental analysis
involves the assessment of a company through such factors as its business
environment, management, balance sheet, income statement, anticipated
earnings, revenues, and other related measures of value.
The fund favors high-quality growth companies. The key characteristics of
high-quality growth companies include a leadership position within an industry,
a strong balance sheet, a high return on equity, and a strong management team.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. Because the fund
concentrates on mid-sized companies, its performance may be more volatile than
that of a fund that invests primarily in larger companies. You could lose money
as a result of your investment.
Stocks of mid-sized companies may be more risky than stocks of larger companies.
These companies may be young and have more limited operating or business
history. Because these businesses frequently rely on narrower product lines and
niche markets, they can suffer from isolated business setbacks.
The fund's management strategy will influence performance significantly.
Mid-sized company stocks as a group could fall out of favor with the market,
causing the fund to underperform funds that focus on other types of stocks.
Similarly, if the managers' stock selection strategy doesn't perform as
expected, the fund could underperform its peers or lose money.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund.The bar chart shows the fund's total returns, while the table
compares the fund's average annual total returns to that of a broad measure of
market performance. Although the fund commenced operations on July 14, 1997,
Class IB shares of the fund do not have a full calendar year of performance
history. Therefore, the performance shown below reflects the performance of
Class IA shares of the fund which is restated to reflect the 12b-1 distribution
fee of 0.18% that applies to the Class IB shares.
These figures do not include the effect of sales charges or other fees which may
be applied at the variable life insurance, variable annuity or qualified
retirement plan product level. Any such additional sales charges or other fees
will lower the fund's performance. All figures assume that all dividends and
distributions were reinvested. Keep in mind that past performance does not
indicate future results.
CLASS IB TOTAL RETURNS BY CALENDAR
YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
98 26.34%
99 51.53%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
30.43%, (4TH QUARTER, 1999) AND THE LOWEST QUARTERLY RETURN WAS -16.19% (3RD
QUARTER, 1998).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (JULY 14, 1997)
<S> <C> <C>
Class IB 51.53% 37.10%
Index 14.72% 17.96%
</TABLE>
INDEX: The S&P MidCap 400 Index is an unmanaged index of common stocks of
companies chosen by Standard & Poor's designed to represent price movements in
the midcap U.S. equity market.
20 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD MIDCAP HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IB
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.76%
Distribution and service (12b-1) fees 0.25%
Other expenses 0.03%
Total operating expenses 1.04%
Fee waiver (0.07%)
Net expenses(1) 0.97%
</TABLE>
(1) Although the Rule 12b-1 fee for Class IB shares is 0.25% of average net
assets, the fund's distributor has contractually agreed to reduce the fee
to 0.18% through at least April 30, 2001. This waiver may be discontinued
at any time thereafter.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IB shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IB
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 99
Year 3 $ 326
Year 5 $ 570
Year 10 $1,270
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGER
Phillip H. Perelmuter
- - Senior Vice President of Wellington Management
- - Manager of the fund since inception (1997)
- - Joined Wellington Management in 1995
- - Investment professional since 1983
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 21
<PAGE>
HARTFORD SMALL COMPANY HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Small Company HLS Fund seeks growth of capital by
investing primarily in stocks selected on the basis of potential for capital
appreciation.
INVESTMENT STRATEGY. The fund normally invests at least 65% of its total assets
in common stocks of companies with market capitalizations within the range
represented by the Russell 2000 Index. As of December 31, 1999 this range was
between approximately $10 million and $13 billion, and the average market
capitalization was $664 million. The fund may invest up to 20% of its total
assets in securities of non-U.S. issuers.
Through fundamental analysis Wellington Management identifies companies that it
believes have substantial potential for near-term capital appreciation.
Wellington Management selects securities of companies that, in its opinion:
- have potential for above-average earnings growth,
- are undervalued in relation to their investment potential,
- have positive business and/or fundamental financial characteristics that
are overlooked or misunderstood by investors, or
- are relatively obscure and undiscovered by the overall investment
community.
Fundamental analysis of a company involves the assessment of such factors as its
business environment, management, balance sheet, income statement, anticipated
earnings, revenues, dividends, and other related measures of value.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. Because the fund
concentrates on small companies, its performance may be more volatile than that
of a fund that invests primarily in larger companies. You could lose money as a
result of your investment.
Stocks of smaller companies may be more risky than stocks of larger companies.
Many of these companies are young and have limited operating or business
history. Because these businesses frequently rely on narrow product lines and
niche markets, they can suffer severely from isolated business setbacks.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund's management strategy will influence performance significantly. Small
company stocks as a group could fall out of favor with the market, causing the
fund to underperform funds that focus on other types of stocks. Similarly, if
the managers' stock selection strategy doesn't perform as expected, the fund
could underperform its peers or lose money.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund.The bar chart shows the fund's total returns, while the table
compares the fund's average annual total returns to that of a broad measure of
market performance. Although the fund commenced operations on August 9, 1996, it
did not offer Class IB shares until April 1, 1998. Therefore, the performance
shown below prior to such date reflects the performance of Class IA shares of
the fund which is restated to reflect the 12b-1 distribution fee of 0.18% that
applies to the Class IB shares. The performance shown below after such date
reflects actual Class IB share performance.
These figures do not include the effect of sales charges or other fees which may
be applied at the variable life insurance, variable annuity or qualified
retirement plan product level. Any such additional sales charges or other fees
will lower the fund's performance. All figures assume that all dividends and
distributions were reinvested. Keep in mind that past performance does not
indicate future results.
CLASS IB TOTAL RETURNS BY CALENDAR
YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
97 18.17%
98 11.42%
99 65.53%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
35.87%, (4TH QUARTER, 1999) AND THE LOWEST QUARTERLY RETURN WAS -19.75% (3RD
QUARTER, 1998).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (AUGUST 9, 1996)
<S> <C> <C>
Class IB 65.53% 28.36%
Index 21.26% 15.10%
</TABLE>
INDEX: The Russell 2000 Index is a broad based unmanaged index comprised of
2,000 of the smallest U.S. domiciled company common stocks (on the basis of
capitalization) that are traded in the United States on the New York Stock
Exchange, American Stock Exchange and NASDAQ.
22 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD SMALL COMPANY HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IB
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.75%
Distribution and service (12b-1) fees 0.25%
Other expenses 0.03%
Total operating expenses 1.03%
Fee waiver (0.07%)
Net expenses(1) 0.96%
</TABLE>
(1) Although the Rule 12b-1 fee for Class IB shares is 0.25% of average net
assets, the fund's distributor has contractually agreed to reduce the fee
to 0.18% through at least April 30, 2001. This waiver may be discontinued
at any time thereafter.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IB shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IB
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 98
Year 3 $ 322
Year 5 $ 564
Year 10 $1,258
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGER
Steven C. Angeli
- - Vice President of Wellington Management
- - Manager of the fund since January 1, 2000
- - Joined Wellington Management in 1994
- - Investment professional since 1990
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 23
<PAGE>
HARTFORD STOCK HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Stock HLS Fund seeks long-term growth of capital,
with income as a secondary consideration, by investing primarily in stocks.
INVESTMENT STRATEGY. The fund normally invests at least 65% of the fund's total
assets in the common stocks of high-quality growth companies. Many of the
companies in which the fund invests have a history of paying dividends and are
expected to continue paying dividends in the future. The fund may invest up to
20% of its total assets in securities of non-U.S. issuers. The fund invests in a
diversified portfolio of primarily equity securities using a two-tiered
investment strategy:
- Using what is sometimes referred to as a "top down" approach, Wellington
Management analyzes the general economic and investment environment. This
includes an evaluation of economic conditions, U.S. fiscal and monetary
policy, demographic trends, and investor sentiment. Through top down
analysis, Wellington Management anticipates trends and changes in markets
in the economy overall and identifies industries and sectors that are
expected to outperform.
- Top down analysis is followed by what is sometimes referred to as a
"bottom up" approach, which is the use of fundamental analysis to
identify specific securities for purchase or sale. Fundamental analysis
of a company involves the assessment of such factors as its business
environment, management, balance sheet, income statement, anticipated
earnings, revenues, dividends, and other related measures of value.
The key characteristics of high-quality growth companies favored by the fund
include a leadership position within an industry, a strong balance sheet, a high
return on equity, sustainable or increasing dividends, a strong management team
and a globally competitive position.
- --------------------------------------------------------------------------------
MAIN RISKS. As with most stock funds, the value of your investment may go down
in response to overall stock market movements and trends. You could lose money
as a result of your investment.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund's management strategy will influence performance significantly.
Large-capitalization stocks as a group could fall out of favor with the market,
causing the fund to underperform funds that focus on small- or
medium-capitalization stocks. Similarly, if the managers' stock selection
strategy doesn't perform as expected, the fund could underperform its peers or
lose money.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows the fund's total returns, while the table
compares the fund's average annual total returns to that of a broad measure of
market performance. Although the fund commenced operations on August 31, 1977,
it did not offer Class IB shares until April 1, 1998. Therefore, the performance
shown below prior to such date reflects the performance of Class IA shares of
the fund which is restated to reflect the 12b-1 distribution fee of 0.18% that
applies to the Class IB shares. The performance shown below after such date
reflects actual Class IB share performance.
These figures do not include the effect of sales charges or other fees which may
be applied at the variable life insurance, variable annuity or qualified
retirement plan product level. Any such additional sales charges or other fees
will lower the fund's performance. All figures assume that all dividends and
distributions were reinvested. Keep in mind that past performance does not
indicate future results.
CLASS IB TOTAL RETURNS BY CALENDAR
YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
90 -4.04%
91 24.36%
92 9.84%
93 14.13%
94 -2.07%
95 33.86%
96 24.15%
97 31.14%
98 33.23%
99 19.57%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
22.12%, (4TH QUARTER, 1998) AND THE LOWEST QUARTERLY RETURN WAS -17.26% (3RD
QUARTER, 1990).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (AUGUST 31, 1977)
<S> <C> <C> <C> <C>
Class IB 19.57% 28.26% 17.67% 16.07%
Index 21.04% 28.53% 18.19% 17.07%
</TABLE>
INDEX: The S&P 500 Index is a market capitalization weighted price index
composed of 500 widely held common stocks.
24 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD STOCK HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IB
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.46%
Distribution and service (12b-1) fees 0.25%
Other expenses 0.02%
Total operating expenses 0.73%
Fee waiver (0.07%)
Net expenses(1) 0.66%
</TABLE>
(1) Although the Rule 12b-1 fee for Class IB shares is 0.25% of average net
assets, the fund's distributor has contractually agreed to reduce the fee
to 0.18% through at least April 30, 2001. This waiver may be discontinued
at any time thereafter.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IB shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IB
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 68
Year 3 $227
Year 5 $400
Year 10 $902
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGERS
Rand L. Alexander
- - Senior Vice President of Wellington Management
- - Manager of the fund since 1992
- - Joined Wellington Management in 1990
- - Investment professional since 1976
Philip H. Perelmuter
- - Senior Vice President of Wellington Management
- - Associate Manager of the fund since 1995
- - Joined Wellington Management in 1995
- - Investment professional since 1983
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 25
<PAGE>
HARTFORD ADVISERS HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Advisers HLS Fund seeks maximum long-term total
return.
INVESTMENT STRATEGY. The fund allocates its assets among three categories:
- stocks,
- debt securities, and
- money market instruments.
The fund favors stocks issued by high-quality growth companies. The key
characteristics of high-quality growth companies include a leadership position
within an industry, a strong balance sheet, a high return on equity, sustainable
or increasing dividends, a strong management team and a globally competitive
position.
The debt securities (other than money market instruments) in which the fund
primarily invests include securities issued or guaranteed by the U.S. Government
and its agencies or instrumentalities and securities rated investment grade
(rated at least BBB by Standard & Poor's Corporation or Baa by Moody's Investors
Service, Inc., or if unrated, securities deemed by Wellington Management to be
of comparable quality). The fund is not restricted to any specific maturity
term.
Asset allocation decisions are based on Wellington Management's judgment of the
projected investment environment for financial assets, relative fundamental
values, the attractiveness of each asset category, and expected future returns
of each asset category. Wellington Management does not attempt to engage in
short-term market timing among asset categories. As a result, shifts in asset
allocation are expected to be gradual and continuous and the fund will normally
have some portion of its assets invested in each asset category. There is no
limit on the amount of fund assets that may be allocated to each asset category
and the allocation is in Wellington Management's discretion.
The fund may invest up to 20% of its total assets in securities of non-U.S.
issuers.
- --------------------------------------------------------------------------------
MAIN RISKS. This fund has stock market risk, interest rate risk, manager
allocation risk, credit risk and prepayment risk. You could lose money as a
result of your investment.
Stock market risk means the stocks held by the fund may decline in value due to
the activities and financial prospects of individual companies or to general
market and economic conditions.
Interest rate risk refers to the possibility that your investment may go down in
value when interest rates rise.
Credit risk refers to the possibility that the issuing company may not be able
to pay interest and principal when due.
Manager allocation risk refers to the possibility that the portfolio managers
could allocate assets in a manner that results in the fund underperforming its
peers.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows the fund's total returns, while the table
compares the fund's average annual total returns to that of a broad measure of
market performance. Although the fund commenced operations on March 31, 1983, it
did not offer Class IB shares until April 1, 1998. Therefore, the performance
shown below prior to such date reflects the performance of Class IA shares of
the fund which is restated to reflect the 12b-1 distribution fee of 0.18% that
applies to the Class IB shares. The performance shown below after such date
reflects actual Class IB share performance.
These figures do not include the effect of sales charges or other fees which may
be applied at the variable life insurance, variable annuity or qualified
retirement plan product level. Any such additional sales charges or other fees
will lower the fund's performance. All figures assume that all dividends and
distributions were reinvested. Keep in mind that past performance does not
indicate future results.
CLASS IB TOTAL RETURNS BY CALENDAR
YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
90 1.08%
91 20.11%
92 8.11%
93 12.05%
94 -2.91%
95 28.11%
96 16.38%
97 24.29%
98 24.44%
99 10.39%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
13.87%, (2ND QUARTER, 1997) AND THE LOWEST QUARTERLY RETURN WAS -9.29% (3RD
QUARTER, 1990).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (MARCH 31, 1983)
<S> <C> <C> <C> <C>
Class IB 10.39% 20.54% 13.78% 13.50%
S&P 500 Index 21.04% 28.54% 18.19% 18.41%
LGCB Index -2.15% 7.61% 7.65% 7.43%
</TABLE>
INDICES: The S&P 500 Index is a market capitalization weighted price index
composed of 500 widely held common stocks.
The Lehman Brothers Government/Corporate Bond Index ("LGCB") is a broad based
unmanaged, market-value-weighted index of all debt obligations of the U.S.
Treasury and U.S. Government agencies (excluding mortgaged-backed securities)
and of all publicly-issued fixed-rate, nonconvertible, investment grade
domestic corporate debt.
26 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD ADVISERS HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IB
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.63%
Distribution and service (12b-1) fees 0.25%
Other expenses 0.02%
Total operating expenses 0.90%
Fee waiver (0.07%)
Net expenses(1) 0.83%
</TABLE>
(1) Although the Rule 12b-1 fee for Class IB shares is 0.25% of average net
assets, the fund's distributor has contractually agreed to reduce the fee
to 0.18% through at least April 30, 2001. This waiver may be discontinued
at any time thereafter.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IB shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IB
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 85
Year 3 $ 281
Year 5 $ 494
Year 10 $1,105
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGERS
Paul D. Kaplan
- - Senior Vice President of Wellington Management
- - Co-manager of the fund since 1987
- - Joined Wellington Management in 1982
- - Investment professional since 1974
Rand L. Alexander
- - Senior Vice President of Wellington Management
- - Co-manager of the fund since 1992
- - Joined Wellington Management in 1990
- - Investment professional since 1976
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 27
<PAGE>
HARTFORD INTERNATIONAL ADVISERS HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford International Advisers HLS Fund seeks maximum
long-term total rate of return.
INVESTMENT STRATEGY. The fund actively allocates its assets among three
categories:
- stocks
- debt securities and
- money market instruments.
Securities in which the fund invests primarily will be denominated in non-U.S.
currencies and will be traded in non-U.S. markets.
The fund consists of a diversified portfolio of securities covering a broad
range of countries, industries, and companies. The fund anticipates that, under
normal market conditions, it will diversify its investments in at least three
countries other than the United States.
The fund's investments in equity securities are substantially similar to the
equity securities investments permitted for the Hartford International
Opportunities HLS Fund.
Debt securities (other than money market instruments) in which the fund may
invest include investment grade securities assigned within the four highest bond
rating categories by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Corporation ("S&P"), or, if unrated, which are determined by Wellington
Management to be of comparable quality. In addition, the fund may invest up to
15% of its total assets in high yield-high risk securities, commonly known as
"junk bonds." Such securities may be rated as low as "C" by Moody's and by S&P,
or, if unrated, are of comparable quality as determined by Wellington
Management.
Asset allocation decisions are based upon Wellington Management's judgment of
the projected investment environment for financial assets, relative fundamental
values and attractiveness of each asset category. Wellington Management does not
attempt to make short-term market timing decisions among asset categories and
asset allocation is in Wellington Management's discretion. As a result, shifts
in asset allocation are expected to be gradual and continuous and the fund will
normally have some portion of its assets invested in each asset category. There
is no limit on the amount of fund assets that may be allocated to each asset
category.
- --------------------------------------------------------------------------------
MAIN RISKS. This fund has stock market risk, interest rate risk, manager
allocation risk, credit risk and prepayment risk. You could lose money as a
result of your investment.
Stock market risk means the stocks held by the fund may decline in value due to
the activities and financial prospects of individual companies or to general
market and economic conditions.
Interest rate risk refers to the possibility that your investment may go down in
value when interest rates rise.
Credit risk refers to the possibility that the issuing company may not be able
to pay interest and principal when due.
Manager allocation risk refers to the possibility that the portfolio managers
could allocate assets in a manner that results in the fund underperforming its
peers.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund.The bar chart shows the fund's total returns, while the table
compares the fund's average annual total returns to that of a broad measure of
market performance. Although the fund commenced operations on March 1, 1995,
Class IB shares of the fund do not have a full calendar year of performance
history. Therefore, the performance shown below reflects the performance of
Class IA shares of the fund which is restated to reflect the 12b-1 distribution
fee of 0.18% that applies to the Class IB shares.
These figures do not include the effect of sales charges or other fees which may
be applied at the variable life insurance, variable annuity or qualified
retirement plan product level. Any such additional sales charges or other fees
will lower the fund's performance. All figures assume that all dividends and
distributions were reinvested. Keep in mind that past performance does not
indicate future results.
CLASS IB TOTAL RETURNS BY CALENDAR
YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
96 11.59%
97 5.33%
98 13.15%
99 22.94%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
13.12%, (4TH QUARTER, 1999) AND THE LOWEST QUARTERLY RETURN WAS -9.09% (3RD
QUARTER, 1998).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (MARCH 1, 1995)
<S> <C> <C>
Class IB 22.94% 14.08%
EAFE GDP Index 31.02% 17.23%
Salomon Index (ex-U.S) 18.00% 13.47%*
</TABLE>
INDICES: The Morgan Stanley Europe, Australia, Far East GDP ("EAFE GDP") Index
is an unmanaged index of stocks of companies representing stock markets in
Europe, Australia, New Zealand and the Far East.
Salomon Smith Barney World Government Bond Index ("Salomon Index") is a
market-capitalization weighted index of government bonds representing 18
government bond markets of Europe, Australia, North America and the Far East
and the ex-U.S. Index excludes the United States.
*Index inception performance from 2/28/95
28 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD INTERNATIONAL ADVISERS HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IB
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.76%
Distribution and service (12b-1) fees 0.25%
Other expenses 0.09%
Total operating expenses 1.10%
Fee waiver (0.07%)
Net expenses(1) 1.03%
</TABLE>
(1) Although the Rule 12b-1 fee for Class IB shares is 0.25% of average net
assets, the fund's distributor has contractually agreed to reduce the fee
to 0.18% through at least April 30, 2001. This waiver may be discontinued
at any time thereafter.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IB shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IB
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 106
Year 3 $ 345
Year 5 $ 602
Year 10 $1,339
</TABLE>
[SIDE NOTE]
SUB-ADVISER
Wellington Management
PORTFOLIO MANAGERS
Trond Skramstad
- - Senior Vice President of Wellington Management
- - Manager of the equity component of the fund since inception (1995)
- - Joined Wellington Management in 1993
- - Investment professional since 1990
Andrew S. Offit
- - Vice President of Wellington Management
- - Associate Manager of the equity component of the fund since 1997
- - Joined Wellington Management in 1997
- - Investment professional since 1987
Robert L. Evans
- - Senior Vice President of Wellington Management
- - Manager of the debt component of the fund since inception (1995)
- - Joined Wellington Management in 1995
- - Investment professional since 1985
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 29
<PAGE>
HARTFORD BOND HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Bond HLS Fund seeks a high level of current
income, consistent with a competitive total return, as compared to bond funds
with similar investment objectives and policies,by investing primarily in debt
securities.
INVESTMENT STRATEGY. Debt securities in which the fund invests include
(1) securities issued or guaranteed as to principal or interest by the U.S.
Government, its agencies or instrumentalities; (2) non-convertible debt
securities issued or guaranteed by U.S. corporations or other issuers (including
foreign governments or corporations); (3) asset-backed and mortgage-related
securities; and (4) securities issued or guaranteed as to principal or interest
by a sovereign government or one of its agencies or political subdivisions,
supranational entities such as development banks, non-U.S. corporations, banks
or bank holding companies, or other non-U.S. issuers.
The fund normally invests at least 80% of its portfolio in investment grade debt
securities. The fund may invest up to 20% of its total assets in securities
rated in the highest category of below investment grade bonds, or securities
which, if unrated, are determined by HIMCO to be of comparable quality. Debt
securities rated below investment grade are commonly referred to as "high
yield-high risk securities" or "junk bonds".
The fund invests at least 65% of its total assets in debt securities with a
maturity of at least one year. Although the fund does not have a maximum
maturity term restriction, the fund tends to have an average maturity within the
intermediate-term range which is typically defined as between 5 to 10 years.
The fund may invest up to 15% of its total assets in preferred stocks,
convertible securities, and securities accompanied by warrants to purchase
equity securities. The fund will not invest in common stocks directly, but may
retain, for reasonable periods of time, common stocks acquired upon conversion
of debt securities or upon exercise of warrants acquired with debt securities.
The fund may invest up to 30% of its total assets in debt securities of non-U.S.
issuers and up to 10% of its total assets in securities denominated in foreign
currencies.
The fund uses what is sometimes referred to as a top-down analysis to determine
which industries may benefit from current and future changes in the economy. The
fund then selects individual securities from selected industries that, from a
yield perspective, appear to be attractive. The portfolio manager assesses such
factors as a company's business environment, balance sheet, income statement,
anticipated earnings and management team.
- --------------------------------------------------------------------------------
MAIN RISKS. The major factors affecting this fund's performance are interest
rates and credit risk. You could lose money as a result of your investment.
When interest rates rise, bond prices fall; generally the longer the fund's
maturity, the more sensitive it is to this risk.
The fund could lose money if any bonds it owns are downgraded in credit rating
or go into default. In general, lower-rated bonds have higher credit risks. If
certain sectors or investments don't perform as the manager expects, the fund
could underperform its peers or lose money.
High yield bonds and foreign securities may make the fund more sensitive to
market or economic shifts in the U.S. and abroad.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows the fund's total returns, while the table
compares the fund's average annual total returns to that of a broad measure of
market performance. Although the fund commenced operations on August 31, 1977,
it did not offer Class IB shares until April 1, 1998. Therefore, the performance
shown below prior to such date reflects the performance of Class IA shares of
the fund which is restated to reflect the 12b-1 distribution fee of 0.18% that
applies to the Class IB shares. The performance shown below after such date
reflects actual Class IB share performance.
These figures do not include the effect of sales charges or other fees which may
be applied at the variable life insurance, variable annuity or qualified
retirement plan product level. Any such additional sales charges or other fees
will lower the fund's performance. All figures assume that all dividends and
distributions were reinvested. Keep in mind that past performance does not
indicate future results.
CLASS IB TOTAL RETURNS BY CALENDAR
YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
90 8.20%
91 16.22%
92 5.34%
93 10.04%
94 -4.12%
95 18.28%
96 3.33%
97 11.15%
98 7.96%
99 -2.19%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
6.35%, (2ND QUARTER, 1995) AND THE LOWEST QUARTERLY RETURN WAS -3.44% (1ST
QUARTER, 1994).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (AUGUST 31, 1977)
<S> <C> <C> <C> <C>
Class IB -2.19% 7.48% 7.21% 8.33%
Index -2.15% 7.61% 7.65% 9.01%
</TABLE>
INDEX: The Lehman Brothers Government/Corporate Bond Index is a broad based
unmanaged, market-value-weighted index of all debt obligations of the U.S.
Treasury and U.S. Government agencies (excluding mortgaged-backed securities)
and of all publicly-issued fixed-rate, nonconvertible, investment grade
domestic corporate debt.
30 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD BOND HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IB
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.49%
Distribution and service (12b-1) fees 0.25%
Other expenses 0.03%
Total operating expenses 0.77%
Fee waiver (0.07%)
Net expenses(1) 0.70%
</TABLE>
(1) Although the Rule 12b-1 fee for Class IB shares is 0.25% of average net
assets, the fund's distributor has contractually agreed to reduce the fee
to 0.18% through at least April 30, 2001. This waiver may be discontinued
at any time thereafter.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IB shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IB
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 72
Year 3 $240
Year 5 $422
Year 10 $950
</TABLE>
[SIDE NOTE]
SUB-ADVISER
HIMCO
PORTFOLIO MANAGER
Alison D. Granger, CFA
- - Senior Vice President of HIMCO
- - Manager of the fund since 1996
- - Joined HIMCO in 1993
- - Investment professional since 1981
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 31
<PAGE>
HARTFORD HIGH YIELD HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford High Yield HLS Fund seeks high current income by
investing in non-investment grade debt securities. Growth of capital is a
secondary objective.
INVESTMENT STRATEGY. The fund normally invests at least 65%, and may invest up
to 100%, of its portfolio in non-investment grade debt securities (securities
rated "Ba" or lower by Moody's Investors Service, Inc. ("Moody's") or "BB" or
lower by Standard and Poor's Corporation ("S&P"), or securities which, if
unrated, are determined by HIMCO to be of comparable quality). Debt securities
rated below investment grade are commonly referred to as "high yield-high risk
securities" or "junk bonds". The fund will invest no more than 10% of total
assets in securities rated below B3 by Moody's or B- by S&P, or, if unrated,
determined to be of comparable quality by HIMCO. The fund may invest in bonds of
any maturity although the fund tends to have an average maturity within the
intermediate-term range which is typically defined as between 5 to 10 years.
The fund may invest up to 15% of its total assets in preferred stocks,
convertible securities, and securities carrying warrants to purchase equity
securities. The fund will not invest in common stocks directly, but may retain,
for reasonable periods of time, common stocks acquired upon conversion of debt
securities or upon exercise of warrants acquired with debt securities. The fund
may invest up to 30% of its total assets in securities of non-U.S. issuers and
up to 10% of its total assets in securities denominated in foreign currencies.
To achieve its goal of high current income, the fund uses what is sometimes
referred to as a top-down analysis to determine which industries may benefit
from current and future changes in the economy. The fund then selects individual
securities within selected industries that appear from a yield perspective to be
attractive. The fund assesses such factors as the company's business
environment, balance sheet, income statement, anticipated earnings and
management team.
