UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-08629
HARTFORD SERIES FUND, INC.
(Exact name of registrant as specified in charter)
P. O. Box 2999, Hartford, Connecticut 06104-2999
(Address of Principal Executive Offices)
Edward P. Macdonald, Esquire
Life Law Unit
The Hartford Financial Services Group, Inc.
200 Hopmeadow Street
Simsbury, Connecticut 06089
(Name and Address of Agent for Service)
Registrant’s telephone number, including area code: (860) 843-9934
Date of fiscal year end: December 31, 2012
Date of reporting period: January 1, 2012 – December 31, 2012
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholder s under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford Series Fund, Inc.
Table of Contents
This report is prepared for the general information of contract owners and is not an offer of contracts. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent product information including the applicable sales, administrative and other charges.
| American Funds Asset Allocation HLS Fund inception 4/30/2008 |
| (advised by Hartford Funds Management Company, LLC) |
| |
| Investment Goal: Seeks high total return (including income and capital gains) consistent with preservation of capital over the long term. |
Performance Overview 4/30/08 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IB.
| Average Annual Total Returns (as of 12/31/12) |
| | | 1 Year | | | Since
Inception▲ | |
| American Funds Asset Allocation HLS Fund IB | | | 15.80% | | | | 3.71% | |
| Barclays U.S. Aggregate Index | | | 4.22% | | | | 5.94% | |
| Citigroup Broad Investment-Grade Bond Index | | | 4.23% | | | | 6.03% | |
| S&P 500 Index | | | 15.99% | | | | 2.91% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund’s net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
Barclays U.S. Aggregate Index (formerly known as Barclays Capital U.S. Aggregate Index) represents the U.S. investment-grade fixed-rate bond market. This index is unmanaged, and its results include reinvested dividends and/or distributions, but do not reflect the effect of sales charges, commissions, expenses or taxes.
Citigroup Broad Investment-Grade Bond Index is a market capitalization-weighted index that includes fixed-rate U.S. Treasury, government-sponsored, mortgage, asset-backed and investment-grade corporates with a maturity of one year or longer. This index is unmanaged, and its results include reinvested dividends and/or distributions, but do not reflect the effect of sales charges, commissions, expenses or taxes.
S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.
You cannot invest directly in an index.
As of the Fund’s current prospectus dated May 1, 2012, the net total annual operating expense ratio for Class IB shares was 0.86% and the gross total annual operating expense ratio for Class IB shares was 1.26%. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect for as long as the Fund is a part of a master-feeder fund structure unless terminated by the Fund or its Board of Directors if the fund structure changes. For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
How did the Fund perform?
The Class IB Shares of the American Funds Asset Allocation HLS Fund returned 15.80% for the twelve-month period ended December 31, 2012, versus the returns of 15.99% for the S&P 500 Index, 4.23% for the Citigroup Broad Investment-Grade Bond Index and 4.22% for the Barclays U.S. Aggregate Index. The Fund outperformed the 13.50% average return of the Lipper Mixed Asset Target Allocation Growth Funds VP-UF peer group, a group of funds with investment strategies similar to those of the Fund.
The performance of the American Funds Asset Allocation HLS Fund is directly related to the performance of the American Funds Insurance Series – Asset Allocation Fund Class 1, in which the Fund invests. The financial statements of the American Funds Insurance Series – Asset Allocation Fund Class 1, including the Schedule of Investments, are provided in the accompanying report and should be read in conjunction with the American Funds Asset Allocation HLS Fund’s financial statements.
| American Funds Blue Chip Income and Growth HLS Fund inception 4/30/2008 |
| (advised by Hartford Funds Management Company, LLC) |
| |
| Investment Goal: Seeks to produce income exceeding the average yield on U.S. stocks generally and to provide an opportunity for growth of principal consistent with sound common stock investing. |
Performance Overview 4/30/08 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IB.
Average Annual Total Returns (as of 12/31/12)
| | | 1 Year | | | Since
Inception▲ | |
| American Funds Blue Chip Income and Growth HLS Fund IB | | | 13.53% | | | | 1.63% | |
| S&P 500 Index | | | 15.99% | | | | 2.91% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund’s net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.
You cannot invest directly in an index.
As of the Fund's current prospectus dated May 1, 2012, the net total annual operating expense ratio for Class IB shares was 0.99% and the gross total annual operating expense ratio for Class IB shares was 1.49%. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect for as long as the Fund is a part of a master-feeder fund structure unless terminated by the Fund or its Board of Directors if the fund structure changes. For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
How did the Fund perform?
The Class IB Shares of the American Funds Blue Chip Income and Growth HLS Fund returned 13.53% for the twelve-month period ended December 31, 2012, versus the return of 15.99% for the S&P 500 Index. The Fund underperformed the 15.02% average return of the Lipper Large Cap Core Funds VP-UF peer group, a group of funds with investment strategies similar to those of the Fund.
The performance of the American Funds Blue Chip Income and Growth HLS Fund is directly related to the performance of the American Funds Insurance Series – Blue Chip Income and Growth Fund Class 1, in which the Fund invests. The financial statements of the American Funds Insurance Series – Blue Chip Income and Growth Fund Class 1, including the Schedule of Investments, are provided in the accompanying report and should be read in conjunction with the American Funds Blue Chip Income and Growth HLS Fund’s financial statements.
| American Funds Bond HLS Fund inception 4/30/2008 |
| (advised by Hartford Funds Management Company, LLC) |
| |
| Investment Goal: Seeks to maximize current income and preservation of capital. |
Performance Overview 4/30/08 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IB.
| Average Annual Total Returns (as of 12/31/12) |
| | | 1 Year | | | Since
Inception▲ | |
| American Funds Bond HLS Fund IB | | | 5.01% | | | | 3.77% | |
| Barclays U.S. Aggregate Index | | | 4.22% | | | | 5.94% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund’s net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
Barclays U.S. Aggregate Index (formerly known as Barclays Capital U.S. Aggregate Index) represents the U.S. investment-grade fixed-rate bond market. This index is unmanaged, and its results include reinvested dividends and/or distributions, but do not reflect the effect of sales charges, commissions, expenses or taxes.
You cannot invest directly in an index.
As of the Fund's current prospectus dated May 1, 2012, the net total annual operating expense ratio for Class IB shares was 0.92% and the gross total annual operating expense ratio for Class IB shares was 1.17%. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect for as long as the Fund is a part of a master-feeder fund structure unless terminated by the Fund or its Board of Directors if the fund structure changes. For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
How did the Fund perform?
The Class IB Shares of the American Funds Bond HLS Fund returned 5.01% for the twelve-month period ended December 31, 2012, versus the return of 4.22% for the Barclays U.S. Aggregate Index. The Fund underperformed the 7.66% average return of the Lipper Corporate Debt Funds BBB-Rated VP-UF peer group, a group of funds with investment strategies similar to those of the Fund.
The performance of the American Funds Bond HLS Fund is directly related to the performance of the American Funds Insurance Series – Bond Fund Class 1, in which the Fund invests. The financial statements of the American Funds Insurance Series – Bond Fund Class 1, including the Schedule of Investments, are provided in the accompanying report and should be read in conjunction with the American Funds Bond HLS Fund’s financial statements.
| American Funds Global Bond HLS Fund inception 4/30/2008 |
| (advised by Hartford Funds Management Company, LLC) |
| |
| Investment Goal: Seeks a high level of total return over the long term. |
Performance Overview 4/30/08 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IB.
Average Annual Total Returns (as of 12/31/12)
| | | 1 Year | | | Since
Inception▲ | |
| American Funds Global Bond HLS Fund IB | | | 5.83% | | | | 4.84% | |
| Barclays Global Aggregate Index | | | 4.32% | | | | 4.82% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund’s net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
Barclays Global Aggregate Index (formerly known as Barclays Capital Aggregate Index) represents the global investment-grade fixed-income markets. This index is unmanaged and its results include reinvested dividends and/or distributions, but do not reflect the effect of sales charges, commissions, expenses or taxes.
You cannot invest directly in an index.
As of the Fund's current prospectus dated May 1, 2012, the net total annual operating expense ratio for Class IB shares was 1.12% and the gross total annual operating expense ratio for Class IB shares was 1.62%. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect for as long as the Fund is a part of a master-feeder fund structure unless terminated by the Fund or its Board of Directors if the fund structure changes. For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
How did the Fund perform?
The Class IB Shares of the American Funds Global Bond HLS Fund returned 5.83% for the twelve-month period ended December 31, 2012, versus the return of 4.32% for the Barclays Global Aggregate Index. The Fund underperformed the 9.42% average return of the Lipper Global Income Funds VP-UF peer group, a group of funds with investment strategies similar to those of the Fund.
The performance of the American Funds Global Bond HLS Fund is directly related to the performance of the American Funds Insurance Series – Global Bond Fund Class 1, in which the Fund invests. The financial statements of the American Funds Insurance Series – Global Bond Fund Class 1, including the Schedule of Investments, are provided in the accompanying report and should be read in conjunction with the American Funds Global Bond HLS Fund’s financial statements.
| American Funds Global Growth and Income HLS Fund inception 4/30/2008 |
| (advised by Hartford Funds Management Company, LLC) |
| |
| Investment Goal: Seeks growth of capital over time and current income. |
Performance Overview 4/30/08 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IB.
Average Annual Total Returns (as of 12/31/12)
| | | 1 Year | | | Since
Inception▲ | |
| American Funds Global Growth and Income HLS Fund IB | | | 17.30% | | | | 0.96% | |
| MSCI All Country World Index | | | 16.80% | | | | 0.23% | |
| MSCI World Index | | | 16.54% | | | | 0.25% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund’s net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
MSCI All Country World Index is a free float-adjusted market capitalization index that measures equity market performance in the global developed and emerging markets, consisting of 45 developed and emerging market country indices. This index is unmanaged, and its results include reinvested dividends and/or distributions, but do not reflect the effect of sales charges, commissions, expenses or taxes.
MSCI World Index is a free float-adjusted market capitalization index that is designed to measure global-developed market equity performance. The index consists of 23 developed-market country indices, including the United States. This index is unmanaged, and its results include reinvested dividends and/or distributions, but do not reflect the effect of sales charges, commissions, expenses or taxes.
You cannot invest directly in an index.
As of the Fund's current prospectus dated May 1, 2012, the net total annual operating expense ratio for Class IB shares was 1.15% and the gross total annual operating expense ratio for Class IB shares was 1.70%. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect for as long as the Fund is a part of a master-feeder fund structure unless terminated by the Fund or its Board of Directors if the fund structure changes. For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
How did the Fund perform?
The Class IB Shares of the American Funds Global Growth and Income HLS Fund returned 17.30% for the twelve-month period ended December 31, 2012, versus the return of 16.80% for the MSCI All Country World Index and 16.54% for the MSCI World Index. The Fund underperformed the 17.34% average return of the Lipper Global Growth Funds VP-UF peer group, a group of funds with investment strategies similar to those of the Fund.
The performance of the American Funds Global Growth and Income HLS Fund is directly related to the performance of the American Funds Insurance Series – Global Growth and Income Fund Class 1, in which the Fund invests. The financial statements of the American Funds Insurance Series – Global Growth and Income Fund Class 1, including the Schedule of Investments, are provided in the accompanying report and should be read in conjunction with the American Funds Global Growth and Income HLS Fund’s financial statements.
| American Funds Global Growth HLS Fund inception 4/30/2008 |
| (advised by Hartford Funds Management Company, LLC) |
| |
| Investment Goal: Seeks long-term growth of capital. |
Performance Overview 4/30/08 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IB.
Average Annual Total Returns (as of 12/31/12)
| | | 1 Year | | | Since
Inception▲ | |
| American Funds Global Growth HLS Fund IB | | | 22.19% | | | | 2.51% | |
| MSCI All Country World Index | | | 16.80% | | | | 0.23% | |
| MSCI World Index | | | 16.54% | | | | 0.25% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund’s net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
MSCI All Country World Index is a free float-adjusted market capitalization index that measures equity market performance in the global developed and emerging markets, consisting of 45 developed and emerging market country indices. This index is unmanaged, and its results include reinvested dividends and/or distributions, but do not reflect the effect of sales charges, commissions, expenses or taxes.
MSCI World Index is a free float-adjusted market capitalization index that is designed to measure global-developed market equity performance. The index consists of 23 developed-market country indices, including the United States. This index is unmanaged, and its results include reinvested dividends and/or distributions, but do not reflect the effect of sales charges, commissions, expenses or taxes.
You cannot invest directly in an index.
As of the Fund's current prospectus dated May 1, 2012, the net total annual operating expense ratio for Class IB shares was 1.12% and the gross total annual operating expense ratio for Class IB shares was 1.87%. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect for as long as the Fund is a part of a master-feeder fund structure unless terminated by the Fund or its Board of Directors if the fund structure changes. For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
How did the Fund perform?
The Class IB Shares of the American Funds Global Growth HLS Fund returned 22.19% for the twelve-month period ended December 31, 2012, versus the return of 16.80% for the MSCI All Country World Index and 16.54% for the MSCI World Index. The Fund outperformed the 19.02% average return of the Lipper Global Core Funds VP-UF peer group, a group of funds with investment strategies similar to those of the Fund.
The performance of the American Funds Global Growth HLS Fund is directly related to the performance of the American Funds Insurance Series – Global Growth Fund Class 1, in which the Fund invests. The financial statements of the American Funds Insurance Series – Global Growth Fund Class 1, including the Schedule of Investments, are provided in the accompanying report and should be read in conjunction with the American Funds Global Growth HLS Fund’s financial statements.
| American Funds Global Small Capitalization HLS Fund inception 4/30/2008 |
| (advised by Hartford Funds Management Company, LLC) |
| |
| Investment Goal: Seeks growth of capital over time. |
Performance Overview 4/30/08 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IB.
Average Annual Total Returns (as of 12/31/12)
| | | 1 Year | | | Since
Inception▲ | |
| American Funds Global Small Capitalization HLS Fund IB | | | 17.85% | | | | -1.09% | |
| MSCI All Country World Small Cap Index | | | 18.63% | | | | 4.01% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund’s net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
MSCI All Country World Small Cap Index is a free float-adjusted market capitalization-weighted index that is designed to measure equity market performance of smaller capitalization companies in both developed and emerging markets. This index is unmanaged and its results include reinvested dividends and/or distributions, but do not reflect the effect of sales charges, commissions, expenses or taxes.
You cannot invest directly in an index.
As of the Fund's current prospectus dated May 1, 2012, the net total annual operating expense ratio for Class IB shares was 1.30% and the gross total annual operating expense ratio for Class IB shares was 1.85%. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect for as long as the Fund is a part of a master-feeder fund structure unless terminated by the Fund or its Board of Directors if the fund structure changes. For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
How did the Fund perform?
The Class IB Shares of the American Funds Global Small Capitalization HLS Fund returned 17.85% for the twelve-month period ended December 31, 2012, versus the return of 18.63% for the MSCI All Country World Small Cap Index. The Fund outperformed the 17.34% average return of the Lipper Global Growth Funds VP-UF peer group, a group of funds with investment strategies similar to those of the Fund.
The performance of the American Funds Global Small Capitalization HLS Fund is directly related to the performance of the American Funds Insurance Series – Global Small Capitalization Fund Class 1, in which the Fund invests. The financial statements of the American Funds Insurance Series – Global Small Capitalization Fund Class 1, including the Schedule of Investments, are provided in the accompanying report and should be read in conjunction with the American Funds Global Small Capitalization HLS Fund’s financial statements.
| American Funds Growth HLS Fund inception 4/30/2008 |
| (advised by Hartford Funds Management Company, LLC) |
| |
| Investment Goal: Seeks growth of capital |
Performance Overview 4/30/08 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IB.
Average Annual Total Returns (as of 12/31/12)
| | | 1 Year | | | Since
Inception▲ | |
| American Funds Growth HLS Fund IB | | | 17.56% | | | | 1.78% | |
| S&P 500 Index | | | 15.99% | | | | 2.91% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund’s net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.
You cannot invest directly in an index.
As of the Fund's current prospectus dated May 1, 2012, the net total annual operating expense ratio for Class IB shares was 0.88% and the gross total annual operating expense ratio for Class IB shares was 1.38%.Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect for as long as the Fund is a part of a master-feeder fund structure unless terminated by the Fund or its Board of Directors if the fund structure changes. For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
How did the Fund perform?
The Class IB Shares of the American Funds Growth HLS Fund returned 17.56% for the twelve-month period ended December 31, 2012, versus the return of 15.99% for the S&P 500 Index. The Fund outperformed the 16.00% average return of the Lipper Large Cap Growth Funds VP-UF peer group, a group of funds with investment strategies similar to those of the Fund.
The performance of the American Funds Growth HLS Fund is directly related to the performance of the American Funds Insurance Series – Growth Fund Class 1, in which the Fund invests. The financial statements of the American Funds Insurance Series – Growth Fund Class 1, including the Schedule of Investments, are provided in the accompanying report and should be read in conjunction with the American Funds Growth HLS Fund’s financial statements.
| American Funds Growth-Income HLS Fund inception 4/30/2008 |
| (advised by Hartford Funds Management Company, LLC) |
| |
| Investment Goal: Seeks long-term growth of capital and income over time. |
Performance Overview 4/30/08 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IB.
Average Annual Total Returns (as of 12/31/12)
| | | 1 Year | | | Since
Inception▲ | |
| American Funds Growth-Income HLS Fund IB | | | 17.16% | | | | 1.74% | |
| S&P 500 Index | | | 15.99% | | | | 2.91% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund’s net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.
You cannot invest directly in an index.
As of the Fund's current prospectus dated May 1, 2012, the net total annual operating expense ratio for Class IB shares was 0.81% and the gross total annual operating expense ratio for Class IB shares was 1.26%. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect for as long as the Fund is a part of a master-feeder fund structure unless terminated by the Fund or its Board of Directors if the fund structure changes. For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
How did the Fund perform?
The Class IB Shares of the American Funds Growth-Income HLS Fund returned 17.16% for the twelve-month period ended December 31, 2012, versus the return of 15.99% for the S&P 500 Index. The Fund outperformed the 15.02% average return of the Lipper Large Cap Core Funds VP-UF peer group, a group of funds with investment strategies similar to those of the Fund.
The performance of the American Funds Growth-Income HLS Fund is directly related to the performance of the American Funds Insurance Series – Growth-Income Fund Class 1, in which the Fund invests. The financial statements of the American Funds Insurance Series – Growth-Income Fund Class 1, including the Schedule of Investments, are provided in the accompanying report and should be read in conjunction with the American Funds Growth-Income HLS Fund’s financial statements.
| American Funds International HLS Fund inception 4/30/2008 |
| (advised by Hartford Funds Management Company, LLC) |
| |
| Investment Goal: Seeks long-term growth of capital over time. |
Performance Overview 4/30/08 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IB.
Average Annual Total Returns (as of 12/31/12)
| | | 1 Year | | | Since
Inception▲ | |
| American Funds International HLS Fund IB | | | 17.58% | | | | -1.37% | |
| MSCI All Country World ex USA Index | | | 17.39% | | | | -1.87% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund’s net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
MSCI All Country World ex USA Index is a broad-based, unmanaged, market capitalization weighted, total return index that measures the performance of both developed and emerging stock markets, excluding the U.S. The index is calculated to exclude companies and share classes which cannot be freely purchased by foreigners.
You cannot invest directly in an index.
As of the Fund's current prospectus dated May 1, 2012, the net total annual operating expense ratio for Class IB shares was 1.07% and the gross total annual operating expense ratio for Class IB shares was 1.67%. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect for as long as the Fund is a part of a master-feeder fund structure unless terminated by the Fund or its Board of Directors if the fund structure changes. For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
How did the Fund perform?
The Class IB Shares of the American Funds International HLS Fund returned 17.58% for the twelve-month period ended December 31, 2012, versus the return of 17.39% for the MSCI All Country World ex USA Index. The Fund outperformed the 17.56% average return of the Lipper International Core Funds VP-UF peer group, a group of funds with investment strategies similar to those of the Fund.
The performance of the American Funds International HLS Fund is directly related to the performance of the American Funds Insurance Series – International Fund Class 1, in which the Fund invests. The financial statements of the American Funds Insurance Series – International Fund Class 1, including the Schedule of Investments, are provided in the accompanying report and should be read in conjunction with the American Funds International HLS Fund’s financial statements.
| American Funds New World HLS Fund inception 4/30/2008 |
| (advised by Hartford Funds Management Company, LLC) |
| |
| Investment Goal: Seeks long-term capital appreciation. |
Performance Overview 4/30/08 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IB.
Average Annual Total Returns (as of 12/31/12)
| | | 1 Year | | | Since
Inception▲ | |
| American Funds New World HLS Fund IB | | | 17.47% | | | | 1.26% | |
| MSCI All Country World Index | | | 16.80% | | | | 0.23% | |
| MSCI Emerging Markets Index | | | 18.63% | | | | 0.15% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund’s net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
MSCI All Country World Index is a free float-adjusted market capitalization index that measures equity market performance in the global developed and emerging markets, consisting of 45 developed and emerging market country indices. This index is unmanaged, and its results include reinvested dividends and/or distributions, but do not reflect the effect of sales charges, commissions, expenses or taxes.
MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index that is designed to measure equity market performance in the global emerging markets, consisting of 24 emerging market country indices. This index is unmanaged and its results include reinvested dividends and/or distributions, but do not reflect the effect of sales charges, commissions, expenses or taxes.
You cannot invest directly in an index.
As of the Fund's current prospectus dated May 1, 2012, the net total annual operating expense ratio for Class IB shares was 1.34% and the gross total annual operating expense ratio for Class IB shares was 2.19%. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect for as long as the Fund is a part of a master-feeder fund structure unless terminated by the Fund or its Board of Directors if the fund structure changes. For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
How did the Fund perform?
The Class IB Shares of the American Funds New World HLS Fund returned 17.47% for the twelve-month period ended December 31, 2012, versus the returns of 16.80% for the MSCI All Country World Index and 18.63% for the MSCI Emerging Markets Index. The Fund underperformed the 18.23% average return of the Lipper Emerging Markets Funds VP-UF peer group, a group of funds with investment strategies similar to those of the Fund.
The performance of the American Funds New World HLS Fund is directly related to the performance of the American Funds Insurance Series – New World Fund Class 1, in which the Fund invests. The financial statements of the American Funds Insurance Series – New World Fund Class 1, including the Schedule of Investments, are provided in the accompanying report and should be read in conjunction with the American Funds New World HLS Fund’s financial statements.
| American Funds Asset Allocation HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares | | | | | | | | Market Value ╪ | |
| INVESTMENT COMPANIES - 100.0% | | | | | | | | |
| | 3,507 | | | American Funds Insurance Series - Asset | | | | | | | | |
| | | | | Allocation Fund Class 1 | | | | | | $ | 64,627 | |
| | | | | | | | | | | | | |
| | | | | Total investment companies | | | | | | | | |
| | | | | (cost $51,629) | | | | | | $ | 64,627 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $51,629) ▲ | | | 100.0 | % | | $ | 64,627 | |
| | | | | Other assets and liabilities | | | — | % | | | (11 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 64,616 | |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $53,460 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 11,167 | |
| Unrealized Depreciation | | | — | |
| Net Unrealized Appreciation | | $ | 11,167 | |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
At December 31, 2012, the investment valuation hierarchy levels were:
| Assets: | | | | |
| Investment in Securities - Level 1 | | $ | 64,627 | |
| Total | | $ | 64,627 | |
| American Funds Blue Chip Income and Growth HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares | | | | | | | | Market Value ╪ | |
| INVESTMENT COMPANIES - 100.0% | | | | | | | | |
| | 3,973 | | | American Funds Insurance Series - Blue | | | | | | | | |
| | | | | Chip Income and Growth Fund Class 1 | | | | | | $ | 39,928 | |
| | | | | | | | | | | | | |
| | | | | Total investment companies | | | | | | | | |
| | | | | (cost $32,604) | | | | | | $ | 39,928 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $32,604) ▲ | | | 100.0 | % | | $ | 39,928 | |
| | | | | Other assets and liabilities | | | — | % | | | (8 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 39,920 | |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $33,603 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 6,325 | |
| Unrealized Depreciation | | | — | |
| Net Unrealized Appreciation | | $ | 6,325 | |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
At December 31, 2012, the investment valuation hierarchy levels were:
| Assets: | | | | |
| Investment in Securities - Level 1 | | $ | 39,928 | |
| Total | | $ | 39,928 | |
The accompanying notes are an integral part of these financial statements.
| American Funds Bond HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares | | | | | | | | Market Value ╪ | |
| INVESTMENT COMPANIES - 100.0% | | | | | | | | |
| | 17,629 | | | American Funds Insurance Series - Bond | | | | | | | | |
| | | | | Fund Class 1 | | | | | | $ | 199,036 | |
| | | | | | | | | | | | | |
| | | | | Total investment companies | | | | | | | | |
| | | | | (cost $186,977) | | | | | | $ | 199,036 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $186,977) ▲ | | | 100.0 | % | | $ | 199,036 | |
| | | | | Other assets and liabilities | | | — | % | | | (28 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 199,008 | |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $187,814 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 11,222 | |
| Unrealized Depreciation | | | — | |
| Net Unrealized Appreciation | | $ | 11,222 | |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
At December 31, 2012, the investment valuation hierarchy levels were:
| Assets: | | | | |
| Investment in Securities - Level 1 | | $ | 199,036 | |
| Total | | $ | 199,036 | |
| American Funds Global Bond HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares | | | | | | | | Market Value ╪ | |
| INVESTMENT COMPANIES - 100.0% | | | | | | | | |
| | 3,101 | | | American Funds Insurance Series - Global | | | | | | | | |
| | | | | Bond Fund Class 1 | | | | | | $ | 38,201 | |
| | | | | | | | | | | | | |
| | | | | Total investment companies | | | | | | | | |
| | | | | (cost $36,126) | | | | | | $ | 38,201 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $36,126) ▲ | | | 100.0 | % | | $ | 38,201 | |
| | | | | Other assets and liabilities | | | — | % | | | (8 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 38,193 | |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $36,178 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 2,023 | |
| Unrealized Depreciation | | | — | |
| Net Unrealized Appreciation | | $ | 2,023 | |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
At December 31, 2012, the investment valuation hierarchy levels were:
| Assets: | | | | |
| Investment in Securities - Level 1 | | $ | 38,201 | |
| Total | | $ | 38,201 | |
The accompanying notes are an integral part of these financial statements.
| American Funds Global Growth and Income HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares | | | | | | | | Market Value ╪ | |
| INVESTMENT COMPANIES - 100.0% | | | | | | | | |
| | 7,097 | | | American Funds Insurance Series - Global | | | | | | | | |
| | | | | Growth and Income Fund Class 1 | | | | | | $ | 74,940 | |
| | | | | | | | | | | | | |
| | | | | Total investment companies | | | | | | | | |
| | | | | (cost $52,924) | | | | | | $ | 74,940 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $52,924) ▲ | | | 100.0 | % | | $ | 74,940 | |
| | | | | Other assets and liabilities | | | – | % | | | (13 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 74,927 | |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $54,819 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 20,121 | |
| Unrealized Depreciation | | | — | |
| Net Unrealized Appreciation | | $ | 20,121 | |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
At December 31, 2012, the investment valuation hierarchy levels were:
| Assets: | | | | |
| Investment in Securities - Level 1 | | $ | 74,940 | |
| Total | | $ | 74,940 | |
| American Funds Global Growth HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares | | | | | | | | Market Value ╪ | |
| INVESTMENT COMPANIES – 100.0% | | | | | | | | |
| | 1,232 | | | American Funds Insurance Series – Global | | | | | | | | |
| | | | | Growth Fund Class 1 | | | | | | $ | 29,062 | |
| | | | | | | | | | | | | |
| | | | | Total investment companies | | | | | | | | |
| | | | | (cost $20,966) | | | | | | $ | 29,062 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $20,966) ▲ | | | 100.0 | % | | $ | 29,062 | |
| | | | | Other assets and liabilities | | | – | % | | | (7 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 29,055 | |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $22,557 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 6,505 | |
| Unrealized Depreciation | | | — | |
| Net Unrealized Appreciation | | $ | 6,505 | |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
At December 31, 2012, the investment valuation hierarchy levels were:
| Assets: | | | | |
| Investment in Securities – Level 1 | | $ | 29,062 | |
| Total | | $ | 29,062 | |
The accompanying notes are an integral part of these financial statements.
| American Funds Global Small Capitalization HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares | | | | | | | | Market Value ╪ | |
| INVESTMENT COMPANIES - 100.0% | | | | | | | | |
| | 2,673 | | | American Funds Insurance Series - Global | | | | | | | | |
| | | | | Small Capitalization Fund Class 1 | | | | | | $ | 53,891 | |
| | | | | | | | | | | | | |
| | | | | Total investment companies | | | | | | | | |
| | | | | (cost $43,540) | | | | | | $ | 53,891 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $43,540) ▲ | | | 100.0 | % | | $ | 53,891 | |
| | | | | Other assets and liabilities | | | — | % | | | (10 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 53,881 | |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $45,941 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 7,950 | |
| Unrealized Depreciation | | | — | |
| Net Unrealized Appreciation | | $ | 7,950 | |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
At December 31, 2012, the investment valuation hierarchy levels were:
| Assets: | | | | |
| Investment in Securities - Level 1 | | $ | 53,891 | |
| Total | | $ | 53,891 | |
| American Funds Growth HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares | | | | | | | | Market Value ╪ | |
| INVESTMENT COMPANIES - 100.0% | | | | | | | | |
| | 5,483 | | | American Funds Insurance Series - Growth | | | | | | | | |
| | | | | Fund Class 1 | | | | | | $ | 333,933 | |
| | | | | | | | | | | | | |
| | | | | Total investment companies | | | | | | | | |
| | | | | (cost $213,488) | | | | | | $ | 333,933 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $213,488) ▲ | | | 100.0 | % | | $ | 333,933 | |
| | | | | Other assets and liabilities | | | — | % | | | (44 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 333,889 | |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $222,632 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 111,301 | |
| Unrealized Depreciation | | | — | |
| Net Unrealized Appreciation | | $ | 111,301 | |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
At December 31, 2012, the investment valuation hierarchy levels were:
| Assets: | | | | |
| Investment in Securities - Level 1 | | $ | 333,933 | |
| Total | | $ | 333,933 | |
The accompanying notes are an integral part of these financial statements.
| American Funds Growth-Income HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares | | | | | | | | Market Value ╪ | |
| INVESTMENT COMPANIES - 100.0% | | | | | | | | |
| | 4,762 | | | American Funds Insurance Series - | | | | | | | | |
| | | | | Growth-Income Fund Class 1 | | | | | | $ | 183,245 | |
| | | | | | | | | | | | | |
| | | | | Total investment companies | | | | | | | | |
| | | | | (cost $129,701) | | | | | | $ | 183,245 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $129,701) ▲ | | | 100.0 | % | | $ | 183,245 | |
| | | | | Other assets and liabilities | | | — | % | | | (25 | ) |
| | | | | Total net assets. | | | 100.0 | % | | $ | 183,220 | |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $133,571 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 49,674 | |
| Unrealized Depreciation | | | — | |
| Net Unrealized Appreciation | | $ | 49,674 | |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
At December 31, 2012, the investment valuation hierarchy levels were:
| Assets: | | | | |
| Investment in Securities - Level 1 | | $ | 183,245 | |
| Total | | $ | 183,245 | |
| American Funds International HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares | | | | | | | | Market Value ╪ | |
| INVESTMENT COMPANIES - 100.0% | | | | | | | | |
| | 12,745 | | | American Funds Insurance Series - | | | | | | | | |
| | | | | International Fund Class 1 | | | | | | $ | 225,329 | |
| | | | | | | | | | | | | |
| | | | | Total investment companies | | | | | | | | |
| | | | | (cost $186,019) | | | | | | $ | 225,329 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $186,019) ▲ | | | 100.0 | % | | $ | 225,329 | |
| | | | | Other assets and liabilities | | | — | % | | | (31 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 225,298 | |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $192,048 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 33,281 | |
| Unrealized Depreciation | | | — | |
| Net Unrealized Appreciation | | $ | 33,281 | |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
At December 31, 2012, the investment valuation hierarchy levels were:
| Assets: | | | | |
| Investment in Securities - Level 1 | | $ | 225,329 | |
| Total | | $ | 225,329 | |
The accompanying notes are an integral part of these financial statements.
| American Funds New World HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares | | | | | | | | Market Value ╪ | |
| INVESTMENT COMPANIES - 100.0% | | | | | | | | |
| | 2,255 | | | American Funds Insurance Series - New | | | | | | | | |
| | | | | World Fund Class 1 | | | | | | $ | 51,706 | |
| | | | | | | | | | | | | |
| | | | | Total investment companies | | | | | | | | |
| | | | | (cost $42,205) | | | | | | $ | 51,706 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $42,205) ▲ | | | 100.0 | % | | $ | 51,706 | |
| | | | | Other assets and liabilities | | | — | % | | | (9 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 51,697 | |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $44,230 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 7,476 | |
| Unrealized Depreciation | | | — | |
| Net Unrealized Appreciation | | $ | 7,476 | |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
At December 31, 2012, the investment valuation hierarchy levels were:
| Assets: | | | | |
| Investment in Securities - Level 1 | | $ | 51,706 | |
| Total | | $ | 51,706 | |
The accompanying notes are an integral part of these financial statements.
[This page is intentionally left blank]
| Hartford Series Fund, Inc. |
| Statements of Assets and Liabilities |
| December 31, 2012 |
| (000’s Omitted) |
| | | American Funds
Asset Allocation
HLS Fund | | | American Funds
Blue Chip
Income and
Growth
HLS Fund | | | American Funds
Bond
HLS Fund | |
| Assets: | | | | | | | | | | | | |
| Investments in underlying funds, at market value @ | | $ | 64,627 | | | $ | 39,928 | | | $ | 199,036 | |
| Receivables: | | | | | | | | | | | | |
| Investment securities sold | | | 13 | | | | 7 | | | | 103 | |
| Fund shares sold | | | 15 | | | | 3 | | | | 6 | |
| Other assets | | | 5 | | | | 4 | | | | 9 | |
| Total assets | | | 64,660 | | | | 39,942 | | | | 199,154 | |
| Liabilities: | | | | | | | | | | | | |
| Payables: | | | | | | | | | | | | |
| Fund shares redeemed | | | 28 | | | | 10 | | | | 109 | |
| Investment management fees | | | 8 | | | | 6 | | | | 19 | |
| Distribution fees | | | 3 | | | | 2 | | | | 9 | |
| Accrued expenses | | | 5 | | | | 4 | | | | 9 | |
| Total liabilities | | | 44 | | | | 22 | | | | 146 | |
| Net assets | | $ | 64,616 | | | $ | 39,920 | | | $ | 199,008 | |
| Summary of Net Assets: | | | | | | | | | | | | |
| Capital stock and paid-in-capital | | $ | 47,904 | | | $ | 30,165 | | | $ | 177,476 | |
| Undistributed net investment income | | | 1,042 | | | | 628 | | | | 4,314 | |
| Accumulated net realized gain (loss) | | | 2,672 | | | | 1,803 | | | | 5,159 | |
| Unrealized appreciation of investments | | | 12,998 | | | | 7,324 | | | | 12,059 | |
| Net assets | | $ | 64,616 | | | $ | 39,920 | | | $ | 199,008 | |
| Shares authorized | | | 200,000 | | | | 200,000 | | | | 200,000 | |
| Par value | | $ | 0.001 | | | $ | 0.001 | | | $ | 0.001 | |
| Class IB: Net asset value per share | | $ | 11.04 | | | $ | 10.11 | | | $ | 10.52 | |
| Shares outstanding | | | 5,852 | | | | 3,949 | | | | 18,920 | |
| Net assets | | $ | 64,616 | | | $ | 39,920 | | | $ | 199,008 | |
| @ Cost of underlying funds | | $ | 51,629 | | | $ | 32,604 | | | $ | 186,977 | |
The accompanying notes are an integral part of these financial statements.
American Funds
Global Bond
HLS Fund | | | American Funds
Global Growth
and Income
HLS Fund | | | American Funds
Global Growth
HLS Fund | | | American Funds
Global Small
Capitalization
HLS Fund | | | American Funds
Growth
HLS Fund | | | American Funds
Growth-Income
HLS Fund | | | American Funds
International
HLS Fund | | | American Funds
New World
HLS Fund | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 38,201 | | | $ | 74,940 | | | $ | 29,062 | | | $ | 53,891 | | | $ | 333,933 | | | $ | 183,245 | | | $ | 225,329 | | | $ | 51,706 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 18 | | | | 38 | | | | 136 | | | | 84 | | | | 417 | | | | 312 | | | | 75 | | | | 34 | |
| | 2 | | | | 13 | | | | 1 | | | | — | | | | 28 | | | | 95 | | | | 9 | | | | 9 | |
| | 4 | | | | 8 | | | | 4 | | | | 5 | | | | 32 | | | | 16 | | | | 26 | | | | 8 | |
| | 38,225 | | | | 74,999 | | | | 29,203 | | | | 53,980 | | | | 334,410 | | | | 183,668 | | | | 225,439 | | | | 51,757 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 21 | | | | 50 | | | | 138 | | | | 84 | | | | 445 | | | | 407 | | | | 84 | | | | 43 | |
| | 5 | | | | 12 | | | | 5 | | | | 8 | | | | 47 | | | | 24 | | | | 36 | | | | 11 | |
| | 2 | | | | 4 | | | | 1 | | | | 3 | | | | 16 | | | | 9 | | | | 11 | | | | 2 | |
| | 4 | | | | 6 | | | | 4 | | | | 4 | | | | 13 | | | | 8 | | | | 10 | | | | 4 | |
| | 32 | | | | 72 | | | | 148 | | | | 99 | | | | 521 | | | | 448 | | | | 141 | | | | 60 | |
| $ | 38,193 | | | $ | 74,927 | | | $ | 29,055 | | | $ | 53,881 | | | $ | 333,889 | | | $ | 183,220 | | | $ | 225,298 | | | $ | 51,697 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 33,563 | | | $ | 52,222 | | | $ | 20,664 | | | $ | 39,778 | | | $ | 210,155 | | | $ | 128,848 | | | $ | 185,242 | | | $ | 38,990 | |
| | 887 | | | | 1,597 | | | | 147 | | | | 560 | | | | 1,685 | | | | 2,338 | | | | 2,543 | | | | 325 | |
| | 1,668 | | | | (908 | ) | | | 148 | | | | 3,192 | | | | 1,604 | | | | (1,510 | ) | | | (1,797 | ) | | | 2,881 | |
| | 2,075 | | | | 22,016 | | | | 8,096 | | | | 10,351 | | | | 120,445 | | | | 53,544 | | | | 39,310 | | | | 9,501 | |
| $ | 38,193 | | | $ | 74,927 | | | $ | 29,055 | | | $ | 53,881 | | | $ | 333,889 | | | $ | 183,220 | | | $ | 225,298 | | | $ | 51,697 | |
| | 200,000 | | | | 200,000 | | | | 200,000 | | | | 200,000 | | | | 200,000 | | | | 200,000 | | | | 200,000 | | | | 200,000 | |
| $ | 0.001 | | | $ | 0.001 | | | $ | 0.001 | | | $ | 0.001 | | | $ | 0.001 | | | $ | 0.001 | | | $ | 0.001 | | | $ | 0.001 | |
| $ | 11.10 | | | $ | 9.58 | | | $ | 10.45 | | | $ | 8.29 | | | $ | 10.45 | | | $ | 10.20 | | | $ | 8.73 | | | $ | 9.46 | |
| | 3,440 | | | | 7,823 | | | | 2,779 | | | | 6,503 | | | | 31,937 | | | | 17,962 | | | | 25,803 | | | | 5,464 | |
| $ | 38,193 | | | $ | 74,927 | | | $ | 29,055 | | | $ | 53,881 | | | $ | 333,889 | | | $ | 183,220 | | | $ | 225,298 | | | $ | 51,697 | |
| $ | 36,126 | | | $ | 52,924 | | | $ | 20,966 | | | $ | 43,540 | | | $ | 213,488 | | | $ | 129,701 | | | $ | 186,019 | | | $ | 42,205 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Series Fund, Inc. |
| Statements of Operations |
| For the Year Ended December 31, 2012 |
| (000’s Omitted) |
| | | American Funds
Asset Allocation
HLS Fund | | | American Funds
Blue Chip
Income and
Growth
HLS Fund | | | American Funds
Bond
HLS Fund | |
| Investment Income: | | | | | | | | | | | | |
| Dividends from underlying funds | | $ | 1,407 | | | $ | 842 | | | $ | 5,405 | |
| Total investment income | | | 1,407 | | | | 842 | | | | 5,405 | |
| | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | |
| Investment management fees | | | 433 | | | | 281 | | | | 1,013 | |
| Distribution fees - Class IB | | | 166 | | | | 94 | | | | 507 | |
| Custodian fees | | | 1 | | | | 1 | | | | 1 | |
| Accounting services fees | | | 7 | | | | 4 | | | | 20 | |
| Board of Directors' fees | | | 2 | | | | 1 | | | | 6 | |
| Audit fees | | | 10 | | | | 10 | | | | 11 | |
| Other expenses | | | 12 | | | | 10 | | | | 40 | |
| Total expenses (before waivers) | | | 631 | | | | 401 | | | | 1,598 | |
| Expense waivers | | | (266 | ) | | | (187 | ) | | | (507 | ) |
| Total waivers | | | (266 | ) | | | (187 | ) | | | (507 | ) |
| Total expenses, net | | | 365 | | | | 214 | | | | 1,091 | |
| Net Investment Income | | | 1,042 | | | | 628 | | | | 4,314 | |
| | | | | | | | | | | | | |
| Net Realized Gain on Investments: | | | | | | | | | | | | |
| Capital gain distribution received from underlying funds | | | — | | | | — | | | | — | |
| Net realized gain on investments in underlying funds | | | 4,503 | | | | 2,809 | | | | 6,087 | |
| Net Realized Gain on Investments | | | 4,503 | | | | 2,809 | | | | 6,087 | |
| | | | | | | | | | | | | |
| Net Changes in Unrealized Appreciation of Investments: | | | | | | | | | | | | |
| Net unrealized appreciation (depreciation) of investments in underlying funds | | | 4,256 | | | | 1,230 | | | | (428 | ) |
| Net Gain on Investments | | | 8,759 | | | | 4,039 | | | | 5,659 | |
| Net Increase in Net Assets Resulting from Operations | | $ | 9,801 | | | $ | 4,667 | | | $ | 9,973 | |
The accompanying notes are an integral part of these financial statements.
American Funds
Global Bond
HLS Fund | | | American Funds
Global Growth
and Income
HLS Fund | | | American Funds
Global Growth
HLS Fund | | | American Funds
Global Small
Capitalization
HLS Fund | | | American Funds
Growth
HLS Fund | | | American Funds
Growth-Income
HLS Fund | | | American Funds
International
HLS Fund | | | American Funds
New World
HLS Fund | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 942 | | | $ | 2,025 | | | $ | 323 | | | $ | 876 | | | $ | 3,503 | | | $ | 3,311 | | | $ | 3,741 | | | $ | 625 | |
| | 942 | | | | 2,025 | | | | 323 | | | | 876 | | | | 3,503 | | | | 3,311 | | | | 3,741 | | | | 625 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 313 | | | | 623 | | | | 304 | | | | 450 | | | | 2,537 | | | | 1,266 | | | | 1,873 | | | | 586 | |
| | 105 | | | | 194 | | | | 76 | | | | 141 | | | | 845 | | | | 452 | | | | 551 | | | | 133 | |
| | 1 | | | | 1 | | | | 1 | | | | 1 | | | | 1 | | | | 1 | | | | 1 | | | | 1 | |
| | 4 | | | | 8 | | | | 3 | | | | 6 | | | | 34 | | | | 18 | | | | 22 | | | | 5 | |
| | 2 | | | | 2 | | | | 1 | | | | 2 | | | | 10 | | | | 5 | | | | 6 | | | | 2 | |
| | 10 | | | | 11 | | | | 11 | | | | 10 | | | | 12 | | | | 12 | | | | 12 | | | | 10 | |
| | 10 | | | | 16 | | | | 8 | | | | 16 | | | | 69 | | | | 33 | | | | 55 | | | | 16 | |
| | 445 | | | | 855 | | | | 404 | | | | 626 | | | | 3,508 | | | | 1,787 | | | | 2,520 | | | | 753 | |
| | (209 | ) | | | (428 | ) | | | (228 | ) | | | (310 | ) | | | (1,691 | ) | | | (814 | ) | | | (1,322 | ) | | | (453 | ) |
| | (209 | ) | | | (428 | ) | | | (228 | ) | | | (310 | ) | | | (1,691 | ) | | | (814 | ) | | | (1,322 | ) | | | (453 | ) |
| | 236 | | | | 427 | | | | 176 | | | | 316 | | | | 1,817 | | | | 973 | | | | 1,198 | | | | 300 | |
| | 706 | | | | 1,598 | | | | 147 | | | | 560 | | | | 1,686 | | | | 2,338 | | | | 2,543 | | | | 325 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 385 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | 1,615 | | | | 2,782 | | | | 1,741 | | | | 5,606 | | | | 10,749 | | | | 3,072 | | | | 4,308 | | | | 4,944 | |
| | 2,000 | | | | 2,782 | | | | 1,741 | | | | 5,606 | | | | 10,749 | | | | 3,072 | | | | 4,308 | | | | 4,944 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (311 | ) | | | 7,964 | | | | 4,172 | | | | 3,066 | | | | 41,625 | | | | 22,943 | | | | 28,881 | | | | 3,202 | |
| | 1,689 | | | | 10,746 | | | | 5,913 | | | | 8,672 | | | | 52,374 | | | | 26,015 | | | | 33,189 | | | | 8,146 | |
| $ | 2,395 | | | $ | 12,344 | | | $ | 6,060 | | | $ | 9,232 | | | $ | 54,060 | | | $ | 28,353 | | | $ | 35,732 | | | $ | 8,471 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Series Fund, Inc. |
| Statements of Changes in Net Assets |
| |
| (000’s Omitted) |
| | | American Funds
Asset Allocation
HLS Fund | | | American Funds
Blue Chip Income and Growth
HLS Fund | |
| | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| Operations: | | | | | | | | | | | | | | | | |
| Net investment income | | $ | 1,042 | | | $ | 1,027 | | | $ | 628 | | | $ | 467 | |
| Net realized gain (loss) on investments | | | 4,503 | | | | 68 | | | | 2,809 | | | | 322 | |
| Net unrealized appreciation (depreciation) of investments | | | 4,256 | | | | (605 | ) | | | 1,230 | | | | (1,140 | ) |
| Net Increase (Decrease) in Net assets Resulting from Operations | | | 9,801 | | | | 490 | | | | 4,667 | | | | (351 | ) |
| Distributions to Shareholders: | | | | | | | | | | | | | | | | |
| From net investment income | | | | | | | | | | | | | | | | |
| Class IB | | | (1,026 | ) | | | (863 | ) | | | (467 | ) | | | (8 | ) |
| From net realized gain on investments | | | | | | | | | | | | | | | | |
| Class IB | | | (140 | ) | | | (5 | ) | | | (266 | ) | | | — | |
| Total distributions | | | (1,166 | ) | | | (868 | ) | | | (733 | ) | | | (8 | ) |
| Capital Share Transactions: | | | | | | | | | | | | | | | | |
| Class IB | | | | | | | | | | | | | | | | |
| Sold | | | 10,741 | | | | 13,867 | | | | 14,324 | | | | 5,896 | |
| Issued on reinvestment of distributions | | | 1,166 | | | | 868 | | | | 733 | | | | 8 | |
| Redeemed | | | (20,282 | ) | | | (8,327 | ) | | | (11,496 | ) | | | (7,150 | ) |
| Net increase (decrease) from capital share transactions | | | (8,375 | ) | | | 6,408 | | | | 3,561 | | | | (1,246 | ) |
| Net increase (decrease) in net assets | | | 260 | | | | 6,030 | | | | 7,495 | | | | (1,605 | ) |
| Net Assets: | | | | | | | | | | | | | | | | |
| Beginning of period | | | 64,356 | | | | 58,326 | | | | 32,425 | | | | 34,030 | |
| End of period | | $ | 64,616 | | | $ | 64,356 | | | $ | 39,920 | | | $ | 32,425 | |
| Undistributed (distribution in excess of) | | | | | | | | | | | | | | | | |
| net investment income | | $ | 1,042 | | | $ | 1,026 | | | $ | 628 | | | $ | 467 | |
| Shares: | | | | | | | | | | | | | | | | |
| Class IB | | | | | | | | | | | | | | | | |
| Sold | | | 1,021 | | | | 1,409 | | | | 1,460 | | | | 650 | |
| Issued on reinvestment of distributions | | | 109 | | | | 94 | | | | 73 | | | | 1 | |
| Redeemed | | | (1,912 | ) | | | (857 | ) | | | (1,160 | ) | | | (782 | ) |
| Total share activity | | | (782 | ) | | | 646 | | | | 373 | | | | (131 | ) |
The accompanying notes are an integral part of these financial statements.
American Funds
Bond
HLS Fund | | | American Funds
Global Bond
HLS Fund | | | American Funds
Global Growth and Income
HLS Fund | | | American Funds
Global Growth
HLS Fund | |
For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 4,314 | | | $ | 5,360 | | | $ | 706 | | | $ | 1,075 | | | $ | 1,598 | | | $ | 1,975 | | | $ | 147 | | | $ | 313 | |
| | 6,087 | | | | 4,436 | | | | 2,000 | | | | 1,051 | | | | 2,782 | | | | (365 | ) | | | 1,741 | | | | 309 | |
| | (428 | ) | | | 2,021 | | | | (311 | ) | | | (542 | ) | | | 7,964 | | | | (6,146 | ) | | | 4,172 | | | | (3,627 | ) |
| | 9,973 | | | | 11,817 | | | | 2,395 | | | | 1,584 | | | | 12,344 | | | | (4,536 | ) | | | 6,060 | | | | (3,005 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (5,360 | ) | | | (5,572 | ) | | | (1,092 | ) | | | (962 | ) | | | (1,976 | ) | | | (1,921 | ) | | | (313 | ) | | | (363 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (4,400 | ) | | | (62 | ) | | | (825 | ) | | | (316 | ) | | | — | | | | — | | | | (324 | ) | | | — | |
| | (9,760 | ) | | | (5,634 | ) | | | (1,917 | ) | | | (1,278 | ) | | | (1,976 | ) | | | (1,921 | ) | | | (637 | ) | | | (363 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 33,978 | | | | 34,811 | | | | 3,834 | | | | 13,479 | | | | 4,117 | | | | 4,913 | | | | 2,125 | | | | 4,927 | |
| | 9,760 | | | | 5,634 | | | | 1,917 | | | | 1,278 | | | | 1,976 | | | | 1,921 | | | | 637 | | | | 363 | |
| | (43,146 | ) | | | (54,785 | ) | | | (12,388 | ) | | | (9,365 | ) | | | (20,173 | ) | | | (12,992 | ) | | | (8,449 | ) | | | (6,848 | ) |
| | 592 | | | | (14,340 | ) | | | (6,637 | ) | | | 5,392 | | | | (14,080 | ) | | | (6,158 | ) | | | (5,687 | ) | | | (1,558 | ) |
| | 805 | | | | (8,157 | ) | | | (6,159 | ) | | | 5,698 | | | | (3,712 | ) | | | (12,615 | ) | | | (264 | ) | | | (4,926 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 198,203 | | | | 206,360 | | | | 44,352 | | | | 38,654 | | | | 78,639 | | | | 91,254 | | | | 29,319 | | | | 34,245 | |
| $ | 199,008 | | | $ | 198,203 | | | $ | 38,193 | | | $ | 44,352 | | | $ | 74,927 | | | $ | 78,639 | | | $ | 29,055 | | | $ | 29,319 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 4,314 | | | $ | 5,360 | | | $ | 887 | | | $ | 1,091 | | | $ | 1,597 | | | $ | 1,975 | | | $ | 147 | | | $ | 313 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 3,188 | | | | 3,348 | | | | 342 | | | | 1,191 | | | | 452 | | | | 547 | | | | 219 | | | | 508 | |
| | 943 | | | | 541 | | | | 177 | | | | 113 | | | | 221 | | | | 234 | | | | 65 | | | | 42 | |
| | (4,046 | ) | | | (5,267 | ) | | | (1,105 | ) | | | (839 | ) | | | (2,235 | ) | | | (1,473 | ) | | | (861 | ) | | | (710 | ) |
| | 85 | | | | (1,378 | ) | | | (586 | ) | | | 465 | | | | (1,562 | ) | | | (692 | ) | | | (577 | ) | | | (160 | ) |
The accompanying notes are an integral part of these financial statements.
| Hartford Series Fund, Inc. |
| Statements of Changes in Net Assets – (continued) |
| |
| (000’s Omitted) |
| | | American Funds
Global Small Capitalization
HLS Fund | | | American Funds
Growth
HLS Fund | |
| | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| Operations: | | | | | | | | | | | | | | | | |
| Net investment income | | $ | 560 | | | $ | 649 | | | $ | 1,686 | | | $ | 1,116 | |
| Net realized gain (loss) on investments | | | 5,606 | | | | 4,956 | | | | 10,749 | | | | 1,657 | |
| Net unrealized appreciation (depreciation) of investments | | | 3,066 | | | | (18,721 | ) | | | 41,625 | | | | (16,989 | ) |
| Net Increase (Decrease) in Net assets Resulting from Operations | | | 9,232 | | | | (13,116 | ) | | | 54,060 | | | | (14,216 | ) |
| Distributions to Shareholders: | | | | | | | | | | | | | | | | |
| From net investment income | | | | | | | | | | | | | | | | |
| Class IB | | | (648 | ) | | | (866 | ) | | | (1,117 | ) | | | (10 | ) |
| From net realized gain on investments | | | | | | | | | | | | | | | | |
| Class IB | | | (4,957 | ) | | | (360 | ) | | | (975 | ) | | | — | |
| Total distributions | | | (5,605 | ) | | | (1,226 | ) | | | (2,092 | ) | | | (10 | ) |
| Capital Share Transactions: | | | | | | | | | | | | | | | | |
| Class IB | | | | | | | | | | | | | | | | |
| Sold | | | 3,154 | | | | 9,505 | | | | 33,586 | | | | 32,641 | |
| Issued on reinvestment of distributions | | | 5,605 | | | | 1,226 | | | | 2,092 | | | | 10 | |
| Redeemed | | | (14,163 | ) | | | (15,730 | ) | | | (71,725 | ) | | | (56,619 | ) |
| Net increase (decrease) from capital share transactions | | | (5,404 | ) | | | (4,999 | ) | | | (36,047 | ) | | | (23,968 | ) |
| Net increase (decrease) in net assets | | | (1,777 | ) | | | (19,341 | ) | | | 15,921 | | | | (38,194 | ) |
| Net Assets: | | | | | | | | | | | | | | | | |
| Beginning of period | | | 55,658 | | | | 74,999 | | | | 317,968 | | | | 356,162 | |
| End of period | | $ | 53,881 | | | $ | 55,658 | | | $ | 333,889 | | | $ | 317,968 | |
| Undistributed (distribution in excess of) | | | | | | | | | | | | | | | | |
| net investment income | | $ | 560 | | | $ | 648 | | | $ | 1,685 | | | $ | 1,116 | |
| Shares: | | | | | | | | | | | | | | | | |
| Class IB | | | | | | | | | | | | | | | | |
| Sold | | | 379 | | | | 1,071 | | | | 3,394 | | | | 3,537 | |
| Issued on reinvestment of distributions | | | 731 | | | | 147 | | | | 210 | | | | 1 | |
| Redeemed | | | (1,717 | ) | | | (1,667 | ) | | | (7,202 | ) | | | (5,986 | ) |
| Total share activity | | | (607 | ) | | | (449 | ) | | | (3,598 | ) | | | (2,448 | ) |
The accompanying notes are an integral part of these financial statements.
American Funds
Growth-Income
HLS Fund | | | American Funds
International
HLS Fund | | | American Funds
New World
HLS Fund | |
For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| $ | 2,338 | | | $ | 2,243 | | | $ | 2,543 | | | $ | 3,474 | | | $ | 325 | | | $ | 836 | |
| | 3,072 | | | | (381 | ) | | | 4,308 | | | | (625 | ) | | | 4,944 | | | | 3,019 | |
| | 22,943 | | | | (5,655 | ) | | | 28,881 | | | | (35,372 | ) | | | 3,202 | | | | (13,070 | ) |
| | 28,353 | | | | (3,793 | ) | | | 35,732 | | | | (32,523 | ) | | | 8,471 | | | | (9,215 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (2,243 | ) | | | (2 | ) | | | (3,474 | ) | | | (3,792 | ) | | | (835 | ) | | | (797 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| | — | | | | — | | | | — | | | | — | | | | (2,795 | ) | | | — | |
| | (2,243 | ) | | | (2 | ) | | | (3,474 | ) | | | (3,792 | ) | | | (3,630 | ) | | | (797 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 25,921 | | | | 15,378 | | | | 20,802 | | | | 35,399 | | | | 6,030 | | | | 9,630 | |
| | 2,243 | | | | 2 | | | | 3,474 | | | | 3,792 | | | | 3,630 | | | | 797 | |
| | (41,113 | ) | | | (27,362 | ) | | | (39,635 | ) | | | (30,179 | ) | | | (15,373 | ) | | | (20,103 | ) |
| | (12,949 | ) | | | (11,982 | ) | | | (15,359 | ) | | | 9,012 | | | | (5,713 | ) | | | (9,676 | ) |
| | 13,161 | | | | (15,777 | ) | | | 16,899 | | | | (27,303 | ) | | | (872 | ) | | | (19,688 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 170,059 | | | | 185,836 | | | | 208,399 | | | | 235,702 | | | | 52,569 | | | | 72,257 | |
| $ | 183,220 | | | $ | 170,059 | | | $ | 225,298 | | | $ | 208,399 | | | $ | 51,697 | | | $ | 52,569 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| $ | 2,338 | | | $ | 2,243 | | | $ | 2,543 | | | $ | 3,474 | | | $ | 325 | | | $ | 835 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 2,678 | | | | 1,719 | | | | 2,601 | | | | 4,305 | | | | 658 | | | | 982 | |
| | 226 | | | | — | | | | 432 | | | | 488 | | | | 417 | | | | 88 | |
| | (4,240 | ) | | | (3,063 | ) | | | (4,853 | ) | | | (3,471 | ) | | | (1,684 | ) | | | (2,055 | ) |
| | (1,336 | ) | | | (1,344 | ) | | | (1,820 | ) | | | 1,322 | | | | (609 | ) | | | (985 | ) |
The accompanying notes are an integral part of these financial statements.
| Hartford Series Fund, Inc. |
| Notes to Financial Statements |
| December 31, 2012 |
| (000’s Omitted) |
The Hartford HLS Funds serve as underlying investment options for certain variable annuity and variable life insurance separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates and certain qualified retirement plans. Certain Hartford HLS Funds may also serve as underlying investment options for certain variable annuity and variable life separate accounts of other insurance companies. Owners of variable annuity contracts and policyholders of variable life insurance contracts may choose the funds permitted in the variable insurance contract prospectus. In addition, participants in certain qualified retirement plans may choose the funds if permitted by their plans.
Hartford Series Fund, Inc. (the “Company”) is an open-end management investment company comprised of thirty portfolios, eleven portfolios of which are included in these financial statements (each a “Fund” or together the “Funds”). These eleven portfolios of the Company are American Funds Asset Allocation HLS Fund, American Funds Blue Chip Income and Growth HLS Fund, American Funds Bond HLS Fund, American Funds Global Bond HLS Fund, American Funds Global Growth and Income HLS Fund, American Funds Global Growth HLS Fund, American Funds Global Small Capitalization HLS Fund, American Funds Growth HLS Fund, American Funds Growth-Income HLS Fund, American Funds International HLS Fund and American Funds New World HLS Fund.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). Each Fund is organized as a diversified open-end management investment company, except for American Funds Global Bond HLS Fund, which is non-diversified.
Each Fund operates in the manner of a fund of funds, investing in shares of underlying mutual funds (the “Underlying Funds”). Each Underlying Fund is offered by American Funds Insurance Series, and is a registered open-end investment company. The Funds and their related Underlying Funds are listed below:
| Fund | | Underlying Fund |
| American Funds Asset Allocation HLS Fund | | Asset Allocation Fund Class 1 |
| American Funds Blue Chip Income and Growth HLS Fund | | Blue Chip Income and Growth Fund Class 1 |
| American Funds Bond HLS Fund | | Bond Fund Class 1 |
| American Funds Global Bond HLS Fund | | Global Bond Fund Class 1 |
| American Funds Global Growth and Income HLS Fund | | Global Growth and Income Fund Class 1 |
| American Funds Global Growth HLS Fund | | Global Growth Fund Class 1 |
| American Funds Global Small Capitalization HLS Fund | | Global Small Capitalization Fund Class 1 |
| American Funds Growth HLS Fund | | Growth Fund Class 1 |
| American Funds Growth-Income HLS Fund | | Growth-Income Fund Class 1 |
| American Funds International HLS Fund | | International Fund Class 1 |
| American Funds New World HLS Fund | | New World Fund Class 1 |
The Underlying Funds’ accounting policies are outlined in the Underlying Funds’ shareholder report, which accompanies this report.
Class IB shares of the Funds are offered at the per share net asset value (“NAV”) without a sales charge and are subject to distribution fees charged pursuant to a Distribution and Service Plan. The Distribution and Service Plan has been adopted in accordance with Rule 12b-1 under the 1940 Act.
| 2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Funds in the preparation of their financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| a) | Determination of Net Asset Value – The NAV of each class of the Funds’ shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Funds after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| b) | Investment Valuation – Investments in the Underlying Funds are valued at the respective NAV of each Underlying Fund as determined as of the NYSE Close on Valuation Date. Valuation of investments held by the Underlying Funds is discussed in Notes to Financial Statements of the Underlying Funds, which are included in the Underlying Funds’ shareholder report, accompanying this report. |
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of each Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| · | Level 1 – Quoted prices in active markets for identical investments. |
| · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
| · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. |
Valuation levels are not necessarily indicative of the risk associated with investing in such securities. Individual securities within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
During the year ended December 31, 2012, the Funds held no Level 3 securities, therefore no reconciliations of Level 3 securities are presented.
For additional information, refer to the investment valuation hierarchy level summary which follows the Schedule of Investments for each Fund.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period. During the year ended December 31, 2012, there were no transfers between different hierarchy levels.
| c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Realized gains and losses are determined on the basis of identified cost. |
Income and capital gain distributions from the Underlying Funds are accrued on the ex-dividend date.
| d) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Funds’ shares are executed in accordance with the investment instructions of the contract holders. The NAV of each Fund’s shares is determined as of |
| Hartford Series Fund, Inc. |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
the close of each business day of the Exchange. The NAV is determined for each Fund by dividing the Fund’s net assets by the number of shares outstanding. Orders for the purchase of a Fund’s shares received by an insurance company prior to the close of the Exchange on any day on which the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received by an insurance company after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Funds. The policy of all the Funds is to pay dividends from net investment income and realized capital gains, if any, at least once a year.
Distributions from net investment income, realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These differences may include but are not limited to losses deferred due to wash sale adjustments and short-term capital gain adjustments. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Funds’ capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| a) | Market Risks – The Funds are exposed to the risks of the Underlying Funds in direct proportion to the amount of assets each Fund allocates to each Underlying Fund. The market values of the Underlying Funds may decline due to general market conditions which are not specifically related to a particular fund, such as real or perceived adverse economic conditions or adverse investor sentiment generally. |
| a) | Federal Income Taxes – For federal income tax purposes, the Funds intend to continue to qualify as Regulated Investment Companies (“RIC”) under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of their taxable net investment income and net realized capital gains to their shareholders and otherwise complying with the requirements of the IRC. The Funds have distributed substantially all of their income and capital gains in the prior year and each Fund intends to distribute substantially all of its income and gains prior to the next fiscal year end. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments and short-term capital gain adjustments. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the net investment income (loss) or net realized gains (losses) were recorded by a Fund. |
| c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Funds for the periods indicated is as follows (as adjusted for dividends payable, if applicable): |
| | | For the Year Ended
December 31, 2012 | | | For the Year Ended
December 31, 2011 | |
| | | Ordinary
Income | | | Long-
Term
Capital
Gains(a) | | | Tax
return
of
capital | | | Ordinary
Income | | | Long-
Term
Capital
Gains(a) | | | Tax
return
of
capital | |
| American Funds Asset Allocation HLS Fund | | $ | 1,026 | | | $ | 140 | | | $ | — | | | $ | 863 | | | $ | 5 | | | $ | — | |
| American Funds Blue Chip Income and Growth HLS Fund | | | 467 | | | | 266 | | | | — | | | | 8 | | | | — | | | | — | |
| American Funds Bond HLS Fund | | | 5,360 | | | | 4,400 | | | | — | | | | 5,572 | | | | 62 | | | | — | |
| American Funds Global Bond HLS Fund | | | 1,092 | | | | 825 | | | | — | | | | 962 | | | | 316 | | | | — | |
| American Funds Global Growth and Income HLS Fund | | | 1,976 | | | | — | | | | — | | | | 1,921 | | | | — | | | | — | |
| American Funds Global Growth HLS Fund | | | 313 | | | | 324 | | | | — | | | | 363 | | | | — | | | | — | |
| American Funds Global Small Capitalization HLS Fund | | | 648 | | | | 4,957 | | | | — | | | | 866 | | | | 360 | | | | — | |
| American Funds Growth HLS Fund | | | 1,117 | | | | 975 | | | | — | | | | 10 | | | | — | | | | — | |
| American Funds Growth-Income HLS Fund | | | 2,243 | | | | — | | | | — | | | | 2 | | | | — | | | | — | |
| American Funds International HLS Fund | | | 3,474 | | | | — | | | | — | | | | 3,792 | | | | — | | | | — | |
| American Funds New World HLS Fund | | | 835 | | | | 2,795 | | | | — | | | | 797 | | | | — | | | | — | |
(a) The Funds designate these distributions as long-term capital dividends per IRC code Sec. 852(b) (3) (C).
As of December 31, 2012, the components of distributable earnings (deficit) on a tax basis were as follows:
| | | Undistributed
Ordinary
Income | | | Undistributed
Long-Term
Capital Gain | | | Accumulated
Capital and Other
Losses | | | Unrealized
Appreciation
(Depreciation)@ | | | Total
Accumulated
Earnings
(Deficit) | |
| American Funds Asset Allocation HLS Fund | | $ | 1,042 | | | $ | 4,503 | | | $ | – | | | $ | 11,167 | | | $ | 16,712 | |
| American Funds Blue Chip Income and Growth HLS Fund | | | 628 | | | | 2,802 | | | | – | | | | 6,325 | | | | 9,755 | |
| American Funds Bond HLS Fund | | | 4,314 | | | | 5,996 | | | | – | | | | 11,222 | | | | 21,532 | |
| American Funds Global Bond HLS Fund | | | 887 | | | | 1,720 | | | | – | | | | 2,023 | | | | 4,630 | |
| American Funds Global Growth and Income HLS Fund | | | 1,597 | | | | 987 | | | | – | | | | 20,121 | | | | 22,705 | |
| American Funds Global Growth HLS Fund | | | 147 | | | | 1,739 | | | | – | | | | 6,505 | | | | 8,391 | |
| American Funds Global Small Capitalization HLS Fund | | | 560 | | | | 5,593 | | | | – | | | | 7,950 | | | | 14,103 | |
| American Funds Growth HLS Fund | | | 1,685 | | | | 10,748 | | | | – | | | | 111,301 | | | | 123,734 | |
| American Funds Growth-Income HLS Fund | | | 2,338 | | | | 2,360 | | | | – | | | | 49,674 | | | | 54,372 | |
| American Funds International HLS Fund | | | 2,543 | | | | 4,232 | | | | – | | | | 33,281 | | | | 40,056 | |
| American Funds New World HLS Fund | | | 324 | | | | 4,907 | | | | – | | | | 7,476 | | | | 12,707 | |
| @ | The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of wash sale losses. |
| d) | Reclassification of Capital Accounts – The Funds may record reclassifications in their capital accounts. These reclassifications have no impact on the total net assets of the Funds. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for items such as net operating losses that reduce distribution requirements. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of a Fund’s distributable income may be shown in the accompanying Statement of |
| Hartford Series Fund, Inc. |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
Assets and Liabilities as from net investment income, from net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Funds recorded the following reclassifications to increase (decrease) the accounts listed below.
| | | Net Investment
Income | | | Net Realized
Gain (Loss) | | | Paid-in-
Capital | |
| American Funds Global Bond HLS Fund | | $ | 182 | | | $ | (182 | ) | | $ | – | |
| e) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation. |
The Funds had no capital loss carryforward for U.S. federal income tax purposes as of December 31, 2012.
During the year ended December 31, 2012, the following Funds utilized prior year capital loss carryforwards:
| | | Amount | |
| American Funds Global Growth and Income HLS Fund | | $ | 1,801 | |
| American Funds Growth-Income HLS Fund | | | 782 | |
| American Funds International HLS Fund | | | 304 | |
| f) | Accounting for Uncertainty in Income Taxes – The Funds have adopted financial reporting rules that require the Funds to analyze all open tax years, as defined by the Statute of Limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Funds do not have an examination in progress. |
The Funds have reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules have no effect on the Funds’ financial positions or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax returns for the fiscal year-end December 31, 2012. The Funds are also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Funds’ investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Funds pursuant to an Investment Management Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Funds’ investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees paid under, the Funds’ investment management agreements; or (ii) the day-to-day management of the Funds. The investment manager has overall investment supervisory responsibility for each Fund. In addition, the investment manager provides administrative personnel, services, equipment, facilities and office space for proper operation of the Funds. |
The schedule below reflects the rates of compensation as a percentage of each Fund’s average daily net assets paid to HL Advisors for investment management services rendered during the year ended December 31, 2012. The rates are accrued daily and paid monthly:
| Fund | | Annual Rate* | |
| American Funds Asset Allocation HLS Fund | | | 0.65 | % |
| American Funds Blue Chip Income and Growth HLS Fund | | | 0.75 | % |
| American Funds Bond HLS Fund | | | 0.50 | % |
| American Funds Global Bond HLS Fund | | | 0.75 | % |
| American Funds Global Growth and Income HLS Fund | | | 0.80 | % |
| American Funds Global Growth HLS Fund | | | 1.00 | % |
| American Funds Global Small Capitalization HLS Fund | | | 0.80 | % |
| American Funds Growth HLS Fund | | | 0.75 | % |
| American Funds Growth-Income HLS Fund | | | 0.70 | % |
| American Funds International HLS Fund | | | 0.85 | % |
| American Funds New World HLS Fund | | | 1.10 | % |
| * | The investment manager has entered into an agreement under which it will waive a portion of its investment management fee with respect to each Fund for as long as that Fund is invested in its corresponding Underlying Fund. The net investment management fee under the agreement with the investment manager, after giving effect to the waiver, is 0.25% of the average daily net assets for each Fund. |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Funds. HLIC provided accounting services for the Funds for the fiscal year ended December 31, 2012. The replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Funds or the fees charged to the Funds for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Funds, HFMC provides accounting services to the Funds and receives monthly compensation of 0.01% of each Fund’s average daily net assets. These fees are accrued daily and paid monthly. |
| c) | Other Related Party Transactions – Certain officers of the Funds are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Funds’ Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Funds was in the amount of $2. These fees are accrued daily and paid monthly. |
| d) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund in proportion to the average daily net assets of each Fund, except where allocation of certain expenses is more fairly made directly to the Fund. |
| e) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Funds’ principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD with HIFSCO did not result in any changes to the distribution services provided to the Funds. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Funds, has adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, 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, subject to the review and approval of the Company’s Board of Directors. |
The Distribution Plan provides that each Fund may pay annually up to 0.25% of the average daily net assets of each Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, each Fund is authorized to make payments monthly to the Distributor that may be
| Hartford Series Fund, Inc. |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
used to pay or compensate 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. These fees are accrued daily and paid monthly.
| 6. | Investment Transactions: |
For the year ended December 31, 2012, aggregate purchases and sales of investments in underlying funds (excluding short-term investments) were as follows:
| | | Cost of Purchases
Excluding U.S.
Government
Obligations | | | Sales Proceeds
Excluding U.S.
Government
Obligations | |
| American Funds Asset Allocation HLS Fund | | $ | 9,135 | | | $ | 17,641 | |
| American Funds Blue Chip Income and Growth HLS Fund | | | 11,921 | | | | 8,471 | |
| American Funds Bond HLS Fund | | | 31,058 | | | | 35,918 | |
| American Funds Global Bond HLS Fund | | | 3,329 | | | | 10,799 | |
| American Funds Global Growth and Income HLS Fund | | | 3,942 | | | | 18,406 | |
| American Funds Global Growth HLS Fund | | | 1,130 | | | | 7,313 | |
| American Funds Global Small Capitalization HLS Fund | | | 2,373 | | | | 12,830 | |
| American Funds Growth HLS Fund | | | 14,401 | | | | 50,859 | |
| American Funds Growth-Income HLS Fund | | | 15,730 | | | | 28,589 | |
| American Funds International HLS Fund | | | 15,348 | | | | 31,643 | |
| American Funds New World HLS Fund | | | 4,074 | | | | 13,100 | |
The Funds, along with several other Hartford funds, participate in a $500 million committed revolving line of credit facility. The facility is to be used for temporary or emergency purposes. Under the arrangement, a fund is required to own securities having a market value in excess of 300% of the total bank borrowings. The interest rate on borrowings varies depending on the nature of the loan. The facility also requires a fee to be paid based on the amount of the commitment. This commitment fee is allocated to all the funds participating in the line of credit based on the average net assets of the funds. During the year ended December 31, 2012, the Funds did not have any borrowings under this facility.