The fund seeks its secondary goal of capital growth, when consistent with its
primary objective of high current income, by investing in securities that the
portfolio manager expects to appreciate in value as a result of declines in
long-term interest rates or favorable developments affecting the business or
prospects of the issuer which may improve the issuer's financial condition and
credit rating.
- --------------------------------------------------------------------------------
MAIN RISKS. The major factors affecting this fund's performance are interest
rates and credit risk. You could lose money as a result of your investment.
When interest rates rise, bond prices fall; generally the longer a bond's
maturity, the more sensitive it is to this risk.
Credit risk depends largely on the perceived financial health of bond issuers.
In general, lower-rated bonds have higher credit risks. Junk bond prices can
fall on bad news about the economy, an industry or a company. Share price, yield
and total return may fluctuate more than with less aggressive bond funds.
The fund could lose money if any bonds it owns are downgraded in credit rating
or go into default. If certain industries or investments don't perform as the
fund expects, it could underperform its peers or lose money.
Foreign investments may be more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social upheavals
and political actions ranging from tax code changes to governmental collapse.
High yield bonds and foreign securities may make the fund more sensitive to
market or economic shifts in the U.S. and abroad.
In a down market some of the fund's investments could become harder to value.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows the fund's Class IB shares' total return for
the first full calendar year of operation, while the table shows how the fund's
Class IB shares' performance over the same period and since inception compares
to that of a broad-based market index. These figures do not include the effect
of sales charges or other fees which may be applied at the variable life
insurance, variable annuity or qualified retirement plan product level. Any such
additional sales charges or other fees will lower the fund's performance. All
figures assume that all dividends and distributions were reinvested. Keep in
mind that past performance does not indicate future results.
CLASS IB TOTAL RETURN FOR CALENDAR YEAR 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
99 4.52%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
3.09%, (1ST QUARTER, 1999) AND THE LOWEST QUARTERLY RETURN WAS -1.01% (3RD
QUARTER, 1999).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (SEPTEMBER 30, 1998)
<S> <C> <C>
Class IB 4.52% 6.57%
Index 1.87% 3.62%
</TABLE>
INDEX: The Lehman Brothers High Yield Corporate Index is a broad-based
market-value-weighted index that tracks the total return performance of
non-investment grade, fixed-rate, publicly placed, dollar denominated and
nonconvertible debt registered with the SEC.
32 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD HIGH YIELD HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IB
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.66%
Distribution and service (12b-1) fees 0.25%
Other expenses 0.06%
Total operating expenses 0.97%
Fee waiver (0.07%)
Net expenses(1) 0.90%
</TABLE>
(1) Although the Rule 12b-1 fee for Class IB shares is 0.25% of average net
assets, the fund's distributor has contractually agreed to reduce the fee
to 0.18% through at least April 30, 2001. This waiver may be discontinued
at any time thereafter.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IB shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IB
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 92
Year 3 $ 303
Year 5 $ 532
Year 10 $1,188
</TABLE>
[SIDE NOTE]
SUB-ADVISER
HIMCO
PORTFOLIO MANAGER
Alison D. Granger, CFA
- - Senior Vice President of HIMCO
- - Manager of the fund since inception (1998)
- - Joined HIMCO in 1993
- - Investment professional since 1981
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 33
<PAGE>
HARTFORD MORTGAGE SECURITIES HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Mortgage Securities HLS Fund seeks maximum
current income consistent with safety of principal and maintenance of liquidity
by investing primarily in mortgage-related securities.
INVESTMENT STRATEGY. The fund normally invests at least 65% of its total assets
in high quality mortgage-related securities either (i) issued by U.S. Government
agencies, instrumentalities or sponsored corporations, or (ii) rated A or better
by Moody's or S&P or, if not rated, which are of equivalent investment quality
as determined by HIMCO. These U. S. Government agencies, instrumentalities or
sponsored corporations may include the Government National Mortgage Association,
the Federal National Mortgage Association and the Federal Home Loan Mortgage
Corporation.
At times the fund may invest in mortgage-related securities not meeting the
foregoing investment quality standards when HIMCO deems such investments to be
consistent with the fund's investment objective; however, no such investments
will be made in excess of 20% of the value of the fund's total assets. Such
investments will be considered mortgage-related securities for purposes of the
investment strategy that the fund invest at least 65% of its total assets in
mortgage-related securities.
In addition, the fund may invest in mortgage-related securities known as
collateralized mortgage obligations, including residential and commercial
mortgage-backed securities which are issued by governmental agencies or private
entities. The fund may also purchase asset-backed securities.
- --------------------------------------------------------------------------------
MAIN RISKS. The primary risks of this fund are interest rate risk, credit risk,
prepayment risk, and manager risk. You could lose money as a result of your
investment.
Interest rate risk refers to the possibility that your investment may go down in
value when interest rates rise.
Credit risk refers to the possibility that the issuing company may not be able
to pay interest and principal when due.
Prepayment risk refers to the possibility that any mortgage securities held by
the fund may be adversely affected by changes in prepayment rates on the
underlying mortgages. If prepayments increase as a result of lower interest
rates the fund may have to invest a portion of its assets at lower rates.
The fund's management strategy will influence performance significantly.
Mortgage securities as a group could fall out of favor with the market, causing
the fund to underperform funds that focus on other categories. Similarly, if the
managers' selection strategy doesn't perform as expected, the fund could
underperform its peers or lose money.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance).
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund. The bar chart shows the fund's total returns, while the table
compares the fund's average annual total returns to that of a broad measure of
market performance. Although the fund commenced operations on January 1, 1985,
Class IB shares do not have a full calendar year of performance history.
Therefore, the performance shown below reflects the performance of Class IA
shares of the fund which is restated to reflect the 12b-1 distribution fee of
0.18% that applies to the Class IB shares.
These figures do not include the effect of sales charges or other fees which may
be applied at the variable life insurance, variable annuity or qualified
retirement plan product level. Any such additional sales charges or other fees
will lower the fund's performance. All figures assume that all dividends and
distributions were reinvested. Keep in mind that past performance does not
indicate future results.
CLASS IB TOTAL RETURNS BY CALENDAR
YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
90 9.50%
91 14.50%
92 4.45%
93 6.12%
94 -1.79%
95 15.96%
96 4.88%
97 8.81%
98 6.53%
99 1.34%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
5.61%, (3RD QUARTER, 1991) AND THE LOWEST QUARTERLY RETURN WAS -2.17% (1ST
QUARTER, 1994).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (JANUARY 1, 1985)
<S> <C> <C> <C> <C>
Class IB 1.34% 7.40% 6.91% 8.19%
Index 1.86% 7.98% 7.78% 9.55%
</TABLE>
INDEX: Lehman Mortgage-Backed Securities Index is an index of mortgage backed
pass-through securities of the Government National Mortgage Association,
Federal National Mortgage Association and Federal Home Loan Mortgage
Corporation.
34 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD MORTGAGE SECURITIES HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IB
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.45%
Distribution and service (12b-1) fees 0.25%
Other expenses 0.03%
Total operating expenses 0.73%
Fee waiver (0.07%)
Net expenses(1) 0.66%
</TABLE>
(1) Although the Rule 12b-1 fee for Class IB shares is 0.25% of average net
assets, the fund's distributor has contractually agreed to reduce the fee
to 0.18% through at least April 30, 2001. This waiver may be discontinued
at any time thereafter.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IB shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IB
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 68
Year 3 $227
Year 5 $400
Year 10 $902
</TABLE>
[SIDE NOTE]
SUB-ADVISER
HIMCO
PORTFOLIO MANAGER
Peter P. Perrotti
- - Senior Vice President of HIMCO
- - Manager of the fund since May 1, 1999
- - Joined HIMCO in 1990
- - Investment professional since 1989
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 35
<PAGE>
HARTFORD MONEY MARKET HLS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Hartford Money Market HLS Fund seeks maximum current
income consistent with liquidity and preservation of capital.
INVESTMENT STRATEGY. The fund seeks to maintain a stable share price of $1.00.
The fund focuses on specific short-term U.S. dollar denominated money market
instruments which are rated in the first two investment tiers by at least one
nationally recognized statistical rating organization, or if unrated, determined
to be of comparable quality by HIMCO. Money market instruments include
(1) banker's acceptances; (2) obligations of governments (whether U.S. or
non-U.S.) and their agencies and instrumentalities; (3) short-term corporate
obligations, including commercial paper, notes, and bonds; (4) other short-term
debt obligations; (5) obligations of U.S. banks, non-U.S. branches of U.S. banks
(Eurodollars), U.S. branches and agencies of non-U.S. banks (Yankee dollars),
and non-U.S. branches of non-U.S. banks; (6) asset-backed securities; and
(7) repurchase agreements.
The fund purchases securities which it believes offer attractive returns
relative to the risks undertaken. In addition, the portfolio manager adjusts the
average maturity of the portfolio in anticipation of interest rate changes.
- --------------------------------------------------------------------------------
MAIN RISKS. The primary risks of this fund are interest rate risk, credit risk
and manager risk.
A rise in interest rates could cause a fall in the values of the fund's
securities. Credit risk refers to the risk that a security's credit rating could
be downgraded affecting the value and, potentially the likelihood of repayment,
of the fund's securities. Manager risk refers to the risk that if the manager
does not effectively implement the fund's investment goal and style, the fund
could underperform its peers.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, there is a risk that
the fund's share price could fall below $1.00, which would make your shares
worth less than what you paid for them.
- --------------------------------------------------------------------------------
PAST PERFORMANCE. The bar chart and table below indicate the risks of investing
in the fund.The bar chart shows the fund's total returns, while the table
compares the fund's average annual total returns to that of a broad measure of
market performance. Although the fund commenced operations on June 30, 1980, it
did not offer Class IB shares until April 1, 1998. Therefore, the performance
shown below prior to such date reflects the performance of Class IA shares of
the fund which is restated to reflect the 12b-1 distribution fee of 0.18% that
applies to the Class IB shares. The performance shown below after such date
reflects actual Class IB share performance.
These figures do not include the effect of sales charges or other fees which may
be applied at the variable life insurance, variable annuity or qualified
retirement plan product level. Any such additional sales charges or other fees
will lower the fund's performance. All figures assume that all dividends and
distributions were reinvested. Keep in mind that past performance does not
indicate future results.
CLASS IB TOTAL RETURNS BY CALENDAR
YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
90 7.90%
<S> <C>
91 5.82%
92 3.44%
93 2.76%
94 3.76%
95 5.55%
96 5.00%
97 5.12%
98 5.06%
99 4.70%
</TABLE>
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST QUARTERLY RETURN WAS
1.94%, (2ND QUARTER, 1990) AND THE LOWEST QUARTERLY RETURN WAS 0.67% (1ST
QUARTER, 1994).
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (JUNE 30, 1980)
<S> <C> <C> <C> <C>
Class IB 4.70% 5.09% 4.91% 7.18%
Index 4.79% 5.19% 5.04% N/A
</TABLE>
INDEX: 60-Day Treasury Bill Index, an unmanaged index of short-term treasury
bills.
Current 7-day yield as of December 31, 1999: 5.16%
Effective 7-day yield (which indicates the effect of daily compounding) as of
December 31, 1999: 5.30%
Please call 1-800-862-6668 for the most recent current and effective yield
information.
36 HARTFORD HLS MUTUAL FUNDS
<PAGE>
HARTFORD MONEY MARKET HLS FUND
- --------------------------------------------------------------------------------
YOUR EXPENSES. This table describes the fees and expenses that you may pay if
you buy and hold shares of the fund. Please note that this table does not
include fees and expenses that will be applied at the variable life insurance,
variable annuity and qualified retirement plan product level.
SHAREHOLDER FEES CLASS IB
(fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum sales charge (load) as a percentage of
offering price None
Maximum deferred sales charge (load) None
Exchange fees None
</TABLE>
ANNUAL OPERATING EXPENSES
(expenses that are deducted from the fund's assets)
<TABLE>
<S> <C>
Management fees 0.45%
Distribution and service (12b-1) fees 0.25%
Other expenses 0.02%
Total operating expenses 0.72%
Fee waiver (0.07%)
Net expenses(1) 0.65%
</TABLE>
(1) Although the Rule 12b-1 fee for Class IB shares is 0.25% of average net
assets, the fund's distributor has contractually agreed to reduce the fee
to 0.18% through at least April 30, 2001. This waiver may be discontinued
at any time thereafter.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, that the fund's operating
expenses remain the same and that you reinvest all dividends and distributions.
Because no sales charges apply to the Class IB shares you would have the same
expenses whether or not you redeemed your shares. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES CLASS IB
(with or without redemption)
<TABLE>
<S> <C>
Year 1 $ 67
Year 3 $224
Year 5 $395
Year 10 $890
</TABLE>
[SIDE NOTE]
SUB-ADVISER
HIMCO
PORTFOLIO MANAGER
William H. Davison, Jr.
- - Senior Vice President of HIMCO
- - Manager of the fund since 1992
- - Joined HIMCO in 1990
- - Investment professional since 1981
[END SIDE NOTE]
HARTFORD HLS MUTUAL FUNDS 37
<PAGE>
FURTHER INFORMATION ON THE FUNDS
- --------------------------------------------------------------------------------
OTHER INVESTMENT STRATEGIES AND INVESTMENT MATTERS
USE OF MONEY MARKET INVESTMENTS FOR TEMPORARY DEFENSIVE PURPOSES
From time to time, as part of its primary investment strategy, each fund (other
than the Money Market fund) may invest some or all of its assets in high quality
money market securities for temporary defensive purposes in response to adverse
market, economic or political conditions. To the extent a fund is in a defensive
position, the fund may lose the benefit of upswings and limit its ability to
meet its investment objective.
USE OF OPTIONS, FUTURES AND OTHER DERIVATIVES
Each fund (other than the Money Market fund) may purchase and sell options,
enter into futures contracts or utilize other derivatives with respect to
stocks, bonds, groups of securities (such as financial indices), foreign
currencies or interest rates. These techniques, which are incidental to each
fund's primary strategy, permit a fund to gain exposure to a particular
security, group of securities, interest rate or index, and thereby have the
potential for a fund to earn returns that are similar to those which would be
earned by direct investments in those securities or instruments.
These techniques are also used to manage risk by hedging a fund's portfolio
investments. Hedging techniques may not always be available to the funds; and it
may not always be feasible for a fund to use hedging techniques even when they
are available.
Derivatives have risks, however. If the issuer of the derivative instrument does
not pay the amount due, a fund could lose money on the instrument. In addition,
the underlying security or investment on which the derivative is based, and the
derivative itself, may not perform the way the manager expected. As a result,
the use of these techniques may result in losses to a fund or increase
volatility in a fund's performance.
ABOUT EACH FUND'S INVESTMENT GOAL
Each fund's investment goal may be changed only with approval of the
shareholders of the fund. A fund may not be able to achieve its goal.
EXPENSE CONSEQUENCES OF PORTFOLIO TRADING PRACTICES
At times each fund (other than the Money Market fund) may engage in short-term
trading, which could produce higher brokerage expenses for a fund and thus
lowering a fund's performance.
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
Each fund may invest in various securities and engage in various investment
techniques which are not the principal focus of the fund and therefore are not
described in this prospectus. These securities and techniques, together with
their risks are discussed in the fund's Statement of Additional Information
which may be obtained free of charge by contacting the fund (see back cover for
address and phone number).
MANAGEMENT OF THE FUNDS
THE INVESTMENT ADVISER
HL Investment Advisors, LLC ("HL Advisors") is the investment adviser to each
fund. As investment adviser, HL Advisors is responsible for supervising the
activities of the investment sub-advisers described below. In addition, Hartford
Life serves as the administrator of each fund. HL Advisors and Hartford Life are
majority-owned indirect subsidiaries of The Hartford Financial Services
Group, Inc. ("The Hartford"), a Connecticut financial services company with over
$165 billion in assets. As of December 31, 1999 HL Advisors had over
$40 billion in assets under management. HL Advisors is principally located at
200 Hopmeadow Street, Simsbury, Connecticut 06070.
THE INVESTMENT SUB-ADVISERS
Wellington Management Company, LLP ("Wellington Management") is the investment
sub-adviser to the Global Health HLS Fund, Global Technology HLS Fund, Advisers
HLS Fund, Capital Appreciation HLS Fund, Dividend and Growth HLS Fund, Global
Leaders HLS Fund, Growth and Income HLS Fund, International Advisers HLS Fund,
International Opportunities HLS Fund, MidCap HLS Fund, Small Company HLS Fund
and Stock HLS Fund.
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
38 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FURTHER INFORMATION ON THE FUNDS
- --------------------------------------------------------------------------------
services since 1928. As of December 31, 1999 Wellington Management had
investment management authority over approximately $235 billion in assets.
Wellington Management is principally located at 75 State Street, Boston,
Massachusetts 02109.
The Hartford Investment Management Company ("HIMCO-Registered Trademark-") is
the investment sub-adviser to the High Yield HLS Fund, Index HLS Fund, Bond HLS
Fund, Mortgage Securities HLS Fund and Money Market HLS Fund. HIMCO is a
professional money management firm that provides services to investment
companies, employee benefit plans and insurance companies. HIMCO is a
wholly-owned subsidiary of The Hartford. As of December 31, 1999 HIMCO and its
wholly-owned subsidiary had investment management authority over approximately
$59 billion in assets. HIMCO is principally located at 55 Farmington Avenue,
Hartford, Connecticut 06105.
MANAGEMENT FEES
Each Fund pays a monthly advisory fee and administration fee to HL Advisors and
Hartford Life based on a stated percentage of the fund's average daily net asset
value as follows:
INDEX FUND
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- --------------- -----------
<S> <C>
All Assets 0.400%
</TABLE>
MONEY MARKET FUND AND MORTGAGE SECURITIES FUND
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- --------------- -----------
<S> <C>
All Assets 0.450%
</TABLE>
BOND FUND AND STOCK FUND
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- --------------- -----------
<S> <C>
First $250,000,000 0.525%
Next $250,000,000 0.500%
Next $500,000,000 0.475%
Amount Over $1 Billion 0.450%
</TABLE>
ADVISERS FUND, CAPITAL APPRECIATION FUND, DIVIDEND AND GROWTH FUND, GLOBAL
LEADERS FUND, GROWTH AND INCOME FUND, HIGH YIELD FUND, INTERNATIONAL ADVISERS
FUND, INTERNATIONAL OPPORTUNITIES FUND, MIDCAP FUND AND SMALL COMPANY FUND
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- --------------- -----------
<S> <C>
First $250,000,000 0.775%
Next $250,000,000 0.725%
Next $500,000,000 0.675%
Amount Over $1 Billion 0.625%
</TABLE>
GLOBAL HEALTH FUND AND GLOBAL TECHNOLOGY FUND
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- --------------- -----------
<S> <C>
First $250,000,000 0.850%
Next $250,000,000 0.800%
Amount Over $500,000,000 0.750%
</TABLE>
For the year ended December 31, 1999, the investment advisory fees and
administrative fees paid to HL Advisors and Hartford Life, expressed as a
percentage of net assets, were as follows:
<TABLE>
<CAPTION>
FUND NAME ANNUAL RATE
- --------- -----------
<S> <C>
Hartford Advisers HLS Fund 0.63%
Hartford Bond HLS Fund 0.49%
Hartford Capital Appreciation HLS Fund 0.64%
Hartford Dividend and Growth HLS Fund 0.65%
Hartford Global Health HLS Fund(1) --
Hartford Global Leaders HLS Fund 0.74%
Hartford Global Technology HLS Fund(1) --
Hartford Growth and Income HLS Fund 0.78%
Hartford High Yield HLS Fund 0.66%
Hartford Index HLS Fund 0.40%
Hartford International Advisers HLS Fund 0.76%
Hartford International Opportunities HLS Fund 0.69%
Hartford MidCap HLS Fund 0.76%
Hartford Money Market HLS Fund 0.45%
Hartford Mortgage Securities HLS Fund 0.45%
Hartford Small Company HLS Fund 0.75%
Hartford Stock HLS Fund 0.46%
(1)Fund commenced operations in 2000.
</TABLE>
HARTFORD HLS MUTUAL FUNDS 39
<PAGE>
FURTHER INFORMATION ON THE FUNDS
- --------------------------------------------------------------------------------
PURCHASE OF FUND SHARES
Fund shares are made available to serve as the underlying investment options for
variable annuity and variable life insurance separate accounts of Hartford Life
and for certain qualified retirement plans. Shares of the funds are sold by
Hartford Securities Distribution Company, Inc. (the "Distributor") at their net
asset value as defined under Determination of Net Asset Value.
The funds offer 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. The different classes of shares represent investments in
the same portfolio of securities but are subject to different expenses and will
have different share prices and performance. 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.
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 Hartford Life and the funds do not
currently foresee any such disadvantages either to variable annuity contract
owners or variable life insurance policy owners, each fund's Board of Directors
intends to monitor events in order to identify any material conflicts between
such contract owners and policy owners and to determine what action, if any,
should be taken in response thereto. If the Board of Directors of a fund were to
conclude that separate funds should be established for variable life and
variable annuity separate accounts, the variable life and variable annuity
contract holders would not bear any expenses attendant to the establishment of
such separate funds.
SALE AND REDEMPTION OF SHARES
The Class IB shares of each fund are sold and redeemed by the fund at their net
asset value next determined after receipt of a purchase or redemption order in
good order in writing at its home office, P.O. Box 5085, Hartford, CT
06102-5085. The value of shares redeemed may be more or less than original cost,
depending upon the market value of the portfolio securities at the time of
redemption. Payment for shares redeemed will be made within seven days after the
redemption request is received in proper form by the funds. However, the right
to redeem fund shares may be suspended or payment therefor postponed for any
period during which: (1) trading on the NYSE is closed for other than weekends
and holidays; (2) an emergency exists, as determined by the SEC, as a result of
which (a) disposal by a fund of securities owned by it is not reasonably
practicable, or (b) it is not reasonably practicable for a fund to determine
fairly the value of its net assets; or (3) the SEC by order so permits for the
protection of stockholders of the funds.
Each 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, each 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 to those documents 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 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 each fund may pay annually up to
0.25% of the average daily net assets of a fund attributable to its Class IB
shares for activities primarily intended to result in the sale of Class IB
shares, the Distributor has contractually agreed to waive .07% of the fee at
least through April 30, 2001. This waiver may be discontinued at any time
thereafter. Under the terms of the Distribution Plan and the principal
underwriting agreement, each 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 to those documents and shareholder reports for prospective contract
owners of variable insurance products with respect to the Class IB shares of a
fund; (b) those relating to the development, preparation,
40 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FURTHER INFORMATION ON THE FUNDS
- --------------------------------------------------------------------------------
printing and mailing of advertisements, sales literature and other promotional
materials describing and/or relating to the Class IB shares of a 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 a fund, including the
performance of the funds; (e) training sales personnel regarding the Class IB
shares of a fund; (f) compensation to financial intermediaries and third-party
broker-dealers; and (g) financing any other activity that the Distributor
determines is primarily intended to result in the sale of Class IB shares.
Rule 12b-1 fees have the effect of increasing operating expenses of the funds.
DETERMINATION OF NET ASSET VALUE
The net asset value per share is determined for each fund as of the close of the
New York Stock Exchange ("NYSE") (normally 4:00 p.m. Eastern Time) on each
business day that the NYSE is open. The net asset value is determined by
dividing the value of the fund's net assets attributable to a class of shares by
the number of shares outstanding for that class. Except for the Money Market
Fund, the funds use market prices in valuing portfolio securities, but may use
fair value estimates, as determined by HL Advisors under the direction of the
Board of Directors, if reliable market prices are not available. Fair value
pricing may be used by a fund when current market values are unavailable or when
an event occurs after the close of the exchange on which the fund's portfolio
securities are principally traded that is likely to have changed the value of
the securities. The use of fair value pricing by a fund may cause the net asset
value of its shares to differ significantly from the net asset value that would
be calculated using current market values. The Money Market Fund's assets and
debt securities with remaining maturities of 60 days or less are valued at
amortized cost.
The assets of the Money Market Fund are valued at their amortized cost pursuant
to procedures established by the Board of Directors. Foreign securities are
valued on the basis of quotations from the primary market in which they are
traded, and are translated from the local currency into U.S. dollars using
current exchange rates. With respect to all funds, short-term investments that
will mature in 60 days or less are also valued at amortized cost, which
approximates market value.
Trading on many foreign securities markets is completed at various times before
the close of the NYSE or on days the NYSE is not open for business.
Consequently, the calculation of a fund's net asset value may take place at a
time that is different than when prices are determined for certain foreign
funds. As a result, events affecting the values of foreign portfolio securities
that occur after the close of the NYSE will not be reflected in a fund's
calculation of net asset value.
DIVIDENDS AND DISTRIBUTIONS
The shareholders of each fund are entitled to receive such dividends and
distributions as may be declared by each fund's Board of Directors, from time to
time based upon the investment performance of the assets making up that fund's
portfolio. The current policy for each fund, except the Money Market Fund, is to
pay dividends from net investment income and to make distributions of realized
capital gains, if any, at least once each year. The Money Market Fund declares
dividends on a daily basis and pays them monthly.
Such dividends and distributions will be automatically invested in additional
full or fractional shares monthly on the last business day of each month at the
per share net asset value on that date. Provision is also made to pay such
dividends and distributions in cash if requested. Such dividends and
distributions will be in cash or in full or fractional shares of the fund at net
asset value.
EXCHANGE PRIVILEGES
Contractholders and policyholders may exchange shares in each fund as indicated
by the accompanying insurance product prospectus. The funds are intended to be
long-term investment vehicles and are not designed to provide investors with a
means of speculating on short-term market movements. Investors who engage in
excessive account activity generate additional costs which are borne by all of
the funds' shareholders. In order to minimize such costs, the funds reserve the
right to reject any purchase request that is reasonably deemed to be disruptive
to efficient portfolio management, either because of the timing of the
investment or previous excessive trading by the contractholder/policyholder.
FEDERAL INCOME TAXES
Each fund has elected and intends to continue qualifying under Subchapter M of
the Internal Revenue Code of 1986, as amended. Each fund intends to distribute
all of its net income and gains to shareholders. Because the shares are
purchased only through products that defer taxes, these distributions generally
will not be considered taxable income to you at the time of distribution. When
appropriate each fund will inform contractholders or policyholders of the amount
and nature of such income and gains.
Each fund may be subject to a 4% nondeductible excise tax as well as an income
tax measured with respect to certain undistributed amounts of income
HARTFORD HLS MUTUAL FUNDS 41
<PAGE>
FURTHER INFORMATION ON THE FUNDS
- --------------------------------------------------------------------------------
and capital gain. Each fund expects to make such additional distributions of net
investment income as are necessary to avoid the application of these taxes. For
a discussion of the tax implications of a purchase or sale of the funds' shares
by the insurer, reference should be made to the section entitled "Federal Tax
Considerations" in the appropriate insurance product prospectus.
If eligible, each fund may make an election to pass through to its shareholder,
Hartford Life, a credit for any foreign taxes paid during the year. If such an
election is made, the pass-through of the foreign tax credit will result in
additional taxable income and income tax to Hartford Life. 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 Hartford
Life.
BROKERAGE COMMISSIONS
Although the rules of the National Association of Securities Dealers, Inc.
prohibit its members from seeking orders for the execution of investment company
portfolio transactions on the basis of their sales of investment company shares,
under such rules, sales of investment company shares may be considered in
selecting brokers to effect portfolio transactions. Accordingly, some portfolio
transactions are, subject to such rules and to obtaining best prices and
executions, effected through dealers who sell shares of the funds.
PERFORMANCE RELATED INFORMATION
The funds may advertise performance related information. Performance information
about a fund is based on the fund's past performance only and is no indication
of future performance.
Each fund may include its total return in advertisements or other sales
material. When a fund advertises its total return, it will usually be calculated
for one year, five years, and ten years or some other relevant period if the
fund has not been in existence for at least ten years. Total return is measured
by comparing the value of an investment in the fund at the beginning of the
relevant period to the value of the investment at the end of the period
(assuming immediate reinvestment of any dividends or capital gains
distributions).
The Money Market Fund may advertise yield and effective yield. The yield of each
of those funds is based upon the income earned by the fund over a seven-day
period and then annualized, i.e. the income earned in the period is assumed to
be earned every seven days over a 52-week period and stated as a percentage of
the investment. Effective yield is calculated similarly but when annualized, the
income earned by the investment is assumed to be reinvested in fund shares and
thus compounded in the course of a 52-week period.
The funds are offered exclusively through variable insurance products and to
certain qualified retirement plans. Performance information presented for the
funds should not be compared directly with performance information of other
insurance products or retirement plans without taking into account charges and
expenses payable with respect to these insurance products or retirement plans.
Such charges and expenses are not reflected in the funds' performance
information and will reduce an investor's return under the insurance products or
retirement plans.
DISTRIBUTOR, CUSTODIAN AND TRANSFER AGENT
Hartford Securities Distribution Company, Inc., 200 Hopmeadow Street, Simsbury,
CT 06089, serves as distributor to the funds.
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, serves as custodian of each fund's assets.
Hartford Life Insurance Company, 200 Hopmeadow Street, Simsbury, CT 06089,
serves as Transfer and Dividend Disbursing Agent for the funds.
42 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD CAPITAL APPRECIATION HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IB shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IB shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IB - PERIOD ENDED:
12/31/99(1) 4/1/98-12/31/98(1)
------------------ ------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $6.437 $6.486
Net investment income (loss) 0.150 0.013
Net realized and unrealized gain (loss)
on investments 1.503 0.094
----------------- -----------------------
Total from investment operations 1.653 0.107
Less distributions:
Dividends from net investment income (0.013) (0.156)
Distributions from net realized gain
on investments (1.979) 0.000
Return of capital 0.000 0.000
----------------- -----------------------
Total from distributions (1.992) (0.156)
----------------- -----------------------
Net increase (decrease) in net asset
value (0.339) (0.049)
Net asset value, end of period $6.098 $6.437
----------------- -----------------------
TOTAL RETURN 37.21% 1.65%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $22,993 $5,942
Ratio of expenses to average net assets 0.84% 0.82%
Ratio of net investment income (loss) to
average net assets 0.28% 0.30%
Portfolio turnover rate 66.40% 51.20%
</TABLE>
1 Per share amounts have been restated to reflect a reverse stock split which
was effective September 17, 1999.
HARTFORD HLS MUTUAL FUNDS 43
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD DIVIDEND AND GROWTH HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IB shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IB shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IB - PERIOD ENDED:
12/31/99(1) 4/1/98-12/31/98(1)
------------------ -----------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $2.267 $2.253
Net investment income (loss) 0.024 0.016
Net realized and unrealized gain (loss)
on investments 0.077 0.068
----------------- ----------------------
Total from investment operations 0.101 0.084
Less distributions:
Dividends from net investment income (0.034) (0.070)
Distributions from net realized gain
on investments (0.183) 0.000
Return of capital 0.000 0.000
----------------- ----------------------
Total from distributions (0.217) 0.070
----------------- ----------------------
Net increase (decrease) in net asset
value (0.116) 0.014
Net asset value, end of period $2.151 $2.267
----------------- ----------------------
TOTAL RETURN 5.12% 3.67%(3)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $16,087 $8,600
Ratio of expenses to average net assets 0.86% 0.85%(2)
Ratio of net investment income (loss) to
average net assets 1.42% 1.57%(2)
Portfolio turnover rate 55.90% 48.20%
</TABLE>
1 Per share amounts have been restated to reflect a reverse stock split which
was effective September 17, 1999.
2 Annualized.
3 Not Annualized.
44 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD GLOBAL LEADERS HLS FUND
These tables are intended to help you understand each fund's financial
performance of the Class IB shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IB shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IB - PERIOD ENDED:
12/31/99 9/30/98-12/31/98
--------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $1.285 $1.00
Net investment income (loss) 0.007 0.002
Net realized and unrealized gain (loss)
on investments 0.634 0.316
-------- -------
Total from investment operations 0.641 0.318
Less distributions:
Dividends from net investment income 0.000 (0.001)
Distributions from net realized gain
on investments (0.014) (0.032)
Return of capital 0.000 0.000
-------- -------
Total from distributions (0.014) (0.033)
-------- -------
Net increase (decrease) in net asset
value 0.627 0.285
Net asset value, end of period $1.912 $1.285
-------- -------
TOTAL RETURN 50.11% 31.82%(3)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $69 $39
Ratio of expenses to average net assets 1.04% 0.98%(2)
Ratio of net investment income (loss) to
average net assets 0.36%(3) 0.59%(1,2)
Portfolio turnover rate 207.40% 47.90%
</TABLE>
1 Management fees were waived until assets (excluding assets contributed by
companies affiliated with HL Advisors) reached $20 million. The ratio of
net investment income to average net assets would have been lower if
management fees were not waived.
2 Annualized.
3 Not Annualized.
HARTFORD HLS MUTUAL FUNDS 45
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD GROWTH AND INCOME HLS FUND
These tables are intended to help you understand each fund's financial
performance of the Class IB shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IB shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IB - PERIOD ENDED:
12/31/99 5/29/98-12/31/98
--------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $1.185 $1.000
Net investment income (loss) 0.006 0.009
Net realized and unrealized gain (loss)
on investments 0.250 0.179
-------- -----------------
Total from investment operations 0.256 0.188
Less distributions:
Dividends from net investment income (0.002) (0.003)
Distributions from net realized gain
on investments (0.009) 0.000
Return of capital 0.000 0.000
-------- -----------------
Total from distributions (0.011) (0.003)
-------- -----------------
Net increase (decrease) in net asset
value 0.245 0.185
Net asset value, end of period $1.430 $1.185
-------- -----------------
TOTAL RETURN 21.61% 18.82%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $14 $11
Ratio of expenses to average net assets 1.00% 0.44%(4)
Ratio of net investment income (loss) to
average net assets 0.45% 1.34%(1,2)
Portfolio turnover rate 53.80% 29.60%
</TABLE>
1 Annualized.
2 Management fees were waived until assets (excluding assets contributed by
companies affiliated with HL Advisors) reached $20 million. The ratio of
net investment income to average net assets would have been lower if
management fees were not waived.
46 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD INDEX HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IB shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IB shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IB -
PERIOD ENDED:
11/9/99-
12/31/99
---------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $3.922
Net investment income (loss) 0.004
Net realized and unrealized gain (loss) on
investments 0.298
-----
Total from investment operations 0.302
Less distributions:
Dividends from net investment income (0.032)
Distributions from net realized gain on
investments (0.003)
Return of capital 0.000
-----
Total from distributions (0.035)
-----
Net increase (decrease) in net asset value 0.267
Net asset value, end of period $4.189
-----
TOTAL RETURN 7.73%(2)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $11
Ratio of expenses to average net assets 0.61%(1)
Ratio of net investment income (loss) to average
net assets 0.77%(1)
Portfolio turnover rate 2.80%
</TABLE>
(1) Annualized.
(2) Not Annualized
HARTFORD HLS MUTUAL FUNDS 47
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IB shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IB shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IB - PERIOD ENDED:
12/31/99(1) 4/1/98-12/31/98(1)
------------------ -----------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $.1357 $1.396
Net investment income (loss) 0.017 0.004
Net realized and unrealized gain (loss)
on investments 0.519 (0.021)
----------------- -------------
Total from investment operations 0.536 (0.017)
Less distributions:
Dividends from net investment income (0.017) (0.022)
Distributions from net realized gain
on investments 0.000 0.000
Return of capital 0.000 0.000
----------------- -------------
Total from distributions (0.017) (0.022)
----------------- -------------
Net increase (decrease) in net asset
value 0.519 (0.039)
Net asset value, end of period $1.876 $1.357
----------------- -------------
TOTAL RETURN 39.61% (1.13%)(3)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $3,203 $663
Ratio of expenses to average net assets 0.96% 0.94%(2)
Ratio of net investment income (loss) to
average net assets 1.02% 0.71%(2)
Portfolio turnover rate 133.20% 157.40%
</TABLE>
(1) Per share amounts have been restated to reflect a reverse stock split which
was effective September 17, 1999.
(2) Annualized.
(3) Not Annualized.
48 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD MIDCAP HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IB shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IB shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IB -
PERIOD ENDED:
11/9/99-12/31/99
----------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $1.758
Net investment income (loss) 0.000
Net realized and unrealized gain (loss) on
investments 0.373
-----
Total from investment operations 0.373
Less distributions:
Dividends from net investment income 0.000
Distributions from net realized gain on
investments (0.078)
Return of capital 0.000
-----
Total from distributions (0.078)
-----
Net increase (decrease) in net asset value 0.295
Net asset value, end of period $2.053
-----
TOTAL RETURN 21.39%(2)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $36
Ratio of expenses to average net assets 0.97%(1)
Ratio of net investment income (loss) to average
net assets (0.32%)(1)
Portfolio turnover rate 120.70%
</TABLE>
(1) Annualized.
(2) Not Annualized.
HARTFORD HLS MUTUAL FUNDS 49
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD SMALL COMPANY HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IB shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IB shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IB - PERIOD ENDED:
12/31/99(1) 4/1/98-12/31/98(1)
------------------ ------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $1.323 $1.34
Net investment income (loss) (0.004) (0.002)
Net realized and unrealized gain (loss)
on investments 0.871 (0.015)
----------------- ---
Total from investment operations 0.867 (0.017)
Less distributions:
Dividends from net investment income 0.000 0.000
Distributions from net realized gain
on investments (0.003) 0.000
Return of capital 0.000 0.000
----------------- ---
Total from distributions (0.003) 0.000
----------------- ---
Net increase (decrease) in net asset
value 0.864 (0.017)
Net asset value, end of period $2.187 $1.323
----------------- ---
TOTAL RETURN 65.54% (1.30%)(3)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $10,200 $696
Ratio of expenses to average net assets 0.96% 0.95%(2)
Ratio of net investment income (loss) to
average net assets (0.63%) (0.46%)(2)
Portfolio turnover rate 181.30% 235.70%
</TABLE>
(1) Per share amounts have been restated to reflect a reverse stock split which
was effective September 17, 1999.
(2) Annualized.
(3) Not Annualized.
50 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD STOCK HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IB shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IB shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IB - PERIOD ENDED:
12/31/99(1) 4/1/98-12/31/98(1)
------------------ -----------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $11.884 $10.793
Net investment income (loss) 0.021 0.043
Net realized and unrealized gain (loss)
on investments 1.200 1.565
----------------- ----------------------
Total from investment operations 1.221 1.608
Less distributions:
Dividends from net investment income (0.056) (0.517)
Distributions from net realized gain
on investments (5.898) 0.000
Return of capital 0.000 0.000
----------------- ----------------------
Total from distributions (5.954) (0.517)
----------------- ----------------------
Net increase (decrease) in net asset
value (4.733) 1.091
Net asset value, end of period $7.151 $11.884
----------------- ----------------------
TOTAL RETURN 19.57% 14.91%(3)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $47,439 $10,167
Ratio of expenses to average net assets 0.66% 0.65%(2)
Ratio of net investment income (loss) to
average net assets 0.62% 0.73%(2)
Portfolio turnover rate 38.50% 27.10%
</TABLE>
1 Per share amounts have been restated to reflect a reverse stock split which
was effective September 17, 1999.
2 Annualized.
3 Not Annualized
HARTFORD HLS MUTUAL FUNDS 51
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD ADVISERS HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IB shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IB shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IB - PERIOD ENDED:
12/31/99(1) 4/1/98-12/31/98(1)
------------------ ------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $3.577 $3.371
Net investment income (loss) 0.061 0.034
Net realized and unrealized gain (loss)
on investments 0.221 0.367
----------------- ---
Total from investment operations 0.282 0.401
Less distributions:
Dividends from net investment income (0.064) (0.195)
Distributions from net realized gain
on investments (0.829) 0.000
Return of capital 0.000 0.000
----------------- ---
Total from distributions (0.893) (0.195)
----------------- ---
Net increase (decrease) in net asset
value (0.611) 0.206
Net asset value, end of period $2.966 $3.577
----------------- ---
TOTAL RETURN 10.39% 11.96%(3)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $137,318 $34,714
Ratio of expenses to average net assets 0.83% 0.83%(2)
Ratio of net investment income (loss) to
average net assets 2.28% 2.22%(2)
Portfolio turnover rate 38.40% 36.70%
</TABLE>
(1) Per share amounts have been restated to reflect a reverse stock split which
was effective September 17, 1999.
(2) Annualized.
(3) Not Annualized.
52 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD INTERNATIONAL ADVISERS HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IB shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IB shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IB -
PERIOD ENDED:
11/9/99-
12/31/99
--------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $1.300
Net investment income (loss) 0.004
Net realized and unrealized gain (loss) on
investments 0.118
-------------
Total from investment operations 0.122
Less distributions:
Dividends from net investment income (0.025)
Distributions from net realized gain on
investments 0.000
Return of capital 0.000
-------------
Total from distributions (0.025)
-------------
Net increase (decrease) in net asset value 0.097
Net asset value, end of period $1.397
-------------
TOTAL RETURN 9.35%(2)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $11
Ratio of expenses to average net assets 1.03%(1)
Ratio of net investment income (loss) to average
net assets 2.42%(1)
Portfolio turnover rate 141.50%
</TABLE>
(1) Annualized.
(2) Not Annualized.
HARTFORD HLS MUTUAL FUNDS 53
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD BOND HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IB shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IB shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IB - PERIOD ENDED:
12/31/99(1) 4/1/98-12/31/98(1)
------------------ ------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $1.083 $1.075
Net investment income (loss) 0.061 0.023
Net realized and unrealized gain (loss)
on investments (0.084) 0.040
----------------- ---
Total from investment operations (0.023) 0.063
Less distributions:
Dividends from net investment income (0.057) (0.055)
Distributions from net realized gain
on investments (0.008) 0.000
Return of capital 0.000 0.000
----------------- ---
Total from distributions (0.065) (0.055)
----------------- ---
Net increase (decrease) in net asset
value (0.088) 0.008
Net asset value, end of period $0.995 $1.083
----------------- ---
TOTAL RETURN (2.19%) 5.89%(3)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $15,818 $5,285
Ratio of expenses to average net assets 0.70% 0.69%(2)
Ratio of net investment income (loss) to
average net assets 5.91% 5.54%(2)
Portfolio turnover rate 110.70% 122.30%
Current Yield(4) 6.82% 5.72%
</TABLE>
(1) Per share amounts have been restated to reflect a reverse stock split which
was effective September 17, 1999.
(2) Annualized.
(3) Not Annualized.
(4) Not Audited.
54 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD HIGH YIELD HLS FUND
These tables are intended to help you understand each fund's financial
performance of the Class IB shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IB shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IB - PERIOD ENDED:
12/31/99 9/30/98-12/31/98
--------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $1.017 $1.000
Net investment income (loss) 0.085 0.022
Net realized and unrealized gain (loss)
on investments (0.039) 0.014
-------- -----------------
Total from investment operations 0.046 0.036
Less distributions:
Dividends from net investment income (0.058) (0.019)
Distributions from net realized gain
on investments 0.000 0.000
Return of capital 0.000 0.000
-------- -----------------
Total from distributions (0.058) (0.019)
-------- -----------------
Net increase (decrease) in net asset
value (0.012) 0.017
Net asset value, end of period $1.005 $1.017
-------- -----------------
TOTAL RETURN 4.49% 3.64%(2)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $102 $102
Ratio of expenses to average net assets 0.90% 0.53%(1)
Ratio of net investment income (loss) to
average net assets 8.18% 7.77%(1,3)
Portfolio turnover rate 46.90% 15.40%
Current Yield(4) 9.46% 8.65%
</TABLE>
(1) Annualized.
(2) Not Annualized.
(3) Management fees were waived until assets (excluding assets contributed by
companies affiliated with HL Advisors) reached $20 million. The ratio of
net investment income to average net assets would have been lower if
management fees were not waived.
(4) Not Audited.
HARTFORD HLS MUTUAL FUNDS 55
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD MORTGAGE SECURITIES HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IB shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IB shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IB -
PERIOD ENDED:
11/9/99-
12/31/99
--------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $1.107
Net investment income (loss) 0.009
Net realized and unrealized gain (loss) on
investments (0.016)
-------------
Total from investment operations (0.007)
Less distributions:
Dividends from net investment income (0.061)
Distributions from net realized gain on
investments 0.000
Return of capital 0.000
-------------
Total from distributions (0.061)
-------------
Net increase (decrease) in net asset value (0.068)
Net asset value, end of period $1.039
-------------
TOTAL RETURN (0.60%)(2)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $9
Ratio of expenses to average net assets 0.66%(1)
Ratio of net investment income (loss) to average
net assets 5.80%(1)
Portfolio turnover rate 472.00%
Current Yield(3) 6.64%
</TABLE>
(1) Annualized.
(2) Not Annualized.
(3) Not Audited.
56 HARTFORD HLS MUTUAL FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HARTFORD MONEY MARKET HLS FUND, INC.
These tables are intended to help you understand each fund's financial
performance of the Class IB shares since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor in Class IB shares would have earned or lost
on an investment in each fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with each fund's financial statements and financial highlights,
are included in the annual report which is available upon request.
<TABLE>
<CAPTION>
CLASS IB - PERIOD ENDED:
12/31/99 4/1/98-12/31/98
--------- ----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $1.000 $1.000
Net investment income (loss) 0.068 0.037
Net realized and unrealized gain (loss)
on investments 0.000 0.000
-------- ---------------
Total from investment operations 0.068 0.037
Less distributions:
Dividends from net investment income (0.068) (0.037)
Distributions from net realized gain
on investments 0.000 0.000
Return of capital 0.000 0.000
-------- ---------------
Total from distributions (0.068) (0.037)
-------- ---------------
Net increase (decrease) in net asset
value 0.000 0.000
Net asset value, end of period $1.000 $1.000
-------- ---------------
TOTAL RETURN 4.70% 3.76%(2)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $8,804 $2,179
Ratio of expenses to average net assets 0.65% 0.64%(1)
Ratio of net investment income (loss) to
average net assets 4.63% 4.81%(1)
Portfolio turnover rate 0.000% 0.000%
Current Yield(3) 5.16% 4.61%
Effective Yield(3) 5.30% 4.71%
</TABLE>
(1) Annualized.
(2) Not Annualized.
(3) The yield information will fluctuate and publication of yield may not
provide a basis for comparison with bank deposits, other investments which
are insured and/or pay a fixed yield for a stated period of time, or other
investment companies. In addition, information may be of limited use for
comparative purposes because it does not reflect charges imposed at the
Separate Account level which, if included, would decrease the yield. These
figures have not been audited.
HARTFORD HLS MUTUAL FUNDS 57
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD GLOBAL HEALTH HLS FUND
HARTFORD GLOBAL TECHNOLOGY HLS FUND
HARTFORD CAPITAL APPRECIATION HLS FUND, INC.
HARTFORD DIVIDEND AND GROWTH HLS FUND, INC.
HARTFORD GLOBAL LEADERS HLS FUND
HARTFORD GROWTH AND INCOME HLS FUND
HARTFORD INDEX HLS FUND, INC.
HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND, INC.
HARTFORD MIDCAP HLS FUND, INC.
HARTFORD SMALL COMPANY HLS FUND, INC.
HARTFORD STOCK HLS FUND, INC.
HARTFORD ADVISERS HLS FUND, INC.
HARTFORD INTERNATIONAL ADVISERS HLS FUND, INC.
HARTFORD BOND HLS FUND, INC.
HARTFORD HIGH YIELD HLS FUND
HARTFORD MORTGAGE SECURITIES HLS FUND, INC.
HARTFORD MONEY MARKET HLS FUND, INC.
CLASS IA and CLASS IB SHARES
P.O. Box 5085
Hartford, CT 06102-5085
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 HLS Funds, c/o Individual
Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085 or call 1-800-862-6668.
Date of Prospectus: May 1, 2000
Date of Statement of Additional Information: May 1, 2000
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
GENERAL INFORMATION........................................................3
INVESTMENT OBJECTIVES AND POLICIES.........................................3
MANAGEMENT OF THE HLS FUNDS...............................................14
INVESTMENT MANAGEMENT ARRANGEMENTS........................................18
HLS FUND EXPENSES.........................................................21
DISTRIBUTION ARRANGEMENTS.................................................22
PORTFOLIO TRANSACTIONS AND BROKERAGE......................................23
DETERMINATION OF NET ASSET VALUE..........................................25
PURCHASE AND REDEMPTION OF SHARES.........................................26
OWNERSHIP AND CAPITALIZATION OF THE HLS FUNDS.............................26
INVESTMENT PERFORMANCE....................................................27
TAXES.....................................................................34
CUSTODIAN.................................................................36
TRANSFER AGENT SERVICES...................................................36
DISTRIBUTOR...............................................................36
INDEPENDENT PUBLIC ACCOUNTANTS............................................36
OTHER INFORMATION.........................................................37
FINANCIAL STATEMENTS......................................................37
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GENERAL INFORMATION
This SAI relates to seventeen mutual funds (each a "HLS Fund" and
together the "HLS Funds") which serve as the underlying investment vehicles for
variable annuity and variable life insurance separate accounts of Hartford Life
Insurance Company and Hartford Life and Annuity Insurance Company and for
certain qualified retirement plans. Each HLS Fund offers two classes of shares:
Class IA and Class IB. HL Investment Advisors, LLC ("HL Advisors") is the
investment adviser and Hartford Life Insurance Company ("Hartford Life") is the
administrator of each HLS Fund. HL Advisors and Hartford Life are indirect
majority owned subsidiaries of The Hartford Financial Services Group, Inc.,
("The Hartford") an insurance holding company with over $165 billion in assets.
In addition, Wellington Management Company, LLP ("Wellington Management") and
Hartford Investment Management Company ("HIMCO-Registered Trademark-"), an
affiliate of HL Advisors, are sub-advisers to certain of the HLS Funds. HIMCO
is a wholly-owned subsidiary of The Hartford. The Hartford also sponsors a
family of mutual funds that is offered directly to the public. Hartford
Investment Financial Services Company ("HIFSCO"), an affiliate of The
Hartford, is the investment manager and principal underwriter to that fund
family.
INVESTMENT OBJECTIVES AND POLICIES
A. FUNDAMENTAL RESTRICTIONS OF THE FUNDS
Each HLS Fund has adopted the following fundamental investment
restrictions which may not be changed without approval of a majority of the
applicable HLS 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 an HLS Fund
represented at a meeting if the holders of more than 50% of the outstanding
shares of the HLS Fund are present in person or by proxy or (2) the holders of
more than 50% of the outstanding shares of the HLS Fund.
The investment objective and principal investment strategies of each
HLS Fund are set forth in the Prospectus. Set forth below are the fundamental
investment policies applicable to each HLS Fund followed by the non-fundamental
policies applicable to each HLS Fund.
Each HLS 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 HLS 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 HLS Fund's investment policies, and reverse repurchase agreements and
mortgage dollar rolls.
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.
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3. Act as an underwriter, except to the extent that in connection
with the disposition of portfolio securities, a HLS Fund may be deemed to be an
underwriter for purposes of the Securities Act of 1933 (the "1933 Act").
4. Purchase or sell real estate, except that an HLS 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 HLS Fund as a result of the ownership of
securities and (vi) invest in real estate limited partnerships.
5. Invest in commodities, except that an HLS 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 HLS Fund's investment policies.
6. Make loans, except that an HLS Fund (i) may lend portfolio
securities in accordance with the HLS Fund's investment policies in amounts up
to 33-1/3% of the HLS Fund's total assets taken at market value, (ii) enter into
fully collateralized repurchase agreements, and (iii) purchase debt obligations
in which the HLS 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 policy does not apply to the
Global Technology HLS Fund or the Global Health HLS Fund. 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. The Global
Health HLS Fund may invest more than 25% of its assets in an industry within
the health care sector. This fund will normally invest at least 25% of its
total assets, in the aggregate, in the following sector groups: drugs, medical
products and health services. The Global Technology HLS Fund may invest more
than 25% of its assets in an industry within the technology sector. This fund
will normally invest at least 25% of its total assets, in the aggregate, in the
following sector groups: computers and equipment, software and services,
electronics and communications equipment.
In addition, each HLS Fund, except the Global Health HLS Fund and
Global Technology HLS Fund, will operate as a "diversified" fund within the
meaning of the 1940 Act. This means that with respect to 75% of an HLS Fund's
total assets, a Fund will not purchase securities of an issuer (other than cash,
cash items or securities issued or guaranteed by the U.S. Government, its
agencies, instrumentalities or authorities), if
(a) such purchase would cause more than 5% of the HLS 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
HLS Fund.
Each of the Global Health HLS Fund and Global Technology HLS Fund will
operate as a non-diversified fund within the interpretation of the Securities
and Exchange Commission of the 1940 Act. This means that each of the Global
Health HLS Fund and Global Technology HLS Fund is permitted to invest more than
5% of each fund's net assets in a particular issuer.
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 an HLS 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 HLS Funds in certain
states, the Board of Directors may, in its sole discretion, adopt restrictions
on investment policy more restrictive than those described above. Should the
Board of Directors determine that any such more restrictive policy is no longer
in the best interest of an HLS Fund and its shareholders, the HLS Fund may cease
offering shares in the state involved and the Board of Directors may
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revoke such restrictive policy. Moreover, if the states involved shall no longer
require any such restrictive policy, the Board of Directors may, in its sole
discretion, revoke such policy.
B. NON-FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE FUNDS.
The following restrictions are designated as non-fundamental and may be
changed by the Board of Directors without the approval of shareholders.
Each HLS Fund may not:
1. Pledge, mortgage or hypothecate its assets, except to the extent
required to secure permitted borrowings. This investment restriction shall not
apply to any required segregated account or securities lending arrangements. The
deposit of underlying securities and other assets in escrow and collateral
arrangements with respect to margin for futures contracts and related options is
not deemed to be a pledge or other encumbrance.
2. Purchase any securities on margin (except that an HLS Fund may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of portfolio securities) or make short sales of securities
(except short sales against the box) or maintain a short position. The deposit
or payment by an HLS Fund of initial or maintenance margin in connection with
futures contracts or related options transactions is not considered the purchase
of a security on margin.
3. Purchase securities which are illiquid if, as a result of any
such purchase, more than 15% of its net assets (10% for the Money Market HLS
Fund) would consist of such securities.
4. Purchase securities while outstanding borrowings exceed 5% of an
HLS Fund's total assets.
5. Purchase interests in oil, gas, or other mineral exploration
programs or mineral leases; however, this policy will not prohibit the
acquisition of securities of companies engaged in the production or transmission
of oil, gas, or other minerals.
6. Invest for the purpose of exercising control over or management
of any company.
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 an HLS Fund's assets will
not be considered a violation of the restriction.
ALL FUNDS
U.S. TREASURY DEPARTMENT DIVERSIFICATION REGULATIONS. The U.S. Treasury
Department has issued diversification regulations under Section 817 of the
Internal Revenue Code. If a mutual fund underlying a variable contract, other
than a pension plan contract, is not adequately diversified within the terms of
these regulations, the contract owner will have adverse income tax consequences.