Under the Company’s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on behalf of the Funds, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
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| Hartford Series Fund, Inc. |
| Financial Highlights |
| | | ─ Selected Per-Share Data(A) ─ | | | ─ Ratios and Supplemental Data ─ | |
| Class | | Net Asset
Value at
Beginning
of Period | | | Net
Invest-
ment
Income
(Loss) | | | Net
Realized
and Un-
realized
Gain
(Loss) on
Invest-
ments | | | Total from
Investment
Operations | | | Dividends
from Net
Invest-
ment
Income | | | Distrib-
utions
from
Realized
Capital
Gains | | | Total
Distri-
butions | | | Net Asset
Value at
End of
Period | | | Total
Return(B) | | | Net Assets at
End of
Period | | | Ratio of
Expenses to
Average Net
Assets Before
Waivers(C) | | | Ratio of
Expenses to
Average
Net Assets
After
Waivers(C) | | | Ratio of Net
Investment
Income to
Average Net
Assets(C) | | | Portfolio
Turnover
Rate | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| American Funds Asset Allocation HLS Fund |
| For the Year Ended December 31, 2012 |
| IB | | $ | 9.70 | | | $ | 0.19 | | | $ | 1.34 | | | $ | 1.53 | | | $ | (0.17 | ) | | $ | (0.02 | ) | | $ | (0.19 | ) | | $ | 11.04 | | | | 15.80 | % | | $ | 64,616 | | | | 0.95 | % | | | 0.55 | % | | | 1.56 | % | | | 14 | % |
| For the Year Ended December 31, 2011 |
| IB | | | 9.74 | | | | 0.14 | | | | (0.05 | ) | | | 0.09 | | | | (0.13 | ) | | | – | | | | (0.13 | ) | | | 9.70 | | | | 1.02 | | | | 64,356 | | | | 0.95 | | | | 0.55 | | | | 1.61 | | | | 9 | |
| For the Year Ended December 31, 2010 |
| IB | | | 8.85 | | | | 0.14 | | | | 0.91 | | | | 1.05 | | | | (0.16 | ) | | | – | | | | (0.16 | ) | | | 9.74 | | | | 12.13 | | | | 58,326 | | | | 0.95 | | | | 0.55 | | | | 1.73 | | | | 11 | |
| For the Year Ended December 31, 2009(D) |
| IB | | | 7.31 | | | | 0.18 | | | | 1.53 | | | | 1.71 | | | | (0.14 | ) | | | (0.03 | ) | | | (0.17 | ) | | | 8.85 | | | | 23.59 | | | | 48,568 | | | | 0.95 | | | | 0.55 | | | | 2.33 | | | | 8 | |
| From (commencement of operations) April 30, 2008 through December 31, 2008 |
| IB | | | 10.00 | | | | 0.19 | | | | (2.88 | ) | | | (2.69 | ) | | | – | | | | – | | | | – | | | | 7.31 | | | | (26.88 | )(E) | | | 26,312 | | | | 0.99 | (F) | | | 0.59 | (F) | | | 8.02 | (F) | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| American Funds Blue Chip Income and Growth HLS Fund |
| For the Year Ended December 31, 2012 |
| IB | | | 9.07 | | | | 0.15 | | | | 1.07 | | | | 1.22 | | | | (0.12 | ) | | | (0.06 | ) | | | (0.18 | ) | | | 10.11 | | | | 13.53 | | | | 39,920 | | | | 1.07 | | | | 0.57 | | | | 1.67 | | | | 23 | |
| For the Year Ended December 31, 2011 |
| IB | | | 9.18 | | | | 0.13 | | | | (0.24 | ) | | | (0.11 | ) | | | – | | | | – | | | | – | | | | 9.07 | | | | (1.19 | ) | | | 32,425 | | | | 1.07 | | | | 0.57 | | | | 1.44 | | | | 14 | |
| For the Year Ended December 31, 2010 |
| IB | | | 8.44 | | | | 0.12 | | | | 0.86 | | | | 0.98 | | | | (0.24 | ) | | | – | | | | (0.24 | ) | | | 9.18 | | | | 11.98 | | | | 34,030 | | | | 1.07 | | | | 0.57 | | | | 1.48 | | | | 11 | |
| For the Year Ended December 31, 2009(D) |
| IB | | | 6.74 | | | | 0.15 | | | | 1.68 | | | | 1.83 | | | | (0.09 | ) | | | (0.04 | ) | | | (0.13 | ) | | | 8.44 | | | | 27.46 | | | | 29,030 | | | | 1.07 | | | | 0.57 | | | | 2.06 | | | | 6 | |
| From (commencement of operations) April 30, 2008 through December 31, 2008 |
| IB | | | 10.00 | | | | 0.14 | | | | (3.40 | ) | | | (3.26 | ) | | | – | | | | – | | | | – | | | | 6.74 | | | | (32.64 | )(E) | | | 13,182 | | | | 1.17 | (F) | | | 0.67 | (F) | | | 6.79 | (F) | | | 3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| American Funds Bond HLS Fund |
| For the Year Ended December 31, 2012 |
| IB | | | 10.52 | | | | 0.23 | | | | 0.29 | | | | 0.52 | | | | (0.29 | ) | | | (0.23 | ) | | | (0.52 | ) | | | 10.52 | | | | 5.01 | | | | 199,008 | | | | 0.79 | | | | 0.54 | | | | 2.13 | | | | 15 | |
| For the Year Ended December 31, 2011 |
| IB | | | 10.21 | | | | 0.29 | | | | 0.30 | | | | 0.59 | | | | (0.28 | ) | | | – | | | | (0.28 | ) | | | 10.52 | | | | 5.84 | | | | 198,203 | | | | 0.79 | | | | 0.54 | | | | 2.57 | | | | 15 | |
| For the Year Ended December 31, 2010 |
| IB | | | 9.84 | | | | 0.26 | | | | 0.35 | | | | 0.61 | | | | (0.24 | ) | | | – | | | | (0.24 | ) | | | 10.21 | | | | 6.15 | | | | 206,360 | | | | 0.80 | | | | 0.55 | | | | 2.75 | | | | 13 | |
| For the Year Ended December 31, 2009(D) |
| IB | | | 8.98 | | | | 0.35 | | | | 0.74 | | | | 1.09 | | | | (0.23 | ) | | | – | | | | (0.23 | ) | | | 9.84 | | | | 12.23 | | | | 181,550 | | | | 0.78 | | | | 0.53 | | | | 3.75 | | | | 2 | |
| From (commencement of operations) April 30, 2008 through December 31, 2008 |
| IB | | | 10.00 | | | | 0.44 | | | | (1.46 | ) | | | (1.02 | ) | | | – | | | | – | | | | – | | | | 8.98 | | | | (10.21 | )(E) | | | 67,597 | | | | 0.80 | (F) | | | 0.55 | (F) | | | 16.32 | (F) | | | 5 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| American Funds Global Bond HLS Fund |
| For the Year Ended December 31, 2012 |
| IB | | | 11.02 | | | | 0.24 | | | | 0.38 | | | | 0.62 | | | | (0.31 | ) | | | (0.23 | ) | | | (0.54 | ) | | | 11.10 | | | | 5.83 | | | | 38,193 | | | | 1.07 | | | | 0.57 | | | | 1.69 | | | | 8 | |
| For the Year Ended December 31, 2011 |
| IB | | | 10.86 | | | | 0.23 | | | | 0.24 | | | | 0.47 | | | | (0.23 | ) | | | (0.08 | ) | | | (0.31 | ) | | | 11.02 | | | | 4.28 | | | | 44,352 | | | | 1.06 | | | | 0.56 | | | | 2.56 | | | | 16 | |
| For the Year Ended December 31, 2010 |
| IB | | | 10.47 | | | | 0.27 | | | | 0.24 | | | | 0.51 | | | | (0.11 | ) | | | (0.01 | ) | | | (0.12 | ) | | | 10.86 | | | | 4.85 | | | | 38,654 | | | | 1.07 | | | | 0.57 | | | | 2.49 | | | | 17 | |
| For the Year Ended December 31, 2009(D) |
| IB | | | 9.85 | | | | 0.13 | | | | 0.79 | | | | 0.92 | | | | (0.30 | ) | | | – | | | | (0.30 | ) | | | 10.47 | | | | 9.43 | | | | 38,533 | | | | 1.06 | | | | 0.56 | | | | 1.29 | | | | 5 | |
| From (commencement of operations) April 30, 2008 through December 31, 2008 |
| IB | | | 10.00 | | | | 0.42 | | | | (0.57 | ) | | | (0.15 | ) | | | – | | | | – | | | | – | | | | 9.85 | | | | (1.51 | )(E) | | | 22,386 | | | | 1.10 | (F) | | | 0.60 | (F) | | | 13.11 | (F) | | | 42 | |
| | | ─ Selected Per-Share Data(A) | | | ─ Ratios and Supplemental Data ─ | |
| Class | | Net Asset
Value at
Beginning
of Period | | | Net
Invest-
ment
Income
(Loss) | | | Net
Realized
and Un-
realized
Gain
(Loss) on
Invest-
ments | | | Total from
Investment
Operations | | | Dividends
from Net
Invest-
ment
Income | | | Distrib-
utions
from
Realized
Capital
Gains | | | Total
Distri-
butions | | | Net Asset
Value at
End of
Period | | | Total
Return(B) | | | Net Assets at
End of
Period | | | Ratio of
Expenses to
Average Net
Assets Before
Waivers(C) | | | Ratio of
Expenses to
Average
Net Assets
After
Waivers(C) | | | Ratio of Net
Investment
Income to
Average Net
Assets(C) | | | Portfolio
Turnover
Rate | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| American Funds Global Growth and Income HLS Fund |
| For the Year Ended December 31, 2012 |
| IB | | $ | 8.38 | | | $ | 0.23 | | | $ | 1.20 | | | $ | 1.43 | �� | | $ | (0.23 | ) | | $ | – | | | $ | (0.23 | ) | | $ | 9.58 | | | | 17.30 | % | | $ | 74,927 | | | | 1.10 | % | | | 0.55 | % | | | 2.05 | % | | | 5 | % |
| For the Year Ended December 31, 2011 |
| IB | | | 9.06 | | | | 0.22 | | | | (0.70 | ) | | | (0.48 | ) | | | (0.20 | ) | | | – | | | | (0.20 | ) | | | 8.38 | | | | (5.19 | ) | | | 78,639 | | | | 1.09 | | | | 0.54 | | | | 2.30 | | | | 5 | |
| For the Year Ended December 31, 2010 |
| IB | | | 8.30 | | | | 0.20 | | | | 0.72 | | | | 0.92 | | | | (0.16 | ) | | | – | | | | (0.16 | ) | | | 9.06 | | | | 11.41 | | | | 91,254 | | | | 1.10 | | | | 0.55 | | | | 2.25 | | | | 8 | |
| For the Year Ended December 31, 2009(D) |
| IB | | | 6.06 | | | | 0.16 | | | | 2.21 | | | | 2.37 | | | | (0.13 | ) | | | – | | | | (0.13 | ) | | | 8.30 | | | | 39.37 | | | | 88,762 | | | | 1.09 | | | | 0.54 | | | | 2.39 | | | | 3 | |
| From (commencement of operations) April 30, 2008 through December 31, 2008 |
| IB | | | 10.00 | | | | 0.17 | | | | (4.11 | ) | | | (3.94 | ) | | | – | | | | – | | | | – | | | | 6.06 | | | | (39.43 | )(E) | | | 44,065 | | | | 1.11 | (F) | | | 0.56 | (F) | | | 8.24 | (F) | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| American Funds Global Growth HLS Fund |
| For the Year Ended December 31, 2012 |
| IB | | | 8.74 | | | | 0.06 | | | | 1.86 | | | | 1.92 | | | | (0.10 | ) | | | (0.11 | ) | | | (0.21 | ) | | | 10.45 | | | | 22.19 | | | | 29,055 | | | | 1.33 | | | | 0.58 | | | | 0.48 | | | | 4 | |
| For the Year Ended December 31, 2011 |
| IB | | | 9.74 | | | | 0.10 | | | | (0.99 | ) | | | (0.89 | ) | | | (0.11 | ) | | | – | | | | (0.11 | ) | | | 8.74 | | | | (9.18 | ) | | | 29,319 | | | | 1.32 | | | | 0.57 | | | | 0.95 | | | | 11 | |
| For the Year Ended December 31, 2010 |
| IB | | | 8.83 | | | | 0.10 | | | | 0.89 | | | | 0.99 | | | | (0.08 | ) | | | – | | | | (0.08 | ) | | | 9.74 | | | | 11.41 | | | | 34,245 | | | | 1.32 | | | | 0.57 | | | | 1.17 | | | | 11 | |
| For the Year Ended December 31, 2009(D) |
| IB | | | 6.40 | | | | 0.09 | | | | 2.57 | | | | 2.66 | | | | (0.12 | ) | | | (0.11 | ) | | | (0.23 | ) | | | 8.83 | | | | 41.78 | | | | 30,457 | | | | 1.32 | | | | 0.57 | | | | 1.24 | | | | 12 | |
| From (commencement of operations) April 30, 2008 through December 31, 2008 |
| IB | | | 10.00 | | | | 0.15 | | | | (3.75 | ) | | | (3.60 | ) | | | – | | | | – | | | | – | | | | 6.40 | | | | (35.95 | )(E) | | | 15,490 | | | | 1.37 | (F) | | | 0.62 | (F) | | | 5.68 | (F) | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| American Funds Global Small Capitalization HLS Fund |
| For the Year Ended December 31, 2012 |
| IB | | | 7.83 | | | | 0.10 | | | | 1.23 | | | | 1.33 | | | | (0.10 | ) | | | (0.77 | ) | | | (0.87 | ) | | | 8.29 | | | | 17.85 | | | | 53,881 | | | | 1.11 | | | | 0.56 | | | | 0.99 | | | | 4 | |
| For the Year Ended December 31, 2011 |
| IB | | | 9.92 | | | | 0.10 | | | | (2.01 | ) | | | (1.91 | ) | | | (0.13 | ) | | | (0.05 | ) | | | (0.18 | ) | | | 7.83 | | | | (19.40 | ) | | | 55,658 | | | | 1.11 | | | | 0.56 | | | | 0.98 | | | | 11 | |
| For the Year Ended December 31, 2010 |
| IB | | | 8.13 | | | | 0.11 | | | | 1.68 | | | | 1.79 | | | | – | | | | – | | | | – | | | | 9.92 | | | | 22.06 | | | | 74,999 | | | | 1.12 | | | | 0.57 | | | | 1.35 | | | | 16 | |
| For the Year Ended December 31, 2009(D) |
| IB | | | 5.10 | | | | – | | | | 3.08 | | | | 3.08 | | | | – | | | | (0.05 | ) | | | (0.05 | ) | | | 8.13 | | | | 60.77 | | | | 61,519 | | | | 1.10 | | | | 0.55 | | | | 0.02 | | | | 10 | |
| From (commencement of operations) April 30, 2008 through December 31, 2008 |
| IB | | | 10.00 | | | | (0.01 | ) | | | (4.89 | ) | | | (4.90 | ) | | | – | | | | – | | | | – | | | | 5.10 | | | | (49.04 | )(E) | | | 19,807 | | | | 1.16 | (F) | | | 0.61 | (F) | | | (0.62 | )(F) | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| American Funds Growth HLS Fund |
| For the Year Ended December 31, 2012 |
| IB | | | 8.95 | | | | 0.05 | | | | 1.51 | | | | 1.56 | | | | (0.03 | ) | | | (0.03 | ) | | | (0.06 | ) | | | 10.45 | | | | 17.56 | | | | 333,889 | | | | 1.04 | | | | 0.54 | | | | 0.50 | | | | 4 | |
| For the Year Ended December 31, 2011 |
| IB | | | 9.38 | | | | 0.03 | | | | (0.46 | ) | | | (0.43 | ) | | | – | | | | – | | | | – | | | | 8.95 | | | | (4.57 | ) | | | 317,968 | | | | 1.04 | | | | 0.54 | | | | 0.33 | | | | 5 | |
| For the Year Ended December 31, 2010 |
| IB | | | 7.96 | | | | 0.04 | | | | 1.42 | | | | 1.46 | | | | (0.04 | ) | | | – | | | | (0.04 | ) | | | 9.38 | | | | 18.36 | | | | 356,162 | | | | 1.05 | | | | 0.55 | | | | 0.43 | | | | 7 | |
| For the Year Ended December 31, 2009(D) |
| IB | | | 5.81 | | | | 0.03 | | | | 2.22 | | | | 2.25 | | | | (0.03 | ) | | | (0.07 | ) | | | (0.10 | ) | | | 7.96 | | | | 39.02 | | | | 296,659 | | | | 1.03 | | | | 0.53 | | | | 0.47 | | | | 3 | |
| From (commencement of operations) April 30, 2008 through December 31, 2008 |
| IB | | | 10.00 | | | | 0.07 | | | | (4.18 | ) | | | (4.11 | ) | | | (0.08 | ) | | | – | | | | (0.08 | ) | | | 5.81 | | | | (41.18 | )(E) | | | 122,888 | | | | 1.03 | (F) | | | 0.53 | (F) | | | 3.39 | (F) | | | – | |
| Hartford Series Fund, Inc. |
| Financial Highlights – (continued) |
| | | ─ Selected Per-Share Data(A) ─ | | | ─ Ratios and Supplemental Data ─ | |
Class | | Net Asset
Value at
Beginning
of Period | | | Net
Invest-
ment
Income
(Loss) | | | Net
Realized
and Un-
realized
Gain
(Loss) on
Invest-
ments | | | Total from
Investment
Operations | | | Dividends
from Net
Invest- ment
Income | | | Distrib-
utions
from
Realized
Capital
Gains | | | Total
Distri-
butions | | | Net Asset
Value at
End of
Period | | | Total
Return(B) | | | Net Assets at
End of
Period | | | Ratio of
Expenses to
Average Net
Assets Before
Waivers(C) | | | Ratio of
Expenses to
Average
Net Assets
After
Waivers(C) | | | Ratio of Net
Investment
Income to
Average Net
Assets(C) | | | Portfolio
Turnover
Rate | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| American Funds Growth-Income HLS Fund |
| For the Year Ended December 31, 2012 |
| IB | | $ | 8.81 | | | $ | 0.13 | | | $ | 1.38 | | | $ | 1.51 | | | $ | (0.12 | ) | | $ | – | | | $ | (0.12 | ) | | $ | 10.20 | | | | 17.16 | % | | $ | 183,220 | | | | 0.99 | % | | | 0.54 | % | | | 1.29 | % | | | 9 | % |
| For the Year Ended December 31, 2011 |
| IB | | | 9.00 | | | | 0.12 | | | | (0.31 | ) | | | (0.19 | ) | | | – | | | | – | | | | – | | | | 8.81 | | | | (2.12 | ) | | | 170,059 | | | | 0.98 | | | | 0.53 | | | | 1.26 | | | | 5 | |
| For the Year Ended December 31, 2010 |
| IB | | | 8.20 | | | | 0.10 | | | | 0.81 | | | | 0.91 | | | | (0.11 | ) | | | – | | | | (0.11 | ) | | | 9.00 | | | | 11.11 | | | | 185,836 | | | | 0.99 | | | | 0.54 | | | | 1.19 | | | | 8 | |
| For the Year Ended December 31, 2009(D) |
| IB | | | 6.39 | | | | 0.11 | | | | 1.86 | | | | 1.97 | | | | (0.11 | ) | | | (0.05 | ) | | | (0.16 | ) | | | 8.20 | | | | 30.85 | | | | 168,690 | | | | 0.98 | | | | 0.53 | | | | 1.56 | | | | 1 | |
| From (commencement of operations) April 30, 2008 through December 31, 2008 |
| IB | | | 10.00 | | | | 0.13 | | | | (3.63 | ) | | | (3.50 | ) | | | (0.11 | ) | | | – | | | | (0.11 | ) | | | 6.39 | | | | (34.98 | )(E) | | | 74,039 | | | | 0.99 | (F) | | | 0.54 | (F) | | | 5.87 | (F) | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| American Funds International HLS Fund |
| For the Year Ended December 31, 2012 |
| IB | | | 7.54 | | | | 0.10 | | | | 1.22 | | | | 1.32 | | | | (0.13 | ) | | | – | | | | (0.13 | ) | | | 8.73 | | | | 17.58 | | | | 225,298 | | | | 1.14 | | | | 0.54 | | | | 1.15 | | | | 7 | |
| For the Year Ended December 31, 2011 |
| IB | | | 8.96 | | | | 0.13 | | | | (1.40 | ) | | | (1.27 | ) | | | (0.15 | ) | | | – | | | | (0.15 | ) | | | 7.54 | | | | (14.23 | ) | | | 208,399 | | | | 1.14 | | | | 0.54 | | | | 1.52 | | | | 9 | |
| For the Year Ended December 31, 2010 |
| IB | | | 8.50 | | | | 0.13 | | | | 0.44 | | | | 0.57 | | | | (0.08 | ) | | | (0.03 | ) | | | (0.11 | ) | | | 8.96 | | | | 6.92 | | | | 235,702 | | | | 1.16 | | | | 0.56 | | | | 1.78 | | | | 7 | |
| For the Year Ended December 31, 2009(D) |
| IB | | | 6.09 | | | | 0.11 | | | | 2.48 | | | | 2.59 | | | | (0.11 | ) | | | (0.07 | ) | | | (0.18 | ) | | | 8.50 | | | | 42.75 | | | | 197,258 | | | | 1.13 | | | | 0.53 | | | | 1.53 | | | | 7 | |
| From (commencement of operations) April 30, 2008 through December 31, 2008 |
| IB | | | 10.00 | | | | 0.16 | | | | (4.07 | ) | | | (3.91 | ) | | | – | | | | – | | | | – | | | | 6.09 | | | | (39.10 | )(E) | | | 78,825 | | | | 1.14 | (F) | | | 0.54 | (F) | | | 8.05 | (F) | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| American Funds New World HLS Fund |
| For the Year Ended December 31, 2012 |
| IB | | | 8.66 | | | | 0.07 | | | | 1.38 | | | | 1.45 | | | | (0.15 | ) | | | (0.50 | ) | | | (0.65 | ) | | | 9.46 | | | | 17.47 | | | | 51,697 | | | | 1.41 | | | | 0.56 | | | | 0.61 | | | | 8 | |
| For the Year Ended December 31, 2011 |
| IB | | | 10.24 | | | | 0.15 | | | | (1.60 | ) | | | (1.45 | ) | | | (0.13 | ) | | | – | | | | (0.13 | ) | | | 8.66 | | | | (14.23 | ) | | | 52,569 | | | | 1.41 | | | | 0.56 | | | | 1.33 | | | | 9 | |
| For the Year Ended December 31, 2010 |
| IB | | | 8.80 | | | | 0.11 | | | | 1.42 | | | | 1.53 | | | | (0.09 | ) | | | – | | | | (0.09 | ) | | | 10.24 | | | | 17.54 | | | | 72,257 | | | | 1.42 | | | | 0.57 | | | | 1.30 | | | | 12 | |
| For the Year Ended December 31, 2009(D) |
| IB | | | 6.00 | | | | 0.10 | | | | 2.84 | | | | 2.94 | | | | (0.08 | ) | | | (0.06 | ) | | | (0.14 | ) | | | 8.80 | | | | 49.14 | | | | 58,578 | | | | 1.40 | | | | 0.55 | | | | 1.44 | | | | 8 | |
| From (commencement of operations) April 30, 2008 through December 31, 2008 |
| IB | | | 10.00 | | | | 0.11 | | | | (4.11 | ) | | | (4.00 | ) | | | – | | | | – | | | | – | | | | 6.00 | | | | (39.97 | )(E) | | | 23,933 | | | | 1.44 | (F) | | | 0.59 | (F) | | | 5.06 | (F) | | | 1 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include 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 would lower the Fund's performance. |
| (C) | Ratios do not include expenses of the Underlying Funds. |
| (D) | Per share amounts have been calculated using average shares method. |
| (E) | Not annualized. |
| Report of Independent Registered Public Accounting Firm |
| The Board of Directors and Shareholders of |
| Hartford Series Fund, Inc. |
We have audited the accompanying statements of assets and liabilities, including the schedule of investments, of American Funds Asset Allocation HLS Fund, American Funds Blue Chip Income and Growth HLS Fund, American Funds Bond HLS Fund, American Funds Global Bond HLS Fund, American Funds Global Growth and Income HLS Fund, American Funds Global Growth HLS Fund, American Funds Global Small Capitalization HLS Fund, American Funds Growth HLS Fund, American Funds Growth-Income HLS Fund, American Funds International HLS Fund and American Funds New World HLS Fund (eleven of the thirty portfolios constituting the Hartford Series Fund, Inc. (the Funds)) as of December 31, 2012, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the transfer agent of the underlying funds or by other appropriate auditing procedures where replies were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the portfolios listed above (eleven of the thirty portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
| |  |
| Minneapolis, MN | |
| February 15, 2013 | |
| Hartford Series Fund, Inc. |
| Directors and Officers (Unaudited) |
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Funds and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Funds pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Funds. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Funds’ statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Funds pay to The Hartford a portion of the Chief Compliance Officer’s compensation, but do not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
| Hartford Series Fund, Inc. |
| Directors and Officers (Unaudited) – (continued) |
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010 (4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities and a record of how the Funds voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Qs. The Funds’ Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
| Hartford Series Fund, Inc. |
| Expense Example (Unaudited) |
Your Fund's Expenses
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on a Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Beginning Account
Value June 30,
2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30,
2012 through
December 31, 2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2
year | | | Days
in the
full
year | |
| American Funds Asset Allocation HLS Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class IB | | $ | 1,000.00 | | | $ | 1,007.50 | | | $ | 2.77 | | | $ | 1,000.00 | | | $ | 1,022.37 | | | $ | 2.79 | | | | 0.55 | % | | | 184 | | | | 366 | |
| American Funds Blue Chip Income and Growth HLS Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class IB | | $ | 1,000.00 | | | $ | 1,004.81 | | | $ | 2.89 | | | $ | 1,000.00 | | | $ | 1,022.25 | | | $ | 2.92 | | | | 0.57 | % | | | 184 | | | | 366 | |
| American Funds Bond HLS Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class IB | | $ | 1,000.00 | | | $ | 1,002.06 | | | $ | 2.71 | | | $ | 1,000.00 | | | $ | 1,022.43 | | | $ | 2.74 | | | | 0.54 | % | | | 184 | | | | 366 | |
| American Funds Global Bond HLS Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class IB | | $ | 1,000.00 | | | $ | 1,003.04 | | | $ | 2.85 | | | $ | 1,000.00 | | | $ | 1,022.29 | | | $ | 2.88 | | | | 0.57 | % | | | 184 | | | | 366 | |
| American Funds Global Growth and Income HLS Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class IB | | $ | 1,000.00 | | | $ | 1,011.10 | | | $ | 2.78 | | | $ | 1,000.00 | | | $ | 1,022.38 | | | $ | 2.79 | | | | 0.55 | % | | | 184 | | | | 366 | |
| American Funds Global Growth HLS Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class IB | | $ | 1,000.00 | | | $ | 1,012.34 | | | $ | 2.86 | | | $ | 1,000.00 | | | $ | 1,022.29 | | | $ | 2.88 | | | | 0.57 | % | | | 184 | | | | 366 | |
| American Funds Global Small Capitalization HLS Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class IB | | $ | 1,000.00 | | | $ | 1,011.09 | | | $ | 2.82 | | | $ | 1,000.00 | | | $ | 1,022.33 | | | $ | 2.84 | | | | 0.56 | % | | | 184 | | | | 366 | |
| American Funds Growth HLS Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class IB | | $ | 1,000.00 | | | $ | 1,008.82 | | | $ | 2.71 | | | $ | 1,000.00 | | | $ | 1,022.44 | | | $ | 2.73 | | | | 0.54 | % | | | 184 | | | | 366 | |
| American Funds Growth-Income HLS Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class IB | | $ | 1,000.00 | | | $ | 1,008.19 | | | $ | 2.73 | | | $ | 1,000.00 | | | $ | 1,022.42 | | | $ | 2.75 | | | | 0.54 | % | | | 184 | | | | 366 | |
| American Funds International HLS Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class IB | | $ | 1,000.00 | | | $ | 1,012.74 | | | $ | 2.75 | | | $ | 1,000.00 | | | $ | 1,022.40 | | | $ | 2.77 | | | | 0.54 | % | | | 184 | | | | 366 | |
| American Funds New World HLS Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class IB | | $ | 1,000.00 | | | $ | 1,012.36 | | | $ | 2.85 | | | $ | 1,000.00 | | | $ | 1,022.30 | | | $ | 2.87 | | | | 0.56 | % | | | 184 | | | | 366 | |
| Hartford Series Fund, Inc. |
| Approval of Investment Management Agreement (Unaudited) |
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory agreement. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for the Funds with HL Investment Advisors, LLC (“HL Advisors”) (the “Agreement”). Each Fund invests all of its assets directly in a corresponding portfolio of the American Funds Insurance Series (each a “Master Fund,” and collectively, the “Master Funds”) that is advised by Capital Research and Management Company (“CRMC”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from HL Advisors to questions posed to it on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreement at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Funds by HL Advisors and its affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreement.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreement with respect to each Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Funds’ contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Funds’ management fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the Agreement.
In determining to continue the Agreement for the Funds, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreement was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreement. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreement is provided below.
Nature, Extent, and Quality of Services Provided by HL Advisors
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Funds by HL Advisors. The Board considered, among other things, the terms of the Agreement and the range of services provided by HL Advisors. In this regard, the Board considered that because of the master-feeder structure, the portfolio management services provided by HL Advisors to each Fund are limited to selecting one of the Master Funds, investing a Fund’s assets in that Master Fund, and monitoring the Master Fund’s performance as an investment for the Fund. The Board also considered that certain administrative services, such as oversight of service providers, production of Fund registration statements and shareholder reports, and provision of information to the Board, are also provided by HL Advisors under the Agreement. The Board considered HL Advisors’ reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to each Fund. In addition, the Board considered the quality of HL Advisors’ communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning HL Advisors’ regulatory and compliance environment. In this regard, the Board requested and reviewed information on HL Advisors’ compliance policies and procedures, compliance history, and a report from the Funds’ Chief Compliance Officer on HL Advisors’ compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. The Board also noted HL Advisors’
support of the Funds’ compliance control structure, particularly the resources devoted by HL Advisors in support of the Funds’ obligations pursuant to Rule 38a-1 under the 1940 Act. The Board considered that HL Advisors or its affiliates are responsible for providing the Funds’ officers. In addition, the Board considered the nature and quality of the services provided to the Funds and their shareholders by HL Advisors’ affiliates. Further, the Board considered the possibility that at some point in the future, HL Advisors may recommend the withdrawal of one or more of the Funds from the master-feeder structure and the management of the Funds’ assets directly or through a sub-adviser.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Funds by HL Advisors.
Performance of the Funds
The Board considered the investment performance of the Funds. In this regard, the Board reviewed the performance of each Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of each Fund’s performance for these time periods. The Board considered information and materials provided to the Board by HL Advisors concerning Fund performance, as well as information from Lipper comparing the investment performance of each Fund to an appropriate benchmark and universe of peer funds. The Board noted that the performance of each Fund was within expectations in light of each Fund’s objective of providing access to the corresponding Master Fund.
The Board noted that the performance of each Fund is based on the performance of the Fund’s corresponding Master Fund. The Board noted that CRMC uses a system of multiple portfolio counselors in managing the Master Funds’ assets. Under this approach, the portfolio of a Master Fund is divided into segments managed by individual portfolio counselors who decide how their respective segment will be invested within the limits provided by a Master Fund’s investment objective, policies and restrictions and subject to the oversight of CRMC’s investment committee.
In light of all the considerations noted above, the Board concluded that while there could be no guarantee of future results, the overall performance of the Funds and their corresponding Master Funds was satisfactory.
Costs of the Services and Profitability of HL Advisors
The Board reviewed information regarding HL Advisors’ costs to provide administrative services and certain advisory services to the Funds and the profitability to it and its affiliates from managing the Funds. The Board considered that HL Advisors offers a contractual management fee waiver on each of the Funds for as long as each Fund remains invested in a Master Fund. Under the waiver, HL Advisors retains a net contractual management fee of 0.25% of each Fund’s average daily net assets in order to compensate it for the administrative services and certain advisory services that HL Advisors provides each Fund under the Agreement. The Board noted that the future profitability of each Fund to HL Advisors would depend on the growth of assets under management. The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the Agreement, noting the Consultant’s view that The Hartford’s process for calculating and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by HL Advisors and its affiliates from their relationships with the Funds would not be excessive.
Comparison of Fees and Expenses
The Board considered comparative information with respect to the management fees to be paid by each Fund to HL Advisors and the total expense ratios of each Fund. The Board noted that each Fund and its shareholders bears the fees and expenses of the Fund and the Master Fund in which it invests, with the result that each Fund’s expenses are generally higher than those of other mutual funds that invest directly in securities. The Board also considered that each Master Fund may have other shareholders, each of whom will pay their proportionate share of the Master Fund’s expenses.
| Hartford Series Fund, Inc. |
| Approval of Investment Management Agreement (Unaudited) — (continued) |
The Board reviewed written materials from Lipper providing comparative information about each Fund’s management fees and overall expense ratios relative to those of peer groups. While the Board recognized that comparisons between the Funds and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business model and cost structure of HL Advisors, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of each Fund’s management fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to each Fund’s management fees and total operating expenses.
Based on these considerations, the Board concluded that each Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding HL Advisors’ realization of economies of scale with respect to the Funds and whether the fee levels reflect these economies of scale for the benefit of the Funds’ shareholders. In this regard, the Board took note that the management fee schedule for each Master Fund includes breakpoints that are designed to reduce the management fee rates as the Master Fund’s average daily net assets increase. Therefore, shareholders of the Funds are expected to receive an indirect benefit from economies of scale at the Master Fund level since the amount of the advisory fee a Fund pays CRMC should decrease as the corresponding Master Fund’s average daily net assets increase. The Board also took note that even if the amount of the advisory fee paid by a Fund decreases as a result of economies of scale at the Master Fund level, the amount of the Fund’s advisory fee retained by HL Advisors as a percentage of the Fund’s average daily net assets will not increase. Therefore, HL Advisors will not benefit from any economies of scale realized at the Master Fund level. Instead, any economies of scale at the Master Fund level will be passed on to the shareholders of the relevant Fund. The Board also noted the Funds’ low asset levels.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Funds’ shareholders.
Other Benefits
The Board considered other benefits to HL Advisors and their affiliates from their relationships with the Funds, including the role of the Funds in supporting the variable life insurance and variable annuity products offered by The Hartford. The Board reviewed information noting that Hartford Life Insurance Company (“HLIC”), an affiliate of HL Advisors, receives fees from the Funds for providing fund accounting services, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Funds’ transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Funds, and the Board reviewed information on the profitability of the Funds’ transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Funds were fair and reasonable based on publicly available information.
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Funds, receives 12b-1 fees from the Funds. The Board also noted that certain affiliates of HL Advisors distribute shares of the Funds and receive compensation in that connection.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of each Fund and its shareholders for the Board to approve the Agreement for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory agreement. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreement for the Funds and approve a new investment management agreement for the Funds with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser (the “Post-Restructuring Adviser”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Funds. In order to implement the Restructuring, the Funds would terminate the existing Agreement and enter into a new investment management agreement with HFMC (the “New Agreement”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreement at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Funds by HL Advisors and its affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreement.
In determining to approve the New Agreement for the Funds, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the New Agreement was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreement.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Funds and the performance of investment management personnel to the Funds. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Funds prior to the Restructuring would continue to provide such services to the Funds, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreement would involve no changes to (i) the contractual terms of, including the management fees payable under, the Funds’ investment management agreement; (ii) the investment processes and strategies employed in the management of the Funds’ assets; (iii) the nature and level of services provided under the Funds’ investment management agreement; and (iv) the day-to-day management of the Funds and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Funds.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Funds.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Funds, the investment management arrangement for the Funds following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreement: (i) nature, extent and quality of services provided by HL Advisors; (ii) performance of the Funds; (iii) costs of the services and profitability of HL Advisors; (iv) comparative investment management fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors with respect to the Funds and
| Hartford Series Fund, Inc. |
| Approval of Investment Management Agreement (Unaudited) — (continued) |
whether the fee levels reflect these economies of scale for the benefit of the Funds’ shareholders. With respect to the other benefits to the Post-Restructuring Adviser and its affiliates from their relationships with the Funds, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting services from the Funds.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of each Fund and their shareholders for the Board to approve the New Agreement. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
| Hartford Series Fund, Inc. |
| Principal Risks (Unaudited) |
The principal risks of investing in the Funds are described below.
| American Funds Asset Allocation HLS Fund 1,3,6,7,8,12,13,14,16 | | American Funds Global Small Capitalization HLS Fund 4,6,11,12,13,14 |
| American Funds Blue Chip Income and Growth HLS Fund 6,7,12,13,14 | | American Funds Growth HLS Fund 6,12,13,14 |
| American Funds Bond HLS Fund 3,5,8,9,10,12,13,14,16 | | American Funds Growth-Income HLS Fund 6,7,12,13,14 |
| American Funds Global Bond HLS Fund 2,3,4,8,12,13,14,15,16 | | American Funds International HLS Fund 4,6,12,13,14 |
| American Funds Global Growth and Income HLS Fund 4,6,7,12,13,14 | | American Funds New World HLS Fund 3,4,6,8,11,12,13,14,16 |
| American Funds Global Growth HLS Fund 4,6,12,13,14 | | |
| 1 | Asset allocation: The fund's percentage allocations to equity securities, debt securities and money market instruments could cause the fund to underperform relative to relevant benchmarks and other funds with similar investment objectives. |
| 2 | Currency: The prices of, and the income generated by, most debt securities held by the fund may also be affected by changes in relative currency values. If the U.S. dollar appreciates against foreign currencies, the value in U.S. dollars of the fund's securities denominated in such currencies would generally fall and vice versa. U.S. dollar-denominated securities of foreign issuers may also be affected by changes in relative currency values. |
| 3 | Investing in bonds: Rising interest rates will generally cause the prices of bonds and other debt securities to fall. Longer maturity debt securities may be subject to greater price fluctuations than shorter maturity debt securities. In addition, falling interest rates may cause an issuer to redeem, call or refinance a security before its stated maturity, which may result in the fund having to reinvest the proceeds in lower yielding securities. |
Bonds and other debt securities are subject to credit risk, which is the possibility that the credit strength of an issuer will weaken and/or an issuer of a debt security will fail to make timely payments of principal or interest and the security will go into default.
| 4 | Investing in emerging and developing countries: Investing in countries with developing economies and/or markets may involve risks in addition to and greater than those generally associated with investing in developed countries. For instance, emerging and developing countries may have less developed legal and accounting systems than those in developed countries. The governments of these countries may be more unstable and more likely to impose capital controls, nationalize a company or industry, place restrictions on foreign ownership and on withdrawing sale proceeds of securities from the country, and/or impose punitive taxes that could adversely affect the prices of securities. In addition, the economies of these countries may be dependent on relatively few industries that are more susceptible to local and global changes. Securities markets in these countries can also be relatively small and have substantially lower trading volumes. As a result, securities issued in these countries may be more volatile and less liquid, and may be more difficult to value, than securities issued in countries with more developed economies or markets. Additionally, because these markets may not be as mature, there may be increased settlement risks for transactions in local securities. |
| 5 | Investing in future delivery contracts: Contracts for future delivery of mortgage-related securities, such as to be announced contracts and mortgage dollar rolls, involve the fund selling mortgage-related securities and simultaneously contracting to repurchase similar securities for delivery at a future date at a predetermined price. This can increase the fund's market exposure, and the market price of the securities the fund contracts to repurchase could drop below their purchase price. While the fund can preserve capital and generate gains through the use of such contracts by, for example, realizing the difference between the sale price and the future purchase price, the income generated by the fund may be reduced by engaging in such transactions. In addition, these transactions may increase the turnover rate of the fund. |
| 6 | Investing in growth-oriented stocks: Growth-oriented stocks may involve larger price swings and greater potential for loss than other types of investments. |
| 7 | Investing in income-oriented stocks: Income provided by the fund may be reduced by changes in the dividend policies of, and the capital resources available at, the companies in which the fund invests. |
| Hartford Series Fund, Inc. and Hartford HLS Series Fund II, Inc. |
| Principal Risks (Unaudited) — (continued) |
| 8 | Investing in lower rated bonds: Lower rated bonds and other lower rated debt securities generally have higher rates of interest and involve greater risk of default or price declines due to changes in the issuer’s creditworthiness than those of higher quality debt securities. The market prices of these securities may fluctuate more than the prices of higher quality debt securities and may decline significantly in periods of general economic difficulty. These risks may be increased with respect to investments in junk bonds. |
| 9 | Investing in mortgage-related securities: Mortgage-related securities are subject to prepayment risk, as well as the risks associated with investing in debt securities in general. If interest rates fall and the loans underlying these securities are prepaid faster than expected, the fund may have to reinvest the prepaid principal in lower yielding securities, thus reducing the fund's income. Conversely, if interest rates increase and the loans underlying the securities are prepaid more slowly than expected, the expected duration of the securities may be extended. This reduces the potential for the fund to invest the principal in higher yielding securities. |
| 10 | Investing in securities backed by the U.S. Government: Securities backed by the U.S. Treasury or the full faith and credit of the U.S. government are guaranteed only as to the timely payment of interest and principal when held to maturity. Accordingly, the current market values for these securities will fluctuate with changes in interest rates. Securities issued by government-sponsored entities and federal agencies and instrumentalities that are not backed by the full faith and credit of the U.S. government are neither issued nor guaranteed by the U.S. government. |
| 11 | Investing in small companies: Investing in smaller companies may pose additional risks. For example, it is often more difficult to value or dispose of small company stocks and more difficult to obtain information about smaller companies than about larger companies. In addition, the prices of these stocks may be more volatile than stocks of larger, more established companies. |
| 12 | Investing outside the United States: Securities of issuers domiciled outside the United States, or with significant operations outside the United States, may lose value because of political, social, economic or market developments or instability in the countries or regions in which the issuer operates. These securities may also lose value due to changes in foreign currency exchange rates against the U.S. dollar and/or currencies of other countries. Securities markets in certain countries may be more volatile and/or less liquid than those in the United States. Investments outside the United States may also be subject to different settlement and accounting practices and different regulatory, legal and reporting standards, and may be more difficult to value, than those in the United States. |
| 13 | Management: The investment adviser to the master fund actively manages the fund's investments. Consequently, the fund is subject to the risk that the methods and analyses employed by the investment adviser in this process may not produce the desired results. This could cause the fund to lose value or its investment results to lag relevant benchmarks or other funds with similar objectives. |
| 14 | Market Conditions: The prices of, and income generated by, the common stocks, bonds, and other securities held by the fund may decline due to market conditions and other factors, including those directly involving the issuers of securities held by the fund. |
| 15 | Non-diversification: As a non-diversified fund, the fund has the ability to invest a larger percentage of its assets in the securities of a smaller number of issuers than a diversified fund. Although the fund does not intend to limit its investments to the securities of a small number of issuers, if it were to do so, poor performance by a single large holding would adversely impact the fund's investment results more than if the fund were invested in a larger number of issuers. |
| 16 | Thinly traded securities: There may be little trading in the secondary market for particular bonds or other securities, which may make them more difficult to value, acquire or sell. |
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
AFHLSAR-12 2-13 113558 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 |  |
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford Balanced HLS Fund
(formerly Hartford Advisers HLS Fund)
Table of Contents
This report is prepared for the general information of contract owners and qualified retirement plan participants. It is not an offer of contracts or of qualified retirement plans. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent information including the applicable sales, administrative and other charges.
The views expressed in the Fund’s Manager Discussion under ‘‘Why did the Fund perform this way?’’ and ‘‘What is the outlook?’’ are views of the Fund’s sub-adviser and portfolio management team through the end of the period and are subject to change based on market and other conditions.
| Hartford Balanced HLS Fund inception 03/31/1983 |
| (formerly Hartford Advisers HLS Fund) |
| (sub-advised by Wellington Management Company, LLP) |
| |
| Investment objective – Seeks long-term total return. |
Performance Overview 12/31/02 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IA. Growth results in classes other than Class IA will vary from what is seen above due to differences in the expenses charged to those share classes.
| Average Annual Total Returns (as of 12/31/12) |
| | | 1 Year | | | 5 Year | | | 10 Year | |
| Balanced IA | | | 12.02% | | | | 2.65% | | | | 5.90% | |
| Balanced IB | | | 11.74% | | | | 2.39% | | | | 5.63% | |
| Balanced HLS Fund Blended Index | | | 11.31% | | | | 3.58% | | | | 6.32% | |
| Barclays Government/Credit Bond Index | | | 4.82% | | | | 6.06% | | | | 5.25% | |
| S&P 500 Index | | | 15.99% | | | | 1.66% | | | | 7.09% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund’s net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
Balanced HLS Fund Blended Index is a blended index comprised of the following indices: S&P 500 (60%), Barclays Government/Credit Bond (35%) and 90-day Treasury Bill (5%).
Barclays Government/Credit Bond Index (formerly known as Barclays Capital Government/Credit Bond Index) is an 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.
S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.
You cannot invest directly in an index.
As of the Fund’s current prospectus dated May 1, 2012, the net total annual operating expense ratios for Class IA and Class IB shares were 0.64% and 0.89%, respectively, and the gross total annual operating expense ratios for Class IA and Class IB shares were 0.64% and 0.89%, respectively. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect until April 30, 2013, and automatically renew for one-year terms unless terminated by the Fund’s Investment Advisor (Hartford Funds Management Company, LLC). For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Manager Discussion |
| December 31, 2012 (Unaudited) |
| Portfolio Managers | |
| John C. Keogh | Karen H. Grimes, CFA* |
| Senior Vice President and Fixed Income Portfolio Manager | Senior Vice President and Equity Portfolio Manager |
| * Appointed as a Portfolio Manager for the Fund as of April 30, 2012. As of the same date, Steven T. Irons and Peter I. Higgins no longer serve as portfolio managers for the Fund. |
How did the Fund perform?
The Class IA shares of the Hartford Balanced HLS Fund returned 12.02% for the twelve-month period ended December 31, 2012, outperforming its blended benchmark, 60% S&P 500 Index, 35% Barclays Government/Credit Bond Index, and 5% Treasury Bills, which returned 11.31% for the same period. The Fund underperformed the 13.50% return of the average fund in the Lipper VP-UF Mixed-Asset Target Allocation Growth Funds peer group, a group of funds that hold between 60%-80% in equity securities, with the remainder invested in bonds, cash, and cash equivalents.
Why did the Fund perform this way?
U.S. equities moved higher in the period, in part due to a strengthening housing market and central bank interventions around the globe. Although Europe continued to grapple with economic and structural challenges, investors’ risk appetites surged after European Central Bank (ECB) President Mario Draghi revealed a comprehensive plan to support struggling sovereigns, including direct purchases of government bonds in the open market. Additionally, the U.S. Federal Reserve’s (Fed) announcement of a third round of quantitative easing (QE3) was well received by the market, boosting stock prices. Despite concerns about the looming U.S. fiscal cliff (i.e. expiration of certain tax rate cuts combined with forced spending cuts), tepid corporate revenue results, and economic malaise in Europe, investors bid up risk assets amid further signs of recovery in China and signs that the U.S. housing market may bolster the U.S. economy for the first time in seven years. Risk sentiment also ticked up on continued hopes that the ECB’s bond-buying plan will succeed, essentially reducing the tail risks in Europe.
The year was also marked by important political events in the U.S. including the elections in November and the fiscal cliff negotiations, which kept markets on edge particularly in December, as it threatened to push the economy back into recession. On January 1, 2013, the House of Representatives passed legislation averting tax increases for most U.S. taxpayers while delaying spending cuts.
The S&P 500 Index returned 15.99% during the period. All ten equity sectors posted positive returns with Financials (+29%), Consumer Discretionary (+24%) and Telecommunication Services (+19%) posting the largest gains while Utilities (+1%) lagged the overall index.
The Fed remained extremely accommodative throughout the year given the fragile state of the global economic recovery. The U.S. central bank announced plans to purchase additional mortgage-backed securities (MBS) and Treasury securities, significantly expanding the size of its balance sheet. Additionally, the Fed adopted inflation and unemployment-rate thresholds in place of its mid-2015 forward rate guidance, noting that it would keep rates unchanged for at least as long as unemployment remains above 6.5% and inflation projections stay near the Fed’s 2% target.
U.S. economic releases generally showed modest improvement throughout the period, highlighted by a recovery in the housing market. Home prices showed their first year-over-year gain (excluding short-term blips caused by homebuyer tax credits) since late 2006, aided by increased home sales and reduced inventory. Meanwhile, the unemployment rate declined by 0.70 percentage points to 7.8% as the labor market continued its slow recovery. Manufacturing activity slowed over the year, service sector growth picked up some, and consumer confidence edged up amid a healing jobs market.
The bond market, as measured by the Barclays Government/Credit Bond Index, returned 4.82% during the period. Treasury yields were mixed over the period as the 30-year yield rose 6 basis points, while 5-year and 10-year yields fell 11 and 12 basis points, respectively. All of the major fixed income spread sectors posted strong absolute gains and outperformed Treasuries on a duration-adjusted basis.
The Fund has three primary levers to generate investment performance: equity investments, fixed income investments, and asset allocation among stocks, bonds, and cash. During the period, the equity portion of the Fund underperformed its benchmark, while the fixed income portion of the Fund outperformed its benchmark. Asset allocation contributed positively to benchmark-relative results as the Fund was
Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund)
| Manager Discussion – (continued) |
| December 31, 2012 (Unaudited) |
generally overweight to equities and underweight to fixed income and cash relative to the benchmark.
Equity underperformance versus the benchmark was driven by security selection, which was weakest in Information Technology, Financials, and Consumer Staples. This was partially offset by stronger selection in Consumer Discretionary. Sector positioning, which is a result of bottom-up security selection (i.e. stock by stock fundamental research), contributed positively to relative performance due to an overweight (i.e. the Fund’s sector position was greater than the benchmark position) to Financials and underweight exposure to Utilities.
Stocks that detracted the most from benchmark-relative returns in the equity portion of the Fund during the period were Western Union (Information Technology), Bank of America (Financials), and Hewlett-Packard (Information Technology). Shares of Western Union plunged during the period after the company reported weaker-than-expected revenue and cut its full-year profit forecast for 2013. Bank of America, a U.S.-based multinational bank and brokerage company, saw shares rally amid signs of upturn in the U.S. residential housing market. Not owning the benchmark component stock hurt relative performance during the period. Shares of Hewlett-Packard fell when the company guided expectations toward the lower end of the earnings estimates range amid declining revenues, and slid further when they announced an $8.5 billion write-off for their Autonomy unit (a software firm they purchased a year earlier). Intel (Information Technology) also detracted from the Fund’s returns on an absolute basis (i.e. total return).
Top contributors to relative performance of the equity portion of the Fund during the period were Lowe’s Companies (Consumer Discretionary), eBay Inc. (Information Technology), and Allstar Co, LLC (Consumer Discretionary). Lowe’s, a home improvement retailer, continued to benefit from a solid recovery in the U.S. housing market. Hurricane Sandy also caused investors to bid up the company’s share price on the belief that the rebuilding process for the U.S. east coast should boost materials purchases by individuals and companies. Shares of eBay, a U.S.-based global provider of online marketplaces and payment solutions, rose after the company reported better-than-expected first quarter results due to strong growth in its marketplace segment and higher transaction margins in the payments segment. Allstar Co, LLC operates a chain of sporting good stores in the south and southwest United States. This is a private placement investment; the company has executed its plan well, resulting in increased gross margins and incrementally positive sales compared to prior periods. Apple (Information Technology), Comcast (Consumer Discretionary), and JPMorgan (Financials) also contributed positively to the Fund’s returns on an absolute basis.
The fixed income portion of the Fund outperformed its benchmark during the period. Security selection within the investment grade corporate bond sector, primarily an overweight to Financials, was the main driver of the outperformance. Our duration and yield curve positioning was modestly additive to relative performance. The fund’s allocation to agency mortgage back securities (MBS) was also positive for relative performance. The fund held an allocation to the agency MBS sector based on attractive valuations. Agency MBS performed well in 2012 on the heels of the Fed’s third round of quantitative easing. During the period Treasury futures were used to manage the Fund’s duration and yield curve positioning. In isolation, the derivative instruments used marginally contributed to absolute performance during the period.
What is the outlook?
In the equity portion of the Fund, we expect global economic growth to continue, but at a slow rate and with varying degrees of recovery by region. In Europe, we believe a more favorable policy environment should give the Euro Area economy a lift in early 2013, after experiencing a pronounced economic decline in the second half of 2012. China’s economy continues to slow but recent positive economic data points have alleviated many investors’ fears of a hard landing, such as increasing manufacturing activity. While we still grapple with whether these are short-term or longer-lived growth activities, the Chinese have shown early signs that they will stimulate their economy. The U.S. has been better positioned than many other economies, partly because its deleveraging process is more advanced and partly in response to a more aggressive policy environment. The U.S. household balance sheet has also received a welcome windfall gain from recovering housing and equity prices this year. However, many risks still remain including the lingering issues around the well publicized “fiscal cliff”. A last minute deal averted a full dive off the fiscal cliff on January 1; however, the temporary payroll tax cut of the past two years was allowed to expire, which will raise taxes 2% on most Americans. We believe that housing and employment should continue to improve, and corporate earnings should also enjoy moderate growth during 2013. It appears that interest rates are slowly creeping higher, which in our view is a sign that the economy is improving. We believe that the U.S. will remain in a slow growth environment. Continued accommodative Fed policy (QE3) and an improving housing market should help us to avoid a recession.
At the end of the period, our largest overweights relative to the benchmark were in the Health Care and Information
Technology sectors. Our largest underweights were Consumer Staples and Telecommunication Services.
Within the fixed income portion of the Fund, at the end of the period we are tactically positioned with a short duration posture while we are maintaining our curve flattening bias. We continue to be positioned with an underweight to the Government sector, as we believe that there are more compelling opportunities in other sectors. We believe that corporate fundamentals remain strong, financial companies have de-leveraged significantly, and that communications issuers have solid balance sheets. We maintained our overweight posture to the credit sector at the end of the period, with a focus on financials and taxable municipals. We also maintained our modest allocation to agency MBS.
The equity and fixed income managers will continue to work collaboratively to make decisions regarding portfolio weights in stocks, bonds, and cash. As of December 31, 2012, the Fund’s equity exposure was at 69% compared to 60% in its benchmark and at the upper end of the Fund’s 50-70% range.
| Diversification by Industry |
| as of December 31, 2012 |
| Industry (Sector) | | Percentage of
Net Assets | |
| Equity Securities | | | | |
| Automobiles and Components (Consumer Discretionary) | | | 0.8 | % |
| Banks (Financials) | | | 3.5 | |
| Capital Goods (Industrials) | | | 5.2 | |
| Consumer Durables and Apparel (Consumer Discretionary) | | | 0.6 | |
| Diversified Financials (Financials) | | | 6.0 | |
| Energy (Energy) | | | 7.5 | |
| Food and Staples Retailing (Consumer Staples) | | | 0.9 | |
| Food, Beverage and Tobacco (Consumer Staples) | | | 3.8 | |
| Health Care Equipment and Services (Health Care) | | | 2.5 | |
| Insurance (Financials) | | | 2.1 | |
| Materials (Materials) | | | 2.6 | |
| Media (Consumer Discretionary) | | | 3.1 | |
| Pharmaceuticals, Biotechnology and Life Sciences (Health Care) | | | 8.4 | |
| Retailing (Consumer Discretionary) | | | 4.2 | |
| Semiconductors and Semiconductor Equipment (Information Technology) | | | 3.0 | |
| Software and Services (Information Technology) | | | 5.2 | |
| Technology Hardware and Equipment (Information Technology) | | | 6.8 | |
| Telecommunication Services (Services) | | | 0.7 | |
| Transportation (Industrials) | | | 0.7 | |
| Utilities (Utilities) | | | 1.1 | |
| Total | | | 68.7 | % |
| | | | | |
| Fixed Income Securities | | | | |
| Air Transportation (Transportation) | | | 0.3 | % |
| Arts, Entertainment and Recreation (Services) | | | 0.9 | |
| Beverage and Tobacco Product Manufacturing (Consumer Staples) | | | 0.4 | |
| Chemical Manufacturing (Basic Materials) | | | 0.0 | |
| Computer and Electronic Product Manufacturing (Technology) | | | 0.1 | |
| Couriers and Messengers (Services) | | | 0.0 | |
| Finance and Insurance (Finance) | | | 6.0 | |
| Food Manufacturing (Consumer Staples) | | | 0.5 | |
| General Obligations (General Obligations) | | | 0.4 | |
| Health Care and Social Assistance (Health Care) | | | 0.2 | |
| Health Care/Services (Health Care/Services) | | | 0.1 | |
| Higher Education (Univ., Dorms, etc.) (Higher Education (Univ., Dorms, etc.)) | | | 0.1 | |
| Information (Technology) | | | 0.4 | |
| Miscellaneous Manufacturing (Capital Goods) | | | 0.0 | |
| Motor Vehicle and Parts Manufacturing (Consumer Cyclical) | | | 0.2 | |
| Petroleum and Coal Products Manufacturing (Energy) | | | 0.6 | |
| Pipeline Transportation (Utilities) | | | 0.2 | |
| Real Estate, Rental and Leasing (Finance) | | | 0.2 | |
| Refunded (Refunded) | | | 0.1 | |
| Retail Trade (Consumer Cyclical) | | | 0.2 | |
| Soap, Cleaning Compound and Toilet Manufacturing (Consumer Staples) | | | 0.4 | |
| Tax Allocation (Tax Allocation) | | | 0.1 | |
| Transportation (Transportation) | | | 0.5 | |
| Utilities (Utilities) | | | 0.7 | |
| Total | | | 12.6 | % |
| U.S. Government Agencies | | | 0.9 | |
| U.S. Government Securities | | | 16.3 | |
| Short-Term Investments | | | 1.3 | |
| Other Assets and Liabilities | | | 0.2 | |
| Total | | | 100.0 | % |
| Distribution by Credit Quality |
| as of December 31, 2012 |
| Credit Rating * | | Percentage of
Net Assets | |
| Aaa / AAA | | | 0.3 | % |
| Aa / AA | | | 2.0 | |
| A | | | 4.5 | |
| Baa / BBB | | | 5.0 | |
| Ba / BB | | | 0.2 | |
| Unrated | | | 0.6 | |
| U.S. Government Agencies and Securities | | | 17.2 | |
| Non Debt Securities and Other Short-Term Instruments | | | 70.0 | |
| Other Assets & Liabilities | | | 0.2 | |
| Total | | | 100.0 | % |
| * | Does not apply to the Fund itself. Based upon Moody’s and S&P long-term credit ratings for the Fund’s holdings as of the date noted. If Moody's and S&P assign different ratings to a holding, the lower rating is used. "Unrated" includes fixed-income securities (other than cash-like short-term instruments and U.S. Government securities) for which Moody’s and S&P have not issued long-term credit ratings. |
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | | Market Value ╪ | |
| COMMON STOCKS - 68.7% |
| | | | | Automobiles and Components - 0.8% | | | | |
| | 1,811 | | | Ford Motor Co. | | $ | 23,454 | |
| | | | | | | | | |
| | | | | Banks - 3.5% | | | | |
| | 611 | | | BB&T Corp. | | | 17,791 | |
| | 576 | | | PNC Financial Services Group, Inc. | | | 33,578 | |
| | 1,757 | | | Wells Fargo & Co. | | | 60,048 | |
| | | | | | | | 111,417 | |
| | | | | Capital Goods - 5.2% | | | | |
| | 416 | | | 3M Co. | | | 38,641 | |
| | 328 | | | Boeing Co. | | | 24,692 | |
| | 538 | | | Ingersoll-Rand plc | | | 25,791 | |
| | 654 | | | PACCAR, Inc. | | | 29,586 | |
| | 339 | | | Stanley Black & Decker, Inc. | | | 25,097 | |
| | 261 | | | United Technologies Corp. | | | 21,421 | |
| | | | | | | | 165,228 | |
| | | | | Consumer Durables and Apparel - 0.6% | | | | |
| | 185 | | | Coach, Inc. | | | 10,280 | |
| | 264 | | | Mattel, Inc. | | | 9,668 | |
| | | | | | | | 19,948 | |
| | | | | Diversified Financials - 6.0% | | | | |
| | 207 | | | Ameriprise Financial, Inc. | | | 12,973 | |
| | 130 | | | BlackRock, Inc. | | | 26,779 | |
| | 947 | | | Citigroup, Inc. | | | 37,449 | |
| | 173 | | | Goldman Sachs Group, Inc. | | | 22,020 | |
| | 939 | | | Invesco Ltd. | | | 24,487 | |
| | 1,512 | | | JP Morgan Chase & Co. | | | 66,478 | |
| | | | | | | | 190,186 | |
| | | | | Energy - 7.5% | | | | |
| | 380 | | | Anadarko Petroleum Corp. | | | 28,216 | |
| | 488 | | | BP plc ADR | | | 20,320 | |
| | 312 | | | Chevron Corp. | | | 33,710 | |
| | 646 | | | Exxon Mobil Corp. | | | 55,930 | |
| | 607 | | | Halliburton Co. | | | 21,041 | |
| | 312 | | | Noble Corp. | | | 10,880 | |
| | 308 | | | Occidental Petroleum Corp. | | | 23,571 | |
| | 393 | | | Southwestern Energy Co. ● | | | 13,141 | |
| | 1,166 | | | Statoilhydro ASA ADR | | | 29,188 | |
| | | | | | | | 235,997 | |
| | | | | Food and Staples Retailing - 0.9% | | | | |
| | 605 | | | CVS Caremark Corp. | | | 29,273 | |
| | | | | | | | | |
| | | | | Food, Beverage and Tobacco - 3.8% | | | | |
| | 799 | | | General Mills, Inc. | | | 32,282 | |
| | 208 | | | Kraft Foods Group, Inc. ● | | | 9,477 | |
| | 446 | | | PepsiCo, Inc. | | | 30,498 | |
| | 262 | | | Philip Morris International, Inc. | | | 21,945 | |
| | 686 | | | Unilever N.V. NY Shares ADR | | | 26,267 | |
| | | | | | | | 120,469 | |
| | | | | Health Care Equipment and Services - 2.5% | | | | |
| | 364 | | | Baxter International, Inc. | | | 24,232 | |
| | 480 | | | Covidien plc | | | 27,713 | |
| | 501 | | | UnitedHealth Group, Inc. | | | 27,186 | |
| | | | | | | | 79,131 | |
| | | | | Insurance - 2.1% | | | | |
| | 665 | | | American International Group, Inc. ● | | | 23,475 | |
| | 923 | | | Marsh & McLennan Cos., Inc. | | | 31,800 | |
| | 596 | | | Unum Group | | | 12,413 | |
| | | | | | | | 67,688 | |
| | | | | Materials - 2.6% | | | | |
| | 679 | | | Dow Chemical Co. | | | 21,931 | |
| | 557 | | | International Paper Co. | | | 22,181 | |
| | 376 | | | Mosaic Co. | | | 21,289 | |
| | 346 | | | Nucor Corp. | | | 14,959 | |
| | | | | | | | 80,360 | |
| | | | | Media - 3.1% | | | | |
| | 324 | | | CBS Corp. Class B | | | 12,335 | |
| | 976 | | | Comcast Corp. Class A | | | 36,464 | |
| | 638 | | | Thomson Reuters Corp. | | | 18,529 | |
| | 609 | | | Walt Disney Co. | | | 30,314 | |
| | | | | | | | 97,642 | |
| | | | | Pharmaceuticals, Biotechnology and Life Sciences - 8.4% | | | | |
| | 520 | | | Agilent Technologies, Inc. | | | 21,309 | |
| | 310 | | | Amgen, Inc. | | | 26,774 | |
| | 307 | | | Celgene Corp. ● | | | 24,173 | |
| | 1,158 | | | Daiichi Sankyo Co., Ltd. | | | 17,774 | |
| | 159 | | | Johnson & Johnson | | | 11,132 | |
| | 1,235 | | | Merck & Co., Inc. | | | 50,549 | �� |
| | 1,550 | | | Pfizer, Inc. | | | 38,878 | |
| | 155 | | | Roche Holding AG | | | 31,359 | |
| | 407 | | | UCB S.A. | | | 23,290 | |
| | 467 | | | Vertex Pharmaceuticals, Inc. ● | | | 19,590 | |
| | | | | | | | 264,828 | |
| | | | | Retailing - 4.2% | | | | |
| | 11,702 | | | Allstar LLC ⌂† | | | 16,502 | |
| | 56 | | | AutoZone, Inc. ● | | | 19,742 | |
| | 11,241 | | | Buck Holdings L.P. ⌂●† | | | 8,040 | |
| | 420 | | | Kohl's Corp. | | | 18,062 | |
| | 1,437 | | | Lowe's Co., Inc. | | | 51,059 | |
| | 352 | | | Nordstrom, Inc. | | | 18,837 | |
| | | | | | | | 132,242 | |
| | | | | Semiconductors and Semiconductor Equipment - 3.0% | | | | |
| | 653 | | | Analog Devices, Inc. | | | 27,479 | |
| | 1,079 | | | Intel Corp. | | | 22,264 | |
| | 982 | | | Maxim Integrated Products, Inc. | | | 28,884 | |
| | 454 | | | Xilinx, Inc. | | | 16,289 | |
| | | | | | | | 94,916 | |
| | | | | Software and Services - 5.2% | | | | |
| | 382 | | | Accenture plc | | | 25,429 | |
| | 449 | | | Automatic Data Processing, Inc. | | | 25,612 | |
| | 543 | | | eBay, Inc. ● | | | 27,707 | |
| | 62 | | | Google, Inc. ● | | | 43,676 | |
| | 1,023 | | | Microsoft Corp. | | | 27,355 | |
| | 968 | | | Western Union Co. | | | 13,177 | |
| | | | | | | | 162,956 | |
| | | | | Technology Hardware and Equipment - 6.8% | | | | |
| | 153 | | | Apple, Inc. | | | 81,495 | |
| | 2,973 | | | Cisco Systems, Inc. | | | 58,412 | |
| | 1,050 | | | EMC Corp. ● | | | 26,563 | |
| | 647 | | | Hewlett-Packard Co. | | | 9,223 | |
| | 242 | | | NetApp, Inc. ● | | | 8,119 | |
| | 518 | | | Qualcomm, Inc. | | | 32,096 | |
| | | | | | | | 215,908 | |
| | | | | Telecommunication Services - 0.7% | | | | |
| | 904 | | | Vodafone Group plc ADR | | | 22,760 | |
| | | | | | | | | |
| | | | | Transportation - 0.7% | | | | |
| | 221 | | | FedEx Corp. | | | 20,296 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | | Market Value ╪ | |
| COMMON STOCKS - 68.7% - (continued) |
| | | | | Utilities - 1.1% | | | | |
| | 514 | | | NextEra Energy, Inc. | | $ | 35,565 | |
| | | | | | | | | |
| | | | | Total common stocks | | | | |
| | | | | (cost $1,832,825) | | $ | 2,170,264 | |
| | | | | | | | | |
ASSET & COMMERCIAL MORTGAGE BACKED SECURITIES - 0.2% |
| | | | | Finance and Insurance - 0.2% | | | | |
| | | | | Ally Master Owner Trust | | | | |
| $ | 4,885 | | | 1.54%, 09/15/2019 | | $ | 4,903 | |
| | | | | CS First Boston Mortgage Securities Corp. | | | | |
| | 259 | | | 3.94%, 05/15/2038 | | | 260 | |
| | | | | Goldman Sachs Mortgage Securities Corp. II | | | | |
| | 110 | | | 2.79%, 03/06/2020 ■Δ | | | 110 | |
| | | | | Marriott Vacation Club Owner Trust | | | | |
| | 283 | | | 5.36%, 10/20/2028 ■ | | | 282 | |
| | | | | New Century Home Equity Loan Trust | | | | |
| | 8 | | | 0.50%, 03/25/2035 Δ | | | 8 | |
| | | | | Prudential Commercial Mortgage Trust | | | | |
| | 244 | | | 4.49%, 02/11/2036 | | | 244 | |
| | | | | | | | 5,807 | |
| | | | | | | | | |
| | | | | Total asset & commercial mortgage backed securities | | | | |
| | | | | (cost $5,786) | | $ | 5,807 | |
| | | | | | | | | |
CORPORATE BONDS - 11.1% |
| | | | | Air Transportation - 0.3% | | | | |
| | | | | Continental Airlines, Inc. | | | | |
| $ | 3,704 | | | 5.98%, 04/19/2022 | | $ | 4,125 | |
| | | | | Southwest Airlines Co. | | | | |
| | 2,700 | | | 5.75%, 12/15/2016 | | | 3,053 | |
| | 2,834 | | | 6.15%, 08/01/2022 | | | 3,316 | |
| | | | | | | | 10,494 | |
| | | | | Arts, Entertainment and Recreation - 0.9% | | | | |
| | | | | CBS Corp. | | | | |
| | 6,860 | | | 3.38%, 03/01/2022 | | | 7,133 | |
| | 575 | | | 5.75%, 04/15/2020 | | | 689 | |
| | | | | Comcast Corp. | | | | |
| | 1,740 | | | 4.65%, 07/15/2042 | | | 1,834 | |
| | 4,500 | | | 5.90%, 03/15/2016 | | | 5,170 | |
| | | | | DirecTV Holdings LLC | | | | |
| | 3,310 | | | 6.38%, 03/01/2041 | | | 3,830 | |
| | | | | Discovery Communications, Inc. | | | | |
| | 250 | | | 4.95%, 05/15/2042 | | | 267 | |
| | | | | News America, Inc. | | | | |
| | 1,275 | | | 4.50%, 02/15/2021 | | | 1,457 | |
| | | | | Time Warner Cable, Inc. | | | | |
| | 930 | | | 4.50%, 09/15/2042 | | | 907 | |
| | 4,120 | | | 5.85%, 05/01/2017 | | | 4,867 | |
| | | | | Viacom, Inc. | | | | |
| | 835 | | | 3.88%, 12/15/2021 | | | 910 | |
| | | | | Virgin Media Secured Finance plc | | | | |
| | 1,255 | | | 5.25%, 01/15/2021 | | | 1,465 | |
| | | | | | | | 28,529 | |
| | | | | Beverage and Tobacco Product Manufacturing - 0.4% | | | | |
| | | | | Altria Group, Inc. | | | | |
| | 2,445 | | | 4.75%, 05/05/2021 | | | 2,771 | |
| | | | | Anheuser-Busch InBev Worldwide, Inc. | | | | |
| 4,200 | | | 7.75%, 01/15/2019 | | | 5,610 | |
| | | | | BAT International Finance plc | | | | |
| | 2,775 | | | 3.25%, 06/07/2022 ■ | | | 2,893 | |
| | | | | Coca-Cola Co. | | | | |
| | 500 | | | 3.30%, 09/01/2021 | | | 551 | |
| | | | | Heineken N.V. | | | | |
| | 230 | | | 2.75%, 04/01/2023 ■ | | | 226 | |
| | 50 | | | 4.00%, 10/01/2042 ■ | | | 48 | |
| | | | | Molson Coors Brewing Co. | | | | |
| | 60 | | | 2.00%, 05/01/2017 | | | 61 | |
| | 165 | | | 3.50%, 05/01/2022 | | | 174 | |
| | 495 | | | 5.00%, 05/01/2042 | | | 555 | |
| | | | | Philip Morris International, Inc. | | | | |
| | 270 | | | 5.65%, 05/16/2018 | | | 327 | |
| | | | | | | | 13,216 | |
| | | | | Chemical Manufacturing - 0.0% | | | | |
| | | | | Agrium, Inc. | | | | |
| | 660 | | | 6.13%, 01/15/2041 | | | 793 | |
| | | | | | | | | |
| | | | | Computer and Electronic Product Manufacturing - 0.1% | | | | |
| | | | | Dell, Inc. | | | | |
| | 2,735 | | | 5.88%, 06/15/2019 | | | 3,154 | |
| | | | | | | | | |
| | | | | Couriers and Messengers - 0.0% | | | | |
| | | | | FedEx Corp. | | | | |
| | 270 | | | 2.63%, 08/01/2022 | | | 269 | |
| | | | | | | | | |
| | | | | Finance and Insurance - 5.8% | | | | |
| | | | | ACE INA Holdings, Inc. | | | | |
| | 700 | | | 5.88%, 06/15/2014 | | | 752 | |
| | | | | American Express Centurion Bank | | | | |
| | 6,350 | | | 6.00%, 09/13/2017 | | | 7,677 | |
| | | | | Bank of America Corp. | | | | |
| | 200 | | | 7.38%, 05/15/2014 | | | 217 | |
| | | | | Barclays Bank plc | | | | |
| | 2,150 | | | 2.38%, 01/13/2014 | | | 2,186 | |
| | | | | BP Capital Markets plc | | | | |
| | 2,850 | | | 4.75%, 03/10/2019 | | | 3,305 | |
| | | | | Brandywine Operating Partnership | | | | |
| | 2,010 | | | 6.00%, 04/01/2016 | | | 2,263 | |
| | | | | Capital One Financial Corp. | | | | |
| | 2,460 | | | 2.15%, 03/23/2015 | | | 2,511 | |
| | | | | CDP Financial, Inc. | | | | |
| | 3,475 | | | 4.40%, 11/25/2019 ■ | | | 3,998 | |
| | | | | Citigroup, Inc. | | | | |
| | 3,000 | | | 5.85%, 08/02/2016 | | | 3,429 | |
| | 2,700 | | | 6.13%, 05/15/2018 | | | 3,236 | |
| | 1,700 | | | 6.88%, 03/05/2038 | | | 2,238 | |
| | 520 | | | 8.13%, 07/15/2039 | | | 778 | |
| | | | | Credit Agricole S.A. | | | | |
| | 3,950 | | | 3.50%, 04/13/2015 ■ | | | 4,086 | |
| | | | | Discover Financial Services, Inc. | | | | |
| | 3,620 | | | 6.45%, 06/12/2017 | | | 4,233 | |
| | | | | Eaton Vance Corp. | | | | |
| | 3,305 | | | 6.50%, 10/02/2017 | | | 3,988 | |
| | | | | Everest Reinsurance Holdings, Inc. | | | | |
| | 4,525 | | | 5.40%, 10/15/2014 | | | 4,776 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
Shares or Principal Amount | | | Market Value ╪ | |
| CORPORATE BONDS - 11.1% - (continued) |
| | | | | Finance and Insurance - 5.8% - (continued) | | | | |
| | | | | Ford Motor Credit Co. LLC | | | | |
| $ | 2,665 | | | 3.00%, 06/12/2017 | | $ | 2,738 | |
| | | | | General Electric Capital Corp. | | | | |
| | 4,300 | | | 4.38%, 09/16/2020 | | | 4,799 | |
| | 5,000 | | | 5.88%, 01/14/2038 | | | 6,031 | |
| | | | | Goldman Sachs Group, Inc. | | | | |
| | 6,000 | | | 5.63%, 01/15/2017 | | | 6,583 | |
| | 1,700 | | | 6.15%, 04/01/2018 | | | 1,997 | |
| | 2,590 | | | 6.25%, 02/01/2041 | | | 3,178 | |
| | | | | HCP, Inc. | | | | |
| | 2,030 | | | 6.00%, 01/30/2017 | | | 2,332 | |
| | | | | HSBC Holdings plc | | | | |
| | 4,000 | | | 6.10%, 01/14/2042 | | | 5,322 | |
| | | | | ING Bank N.V. | | | | |
| | 5,200 | | | 3.75%, 03/07/2017 ■ | | | 5,526 | |
| | | | | Jackson National Life Insurance Co. | | | | |
| | 6,250 | | | 8.15%, 03/15/2027 ■ | | | 7,675 | |
| | | | | JP Morgan Chase & Co. | | | | |
| | 2,240 | | | 3.25%, 09/23/2022 | | | 2,307 | |
| | 2,000 | | | 4.95%, 03/25/2020 | | | 2,320 | |
| | 6,035 | | | 5.13%, 09/15/2014 | | | 6,418 | |
| | 1,080 | | | 5.40%, 01/06/2042 | | | 1,301 | |
| | | | | Merrill Lynch & Co., Inc. | | | | |
| | 11,000 | | | 5.00%, 02/03/2014 | | | 11,447 | |
| | 1,000 | | | 6.40%, 08/28/2017 | | | 1,174 | |
| | 6,000 | | | 6.88%, 04/25/2018 | | | 7,233 | |
| | | | | Morgan Stanley | | | | |
| | 250 | | | 5.63%, 09/23/2019 | | | 283 | |
| | | | | National City Corp. | | | | |
| | 4,250 | | | 6.88%, 05/15/2019 | | | 5,302 | |
| | | | | Nordea Bank AB | | | | |
| | 1,790 | | | 3.70%, 11/13/2014 ■ | | | 1,879 | |
| | | | | Postal Square L.P. | | | | |
| | 13,245 | | | 8.95%, 06/15/2022 | | | 17,919 | |
| | | | | Prudential Financial, Inc. | | | | |
| | 3,000 | | | 5.50%, 03/15/2016 | | | 3,385 | |
| | | | | Rabobank Netherlands | | | | |
| | 3,900 | | | 3.20%, 03/11/2015 ■ | | | 4,089 | |
| | | | | Republic New York Capital I | | | | |
| | 500 | | | 7.75%, 11/15/2026 | | | 509 | |
| | | | | Southern Capital Corp. | | | | |
| | 53 | | | 5.70%, 06/30/2022 ■ | | | 55 | |
| | | | | Sovereign Bancorp, Inc. | | | | |
| | 4,795 | | | 8.75%, 05/30/2018 | | | 5,646 | |
| | | | | Svenska Handelsbanken AB | | | | |
| | 2,900 | | | 4.88%, 06/10/2014 ■ | | | 3,065 | |
| | | | | UBS AG Stamford | | | | |
| | 235 | | | 5.88%, 12/20/2017 | | | 280 | |
| | | | | Wachovia Corp. | | | | |
| | 10,000 | | | 5.25%, 08/01/2014 | | | 10,664 | |
| | 1,000 | | | 5.75%, 06/15/2017 | | | 1,184 | |
| | | | | WEA Finance LLC | | | | |
| | 1,450 | | | 7.13%, 04/15/2018 ■ | | | 1,787 | |
| | | | | Wellpoint, Inc. | | | | |
| | 421 | | | 3.30%, 01/15/2023 | | | 432 | |
| | | | | | | | 184,533 | |
| | | | | Food Manufacturing - 0.5% | | | | |
| | | | | Kellogg Co. | | | | |
| | 3,900 | | | 4.00%, 12/15/2020 | | | 4,344 | |
| | | | | Kraft Foods Group, Inc. | | | | |
| 555 | | | 2.25%, 06/05/2017 ■ | | | 574 | |
| | 535 | | | 3.50%, 06/06/2022 ■ | | | 571 | |
| | 605 | | | 5.00%, 06/04/2042 ■ | | | 681 | |
| | 285 | | | 5.38%, 02/10/2020 | | | 344 | |
| | | | | Mondelez International, Inc. | | | | |
| | 3,800 | | | 4.13%, 02/09/2016 | | | 4,140 | |
| | | | | Wrigley Jr., William Co. | | | | |
| | 3,900 | | | 3.70%, 06/30/2014 ■ | | | 4,037 | |
| | | | | | | | 14,691 | |
| | | | | Health Care and Social Assistance - 0.2% | | | | |
| | | | | Amgen, Inc. | | | | |
| | 3,300 | | | 5.15%, 11/15/2041 | | | 3,714 | |
| | | | | Express Scripts, Inc. | | | | |
| | 1,020 | | | 6.25%, 06/15/2014 | | | 1,098 | |
| | | | | Kaiser Foundation Hospitals | | | | |
| | 326 | | | 3.50%, 04/01/2022 | | | 344 | |
| | 640 | | | 4.88%, 04/01/2042 | | | 727 | |
| | | | | | | | 5,883 | |
| | | | | Information - 0.4% | | | | |
| | | | | America Movil S.A.B. de C.V. | | | | |
| | 635 | | | 3.13%, 07/16/2022 | | | 645 | |
| | 530 | | | 4.38%, 07/16/2042 | | | 551 | |
| | | | | AT&T, Inc. | | | | |
| | 2,510 | | | 6.80%, 05/15/2036 | | | 3,351 | |
| | | | | BellSouth Telecommunications, Inc. | | | | |
| | 650 | | | 7.00%, 12/01/2095 | | | 796 | |
| | | | | Cox Communications, Inc. | | | | |
| | 255 | | | 4.70%, 12/15/2042 ■ | | | 260 | |
| | | | | France Telecom S.A. | | | | |
| | 1,300 | | | 4.13%, 09/14/2021 | | | 1,433 | |
| | | | | SBA Tower Trust | | | | |
| | 2,035 | | | 4.25%, 04/15/2015 ■Δ | | | 2,138 | |
| | | | | Verizon Communications, Inc. | | | | |
| | 2,415 | | | 3.50%, 11/01/2021 | | | 2,642 | |
| | 715 | | | 4.75%, 11/01/2041 | | | 811 | |
| | | | | | | | 12,627 | |
| | | | | Miscellaneous Manufacturing - 0.0% | | | | |
| | | | | United Technologies Corp. | | | | |
| | 365 | | | 3.10%, 06/01/2022 | | | 387 | |
| | | | | | | | | |
| | | | | Motor Vehicle and Parts Manufacturing - 0.2% | | | | |
| | | | | Daimler Finance NA LLC | | | | |
| | 5,600 | | | 2.63%, 09/15/2016 ■ | | | 5,818 | |
| | | | | | | | | |
| | | | | Petroleum and Coal Products Manufacturing - 0.6% | | | | |
| | | | | Atmos Energy Corp. | | | | |
| | 5,875 | | | 6.35%, 06/15/2017 | | | 7,106 | |
| | | | | EnCana Corp. | | | | |
| | 305 | | | 5.90%, 12/01/2017 | | | 363 | |
| | | | | Gazprom Neft OAO via GPN Capital S.A. | | | | |
| | 1,100 | | | 4.38%, 09/19/2022 ■ | | | 1,125 | |
| | | | | Motiva Enterprises LLC | | | | |
| | 420 | | | 5.75%, 01/15/2020 ■ | | | 509 | |
| | | | | Ras Laffan Liquefied Natural Gas Co., Ltd. | | | | |
| | 1,200 | | | 5.50%, 09/30/2014 ■ | | | 1,292 | |
| | | | | Shell International Finance B.V. | | | | |
| | 6,400 | | | 4.38%, 03/25/2020 | | | 7,424 | |
| | | | | | | | 17,819 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | | Market Value ╪ | |
| CORPORATE BONDS - 11.1% - (continued) |
| | | | | Pipeline Transportation - 0.2% | | | | |
| | | | | Kinder Morgan Energy Partners L.P. | | | | |
| $ | 5,000 | | | 6.95%, 01/15/2038 | | $ | 6,579 | |
| | | | | | | | | |
| | | | | Real Estate, Rental and Leasing - 0.2% | | | | |
| | | | | ERAC USA Finance Co. | | | | |
| | 1,121 | | | 2.25%, 01/10/2014 ■ | | | 1,133 | |
| | 340 | | | 2.75%, 03/15/2017 ■ | | | 355 | |
| | 1,800 | | | 4.50%, 08/16/2021 ■ | | | 1,961 | |
| | 1,500 | | | 5.63%, 03/15/2042 ■ | | | 1,662 | |
| | | | | | | | 5,111 | |
| | | | | Retail Trade - 0.2% | | | | |
| | | | | Amazon.com, Inc. | | | | |
| | 1,550 | | | 2.50%, 11/29/2022 | | | 1,528 | |
| | | | | AutoZone, Inc. | | | | |
| | 1,908 | | | 3.70%, 04/15/2022 | | | 2,006 | |
| | | | | Lowe's Cos., Inc. | | | | |
| | 3,400 | | | 4.63%, 04/15/2020 | | | 3,990 | |
| | | | | | | | 7,524 | |
| | | | | Soap, Cleaning Compound and Toilet Manufacturing - 0.4% | | | | |
| | | | | Procter & Gamble Co. | | | | |
| | 9,341 | | | 9.36%, 01/01/2021 | | | 12,271 | |
| | | | | | | | | |
| | | | | Utilities - 0.7% | | | | |
| | | | | Consolidated Edison Co. of NY | | | | |
| | 4,605 | | | 5.30%, 12/01/2016 | | | 5,302 | |
| | | | | Enel Finance International S.A. | | | | |
| | 300 | | | 3.88%, 10/07/2014 ■ | | | 309 | |
| | | | | Indianapolis Power and Light | | | | |
| | 8,000 | | | 6.60%, 06/01/2037 ■ | | | 10,229 | |
| | | | | Southern California Edison Co. | | | | |
| | 4,000 | | | 5.55%, 01/15/2037 | | | 4,970 | |
| | | | | | | | 20,810 | |
| | | | | Total corporate bonds | | | | |
| | | | | (cost $306,828) | | $ | 350,508 | |
| | | | | | | | | |
MUNICIPAL BONDS - 1.3% |
| | | | | General Obligations - 0.4% | | | | |
| | | | | California State GO, Taxable, | | | | |
| $ | 1,235 | | | 7.55%, 04/01/2039 | | $ | 1,781 | |
| | | | | Chicago, IL, Metropolitan Water Reclamation GO, | | | | |
| | 685 | | | 5.72%, 12/01/2038 | | | 869 | |
| | | | | Los Angeles, CA, USD GO, | | | | |
| | 4,300 | | | 5.75%, 07/01/2034 | | | 5,155 | |
| | | | | Oregon State GO, | | | | |
| | 6,000 | | | 4.76%, 06/30/2028 | | | 7,091 | |
| | | | | | | | 14,896 | |
| | | | | Health Care/Services - 0.1% | | | | |
| | | | | University of California, Regents MedCenter Pooled Rev, | | | | |
| | 1,935 | | | 6.58%, 05/15/2049 | | | 2,527 | |
| | | | | | | | | |
| | | | | Higher Education (Univ., Dorms, etc.) - 0.1% | | | | |
| | | | | University of California, Build America Bonds Rev, | | | | |
| | 1,960 | | | 5.77%, 05/15/2043 | | | 2,417 | |
| | | | | | | | | |
| | | | | Refunded - 0.1% | | | | |
| | | | | Irvine Ranch, CA, Water Dist Joint Powers Agency, | | | | |
| 2,870 | | | 2.61%, 03/15/2014 | | | 2,944 | |
| | | | | | | | | |
| | | | | Tax Allocation - 0.1% | | | | |
| | | | | Dallas, TX, Area Rapid Transit Sales Tax Rev, | | | | |
| | 2,200 | | | 6.00%, 12/01/2044 | | | 2,980 | |
| | | | | | | | | |
| | | | | Transportation - 0.5% | | | | |
| | | | | Bay Area, CA, Toll Auth Bridge Rev, | | | | |
| | 3,100 | | | 6.26%, 04/01/2049 | | | 4,293 | |
| | | | | Illinois State Toll Highway Auth, Taxable Rev, | | | | |
| | 1,875 | | | 6.18%, 01/01/2034 | | | 2,372 | |
| | | | | Maryland State Transportation Auth, | | | | |
| | 1,350 | | | 5.89%, 07/01/2043 | | | 1,794 | |
| | | | | New York and New Jersey PA, Taxable Rev, | | | | |
| | 975 | | | 5.86%, 12/01/2024 | | | 1,245 | |
| | 570 | | | 6.04%, 12/01/2029 | | | 720 | |
| | | | | North Texas Tollway Auth Rev, | | | | |
| | 3,400 | | | 6.72%, 01/01/2049 | | | 4,587 | |
| | | | | | | | 15,011 | |
| | | | | Total municipal bonds | | | | |
| | | | | (cost $32,790) | | $ | 40,775 | |
| | | | | | | | | |
| U.S. GOVERNMENT AGENCIES - 0.9% |
| | | | | FHLMC - 0.5% | | | | |
| $ | 141 | | | 2.27%, 04/01/2029 Δ | | $ | 147 | |
| | 56 | | | 4.00%, 03/01/2041 | | | 60 | |
| | 6,046 | | | 5.00%, 07/01/2028 - 05/01/2041 | | | 6,535 | |
| | 9,288 | | | 5.50%, 12/01/2036 - 06/01/2041 | | | 10,046 | |
| | | | | | | | 16,788 | |
| | | | | FNMA - 0.0% | | | | |
| | 758 | | | 4.78%, 02/01/2014 | | | 776 | |
| | 698 | | | 4.98%, 12/01/2013 | | | 715 | |
| | 211 | | | 5.00%, 02/01/2019 - 04/01/2019 | | | 229 | |
| | 4 | | | 6.50%, 11/01/2013 | | | 4 | |
| | 1 | | | 7.00%, 02/01/2029 | | | 2 | |
| | | | | | | | 1,726 | |
| | | | | GNMA - 0.4% | | | | |
| | 3,414 | | | 6.00%, 06/15/2024 - 06/15/2035 | | | 3,851 | |
| | 1,092 | | | 6.50%, 03/15/2026 - 02/15/2035 | | | 1,272 | |
| | 4,743 | | | 7.00%, 11/15/2031 - 11/15/2033 | | | 5,654 | |
| | 227 | | | 7.50%, 09/16/2035 | | | 262 | |
| | 900 | | | 8.00%, 09/15/2026 - 02/15/2031 | | | 1,021 | |
| | 42 | | | 9.00%, 07/20/2016 - 06/15/2022 | | | 46 | |
| | | | | | | | 12,106 | |
| | | | | Total U.S. government agencies | | | | |
| | | | | (cost $29,090) | | $ | 30,620 | |
| | | | | | | | | |
| U.S. GOVERNMENT SECURITIES - 16.3% |
| Other Direct Federal Obligations - 2.9% |
| | | | | FFC - 0.5% | | | | |
| $ | 17,617 | | | 4.40%, 12/06/2013 - 12/27/2013 ○ | | $ | 17,510 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | | | | | | Market Value ╪ | |
| U.S. GOVERNMENT SECURITIES - 16.3% - (continued) |
| Other Direct Federal Obligations - 2.9% - (continued) |
| | | | | Tennessee Valley Authority - 2.4% | | | | | | | | |
| $ | 22,300 | | | 4.38%, 06/15/2015 | | | | | | $ | 24,435 | |
| | 50,000 | | | 6.00%, 03/15/2013 | | | | | | | 50,585 | |
| | | | | | | | | | | | 75,020 | |
| | | | | | | | | | | | 92,530 | |
| U.S. Treasury Securities - 13.4% |
| | | | | U.S. Treasury Bonds - 2.9% | | | | | | | | |
| | 23,178 | | | 4.38%, 02/15/2038 - 11/15/2039 | | | | | | | 30,078 | |
| | 18,000 | | | 6.00%, 02/15/2026 | | | | | | | 26,046 | |
| | 25,650 | | | 6.25%, 08/15/2023 | | | | | | | 36,776 | |
| | | | | | | | | | | | 92,900 | |
| | | | | U.S. Treasury Notes - 10.5% | | | | | | | | |
| | 72,630 | | | 0.25%, 04/30/2014 - 11/30/2014 | | | | | | | 72,646 | |
| | 8,300 | | | 0.63%, 05/31/2017 | | | | | | | 8,313 | |
| | 5,343 | | | 0.88%, 01/31/2017 | | | | | | | 5,414 | |
| | 4,800 | | | 1.00%, 09/30/2016 | | | | | | | 4,891 | |
| | 113,200 | | | 1.25%, 10/31/2015 | | | | | | | 116,074 | |
| | 28,700 | | | 1.50%, 06/30/2016 | | | | | | | 29,749 | |
| | 10,100 | | | 1.63%, 08/15/2022 | | | | | | | 10,034 | |
| | 5,300 | | | 2.00%, 04/30/2016 | | | | | | | 5,576 | |
| | 23,000 | | | 2.75%, 02/15/2019 | | | | | | | 25,467 | |
| | 18,935 | | | 3.50%, 05/15/2020 | | | | | | | 21,984 | |
| | 25,000 | | | 3.88%, 05/15/2018 | | | | | | | 29,053 | |
| | | | | | | | | | | | 329,201 | |
| | | | | | | | | | | | 422,101 | |
| | | | | Total U.S. government securities | | | | | | | | |
| | | | | (cost $476,840) | | | | | | $ | 514,631 | |
| | | | | | | | | | | | | |
| | | | | Total long-term investments | | | | | | | | |
| | | | | (cost $2,684,159) | | | | | | $ | 3,112,605 | |
| | | | | | | | | | | | | |
| SHORT-TERM INVESTMENTS - 1.3% |
| Repurchase Agreements - 1.3% |
| | | | | Bank of America Merrill Lynch TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $921,
collateralized by FHLMC 3.00%, 2042,
FNMA 4.00%, 2042, value of $939) | | | | | | | | |
| $ | 921 | | | 0.19%, 12/31/2012 | | | | | | $ | 921 | |
| | | | | Bank of Montreal TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $6,546, collateralized by
FHLMC 2.50% - 5.50%, 2019 - 2042,
FNMA 0.76% - 6.11%, 2016 - 2042,
GNMA 3.50%, 2042, value of $6,676) | | | | | | | | |
| | 6,545 | | | 0.23%, 12/31/2012 | | | | | | | 6,545 | |
| | | | | Barclays Capital TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $2,048, collateralized by U.S.