These regulations provide, among other things, that a mutual fund shall be
considered adequately diversified if (i) no more than 55% of the value of the
assets in the fund is represented by any one investment; (ii) no more than 70%
of the value of the assets in the fund is represented by any two investments;
(iii) no more than 80% of the value of the assets in the fund is represented by
any three investments and (iv) no more than 90% of the value of the total assets
of the fund is represented by any four investments. In determining whether the
diversification standards are met, each United States Government Agency or
instrumentality shall be treated as a separate issuer.
MISCELLANEOUS INVESTMENT STRATEGIES AND RISKS The investment objective
and principal investment strategies for each HLS Fund are discussed in the HLS
Fund's prospectus. A further description of certain
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investment strategies of each HLS Fund is set forth below. The percentage limits
described in the sections below are based on market value and are determined as
of the time securities are purchased.
MONEY MARKET INSTRUMENTS AND TEMPORARY INVESTMENT STRATEGIES In
addition to the Money Market HLS Fund which may hold cash and invest in money
market instruments at any time, all other HLS Funds may hold cash and invest in
high quality money market instruments under appropriate circumstances as
determined by HIMCO or Wellington Management, subject to the overall supervision
of HL Advisors. Such HLS Funds may invest up to 100% of their 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 A repurchase agreement is an agreement by which
the seller of a security agrees to repurchase the security sold at a mutually
agreed upon time and price. It may also be viewed as the loan of money by an HLS
Fund to the seller. The resale price by the HLS Fund would be in excess of the
purchase price, reflecting an agreed upon market interest rate.
Each HLS Fund is permitted to enter into fully collateralized
repurchase agreements. The HLS Fund's Board of Directors has delegated to HIMCO
and Wellington Management the responsibility of evaluating the creditworthiness
of the banks and securities dealers with which the HLS Funds will engage in
repurchase agreements.
HIMCO or Wellington Management will monitor such transactions to ensure
that the value of underlying collateral will be at least equal at all times to
the total amount of the repurchase obligation, including the accrued interest.
If the seller defaults, the HLS 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.
REVERSE REPURCHASE AGREEMENTS Each HLS Fund may also enter into reverse
repurchase agreements. Reverse repurchase agreements involve sales by an HLS
Fund of portfolio assets concurrently with an agreement by an HLS Fund to
repurchase the same assets at a later date at a fixed price. Reverse repurchase
agreements carry the risk that the market value of the securities which an HLS
Fund is obligated to repurchase may decline below the repurchase price. A
reverse repurchase agreement is viewed as a collateralized borrowing by an HLS
Fund. Borrowing magnifies the potential for gain or loss on the portfolio
securities of an HLS Fund and, therefore, increases the possibility of
fluctuation in an HLS Fund's net asset value. An HLS Fund will establish a
segregated account with the HLS Fund's custodian bank in which an HLS Fund will
maintain liquid assets equal in value to an HLS Fund's obligations in respect of
reverse repurchase agreements.
DEBT SECURITIES Each HLS Fund is permitted to invest in debt securities
including: (1) securities issued or guaranteed as to principal or interest by
the U.S. Government, its agencies or instrumentalities; (2) non-convertible debt
securities issued or guaranteed by U.S. corporations or other issuers (including
foreign governments or corporations); (3) asset-backed securities (Global Health
HLS Fund, Global Technology HLS Fund, International Opportunities HLS Fund,
International Advisers HLS Fund, Advisers HLS Fund, Bond HLS Fund, High Yield
HLS Fund, Mortgage Securities HLS Fund and Money Market HLS Fund only); (4)
mortgage-related securities, including collateralized mortgage obligations
("CMO's") (International Opportunities HLS Fund, International Advisers HLS
Fund, Advisers HLS Fund, Bond HLS Fund, High Yield HLS Fund and Mortgage
Securities HLS Fund only); and (5) securities issued or guaranteed as to
principal or interest by a sovereign government or one of
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its agencies or 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 Money Market HLS Fund is permitted
to invest only in high quality, short term instruments as determined by Rule
2a-7 under the 1940 Act. Each of the other HLS Funds is permitted to invest in
debt securities rated within the four highest rating categories (i.e., Aaa, Aa,
A or Baa by Moody's or AAA, AA, A or BBB by S&P) (or, if unrated, securities of
comparable quality as determined by HIMCO or Wellington Management). These
securities are generally referred to as "investment grade securities." Each
rating category has within it different gradations or sub-categories. If an HLS
Fund is authorized to invest in a certain rating category, the HLS Fund is also
permitted to invest in any of the sub-categories or gradations within that
rating category. If a security is downgraded to a rating category which does not
qualify for investment, HIMCO or Wellington Management will use its discretion
on whether to hold or sell based upon its opinion on the best method to maximize
value for shareholders over the long term. Debt securities carrying the fourth
highest rating (i.e., "Baa" by Moody's and "BBB" by S&P), and unrated securities
of comparable quality (as determined by HIMCO or Wellington Management) are
viewed to have adequate capacity for payment of principal and interest, but do
involve a higher degree of risk than that associated with investments in debt
securities in the higher rating categories and such securities lack outstanding
investment characteristics and do have speculative characteristics.
HIGH YIELD-HIGH RISK SECURITIES Each of the Global Health HLS Fund,
Global Technology HLS Fund, Capital Appreciation HLS Fund, Dividend and Growth
HLS Fund, Global Leaders HLS Fund, Growth and Income HLS Fund, MidCap HLS Fund,
Small Company HLS Fund, Stock HLS Fund, Advisers HLS Fund and International
Opportunities HLS Fund is permitted to invest up to 5%, and the International
Advisers HLS Fund is permitted to invest up to 15%, of its assets in securities
rated as low as "C" by Moody's or "CC" by S&P or of comparable quality if not
rated. The Bond HLS Fund is permitted to invest up to 20% of its assets in
securities rated in the highest level below investment grade (i.e., "Ba" for
Moody's or "BB" by S&P), or if unrated, securities determined to be of
comparable quality by HIMCO. Although the High Yield HLS Fund is permitted to
invest up to 100% of its total assets in securities rated below investment
grade, no more than 10% of total assets will be invested in securities rated
below B3 by Moody's or B- by S&P, or if unrated, determined to be of comparable
quality by HIMCO. Securities rated below investment grade are commonly referred
to as "high yield-high risk securities" or "junk bonds". Each rating category
has within it different gradations or sub-categories. For instance the "Ba"
rating for Moody's includes "Ba3", "Ba2" and "Ba1". Likewise the S&P rating
category of "BB" includes "BB+", "BB" and "BB-". If an HLS Fund is authorized to
invest in a certain rating category, the HLS 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. Descriptions of the debt securities
ratings system, including their speculative characteristics attributable to each
ratings category, are set forth as an appendix to this SAI. These securities are
considered speculative with respect to the issuer's capacity to pay interest and
repay principal in accordance with the terms of the obligations. Accordingly, it
is possible that these types of factors could, in certain instances, reduce the
value of securities held by an HLS Fund with a commensurate effect on the value
of an HLS Fund's shares. If a security is downgraded to a rating category which
does not qualify for investment, HIMCO or Wellington Management will use its
discretion on whether to hold or sell based upon its opinion on the best method
to maximize value for shareholders over the long term.
MORTGAGE-RELATED SECURITIES The mortgage-related securities in which
the International Opportunities HLS Fund, International Advisers HLS Fund,
Advisers HLS Fund, Bond HLS Fund, High Yield HLS Fund and Mortgage Securities
HLS Fund may invest include interests in pools of mortgage loans made by lenders
such as savings and loan institutions, mortgage bankers, commercial banks and
others. Pools of mortgage loans are assembled for sale to investors (such as the
HLS Funds) by various governmental, government-related and private
organizations. These HLS Funds may also invest in similar mortgage-related
securities which provide funds for multi-family residences or commercial real
estate properties.
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The value of these securities may be significantly affected by interest
rates, the market's perception of the issuers and the creditworthiness of the
parties involved. These securities may also be subject to prepayment risk. The
yield characteristics of the mortgage securities differ from those of
traditional debt securities. Among the major differences are that interest and
principal payments are made more frequently on mortgage securities, usually
monthly, and that principal may be prepaid at any time because the underlying
mortgage loans or other assets generally permit prepayment at any time.
Evaluating the risks associated with prepayment and determining the rate at
which prepayment is influenced by a variety of economic, geographic,
demographic, social and other factors including interest rate levels, changes in
housing needs, net equity built by mortgagors in the mortgaged properties, job
transfers, and unemployment rates. If an HLS Fund purchases these securities at
a premium, a prepayment rate that is faster than expected will reduce yield to
maturity, while a prepayment rate that is slower than expected will have the
opposite effect of increasing yield to maturity. Conversely, if an HLS Fund
purchases these securities at a discount, faster than expected prepayments will
increase, while slower than expected prepayments will reduce, yield to maturity.
Amounts available for reinvestment are likely to be greater during a period of
declining interest rates and, as a result, are likely to be reinvested at lower
interest rates than during a period of declining interest rates and, as a
result, are likely to be reinvested at lower interest rates than during a period
of rising interest rates. Accelerated prepayments on securities purchased by an
HLS Fund at a premium also impose a risk of loss of principal because the
premium may not have been fully amortized at the time the principal is repaid in
full.
The mortgage securities in which each HLS Fund invests differ from
conventional bonds in that principal is paid back over the life of the mortgage
securities rather than at maturity. As a result, the holder of the mortgage
securities (i.e., an HLS Fund) receives monthly scheduled payments of principal
and interest, and may receive unscheduled principal payments representing
prepayments on the underlying mortgages. When the holder reinvests the payments
and any unscheduled prepayments of principal it receives, it may receive a rate
of interest which is lower than the rate on the existing mortgage securities.
For this reason, mortgage securities are less effective than other types of U.S.
Government securities as a means of "locking in" long-term interest rates.
ASSET-BACKED SECURITIES The Global Health HLS Fund, Global Technology
HLS Fund, International Opportunities HLS Fund, International Advisers HLS Fund,
Advisers HLS Fund, Bond HLS Fund, High Yield HLS Fund, Mortgage Securities HLS
Fund and the Money Market HLS Fund may invest in asset-backed securities. The
securitization techniques used for asset-backed securities are similar to those
used for mortgage-related securities. The collateral for these securities has
included home equity loans, automobile and credit card receivables, boat loans,
computer leases, airplane leases, mobile home loans, recreational vehicle loans
and hospital accounts receivables. These HLS Funds may invest in these and other
types of asset-backed securities that may be developed in the future. These
securities may be subject to the risk of prepayment or default. The ability of
an issuer of asset-backed securities to enforce its security interest in the
underlying securities may be limited.
EQUITY SECURITIES Each HLS Fund except the Bond HLS Fund and High Yield
HLS Fund as described below and except the Mortgage Securities HLS Fund and
Money Market HLS Fund may invest all or a portion of their assets in equity
securities which include common stocks, preferred stocks (including convertible
preferred stock) and rights to acquire such securities. In addition, these HLS
Funds may invest in securities such as bonds, debentures and corporate notes
which are convertible into common stock at the option of the holder. The Bond
HLS Fund and High Yield HLS Fund may each invest up to 15% of its total assets
in preferred stocks, convertible securities, and securities carrying warrants to
purchase equity securities. The Bond HLS Fund and High Yield HLS Fund will not
invest in common stocks directly, but may retain, for reasonable periods of
time, common stocks acquired upon conversion of debt securities or upon exercise
of warrants acquired with debt securities.
SMALL CAPITALIZATION SECURITIES All HLS Funds except the Mortgage
Securities HLS Fund and Money Market HLS Fund may invest in equity securities
(including securities issued in initial public offerings) of companies with
market capitalizations within the range represented by the Russell 2000 Index
("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, may have less
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historical data with respect to operations and management and may be more
dependent on a limited number of key employees. As a result, Small
Capitalization Securities are often less marketable and experience a higher
level of price volatility than securities of larger or more well-established
companies. Small Capitalization Securities may be more likely to be offered in
initial public offerings. Because securities issued in initial public offerings
are being offered to the public for the first time, the market for such
securities may be inefficient and less liquid.
NON-U.S. ISSUERS Each HLS Fund is permitted to invest a portion of
its assets in securities of non-U.S. issuers, 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. Generally, a non-U.S. company is considered to
be a company that is domiciled in a country other than the United States. When
selecting securities of non-U.S. issuers, HIMCO or Wellington Management will
evaluate the economic and political climate and the principal securities markets
of the country in which an issuer is located.
The Capital Appreciation HLS Fund, Dividend and Growth HLS Fund, Growth
and Income HLS Fund, Small Company HLS Fund, MidCap HLS Fund, Stock HLS Fund and
Advisers HLS Fund are permitted to invest up to 20% of their assets in non-U.S.
issuers. The Money Market HLS Fund may invest up to 25% of its assets (provided
such assets are U.S. dollar denominated), the High Yield HLS Fund and Bond HLS
Fund are permitted to invest up to 30% of their assets, and each of the
International Opportunities HLS Fund and International Advisers HLS Fund may
invest 100% of its assets in such issuers. Each of the High Yield HLS Fund and
Bond HLS Fund may also invest up to 10% of their total assets in securities
denominated in foreign currencies. The Global Leaders HLS Fund invests in at
least five countries, one of which is the United States; however, the fund has
no limit on the amount of assets that must be invested in each country. The
Global Health HLS Fund and Global Technology HLS Fund each invest in at least
three countries, one of which may be the United States; however, the funds have
no limit on the amount of assets that must be invested in each country. The
Global Health HLS Fund and Global Technology HLS Fund may invest in securities
denominated in any currency.
Investing in securities issued by non-U.S. issuers involves
considerations and potential risks not typically associated with investing in
obligations issued by U.S. issuers. Less information may be available about
non-U.S. issuers compared with U.S. issuers. For example, 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. In addition, 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 an HLS 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 HLS Funds may invest have historically experienced, and may continue
to experience, high rates of inflation, high interest rates, exchange rate trade
difficulties and unemployment. Some of these countries are also characterized by
political uncertainty or instability. Additional factors which may influence the
ability or willingness to service debt include, but are not limited to, a
country's cash flow situation, the availability of sufficient foreign exchange
on the date a
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payment is due, the relative size of its debt service burden to economy as a
whole, and its government's policy towards the IMF, the World Bank and other
international agencies.
From time to time, each of the International Advisers HLS Fund, Bond
HLS Fund and High Yield HLS Fund may invest up to 15%, 20% and 30% of their
respective total assets, and the Global Health HLS Fund, Global Technology HLS
Fund, Global Leaders HLS Fund and International Opportunities HLS Fund may
invest up to 25% of their assets in securities of issuers located in emerging
countries. Compared to the United States and other developed countries,
developing countries may have relatively unstable governments, economies based
on only a few industries, and securities markets that are less liquid and trade
a small number of securities. Prices on these exchanges tend to be volatile and,
in the past, securities in these countries have offered greater potential for
gain (as well as loss) than securities of companies located in developed
countries.
CURRENCY TRANSACTIONS Each HLS Fund, except the Index HLS Fund,
Mortgage Securities HLS Fund and Money Market HLS 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 an HLS 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 HLS Fund's underlying
securities. Further, the HLS Funds may enter into currency transactions only
with counterparties that HIMCO or Wellington Management deems to be
creditworthy.
The HLS Funds may also enter into options and futures contracts
relative to foreign currency to hedge against fluctuations in foreign currency
rates. See "Options and Futures Contracts" for a discussion of risk factors
relating to foreign currency transactions including options and futures
contracts related thereto.
OPTIONS AND FUTURES CONTRACTS In seeking to protect against the effect
of changes in equity market values, currency exchange rates or interest rates
that are adverse to the present or prospective position of the HLS Funds, for
cash flow management, and, to a lesser extent, to enhance returns, each HLS
Fund, except the Money Market HLS Fund, may employ certain hedging, income
enhancement and risk management techniques, including the purchase and sale of
options, futures and options on futures involving equity and debt securities and
foreign currencies, aggregates of equity and debt securities, indices of prices
of equity and debt securities and other financial indices. An HLS Fund's ability
to engage in these practices may be limited by tax considerations and certain
other legal considerations.
An HLS 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
HLS Fund. This strategy limits potential capital appreciation in the portfolio
securities subject to the put or call option.
The HLS Funds may also write covered put and call options and purchase
put and call options on foreign currencies to hedge against the risk of foreign
exchange fluctuations on foreign securities the particular HLS Fund holds in its
portfolio or that it intends to purchase. For example, if an HLS 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 an HLS Fund held
securities
-10-
<PAGE>
denominated in a foreign currency and anticipated a decline in the value of that
currency against the U.S. dollar, the HLS Fund could hedge against such a
decline by purchasing a put option on the foreign currency involved.
Aggregates are composites of equity or debt securities that are not
tied to a commonly known index. An index is a measure of the value of a group of
securities or other interests. An index assigns relative values to the
securities included in that index, and the index fluctuates with changes in the
market value of those securities. An HLS 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.
An HLS Fund may write covered options only. "Covered" means that, so
long as an HLS 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 liquid assets having a value equal to
the fluctuating market value of the optioned securities or currencies. An HLS
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, an HLS Fund
may purchase or sell foreign currency futures contracts, and write put and call
options and purchase put and call options on such futures contracts. For
example, an HLS Fund may use foreign currency futures contracts when it
anticipates a general weakening of the foreign currency exchange rate that could
adversely affect the market values of the HLS 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 HLS Fund and resulting transaction costs. When the
HLS Fund anticipates a significant foreign exchange rate increase while
intending to invest in a non-U.S. security, the HLS Fund may purchase a foreign
currency futures contract to hedge or partially hedge against a rise in foreign
exchange rates pending completion of the anticipated transaction. Such a
purchase of a futures contract would serve as a temporary measure to protect the
HLS Fund against any rise in the foreign exchange rate that may add additional
costs to acquiring the non-U.S. security position. The HLS 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 HLS Funds also may purchase call or put options on foreign currency
futures contracts to obtain a fixed foreign exchange rate at limited risk. An
HLS 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. An HLS 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. An HLS 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 an HLS 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 an HLS Fund writes a covered option on an
index, an HLS Fund will be required to deposit and maintain with a custodian
liquid assets 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 HLS Fund will deposit with the
custodian liquid assets equal in value to the deficiency.
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<PAGE>
To the extent that an HLS 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 HLS
Fund's portfolio, after taking into account the unrealized profits and
unrealized losses on any such contracts the HLS Fund has entered into. However,
options which are currently exercisable may be excluded in computing the 5%
limit. Adoption of this guideline will not limit the percentage of an HLS Fund's
assets at risk to 5%.
Although any one HLS Fund may not employ all or any of the foregoing
strategies, its use of options, futures and options thereon and forward currency
contracts (as described under "Currency Transactions") would involve certain
investment risks and transaction costs to which it might not be subject were
such strategies not employed. Such risks include: (1) dependence on the ability
of HIMCO or Wellington Management to predict movements in the prices of
individual securities, fluctuations in the general securities markets or market
sections and movements in interest rates and currency markets; (2) imperfect
correlation between movements in the price of the securities or currencies
hedged or used for cover; (3) the fact that skills and techniques needed to
trade options, futures contracts and options thereon or to use forward currency
contracts are different from those needed to select the securities in which an
HLS Fund invests; (4) lack of assurance that a liquid secondary market will
exist for any particular option, futures contract, option thereon or forward
contract at any particular time, which may affect an HLS Fund's ability to
establish or close out a position; (5) possible impediments to effective
portfolio management or the ability to meet current obligations caused by the
segregation of a large percentage of an HLS 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 an HLS Fund would have been in a better position had it
not used such a strategy at all.
SWAP AGREEMENTS Each HLS Fund, except the Index HLS Fund and Money
Market HLS 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 an HLS Fund's investment exposure
from one type of investment to another. For example, if an HLS Fund agreed to
exchange floating rate payments for fixed rate payments, the swap agreement
would tend to decrease the HLS Fund's exposure to rising interest rates. Caps
and floors have an effect similar to buying or writing options. Depending on how
they are used, swap agreements may increase or decrease the overall volatility
of an HLS Fund's investments and its share price and yield.
The HLS Funds will usually enter into interest rate swaps on a net
basis, i.e., where the two parties make net payments with an HLS Fund receiving
or paying, as the case may be, only the net amount of the two payments. The net
amount of the excess, if any, of an HLS Fund's obligations over its entitlement
with respect to each interest rate swap will be covered by an amount consisting
of liquid assets having an aggregate net asset value at least equal
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<PAGE>
to the accrued excess maintained by the HLS Fund's custodian in a segregated
account. If an HLS Fund enters into a swap on other than a net basis, the HLS
Fund will maintain in the segregated account the full amount of the HLS Fund's
obligations under each such swap. The HLS Fund may enter into swaps, caps,
collars and floors with member banks of the Federal Reserve System, members of
the New York Stock Exchange or other entities determined by HIMCO or Wellington
Management to be creditworthy. If a default occurs by the other party to such
transaction, an HLS 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 HLS 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 an HLS Fund will be able to enter into interest rate swaps or to
purchase interest rate caps, collars or floors at prices or on terms HIMCO or
Wellington Management, as appropriate, believes are advantageous to such HLS
Fund. In addition, although the terms of interest rate swaps, caps, collars and
floors may provide for termination, there can be no assurance that an HLS Fund
will be able to terminate an interest rate swap or to sell or offset interest
rate caps, collars or floors that it has purchased. Interest rate swaps, caps,
collars and floors are considered by the SEC to be illiquid securities.
The successful utilization of hedging and risk management transactions
requires skills different from those needed in the selection of an HLS Fund's
portfolio securities and depends on HIMCO's or Wellington Management's ability
to predict correctly the direction and degree of movements in interest rates.
Although the HLS Funds believe that use of the hedging and risk management
techniques described above will benefit the HLS Funds, if HIMCO's or Wellington
Management's judgment about the direction or extent of the movement in interest
rates is incorrect, an HLS Fund's overall performance would be worse than if it
had not entered into any such transactions. For example, if an HLS Fund had
purchased an interest rate swap or an interest rate floor to hedge against its
expectation that interest rates would decline but instead interest rates rose,
such HLS Fund would lose part or all of the benefit of the increased payments it
would receive as a result of the rising interest rates because it would have to
pay amounts to its counterparties under the swap agreement or would have paid
the purchase price of the interest rate floor. These activities are commonly
used when managing derivative investments.
ILLIQUID SECURITIES Each HLS Fund is permitted to invest in illiquid
securities. No illiquid securities will be acquired if upon the purchase more
than 10% of the Money Market HLS Fund's net assets or 15% of each other HLS
Fund's net assets would consist of such securities. "Illiquid Securities" are
securities that may not be sold or disposed of in the ordinary course of
business within seven days at approximately the price used to determine an HLS
Fund's net asset value. Each HLS 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. An HLS Fund may not be able to sell illiquid securities when
HIMCO or Wellington Management considers it desirable to do so or may have to
sell such securities at a price that is lower than the price that could be
obtained if the securities were more liquid. A sale of illiquid securities may
require more time and may result in higher dealer discounts and other selling
expenses than does the sale of securities that are not illiquid. Illiquid
securities also may be more difficult to value due to the unavailability of
reliable market quotations for such securities, and investment in illiquid
securities may have an adverse impact on net asset value.
Under current interpretations of the SEC Staff, the following types of
securities in which an HLS 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 an HLS Fund may invest that are not readily marketable.
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<PAGE>
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES Each HLS 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 HLS Funds generally purchase securities on a
when-issued basis with the intention of acquiring the securities, the HLS Funds
may sell the securities before the settlement date if HIMCO or Wellington
Management deems it advisable. At the time an HLS Fund makes the commitment to
purchase securities on a when-issued basis, the HLS Fund will record the
transaction and thereafter reflect the value, each day, of such security in
determining the net asset value of the HLS Fund. At the time of delivery of the
securities, the value may be more or less than the purchase price. An HLS Fund
will maintain, in a segregated account, liquid assets having a value equal to or
greater than the HLS Fund's purchase commitments; likewise an HLS Fund will
segregate securities sold on a delayed-delivery basis.
OTHER INVESTMENT COMPANIES Each HLS Fund, except the Index HLS Fund, is
permitted to invest in other investment companies. The investment companies in
which an HLS Fund would invest may or may not be registered under the 1940 Act.
Securities in certain countries are currently accessible to the HLS Funds only
through such investments. The investment in other investment companies is
limited in amount by the 1940 Act, and will involve the indirect payment of a
portion of the expenses, including advisory fees, of such other investment
companies. Generally, an HLS Fund will not purchase a security of an investment
company if, as a result, (1) more than 10% of the HLS 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 HLS Fund; or (3) more than 5% of the
HLS Fund's assets would be invested in any one such investment company.
PORTFOLIO SECURITIES LENDING Each of the HLS Funds may lend its
portfolio securities to broker/dealers and other institutions as a means of
earning interest income. The borrower will be required to deposit as collateral,
cash, cash equivalents, U.S. government securities or other high quality liquid
debt securities that at all times will be at least equal to 100% of the market
value of the loaned securities and such amount will be maintained in a
segregated account of the respective HLS Fund. While the securities are on loan
the borrower will pay the respective HLS 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 HLS Funds may lend securities only if: (1) each loan is fully secured by
appropriate collateral at all times; and (2) the value of all loaned securities
of any HLS Fund is not more than 33-1/3% of the HLS Fund's total assets taken at
the time of the loan (including collateral received in connection with any
loans).
MANAGEMENT OF THE HLS FUNDS
The business of each HLS Fund is managed by a Board of Directors, who
elect officers who are responsible for the day-to-day operations of the HLS
Funds and who execute policies formulated by the directors. The directors and
officers of the HLS 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 HLS Fund, as that term is defined in the 1940 Act are indicated
by an asterisk next to their respective names.
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<PAGE>
<TABLE>
<CAPTION>
POSITION
NAME, ADDRESS, AGE HELD WITH PRINCIPAL OCCUPATIONS HELD
THE HLS DURING LAST 5 YEARS
FUNDS
- ------------------------------------------------------ -------------- ---------------------------------------------------------
<S> <C> <C>
ROBERT J. CLARK (age 67) Director Mr. Clark, currently retired, served as President of
725 Mapleton Avenue American Nuclear Insurers from 1990 to 1997.
Suffield, CT 06078 Previously, Mr. Clark served in positions of increasing
responsibility with Aetna Life & Casualty Company from
1955 to 1989 retiring as President of the Commercial
Insurance Division. Mr. Clark is also an active
director or trustee with Hartford Health Care
Corporation, Hartford Hospital, CHS Insurance, Ltd. and
St. Joseph's College.
WINIFRED ELLEN COLEMAN (age 67) Director Ms. Coleman has served as President of Saint Joseph
27 Buckingham Lane College since 1991. She is a Director of LeMoyne
West Hartford, CT 06117 College, St. Francis Hospital, Connecticut Higher
Education Student Loan Administration, and The National
Conference (Greater Hartford Board of Directors).
WILLIAM ATCHISON O'NEILL (age 69) Director The Honorable William A. O'Neill served as Governor of
Box 360 the State of Connecticut from 1980 until 1991. He is
East Hampton, CT 06424 presently retired.
MILLARD HANDLEY PRYOR, JR. (age 66) Director Mr. Pryor has served as Managing Director of Pryor &
695 Bloomfield Avenue Clark Company, Hartford, Connecticut, since June, 1992.
Bloomfield, CT 06002 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. and Infodata
Systems, Inc.