Treasury Note 2.00% - 2.13%, 2016, value
of $2,089) | | | | | | | | |
| | 2,048 | | | 0.20%, 12/31/2012 | | | | | | | 2,048 | |
| | | | | Citigroup Global Markets, Inc. TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $12,895,
collateralized by U.S. Treasury Note
1.88% - 4.13%, 2015 - 2018, value of
$13,153) | | | | | | | | |
| | 12,895 | | | 0.17%, 12/31/2012 | | | | | | | 12,895 | |
| | | | | Deutsche Bank Securities TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $266,
collateralized by FNMA 3.00%, 2032,
value of $271) | | | | | | | | |
| 266 | | | 0.25%, 12/31/2012 | | | | | | | 266 | |
| | | | | RBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $9,073, collateralized by U.S.
Treasury Note 0.50% - 2.75%, 2013 -
2019, value of $9,254) | | | | | | | | |
| | 9,073 | | | 0.20%, 12/31/2012 | | | | | | | 9,073 | |
| | | | | TD Securities TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $7,943, collateralized by
FHLMC 3.50% - 6.00%, 2036 - 2042,
FNMA 0.22% - 5.50%, 2013 - 2042, value
of $8,102) | | | | | | | | |
| | 7,943 | | | 0.21%, 12/31/2012 | | | | | | | 7,943 | |
| | | | | UBS Securities, Inc. Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$153, collateralized by U.S. Treasury Bill
0.75%, 2013, value of $157) | | | | | | | | |
| | 153 | | | 0.17%, 12/31/2012 | | | | | | | 153 | |
| | | | | UBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $542, collateralized by FNMA
2.50%, 2027, GNMA 3.00%, 2042, value
of $552) | | | | | | | | |
| | 541 | | | 0.25%, 12/31/2012 | | | | | | | 541 | |
| | | | | | | | | | | | 40,385 | |
| | | | | Total short-term investments | | | | | | | | |
| | | | | (cost $40,385) | | | | | | $ | 40,385 | |
| | | | | | | | | | | | | |
| | | | Total investments | | | | | | | | |
| | | | | (cost $2,724,544) ▲ | | | 99.8 | % | | $ | 3,152,990 | |
| | | | | Other assets and liabilities | | | 0.2 | % | | | 7,280 | |
| | | | | Total net assets | | | 100.0 | % | | $ | 3,160,270 | |
The accompanying notes are an integral part of these financial statements.
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| | |
| | Prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for factors occurring after the close of certain foreign markets but before the close of the New York Stock Exchange. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $2,744,638 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| | Unrealized Appreciation | | $ | 495,671 | |
| | Unrealized Depreciation | | | (87,319 | ) |
| | Net Unrealized Appreciation | | $ | 408,352 | |
| † | These securities were valued in good faith at fair value as determined under policies and procedures established by and under the supervision of the Company's Board of Directors. At December 31, 2012, the aggregate value of these securities was $24,542, which represents 0.8% of total net assets. This amount excludes securities that are principally traded in certain foreign markets and whose prices are adjusted pursuant to a third party pricing service methodology approved by the Board of Directors. |
| | |
| ● | Non-income producing. |
| | |
| Δ | Variable rate securities; the rate reported is the coupon rate in effect at December 31, 2012.
|
| | |
| ○ | The interest rate disclosed for these securities represents the effective yield on the date of the acquisition.
|
| ■ | Securities issued within terms of a private placement memorandum, exempt from registration under Rule 144A under the Securities Act of 1933, as amended, and may be sold only to qualified institutional buyers. Unless otherwise indicated, these issues are determined to be liquid. At December 31, 2012, the aggregate value of these securities was $68,373, which represents 2.2% of total net assets. |
| | |
| ⌂ | The following securities are considered illiquid. Illiquid securities are often purchased in private placement transactions, are often not registered under the Securities Act of 1933 and may have contractual restrictions on resale. A security may also be considered illiquid if the security lacks a readily available market or if its valuation has not changed for a certain period of time. |
| | Period Acquired | | Shares/ Par | | | Security | | Cost Basis | |
| | 08/2011 | | | 11,702 | | | Allstar LLC | | $ | 6,915 | |
| | 06/2007 | | | 11,241 | | | Buck Holdings L.P. | | | 1,999 | |
| | At December 31, 2012, the aggregate value of these securities was $24,542, which represents 0.8% of total net assets. |
| Securities Sold Short Outstanding at December 31, 2012 |
| Description | | Principal
Amount | | | Maturity Date | | Market Value ╪ | | | Unrealized
Appreciation/
Depreciation | |
| FHLMC TBA, 5.50% | | $ | 7,000 | | | 01/15/2040 | | $ | 7,555 | | | $ | (13 | ) |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
| GLOSSARY: (abbreviations used in preceding Schedule of Investments) |
| |
| Municipal Bond Abbreviations: |
| GO | General Obligation | |
| PA | Port Authority | |
| Rev | Revenue | |
| USD | United School District | |
| | |
Other Abbreviations: |
| ADR | American Depositary Receipt |
| FFC | Federal Financing Corp. | |
| FHLMC | Federal Home Loan Mortgage Corp. |
| FNMA | Federal National Mortgage Association |
| GNMA | Government National Mortgage Association |
The accompanying notes are an integral part of these financial statements.
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Investment Valuation Hierarchy Level Summary |
| December 31, 2012 |
| (000’s Omitted) |
| | | Total | | | Level 1 ♦ | | | Level 2 ♦ | | | Level 3 | |
| Assets: | | | | | | | | | | | | | | | | |
| Asset & Commercial Mortgage Backed Securities | | $ | 5,807 | | | $ | – | | | $ | 5,799 | | | $ | 8 | |
| Common Stocks ‡ | | | 2,170,264 | | | | 2,073,299 | | | | 72,423 | | | | 24,542 | |
| Corporate Bonds | | | 350,508 | | | | – | | | | 325,093 | | | | 25,415 | |
| Municipal Bonds | | | 40,775 | | | | – | | | | 40,775 | | | | – | |
| U.S. Government Agencies | | | 30,620 | | | | – | | | | 30,620 | | | | – | |
| U.S. Government Securities | | | 514,631 | | | | – | | | | 514,631 | | | | – | |
| Short-Term Investments | | | 40,385 | | | | – | | | | 40,385 | | | | – | |
| Total | | $ | 3,152,990 | | | $ | 2,073,299 | | | $ | 1,029,726 | | | $ | 49,965 | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Securities Sold Short | | $ | 7,555 | | | $ | – | | | $ | 7,555 | | | $ | – | |
| Total | | $ | 7,555 | | | $ | – | | | $ | 7,555 | | | $ | – | |
| ♦ | For the year ended December 31, 2012, there were no transfers between Level 1 and Level 2. |
| ‡ | The Fund has all or primarily all of the equity securities categorized in a particular level. Refer to the Schedule of Investments for further industry breakout. |
| Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value: |
| | | Balance as
of
December
31, 2011 | | | Realized
Gain
(Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Net
Amortization | | | Purchases | | | Sales | | | Transfers
Into
Level 3 * | | | Transfers
Out of
Level 3 * | | | Balance as
of
December
31, 2012 | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Asset & Commercial Mortgage Backed Securities | | $ | 7 | | | $ | — | | | $ | 1 | † | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 8 | |
| Common Stocks | | | 37,276 | | | | 17,792 | | | | (3,100 | )‡ | | | — | | | | — | | | | (27,426 | ) | | | — | | | | — | | | | 24,542 | |
| Corporate Bonds | | | 7,254 | | | | (97 | ) | | | 153 | § | | | (103 | ) | | | — | | | | (1,136 | ) | | | 19,344 | | | | — | | | | 25,415 | |
| Total | | $ | 44,537 | | | $ | 17,695 | | | $ | (2,946 | ) | | $ | (103 | ) | | $ | — | | | $ | (28,562 | ) | | $ | 19,344 | | | $ | — | | | $ | 49,965 | |
| * | Investments are transferred into and out of Level 3 for a variety of reasons including, but not limited to: |
| 1) | Investments where trading has been halted (transfer into Level 3) or investments where trading has resumed (transfer out of Level 3). |
| 2) | Broker quoted investments (transfer into Level 3) or quoted prices in active markets (transfer out of Level 3). |
| 3) | Investments that have certain restrictions on trading (transfer into Level 3) or investments where trading restrictions have expired (transfer out of Level 3). |
| † | Change in unrealized appreciation (depreciation) in the current period relating to assets still held at December 31, 2012 was $1. |
| ‡ | Change in unrealized appreciation (depreciation) in the current period relating to assets still held at December 31, 2012 was $(3,100). |
| § | Change in unrealized appreciation (depreciation) in the current period relating to assets still held at December 31, 2012 was $153. |
The accompanying notes are an integral part of these financial statements.
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Statement of Assets and Liabilities |
| December 31, 2012 |
| (000’s Omitted) |
| Assets: | | | | |
| Investments in securities, at market value (cost $2,724,544) | | $ | 3,152,990 | |
| Cash | | | 3 | |
| Receivables: | | | | |
| Investment securities sold | | | 7,544 | |
| Fund shares sold | | | 211 | |
| Dividends and interest | | | 10,911 | |
| Total assets | | | 3,171,659 | |
| Liabilities: | | | | |
| Securities sold short, at market value (proceeds $7,542) | | | 7,555 | |
| Payables: | | | | |
| Fund shares redeemed | | | 3,298 | |
| Investment management fees | | | 370 | |
| Distribution fees | | | 19 | |
| Accrued expenses | | | 147 | |
| Total liabilities | | | 11,389 | |
| Net assets | | $ | 3,160,270 | |
| Summary of Net Assets: | | | | |
| Capital stock and paid-in-capital | | $ | 3,676,774 | |
| Undistributed net investment income | | | 664 | |
| Accumulated net realized loss | | | (945,621 | ) |
| Unrealized appreciation of investments and the translations of assets and liabilities denominated in foreign currency | | | 428,453 | |
| Net assets | | $ | 3,160,270 | |
| Shares authorized | | | 9,500,000 | |
| Par value | | $ | 0.001 | |
| Class IA: Net asset value per share | | $ | 21.03 | |
| Shares outstanding | | | 130,956 | |
| Net assets | | $ | 2,754,114 | |
| Class IB: Net asset value per share | | $ | 21.30 | |
| Shares outstanding | | | 19,064 | |
| Net assets | | $ | 406,156 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Statement of Operations |
| For the Year Ended December 31, 2012 |
| (000’s Omitted) |
| Investment Income: | | | | |
| Dividends | | $ | 52,476 | |
| Interest | | | 36,495 | |
| Less: Foreign tax withheld | | | (787 | ) |
| Total investment income, net | | | 88,184 | |
| | | | | |
| Expenses: | | | | |
| Investment management fees | | | 20,543 | |
| Distribution fees - Class IB | | | 1,094 | |
| Custodian fees | | | 13 | |
| Accounting services fees | | | 536 | |
| Board of Directors' fees | | | 86 | |
| Audit fees | | | 32 | |
| Other expenses | | | 543 | |
| Total expenses (before fees paid indirectly) | | | 22,847 | |
| Commission recapture | | | (34 | ) |
| Total fees paid indirectly | | | (34 | ) |
| Total expenses, net | | | 22,813 | |
| Net Investment Income | | | 65,371 | |
| | | | | |
| Net Realized Gain on Investments, Other Financial Instruments and Foreign Currency Transactions: | | | | |
| Net realized gain on investments | | | 164,454 | |
| Net realized gain on securities sold short | | | 101 | |
| Net realized gain on futures | | | 42 | |
| Net realized gain on foreign currency contracts | | | 2,102 | |
| Net realized gain on other foreign currency transactions | | | 49 | |
| Net Realized Gain on Investments, Other Financial Instruments and Foreign Currency Transactions | | | 166,748 | |
| | | | | |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions: | | | | |
| Net unrealized appreciation of investments | | | 152,293 | |
| Net unrealized depreciation of securities sold short | | | (13 | ) |
| Net unrealized depreciation of foreign currency contracts | | | (147 | ) |
| Net unrealized appreciation on translation of other assets and liabilities in foreign currencies | | | 4 | |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions | | | 152,137 | |
| Net Gain on Investments, Other Financial Instruments and Foreign Currency Transactions | | | 318,885 | |
| Net Increase in Net Assets Resulting from Operations | | $ | 384,256 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Statement of Changes in Net Assets |
| |
|
| (000’s Omitted) |
| | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| Operations: | | | | | | | | |
| Net investment income | | $ | 65,371 | | | $ | 68,092 | |
| Net realized gain on investments, other financial instruments and foreign currency transactions | | | 166,748 | | | | 179,870 | |
| Net unrealized appreciation (depreciation) of investments and foreign currency transactions | | | 152,137 | | | | (177,718 | ) |
| Net Increase in Net Assets Resulting from Operations | | | 384,256 | | | | 70,244 | |
| Distributions to Shareholders: | | | | | | | | |
| From net investment income | | | | | | | | |
| Class IA | | | (82,214 | ) | | | (51,277 | ) |
| Class IB | | | (10,942 | ) | | | (6,578 | ) |
| Total distributions | | | (93,156 | ) | | | (57,855 | ) |
| Capital Share Transactions: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 50,211 | | | | 50,601 | |
| Issued on reinvestment of distributions | | | 82,214 | | | | 51,277 | |
| Redeemed | | | (589,901 | ) | | | (693,355 | ) |
| Total capital share transactions | | | (457,476 | ) | | | (591,477 | ) |
| Class IB | | | | | | | | |
| Sold | | | 19,586 | | | | 23,096 | |
| Issued on reinvestment of distributions | | | 10,942 | | | | 6,578 | |
| Redeemed | | | (118,840 | ) | | | (131,780 | ) |
| Total capital share transactions | | | (88,312 | ) | | | (102,106 | ) |
| Net decrease from capital share transactions | | | (545,788 | ) | | | (693,583 | ) |
| Net Decrease in Net Assets | | | (254,688 | ) | | | (681,194 | ) |
| Net Assets: | | | | | | | | |
| Beginning of period | | | 3,414,958 | | | | 4,096,152 | |
| End of period | | $ | 3,160,270 | | | $ | 3,414,958 | |
| Undistributed (distribution in excess of) net investment income | | $ | 664 | | | $ | 28,105 | |
| Shares: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 2,405 | | | | 2,583 | |
| Issued on reinvestment of distributions | | | 3,914 | | | | 2,706 | |
| Redeemed | | | (28,367 | ) | | | (35,495 | ) |
| Total share activity | | | (22,048 | ) | | | (30,206 | ) |
| Class IB | | | | | | | | |
| Sold | | | 928 | | | | 1,160 | |
| Issued on reinvestment of distributions | | | 514 | | | | 344 | |
| Redeemed | | | (5,664 | ) | | | (6,663 | ) |
| Total share activity | | | (4,222 | ) | | | (5,159 | ) |
The accompanying notes are an integral part of these financial statements.
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Notes to Financial Statements |
| December 31, 2012 |
| (000’s Omitted) |
Hartford Balanced HLS Fund (the “Fund”) serves as an underlying investment option for certain variable annuity and variable life insurance separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates and certain qualified retirement plans. The Fund may also serve as an underlying investment option for certain variable annuity and variable life separate accounts of other insurance companies. Owners of variable annuity contracts and policyholders of variable life insurance contracts may choose the funds permitted in the variable insurance contract prospectus. In addition, participants in certain qualified retirement plans may choose the Fund if permitted by their plans.
Hartford Series Fund, Inc. (the “Company”) is an open-end registered management investment company comprised of thirty portfolios. Financial Statements for the Fund, a series of the Company, are included in this report.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund is a diversified open-end management investment company.
The Fund is divided into Class IA and Class IB shares. Each class is offered at the per share net asset value (“NAV”) without a sales charge and is subject to the same expenses, except that the Class IB shares are subject to distribution and service fees charged pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act.
| 2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Fund in the preparation of its financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| a) | Determination of Net Asset Value – The NAV of each class of the Fund’s shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| b) | Investment Valuation and Fair Value Measurements – For purposes of calculating the NAV, portfolio investments and other assets held by the Fund's portfolio for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of last reported sales prices or official close price. If no sales are reported, market value is based on quotes obtained from a quotation reporting system, established market makers, or independent pricing services. If market prices are not readily available or are deemed unreliable, the Fund will use the fair value of the investment as determined in good faith under policies and procedures established by and under the supervision of the Company’s Board of Directors. Market quotes are considered not readily available where there is an absence of current or reliable market-based data (e.g., trade information or indicative market quotes), including where events occur after the close of the relevant market, but prior to the NYSE Close that materially affect the values of the Fund’s portfolio investments or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the investments trade do not open for trading for the entire day and no other market prices are available. In addition, prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close. Investments that are primarily traded on foreign markets may trade on days that are not business days of the Fund. The |
value of the foreign investments in which the Fund invests may change on days when a shareholder will not be able to purchase or redeem shares of the Fund. Fair value pricing is subjective in nature and the use of fair value pricing by the Fund may cause the NAV of its shares to differ significantly from the NAV that would have been calculated using market prices at the close of the exchange on which a portfolio investment is primarily traded. There can be no assurance that the Fund could obtain the fair market value assigned to an investment if the Fund were to sell the investment at approximately the time at which the Fund determines its NAV.
Fixed income investments (other than short term obligations) and non-exchange traded derivatives held by the Fund are normally valued on the basis of quotes obtained from brokers and dealers or independent pricing services in accordance with procedures established by the Company’s Board of Directors. Prices obtained from independent pricing services use information provided by market makers or estimates of market values through accepted market modeling and trading and pricing conventions. Inputs to the models may include, but are not limited to, prepayment speeds, pricing spread, yield, trade information, dealer quotes, market color, cash flow models and the bond’s terms and conditions. Generally, the Fund may use fair valuation in regard to fixed income investments when the Fund holds defaulted or distressed investments or investments in a company in which a reorganization is pending. Short-term investments maturing in 60 days or less are generally valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days.
Exchange traded options, futures and options on futures are valued at the settlement price determined by the relevant exchange as of the NYSE Close. If such instruments do not trade on an exchange, values may be supplied by an independent pricing service using a formula or other objective method that may take into consideration the style, direction, expiration, strike price, notional value and volatility or other adjustments.
Investments valued in currencies other than U.S. dollars are converted to U.S. dollars using exchange rates obtained from independent pricing services for calculation of the NAV. As a result, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of investments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the NYSE is closed and the market value may change on days when an investor is not able to purchase, redeem or exchange shares of the Fund.
Foreign currency contracts represent agreements to exchange currencies on specific future dates at predetermined rates. Foreign currency contracts are valued using foreign currency exchange rates and forward rates as provided by an independent pricing service on the Valuation Date.
Financial instruments for which prices are not available from an independent pricing service may be valued using market quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with procedures established by the Company’s Board of Directors.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| · | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange traded funds, rights and warrants. |
| · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 may include debt investments that are traded less frequently than exchange traded |
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
instruments and which are valued using independent pricing services; foreign equities, which are principally traded on certain foreign markets and are adjusted daily pursuant to a fair value pricing service in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close; and short-term investments, which are valued at amortized cost.
| · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price. |
The Board of Directors of the Company generally reviews and approves the “Procedures for Valuation of Portfolio Securities” on an annual basis. These procedures define how investments are to be valued, including the formation and activities of a Valuation Committee. The Valuation Committee is responsible for determining in good faith the fair value of investments when the value cannot be obtained from primary pricing services or alternative sources or if the valuation of an investment as provided by the primary pricing service or alternative source is believed not to reflect the investment’s fair value as of the Valuation Date. Members of the Valuation Committee include the Fund’s Treasurer or designee, a Vice President of the Fund with legal expertise or designee, and a Vice President of the investment manager or designee. In addition, the Fund’s Chief Compliance Officer shall designate a member of the compliance group to attend Valuation Committee meetings as a non-voting resource, to monitor for and provide guidance with respect to compliance with these procedures. Two members of the Valuation Committee or their designees, representing different departments, shall constitute a quorum for purposes of permitting the Valuation Committee to take action. The Valuation Committee will consider all relevant factors in determining an investment’s fair value, and may seek the advice of the Fund’s sub-adviser, knowledgeable brokers, and legal counsel in making such determination. The Valuation Committee reports to the Audit Committee of the Company’s Board of Directors. The Audit Committee receives quarterly written reports which include details of all fair-valued investments, including the reason for the fair valuation, and an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such investments (the “look-back” test). The Board of Directors then must consider for ratification all of the fair value determinations made during the previous quarter.
Valuation levels are not necessarily indicative of the risk associated with investing in such investments. Individual investments within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
For additional information, refer to the Investment Valuation Hierarchy Level Summary and the Level 3 roll-forward reconciliation, if applicable, which follow the Schedule of Investments.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period.
| c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Investments purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses are determined on the basis of identified cost. |
Dividend income from domestic securities is accrued on the ex-dividend date. In general, dividend income from foreign securities is recorded on the ex-date; however, dividend notifications in certain foreign jurisdictions may not be available in a timely manner and as a result, the Fund will record the dividend as soon as the relevant details (i.e., rate per share, payment date, shareholders of record, etc.) are publicly available. Interest income, including amortization of premium and accretion of discounts, is accrued on a daily basis. Paydown gains and losses on mortgage-related and other asset-backed securities are included in interest income in the Statement of Operations, as applicable.
| d) | Foreign Currency Transactions – Assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investments, income, and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. |
The Fund does not isolate that portion of portfolio investment valuation resulting from fluctuations in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of investments held. Exchange rate fluctuations are included with the net realized and unrealized gain or loss on investments in the accompanying financial statements.
Net realized foreign exchange gains or losses arise from sales of foreign currencies and the difference between asset and liability amounts initially stated in foreign currencies and the U.S. dollar value of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of other assets and liabilities at the end of the reporting period, resulting from changes in the exchange rates.
| e) | Joint Trading Account – The Fund may invest cash balances into a joint trading account that may be invested in one or more repurchase agreements. |
| f) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Fund’s shares are executed in accordance with the investment instructions of the contract holders and plan participants. The NAV of the Fund’s shares is determined as of the close of business on each business day of the Exchange. The NAV is determined separately for each class of shares of the Fund by dividing the Fund’s net assets attributable to that class by the number of shares of the class outstanding. Each class of shares offered by the Fund has equal rights as to assets and voting privileges (except that shareholders of a class have exclusive voting rights regarding any matter relating solely to that class of shares). Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets of the class. Realized and unrealized capital gains and losses are allocated daily based on the relative net assets of each class of shares of the Fund. |
Orders for the purchase of the Fund’s shares received prior to the close of the Exchange on any day the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Fund. The policy of the Fund is to pay dividends from net investment income and realized capital gains, if any, at least once a year.
Distributions from net investment income, net realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These differences may include but are not limited to losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to Passive Foreign Investment Companies (“PFICs”), Real Estate Investment Trusts (“REITs”), Regulated Investment Companies (“RICs”), certain derivatives and partnerships. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Fund’s capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| 3. | Securities and Other Investments: |
| a) | Repurchase Agreements – A repurchase agreement is an agreement by which a counterparty agrees to sell an investment and agrees to repurchase the investment sold from the buyer at a mutually agreed upon time and price. At the time the Fund enters into a repurchase agreement, the value of the underlying collateral, including accrued interest, will be equal to or exceed the value of the repurchase agreement. Repurchase agreements expose the Fund to counterparty risk - that is, the risk that the counterparty will not fulfill its obligations. To minimize counterparty risk, the investments that serve to collateralize the repurchase agreement are held by the Fund’s custodian in book entry or physical form in the custodial account of the Fund or in a third party custodial account. Repurchase agreements are valued at cost plus accrued interest, which approximates fair value. The Fund, as shown on the Schedule of Investments, had outstanding repurchase agreements as of December 31, 2012. |
| b) | Illiquid and Restricted Investments – The Fund is permitted to invest up to 15% of its net assets in illiquid investments. Illiquid investments are those that may not be sold or disposed of in the ordinary course of business within seven days, at approximately the price used to determine the Fund’s NAV. The Fund may not be able to sell illiquid investments when its sub-adviser considers it desirable to do so or may have to sell such investments at a price that is lower than the price that could be obtained if the investments were more liquid. A sale of illiquid investments may require more time and may result in higher dealer discounts and other selling expenses than does the sale of those that are liquid. Illiquid investments also may be more difficult to value due to the unavailability of reliable market quotations for such investments, and an investment in them may have an adverse impact on the Fund’s NAV. The Fund may also purchase certain restricted investments that can only be resold to certain qualified investors and may be determined to be liquid pursuant to policies and guidelines established by the Company’s Board of Directors. The Fund, as shown on the Schedule of Investments, had illiquid and/or restricted investments as of December 31, 2012. |
| c) | Investments Purchased on a When-Issued or Delayed-Delivery Basis – Delivery and payment for investments that have been purchased by the Fund on a forward commitment, or when-issued or delayed-delivery basis, take place beyond the customary settlement period. A fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell delayed-delivery investments before they are delivered, which may result in a realized gain or loss. During this period, such investments are subject to market fluctuations, and the Fund identifies investments segregated in its records with a value at least equal to the amount of the commitment. As of December 31, 2012, the Fund had no outstanding when-issued or delayed-delivery investments. |
In connection with the Fund’s ability to purchase investments on a when-issued or forward commitment basis, the Fund may enter into to-be announced (“TBA”) commitments. TBA commitments are forward agreements for the purchase or sale of mortgage-backed securities for a fixed price, with payment and delivery on an agreed-upon future settlement date. The specific securities to be delivered are not identified at the trade date; however, delivered securities must meet specified terms, including issuer, rate and mortgage terms. Although the Fund may enter into TBA commitments with the intention of acquiring or delivering securities for its portfolio, the Fund can extend the settlement date, roll the transaction, or dispose of a commitment prior to settlement if deemed appropriate to do so. If the TBA commitment is closed through the acquisition of an offsetting TBA commitment, the Fund realizes a gain or loss. In a TBA roll transaction, the Fund generally purchases or sells the initial TBA commitment prior to the agreed upon settlement date and enters into a new TBA commitment for future delivery or receipt of the mortgage-backed securities. TBA commitments involve a risk of loss if the value of the security to be purchased or sold declines or increases, respectively, prior to settlement date.
The Fund may enter into “dollar rolls” in which the Fund sells securities and contracts with the same counterparty to repurchase substantially similar securities (for example, same issuer, coupon and maturity) on a specified future date at an agreed upon price. The Fund gives up the right to receive interest paid on the investments sold. The Fund would benefit to the extent of any differences between the price received for the security and the lower forward price for the future purchase. Dollar rolls involve the risk that the market value of the securities that the Fund is required to purchase
may decline below the agreed upon repurchase price of those securities. The Fund records dollar roll transactions as purchases and sales and realizes gains and losses on these transactions. These transactions are excluded from the Fund’s portfolio turnover rate. The Fund had open dollar roll transactions as of December 31, 2012.
| d) | Mortgage Related and Other Asset Backed Securities – The Fund may invest in mortgage related and other asset backed securities. These securities include mortgage pass-through securities, collateralized mortgage obligations, commercial mortgage backed securities, stripped mortgage backed securities, asset backed securities, collateralized debt obligations and other securities that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property. Mortgage related securities are created from pools of residential or commercial mortgage loans, including mortgage loans made by savings and loan institutions, mortgage bankers, commercial banks and others. Asset backed securities are created from many types of assets, including auto loans, credit card receivables, home equity loans, and student loans. These securities provide a monthly payment that consists of both interest and principal payments. Interest payments may be determined by fixed or adjustable rates. The rate of pre-payments on underlying mortgages will affect the price and volatility of a mortgage related security, and may have the effect of shortening or extending the effective duration of the security relative to what was anticipated at the time of purchase. The timely payment of principal and interest of certain mortgage related securities is guaranteed by the full faith and credit of the United States Government. Mortgage related and other asset backed securities created and guaranteed by non-governmental issuers, including government-sponsored corporations, may be supported by various forms of insurance or guarantees, but there can be no assurance that the private insurers or guarantors can meet their obligations under the insurance policies or guarantee arrangements. The Fund, as shown on the Schedule of Investments, had mortgage related and other asset backed securities as of December 31, 2012. |
| 4. | Financial Derivative Instruments: |
The following disclosures contain information on how and why the Fund uses derivative instruments, the credit-risk-related contingent features in certain derivative instruments, and how derivative instruments affect the Fund’s financial position and results of operations. The location and fair value amounts of these instruments on the Statement of Assets and Liabilities and the realized gains and losses and changes in unrealized gains and losses on the Statement of Operations, each categorized by type of derivative contract, are included in the following Additional Derivative Instrument Information footnote. The derivative instruments outstanding as of year-end are disclosed in the notes to or within the Schedule of Investments for purchased options, if applicable. The amounts of realized gains and losses and changes in unrealized gains and losses on derivative instruments during the year are disclosed in the Statement of Operations.
| a) | Foreign Currency Contracts – The Fund may enter into foreign currency contracts that obligate the Fund to purchase or sell currencies at specified future dates. Foreign currency contracts are used to hedge the currency exposure associated with some or all of the Fund’s investments and/or as part of an investment strategy. Foreign currency contracts are marked to market daily and the change in value is recorded by the Fund as an unrealized gain or loss. The Fund will record a realized gain or loss when the foreign currency contract is settled. |
Foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. In addition, risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of the contracts and from unanticipated movements in the value of the foreign currencies relative to the U.S. dollar. The Fund had no outstanding foreign currency contracts as of December 31, 2012.
| b) | Futures Contracts – The Fund may enter into futures contracts. A futures contract is an agreement between two parties to buy or sell an asset at a set price on a future date. The Fund uses futures contracts to manage or obtain exposure to the investment markets, commodities, or movements in interest rates and currency values. The primary risks associated with the use of futures contracts are the imperfect correlation between the change in market value of the investments held by the Fund and the prices of futures contracts and the possibility of an illiquid market. Upon entering into a futures contract, the Fund is required to deposit with a futures commission merchant (“FCM”) an amount of cash or U.S. |
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
Government or Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily at the most recent settlement price reported by an exchange on which, over time, they are traded most extensively, and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statement of Assets and Liabilities; however, the Fund seeks to reduce this risk through the use of an FCM. As of December 31, 2012, the Fund had no outstanding futures contracts.
| c) | Additional Derivative Instrument Information: |
The volume of derivative activity was minimal during the year ended December 31, 2012.
The Effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
|
| Realized Gain on Derivatives Recognized as a Result of Operations: |
| Net realized gain on futures | | $ | 42 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 42 | |
| Net realized gain on foreign currency contracts | | | — | | | | 2,102 | | | | — | | | | — | | | | — | | | | — | | | | 2,102 | |
| Total | | $ | 42 | | | $ | 2,102 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,144 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| Net Change in Unrealized Depreciation on Derivatives Recognized as a Result of Operations: |
| Net change in unrealized depreciation of foreign currency contracts | | $ | — | | | $ | (147 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (147 | ) |
| Total | | $ | — | | | $ | (147 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (147 | ) |
| a) | Credit and Counterparty Risks – Credit risk depends largely on the perceived financial health of bond issuers. In general, the credit rating is inversely related to the credit risk of the issuer. Higher rated bonds generally are deemed to have less credit risk, while lower or unrated bonds are deemed to have higher risk of default. The share price, yield and total return of a fund that holds securities with higher credit risk may be more volatile than those of a fund that holds bonds with lower credit risk. Similar to credit risk, the Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will default. |
| b) | Market Risks – The Fund’s investments expose the Fund to various risks including, but not limited to, interest rate, prepayment, extension, foreign currency, and equity risks. Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the values of certain fixed income securities held by the Fund are likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a fixed income security’s market price to interest rate (i.e., yield) movements. In addition, securities are subject to extension risk. Rising interest rates may cause prepayments to occur at a slower than expected rate, thereby effectively lengthening the maturity of the security and making the security more sensitive to interest rate changes. Prepayment and extension risk are major risks of mortgage backed securities and certain asset backed securities. For certain asset backed securities, the actual maturity may be less than the stated maturity shown in the Schedule of Investments, if applicable. As a result, the timing of income recognition relating to these securities may vary based upon the actual maturity. If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, |
that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities, such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund. The market values of equity securities, such as common stocks and preferred stocks, or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The market value of equity securities may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities.
| a) | Federal Income Taxes – For federal income tax purposes, the Fund intends to continue to qualify as a RIC under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders and otherwise complying with the requirements of the IRC. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains prior to the next fiscal year-end. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. |
| c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Fund for the periods indicated is as follows (as adjusted for dividends payable, if applicable): |
| | | For the Year Ended
December 31, 2012 | | | For the Year Ended
December 31, 2011 | |
| Ordinary Income | | $ | 93,156 | | | $ | 57,855 | |
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
As of December 31, 2012, the Fund’s components of distributable earnings (deficit) on a tax basis were as follows:
| | | Amount | |
| Undistributed Ordinary Income | | $ | 664 | |
| Accumulated Capital and Other Losses* | | | (925,527 | ) |
| Unrealized Appreciation† | | | 408,359 | |
| Total Accumulated Deficit | | $ | (516,504 | ) |
| * | The Fund has capital loss carryforwards that are identified in the Capital Loss Carryforward note that follows. |
| † | Differences between book-basis and tax-basis unrealized appreciation (depreciation) may be attributable to the losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. |
| d) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as foreign currency, PFICs, expiration or utilization of capital loss carryforwards or net operating losses. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Fund’s distributions may be shown in the accompanying Statement of Changes in Net Assets as from undistributed net investment income, from accumulated net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Fund recorded reclassifications to increase (decrease) the accounts listed below: |
| | | Amount | |
| Undistributed Net Investment Income | | $ | 344 | |
| Accumulated Net Realized Gain (Loss) | | | (344 | ) |
| e) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation. |
At December 31, 2012 (tax-year-end), the Fund had capital loss carryforwards for U.S. federal income tax purposes as follows:
| Year of Expiration | | Amount | |
| 2017 | | $ | 925,527 | |
| Total | | $ | 925,527 | |
|
During the year ended December 31, 2012, the Fund utilized $155,644 of prior year capital loss carryforwards.
| f) | Accounting for Uncertainty in Income Taxes – The Fund has adopted financial reporting rules that require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Fund does not have an examination in progress. |
The Fund has reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules had no effect on the Fund’s financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2012. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Fund’s investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Fund pursuant to an Investment Management Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Fund’s investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees payable under, the Fund’s investment management agreements; or (ii) the day-to-day management of the Fund. The investment manager has overall investment supervisory responsibility for the Fund. In addition, the investment manager provides administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. The investment manager has contracted with Wellington Management Company, LLP (“Wellington Management”) under a sub-advisory agreement for the provision of day-to-day investment management services to the Fund in accordance with the Fund’s investment objective and policies. The Fund pays a fee to the investment manager, a portion of which may be used to compensate Wellington Management. |
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered as of December 31, 2012; the rates are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee | |
| On first $250 million | | | 0.6800 | % |
| On next $250 million | | | 0.6550 | % |
| On next $500 million | | | 0.6450 | % |
| On next $4 billion | | | 0.5950 | % |
| On next $5 billion | | | 0.5925 | % |
| Over $10 billion | | | 0.5900 | % |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Fund. HLIC provided accounting services for the Fund for the fiscal year ended December 31, 2012. The replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Fund or the fees charged to the Fund for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Fund, HFMC provides accounting services to the Fund and receives monthly compensation based on the Fund’s average daily net assets at the rates set forth below. The Fund’s accounting services fees are accrued daily and paid monthly. |
| Average Daily Net Assets | | Annual Fee | |
| On first $5 billion | | | 0.016 | % |
| On next $5 billion | | | 0.014 | % |
| Over $10 billion | | | 0.012 | % |
| c) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund and allocated to classes within a Fund in proportion to the average daily net assets of the Fund and each class, except where allocation of certain expenses is more fairly made directly to the Fund or to specific classes within a Fund. |
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| d) | Fees Paid Indirectly – The Company, on behalf of the Fund, has entered into agreements with State Street Global Markets, LLC and Russell Implementation Services, Inc. to partially recapture non-discounted trade commissions. Such rebates are used to pay a portion of the Fund’s expenses. In addition, the Fund’s custodian banks have agreed to reduce its fees when the Fund maintains cash on deposit in a non-interest-bearing custody account. For the year ended December 31, 2012, these amounts, if any, are included in the Statement of Operations. |
The ratio of expenses to average net assets in the accompanying financial highlights excludes the reduction in expenses related to fees paid indirectly. The annualized expense ratio after waivers for the period listed below reflecting the reduction for fees paid indirectly is as follows:
| | | Year Ended
December 31, 2012 | |
| Class IA | | | 0.65 | % |
| Class IB | | | 0.90 | |
| e) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Fund's principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD with HIFSCO did not result in any changes to the distribution services provided to the Fund. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Fund, has adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, 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, subject to the review and approval of the Company’s Board of Directors. |
The Distribution Plan provides that the Fund may pay annually up to 0.25% of the average daily net assets of the Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, the Fund is authorized to make payments monthly to the Distributor that may be used to pay or compensate 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. These fees are accrued daily and paid monthly.
| f) | Other Related Party Transactions – Certain officers of the Fund are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Fund’s Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Fund was in the amount of $4. These fees are accrued daily and paid monthly. |
| 8. | Investment Transactions: |
For the year ended December 31, 2012, the Fund's aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
| | | Amount | |
| Cost of Purchases Excluding U.S. Government Obligations | | $ | 746,292 | |
| Sales Proceeds Excluding U.S. Government Obligations | | | 1,305,608 | |
| Cost of Purchases for U.S. Government Obligations | | | 163,810 | |
| Sales Proceeds for U.S. Government Obligations | | | 165,586 | |
The Fund is one of several Hartford funds that participate in a $500 million committed revolving line of credit facility. The facility is to be used for temporary or emergency purposes. Under the arrangement, the funds are required to own securities having a market value in excess of 300% of the total bank borrowings. The interest rate on borrowings varies depending on the nature of the loan. The facility also requires a fee to be paid based on the amount of the commitment. This commitment fee is allocated to all of the funds participating in the line of credit based on the average net assets of the funds. During the year ended December 31, 2012, the Fund did not have any borrowings under this facility.
| 10. | Industry Classifications: |
Other than the industry classifications “Other Investment Pools and Funds” and “Exchange Traded Funds,” equity industry classifications used in this report are the Global Industry Classification Standard, which was developed by and is the exclusive property and service mark of MSCI, Inc. and Standard & Poor’s.
Under the Company’s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
| 12. | Recent Accounting Pronouncement: |
Disclosures about Offsetting Assets and Liabilities - In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The objective of the ASU is to enhance current disclosure requirements on offsetting of certain assets and liabilities and to enable financial statement users to compare financial statements prepared under U.S. GAAP and International Financial Reporting Standards.
Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Financial Highlights |
| – Selected Per-Share Data – (A) |
Class | | Net Asset Value at
Beginning of
Period | | | Net Investment
Income (Loss) | | | Net Realized and
Unrealized Gain
(Loss) on
Investments | | | Total from
Investment
Operations | | | Dividends from Net
Investment Income | | | Distributions from
Realized Capital
Gains | | | Distributions from
Capital | | | Total Distributions | | | Net Asset Value at
End of Period | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2012 |
| IA | | $ | 19.34 | | | $ | 0.47 | | | $ | 1.85 | | | $ | 2.32 | | | $ | (0.63) | | | $ | – | | | $ | – | | | $ | (0.63) | | | $ | 21.03 | |
| IB | | | 19.58 | | | | 0.43 | | | | 1.86 | | | | 2.29 | | | | (0.57) | | | | – | | | | – | | | | (0.57) | | | | 21.30 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2011 |
| IA | | | 19.32 | | | | 0.41 | | | | (0.06) | | | | 0.35 | | | | (0.33) | | | | – | | | | – | | | | (0.33) | | | | 19.34 | |
| IB | | | 19.55 | | | | 0.36 | | | | (0.05) | | | | 0.31 | | | | (0.28) | | | | – | | | | – | | | | (0.28) | | | | 19.58 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2010 (E) |
| IA | | | 17.47 | | | | 0.30 | | | | 1.82 | | | | 2.12 | | | | (0.27) | | | | – | | | | – | | | | (0.27) | | | | 19.32 | |
| IB | | | 17.68 | | | | 0.26 | | | | 1.83 | | | | 2.09 | | | | (0.22) | | | | – | | | | – | | | | (0.22) | | | | 19.55 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2009 |
| IA | | | 13.69 | | | | 0.36 | | | | 3.78 | | | | 4.14 | | | | (0.36) | | | | – | | | | – | | | | (0.36) | | | | 17.47 | |
| IB | | | 13.85 | | | | 0.32 | | | | 3.83 | | | | 4.15 | | | | (0.32) | | | | – | | | | – | | | | (0.32) | | | | 17.68 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2008 |
| IA | | | 20.97 | | | | 0.50 | | | | (7.09) | | | | (6.59) | | | | (0.58) | | | | (0.11) | | | | – | | | | (0.69) | | | | 13.69 | |
| IB | | | 21.18 | | | | 0.47 | | | | (7.17) | | | | (6.70) | | | | (0.52) | | | | (0.11) | | | | – | | | | (0.63) | | | | 13.85 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include 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 would lower the Fund's performance. |
| (C) | Ratios do not reflect reductions for fees paid indirectly. Please see Fees Paid Indirectly in the Notes to Financial Statements. |
| (D) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
| (E) | Per share amounts have been calculated using the average shares method. |
| (F) | During the year ended December 31, 2010, the Fund incurred $204.5 million in purchases associated with the transition of assets from Hartford Global Advisers HLS Fund, which merged into the Fund on March 19, 2010. These purchases were excluded from the portfolio turnover calculation. |
| - Ratios and Supplemental Data - |
Total Return(B) | | | Net Assets at End of Period | | | Ratio of Expenses to Average Net Assets
Before Waivers(C) | | | Ratio of Expenses to Average Net Assets
After Waivers(C) | | | Ratio of Net Investment
Income (Loss) to Average Net
Assets | | | Portfolio
Turnover
Rate(D) | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | 12.02 | % | | $ | 2,754,114 | | | | 0.65 | % | | | 0.65 | % | | | 1.98 | % | | | 28 | % |
| | 11.74 | | | | 406,156 | | | | 0.90 | | | | 0.90 | | | | 1.73 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 1.86 | | | | 2,959,019 | | | | 0.64 | | | | 0.64 | | | | 1.84 | | | | 34 | |
| | 1.61 | | | | 455,939 | | | | 0.89 | | | | 0.89 | | | | 1.59 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 12.14 | | | | 3,539,983 | | | | 0.65 | | | | 0.65 | | | | 1.68 | | | | 65 | (F) |
| | 11.86 | | | | 556,169 | | | | 0.90 | | | | 0.90 | | | | 1.43 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 30.29 | | | | 3,607,929 | | | | 0.65 | | | | 0.65 | | | | 2.15 | | | | 73 | |
| | 29.96 | | | | 578,338 | | | | 0.90 | | | | 0.90 | | | | 1.90 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (31.64 | ) | | | 3,404,626 | | | | 0.63 | | | | 0.63 | | | | 2.43 | | | | 76 | |
| | (31.81 | ) | | | 548,899 | | | | 0.88 | | | | 0.88 | | | | 2.18 | | | | – | |
| Report of Independent Registered Public Accounting Firm |
| The Board of Directors and Shareholders of |
| Hartford Series Fund, Inc. |
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Hartford Balanced HLS Fund (formerly know as Hartford Advisers HLS Fund) (one of the portfolios constituting Hartford Series Fund, Inc. (the Fund)) as of December 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Hartford Balanced HLS Fund (formerly know as Hartford Advisers HLS Fund) (one of the portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
| | |
Minneapolis, MN
February 15, 2013 |
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Directors and Officers (Unaudited) |
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Fund pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Fund. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Fund’s statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Fund pays to The Hartford a portion of the Chief Compliance Officer’s compensation, but does not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Directors and Officers (Unaudited) – (continued) |
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010 (4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and a record of how the Fund voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Expense Example (Unaudited) |
Your Fund's Expenses
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Actual return | | | Hypothetical (5% return before expenses) | | | | | | | | | | |
| | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2
year | | | Days
in the
full
year | |
| Class IA | | $ | 1,000.00 | | | $ | 1,005.63 | | | $ | 3.29 | | | $ | 1,000.00 | | | $ | 1,021.85 | | | $ | 3.32 | | | | 0.65 | % | | | 184 | | | | 366 | |
| Class IB | | $ | 1,000.00 | | | $ | 1,005.50 | | | $ | 4.55 | | | $ | 1,000.00 | | | $ | 1,020.60 | | | $ | 4.59 | | | | 0.90 | % | | | 184 | | | | 366 | |
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) |
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory and sub-advisory agreements. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for Hartford Balanced HLS Fund (the “Fund”) with HL Investment Advisors, LLC (“HL Advisors”) and the continuation of the investment sub-advisory agreement between HL Advisors and the Fund’s sub-adviser, Wellington Management Company, LLP (the “Sub-adviser,” and together with HL Advisors, the “Advisers”) (collectively, the “Agreements”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from the Advisers to questions posed to them on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreements at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by the Advisers and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreements.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreements with respect to the Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Fund’s contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Fund’s management fees, sub-advisory fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement.
In determining to continue the Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreements. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreements is provided below.
Nature, Extent, and Quality of Services Provided by the Advisers
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Fund by the Advisers. The Board considered, among other things, the terms of the Agreements and the range of services provided by the Advisers. The Board considered the Advisers’ professional personnel who provide services to the Fund, including each Adviser’s ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered each Adviser’s reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to the Fund. In addition, the Board considered the quality of each Adviser’s communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning each Adviser’s regulatory and compliance environment. In this regard, the Board requested and reviewed information on each Adviser’s compliance policies and procedures, compliance history, and a report from the Fund’s Chief Compliance Officer on each Adviser’s compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. The Board also noted the Advisers’ support of the Fund’s compliance control structure, particularly the resources devoted by the Advisers in support of the Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act.
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
With respect to HL Advisors, the Board noted that under the Agreements, HL Advisors is responsible for the management of the Fund, including overseeing fund operations and service providers, as well as investment advisory services in connection with selecting, monitoring and supervising the Sub-adviser. The Board considered HL Advisors’ ongoing monitoring of people, process and performance, including its quarterly reviews of each of the Hartford HLS Funds, semi-annual meetings with the leaders of each Fund’s portfolio management team, and oversight of the Funds’ approximately 40 portfolio managers. The Board recognized that HL Advisors has demonstrated a record of making changes to the management and/or strategies of the Funds when warranted. The Board considered HL Advisors’ oversight of the Sub-adviser’s investment approach and results, process for monitoring best execution of portfolio trades by the Sub-adviser, and approach to risk management with respect to the Fund and the service providers to the Fund. The Board also considered HL Advisors’ oversight of compliance with the Fund’s objective and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led to an increase in the scope of HL Advisors’ services in this regard. In addition, the Board considered HL Advisors’ ongoing commitment to review and rationalize the Hartford fund family’s product line-up and the expenses that HL Advisors had incurred in connection with fund combinations in recent years. The Board considered that HL Advisors or its affiliates are responsible for providing the Fund’s officers. The Board also noted that Hartford Life Insurance Company (“HLIC”) provides administrative services to the Fund. The Board considered its experiences with HL Advisors and HLIC with respect to each of these services.
With respect to the Sub-adviser, who provides day-to-day portfolio management services, the Board considered the quality of the Fund’s portfolio managers, the Sub-adviser’s other investment personnel, its investment philosophy and process, investment research capabilities and resources, performance record, trade execution capabilities and experience. The Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers, and the Sub-adviser’s method for compensating the portfolio managers. The Board noted recent changes to the Fund’s portfolio management team.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Fund by HL Advisors and the Sub-adviser.
Performance of the Fund and the Advisers
The Board considered the investment performance of the Fund. In this regard, the Board reviewed the performance of the Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of the Fund’s performance for these time periods. The Board considered information and materials provided to the Board by the Advisers concerning Fund performance, as well as information from Lipper comparing the investment performance of the Fund to an appropriate benchmark and universe of peer funds. The Board noted that the performance of the Fund was within expectations.
The Board considered the detailed investment analytics reports provided by The Hartford’s Investment Advisory Group throughout the year. These reports include, among other things, information on the Fund’s gross and net returns, the Fund’s investment performance relative to an appropriate benchmark and peer group, various statistics concerning the Fund’s portfolio, and a narrative summary of various factors affecting Fund performance. The Board considered the Advisers’ cooperation with the Investment Committee, which assists the Board in evaluating the performance of the Fund at periodic meetings throughout the year. The Board also considered the analysis provided by the Consultant relating to the Fund’s performance track record.
In light of all the considerations noted above, the Board concluded that it had continued confidence in HL Advisors’ and the Sub-adviser’s overall capabilities to manage the Fund.
Costs of the Services and Profitability of the Advisers
The Board reviewed information regarding HL Advisors’ cost to provide investment management and related services to the Fund and HL Advisors’ profitability, both overall and for the Fund, on a pre-tax basis without regard to distribution expenses. The Board also requested and reviewed information about the profitability to HL Advisors and its affiliates from all services provided to the Fund and all aspects of their relationship with the Fund. The Board also requested and received information relating to the operations and profitability of the Sub-adviser.
The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement, noting the Consultant’s view that The Hartford’s process for calculating
and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by the Advisers and their affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by the Advisers
The Board considered comparative information with respect to the management fees to be paid by the Fund to HL Advisors and the total expense ratios of the Fund. The Board also considered comparative information with respect to the sub-advisory fees to be paid by HL Advisors to the Sub-adviser, to the extent applicable. In this regard, the Board requested and reviewed information from HL Advisors and the Sub-adviser relating to the management and sub-advisory fees, including the sub-advisory fee schedule for the Fund, and total operating expenses for the Fund. The Board considered that the management fee for the Fund includes the fee paid to HLIC for providing certain administrative services to the Fund. With respect to the sub-advisory fee schedule, the Board considered representations from HL Advisors and the Sub-adviser that the Sub-adviser’s fees were negotiated at arm’s length. The Board also reviewed information from Lipper comparing the Fund’s contractual management fees, actual management fees and overall expense ratios relative to a group of funds selected by Lipper, in consultation with the Consultant, and a broader universe of funds selected by Lipper.
While the Board recognized that comparisons between the Fund and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business models and cost structures of the Advisers, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of the Fund’s management and sub-advisory fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to the Fund’s management and sub-advisory fees and total operating expenses.
Based on these considerations, the Board concluded that the Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding the Advisers’ realization of economies of scale with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. The Board reviewed the breakpoints in the management fee schedule for the Fund, which reduces fee rates as Fund assets grow over time. The Board recognized that a fund with assets beyond the last breakpoint level will continue to benefit from economies of scale because additional assets are charged the lowest breakpoint fee resulting in lower overall effective management fee rates. The Board also recognized that a fee schedule that reaches a lower breakpoint quickly provides shareholders with the benefit of anticipated or potential economies of scale.
The Board reviewed and evaluated materials from Lipper showing how management fee schedules of peer funds reflect economies of scale for the benefit of shareholders as a peer fund’s assets hypothetically increase over time. Based on information provided by HL Advisors, Lipper, and the Consultant, the Board recognized that there is no uniform methodology for establishing breakpoints or uniform pattern in asset levels that trigger breakpoints or the amounts of breakpoints triggered.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Fund’s shareholders based on currently available information and the effective advisory fees and expense ratios for the Fund at its current and reasonably anticipated asset levels. The Board noted, however, that it would continue to monitor future growth in Fund assets and the appropriateness of additional breakpoints.
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
Other Benefits
The Board considered other benefits to the Advisers and their affiliates from their relationships with the Fund, including the role of the Fund in supporting the variable life insurance and variable annuity products offered by The Hartford. The Board reviewed information noting that HLIC, an affiliate of HL Advisors, receives fees for providing certain administrative services to the Fund, and that HLIC also receives fees for fund accounting and related services from the Fund, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Fund’s transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Fund, and the Board reviewed information on the profitability of the Fund’s transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Fund were fair and reasonable based on publicly available information.
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Fund, receives 12b-1 fees from the Fund. The Board also noted that certain affiliates of HL Advisors distribute shares of the Fund and receive compensation in that connection.
The Board considered benefits to the Sub-adviser from its use of the Fund’s brokerage commissions to obtain soft dollar research, and representations from HL Advisors and the Sub-adviser that the Sub-adviser would not make any revenue-sharing payments or any other type of distribution payments to HL Advisors or its affiliates.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the Agreements for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory and sub-advisory agreements. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreements for the Fund and approve a new investment management agreement for the Fund with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser, and a new investment sub-advisory agreement between HFMC and the Fund’s existing Sub-adviser, Wellington Management Company, LLP (together with HFMC, the “Post-Restructuring Advisers”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Fund. In order to implement the Restructuring, the Fund would terminate the existing Agreements and enter into a new investment management agreement with HFMC, with HFMC also entering into a new investment sub-advisory agreement with the Sub-adviser (collectively, the “New Agreements”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreements at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by HL Advisors and the Sub-adviser and their affiliates. In addition, the Board received in-person presentations by Fund
officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreements.
In determining to approve the New Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the New Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreements.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Fund and the performance of investment management personnel to the Fund. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Fund prior to the Restructuring would continue to provide such services to the Fund, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreements would involve no changes to (i) the contractual terms of, including the management fees payable under, the Fund’s investment management and investment sub-advisory agreements; (ii) the investment processes and strategies employed in the management of the Fund’s assets; (iii) the nature and level of services provided under the Fund’s investment management and investment sub-advisory agreements; and (iv) the day-to-day management of the Fund and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Fund.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Fund.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Fund, the investment management arrangement for the Fund following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreements: (i) nature, extent and quality of services provided by HL Advisors and the Sub-adviser; (ii) performance of the Fund, HL Advisors and the Sub-adviser; (iii) costs of the services and profitability of HL
Advisors and the Sub-adviser; (iv) comparative services rendered and comparative investment management and sub-advisory fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors and the Sub-adviser with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. With respect to the other benefits to the Post-Restructuring Advisers and their affiliates from their relationships with the Fund, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting and related services from the Fund.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the New Agreements. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
| Hartford Balanced HLS Fund (formerly Hartford Advisers HLS Fund) |
| Principal Risks (Unaudited) |
The principal risks of investing in the Fund are described below.
Market and Selection Risk: The Fund’s share price may fluctuate due to market risk and/or security selections that may underperform compared to the market or relevant benchmarks.
Asset Allocation Strategy Risk: The portfolio managers’ asset allocation strategy may not always work as intended, and asset allocation does not guarantee better performance or reduce the risk of investment loss.
Fixed Income Risk: The Fund is subject to interest rate risk (the risk that the value of an investment decreases when interest rates rise) and credit risk (the risk that the issuing company of a security is unable to pay interest and principal when due) and call risk (the risk that an investment may be redeemed early).
Mortgage-Backed Securities Risk: Mortgage-backed securities are subject to interest rate risk, credit risk, prepayment risk, extension risk, and the risk that an investment’s value may be reduced or become worthless if it receives interest or income payments only after other investments in the same pool.
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
HLSAR-B12 2-13 113521 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 | |
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford Capital Appreciation HLS Fund
Table of Contents
This report is prepared for the general information of contract owners and qualified retirement plan participants. It is not an offer of contracts or of qualified retirement plans. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent information including the applicable sales, administrative and other charges.
The views expressed in the Fund’s Manager Discussion under ‘‘Why did the Fund perform this way?’’ and ‘‘What is the outlook?’’ are views of the Fund’s sub-adviser and portfolio management team through the end of the period and are subject to change based on market and other conditions.
| Hartford Capital Appreciation HLS Fund inception 04/02/1984 |
| (sub-advised byWellington Management Company, LLP) |
| |
| Investment objective – Seeks growth of capital. |
Performance Overview 12/31/02 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class 1A. Growth results in classes other than Class 1A will vary from what is seen above due to differences in the expenses charged to those share classes.
Average Annual Total Returns (as of 12/31/12)
| | | 1 Year | | | 5 Year | | | 10 Year | |
| Capital Appreciation IA | | | 18.34% | | | | -0.65% | | | | 9.98% | |
| Capital Appreciation IB | | | 18.04% | | | | -0.90% | | | | 9.71% | |
| Russell 3000 Index | | | 16.42% | | | | 2.04% | | | | 7.68% | |
| S&P 500 Index | | | 15.99% | | | | 1.66% | | | | 7.09% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund's net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
Russell 3000 Index is an unmanaged index that measures the performance of the 3,000 largest U.S. companies based on total market capitalization.
S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.
You cannot invest directly in an index.
As of the Fund’s current prospectus dated May 1, 2012, the net total annual operating expense ratios for Class IA and Class IB shares were 0.67% and 0.92%, respectively, and the gross total annual operating expense ratios for Class IA and Class IB shares were 0.67% and 0.92%, respectively. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect until April 30, 2013, and automatically renew for one-year terms unless terminated by the Fund’s Investment Advisor (Hartford Funds Management Company, LLC). For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
| Hartford Capital Appreciation HLS Fund |
| Manager Discussion |
| December 31, 2012 (Unaudited) |
| Portfolio Managers | | |
| Saul J. Pannell, CFA | Kent M. Stahl, CFA | Peter I. Higgins, CFA |
| Senior Vice President and Equity Portfolio Manager | Senior Vice President and Director, Investments and Risk Managment | Senior Vice President and Equity Portfolio Manager |
| Paul E. Marrkand, CFA | Nicolas M. Choumenkovitch | Donald J. Kilbride |
| Senior Vice President and Equity Portfolio Manager | Senior Vice President and Equity Portfolio Manager | Senior Vice President and Equity Portfolio Manager |
| Stephen Mortimer | David W. Palmer, CFA | Francis J. Boggan, CFA |
| Senior Vice President and Equity Portfolio Manager | Senior Vice President and Equity Portfolio Manager | Senior Vice President and Equity Portfolio Manager |
| | | |
How did the Fund perform?
The Class IA shares of the Hartford Capital Appreciation HLS Fund returned 18.34% for the twelve-month period ended December 31, 2012, outperforming its benchmark, the Russell 3000 Index, which returned 16.42% for the same period. The Fund also outperformed the 15.02% return of the average fund in the Lipper VP-UF Multi-Cap Core Funds peer group, a group of funds with investment strategies similar to those of the Fund.
Why did the Fund perform this way?
U.S. equities moved higher in the period, in part due to a strengthening housing market and central bank interventions around the globe. Although Europe continued to grapple with economic and structural challenges, investors’ risk appetites surged after European Central Bank (ECB) President Mario Draghi revealed a comprehensive plan to support struggling sovereigns, including direct purchases of government bonds in the open market. Additionally, the U.S. Federal Reserve’s (Fed) announcement of a third round of quantitative easing (QE3) was well-received by the market, boosting stock prices. Despite concerns about the looming U.S. fiscal cliff, tepid corporate revenue results, and economic malaise in Europe, investors bid up risk assets amid further signs of recovery in China and signs that the U.S. housing market may bolster the U.S. economy for the first time in seven years. Risk sentiment also ticked up on continued hopes that the ECB’s bond-buying plan will succeed, essentially reducing the tail risks in Europe.
Equity markets, as measured by the Russell 3000, returned (+16%) rose during the period with all ten sectors within the index posting positive returns. Financials (+26%), Consumer Discretionary (+25%), and Health Care (+19%) posted the strongest gains. Utilities (+2%), Energy (+4%), and Consumer Staples (+11%) lagged on a relative basis.
The Fund outperformed its benchmark due primarily to strong stock selection in the Financials, Information Technology, and Industrials sectors. Stock selection was weak within the Telecommunication Services, Consumer Discretionary, and Materials sectors. Sector allocation, a residual of our bottom-up stock-by-stock security selection process, also contributed to relative performance primarily as a result of an underweight (i.e. the Fund’s sector position was less than the benchmark position) to Utilities and an overweight to Consumer Discretionary. A modest cash balance in a generally rising market also detracted from relative returns.
The top contributors to relative performance included Gilead Sciences (Health Care), Exxon Mobil (Energy) and Bank of America (Financials). U.S.-based biopharmaceutical company Gilead Sciences outperformed after the firm's results exceeded expectations based on strong antiviral product sales, and investors reacted positively to the firm's plans for developing its hepatitis C franchise. Our significant underweight to energy company Exxon Mobil contributed positively to relative performance. Exxon shares fell after the company reported disappointing third quarter results related to its oil and gas production volumes. Shares of the diversified financial services provider, Bank of America, rallied amid signs of a recovery in the residential housing market. A reduction in loan delinquencies and new mortgage repurchase claims also decreased sequentially, both of which imply lower expenses for Bank of America’s mortgage business. Apple (Information Technology) and JPMorgan Chase (Financials) were also top contributors to absolute returns.
The largest detractors from relative returns were Chesapeake Energy (Energy), Teva Pharmaceuticals (Health Care), and NII Holdings (Telecommunication Services). Chesapeake Energy, a U.S.-based producer of natural gas, oil, and natural gas liquids, underperformed due to concerns regarding corporate governance and questions regarding the company’s ability to fund its capital expenditure plans. Shares of drug company Teva Pharmaceuticals faltered during the period after management provided an update suggesting cost efficiency should lead to margin expansion but added that the strategy may take longer than investors previously expected to
| Hartford Capital Appreciation HLS Fund |
| Manager Discussion – (continued) |
| December 31, 2012 (Unaudited) |
bear fruit. NII Holdings, a provider of mobile communications for business customers in Latin America, declined during the period due to weak reported revenue and concerns about near-term profitability. MBIA Insurance (Financials) was also a large detractor from absolute performance (i.e. total return).
What is the outlook?
While valuations remain reasonable as we look forward to 2013, fundamentals are weaker at the margin than they were last year at this time. Concerns regarding the fiscal cliff and ongoing eurozone economic worries are likely responsible for some of this softness as decision makers have been deferring capital expenditures and investment plans. We expect to get more clarity on the environment as we enter the new year, creating a more constructive backdrop, but this depends on a variety of political and economic variables. We do recognize certain areas of strength in the markets; for example, housing and homebuilding trends in the U.S. are positive. Based on bottom-up, fundamental analysis, at the end of the period we have ancillary exposure to housing and homebuilding where we have identified favorable company and industry dynamics. Given our unconstrained approach, we continue to look for compelling opportunities for capital appreciation across the market cap spectrum. We remain focused on company specifics, which will continue to drive the Fund’s overall positioning.
As a result of our bottom-up investment process, at the end of the period the Fund was most overweight in the Consumer Discretionary, Industrials, and Information Technology sectors relative to the benchmark. The Fund was most underweight in the Consumer Staples, Utilities, and Telecommunication Services sectors at the end of the period relative to the benchmark.
| Diversification by Industry |
| as of December 31, 2012 |
| Industry (Sector) | | Percentage of
Net Assets | |
| Equity Securities | | | | |
| Automobiles and Components (Consumer Discretionary) | | | 5.5 | % |
| Banks (Financials) | | | 2.1 | |
| Capital Goods (Industrials) | | | 6.8 | |
| Commercial and Professional Services (Industrials) | | | 0.4 | |
| Consumer Durables and Apparel (Consumer Discretionary) | | | 1.4 | |
| Consumer Services (Consumer Discretionary) | | | 1.7 | |
| Diversified Financials (Financials) | | | 7.3 | |
| Energy (Energy) | | | 10.7 | |
| Food and Staples Retailing (Consumer Staples) | | | 2.3 | |
| Food, Beverage and Tobacco (Consumer Staples) | | | 2.4 | |
| Health Care Equipment and Services (Health Care) | | | 3.2 | |
| Household and Personal Products (Consumer Staples) | | | 0.2 | |
| Insurance (Financials) | | | 5.0 | |
| Materials (Materials) | | | 4.4 | |
| Media (Consumer Discretionary) | | | 2.5 | |
| Pharmaceuticals, Biotechnology and Life Sciences (Health Care) | | | 7.7 | |
| Real Estate (Financials) | | | 0.9 | |
| Retailing (Consumer Discretionary) | | | 6.9 | |
| Semiconductors and Semiconductor Equipment (Information Technology) | | | 1.8 | |
| Software and Services (Information Technology) | | | 9.6 | |
| Technology Hardware and Equipment (Information Technology) | | | 7.3 | |
| Telecommunication Services (Services) | | | 0.9 | |
| Transportation (Industrials) | | | 6.3 | |
| Utilities (Utilities) | | | 0.8 | |
| Total | | | 98.1 | % |
| Fixed Income Securities | | | | |
| Finance and Insurance (Finance) | | | 0.1 | % |
| Total | | | 0.1 | % |
| Short-Term Investments | | | 1.8 | |
| Other Assets and Liabilities | | | 0.0 | |
| Total | | | 100.0 | % |
| Hartford Capital Appreciation HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 98.1% | |
| | | | | Automobiles and Components - 5.5% | | | | |
| | 116 | | | Allison Transmission Holdings, Inc. | | $ | 2,367 | |
| | 932 | | | Dana Holding Corp. | | | 14,545 | |
| | 15,966 | | | Ford Motor Co. | | | 206,760 | |
| | 259 | | | General Motors Co. ● | | | 7,474 | |
| | 5,033 | | | Goodyear (The) Tire & Rubber Co. ● | | | 69,508 | |
| | 210 | | | Harley-Davidson, Inc. | | | 10,242 | |
| | 198 | | | Hyundai Motor Co., Ltd. | | | 40,772 | |
| | 1,622 | | | Modine Manufacturing Co. ● | | | 13,187 | |
| | 152 | | | Renault S.A. | | | 8,240 | |
| | 1,440 | | | Stoneridge, Inc. ● | | | 7,371 | |
| | 227 | | | Tenneco Automotive, Inc. ● | | | 7,974 | |
| | 1,465 | | | TRW Automotive Holdings Corp. ● | | | 78,538 | |
| | 529 | | | Yamaha Motor Co., Ltd. | | | 5,865 | |
| | | | | | | | 472,843 | |
| | | | | Banks - 2.1% | | | | |
| | 378 | | | Hana Financial Holdings | | | 12,351 | |
| | 3,600 | | | Mitsubishi UFJ Financial Group, Inc. | | | 19,480 | |
| | 1,049 | | | Oversea-Chinese Banking Corp., Ltd. | | | 8,456 | |
| | 1,130 | | | PNC Financial Services Group, Inc. | | | 65,872 | |
| | 190 | | | Standard Chartered plc | | | 4,914 | |
| | 1,939 | | | Wells Fargo & Co. | | | 66,273 | |
| | | | | | | | 177,346 | |
| | | | | Capital Goods - 6.8% | | | | |
| | 168 | | | 3M Co. | | | 15,589 | |
| | 337 | | | AGCO Corp. ● | | | 16,534 | |
| | 321 | | | AMETEK, Inc. | | | 12,063 | |
| | 287 | | | Assa Abloy Ab | | | 10,790 | |
| | 278 | | | Belden, Inc. | | | 12,503 | |
| | 39 | | | Caterpillar, Inc. | | | 3,458 | |
| | 157 | | | Dover Corp. | | | 10,325 | |
| | 235 | | | Eaton Corp. plc | | | 12,753 | |
| | 55 | | | Fanuc Corp. | | | 10,140 | |
| | 66 | | | Flowserve Corp. | | | 9,760 | |
| | 139 | | | General Cable Corp. ● | | | 4,227 | |
| | 280 | | | General Electric Co. | | | 5,867 | |
| | 91 | | | Honeywell International, Inc. | | | 5,751 | |
| | 196 | | | Illinois Tool Works, Inc. | | | 11,913 | |
| | 5,890 | | | Itochu Corp. | | | 62,249 | |
| | 148 | | | Joy Global, Inc. | | | 9,433 | |
| | 1,426 | | | KBR, Inc. | | | 42,675 | |
| | 164 | | | Kennametal, Inc. | | | 6,560 | |
| | 133 | | | L-3 Communications Holdings, Inc. | | | 10,220 | |
| | 280 | | | Lockheed Martin Corp. | | | 25,880 | |
| | 1,510 | | | Meritor, Inc. ● | | | 7,144 | |
| | 383 | | | Northrop Grumman Corp. | | | 25,899 | |
| | 168 | | | Owens Corning, Inc. ● | | | 6,216 | |
| | 62 | | | Parker-Hannifin Corp. | | | 5,272 | |
| | 1,165 | | | Pentair Ltd. | | | 57,250 | |
| | 227 | | | Polypore International, Inc. ● | | | 10,549 | |
| | 312 | | | Rexel S.A. | | | 6,386 | |
| | 2,545 | | | Rolls-Royce Holdings plc | | | 36,507 | |
| | 954 | | | Safran S.A. | | | 41,335 | |
| | 152 | | | Schneider Electric S.A. | | | 11,152 | |
| | 99 | | | Siemens AG | | | 10,806 | |
| | 346 | | | SKF AB Class B | | | 8,762 | |
| | 142 | | | Stanley Black & Decker, Inc. | | | 10,496 | |
| | 100 | | | TransDigm Group, Inc. | | | 13,622 | |
| | 150 | | | United Technologies Corp. | | | 12,326 | |
| | 148 | | | Vallourec S.A. | | | 7,776 | |
| | 48 | | | Wabco Holdings, Inc. ● | | | 3,161 | |
| | 179 | | | WESCO International, Inc. ● | | | 12,056 | |
| | 21 | | | Zodiac Aerospace | | | 2,351 | |
| | | | | | | | 587,756 | |
| | | | | Commercial and Professional Services - 0.4% | | | | |
| | 169 | | | Edenred | | | 5,224 | |
| | 59 | | | IHS, Inc. ● | | | 5,616 | |
| | 275 | | | Knoll, Inc. | | | 4,219 | |
| | 468 | | | Manpower, Inc. | | | 19,845 | |
| | | | | | | | 34,904 | |
| | | | | Consumer Durables and Apparel - 1.4% | | | | |
| | 56 | | | Cie Financiere Richemont S.A. | | | 4,378 | |
| | 49 | | | Coach, Inc. | | | 2,728 | |
| | 555 | | | D.R. Horton, Inc. | | | 10,968 | |
| | 262 | | | Deckers Outdoor Corp. ● | | | 10,567 | |
| | 291 | | | De'Longhi S.p.A. | | | 4,189 | |
| | 1,364 | | | Fifth & Pacific Cos., Inc. ● | | | 16,979 | |
| | 80 | | | Fossil, Inc. ● | | | 7,476 | |
| | 1,400 | | | Furniture Brands International, Inc. ● | | | 1,484 | |
| | 210 | | | Hanesbrands, Inc. ● | | | 7,533 | |
| | 35 | | | Lululemon Athletica, Inc. ● | | | 2,649 | |
| | 7 | | | LVMH Moet Hennessy Louis Vuitton S.A. | | | 1,214 | |
| | 355 | | | Mattel, Inc. | | | 13,011 | |
| | 49 | | | PVH Corp. | | | 5,480 | |
| | 129 | | | Tempur-Pedic International, Inc. ● | | | 4,075 | |
| | 42 | | | Tumi Holdings, Inc. ● | | | 878 | |
| | 52 | | | V.F. Corp. | | | 7,911 | |
| | 408 | | | Vera Bradley, Inc. ● | | | 10,247 | |
| | 52 | | | Whirlpool Corp. | | | 5,283 | |
| | | | | | | | 117,050 | |
| | | | | Consumer Services - 1.7% | | | | |
| | 64 | | | Buffalo Wild Wings, Inc. ● | | | 4,631 | |
| | 501 | | | Burger King Worldwide, Inc. ● | | | 8,242 | |
| | 336 | | | Compass Group plc | | | 3,986 | |
| | 244 | | | DeVry, Inc. | | | 5,780 | |
| | 1,261 | | | Dunkin' Brands Group, Inc. | | | 41,834 | |
| | 459 | | | ITT Educational Services, Inc. ● | | | 7,940 | |
| | 1,578 | | | Sands China Ltd. § | | | 7,057 | |
| | 322 | | | Tim Hortons, Inc. | | | 15,822 | |
| | 799 | | | Wyndham Worldwide Corp. | | | 42,514 | |
| | 851 | | | Wynn Macau Ltd. | | | 2,343 | |
| | 145 | | | Yum! Brands, Inc. | | | 9,595 | |
| | | | | | | | 149,744 | |
| | | | | Diversified Financials - 7.3% | | | | |
| | 407 | | | Ameriprise Financial, Inc. | | | 25,469 | |
| | 10,495 | | | Bank of America Corp. | | | 121,741 | |
| | 280 | | | BlackRock, Inc. | | | 57,775 | |
| | 2,834 | | | Citigroup, Inc. | | | 112,105 | |
| | 507 | | | Credit Suisse Group AG | | | 12,370 | |
| | 234 | | | Discover Financial Services, Inc. | | | 9,017 | |
| | 374 | | | IntercontinentalExchange, Inc. ● | | | 46,268 | |
| | 392 | | | Invesco Ltd. | | | 10,227 | |
| | 4,382 | | | JP Morgan Chase & Co. | | | 192,686 | |
| | 147 | | | Julius Baer Group Ltd. | | | 5,242 | |
| | 557 | | | Nasdaq OMX Group, Inc. | | | 13,930 | |
| | 147 | | | Oaktree Capital Group LLC | | | 6,678 | |
| | 75 | | | Solar Cayman Ltd. ⌂■●�� | | | 5 | |
| | 370 | | | Waddell & Reed Financial, Inc. Class A | | | 12,894 | |
| | | | | | | | 626,407 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Capital Appreciation HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 98.1% - (continued) | |
| | | | | Energy - 10.7% | | | | |
| | 468 | | | Alpha Natural Resources, Inc. ● | | $ | 4,562 | |
| | 733 | | | Anadarko Petroleum Corp. | | | 54,436 | |
| | 45 | | | Apache Corp. | | | 3,499 | |
| | 266 | | | Atwood Oceanics, Inc. ● | | | 12,164 | |
| | 626 | | | Baker Hughes, Inc. | | | 25,556 | |
| | 4,694 | | | BG Group plc | | | 78,297 | |
| | 1,870 | | | BP plc ADR | | | 77,852 | |
| | 87 | | | Cabot Oil & Gas Corp. | | | 4,325 | |
| | 177 | | | Cameron International Corp. ● | | | 9,988 | |
| | 399 | | | Canadian Natural Resources Ltd. ADR | | | 11,530 | |
| | 2,273 | | | Chesapeake Energy Corp. | | | 37,782 | |
| | 151 | | | Chevron Corp. | | | 16,318 | |
| | 2,028 | | | Cobalt International Energy, Inc. ● | | | 49,801 | |
| | 228 | | | Consol Energy, Inc. | | | 7,320 | |
| | 105 | | | Diamond Offshore Drilling, Inc. | | | 7,120 | |
| | 1,236 | | | Ensco plc | | | 73,273 | |
| | 36 | | | EOG Resources, Inc. | | | 4,403 | |
| | 150 | | | Exxon Mobil Corp. | | | 13,000 | |
| | 916 | | | Halliburton Co. | | | 31,791 | |
| | 396 | | | Imperial Oil Ltd. | | | 17,019 | |
| | 1 | | | Inpex Corp. | | | 5,969 | |
| | 5,667 | | | JX Holdings, Inc. | | | 31,996 | |
| | 2,816 | | | Karoon Gas Australia Ltd. ● | | | 15,969 | |
| | 438 | | | Kior, Inc. ● | | | 2,811 | |
| | 660 | | | McDermott International, Inc. ● | | | 7,277 | |
| | 64 | | | National Oilwell Varco, Inc. | | | 4,379 | |
| | 926 | | | Newfield Exploration Co. ● | | | 24,790 | |
| | 511 | | | Occidental Petroleum Corp. | | | 39,148 | |
| | 182 | | | Patterson-UTI Energy, Inc. | | | 3,394 | |
| | 395 | | | Peabody Energy Corp. | | | 10,524 | |
| | 334 | | | Petroleo Brasileiro S.A. ADR | | | 6,503 | |
| | 53 | | | Pioneer Natural Resources Co. | | | 5,661 | |
| | 307 | | | QEP Resources, Inc. | | | 9,299 | |
| | 83 | | | Repsol S.A. - Rights | | | 51 | |
| | 275 | | | Royal Dutch Shell plc ADR | | | 19,324 | |
| | 790 | | | Southwestern Energy Co. ● | | | 26,387 | |
| | 299 | | | Statoil ASA | | | 7,527 | |
| | 368 | | | Superior Energy Services, Inc. ● | | | 7,623 | |
| | 1,463 | | | Tesoro Corp. | | | 64,442 | |
| | 358 | | | TGS Nopec Geophysical Co. ASA | | | 11,807 | |
| | 166 | | | Transocean, Inc. | | | 7,410 | |
| | 569 | | | Trican Well Service Ltd. | | | 7,508 | |
| | 180 | | | Tullow Oil plc | | | 3,756 | |
| | 1,280 | | | Uranium One, Inc. ● | | | 3,024 | |
| | 1,336 | | | Valero Energy Corp. | | | 45,599 | |
| | 276 | | | Whiting Petroleum Corp. ● | | | 11,968 | |
| | | | | | | | 924,182 | |
| | | | | Food and Staples Retailing - 2.3% | | | | |
| | 1,961 | | | CVS Caremark Corp. | | | 94,827 | |
| | 155 | | | FamilyMart Co., Ltd. | | | 6,365 | |
| | 2,864 | | | Kroger (The) Co. | | | 74,521 | |
| | 205 | | | Seven & I Holdings Co., Ltd. | | | 5,788 | |
| | 1,502 | | | Tesco plc | | | 8,272 | |
| | 168 | | | Wal-Mart Stores, Inc. | | | 11,436 | |
| | | | | | | | 201,209 | |
| | | | | Food, Beverage and Tobacco - 2.4% | | | | |
| | 252 | | | Archer-Daniels-Midland Co. | | | 6,900 | |
| | 167 | | | British American Tobacco plc | | | 8,494 | |
| | 329 | | | Coca-Cola Co. | | | 11,944 | |
| | 158 | | | Constellation Brands, Inc. Class A ● | | | 5,603 | |
| | 83 | | | Diageo plc ADR | | | 9,727 | |
| | 260 | | | General Mills, Inc. | | | 10,486 | |
| | 731 | | | Green Mountain Coffee Roasters, Inc. ● | | | 30,217 | |
| | 140 | | | Groupe Danone | | | 9,211 | |
| | 131 | | | Grupo Modelo S.A.B. de C.V. | | | 1,171 | |
| | 226 | | | Kraft Foods Group, Inc. ● | | | 10,270 | |
| | 739 | | | Maple Leaf Foods, Inc. w/ Rights | | | 8,896 | |
| | 1,689 | | | Marfig Frigorificos E Comer ●☼ | | | 6,994 | |
| | 328 | | | Molson Coors Brewing Co. | | | 14,026 | |
| | 475 | | | PepsiCo, Inc. | | | 32,535 | |
| | 381 | | | Philip Morris International, Inc. | | | 31,877 | |
| | 268 | | | Unilever N.V. NY Shares ADR | | | 10,245 | |
| | | | | | | | 208,596 | |
| | | | | Health Care Equipment and Services - 3.2% | | | | |
| | 368 | | | Aetna, Inc. | | | 17,057 | |
| | 480 | | | Boston Scientific Corp. ● | | | 2,753 | |
| | 648 | | | Cardinal Health, Inc. | | | 26,696 | |
| | 9,120 | | | CareView Communications, Inc. ● | | | 7,706 | |
| | 187 | | | Catamaran Corp. ● | | | 8,806 | |
| | 87 | | | Cie Generale d'Optique Essilor International S.A. | | | 8,742 | |
| | 167 | | | CIGNA Corp. | | | 8,928 | |
| | 610 | | | Covidien plc | | | 35,244 | |
| | 104 | | | Edwards Lifesciences Corp. ● | | | 9,399 | |
| | 32 | | | Heartware International, Inc. ● | | | 2,658 | |
| | 3,310 | | | Hologic, Inc. ● | | | 66,299 | |
| | 996 | | | Medtronic, Inc. | | | 40,838 | |
| | 260 | | | St. Jude Medical, Inc. | | | 9,393 | |
| | 158 | | | Team Health Holdings ● | | | 4,540 | |
| | 196 | | | UnitedHealth Group, Inc. | | | 10,621 | |
| | 313 | | | Universal Health Services, Inc. Class B | | | 15,129 | |
| | | | | | | | 274,809 | |
| | | | | Household and Personal Products - 0.2% | | | | |
| | 441 | | | Herbalife Ltd. | | | 14,512 | |
| | | | | | | | | |
| | | | | Insurance - 5.0% | | | | |
| | 297 | | | ACE Ltd. | | | 23,732 | |
| | 1,441 | | | Aflac, Inc. | | | 76,526 | |
| | 8,704 | | | AIA Group Ltd. | | | 34,523 | |
| | 5,084 | | | American International Group, Inc. ● | | | 179,455 | |
| | 103 | | | Aon plc | | | 5,716 | |
| | 800 | | | Assured Guaranty Ltd. | | | 11,390 | |
| | 691 | | | AXA S.A. | | | 12,413 | |
| | 2,258 | | | China Pacific Insurance Co., Ltd. | | | 8,512 | |
| | 512 | | | Marsh & McLennan Cos., Inc. | | | 17,645 | |
| | 328 | | | Principal Financial Group, Inc. | | | 9,364 | |
| | 237 | | | Reinsurance Group of America, Inc. | | | 12,703 | |
| | 114 | | | Swiss Re Ltd. | | | 8,258 | |
| | 880 | | | Unum Group | | | 18,319 | |
| | 38 | | | Zurich Financial Services AG | | | 10,191 | |
| | | | | | | | 428,747 | |
| | | | | Materials - 4.4% | | | | |
| | 190 | | | Agnico-Eagle Mines Ltd. | | | 9,973 | |
| | 120 | | | Air Liquide | | | 15,179 | |
| | 337 | | | Antofagasta plc | | | 7,379 | |
| | 562 | | | AuRico Gold, Inc. ● | | | 4,597 | |
| | 63 | | | Ball Corp. | | | 2,837 | |
| | 392 | | | Barrick Gold Corp. | | | 13,738 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 98.1% - (continued) | |
| | | | | Materials - 4.4% - (continued) | | | | |
| | 224 | | | Cabot Corp. | | $ | 8,924 | |
| | 269 | | | Celanese Corp. | | | 11,990 | |
| | 948 | | | Continental Gold Ltd. ● | | | 8,439 | |
| | 325 | | | CRH plc | | | 6,717 | |
| | 72 | | | Crown Holdings, Inc. ● | | | 2,643 | |
| | 596 | | | Dow Chemical Co. | | | 19,252 | |
| | 5,052 | | | Glencore International plc | | | 29,182 | |
| | 1,546 | | | International Paper Co. | | | 61,581 | |
| | 200 | | | JSR Corp. | | | 3,808 | |
| | 177 | | | KGHM Polska Miedz S.A. | | | 10,949 | |
| | 587 | | | Louisiana-Pacific Corp. ● | | | 11,350 | |
| | 1,359 | | | Lundin Mining Corp. ● | | | 6,994 | |
| | 573 | | | Methanex Corp. ADR | | | 18,266 | |
| | 779 | | | Molycorp, Inc. ● | | | 7,352 | |
| | 58 | | | Monsanto Co. | | | 5,534 | |
| | 391 | | | Mosaic Co. | | | 22,135 | |
| | 462 | | | Norbord, Inc. ● | | | 14,008 | |
| | 363 | | | PETRONAS Chemicals Group Berhad | | | 763 | |
| | 10,861 | | | PTT Chemical Public Co., Ltd. ● | | | 24,746 | |
| | 190 | | | Rio Tinto plc ADR | | | 11,031 | |
| | 97 | | | Rock Tenn Co. Class A | | | 6,782 | |
| | 170 | | | SunCoke Energy, Inc. ● | | | 2,652 | |
| | 1,634 | | | TSRC Corp. | | | 3,332 | |
| | 175 | | | Umicore S.A. | | | 9,705 | |
| | 341 | | | Walter Energy, Inc. | | | 12,232 | |
| | 35 | | | Yara International ASA | | | 1,749 | |
| | | | | | | | 375,819 | |
| | | | | Media - 2.5% | | | | |
| | 100 | | | AMC Networks, Inc. Class A ●‡ | | | 4,959 | |
| | 265 | | | CBS Corp. Class B | | | 10,076 | |
| | 222 | | | Comcast Corp. Class A | | | 8,308 | |
| | 665 | | | Gannett Co., Inc. | | | 11,968 | |
| | 30 | | | Harvey Weinstein Co. Holdings Class A-1 ⌂●†∞ | | | – | |
| | 76 | | | Liberty Global, Inc. ● | | | 4,817 | |
| | 686 | | | Omnicom Group, Inc. | | | 34,270 | |
| | 1,281 | | | Pandora Media, Inc. ● | | | 11,760 | |
| | 66 | | | Publicis Groupe | | | 3,962 | |
| | 1,885 | | | Sirius XM Radio, Inc. w/ Rights ● | | | 5,447 | |
| | 1,742 | | | Time Warner, Inc. | | | 83,335 | |
| | 367 | | | Walt Disney Co. | | | 18,271 | |
| | 1,388 | | | WPP plc | | | 20,272 | |
| | | | | | | | 217,445 | |
| | | | | Pharmaceuticals, Biotechnology and Life Sciences - 7.7% | | | | |
| | 926 | | | Agilent Technologies, Inc. | | | 37,925 | |
| | 199 | | | Alkermes plc ● | | | 3,686 | |
| | 771 | | | Almirall S.A. | | | 7,613 | |
| | 288 | | | Amgen, Inc. | | | 24,845 | |
| | 947 | | | Arena Pharmaceuticals, Inc. ● | | | 8,539 | |
| | 104 | | | Auxilium Pharmaceuticals, Inc. ● | | | 1,928 | |
| | 1,616 | | | AVANIR Pharmaceuticals, Inc. ● | | | 4,249 | |
| | 78 | | | Biogen Idec, Inc. ● | | | 11,440 | |
| | 335 | | | Bristol-Myers Squibb Co. | | | 10,905 | |
| | 278 | | | Bruker Corp. ● | | | 4,247 | |
| | 97 | | | Celgene Corp. ● | | | 7,674 | |
| | 96 | | | Covance, Inc. ● | | | 5,525 | |
| | 673 | | | Daiichi Sankyo Co., Ltd. | | | 10,330 | |
| | 256 | | | Elan Corp. plc ADR ● | | | 2,609 | |
| | 1,751 | | | Gilead Sciences, Inc. ● | | | 128,613 | |
| | 616 | | | Johnson & Johnson | | | 43,210 | |
| | 293 | | | Map Pharmaceuticals, Inc. ● | | | 4,597 | |
| | 1,610 | | | Merck & Co., Inc. | | | 65,924 | |
| | 146 | | | Novartis AG ADR | | | 9,251 | |
| | 8 | | | Onyx Pharmaceuticals, Inc. ● | | | 629 | |
| | 231 | | | Pfizer, Inc. | | | 5,793 | |
| | 6 | | | Prothena Corp. plc ● | | | 45 | |
| | 47 | | | Regeneron Pharmaceuticals, Inc. ● | | | 7,974 | |
| | 344 | | | Roche Holding AG | | | 69,602 | |
| | 59 | | | Salix Pharmaceuticals Ltd. ● | | | 2,400 | |
| | 858 | | | Shionogi & Co., Ltd. | | | 14,291 | |
| | 3,786 | | | Teva Pharmaceutical Industries Ltd. ADR | | | 141,353 | |
| | 2,667 | | | TherapeuticsMD, Inc. ● | | | 8,268 | |
| | 99 | | | Vertex Pharmaceuticals, Inc. ● | | | 4,135 | |
| | 75 | | | Watson Pharmaceuticals, Inc. ● | | | 6,424 | |
| | 631 | | | WuXi PharmaTech Cayman, Inc. ● | | | 9,940 | |
| | | | | | | | 663,964 | |
| | | | | Real Estate - 0.9% | | | | |
| | 397 | | | BR Malls Participacoes S.A. ☼ | | | 5,238 | |
| | 459 | | | CBRE Group, Inc. ● | | | 9,136 | |
| | 119 | | | Daito Trust Construction Co., Ltd. | | | 11,237 | |
| | 91 | | | Health Care, Inc. REIT | | | 5,565 | |
| | 429 | | | Host Hotels & Resorts, Inc. REIT | | | 6,717 | |
| | 643 | | | Sun Hung Kai Properties Ltd. | | | 9,758 | |
| | 64 | | | Unibail-Rodamco SE REIT | | | 15,604 | |
| | 1,232 | | | Westfield Group REIT | | | 13,609 | |
| | | | | | | | 76,864 | |
| | | | | Retailing - 6.9% | | | | |
| | 194 | | | Abercrombie & Fitch Co. Class A | | | 9,310 | |
| | 539 | | | Aeropostale, Inc. ● | | | 7,015 | |
| | 8,452 | | | Allstar LLC ⌂† | | | 11,919 | |
| | 79 | | | Amazon.com, Inc. ● | | | 19,892 | |
| | 474 | | | Ascena Retail Group, Inc. ● | | | 8,768 | |
| | 142 | | | AutoZone, Inc. ● | | | 50,294 | |
| | 159 | | | Bed Bath & Beyond, Inc. ● | | | 8,890 | |
| | 29,055 | | | Buck Holdings L.P. ⌂●† | | | 20,781 | |
| | 137 | | | Buckle (The), Inc. | | | 6,117 | |
| | 255 | | | CarMax, Inc. ● | | | 9,582 | |
| | 445 | | | Chico's FAS, Inc. | | | 8,211 | |
| | 146 | | | Dick's Sporting Goods, Inc. | | | 6,621 | |
| | 221 | | | Dollar Tree, Inc. ● | | | 8,972 | |
| | 84 | | | Dollarama, Inc. | | | 4,984 | |
| | 64 | | | DSW, Inc. | | | 4,236 | |
| | 642 | | | Express, Inc. ● | | | 9,686 | |
| | 733 | | | Family Dollar Stores, Inc. | | | 46,463 | |
| | 213 | | | Francescas Holding Corp. ● | | | 5,517 | |
| | 390 | | | GameStop Corp. Class A | | | 9,780 | |
| | 108 | | | HomeAway, Inc. ● | | | 2,376 | |
| | 2,601 | | | J.C. Penney Co., Inc. | | | 51,263 | |
| | 157 | | | Kohl's Corp. | | | 6,754 | |
| | 1,661 | | | Liberty Media - Interactive A ● | | | 32,681 | |
| | 356 | | | LKQ Corp. ● | | | 7,501 | |
| | 1,872 | | | Lowe's Co., Inc. | | | 66,511 | |
| | 39 | | | Netflix, Inc. ● | | | 3,594 | |
| | 94 | | | Priceline.com, Inc. ● | | | 58,101 | |
| | 3,998 | | | Staples, Inc. | | | 45,579 | |
| | 319 | | | Start Today Co., Ltd. | | | 2,952 | |
| | 289 | | | Target Corp. | | | 17,071 | |
| | 787 | | | TJX Cos., Inc. | | | 33,397 | |
| | 151 | | | TripAdvisor, Inc. ● | | | 6,327 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Capital Appreciation HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 98.1% - (continued) | |
| | | | | Retailing - 6.9% - (continued) | | | | |
| | 153 | | | Urban Outfitters, Inc. ● | | $ | 6,033 | |
| | | | | | | | 597,178 | |
| | | | | Semiconductors and Semiconductor Equipment - 1.8% | | | | |
| | 209 | | | Altera Corp. | | | 7,198 | |
| | 375 | | | Analog Devices, Inc. | | | 15,777 | |
| | 398 | | | ASML Holding N.V. | | | 25,661 | |
| | 289 | | | First Solar, Inc. ● | | | 8,937 | |
| | 1,796 | | | GT Advanced Technologies, Inc. ● | | | 5,424 | |
| | 798 | | | Intel Corp. | | | 16,465 | |
| | 772 | | | Marvell Technology Group Ltd. ● | | | 5,602 | |
| | 180 | | | Maxim Integrated Products, Inc. | | | 5,283 | |
| | 1,736 | | | Micron Technology, Inc. ● | | | 11,026 | |
| | 1,019 | | | RF Micro Devices, Inc. ● | | | 4,565 | |
| | 2 | | | Samsung Electronics Co., Ltd. | | | 2,773 | |
| | 2,454 | | | Taiwan Semiconductor Manufacturing Co., Ltd. | | | 8,208 | |
| | 1,937 | | | Teradyne, Inc. ● | | | 32,719 | |
| | 270 | | | Xilinx, Inc. | | | 9,686 | |
| | | | | | | | 159,324 | |
| | | | | Software and Services - 9.6% | | | | |
| | 130 | | | Accenture plc | | | 8,652 | |
| | 1,101 | | | Activision Blizzard, Inc. | | | 11,695 | |
| | 347 | | | Akamai Technologies, Inc. ● | | | 14,181 | |
| | 1,223 | | | Amadeus IT Holding S.A. Class A | | | 30,913 | |
| | 222 | | | Automatic Data Processing, Inc. | | | 12,683 | |
| | 96 | | | BMC Software, Inc. ● | | | 3,821 | |
| | 528 | | | Booz Allen Hamilton Holding Corp. | | | 7,350 | |
| | 673 | | | Cadence Design Systems, Inc. ● | | | 9,097 | |
| | 497 | | | Check Point Software Technologies Ltd. ADR ● | | | 23,693 | |
| | 96 | | | Concur Technologies, Inc. ● | | | 6,515 | |
| | 132 | | | DeNa Co., Ltd. | | | 4,333 | |
| | 218 | | | Dropbox, Inc. ⌂●† | | | 1,854 | |
| | 311 | | | eBay, Inc. ● | | | 15,879 | |
| | 28 | | | Equinix, Inc. ● | | | 5,784 | |
| | 1,625 | | | Facebook, Inc. ● | | | 43,282 | |
| | 2,422 | | | Genpact Ltd. | | | 37,540 | |
| | 217 | | | Global Payments, Inc. | | | 9,843 | |
| | 163 | | | Google, Inc. ● | | | 115,398 | |
| | 469 | | | IAC/InterActiveCorp. | | | 22,179 | |
| | 41 | | | IBM Corp. | | | 7,843 | |
| | 593 | | | iGate Corp. ● | | | 9,352 | |
| | 87 | | | Imperva, Inc. ● | | | 2,745 | |
| | 115 | | | Kakaku.com, Inc. | | | 3,793 | |
| | 137 | | | LinkedIn Corp. Class A ● | | | 15,721 | |
| | 142 | | | Micros Systems ● | | | 6,020 | |
| | 3,949 | | | Microsoft Corp. | | | 105,551 | |
| | 4,207 | | | Oracle Corp. | | | 140,167 | |
| | 163 | | | Rovi Corp. ● | | | 2,517 | |
| | 61 | | | Salesforce.com, Inc. ● | | | 10,296 | |
| | 258 | | | ServiceNow, Inc. ● | | | 7,760 | |
| | 345 | | | Splunk, Inc. ● | | | 10,008 | |
| | 67 | | | Teradata Corp. ● | | | 4,146 | |
| | 213 | | | Tibco Software, Inc. ● | | | 4,682 | |
| | 344 | | | TiVo, Inc. ● | | | 4,241 | |
| | 715 | | | Velti plc ● | | | 3,217 | |
| | 630 | | | VeriFone Systems, Inc. ● | | | 18,703 | |
| | 64 | | | Visa, Inc. | | | 9,716 | |
| | 336 | | | Web.com Group, Inc. ● | | | 4,980 | |
| | 2,474 | | | Western Union Co. | | | 33,673 | |
| | 152 | | | WEX, Inc. | | | 11,456 | |
| | 11 | | | Workday, Inc. Class A ● | | | 615 | |
| | 1,427 | | | Yahoo!, Inc. ● | | | 28,394 | |
| | | | | | | | 830,288 | |
| | | | | Technology Hardware and Equipment - 7.3% | | | | |
| | 690 | | | Acme Packet, Inc. ● | | | 15,254 | |
| | 1,886 | | | Alcatel - Lucent ADR ● | | | 2,622 | |
| | 313 | | | Apple, Inc. | | | 166,707 | |
| | 264 | | | Arrow Electronics, Inc. ● | | | 10,053 | |
| | 155 | | | Canon, Inc. | | | 5,992 | |
| | 2,651 | | | Ciena Corp. ● | | | 41,625 | |
| | 11,814 | | | Cisco Systems, Inc. | | | 232,152 | |
| | 817 | | | EMC Corp. ● | | | 20,660 | |
| | 257 | | | Emulex Corp. ● | | | 1,874 | |
| | 1,647 | | | Flextronics International Ltd. ● | | | 10,225 | |
| | 296 | | | Hewlett-Packard Co. | | | 4,214 | |
| | 6,323 | | | Hon Hai Precision Industry Co., Ltd. | | | 19,573 | |
| | 1,558 | | | JDS Uniphase Corp. ● | | | 21,096 | |
| | 1,248 | | | Juniper Networks, Inc. ● | | | 24,542 | |
| | 5,915 | | | Legend Holdings Ltd. | | | 5,454 | |
| | 98 | | | National Instruments Corp. | | | 2,524 | |
| | 395 | | | NetApp, Inc. ● | | | 13,249 | |
| | 13 | | | Palo Alto Networks, Inc. ● | | | 706 | |
| | 444 | | | QLogic Corp. ● | | | 4,323 | |
| | 78 | | | Qualcomm, Inc. | | | 4,836 | |
| | 207 | | | SanDisk Corp. ● | | | 9,013 | |
| | 210 | | | Seagate Technology plc | | | 6,398 | |
| | 111 | | | Trimble Navigation Ltd. ● | | | 6,648 | |
| | 152 | | | Universal Display Corp. ● | | | 3,895 | |
| | | | | | | | 633,635 | |
| | | | | Telecommunication Services - 0.9% | | | | |
| | 269 | | | AT&T, Inc. | | | 9,061 | |
| | 349 | | | SoftBank Corp. | | | 12,790 | |
| | 500 | | | Telefonica S.A. | | | 6,764 | |
| | 397 | | | Telenor ASA | | | 8,088 | |
| | 1,307 | | | Vivendi S.A. | | | 29,551 | |
| | 364 | | | Vodafone Group plc ADR | | | 9,161 | |
| | | | | | | | 75,415 | |
| | | | | Transportation - 6.3% | | | | |
| | 21,302 | | | AirAsia Berhad | | | 19,167 | |
| | 108 | | | Canadian National Railway Co. | | | 9,762 | |
| | 680 | | | CSX Corp. | | | 13,417 | |
| | 7,450 | | | Delta Air Lines, Inc. ● | | | 88,437 | |
| | 322 | | | FedEx Corp. | | | 29,552 | |
| | 6,535 | | | Hertz Global Holdings, Inc. ● | | | 106,316 | |
| | 5,745 | | | JetBlue Airways Corp. ● | | | 32,806 | |
| | 702 | | | Knight Transportation, Inc. | | | 10,263 | |
| | 359 | | | Spirit Airlines, Inc. ● | | | 6,358 | |
| | 1,361 | | | Toll Holdings Ltd. | | | 6,525 | |
| | 165 | | | Union Pacific Corp. | | | 20,794 | |
| | 6,716 | | | United Continental Holdings, Inc. ● | | | 157,012 | |
| | 634 | | | United Parcel Service, Inc. Class B | | | 46,750 | |
| | | | | | | | 547,159 | |
| | | | | Utilities - 0.8% | | | | |
| | 364 | | | Companhia Energetica de Minas Gerais ADR | | | 3,950 | |
| | 215 | | | Entergy Corp. | | | 13,714 | |
| | 1,293 | | | Snam S.p.A. | | | 6,037 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 98.1% - (continued) | | | | |
| | | | | Utilities - 0.8% - (continued) | | | | |
| | 649 | | | UGI Corp. | | $ | 21,240 | |
| | 766 | | | Xcel Energy, Inc. | | | 20,460 | |
| | | | | | | | 65,401 | |
| | | | | Total common stocks | | | | |
| | | | | (cost $7,911,608) | | $ | 8,460,597 | |
| | | | | | | | | |
| WARRANTS - 0.0% | | | | |
| | | | | Pharmaceuticals, Biotechnology and Life Sciences - 0.0% | | | | |
| | 510 | | | Novavax, Inc. ⌂● | | $ | — | |
| | | | | | | | | |
| | | | | Total warrants | | | | |
| | | | | (cost $–) | | $ | — | |
| | | | | | | | | |
| EXCHANGE TRADED FUNDS - 0.0% | | | | |
| | | | | Diversified Financials - 0.0% | | | | |
| | 102 | | | Ishares Russell 3000 Growth | | $ | 5,459 | |
| | | | | | | | | |
| | | | | Total exchange traded funds | | | | |
| | | | | (cost $5,397) | | $ | 5,459 | |
| | | | | | | | | |
| CORPORATE BONDS - 0.1% | | | | |
| | | | | Finance and Insurance - 0.1% | | | | |
| | | | | MBIA Insurance Co. | | | | |
| $ | 53,500 | | | 14.00%, 01/15/2033 ■Δ | | $ | 9,095 | |
| | | | | | | | | |
| | | | | Total corporate bonds | | | | |
| | | | | (cost $53,141) | | $ | 9,095 | |
| | | | | | | | | |
| | | | | Total long-term investments | | | | |
| | | | | (cost $7,970,146) | | $ | 8,475,151 | |
| | | | | | | | | |
| SHORT-TERM INVESTMENTS - 1.8% | | | | |
| Repurchase Agreements - 1.8% | | | | |
| | | | | Bank of America Merrill Lynch TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $3,469,
collateralized by FHLMC 3.00%, 2042,
FNMA 4.00%, 2042, value of $3,539) | | | | |
| $ | 3,469 | | | 0.19%, 12/31/2012 | | $ | 3,469 | |
| | | | | Bank of Montreal TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $24,663, collateralized by
FHLMC 2.50% - 5.50%, 2019 - 2042,
FNMA 0.76% - 6.11%, 2016 - 2042,
GNMA 3.50%, 2042, value of $25,156) | | | | |
| | 24,663 | | | 0.23%, 12/31/2012 | | | 24,663 | |
| | | | | Barclays Capital TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $7,716, collateralized by U.S.
Treasury Note 2.00% - 2.13%, 2016, value
of $7,870) | | | | |
| | 7,716 | | | 0.20%, 12/31/2012 | | | 7,716 | |
| | | | | Citigroup Global Markets, Inc. TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $48,588,
collateralized by U.S. Treasury Note
1.88% - 4.13%, 2015 - 2018, value of
$49,560) | | | | |
| | 48,588 | | | 0.17%, 12/31/2012 | | | | | | | 48,588 | |
| | | | | Deutsche Bank Securities TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $1,001,
collateralized by FNMA 3.00%, 2032,
value of $1,021) | | | | | | | | |
| 1,001 | | | 0.25%, 12/31/2012 | | | | | | | 1,001 | |
| | | | | RBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $34,187, collateralized by U.S.
Treasury Note 0.50% - 2.75%, 2013 -
2019, value of $34,870) | | | | | | | | |
| | 34,186 | | | 0.20%, 12/31/2012 | | | | | | | 34,186 | |
| | | | | TD Securities TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $29,930, collateralized by
FHLMC 3.50% - 6.00%, 2036 - 2042,
FNMA 0.22% - 5.50%, 2013 - 2042, value
of $30,529) | | | | | | | | |
| | 29,930 | | | 0.21%, 12/31/2012 | | | | | | | 29,930 | |
| | | | | UBS Securities, Inc. Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$576, collateralized by U.S. Treasury Bill
0.75%, 2013, value of $591) | | | | | | | | |
| | 576 | | | 0.17%, 12/31/2012 | | | | | | | 576 | |
| | | | | UBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $2,041, collateralized by
FNMA 2.50%, 2027, GNMA 3.00%,
2042, value of $2,082) | | | | | | | | |
| | 2,041 | | | 0.25%, 12/31/2012 | | | | | | | 2,041 | |
| | | | | | | | | | | | 152,170 | |
| | | | | Total short-term investments | | | | | | | | |
| | | | | (cost $152,170) | | | | | | $ | 152,170 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $8,122,316) ▲ | | | 100.0 | % | | $ | 8,627,321 | |
| | | | | Other assets and liabilities | | | — | % | | | (2,011 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 8,625,310 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Capital Appreciation HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
Prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for factors occurring after the close of certain foreign markets but before the close of the New York Stock Exchange.
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $8,292,774 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 874,483 | |
| Unrealized Depreciation | | | (539,936 | ) |
| Net Unrealized Appreciation | | $ | 334,547 | |
| † | These securities were valued in good faith at fair value as determined under policies and procedures established by and under the supervision of the Company's Board of Directors. At December 31, 2012, the aggregate value of these securities was $34,559, which represents 0.4% of total net assets. This amount excludes securities that are principally traded in certain foreign markets and whose prices are adjusted pursuant to a third party pricing service methodology approved by the Board of Directors. |
| Δ | Variable rate securities; the rate reported is the coupon rate in effect at December 31, 2012. |
| ■ | Securities issued within terms of a private placement memorandum, exempt from registration under Rule 144A under the Securities Act of 1933, as amended, and may be sold only to qualified institutional buyers. Unless otherwise indicated, these issues are determined to be liquid. At December 31, 2012, the aggregate value of these securities was $9,100, which represents 0.1% of total net assets. |
| § | These securities were sold to the Fund under Regulation S, rules governing offers and sales made outside the United States without registration under the Securities Act of 1933. The Fund may only be able to resell these securities in the United States if an exemption from registration under the federal and state securities laws is available, or the Fund may only be able to sell these securities outside of the United States (such as on a foreign exchange) to a non-U.S. person. Unless otherwise indicated, these holdings are determined to be liquid. At December 31, 2012, the aggregate value of these securities was $7,057, which represents 0.1% of total net assets. |
| ∞ | Securities exempt from registration under Regulation D of the Securities Act of 1933. The Fund may only be able to resell these securities if they are subsequently registered or if an exemption from registration under the federal and state securities laws is available. Unless otherwise indicated, these holdings are determined to be liquid. At December 31, 2012, the aggregate value and percentage of net assets of these securities rounds to zero. |
| ⌂ | The following securities are considered illiquid. Illiquid securities are often purchased in private placement transactions, are often not registered under the Securities Act of 1933 and may have contractual restrictions on resale. A security may also be considered illiquid if the security lacks a readily available market or if its valuation has not changed for a certain period of time. |
| Period Acquired | | Shares/ Par | | | Security | | Cost Basis | |
| 08/2011 | | | 8,452 | | | Allstar LLC | | $ | 4,994 | |
| 06/2007 | | | 29,055 | | | Buck Holdings L.P. | | | 5,148 | |
| 05/2012 | | | 218 | | | Dropbox, Inc. | | | 1,972 | |
| 10/2005 | | | 30 | | | Harvey Weinstein Co. Holdings Class A-1 - Reg D | | | 27,951 | |
| 07/2008 | | | 510 | | | Novavax, Inc. Warrants | | | – | |
| 03/2007 | | | 75 | | | Solar Cayman Ltd. - 144A | | | 22 | |
At December 31, 2012, the aggregate value of these securities was $34,559, which represents 0.4% of total net assets.
| ☼ | This security, or a portion of this security, was purchased on a when-issued, delayed-delivery or delayed-draw basis. The cost of these securities was $582 at December 31, 2012. |
| ‡ | This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future. |
The accompanying notes are an integral part of these financial statements.
Foreign Currency Contracts Outstanding at December 31, 2012
| Currency | | | Buy / Sell | | Delivery Date | | Counterparty | | | Contract Amount | | | Market Value ╪ | | | Unrealized
Appreciation/
(Depreciation) | |
| AUD | | | Buy | | 01/03/2013 | | | BCLY | | | $ | 274 | | | $ | 274 | | | $ | – | |
| AUD | | | Buy | | 01/02/2013 | | | UBS | | | | 155 | | | | 155 | | | | – | |
| BRL | | | Buy | | 01/02/2013 | | | JPM | | | | 478 | | | | 476 | | | | (2 | ) |
| BRL | | | Buy | | 01/03/2013 | | | JPM | | | | 105 | | | | 105 | | | | – | |
| CAD | | | Sell | | 01/02/2013 | | | BCLY | | | | 63 | | | | 63 | | | | – | |
| CAD | | | Sell | | 01/03/2013 | | | JPM | | | | 73 | | | | 73 | | | | – | |
| EUR | | | Sell | | 01/02/2013 | | | UBS | | | | 1,765 | | | | 1,761 | | | | 4 | |
| HKD | | | Buy | | 01/03/2013 | | | DEUT | | | | 80 | | | | 80 | | | | – | |
| HKD | | | Buy | | 01/02/2013 | | | SCB | | | | 750 | | | | 750 | | | | – | |
| JPY | | | Sell | | 12/12/2013 | | | BCLY | | | | 51,668 | | | | 51,582 | | | | 86 | |
| JPY | | | Sell | | 12/12/2013 | | | CSFB | | | | 24,580 | | | | 24,583 | | | | (3 | ) |
| JPY | | | Sell | | 12/12/2013 | | | DEUT | | | | 36,088 | | | | 34,267 | | | | 1,821 | |
| JPY | | | Sell | | 12/12/2013 | | | GSC | | | | 24,598 | | | | 24,583 | | | | 15 | |
| JPY | | | Sell | | 12/12/2013 | | | MSC | | | | 36,063 | | | | 34,267 | | | | 1,796 | |
| | | | | | | | | | | | | | | | | | | | $ | 3,717 | |
| | ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
| GLOSSARY: (abbreviations used in preceding Schedule of Investments) |
| |
| Counterparty Abbreviations: |
| BCLY | Barclays |
| CSFB | Credit Suisse First Boston Corp. |
| DEUT | Deutsche Bank Securities, Inc. |
| GSC | Goldman Sachs & Co. |
| JPM | JP Morgan Chase & Co. |
| MSC | Morgan Stanley |
| SCB | Standard Chartered Bank |
| UBS | UBS AG |
| |
| Currency Abbreviations: |
| AUD | Australian Dollar |
| BRL | Brazilian Real |
| CAD | Canadian Dollar |
| EUR | EURO |
| HKD | Hong Kong Dollar |
| JPY | Japanese Yen |
| |
| Other Abbreviations: |
| ADR | American Depositary Receipt |
| FHLMC | Federal Home Loan Mortgage Corp. |
| FNMA | Federal National Mortgage Association |
| GNMA | Government National Mortgage Association |
| REIT | Real Estate Investment Trust |
The accompanying notes are an integral part of these financial statements.
| Hartford Capital Appreciation HLS Fund |
| Investment Valuation Hierarchy Level Summary |
| December 31, 2012 |
| (000’s Omitted) |
| | | Total | | | Level 1 ♦ | | | Level 2 ♦ | | | Level 3 | |
| Assets: | | | | | | | | | | | | | | | | |
| Common Stocks | | | | | | | | | | | | | | | | |
| Automobiles and Components | | $ | 472,843 | | | $ | 417,966 | | | $ | 54,877 | | | $ | – | |
| Banks | | | 177,346 | | | | 132,145 | | | | 45,201 | | | | – | |
| Capital Goods | | | 587,756 | | | | 379,502 | | | | 208,254 | | | | – | |
| Commercial and Professional Services | | | 34,904 | | | | 29,680 | | | | 5,224 | | | | – | |
| Consumer Durables and Apparel | | | 117,050 | | | | 107,269 | | | | 9,781 | | | | – | |
| Consumer Services | | | 149,744 | | | | 136,358 | | | | 13,386 | | | | – | |
| Diversified Financials | | | 626,407 | | | | 608,790 | | | | 17,612 | | | | 5 | |
| Energy | | | 924,182 | | | | 768,861 | | | | 155,321 | | | | – | |
| Food and Staples Retailing | | | 201,209 | | | | 180,784 | | | | 20,425 | | | | – | |
| Food, Beverage and Tobacco | | | 208,596 | | | | 200,102 | | | | 8,494 | | | | – | |
| Health Care Equipment and Services | | | 274,809 | | | | 266,067 | | | | 8,742 | | | | – | |
| Household and Personal Products | | | 14,512 | | | | 14,512 | | | | – | | | | – | |
| Insurance | | | 428,747 | | | | 354,850 | | | | 73,897 | | | | – | |
| Materials | | | 375,819 | | | | 262,310 | | | | 113,509 | | | | – | |
| Media | | | 217,445 | | | | 193,211 | | | | 24,234 | | | | – | |
| Pharmaceuticals, Biotechnology and Life Sciences | | | 663,964 | | | | 562,128 | | | | 101,836 | | | | – | |
| Real Estate | | | 76,864 | | | | 26,656 | | | | 50,208 | | | | – | |
| Retailing | | | 597,178 | | | | 564,478 | | | | – | | | | 32,700 | |
| Semiconductors and Semiconductor Equipment | | | 159,324 | | | | 148,343 | | | | 10,981 | | | | – | |
| Software and Services | | | 830,288 | | | | 793,728 | | | | 34,706 | | | | 1,854 | |
| Technology Hardware and Equipment | | | 633,635 | | | | 602,616 | | | | 31,019 | | | | – | |
| Telecommunication Services | | | 75,415 | | | | 18,222 | | | | 57,193 | | | | – | |
| Transportation | | | 547,159 | | | | 521,467 | | | | 25,692 | | | | – | |
| Utilities | | | 65,401 | | | | 59,364 | | | | 6,037 | | | | – | |
| Total | | | 8,460,597 | | | | 7,349,409 | | | | 1,076,629 | | | | 34,559 | |
| Corporate Bonds | | | 9,095 | | | | – | | | | 9,095 | | | | – | |
| Exchange Traded Funds | | | 5,459 | | | | 5,459 | | | | – | | | | – | |
| Warrants | | | – | | | | – | | | | – | | | | – | |
| Short-Term Investments | | | 152,170 | | | | – | | | | 152,170 | | | | – | |
| Total | | $ | 8,627,321 | | | $ | 7,354,868 | | | $ | 1,237,894 | | | $ | 34,559 | |
| Foreign Currency Contracts* | | | 3,722 | | | | – | | | | 3,722 | | | | – | |
| Total | | $ | 3,722 | | | $ | – | | | $ | 3,722 | | | $ | – | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Foreign Currency Contracts* | | | 5 | | | | – | | | | 5 | | | | – | |
| Total | | $ | 5 | | | $ | – | | | $ | 5 | | | $ | – | |
| ♦ | For the year ended December 31, 2012, investments valued at $7,743 were transferred from Level 1 to Level 2, and investments valued at $18,824 were transferred from Level 2 to Level 1. Investments are transferred between Level 1 and Level 2 for a variety of reasons including, but not limited to: |
| 1) | Foreign equities for which a fair value price is more representative of exit value than the local market close (transfer into Level 2). Foreign equities for which the local market close is more representative of exit value (transfer into Level 1). |
| 2) | U.S. Treasury securities that no longer represent the most recent issue (transfer into Level 2). |
| 3) | Equity investments with no observable trading but a bid or close price is used (transfer into Level 2). Equity investments using observable quoted prices in an active market (transfer into Level 1). |
| * | Derivative instruments not reflected in the Schedule of Investments are valued at the unrealized appreciation/depreciation on the investments. |
The accompanying notes are an integral part of these financial statements.
Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:
| | | Balance
as of
December
31, 2011 | | | Realized
Gain
(Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Net
Amortization | | | Purchases | | | Sales | | | Transfers
Into
Level 3 * | | | Transfers
Out of
Level 3 * | | | Balance
as of
December
31, 2012 | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stocks | | $ | 79,825 | | | $ | 12,592 | | | $ | 7,121 | † | | $ | — | | | $ | 69,199 | | | $ | (128,814 | ) | | $ | — | | | $ | (5,364 | ) | | $ | 34,559 | |
| Total | | $ | 79,825 | | | $ | 12,592 | | | $ | 7,121 | | | $ | — | | | $ | 69,199 | | | $ | (128,814 | ) | | $ | — | | | $ | (5,364 | ) | | $ | 34,559 | |
| * | Investments are transferred into and out of Level 3 for a variety of reasons including, but not limited to: |
| 1) | Investments where trading has been halted (transfer into Level 3) or investments where trading has resumed (transfer out of Level 3). |
| 2) | Broker quoted investments (transfer into Level 3) or quoted prices in active markets (transfer out of Level 3). |
| 3) | Investments that have certain restrictions on trading (transfer into Level 3) or investments where trading restrictions have expired (transfer out of Level 3). |
| † | Change in unrealized appreciation (depreciation) in the current period relating to assets still held at December 31, 2012 was $(25,599). |
The accompanying notes are an integral part of these financial statements.
| Hartford Capital Appreciation HLS Fund |
| Statement of Assets and Liabilities |
| December 31, 2012 |
| (000’s Omitted) |
| Assets: | | | | |
| Investments in securities, at market value (cost $8,122,316) | | $ | 8,627,321 | |
| Cash | | | 1,592 | |
| Foreign currency on deposit with custodian (cost $62) | | | 61 | |
| Unrealized appreciation on foreign currency contracts | | | 3,722 | |
| Receivables: | | | | |
| Investment securities sold | | | 43,919 | |
| Fund shares sold | | | 568 | |
| Dividends and interest | | | 7,979 | |
| Other assets | | | — | |
| Total assets | | | 8,685,162 | |
| Liabilities: | | | | |
| Unrealized depreciation on foreign currency contracts | | | 5 | |
| Payables: | | | | |
| Investment securities purchased | | | 45,399 | |
| Fund shares redeemed | | | 13,045 | |
| Investment management fees | | | 1,030 | |
| Distribution fees | | | 42 | |
| Accrued expenses | | | 331 | |
| Total liabilities | | | 59,852 | |
| Net assets | | $ | 8,625,310 | |
| Summary of Net Assets: | | | | |
| Capital stock and paid-in-capital | | $ | 8,725,339 | |
| Distributions in excess of net investment loss | | | (2,150 | ) |
| Accumulated net realized loss | | | (606,593 | ) |
| Unrealized appreciation of investments and the translations of assets and liabilities denominated in foreign currency | | | 508,714 | |
| Net assets | | $ | 8,625,310 | |
| Shares authorized | | | 5,000,000 | |
| Par value | | $ | 0.001 | |
| Class IA: Net asset value per share | | $ | 43.37 | |
| Shares outstanding | | | 178,701 | |
| Net assets | | $ | 7,750,924 | |
| Class IB: Net asset value per share | | $ | 43.05 | |
| Shares outstanding | | | 20,312 | |
| Net assets | | $ | 874,386 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Capital Appreciation HLS Fund |
| Statement of Operations |
| For the Year Ended December 31, 2012 |
| (000’s Omitted) |
| Investment Income: | | | | |
| Dividends | | $ | 171,634 | |
| Interest | | | 7,807 | |
| Less: Foreign tax withheld | | | (5,270 | ) |
| Total investment income, net | | | 174,171 | |
| | | | | |
| Expenses: | | | | |
| Investment management fees | | | 57,617 | |
| Transfer agent fees | | | 6 | |
| Distribution fees - Class IB | | | 2,641 | |
| Custodian fees | | | 197 | |
| Accounting services fees | | | 1,564 | |
| Board of Directors' fees | | | 253 | |
| Audit fees | | | 77 | |
| Other expenses | | | 1,167 | |
| Total expenses (before fees paid indirectly) | | | 63,522 | |
| Commission recapture | | | (442 | ) |
| Total fees paid indirectly | | | (442 | ) |
| Total expenses, net | | | 63,080 | |
| Net Investment Income | | | 111,091 | |
| | | | | |
| Net Realized Gain on Investments and Foreign Currency Transactions: | | | | |
| Net realized gain on investments | | | 514,307 | |
| Net realized loss on purchased options | | | (866 | ) |
| Net realized gain on foreign currency contracts | | | 11,712 | |
| Net realized gain on other foreign currency transactions | | | 906 | |
| Net Realized Gain on Investments and Foreign Currency Transactions | | | 526,059 | |
| | | | | |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions: | | | | |
| Net unrealized appreciation of investments | | | 905,838 | |
| Net unrealized appreciation of foreign currency contracts | | | 15,577 | |
| Net unrealized depreciation on translation of other assets and liabilities in foreign currencies | | | (158 | ) |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions | | | 921,257 | |
| Net Gain on Investments and Foreign Currency Transactions | | | 1,447,316 | |
| Net Increase in Net Assets Resulting from Operations | | $ | 1,558,407 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Capital Appreciation HLS Fund |
| Statement of Changes in Net Assets |
| |
| (000’s Omitted) |
| | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| Operations: | | | | | | | | |
| Net investment income | | $ | 111,091 | | | $ | 90,518 | |
| Net realized gain on investments and foreign currency transactions | | | 526,059 | | | | 750,977 | |
| Net unrealized appreciation (depreciation) of investments and foreign currency transactions | | | 921,257 | | | | (1,939,769 | ) |
| Net Increase (Decrease) in Net Assets Resulting from Operations | | | 1,558,407 | | | | (1,098,274 | ) |
| Distributions to Shareholders: | | | | | | | | |
| From net investment income | | | | | | | | |
| Class IA | | | (113,065 | ) | | | (71,587 | ) |
| Class IB | | | (10,365 | ) | | | (6,414 | ) |
| Total distributions | | | (123,430 | ) | | | (78,001 | ) |
| Capital Share Transactions: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 251,349 | | | | 1,967,235 | |
| Issued on reinvestment of distributions | | | 113,065 | | | | 71,587 | |
| Redeemed | | | (2,056,141 | ) | | | (1,742,622 | ) |
| Total capital share transactions | | | (1,691,727 | ) | | | 296,200 | |
| Class IB | | | | | | | | |
| Sold | | | 60,463 | | | | 100,885 | |
| Issued on reinvestment of distributions | | | 10,365 | | | | 6,414 | |
| Redeemed | | | (460,000 | ) | | | (368,116 | ) |
| Total capital share transactions | | | (389,172 | ) | | | (260,817 | ) |
| Net increase (decrease) from capital share transactions | | | (2,080,899 | ) | | | 35,383 | |
| Net Decrease in Net Assets | | | (645,922 | ) | | | (1,140,892 | ) |
| Net Assets: | | | | | | | | |
| Beginning of period | | | 9,271,232 | | | | 10,412,124 | |
| End of period | | $ | 8,625,310 | | | $ | 9,271,232 | |
| Undistributed (distribution in excess of) net investment income | | $ | (2,150 | ) | | $ | 5,962 | |
| Shares: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 6,122 | | | | 50,481 | |
| Issued on reinvestment of distributions | | | 2,632 | | | | 1,944 | |
| Redeemed | | | (49,673 | ) | | | (42,673 | ) |
| Total share activity | | | (40,919 | ) | | | 9,752 | |
| Class IB | | | | | | | | |
| Sold | | | 1,472 | | | | 2,434 | |
| Issued on reinvestment of distributions | | | 243 | | | | 176 | |
| Redeemed | | | (11,267 | ) | | | (8,988 | ) |
| Total share activity | | | (9,552 | ) | | | (6,378 | ) |
The accompanying notes are an integral part of these financial statements.
| Hartford Capital Appreciation HLS Fund |
| Notes to Financial Statements |
| December 31, 2012 |
| (000’s Omitted) |
Hartford Capital Appreciation HLS Fund (the “Fund”) serves as an underlying investment option for certain variable annuity and variable life insurance separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates and certain qualified retirement plans. The Fund may also serve as an underlying investment option for certain variable annuity and variable life separate accounts of other insurance companies. Owners of variable annuity contracts and policyholders of variable life insurance contracts may choose the funds permitted in the variable insurance contract prospectus. In addition, participants in certain qualified retirement plans may choose the Fund if permitted by their plans.
Hartford Series Fund, Inc. (the “Company”) is an open-end registered management investment company comprised of thirty portfolios. Financial Statements for the Fund, a series of the Company, are included in this report.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund is a diversified open-end management investment company.
The Fund is divided into Class IA and Class IB shares. Each class is offered at the per share net asset value (“NAV”) without a sales charge and is subject to the same expenses, except that the Class IB shares are subject to distribution and service fees charged pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act.
| 2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Fund in the preparation of its financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| | a) | Determination of Net Asset Value – The NAV of each class of the Fund’s shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| | b) | Investment Valuation and Fair Value Measurements – For purposes of calculating the NAV, portfolio investments and other assets held by the Fund's portfolio for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of last reported sales prices or official close price. If no sales are reported, market value is based on quotes obtained from a quotation reporting system, established market makers, or independent pricing services. If market prices are not readily available or are deemed unreliable, the Fund will use the fair value of the investment as determined in good faith under policies and procedures established by and under the supervision of the Company’s Board of Directors. Market quotes are considered not readily available where there is an absence of current or reliable market-based data (e.g., trade information or indicative market quotes), including where events occur after the close of the relevant market, but prior to the NYSE Close that materially affect the values of the Fund’s portfolio investments or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the investments trade do not open for trading for the entire day and no other market prices are available. In addition, prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close. Investments that are primarily traded on foreign markets may trade on days that are not business days of the Fund. The value of the foreign investments in which the Fund invests may change on days when a shareholder will not be able to purchase or redeem shares of the Fund. Fair value pricing is subjective in nature and the use of fair |
| Hartford Capital Appreciation HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
value pricing by the Fund may cause the NAV of its shares to differ significantly from the NAV that would have been calculated using market prices at the close of the exchange on which a portfolio investment is primarily traded. There can be no assurance that the Fund could obtain the fair market value assigned to an investment if the Fund were to sell the investment at approximately the time at which the Fund determines its NAV.
Fixed income investments (other than short term obligations) and non-exchange traded derivatives held by the Fund are normally valued on the basis of quotes obtained from brokers and dealers or independent pricing services in accordance with procedures established by the Company’s Board of Directors. Prices obtained from independent pricing services use information provided by market makers or estimates of market values through accepted market modeling and trading and pricing conventions. Inputs to the models may include, but are not limited to, prepayment speeds, pricing spread, yield, trade information, dealer quotes, market color, cash flow models and the bond’s terms and conditions. Generally, the Fund may use fair valuation in regard to fixed income investments when the Fund holds defaulted or distressed investments or investments in a company in which a reorganization is pending. Short-term investments maturing in 60 days or less are generally valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days.
Exchange traded options, futures and options on futures are valued at the settlement price determined by the relevant exchange as of the NYSE Close. If such instruments do not trade on an exchange, values may be supplied by an independent pricing service using a formula or other objective method that may take into consideration the style, direction, expiration, strike price, notional value and volatility or other adjustments.
Investments valued in currencies other than U.S. dollars are converted to U.S. dollars using exchange rates obtained from independent pricing services for calculation of the NAV. As a result, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of investments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the NYSE is closed and the market value may change on days when an investor is not able to purchase, redeem or exchange shares of the Fund.
Foreign currency contracts represent agreements to exchange currencies on specific future dates at predetermined rates. Foreign currency contracts are valued using foreign currency exchange rates and forward rates as provided by an independent pricing service on the Valuation Date.
Investments in open-end mutual funds are valued at the respective NAV of each open-end mutual fund on the Valuation Date.
Financial instruments for which prices are not available from an independent pricing service may be valued using market quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with procedures established by the Company’s Board of Directors.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| · | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange traded funds, rights and warrants. |
| · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 may include debt investments that are traded less frequently than exchange traded instruments and which are valued using independent pricing services; foreign equities, which are principally |
traded on certain foreign markets and are adjusted daily pursuant to a fair value pricing service in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close; and short-term investments, which are valued at amortized cost.
| | · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price. |
The Board of Directors of the Company generally reviews and approves the “Procedures for Valuation of Portfolio Securities” on an annual basis. These procedures define how investments are to be valued, including the formation and activities of a Valuation Committee. The Valuation Committee is responsible for determining in good faith the fair value of investments when the value cannot be obtained from primary pricing services or alternative sources or if the valuation of an investment as provided by the primary pricing service or alternative source is believed not to reflect the investment’s fair value as of the Valuation Date. Members of the Valuation Committee include the Fund’s Treasurer or designee, a Vice President of the Fund with legal expertise or designee, and a Vice President of the investment manager or designee. In addition, the Fund’s Chief Compliance Officer shall designate a member of the compliance group to attend Valuation Committee meetings as a non-voting resource, to monitor for and provide guidance with respect to compliance with these procedures. Two members of the Valuation Committee or their designees, representing different departments, shall constitute a quorum for purposes of permitting the Valuation Committee to take action. The Valuation Committee will consider all relevant factors in determining an investment’s fair value, and may seek the advice of the Fund’s sub-adviser, knowledgeable brokers, and legal counsel in making such determination. The Valuation Committee reports to the Audit Committee of the Company’s Board of Directors. The Audit Committee receives quarterly written reports which include details of all fair-valued investments, including the reason for the fair valuation, and an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such investments (the “look-back” test). The Board of Directors then must consider for ratification all of the fair value determinations made during the previous quarter.
Valuation levels are not necessarily indicative of the risk associated with investing in such investments. Individual investments within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
For additional information, refer to the Investment Valuation Hierarchy Level Summary and the Level 3 roll-forward reconciliation, if applicable, which follow the Schedule of Investments.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period.
| c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Investments purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses are determined on the basis of identified cost. |
Dividend income from domestic securities is accrued on the ex-dividend date. In general, dividend income from foreign securities is recorded on the ex-date; however, dividend notifications in certain foreign jurisdictions may not be available in a timely manner and as a result, the Fund will record the dividend as soon as the relevant details (i.e., rate
Hartford Capital Appreciation HLS Fund
Notes to Financial Statements – (continued)
December 31, 2012
(000’s Omitted)
per share, payment date, shareholders of record, etc.) are publicly available. Interest income, including amortization of premium and accretion of discounts, is accrued on a daily basis.
| d) | Foreign Currency Transactions – Assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investments, income, and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. |
The Fund does not isolate that portion of portfolio investment valuation resulting from fluctuations in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of investments held. Exchange rate fluctuations are included with the net realized and unrealized gain or loss on investments in the accompanying financial statements.
Net realized foreign exchange gains or losses arise from sales of foreign currencies and the difference between asset and liability amounts initially stated in foreign currencies and the U.S. dollar value of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of other assets and liabilities at the end of the reporting period, resulting from changes in the exchange rates.
| e) | Joint Trading Account – The Fund may invest cash balances into a joint trading account that may be invested in one or more repurchase agreements. |
| f) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Fund’s shares are executed in accordance with the investment instructions of the contract holders and plan participants. The NAV of the Fund’s shares is determined as of the close of business on each business day of the Exchange. The NAV is determined separately for each class of shares of the Fund by dividing the Fund’s net assets attributable to that class by the number of shares of the class outstanding. Each class of shares offered by the Fund has equal rights as to assets and voting privileges (except that shareholders of a class have exclusive voting rights regarding any matter relating solely to that class of shares). Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets of the class. Realized and unrealized capital gains and losses are allocated daily based on the relative net assets of each class of shares of the Fund. |
Orders for the purchase of the Fund’s shares received prior to the close of the Exchange on any day the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Fund. The policy of the Fund is to pay dividends from net investment income and realized capital gains, if any, at least once a year.
Distributions from net investment income, net realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These differences may include but are not limited to losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to Passive Foreign Investment Companies (“PFICs”), Real Estate Investment Trusts (“REITs”), Regulated Investment Companies (“RICs”), certain derivatives and partnerships. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Fund’s capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| 3. | Securities and Other Investments: |
| a) | Repurchase Agreements – A repurchase agreement is an agreement by which a counterparty agrees to sell an investment and agrees to repurchase the investment sold from the buyer at a mutually agreed upon time and price. At the time the Fund enters into a repurchase agreement, the value of the underlying collateral, including accrued interest, |
will be equal to or exceed the value of the repurchase agreement. Repurchase agreements expose the Fund to counterparty risk - that is, the risk that the counterparty will not fulfill its obligations. To minimize counterparty risk, the investments that serve to collateralize the repurchase agreement are held by the Fund’s custodian in book entry or physical form in the custodial account of the Fund or in a third party custodial account. Repurchase agreements are valued at cost plus accrued interest, which approximates fair value. The Fund, as shown on the Schedule of Investments, had outstanding repurchase agreements as of December 31, 2012.
| b) | Illiquid and Restricted Investments – The Fund is permitted to invest up to 15% of its net assets in illiquid investments. Illiquid investments are those that may not be sold or disposed of in the ordinary course of business within seven days, at approximately the price used to determine the Fund’s NAV. The Fund may not be able to sell illiquid investments when its sub-adviser considers it desirable to do so or may have to sell such investments at a price that is lower than the price that could be obtained if the investments were more liquid. A sale of illiquid investments may require more time and may result in higher dealer discounts and other selling expenses than does the sale of those that are liquid. Illiquid investments also may be more difficult to value due to the unavailability of reliable market quotations for such investments, and an investment in them may have an adverse impact on the Fund’s NAV. The Fund may also purchase certain restricted investments that can only be resold to certain qualified investors and may be determined to be liquid pursuant to policies and guidelines established by the Company’s Board of Directors. The Fund, as shown on the Schedule of Investments, had illiquid and/or restricted investments as of December 31, 2012. |
| c) | Investments Purchased on a When-Issued or Delayed-Delivery Basis – Delivery and payment for investments that have been purchased by the Fund on a forward commitment, or when-issued or delayed-delivery basis, take place beyond the customary settlement period. A fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell delayed-delivery investments before they are delivered, which may result in a realized gain or loss. During this period, such investments are subject to market fluctuations, and the Fund identifies investments segregated in its records with a value at least equal to the amount of the commitment. The Fund, as shown on the Schedule of Investments, had when-issued or delayed-delivery investments as of December 31, 2012. |
| | 4. | Financial Derivative Instruments: |
The following disclosures contain information on how and why the Fund uses derivative instruments, the credit-risk-related contingent features in certain derivative instruments, and how derivative instruments affect the Fund’s financial position and results of operations. The location and fair value amounts of these instruments on the Statement of Assets and Liabilities and the realized gains and losses and changes in unrealized gains and losses on the Statement of Operations, each categorized by type of derivative contract, are included in the following Additional Derivative Instrument Information footnote. The derivative instruments outstanding as of year-end are disclosed in the notes to or within the Schedule of Investments for purchased options, if applicable. The amounts of realized gains and losses and changes in unrealized gains and losses on derivative instruments during the year are disclosed in the Statement of Operations.
| a) | Foreign Currency Contracts – The Fund may enter into foreign currency contracts that obligate the Fund to purchase or sell currencies at specified future dates. Foreign currency contracts are used to hedge the currency exposure associated with some or all of the Fund’s investments and/or as part of an investment strategy. Foreign currency contracts are marked to market daily and the change in value is recorded by the Fund as an unrealized gain or loss. The Fund will record a realized gain or loss when the foreign currency contract is settled. |
Foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. In addition, risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of the contracts and from unanticipated movements in the value of the foreign currencies relative to the U.S. dollar. The Fund had outstanding foreign currency contracts as shown on the Schedule of Investments as of December 31, 2012.