LOWNDES ANDREW SMITH* (age 60) Director and Mr. Smith has served as Vice Chairman of Hartford
P.O. Box 2999 Chairman Financial Services Group, Inc. since February, 1997, as
Hartford, CT 06104-2999 President and Chief Executive Officer of Hartford Life,
Inc. since February, 1997, and as President and Chief
Operating Officer of The Hartford Life Insurance Companies
since January,1989. He was formerly Senior VicePresident
and Group Comptroller of The Hartford Insurance Group from
1987-1989. He has been a Director of Connecticut Children's
Medical Center since 1993, a Director of American Counsel of
Life Insurance from 1993-1996 and 1998-present, and a
Director of Insurance Marketplace Standards Association
from 1996 to present. Mr. Smith is also President and a
Director of HIFSCO and HL Advisors.
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
POSITION
NAME, ADDRESS, AGE HELD WITH PRINCIPAL OCCUPATIONS HELD
THE HLS DURING LAST 5 YEARS
FUNDS
- ------------------------------------------------------ -------------- ---------------------------------------------------------
<S> <C> <C>
JOHN KELLEY SPRINGER (age 68) Director Mr. Springer currently serves as Chairman of Medspan,
225 Asylum Avenue Inc. From 1986 to 1997 he served as Chief Executive
Hartford, CT 06103 Officer of Connecticut Health System, Inc. Formerly, he
served as the Chief Executive Officer of Hartford
Hospital, Hartford, Connecticut (June, 1976 - August,
1989). He is also a Director of Hartford Hospital, and
CHS Insurance Ltd. (Chairman).
DAVID M. ZNAMIEROWSKI (age 39) President Mr. Znamierowski currently serves as Senior Vice
55 Farmington Avenue and Director President, Chief Investment Officer and Director of
Hartford, CT 06105 Investment Strategy for Hartford Life, Inc. Mr.
Znamierowski previously was Vice President, Investment
Strategy and Policy with Aetna Life & Casualty Company
from 1991 to 1996 and held several positions including
Vice President, Corporate Finance with Solomon Brothers
from 1986 to 1991. Mr. Znamierowski is also a Director
and Senior Vice President of HIFSCO and a Director
and Managing Director with HL Advisors.
PETER CUMMINS (age 62) Vice Mr. Cummins has served as Senior Vice President since
P. O. Box 2999 President 1997 and Vice President since 1989 of sales and
Hartford, CT 06104-2999 marketing of the Investment Products Division of
Hartford Life Insurance Company. He is also a Director
and Senior Vice President of HIFSCO and a Director and
Managing Director of HL Advisors.
ANDREW WILLIAM KOHNKE (age 41) Vice Mr. Kohnke serves as Managing Director and a Director
55 Farmington Avenue President of HIMCO. Previously he served as Vice President of
Hartford, CT 06105 HIMCO (1986-1996) and Investment Manager for HIMCO
(1983-1986). Mr. Kohnke is also a Director and Managing
Director of HL Investment Advisors, LLC ("HL Advisors")
and a Director and Senior Vice President of HIFSCO and
a Director and Managing Director of HL Advisors.
THOMAS MICHAEL MARRA (age 41) Vice Mr. Marra has served as Chief Operating Officer since
P.O. Box 2999 President 2000, Executive Vice President since 1996, and as
Hartford, CT 06104-2999 Senior Vice President and Director since 1994 of the
Investment Products Division of Hartford Life Insurance
Company. Mr. Marra is also a Director and Executive
Vice President of HIFSCO. Mr. Marra joined Hartford
Life Insurance Company in 1980 and a Director and
Managing Director of HL Advisors.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
POSITION
NAME, ADDRESS, AGE HELD WITH PRINCIPAL OCCUPATIONS HELD
THE HLS DURING LAST 5 YEARS
FUNDS
- ------------------------------------------------------ -------------- ---------------------------------------------------------
<S> <C> <C>
CHARLES MINER O'HALLORAN (age 52) Vice Mr. O'Halloran has served as Senior Vice President
Hartford Plaza President since January, 1998, Corporate Secretary from 1996 to
Hartford, CT 06115 and Secretary 1998, 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.
GEORGE RICHARD JAY (age 47) Controller Mr. Jay has served as Secretary and Director, Life and
P.O. Box 2999 and Treasurer Equity Accounting and Financial Control, of Hartford
Hartford, CT 06104-2999 Life Insurance Company since 1987.
KEVIN J. CARR (age 45) Assistant Mr. Carr has served as Assistant General Counsel since
55 Farmington Avenue Secretary 1999, Counsel since November 1996 and Associate Counsel
Hartford, CT 06105 and 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 and Associate Counsel of 440 Financial Group of
Worcester from 1994 to 1995. Mr. Carr is also Counsel
and Assistant Secretary of HL Advisors and HIFSCO and
Assistant Secretary of HIMCO.
CHRISTOPHER JAMES COSTA (age 35) Assistant Mr. Costa has served as the Tax Manager of The
P.O. Box 2999 Secretary Hartford-Sponsored Mutual Funds since July 1996.
Hartford, CT 06104-2999 Formerly he served as the Tax Manager and Assistant
Treasurer of The Phoenix Mutual Funds from June 1994
to June 1996 and as a Tax Consultant with Arthur
Andersen LLP from September 1990 to June 1994.
</TABLE>
An Audit Committee and Nominating Committee have been appointed for
each fund. Each Committee is made up of those directors who are not "interested
persons" of the HLS Fund.
All board members and officers of the HLS Funds are also board members
and officers of The Hartford Mutual Funds, Inc., a family of mutual funds with
fourteen portfolios.
COMPENSATION OF OFFICERS AND DIRECTORS The HLS 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 HLS Fund to the non-interested Directors
for the 1999 fiscal year and certain other information:
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<TABLE>
<CAPTION>
Pension Or Total Compensation
Aggregate Retirement Benefits Estimated Annual From the HLS Funds
Compensation From Accrued As Part Of Benefits Upon And Fund Complex
Name of Person, Position the HLS Funds HLS Fund Expenses Retirement Paid To Directors*
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert J. Clark, Director $ 5,912.50 $0 $0 $ 8,250
Winifred E. Coleman, Director $22,262.50 $0 $0 $31,000
William A. O'Neill, Director $22,262.50 $0 $0 $31,000
Millard H. Pryor, Director $20,262.50 $0 $0 $28,000
John K. Springer, Director $22,262.50 $0 $0 $31,000
</TABLE>
*As of December 31, 1999, there were twenty-seven funds in the Complex
(including the HLS Funds).
OTHER INFORMATION ABOUT THE HLS FUNDS Each HLS Fund, except for the
Global Health HLS Fund, Global Technology HLS Fund, Global Leaders HLS Fund,
Growth and Income HLS Fund and High Yield HLS Fund, is a separate Maryland
corporation registered with the Securities and Exchange Commission as an
open-end management investment company. The Global Health HLS Fund, Global
Technology HLS Fund, Global Leaders HLS Fund, Growth and Income HLS Fund and
High Yield HLS Fund are diversified series of Hartford Series HLS Fund, Inc., a
Maryland corporation, also registered with the Securities and Exchange
Commission as an open-end management investment company. The shares of each HLS
Fund have been divided into Class IA and Class IB. The Board of Directors may
reclassify authorized shares to increase or decrease the allocation of shares in
each HLS Fund. The Board of Directors is also authorized, from time to time and
without further shareholder approval, to authorize additional shares of each HLS
Fund. The organization dates of each HLS Fund are as follows: Global Health HLS
Fund, 2000; Global Technology HLS Fund, 2000; Capital Appreciation HLS Fund,
1983; Dividend and Growth HLS Fund, 1994; Global Leaders HLS Fund, 1998; Growth
and Income HLS Fund, 1998; Index HLS Fund, 1987; International Opportunities HLS
Fund, 1990; MidCap HLS Fund, 1997; Small Company HLS Fund, 1996; Stock HLS Fund,
1977; Advisers HLS Fund, 1983; International Advisers HLS Fund, 1995; Bond HLS
Fund, 1977; High Yield HLS Fund, 1998; Mortgage Securities HLS Fund, 1985, and
Money Market HLS Fund, 1980.
As of January 31, 2000, the officers and directors as a group
beneficially owned less than 1% of the outstanding shares of each HLS Fund.
INVESTMENT MANAGEMENT ARRANGEMENTS
Each HLS Fund has entered into an investment advisory agreement with HL
Investment Advisors, LLC ("HL Advisors"). The investment advisory agreement
provides that HL Advisors, subject to the supervision and approval of each HLS
Fund's Board of Directors, is responsible for the management of each HLS Fund.
HL Advisors is responsible for investment management supervision of all HLS
Funds. In addition, Hartford Life, a corporate affiliate of HL Advisors and
HIMCO, provides administrative services to the HLS Funds including
administrative personnel, services, equipment and facilities and office space
for proper operation of the HLS Funds. Although Hartford Life has agreed to
arrange for the provision of additional services necessary for the proper
operation of the HLS Fund, each HLS Fund pays for these services directly.
With respect to the Global Health HLS Fund, Global Technology HLS Fund,
Small Company HLS Fund, Capital Appreciation HLS Fund, International Advisers
HLS Fund, International Opportunities HLS Fund, MidCap HLS Fund, Stock HLS Fund,
Dividend and Growth HLS Fund, Global Leaders HLS Fund, Growth and Income HLS
Fund and Advisers HLS Fund, HL Advisors has entered into an investment
sub-advisory agreement with
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<PAGE>
Wellington Management Company ("Wellington). Under the sub-advisory agreement,
Wellington Management, subject to the general supervision of the Board of
Directors and HL Advisors, is responsible for (among other things) the
day-to-day investment and reinvestment of the assets of such HLS Funds and
furnishing each such HLS Fund with advice and recommendations with respect to
investments and the purchase and sale of appropriate securities for each HLS
Fund. HL Advisors has entered into an investment services agreement with HIMCO
for services related to the day-to-day investment and reinvestment of the assets
of the Index HLS Fund, Mortgage Securities HLS Fund, Bond HLS Fund, High Yield
HLS Fund and Money Market HLS Fund.
As provided by the investment advisory agreements, each HLS Fund pays
HL Advisors an investment advisory fee, which is accrued daily and paid monthly,
equal on an annual basis to a stated percentage of the respective HLS Fund's
average daily net asset value. HL Advisors, not any HLS Fund, pays the
subadvisory fees of Wellington Management as set forth in the Prospectus. HL
Advisors pays HIMCO the direct and indirect costs incurred in managing the
HIMCO-advised HLS Funds.
No person other than HL Advisors, HIMCO or Wellington Management and
their directors and employees regularly furnishes advice to the HLS Funds with
respect to the desirability of the HLS Funds investing in, purchasing or selling
securities. HIMCO and Wellington Management may from time to time receive
statistical or other information regarding general economic factors and trends,
from The Hartford and its affiliates.
Securities held by any HLS Fund may also be held by other funds and
other clients for which HIMCO, Wellington Management or their respective
affiliates provide investment advice. Because of different investment objectives
or other factors, a particular security may be bought by HIMCO or Wellington
Management for one or more clients when one or more clients are selling the same
security. If purchases or sales of securities arise for consideration at or
about the same time for any HLS Fund or client accounts (including other funds)
for which HIMCO or Wellington Management act as an investment adviser,
(including the HLS Funds described herein) transactions in such securities will
be made, insofar as feasible, for the respective funds and other client accounts
in a manner deemed equitable to all. To the extent that transactions on behalf
of more than one client of HIMCO, Wellington Management or their respective
affiliates during the same period may increase the demand for securities being
purchased or the supply of securities being sold, there may be an adverse effect
on price.
For the last three fiscal years, each HLS Fund has paid the following
advisory fees to HL Advisors:
<TABLE>
<CAPTION>
HLS FUND NAME 1999 1998 1997
- ------------- ---- ---- ----
<S> <C> <C> <C>
Global Health HLS Fund(1) --- --- ---
Global Technology HLS Fund(1) --- --- ---
Capital Appreciation HLS Fund $28,279,376 $23,148,831 $18,471,888
Dividend and Growth HLS Fund $14,387,861 $11,746,871 $6,910,062
Global Leaders HLS Fund(2) $315,278 $5,826 ---
Growth and Income HLS Fund2 $504,291 $38,069 ---
Index HLS Fund $4,356,861 $2,931,531 $1,771,465
International Opportunities HLS Fund $6,344,130 $5,838,942 $5,565,620
MidCap HLS Fund(3) $1,712,667 $449,736 $28,186
Small Company HLS Fund $2,400,827 $1,511,160 $657,507
Stock HLS Fund $20,925,628 $15,103,808 $10,265,666
Advisers HLS Fund $56,203,516 $43,114,112 $31,252,771
International Advisers HLS Fund $1,821,043 $1,429,470 $926,609
Bond HLS Fund $2,830,655 $2,165,188 $1,422,689
High Yield HLS Fund(2) $207,216 $19,214 --
Mortgage Securities HLS Fund $884,063 $838,841 $802,900
Money Market HLS Fund $2,688,668 $1,756,465 $1,436,068
</TABLE>
(1) Fund commenced operations in 2000
-19-
<PAGE>
(2) Portion of advisory fee waived for 1998
(3) Portion of advisory fee waived for 1997
Pursuant to the investment advisory agreement, investment sub-advisory
and investment services agreements neither HL Advisors, HIMCO nor Wellington
Management is liable to the HLS Funds or their shareholders for any error of
judgment or mistake of law or for any loss suffered by the HLS Funds in
connection with the matters to which their respective agreements relate, except
a loss resulting from willful misfeasance, bad faith or gross negligence on the
part of HIMCO or Wellington Management in the performance of their duties or
from their reckless disregard of the obligations and duties under the applicable
agreement.
HL Advisors, whose principal business address is at 200 Hopmeadow
Street, Simsbury, Connecticut 06089, was organized in 1981. As of December 31,
1999, HL Advisors had approximately $40 billion in assets under management. HL
Advisors is a majority owned indirect subsidiary of The Hartford. HIMCO, whose
principal business addresses is 55 Farmington Avenue, Hartford, Connecticut
06105, was organized in 1996 and is a wholly-owned subsidiary of The Hartford.
HIMCO is a professional money management firm that provides services to
investment companies, employee benefit plans, its affiliated insurance companies
and other institutional accounts. As of December 31, 1999, HIMCO and its
wholly-owned subsidiary had approximately $59 billion in assets under
management.
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, 1999, Wellington Management had investment management authority
with respect to approximately $235 billion in assets. Wellington Management is a
Massachusetts Limited Liability Partnership. The three managing partners of
Wellington Management are Laurie A. Gabriel, Duncan M. McFarland and John R.
Ryan.
The investment advisory agreements, investment subadvisory agreements
and investment services agreements continue in effect for two years from initial
approval and from year to year thereafter if approved annually by a vote of a
majority of the Directors of the HLS Fund including a majority of the Directors
who are not parties to an agreement or interested persons of any party to the
contract, cast in person at a meeting called for the purpose of voting on such
approval, or by holders of a majority of the applicable HLS Fund's outstanding
voting securities. The contract automatically terminates upon assignment as
defined under the 1940 Act. The investment advisory agreement may be terminated
without penalty on 60 days' notice at the option of either party to the
respective contract or by vote of the holders of a majority of the outstanding
voting securities of the applicable HLS Fund. The investment subadvisory
agreements and investment services agreements may be terminated at any time
without the payment of any penalty by the Board of Directors, by vote of a
majority of the outstanding voting securities of the respective HLS Fund or by
HL Advisors, upon 60 days' notice to HIMCO and Wellington Management, and by
Wellington Management or HIMCO upon 90 days' written notice to HL Advisors (with
respect to that HLS Fund only). The investment subadvisory agreement and
investment services agreements terminate automatically upon the termination of
the corresponding investment advisory agreement.
HL Advisors may make payments from time to time from its own resources,
which may include the management fees paid by the HLS 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 HLS Funds including paying for the preparation, printing and
distribution of prospectuses and sales literature or other promotional
activities.
Each fund and each adviser, sub-adviser and principal underwriter to
each fund has adopted a Code of Ethics designed to protect the interests of each
fund's shareholders. Under each Code of Ethics investment
-20-
<PAGE>
personnel are permitted to trade securities for their own account subject to a
number of restrictions. Each Code of Ethics has been filed with the SEC via the
EDGAR system and may be viewed by the public.
HLS FUND ADMINISTRATION
An Administrative Services Agreement between each HLS Fund and Hartford
Life provides that Hartford Life will manage the business affairs and provide
administrative services to each HLS Fund. Under the terms of these Agreements,
Hartford Life will provide the following: administrative personnel, services,
equipment and facilities and office space for proper operation of the HLS Funds.
Hartford Life has also agreed to arrange for the provision of additional
services necessary for the proper operation of the HLS Funds, although the HLS
Funds pay for these services directly. See "Expenses of the Funds." As
compensation for the services to be performed by Hartford Life, each HLS 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 .20% of the average daily net assets
of the HLS Fund. In addition to the administrative services fee Hartford Life is
compensated for fund accounting services at a competitive market rate.
For the last three fiscal years, each HLS Fund has paid the following
administrative fees to Hartford Life:
<TABLE>
<CAPTION>
HLS FUND NAME 1999 1998 1997
- ------------- ---- ---- ----
<S> <C> <C> <C>
Global Health HLS Fund(1) --- --- ---
Global Technology HLS Fund(1) --- --- ---
Capital Appreciation HLS Fund $12,896,177 $9,497,866 $7,245,777
Dividend and Growth HLS Fund $6,358,994 $4,656,224 $2,486,421
Global Leaders HLS Fund $108,269 $2,027 --
Growth and Income HLS Fund $174,191 $12,712 --
Index HLS Fund $4,356,861 $2,669,517 $1,550,032
International Opportunities HLS Fund $2,573,708 $2,115,423 $1,931,542
MidCap HLS Fund $610,859 $144,116 $9,636
Small Company HLS Fund $870,967 $481,386 $200,110
Stock HLS Fund $16,390,499 $10,675,568 $6,879,714
Advisers HLS Fund $26,036,945 $18,087,300 $12,508,493
International Advisers HLS Fund $646,111 $453,310 $282,011
Bond HLS Fund $1,922,419 $1,314,094 $794,107
High Yield HLS Fund $71,775 $6,684 $794,107
Mortgage Securities HLS Fund $707,251 $609,614 $562,030
Money Market HLS Fund $2,150,934 $1,284,777 $1,005,248
</TABLE>
(1) Fund commenced operations in 2000.
HLS FUND EXPENSES
Each HLS Fund assumes and pays the following costs and expenses:
interest; taxes; brokerage charges (which may be to affiliated broker-dealers);
costs of preparing, printing and filing any amendments or supplements to the
registration forms of each HLS Fund and its securities; all federal and state
registration, qualification and filing costs and fees, (except the initial costs
and fees, which will be borne by Hartford Life), issuance and redemption
expenses, transfer agency and dividend and distribution disbursing agency costs
and expenses; custodian fees and expenses; accounting, auditing and legal
expenses; fidelity bond and other insurance premiums; fees and salaries of
directors, officers and employees of each HLS Fund other than those who are also
officers of Hartford Life; industry membership dues; all annual and semiannual
reports and prospectuses mailed to each HLS Fund's shareholders as well as all
quarterly, annual and any other periodic report required to be filed with the
SEC or with any state; any notices required by a federal or state regulatory
authority, and any proxy solicitation materials directed to each HLS Fund's
shareholders as well as all printing, mailing and tabulation costs incurred in
connection therewith, and any expenses incurred in connection with the holding
of meetings of each HLS Fund's shareholders,
-21-
<PAGE>
expenses related to distribution activities as provided under each HLS Fund's
Rule 12b-1 distribution plan for Class IB shares and other miscellaneous
expenses related directly to the HLS Funds' operations and interest.
DISTRIBUTION ARRANGEMENTS
Each fund's shares are sold by Hartford Securities Distribution Company
(the "distributor") on a continuous basis to separate accounts sponsored by The
Hartford and its affiliates and to certain qualified retirement plans.
Each fund has adopted separate distribution plans (the "Plans") for
Class IB shares pursuant to appropriate resolutions of each fund's Board of
Directors in accordance with the requirements of Rule 12b-1 under the 1940 Act
and the requirements of the applicable rule of the NASD regarding asset based
sales charges.
Pursuant to the Plan, each fund may compensate the distributor for its
expenditures in financing any activity primarily intended to result in the sale
of HLS Fund shares. The expenses of each HLS Fund pursuant to each Plan are
accrued on a fiscal year basis and may not exceed, the annual rate of 0.25% of
each HLS Fund's average daily net assets attributable to Class IB shares. All or
any portion of this fee may be remitted to brokers who provide distribution or
shareholder account services.
Distribution fees paid to the distributor may be spent on any
activities or expenses primarily intended to result in the sale of each fund's
shares including (a) compensation to and expenses, including overhead and
telephone expenses, of employees of the distributor engaged in the distribution
of the Class IB shares; (b) printing and mailing of prospectuses, statements of
additional information, and reports for prospective purchasers of variable
annuity or variable life insurance contracts ("Variable Contracts") investing
indirectly in Class IB shares; (c) compensation to financial intermediaries and
broker-dealers to pay or reimburse them for their services or expenses in
connection with the distribution of Variable Contracts investing indirectly in
Class IB shares; (d) expenses relating to the development, preparation,
printing, and mailing of fund advertisements, sales literature, and other
promotional materials describing and/or relating to the fund; (e) expenses of
holding seminars and sales meetings designed to promote the distribution of the
Class IB shares; (f) expenses of obtaining information and providing
explanations to Variable Contract owners regarding fund investment objectives
and policies and other information about the fund, including performance; (g)
expenses of training sales personnel regarding the fund; (h) expenses of
compensating sales personnel in connection with the allocation of cash values
and premiums of the Variable Contracts to the fund; and (i) expenses of personal
services and/or maintenance of Variable Contract accounts with respect to Class
IB shares attributable to such accounts. These plans are considered compensation
type plans which means the distributor is paid the agreed upon fee regardless of
the distributor's expenditures.
In accordance with the terms of the Plans, the distributor provides to
each HLS Fund, for review by each fund's Board of Directors, a quarterly written
report of the amounts expended under the respective Plans and the purpose for
which such expenditures were made.
The Plans were adopted by a majority vote of the Board of Directors,
including at least a majority of Directors who are not, and were not at the time
they voted, interested persons of each fund as defined in the 1940 Act and do
not and did not have any direct or indirect financial interest in the operation
of the Plans, cast in person at a meeting called for the purpose of voting on
the Plans. In approving the Plans, the Directors identified and considered a
number of potential benefits which the Plans may provide including the potential
to increase assets in order to benefit from economics of scale. The Board of
Directors believes that there is a reasonable likelihood that the Plans will
benefit the Class IB shareholders of each HLS Fund. Under their terms, the Plans
remain in effect from year to year provided such continuance is approved
annually by vote of the Directors in the manner described above. The Plans may
not be amended to increase materially the amount to be spent for distribution
without approval of the shareholders of each fund affected thereby, and material
amendments to the Plans must also be approved by the Board of Directors in the
manner described above. A Plan may be terminated at any time, without
-22-
<PAGE>
payment of any penalty, by vote of the majority of the Directors who are not
interested persons of each fund and have no direct or indirect financial
interest in the operations of the Plan, or by a vote of a "majority of the
outstanding voting securities" (as defined in the 1940 Act) of each fund
affected thereby. A Plan will automatically terminate in the event of its
assignment (as defined in the 1940 Act).
For the fiscal year ended December 31, 1999, the following 12b-1 fees
were paid by the HLS Funds:
<TABLE>
<CAPTION>
HLS FUND NAME CLASS IB SHARES
------------- ---------------
<S> <C>
Global Health HLS Fund(1) ---
Global Technology HLS Fund(1) ---
Capital Appreciation HLS Fund $21,889
Dividend and Growth HLS Fund $23,523
Global Leaders HLS Fund $81
Growth and Income HLS Fund $22
Index HLS Fund $3
International Opportunities HLS Fund $2,532
MidCap HLS Fund $3
Small Company HLS Fund $6,982
Stock HLS Fund $48,441
Advisers HLS Fund $147,810
International Advisers HLS Fund $3
Bond HLS Fund $17,793
High Yield HLS Fund $191
Mortgage Securities HLS Fund $3
Money Market HLS Fund $10,172
</TABLE>
(1) Fund commenced operation in 2000.
The entire amount of 12b-1 fees listed above were paid to
broker-dealers as compensation.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The HLS Funds have no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to any
policy established by the Board of Directors, HIMCO and Wellington Management
are primarily responsible for the investment decisions of each HLS Fund and the
placing of its portfolio transactions. In placing orders, it is the policy of
each HLS Fund to obtain the most favorable net results, taking into account
various factors, including price, dealer spread or commission, if any, size of
the transaction and difficulty of execution. While HIMCO and Wellington
Management generally seek reasonably competitive spreads or commissions, the HLS
Funds will not necessarily be paying the lowest possible spread or commission.
Upon instructions from the HLS Funds, HIMCO and Wellington Management may direct
brokerage transactions to broker/dealers who also sell shares of the HLS Funds.
HIMCO and Wellington Management will generally deal directly with the
dealers who make a market in the securities involved (unless better prices and
execution are available elsewhere) if the securities are traded primarily in the
over-the-counter market. Such dealers usually act as principals for their own
account. On occasion, securities may be purchased directly from the issuer.
Bonds and money market securities are generally traded on a net basis and do not
normally involve either brokerage commissions or transfer taxes. Portfolio
securities in the Money Market HLS Fund normally are purchased directly from, or
sold directly to, the issuer, an underwriter or market maker for the securities.
There usually will be no brokerage commissions paid by the Money Market HLS Fund
for such purchases or sales.
-23-
<PAGE>
While HIMCO and Wellington Management (as applicable) seek to obtain
the most favorable net results in effecting transactions in an HLS Fund's
portfolio securities, dealers who provide supplemental investment research to
HIMCO or Wellington Management may receive orders for transactions from HIMCO or
Wellington Management. Such supplemental research services ordinarily consist of
assessments and analyses of the business or prospects of a company, industry, or
economic sector. If, in the judgment of HIMCO or Wellington Management, an HLS
Fund will be benefited by such supplemental research services, HIMCO and
Wellington Management are authorized to pay spreads or commissions to brokers or
dealers furnishing such services which are in excess of spreads or commissions
which another broker or dealer may charge for the same transaction. Information
so received will be in addition to and not in lieu of the services required to
be performed by HIMCO and Wellington Management under the investment advisory
agreement or the investment sub-advisory agreement. The expenses of HIMCO and
Wellington Management will not necessarily be reduced as a result of the receipt
of such supplemental information. HIMCO and Wellington Management may use such
supplemental research in providing investment advice to portfolios other than
those for which the transactions are made. Similarly, the HLS Funds may benefit
from such research obtained by HIMCO and Wellington Management for portfolio
transactions for other clients.
Investment decisions for the HLS Funds will be made independently from
those of any other clients that may be (or in the future may be) managed by
HIMCO, Wellington Management or their affiliates. If, however, accounts managed
by HIMCO or Wellington Management are simultaneously engaged in the purchase of
the same security, then, pursuant to general authorization of each HLS Fund's
Board of Directors, available securities may be allocated to each HLS Fund or
other client account and may be averaged as to price in whatever manner HIMCO or
Wellington Management deems to be fair. Such allocation and pricing may affect
the amount of brokerage commissions paid by each HLS Fund. In some cases, this
system might adversely affect the price paid by an HLS Fund (for example, during
periods of rapidly rising or falling interest rates) or limit the size of the
position obtainable for an HLS Fund (for example, in the case of a small issue).