Hartford Capital Appreciation HLS Fund
Notes to Financial Statements – (continued)
December 31, 2012
(000’s Omitted)
| b) | Options Contracts – An option contract is a contract sold by one party to another party that offers the buyer the right, but not the obligation, to buy (call) or sell (put) an investment or other financial asset at an agreed-upon price during a specific period of time or on a specific date. The Fund may write (sell) covered call and put options on futures, swaps (“swaptions”), securities, commodities or currencies. “Covered” means that so long as the Fund is obligated as the writer of an option, it will own either the underlying investments or currency or an option to purchase the same underlying investments or currency having an expiration date of the covered option and an exercise price equal to or less than the exercise price of the covered option, or will pledge cash or other liquid investments having a value equal to or greater than the fluctuating market value of the option investment or currency. Writing put options increases the Fund’s exposure to the underlying instrument. Writing call options decreases the Fund’s exposure to the underlying instrument. Premiums received from writing options that expire are treated as realized gains. Premiums received from writing options that are exercised or closed are added to the proceeds or offset amounts paid on the underlying futures, swap, investment or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying instrument may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the instrument underlying the written option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. The Fund may also purchase put and call options. Purchasing call options increases the Fund’s exposure to the underlying instrument. Purchasing put options decreases the Fund’s exposure to the underlying instrument. The Fund pays a premium, which is included on the Fund’s Statement of Assets and Liabilities as an investment and is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options that expire are treated as realized losses. Certain options may be purchased with premiums to be determined on a future date. The premiums for these options are based upon implied volatility parameters at specified terms. The risk associated with purchasing put and call options is generally limited to the premium paid. Premiums paid for purchasing options that are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying investment transaction to determine the realized gain or loss. Entering into over-the-counter options also exposes the Fund to counterparty risk. Counterparty risk is the possibility that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements. As of December 31, 2012, there were no outstanding options contracts. |
| c) | Additional Derivative Instrument Information: |
Fair Value of Derivative Instruments on the Statement of Assets and Liabilities as of December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized appreciation on foreign currency contracts | | $ | — | | | $ | 3,722 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 3,722 | |
| Total | | $ | — | | | $ | 3,722 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 3,722 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized depreciation on foreign currency contracts | | $ | — | | | $ | 5 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 5 | |
| Total | | $ | — | | | $ | 5 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 5 | |
The ratio of foreign exchange contracts to net assets at December 31, 2012, was 1.93% compared to the one year average of 8.01% for the year ended December 31, 2012. The volume of the other derivatives that are presented in the Schedule of Investments is consistant with the derivative activity during the year ended December 31, 2012.
The Effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Realized Gain (Loss) on Derivatives Recognized as a Result of Operations: | |
| Net realized loss on purchased options | | $ | — | | | $ | — | | | $ | — | | | $ | (866 | ) | | $ | — | | | $ | — | | | $ | (866 | ) |
| Net realized gain on foreign currency contracts | | | — | | | | 11,712 | | | | — | | | | — | | | | — | | | | — | | | | 11,712 | |
| Total | | $ | — | | | $ | 11,712 | | | $ | — | | | $ | (866 | ) | | $ | — | | | $ | — | | | $ | 10,846 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Change in Unrealized Appreciation on Derivatives Recognized as a Result of Operations: | |
| Net change in unrealized appreciation of foreign currency contracts | | $ | — | | | $ | 15,577 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 15,577 | |
| Total | | $ | — | | | $ | 15,577 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 15,577 | |
| a) | Credit and Counterparty Risks – Credit risk depends largely on the perceived financial health of bond issuers. In general, the credit rating is inversely related to the credit risk of the issuer. Higher rated bonds generally are deemed to have less credit risk, while lower or unrated bonds are deemed to have higher risk of default. The share price, yield and total return of a fund that holds securities with higher credit risk may be more volatile than those of a fund that holds bonds with lower credit risk. Similar to credit risk, the Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will default. |
| b) | Market Risks – The Fund’s investments expose the Fund to various risks including, but not limited to, interest rate, prepayment, extension, foreign currency, and equity risks. Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the values of certain fixed income securities held by the Fund are likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a fixed income security’s market price to interest rate (i.e., yield) movements. In addition, securities are subject to extension risk. Rising interest rates may cause prepayments to occur at a slower than expected rate, thereby effectively lengthening the maturity of the security and making the security more sensitive to interest rate changes. Prepayment and extension risk are major risks of mortgage backed securities and certain asset backed securities. For certain asset backed securities, the actual maturity may be less than the stated maturity shown in the Schedule of Investments, if applicable. As a result, the timing of income recognition relating to these securities may vary based upon the actual maturity. If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities, such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund. The market values of equity securities, such as common stocks and preferred stocks, or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The market value of equity securities may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities. |
Hartford Capital Appreciation HLS Fund
Notes to Financial Statements – (continued)
December 31, 2012
(000’s Omitted)
| a) | Federal Income Taxes – For federal income tax purposes, the Fund intends to continue to qualify as a RIC under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders and otherwise complying with the requirements of the IRC. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains prior to the next fiscal year-end. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. |
| c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Fund for the periods indicated is as follows (as adjusted for dividends payable, if applicable): |
| | | For the Year Ended
December 31, 2012 | | | For the Year Ended
December 31, 2011 | |
| Ordinary Income | | $ | 123,430 | | | $ | 78,001 | |
As of December 31, 2012, the Fund’s components of distributable earnings (deficit) on a tax basis were as follows:
| | | Amount | |
| Undistributed Ordinary Income | | $ | 742 | |
| Accumulated Capital and Other Losses* | | | (435,312 | ) |
| Unrealized Appreciation† | | | 334,541 | |
| Total Accumulated Deficit | | $ | (100,029 | ) |
| * | The Fund has capital loss carryforwards that are identified in the Capital Loss Carryforward note that follows. |
| † | Differences between book-basis and tax-basis unrealized appreciation (depreciation) may be attributable to the losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. |
| d) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as foreign currency, PFICs, expiration or utilization of capital loss carryforwards or net operating losses. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Fund’s distributions may be shown in the accompanying Statement of Changes in Net Assets as from undistributed net investment income, from accumulated net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Fund recorded reclassifications to increase (decrease) the accounts listed below: |
| | | Amount | |
| Undistributed Net Investment Income | | $ | 4,227 | |
| Accumulated Net Realized Gain (Loss) | | | (1,176 | ) |
| Capital Stock and Paid-in-Capital | | | (3,051 | ) |
| e) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation. |
At December 31, 2012 (tax-year-end), the Fund had capital loss carryforwards for U.S. federal income tax purposes as follows:
| Year of Expiration | | Amount | |
| 2017 | | $ | 435,312 | |
| Total | | $ | 435,312 | |
During the year ended December 31, 2012, the Fund utilized $431,146 of prior year capital loss carryforwards.
| f) | Accounting for Uncertainty in Income Taxes – The Fund has adopted financial reporting rules that require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Fund does not have an examination in progress. |
The Fund has reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules had no effect on the Fund’s financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2012. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Fund’s investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Fund pursuant to an Investment Management Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Fund’s investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees payable under, the |
Hartford Capital Appreciation HLS Fund
Notes to Financial Statements – (continued)
December 31, 2012
(000’s Omitted)
Fund’s investment management agreements; or (ii) the day-to-day management of the Fund. The investment manager has overall investment supervisory responsibility for the Fund. In addition, the investment manager provides administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. The investment manager has contracted with Wellington Management Company, LLP (“Wellington Management”) under a sub-advisory agreement for the provision of day-to-day investment management services to the Fund in accordance with the Fund’s investment objective and policies. The Fund pays a fee to the investment manager, a portion of which may be used to compensate Wellington Management.
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered as of December 31, 2012, (paid for the period March 1, 2012 through December 31, 2012); the rates are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee |
| On first $250 million | | | 0.7750 | % |
| On next $250 million | | | 0.7250 | % |
| On next $500 million | | | 0.6750 | % |
| On next $1.5 billion | | | 0.6250 | % |
| On next $2.5 billion | | | 0.6200 | % |
| On next $5 billion | | | 0.6150 | % |
| Over $10 billion | | | 0.6100 | % |
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered during the period January 1, 2012, through February 29, 2012.
| Average Daily Net Assets | | Annual Fee |
| On first $250 million | | | 0.7750 | % |
| On next $250 million | | | 0.7250 | % |
| On next $500 million | | | 0.6750 | % |
| On next $4 billion | | | 0.6250 | % |
| On next $5 billion | | | 0.6225 | % |
| Over $10 billion | | | 0.6200 | % |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Fund. HLIC provided accounting services for the Fund for the fiscal year ended December 31, 2012. The replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Fund or the fees charged to the Fund for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Fund, HFMC provides accounting services to the Fund and receives monthly compensation based on the Fund’s average daily net assets at the rates set forth below. The Fund’s accounting services fees are accrued daily and paid monthly. |
| Average Daily Net Assets | | Annual Fee |
| On first $5 billion | | | 0.018 | % |
| On next $5 billion | | | 0.016 | % |
| Over $10 billion | | | 0.014 | % |
| c) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund and allocated to classes within a Fund in proportion to the average daily net assets of the Fund and each class, except where allocation of certain expenses is more fairly made directly to the Fund or to specific classes within a Fund. |
| d) | Fees Paid Indirectly – The Company, on behalf of the Fund, has entered into agreements with State Street Global Markets, LLC and Russell Implementation Services, Inc. to partially recapture non-discounted trade commissions. Such |
rebates are used to pay a portion of the Fund’s expenses. In addition, the Fund’s custodian banks have agreed to reduce its fees when the Fund maintains cash on deposit in a non-interest-bearing custody account. For the year ended December 31, 2012, these amounts, if any, are included in the Statement of Operations.
The ratio of expenses to average net assets in the accompanying financial highlights excludes the reduction in expenses related to fees paid indirectly. The annualized expense ratio after waivers for the period listed below reflecting the reduction for fees paid indirectly is as follows:
| | | Year Ended
December 31, 2012 | |
| Class IA | | | 0.66 | % |
| Class IB | | | 0.91 | |
| e) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Fund's principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD with HIFSCO did not result in any changes to the distribution services provided to the Fund. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Fund, has adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, 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, subject to the review and approval of the Company’s Board of Directors. |
The Distribution Plan provides that the Fund may pay annually up to 0.25% of the average daily net assets of the Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, the Fund is authorized to make payments monthly to the Distributor that may be used to pay or compensate 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. These fees are accrued daily and paid monthly.
| f) | Other Related Party Transactions – Certain officers of the Fund are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Fund’s Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Fund was in the amount of $12. Hartford Administrative Services Company (“HASCO”), an indirect wholly owned subsidiary of The Hartford, provides transfer agent services to the Fund. The amount paid to HASCO can be found in the Statement of Operations. These fees are accrued daily and paid monthly. |
| g) | Payment from Affiliate – In July of 2007, The Hartford entered into a settlement with the Attorneys General of the states of New York, Connecticut and Illinois relating to market timing and the company's individual variable annuity contracts in which certain payments would be made directly to the variable annuity contract holders. The distribution plan provided that unclaimed money from the settlement would be distributed to certain HLS Funds that are investment options through a Hartford individual variable annuity contract. The unclaimed money was distributed to the Fund on September 18, 2009. |
The total return in the accompanying financial highlights includes a payment from an affiliate. Had the payment from the affiliate been excluded, the impact and total return for the period listed below would have been as follows:
| | | For the Year Ended December 31, 2009 | |
| | | Class IA | | | Class IB | |
| Impact from Payment from Affiliate for Attorneys General Settlement | | | — | % | | | — | % |
| Total Return Excluding Payment from Affiliate | | | 45.66 | % | | | 45.30 | % |
Hartford Capital Appreciation HLS Fund
Notes to Financial Statements – (continued)
December 31, 2012
(000’s Omitted)
| 8. | Investment Transactions: |
For the year ended December 31, 2012, the Fund's aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
| | | Amount | |
| Cost of Purchases Excluding U.S. Government Obligations | | $ | 12,659,223 | |
| Sales Proceeds Excluding U.S. Government Obligations | | | 14,599,018 | |
The Fund is one of several Hartford funds that participate in a $500 million committed revolving line of credit facility. The facility is to be used for temporary or emergency purposes. Under the arrangement, the funds are required to own securities having a market value in excess of 300% of the total bank borrowings. The interest rate on borrowings varies depending on the nature of the loan. The facility also requires a fee to be paid based on the amount of the commitment. This commitment fee is allocated to all of the funds participating in the line of credit based on the average net assets of the funds. During the year ended December 31, 2012, the Fund did not have any borrowings under this facility.
| 10. | Industry Classifications: |
Other than the industry classifications “Other Investment Pools and Funds” and “Exchange Traded Funds,” equity industry classifications used in this report are the Global Industry Classification Standard, which was developed by and is the exclusive property and service mark of MSCI, Inc. and Standard & Poor’s.
Under the Company’s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
| 12. | Recent Accounting Pronouncement: |
Disclosures about Offsetting Assets and Liabilities - In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The objective of the ASU is to enhance current disclosure requirements on offsetting of certain assets and liabilities and to enable financial statement users to compare financial statements prepared under U.S. GAAP and International Financial Reporting Standards.
Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
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Hartford Capital Appreciation HLS Fund
Financial Highlights
– Selected Per-Share Data (A) –
| Class | | | Net Asset Value at
Beginning of
Period | | | Net Investment
Income (Loss) | | | Net Realized and
Unrealized Gain
(Loss) on
Investments | | | Total from
Investment
Operations | | | Dividends from Net
Investment Income | | | Distributions from
Realized Capital
Gains | | | Distributions from
Capital | | | Total Distributions | | | Net Asset Value at
End of Period | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2012 | |
| IA | | | $ | 37.20 | | | $ | 0.57 | | | $ | 6.24 | | | $ | 6.81 | | | $ | (0.64 | ) | | $ | — | | | $ | — | | | $ | (0.64 | ) | | $ | 43.37 | |
| IB | | | | 36.90 | | | | 0.52 | | | | 6.14 | | | | 6.66 | | | | (0.51 | ) | | | — | | | | — | | | | (0.51 | ) | | | 43.05 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2011 |
| IA | | | | 42.36 | | | | 0.37 | | | | (5.20 | ) | | | (4.83 | ) | | | (0.33 | ) | | | — | | | | — | | | | (0.33 | ) | | | 37.20 | |
| IB | | | | 42.00 | | | | 0.32 | | | | (5.20 | ) | | | (4.88 | ) | | | (0.22 | ) | | | — | | | | — | | | | (0.22 | ) | | | 36.90 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2010 |
| IA | | | | 36.63 | | | | 0.30 | | | | 5.72 | | | | 6.02 | | | | (0.26 | ) | | | — | | | | (0.03 | ) | | | (0.29 | ) | | | 42.36 | |
| IB | | | | 36.32 | | | | 0.21 | | | | 5.66 | | | | 5.87 | | | | (0.16 | ) | | | — | | | | (0.03 | ) | | | (0.19 | ) | | | 42.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2009 |
| IA | | | | 25.34 | | | | 0.31 | | | | 11.27 | | | | 11.58 | | | | (0.29 | ) | | | — | | | | — | | | | (0.29 | ) | | | 36.63 | |
| IB | | | | 25.14 | | | | 0.25 | | | | 11.14 | | | | 11.39 | | | | (0.21 | ) | | | — | | | | — | | | | (0.21 | ) | | | 36.32 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2008 |
| IA | | | | 52.46 | | | | 0.46 | | | | (22.58 | ) | | | (22.12 | ) | | | (0.50 | )(F) | | | (4.28 | ) | | | (0.22 | )(F) | | | (5.00 | ) | | | 25.34 | |
| IB | | | | 52.01 | | | | 0.39 | | | | (22.37 | ) | | | (21.98 | ) | | | (0.39 | )(F) | | | (4.28 | ) | | | (0.22 | )(F) | | | (4.89 | ) | | | 25.14 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include 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 would lower the Fund's performance. |
| (C) | Ratios do not reflect reductions for fees paid indirectly. Please see Fees Paid Indirectly in the Notes to Financial Statements. |
| (D) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
| (E) | Total return without the inclusion of the Payment from (to) Affiliate can be found in Expenses in the accompanying Notes to Financial Statements. |
| (F) | In 2009, the Fund amended its 2008 federal tax return in order to change an election relating to the recognition and classification of certain net realized losses and ordinary income items. As a result, a portion of the distributions that were made by the Fund during 2008 were reclassified as return of capital. This reclassification had no impact on the total net assets or net asset value of the Fund. |
– Ratios and Supplemental Data –
| Total Return(B) | | | Net Assets at End of Period | | | Ratio of Expenses to Average Net Assets
Before Waivers(C) | | | Ratio of Expenses to Average Net Assets
After Waivers(C) | | | Ratio of Net Investment
Income (Loss) to Average Net
Assets | | | Portfolio
Turnover
Rate(D) | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 18.34 | % | | $ | 7,750,924 | | | | 0.67 | % | | | 0.67 | % | | | 1.24 | % | | | 142 | % |
| | 18.04 | | | | 874,386 | | | | 0.92 | | | | 0.92 | | | | 0.99 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (11.41 | ) | | | 8,169,178 | | | | 0.67 | | | | 0.67 | | | | 0.95 | | | | 113 | |
| | (11.62 | ) | | | 1,102,054 | | | | 0.92 | | | | 0.92 | | | | 0.71 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 16.50 | | | | 8,889,906 | | | | 0.67 | | | | 0.67 | | | | 0.77 | | | | 95 | |
| | 16.21 | | | | 1,522,218 | | | | 0.92 | | | | 0.92 | | | | 0.52 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 45.67 | (E) | | | 8,410,214 | | | | 0.68 | | | | 0.68 | | | | 1.03 | | | | 128 | |
| | 45.30 | (E) | | | 1,595,912 | | | | 0.93 | | | | 0.93 | | | | 0.79 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (45.59 | ) | | | 6,017,984 | | | | 0.67 | | | | 0.67 | | | | 1.12 | | | | 131 | |
| | (45.73 | ) | | | 1,295,065 | | | | 0.92 | | | | 0.92 | | | | 0.87 | | | | — | |
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of
Hartford Series Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Hartford Capital Appreciation HLS Fund (one of the portfolios constituting Hartford Series Fund, Inc. (the Fund)) as of December 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Hartford Capital Appreciation HLS Fund (one of the portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Minneapolis, MN
February 15, 2013
Hartford Capital Appreciation HLS Fund
Directors and Officers (Unaudited)
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Fund pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Fund. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Fund’s statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Fund pays to The Hartford a portion of the Chief Compliance Officer’s compensation, but does not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
Hartford Capital Appreciation HLS Fund
Directors and Officers (Unaudited) – (continued)
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010 (4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and a record of how the Fund voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Hartford Capital Appreciation HLS Fund
Expense Example (Unaudited)
Your Fund's Expenses
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Actual return | | | Hypothetical (5% return before expenses) | | | | | | | | | | |
| | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid during the period
June 30, 2012
through
December 31, 2012 | | | Beginning
Account Value
June 30, 2012 | | | Ending Account Value
December 31,
2012 | | | Expenses paid during the period
June 30, 2012
through
December 31, 2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2
year | | | Days
in the
full
year | |
| Class IA | | $ | 1,000.00 | | | $ | 1,009.98 | | | $ | 3.36 | | | $ | 1,000.00 | | | $ | 1,021.79 | | | $ | 3.38 | | | | 0.67 | % | | | 184 | | | | 366 | |
| Class IB | | $ | 1,000.00 | | | $ | 1,009.84 | | | $ | 4.62 | | | $ | 1,000.00 | | | $ | 1,020.53 | | | $ | 4.65 | | | | 0.92 | % | | | 184 | | | | 366 | |
Hartford Capital Appreciation HLS Fund
Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory and sub-advisory agreements. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for Hartford Capital Appreciation HLS Fund (the “Fund”) with HL Investment Advisors, LLC (“HL Advisors”) and the continuation of the investment sub-advisory agreement between HL Advisors and the Fund’s sub-adviser, Wellington Management Company, LLP (the “Sub-adviser,” and together with HL Advisors, the “Advisers”) (collectively, the “Agreements”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from the Advisers to questions posed to them on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreements at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by the Advisers and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreements.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreements with respect to the Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Fund’s contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Fund’s management fees, sub-advisory fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement.
In determining to continue the Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreements. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreements is provided below.
Nature, Extent, and Quality of Services Provided by the Advisers
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Fund by the Advisers. The Board considered, among other things, the terms of the Agreements and the range of services provided by the Advisers. The Board considered the Advisers’ professional personnel who provide services to the Fund, including each Adviser’s ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered each Adviser’s reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to the Fund. In addition, the Board considered the quality of each Adviser’s communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning each Adviser’s regulatory and compliance environment. In this regard, the Board requested and reviewed information on each Adviser’s compliance policies and procedures, compliance history, and a report from the Fund’s Chief Compliance Officer on each Adviser’s compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. The Board also noted the Advisers’ support of the Fund’s compliance control structure, particularly the resources devoted by the Advisers in support of the Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act.
Hartford Capital Appreciation HLS Fund
Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued)
With respect to HL Advisors, the Board noted that under the Agreements, HL Advisors is responsible for the management of the Fund, including overseeing fund operations and service providers, as well as investment advisory services in connection with selecting, monitoring and supervising the Sub-adviser. The Board considered HL Advisors’ ongoing monitoring of people, process and performance, including its quarterly reviews of each of the Hartford HLS Funds, semi-annual meetings with the leaders of each Fund’s portfolio management team, and oversight of the Funds’ approximately 40 portfolio managers. The Board recognized that HL Advisors has demonstrated a record of making changes to the management and/or strategies of the Funds when warranted. The Board considered HL Advisors’ oversight of the Sub-adviser’s investment approach and results, process for monitoring best execution of portfolio trades by the Sub-adviser, and approach to risk management with respect to the Fund and the service providers to the Fund. The Board also considered HL Advisors’ oversight of compliance with the Fund’s objective and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led to an increase in the scope of HL Advisors’ services in this regard. In addition, the Board considered HL Advisors’ ongoing commitment to review and rationalize the Hartford fund family’s product line-up and the expenses that HL Advisors had incurred in connection with fund combinations in recent years. The Board considered that HL Advisors or its affiliates are responsible for providing the Fund’s officers. The Board also noted that Hartford Life Insurance Company (“HLIC”) provides administrative services to the Fund. The Board considered its experiences with HL Advisors and HLIC with respect to each of these services.
With respect to the Sub-adviser, who provides day-to-day portfolio management services, the Board considered the quality of the Fund’s portfolio managers, the Sub-adviser’s other investment personnel, its investment philosophy and process, investment research capabilities and resources, performance record, trade execution capabilities and experience. The Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers, and the Sub-adviser’s method for compensating the portfolio managers.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Fund by HL Advisors and the Sub-adviser.
Performance of the Fund and the Advisers
The Board considered the investment performance of the Fund. In this regard, the Board reviewed the performance of the Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of the Fund’s performance for these time periods. The Board considered information and materials provided to the Board by the Advisers concerning Fund performance, as well as information from Lipper comparing the investment performance of the Fund to an appropriate benchmark and universe of peer funds. The Board noted that the Fund had underperformed relative to its peer group and benchmark for the 1-year period and that its performance was in line with the peer group and benchmark for the 3- and 5-year periods. HL Advisors noted that it would continue to monitor the Fund’s performance.
The Board considered the detailed investment analytics reports provided by The Hartford’s Investment Advisory Group throughout the year. These reports include, among other things, information on the Fund’s gross and net returns, the Fund’s investment performance relative to an appropriate benchmark and peer group, various statistics concerning the Fund’s portfolio, and a narrative summary of various factors affecting Fund performance. The Board considered the Advisers’ cooperation with the Investment Committee, which assists the Board in evaluating the performance of the Fund at periodic meetings throughout the year. The Board also considered the analysis provided by the Consultant relating to the Fund’s performance track record.
In light of all the considerations noted above, the Board concluded that it had continued confidence in HL Advisors’ and the Sub-adviser’s overall capabilities to manage the Fund.
Costs of the Services and Profitability of the Advisers
The Board reviewed information regarding HL Advisors’ cost to provide investment management and related services to the Fund and HL Advisors’ profitability, both overall and for the Fund, on a pre-tax basis without regard to distribution expenses. The Board also requested and reviewed information about the profitability to HL Advisors and its affiliates from all services provided to the Fund and all aspects of their relationship with the Fund. The Board also requested and received information relating to the operations and profitability of the Sub-adviser.
The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement, noting the Consultant’s view that The Hartford’s process for calculating and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by the Advisers and their affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by the Advisers
The Board considered comparative information with respect to the management fees to be paid by the Fund to HL Advisors and the total expense ratios of the Fund. The Board also considered comparative information with respect to the sub-advisory fees to be paid by HL Advisors to the Sub-adviser, to the extent applicable. In this regard, the Board requested and reviewed information from HL Advisors and the Sub-adviser relating to the management and sub-advisory fees, including the sub-advisory fee schedule for the Fund, and total operating expenses for the Fund. The Board considered that the management fee for the Fund includes the fee paid to HLIC for providing certain administrative services to the Fund. With respect to the sub-advisory fee schedule, the Board considered representations from HL Advisors and the Sub-adviser that the Sub-adviser’s fees were negotiated at arm’s length. The Board also reviewed information from Lipper comparing the Fund’s contractual management fees, actual management fees and overall expense ratios relative to a group of funds selected by Lipper, in consultation with the Consultant, and a broader universe of funds selected by Lipper. The Board noted that, in connection with The Hartford’s preferred partnership agreement with the Sub-adviser, an additional breakpoint had been added to the Fund’s management fee schedule.
While the Board recognized that comparisons between the Fund and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business models and cost structures of the Advisers, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of the Fund’s management and sub-advisory fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to the Fund’s management and sub-advisory fees and total operating expenses.
Based on these considerations, the Board concluded that the Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding the Advisers’ realization of economies of scale with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. The Board reviewed the breakpoints in the management fee schedule for the Fund, which reduce fee rates as Fund assets grow over time, and noted that an additional breakpoint had recently been added to the Fund’s management fee schedule. The Board recognized that a fund with assets beyond the last breakpoint level will continue to benefit from economies of scale because additional assets are charged the lowest breakpoint fee resulting in lower overall effective management fee rates. The Board also recognized that a fee schedule that reaches a lower breakpoint quickly provides shareholders with the benefit of anticipated or potential economies of scale.
The Board reviewed and evaluated materials from Lipper showing how management fee schedules of peer funds reflect economies of scale for the benefit of shareholders as a peer fund’s assets hypothetically increase over time. Based on information provided by HL Advisors, Lipper, and the Consultant, the Board recognized that there is no uniform methodology for establishing breakpoints or uniform pattern in asset levels that trigger breakpoints or the amounts of breakpoints triggered.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Fund’s shareholders based on currently available information and the effective advisory fees and expense ratios for the Fund at its current and reasonably anticipated asset levels. The Board noted, however, that it would continue to monitor future growth in Fund assets and the appropriateness of additional breakpoints.
Hartford Capital Appreciation HLS Fund
Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued)
Other Benefits
The Board considered other benefits to the Advisers and their affiliates from their relationships with the Fund, including the role of the Fund in supporting the variable life insurance and variable annuity products offered by The Hartford. The Board reviewed information noting that HLIC, an affiliate of HL Advisors, receives fees for providing certain administrative services to the Fund, and that HLIC also receives fees for fund accounting and related services from the Fund, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Fund’s transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Fund, and the Board reviewed information on the profitability of the Fund’s transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Fund were fair and reasonable based on publicly available information.
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Fund, receives 12b-1 fees from the Fund. The Board also noted that certain affiliates of HL Advisors distribute shares of the Fund and receive compensation in that connection.
The Board considered benefits to the Sub-adviser from its use of the Fund’s brokerage commissions to obtain soft dollar research, and representations from HL Advisors and the Sub-adviser that the Sub-adviser would not make any revenue-sharing payments or any other type of distribution payments to HL Advisors or its affiliates.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the Agreements for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory and sub-advisory agreements. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreements for the Fund and approve a new investment management agreement for the Fund with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser, and a new investment sub-advisory agreement between HFMC and the Fund’s existing Sub-adviser, Wellington Management Company, LLP (together with HFMC, the “Post-Restructuring Advisers”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Fund. In order to implement the Restructuring, the Fund would terminate the existing Agreements and enter into a new investment management agreement with HFMC, with HFMC also entering into a new investment sub-advisory agreement with the Sub-adviser (collectively, the “New Agreements”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreements at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by HL Advisors and the Sub-adviser and their affiliates. In addition, the Board received in-person presentations by Fund
officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreements.
In determining to approve the New Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the New Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreements.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Fund and the performance of investment management personnel to the Fund. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Fund prior to the Restructuring would continue to provide such services to the Fund, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreements would involve no changes to (i) the contractual terms of, including the management fees payable under, the Fund’s investment management and investment sub-advisory agreements; (ii) the investment processes and strategies employed in the management of the Fund’s assets; (iii) the nature and level of services provided under the Fund’s investment management and investment sub-advisory agreements; and (iv) the day-to-day management of the Fund and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Fund.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Fund.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Fund, the investment management arrangement for the Fund following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreements: (i) nature, extent and quality of services provided by HL Advisors and the Sub-adviser; (ii) performance of the Fund, HL Advisors and the Sub-adviser; (iii) costs of the services and profitability of HL Advisors and the Sub-adviser; (iv) comparative services rendered and comparative investment management and sub-advisory fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors and the Sub-adviser with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. With respect to the other benefits to the Post-Restructuring Advisers and their affiliates from their relationships with the Fund, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting and related services from the Fund.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the New Agreements. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Hartford Capital Appreciation HLS Fund
Principal Risks (Unaudited)
The principal risks of investing in the Fund are described below.
Market and Selection Risk: The Fund’s share price may fluctuate due to market risk and/or security selections that may underperform compared to the market or relevant benchmarks.
Small/Mid-cap Stock Risk: Small- and mid-cap stocks are generally more volatile and risky and may be less liquid than large-cap stocks because they may have limited operating histories, narrow product lines, and focus on niche markets.
Foreign Investment Risk: Foreign investments can be riskier than U.S. investments. Potential risks include currency risk that may result from unfavorable exchange rates, liquidity risk if decreased demand for a security makes it difficult to sell at the desired price, and risks that stem from substantially lower trading volume on foreign markets.
Asset Allocation Strategy Risk: The portfolio managers’ asset allocation strategy may not always work as intended, and asset allocation does not guarantee better performance or reduce the risk of investment loss.
Active Trading Risk: Actively trading investments may result in higher costs and higher taxable income.
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
HLSAR-CA12 2-13 113522 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 | |
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford Disciplined Equity HLS Fund
Table of Contents
This report is prepared for the general information of contract owners and qualified retirement plan participants. It is not an offer of contracts or of qualified retirement plans. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent information including the applicable sales, administrative and other charges.
The views expressed in the Fund’s Manager Discussion under ‘‘Why did the Fund perform this way?’’ and ‘‘What is the outlook?’’ are views of the Fund’s sub-adviser and portfolio management team through the end of the period and are subject to change based on market and other conditions.
| Hartford Disciplined Equity HLS Fund inception 05/29/1998 |
| (sub-advised by Wellington Management Company, LLP) |
| |
| Investment objective – Seeks growth of capital. | |
Performance Overview 12/31/02 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IA. Growth results in classes other than Class IA will vary from what is seen above due to differences in the expenses charged to those share classes.
| Average Annual Total Returns (as of 12/31/12) |
| | | 1 Year | | | 5 Year | | | 10 Year | |
| Disciplined Equity IA | | | 17.62% | | | | 1.35% | | | | 6.85% | |
| Disciplined Equity IB | | | 17.33% | | | | 1.10% | | | | 6.58% | |
| S&P 500 Index | | | 15.99% | | | | 1.66% | | | | 7.09% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund’s net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.
You cannot invest directly in an index.
As of the Fund’s current prospectus dated May 1, 2012, the net total annual operating expense ratios for Class IA and Class IB shares were 0.74% and 0.99%, respectively, and the gross total annual operating expense ratios for Class IA and Class IB shares were 0.74% and 0.99%, respectively. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect until April 30, 2013, and automatically renew for one-year terms unless terminated by the Fund’s Investment Advisor (Hartford Funds Management Company, LLC). For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
| Hartford Disciplined Equity HLS Fund |
| Manager Discussion |
| December 31, 2012 (Unaudited) |
| Portfolio Manager |
| Mammen Chally, CFA |
| Vice President and Equity Portfolio Manager |
| |
How did the Fund perform?
The Class IA shares of the Hartford Disciplined Equity HLS Fund returned 17.62% for the twelve-month period ended December 31, 2012, outperforming its benchmark, the S&P 500 Index, which returned 15.99% for the same period. The Fund also outperformed the 15.02% return of the average fund in the Lipper VP-UF Large-Cap Core Funds peer group, a group of funds with investment strategies similar to those of the Fund.
Why did the Fund perform this way?
U.S. equities moved higher in the period, in part due to a strengthening housing market and central bank interventions around the globe. Although Europe continued to grapple with economic and structural challenges, investors’ risk appetites surged after European Central Bank (ECB) President Mario Draghi revealed a comprehensive plan to support struggling sovereigns, including direct purchases of government bonds in the open market. Additionally, the U.S. Federal Reserve’s (Fed) announcement of a third round of quantitative easing (QE3) was well received by the market, boosting stock prices. Despite concerns about the looming U.S. fiscal cliff, tepid corporate revenue results, and economic malaise in Europe, investors bid up risk assets amid further signs of recovery in China and signs that the U.S. housing market may bolster the U.S. economy for the first time in seven years. Risk sentiment also ticked up on continued hopes that the ECB’s bond-buying plan will succeed, essentially reducing the tail risks in Europe.
Overall equity market performance was positive for the period across all market capitalizations: large cap equities (+16%), mid caps (+18%), and small caps (+16%) all rose as represented by the S&P 500, S&P MidCap 400 , and Russell 2000 Indices respectively. During the twelve-month period all ten sectors within the S&P 500 Index posted positive returns, led by Financials (+29%), Consumer Discretionary (+24%), and Telecommunication Services (+18%).
The Fund outperformed its benchmark due to stock selection, which was strongest in Health Care, Information Technology, and Industrials. This was partially offset by weaker security selection in Energy, Consumer Discretionary, and Materials. Allocation among sectors detracted modestly from relative performance. A modest options writing program contributed 14 basis points to performance.
The largest contributors to benchmark-relative performance were Regeneron Pharmaceuticals (Health Care), Gilead Sciences (Health Care), and PVH (Consumer Discretionary). Shares of biopharmaceutical company Regeneron Pharmaceuticals rose after the company reported better-than-expected sales and raised guidance during the second quarter. Shares of Gilead, a U.S.-based biopharmaceutical company, outperformed as the firm’s results exceeded expectations on strong antiviral product sales; additionally, investors reacted positively to the firm’s plans for developing its hepatitis C franchise. Shares of PVH, a clothing company with a large portfolio of brands including Calvin Klein and Tommy Hilfiger, climbed after the company announced it would acquire Warnaco, another apparel company. Top contributors to absolute performance (i.e. total return) also included Apple (Information Technology) and Bank of America (Financials).
The largest detractors from benchmark-relative and absolute performance were Deckers Outdoor (Consumer Discretionary), Occidental Petroleum (Energy), and Chesapeake Energy (Energy). Deckers Outdoor is a designer and marketer of fashion-oriented footwear, including the UGG and Teva proprietary brands. Shares declined after disappointing guidance and margin pressures from higher product costs led to a reduction in consensus earnings expectations. Shares of Occidental Petroleum, an exploration and production company with attractive acreage positions in California, West Texas, and the Middle East, declined due to recent concerns over performance in California, and skepticism over large investments in Texas and the Middle East. Shares of Chesapeake Energy, a producer of natural gas, oil, and natural gas liquids, underperformed on concerns that increased spending on leaseholds and capital expenditures would not result in higher production guidance.
What is the outlook?
In 2013, we expect slow but steady growth in the U.S., somewhere around 2.5% Gross Domestic Product. A last minute deal averted a full dive off the fiscal cliff on January 1, 2013; however, the temporary payroll tax cut of the past two years was allowed to expire, which will raise taxes 2% on most Americans. We believe that housing and employment should continue to improve, and corporate earnings should also enjoy moderate growth this year. Households have enjoyed a nice boost to their net worth in recent years, which should cushion the negative impact of higher taxation. Household formation is still going strong in the U.S. and
| Hartford Disciplined Equity HLS Fund |
| Manager Discussion – (continued) |
| December 31, 2012 (Unaudited) |
housing starts have just started to normalize. It appears that interest rates are slowly creeping higher, which in our view is a sign that the economy is improving. We remain cautiously optimistic and believe that the U.S. should avoid recession in 2013.
We expect the global economic recovery to continue, but at a slow rate and with varying degrees of recovery by region. In Europe, the ECB bond buying plan has reduced the fears of a cataclysmic liquidity event, although the region remains in recession and still faces many challenges ahead. China’s economy continues to slow but recent positive economic data points have alleviated many investors’ fears of a hard landing.
The Fund focuses on stock selection as the key driver of returns and uses proprietary fundamental and quantitative research in a disciplined framework to build a portfolio of the most attractive stocks. Sector exposures are residuals from this bottom-up stock selection process and are not explicit management decisions. Based on individual stock decisions, the Fund ended the period most overweight (i.e. the Fund’s sector position was greater than the benchmark position) the Health Care, Industrials, and Consumer Staples sectors and most underweight the Financials, Energy, and Telecommunication Services sectors relative to the S&P 500 Index, the Fund’s benchmark.
Diversification by Industry
as of December 31, 2012
| Industry (Sector) | | Percentage of
Net Assets | |
| Banks (Financials) | | | 3.2 | % |
| Capital Goods (Industrials) | | | 9.0 | |
| Commercial and Professional Services (Industrials) | | | 1.8 | |
| Consumer Durables and Apparel (Consumer Discretionary) | | | 1.1 | |
| Consumer Services (Consumer Discretionary) | | | 1.6 | |
| Diversified Financials (Financials) | | | 6.3 | |
| Energy (Energy) | | | 9.3 | |
| Food and Staples Retailing (Consumer Staples) | | | 3.9 | |
| Food, Beverage and Tobacco (Consumer Staples) | | | 6.9 | |
| Health Care Equipment and Services (Health Care) | | | 3.3 | |
| Insurance (Financials) | | | 4.0 | |
| Materials (Materials) | | | 3.0 | |
| Media (Consumer Discretionary) | | | 2.6 | |
| Pharmaceuticals, Biotechnology and Life Sciences (Health Care) | | | 12.7 | |
| Retailing (Consumer Discretionary) | | | 6.1 | |
| Software and Services (Information Technology) | | | 12.7 | |
| Technology Hardware and Equipment (Information Technology) | | | 6.4 | |
| Telecommunication Services (Services) | | | 1.7 | |
| Utilities (Utilities) | | | 3.5 | |
| Short-Term Investments | | | 0.6 | |
| Other Assets and Liabilities | | | 0.3 | |
| Total | | | 100.0 | % |
| Hartford Disciplined Equity HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 99.1% | | | | |
| | | | | Banks - 3.2% | | | | |
| | 221 | | | PNC Financial Services Group, Inc. | | $ | 12,860 | |
| | 481 | | | Wells Fargo & Co. | | | 16,454 | |
| | | | | | | | 29,314 | |
| | | | | Capital Goods - 9.0% | | | | |
| | 212 | | | AMETEK, Inc. | | | 7,955 | |
| | 111 | | | Boeing Co. | | | 8,329 | |
| | 110 | | | Dover Corp. | | | 7,201 | |
| | 142 | | | Eaton Corp. plc | | | 7,714 | |
| | 516 | | | General Electric Co. | | | 10,833 | |
| | 119 | | | Illinois Tool Works, Inc. | | | 7,215 | |
| | 56 | | | Parker-Hannifin Corp. | | | 4,773 | |
| | 66 | | | TransDigm Group, Inc. | | | 8,960 | |
| | 175 | | | United Technologies Corp. | | | 14,371 | |
| | 26 | | | W.W. Grainger, Inc. | | | 5,163 | |
| | | | | | | | 82,514 | |
| | | | | Commercial and Professional Services - 1.8% | | | | |
| | 164 | | | Equifax, Inc. ● | | | 8,892 | |
| | 135 | | | Towers Watson & Co. | | | 7,602 | |
| | | | | | | | 16,494 | |
| | | | | Consumer Durables and Apparel - 1.1% | | | | |
| | 90 | | | PVH Corp. | | | 10,024 | |
| | | | | | | | | |
| | | | | Consumer Services - 1.6% | | | | |
| | 171 | | | McDonald's Corp. | | | 15,056 | |
| | | | | | | | | |
| | | | | Diversified Financials - 6.3% | | | | |
| | 124 | | | Ameriprise Financial, Inc. | | | 7,744 | |
| | 1,251 | | | Bank of America Corp. Θ | | | 14,507 | |
| | 38 | | | BlackRock, Inc. | | | 7,752 | |
| | 313 | | | Citigroup, Inc. | | | 12,394 | |
| | 346 | | | JP Morgan Chase & Co. | | | 15,211 | |
| | | | | | | | 57,608 | |
| | | | | Energy - 9.3% | | | | |
| | 103 | | | Anadarko Petroleum Corp. | | | 7,626 | |
| | 96 | | | Chevron Corp. | | | 10,383 | |
| | 252 | | | Cobalt International Energy, Inc. ● | | | 6,191 | |
| | 172 | | | ConocoPhillips Holding Co. | | | 9,985 | |
| | 195 | | | Exxon Mobil Corp. | | | 16,878 | |
| | 134 | | | Halliburton Co. | | | 4,663 | |
| | 100 | | | National Oilwell Varco, Inc. | | | 6,823 | |
| | 203 | | | Newfield Exploration Co. ● | | | 5,449 | |
| | 142 | | | Occidental Petroleum Corp. | | | 10,859 | |
| | 124 | | | Phillips 66 | | | 6,580 | |
| | | | | | | | 85,437 | |
| | | | | Food and Staples Retailing - 3.9% | | | | |
| | 114 | | | Costco Wholesale Corp. | | | 11,272 | |
| | 268 | | | CVS Caremark Corp. | | | 12,945 | |
| | 305 | | | Walgreen Co. | | | 11,285 | |
| | | | | | | | 35,502 | |
| | | | | Food, Beverage and Tobacco - 6.9% | | | | |
| | 322 | | | Altria Group, Inc. | | | 10,117 | |
| | 234 | | | Constellation Brands, Inc. Class A ● | | | 8,293 | |
| | 87 | | | Lorillard, Inc. | | | 10,186 | |
| | 230 | | | PepsiCo, Inc. | | | 15,712 | |
| | 219 | | | Philip Morris International, Inc. | | | 18,325 | |
| | | | | | | | 62,633 | |
| | | | | Health Care Equipment and Services - 3.3% | | | | |
| | 132 | | | Covidien plc | | | 7,642 | |
| | 106 | | | McKesson Corp. | | | 10,260 | |
| | 230 | | | UnitedHealth Group, Inc. | | | 12,459 | |
| | | | | | | | 30,361 | |
| | | | | Insurance - 4.0% | | | | |
| | 101 | | | ACE Ltd. | | | 8,025 | |
| | 277 | | | American International Group, Inc. ● | | | 9,764 | |
| | 212 | | | Aon plc | | | 11,796 | |
| | 126 | | | Prudential Financial, Inc. | | | 6,719 | |
| | | | | | | | 36,304 | |
| | | | | Materials - 3.0% | | | | |
| | 169 | | | Crown Holdings, Inc. ● | | | 6,232 | |
| | 303 | | | Dow Chemical Co. | | | 9,807 | |
| | 114 | | | Newmont Mining Corp. | | | 5,317 | |
| | 38 | | | Sherwin-Williams Co. | | | 5,921 | |
| | | | | | | | 27,277 | |
| | | | | Media - 2.6% | | | | |
| | 263 | | | Time Warner, Inc. | | | 12,573 | |
| | 208 | | | Viacom, Inc. Class B | | | 10,985 | |
| | | | | | | | 23,558 | |
| | | | | Pharmaceuticals, Biotechnology and Life Sciences - 12.7% | | | | |
| | 129 | | | Agilent Technologies, Inc. | | | 5,267 | |
| | 125 | | | Amgen, Inc. | | | 10,807 | |
| | 51 | | | Biogen Idec, Inc. ●Θ | | | 7,413 | |
| | 148 | | | Cubist Pharmaceuticals, Inc. ● | | | 6,225 | |
| | 284 | | | Eli Lilly & Co. | | | 13,987 | |
| | 309 | | | Forest Laboratories, Inc. ●Θ | | | 10,925 | |
| | 184 | | | Gilead Sciences, Inc. ● | | | 13,545 | |
| | 543 | | | Merck & Co., Inc. | | | 22,238 | |
| | 218 | | | Pfizer, Inc. | | | 5,455 | |
| | 26 | | | Regeneron Pharmaceuticals, Inc. ●Θ | | | 4,450 | |
| | 117 | | | Salix Pharmaceuticals Ltd. ● | | | 4,723 | |
| | 125 | | | Watson Pharmaceuticals, Inc. ● | | | 10,741 | |
| | | | | | | | 115,776 | |
| | | | | Retailing - 6.1% | | | | |
| | 55 | | | Amazon.com, Inc. ●Θ | | | 13,888 | |
| | 216 | | | Dollar Tree, Inc. ● | | | 8,754 | |
| | 413 | | | Lowe's Co., Inc. | | | 14,668 | |
| | 140 | | | Ross Stores, Inc. | | | 7,573 | |
| | 265 | | | TJX Cos., Inc. | | | 11,250 | |
| | | | | | | | 56,133 | |
| | | | | Software and Services - 12.7% | | | | |
| | 208 | | | Accenture plc | | | 13,799 | |
| | 424 | | | Activision Blizzard, Inc. | | | 4,502 | |
| | 198 | | | Automatic Data Processing, Inc. | | | 11,308 | |
| | 180 | | | eBay, Inc. ● | | | 9,194 | |
| | 57 | | | Factset Research Systems, Inc. | | | 5,045 | |
| | 425 | | | Genpact Ltd. | | | 6,593 | |
| | 20 | | | Google, Inc. ● | | | 14,003 | |
| | 178 | | | Intuit, Inc. | | | 10,600 | |
| | 17 | | | Mastercard, Inc. | | | 8,244 | |
| | 546 | | | Oracle Corp. | | | 18,181 | |
| | 105 | | | Teradata Corp. ● | | | 6,515 | |
| | 198 | | | VeriSign, Inc. ● | | | 7,667 | |
| | | | | | | | 115,651 | |
| | | | | Technology Hardware and Equipment - 6.4% | | | | |
| | 53 | | | Apple, Inc. Θ | | | 28,424 | |
| | 630 | | | Cisco Systems, Inc. | | | 12,378 | |
| | 369 | | | EMC Corp. ● | | | 9,345 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Disciplined Equity HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 99.1% - (continued) | | | | |
| | | | | Technology Hardware and Equipment - 6.4% - (continued) | | | | |
| | 137 | | | Qualcomm, Inc. | | $ | 8,488 | |
| | | | | | | | 58,635 | |
| | | | | Telecommunication Services - 1.7% | | | | |
| | 457 | | | AT&T, Inc. | | | 15,397 | |
| | | | | | | | | |
| | | | | Utilities - 3.5% | | | | |
| | 214 | | | American Electric Power Co., Inc. | | | 9,135 | |
| | 95 | | | NextEra Energy, Inc. | | | 6,568 | |
| | 90 | | | Pinnacle West Capital Corp. | | | 4,603 | |
| | 434 | | | Xcel Energy, Inc. | | | 11,586 | |
| | | | | | | | 31,892 | |
| | | | | Total common stocks | | | | |
| | | | | (cost $719,434) | | $ | 905,566 | |
| | | | | | | | | |
| | | | | Total long-term investments | | | | |
| | | | | (cost $719,434) | | $ | 905,566 | |
| | | | | | | | | |
| SHORT-TERM INVESTMENTS - 0.6% | | | | |
| Repurchase Agreements - 0.6% | | | | |
| | | | | Bank of America Merrill Lynch TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $127,
collateralized by FHLMC 3.00%, 2042,
FNMA 4.00%, 2042, value of $129) | | | | |
| $ | 127 | | | 0.19%, 12/31/2012 | | $ | 127 | |
| | | | | Bank of Montreal TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $900, collateralized by FHLMC
2.50% - 5.50%, 2019 - 2042, FNMA 0.76%
- 6.11%, 2016 - 2042, GNMA 3.50%, 2042,
value of $918) | | | | |
| | 900 | | | 0.23%, 12/31/2012 | | | 900 | |
| | | | | Barclays Capital TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $282, collateralized by U.S.
Treasury Note 2.00% - 2.13%, 2016, value
of $287) | | | | |
| | 282 | | | 0.20%, 12/31/2012 | | | 282 | |
| | | | | Citigroup Global Markets, Inc. TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $1,773,
collateralized by U.S. Treasury Note 1.88%
- 4.13%, 2015 - 2018, value of $1,809) | | | | |
| | 1,773 | | | 0.17%, 12/31/2012 | | | 1,773 | |
| | | | | Deutsche Bank Securities TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $37, collateralized by FNMA
3.00%, 2032, value of $37) | | | | |
| | 37 | | | 0.25%, 12/31/2012 | | | 37 | |
| | | | | RBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $1,248, collateralized by U.S.
Treasury Note 0.50% - 2.75%, 2013 - 2019,
value of $1,273) | | | | |
| | 1,248 | | | 0.20%, 12/31/2012 | | | 1,248 | |
| | | | | TD Securities TriParty Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$1,092, collateralized by FHLMC 3.50% -
6.00%, 2036 - 2042, FNMA 0.22% - 5.50%,
2013 - 2042, value of $1,114) | | | | |
| 1,092 | | | 0.21%, 12/31/2012 | | | 1,092 | |
| | | | | UBS Securities, Inc. Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$21, collateralized by U.S. Treasury Bill
0.75%, 2013, value of $22) | | | | |
| | 21 | | | 0.17%, 12/31/2012 | | | 21 | |
| | | | | UBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $74, collateralized by FNMA
2.50%, 2027, GNMA 3.00%, 2042, value of
$76) | | | | |
| | 74 | | | 0.25%, 12/31/2012 | | | 74 | |
| | | | | | | | 5,554 | |
| | | | | Total short-term investments | | | | |
| | | | | (cost $5,554) | | $ | 5,554 | |
| | | | | | | | | |
| | | | | Total investments | | | | | | | |
| | | | | (cost $724,988) ▲ | | 99.7 | % | | $ | 911,120 | |
| | | | | Other assets and liabilities | | 0.3 | % | | | 3,141 | |
| | | | | Total net assets | | 100.0 | % | | $ | 914,261 | |
The accompanying notes are an integral part of these financial statements.
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $725,704 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 198,341 | |
| Unrealized Depreciation | | | (12,925 | ) |
| Net Unrealized Appreciation | | $ | 185,416 | |
| Θ | At December 31, 2012, this security, or a portion of this security, is designated to cover written call options in the table below: |
| Description | | Option Type | | Exercise
Price/ Rate | | | Expiration
Date | | Number of
Contracts* | | | Market
Value ╪ | | | Premiums
Received | | | Unrealized
Appreciation
(Depreciation) | |
| Amazon.com, Inc. Option | | Equity | | $ | 270.00 | | | 01/19/2013 | | | 36 | | | $ | 3 | | | $ | 10 | | | $ | 7 | |
| Apple, Inc. Option | | Equity | | $ | 650.00 | | | 01/19/2013 | | | 15 | | | | 1 | | | | 10 | | | | 9 | |
| Bank of America Corp. Option | | Equity | | $ | 11.00 | | | 01/19/2013 | | | 941 | | | | 75 | | | | 25 | | | | (50 | ) |
| Biogen Idec, Inc. Option | | Equity | | $ | 165.00 | | | 01/19/2013 | | | 61 | | | | 3 | | | | 11 | | | | 8 | |
| Forest Laboratories, Inc. Option | | Equity | | $ | 39.00 | | | 01/19/2013 | | | 261 | | | | 5 | | | | 10 | | | | 5 | |
| Regeneron Pharmaceuticals, Inc. Option | | Equity | | $ | 195.00 | | | 01/19/2013 | | | 50 | | | | 4 | | | | 14 | | | | 10 | |
| | | | | | | | | | | | | | | $ | 91 | | | $ | 80 | | | $ | (11 | ) |
| | * The number of contracts does not omit 000's. Number of contracts shown in U.S. dollars unless otherwise noted. |
Written Put Option Contracts Outstanding at December 31, 2012
| Description | | Option Type | | Exercise
Price/ Rate | | | Expiration
Date | | Number of
Contracts* | | | Market
Value ╪ | | | Premiums
Received | | | Unrealized
Appreciation
(Depreciation) | |
| Apple, Inc. Option | | Equity | | $ | 460.00 | | | 01/19/2013 | | | 15 | | | $ | 2 | | | $ | 9 | | | $ | 7 | |
| National Oilwell Varco, Inc. Option | | Equity | | $ | 62.50 | | | 01/19/2013 | | | 135 | | | | 4 | | | | 12 | | | | 8 | |
| Prudential Financial, Inc. Option | | Equity | | $ | 48.00 | | | 01/19/2013 | | | 178 | | | | 3 | | | | 10 | | | | 7 | |
| PVH Corp. Option | | Equity | | $ | 100.00 | | | 01/19/2013 | | | 18 | | | | 1 | | | | 2 | | | | 1 | |
| Teradata Corp. Option | | Equity | | $ | 55.00 | | | 01/19/2013 | | | 157 | | | | 5 | | | | 18 | | | | 13 | |
| VeriSign, Inc. Option | | Equity | | $ | 32.25 | | | 01/19/2013 | | | 252 | | | | 2 | | | | 7 | | | | 5 | |
| | | | | | | | | | | | | | | $ | 17 | | | $ | 58 | | | $ | 41 | |
* The number of contracts does not omit 000's. Number of contracts shown in U.S. dollars unless otherwise noted.
Cash of $2,923 was pledged as collateral for open written put option contracts at December 31, 2012.
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
| GLOSSARY: (abbreviations used in preceding Schedule of Investments) |
| |
| Other Abbreviations: |
| FHLMC | Federal Home Loan Mortgage Corp. |
| FNMA | Federal National Mortgage Association |
| GNMA | Government National Mortgage Association |
The accompanying notes are an integral part of these financial statements.
| Hartford Disciplined Equity HLS Fund |
| Investment Valuation Hierarchy Level Summary |
| December 31, 2012 |
| (000’s Omitted) |
| | | Total | | | Level 1 ♦ | | | Level 2 ♦ | | | Level 3 | |
| Assets: | | | | | | | | | | | | | | | | |
| Common Stocks ‡ | | $ | 905,566 | | | $ | 905,566 | | | $ | — | | | $ | — | |
| Short-Term Investments | | | 5,554 | | | | — | | | | 5,554 | | | | — | |
| Total | | $ | 911,120 | | | $ | 905,566 | | | $ | 5,554 | | | $ | — | |
| Written Options * | | | 80 | | | | 80 | | | | — | | | | — | |
| Total | | $ | 80 | | | $ | 80 | | | $ | — | | | $ | — | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Written Options * | | | 50 | | | | 50 | | | | — | | | | — | |
| Total | | $ | 50 | | | $ | 50 | | | $ | — | | | $ | — | |
| ♦ | For the year ended December 31, 2012, there were no transfers between Level 1 and Level 2. |
| ‡ | The Fund has all or primarily all of the equity securities categorized in a particular level. Refer to the Schedule of Investments for further industry breakout. |
| * | Derivative instruments not reflected in the Schedule of Investments are valued at the unrealized appreciation/depreciation on the investments. |
The accompanying notes are an integral part of these financial statements.
| Hartford Disciplined Equity HLS Fund |
| Statement of Assets and Liabilities |
| December 31, 2012 |
| (000’s Omitted) |
| Assets: | | | | |
| Investments in securities, at market value (cost $724,988) | | $ | 911,120 | |
| Cash | | | 2,923 | * |
| Receivables: | | | | |
| Fund shares sold | | | 109 | |
| Dividends and interest | | | 1,025 | |
| Total assets | | | 915,177 | |
| Liabilities: | | | | |
| Bank overdraft | | | 10 | |
| Payables: | | | | |
| Fund shares redeemed | | | 609 | |
| Investment management fees | | | 124 | |
| Distribution fees | | | 6 | |
| Accrued expenses | | | 59 | |
| Written options (proceeds $138) | | | 108 | |
| Total liabilities | | | 916 | |
| Net assets | | $ | 914,261 | |
| Summary of Net Assets: | | | | |
| Capital stock and paid-in-capital | | $ | 869,589 | |
| Undistributed net investment income | | | — | |
| Accumulated net realized loss | | | (141,490 | ) |
| Unrealized appreciation of investments | | | 186,162 | |
| Net assets | | $ | 914,261 | |
| Shares authorized | | | 3,500,000 | |
| Par value | | $ | 0.001 | |
| Class IA: Net asset value per share | | $ | 13.64 | |
| Shares outstanding | | | 58,502 | |
| Net assets | | $ | 798,148 | |
| Class IB: Net asset value per share | | $ | 13.58 | |
| Shares outstanding | | | 8,551 | |
| Net assets | | $ | 116,113 | |
* Cash of $2,923 was designated to cover open put options written at December 31, 2012.
The accompanying notes are an integral part of these financial statements.
| Hartford Disciplined Equity HLS Fund |
| Statement of Operations |
| For the Year Ended December 31, 2012 |
| (000’s Omitted) |
| Investment Income: | | | | |
| Dividends | | $ | 21,526 | |
| Interest | | | 19 | |
| Total investment income, net | | | 21,545 | |
| | | | | |
| Expenses: | | | | |
| Investment management fees | | | 6,983 | |
| Distribution fees - Class IB | | | 318 | |
| Custodian fees | | | 6 | |
| Accounting services fees | | | 118 | |
| Board of Directors' fees | | | 26 | |
| Audit fees | | | 16 | |
| Other expenses | | | 196 | |
| Total expenses (before fees paid indirectly) | | | 7,663 | |
| Commission recapture | | | (25 | ) |
| Total fees paid indirectly | | | (25 | ) |
| Total expenses, net | | | 7,638 | |
| Net Investment Income | | | 13,907 | |
| | | | | |
| Net Realized Gain on Investments and Other Financial Instruments: | | | | |
| Net realized gain on investments | | | 92,633 | |
| Net realized gain on futures | | | 1,966 | |
| Net realized gain on written options | | | 847 | |
| Net Realized Gain on Investments and Other Financial Instruments | | | 95,446 | |
| | | | | |
| Net Changes in Unrealized Appreciation of Investments and Other Financial Instruments: | | | | |
| Net unrealized appreciation of investments | | | 51,964 | |
| Net unrealized appreciation of futures | | | 38 | |
| Net unrealized appreciation of written options | | | 35 | |
| Net Changes in Unrealized Appreciation of Investments and Other Financial Instruments | | | 52,037 | |
| Net Gain on Investments and Other Financial Instruments | | | 147,483 | |
| Net Increase in Net Assets Resulting from Operations | | $ | 161,390 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Disciplined Equity HLS Fund |
| Statement of Changes in Net Assets |
| |
| (000’s Omitted) |
| | | For the
Year Ended
December 31, 2012 | | | For the
Year Ended
December 31, 2011 | |
| Operations: | | | | | | | | |
| Net investment income | | $ | 13,907 | | | $ | 11,096 | |
| Net realized gain on investments and other financial instruments | | | 95,446 | | | | 76,546 | |
| Net unrealized appreciation (depreciation) of investments and other financial instruments | | | 52,037 | | | | (69,588 | ) |
| Net Increase in Net Assets Resulting from Operations | | | 161,390 | | | | 18,054 | |
| Distributions to Shareholders: | | | | | | | | |
| From net investment income | | | | | | | | |
| Class IA | | | (12,461 | ) | | | (10,406 | ) |
| Class IB | | | (1,507 | ) | | | (1,233 | ) |
| Total distributions | | | (13,968 | ) | | | (11,639 | ) |
| Capital Share Transactions: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 32,537 | | | | 40,647 | |
| Issued on reinvestment of distributions | | | 12,461 | | | | 10,406 | |
| Redeemed | | | (227,233 | ) | | | (226,529 | ) |
| Total capital share transactions | | | (182,235 | ) | | | (175,476 | ) |
| Class IB | | | | | | | | |
| Sold | | | 9,132 | | | | 12,903 | |
| Issued on reinvestment of distributions | | | 1,507 | | | | 1,233 | |
| Redeemed | | | (43,293 | ) | | | (45,566 | ) |
| Total capital share transactions | | | (32,654 | ) | | | (31,430 | ) |
| Net decrease from capital share transactions | | | (214,889 | ) | | | (206,906 | ) |
| Net Decrease in Net Assets | | | (67,467 | ) | | | (200,491 | ) |
| Net Assets: | | | | | | | | |
| Beginning of period | | | 981,728 | | | | 1,182,219 | |
| End of period | | $ | 914,261 | | | $ | 981,728 | |
| Undistributed (distribution in excess of) | | | | | | | | |
| net investment income | | $ | — | | | $ | 683 | |
| Shares: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 2,498 | | | | 3,390 | |
| Issued on reinvestment of distributions | | | 918 | | | | 891 | |
| Redeemed | | | (17,242 | ) | | | (18,634 | ) |
| Total share activity | | | (13,826 | ) | | | (14,353 | ) |
| Class IB | | | | | | | | |
| Sold | | | 705 | | | | 1,078 | |
| Issued on reinvestment of distributions | | | 111 | | | | 106 | |
| Redeemed | | | (3,301 | ) | | | (3,775 | ) |
| Total share activity | | | (2,485 | ) | | | (2,591 | ) |
The accompanying notes are an integral part of these financial statements.
| Hartford Disciplined Equity HLS Fund |
| Notes to Financial Statements |
| December 31, 2012 |
| (000’s Omitted) |
Hartford Disciplined Equity HLS Fund (the “Fund”) serves as an underlying investment option for certain variable annuity and variable life insurance separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates and certain qualified retirement plans. The Fund may also serve as an underlying investment option for certain variable annuity and variable life separate accounts of other insurance companies. Owners of variable annuity contracts and policyholders of variable life insurance contracts may choose the funds permitted in the variable insurance contract prospectus. In addition, participants in certain qualified retirement plans may choose the Fund if permitted by their plans.
Hartford Series Fund, Inc. (the “Company”) is an open-end registered management investment company comprised of thirty portfolios. Financial Statements for the Fund, a series of the Company, are included in this report.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund is a diversified open-end management investment company.
The Fund is divided into Class IA and Class IB shares. Each class is offered at the per share net asset value (“NAV”) without a sales charge and is subject to the same expenses, except that the Class IB shares are subject to distribution and service fees charged pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act.
| 2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Fund in the preparation of its financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| a) | Determination of Net Asset Value – The NAV of each class of the Fund’s shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| b) | Investment Valuation and Fair Value Measurements – For purposes of calculating the NAV, portfolio investments and other assets held by the Fund's portfolio for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of last reported sales prices or official close price. If no sales are reported, market value is based on quotes obtained from a quotation reporting system, established market makers, or independent pricing services. If market prices are not readily available or are deemed unreliable, the Fund will use the fair value of the investment as determined in good faith under policies and procedures established by and under the supervision of the Company’s Board of Directors. Market quotes are considered not readily available where there is an absence of current or reliable market-based data (e.g., trade information or indicative market quotes), including where events occur after the close of the relevant market, but prior to the NYSE Close that materially affect the values of the Fund’s portfolio investments or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the investments trade do not open for trading for the entire day and no other market prices are available. In addition, prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close. Investments that are primarily traded on foreign markets may trade on days that are not business days of the Fund. The value of the foreign investments in which the Fund invests may change on days when a shareholder will not be able to |
| | purchase or redeem shares of the Fund. Fair value pricing is subjective in nature and the use of fair value pricing by the Fund may cause the NAV of its shares to differ significantly from the NAV that would have been calculated using market prices at the close of the exchange on which a portfolio investment is primarily traded. There can be no assurance that the Fund could obtain the fair market value assigned to an investment if the Fund were to sell the investment at approximately the time at which the Fund determines its NAV. |
Exchange traded options, futures and options on futures are valued at the settlement price determined by the relevant exchange as of the NYSE Close. If such instruments do not trade on an exchange, values may be supplied by an independent pricing service using a formula or other objective method that may take into consideration the style, direction, expiration, strike price, notional value and volatility or other adjustments.
Financial instruments for which prices are not available from an independent pricing service may be valued using market quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with procedures established by the Company’s Board of Directors.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| · | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange traded funds, rights and warrants. |
| · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 may include debt investments that are traded less frequently than exchange traded instruments and which are valued using independent pricing services; foreign equities, which are principally traded on certain foreign markets and are adjusted daily pursuant to a fair value pricing service in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close; and short-term investments, which are valued at amortized cost. |
| · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price. |
The Board of Directors of the Company generally reviews and approves the “Procedures for Valuation of Portfolio Securities” on an annual basis. These procedures define how investments are to be valued, including the formation and activities of a Valuation Committee. The Valuation Committee is responsible for determining in good faith the fair value of investments when the value cannot be obtained from primary pricing services or alternative sources or if the valuation of an investment as provided by the primary pricing service or alternative source is believed not to reflect the investment’s fair value as of the Valuation Date. Members of the Valuation Committee include the Fund’s Treasurer or designee, a Vice President of the Fund with legal expertise or designee, and a Vice President of the investment manager or designee. In addition, the Fund’s Chief Compliance Officer shall designate a member of the compliance group to attend Valuation Committee meetings
| Hartford Disciplined Equity HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
as a non-voting resource, to monitor for and provide guidance with respect to compliance with these procedures. Two members of the Valuation Committee or their designees, representing different departments, shall constitute a quorum for purposes of permitting the Valuation Committee to take action. The Valuation Committee will consider all relevant factors in determining an investment’s fair value, and may seek the advice of the Fund’s sub-adviser, knowledgeable brokers, and legal counsel in making such determination. The Valuation Committee reports to the Audit Committee of the Company’s Board of Directors. The Audit Committee receives quarterly written reports which include details of all fair-valued investments, including the reason for the fair valuation, and an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such investments (the “look-back” test). The Board of Directors then must consider for ratification all of the fair value determinations made during the previous quarter.
Valuation levels are not necessarily indicative of the risk associated with investing in such investments. Individual investments within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
For additional information, refer to the Investment Valuation Hierarchy Level Summary and the Level 3 roll-forward reconciliation, if applicable, which follow the Schedule of Investments.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period.
| c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Investments purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses are determined on the basis of identified cost. |
Dividend income from domestic securities is accrued on the ex-dividend date. In general, dividend income from foreign securities is recorded on the ex-date; however, dividend notifications in certain foreign jurisdictions may not be available in a timely manner and as a result, the Fund will record the dividend as soon as the relevant details (i.e., rate per share, payment date, shareholders of record, etc.) are publicly available. Interest income, including amortization of premium and accretion of discounts, is accrued on a daily basis.
| d) | Joint Trading Account – The Fund may invest cash balances into a joint trading account that may be invested in one or more repurchase agreements. |
| e) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Fund’s shares are executed in accordance with the investment instructions of the contract holders and plan participants. The NAV of the Fund’s shares is determined as of the close of business on each business day of the Exchange. The NAV is determined separately for each class of shares of the Fund by dividing the Fund’s net assets attributable to that class by the number of shares of the class outstanding. Each class of shares offered by the Fund has equal rights as to assets and voting privileges (except that shareholders of a class have exclusive voting rights regarding any matter relating solely to that class of shares). Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets of the class. Realized and unrealized capital gains and losses are allocated daily based on the relative net assets of each class of shares of the Fund. |
Orders for the purchase of the Fund’s shares received prior to the close of the Exchange on any day the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Fund. The policy of the Fund is to pay dividends from net investment income and realized capital gains, if any, at least once a year.
Distributions from net investment income, net realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These differences may include but are not limited to losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to Passive Foreign Investment Companies (“PFICs”), Real Estate Investment Trusts (“REITs”), Regulated Investment Companies (“RICs”), certain derivatives and partnerships. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Fund’s capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| 3. | Securities and Other Investments: |
| a) | Repurchase Agreements – A repurchase agreement is an agreement by which a counterparty agrees to sell an investment and agrees to repurchase the investment sold from the buyer at a mutually agreed upon time and price. At the time the Fund enters into a repurchase agreement, the value of the underlying collateral, including accrued interest, will be equal to or exceed the value of the repurchase agreement. Repurchase agreements expose the Fund to counterparty risk - that is, the risk that the counterparty will not fulfill its obligations. To minimize counterparty risk, the investments that serve to collateralize the repurchase agreement are held by the Fund’s custodian in book entry or physical form in the custodial account of the Fund or in a third party custodial account. Repurchase agreements are valued at cost plus accrued interest, which approximates fair value. The Fund, as shown on the Schedule of Investments, had outstanding repurchase agreements as of December 31, 2012. |
| b) | Investments Purchased on a When-Issued or Delayed-Delivery Basis – Delivery and payment for investments that have been purchased by the Fund on a forward commitment, or when-issued or delayed-delivery basis, take place beyond the customary settlement period. A fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell delayed-delivery investments before they are delivered, which may result in a realized gain or loss. During this period, such investments are subject to market fluctuations, and the Fund identifies investments segregated in its records with a value at least equal to the amount of the commitment. As of December 31, 2012, the Fund had no outstanding when-issued or delayed-delivery investments. |
| 4. | Financial Derivative Instruments: |
The following disclosures contain information on how and why the Fund uses derivative instruments, the credit-risk-related contingent features in certain derivative instruments, and how derivative instruments affect the Fund’s financial position and results of operations. The location and fair value amounts of these instruments on the Statement of Assets and Liabilities and the realized gains and losses and changes in unrealized gains and losses on the Statement of Operations, each categorized by type of derivative contract, are included in the following Additional Derivative Instrument Information footnote. The derivative instruments outstanding as of year-end are disclosed in the notes to or within the Schedule of Investments for purchased options, if applicable. The amounts of realized gains and losses and changes in unrealized gains and losses on derivative instruments during the year are disclosed in the Statement of Operations.
| a) | Futures Contracts – The Fund may enter into futures contracts. A futures contract is an agreement between two parties to buy or sell an asset at a set price on a future date. The Fund uses futures contracts to manage or obtain exposure to the investment markets, commodities, or movements in interest rates and currency values. The primary risks associated with the use of futures contracts are the imperfect correlation between the change in market value of the investments held by the Fund and the prices of futures contracts and the possibility of an illiquid market. Upon entering into a futures contract, the Fund is required to deposit with a futures commission merchant (“FCM”) an amount of cash or U.S. |
| Hartford Disciplined Equity HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| | Government or Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily at the most recent settlement price reported by an exchange on which, over time, they are traded most extensively, and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statement of Assets and Liabilities; however, the Fund seeks to reduce this risk through the use of an FCM. As of December 31, 2012, the Fund had no outstanding futures contracts. |
| b) | Options Contracts – An option contract is a contract sold by one party to another party that offers the buyer the right, but not the obligation, to buy (call) or sell (put) an investment or other financial asset at an agreed-upon price during a specific period of time or on a specific date. The Fund may write (sell) covered call and put options on futures, swaps (“swaptions”), securities, commodities or currencies. “Covered” means that so long as the Fund is obligated as the writer of an option, it will own either the underlying investments or currency or an option to purchase the same underlying investments or currency having an expiration date of the covered option and an exercise price equal to or less than the exercise price of the covered option, or will pledge cash or other liquid investments having a value equal to or greater than the fluctuating market value of the option investment or currency. Writing put options increases the Fund’s exposure to the underlying instrument. Writing call options decreases the Fund’s exposure to the underlying instrument. Premiums received from writing options that expire are treated as realized gains. Premiums received from writing options that are exercised or closed are added to the proceeds or offset amounts paid on the underlying futures, swap, investment or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying instrument may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the instrument underlying the written option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. The Fund may also purchase put and call options. Purchasing call options increases the Fund’s exposure to the underlying instrument. Purchasing put options decreases the Fund’s exposure to the underlying instrument. The Fund pays a premium, which is included on the Fund’s Statement of Assets and Liabilities as an investment and is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options that expire are treated as realized losses. Certain options may be purchased with premiums to be determined on a future date. The premiums for these options are based upon implied volatility parameters at specified terms. The risk associated with purchasing put and call options is generally limited to the premium paid. Premiums paid for purchasing options that are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying investment transaction to determine the realized gain or loss. Entering into over-the-counter options also exposes the Fund to counterparty risk. Counterparty risk is the possibility that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements. The Fund had no outstanding purchased options contracts as of December 31, 2012. Transactions involving written options contracts for the Fund during the year ended December 31, 2012, are summarized below: |
| | | Options Contract Activity During the
Year Ended December 31, 2012 | |
| Call Options Written During the Year | | Number of Contracts* | | | Premium Amounts | |
| Beginning of the year | | | 1,268 | | | $ | 80 | |
| Written | | | 15,402 | | | | 1,110 | |
| Expired | | | (8,627 | ) | | | (570 | ) |
| Closed | | | (4,854 | ) | | | (384 | ) |
| Exercised | | | (1,825 | ) | | | (156 | ) |
| End of year | | | 1,364 | | | $ | 80 | |
| Put Options Written During the Year | | Number of Contracts* | | | Premium Amounts | |
| Beginning of the year | | | 774 | | | $ | 36 | |
| Written | | | 15,796 | | | | 755 | |
| Expired | | | (13,583 | ) | | | (578 | ) |
| Closed | | | (2,061 | ) | | | (141 | ) |
| Exercised | | | (171 | ) | | | (14 | ) |
| End of year | | | 755 | | | $ | 58 | |
* The number of contracts does not omit 000's.
| c) | Additional Derivative Instrument Information: |
| | Fair Value of Derivative Instruments on the Statement of Assets and Liabilities as of December 31, 2012: |
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Written options, market value | | $ | — | | | $ | — | | | $ | — | | | $ | 108 | | | $ | — | | | $ | — | | | $ | 108 | |
| Total | | $ | — | | | $ | — | | | $ | — | | | $ | 108 | | | $ | — | | | $ | — | | | $ | 108 | |
The volume of derivatives that is presented in the Schedule of Investments is consistent with the derivative activity during the year ended December 31, 2012.
The Effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Realized Gain on Derivatives Recognized as a Result of Operations: | |
| Net realized gain on futures | | $ | — | | | $ | — | | | $ | — | | | $ | 1,966 | | | $ | — | | | $ | — | | | $ | 1,966 | |
| Net realized gain on written options | | | — | | | | — | | | | — | | | | 847 | | | | — | | | | — | | | | 847 | |
| Total | | $ | — | | | $ | — | | | $ | — | | | $ | 2,813 | | | $ | — | | | $ | — | | | $ | 2,813 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Change in Unrealized Appreciation on Derivatives Recognized as a Result of Operations: | |
| Net change in unrealized appreciation of futures | | $ | — | | | $ | — | | | $ | — | | | $ | 38 | | | $ | — | | | $ | — | | | $ | 38 | |
| Net change in unrealized appreciation of written options | | | — | | | | — | | | | — | | | | 35 | | | | — | | | | — | | | | 35 | |
| Total | | $ | — | | | $ | — | | | $ | — | | | $ | 73 | | | $ | — | | | $ | — | | | $ | 73 | |
| a) | Counterparty Risk – The Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will default. |
| Hartford Disciplined Equity HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| b) | Market Risks – The market values of equity securities, such as common stocks and preferred stocks, or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The market value of equity securities may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities. |
| a) | Federal Income Taxes – For federal income tax purposes, the Fund intends to continue to qualify as a RIC under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders and otherwise complying with the requirements of the IRC. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains prior to the next fiscal year-end. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. |
| c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Fund for the periods indicated is as follows (as adjusted for dividends payable, if applicable): |
| | | For the Year Ended
December 31, 2012 | | | For the Year Ended
December 31, 2011 | |
| Ordinary Income | | $ | 13,968 | | | $ | 11,639 | |
As of December 31, 2012, the Fund’s components of distributable earnings (deficit) on a tax basis were as follows:
| | | Amount | |
| Accumulated Capital and Other Losses* | | $ | (140,775 | ) |
| Unrealized Appreciation† | | | 185,447 | |
| Total Accumulated Earnings | | $ | 44,672 | |
| * | The Fund has capital loss carryforwards that are identified in the Capital Loss Carryforward note that follows. |
| † | Differences between book-basis and tax-basis unrealized appreciation (depreciation) may be attributable to the losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. |
| d) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as foreign currency, PFICs, expiration or utilization of capital loss carryforwards or net operating losses. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Fund’s distributions may be shown in the |
accompanying Statement of Changes in Net Assets as from undistributed net investment income, from accumulated net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Fund recorded reclassifications to increase (decrease) the accounts listed below:
| | | Amount | |
| Undistributed Net Investment Income | | $ | (622 | ) |
| Accumulated Net Realized Gain (Loss) | | | 1,028 | |
| Capital Stock and Paid-in-Capital | | | (406 | ) |
| e) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation. |
At December 31, 2012 (tax-year-end), the Fund had capital loss carryforwards for U.S. federal income tax purposes as follows:
| Year of Expiration | | Amount | |
| 2017 | | $ | 140,775 | |
| Total | | $ | 140,775 | |
During the year ended December 31, 2012, the Fund utilized $96,131 of prior year capital loss carryforwards.
| f) | Accounting for Uncertainty in Income Taxes – The Fund has adopted financial reporting rules that require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Fund does not have an examination in progress. |
The Fund has reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules had no effect on the Fund’s financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2012. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Fund’s investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Fund pursuant to an Investment Management Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Fund’s investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees payable under, the Fund’s investment management agreements; or (ii) the day-to-day management of the Fund. The investment manager has overall investment supervisory responsibility for the Fund. In addition, the investment manager provides administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. The investment manager has contracted with Wellington Management Company, LLP (“Wellington Management”) under a |
| Hartford Disciplined Equity HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
sub-advisory agreement for the provision of day-to-day investment management services to the Fund in accordance with the Fund’s investment objective and policies. The Fund pays a fee to the investment manager, a portion of which may be used to compensate Wellington Management.
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered as of December 31, 2012; the rates are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee | |
| On first $250 million | | | 0.7750 | % |
| On next $250 million | | | 0.7250 | % |
| On next $500 million | | | 0.6750 | % |
| On next $4 billion | | | 0.6250 | % |
| On next $5 billion | | | 0.6225 | % |
| Over $10 billion | | | 0.6200 | % |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Fund. HLIC provided accounting services for the Fund for the fiscal year ended December 31, 2012. The replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Fund or the fees charged to the Fund for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Fund, HFMC provides accounting services to the Fund and receives monthly compensation based on the Fund’s average daily net assets at the rates set forth below. The Fund’s accounting services fees are accrued daily and paid monthly. |
| Average Daily Net Assets | | Annual Fee | |
| On first $5 billion | | | 0.012 | % |
| Over $5 billion | | | 0.010 | % |
| c) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund and allocated to classes within a Fund in proportion to the average daily net assets of the Fund and each class, except where allocation of certain expenses is more fairly made directly to the Fund or to specific classes within a Fund. |
| d) | Fees Paid Indirectly – The Company, on behalf of the Fund, has entered into agreements with State Street Global Markets, LLC and Russell Implementation Services, Inc. to partially recapture non-discounted trade commissions. Such rebates are used to pay a portion of the Fund’s expenses. In addition, the Fund’s custodian banks have agreed to reduce its fees when the Fund maintains cash on deposit in a non-interest-bearing custody account. For the year ended December 31, 2012, these amounts, if any, are included in the Statement of Operations. |
The ratio of expenses to average net assets in the accompanying financial highlights excludes the reduction in expenses related to fees paid indirectly. The annualized expense ratio after waivers for the period listed below reflecting the reduction for fees paid indirectly is as follows:
| | | Year Ended
December 31, 2012 | |
| Class IA | | | 0.75 | % |
| Class IB | | | 1.00 | |
| e) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Fund's principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD |
with HIFSCO did not result in any changes to the distribution services provided to the Fund. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Fund, has adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, 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, subject to the review and approval of the Company’s Board of Directors.
The Distribution Plan provides that the Fund may pay annually up to 0.25% of the average daily net assets of the Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, the Fund is authorized to make payments monthly to the Distributor that may be used to pay or compensate 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. These fees are accrued daily and paid monthly.
| f) | Other Related Party Transactions – Certain officers of the Fund are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Fund’s Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Fund was in the amount of $1. These fees are accrued daily and paid monthly. |
| g) | Payment from Affiliate – In July of 2007, The Hartford entered into a settlement with the Attorneys General of the states of New York, Connecticut and Illinois relating to market timing and the company's individual variable annuity contracts in which certain payments would be made directly to the variable annuity contract holders. The distribution plan provided that unclaimed money from the settlement would be distributed to certain HLS Funds that are investment options through a Hartford individual variable annuity contract. The unclaimed money was distributed to the Fund on September 18, 2009. |
The total return in the accompanying financial highlights includes a payment from an affiliate. Had the payment from the affiliate been excluded, the impact and total return for the period listed below would have been as follows:
| | | For the Year Ended December 31, 2009 | |
| | | Class IA | | | Class IB | |
| Impact from Payment from Affiliate for Attorneys General Settlement | | | 0.01 | % | | | 0.01 | % |
| Total Return Excluding Payment from Affiliate | | | 25.64 | % | | | 25.32 | % |
| 8. | Investment Transactions: |
For the year ended December 31, 2012, the Fund's aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
| | | Amount | |
| Cost of Purchases Excluding U.S. Government Obligations | | $ | 328,831 | |
| Sales Proceeds Excluding U.S. Government Obligations | | | 529,831 | |
The Fund is one of several Hartford funds that participate in a $500 million committed revolving line of credit facility. The facility is to be used for temporary or emergency purposes. Under the arrangement, the funds are required to own securities having a market value in excess of 300% of the total bank borrowings. The interest rate on borrowings varies depending on the nature of the loan. The facility also requires a fee to be paid based on the amount of the commitment. This commitment
| Hartford Disciplined Equity HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
fee is allocated to all of the funds participating in the line of credit based on the average net assets of the funds. During the year ended December 31, 2012, the Fund did not have any borrowings under this facility.
| 10. | Industry Classifications: |
Other than the industry classifications “Other Investment Pools and Funds” and “Exchange Traded Funds,” equity industry classifications used in this report are the Global Industry Classification Standard, which was developed by and is the exclusive property and service mark of MSCI, Inc. and Standard & Poor’s.
Under the Company’s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
| 12. | Recent Accounting Pronouncement: |
Disclosures about Offsetting Assets and Liabilities - In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The objective of the ASU is to enhance current disclosure requirements on offsetting of certain assets and liabilities and to enable financial statement users to compare financial statements prepared under U.S. GAAP and International Financial Reporting Standards.
Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
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| Hartford Disciplined Equity HLS Fund |
| Financial Highlights |
| - Selected Per-Share Data (A) - |
Class | | Net Asset Value at
Beginning of
Period | | | Net Investment
Income (Loss) | | | Net Realized and
Unrealized Gain
(Loss) on
Investments | | | Total from
Investment
Operations | | | Dividends from Net
Investment Income | | | Distributions from
Realized Capital
Gains | | | Distributions from
Capital | | | Total Distributions | | | Net Asset Value at
End of Period | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2012 | |
| IA | | $ | 11.78 | | | $ | 0.22 | | | $ | 1.86 | | | $ | 2.08 | | | $ | (0.22) | | | $ | — | | | $ | — | | | $ | (0.22) | | | $ | 13.64 | |
| IB | | | 11.73 | | | | 0.18 | | | | 1.85 | | | | 2.03 | | | | (0.18) | | | | — | | | | — | | | | (0.18) | | | | 13.58 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2011 |
| IA | | | 11.79 | | | | 0.14 | | | | (0.01 | ) | | | 0.13 | | | | (0.14) | | | | — | | | | — | | | | (0.14) | | | | 11.78 | |
| IB | | | 11.73 | | | | 0.11 | | | | — | | | | 0.11 | | | | (0.11) | | | | — | | | | — | | | | (0.11) | | | | 11.73 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2010 | |
| IA | | | 10.47 | | | | 0.15 | | | | 1.32 | | | | 1.47 | | | | (0.15) | | | | — | | | | — | | | | (0.15) | | | | 11.79 | |
| IB | | | 10.42 | | | | 0.13 | | | | 1.30 | | | | 1.43 | | | | (0.12) | | | | — | | | | — | | | | (0.12) | | | | 11.73 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2009 | |
| IA | | | 8.46 | | | | 0.15 | | | | 2.01 | | | | 2.16 | | | | (0.15) | | | | — | | | | — | | | | (0.15) | | | | 10.47 | |
| IB | | | 8.41 | | | | 0.13 | | | | 2.00 | | | | 2.13 | | | | (0.12) | | | | — | | | | — | | | | (0.12) | | | | 10.42 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2008 | | |
| IA | | | 15.05 | | | | 0.14 | | | | (5.37 | ) | | | (5.23 | ) | | | (0.14) | | | | (1.22) | | | | — | | | | (1.36) | | | | 8.46 | |
| IB | | | 14.97 | | | | 0.12 | | | | (5.35 | ) | | | (5.23 | ) | | | (0.11) | | | | (1.22) | | | | — | | | | (1.33) | | | | 8.41 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include 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 would lower the Fund's performance. |
| (C) | Ratios do not reflect reductions for fees paid indirectly. Please see Fees Paid Indirectly in the Notes to Financial Statements. |
| (D) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
| (E) | Total return without the inclusion of the Payment from (to) Affiliate can be found in Expenses in the accompanying Notes to Financial Statements. |
| |
| - Ratios and Supplemental Data - |
| Total Return(B) | | | Net Assets at End of Period | | | Ratio of Expenses to Average Net Assets
Before Waivers(C) | | | Ratio of Expenses to Average Net Assets
After Waivers(C) | | | Ratio of Net Investment
Income (Loss) to Average Net
Assets | | | Portfolio
Turnover
Rate(D) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 17.62 | % | | $ | 798,148 | | | | 0.75 | % | | | 0.75 | % | | | 1.45 | % | | | 34 | % |
| | 17.33 | | | | 116,113 | | | | 1.00 | | | | 1.00 | | | | 1.20 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 1.15 | | | | 852,312 | | | | 0.74 | | | | 0.74 | | | | 1.06 | | | | 44 | |
| | 0.90 | | | | 129,416 | | | | 0.99 | | | | 0.99 | | | | 0.81 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 14.04 | | | | 1,022,321 | | | | 0.75 | | | | 0.75 | | | | 1.35 | | | | 44 | |
| | 13.76 | | | | 159,898 | | | | 1.00 | | | | 1.00 | | | | 1.10 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 25.65 | (E) | | | 1,008,875 | | | | 0.75 | | | | 0.75 | | | | 1.56 | | | | 59 | |
| | 25.33 | (E) | | | 173,063 | | | | 1.00 | | | | 1.00 | | | | 1.31 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (37.27 | ) | | | 868,799 | | | | 0.71 | | | | 0.71 | | | | 1.14 | | | | 73 | |
| | (37.43 | ) | | | 165,848 | | | | 0.96 | | | | 0.96 | | | | 0.89 | | | | — | |
| Report of Independent Registered Public Accounting Firm |
| The Board of Directors and Shareholders of |
| Hartford Series Fund, Inc. |
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Hartford Disciplined Equity HLS Fund (one of the portfolios constituting Hartford Series Fund, Inc. (the Fund)) as of December 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Hartford Disciplined Equity HLS Fund (one of the portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Minneapolis, MN
February 15, 2013
| Hartford Disciplined Equity HLS Fund |
| Directors and Officers (Unaudited) |
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Fund pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Fund. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Fund’s statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Fund pays to The Hartford a portion of the Chief Compliance Officer’s compensation, but does not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
| Hartford Disciplined Equity HLS Fund |
| Directors and Officers (Unaudited) – (continued) |
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010 (4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and a record of how the Fund voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
| Hartford Disciplined Equity HLS Fund |
| Expense Example (Unaudited) |
Your Fund's Expenses
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Actual return | | | Hypothetical (5% return before expenses) | | | | | | | | | | |
| | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2
year | | | Days
in the
full
year | |
| Class IA | | $ | 1,000.00 | | | $ | 1,006.23 | | | $ | 3.79 | | | $ | 1,000.00 | | | $ | 1,021.36 | | | $ | 3.82 | | | | 0.75 | % | | | 184 | | | | 366 | |
| Class IB | | $ | 1,000.00 | | | $ | 1,006.09 | | | $ | 5.05 | | | $ | 1,000.00 | | | $ | 1,020.10 | | | $ | 5.09 | | | | 1.00 | % | | | 184 | | | | 366 | |
| Hartford Disciplined Equity HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) |
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory and sub-advisory agreements. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for Hartford Disciplined Equity HLS Fund (the “Fund”) with HL Investment Advisors, LLC (“HL Advisors”) and the continuation of the investment sub-advisory agreement between HL Advisors and the Fund’s sub-adviser, Wellington Management Company, LLP (the “Sub-adviser,” and together with HL Advisors, the “Advisers”) (collectively, the “Agreements”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from the Advisers to questions posed to them on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreements at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by the Advisers and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreements.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreements with respect to the Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Fund’s contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Fund’s management fees, sub-advisory fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement.
In determining to continue the Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreements. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreements is provided below.
Nature, Extent, and Quality of Services Provided by the Advisers
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Fund by the Advisers. The Board considered, among other things, the terms of the Agreements and the range of services provided by the Advisers. The Board considered the Advisers’ professional personnel who provide services to the Fund, including each Adviser’s ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered each Adviser’s reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to the Fund. In addition, the Board considered the quality of each Adviser’s communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning each Adviser’s regulatory and compliance environment. In this regard, the Board requested and reviewed information on each Adviser’s compliance policies and procedures, compliance history, and a report from the Fund’s Chief Compliance Officer on each Adviser’s compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. The Board also noted the Advisers’ support of the Fund’s compliance control structure, particularly the resources devoted by the Advisers in support of the Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act.
| Hartford Disciplined Equity HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
With respect to HL Advisors, the Board noted that under the Agreements, HL Advisors is responsible for the management of the Fund, including overseeing fund operations and service providers, as well as investment advisory services in connection with selecting, monitoring and supervising the Sub-adviser. The Board considered HL Advisors’ ongoing monitoring of people, process and performance, including its quarterly reviews of each of the Hartford HLS Funds, semi-annual meetings with the leaders of each Fund’s portfolio management team, and oversight of the Funds’ approximately 40 portfolio managers. The Board recognized that HL Advisors has demonstrated a record of making changes to the management and/or strategies of the Funds when warranted. The Board considered HL Advisors’ oversight of the Sub-adviser’s investment approach and results, process for monitoring best execution of portfolio trades by the Sub-adviser, and approach to risk management with respect to the Fund and the service providers to the Fund. The Board also considered HL Advisors’ oversight of compliance with the Fund’s objective and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led to an increase in the scope of HL Advisors’ services in this regard. In addition, the Board considered HL Advisors’ ongoing commitment to review and rationalize the Hartford fund family’s product line-up and the expenses that HL Advisors had incurred in connection with fund combinations in recent years. The Board considered that HL Advisors or its affiliates are responsible for providing the Fund’s officers. The Board also noted that Hartford Life Insurance Company (“HLIC”) provides administrative services to the Fund. The Board considered its experiences with HL Advisors and HLIC with respect to each of these services.
With respect to the Sub-adviser, who provides day-to-day portfolio management services, the Board considered the quality of the Fund’s portfolio manager, the Sub-adviser’s other investment personnel, its investment philosophy and process, investment research capabilities and resources, performance record, trade execution capabilities and experience. The Board considered the experience of the Fund’s portfolio manager, the number of accounts managed by the portfolio manager, and the Sub-adviser’s method for compensating the portfolio manager.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Fund by HL Advisors and the Sub-adviser.
Performance of the Fund and the Advisers
The Board considered the investment performance of the Fund. In this regard, the Board reviewed the performance of the Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of the Fund’s performance for these time periods. The Board considered information and materials provided to the Board by the Advisers concerning Fund performance, as well as information from Lipper comparing the investment performance of the Fund to an appropriate benchmark and universe of peer funds. The Board noted that the performance of the Fund was within expectations.
The Board considered the detailed investment analytics reports provided by The Hartford’s Investment Advisory Group throughout the year. These reports include, among other things, information on the Fund’s gross and net returns, the Fund’s investment performance relative to an appropriate benchmark and peer group, various statistics concerning the Fund’s portfolio, and a narrative summary of various factors affecting Fund performance. The Board considered the Advisers’ cooperation with the Investment Committee, which assists the Board in evaluating the performance of the Fund at periodic meetings throughout the year. The Board also considered the analysis provided by the Consultant relating to the Fund’s performance track record.
In light of all the considerations noted above, the Board concluded that it had continued confidence in HL Advisors’ and the Sub-adviser’s overall capabilities to manage the Fund.
Costs of the Services and Profitability of the Advisers
The Board reviewed information regarding HL Advisors’ cost to provide investment management and related services to the Fund and HL Advisors’ profitability, both overall and for the Fund, on a pre-tax basis without regard to distribution expenses. The Board also requested and reviewed information about the profitability to HL Advisors and its affiliates from all services provided to the Fund and all aspects of their relationship with the Fund. The Board also requested and received information relating to the operations and profitability of the Sub-adviser.
The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement, noting the Consultant’s view that The Hartford’s process for calculating and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by the Advisers and their affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by the Advisers
The Board considered comparative information with respect to the management fees to be paid by the Fund to HL Advisors and the total expense ratios of the Fund. The Board also considered comparative information with respect to the sub-advisory fees to be paid by HL Advisors to the Sub-adviser, to the extent applicable. In this regard, the Board requested and reviewed information from HL Advisors and the Sub-adviser relating to the management and sub-advisory fees, including the sub-advisory fee schedule for the Fund, and total operating expenses for the Fund. The Board considered that the management fee for the Fund includes the fee paid to HLIC for providing certain administrative services to the Fund. With respect to the sub-advisory fee schedule, the Board considered representations from HL Advisors and the Sub-adviser that the Sub-adviser’s fees were negotiated at arm’s length. The Board also reviewed information from Lipper comparing the Fund’s contractual management fees, actual management fees and overall expense ratios relative to a group of funds selected by Lipper, in consultation with the Consultant, and a broader universe of funds selected by Lipper.
While the Board recognized that comparisons between the Fund and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business models and cost structures of the Advisers, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of the Fund’s management and sub-advisory fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to the Fund’s management and sub-advisory fees and total operating expenses.
Based on these considerations, the Board concluded that the Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding the Advisers’ realization of economies of scale with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. The Board reviewed the breakpoints in the management fee schedule for the Fund, which reduce fee rates as Fund assets grow over time. The Board recognized that a fund with assets beyond the last breakpoint level will continue to benefit from economies of scale because additional assets are charged the lowest breakpoint fee resulting in lower overall effective management fee rates. The Board also recognized that a fee schedule that reaches a lower breakpoint quickly provides shareholders with the benefit of anticipated or potential economies of scale.
The Board reviewed and evaluated materials from Lipper showing how management fee schedules of peer funds reflect economies of scale for the benefit of shareholders as a peer fund’s assets hypothetically increase over time. Based on information provided by HL Advisors, Lipper, and the Consultant, the Board recognized that there is no uniform methodology for establishing breakpoints or uniform pattern in asset levels that trigger breakpoints or the amounts of breakpoints triggered.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Fund’s shareholders based on currently available information and the effective advisory fees and expense ratios for the Fund at its current and reasonably anticipated asset levels. The Board noted, however, that it would continue to monitor future growth in Fund assets and the appropriateness of additional breakpoints.
| Hartford Disciplined Equity HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
Other Benefits
The Board considered other benefits to the Advisers and their affiliates from their relationships with the Fund, including the role of the Fund in supporting the variable life insurance and variable annuity products offered by The Hartford. The Board reviewed information noting that HLIC, an affiliate of HL Advisors, receives fees for providing certain administrative services to the Fund, and that HLIC also receives fees for fund accounting and related services from the Fund, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Fund’s transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Fund, and the Board reviewed information on the profitability of the Fund’s transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Fund were fair and reasonable based on publicly available information.
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Fund, receives 12b-1 fees from the Fund. The Board also noted that certain affiliates of HL Advisors distribute shares of the Fund and receive compensation in that connection.
The Board considered benefits to the Sub-adviser from its use of the Fund’s brokerage commissions to obtain soft dollar research, and representations from HL Advisors and the Sub-adviser that the Sub-adviser would not make any revenue-sharing payments or any other type of distribution payments to HL Advisors or its affiliates.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the Agreements for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory and sub-advisory agreements. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreements for the Fund and approve a new investment management agreement for the Fund with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser, and a new investment sub-advisory agreement between HFMC and the Fund’s existing Sub-adviser, Wellington Management Company, LLP (together with HFMC, the “Post-Restructuring Advisers”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Fund. In order to implement the Restructuring, the Fund would terminate the existing Agreements and enter into a new investment management agreement with HFMC, with HFMC also entering into a new investment sub-advisory agreement with the Sub-adviser (collectively, the “New Agreements”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreements at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by HL Advisors and the Sub-adviser and their affiliates. In addition, the Board received in-person presentations by Fund
officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreements.
In determining to approve the New Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the New Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreements.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Fund and the performance of investment management personnel to the Fund. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Fund prior to the Restructuring would continue to provide such services to the Fund, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreements would involve no changes to (i) the contractual terms of, including the management fees payable under, the Fund’s investment management and investment sub-advisory agreements; (ii) the investment processes and strategies employed in the management of the Fund’s assets; (iii) the nature and level of services provided under the Fund’s investment management and investment sub-advisory agreements; and (iv) the day-to-day management of the Fund and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Fund.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Fund.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Fund, the investment management arrangement for the Fund following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreements: (i) nature, extent and quality of services provided by HL Advisors and the Sub-adviser; (ii) performance of the Fund, HL Advisors and the Sub-adviser; (iii) costs of the services and profitability of HL Advisors and the Sub-adviser; (iv) comparative services rendered and comparative investment management and sub-advisory fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors and the Sub-adviser with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. With respect to the other benefits to the Post-Restructuring Advisers and their affiliates from their relationships with the Fund, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting and related services from the Fund.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the New Agreements. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
| Hartford Disciplined Equity HLS Fund |
| Principal Risks (Unaudited) |
The principal risks of investing in the Fund are described below.
Market and Selection Risk: The Fund’s share price may fluctuate due to market risk and/or security selections that may underperform compared to the market or relevant benchmarks.
Foreign Investment Risk: Foreign investments can be riskier than U.S. investments. Potential risks include currency risk that may result from unfavorable exchange rates, liquidity risk if decreased demand for a security makes it difficult to sell at the desired price, and risks that stem from substantially lower trading volume on foreign markets.
Quantitative Analysis Risk: The Fund uses quantitative analysis in its securities selection; securities selected by this method may perform differently from the broader stock market.
Active Trading Risk: Actively trading investments may result in higher costs and higher taxable income.
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
HLSAR-DE12 2-13 113537 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 | |
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford Dividend and Growth HLS Fund
Table of Contents
This report is prepared for the general information of contract owners and qualified retirement plan participants. It is not an offer of contracts or of qualified retirement plans. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent information including the applicable sales, administrative and other charges.
The views expressed in the Fund’s Manager Discussion under ‘‘Why did the Fund perform this way?’’ and ‘‘What is the outlook?’’ are views of the Fund’s sub-adviser and portfolio management team through the end of the period and are subject to change based on market and other conditions.
Hartford Dividend and Growth HLS Fund inception 03/09/1994
(sub-advised by Wellington Management Company, LLP)
| Investment objective – Seeks a high level of current income consistent with growth of capital. |
Performance Overview 12/31/02 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IA. Growth results in classes other than Class IA will vary from what is seen above due to differences in the expenses charged to those share classes.
Average Annual Total Returns (as of 12/31/12)
| | 1 Year | 5 Year | 10 Year |
| Dividend and Growth IA | 13.59% | 1.88% | 8.01% |
| Dividend and Growth IB | 13.31% | 1.63% | 7.74% |
| Russell 1000 Value Index | 17.51% | 0.59% | 7.38% |
| S&P 500 Index | 15.99% | 1.66% | 7.09% |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund’s net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
Russell 1000 Value Index is an unmanaged index measuring the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values. The Russell 1000 Index is an unmanaged index that measures the performance of the 1,000 largest companies in the Russell 3000 Index, which measures the performance of the 3,000 largest U.S. companies, based on total market capitalizations.
S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.
You cannot invest directly in an index.
As of the Fund’s current prospectus dated May 1, 2012, the net total annual operating expense ratios for Class IA and Class IB shares were 0.67% and 0.92%, respectively, and the gross total annual operating expense ratios for Class IA and Class IB shares were 0.67% and 0.92%, respectively. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect until April 30, 2013, and automatically renew for one-year terms unless terminated by the Fund’s Investment Advisor (Hartford Funds Management Company, LLC). For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
| Hartford Dividend and Growth HLS Fund |
| Manager Discussion – (Unaudited) |
| December 31, 2012 |
| Portfolio Managers | | | |
| Edward P. Bousa, CFA | Donald J. Kilbride | | Matthew G. Baker |
Senior Vice President and Equity Portfolio
Manager | Senior Vice President and Equity Portfolio
Manager | | Vice President and Equity Portfolio
Manager |
| | | | |
How did the Fund perform?
The Class IA shares of the Hartford Dividend and Growth HLS Fund returned 13.59% for the twelve-month period ended December 31, 2012, underperforming its benchmark, the S&P 500 Index, which returned 15.99% for the same period. The Fund underperformed the 14.99% return of the average fund in the Lipper VP-UF Equity Income Funds peer group, a group of funds with investment strategies similar to those of the Fund.
Why did the Fund perform this way?
U.S. equities moved higher in the period, in part due to a strengthening housing market and central bank interventions around the globe. Although Europe continued to grapple with economic and structural challenges, investors’ risk appetites surged after European Central Bank (ECB) President Mario Draghi revealed a comprehensive plan to support struggling sovereigns, including direct purchases of government bonds in the open market. Additionally, the U.S. Federal Reserve’s (Fed) announcement of a third round of quantitative easing (QE3) was well received by the market, boosting stock prices. Despite concerns about the looming U.S. fiscal cliff (i.e. expiration of certain tax rate cuts combined with forced spending cuts), tepid corporate revenue results, and economic malaise in Europe, investors bid up risk assets amid further signs of recovery in China and signs that the U.S. housing market may bolster the U.S. economy for the first time in seven years. Risk sentiment also ticked up on continued hopes that the ECB’s bond-buying plan will succeed, essentially reducing the tail risks in Europe.
Overall equity market performance was positive for the period across all market capitalizations: large cap equities (+16%), small caps (+16%), and mid caps (+18%) all rose as represented by the S&P 500, Russell 2000, and S&P Midcap 400 Indices, respectively. During the twelve-month period all ten sectors within the S&P 500 Index posted positive returns, led by Financials (+29%) Consumer Discretionary (+24%), and Telecommunication Services (+18%).
The Fund’s underperformance relative to the S&P 500 was due to negative stock selection within Energy, Health Care, and Financials. This was partially offset by stronger selection in Consumer Discretionary, Industrials, and Consumer Staples. Overall sector allocation, a residual of bottom-up stock selection, was positive driven in part by our overweight to Financials (i.e. the Fund’s sector position was greater than the benchmark position) and underweight to Consumer Staples. A modest cash position detracted in an upward trending market.
The Fund’s top detractors from benchmark-relative returns were Apple (Information Technology), Ultra Petroleum (Materials), and Barrick Gold (Materials). Shares of Apple, a designer, manufacturer, and retailer of a range of interconnected computing devices and personal electronic products, moved higher after a U.S. District Court ruled that Samsung owes Apple $1.05 billion for willfully infringing Apple's intellectual property. The stock also moved steadily higher in anticipation of strong demand for the iPhone 5. Not owning the benchmark component stock hurt relative performance during the period. Shares of independent energy company Ultra Petroleum, a company actively engaged in the exploration and production of oil and natural gas, declined during the period as investors feared that weak natural gas pricing would hinder the company’s near term earnings growth. At the end of the period, we continued to hold the stock as we expect natural gas fundamentals to improve in 2013. Shares of Barrick Gold fell after the company posted disappointing fourth quarter earnings and lowered its 2012 gold production guidance. While the price of gold went up during the period, costs have been rising for Barrick, which caused incremental returns to be challenged. We have a favorable view of the company’s mix of assets, current expansion projects, and cost discipline. Exelon (Utilities) and JC Penney (Retailing) also detracted from absolute returns (i.e. total return).
The Fund’s top contributors to benchmark-relative performance during the period were Comcast (Consumer Discretionary), eBay (Information Technology), and Lowe’s (Consumer Discretionary). Comcast, the largest U.S. cable communications company and new owner of NBC Universal, saw market share gains in high margin residential and commercial phone and data services, which helped to drive the company’s share price higher. The company also benefitted from better-than-expected ad revenue during the 2012 London Olympics. Shares of eBay, a global provider of online marketplaces and payment solutions, rose during the period as the company reported better-than-expected results due
| Hartford Dividend and Growth HLS Fund |
| Manager Discussion – (continued) |
| December 31, 2012 (Unaudited) |
primarily to growth in its marketplace segment and higher transaction margins in the payments segment. Lowe’s, a home improvement retailer, saw its shares rise on positive U.S. housing reports and signs of a recovery in its repair and remodel business. Also, new in-store merchandising concepts and operating practices led to positive customer feedback and shopping experiences. Wells Fargo (Financials) and JPMorgan Chase (Financials) were among the top contributors to absolute performance.
What is the outlook?
In 2013, we expect slow but steady growth in the U.S., somewhere in the 1 to 2% Gross Domestic Product (GDP) range. A last minute deal averted a full dive off the fiscal cliff on January 1, 2013; however, the temporary payroll tax cut of the past two years was allowed to expire, which will raise taxes 2% on most Americans. We believe that housing and employment should continue to improve, and corporate earnings should also enjoy moderate growth this year. It appears that interest rates are slowly creeping higher, which in our view is a sign that the economy is improving. We remain cautiously optimistic and believe that the U.S. should avoid recession in 2013.
The world economy is slowly but steadily emerging from a post-bubble environment and the macro economic environment should be moderately favorable in 2013. We believe that the worst is behind Europe but it will continue to be a slow improvement. Europe should gradually move out of recession, while China and other emerging economies are already showing signs of re-acceleration.
Our investment discipline is focused on investing in areas of strong demand and avoiding areas of oversupply. At the end of the period, our largest overweights were to Financials, Health Care, and Energy, while we remained underweight in Information Technology, Consumer Staples, and Materials, relative to the benchmark.
Diversification by Industry
as of December 31, 2012
| Industry (Sector) | | Percentage of
Net Assets | |
| Automobiles and Components (Consumer Discretionary) | | | 1.6 | % |
| Banks (Financials) | | | 6.6 | |
| Capital Goods (Industrials) | | | 7.7 | |
| Commercial and Professional Services (Industrials) | | | 0.1 | |
| Diversified Financials (Financials) | | | 7.6 | |
| Energy (Energy) | | | 11.9 | |
| Food and Staples Retailing (Consumer Staples) | | | 1.3 | |
| Food, Beverage and Tobacco (Consumer Staples) | | | 5.0 | |
| Health Care Equipment and Services (Health Care) | | | 3.3 | |
| Household and Personal Products (Consumer Staples) | | | 1.5 | |
| Insurance (Financials) | | | 5.2 | |
| Materials (Materials) | | | 2.1 | |
| Media (Consumer Discretionary) | | | 5.8 | |
| Pharmaceuticals, Biotechnology and Life Sciences (Health Care) | | | 12.2 | |
| Retailing (Consumer Discretionary) | | | 2.8 | |
| Semiconductors and Semiconductor Equipment (Information Technology) | | | 2.3 | |
| Software and Services (Information Technology) | | | 8.0 | |
| Technology Hardware and Equipment (Information Technology) | | | 3.8 | |
| Telecommunication Services (Services) | | | 2.6 | |
| Transportation (Industrials) | | | 2.8 | |
| Utilities (Utilities) | | | 4.4 | |
| Short-Term Investments | | | 1.3 | |
| Other Assets and Liabilities | | | 0.1 | |
| Total | | | 100.0 | % |
| Hartford Dividend and Growth HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
COMMON STOCKS - 98.6% |
| | | | | Automobiles and Components - 1.6% | | | | |
| | 3,613 | | | Ford Motor Co. w/ rights | | $ | 46,785 | |
| | 719 | | | Johnson Controls, Inc. | | | 22,068 | |
| | | | | | | | 68,853 | |
| | | | | Banks - 6.6% | | | | |
| | 1,225 | | | PNC Financial Services Group, Inc. | | | 71,430 | |
| | 1,217 | | | US Bancorp | | | 38,878 | |
| | 4,930 | | | Wells Fargo & Co. | | | 168,515 | |
| | | | | | | | 278,823 | |
| | | | | Capital Goods - 7.7% | | | | |
| | 397 | | | Boeing Co. | | | 29,925 | |
| | 558 | | | Deere & Co. | | | 48,262 | |
| | 789 | | | Eaton Corp. plc | | | 42,743 | |
| | 140 | | | General Dynamics Corp. | | | 9,712 | |
| | 2,691 | | | General Electric Co. | | | 56,492 | |
| | 957 | | | Honeywell International, Inc. | | | 60,734 | |
| | 48 | | | Lockheed Martin Corp. | | | 4,471 | |
| | 814 | | | Raytheon Co. | | | 46,825 | |
| | 254 | | | Siemens AG ADR | | | 27,798 | |
| | | | | | | | 326,962 | |
| | | | | Commercial and Professional Services - 0.1% | | | | |
| | 150 | | | Waste Management, Inc. | | | 5,075 | |
| | | | | | | | | |
| | | | | Diversified Financials - 7.6% | | | | |
| | 940 | | | Ameriprise Financial, Inc. | | | 58,847 | |
| | 2,248 | | | Bank of America Corp. | | | 26,079 | |
| | 280 | | | BlackRock, Inc. | | | 57,906 | |
| | 669 | | | Citigroup, Inc. | | | 26,453 | |
| | 2,912 | | | JP Morgan Chase & Co. | | | 128,029 | |
| | 1,511 | | | UBS AG ADR | | | 23,777 | |
| | | | | | | | 321,091 | |
| | | | | Energy - 11.9% | | | | |
| | 980 | | | Anadarko Petroleum Corp. | | | 72,843 | |
| | 891 | | | Baker Hughes, Inc. | | | 36,390 | |
| | 1,133 | | | BP plc ADR | | | 47,184 | |
| | 750 | | | Cameco Corp. | | | 14,781 | |
| | 865 | | | Chevron Corp. | | | 93,564 | |
| | 1,119 | | | EnCana Corp. ADR | | | 22,118 | |
| | 1,746 | | | Exxon Mobil Corp. | | | 151,137 | |
| | 713 | | | Occidental Petroleum Corp. | | | 54,609 | |
| | 617 | | | Ultra Petroleum Corp. ● | | | 11,179 | |
| | | | | | | | 503,805 | |
| | | | | Food and Staples Retailing - 1.3% | | | | |
| | 1,146 | | | CVS Caremark Corp. | | | 55,386 | |
| | | | | | | | | |
| | | | | Food, Beverage and Tobacco - 5.0% | | | | |
| | 983 | | | General Mills, Inc. | | | 39,719 | |
| | 1,181 | | | PepsiCo, Inc. | | | 80,845 | |
| | 602 | | | Philip Morris International, Inc. | | | 50,338 | |
| | 1,108 | | | Unilever N.V. Class NY ADR | | | 42,433 | |
| | | | | | | | 213,335 | |
| | | | | Health Care Equipment and Services - 3.3% | | | | |
| | 1,297 | | | Cardinal Health, Inc. | | | 53,394 | |
| | 1,609 | | | Medtronic, Inc. | | | 66,009 | |
| | 419 | | | UnitedHealth Group, Inc. | | | 22,734 | |
| | | | | | | | 142,137 | |
| | | | | Household and Personal Products - 1.5% | | | | |
| | 961 | | | Procter & Gamble Co. | | | 65,229 | |
| | | | | | | | | |
| | | | | Insurance - 5.2% | | | | |
| | 932 | | | ACE Ltd. | | | 74,346 | |
| | 721 | | | American International Group, Inc. ● | | | 25,468 | |
| | 495 | | | Marsh & McLennan Cos., Inc. | | | 17,072 | |
| | 809 | | | MetLife, Inc. | | | 26,640 | |
| | 1,196 | | | Principal Financial Group, Inc. | | | 34,123 | |
| | 821 | | | Prudential Financial, Inc. | | | 43,789 | |
| | | | | | | | 221,438 | |
| | | | | Materials - 2.1% | | | | |
| | 781 | | | Barrick Gold Corp. | | | 27,352 | |
| | 1,902 | | | Dow Chemical Co. | | | 61,476 | |
| | | | | | | | 88,828 | |
| | | | | Media - 5.8% | | | | |
| | 2,589 | | | Comcast Corp. Class A | | | 96,758 | |
| | 512 | | | Omnicom Group, Inc. | | | 25,604 | |
| | 1,420 | | | Time Warner, Inc. | | | 67,905 | |
| | 1,088 | | | Walt Disney Co. | | | 54,185 | |
| | | | | | | | 244,452 | |
| | | | | Pharmaceuticals, Biotechnology and Life Sciences - 12.2% | | | | |
| | 803 | | | AstraZeneca plc ADR | | | 37,972 | |
| | 917 | | | Bristol-Myers Squibb Co. | | | 29,898 | |
| | 1,468 | | | Eli Lilly & Co. | | | 72,382 | |
| | 1,335 | | | Johnson & Johnson | | | 93,592 | |
| | 2,960 | | | Merck & Co., Inc. | | | 121,179 | |
| | 5,114 | | | Pfizer, Inc. | | | 128,250 | |
| | 891 | | | Teva Pharmaceutical Industries Ltd. ADR | | | 33,267 | |
| | | | | | | | 516,540 | |
| | | | | Retailing - 2.8% | | | | |
| | 542 | | | J.C. Penney Co., Inc. | | | 10,682 | |
| | 1,589 | | | Lowe's Co., Inc. | | | 56,459 | |
| | 915 | | | Target Corp. | | | 54,122 | |
| | | | | | | | 121,263 | |
| | | | | Semiconductors and Semiconductor Equipment - 2.3% | | | | |
| | 2,421 | | | Intel Corp. | | | 49,950 | |
| | 1,523 | | | Texas Instruments, Inc. | | | 47,125 | |
| | | | | | | | 97,075 | |
| | | | | Software and Services - 8.0% | | | | |
| | 340 | | | Accenture plc | | | 22,578 | |
| | 580 | | | Automatic Data Processing, Inc. | | | 33,060 | |
| | 804 | | | eBay, Inc. ● | | | 41,017 | |
| | 548 | | | IBM Corp. | | | 105,027 | |
| | 3,006 | | | Microsoft Corp. | | | 80,344 | |
| | 996 | | | Oracle Corp. | | | 33,195 | |
| | 1,174 | | | Yahoo!, Inc. ● | | | 23,368 | |
| | | | | | | | 338,589 | |
| | | | | Technology Hardware and Equipment - 3.8% | | | | |
| | 930 | | | Avnet, Inc. ● | | | 28,467 | |
| | 2,700 | | | Cisco Systems, Inc. | | | 53,048 | |
| | 2,207 | | | Corning, Inc. | | | 27,849 | |
| | 882 | | | EMC Corp. ● | | | 22,315 | |
| | 454 | | | Qualcomm, Inc. | | | 28,172 | |
| | | | | | | | 159,851 | |
| | | | | Telecommunication Services - 2.6% | | | | |
| | 3,339 | | | AT&T, Inc. | | | 112,564 | |
| | | | | | | | | |
| | | | | Transportation - 2.8% | | | | |
| | 1,591 | | | Delta Air Lines, Inc. ● | | | 18,887 | |
| | 522 | | | FedEx Corp. | | | 47,923 | |
| | 718 | | | United Parcel Service, Inc. Class B | | | 52,971 | |
| | | | | | | | 119,781 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Dividend and Growth HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | | | | Market Value ╪ | |
| COMMON STOCKS - 98.6% - (continued) | | | | |
| | | | | Utilities - 4.4% | | | | | | | | |
| | 914 | | | Dominion Resources, Inc. | | | | | | $ | 47,330 | |
| | 690 | | | Edison International | | | | | | | 31,167 | |
| | 1,101 | | | Exelon Corp. | | | | | | | 32,746 | |
| | 690 | | | NextEra Energy, Inc. | | | | | | | 47,771 | |
| | 1,050 | | | Xcel Energy, Inc. | | | | | | | 28,048 | |
| | | | | | | | | | | | 187,062 | |
| | | | | Total common stocks | | | | | | | | |
| | | | | (cost $3,404,739) | | | | | | $ | 4,188,139 | |
| | | | | | | | | | | | | |
| | | | | Total long-term investments | | | | | | | | |
| | | | | (cost $3,404,739) | | | | | | $ | 4,188,139 | |
| | | | | | | | | | | | | |
| SHORT-TERM INVESTMENTS - 1.3% | | | |
| | | Repurchase Agreements - 1.3% | | | | | | | | |
| | | | | Bank of America Merrill Lynch TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $1,213,
collateralized by FHLMC 3.00%, 2042,
FNMA 4.00%, 2042, value of $1,238) | | | | | | | | |
| $ | 1,213 | | | 0.19%, 12/31/2012 | | | | | | $ | 1,213 | |
| | | | | Bank of Montreal TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $8,627, collateralized by
FHLMC 2.50% - 5.50%, 2019 - 2042,
FNMA 0.76% - 6.11%, 2016 - 2042,
GNMA 3.50%, 2042, value of $8,799) | | | | | | | | |
| | 8,627 | | | 0.23%, 12/31/2012 | | | | | | | 8,627 | |
| | | | | Barclays Capital TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $2,699, collateralized by U.S.
Treasury Note 2.00% - 2.13%, 2016, value
of $2,753) | | | | | | | | |
| | 2,699 | | | 0.20%, 12/31/2012 | | | | | | | 2,699 | |
| | | | | Citigroup Global Markets, Inc. TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $16,995,
collateralized by U.S. Treasury Note
1.88% - 4.13%, 2015 - 2018, value of
$17,335) | | | | | | | | |
| | 16,995 | | | 0.17%, 12/31/2012 | | | | | | | 16,995 | |
| | | | | Deutsche Bank Securities TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $350,
collateralized by FNMA 3.00%, 2032,
value of $357) | | | | | | | | |
| | 350 | | | 0.25%, 12/31/2012 | | | | | | | 350 | |
| | | | | RBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $11,958, collateralized by U.S.
Treasury Note 0.50% - 2.75%, 2013 -
2019, value of $12,197) | | | | | | | | |
| | 11,958 | | | 0.20%, 12/31/2012 | | | | | | | 11,958 | |
| | | | | TD Securities TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $10,469, collateralized by
FHLMC 3.50% - 6.00%, 2036 - 2042,
FNMA 0.22% - 5.50%, 2013 - 2042, value
of $10,678) | | | | | | | | |
| | 10,469 | | | 0.21%, 12/31/2012 | | | | | | | 10,469 | |
| | | | | UBS Securities, Inc. Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$201, collateralized by U.S. Treasury Bill
0.75%, 2013, value of $207) | | | | | | | | |
| | 201 | | | 0.17%, 12/31/2012 | | | | | | | 201 | |
| | | | | UBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $714, collateralized by FNMA
2.50%, 2027, GNMA 3.00%, 2042, value
of $728) | | | | | | | | |
| | 714 | | | 0.25%, 12/31/2012 | | | | | | | 714 | |
| | | | | | | | | | | | 53,226 | |
| | | | | Total short-term investments | | | | | | | | |
| | | | | (cost $53,226) | | | | | | $ | 53,226 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $3,457,965) ▲ | | | 99.9 | % | | $ | 4,241,365 | |
| | | | | Other assets and liabilities | | | 0.1 | % | | | 5,905 | |
| | | | | Total net assets | | | 100.0 | % | | $ | 4,247,270 | |
The accompanying notes are an integral part of these financial statements.
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $3,467,459 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 875,299 | |
| Unrealized Depreciation | | | (101,393 | ) |
| Net Unrealized Appreciation | | $ | 773,906 | |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
| GLOSSARY: (abbreviations used in preceding Schedule of Investments) |
| |
| Other Abbreviations: |
| ADR | American Depositary Receipt |
| FHLMC | Federal Home Loan Mortgage Corp. |
| FNMA | Federal National Mortgage Association |
| GNMA | Government National Mortgage Association |
The accompanying notes are an integral part of these financial statements.
| Hartford Dividend and Growth HLS Fund |
| Investment Valuation Hierarchy Level Summary |
| December 31, 2012 |
| (000’s Omitted) |
| | | Total | | | Level 1 ♦ | | | Level 2 ♦ | | | Level 3 | |
| Assets: | | | | | | | | | | | | | | | | |
| Common Stocks ‡ | | $ | 4,188,139 | | | $ | 4,188,139 | | | $ | – | | | $ | – | |
| Short-Term Investments | | | 53,226 | | | | – | | | | 53,226 | | | | – | |
| Total | | $ | 4,241,365 | | | $ | 4,188,139 | | | $ | 53,226 | | | $ | – | |
| ♦ | For the year ended December 31, 2012, there were no transfers between Level 1 and Level 2. |
| ‡ | The Fund has all or primarily all of the equity securities categorized in a particular level. Refer to the Schedule of Investments for further industry breakout. |
The accompanying notes are an integral part of these financial statements.
| Hartford Dividend and Growth HLS Fund |
| Statement of Assets and Liabilities |
| December 31, 2012 |
| (000’s Omitted) |
| Assets: | | | | |
| Investments in securities, at market value (cost $3,457,965) | | $ | 4,241,365 | |
| Cash | | | — | |
| Receivables: | | | | |
| Investment securities sold | | | 7,174 | |
| Fund shares sold | | | 1,358 | |
| Dividends and interest | | | 5,678 | |
| Total assets | | | 4,255,575 | |
| Liabilities: | | | | |
| Payables: | | | | |
| Investment securities purchased | | | 3,524 | |
| Fund shares redeemed | | | 4,069 | |
| Investment management fees | | | 520 | |
| Distribution fees | | | 28 | |
| Accrued expenses | | | 164 | |
| Total liabilities | | | 8,305 | |
| Net assets | | $ | 4,247,270 | |
| Summary of Net Assets: | | | | |
| Capital stock and paid-in-capital | | $ | 3,376,848 | |
| Undistributed net investment income | | | 1,559 | |
| Accumulated net realized gain | | | 85,463 | |
| Unrealized appreciation of investments and the translations of assets and liabilities denominated in foreign currency | | | 783,400 | |
| Net assets | | $ | 4,247,270 | |
| Shares authorized | | | 4,000,000 | |
| Par value | | $ | 0.001 | |
| Class IA: Net asset value per share | | $ | 21.46 | |
| Shares outstanding | | | 170,448 | |
| Net assets | | $ | 3,658,076 | |
| Class IB: Net asset value per share | | $ | 21.42 | |
| Shares outstanding | | | 27,506 | |
| Net assets | | $ | 589,194 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Dividend and Growth HLS Fund |
| Statement of Operations |
| For the Year Ended December 31, 2012 |
| (000’s Omitted) |
| Investment Income: | | | | |
| Dividends | | $ | 126,817 | |
| Interest | | | 106 | |
| Less: Foreign tax withheld | | | (1,357 | ) |
| Total investment income, net | | | 125,566 | |
| | | | | |
| Expenses: | | | | |
| Investment management fees | | | 28,857 | |
| Transfer agent fees | | | 5 | |
| Distribution fees - Class IB | | | 1,612 | |
| Custodian fees | | | 6 | |
| Accounting services fees | | | 539 | |
| Board of Directors' fees | | | 115 | |
| Audit fees | | | 47 | |
| Other expenses | | | 564 | |
| Total expenses (before fees paid indirectly) | | | 31,745 | |
| Commission recapture | | | (57 | ) |
| Total fees paid indirectly | | | (57 | ) |
| Total expenses, net | | | 31,688 | |
| Net Investment Income | | | 93,878 | |
| | | | | |
| Net Realized Gain on Investments: | | | | |
| Net realized gain on investments | | | 237,302 | |
| Net Realized Gain on Investments | | | 237,302 | |
| | | | | |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions: | | | | |
| Net unrealized appreciation of investments | | | 243,080 | |
| Net unrealized appreciation on translation of other assets and liabilities in foreign currencies | | | — | |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions | | | 243,080 | |
| Net Gain on Investments and Foreign Currency Transactions | | | 480,382 | |
| Net Increase in Net Assets Resulting from Operations | | $ | 574,260 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Dividend and Growth HLS Fund |
| Statement of Changes in Net Assets |
| |
| (000’s Omitted) |
| | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| Operations: | | | | | | | | |
| Net investment income | | $ | 93,878 | | | $ | 94,097 | |
| Net realized gain on investments | | | 237,302 | | | | 294,702 | |
| Net unrealized appreciation (depreciation) of investments | | | 243,080 | | | | (319,890 | ) |
| Net Increase in Net Assets Resulting from Operations | | | 574,260 | | | | 68,909 | |
| Distributions to Shareholders: | | | | | | | | |
| From net investment income | | | | | | | | |
| Class IA | | | (83,992 | ) | | | (81,230 | ) |
| Class IB | | | (12,015 | ) | | | (12,208 | ) |
| Total distributions | | | (96,007 | ) | | | (93,438 | ) |
| Capital Share Transactions: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 108,142 | | | | 192,919 | |
| Issued on reinvestment of distributions | | | 83,992 | | | | 81,230 | |
| Redeemed | | | (794,723 | ) | | | (811,468 | ) |
| Total capital share transactions | | | (602,589 | ) | | | (537,319 | ) |
| Class IB | | | | | | | | |
| Sold | | | 52,210 | | | | 91,132 | |
| Issued on reinvestment of distributions | | | 12,015 | | | | 12,208 | |
| Redeemed | | | (202,695 | ) | | | (197,204 | ) |
| Total capital share transactions | | | (138,470 | ) | | | (93,864 | ) |
| Net decrease from capital share transactions | | | (741,059 | ) | | | (631,183 | ) |
| Net Decrease in Net Assets | | | (262,806 | ) | | | (655,712 | ) |
| Net Assets: | | | | | | | | |
| Beginning of period | | | 4,510,076 | | | | 5,165,788 | |
| End of period | | $ | 4,247,270 | | | $ | 4,510,076 | |
| Undistributed (distribution in excess of) net investment income | | $ | 1,559 | | | $ | 4,050 | |
| Shares: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 5,191 | | | | 9,736 | |
| Issued on reinvestment of distributions | | | 3,923 | | | | 4,240 | |
| Redeemed | | | (37,859 | ) | | | (40,935 | ) |
| Total share activity | | | (28,745 | ) | | | (26,959 | ) |
| Class IB | | | | | | | | |
| Sold | | | 2,507 | | | | 4,600 | |
| Issued on reinvestment of distributions | | | 562 | | | | 639 | |
| Redeemed | | | (9,685 | ) | | | (9,974 | ) |
| Total share activity | | | (6,616 | ) | | | (4,735 | ) |
The accompanying notes are an integral part of these financial statements.
| Hartford Dividend and Growth HLS Fund |
| Notes to Financial Statements |
| December 31, 2012 |
| (000’s Omitted) |
Hartford Dividend and Growth HLS Fund (the “Fund”) serves as an underlying investment option for certain variable annuity and variable life insurance separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates and certain qualified retirement plans. The Fund may also serve as an underlying investment option for certain variable annuity and variable life separate accounts of other insurance companies. Owners of variable annuity contracts and policyholders of variable life insurance contracts may choose the funds permitted in the variable insurance contract prospectus. In addition, participants in certain qualified retirement plans may choose the Fund if permitted by their plans.
Hartford Series Fund, Inc. (the “Company”) is an open-end registered management investment company comprised of thirty portfolios. Financial Statements for the Fund, a series of the Company, are included in this report.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund is a diversified open-end management investment company.
The Fund is divided into Class IA and Class IB shares. Each class is offered at the per share net asset value (“NAV”) without a sales charge and is subject to the same expenses, except that the Class IB shares are subject to distribution and service fees charged pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act.
| 2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Fund in the preparation of its financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| a) | Determination of Net Asset Value – The NAV of each class of the Fund’s shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| b) | Investment Valuation and Fair Value Measurements – For purposes of calculating the NAV, portfolio investments and other assets held by the Fund's portfolio for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of last reported sales prices or official close price. If no sales are reported, market value is based on quotes obtained from a quotation reporting system, established market makers, or independent pricing services. If market prices are not readily available or are deemed unreliable, the Fund will use the fair value of the investment as determined in good faith under policies and procedures established by and under the supervision of the Company’s Board of Directors. Market quotes are considered not readily available where there is an absence of current or reliable market-based data (e.g., trade information or indicative market quotes), including where events occur after the close of the relevant market, but prior to the NYSE Close that materially affect the values of the Fund’s portfolio investments or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the investments trade do not open for trading for the entire day and no other market prices are available. In addition, prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close. Investments that are primarily traded on foreign markets may trade on days that are not business days of the Fund. |
The value of the foreign investments in which the Fund invests may change on days when a shareholder will not be able to purchase or redeem shares of the Fund. Fair value pricing is subjective in nature and the use of fair value pricing by the Fund may cause the NAV of its shares to differ significantly from the NAV that would have been calculated using market prices at the close of the exchange on which a portfolio investment is primarily traded. There can be no assurance that the Fund could obtain the fair market value assigned to an investment if the Fund were to sell the investment at approximately the time at which the Fund determines its NAV.
Investments valued in currencies other than U.S. dollars are converted to U.S. dollars using exchange rates obtained from independent pricing services for calculation of the NAV. As a result, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of investments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the NYSE is closed and the market value may change on days when an investor is not able to purchase, redeem or exchange shares of the Fund.
Financial instruments for which prices are not available from an independent pricing service may be valued using market quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with procedures established by the Company’s Board of Directors.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| · | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange traded funds, rights and warrants. |
| · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 may include debt investments that are traded less frequently than exchange traded instruments and which are valued using independent pricing services; foreign equities, which are principally traded on certain foreign markets and are adjusted daily pursuant to a fair value pricing service in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close; and short-term investments, which are valued at amortized cost. |
| · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price. |
The Board of Directors of the Company generally reviews and approves the “Procedures for Valuation of Portfolio Securities” on an annual basis. These procedures define how investments are to be valued, including the formation and activities of a Valuation Committee. The Valuation Committee is responsible for determining in good faith the fair value of investments when the value cannot be obtained from primary pricing services or alternative sources or if the valuation of an investment as provided by the primary pricing service or alternative source is believed not to reflect the investment’s fair value as of the Valuation Date. Members of the Valuation Committee include the Fund’s Treasurer or designee, a Vice President of the Fund with legal expertise or
| Hartford Dividend and Growth HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
designee, and a Vice President of the investment manager or designee. In addition, the Fund’s Chief Compliance Officer shall designate a member of the compliance group to attend Valuation Committee meetings as a non-voting resource, to monitor for and provide guidance with respect to compliance with these procedures. Two members of the Valuation Committee or their designees, representing different departments, shall constitute a quorum for purposes of permitting the Valuation Committee to take action. The Valuation Committee will consider all relevant factors in determining an investment’s fair value, and may seek the advice of the Fund’s sub-adviser, knowledgeable brokers, and legal counsel in making such determination. The Valuation Committee reports to the Audit Committee of the Company’s Board of Directors. The Audit Committee receives quarterly written reports which include details of all fair-valued investments, including the reason for the fair valuation, and an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such investments (the “look-back” test). The Board of Directors then must consider for ratification all of the fair value determinations made during the previous quarter.
Valuation levels are not necessarily indicative of the risk associated with investing in such investments. Individual investments within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
For additional information, refer to the Investment Valuation Hierarchy Level Summary and the Level 3 roll-forward reconciliation, if applicable, which follow the Schedule of Investments.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period.
| c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Investments purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses are determined on the basis of identified cost. |
Dividend income from domestic securities is accrued on the ex-dividend date. In general, dividend income from foreign securities is recorded on the ex-date; however, dividend notifications in certain foreign jurisdictions may not be available in a timely manner and as a result, the Fund will record the dividend as soon as the relevant details (i.e., rate per share, payment date, shareholders of record, etc.) are publicly available. Interest income, including amortization of premium and accretion of discounts, is accrued on a daily basis.
| d) | Foreign Currency Transactions – Assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investments, income, and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. |
The Fund does not isolate that portion of portfolio investment valuation resulting from fluctuations in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of investments held. Exchange rate fluctuations are included with the net realized and unrealized gain or loss on investments in the accompanying financial statements.
Net realized foreign exchange gains or losses arise from sales of foreign currencies and the difference between asset and liability amounts initially stated in foreign currencies and the U.S. dollar value of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of other assets and liabilities at the end of the reporting period, resulting from changes in the exchange rates.
| e) | Joint Trading Account – The Fund may invest cash balances into a joint trading account that may be invested in one or more repurchase agreements. |
| f) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Fund’s shares are executed in accordance with the investment instructions of the contract holders and plan participants. The NAV of the Fund’s shares is determined as of the close of business on each business day of the Exchange. The NAV is determined separately for each class of shares of the Fund by dividing the Fund’s net assets attributable to that class by the number of shares of the class outstanding. Each class of shares offered by the Fund has equal rights as to assets and voting privileges (except that shareholders of a class have exclusive voting rights regarding any matter relating solely to that class of shares). Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets of the class. Realized and unrealized capital gains and losses are allocated daily based on the relative net assets of each class of shares of the Fund. |
Orders for the purchase of the Fund’s shares received prior to the close of the Exchange on any day the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Fund. The policy of the Fund is to pay dividends from net investment income and realized capital gains, if any, at least once a year.
Distributions from net investment income, net realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These differences may include but are not limited to losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to Passive Foreign Investment Companies (“PFICs”), Real Estate Investment Trusts (“REITs”), Regulated Investment Companies (“RICs”), certain derivatives and partnerships. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Fund’s capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| 3. | Securities and Other Investments: |
| a) | Repurchase Agreements – A repurchase agreement is an agreement by which a counterparty agrees to sell an investment and agrees to repurchase the investment sold from the buyer at a mutually agreed upon time and price. At the time the Fund enters into a repurchase agreement, the value of the underlying collateral, including accrued interest, will be equal to or exceed the value of the repurchase agreement. Repurchase agreements expose the Fund to counterparty risk - that is, the risk that the counterparty will not fulfill its obligations. To minimize counterparty risk, the investments that serve to collateralize the repurchase agreement are held by the Fund’s custodian in book entry or physical form in the custodial account of the Fund or in a third party custodial account. Repurchase agreements are valued at cost plus accrued interest, which approximates fair value. The Fund, as shown on the Schedule of Investments, had outstanding repurchase agreements as of December 31, 2012. |
| a) | Counterparty Risk – The Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will default. |
| b) | Market Risks – If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities, such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United |
| Hartford Dividend and Growth HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund. The market values of equity securities, such as common stocks and preferred stocks, or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The market value of equity securities may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities.
| a) | Federal Income Taxes – For federal income tax purposes, the Fund intends to continue to qualify as a RIC under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders and otherwise complying with the requirements of the IRC. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains prior to the next fiscal year-end. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. |
| c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Fund for the periods indicated is as follows (as adjusted for dividends payable, if applicable): |
| | | For the Year Ended
December 31, 2012 | | | For the Year Ended
December 31, 2011 | |
| Ordinary Income | | $ | 96,007 | | | $ | 93,438 | |
As of December 31, 2012, the Fund’s components of distributable earnings (deficit) on a tax basis were as follows:
| | | Amount | |
| Undistributed Ordinary Income | | $ | 1,559 | |
| Undistributed Long-Term Capital Gain | | | 94,957 | |
| Unrealized Appreciation* | | | 773,906 | |
| Total Accumulated Earnings | | $ | 870,422 | |
| * | Differences between book-basis and tax-basis unrealized appreciation (depreciation) may be attributable to the losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. |
| d) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as foreign currency, PFICs, expiration or utilization of capital loss carryforwards or net operating losses. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Fund’s distributions may be shown in the accompanying Statement of Changes in Net Assets as from undistributed net investment income, from accumulated net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Fund recorded reclassifications to increase (decrease) the accounts listed below: |
| | | Amount | |
| Undistributed Net Investment Income | | $ | (362 | ) |
| Accumulated Net Realized Gain (Loss) | | | 362 | |
| e) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation. |
The Fund had no capital loss carryforward for U.S. federal income tax purposes as of December 31, 2012.
During the year ended December 31, 2012, the Fund utilized $139,514 of prior year capital loss carryforwards.
| f) | Accounting for Uncertainty in Income Taxes – The Fund has adopted financial reporting rules that require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Fund does not have an examination in progress. |
The Fund has reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules had no effect on the Fund’s financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2012. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Fund’s investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Fund pursuant to an Investment Management Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Fund’s investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees payable under, the Fund’s investment management agreements; or (ii) the day-to-day management of the Fund. The investment manager has overall investment supervisory responsibility for the Fund. In addition, the investment manager provides administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. The investment manager has contracted with Wellington Management Company, LLP (“Wellington Management”) under a sub-advisory agreement for the provision of day-to-day investment management services to the Fund in accordance with |
Hartford Dividend and Growth HLS Fund
Notes to Financial Statements – (continued)
December 31, 2012
(000’s Omitted)
the Fund’s investment objective and policies. The Fund pays a fee to the investment manager, a portion of which may be used to compensate Wellington Management.
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered as of December 31, 2012, (paid for the period March 1, 2012 through December 31, 2012); the rates are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee | |
| On first $250 million | | | 0.7750 | % |
| On next $250 million | | | 0.7250 | % |
| On next $500 million | | | 0.6750 | % |
| On next $1.5 billion | | | 0.6250 | % |
| On next $2.5 billion | | | 0.6200 | % |
| On next $5 billion | | | 0.6150 | % |
| Over $10 billion | | | 0.6100 | % |
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered during the period January 1, 2012, through February 29, 2012.
| Average Daily Net Assets | | Annual Fee | |
| On first $250 million | | | 0.7750 | % |
| On next $250 million | | | 0.7250 | % |
| On next $500 million | | | 0.6750 | % |
| On next $4 billion | | | 0.6250 | % |
| On next $5 billion | | | 0.6225 | % |
| Over $10 billion | | | 0.6200 | % |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Fund. HLIC provided accounting services for the Fund for the fiscal year ended December 31, 2012. The replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Fund or the fees charged to the Fund for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Fund, HFMC provides accounting services to the Fund and receives monthly compensation based on the Fund’s average daily net assets at the rates set forth below. The Fund’s accounting services fees are accrued daily and paid monthly. |
| Average Daily Net Assets | | Annual Fee | |
| On first $5 billion | | | 0.012 | % |
| Over $5 billion | | | 0.010 | % |
| c) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund and allocated to classes within a Fund in proportion to the average daily net assets of the Fund and each class, except where allocation of certain expenses is more fairly made directly to the Fund or to specific classes within a Fund. |
| d) | Fees Paid Indirectly – The Company, on behalf of the Fund, has entered into agreements with State Street Global Markets, LLC and Russell Implementation Services, Inc. to partially recapture non-discounted trade commissions. Such rebates are used to pay a portion of the Fund’s expenses. In addition, the Fund’s custodian banks have agreed to reduce its fees when the Fund maintains cash on deposit in a non-interest-bearing custody account. For the year ended December 31, 2012, these amounts, if any, are included in the Statement of Operations. |
The ratio of expenses to average net assets in the accompanying financial highlights excludes the reduction in expenses related to fees paid indirectly. The annualized expense ratio after waivers for the period listed below reflecting the reduction for fees paid indirectly is as follows:
| | | Year Ended
December 31, 2012 | |
| Class IA | | | 0.67 | % |
| Class IB | | | 0.92 | |
| e) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Fund's principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD with HIFSCO did not result in any changes to the distribution services provided to the Fund. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Fund, has adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, 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, subject to the review and approval of the Company’s Board of Directors. |
The Distribution Plan provides that the Fund may pay annually up to 0.25% of the average daily net assets of the Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, the Fund is authorized to make payments monthly to the Distributor that may be used to pay or compensate 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. These fees are accrued daily and paid monthly.
| f) | Other Related Party Transactions – Certain officers of the Fund are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Fund’s Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Fund was in the amount of $6. Hartford Administrative Services Company (“HASCO”), an indirect wholly owned subsidiary of The Hartford, provides transfer agent services to the Fund. The amount paid to HASCO can be found in the Statement of Operations. These fees are accrued daily and paid monthly. |
| g) | Payment from Affiliate – In July of 2007, The Hartford entered into a settlement with the Attorneys General of the states of New York, Connecticut and Illinois relating to market timing and the company's individual variable annuity contracts in which certain payments would be made directly to the variable annuity contract holders. The distribution plan provided that unclaimed money from the settlement would be distributed to certain HLS Funds that are investment options through a Hartford individual variable annuity contract. The unclaimed money was distributed to the Fund on September 18, 2009. |
The total return in the accompanying financial highlights includes a payment from an affiliate. Had the payment from the affiliate been excluded, the impact and total return for the period listed below would have been as follows:
| | | For the Year Ended December 31, 2009 | |
| | | Class IA | | | Class IB | |
| Impact from Payment from Affiliate for Attorneys General Settlement | | | — | % | | | — | % |
| Total Return Excluding Payment from Affiliate | | | 24 .67 | % | | | 24 .36 | % |
Hartford Dividend and Growth
Hartford Dividend and Growth HLS Fund
Notes to Financial Statements – (continued)
December 31, 2012
(000’s Omitted)
| 7. | Investment Transactions: |
For the year ended December 31, 2012, the Fund's aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
| | | Amount | |
| Cost of Purchases Excluding U.S. Government Obligations | | $ | 870,280 | |
| Sales Proceeds Excluding U.S. Government Obligations | | | 1,598,139 | |
The Fund is one of several Hartford funds that participate in a $500 million committed revolving line of credit facility. The facility is to be used for temporary or emergency purposes. Under the arrangement, the funds are required to own securities having a market value in excess of 300% of the total bank borrowings. The interest rate on borrowings varies depending on the nature of the loan. The facility also requires a fee to be paid based on the amount of the commitment. This commitment fee is allocated to all of the funds participating in the line of credit based on the average net assets of the funds. During the year ended December 31, 2012, the Fund did not have any borrowings under this facility.
| 9. | Industry Classifications: |
Other than the industry classifications “Other Investment Pools and Funds” and “Exchange Traded Funds,” equity industry classifications used in this report are the Global Industry Classification Standard, which was developed by and is the exclusive property and service mark of MSCI, Inc. and Standard & Poor’s.
Under the Company’s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
| 11. | Recent Accounting Pronouncement: |
Disclosures about Offsetting Assets and Liabilities - In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The objective of the ASU is to enhance current disclosure requirements on offsetting of certain assets and liabilities and to enable financial statement users to compare financial statements prepared under U.S. GAAP and International Financial Reporting Standards.
Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
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Hartford Dividend and Growth HLS Fund
Financial Highlights
- Selected Per-Share Data (A) -
| Class | | Net Asset Value at
Beginning of
Period | | | Net Investment
Income (Loss) | | | Net Realized and
Unrealized Gain
(Loss) on
Investments | | | Total from
Investment
Operations | | | Dividends from Net
Investment Income | | | Distributions from
Realized Capital
Gains | | | Distributions from
Capital | | | Total Distributions | | | Net Asset Value at
End of Period | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| IA | | $ | 19.34 | | | $ | 0.49 | | | $ | 2.13 | | | $ | 2.62 | | | $ | (0.50 | ) | | $ | – | | | $ | – | | | $ | (0.50 | ) | | $ | 21.46 | |
| IB | | | 19.30 | | | | 0.45 | | | | 2.11 | | | | 2.56 | | | | (0.44 | ) | | | – | | | | – | | | | (0.44 | ) | | | 21.42 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2011 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| IA | | | 19.50 | | | | 0.42 | | | | (0.16 | ) | | | 0.26 | | | | (0.42 | ) | | | – | | | | – | | | | (0.42 | ) | | | 19.34 | |
| IB | | | 19.46 | | | | 0.36 | | | | (0.16 | ) | | | 0.20 | | | | (0.36 | ) | | | – | | | | – | | | | (0.36 | ) | | | 19.30 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2010 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| IA | | | 17.55 | | | | 0.35 | | | | 1.96 | | | | 2.31 | | | | (0.36 | ) | | | – | | | | – | | | | (0.36 | ) | | | 19.50 | |
| IB | | | 17.51 | | | | 0.32 | | | | 1.94 | | | | 2.26 | | | | (0.31 | ) | | | – | | | | – | | | | (0.31 | ) | | | 19.46 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2009 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| IA | | | 14.37 | | | | 0.35 | | | | 3.19 | | | | 3.54 | | | | (0.36 | ) | | | – | | | | – | | | | (0.36 | ) | | | 17.55 | |
| IB | | | 14.34 | | | | 0.33 | | | | 3.16 | | | | 3.49 | | | | (0.32 | ) | | | – | | | | – | | | | (0.32 | ) | | | 17.51 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2008 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| IA | | | 22.35 | | | | 0.44 | | | | (7.57 | ) | | | (7.13 | ) | | | (0.44 | ) | | | (0.41 | ) | | | – | | | | (0.85 | ) | | | 14.37 | |
| IB | | | 22.28 | | | | 0.42 | | | | (7.56 | ) | | | (7.14 | ) | | | (0.39 | ) | | | (0.41 | ) | | | – | | | | (0.80 | ) | | | 14.34 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include 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 would lower the Fund's performance. |
| (C) | Ratios do not reflect reductions for fees paid indirectly. Please see Fees Paid Indirectly in the Notes to Financial Statements. |
| (D) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
| (E) | Total return without the inclusion of the Payment from (to) Affiliate can be found in Expenses in the accompanying Notes to Financial Statements. |
- Ratios and Supplemental Data -
| Total Return(B) | | | Net Assets at
End of Period | | | Ratio of Expenses to Average Net Assets
Before Waivers(C) | | | Ratio of Expenses to Average Net Assets
After Waivers(C) | | | Ratio of Net Investment
Income (Loss) to Average Net
Assets | | | Portfolio
Turnover
Rate(D) | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | 13 .59 | % | | $ | 3,658,076 | | | | 0 .67 | % | | | 0 .67 | % | | | 2 .13 | % | | | 20 | % |
| | 13 .31 | | | | 589,194 | | | | 0 .92 | | | | 0 .92 | | | | 1 .88 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 1 .32 | | | | 3,851,657 | | | | 0 .67 | | | | 0 .67 | | | | 1 .98 | | | | 24 | |
| | 1 .06 | | | | 658,419 | | | | 0 .92 | | | | 0 .92 | | | | 1 .73 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 13 .21 | | | | 4,409,787 | | | | 0 .68 | | | | 0 .68 | | | | 1 .87 | | | | 32 | |
| | 12 .93 | | | | 756,001 | | | | 0 .93 | | | | 0 .93 | | | | 1 .62 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 24 .68 | (E) | | | 4,247,031 | | | | 0 .69 | | | | 0 .69 | | | | 2 .24 | | | | 34 | |
| | 24 .36 | (E) | | | 815,752 | | | | 0 .94 | | | | 0 .94 | | | | 2 .00 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (32 .43 | ) | | | 3,628,793 | | | | 0 .67 | | | | 0 .67 | | | | 2 .20 | | | | 41 | |
| | (32 .60 | ) | | | 776,959 | | | | 0 .92 | | | | 0 .92 | | | | 1 .95 | | | | – | |
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of
Hartford Series Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Hartford Dividend and Growth HLS Fund (one of the portfolios constituting Hartford Series Fund, Inc. (the Fund)) as of December 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Hartford Dividend and Growth HLS Fund (one of the portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
|
Minneapolis, MN
February 15, 2013 |
Hartford Dividend and Growth HLS Fund
Directors and Officers (Unaudited)
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Fund pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Fund. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Fund’s statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Fund pays to The Hartford a portion of the Chief Compliance Officer’s compensation, but does not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
Hartford Dividend and Growth HLS Fund
Directors and Officers (Unaudited) – (continued)
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010(4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and a record of how the Fund voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Hartford Dividend and Growth HLS Fund
Expense Example (Unaudited)
Your Fund's Expenses
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Actual return | | | Hypothetical (5% return before expenses) | | | | | | | | | | |
| | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid during the period
June 30, 2012
through
December 31, 2012 | | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid during the period
June 30, 2012
through
December 31, 2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2
year | | | Days
in the
full
year | |
| Class IA | | $ | 1,000.00 | | | $ | 1,005.82 | | | $ | 3.39 | | | $ | 1,000.00 | | | $ | 1,021.76 | | | $ | 3.42 | | | | 0.67 | % | | | 184 | | | | 366 | |
| Class IB | | $ | 1,000.00 | | | $ | 1,005.69 | | | $ | 4.65 | | | $ | 1,000.00 | | | $ | 1,020.50 | | | $ | 4.68 | | | | 0.92 | % | | | 184 | | | | 366 | |
Hartford Dividend and Growth HLS Fund
Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory and sub-advisory agreements. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for Hartford Dividend and Growth HLS Fund (the “Fund”) with HL Investment Advisors, LLC (“HL Advisors”) and the continuation of the investment sub-advisory agreement between HL Advisors and the Fund’s sub-adviser, Wellington Management Company, LLP (the “Sub-adviser,” and together with HL Advisors, the “Advisers”) (collectively, the “Agreements”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from the Advisers to questions posed to them on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreements at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by the Advisers and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreements.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreements with respect to the Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Fund’s contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Fund’s management fees, sub-advisory fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement.
In determining to continue the Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreements. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreements is provided below.
Nature, Extent, and Quality of Services Provided by the Advisers
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Fund by the Advisers. The Board considered, among other things, the terms of the Agreements and the range of services provided by the Advisers. The Board considered the Advisers’ professional personnel who provide services to the Fund, including each Adviser���s ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered each Adviser’s reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to the Fund. In addition, the Board considered the quality of each Adviser’s communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning each Adviser’s regulatory and compliance environment. In this regard, the Board requested and reviewed information on each Adviser’s compliance policies and procedures, compliance history, and a report from the Fund’s Chief Compliance Officer on each Adviser’s compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. The Board also noted the Advisers’
Hartford Dividend and Growth HLS Fund
Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued)
support of the Fund’s compliance control structure, particularly the resources devoted by the Advisers in support of the Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act.
With respect to HL Advisors, the Board noted that under the Agreements, HL Advisors is responsible for the management of the Fund, including overseeing fund operations and service providers, as well as investment advisory services in connection with selecting, monitoring and supervising the Sub-adviser. The Board considered HL Advisors’ ongoing monitoring of people, process and performance, including its quarterly reviews of each of the Hartford HLS Funds, semi-annual meetings with the leaders of each Fund’s portfolio management team, and oversight of the Funds’ approximately 40 portfolio managers. The Board recognized that HL Advisors has demonstrated a record of making changes to the management and/or strategies of the Funds when warranted. The Board considered HL Advisors’ oversight of the Sub-adviser’s investment approach and results, process for monitoring best execution of portfolio trades by the Sub-adviser, and approach to risk management with respect to the Fund and the service providers to the Fund. The Board also considered HL Advisors’ oversight of compliance with the Fund’s objective and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led to an increase in the scope of HL Advisors’ services in this regard. In addition, the Board considered HL Advisors’ ongoing commitment to review and rationalize the Hartford fund family’s product line-up and the expenses that HL Advisors had incurred in connection with fund combinations in recent years. The Board considered that HL Advisors or its affiliates are responsible for providing the Fund’s officers. The Board also noted that Hartford Life Insurance Company (“HLIC”) provides administrative services to the Fund. The Board considered its experiences with HL Advisors and HLIC with respect to each of these services.
With respect to the Sub-adviser, who provides day-to-day portfolio management services, the Board considered the quality of the Fund’s portfolio managers, the Sub-adviser’s other investment personnel, its investment philosophy and process, investment research capabilities and resources, performance record, trade execution capabilities and experience. The Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers, and the Sub-adviser’s method for compensating the portfolio managers.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Fund by HL Advisors and the Sub-adviser.