For the last three years, each HLS Fund has paid the following
brokerage commissions:
<TABLE>
<CAPTION>
FUND NAME 1999 1998 1997
- --------- ---- ---- ----
<S> <C> <C> <C>
Global Health HLS Fund1 --- --- ---
Global Technology HLS Fund1 --- --- ---
Capital Appreciation HLS Fund $9,414,734 $6,278,243 $6,360,557
Dividend and Growth HLS Fund $3,991,949 $3,315,868 $1,876,099
Global Leaders HLS Fund $406,575 $8,481 ---
Growth and Income HLS Fund $142,956 $13,302 ---
Index HLS Fund $168,000 $163,000 $66,985
International Opportunities HLS Fund $7,376,146 $8,353,895 $4,019,255
MidCap HLS Fund $977,321 $277,583 $18,881
Small Company HLS Fund $1,012,220 $1,237,532 $563,124
Stock HLS Fund $6,262,227 $3,533,875 $2,552,822
Advisers HLS Fund $6,017,777 $3,712,596 $2,994,604
International Advisers HLS Fund $1,079,028 $1,084,719 $436,813
Bond HLS Fund N/A N/A N/A
High Yield HLS Fund N/A N/A ---
Mortgage Securities HLS Fund N/A N/A N/A
Money Market HLS Fund N/A N/A N/A
</TABLE>
(1) Commenced operations in 2000.
Changes in the amounts of brokerage commissions paid reflect changes in
portfolio turnover rates.
Although the rules of the National Association of Securities Dealers,
Inc. prohibit its members from seeking orders for the execution of investment
company portfolio transactions on the basis of their sales of
-24-
<PAGE>
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 funds.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of each HLS Fund is determined by
Hartford Life Insurance Company, ("Hartford Life") an affiliate of The Hartford,
in the manner described in the HLS Funds' Prospectus. The HLS Funds will be
closed for business and will not price their shares on the following business
holidays: New Year's Day, Martin Luther King Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and
other holidays observed by the New York Stock Exchange. Securities held by each
HLS Fund other than the Money Market HLS Fund will be valued as follows: Debt
securities (other than short-term obligations) are valued on the basis of
valuations furnished by an unaffiliated pricing service which determines
valuations for normal institutional size trading units of debt securities.
Short-term securities held in the Money Market HLS Fund are valued at amortized
cost or original cost plus accrued interest receivable, both of which
approximate market value. All other HLS Funds' short-term debt investments with
a maturity of 60 days or less are valued at amortized cost, which approximates
market value. Short-term investments with a maturity of more than 60 days when
purchased are valued based on market quotations until the remaining days to
maturity become less than 61 days. From such time until maturity, the
investments are valued at amortized cost.
Equity securities are valued at the 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 HLS Funds' Board of Directors.
The net asset value per share of the Money Market HLS Fund is
determined by using the amortized cost method of valuing its portfolio
instruments. Under the amortized cost method of valuation, an instrument is
valued at cost and the interest payable at maturity upon the instrument is
accrued as income, on a daily basis, over the remaining life of the instrument.
Neither the amount of daily income nor the net asset value is affected by
unrealized appreciation or depreciation of the portfolio's investments assuming
the instrument's obligation is paid in full on maturity. In periods of declining
interest rates, the indicated daily yield on shares of the portfolio computed
using amortized cost may tend to be higher than a similar computation made using
a method of valuation based upon market prices and estimates. In periods of
rising interest rates, the indicated daily yield on shares of the portfolio
computed using amortized cost may tend to be lower than a similar computation
made using a method of valuation based upon market prices and estimates. For all
HLS Funds, securities with remaining maturities of less than 60 days are valued
at amortized cost, which approximates market value.
The amortized cost method of valuation permits the Money Market HLS
Fund to maintain a stable $1.00 net asset value per share. The Company's Board
of Directors periodically reviews the extent of any deviation from the $1.00 per
share value that would occur if a method of valuation based on market prices and
estimates were used. In the event such a deviation would exceed one-half of one
percent, the Board of Directors will promptly consider any action that
reasonably should be initiated to eliminate or reduce material dilution or other
unfair results to shareholders. Such action may include selling portfolio
securities prior to maturity, not declaring earned income dividends, valuing
portfolio securities on the basis of current market prices, if available, or, if
not available, at fair market value as determined in good faith by the Board of
Directors, and (considered highly unlikely by management of the Company)
redemption of shares in kind (i.e., portfolio securities).
-25-
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
For information regarding the purchase of HLS Fund shares, see
"Purchase of Fund Shares" in the HLS Funds' Prospectus.
For a description of how a shareholder may have an HLS Fund redeem
his/her shares, or how he/she may sell shares, see "Sale and Redemption of
Shares" in the HLS Funds' Prospectus.
SUSPENSION OF REDEMPTIONS
An HLS 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 an HLS Fund of securities
owned by it is not reasonably practicable, (2) it is not reasonably practicable
for an HLS Fund to fairly determine the value of its assets, or (3) for such
other periods as the Securities and Exchange Commission may permit for the
protection of investors.
OWNERSHIP AND CAPITALIZATION OF THE HLS FUNDS
CAPITAL STOCK The Board of Directors is authorized, without further
shareholder approval, to authorize additional shares and to classify and
reclassify the HLS Funds into one or more classes. Accordingly, the Directors
have authorized the issuance of two classes of shares of the HLS Funds
designated as Class IA and Class IB shares. The shares of each class represent
an interest in the same portfolio of investments of the HLS Funds 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.
Pursuant to state insurance law, Hartford Life, or its affiliates, is
the owner of all HLS shares held in Hartford Life's separate accounts. The
shares are held for the benefit of Hartford Life's contractholders and policy
owners. In addition to Hartford Life, the following entity owns 5% or more of
each class of HLS shares.
As of December 31, 1999, HL Advisors owned shares in the following HLS
Funds:
<TABLE>
<CAPTION>
FUND PERCENTAGE OF OWNERSHIP
---- CLASS IA CLASS IB
-------- --------
<S> <C> <C>
Global Leaders HLS Fund 3.16% 85.18%
Growth and Income HLS Fund 0% 100.00%
High Yield HLS Fund 18.86% 100.00%
Index HLS Fund 0% 100.00%
International Advisers HLS Fund 0% 100.00%
MidCap HLS Fund 0% 32.22%
Mortgage Securities HLS Fund 0% 100.00%
</TABLE>
VOTING Under each HLS Fund's multi-class system, shares of each class
of an HLS Fund represent an equal pro rata interest in that HLS 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; 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 HLS Fund's Board of Directors
are
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<PAGE>
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 is entitled to one
vote for each share of the HLS Funds held upon all matters submitted to the
shareholders generally. Class specific issues, such as a modification to a Rule
12b-1 plan for Class IB shares that could materially increase fees, will be
voted on only by the affected class. Hartford Life, or its affiliates, is the
shareholder of record for all HLS Funds. Hartford Life will vote all HLS 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 HLS Funds as investment vehicles. This position
is consistent with the policy of the SEC staff.
OTHER RIGHTS Each share of HLS Fund stock, when issued and paid for in
accordance with the terms of the offering, will be fully paid and
non-assessable. Shares of HLS Fund stock have no pre-emptive, subscription or
conversion rights and are redeemable as set forth under "Purchase and Redemption
of Shares." Upon liquidation of an HLS Fund, the shareholders of that HLS Fund
shall be entitled to share, pro rata, in any assets of the HLS Fund after
discharge of all liabilities and payment of the expenses of liquidation.
Each HLS Fund's Articles of Incorporation provides that the Directors,
officers and employees of the HLS Fund may be indemnified by the HLS Fund to the
fullest extent permitted by Maryland law and the federal securities laws. The
HLS Fund's Bylaws provide that the HLS 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 HLS Fund. Neither the Articles of
Incorporation nor the Bylaws authorize the HLS Fund to indemnify any Director or
officer against any liability to which he or she would otherwise be subject by
reason of or for willful misfeasance, bad faith, gross negligence or reckless
disregard of such person's duties.
INVESTMENT PERFORMANCE
MONEY MARKET HLS FUND
In accordance with regulations prescribed by the SEC, the HLS Fund is
required to compute the Money Market HLS Fund's current annualized yield for a
seven-day period in a manner which does not take into consideration any realized
or unrealized gains or losses on its portfolio securities. This current
annualized yield is computed by determining the net change (exclusive of
realized gains and losses on the sale of securities and unrealized appreciation
and depreciation) in the value of a hypothetical account having a balance of one
share of the Money Market HLS Fund at the beginning of such seven-day period,
dividing such net change in account value by the value of the account at the
beginning of the period to determine the base period return and annualizing this
quotient on a 365-day basis.
The SEC also permits the HLS Fund to disclose the effective yield of
the Money Market HLS Fund for the same seven-day period, determined on a
compounded basis. The effective yield is calculated by compounding the
unannualized base period return by adding one to the base period return, raising
the sum to a power equal to 365 divided by 7, and subtracting one from the
result.
The yield on amounts held in the Money Market HLS Fund normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. The Money Market HLS Fund's actual yield is affected by changes in
interest rates on money market securities, average portfolio maturity of the
Money Market HLS Fund, the types and quality of portfolio securities held by the
Money Market HLS Fund, any default by issuers of investments held by the Money
Market HLS Fund and its operating expenses.
-27-
<PAGE>
For the seven-day period ending December 31, 1999 the Money Market HLS
Fund's annualized yield for Class IA and Class IB was 5.34% and 5.16%
respectively. For the same period the effective yield for Class IA and Class IB
was 5.49% and 5.30% respectively
Example:
Assumptions:
Value of a hypothetical pre-existing account with exactly one share of
Class IA at the beginning of the period: $1.000000
Value of the same account* (excluding capital changes) at the end of
the seven day period: $1.0010249
*This value would include the value of any additional shares purchased
with dividends from the original share, and all dividends declared on both the
original share and any such additional shares.
<TABLE>
<S> <C>
Calculation:
Ending account value $1.0010249
Less beginning account value 1.000000
Net change in account value $.0010249
Base period return:
(adjusted change/beginning account value)
$.0010249/$1.000000 = $.0010249
Current yield = $.0010249 X (365/7) = 5.34%
Effective yield = (1 + .0010249)^(365/7) - 1 = 5.49%
</TABLE>
The current yield and effective yield information will fluctuate, and
publication of yield information may not provide a basis for comparison with
bank deposits, other investments which are insured and/or pay a fixed yield for
a stated period of time, or other investment companies. In addition, the current
yield and effective yield information may be of limited use for comparative
purposes because it does not reflect charges imposed at the Separate Account
level which, if included, would decrease the yield.
OTHER FUNDS
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN QUOTATIONS Average annual
total return quotations for the HLS Funds are computed by finding the average
annual compounded rates of return that would cause a hypothetical investment
made on the first day of a designated period to equal the ending redeemable
value of such hypothetical investment on the last day of the designated period
in accordance with the following formula:
n
P(1+T) = ERV
<TABLE>
<S> <C> <C> <C>
Where:
P = a hypothetical initial payment of n = number of years
$1,000, less the maximum sales load
applicable to a Fund ERV = ending redeemable value of the
hypothetical $1,000 initial payment
T = average annual total return made at the beginning of the
designated period (or fractional
portion thereof)
</TABLE>
-28-
<PAGE>
The computation above assumes that all dividends and distributions made
by an HLS 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 an HLS Fund, or of a hypothetical investment in a class of an HLS
Fund, over any period up to the lifetime of the class. Unless otherwise
indicated, total return calculations will assume the deduction of the maximum
sales charge and usually assume the reinvestment of all dividends and capital
gains distributions and will be expressed as a percentage increase or decrease
from an initial value, for the entire period or for one or more specified
periods within the entire period. Total return calculations that do not reflect
the reduction of sales charges will be higher than those that do reflect such
charges.
Total return percentages for periods longer than one year will usually
be accompanied by total return percentages for each year within the period
and/or by the average annual compounded total return for the period. The income
and capital components of a given return may be separated and portrayed in a
variety of ways in order to illustrate their relative significance. Performance
may also be portrayed in terms of cash or investment values, without
percentages. Past performance cannot guarantee any particular future result. In
determining the average annual total return (calculated as provided above),
recurring fees, if any, that are charged to all shareholder accounts are taken
into consideration. For any account fees that vary with the size of the account,
the account fee used for purposes of the above computation is assumed to be the
fee that would be charged to the mean account size of a class of the HLS Fund.
Each HLS Fund's average annual total return quotations and yield
quotations as they may appear in the Prospectus, this SAI or in advertising are
calculated by standard methods prescribed by the SEC unless otherwise indicated.
NON-STANDARDIZED PERFORMANCE In addition, in order to more completely
represent an HLS Fund's performance or more accurately compare such performance
to other measures of investment return, an HLS 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.
In contrast to Class IA shares, the Class IB shares are new and charge
12b-1 fees to cover distribution expenses. Because the historical performance of
Class IA shares may be helpful to a prospective investor's decision, the HLS
Funds may advertise standard average annual total return for Class IA shares
and, when available, Class IB shares.
The chart below sets forth certain standardized and non-standardized
performance information as of December 31, 1999 for the Class IA and Class IB
shares of each HLS Fund. Past performance is no guarantee and is not necessarily
indicative of future performance of the shares. The actual annual returns for
the shares may vary significantly from the past and future performance.
Investment returns and the value of the shares will fluctuate in response to
market and economic conditions as well as other factors and shares, when
redeemed, may be worth more or less than their original cost. Total returns are
based on capital changes plus reinvestment of all distributions for the time
periods noted in the charts below.
-29-
<PAGE>
The manner in which total return and yield are calculated is described
above. The following table sets forth the average annual total return, and yield
where applicable, for each HLS Fund, except Global Health HLS Fund and Global
Technology HLS Fund, through December 31, 1999. Each of Global Health HLS Fund
and Global Technology HLS Fund commenced operations in 2000.
<TABLE>
<CAPTION>
TOTAL RETURN YIELD
----------------------------------------------- ----------
HLS FUND SINCE 5 10 SEC 30-
(INCEPTION DATE) INCEPTION 1 YEAR YEARS YEARS DAY YIELD
<S> <C> <C> <C> <C> <C>
Capital Appreciation HLS Fund
Class IA (April 2, 1984) 18.74% 37.46% 25.01% 19.76% N/A
Class IB (April 1, 1998) 20.93% 37.21% N/A N/A N/A
Dividend and Growth HLS Fund
Class IA (March 8, 1994) 19.10% 5.31% 22.07% N/A N/A
Class IB (April 1, 1998) 5.04% 5.12% N/A N/A N/A
Global Leaders HLS Fund
Class IA (September 30, 1998) 72.77% 50.37% N/A N/A N/A
Class IB (September 30, 1998) 72.47% 50.11% N/A N/A N/A
Growth and Income HLS Fund
Class IA (May 29, 1998) 26.31% 21.82% N/A N/A N/A
Class IB (May 29, 1998) 26.01% 21.61% N/A N/A N/A
Index HLS Fund
Class IA (May 1, 1987) 16.01% 20.49% 27.82% 17.43% N/A
Class IB (November 9, 1999) 7.73%* N/A N/A N/A N/A
International Opportunities HLS Fund
Class IA (July 2, 1990) 10.36% 39.86% 15.36% N/A N/A
Class IB (April 1, 1998) 21.39% 39.61% N/A N/A N/A
MidCap HLS Fund
Class IA (July 15, 1997) 37.35%* 51.81% N/A N/A N/A
Class IB (November 9, 1999) 21.39%* N/A N/A N/A N/A
Small Company HLS Fund
Class IA (August 9, 1996) 28.59% 65.83% N/A N/A N/A
Class IB (April 1, 1998) 32.37% 65.54% N/A N/A N/A
Stock HLS Fund
Class IA (August 31, 1977) 16.28% 19.78% 28.49% 17.88% N/A
Class IB (April 1, 1998) 19.90% 19.57% N/A N/A N/A
Advisers HLS Fund
Class IA (March 31, 1983) 13.70% 10.59% 20.76% 13.98% N/A
Class IB (April 1, 1998) 12.86% 10.39% N/A N/A N/A
International Advisers HLS Fund
Class IA (March 1, 1995) 14.28% 23.16% N/A N/A N/A
Class IB (November 9, 1999) 9.35%* N/A N/A N/A N/A
Bond HLS Fund
Class IA (August 31, 1977) 8.52% -2.02% 7.68% 7.40% 7.02%
Class IB (April 1, 1998) 2.02% -2.19% N/A N/A 6.83%
High Yield HLS Fund
Class IA (September 30, 1998) 6.78%* 4.70% N/A N/A 9.65%
Class IB (September 30, 1998) 6.57%* 4.49% N/A N/A 9.45%
Mortgage Securities HLS Fund
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<PAGE>
Class IA (January 1, 1985) 8.39% 1.52% 7.59% 7.10% 6.83%
Class IB (November 9, 1999) -0.60%* N/A N/A N/A 6.64%
Money Market HLS Fund
Class IA (June 30, 1980) 7.38% 4.89% 5.28% 5.10% 5.49%
Class IB (April 1, 1998) 4.85% 4.70% N/A N/A 5.30%**
</TABLE>
* Not Annualized
** 7-day Effective Yield
Each HLS Fund may also publish its distribution rate and/or its
effective distribution rate. An HLS Fund's distribution rate is computed by
dividing the most recent monthly distribution per share annualized, by the
current net asset value per share. An HLS 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. An HLS 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 HLS 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 an HLS Fund's last monthly distribution. An HLS 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 HLS Fund
during the month (see "Dividends, Capital Gains and Taxes" in the HLS Funds'
Prospectus).
Other data that may be advertised or published about each HLS 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:
2-b
2 [( --- ) + 1) TO THE POWER OF 6 - 1 ]
cd
<TABLE>
<S> <C> <C> <C>
Where:
a = net investment income earned during c = the average daily number of shares of
the period attributable to the subject the subject class outstanding during
class the period that were entitled to
b = net expenses accrued for the period receive dividends
attributable to the subject class d = the maximum offering price per share
of the subject
</TABLE>
Net investment income will be determined in accordance with rules
established by the SEC.
GENERAL INFORMATION From time to time, the HLS Funds may advertise
their performance compared to similar funds using certain unmanaged indices,
reporting services and publications. Descriptions of some of the indices which
may be used are listed below.
The Standard & Poor's MidCap 400 Index is designed to represent price
movements in the mid cap U.S. equity market. It contains companies chosen by the
Standard & Poor's Index Committee for their size, liquidity and industry
representation. None of the companies in the S&P 400 overlap with those in the
S&P 500 Index or the S&P 600 Index. Decisions about stocks to be included and
deleted are made by the Committee which meets on a regular
-31-
<PAGE>
basis. S&P 400 stocks market cap weighted; each stock influences the Index in
proportion to its relative market cap. REITs are not eligible for inclusion.
The Standard & Poor's 500 Composite Stock Price Index is a well
diversified list of 500 companies representing the U.S. Stock Market.
The Standard and Poor's Small Cap 600 index is designed to represent
price movements in the small cap U.S. equity market. It contains companies
chosen by the Standard & Poors Index Committee for their size, industry
characteristics, and liquidity. None of the companies in the S&P 600 overlap
with the S&P 500 or the S&P 400 (MidCap Index). The S&P 600 is weighted by
market capitalization. REITs are not eligible for inclusion.
The NASDAQ Composite OTC Price Index is a market value-weighted and
unmanaged index showing the changes in the aggregate market value of
approximately 3,500 stocks.
The Lehman Government Bond Index is a measure of the market value of
all public obligations of the U.S. Treasury; all publicly issued debt of all
agencies of the U.S. Government and all quasi-federal corporations; and all
corporate debt guaranteed by the U.S. Government. Mortgage backed securities,
bonds and foreign targeted issues are not included in the Lehman Government
Index.
The Lehman Government/Corporate Bond Index is a measure of the market
value of approximately 5,300 bonds with a face value currently in excess of $1.3
trillion. To be included in the Lehman Government/Corporate Index, an issue must
have amounts outstanding in excess of $1 million, have at least one year to
maturity and be rated "Baa" or higher ("investment grade") by a nationally
recognized rating agency.
The Russell 2000 Index represents the bottom two thirds of the largest
3000 publicly traded companies domiciled in the U.S. Russell uses total market
capitalization to sort its universe to determine the companies that are included
in the Index. Only common stocks are included in the Index.
REITs are eligible for inclusion.
The Russell 2500 Index is a market value-weighted, unmanaged index
showing total return (i.e., principal changes with income) in the aggregate
market value of 2,500 stocks of publicly traded companies domiciled in the
United States. The Index includes stocks traded on the New York Stock Exchange
and the American Stock Exchange as well as in the over-the-counter market.
The Morgan Stanley Capital International EAFE Index (the "EAFE Index")
is an unmanaged index, which includes over 1,000 companies representing the
stock markets of Europe, Australia, New Zealand and the Far East. The EAFE Index
is typically shown weighted by the market capitalization. However, EAFE is also
available weighted by Gross Domestic Product (GDP). These weights are modified
on July 1st of each year to reflect the prior year's GDP. Indices with dividends
reinvested constitute an estimate of total return arrived at by reinvesting one
twelfth of the month end yield at every month end. The series with net dividends
reinvested take into account those dividends net of withholding taxes retained
at the source of payment.
The Lehman Brothers High Yield BB Index is a measure of the market
value of public debt issues with a minimum par value of $100 million and rated
Ba1-Ba3 by Moody's. All bonds within the index are U.S. dollar denominated,
non-convertible and have at least one year remaining to maturity.
The Lehman Mortgage-Backed Securities Index includes the
mortgage-backed pass-through securities of the Government National Mortgage
Association, the Federal National Mortgage Association and the Federal Home Loan
Mortgage Corporation. The Index groups a wide range of pools of fixed rate
mortgage-backed securities of those issuers and defines them generally according
to agency, program, pass-through coupon and origination year. Those securities
which meet the maturity and liquidity criteria are then used to determine the
Index.
-32-
<PAGE>
The Salomon Smith Barney World Government Bond Index is a
market-capitalization weighted benchmark that tracks the performance of the 18
Government bonds markets of Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Portugal,
Spain, Sweden, Switzerland, the United Kingdom and the United States. The
ex-U.S. Index excludes the United States.
The Goldman Sachs Healthcare Index is a modified capitalization
weighted index of selected companies covering a broad range of healthcare and
related businesses. Individual holdings are capped at 7.5% at each semi -annual
reconstitution date and must be listed on the New York Stock Exchange, American
Stock Exchange or National Association of Securities Dealers Automated Quotation
(NASDAQ) System. As of December 31, 1999 there were 87 names in the Index.
The Goldman Sachs Technology Index is a modified capitalization
weighted index of selected companies covering the entire spectrum of the
technology industry. Individual holdings are capped at 8.5% at each semi-annual
reconstitution date and must be listed on the New York Stock Exchange, American
Stock Exchange or National Association of Securities Dealers Automated Quotation
(NASDAQ) System. As of December 31, 1999 there were 159 names in the Index.
In addition, from time to time in reports and promotions: (1) an HLS
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 HLS 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 HLS Fund or
the general economic, business, investment, or financial environment in which
the HLS Fund operates; (4) various financial, economic and market statistics
developed by brokers, dealers and other persons may be used to illustrate
aspects of the HLS Fund's performance; (5) the effect of tax-deferred
compounding on the HLS 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 HLS
Fund (or returns in general) on a tax-deferred basis (assuming reinvestment of
capital gains and dividends and assuming one or more tax rates) with the return
on a taxable basis; and (6) the sectors or industries in which the HLS Fund
invests may be compared to relevant indices or surveys (e.g., S&P Industry
Surveys) in order to evaluate the HLS Fund's historical performance or current
or potential value with respect to the particular industry or sector.
Each HLS Fund's investment performance may be advertised in various
financial publications, newspapers, magazines including the following:
<TABLE>
<S> <C> <C>
Across the Board Business Wire Dow Jones News Service
Advertising Age Business News Features Economist
Adviser's Magazine Business Month Entrepreneur
Adweek Business Marketing Entrepreneurial Woman
Agent Business Daily Financial Services Week
American Banker Business Insurance Financial World
American Agent and Broker California Broker Financial Planning
Associated Press Changing Times Financial Times
Barron's Best's Consumer Reports Forbes Fortune
Review Bloomberg Consumer Digest Hartford Courant Inc
Broker World Crain's
Business Week
</TABLE>
-33-
<PAGE>
<TABLE>
<S> <C> <C>
Independent Business Life Insurance Selling Rough Notes
Institutional Investor Life Times Round the Table
Insurance Forum LIMRA's MarketFacts Service
Insurance Advocate Lipper Analytical Services, Inc. Success
Independent MarketFacts The Standard
Insurance Review Investor's Medical Economics The Boston Globe
Insurance Times Money The Washington Post
Insurance Week Morningstar, Inc. Tillinghast
Insurance Product News Nation's Business Time
Insurance Sales National Underwriter U.S. News & World Report
Investment Dealers Digest New Choices (formerly U.S. Banker
Investment Advisor 50 Plus) United Press International
Journal of Commerce New England Business USA Today
Journal of Accountancy New York Times Value Line
Journal of the American Pension World Wall Street Journal
Society of CLU & ChFC Pensions & Investments Wiesenberger Investment
Kiplinger's Personal Finance Professional Insurance Agents Working Woman
Knight-Ridder Professional Agent
Life Association News Registered Representative
Reuter's
</TABLE>
From time to time the HLS Fund may publish the sales of shares of one
or more of the HLS 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 HLS Funds are offered exclusively through variable insurance
products and to certain qualified retirement plans. Performance information
presented for the HLS Funds should not be compared directly with performance
information of other insurance products without taking into account
insurance-related charges and expenses payable with respect to these insurance
products. Insurance related charges and expenses are not reflected in the HLS
Funds' performance information and will reduce an investor's return under the
insurance product.
TAXES
Each HLS Fund is treated as a separate entity for accounting and tax
purposes. Each HLS Fund has qualified and elected or intends to qualify and
elect to be treated as a "regulated investment company" under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"), and intends to
continue to so qualify in the future. As such and by complying with the
applicable provisions of the Code regarding the sources of its income, the
timing of its distributions, and the diversification of its assets, each HLS
Fund will not be subject to federal income tax on taxable income (including net
short-term and long-term capital gains) which is distributed to shareholders at
least annually in accordance with the timing requirements of the Code.
Each HLS Fund will be subject to a 4% non-deductible federal excise tax
on certain amounts not distributed (and not treated as having been distributed)
on a timely basis in accordance with annual minimum distribution requirements.
Each HLS Fund intends under normal circumstances to avoid liability for such tax
by satisfying such distribution requirements.
If an HLS Fund acquires stock in certain non-U.S. corporations that
receive at least 75% of their annual gross income from passive sources (such as
interest, dividends, rents, royalties or capital gain) or hold at least 50% of
their assets in investments producing such passive income ("passive foreign
investment companies"), that HLS 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 HLS Fund is timely distributed to its
shareholders. The HLS Fund would not be able to pass through to its
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<PAGE>
shareholders credit or deduction for such a tax. Certain elections may, if
available, ameliorate these adverse tax consequences, but any such election
would require the applicable HLS Fund to recognize taxable income or gain
without the concurrent receipt of cash. Any HLS Fund that is permitted to
acquire stock in foreign corporations may limit and/or manage its holdings in
passive foreign investment companies to minimize its tax liability or maximize
its return from these investments.
Foreign exchange gains and losses realized by an HLS 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 an HLS Fund's investment in
stock or securities, possibly including speculative currency positions or
currency derivatives not used for hedging purposes could, under future Treasury
regulations, produce income not among the types of "qualifying income" from
which the HLS Fund must derive at least 90% of its annual gross income.
Some HLS Funds may be subject to withholding and other taxes imposed by
foreign countries with respect to their investments in foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. If eligible, each fund may make an election to pass through to its
shareholder, Hartford Life, a credit for any foreign taxes paid during the year.