Performance of the Fund and the Advisers
The Board considered the investment performance of the Fund. In this regard, the Board reviewed the performance of the Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of the Fund’s performance for these time periods. The Board considered information and materials provided to the Board by the Advisers concerning Fund performance, as well as information from Lipper comparing the investment performance of the Fund to an appropriate benchmark and universe of peer funds. The Board noted that the performance of the Fund was within expectations.
The Board considered the detailed investment analytics reports provided by The Hartford’s Investment Advisory Group throughout the year. These reports include, among other things, information on the Fund’s gross and net returns, the Fund’s investment performance relative to an appropriate benchmark and peer group, various statistics concerning the Fund’s portfolio, and a narrative summary of various factors affecting Fund performance. The Board considered the Advisers’ cooperation with the Investment Committee, which assists the Board in evaluating the performance of the Fund at periodic meetings throughout the year. The Board also considered the analysis provided by the Consultant relating to the Fund’s performance track record.
In light of all the considerations noted above, the Board concluded that it had continued confidence in HL Advisors’ and the Sub-adviser’s overall capabilities to manage the Fund.
Costs of the Services and Profitability of the Advisers
The Board reviewed information regarding HL Advisors’ cost to provide investment management and related services to the Fund and HL Advisors’ profitability, both overall and for the Fund, on a pre-tax basis without regard to distribution expenses. The Board also requested and reviewed information about the profitability to HL Advisors and its affiliates from all services provided
to the Fund and all aspects of their relationship with the Fund. The Board also requested and received information relating to the operations and profitability of the Sub-adviser.
The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement, noting the Consultant’s view that The Hartford’s process for calculating and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by the Advisers and their affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by the Advisers
The Board considered comparative information with respect to the management fees to be paid by the Fund to HL Advisors and the total expense ratios of the Fund. The Board also considered comparative information with respect to the sub-advisory fees to be paid by HL Advisors to the Sub-adviser, to the extent applicable. In this regard, the Board requested and reviewed information from HL Advisors and the Sub-adviser relating to the management and sub-advisory fees, including the sub-advisory fee schedule for the Fund, and total operating expenses for the Fund. The Board considered that the management fee for the Fund includes the fee paid to HLIC for providing certain administrative services to the Fund. With respect to the sub-advisory fee schedule, the Board considered representations from HL Advisors and the Sub-adviser that the Sub-adviser’s fees were negotiated at arm’s length. The Board also reviewed information from Lipper comparing the Fund’s contractual management fees, actual management fees and overall expense ratios relative to a group of funds selected by Lipper, in consultation with the Consultant, and a broader universe of funds selected by Lipper. The Board noted that, in connection with The Hartford’s preferred partnership agreement with the Sub-adviser, an additional breakpoint had been added to the Fund’s management fee schedule.
While the Board recognized that comparisons between the Fund and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business models and cost structures of the Advisers, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of the Fund’s management and sub-advisory fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to the Fund’s management and sub-advisory fees and total operating expenses.
Based on these considerations, the Board concluded that the Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding the Advisers’ realization of economies of scale with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. The Board reviewed the breakpoints in the management fee schedule for the Fund, which reduce fee rates as Fund assets grow over time, and noted that an additional breakpoint had recently been added to the Fund’s management fee schedule. The Board recognized that a fund with assets beyond the last breakpoint level will continue to benefit from economies of scale because additional assets are charged the lowest breakpoint fee resulting in lower overall effective management fee rates. The Board also recognized that a fee schedule that reaches a lower breakpoint quickly provides shareholders with the benefit of anticipated or potential economies of scale.
The Board reviewed and evaluated materials from Lipper showing how management fee schedules of peer funds reflect economies of scale for the benefit of shareholders as a peer fund’s assets hypothetically increase over time. Based on information provided by HL Advisors, Lipper, and the Consultant, the Board recognized that there is no uniform methodology for establishing breakpoints or uniform pattern in asset levels that trigger breakpoints or the amounts of breakpoints triggered.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Fund’s shareholders based on currently available information and the
Hartford Dividend and Growth HLS Fund
Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued)
effective advisory fees and expense ratios for the Fund at its current and reasonably anticipated asset levels. The Board noted, however, that it would continue to monitor future growth in Fund assets and the appropriateness of additional breakpoints.
Other Benefits
The Board considered other benefits to the Advisers and their affiliates from their relationships with the Fund, including the role of the Fund in supporting the variable life insurance and variable annuity products offered by The Hartford. The Board reviewed information noting that HLIC, an affiliate of HL Advisors, receives fees for providing certain administrative services to the Fund, and that HLIC also receives fees for fund accounting and related services from the Fund, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Fund’s transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Fund, and the Board reviewed information on the profitability of the Fund’s transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Fund were fair and reasonable based on publicly available information.
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Fund, receives 12b-1 fees from the Fund. The Board also noted that certain affiliates of HL Advisors distribute shares of the Fund and receive compensation in that connection.
The Board considered benefits to the Sub-adviser from its use of the Fund’s brokerage commissions to obtain soft dollar research, and representations from HL Advisors and the Sub-adviser that the Sub-adviser would not make any revenue-sharing payments or any other type of distribution payments to HL Advisors or its affiliates.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the Agreements for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory and sub-advisory agreements. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreements for the Fund and approve a new investment management agreement for the Fund with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser, and a new investment sub-advisory agreement between HFMC and the Fund’s existing Sub-adviser, Wellington Management Company, LLP (together with HFMC, the “Post-Restructuring Advisers”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Fund. In order to implement the Restructuring, the Fund would terminate the existing Agreements and enter into a new investment management agreement with HFMC, with HFMC also entering into a new investment sub-advisory agreement with the Sub-adviser (collectively, the “New Agreements”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreements at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund
performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by HL Advisors and the Sub-adviser and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreements.
In determining to approve the New Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the New Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreements.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Fund and the performance of investment management personnel to the Fund. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Fund prior to the Restructuring would continue to provide such services to the Fund, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreements would involve no changes to (i) the contractual terms of, including the management fees payable under, the Fund’s investment management and investment sub-advisory agreements; (ii) the investment processes and strategies employed in the management of the Fund’s assets; (iii) the nature and level of services provided under the Fund’s investment management and investment sub-advisory agreements; and (iv) the day-to-day management of the Fund and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Fund.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Fund.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Fund, the investment management arrangement for the Fund following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreements: (i) nature, extent and quality of services provided by HL Advisors and the Sub-adviser; (ii) performance of the Fund, HL Advisors and the Sub-adviser; (iii) costs of the services and profitability of HL Advisors and the Sub-adviser; (iv) comparative services rendered and comparative investment management and sub-advisory fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors and the Sub-adviser with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. With respect to the other benefits to the Post-Restructuring Advisers and their affiliates from their relationships with the Fund, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting and related services from the Fund.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the New Agreements. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Hartford Dividend and Growth HLS Fund
Principal Risks (Unaudited)
The principal risks of investing in the Fund are described below.
Market and Selection Risk: The Fund’s share price may fluctuate due to market risk and/or security selections that may underperform compared to the market or relevant benchmarks.
Foreign Investment Risk: Foreign investments can be riskier than U.S. investments. Potential risks include currency risk that may result from unfavorable exchange rates, liquidity risk if decreased demand for a security makes it difficult to sell at the desired price, and risks that stem from substantially lower trading volume on foreign markets.
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
HLSAR-DG12 2-13 113538 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 | |
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford Global Growth HLS Fund
Table of Contents
This report is prepared for the general information of contract owners and qualified retirement plan participants. It is not an offer of contracts or of qualified retirement plans. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent information including the applicable sales, administrative and other charges.
The views expressed in the Fund’s Manager Discussion under ‘‘Why did the Fund perform this way?’’ and ‘‘What is the outlook?’’ are views of the Fund’s sub-adviser and portfolio management team through the end of the period and are subject to change based on market and other conditions.
| Hartford Global Growth HLS Fund inception 09/30/1998 |
| (sub-advised by Wellington Management Company, LLP) |
| |
| Investment objective – Seeks growth of capital. |
Performance Overview 12/31/02 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class 1A. Growth results in classes other than Class 1A will vary from what is seen above due to differences in the expenses charged to those share classes.
Average Annual Total Returns (as of 12/31/12)
| | | 1 Year | | | 5 Year | | | 10 Year | |
| Global Growth IA | | | 23.41% | | | | -4.78% | | | | 6.36% | |
| Global Growth IB | | | 23.10% | | | | -5.01% | | | | 6.10% | |
| MSCI World Growth Index | | | 16.63% | | | | 0.11% | | | | 7.68% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund's net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
MSCI World Growth Index is a broad-based unmanaged market capitalization-weighted total return index which measures the performance of growth securities in 23 developed-country global equity markets including the United States, Canada, Europe, Australia, New Zealand and the Far East.
You cannot invest directly in an index.
As of the Fund’s current prospectus dated May 1, 2012, the net total annual operating expense ratios for Class IA and Class IB shares were 0.80% and 1.05%, respectively, and the gross total annual operating expense ratios for Class IA and Class IB shares were 0.80% and 1.05%, respectively. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect until April 30, 2013, and automatically renew for one-year terms unless terminated by the Fund’s Investment Advisor (Hartford Funds Management Company, LLC). For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
| Hartford Global Growth HLS Fund |
| Manager Discussion |
| December 31, 2012 (Unaudited) |
| Portfolio Managers | |
| Matthew D. Hudson, CFA | John A. Boselli, CFA* |
| Vice President and Equity Portfolio Manager | Director and Equity Portfolio Manager |
| | |
| * Effective June 27, 2012, Mr. Boselli was added as a Portfolio Manager to the Fund. |
| | |
How did the Fund perform?
The Class IA shares of the Hartford Global Growth HLS Fund returned 23.41% for the twelve-month period ended December 31, 2012, outperforming its benchmark, the MSCI World Growth Index, which returned 16.63% for the same period. The Fund outperformed the 17.34% return of the average fund in the Lipper VP-UF Global Growth Funds peer group, a group of funds with investment strategies similar to those of the Fund.
Why did the Fund perform this way?
Global equities moved higher in the period, in part due to central bank interventions around the globe. Although Europe continued to grapple with economic and structural challenges, investors’ risk appetites surged after European Central Bank (ECB) President Mario Draghi revealed a comprehensive plan to support struggling sovereigns, including direct purchases of government bonds in the open market. Additionally, the U.S. Federal Reserve’s (Fed) announcement of a third round of quantitative easing (QE3) was well received by the market, boosting stock prices. Despite concerns about the looming U.S. fiscal cliff, tepid corporate revenue results, and economic malaise in Europe, investors bid up risk assets toward the end of the period amid further signs of recovery in China and a strengthening U.S. housing market. Global risk sentiment also ticked up on continued hopes that the ECB’s bond-buying plan will succeed, essentially reducing the tail risks in Europe.
For the annual period, Growth stocks (+16.6%) performed roughly in line with Value stocks (+16.4%) as measured by the MSCI World Growth Index and the MSCI World Value Indexes, respectively. Within the MSCI World Growth Index, nine of ten sectors posted positive returns. Financials (+25%), Telecommunication Services (+25%), and Consumer Discretionary (+24%) gained the most, while the Utilities (-3%), Energy (+0%), and Materials (+9%) sectors lagged on a relative basis.
The Fund’s outperformance versus its benchmark was primarily due to strong security selection, particularly in the Consumer Discretionary, Information Technology, and Health Care sectors. This more than offset unfavorable selection in Consumer Staples, Energy, and Materials. Sector allocation, a residual of our bottom-up stock selection process, slightly detracted from relative returns, primarily due to an underweight (i.e. the Fund’s sector position was less than the benchmark position) to the outperforming Industrials sector. Holding cash also detracted from the relative performance.
Top contributors to relative performance included Regeneron Pharmaceuticals (Health Care), Sprint Nextel (Telecommunication Services), and eBay (Information Technology). Shares of Regeneron Pharmaceuticals, a U.S.-based biopharmaceutical company, rose on positive news regarding the firm's drug Eylea, including approval in the European Union and Japan and the U.S. Food and Drug Administration’s approval of a new eye disease indication for the drug. Sprint Nextel, a U.S.-based company offering a range of wireless and wireline communications products and services, saw its share price rise after reporting strong earnings that beat consensus expectations and after management raised fiscal year 2012 earnings guidance higher. Sprint Nextel is also making progress in its Network Vision plans, which consolidates multiple network technologies into one new and improved network. In October, Softbank, a Japanese technology giant that operates a wireless service, agreed to buy 70% of Sprint Nextel for $20.1 billion sending Sprint’s share price higher. The deal strengthens Sprint's financial position as it seeks to build an improved and faster network for its customers. Shares of eBay, a U.S.-based global provider of online marketplaces and payment solutions, rose on strong growth in the online marketplace segment and higher transaction margins in the payments segment. Top absolute (i.e. total return) contributors also included Apple (Information Technology).
The top detractors from the Fund’s relative performance were Chesapeake Energy (Energy), Green Mountain Coffee (Consumer Staples), and Juniper Networks (Information Technology). Shares of natural gas and oil producer, Chesapeake Energy, declined during the period. Despite the company’s attractive portfolio of assets, concerns regarding the company’s operations, governance, and balance sheet strength weighed on the stock price. Shares of Green Mountain Coffee, the leading provider of single-cup brewers and portion packs for coffee and other beverages, underperformed as investors feared that increasing competition, reduced pricing power, and increased
| Hartford Global Growth HLS Fund |
| Manager Discussion – (continued) |
| December 31, 2012 (Unaudited) |
promotional activity might hinder the company's long-term earnings power. Juniper Networks, a carrier and enterprise network equipment provider, saw its shares fall. The company experienced pressure as a result of capital expenditure budget tightening among customers, particularly in Europe. Top absolute detractors also included Repsol (Energy) and Barrick Gold (Materials).
What is the outlook?
Notwithstanding short-term volatility from quarter to quarter, we expect global economic growth to continue, although the pace of recovery will be uneven and vary by region. In the U.S., we expect the housing market recovery and refinancing boom to continue into 2013, which should provide a tailwind for U.S. banks in general. Even with a deal on the U.S. fiscal cliff, additional negotiations on spending cuts and implementation challenges remain, and we continue to monitor these developments closely.
Within Europe, while there are pockets of strength, significant challenges remain. Ultimately, we believe the success of the ECB’s plans to ease the debt crisis in Europe depends on how well it's executed.
In Asia, while China continues to grow, its growth is decelerating along with that of the region. In our opinion, China's growth would benefit if additional stimulus measures were put in place.
Corporate balance sheets in general remain healthier than they have been in years; therefore, most companies are well positioned to weather a slow growth environment. We believe that part of this slower growth is being driven by corporations themselves as they maintain a cautious approach to their capital budgets due to macro uncertainties.
Portfolio construction is a bottom-up process based on intensive company research. Allocations among sectors are the result of individual stock decisions. At the end of the period, our stock-by-stock investment process resulted in greater-than-benchmark weights in Financials, Information Technology, Health Care, Consumer Discretionary, and Utilities. The Fund ended the period most underweight the Industrials, Consumer Staples, and Materials sectors relative to the benchmark.
Diversification by Country
as of December 31, 2012
| | | | Percentage of | |
| Country | | | Net Assets | |
| Austria | | | 0.6 | % |
| Belgium | | | 2.0 | |
| Brazil | | | 0.5 | |
| Canada | | | 0.5 | |
| China | | | 1.0 | |
| Denmark | | | 1.3 | |
| France | | | 4.1 | |
| Germany | | | 2.2 | |
| Hong Kong | | | 2.2 | |
| Ireland | | | 1.1 | |
| Italy | | | 0.5 | |
| Japan | | | 1.6 | |
| Jersey | | | 0.5 | |
| Mexico | | | 1.6 | |
| Netherlands | | | 2.0 | |
| Portugal | | | 0.0 | |
| South Africa | | | 0.6 | |
| South Korea | | | 1.5 | |
| Sweden | | | 0.3 | |
| Switzerland | | | 4.4 | |
| Taiwan | | | 1.2 | |
| Thailand | | | 1.0 | |
| United Kingdom | | | 6.1 | |
| United States | | | 61.6 | |
| Short-Term Investments | | | 1.6 | |
| Other Assets and Liabilities | | | 0.0 | |
| Total | | | 100.0 | % |
|
| Hartford Global Growth HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 98.4% | | | | |
| | | | | Automobiles and Components - 0.5% | | | | |
| | 230 | | | Nissan Motor Co., Ltd. | | $ | 2,185 | |
| | | | | | | | | |
| | | | | Banks - 3.8% | | | | |
| | 158 | | | Banco Espirito Santo S.A. ● | | | 188 | |
| | 1,955 | | | Bank of Ayudhya plc | | | 2,090 | |
| | 47 | | | BNP Paribas | | | 2,704 | |
| | 2,317 | | | China Construction Bank | | | 1,893 | |
| | 71 | | | Erste Group Bank AG | | | 2,266 | |
| | 81 | | | Grupo Financiero Santander Mexico S.A.B. de C.V. ● | | | 1,318 | |
| | 309 | | | Kasikornbank PCL | | | 1,966 | |
| | 100 | | | Standard Chartered plc | | | 2,578 | |
| | | | | | | | 15,003 | |
| | | | | Capital Goods - 4.6% | | | | |
| | 34 | | | Boeing Co. | | | 2,581 | |
| | 39 | | | Honeywell International, Inc. | | | 2,447 | |
| | 24 | | | MTU Aero Engines Holdings AG | | | 2,168 | |
| | 234 | | | Rolls-Royce Holdings plc | | | 3,351 | |
| | 82 | | | Safran S.A. | | | 3,553 | |
| | 30 | | | Schneider Electric S.A. | | | 2,215 | |
| | 10 | | | SMC Corp. of America | | | 1,903 | |
| | | | | | | | 18,218 | |
| | | | | Consumer Durables and Apparel - 3.5% | | | | |
| | 62 | | | Hanesbrands, Inc. ● | | | 2,214 | |
| | 27 | | | Lululemon Athletica, Inc. ● | | | 2,045 | |
| | 3 | | | NVR, Inc. ● | | | 2,823 | |
| | 224 | | | Prada S.p.A. | | | 2,175 | |
| | 1,067 | | | Samsonite International S.A. | | | 2,239 | |
| | 15 | | | V.F. Corp. | | | 2,257 | |
| | | | | | | | 13,753 | |
| | | | | Consumer Services - 2.3% | | | | |
| | 401 | | | Galaxy Entertainment Group Ltd. ● | | | 1,609 | |
| | 177 | | | MGM Resorts International ● | | | 2,060 | |
| | 663 | | | Sands China Ltd. § | | | 2,965 | |
| | 44 | | | Starbucks Corp. | | | 2,336 | |
| | | | | | | | 8,970 | |
| | | | | Diversified Financials - 8.2% | | | | |
| | 563 | | | Aberdeen Asset Management plc | | | 3,388 | |
| | 19 | | | Affiliated Managers Group, Inc. ● | | | 2,421 | |
| | 86 | | | American Express Co. | | | 4,963 | |
| | 38 | | | Ameriprise Financial, Inc. | | | 2,392 | |
| | 13 | | | BlackRock, Inc. | | | 2,646 | |
| | 55 | | | Discover Financial Services, Inc. | | | 2,124 | |
| | 24 | | | Franklin Resources, Inc. | | | 3,057 | |
| | 17 | | | Goldman Sachs Group, Inc. | | | 2,206 | |
| | 101 | | | JP Morgan Chase & Co. | | | 4,463 | |
| | 48 | | | Moody's Corp. | | | 2,398 | |
| | 12 | | | Partners Group | | | 2,760 | |
| | | | | | | | 32,818 | |
| | | | | Energy - 4.0% | | | | |
| | 28 | | | Anadarko Petroleum Corp. | | | 2,067 | |
| | 101 | | | BG Group plc | | | 1,678 | |
| | 62 | | | Cobalt International Energy, Inc. ● | | | 1,510 | |
| | 81 | | | Ensco plc | | | 4,807 | |
| | 17 | | | EOG Resources, Inc. | | | 2,041 | |
| | 27 | | | National Oilwell Varco, Inc. | | | 1,874 | |
| | 29 | | | Schlumberger Ltd. | | | 2,001 | |
| | | | | | | | 15,978 | |
| | | | | Food and Staples Retailing - 1.4% | | | | |
| | 118 | | | CVS Caremark Corp. | | | 5,696 | |
| | | | | | | | | |
| | | | | Food, Beverage and Tobacco - 8.2% | | | | |
| | 70 | | | Anheuser-Busch InBev N.V. | | | 6,057 | |
| | 72 | | | Constellation Brands, Inc. Class A ● | | | 2,557 | |
| | 114 | | | Diageo Capital plc | | | 3,313 | |
| | 23 | | | Fomento Economico Mexicano S.A.B. de C.V. ADR | | | 2,291 | |
| | 84 | | | Green Mountain Coffee Roasters, Inc. ● | | | 3,489 | |
| | 40 | | | Heineken N.V. | | | 2,693 | |
| | 31 | | | Mead Johnson Nutrition Co. | | | 2,049 | |
| | 22 | | | Pernod-Ricard S.A. | | | 2,576 | |
| | 52 | | | Philip Morris International, Inc. | | | 4,316 | |
| | 92 | | | Unilever N.V. | | | 3,535 | |
| | | | | | | | 32,876 | |
| | | | | Health Care Equipment and Services - 3.7% | | | | |
| | 61 | | | Aetna, Inc. | | | 2,836 | |
| | 54 | | | Covidien plc | | | 3,141 | |
| | 22 | | | Edwards Lifesciences Corp. ● | | | 2,022 | |
| | 104 | | | Hologic, Inc. ● | | | 2,081 | |
| | 58 | | | Medtronic, Inc. | | | 2,367 | |
| | 35 | | | Zimmer Holdings, Inc. | | | 2,306 | |
| | | | | | | | 14,753 | |
| | | | | Insurance - 3.3% | | | | |
| | 64 | | | American International Group, Inc. ● | | | 2,251 | |
| | 313 | | | Discovery Holdings Ltd. | | | 2,308 | |
| | 27 | | | Hannover Rueckversicherung AG | | | 2,108 | |
| | 165 | | | Jardine Lloyd Thompson Group plc | | | 2,139 | |
| | 240 | | | Ping An Insurance (Group) Co. | | | 2,043 | |
| | 30 | | | Swiss Re Ltd. | | | 2,146 | |
| | | | | | | | 12,995 | |
| | | | | Materials - 3.3% | | | | |
| | 263 | | | Cemex S.A.B. de C.V. ADR ● | | | 2,593 | |
| | 13 | | | CF Industries Holdings, Inc. | | | 2,640 | |
| | 374 | | | Glencore International plc | | | 2,162 | |
| | 18 | | | HeidelbergCement AG | | | 1,129 | |
| | 216 | | | James Hardie Industries plc | | | 2,092 | |
| | 6 | | | Syngenta AG | | | 2,621 | |
| | | | | | | | 13,237 | |
| | | | | Media - 7.0% | | | | |
| | 70 | | | CBS Corp. Class B | | | 2,652 | |
| | 153 | | | Comcast Corp. Class A | | | 5,730 | |
| | 60 | | | DirecTV ● | | | 3,027 | |
| | 223 | | | News Corp. Class A | | | 5,692 | |
| | 859 | | | Sirius XM Radio, Inc. w/ Rights ● | | | 2,481 | |
| | 41 | | | Time Warner, Inc. | | | 1,953 | |
| | 45 | | | Viacom, Inc. Class B | | | 2,394 | |
| | 41 | | | Walt Disney Co. | | | 2,032 | |
| | 145 | | | WPP plc | | | 2,124 | |
| | | | | | | | 28,085 | |
| | | | | Pharmaceuticals, Biotechnology and Life Sciences - 11.9% | | | | |
| | 45 | | | Amgen, Inc. | | | 3,878 | |
| | 28 | | | Celgene Corp. ● | | | 2,172 | |
| | 103 | | | Gilead Sciences, Inc. ● | | | 7,569 | |
| | 32 | | | Johnson & Johnson | | | 2,271 | |
| | 100 | | | Merck & Co., Inc. | | | 4,077 | |
| | 112 | | | Mylan, Inc. ● | | | 3,082 | |
| | 19 | | | Novo Nordisk A/S | | | 3,172 | |
| | 14 | | | Regeneron Pharmaceuticals, Inc. ● | | | 2,394 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Global Growth HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 98.4% - (continued) | | | | |
| | | | | Pharmaceuticals, Biotechnology and Life Sciences - 11.9% - (continued) | | | | |
| | 40 | | | Roche Holding AG | | $ | 8,086 | |
| | 31 | | | Sanofi-Aventis S.A. | | | 2,918 | |
| | 45 | | | Thermo Fisher Scientific, Inc. | | | 2,896 | |
| | 35 | | | UCB S.A. | | | 2,024 | |
| | 35 | | | Watson Pharmaceuticals, Inc. ● | | | 2,985 | |
| | | | | | | | 47,524 | |
| | | | | Retailing - 5.1% | | | | |
| | 14 | | | Amazon.com, Inc. ● | | | 3,457 | |
| | 6 | | | AutoZone, Inc. ● | | | 2,070 | |
| | 103 | | | Lowe's Co., Inc. | | | 3,664 | |
| | 47 | | | Next plc | | | 2,879 | |
| | 9 | | | Priceline.com, Inc. ● | | | 5,611 | |
| | 60 | | | TJX Cos., Inc. | | | 2,530 | |
| | | | | | | | 20,211 | |
| | | | | Semiconductors and Semiconductor Equipment - 3.5% | | | | |
| | 63 | | | Altera Corp. | | | 2,175 | |
| | 25 | | | ASML Holding N.V. | | | 1,590 | |
| | 117 | | | NVIDIA Corp. ● | | | 1,435 | |
| | 4 | | | Samsung Electronics Co., Ltd. | | | 6,164 | |
| | 738 | | | Taiwan Semiconductor Manufacturing Co., Ltd. | | | 2,468 | |
| | | | | | | | 13,832 | |
| | | | | Software and Services - 14.4% | | | | |
| | 48 | | | Accenture plc | | | 3,216 | |
| | 20 | | | Alliance Data Systems Corp. ● | | | 2,910 | |
| | 64 | | | Amdocs Ltd. | | | 2,165 | |
| | 30 | | | Citrix Systems, Inc. ● | | | 2,000 | |
| | 20 | | | Dassault Systemes S.A. | | | 2,290 | |
| | 131 | | | eBay, Inc. ● | | | 6,661 | |
| | 96 | | | Facebook, Inc. ● | | | 2,567 | |
| | 13 | | | Google, Inc. ● | | | 9,459 | |
| | 42 | | | IAC/InterActiveCorp. | | | 1,982 | |
| | 23 | | | LinkedIn Corp. Class A ● | | | 2,619 | |
| | 7 | | | Mastercard, Inc. | | | 3,655 | |
| | 92 | | | Oracle Corp. | | | 3,051 | |
| | 15 | | | Salesforce.com, Inc. ● | | | 2,512 | |
| | 45 | | | SAP AG | | | 3,579 | |
| | 72 | | | Splunk, Inc. ● | | | 2,084 | |
| | 27 | | | Visa, Inc. | | | 4,079 | |
| | 119 | | | Yahoo!, Inc. ● | | | 2,372 | |
| | | | | | | | 57,201 | |
| | | | | Technology Hardware and Equipment - 5.7% | | | | |
| | 17 | | | Apple, Inc. | | | 8,898 | |
| | 134 | | | EMC Corp. ● | | | 3,400 | |
| | 400 | | | Hitachi Ltd. | | | 2,353 | |
| | 699 | | | Hon Hai Precision Industry Co., Ltd. | | | 2,163 | |
| | 133 | | | Juniper Networks, Inc. ● | | | 2,615 | |
| | 36 | | | Qualcomm, Inc. | | | 2,250 | |
| | 105 | | | Telefonaktiebolaget LM Ericsson Class B | | | 1,059 | |
| | | | | | | | 22,738 | |
| | | | | Telecommunication Services - 0.8% | | | | |
| | 576 | | | Sprint Nextel Corp. ● | | | 3,267 | |
| | | | | | | | | |
| | | | | Transportation - 2.2% | | | | |
| | 222 | | | Delta Air Lines, Inc. ● | | | 2,637 | |
| | 86 | | | DSV A/S | | | 2,226 | |
| | 23 | | | FedEx Corp. | | | 2,115 | |
| | 15 | | | Kuehne & Nagel International AG | | | 1,782 | |
| | | | | | | | 8,760 | |
| | | | | Utilities - 1.0% | | | | |
| | 48 | | | Cia de Saneamento Basico do Estado de Sao Paulo | | | 2,045 | |
| | 2,670 | | | Guangdong Investment Ltd. | | | 2,115 | |
| | | | | | | | 4,160 | |
| | | | | Total common stocks | | | | |
| | | | | (cost $329,769) | | $ | 392,260 | |
| | | | | | | | | |
| | | | | Total long-term investments
(cost $329,769) | | $ | 392,260 | |
| | | | | | | | | |
| SHORT-TERM INVESTMENTS - 1.6% | | | | |
| Repurchase Agreements - 1.6% | | | | |
| | | | | Bank of America Merrill Lynch TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $147,
collateralized by FHLMC 3.00%, 2042,
FNMA 4.00%, 2042, value of $150) | | | | |
| $ | 147 | | | 0.19%, 12/31/2012 | | $ | 147 | |
| | | | | Bank of Montreal TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $1,045, collateralized by
FHLMC 2.50% - 5.50%, 2019 - 2042,
FNMA 0.76% - 6.11%, 2016 - 2042,
GNMA 3.50%, 2042, value of $1,065) | | | | |
| | 1,045 | | | 0.23%, 12/31/2012 | | | 1,045 | |
| | | | | Barclays Capital TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $327, collateralized by U.S.
Treasury Note 2.00% - 2.13%, 2016, value
of $333) | | | | |
| | 327 | | | 0.20%, 12/31/2012 | | | 327 | |
| | | | | Citigroup Global Markets, Inc. TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $2,058,
collateralized by U.S. Treasury Note 1.88%
- 4.13%, 2015 - 2018, value of $2,099) | | | | |
| | 2,058 | | | 0.17%, 12/31/2012 | | | 2,058 | |
| | | | | Deutsche Bank Securities TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $42, collateralized by FNMA
3.00%, 2032, value of $43) | | | | |
| | 42 | | | 0.25%, 12/31/2012 | | | 42 | |
| | | | | RBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $1,448, collateralized by U.S.
Treasury Note 0.50% - 2.75%, 2013 - 2019,
value of $1,477) | | | | |
| | 1,448 | | | 0.20%, 12/31/2012 | | | 1,448 | |
| | | | | TD Securities TriParty Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$1,268, collateralized by FHLMC 3.50% -
6.00%, 2036 - 2042, FNMA 0.22% - 5.50%,
2013 - 2042, value of $1,293) | | | | |
| | 1,268 | | | 0.21%, 12/31/2012 | | | 1,268 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | | | | | Market Value ╪ | |
| SHORT-TERM INVESTMENTS - 1.6% - (continued) | | | | | | | |
| Repurchase Agreements - 1.6% - (continued) | | | | | | | |
| | | | UBS Securities, Inc. Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$24, collateralized by U.S. Treasury Bill
0.75%, 2013, value of $25) | | | | | | | |
| $ | 24 | | | 0.17%, 12/31/2012 | | | | | | $ | 24 | |
| | | | | UBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $86, collateralized by FNMA
2.50%, 2027, GNMA 3.00%, 2042, value of $88) | | | | | | | | |
| | 86 | | | 0.25%, 12/31/2012 | | | | | | | 86 | |
| | | | | | | | | | | | 6,445 | |
| | | | | Total short-term investments | | | | | | | | |
| | | | | (cost $6,445) | | | | | | $ | 6,445 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $336,214) ▲ | | | 100.0 | % | | $ | 398,705 | |
| | | | | Other assets and liabilities | | | – | % | | | (110 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 398,595 | |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| | |
| | Prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for factors occurring after the close of certain foreign markets but before the close of the New York Stock Exchange. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $337,891 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 64,772 | |
| Unrealized Depreciation | | | (3,958 | ) |
| Net Unrealized Appreciation | | $ | 60,814 | |
| § | These securities were sold to the Fund under Regulation S, rules governing offers and sales made outside the United States without registration under the Securities Act of 1933. The Fund may only be able to resell these securities in the United States if an exemption from registration under the federal and state securities laws is available, or the Fund may only be able to sell these securities outside of the United States (such as on a foreign exchange) to a non-U.S. person. Unless otherwise indicated, these holdings are determined to be liquid. At December 31, 2012, the aggregate value of these securities was $2,965, which represents 0.7% of total net assets. |
The accompanying notes are an integral part of these financial statements.
| Hartford Global Growth HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
Foreign Currency Contracts Outstanding at December 31, 2012
| Currency | | Buy / Sell | | Delivery Date | | Counterparty | | Contract Amount | | | Market Value ╪ | | | Unrealized
Appreciation/
(Depreciation) | |
| EUR | | Buy | | 01/03/2013 | | DEUT | | $ | 32 | | | $ | 32 | | | $ | — | |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
| GLOSSARY: (abbreviations used in preceding Schedule of Investments) |
| |
| Counterparty Abbreviations: |
| DEUT | Deutsche Bank Securities, Inc. | |
| | |
| Currency Abbreviations: |
| EUR | EURO | |
| |
| Other Abbreviations: |
| ADR | American Depositary Receipt |
| FHLMC | Federal Home Loan Mortgage Corp. |
| FNMA | Federal National Mortgage Association |
| GNMA | Government National Mortgage Association |
The accompanying notes are an integral part of these financial statements.
| Hartford Global Growth HLS Fund |
| Investment Valuation Hierarchy Level Summary |
| December 31, 2012 |
| (000’s Omitted) |
| | | Total | | | Level 1 ♦ | | | Level 2 ♦ | | | Level 3 | |
| Assets: | | | | | | | | | | | | | | | | |
| Common Stocks | | | | | | | | | | | | | | | | |
| Automobiles and Components | | $ | 2,185 | | | $ | – | | | $ | 2,185 | | | $ | – | |
| Banks | | | 15,003 | | | | 1,318 | | | | 13,685 | | | | – | |
| Capital Goods | | | 18,218 | | | | 5,028 | | | | 13,190 | | | | – | |
| Consumer Durables and Apparel | | | 13,753 | | | | 9,339 | | | | 4,414 | | | | – | |
| Consumer Services | | | 8,970 | | | | 4,396 | | | | 4,574 | | | | – | |
| Diversified Financials | | | 32,818 | | | | 26,670 | | | | 6,148 | | | | – | |
| Energy | | | 15,978 | | | | 14,300 | | | | 1,678 | | | | – | |
| Food and Staples Retailing | | | 5,696 | | | | 5,696 | | | | – | | | | – | |
| Food, Beverage and Tobacco | | | 32,876 | | | | 14,702 | | | | 18,174 | | | | – | |
| Health Care Equipment and Services | | | 14,753 | | | | 14,753 | | | | – | | | | – | |
| Insurance | | | 12,995 | | | | 2,251 | | | | 10,744 | | | | – | |
| Materials | | | 13,237 | | | | 5,233 | | | | 8,004 | | | | – | |
| Media | | | 28,085 | | | | 25,961 | | | | 2,124 | | | | – | |
| Pharmaceuticals, Biotechnology and Life Sciences | | | 47,524 | | | | 31,324 | | | | 16,200 | | | | – | |
| Retailing | | | 20,211 | | | | 17,332 | | | | 2,879 | | | | – | |
| Semiconductors and Semiconductor Equipment | | | 13,832 | | | | 3,610 | | | | 10,222 | | | | – | |
| Software and Services | | | 57,201 | | | | 51,332 | | | | 5,869 | | | | – | |
| Technology Hardware and Equipment | | | 22,738 | | | | 17,163 | | | | 5,575 | | | | – | |
| Telecommunication Services | | | 3,267 | | | | 3,267 | | | | – | | | | – | |
| Transportation | | | 8,760 | | | | 4,752 | | | | 4,008 | | | | – | |
| Utilities | | | 4,160 | | | | 2,045 | | | | 2,115 | | | | – | |
| Total | | | 392,260 | | | | 260,472 | | | | 131,788 | | | | – | |
| Short-Term Investments | | | 6,445 | | | | – | | | | 6,445 | | | | – | |
| Total | | $ | 398,705 | | | $ | 260,472 | | | $ | 138,233 | | | $ | – | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Foreign Currency Contracts* | | | – | | | | – | | | | – | | | | – | |
| Total | | $ | – | | | $ | – | | | $ | – | | | $ | – | |
| ♦ | For the year ended December 31, 2012, there were no transfers between Level 1 and Level 2. |
| * | Derivative instruments not reflected in the Schedule of Investments are valued at the unrealized appreciation/depreciation on the investments. |
The accompanying notes are an integral part of these financial statements.
| Hartford Global Growth HLS Fund |
| Statement of Assets and Liabilities |
| December 31, 2012 |
| (000’s Omitted) |
| Assets: | | | | |
| Investments in securities, at market value (cost $336,214) | | $ | 398,705 | |
| Cash | | | 10 | |
| Foreign currency on deposit with custodian (cost $400) | | | 399 | |
| Receivables: | | | | |
| Fund shares sold | | | 164 | |
| Dividends and interest | | | 518 | |
| Other assets | | | — | |
| Total assets | | | 399,796 | |
| Liabilities: | | | | |
| Unrealized depreciation on foreign currency contracts | | | — | |
| Payables: | | | | |
| Investment securities purchased | | | 446 | |
| Fund shares redeemed | | | 646 | |
| Investment management fees | | | 57 | |
| Distribution fees | | | 4 | |
| Accrued expenses | | | 48 | |
| Total liabilities | | | 1,201 | |
| Net assets | | $ | 398,595 | |
| Summary of Net Assets: | | | | |
| Capital stock and paid-in-capital | | $ | 457,399 | |
| Undistributed net investment income | | | 2,850 | |
| Accumulated net realized loss | | | (124,160 | ) |
| Unrealized appreciation of investments and the translations of assets and liabilities denominated in foreign currency | | | 62,506 | |
| Net assets | | $ | 398,595 | |
| Shares authorized | | | 3,400,000 | |
| Par value | | $ | 0.001 | |
| Class IA: Net asset value per share | | $ | 16.50 | |
| Shares outstanding | | | 19,473 | |
| Net assets | | $ | 321,371 | |
| Class IB: Net asset value per share | | $ | 16.38 | |
| Shares outstanding | | | 4,714 | |
| Net assets | | $ | 77,224 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Global Growth HLS Fund |
| Statement of Operations |
| For the Year Ended December 31, 2012 |
| (000’s Omitted) |
| Investment Income: | | | | |
| Dividends | | $ | 7,246 | |
| Interest | | | 16 | |
| Less: Foreign tax withheld | | | (462 | ) |
| Total investment income, net | | | 6,800 | |
| | | | | |
| Expenses: | | | | |
| Investment management fees | | | 3,327 | |
| Transfer agent fees | | | 2 | |
| Distribution fees - Class IB | | | 209 | |
| Custodian fees | | | 24 | |
| Accounting services fees | | | 62 | |
| Board of Directors' fees | | | 12 | |
| Audit fees | | | 13 | |
| Other expenses | | | 160 | |
| Total expenses (before fees paid indirectly) | | | 3,809 | |
| Commission recapture | | | (11 | ) |
| Total fees paid indirectly | | | (11 | ) |
| Total expenses, net | | | 3,798 | |
| Net Investment Income | | | 3,002 | |
| | | | | |
| Net Realized Gain on Investments and Foreign Currency Transactions: | | | | |
| Net realized gain on investments | | | 53,633 | |
| Net realized gain on foreign currency contracts | | | 82 | |
| Net realized loss on other foreign currency transactions | | | (222 | ) |
| Net Realized Gain on Investments and Foreign Currency Transactions | | | 53,493 | |
| | | | | |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions: | | | | |
| Net unrealized appreciation of investments | | | 36,052 | |
| Net unrealized depreciation of foreign currency contracts | | | — | |
| Net unrealized appreciation on translation of other assets and liabilities in foreign currencies | | | 6 | |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions | | | 36,058 | |
| Net Gain on Investments and Foreign Currency Transactions | | | 89,551 | |
| Net Increase in Net Assets Resulting from Operations | | $ | 92,553 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Global Growth HLS Fund |
| Statement of Changes in Net Assets |
| |
| (000’s Omitted) |
| | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| Operations: | | | | | | | | |
| Net investment income | | $ | 3,002 | | | $ | 2,236 | |
| Net realized gain on investments and foreign currency transactions | | | 53,493 | | | | 52,217 | |
| Net unrealized appreciation (depreciation) of investments and foreign currency transactions | | | 36,058 | | | | (126,300 | ) |
| Net Increase (Decrease) in Net Assets Resulting from Operations | | | 92,553 | | | | (71,847 | ) |
| Distributions to Shareholders: | | | | | | | | |
| From net investment income | | | | | | | | |
| Class IA | | | (2,003 | ) | | | (149 | ) |
| Class IB | | | (201 | ) | | | — | |
| Total distributions | | | (2,204 | ) | | | (149 | ) |
| Capital Share Transactions: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 18,835 | | | | 25,684 | |
| Issued on reinvestment of distributions | | | 2,003 | | | | 149 | |
| Redeemed | | | (125,314 | ) | | | (99,236 | ) |
| Total capital share transactions | | | (104,476 | ) | | | (73,403 | ) |
| Class IB | | | | | | | | |
| Sold | | | 8,583 | | | | 12,370 | |
| Issued on reinvestment of distributions | | | 201 | | | | — | |
| Redeemed | | | (31,213 | ) | | | (35,398 | ) |
| Total capital share transactions | | | (22,429 | ) | | | (23,028 | ) |
| Net decrease from capital share transactions | | | (126,905 | ) | | | (96,431 | ) |
| Net Decrease in Net Assets | | | (36,556 | ) | | | (168,427 | ) |
| Net Assets: | | | | | | | | |
| Beginning of period | | | 435,151 | | | | 603,578 | |
| End of period | | $ | 398,595 | | | $ | 435,151 | |
| Undistributed (distribution in excess of) net investment income | | $ | 2,850 | | | $ | 2,274 | |
| Shares: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 1,247 | | | | 1,683 | |
| Issued on reinvestment of distributions | | | 129 | | | | 11 | |
| Redeemed | | | (8,150 | ) | | | (6,477 | ) |
| Total share activity | | | (6,774 | ) | | | (4,783 | ) |
| Class IB | | | | | | | | |
| Sold | | | 574 | | | | 819 | |
| Issued on reinvestment of distributions | | | 13 | | | | — | |
| Redeemed | | | (2,035 | ) | | | (2,308 | ) |
| Total share activity | | | (1,448 | ) | | | (1,489 | ) |
The accompanying notes are an integral part of these financial statements.
| Hartford Global Growth HLS Fund |
| Notes to Financial Statements |
| December 31, 2012 |
| (000’s Omitted |
Hartford Global Growth HLS Fund (the “Fund”) serves as an underlying investment option for certain variable annuity and variable life insurance separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates and certain qualified retirement plans. The Fund may also serve as an underlying investment option for certain variable annuity and variable life separate accounts of other insurance companies. Owners of variable annuity contracts and policyholders of variable life insurance contracts may choose the funds permitted in the variable insurance contract prospectus. In addition, participants in certain qualified retirement plans may choose the Fund if permitted by their plans.
Hartford Series Fund, Inc. (the “Company”) is an open-end registered management investment company comprised of thirty portfolios. Financial Statements for the Fund, a series of the Company, are included in this report.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund is a diversified open-end management investment company.
The Fund is divided into Class IA and Class IB shares. Each class is offered at the per share net asset value (“NAV”) without a sales charge and is subject to the same expenses, except that the Class IB shares are subject to distribution and service fees charged pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act.
| 2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Fund in the preparation of its financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| a) | Determination of Net Asset Value – The NAV of each class of the Fund’s shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| b) | Investment Valuation and Fair Value Measurements – For purposes of calculating the NAV, portfolio investments and other assets held by the Fund's portfolio for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of last reported sales prices or official close price. If no sales are reported, market value is based on quotes obtained from a quotation reporting system, established market makers, or independent pricing services. If market prices are not readily available or are deemed unreliable, the Fund will use the fair value of the investment as determined in good faith under policies and procedures established by and under the supervision of the Company’s Board of Directors. Market quotes are considered not readily available where there is an absence of current or reliable market-based data (e.g., trade information or indicative market quotes), including where events occur after the close of the relevant market, but prior to the NYSE Close that materially affect the values of the Fund’s portfolio investments or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the investments trade do not open for trading for the entire day and no other market prices are available. In addition, prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close. Investments that are primarily traded on foreign markets may trade on days that are not business days of the Fund. The value of the foreign investments in which the Fund invests may change on days when a shareholder will not be able to |
| Hartford Global Growth HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| | purchase or redeem shares of the Fund. Fair value pricing is subjective in nature and the use of fair value pricing by the Fund may cause the NAV of its shares to differ significantly from the NAV that would have been calculated using market prices at the close of the exchange on which a portfolio investment is primarily traded. There can be no assurance that the Fund could obtain the fair market value assigned to an investment if the Fund were to sell the investment at approximately the time at which the Fund determines its NAV. |
Investments valued in currencies other than U.S. dollars are converted to U.S. dollars using exchange rates obtained from independent pricing services for calculation of the NAV. As a result, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of investments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the NYSE is closed and the market value may change on days when an investor is not able to purchase, redeem or exchange shares of the Fund.
Foreign currency contracts represent agreements to exchange currencies on specific future dates at predetermined rates. Foreign currency contracts are valued using foreign currency exchange rates and forward rates as provided by an independent pricing service on the Valuation Date.
Financial instruments for which prices are not available from an independent pricing service may be valued using market quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with procedures established by the Company’s Board of Directors.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| · | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange traded funds, rights and warrants. |
| · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 may include debt investments that are traded less frequently than exchange traded instruments and which are valued using independent pricing services; foreign equities, which are principally traded on certain foreign markets and are adjusted daily pursuant to a fair value pricing service in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close; and short-term investments, which are valued at amortized cost. |
| · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price. |
The Board of Directors of the Company generally reviews and approves the “Procedures for Valuation of Portfolio Securities” on an annual basis. These procedures define how investments are to be valued, including the formation and activities of a Valuation Committee. The Valuation Committee is responsible for determining
in good faith the fair value of investments when the value cannot be obtained from primary pricing services or alternative sources or if the valuation of an investment as provided by the primary pricing service or alternative source is believed not to reflect the investment’s fair value as of the Valuation Date. Members of the Valuation Committee include the Fund’s Treasurer or designee, a Vice President of the Fund with legal expertise or designee, and a Vice President of the investment manager or designee. In addition, the Fund’s Chief Compliance Officer shall designate a member of the compliance group to attend Valuation Committee meetings as a non-voting resource, to monitor for and provide guidance with respect to compliance with these procedures. Two members of the Valuation Committee or their designees, representing different departments, shall constitute a quorum for purposes of permitting the Valuation Committee to take action. The Valuation Committee will consider all relevant factors in determining an investment’s fair value, and may seek the advice of the Fund’s sub-adviser, knowledgeable brokers, and legal counsel in making such determination. The Valuation Committee reports to the Audit Committee of the Company’s Board of Directors. The Audit Committee receives quarterly written reports which include details of all fair-valued investments, including the reason for the fair valuation, and an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such investments (the “look-back” test). The Board of Directors then must consider for ratification all of the fair value determinations made during the previous quarter.
Valuation levels are not necessarily indicative of the risk associated with investing in such investments. Individual investments within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
For additional information, refer to the Investment Valuation Hierarchy Level Summary and the Level 3 roll-forward reconciliation, if applicable, which follow the Schedule of Investments.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period.
| c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Investments purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses are determined on the basis of identified cost. |
Dividend income from domestic securities is accrued on the ex-dividend date. In general, dividend income from foreign securities is recorded on the ex-date; however, dividend notifications in certain foreign jurisdictions may not be available in a timely manner and as a result, the Fund will record the dividend as soon as the relevant details (i.e., rate per share, payment date, shareholders of record, etc.) are publicly available. Interest income, including amortization of premium and accretion of discounts, is accrued on a daily basis.
| d) | Foreign Currency Transactions – Assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investments, income, and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. |
The Fund does not isolate that portion of portfolio investment valuation resulting from fluctuations in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of investments held. Exchange rate fluctuations are included with the net realized and unrealized gain or loss on investments in the accompanying financial statements.
Net realized foreign exchange gains or losses arise from sales of foreign currencies and the difference between asset and liability amounts initially stated in foreign currencies and the U.S. dollar value of the amounts actually received or paid.
| Hartford Global Growth HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
Net unrealized foreign exchange gains or losses arise from changes in the value of other assets and liabilities at the end of the reporting period, resulting from changes in the exchange rates.
| e) | Joint Trading Account – The Fund may invest cash balances into a joint trading account that may be invested in one or more repurchase agreements. |
| f) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Fund’s shares are executed in accordance with the investment instructions of the contract holders and plan participants. The NAV of the Fund’s shares is determined as of the close of business on each business day of the Exchange. The NAV is determined separately for each class of shares of the Fund by dividing the Fund’s net assets attributable to that class by the number of shares of the class outstanding. Each class of shares offered by the Fund has equal rights as to assets and voting privileges (except that shareholders of a class have exclusive voting rights regarding any matter relating solely to that class of shares). Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets of the class. Realized and unrealized capital gains and losses are allocated daily based on the relative net assets of each class of shares of the Fund. |
Orders for the purchase of the Fund’s shares received prior to the close of the Exchange on any day the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Fund. The policy of the Fund is to pay dividends from net investment income and realized capital gains, if any, at least once a year.
Distributions from net investment income, net realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These differences may include but are not limited to losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to Passive Foreign Investment Companies (“PFICs”), Real Estate Investment Trusts (“REITs”), Regulated Investment Companies (“RICs”), certain derivatives and partnerships. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Fund’s capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| 3. | Securities and Other Investments: |
| a) | Repurchase Agreements – A repurchase agreement is an agreement by which a counterparty agrees to sell an investment and agrees to repurchase the investment sold from the buyer at a mutually agreed upon time and price. At the time the Fund enters into a repurchase agreement, the value of the underlying collateral, including accrued interest, will be equal to or exceed the value of the repurchase agreement. Repurchase agreements expose the Fund to counterparty risk - that is, the risk that the counterparty will not fulfill its obligations. To minimize counterparty risk, the investments that serve to collateralize the repurchase agreement are held by the Fund’s custodian in book entry or physical form in the custodial account of the Fund or in a third party custodial account. Repurchase agreements are valued at cost plus accrued interest, which approximates fair value. The Fund, as shown on the Schedule of Investments, had outstanding repurchase agreements as of December 31, 2012. |
| b) | Illiquid and Restricted Investments – The Fund is permitted to invest up to 15% of its net assets in illiquid investments. Illiquid investments are those that may not be sold or disposed of in the ordinary course of business within seven days, at approximately the price used to determine the Fund’s NAV. The Fund may not be able to sell illiquid investments when its sub-adviser considers it desirable to do so or may have to sell such investments at a price that is lower than the price that could be obtained if the investments were more liquid. A sale of illiquid investments may require more time and |
may result in higher dealer discounts and other selling expenses than does the sale of those that are liquid. Illiquid investments also may be more difficult to value due to the unavailability of reliable market quotations for such investments, and an investment in them may have an adverse impact on the Fund’s NAV. The Fund may also purchase certain restricted investments that can only be resold to certain qualified investors and may be determined to be liquid pursuant to policies and guidelines established by the Company’s Board of Directors. The Fund, as shown on the Schedule of Investments, had illiquid and/or restricted investments as of December 31, 2012.
| c) | Investments Purchased on a When-Issued or Delayed-Delivery Basis – Delivery and payment for investments that have been purchased by the Fund on a forward commitment, or when-issued or delayed-delivery basis, take place beyond the customary settlement period. A fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell delayed-delivery investments before they are delivered, which may result in a realized gain or loss. During this period, such investments are subject to market fluctuations, and the Fund identifies investments segregated in its records with a value at least equal to the amount of the commitment. As of December 31, 2012, the Fund had no outstanding when-issued or delayed-delivery investments. |
| 4. | Financial Derivative Instruments: |
The following disclosures contain information on how and why the Fund uses derivative instruments, the credit-risk-related contingent features in certain derivative instruments, and how derivative instruments affect the Fund’s financial position and results of operations. The location and fair value amounts of these instruments on the Statement of Assets and Liabilities and the realized gains and losses and changes in unrealized gains and losses on the Statement of Operations, each categorized by type of derivative contract, are included in the following Additional Derivative Instrument Information footnote. The derivative instruments outstanding as of year-end are disclosed in the notes to or within the Schedule of Investments for purchased options, if applicable. The amounts of realized gains and losses and changes in unrealized gains and losses on derivative instruments during the year are disclosed in the Statement of Operations.
| a) | Foreign Currency Contracts – The Fund may enter into foreign currency contracts that obligate the Fund to purchase or sell currencies at specified future dates. Foreign currency contracts are used to hedge the currency exposure associated with some or all of the Fund’s investments and/or as part of an investment strategy. Foreign currency contracts are marked to market daily and the change in value is recorded by the Fund as an unrealized gain or loss. The Fund will record a realized gain or loss when the foreign currency contract is settled. |
Foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. In addition, risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of the contracts and from unanticipated movements in the value of the foreign currencies relative to the U.S. dollar. The Fund had outstanding foreign currency contracts as shown on the Schedule of Investments as of December 31, 2012.
| Hartford Global Growth HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| b) | Additional Derivative Instrument Information: |
Fair Value of Derivative Instruments on the Statement of Assets and Liabilities as of December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| | | | | | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized depreciation on foreign currency contracts | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Total | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
The volume of derivative activity was minimal during the year ended December 31, 2012.
The Effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Realized Gain on Derivatives Recognized as a Result of Operations: |
| Net realized gain on foreign currency contracts | | $ | — | | | $ | 82 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 82 | |
| Total | | $ | — | | | $ | 82 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 82 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Change in Unrealized Depreciation on Derivatives Recognized as a Result of Operations: |
| Net change in unrealized depreciation of foreign currency contracts | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Total | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| a) | Counterparty Risk – The Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will default. |
| b) | Market Risks – If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities, such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund. The market values of equity securities, such as common stocks and preferred stocks, or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The market value of equity securities may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities. |
| a) | Federal Income Taxes – For federal income tax purposes, the Fund intends to continue to qualify as a RIC under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders and otherwise complying with the requirements of the IRC. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains prior to the next fiscal year-end. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. |
| c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Fund for the periods indicated is as follows (as adjusted for dividends payable, if applicable): |
| | | For the Year Ended
December 31, 2012 | | | For the Year Ended
December 31, 2011 | |
| Ordinary Income | | $ | 2,204 | | | $ | 149 | |
As of December 31, 2012, the Fund’s components of distributable earnings (deficit) on a tax basis were as follows:
| | | Amount | |
| Undistributed Ordinary Income | | $ | 2,850 | |
| Accumulated Capital and Other Losses* | | | (122,483 | ) |
| Unrealized Appreciation† | | | 60,829 | |
| Total Accumulated Deficit | | $ | (58,804 | ) |
| * | The Fund has capital loss carryforwards that are identified in the Capital Loss Carryforward note that follows. |
| † | Differences between book-basis and tax-basis unrealized appreciation (depreciation) may be attributable to the losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. |
| Hartford Global Growth HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| d) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as foreign currency, PFICs, expiration or utilization of capital loss carryforwards or net operating losses. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Fund’s distributions may be shown in the accompanying Statement of Changes in Net Assets as from undistributed net investment income, from accumulated net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Fund recorded reclassifications to increase (decrease) the accounts listed below: |
| | | Amount | |
| Undistributed Net Investment Income | | $ | (222 | ) |
| Accumulated Net Realized Gain (Loss) | | | 222 | |
| e) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation. |
At December 31, 2012 (tax-year-end), the Fund had capital loss carryforwards for U.S. federal income tax purposes as follows:
| Year of Expiration | | Amount | |
| 2017 | | $ | 122,483 | |
| Total | | $ | 122,483 | |
During the year ended December 31, 2012, the Fund utilized $54,451 of prior year capital loss carryforwards.
| f) | Accounting for Uncertainty in Income Taxes – The Fund has adopted financial reporting rules that require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Fund does not have an examination in progress. |
The Fund has reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules had no effect on the Fund’s financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2012. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Fund’s investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Fund pursuant to an Investment Management Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Fund’s investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees payable under, the |
Fund’s investment management agreements; or (ii) the day-to-day management of the Fund. The investment manager has overall investment supervisory responsibility for the Fund. In addition, the investment manager provides administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. The investment manager has contracted with Wellington Management Company, LLP (“Wellington Management”) under a sub-advisory agreement for the provision of day-to-day investment management services to the Fund in accordance with the Fund’s investment objective and policies. The Fund pays a fee to the investment manager, a portion of which may be used to compensate Wellington Management.
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered as of December 31, 2012; the rates are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee | |
| On first $250 million | | | 0.7750% | |
| On next $250 million | | | 0.7250% | |
| On next $500 million | | | 0.6750% | |
| On next $4 billion | | | 0.6250% | |
| On next $5 billion | | | 0.6225% | |
| Over $10 billion | | | 0.6200% | |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Fund. HLIC provided accounting services for the Fund for the fiscal year ended December 31, 2012. The replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Fund or the fees charged to the Fund for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Fund, HFMC provides accounting services to the Fund and receives monthly compensation based on the Fund’s average daily net assets at the rates set forth below. The Fund’s accounting services fees are accrued daily and paid monthly. |
| Average Daily Net Assets | | Annual Fee | |
| On first $5 billion | | | 0.014% | |
| On next $5 billion | | | 0.012% | |
| Over $10 billion | | | 0.010% | |
| c) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund and allocated to classes within a Fund in proportion to the average daily net assets of the Fund and each class, except where allocation of certain expenses is more fairly made directly to the Fund or to specific classes within a Fund. |
| d) | Fees Paid Indirectly – The Company, on behalf of the Fund, has entered into agreements with State Street Global Markets, LLC and Russell Implementation Services, Inc. to partially recapture non-discounted trade commissions. Such rebates are used to pay a portion of the Fund’s expenses. In addition, the Fund’s custodian banks have agreed to reduce its fees when the Fund maintains cash on deposit in a non-interest-bearing custody account. For the year ended December 31, 2012, these amounts, if any, are included in the Statement of Operations. |
The ratio of expenses to average net assets in the accompanying financial highlights excludes the reduction in expenses related to fees paid indirectly. The annualized expense ratio after waivers for the period listed below reflecting the reduction for fees paid indirectly is as follows:
| | | Year Ended
December 31, 2012 | |
| Class IA | | | 0.81% | |
| Class IB | | | 1.06 | |
| Hartford Global Growth HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| e) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Fund's principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD with HIFSCO did not result in any changes to the distribution services provided to the Fund. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Fund, has adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, 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, subject to the review and approval of the Company’s Board of Directors. |
The Distribution Plan provides that the Fund may pay annually up to 0.25% of the average daily net assets of the Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, the Fund is authorized to make payments monthly to the Distributor that may be used to pay or compensate 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. These fees are accrued daily and paid monthly.
| f) | Other Related Party Transactions – Certain officers of the Fund are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Fund’s Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Fund was in the amount of $1. Hartford Administrative Services Company (“HASCO”), an indirect wholly owned subsidiary of The Hartford, provides transfer agent services to the Fund. The amount paid to HASCO can be found in the Statement of Operations. These fees are accrued daily and paid monthly. |
| g) | Payments from Affiliates – In July of 2007, The Hartford entered into a settlement with the Attorneys General of the states of New York, Connecticut and Illinois relating to market timing and the company's individual variable annuity contracts in which certain payments would be made directly to the variable annuity contract holders. The distribution plan provided that unclaimed money from the settlement would be distributed to certain HLS Funds that are investment options through a Hartford individual variable annuity contract. The unclaimed money was distributed to the Fund on September 18, 2009. |
The total return in the accompanying financial highlights includes a payment from an affiliate. Had the payment from the affiliate been excluded, the impact and total return for the period listed below would have been as follows:
| | | For the Year Ended December 31, 2009 | |
| | | Class IA | | | Class IB | |
| Impact from Payment from Affiliate for Attorneys General Settlement | | | 0.04 | % | | | 0.04 | % |
| Total Return Excluding Payment from Affiliate | | | 35.59 | % | | | 35.26 | % |
| 8. | Investment Transactions: |
For the year ended December 31, 2012, the Fund's aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
| | | Amount | |
| Cost of Purchases Excluding U.S. Government Obligations | | $ | 467,169 | |
| Sales Proceeds Excluding U.S. Government Obligations | | | 588,903 | |
The Fund is one of several Hartford funds that participate in a $500 million committed revolving line of credit facility. The facility is to be used for temporary or emergency purposes. Under the arrangement, the funds are required to own securities having a market value in excess of 300% of the total bank borrowings. The interest rate on borrowings varies depending on the nature of the loan. The facility also requires a fee to be paid based on the amount of the commitment. This commitment fee is allocated to all of the funds participating in the line of credit based on the average net assets of the funds. During the year ended December 31, 2012, the Fund did not have any borrowings under this facility.
| 10. | Industry Classifications: |
Other than the industry classifications “Other Investment Pools and Funds” and “Exchange Traded Funds,” equity industry classifications used in this report are the Global Industry Classification Standard, which was developed by and is the exclusive property and service mark of MSCI, Inc. and Standard & Poor’s.
Under the Company’s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
| 12. | Recent Accounting Pronouncement: |
Disclosures about Offsetting Assets and Liabilities - In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The objective of the ASU is to enhance current disclosure requirements on offsetting of certain assets and liabilities and to enable financial statement users to compare financial statements prepared under U.S. GAAP and International Financial Reporting Standards.
Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
| Hartford Global Growth HLS Fund |
| Financial Highlights |
| - Selected Per-Share Data (A) - |
| Class | | Net Asset Value at
Beginning of
Period | | | Net Investment
Income (Loss) | | | Net Realized and
Unrealized Gain
(Loss) on
Investments | | | Total from
Investment
Operations | | | Dividends from Net
Investment Income | | | Distributions from
Realized Capital
Gains | | | Distributions from
Capital | | | Total Distributions | | | Net Asset Value at
End of Period | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2012 | |
| IA | | $ | 13.45 | | | $ | 0.14 | | | $ | 3.00 | | | $ | 3.14 | | | $ | (0.09 | ) | | $ | – | | | $ | – | | | $ | (0.09 | ) | | $ | 16.50 | |
| IB | | | 13.34 | | | | 0.09 | | | | 2.99 | | | | 3.08 | | | | (0.04 | ) | | | – | | | | – | | | | (0.04 | ) | | | 16.38 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2011 | |
| IA | | | 15.62 | | | | 0.08 | | | | (2.24 | ) | | | (2.16 | ) | | | (0.01 | ) | | | – | | | | – | | | | (0.01 | ) | | | 13.45 | |
| IB | | | 15.53 | | | | 0.04 | | | | (2.23 | ) | | | (2.19 | ) | | | – | | | | – | | | | – | | | | – | | | | 13.34 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2010 | |
| IA | | | 13.71 | | | | 0.04 | | | | 1.91 | | | | 1.95 | | | | (0.04 | ) | | | – | | | | – | | | | (0.04 | ) | | | 15.62 | |
| IB | | | 13.64 | | | | – | | | | 1.90 | | | | 1.90 | | | | (0.01 | ) | | | – | | | | – | | | | (0.01 | ) | | | 15.53 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2009 | |
| IA | | | 10.17 | | | | 0.08 | | | | 3.55 | | | | 3.63 | | | | (0.09 | ) | | | – | | | | – | | | | (0.09 | ) | | | 13.71 | |
| IB | | | 10.12 | | | | 0.05 | | | | 3.53 | | | | 3.58 | | | | (0.06 | ) | | | – | | | | – | | | | (0.06 | ) | | | 13.64 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2008 | |
| IA | | | 22.42 | | | | 0.12 | | | | (11.56 | ) | | | (11.44 | ) | | | (0.12 | ) | | | (0.69 | ) | | | – | | | | (0.81 | ) | | | 10.17 | |
| IB | | | 22.27 | | | | 0.08 | | | | (11.47 | ) | | | (11.39 | ) | | | (0.07 | ) | | | (0.69 | ) | | | – | | | | (0.76 | ) | | | 10.12 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include 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 would lower the Fund's performance. |
| (C) | Ratios do not reflect reductions for fees paid indirectly. Please see Fees Paid Indirectly in the Notes to Financial Statements. |
| (D) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
| (E) | Total return without the inclusion of the Payment from (to) Affiliate can be found in Expenses in the accompanying Notes to Financial Statements. |
| - Ratios and Supplemental Data - |
| Total Return(B) | | | Net Assets at End of Period | | | Ratio of Expenses to Average Net Assets
Before Waivers(C) | | | Ratio of Expenses to Average Net Assets
After Waivers(C) | | | Ratio of Net Investment
Income (Loss) to Average Net
Assets | | | Portfolio
Turnover
Rate(D) | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 23.41 | % | | $ | 321,371 | | | | 0.82 | % | | | 0.82 | % | | | 0.73 | % | | | 108 | % |
| | 23.10 | | | | 77,224 | | | | 1.07 | | | | 1.07 | | | | 0.47 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (13.89 | ) | | | 352,947 | | | | 0.80 | | | | 0.80 | | | | 0.46 | | | | 57 | |
| | (14.10 | ) | | | 82,204 | | | | 1.05 | | | | 1.05 | | | | 0.22 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 14.25 | | | | 484,754 | | | | 0.81 | | | | 0.81 | | | | 0.28 | | | | 62 | |
| | 13.96 | | | | 118,824 | | | | 1.06 | | | | 1.06 | | | | 0.03 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 35.64 | (E) | | | 488,720 | | | | 0.81 | | | | 0.81 | | | | 0.67 | | | | 70 | |
| | 35.31 | (E) | | | 126,320 | | | | 1.06 | | | | 1.06 | | | | 0.42 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (52.46 | ) | | | 419,183 | | | | 0.75 | | | | 0.75 | | | | 0.67 | | | | 76 | |
| | (52.58 | ) | | | 112,226 | | | | 1.00 | | | | 1.00 | | | | 0.42 | | | | – | |
| Report of Independent Registered Public Accounting Firm |
| The Board of Directors and Shareholders of |
| Hartford Series Fund, Inc. |
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Hartford Global Growth HLS Fund (one of the portfolios constituting Hartford Series Fund, Inc. (the Fund)) as of December 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Hartford Global Growth HLS Fund (one of the portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
| | |
| Minneapolis, MN | |
| February 15, 2013 | |
| Hartford Global Growth HLS Fund |
| Directors and Officers (Unaudited) |
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Fund pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Fund. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Fund’s statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Fund pays to The Hartford a portion of the Chief Compliance Officer’s compensation, but does not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
| Hartford Global Growth HLS Fund |
| Directors and Officers (Unaudited) – (continued) |
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010 (4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and a record of how the Fund voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
| Hartford Global Growth HLS Fund |
| Expense Example (Unaudited) |
Your Fund's Expenses
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Actual return | | | Hypothetical (5% return before expenses) | | | | | | | | | | |
| | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2
year | | | Days
in the
full
year | |
| Class IA | | $ | 1,000.00 | | | $ | 1,012.53 | | | $ | 4.14 | | | $ | 1,000.00 | | | $ | 1,021.02 | | | $ | 4.16 | | | | 0.82 | % | | | 184 | | | | 366 | |
| Class IB | | $ | 1,000.00 | | | $ | 1,012.39 | | | $ | 5.41 | | | $ | 1,000.00 | | | $ | 1,019.76 | | | $ | 5.43 | | | | 1.07 | % | | | 184 | | | | 366 | |
| Hartford Global Growth HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) |
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory and sub-advisory agreements. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for Hartford Global Growth HLS Fund (the “Fund”) with HL Investment Advisors, LLC (“HL Advisors”) and the continuation of the investment sub-advisory agreement between HL Advisors and the Fund’s sub-adviser, Wellington Management Company, LLP (the “Sub-adviser,” and together with HL Advisors, the “Advisers”) (collectively, the “Agreements”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from the Advisers to questions posed to them on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreements at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by the Advisers and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreements.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreements with respect to the Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Fund’s contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Fund’s management fees, sub-advisory fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement.
In determining to continue the Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreements. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreements is provided below.
Nature, Extent, and Quality of Services Provided by the Advisers
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Fund by the Advisers. The Board considered, among other things, the terms of the Agreements and the range of services provided by the Advisers. The Board considered the Advisers’ professional personnel who provide services to the Fund, including each Adviser’s ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered each Adviser’s reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to the Fund. In addition, the Board considered the quality of each Adviser’s communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning each Adviser’s regulatory and compliance environment. In this regard, the Board requested and reviewed information on each Adviser’s compliance policies and procedures, compliance history, and a report from the Fund’s Chief Compliance Officer on each Adviser’s compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. The Board also noted the Advisers’ support of the Fund’s compliance control structure, particularly the resources devoted by the Advisers in support of the Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act.
| The Hartford Global Growth HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
With respect to HL Advisors, the Board noted that under the Agreements, HL Advisors is responsible for the management of the Fund, including overseeing fund operations and service providers, as well as investment advisory services in connection with selecting, monitoring and supervising the Sub-adviser. The Board considered HL Advisors’ ongoing monitoring of people, process and performance, including its quarterly reviews of each of the Hartford HLS Funds, semi-annual meetings with the leaders of each Fund’s portfolio management team, and oversight of the Funds’ approximately 40 portfolio managers. The Board recognized that HL Advisors has demonstrated a record of making changes to the management and/or strategies of the Funds when warranted. The Board considered HL Advisors’ oversight of the Sub-adviser’s investment approach and results, process for monitoring best execution of portfolio trades by the Sub-adviser, and approach to risk management with respect to the Fund and the service providers to the Fund. The Board also considered HL Advisors’ oversight of compliance with the Fund’s objective and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led to an increase in the scope of HL Advisors’ services in this regard. In addition, the Board considered HL Advisors’ ongoing commitment to review and rationalize the Hartford fund family’s product line-up and the expenses that HL Advisors had incurred in connection with fund combinations in recent years. The Board considered that HL Advisors or its affiliates are responsible for providing the Fund’s officers. The Board also noted that Hartford Life Insurance Company (“HLIC”) provides administrative services to the Fund. The Board considered its experiences with HL Advisors and HLIC with respect to each of these services.
With respect to the Sub-adviser, who provides day-to-day portfolio management services, the Board considered the quality of the Fund’s portfolio managers, the Sub-adviser’s other investment personnel, its investment philosophy and process, investment research capabilities and resources, performance record, trade execution capabilities and experience. The Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers, and the Sub-adviser’s method for compensating the portfolio managers. The Board noted the June 2012 changes to the Fund’s portfolio management team.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Fund by HL Advisors and the Sub-adviser.
Performance of the Fund and the Advisers
The Board considered the investment performance of the Fund. In this regard, the Board reviewed the performance of the Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of the Fund’s performance for these time periods. The Board considered information and materials provided to the Board by the Advisers concerning Fund performance, as well as information from Lipper comparing the investment performance of the Fund to an appropriate benchmark and universe of peer funds. The Board noted that the Fund had underperformed relative to its peer group for the 3- and 5-year periods and that its performance was in line with the peer group for the 1-year period. The Board also noted that the Fund had underperformed relative to its benchmark for the 1-, 3- and 5-year periods. HL Advisors noted that it would continue to monitor the Fund’s performance.
The Board considered the detailed investment analytics reports provided by The Hartford’s Investment Advisory Group throughout the year. These reports include, among other things, information on the Fund’s gross and net returns, the Fund’s investment performance relative to an appropriate benchmark and peer group, various statistics concerning the Fund’s portfolio, and a narrative summary of various factors affecting Fund performance. The Board considered the Advisers’ cooperation with the Investment Committee, which assists the Board in evaluating the performance of the Fund at periodic meetings throughout the year. The Board also considered the analysis provided by the Consultant relating to the Fund’s performance track record.
In light of all the considerations noted above, the Board concluded that it had continued confidence in HL Advisors’ and the Sub-adviser’s overall capabilities to manage the Fund.
Costs of the Services and Profitability of the Advisers
The Board reviewed information regarding HL Advisors’ cost to provide investment management and related services to the Fund and HL Advisors’ profitability, both overall and for the Fund, on a pre-tax basis without regard to distribution expenses. The Board also requested and reviewed information about the profitability to HL Advisors and its affiliates from all services provided
to the Fund and all aspects of their relationship with the Fund. The Board also requested and received information relating to the operations and profitability of the Sub-adviser.
The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement, noting the Consultant’s view that The Hartford’s process for calculating and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by the Advisers and their affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by the Advisers
The Board considered comparative information with respect to the management fees to be paid by the Fund to HL Advisors and the total expense ratios of the Fund. The Board also considered comparative information with respect to the sub-advisory fees to be paid by HL Advisors to the Sub-adviser, to the extent applicable. In this regard, the Board requested and reviewed information from HL Advisors and the Sub-adviser relating to the management and sub-advisory fees, including the sub-advisory fee schedule for the Fund, and total operating expenses for the Fund. The Board considered that the management fee for the Fund includes the fee paid to HLIC for providing certain administrative services to the Fund. With respect to the sub-advisory fee schedule, the Board considered representations from HL Advisors and the Sub-adviser that the Sub-adviser’s fees were negotiated at arm’s length. The Board also reviewed information from Lipper comparing the Fund’s contractual management fees, actual management fees and overall expense ratios relative to a group of funds selected by Lipper, in consultation with the Consultant, and a broader universe of funds selected by Lipper.
While the Board recognized that comparisons between the Fund and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business models and cost structures of the Advisers, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of the Fund’s management and sub-advisory fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to the Fund’s management and sub-advisory fees and total operating expenses.
Based on these considerations, the Board concluded that the Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding the Advisers’ realization of economies of scale with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. The Board reviewed the breakpoints in the management fee schedule for the Fund, which reduce fee rates as Fund assets grow over time. The Board recognized that a fund with assets beyond the last breakpoint level will continue to benefit from economies of scale because additional assets are charged the lowest breakpoint fee resulting in lower overall effective management fee rates. The Board also recognized that a fee schedule that reaches a lower breakpoint quickly provides shareholders with the benefit of anticipated or potential economies of scale.
The Board reviewed and evaluated materials from Lipper showing how management fee schedules of peer funds reflect economies of scale for the benefit of shareholders as a peer fund’s assets hypothetically increase over time. Based on information provided by HL Advisors, Lipper, and the Consultant, the Board recognized that there is no uniform methodology for establishing breakpoints or uniform pattern in asset levels that trigger breakpoints or the amounts of breakpoints triggered.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Fund’s shareholders based on currently available information and the effective advisory fees and expense ratios for the Fund at its current and reasonably anticipated asset levels. The Board noted, however, that it would continue to monitor future growth in Fund assets and the appropriateness of additional breakpoints.
| The Hartford Global Growth HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
Other Benefits
The Board considered other benefits to the Advisers and their affiliates from their relationships with the Fund, including the role of the Fund in supporting the variable life insurance and variable annuity products offered by The Hartford. The Board reviewed information noting that HLIC, an affiliate of HL Advisors, receives fees for providing certain administrative services to the Fund, and that HLIC also receives fees for fund accounting and related services from the Fund, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Fund’s transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Fund, and the Board reviewed information on the profitability of the Fund’s transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Fund were fair and reasonable based on publicly available information.
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Fund, receives 12b-1 fees from the Fund. The Board also noted that certain affiliates of HL Advisors distribute shares of the Fund and receive compensation in that connection.