If such an election is made, the pass through of the foreign tax credit will
result in additional taxable income and income tax to Hartford Life. 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 Hartford
Life.
For federal income tax purposes, each HLS Fund is permitted to carry
forward a net capital loss in any year to offset its own capital gains, if any,
during the eight years following the year of the loss. To the extent subsequent
capital gains are offset by such losses, they would not result in federal income
tax liability to the applicable HLS Fund and would not be distributed as such to
shareholders.
Each HLS 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 HLS Fund elects to
include market discount in income currently) must accrue income on such
investments prior to the receipt of the corresponding cash payments. However,
each HLS 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, an HLS 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 HLS Fund that may hold such obligations. Tax
rules are not entirely clear about issues such as when the HLS 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 HLS 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 HLS Funds may restrict an HLS Fund's ability to enter into futures, options,
and forward transactions.
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<PAGE>
Certain options, futures and forward foreign currency transactions
undertaken by an HLS Fund may cause the HLS 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 HLS Fund. Also,
certain of an HLS 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 HLS Fund's
taxable income. Certain of the applicable tax rules may be modified if an HLS
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 an HLS Fund's distributions to shareholders. The HLS Funds will
take into account the special tax rules (including consideration of available
elections) applicable to options, futures or forward contracts in order to
minimize any potential adverse tax consequences.
The federal income tax rules applicable to interest rate swaps, caps
and floors are unclear in certain respects, and an HLS 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
an HLS 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
HLS Funds in their particular circumstances.
STATE AND LOCAL Each HLS Fund may be subject to state or local taxes in
jurisdictions in which such HLS Fund may be deemed to be doing business. In
addition, in those states or localities which have income tax laws, the
treatment of such HLS Fund and its shareholders under such laws may differ from
their treatment under federal income tax laws, and investment in such HLS Fund
may have different tax consequences for shareholders than would direct
investment in such HLS Fund's portfolio securities. Shareholders should consult
their own tax advisers concerning these matters.
CUSTODIAN
Portfolio securities of each HLS Fund are held pursuant to Custodian
Agreements between each HLS Fund and State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110.
TRANSFER AGENT SERVICES
Hartford Life Insurance Company, 200 Hopmeadow Street, Simsbury, CT
06089, serves as Transfer and Dividend Disbursing Agent for the HLS Funds. The
Transfer Agent issues and redeems shares of the HLS Funds and disburses any
dividends declared by the HLS Funds.
DISTRIBUTOR
Hartford Securities Distribution Company, 200 Hopmeadow Street,
Simsbury, Connecticut 06089, acts as the HLS Fund's Distributor.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements and financial highlights have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and are incorporated by reference
<PAGE>
herein in reliance upon the authority of said firm as experts in giving said
report. The principal business address of Arthur Andersen LLP is One Financial
Plaza, Hartford, Connecticut 06103.
OTHER INFORMATION
The Hartford has granted the Company the right to use the name, "The
Hartford" or "Hartford", and has reserved the right to withdraw its consent to
the use of such name by the Company and the HLS Funds at any time, or to grant
the use of such name to any other company.
The Hartford Index HLS Fund uses the Standard & Poor's 500 Index as
its benchmark. "Standard & Poor's"-Registered Trademark-, "S&P"-Registered
Trademark-, "S&P 500"-Registered Trademark-, "Standard & Poor's 500", and
"500" are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed for use by Hartford Life Insurance Company. The fund is not
sponsored, endorsed, sold or promoted by S&P. S&P makes no representation or
warranty, express or implied, to the shareholders of the fund regarding the
advisability of investing in securities generally or in the fund particularly
or the ability of the S&P 500 Index to track general stock market
performance. S&P's only relationship to Hartford Life Insurance Company is
the licensing of certain trademarks and trade names of S&P and of the S&P 500
Index which is determined, composed and calculated by S&P without regard to
the fund or Hartford Life Insurance Company. S&P has no obligation to take
the needs of the fund or its shareholders, or Hartford Life Insurance
Company, into consideration in determining, composing or calculating the S&P
500 Index. S&P is not responsible for and has not participated in the
determination of the net asset value of the fund or the timing of the
issuance or sale of shares in the fund. S&P has no obligation or liability in
connection with the administration, marketing or trading of the fund.
In addition, S&P does not guarantee the accuracy and/or the
completeness of the S&P 500 Index or any data included therein and S&P shall
have no liability for any errors, omissions, or interruptions therein. S&P makes
no warranty, express or implied, as to results to be obtained by the fund, its
shareholders or any other person or entity from the use of the S&P 500 Index or
any data included therein. S&P makes no express or implied warranties, and
expressly disclaims all warranties of merchantability or fitness for a
particular purpose or use with respect to the S&P 500 Index or any data included
therein. Without limiting any of the foregoing, in no event shall S&P have any
liability for any special, punitive, indirect, or consequential damages
(including lost profits), even if notified of the possibility of such damages.
FINANCIAL STATEMENTS
Each HLS Fund's audited financial statements as of and for the year
ended December 31, 1999, together with the notes thereto and report of Arthur
Andersen LLP, independent public accountants, contained in the HLS Funds' annual
report as filed with the Securities and Exchange Commission are incorporated by
reference into this Statement of Additional Information.
<PAGE>
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.
<PAGE>
STANDARD AND POOR'S CORPORATION ("STANDARD & POOR'S")
AAA - Bonds rated AAA are the highest grade obligations. Capacity to
pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from AAA issues only in small degree.
A - Bonds rated A have a very strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the considerable
investment strength but are not entirely free from adverse effects of changes in
circumstances and economic conditions than debt in the highest rated categories.
BBB - Bonds rated BBB and regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category then in higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC, and C is regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions.
RATING OF COMMERCIAL PAPER
Purchases of corporate debt securities used for short-term investment,
generally called commercial paper, will be limited to the top two grades of
Moody's, Standard & Poor's, Duff & Phelps, Fitch Investor Services and Thomson
Bank Watch or other NRSROs (nationally recognized statistical rating
organizations) rating services and will be an eligible security under Rule 2a-7.
MOODY'S
Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
- 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.
<PAGE>
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 C
OTHER INFORMATION
Item 23. Exhibits
a.(i) Articles of Incorporation(1)
a.(ii) Articles Supplementary(10)
b. By-Laws(1)
c. Not Applicable
d.(i) Form of Investment Management Agreement(3)
d.(ii) Form of Investment Sub-Advisory Agreement(3)
e. Form of Principal Underwriting Agreement(8)
f. Not Applicable
g.(i) Form of Custodian Agreement(2)
g.(ii) Form of Additional Custodian Agreement(4)
g.(iii) Form of Custodian Agreement with Chase Manhattan Bank(6)
g.(iv) Custodian Agreement with State Street Bank and Trust
Company(7)
h.(i) Form of Administrative Services Agreement(5)
h.(ii) Form of Share Purchase Agreement(5)
i. Opinion and Consent of Counsel
j. Consent of Independent Public Accountants
k. 1999 Annual Report to Shareholders' Financial Statements(9)
l. Not Applicable
m. Form of Rule 12b-1 Distribution Plan(8)
n. Financial Data Schedules(11)
o. Form of Multi-Class Plan Pursuant to Rule 18f-3(8)
p.(i) Code of Ethics of HL Investment Advisors LLC and Hartford
Investment Management Company
p.(ii) Code of Ethics of Hartford Securities Distribution Company
p.(iii) Code of Ethics of Wellington Management Company LLP
q. Power of Attorney
- --------------------------
(1) Previously filed as exhibit to Registrant's Registration Statement filed on
February 3, 1983.
(2) Previously filed as exhibit to Registrant's Pre-Effective Amendment #1
filed on April 6, 1983.
(3) Previously filed as exhibit to Registrant's Proxy Statement dated
September 19, 1984.
(4) Previously filed as exhibit to Registrant's Registration Statement
effective May 1, 1989.
(5) Previously filed as exhibit to Registrant's Registration Statement filed on
April 28, 1993.
(6) Previously filed as exhibit to Registrant's Registration Statement filed on
April 23, 1996.
(7) Previously filed as exhibit to Registrant's Post-Effective Amendment #18
filed on April 10, 1997.
(8) Previously filed as exhibit to Registrant's Post-Effective Amendment #19
filed on November 19, 1997.
(9) Incorporated by reference to Registrant's filing pursuant to Rule 30d-1 of
the Investment Company Act of 1940.
(10) Previously filed as exhibit to Registrant's Post-Effective Amendment #20
filed on April 17, 1998.
(11) Incorporated by reference to Registrant's Form NSAR-B filed on February 29,
2000.
<PAGE>
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Inapplicable
Item 25. INDEMNIFICATION
Article EIGHTH of the Articles of Incorporation provides:
EIGHTH: (a) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a
Director, Officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a Director or Officer of
another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, has no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent, creates a rebuttable presumption
that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interest of the
Corporation, and, with respect to any criminal action or proceeding,
had reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is party or
is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to
procure, a judgment in its favor by reason of the fact that he is or
was a Director, Officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a Director, Officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including attorney's fees)
actually and reasonably incurred by him in connection with the defense
or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Corporation. No indemnification shall be made in
respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the Corporation.
(c) To the extent that a Director, Officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in subsections (a) and
(b), or in defense of any claim, issue
<PAGE>
or matter therein, he shall be indemnified against expenses (including
attorney's fees) actually and reasonably incurred by him in connection
therewith.
(d) Any indemnification under subsections (a) and (b) (unless ordered
by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the
Director, Officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b). Such determination shall be made (1) by the
Board of Directors by a majority vote of a quorum consisting of
Directors who were neither interested persons nor parties to such
action suit or proceeding, or (2) if such quorum is not obtainable, or
even if obtainable a quorum of disinterested Directors so directs, by
independent legal counsel in a written opinion.
(e) Expenses incurred in defending civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the
Board of Directors in the specific case upon receipt of an undertaking
by or on behalf of the Director, Officer, employee or agent to repay
such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the Corporation as authorized in this
Article and upon meeting one of the following conditions:
(i) the indemnitee shall provide a security for his undertaking,
(ii) the investment company shall be insured against losses arising
by reason of any lawful advances, or (iii) a majority of a quorum of
the disinterested, non-party Directors of the investment company, or
an independent legal counsel in a written opinion, shall determine,
based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the
indemnitee ultimately will be found entitled to indemnification.
(f) The corporation may purchase and maintain insurance on behalf of
any person who is or was a Director, Officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as
a Director, Officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such.
(g) Anything to the contrary in the foregoing clauses (a) through (f)
notwithstanding, no Director or Officer shall be indemnified by the
Corporation and no insurance policy obtained by the Corporation will
protect or attempt to protect any such person against any liability to
the Corporation or to its security holders to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office, or in a manner inconsistent with Securities and Exchange
Commission Release 11330 under the Investment Company Act of 1940.
<PAGE>
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person in connection with the
securities being registered), the registrant undertakes that it will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent submit to a court of appropriate jurisdiction the
questions whether such indemnification by it is against public policy
as expressed in the Act and will be governed by the final adjudication
of such issue.
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
HL Investment Advisors, LLC serves as investment adviser to each of the
investment companies included in this Registration Statement.
<TABLE>
<CAPTION>
Position with HL
Name Investment Advisors, LLC Other Business
- ---- ------------------------ --------------
<S> <C> <C>
Lowndes A. Smith Manager, President and President and Chief Executive Officer of
Chief Executive Officer Hartford Life, Inc. ("H. L. Inc.")
Thomas M. Marra Manager and Executive Vice Chief Operating Officer of H. L. Inc.
President
David Znamierowski Manager and Senior Vice Chief Investment Officer of H. L. Inc.
President
Peter W. Cummins Manager and Senior Vice Senior Vice President of H. L. Inc.
President
Andrew W. Kohnke Manager and Senior Vice Managing Director of Hartford Investment
President Management Company ("HIMCO")(1)
Lynda Godkin Senior Vice President, General Counsel of H. L. Inc.
General Counsel and Secretary
David Foy Senior Vice President and Chief Financial Officer of H. L. Inc.
Treasurer
George R. Jay Controller Assistant Vice President of H. L. Inc.
David A. Carlson Vice President and Director Vice President and Director of Taxes of
of Taxes H. L. Inc.
(1) The principal business address for HIMCO is 55 Farmington Avenue,
Hartford, CT 06105.
<PAGE>
Mark E. Hunt Vice President Vice President of Hartford Life Insurance
Company ("HLIC")(2)
Thomas A. Klee Assistant Corporate Secretary Counsel of HLIC
Kevin J. Carr Assistant Secretary and Assistant General Counsel of The Hartford
Counsel Financial Services Group, Inc.(3)("The
Hartford");
Dawn M. Cormier Assistant Secretary Assistant Secretary HLIC
Diane E. Tatelman Assistant Secretary Assistant Secretary HLIC
</TABLE>
Item 27. 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:
<TABLE>
<S> <C>
Hartford Life Insurance Company
DC Variable Account I
Separate Account Two (DC Variable Account II)
Separate Account Two (Variable Account "A")
Separate Account Two (QP Variable Account)
Separate Account Two (NQ Variable Account)
Putnam Capital Manager Trust Separate Account
Separate Account One
Separate Account Two
Separate Account Three
Separate Account Five
Hartford Life and Annuity Insurance
Company Separate Account One
Separate Account Three
Separate Account Five
Separate Account Six
Putnam Capital Manager Trust
Separate Account Two
American Maturity Life Insurance
Company Separate Account American
Maturity Life Variable Annuity
</TABLE>
The Directors and principal officers of HSD and their position with the
Registrant are as follows:
<TABLE>
<CAPTION>
Name and Principal Position and Offices
Business Address* Positions and Offices With Underwriter With Registrant
- ----------------- -------------------------------------- ---------------
<S> <C> <C>
David A. Carlson Vice President None
- ---------------------------------------
(2) The principal business address for Hartford Life is 200 Hopmeadow Street,
Simsbury, CT 06089.
(3) The principal business address for The Hartford is Hartford Plaza,
Hartford, CT 06115.
<PAGE>
Peter Cummins Senior Vice President Vice President
David T. Foy Treasurer None
Lynda Godkin Senior Vice President, General Counsel and None
Corporate Secretary
George Jay Controller & Financial Principal Controller & Treasurer
Robert A. Kerzner Executive Vice President None
Thomas A. Klee Assistant Corporate Secretary None
Stephen T. Joyce Assistant Secretary None
Glen J. Kvadus Assistant Secretary None
Thomas M. Marra Executive Vice President Vice President
Paul Eugene Olson Supervisory Registered Principal None
Edward M. Ryan, Jr. Assistant Secretary None
Lowndes A. Smith President and Chief Executive Officer Chairman
*Principal business address is 200 Hopmeadow Street, Simsbury, CT 06089
</TABLE>
Item 28. LOCATION OF ACCOUNTS AND RECORDS
Hartford Life Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
AND
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Item 29. MANAGEMENT SERVICES
Not Applicable
Item 30. UNDERTAKINGS
The Registrant undertakes to furnish to each person to whom a
prospectus has been delivered a copy of the Registrant's
latest annual report to shareholders, upon request and without
charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hartford, State of Connecticut, on the 19th day of
April, 2000.
HARTFORD ADVISERS HLS FUND, INC.
By: *
-----------------------------------
David M. Znamierowski
Its: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
* President April 19, 2000
- ----------------------- (Chief Executive Officer
David M. Znamierowski & Director)
* Controller & Treasurer April 19, 2000
- ----------------------- (Chief Accounting Officer &
George R. Jay Chief Financial Officer)
* Director April 19, 2000
- -----------------------
Robert J. Clark
* Director April 19, 2000
- -----------------------
Winifred E. Coleman
* Director April 19, 2000
- -----------------------
William A. O'Neill
<PAGE>
* Director April 19, 2000
- -----------------------
Millard H. Pryor, Jr.
* Director April 19, 2000
- -----------------------
Lowndes A. Smith
* Director April 19, 2000
- -----------------------
John K. Springer
/s/ Kevin J. Carr April 19, 2000
- -----------------------
* By Kevin J. Carr
Attorney-in-fact
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit No.
- ----------
i. Opinion and Consent of Counsel
j. Consent of Independent Public Accountants
p.(i) Code of Ethics of HL Investment Advisors LLC and Hartford
Investment Management Company
p.(ii) Code of Ethics of Hartford Securities Distribution Company
p.(iii) Code of Ethics of Wellington Management Company LLP
q. Power of Attorney
<PAGE>
EXHIBIT i.
Opinion and Consent of Counsel
The Hartford Financial Services Group, Inc.
Hartford Plaza
Hartford, CT 06115
April 21, 2000
Hartford Advisers HLS Fund, Inc.
Hartford Plaza
Hartford, CT 06115
Gentlemen:
I have examined the Articles of Incorporation of Hartford Advisers HLS Fund,
Inc. (hereafter referred to as "Fund"); the By-Laws of the Fund; documents
evidencing various pertinent corporate proceedings; and such other things
considered to be material to determine the legality of the sale of the
authorized but unissued shares of the Fund's stock. Based upon my examination,
it is my opinion that the Fund is a validly organized and existing corporation
of the State of Maryland and it is legally authorized to issue its shares of
common stock, at prices determined as described in the Fund's currently
effective Prospectus, when such shares are properly registered under all
applicable federal and state securities laws.
Based upon the foregoing, it is my opinion that the Fund's shares were, when
issued for cash consideration as described in the Fund's currently effective
prospectus, validly issued, fully paid and nonassessable stock of the Fund.
I hereby consent to the inclusion of this Opinion as an Exhibit to the Fund's
Post-Effective Amendment to its Registration Statement.
Very truly yours,
/s/ Kevin J. Carr
Kevin J. Carr
Assistant General Counsel
<PAGE>
EXHIBIT j.
Consent of Independent Public Accountants
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
Registration Statement File No. 2-81647 for Hartford Advisers HLS Fund, Inc.
on Form N-1A.
/s/ Arthur Andersen LLP
Hartford, Connecticut
April 21, 2000
<PAGE>
EXHIBIT p.(i)
Code of Ethics of HL Investment Advisers LLC and
Hartford Investment Management Company
<PAGE>
HL INVESTMENT ADVISORS, LLC
HARTFORD INVESTMENT FINANCIAL SERVICES COMPANY
HARTFORD INVESTMENT SERVICES, INC.
HARTFORD INVESTMENT MANAGEMENT COMPANY
(EACH AN "ADVISER" OR COLLECTIVELY, THE "ADVISERS")
THE HARTFORD-SPONSORED MUTUAL FUNDS
CODE OF ETHICS
SECTION 1 - INTRODUCTION
In accordance with Federal securities laws the Hartford-sponsored mutual funds
and each Hartford affiliated registered investment adviser must adopt and
administer a code of ethics (the "Code"). The adoption and administration of the
Code is predicated upon the following principles: (1) at all times the interests
of investment company shareholders and advisory account clients should be placed
first; (2) all personal securities transactions should be conducted consistent
with the Code and in such a manner as to avoid any actual or potential conflict
of interest or any abuse of an individual's position of trust and
responsibility; and (3) investment personnel should not take inappropriate
advantage of their positions.
SECTION 2 - DEFINITIONS
(a) "Access Person" means any director, officer, general partner or Advisory
Person of the Hartford-sponsored mutual funds or of an Adviser.
(b) "Account" means any registered investment company or advisory account
for which an Adviser is the investment adviser or sub-adviser.
(c) "Advisory Person" means (i) any employee of an Adviser (or of any
company in a control relationship to the Adviser), who, in connection with his
or her regular functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of a Covered Security by any Account,
or whose functions relate to the making of any recommendations with respect to
such purchases or sales; and (ii) any natural person in a control relationship
to any Account or Adviser who obtains information concerning recommendations
made to the Account with regard to the purchase or sale of a Covered Security.
(d) "Being Considered for Purchase or Sale" as to a Covered Security means
when a recommendation to purchase or sell such Covered Security has been made
and communicated.
(e) "Covered Security" means any interest or instrument commonly known as a
security, except that it shall not include securities issued by the government
of the United States, bankers' acceptances, bank certificates of deposit,
commercial paper, high quality short-term instruments and shares of registered
open-end investment companies.
(f) "Disinterested Director" means a Director of the Hartford-sponsored
mutual funds who is not an "interested person" of the those funds within the
meaning of Section 2(a)(19) of the Investment Company Act.
(g) "Investment Personnel" means Portfolio Managers, analysts and traders
of the Advisers who take part in the process of making decisions about Account
investments.
(h) "Portfolio Managers" means personnel of the Advisers who make decisions
about Account investments.
(i) "Purchase or Sale of a Covered Security" includes, among other things,
the writing of an option to purchase or sell a Covered Security.
<PAGE>
SECTION 3 - PROHIBITION ON CERTAIN PURCHASES AND SALES OF SECURITIES AND RELATED
REQUIREMENTS
(a) TRADING RESTRICTION ON ACCESS PERSONS - No Access Person shall purchase
or sell, directly or indirectly, any Covered Security in which he or she has, or
by reason of such transaction acquires, any direct or indirect beneficial
ownership and which to his or her actual knowledge at the time of such purchase
or sale:
(1) Is being considered for purchase or sale by any Account; or
(2) Is being purchased or sold by any Account.
(b) TRADING RESTRICTION ON PORTFOLIO MANAGERS - Portfolio Managers may not
buy or sell a Covered Security within the seven calendar day period before or
after an Account that he or she manages, buys or sells that Covered Security.
Any profits realized on such trades will be disgorged as determined by the
compliance officer.
(c) IPOS - Investment Personnel may not acquire any equity security in an
initial public offering.
(d) PRIVATE PLACEMENTS - Investment Personnel may not acquire any security
in a private placement without express prior approval by the compliance officer
of the Advisers. If, after the purchase, the purchasing party may play a part in
the Account's subsequent consideration of an investment in the issuer, the
Investment Personnel must make a disclosure to the compliance officer of the
Advisers of this conflicting interest. If a decision is made to purchase such a
security for the Account, an independent review of the investment decision will
be made by Investment Personnel with no personal interest in the issuer.
(e) SHORT-TERM TRADES - Investment Personnel may not profit in the purchase
and sale, or sale and purchase of the same (or equivalent) Covered Securities
within 30 calendar days without a written exemption from the compliance officer.
Any profits realized in such short-term trades will be disgorged as determined
by the compliance officer.
(f) GIFTS - Investment Personnel may not accept gifts or other items of more
than de minimis value from any person or entity that does business with or on
behalf of any Account.
(g) SERVICE ON BOARDS OF DIRECTORS - Investment Personnel may not serve on
the Boards of Directors of publicly held companies without prior approval by the
compliance officer of the Advisers.
SECTION 4 - EXEMPTED TRANSACTIONS
The trading restrictions of Section 3 of this Code shall not apply to:
(a) Purchases or sales effected in any personal investment account over
which the Access Person has no direct influence or control. (An Access Person is
presumed to have direct influence or control over the account of a spouse, minor
child or other dependent relatives.);
(b) Purchases or sales of securities or the purchase, sale or exercise of
options related to securities which are not eligible for purchase or sale by any
Account such as securities of The Hartford Financial Services Group, Inc. and
Hartford Life, Inc.;
(c) Purchases or sales which are non-volitional on the part of either the
Access Person or an Account;
(d) Purchases which are part of any automatic dividend reinvestment plan or
stock purchase plan;
2
<PAGE>
(e) Purchases effected upon the exercise of rights issued by an issuer
pro-rata to all holders of a class of its securities, to the extent such rights
were acquired from such issuer, and sales of such rights so acquired; and
(f) Purchases and sales of U.S. or foreign government securities, bankers'
acceptances, bank certificates of deposit, commercial paper, high quality
short-term instruments, shares of open-end mutual funds, securities with a
market capitalization of at least $5 billion and any exchange traded securities
designed to replicate specific indices, or sub-components of an index, such as
SPDRS, Diamonds, Midcap SPDRS and WEBS.
SECTION 5 - COMPLIANCE PROCEDURES
(a) INITIAL AND ANNUAL HOLDINGS REPORT - Within ten days of becoming an
Access Person and not later than January 31st thereafter, each Access Person
must submit a report to the compliance officer with the information listed
below.
(1) The title, number of shares and principal amount of all Covered
Securities owned by the Access Person.
(2) The name of any broker, dealer or bank with whom the Access Person
maintains an account.
(3) The date the report is submitted.
The report should contain information that is no more than 30 days old.
(b) QUARTERLY REPORTING - Every Access Person shall, within ten days of the
end of each calendar quarter, report to the compliance officer, with respect to
transactions in any Covered Security in which such Access Person has, or by
reason of such transaction acquires, any direct or indirect beneficial ownership
in the Covered Security, the information listed below.
(1) The date of the transaction, the title and the number of shares,
and the principal amount of each Covered Security involved.
(2) The nature of the transaction (i.e. purchase, sale or any other
type of acquisition or disposition).
(3) The price at which the transaction was effected.
(4) The name of the broker, dealer or bank with or through whom the
transaction was effected.
(5) If the Access Person has established a brokerage account during the
quarterly period, the name of the broker, dealer or bank and the date
the account was established.
(6) The date the report is submitted.
(c) REVIEW OF REPORTS - The compliance officer or a designee shall be
responsible for reviewing all reports referenced above on at least a quarterly
basis.
(d) CONFIRMATIONS - All Access Persons must direct their brokers to send
duplicate copies of confirmations for all Covered Security transactions to the
compliance officer.
(e) PRE-CLEARANCE - All Access Persons must preclear with the compliance
officer of the Advisers trades in all Covered Securities except equities with
the exception of private placement personnel of HIMCO which must preclear all
Covered Security transactions.
(f) ANNUAL CERTIFICATION - All Access Persons must certify annually that
they have read and understand the Code and have complied with its requirements.
(g) REPORT TO BOARD - On an annual basis management of the
Hartford-sponsored mutual funds and each Adviser which provides services to
those funds must submit to the Boards of Directors of those funds a written
report which:
(1) Describes any issues arising under the Code or procedures since the
last report to the Board of Directors, including, but not limited to,
information about material violations of the Code or procedures and
sanctions imposed in response to the material violations; and
3
<PAGE>
(2) Certifies that the funds and each Adviser have adopted procedures
reasonably necessary to prevent Access Persons from violating the Code.
(h) A Disinterested Director of the Hartford-sponsored mutual funds shall
not be subject to the foregoing except where such Disinterested Director knew,
or in the ordinary course of fulfilling his official duties as a director,
should have known that during the 15-day period immediately preceding or after
the date of the transaction in a security by the director such security was
purchased or sold by the fund or such purchase or sale is or was considered by
the fund or its investment adviser.
(i) The reporting requirements above shall not apply to transactions
effected for, and Covered Securities held in, any account over which the person
has no direct or indirect influence or control (e.g. blind trusts, employee
stock purchase plans or option grants).
SECTION 6 - SANCTIONS
Upon discovering a violation of this Code, the Advisers' Board of Directors may
impose such sanctions as it deems appropriate, including, among other things, a
letter of sanction, suspension or termination of the employment of the violator.
All material violations of this Code and any sanctions imposed with respect
thereto shall be reported periodically to the appropriate entity's Board of
Directors.
SECTION 7 - EXEMPTIVE PROCEDURE
The compliance officer of the appropriate Adviser may grant exemptions from the
requirements in this Code in appropriate circumstances. In addition, violations
of the provisions regarding personal trading will presumptively be subject to
being reversed in the case of a violative purchase, and to disgorgement of any
profit realized from the position by payment of the profit to any client
disadvantaged by the transaction, or to a charitable organization, as determined
by the appropriate Adviser, unless the violator establishes to the satisfaction
of the Adviser that under the particular circumstances disgorgement would be an
unreasonable remedy for the violation.
Approved by the Funds: April 25, 2000
4
<PAGE>
EXHIBIT p.(ii)
Code of Ethics of Hartford Securities Distribution Company
<PAGE>
HARTFORD SECURITIES DISTRIBUTION COMPANY
CODE OF ETHICS
SECTION 1 - PREAMBLE
The Securities and Exchange Commission (SEC) has adopted Rule 17j-1 which in
effect requires that every investment company registered with the SEC, its
investment adviser and its principal underwriter adopt a code of ethics
prohibiting persons with access to information concerning the trading of such
registered investment company from engaging in parallel trading for their own
account. Such code of ethics must contain provisions reasonably necessary to
prevent "access person" (as defined herein) from:
(a) Employing any scheme or artifice to defraud such registered
investment Company;
(b) Making to such registered investment company any untrue statement
of a material fact or omitting to state to such registered
investment company a material fact necessary in order to make
statement made, in light of the circumstances under which they are
made, not misleading;
(c) Engaging in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon any such registered
investment company; and
(d) Engaging in any manipulative practice with respect to such
registered investment company.
SECTION 2 - DEFINITIONS
1. "FUND OR SEPARATE ACCOUNT" means any registered investment company of
which Hartford Securities Distribution Company (HSD) is the principal
underwriter.
2. "ACCESS PERSON" means any director, officer or employee or registered
representative of HSD or any company in a control relationship to HSD, who, in
connection with his regular functions or duties, makes, participates in or
obtains information regarding the purchase or sale of a security by the Fund or
Separate Account, or whose functions relate to the making of any recommendations
with respect to such purchase or sale.
3. "BEING CONSIDERED FOR PURCHASE OR SALE" as to a Security means when a
recommendation to purchase or sell such Security has been made and communicated.
4. "BENEFICIAL OWNERSHIP" shall be interpreted in the same manner as it
would be in determining whether a person is subject to the provisions of Section
16 of the Securities Exchange Act of 1934 and the rules and regulations
thereunder.
5. "COVERED SECURITY" means any interest or interest commonly known as a
security except that it shall not include securities issued by the government of
the United States, bankers acceptances, bank certificates of deposits,
commercial paper, high quality short term instruments and shares of registered
open-end investment companies.
SECTION 3 - PROHIBITION ON PURCHASES AND SALES
1. No Access Person shall purchase or sell, directly or indirectly, any
security in which he has, or by reason of such transaction acquires, any direct
or indirect beneficial ownership and which to his actual knowledge at the time
of such purchase or sale:
(a) Is being considered for purchase or sale by any of the Fund or
Separate Account; or
(b) Is being purchased or sold by any Fund or Separate Account
2. No Access Person shall purchase an interest in any initial public
offering or private placement without prior clearance from HSD's compliance
officer.
SECTION 4 - EXEMPTED TRANSACTIONS
The prohibition of Section 3 of this Code shall not apply to:
<PAGE>
(a) Purchases or sales effected in any account over which the Access
Person has no direct influence or control;
(b) Purchases or sales of Securities which are not eligible for
purchase or sale by the Fund;
(c) Purchases or sales which are non-volitional on the part of
either the Access Person or the Fund;
(d) Purchases which are part of an automatic dividend reinvestment
plan; and
(e) Purchases effected upon the exercise of rights issued by issuer
pro-rata to all holders of a class of its securities, to the extent
such rights were acquired from such issuer, and sales of such
rights so acquired.
SECTION 5 - COMPLIANCE PROCEDURES
1. INITIAL AND ANNUAL HOLDINGS REPORT - Within ten days of becoming an
Access Person and not later than January 31st thereafter, each Access Person
must submit a report to the compliance officer with the information listed
below.
(a) The title, number of shares and principal amount of all Covered
Securities owned by the Access Person.
(b) The name of any broker, dealer or bank with whom the Access Person
maintains an account.
(c) The date the report is submitted.
The report should contain information that is no more than 30 days old.
2. QUARTERLY REPORTING - Every Access Person shall, within ten days of the
end of each calendar quarter, report to the compliance officer, with respect to
transactions in any Covered Security in which such Access Person has, or by
reason of such transaction acquires, any direct or indirect beneficial ownership
in the Covered Security, the information listed below.
(a) The date of the transaction, the title and the number of shares,
and the principal amount of each Covered Security involved.
(b) The nature of the transaction (i.e. purchase, sale or any other
type of acquisition or disposition).
(c) The price at which the transaction was effected.
(d) The name of the broker, dealer or bank with or through whom the
transaction was effected.
(e) If the Access Person has established a brokerage account during
the quarterly period, the name of the broker, dealer or bank and
the date the account was established.
(f) The date the report is submitted.
3. REVIEW OF REPORTS - The compliance officer or a designee shall be
responsible for reviewing all reports referenced above on at least a quarterly
basis.
4. CONFIRMATIONS - All Access Persons must direct their brokers to send
duplicate copies of confirmations for all Covered Security transactions to the
compliance officer.
5. ANNUAL CERTIFICATION - All Access Persons must certify annually that they
have read and understand the Code and have complied with its requirements.
6. The reporting requirements above shall not apply to transactions effected
for, and Covered Securities held in, any account over which the person has no
direct or indirect influence or control (e.g. blind trusts, employee stock
purchase plans or option grants).
-2-
<PAGE>
SECTION 6 - SANCTIONS
Upon discovering violation of the Code, the Board of Directors of HSD may impose
such sanctions as it deems appropriate, including, among other things, a letter
of sanction, suspension or termination of employment of the violator. All
material violations of this Code and any sanctions imposed with respect thereto
shall be reported periodically to the board of directors of the Fund, with
respect to whose Securities violation occurred.
<PAGE>
EXHIBIT p.(iii)
Code of Ethics of Wellington Management Company LLP
<PAGE>
Wellington Management Company, llp
Wellington Trust Company, na
Wellington Management International
Wellington International Management Company
Pte Ltd.
Code of Ethics
- ---------------------------- ---------------------------------------------------
Summary
Wellington Management Company, llp and its
affiliates have a fiduciary duty to investment
company and investment counseling clients which
requires each employee to act solely for the
benefit of clients. Also, each employee has a duty
to act in the best interest of the firm. In
addition to the various laws and regulations
covering the firm's activities, it is clearly in
the firm's best interest as a professional
investment advisory organization to avoid
potential conflicts of interest or even the
appearance of such conflicts with respect to the
conduct of the firm's employees. Wellington
Management's personal trading and conduct must
recognize that the firm's clients always come
first, that the firm must avoid any actual or
potential abuse of our positions of trust and
responsibility, and that the firm must never take
inappropriate advantage of its positions. While it
is not possible to anticipate all instances of
potential conflict, the standard is clear.
In light of the firm's professional and legal
responsibilities, we believe it is appropriate to
restate and periodically distribute the firm's
Code of Ethics to all employees. It is Wellington
Management's aim to be as flexible as possible in
its internal procedures, while simultaneously
protecting the organization and its clients from
the damage that could arise from a situation
involving a real or apparent conflict of interest.
While it is not possible to specifically define
and prescribe rules regarding all possible cases
in which conflicts might arise, this Code of
Ethics is designed to set forth the policy
regarding employee conduct in those situations in
which conflicts are most likely to develop. If an
employee has any doubt as to the propriety of any
activity, he or she should consult the President
or Regulatory Affairs Department.
The Code reflects the requirements of United
States law, Rule 17j-1 of the Investment Company
Act of 1940, as amended on October 29, 1999, as
well as the recommendations issued by an industry
study group in 1994, which were strongly supported
by the SEC. The term "Employee" includes all
employees and Partners.
- ---------------------------- ---------------------------------------------------
Policy on Essentially, this policy requires that all personal
Personal Securities securities transactions (including acquisitions or
Transactions dispositions other than through a purchase or sale)
by all Employees must be cleared prior to
execution. The only exceptions to this policy of
prior clearance are noted below.
- ---------------------------- ---------------------------------------------------
Definition of The following transactions by Employees are
"Personal Securities considered "personal" under applicable SEC rules
Transactions" and therefore subject to this statement of policy:
1
Transactions for an Employee's own account,
including IRA's.
2
Transactions for an account in which an Employee
has indirect beneficial ownership, unless the
Employee has no direct or indirect influence or
control over the account. Accounts involving
family (including husband, wife, minor children or
other dependent relatives), or accounts in which
an Employee has a beneficial interest (such as a
trust of which the Employee is an income or
principal beneficiary) are included within the
meaning of "indirect beneficial interest".
<PAGE>
Code of Ethics
Page 2
If an Employee has a substantial measure of
influence or control over an account, but neither
the Employee nor the Employee's family has any
direct or indirect beneficial interest (e.g., a
trust for which the Employee is a trustee but not
a direct or indirect beneficiary), the rules
relating to personal securities transactions are
not considered to be directly applicable.
Therefore, prior clearance and subsequent
reporting of such transactions are not required.
In all transactions involving such an account an
Employee should, however, conform to the spirit of
these rules and avoid any activity which might
appear to conflict with the investment company or
counseling clients or with respect to the
Employee's position within Wellington Management.
In this regard, please note "Other Conflicts of
Interest", found later in this Code of Ethics,
which does apply to such situations.
- ---------------------------- ---------------------------------------------------
Preclearance EXCEPT AS SPECIFICALLY EXEMPTED IN THIS SECTION,
Required ALL EMPLOYEES MUST CLEAR PERSONAL SECURITIES
TRANSACTIONS PRIOR TO EXECUTION. This includes
bonds, stocks(including closed end funds),
convertibles, preferreds, options on securities,
warrants, rights, etc. for domestic and foreign
securities, whether publicly traded or privately
placed. The only exceptions to this requirement
are automatic dividend reinvestment and stock
purchase plan acquisitions, broad-based stock
index and U.S. government securities futures and
options on such futures, transactions in open-end
mutual funds, U.S. Government securities,
commercial paper, or non-volitional transactions.
Non-volitional transactions include gifts to an
Employee over which the Employee has no control of
the timing or transactions which result from
corporate action applicable to all similar
security holders (such as splits, tender offers,
mergers, stock dividends, etc.). Please note,
however, that most of these transactions must be
reported even though they do not have to be
precleared. See the following section on reporting
obligations.
Clearance for transactions must be obtained by
contacting the Director of Global Equity Trading
or those personnel designated by him for this
purpose. Requests for clearance and approval for
transactions may be communicated orally or via
email. The Trading Department will maintain a log
of all requests for approval as coded confidential
records of the firm. Private placements (including
both securities and partnership interests) are
subject to special clearance by the Director of
Regulatory Affairs, Director of Enterprise Risk
Management or the General Counsel, and the
clearance will remain in effect for a reasonable
period thereafter, not to exceed 90 days.
CLEARANCE FOR PERSONAL SECURITIES TRANSACTIONS FOR
PUBLICLY TRADED SECURITIES WILL BE IN EFFECT FOR
ONE TRADING DAY ONLY. THIS "ONE TRADING DAY"
POLICY IS INTERPRETED AS FOLLOWS:
- IF CLEARANCE IS GRANTED AT A TIME WHEN THE
PRINCIPAL MARKET IN WHICH THE SECURITY TRADES IS
OPEN, CLEARANCE IS EFFECTIVE FOR THE REMAINDER OF
THAT TRADING DAY UNTIL THE OPENING OF THAT MARKET
ON THE FOLLOWING DAY.
- IF CLEARANCE IS GRANTED AT A TIME WHEN THE
PRINCIPAL MARKET IN WHICH THE SECURITY TRADES IS
CLOSED, CLEARANCE IS EFFECTIVE FOR THE NEXT
TRADING DAY UNTIL THE OPENING OF THAT MARKET ON
THE FOLLOWING DAY.
<PAGE>
Code of Ethics
Page 3
- ---------------------------- ---------------------------------------------------
Filing of Reports Records of personal securities transactions by
Employees will be maintained. All Employees are
subject to the following reporting requirements:
1
Duplicate Brokerage All Employees must require their securities brokers
Confirmations to send duplicate confirmations of their securities
transactions to the Regulatory Affairs Department.
Brokerage firms are accustomed to providing this
service. Please contact Regulatory Affairs to
obtain a form letter to request this service. Each
employee must return to the Regulatory Affairs
Department a completed form for each brokerage
account that is used for personal securities
transactions of the Employee. Employees should NOT
send the completed forms to their brokers
directly. The form must be completed and returned
to the Regulatory Affairs Department prior to any
transactions being placed with the broker. The
Regulatory Affairs Department will process the
request in order to assure delivery of the
confirms directly to the Department and to
preserve the confidentiality of this information.
When possible, the transaction confirmation filing
requirement will be satisfied by electronic
filings from securities depositories.
2
Filing of Quarterly SEC rules require that a quarterly record of all
Report of all personal securities transactions submitted by each
"Personal Securities person subject to the Code's requirements and that
Transactions" this record be available for inspection. To comply
with these rules, every Employee must file a
quarterly personal securities transaction report
within 10 calendar days after the end of each
calendar quarter. Reports are filed electronically
utilizing the firm's proprietary Personal
Securities Transaction Reporting System (PSTRS)
accessible to all Employees via the Wellington
Management Intranet.
At the end of each calendar quarter, Employees
will be notified of the filing requirement.
Employees are responsible for submitting the
quarterly report within the deadline established
in the notice.
Transactions during the quarter indicated on
brokerage confirmations or electronic filings are
displayed on the Employee's reporting screen and
must be affirmed if they are accurate. Holdings
not acquired through a broker submitting
confirmations must be entered manually. All
Employees are required to submit a quarterly
report, even if there were no reportable
transactions during the quarter.
Employees must also provide information on any new
brokerage account established during the quarter
including the name of the broker, dealer or bank
and the date the account was established.
IMPORTANT NOTE: The quarterly report must include
the required information for all "personal
securities transactions" as defined above, except
transactions in open-end mutual funds, money
market securities, U.S. Government securities, and
futures and options on futures on U.S. government
securities. Non-volitional transactions and those
resulting from corporate actions must also be
reported even though preclearance is not required
and the nature of the transaction must be clearly
specified in the report.
3
Certification of Compliance As part of the quarterly reporting process on
PSTRS, Employees are required to confirm their
compliance with the provisions of this Code of
Ethics.
<PAGE>
Code of Ethics
Page 4
4
Filing of Personal Annually, all Employees must file a schedule
Holding Report indicating their personal securities holdings as of
December 31 of each year by the following January
30. SEC Rules require that this report include the
title, number of shares and principal amount of
each security held in an Employee's personal
account, and the name of any broker, dealer or
bank with whom the Employee maintains an account.
"Securities" for purposes of this report are those
which must be reported as indicated in the prior
paragraph. Newly hired Employees are required to
file a holding report within ten (10) days of
joining the firm. Employees may indicate
securities held in a brokerage account by
attaching an account statement, but are not
required to do so, since these statements contain
additional information not required by the holding
report.
5
Review of Reports All reports filed in accordance with this section
will be maintained and kept confidential by the
Regulatory Affairs Department. Reports will be
reviewed by the Director of Regulatory Affairs or
personnel designated by her for this purpose.
- ---------------------------- ---------------------------------------------------
Restrictions on While all personal securities transactions must be
"Personal Securities cleared prior to execution, the following
Transactions" guidelines indicate which transactions will be
prohibited, discouraged, or subject to nearly
automatic clearance. The clearance of personal
securities transactions may also depend upon other
circumstances, including the timing of the
proposed transaction relative to transactions by
our investment counseling or investment company
clients; the nature of the securities and the
parties involved in the transaction; and the
percentage of securities involved in the
transaction relative to ownership by clients. The
word "clients" refers collectively to investment
company clients and counseling clients. Employees
are expected to be particularly sensitive to
meeting the spirit as well as the letter of these
restrictions.
Please note that these restrictions apply in the
case of debt securities to the specific issue and
in the case of common stock, not only to the
common stock, but to any equity-related security
of the same issuer including preferred stock,
options, warrants, and convertible bonds. Also, a
gift or transfer from you (an Employee) to a third
party shall be subject to these restrictions,
unless the donee or transferee represents that he
or she has no present intention of selling the
donated security.
1
No Employee may engage in personal transactions
involving any securities which are:
- being bought or sold on behalf of clients until
one trading day after such buying or selling is
completed or canceled. In addition, no Portfolio
Manager may engage in a personal transaction
involving any security for 7 days prior to, and 7
days following, a transaction in the same
security for a client account managed by that
Portfolio Manager without a special exemption.
See "Exemptive Procedures" below. Portfolio
Managers include all designated portfolio
managers and others who have direct authority to
make investment decisions to buy or sell
securities, such as investment team members and
analysts involved in Research Equity portfolios.
All Employees who are considered Portfolio
Managers will be so notified by the Regulatory
Affairs Department.
<PAGE>
Code of Ethics
Page 5
- the subject of a new or changed action
recommendation from a research analyst until 10
business days following the issuance of such
recommendation;
- the subject of a reiterated but unchanged
recommendation from a research analyst until 2
business days following reissuance of the
recommendation
- actively contemplated for transactions on behalf
of clients, even though no buy or sell orders
have been placed. This restriction applies from
the moment that an Employee has been informed in
any fashion that any Portfolio Manager intends to
purchase or sell a specific security. This is a
particularly sensitive area and one in which each
Employee must exercise caution to avoid actions
which, to his or her knowledge, are in conflict
or in competition with the interests of clients.
2
The Code of Ethics strongly discourages short term
trading by Employees. In addition, no Employee may
take a "short term trading" profit in a security,
which means the sale of a security at a gain (or
closing of a short position at a gain) within 60
days of its purchase, without a special exemption.
See "Exemptive Procedures". The 60 day prohibition
does not apply to transactions resulting in a
loss, nor to futures or options on futures on
broad-based securities indexes or U.S. government
securities.
3
No Employee engaged in equity or bond trading may
engage in personal transactions involving any
equity securities of any company whose primary
business is that of a broker/dealer.
4
Subject to preclearance, Employees may engage in
short sales, options, and margin transactions, but
such transactions are strongly discouraged,
particularly due to the 60 day short term
profit-taking prohibition. Any Employee engaging
in such transactions should also recognize the
danger of being "frozen" or subject to a forced
close out because of the general restrictions
which apply to personal transactions as noted
above. In specific case of hardship an exception
may be granted by the Director of Regulatory
Affairs or her designee upon approval of the
Ethics Committee with respect to an otherwise
"frozen" transaction.
5
No Employee may engage in personal transactions
involving the purchase of any security on an
initial public offering. This restriction also
includes new issues resulting from spin-offs,
municipal securities and thrift conversions,
although in limited cases the purchase of such
securities in an offering may be approved by the
Director of Regulatory Affairs or her designee
upon determining that approval would not violate
any policy reflected in this Code. This
restriction does not apply to open-end mutual
funds, U. S. government issues or money market
investments.
6
EMPLOYEES MAY NOT PURCHASE SECURITIES IN PRIVATE
PLACEMENTS UNLESS APPROVAL OF THE DIRECTOR OF
REGULATORY AFFAIRS, DIRECTOR OF ENTERPRISE RISK
<PAGE>
Code of Ethics
Page 6
MANAGEMENT OR THE GENERAL COUNSEL HAS BEEN
OBTAINED. This approval will be based upon a
determination that the investment opportunity need
not be reserved for clients, that the Employee is
not being offered the investment opportunity due
to his or her employment with Wellington
Management and other relevant factors on a
case-by-case basis. If the Employee has portfolio
management or securities analysis responsibilities
and is granted approval to purchase a private
placement, he or she must disclose the privately
placed holding later if asked to evaluate the
issuer of the security. An independent review of
the Employee's analytical work or decision to
purchase the security for a client account will
then be performed by another investment
professional with no personal interest in the
transaction.
Gifts and Other Employees should not seek, accept or offer any
Sensitive Payments gifts or favors of more than minimal value or any
preferential treatment in dealings with any
client, broker/dealer, portfolio company,
financial institution or any other organization
with whom the firm transacts business. Occasional
participation in lunches, dinners, cocktail
parties, sporting activities or similar gatherings
conducted for business purposes are not
prohibited. However, for both the Employee's
protection and that of the firm it is extremely
important that even the appearance of a possible
conflict of interest be avoided. Extreme caution
is to be exercised in any instance in which
business related travel and lodgings are paid for
other than by Wellington Management, and prior
approval must be obtained from the Regulatory
Affairs Department.
Any question as to the propriety of such
situations should be discussed with the Regulatory
Affairs Department and any incident in which an
Employee is encouraged to violate these provisions
should be reported immediately. An explanation of
all extraordinary travel, lodging and related
meals and entertainment is to be reported in a
brief memorandum to the Director of Regulatory
Affairs.
Employees must not participate individually or on
behalf of the firm, a subsidiary, or any client,
directly or indirectly, in any of the following
transactions:
1
Use of the firm's funds for political purposes.
2
Payment or receipt of bribes, kickbacks, or
payment or receipt of any other amount with an
understanding that part or all of such amount will
be refunded or delivered to a third party in
violation of any law applicable to the
transaction.
3
Payments to government officials or employees
(other than disbursements in the ordinary course
of business for such legal purposes as payment of
taxes).
4
Payment of compensation or fees in a manner the
purpose of which is to assist the recipient to
evade taxes, federal or state law, or other valid
charges or restrictions applicable to such
payment.
<PAGE>
Code of Ethics
Page 7
5
Use of the funds or assets of the firm or any
subsidiary for any other unlawful or improper
purpose.
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Other Conflicts of Employees should also be aware that areas other
Interest than personal securities transactions or gifts and
sensitive payments may involve conflicts of
interest. The following should be regarded as
examples of situations involving real or potential
conflicts rather than a complete list of
situations to avoid.
"Inside Information" Specific reference is made to the firm's policy on
the use of "inside information" which applies to
personal securities transactions as well as to
client transactions.
Use of Information Information acquired in connection with employment
by the organization may not be used in any way
which might be contrary to or in competition with
the interests of clients. Employees are reminded
that certain clients have specifically required
their relationship with us to be treated
confidentially.
Disclosure of Information regarding actual or contemplated
Information investment decisions, research priorities or
client interests should not be disclosed to
persons outside our organization and in no way can
be used for personal gain.
Outside All outside relationships such as directorships or
Activities trusteeships of any kind or membership in
investment organizations (e.g., an investment
club) must be cleared by the Director of
Regulatory Affairs prior to the acceptance of such
a position. As a general matter, directorships in
unaffiliated public companies or companies which
may reasonably be expected to become public
companies will not be authorized because of the
potential for conflicts which may impede our
freedom to act in the best interests of clients.
Service with charitable organizations generally
will be authorized, subject to considerations
related to time required during working hours and
use of proprietary information.
Exemptive Procedure The Director of Regulatory Affairs, the Director
of Enterprise Risk Management, the General Counsel
or the Ethics Committee can grant exemptions from
the personal trading restrictions in this Code
upon determining that the transaction for which an
exemption is requested would not result in a
conflict of interest or violate any other policy
embodied in this Code. Factors to be considered
may include: the size and holding period of the
Employee's position in the security, the market
capitalization of the issuer, the liquidity of the
security, the reason for the Employee's requested
transaction, the amount and timing of client
trading in the same or a related security, and
other relevant factors.
Any Employee wishing an exemption should submit a
written request to the Director of Regulatory
Affairs setting forth the pertinent facts and
reasons why the employee believes that the
exemption should be granted. Employees are
cautioned that exemptions are intended to be
exceptions, and repetitive exemptive applications
by an Employee will not be well received.
Records of the approval of exemptions and the
reasons for granting exemptions will be maintained
by the Regulatory Affairs Department.
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Code of Ethics
Page 8
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Compliance with Adherence to the Code of Ethics is considered a
The Code of Ethics basic condition of employment with our
organization. The Ethics Committee monitors
compliance with the Code and reviews violations of
the Code to determine what action or sanctions are
appropriate.
Violations of the provisions regarding personal
trading will presumptively be subject to being
reversed in the case of a violative purchase, and
to disgorgement of any profit realized from the
position (net of transaction costs and capital
gains taxes payable with respect to the
transaction) by payment of the profit to any
client disadvantaged by the transaction, or to a
charitable organization, as determined by the
Ethics Committee, unless the Employee establishes
to the satisfaction of the Ethics Committee that
under the particular circumstances disgorgement
would be an unreasonable remedy for the violation.
Violations of the Code of Ethics may also
adversely affect an Employee's career with
Wellington Management with respect to such matters
as compensation and advancement.
Employees must recognize that a serious violation
of the Code of Ethics or related policies may
result, at a minimum, in immediate dismissal.
Since many provisions of the Code of Ethics also
reflect provisions of the U.S. securities laws,
Employees should be aware that violations could
also lead to regulatory enforcement action
resulting in suspension or expulsion from the
securities business, fines and penalties, and
imprisonment.
Again, Wellington Management would like to
emphasize the importance of obtaining prior
clearance of all personal securities transactions,
avoiding prohibited transactions, filing all
required reports promptly and avoiding other
situations which might involve even an apparent
conflict of interest. Questions regarding
interpretation of this policy or questions related
to specific situations should be directed to the
Regulatory Affairs Department or Ethics Committee.
Revised: March 1, 2000
<PAGE>
EXHIBIT Q
POWER OF ATTORNEY
<PAGE>
HARTFORD ADVISERS HLS FUND, INC., HARTFORD BOND HLS FUND, INC.,
HARTFORD CAPITAL APPRECIATION HLS FUND, INC., HARTFORD DIVIDEND AND
GROWTH HLS FUND, INC., HARTFORD INDEX HLS FUND, INC., HARTFORD INTERNATIONAL
ADVISERS HLS FUND, INC., HARTFORD INTERNATIONAL OPPORTUNITIES
HLS FUND, INC., HARTFORD MIDCAP HLS FUND, INC., HARTFORD MORTGAGE
SECURITIES HLS FUND, INC., HARTFORD SERIES FUND, INC., HARTFORD SMALL
COMPANY HLS FUND, INC., HARTFORD STOCK HLS FUND, INC., HARTFORD MONEY
MARKET HLS FUND, INC. AND THE HARTFORD MUTUAL FUNDS, INC.,
POWER OF ATTORNEY
Robert J. Clark Millard H. Pryor, Jr.
Winifred E. Coleman Lowndes A. Smith
George R. Jay John K. Springer
William A. O'Neill David M. Znamierowski
do hereby jointly and severally authorize Kevin J. Carr, Marilyn T. West, Lynda
Godkin or Marianne O'Doherty, to sign as their agent any Securities Act of 1933
and/or Investment Company Act of 1940 Registration Statement, pre-effective
amendment or post-effective amendment and any Application for Exemption Relief
or other filings with the Securities and Exchange Commission relating to each
above-described Fund.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for the
purpose herein set forth.
/s/ Robert J. Clark Dated: January 27, 2000
- -----------------------------------
Robert J. Clark
/s/ Winifred E. Coleman Dated: January 27, 2000
- -----------------------------------
Winifred E. Coleman
/s/ George R. Jay Dated: January 27, 2000
- -----------------------------------
George R. Jay
/s/ William A. O'neill Dated: January 27, 2000
- -----------------------------------
William A. O'neill
/s/ Millard H. Pryor, Jr. Dated: January 21, 2000
- -----------------------------------
Millard H. Pryor, Jr.
<PAGE>
/s/ Lowndes A. Smith Dated: January 27, 2000
- -----------------------------------
Lowndes A. Smith
/s/ John K. Springer Dated: January 27, 2000
- -----------------------------------
John K. Springer
/s/ David M. Znamierowski Dated: January 27, 2000
- -----------------------------------
David M. Znamierowski