The Board considered benefits to the Sub-adviser from its use of the Fund’s brokerage commissions to obtain soft dollar research, and representations from HL Advisors and the Sub-adviser that the Sub-adviser would not make any revenue-sharing payments or any other type of distribution payments to HL Advisors or its affiliates.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the Agreements for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory and sub-advisory agreements. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreements for the Fund and approve a new investment management agreement for the Fund with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser, and a new investment sub-advisory agreement between HFMC and the Fund’s existing Sub-adviser, Wellington Management Company, LLP (together with HFMC, the “Post-Restructuring Advisers”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Fund. In order to implement the Restructuring, the Fund would terminate the existing Agreements and enter into a new investment management agreement with HFMC, with HFMC also entering into a new investment sub-advisory agreement with the Sub-adviser (collectively, the “New Agreements”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreements at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by HL Advisors and the Sub-adviser and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreements.
In determining to approve the New Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the New Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreements.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Fund and the performance of investment management personnel to the Fund. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Fund prior to the Restructuring would continue to provide such services to the Fund, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreements would involve no changes to (i) the contractual terms of, including the management fees payable under, the Fund’s investment management and investment sub-advisory agreements; (ii) the investment processes and strategies employed in the management of the Fund’s assets; (iii) the nature and level of services provided under the Fund’s investment management and investment sub-advisory agreements; and (iv) the day-to-day management of the Fund and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Fund.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Fund.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Fund, the investment management arrangement for the Fund following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreements: (i) nature, extent and quality of services provided by HL Advisors and the Sub-adviser; (ii) performance of the Fund, HL Advisors and the Sub-adviser; (iii) costs of the services and profitability of HL Advisors and the Sub-adviser; (iv) comparative services rendered and comparative investment management and sub-advisory fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors and the Sub-adviser with respect to
the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. With respect to the other benefits to the Post-Restructuring Advisers and their affiliates from their relationships with the Fund, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting and related services from the Fund.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the New Agreements. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
| Hartford Global Growth HLS Fund |
| Principal Risks (Unaudited) |
The principal risks of investing in the Fund are described below.
Market and Selection Risk: The Fund’s share price may fluctuate due to market risk and/or security selections that may underperform compared to the market or relevant benchmarks.
Foreign Investment and Emerging Markets Risk: Foreign investments can be riskier than U.S. investments. Potential risks include currency risk that may result from unfavorable exchange rates, liquidity risk if decreased demand for a security makes it difficult to sell at the desired price, and risks that stem from substantially lower trading volume on foreign markets. These risks are generally greater for investments in emerging markets, which are also subject to greater price volatility, and custodial and regulatory risks.
Growth Investing Risk: Growth investments can be volatile, and may fail to increase earnings or grow as quickly as anticipated. Growth-style investing falls in and out of favor, which may result in periods of underperformance.
Mid-cap Stock Risk: Mid-cap stocks are generally more volatile and risky and may be less liquid than large-cap stocks because they may have limited operating histories, narrow product lines, and focus on niche markets.
Active Trading Risk: Actively trading investments may result in higher costs and higher taxable income.
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
HLSAR-GG12 2-13 115539 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 | |
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford Global Research HLS Fund
Table of Contents
This report is prepared for the general information of contract owners and qualified retirement plan participants. It is not an offer of contracts or of qualified retirement plans. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent information including the applicable sales, administrative and other charges.
The views expressed in the Fund’s Manager Discussion under ‘‘Why did the Fund perform this way?’’ and ‘‘What is the outlook?’’ are views of the Fund’s sub-adviser and portfolio management team through the end of the period and are subject to change based on market and other conditions.
Hartford Global Research HLS Fund inception 01/31/2008
(sub-advised by Wellington Management Company, LLP)
| Investment objective – Seeks long-term capital appreciation. |
Performance Overview 1/31/08 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IA. Growth results in classes other than Class IA will vary from what is seen above due to differences in the expenses charged to those share classes.
Average Annual Total Returns (as of 12/31/12)
| | | 1 Year | | | Since
Inception▲ | |
| Global Research IA | | | 18.39% | | | | 1.96% | |
| Global Research IB | | | 18.10% | | | | 1.71% | |
| MSCI All Country World Index | | | 16.80% | | | | 1.12% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund's net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
MSCI All Country World Index is a free float-adjusted market capitalization index that measures equity market performance in the global developed and emerging markets, consisting of 45 developed and emerging market country indices. This index is unmanaged, and its results include reinvested dividends and/or distributions, but do not reflect the effect of sales charges, commissions, expenses or taxes.
You cannot invest directly in an index.
As of the Fund’s current prospectus dated May 1, 2012, the net total annual operating expense ratios for Class IA and Class IB shares were 1.03% and 1.28%, respectively, and the gross total annual operating expense ratios for Class IA and Class IB shares were 1.03% and 1.28%, respectively. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect until April 30, 2013, and automatically renew for one-year terms unless terminated by the Fund’s Investment Advisor (Hartford Funds Management Company, LLC). For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
| Hartford Global Research HLS Fund |
| Manager Discussion |
| December 31, 2012 (Unaudited) |
| Portfolio Managers | |
| Cheryl M. Duckworth, CFA | Mark D. Mandel, CFA* |
| Senior Vice President and Associate Director of Global Industry Research | Director of Global Industry Research |
* Mr. Mandel supervises a team of global industry analysts that manage the Fund. Mr. Mandel is not involved in day-to-day management of the Fund.
How did the Fund perform?
The Class IA shares of the Hartford Global Research HLS Fund returned 18.39% for the twelve-month period ended December 31, 2012, outperforming its benchmark, the MSCI All Country World Index, which returned 16.80% for the same period. The Fund also outperformed the 17.34% return of the average fund in the Lipper VP-UF Global Growth Funds peer group, a group of funds with investment strategies similar to those of the Fund.
Why did the Fund perform this way?
Global equities moved higher in the period, in part due to central bank interventions around the globe. Although Europe continued to grapple with economic and structural challenges, investors’ risk appetites surged after European Central Bank (ECB) President Mario Draghi revealed a comprehensive plan to support struggling sovereigns, including direct purchases of government bonds in the open market. Additionally, the U.S. Federal Reserve’s (Fed) announcement of a third round of quantitative easing (QE3) was well received by the market, boosting stock prices. Despite concerns about the looming U.S. fiscal cliff, tepid corporate revenue results, and economic malaise in Europe, investors bid up risk assets toward the end of the period amid further signs of recovery in China and a strengthening U.S. housing market. Global risk sentiment also ticked up on continued hopes that the ECB’s bond-buying plan will succeed, essentially reducing the tail risks in Europe.
All ten sectors in the MSCI All Country World Index rose during the period. Financials (+30%), Consumer Discretionary (+24%), and Health Care (+19%) rose the most while Energy (+3%) and Utilities (+3%) lagged on a relative basis.
The Fund’s outperformance versus the benchmark was driven by positive security selection in eight of ten sectors. Stock selection was strongest in Information Technology, Financials, and Energy while selection in Consumer Staples and Telecommunication Services detracted from relative performance.
Top contributors to benchmark-relative performance during the period included Regeneron Pharmaceuticals (Health Care), Amylin Pharmaceuticals (Health Care), and Apple (Information Technology). Shares of Regeneron Pharmaceuticals, an integrated biopharmaceutical company, rose after the company reported better-than-expected sales of the firm’s recently launched macular degeneration drug Eylea. In addition, Regeneron substantially raised sales guidance for Eylea during the period. Shares of Amylin, a biopharmaceutical company focused on developing drugs for diabetes and other metabolic diseases, rose in response to speculation about a potential takeover. In June, Bristol-Myers Squibb reported that it would acquire Amylin for $5.3 billion, sending Amylin's share price even higher. Shares of consumer electronics manufacturer Apple rose during the period due to continued strong demand for the iPhone and iPad. We continue to own the stock but have moved to an underweight position relative to the benchmark, reflecting our view on price versus expectations. Top contributors to absolute performance also included eBay (Information Technology).
The largest detractors from absolute and benchmark-relative returns were Aquarius Platinum (Materials), Green Mountain Coffee (Consumer Staples), and BG Group (Energy). Aquarius Platinum, an Australia-based platinum mining company with assets in South Africa and Zimbabwe, underperformed as the price for platinum weakened during the period and Aquarius closed two of its unprofitable mines in South Africa. While Green Mountain’s stock has recovered some of its earlier losses during the 2012 period, the stock’s overall decline was due to concerns that increasing competition, reduced pricing power, and increased promotional activity may hinder the company's long-term earnings power. Shares of BG Group, a U.K.-based natural gas company, fell following reduced production guidance for 2013.
What is the outlook?
In 2013, we expect global economic recovery to continue, but at a slow rate and with varying degrees of recovery by region. In the U.S., a last minute deal averted a full dive off the fiscal cliff on January 1, 2013; however, the temporary payroll tax cut of the past two years was allowed to expire, which will raise taxes by 2% on most Americans. In our view, housing and employment should continue to improve, and corporate earnings should also enjoy moderate growth this year. In
| Hartford Global Research HLS Fund |
Manager Discussion – (continued) |
| December 31, 2012 (Unaudited) |
Europe, the ECB bond buying plan has reduced the fears of a cataclysmic liquidity event, although the region remains in recession and still faces many challenges ahead. In Asia, China’s economy continues to slow but recent positive economic data points have alleviated many investors’ fears of a hard landing.
In contrast to the past few years, where we have held overweight positions (i.e. the Fund’s sector position was greater than the benchmark position) in smartphone-related businesses within Information Technology, as of the end of the period we have shifted the portfolio more towards enterprise related businesses. We also have a favorable view on internet technology names and telecommunications equipment names.
As of December 31, 2012, in Energy we favor oil and gas exploration and production companies, where our focus is on companies with quality assets that can be developed at a low cost, over equipment and services companies. We also have an overweight position in select integrated oil and gas companies.
As of December 31, 2012, in Materials we have a modest overweight in gold-related stocks. Over the last year gold producers have materially underperformed gold due to contracting valuation multiples and higher than expected cost inflation. Input costs, mainly currencies and energy, have been deflating and valuations have declined, creating an attractive opportunity generally.
Within Consumer Staples, news on tobacco regulation is at a cyclical high, which has created buying opportunities across the geographical landscape. We believe that tobacco pricing continues to be strong, more than compensating for volumes being flat to down.
In Health Care, as of the end of the period we favor select companies that are poised to benefit from the conversion of branded pharmaceuticals to generics over the next several years. We continue to have a positive view on select pharmaceutical companies that should benefit from continued strength in their drug launches.
The Fund ended the period most overweight the Consumer Staples, Health Care, and Consumer Discretionary sectors and most underweight the Financials, Industrials, and Telecommunication Services sectors relative to the MSCI All Country World Index. The Fund’s largest absolute weightings were in the Financials, Information Technology, and Consumer Discretionary sectors.
| Diversification by Country |
| as of December 31, 2012 |
| | | Percentage of | |
| Country | | Net Assets | |
| Australia | | | 2.1 | % |
| Belgium | | | 1.3 | |
| Brazil | | | 1.9 | |
| Canada | | | 3.6 | |
| China | | | 0.6 | |
| Colombia | | | 0.0 | |
| Denmark | | | 0.4 | |
| Finland | | | 0.0 | |
| France | | | 3.2 | |
| Germany | | | 1.8 | |
| Hong Kong | | | 2.5 | |
| India | | | 0.7 | |
| Indonesia | | | 0.1 | |
| Ireland | | | 0.9 | |
| Israel | | | 0.8 | |
| Italy | | | 0.4 | |
| Japan | | | 5.6 | |
| Luxembourg | | | 0.4 | |
| Malaysia | | | 0.5 | |
| Marshall Islands | | | 0.1 | |
| Mexico | | | 0.3 | |
| Netherlands | | | 1.4 | |
| Norway | | | 1.2 | |
| Papua New Guinea | | | 0.1 | |
| Philippines | | | 0.2 | |
| Poland | | | 0.2 | |
| Portugal | | | 0.4 | |
| Russia | | | 0.2 | |
| Singapore | | | 0.3 | |
| South Africa | | | 0.5 | |
| South Korea | | | 1.2 | |
| Spain | | | 0.9 | |
| Sweden | | | 0.5 | |
| Switzerland | | | 2.8 | |
| Taiwan | | | 0.6 | |
| Thailand | | | 0.2 | |
| Turkey | | | 0.3 | |
| United Kingdom | | | 7.6 | |
| United States | | | 54.0 | |
| Short-Term Investments | | | 0.5 | |
| Other Assets and Liabilities | | | (0.3 | ) |
| Total | | | 100.0 | % |
|
| Hartford Global Research HLS Fund |
Schedule of Investments |
December 31, 2012 |
(000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 99.2% | |
| | | | | Automobiles and Components - 1.5% | | | | |
| | 2 | | | Bayerische Motoren Werke (BMW) AG | | $ | 214 | |
| | 17 | | | Ford Motor Co. | | | 217 | |
| | — | | | Hyundai Motor Co., Ltd. | | | 69 | |
| | 25 | | | Nissan Motor Co., Ltd. ☼ | | | 242 | |
| | 1 | | | Renault S.A. | | | 66 | |
| | 6 | | | Toyota Motor Corp. ☼ | | | 298 | |
| | | | | | | | 1,106 | |
| | | | | Banks - 7.5% | | | | |
| | 7 | | | Alior Bank S.A. ● | | | 146 | |
| | 19 | | | Banco ABC Brasil S.A. | | | 132 | |
| | 73 | | | Banco Espirito Santo S.A. ● | | | 87 | |
| | 57 | | | Banco Santander Brasil S.A. | | | 413 | |
| | 5 | | | Bancorpsouth, Inc. | | | 73 | |
| | 3 | | | BankNordik P/F | | | 38 | |
| | — | | | Banque Cantonale Vaudoise | | | 173 | |
| | 6 | | | BB&T Corp. | | | 166 | |
| | 6 | | | BNP Paribas | | | 360 | |
| | 4 | | | Canadian Imperial Bank of Commerce | | | 317 | |
| | 195 | | | China Construction Bank | | | 159 | |
| | 2 | | | Citizens & Northern Corp. | | | 28 | |
| | 4 | | | Citizens Republic Bancorp, Inc. ● | | | 67 | |
| | 6 | | | DGB Financial Group, Inc. | | | 79 | |
| | 24 | | | DNB ASA | | | 301 | |
| | 1 | | | Gronlandsbanken | | | 118 | |
| | 7 | | | Hana Financial Holdings | | | 242 | |
| | 4 | | | Home Capital Group, Inc. | | | 254 | |
| | 24 | | | HSBC Holdings plc | | | 250 | |
| | 9 | | | Itau Unibanco Banco Multiplo S.A. ADR | | | 145 | |
| | 114 | | | Mitsubishi UFJ Financial Group, Inc. | | | 614 | |
| | 2 | | | National Bank of Canada | | | 161 | |
| | 19 | | | Oversea-Chinese Banking Corp., Ltd. | | | 152 | |
| | 4 | | | PNC Financial Services Group, Inc. | | | 253 | |
| | 16 | | | Regions Financial Corp. | | | 110 | |
| | 16 | | | Spar Nord Bank A/S ● | | | 72 | |
| | 25 | | | Standard Chartered plc | | | 653 | |
| | 125 | | | Turkiye Sinai Kalkinma Bankasi A.S. | | | 162 | |
| | | | | | | | 5,725 | |
| | | | | Capital Goods - 6.7% | | | | |
| | 6 | | | AMETEK, Inc. | | | 227 | |
| | 8 | | | BAE Systems plc | | | 42 | |
| | 4 | | | Boeing Co. | | | 265 | |
| | 1 | | | Brenntag AG | | | 182 | |
| | — | | | Carlisle Cos., Inc. | | | 29 | |
| | 1 | | | Chicago Bridge & Iron Co. N.V. | | | 30 | |
| | 4 | | | Colfax Corp. ● | | | 163 | |
| | 4 | | | Danaher Corp. | | | 240 | |
| | 1 | | | Doosan Corp. | | | 62 | |
| | 1 | | | Dover Corp. | | | 34 | |
| | 3 | | | Eaton Corp. plc | | | 143 | |
| | 4 | | | Empresas ICA, S.A.B. de C.V. ● | | | 9 | |
| | 22 | | | General Electric Co. | | | 455 | |
| | 4 | | | Honeywell International, Inc. | | | 231 | |
| | 2 | | | IDEX Corp. | | | 111 | |
| | 4 | | | Illinois Tool Works, Inc. | | | 258 | |
| | 2 | | | Ingersoll-Rand plc | | | 108 | |
| | 10 | | | Itochu Corp. | | | 100 | |
| | 2 | | | Joy Global, Inc. | | | 106 | |
| | 3 | | | KBR, Inc. | | | 80 | |
| | 2 | | | Komatsu Ltd. | | | 41 | |
| | 2 | | | Lockheed Martin Corp. | | | 168 | |
| | 9 | | | Luxfer Holdings plc ● | | | 108 | |
| | 5 | | | Mitsubishi Corp. | | | 92 | |
| | 2 | | | Moog, Inc. Class A ● | | | 79 | |
| | 1 | | | Neo Holdings Co. Ltd ⌂† | | | 1 | |
| | 1 | | | Northrop Grumman Corp. | | | 56 | |
| | 4 | | | Pentair Ltd. | | | 206 | |
| | — | | | Precision Castparts Corp. | | | 8 | |
| | 2 | | | Raytheon Co. | | | 141 | |
| | 8 | | | Rexel S.A. | | | 157 | |
| | 12 | | | Rolls-Royce Holdings plc | | | 178 | |
| | 3 | | | Safran S.A. | | | 123 | |
| | 1 | | | Siemens AG | | | 87 | |
| | 3 | | | SKF AB Class B | | | 83 | |
| | — | | | SMC Corp. of America | | | 52 | |
| | 4 | | | United Technologies Corp. | | | 322 | |
| | 1 | | | Vallourec S.A. | | | 55 | |
| | 3 | | | Vinci S.A. | | | 132 | |
| | 1 | | | WESCO International, Inc. ● | | | 98 | |
| | | | | | | | 5,062 | |
| | | | | Commercial and Professional Services - 0.2% | | | | |
| | 6 | | | Brambles Ltd. | | | 47 | |
| | 2 | | | Huron Consulting Group, Inc. ● | | | 66 | |
| | 13 | | | Transfield Services Ltd. | | | 26 | |
| | | | | | | | 139 | |
| | | | | Consumer Durables and Apparel - 1.1% | | | | |
| | 1 | | | Adidas AG | | | 128 | |
| | 2 | | | Brunello Cucinelli S.p.A. ● | | | 43 | |
| | 37 | | | Daphne International Holdings Ltd. | | | 51 | |
| | 2 | | | LVMH Moet Hennessy Louis Vuitton S.A. | | | 279 | |
| | 1 | | | NIKE, Inc. Class B | | | 62 | |
| | 1 | | | Salvatore Ferragamo Italia S.p.A. | | | 27 | |
| | 65 | | | Samsonite International S.A. | | | 136 | |
| | 32 | | | Stella International Holdings Ltd. | | | 87 | |
| | | | | | | | 813 | |
| | | | | Consumer Services - 0.7% | | | | |
| | 3 | | | Carnival Corp. | | | 102 | |
| | 3 | | | Compass Group plc | | | 37 | |
| | 4 | | | Dunkin' Brands Group, Inc. | | | 133 | |
| | 25 | | | Sands China Ltd. § | | | 112 | |
| | — | | | Starwood Hotels & Resorts, Inc. | | | 13 | |
| | — | | | Whitbread plc | | | 3 | |
| | — | | | Wyndham Worldwide Corp. | | | 15 | |
| | 2 | | | Yum! Brands, Inc. | | | 147 | |
| | | | | | | | 562 | |
| | | | | Diversified Financials - 5.1% | | | | |
| | 3 | | | Aberdeen Asset Management plc | | | 17 | |
| | 4 | | | Ameriprise Financial, Inc. | | | 225 | |
| | 1 | | | Azimut Holding S.p.A. | | | 12 | |
| | 1 | | | Banca Generali S.p.A. | | | 11 | |
| | 1 | | | BlackRock, Inc. | | | 114 | |
| | 20 | | | Citigroup, Inc. | | | 783 | |
| | 14 | | | EFG International AG ● | | | 138 | |
| | 14 | | | GAM Holding Ltd. | | | 188 | |
| | 1 | | | Goldman Sachs Group, Inc. | | | 150 | |
| | 3 | | | IBJ Leasing Co., Ltd. | | | 76 | |
| | 17 | | | ING Groep N.V. ● | | | 164 | |
| | — | | | IntercontinentalExchange, Inc. ● | | | 37 | |
| | 3 | | | Invesco Ltd. | | | 75 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Global Research HLS Fund |
Schedule of Investments – (continued) |
December 31, 2012 |
(000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 99.2% - (continued) | |
| | | | | Diversified Financials - 5.1% - (continued) | | | | |
| | 13 | | | JP Morgan Chase & Co. | | $ | 573 | |
| | 10 | | | Julius Baer Group Ltd. | | | 341 | |
| | 1 | | | LPL Financial Holdings, Inc. | | | 38 | |
| | 6 | | | Macquarie Group Ltd. | | | 223 | |
| | 3 | | | Matsui Securities Co., Ltd. | | | 27 | |
| | 1 | | | Nasdaq OMX Group, Inc. | | | 18 | |
| | — | | | Partners Group | | | 17 | |
| | 8 | | | SEI Investments Co. | | | 193 | |
| | 26 | | | UBS AG | | | 400 | |
| | 1 | | | Warsaw Stock Exchange | | | 17 | |
| | | | | | | | 3,837 | |
| | | | | Energy - 11.1% | | | | |
| | 6 | | | Anadarko Petroleum Corp. | | | 418 | |
| | — | | | Apache Corp. | | | 21 | |
| | 2 | | | Baker Hughes, Inc. | | | 64 | |
| | 29 | | | Beach Energy Ltd. | | | 46 | |
| | 44 | | | BG Group plc | | | 742 | |
| | 1 | | | BioFuel Energy Corp. ● | | | 5 | |
| | 34 | | | BP plc | | | 238 | |
| | 1 | | | BP plc ADR | | | 46 | |
| | 7 | | | Buru Energy Ltd. ● | | | 17 | |
| | 14 | | | Cairn Energy plc | | | 61 | |
| | 1 | | | Cameron International Corp. ● | | | 30 | |
| | 3 | | | Canadian Natural Resources Ltd. ADR | | | 94 | |
| | 3 | | | Chesapeake Energy Corp. | | | 44 | |
| | 5 | | | Chevron Corp. | | | 518 | |
| | 46 | | | CNOOC Ltd. | | | 102 | |
| | 9 | | | Cobalt International Energy, Inc. ● | | | 224 | |
| | 3 | | | ConocoPhillips Holding Co. | | | 170 | |
| | 4 | | | Consol Energy, Inc. | | | 116 | |
| | 2 | | | Denbury Resources, Inc. ● | | | 37 | |
| | 3 | | | Diamondback Energy, Inc. ● | | | 52 | |
| | 1 | | | Dril-Quip, Inc. ● | | | 68 | |
| | 3 | | | EnCana Corp. ADR | | | 63 | |
| | 3 | | | Ensco plc | | | 148 | |
| | 1 | | | EOG Resources, Inc. | | | 124 | |
| | 1 | | | Exxon Mobil Corp. | | | 87 | |
| | 4 | | | Galp Energia SGPS S.A. | | | 57 | |
| | 2 | | | Genel Energy plc ● | | | 21 | |
| | 14 | | | Green Plains Renewable Energy, Inc. ● | | | 108 | |
| | 1 | | | GS Holdings Corp. | | | 88 | |
| | 2 | | | Halliburton Co. | | | 67 | |
| | 8 | | | Imperial Oil Ltd. | | | 358 | |
| | 33 | | | JX Holdings, Inc. ☼ | | | 185 | |
| | 31 | | | Karoon Gas Australia Ltd. ● | | | 177 | |
| | 3 | | | Kinder Morgan, Inc. | | | 103 | |
| | 60 | | | Kunlun Energy Co., Ltd. | | | 127 | |
| | 2 | | | Marathon Petroleum Corp. | | | 100 | |
| | 1 | | | National Oilwell Varco, Inc. | | | 82 | |
| | 69 | | | New Standard Energy Ltd. ● | | | 21 | |
| | 1 | | | Occidental Petroleum Corp. | | | 47 | |
| | 7 | | | Ocean Rig UDW, Inc. ● | | | 98 | |
| | 11 | | | Oil Search Ltd. | | | 85 | |
| | 5 | | | Ophilr Energy plc | | | 44 | |
| | 3 | | | Painted Pony Petroleum Ltd. ● | | | 30 | |
| | 13 | | | Patterson-UTI Energy, Inc. | | | 238 | |
| | 2 | | | PBF Energy, Inc. ● | | | 44 | |
| | 6 | | | Peabody Energy Corp. | | | 150 | |
| | 10 | | | Petroleo Brasileiro S.A. ADR | | | 194 | |
| | 2 | | | Petrominerales Ltd. | | | 21 | |
| | 8 | | | Phillips 66 | | | 399 | |
| | 2 | | | Pioneer Natural Resources Co. | | | 161 | |
| | 6 | | | Reliance Industries Ltd. | | | 90 | |
| | 3 | | | Reliance Industries Ltd. GDR ■ | | | 77 | |
| | 19 | | | Repsol S.A. | | | 379 | |
| | 19 | | | Repsol S.A. - Rights | | | 12 | |
| | 1 | | | Saipem S.p.A. | | | 51 | |
| | 6 | | | Santos Ltd. | | | 68 | |
| | 3 | | | Sasol Ltd. ADR | | | 141 | |
| | 1 | | | Schlumberger Ltd. | | | 78 | |
| | 1 | | | Southwestern Energy Co. ● | | | 45 | |
| | 5 | | | Statoil ASA | | | 131 | |
| | 3 | | | Suncor Energy, Inc. | | | 92 | |
| | 6 | | | Superior Energy Services, Inc. ● | | | 133 | |
| | 2 | | | Tesoro Corp. | | | 69 | |
| | 11 | | | Tonengeneral Sekiyu KK | | | 91 | |
| | 7 | | | Trican Well Service Ltd. | | | 91 | |
| | 1 | | | Valero Energy Corp. | | | 39 | |
| | 8 | | | Vantage Drilling Co. ● | | | 14 | |
| | 69 | | | Whitehaven Coal Ltd. | | | 257 | |
| | 1 | | | Whiting Petroleum Corp. ● | | | 48 | |
| | | | | | | | 8,446 | |
| | | | | Food and Staples Retailing - 2.6% | | | | |
| | 6 | | | Carrefour S.A. | | | 159 | |
| | 2 | | | Costco Wholesale Corp. | | | 219 | |
| | 9 | | | CVS Caremark Corp. | | | 429 | |
| | 6 | | | Seven & I Holdings Co., Ltd. | | | 179 | |
| | 28 | | | Tesco plc ☼ | | | 154 | |
| | 7 | | | Walgreen Co. | | | 265 | |
| | 4 | | | Wal-Mart Stores, Inc. | | | 289 | |
| | 10 | | | Woolworths Ltd. | | | 292 | |
| | | | | | | | 1,986 | |
| | | | | Food, Beverage and Tobacco - 8.6% | | | | |
| | 25 | | | Altria Group, Inc. | | | 775 | |
| | 6 | | | Anheuser-Busch InBev N.V. | | | 513 | |
| | 19 | | | Bajaj Hindusthan Ltd. | | | 8 | |
| | 13 | | | Balrampur Chini Mills Ltd. ● | | | 12 | |
| | 4 | | | British American Tobacco plc | | | 198 | |
| | 6 | | | Britvic plc | | | 39 | |
| | 19 | | | Cott Corp. ● | | | 152 | |
| | 5 | | | Diamond Foods, Inc. | | | 66 | |
| | 1 | | | General Mills, Inc. | | | 57 | |
| | 2 | | | GLG Life Technology Corp. ⌂●† | | | — | |
| | 7 | | | Green Mountain Coffee Roasters, Inc. ● | | | 286 | |
| | 10 | | | Groupe Danone | | | 654 | |
| | 15 | | | Grupo Modelo S.A.B. de C.V. | | | 137 | |
| | 2 | | | Imperial Tobacco Group plc | | | 61 | |
| | 19 | | | ITC Ltd. | | | 99 | |
| | 3 | | | Japan Tobacco, Inc. | | | 85 | |
| | 4 | | | Kraft Foods Group, Inc. ● | | | 180 | |
| | 7 | | | Lorillard, Inc. | | | 780 | |
| | 12 | | | Mondelez International, Inc. | | | 307 | |
| | 6 | | | Nestle S.A. | | | 411 | |
| | 3 | | | Omega Protein Corp. ● | | | 17 | |
| | 6 | | | PepsiCo, Inc. | | | 404 | |
| | 9 | | | Philip Morris International, Inc. | | | 722 | |
| | 7 | | | Pilgrim's Pride Corp. ● | | | 53 | |
| | 2 | | | Salmar ASA | | | 20 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | Market Value ╪ | |
COMMON STOCKS - 99.2% - (continued) | | | | |
| | | | | Food, Beverage and Tobacco - 8.6% - (continued) | | | | |
| | 9 | | | Smithfield Foods, Inc. ● | | $ | 188 | |
| | 8 | | | Unilever N.V. | | | 297 | |
| | 1 | | | United Spirits Ltd. | | | 19 | |
| | | | | | | | 6,540 | |
| | | | | Health Care Equipment and Services - 2.8% | | | | |
| | 2 | | | Aetna, Inc. | | | 75 | |
| | 1 | | | Allscripts Healthcare Solutions, Inc. ● | | | 8 | |
| | 13 | | | Boston Scientific Corp. ● | | | 76 | |
| | 3 | | | Cardinal Health, Inc. | | | 109 | |
| | 1 | | | CIGNA Corp. | | | 75 | |
| | 4 | | | Covidien plc | | | 206 | |
| | 1 | | | HCA Holdings, Inc. | | | 42 | |
| | 1 | | | Hologic, Inc. ● | | | 27 | |
| | — | | | M3, Inc. ☼ | | | 116 | |
| | 4 | | | McKesson Corp. | | | 371 | |
| | 5 | | | Medtronic, Inc. | | | 204 | |
| | 3 | | | NMC Health plc ● | | | 9 | |
| | 3 | | | Qualicorp S.A. ● | | | 27 | |
| | 1 | | | Rhoen-Klinikum AG | | | 20 | |
| | 9 | | | Smith & Nephew plc | | | 99 | |
| | 5 | | | St. Jude Medical, Inc. | | | 168 | |
| | — | | | Straumann Holding AG | | | 9 | |
| | 1 | | | Stryker Corp. | | | 76 | |
| | 6 | | | UnitedHealth Group, Inc. | | | 336 | |
| | 2 | | | Vanguard Health Systems, Inc. ● | | | 26 | |
| | — | | | Zimmer Holdings, Inc. | | | 31 | |
| | | | | | | | 2,110 | |
| | | | | Insurance - 3.7% | | | | |
| | 2 | | | Aflac, Inc. | | | 80 | |
| | 8 | | | Ageas | | | 244 | |
| | 21 | | | AIA Group Ltd. | | | 82 | |
| | 6 | | | American International Group, Inc. ● | | | 200 | |
| | 2 | | | Aon plc | | | 131 | |
| | 10 | | | AXA S.A. | | | 176 | |
| | 3 | | | Berkshire Hathaway, Inc. Class B ● | | | 269 | |
| | 11 | | | Brasil Insurance Participacoes e Administracao S.A. | | | 103 | |
| | 7 | | | Delta Lloyd N.V. | | | 115 | |
| | 35 | | | Direct Line Insurance Group plc ● | | | 123 | |
| | 23 | | | Discovery Holdings Ltd. | | | 171 | |
| | 8 | | | FBD Holdings | | | 105 | |
| | 3 | | | Marsh & McLennan Cos., Inc. | | | 86 | |
| | 3 | | | National Financial Partners Corp. ● | | | 46 | |
| | 3 | | | Progressive Corp. | | | 68 | |
| | 30 | | | Storebrand ASA | | | 148 | |
| | 4 | | | Swiss Re Ltd. | | | 254 | |
| | 4 | | | Unum Group | | | 87 | |
| | 13 | | | XL Group plc | | | 337 | |
| | | | | | | | 2,825 | |
| | | | | Materials - 7.8% | | | | |
| | 2 | | | Air Products & Chemicals, Inc. | | | 203 | |
| | 3 | | | Akzo Nobel N.V. | | | 175 | |
| | 1 | | | Allegheny Technologies, Inc. | | | 18 | |
| | 3 | | | Antofagasta plc | | | 55 | |
| | 138 | | | Aquarius Platinum Ltd. | | | 123 | |
| | 8 | | | ArcelorMittal ADR | | | 131 | |
| | 3 | | | Asahi Kasei Corp. | | | 18 | |
| | 30 | | | AuRico Gold, Inc. ● | | | 246 | |
| | 4 | | | Ball Corp. | | | 174 | |
| | 6 | | | Banro Corp. ● | | | 18 | |
| | 2 | | | Barrick Gold Corp. | | | 60 | |
| | 2 | | | BASF SE | | | 206 | |
| | 9 | | | BHP Billiton plc | | | 324 | |
| | 1 | | | Cabot Corp. | | | 35 | |
| | 2 | | | Celanese Corp. | | | 94 | |
| | 3 | | | Cemex Latam Holdings S.A. | | | 20 | |
| | — | | | CF Industries Holdings, Inc. | | | 74 | |
| | 61 | | | China Shanshui Cement Group | | | 46 | |
| | 1 | | | Crown Holdings, Inc. ● | | | 54 | |
| | 1 | | | Detour Gold Corp. ● | | | 28 | |
| | 5 | | | Dow Chemical Co. | | | 168 | |
| | — | | | Eastman Chemical Co. | | | 24 | |
| | 7 | | | EcoSynthetix, Inc. ● | | | 23 | |
| | 4 | | | Fertilizantes Heringer S.A. ● | | | 19 | |
| | 4 | | | First Quantum Minerals Ltd. | | | 78 | |
| | 3 | | | Goldcorp, Inc. | | | 100 | |
| | 9 | | | Graphic Packaging Holding Co. ● | | | 56 | |
| | 1 | | | HeidelbergCement AG | | | 92 | |
| | 1 | | | Holcim Ltd. | | | 57 | |
| | 402 | | | Huabao International Holdings Ltd. | | | 201 | |
| | 3 | | | International Paper Co. | | | 111 | |
| | 4 | | | JSR Corp. | | | 73 | |
| | 2 | | | LyondellBasell Industries Class A | | | 90 | |
| | — | | | Martin Marietta Materials, Inc. | | | 36 | |
| | 1 | | | MeadWestvaco Corp. | | | 41 | |
| | 6 | | | Methanex Corp. | | | 186 | |
| | 2 | | | Methanex Corp. ADR | | | 74 | |
| | 5 | | | Mitsubishi Chemical Holdings | | | 24 | |
| | 29 | | | Mitsui Chemicals, Inc. | | | 76 | |
| | 139 | | | Mongolian Mining Corp. ● | | | 69 | |
| | 8 | | | Mosaic Co. | | | 444 | |
| | 4 | | | New Gold, Inc. ● | | | 49 | |
| | 12 | | | Nine Dragons Paper Holdings | | | 11 | |
| | 2 | | | Nippon Shokubai Co., Ltd. | | | 19 | |
| | 4 | | | Owens-Illinois, Inc. ● | | | 84 | |
| | 3 | | | Phosagro OAO GDR § | | | 36 | |
| | 73 | | | PTT Chemical Public Co., Ltd. ● | | | 167 | |
| | 4 | | | Rexam plc | | | 31 | |
| | 10 | | | Rio Tinto plc | | | 558 | |
| | 27 | | | Rubicon Minerals Corp. ● | | | 69 | |
| | 3 | | | Shin-Etsu Chemical Co., Ltd. | | | 163 | |
| | 12 | | | Showa Denko K.K. | | | 18 | |
| | 11 | | | Smurfit Kappa Group plc | | | 128 | |
| | 7 | | | Synthomer plc | | | 21 | |
| | 1 | | | Tikkurila Oyj | | | 27 | |
| | 67 | | | Torex Gold Resources, Inc. ● | | | 149 | |
| | 7 | | | Ube Industries Ltd. | | | 16 | |
| | 6 | | | Universal Stainless & Alloy Products, Inc. ● | | | 207 | |
| | 1 | | | Uralkali GDR § | | | 27 | |
| | — | | | Westlake Chemical Corp. | | | 17 | |
| | | | | | | | 5,941 | |
| | | | | Media - 3.4% | | | | |
| | 1 | | | AMC Networks, Inc. Class A ● | | | 53 | |
| | 1 | | | CBS Corp. Class B | | | 33 | |
| | 1 | | | Charter Communications, Inc. ● | | | 71 | |
| | 9 | | | Comcast Corp. Class A | | | 339 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Global Research HLS Fund |
Schedule of Investments – (continued) |
December 31, 2012 |
(000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
COMMON STOCKS - 99.2% - (continued) | | | | |
| | | | | Media - 3.4% - (continued) | | | | |
| | 5 | | | Comcast Corp. Special Class A | | $ | 170 | |
| | 3 | | | DreamWorks Animation SKG, Inc. ● | | | 46 | |
| | — | | | Fuji Media Holdings, Inc. | | | 41 | |
| | 3 | | | Liberty Global, Inc. ● | | | 181 | |
| | 3 | | | Omnicom Group, Inc. | | | 130 | |
| | 9 | | | Pandora Media, Inc. ● | | | 84 | |
| | 8 | | | Reed Elsevier Capital, Inc. | | | 82 | |
| | 2 | | | SES Global S.A. | | | 56 | |
| | 48 | | | Sirius XM Radio, Inc. w/ Rights ● | | | 138 | |
| | — | | | Time Warner Cable, Inc. | | | 25 | |
| | 10 | | | Time Warner, Inc. | | | 458 | |
| | 5 | | | Virgin Media, Inc. | | | 195 | |
| | 9 | | | Walt Disney Co. | | | 447 | |
| | | | | | | | 2,549 | |
| | | | | Pharmaceuticals, Biotechnology and Life Sciences - 7.1% | | | | |
| | 1 | | | Acorda Therapeutics, Inc. ● | | | 22 | |
| | 1 | | | Actelion Ltd. | | | 24 | |
| | 1 | | | Agilent Technologies, Inc. | | | 41 | |
| | 1 | | | Algeta ASA ● | | | 36 | |
| | — | | | Alk-Abello A/S | | | 17 | |
| | 9 | | | Alkermes plc ● | | | 167 | |
| | 2 | | | Almirall S.A. | | | 23 | |
| | 8 | | | Arena Pharmaceuticals, Inc. ● | | | 75 | |
| | 2 | | | Astellas Pharma, Inc. | | | 111 | |
| | 2 | | | AstraZeneca plc | | | 115 | |
| | 2 | | | AstraZeneca plc ADR | | | 105 | |
| | 1 | | | Auxilium Pharmaceuticals, Inc. ● | | | 24 | |
| | 1 | | | Biogen Idec, Inc. ● | | | 74 | |
| | 11 | | | Bristol-Myers Squibb Co. | | | 372 | |
| | 2 | | | Cadence Pharmaceuticals, Inc. ● | | | 8 | |
| | 1 | | | Covance, Inc. ● | | | 39 | |
| | 1 | | | Cubist Pharmaceuticals, Inc. ● | | | 33 | |
| | 13 | | | Daiichi Sankyo Co., Ltd. | | | 196 | |
| | 5 | | | Eisai Co., Ltd. | | | 207 | |
| | 25 | | | Elan Corp. plc ADR ● | | | 258 | |
| | 9 | | | Eli Lilly & Co. | | | 459 | |
| | 10 | | | Exelixis, Inc. ● | | | 46 | |
| | 7 | | | Forest Laboratories, Inc. ● | | | 257 | |
| | 2 | | | Gilead Sciences, Inc. ● | | | 174 | |
| | 2 | | | H. Lundbeck A/S | | | 30 | |
| | 2 | | | Immunogen, Inc. ● | | | 19 | |
| | 1 | | | Incyte Corp. ● | | | 24 | |
| | 2 | | | Ironwood Pharmaceuticals, Inc. ● | | | 25 | |
| | 2 | | | Johnson & Johnson | | | 119 | |
| | 2 | | | Medicines Co. ● | | | 50 | |
| | 9 | | | Merck & Co., Inc. | | | 382 | |
| | 1 | | | Mylan, Inc. ● | | | 34 | |
| | 1 | | | NPS Pharmaceuticals, Inc. ● | | | 13 | |
| | 1 | | | Ono Pharmaceutical Co., Ltd. | | | 43 | |
| | 1 | | | Onyx Pharmaceuticals, Inc. ● | | | 62 | |
| | 1 | | | Prothena Corp. plc ● | | | 4 | |
| | 2 | | | Regeneron Pharmaceuticals, Inc. ● | | | 359 | |
| | 4 | | | Rigel Pharmaceuticals, Inc. ● | | | 25 | |
| | 1 | | | Roche Holding AG | | | 106 | |
| | 1 | | | Salix Pharmaceuticals Ltd. ● | | | 57 | |
| | 1 | | | Seattle Genetics, Inc. ● | | | 33 | |
| | 14 | | | Shionogi & Co., Ltd. | | | 231 | |
| | — | | | Targacept, Inc. ● | | | 2 | |
| | 15 | | | Teva Pharmaceutical Industries Ltd. ADR | | | 577 | |
| | 4 | | | UCB S.A. | | | 248 | |
| | 1 | | | Vertex Pharmaceuticals, Inc. ● | | | 41 | |
| | — | | | Watson Pharmaceuticals, Inc. ● | | | 38 | |
| | 2 | | | Xenoport, Inc. ● | | | 12 | |
| | | | | | | | 5,417 | |
| | | | | Real Estate - 3.2% | | | | |
| | — | | | Acadia Realty Trust REIT | | | 8 | |
| | 1 | | | Aliansce Shopping Centers S.A. | | | 9 | |
| | 3 | | | American Assets Trust, Inc. REIT | | | 81 | |
| | — | | | American Campus Communities, Inc. REIT | | | 16 | |
| | 1 | | | American Tower Corp. REIT | | | 111 | |
| | 7 | | | Ascendas REIT | | | 14 | |
| | 15 | | | Asian Property Development Public Co., Ltd. | | | 4 | |
| | — | | | AvalonBay Communities, Inc. REIT | | | 24 | |
| | 28 | | | Ayala Land, Inc. | | | 18 | |
| | — | | | Boardwalk REIT | | | 15 | |
| | — | | | Boston Properties, Inc. REIT | | | 27 | |
| | 7 | | | BR Malls Participacoes S.A. | | | 96 | |
| | 4 | | | BR Properties S.A. | | | 49 | |
| | 2 | | | British Land Co. plc REIT | | | 14 | |
| | — | | | Camden Property Trust REIT | | | 15 | |
| | 7 | | | Capitacommercial Trust REIT | | | 10 | |
| | 4 | | | Capitamall Trust REIT | | | 7 | |
| | — | | | Castellum AB | | | 5 | |
| | 68 | | | China Overseas Grand Oceans Group Ltd. | | | 83 | |
| | — | | | Coresite Realty Corp. REIT | | | 11 | |
| | 1 | | | Daito Trust Construction Co., Ltd. | | | 67 | |
| | 1 | | | DDR Corp. REIT | | | 12 | |
| | 1 | | | Derwent London plc REIT | | | 22 | |
| | 1 | | | Douglas Emmett, Inc. REIT | | | 14 | |
| | — | | | EastGroup Properties, Inc. REIT | | | 10 | |
| | — | | | Equity Lifestyle Properties, Inc. REIT | | | 13 | |
| | — | | | Essex Property Trust, Inc. REIT | | | 18 | |
| | 2 | | | Fibra Uno Administracion S.A. REIT ● | | | 5 | |
| | 8 | | | Forest City Enterprises, Inc. Class A ● | | | 121 | |
| | 27 | | | Fortune REIT | | | 22 | |
| | 1 | | | Glimcher Realty Trust REIT | | | 9 | |
| | — | | | GLP J-REIT ● | | | 5 | |
| | 1 | | | GSW Immobilien AG | | | 25 | |
| | 14 | | | Hammerson plc REIT | | | 110 | |
| | — | | | HCP, Inc. REIT | | | 19 | |
| | 1 | | | Health Care, Inc. REIT | | | 36 | |
| | 1 | | | Host Hotels & Resorts, Inc. REIT | | | 13 | |
| | — | | | Icade REIT | | | 7 | |
| | — | | | Industrial & Infrastructure Fund Investment Corp. REIT | | | 7 | |
| | — | | | Japan Logistics Fund REIT | | | 9 | |
| | — | | | Kilroy Realty Corp. REIT | | | 13 | |
| | 9 | | | L.P.N. Development Public Co., Ltd. | | | 5 | |
| | 28 | | | Link (The) REIT | | | 141 | |
| | 2 | | | Mitsubishi Estate Co., Ltd. | | | 40 | |
| | 1 | | | Mitsui Fudosan Co., Ltd. | | | 35 | |
| | 6 | | | New World Development Co., Ltd. | | | 9 | |
| | 3 | | | Norwegian Property ASA | | | 4 | |
| | — | | | Post Properties, Inc. REIT | | | 12 | |
| | — | | | PSP Swiss Property AG | | | 19 | |
| | — | | | Public Storage REIT | | | 34 | |
| | 3 | | | Rayonier, Inc. REIT | | | 130 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | Market Value ╪ | |
COMMON STOCKS - 99.2% - (continued) | | | |
| | | | | Real Estate - 3.2% - (continued) | | | | |
| | 1 | | | RioCan REIT | | $ | 15 | |
| | 187 | | | Robinsons Land Corp. | | | 95 | |
| | 1 | | | Shaftesbury plc REIT | | | 12 | |
| | 2 | | | Simon Property Group, Inc. REIT | | | 255 | |
| | 15 | | | Sino Land Co., Ltd. | | | 27 | |
| | — | | | Stag Industrial, Inc. REIT | | | 9 | |
| | 11 | | | Sun Hung Kai Properties Ltd. | | | 165 | |
| | 1 | | | Sunstone Hotel Investors, Inc. REIT ● | | | 6 | |
| | 8 | | | Supalai Public Co., Ltd. | | | 4 | |
| | — | | | Taubman Centers, Inc. REIT | | | 27 | |
| | — | | | Unibail-Rodamco SE REIT | | | 40 | |
| | 2 | | | Unite Group plc | | | 11 | |
| | 12 | | | Westfield Group REIT | | | 136 | |
| | 6 | | | Westfield Retail Trust REIT | | | 20 | |
| | | | | | | | 2,425 | |
| | | | | Retailing - 4.4% | | | | |
| | 3 | | | Amazon.com, Inc. ●‡ | | | 807 | |
| | — | | | AutoZone, Inc. ● | | | 128 | |
| | 1 | | | Dollar General Corp. ● | | | 56 | |
| | 2 | | | Family Dollar Stores, Inc. | | | 155 | |
| | 4 | | | Hennes & Mauritz Ab ☼ | | | 143 | |
| | 5 | | | Home Depot, Inc. | | | 300 | |
| | 2 | | | Industria de Diseno Textil S.A. | | | 221 | |
| | 156 | | | Intime Department Store Group Co., Ltd. | | | 186 | |
| | 9 | | | Liberty Media - Interactive A ● | | | 167 | |
| | 9 | | | Lowe's Co., Inc. | | | 332 | |
| | 18 | | | Marks & Spencer Group plc | | | 112 | |
| | 11 | | | Myer Holdings Ltd. | | | 26 | |
| | 1 | | | Priceline.com, Inc. ● | | | 339 | |
| | 1 | | | Ryohin Keikaku Co., Ltd. | | | 56 | |
| | 3 | | | Target Corp. | | | 178 | |
| | 1 | | | Urban Outfitters, Inc. ● | | | 42 | |
| | 40 | | | Zhongsheng Group Holdings Ltd. ☼ | | | 61 | |
| | | | | | | | 3,309 | |
| | | | | Semiconductors and Semiconductor Equipment - 1.8% | | | | |
| | 8 | | | ASM Pacific Technology Ltd. | | | 102 | |
| | 2 | | | ASML Holding N.V. | | | 108 | |
| | 2 | | | Cavium, Inc. ● | | | 52 | |
| | 3 | | | Cypress Semiconductor Corp. | | | 38 | |
| | 8 | | | Fairchild Semiconductor International, Inc. ● | | | 113 | |
| | 2 | | | International Rectifier Corp. ● | | | 36 | |
| | 1 | | | Lam Research Corp. ● | | | 43 | |
| | 2 | | | Maxim Integrated Products, Inc. | | | 65 | |
| | 5 | | | NXP Semiconductors N.V. ● | | | 139 | |
| | 10 | | | ON Semiconductor Corp. ● | | | 74 | |
| | — | | | Samsung Electronics Co., Ltd. | | | 319 | |
| | 79 | | | Taiwan Semiconductor Manufacturing Co., Ltd. | | | 264 | |
| | | | | | | | 1,353 | |
| | | | | Software and Services - 6.7% | | | | |
| | 6 | | | Accenture plc | | | 399 | |
| | 4 | | | Activision Blizzard, Inc. | | | 41 | |
| | 2 | | | Akamai Technologies, Inc. ● | | | 95 | |
| | 1 | | | Alliance Data Systems Corp. ● | | | 103 | |
| | 6 | | | Automatic Data Processing, Inc. | | | 370 | |
| | 1 | | | Broadsoft, Inc. ● | | | 24 | |
| | 9 | | | Cadence Design Systems, Inc. ● | | | 127 | |
| | 1 | | | Citrix Systems, Inc. ● | | | 79 | |
| | 2 | | | Cognizant Technology Solutions Corp. ● | | | 140 | |
| | 2 | | | DeNa Co., Ltd. ☼ | | | 66 | |
| | 4 | | | Dropbox, Inc. ⌂●† | | | 36 | |
| | 9 | | | eBay, Inc. ● | | | 437 | |
| | 1 | | | Equinix, Inc. ● | | | 199 | |
| | 1 | | | Exlservice Holdings, Inc. ● | | | 25 | |
| | 10 | | | Facebook, Inc. ● | | | 266 | |
| | 5 | | | Fortinet, Inc. ● | | | 112 | |
| | 6 | | | Genpact Ltd. | | | 91 | |
| | — | | | Google, Inc. ● | | | 254 | |
| | 11 | | | Higher One Holdings, Inc. ● | | | 113 | |
| | 1 | | | IBM Corp. | | | 201 | |
| | 1 | | | Intuit, Inc. | | | 76 | |
| | 4 | | | Kakaku.com, Inc. ☼ | | | 142 | |
| | — | | | MicroStrategy, Inc. ● | | | 24 | |
| | — | | | NetSuite, Inc. ● | | | 22 | |
| | 11 | | | Oracle Corp. | | | 370 | |
| | 5 | | | Pactera Technology International Ltd. ● | | | 37 | |
| | 1 | | | QLIK Technologies, Inc. ● | | | 27 | |
| | 2 | | | Red Hat, Inc. ● | | | 85 | |
| | 1 | | | Salesforce.com, Inc. ● | | | 130 | |
| | 2 | | | Splunk, Inc. ● | | | 50 | |
| | 2 | | | Teradata Corp. ● | | | 100 | |
| | 5 | | | Vantiv, Inc. ● | | | 98 | |
| | 5 | | | VeriFone Systems, Inc. ● | | | 154 | |
| | — | | | VeriSign, Inc. ● | | | 18 | |
| | 2 | | | Visa, Inc. | | | 364 | |
| | 3 | | | Western Union Co. | | | 44 | |
| | 10 | | | Yahoo!, Inc. ● | | | 202 | |
| | | | | | | | 5,121 | |
| | | | | Technology Hardware and Equipment - 3.6% | | | | |
| | 6 | | | Acme Packet, Inc. ● | | | 139 | |
| | 16 | | | Advantech Co., Ltd. | | | 66 | |
| | 4 | | | Anritsu Corp. ☼ | | | 52 | |
| | — | | | Apple, Inc. | | | 161 | |
| | 3 | | | Aruba Networks, Inc. ● | | | 58 | |
| | 2 | | | Avnet, Inc. ● | | | 76 | |
| | 3 | | | Ciena Corp. ● | | | 45 | |
| | 34 | | | Cisco Systems, Inc. | | | 664 | |
| | 8 | | | Delta Electronics, Inc. | | | 28 | |
| | 13 | | | EMC Corp. ● | | | 318 | |
| | 17 | | | Hitachi Ltd. ☼ | | | 98 | |
| | 2 | | | JDS Uniphase Corp. ● | | | 26 | |
| | 10 | | | Juniper Networks, Inc. ● | | | 195 | |
| | 2 | | | National Instruments Corp. | | | 44 | |
| | 2 | | | NetApp, Inc. ● | | | 57 | |
| | 7 | | | Qualcomm, Inc. | | | 407 | |
| | 1 | | | Rogers Corp. ● | | | 28 | |
| | — | | | Ruckus Wireless, Inc. | | | 2 | |
| | 15 | | | Telefonaktiebolaget LM Ericsson ADR | | | 148 | |
| | — | | | Wacom Co., Ltd. ☼ | | | 24 | |
| | 46 | | | WPG Holdings Co., Ltd. | | | 61 | |
| | 25 | | | ZTE Corp. | | | 43 | |
| | | | | | | | 2,740 | |
| | | | | Telecommunication Services - 3.3% | | | | |
| | 5 | | | America Movil S.A.B. de C.V. ADR | | | 107 | |
| | 53 | | | Axiata Group Berhad | | | 114 | |
| | 19 | | | Bharti Infratel Ltd. | | | 69 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Global Research HLS Fund |
Schedule of Investments – (continued) |
December 31, 2012 |
(000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
COMMON STOCKS - 99.2% - (continued) | | | | |
| | | | | Telecommunication Services - 3.3% - (continued) | | | | |
| | 22 | | | Bharti Televentures | | $ | 130 | |
| | 41 | | | China Telecom Corp., Ltd. | | | 23 | |
| | 59 | | | China Unicom Ltd. | | | 96 | |
| | 5 | | | Cincinnati Bell, Inc. ● | | | 26 | |
| | 2 | | | Crown Castle International Corp. ● | | | 143 | |
| | 13 | | | Frontier Communications Co. | | | 57 | |
| | 24 | | | Leap Wireless International, Inc. ● | | | 161 | |
| | 1 | | | Millicom International Cellular SDR | | | 84 | |
| | 3 | | | Mobile Telesystems OJSC ADR | | | 56 | |
| | 5 | | | MTN Group Ltd. | | | 97 | |
| | 1 | | | P.T. Telekomunikasi Indonesia ADR | | | 41 | |
| | 1 | | | Philippine Long Distance Telephone Co. ADR | | | 47 | |
| | 36 | | | Portugal Telecom SGPS S.A. | | | 178 | |
| | 3 | | | SBA Communications Corp. ● | | | 241 | |
| | 4 | | | SK Telecom Co., Ltd. ADR | | | 57 | |
| | 1 | | | SoftBank Corp. | | | 29 | |
| | 33 | | | Sprint Nextel Corp. ● | | | 188 | |
| | 13 | | | Telenor ASA | | | 269 | |
| | 10 | | | Turkcell Iletisim Hizmetleri A.S. ● | | | 62 | |
| | 4 | | | TW Telecom, Inc. ● | | | 91 | |
| | 39 | | | Vodafone Group plc | | | 99 | |
| | | | | | | | 2,465 | |
| | | | | Transportation - 2.4% | | | | |
| | 297 | | | AirAsia Berhad | | | 268 | |
| | 1 | | | C.H. Robinson Worldwide, Inc. | | | 32 | |
| | 4 | | | Celadon Group, Inc. | | | 80 | |
| | 8 | | | Covenant Transport ● | | | 42 | |
| | 21 | | | Delta Air Lines, Inc. ● | | | 244 | |
| | — | | | Expeditors International of Washington, Inc. | | | 16 | |
| | 1 | | | FedEx Corp. | | | 133 | |
| | 1 | | | Genesee & Wyoming, Inc. Class A ● | | | 76 | |
| | 2 | | | J.B. Hunt Transport Services, Inc. | | | 145 | |
| | 1 | | | Kansas City Southern | | | 118 | |
| | 6 | | | Localiza Rent a Car S.A. | | | 108 | |
| | 1 | | | Santos Brasil Participacoes S.A. | | | 17 | |
| | 1 | | | Spirit Airlines, Inc. ● | | | 23 | |
| | 14 | | | Transurban Group | | | 89 | |
| | 23 | | | US Airways Group, Inc. ● | | | 308 | |
| | 6 | | | Vitran Corp., Inc. ● | | | 27 | |
| | 2 | | | XPO Logistics, Inc. ● | | | 41 | |
| | 44 | | | Zhejiang Expressway Co., Ltd. | | | 34 | |
| | | | | | | | 1,801 | |
| | | | | Utilities - 3.9% | | | | |
| | 2 | | | American Electric Power Co., Inc. | | | 98 | |
| | 5 | | | Calpine Corp. ● | | | 97 | |
| | 3 | | | Cheung Kong Infrastructure Holdings Ltd. | | | 19 | |
| | 11 | | | Chubu Electric Power Co., Inc. | | | 147 | |
| | 2 | | | Cia de Saneamento Basico do Estado de Sao Paulo | | | 89 | |
| | 1 | | | Cia Paranaense de Energia-Copel | | | 10 | |
| | 4 | | | Duke Energy Corp. | | | 274 | |
| | 2 | | | Edison International | | | 68 | |
| | 25 | | | Enel Green Power S.p.A. | | | 46 | |
| | 15 | | | Enel S.p.A. | | | 63 | |
| | 10 | | | ENN Energy Holdings Ltd. | | | 43 | |
| | 7 | | | GDF Suez | | | 152 | |
| | 75 | | | Guangdong Investment Ltd. | | | 59 | |
| | 8 | | | Iberdrola S.A. | | | 43 | |
| | 38 | | | National Grid plc | | | 431 | |
| | 7 | | | NextEra Energy, Inc. | | | 477 | |
| | 3 | | | Northeast Utilities | | | 103 | |
| | 1 | | | OGE Energy Corp. | | | 34 | |
| | 11 | | | Osaka Gas Co., Ltd. | | | 39 | |
| | 5 | | | PG&E Corp. | | | 184 | |
| | 1 | | | Pinnacle West Capital Corp. | | | 56 | |
| | 4 | | | RWE AG | | | 157 | |
| | 3 | | | Severn Trent plc | | | 68 | |
| | 8 | | | Snam S.p.A. | | | 39 | |
| | 5 | | | Suez Environment S.A. | | | 57 | |
| | 7 | | | Tokyo Gas Co., Ltd. | | | 33 | |
| | 3 | | | Xcel Energy, Inc. | | | 78 | |
| | | | | | | | 2,964 | |
| | | | | Total common stocks | | | | |
| | | | | (cost $68,324) | | $ | 75,236 | |
| | | | | | | | | |
| PREFERRED STOCKS - 0.5% | | | | |
| | | | | Automobiles and Components - 0.3% | | | | |
| | 1 | | | Volkswagen AG N.V. | | $ | 239 | |
| | | | | | | | | |
| | | | | Software and Services - 0.1% | | | | |
| | 7 | | | FireEye, Inc. Private Placement ⌂† | | | 64 | |
| | | | | | | | | |
| | | | | Utilities - 0.1% | | | | |
| | 3 | | | Cia Paranaense de Energie | | | 40 | |
| | | | | | | | | |
| | | | | Total preferred stocks | | | | |
| | | | | (cost $314) | | $ | 343 | |
| | | | | | | | | |
| EXCHANGE TRADED FUNDS - 0.1% | | | | |
| | | | | Other Investment Pools and Funds - 0.1% | | | | |
| | 1 | | | SPDR S&P Retail ETF | | $ | 86 | |
| | | | | | | | | |
| | | | | Total exchange traded funds | | | | |
| | | | | (cost $87) | | $ | 86 | |
| | | | | | | | | |
| CORPORATE BONDS - 0.0% | | | | |
| | | | | Petroleum and Coal Products Manufacturing - 0.0% | | | | |
| | | | | Green Plains Renewable Energy, Inc. | | | | |
| $ | 13 | | | 5.75%, 11/01/2015 ۞ | | $ | 11 | |
| | | | | | | | | |
| | | | | Total corporate bonds | | | | |
| | | | | (cost $12) | | $ | 11 | |
| | | | | | | | | |
| | | | | Total long-term investments | | | | |
| | | | | (cost $68,737) | | $ | 75,676 | |
| | | | | | | | | |
| SHORT-TERM INVESTMENTS - 0.5% | | | | |
| Repurchase Agreements - 0.5% | | | | |
| | | | | Bank of America Merrill Lynch TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $9,
collateralized by FHLMC 3.00%, 2042,
FNMA 4.00%, 2042, value of $10) | | | | |
| $ | 9 | | | 0.19%, 12/31/2012 | | $ | 9 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | | | | | Market Value ╪ | |
| SHORT-TERM INVESTMENTS - 0.5% - (continued) | |
| Repurchase Agreements - 0.5% - (continued) | | | | | | | | |
| | | | | Bank of Montreal TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $67, collateralized by FHLMC
2.50% - 5.50%, 2019 - 2042, FNMA 0.76%
- 6.11%, 2016 - 2042, GNMA 3.50%, 2042,
value of $69) | | | | | | | | |
| $ | 67 | | | 0.23%, 12/31/2012 | | | | | | $ | 67 | |
| | | | | Barclays Capital TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $21, collateralized by U.S.
Treasury Note 2.00% - 2.13%, 2016, value
of $22) | | | | | | | | |
| | 21 | | | 0.20%, 12/31/2012 | | | | | | | 21 | |
| | | | | Citigroup Global Markets, Inc. TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $133,
collateralized by U.S. Treasury Note 1.88%
- 4.13%, 2015 - 2018, value of $135) | | | | | | | | |
| | 133 | | | 0.17%, 12/31/2012 | | | | | | | 133 | |
| | | | | Deutsche Bank Securities TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $3, collateralized by FNMA
3.00%, 2032, value of $3) | | | | | | | | |
| | 3 | | | 0.25%, 12/31/2012 | | | | | | | 3 | |
| | | | | RBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $93, collateralized by U.S.
Treasury Note 0.50% - 2.75%, 2013 - 2019,
value of $95) | | | | | | | | |
| | 93 | | | 0.20%, 12/31/2012 | | | | | | | 93 | |
| | | | | TD Securities TriParty Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$82, collateralized by FHLMC 3.50% -
6.00%, 2036 - 2042, FNMA 0.22% -
5.50%, 2013 - 2042, value of $83) | | | | | | | | |
| 82 | | | 0.21%, 12/31/2012 | | | | | | | 82 | |
| | | | | UBS Securities, Inc. Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$2, collateralized by U.S. Treasury Bill
0.75%, 2013, value of $2) | | | | | | | | |
| | 2 | | | 0.17%, 12/31/2012 | | | | | | | 2 | |
| | | | | UBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $6, collateralized by FNMA
2.50%, 2027, GNMA 3.00%, 2042, value of
$6) | | | | | | | | |
| | 6 | | | 0.25%, 12/31/2012 | | | | | | | 6 | |
| | | | | | | | | | | | 416 | |
| | | | | Total short-term investments | | | | | | | | |
| | | | | (cost $416) | | | | | | $ | 416 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $69,153) ▲ | | | 100.3 | % | | $ | 76,092 | |
| | | | | Other assets and liabilities | | | (0.3 | )% | | | (198 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 75,894 | |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
Prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for factors occurring after the close of certain foreign markets but before the close of the New York Stock Exchange.
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $70,312 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 9,278 | |
| Unrealized Depreciation | | | (3,498 | ) |
| Net Unrealized Appreciation | | $ | 5,780 | |
| † | These securities were valued in good faith at fair value as determined under policies and procedures established by and under the supervision of the Company's Board of Directors. At December 31, 2012, the aggregate value of these securities was $101, which represents 0.1% of total net assets. This amount excludes securities that are principally traded in certain foreign markets and whose prices are adjusted pursuant to a third party pricing service methodology approved by the Board of Directors. |
| ■ | Securities issued within terms of a private placement memorandum, exempt from registration under Rule 144A under the Securities Act of 1933, as amended, and may be sold only to qualified institutional buyers. Unless otherwise indicated, these issues are determined to be liquid. At December 31, 2012, the aggregate value of these securities was $77, which represents 0.1% of total net assets. |
The accompanying notes are an integral part of these financial statements.
| Hartford Global Research HLS Fund |
Schedule of Investments – (continued) |
December 31, 2012 |
(000’s Omitted) |
| § | These securities were sold to the Fund under Regulation S, rules governing offers and sales made outside the United States without registration under the Securities Act of 1933. The Fund may only be able to resell these securities in the United States if an exemption from registration under the federal and state securities laws is available, or the Fund may only be able to sell these securities outside of the United States (such as on a foreign exchange) to a non-U.S. person. Unless otherwise indicated, these holdings are determined to be liquid. At December 31, 2012, the aggregate value of these securities was $175, which represents 0.2% of total net assets. |
| ⌂ | The following securities are considered illiquid. Illiquid securities are often purchased in private placement transactions, are often not registered under the Securities Act of 1933 and may have contractual restrictions on resale. A security may also be considered illiquid if the security lacks a readily available market or if its valuation has not changed for a certain period of time. |
| Period Acquired | | Shares/ Par | | | Security | | Cost Basis | |
| 05/2012 | | | 4 | | | Dropbox, Inc. | | $ | 38 | |
| 12/2012 | | | 7 | | | FireEye, Inc. Private Placement Preferred | | | 71 | |
| 02/2011 | | | 2 | | | GLG Life Technology Corp. | | | 23 | |
| 11/2012-12/2012 | | | 1 | | | Neo Holdings Co. Ltd | | | 1 | |
At December 31, 2012, the aggregate value of these securities was $101, which represents 0.1% of total net assets.
| ☼ | This security, or a portion of this security, was purchased on a when-issued, delayed-delivery or delayed-draw basis. The cost of these securities was $310 at December 31, 2012. |
| ‡ | This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future. |
Foreign Currency Contracts Outstanding at December 31, 2012
| Currency | | Buy / Sell | | Delivery Date | | Counterparty | | Contract Amount | | | Market Value ╪ | | | Unrealized
Appreciation/
(Depreciation) | |
| AUD | | Sell | | 01/04/2013 | | UBS | | $ | 2 | | | $ | 2 | | | $ | – | |
| EUR | | Buy | | 01/02/2013 | | DEUT | | | 16 | | | | 16 | | | | – | |
| EUR | | Buy | | 01/02/2013 | | UBS | | | 36 | | | | 36 | | | | – | |
| EUR | | Sell | | 01/02/2013 | | DEUT | | | 1 | | | | 1 | | | | – | |
| EUR | | Sell | | 01/03/2013 | | DEUT | | | 3 | | | | 3 | | | | – | |
| EUR | | Sell | | 01/04/2013 | | DEUT | | | 48 | | | | 48 | | | | – | |
| EUR | | Sell | | 01/02/2013 | | UBS | | | 25 | | | | 25 | | | | – | |
| GBP | | Buy | | 01/04/2013 | | DEUT | | | 7 | | | | 7 | | | | – | |
| GBP | | Buy | | 01/08/2013 | | DEUT | | | 100 | | | | 100 | | | | – | |
| GBP | | Buy | | 01/02/2013 | | UBS | | | 9 | | | | 9 | | | | – | |
| GBP | | Sell | | 01/03/2013 | | DEUT | | | 2 | | | | 2 | | | | – | |
| GBP | | Sell | | 01/04/2013 | | DEUT | | | 55 | | | | 55 | | | | – | |
| HKD | | Buy | | 01/07/2013 | | MSC | | | 25 | | | | 25 | | | | – | |
| HKD | | Sell | | 01/03/2013 | | DEUT | | | 65 | | | | 65 | | | | – | |
| HKD | | Sell | | 01/03/2013 | | MSC | | | 2 | | | | 2 | | | | – | |
| HKD | | Sell | | 01/02/2013 | | SCB | | | 22 | | | | 22 | | | | – | |
| JPY | | Buy | | 01/08/2013 | | BCLY | | | 54 | | | | 54 | | | | – | |
| JPY | | Buy | | 01/04/2013 | | UBS | | | 127 | | | | 125 | | | | (2 | ) |
| JPY | | Sell | | 01/08/2013 | | BCLY | | | 1 | | | | 1 | | | | – | |
| JPY | | Sell | | 02/01/2013 | | DEUT | | | 436 | | | | 393 | | | | 43 | |
| JPY | | Sell | | 01/04/2013 | | UBS | | | 2 | | | | 2 | | | | – | |
| NOK | | Sell | | 01/02/2013 | | CBK | | | 5 | | | | 5 | | | | – | |
| NOK | | Sell | | 01/03/2013 | | JPM | | | 3 | | | | 3 | | | | – | |
| SEK | | Buy | | 01/03/2013 | | JPM | | | 6 | | | | 6 | | | | – | |
| SGD | | Sell | | 01/04/2013 | | UBS | | | 16 | | | | 16 | | | | – | |
| ZAR | | Sell | | 01/08/2013 | | JPM | | | 55 | | | | 55 | | | | – | |
| | | | | | | | | | | | | | | | | $ | 41 | |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
The accompanying notes are an integral part of these financial statements.
| GLOSSARY: (abbreviations used in preceding Schedule of Investments) |
| |
| Counterparty Abbreviations: |
| BCLY | Barclays |
| CBK | Citibank NA |
| DEUT | Deutsche Bank Securities, Inc. |
| JPM | JP Morgan Chase & Co. |
| MSC | Morgan Stanley |
| SCB | Standard Chartered Bank |
| UBS | UBS AG |
| |
| Currency Abbreviations: |
| AUD | Australian Dollar |
| EUR | EURO |
| GBP | British Pound |
| HKD | Hong Kong Dollar |
| JPY | Japanese Yen |
| NOK | Norwegian Krone |
| SEK | Swedish Krona |
| SGD | Singapore Dollar |
| ZAR | South African Rand |
| |
| Index Abbreviations: |
| S&P | Standard & Poors |
| |
| Other Abbreviations: |
| ADR | American Depositary Receipt |
| ETF | Exchange Traded Fund |
| FHLMC | Federal Home Loan Mortgage Corp. |
| FNMA | Federal National Mortgage Association |
| GDR | Global Depositary Receipt |
| GNMA | Government National Mortgage Association |
| REIT | Real Estate Investment Trust |
| SDR | Swedish Depositary Receipt |
| SPDR | Standard & Poor's Depositary Receipt |
The accompanying notes are an integral part of these financial statements.
| Hartford Global Research HLS Fund |
Investment Valuation Hierarchy Level Summary |
December 31, 2012 |
(000’s Omitted) |
| | | Total | | | Level 1 ♦ | | | Level 2 ♦ | | | Level 3 | |
| Assets: | | | | | | | | | | | | | | | | |
| Common Stocks | | | | | | | | | | | | | | | | |
| Automobiles and Components | | $ | 1,106 | | | $ | 217 | | | $ | 889 | | | $ | – | |
| Banks | | | 5,725 | | | | 2,493 | | | | 3,232 | | | | – | |
| Capital Goods | | | 5,062 | | | | 3,675 | | | | 1,386 | | | | 1 | |
| Commercial and Professional Services | | | 139 | | | | 66 | | | | 73 | | | | – | |
| Consumer Durables and Apparel | | | 813 | | | | 62 | | | | 751 | | | | – | |
| Consumer Services | | | 562 | | | | 410 | | | | 152 | | | | – | |
| Diversified Financials | | | 3,837 | | | | 2,206 | | | | 1,631 | | | | – | |
| Energy | | | 8,446 | | | | 5,425 | | | | 3,021 | | | | – | |
| Food and Staples Retailing | | | 1,986 | | | | 1,202 | | | | 784 | | | | – | |
| Food, Beverage and Tobacco | | | 6,540 | | | | 4,817 | | | | 1,723 | | | | – | |
| Health Care Equipment and Services | | | 2,110 | | | | 1,877 | | | | 233 | | | | – | |
| Insurance | | | 2,825 | | | | 1,635 | | | | 1,190 | | | | – | |
| Materials | | | 5,941 | | | | 3,243 | | | | 2,698 | | | | – | |
| Media | | | 2,549 | | | | 2,370 | | | | 179 | | | | – | |
| Pharmaceuticals, Biotechnology and Life Sciences | | | 5,417 | | | | 4,077 | | | | 1,340 | | | | – | |
| Real Estate | | | 2,425 | | | | 1,238 | | | | 1,187 | | | | – | |
| Retailing | | | 3,309 | | | | 2,504 | | | | 805 | | | | – | |
| Semiconductors and Semiconductor Equipment | | | 1,353 | | | | 614 | | | | 739 | | | | – | |
| Software and Services | | | 5,121 | | | | 4,943 | | | | 142 | | | | 36 | |
| Technology Hardware and Equipment | | | 2,740 | | | | 2,368 | | | | 372 | | | | – | |
| Telecommunication Services | | | 2,465 | | | | 1,284 | | | | 1,181 | | | | – | |
| Transportation | | | 1,801 | | | | 1,410 | | | | 391 | | | | – | |
| Utilities | | | 2,964 | | | | 1,568 | | | | 1,396 | | | | – | |
| Total | | | 75,236 | | | | 49,704 | | | | 25,495 | | | | 37 | |
| Corporate Bonds | | | 11 | | | | – | | | | 11 | | | | – | |
| Exchange Traded Funds | | | 86 | | | | 86 | | | | – | | | | – | |
| Preferred Stocks | | | 343 | | | | 40 | | | | 239 | | | | 64 | |
| Short-Term Investments | | | 416 | | | | – | | | | 416 | | | | – | |
| Total | | $ | 76,092 | | | $ | 49,830 | | | $ | 26,161 | | | $ | 101 | |
| Foreign Currency Contracts* | | | 43 | | | | – | | | | 43 | | | | – | |
| Total | | $ | 43 | | | $ | – | | | $ | 43 | | | $ | – | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Foreign Currency Contracts* | | | 2 | | | | – | | | | 2 | | | | – | |
| Total | | $ | 2 | | | $ | – | | | $ | 2 | | | $ | – | |
| ♦ | For the year ended December 31, 2012, investments valued at $100 were transferred from Level 1 to Level 2, and investments valued at $910 were transferred from Level 2 to Level 1. Investments are transferred between Level 1 and Level 2 for a variety of reasons including, but not limited to: |
| 1) | Foreign equities for which a fair value price is more representative of exit value than the local market close (transfer into Level 2). Foreign equities for which the local market close is more representative of exit value (transfer into Level 1). |
| 2) | U.S. Treasury securities that no longer represent the most recent issue (transfer into Level 2). |
| 3) | Equity investments with no observable trading but a bid or close price is used (transfer into Level 2). Equity investments using observable quoted prices in an active market (transfer into Level 1). |
| * | Derivative instruments not reflected in the Schedule of Investments are valued at the unrealized appreciation/depreciation on the investments. |
The accompanying notes are an integral part of these financial statements.
Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:
| | | Balance as
of
December
31, 2011 | | | Realized
Gain
(Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Net
Amortization | | | Purchases | | | Sales | | | Transfers
Into
Level 3 * | | | Transfers
Out of
Level 3 * | | | Balance as
of
December
31, 2012 | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stocks | | $ | 40 | | | $ | (471 | ) | | $ | 434 | † | | $ | — | | | $ | 40 | | | $ | (38 | ) | | $ | 32 | | | $ | — | | | $ | 37 | |
| Preferred Stocks | | | — | | | | — | | | | (7 | )‡ | | | — | | | | 71 | | | | — | | | | — | | | | — | | | | 64 | |
| Total | | $ | 40 | | | $ | (471 | ) | | $ | 427 | | | $ | — | | | $ | 111 | | | $ | (38 | ) | | $ | 32 | | | $ | — | | | $ | 101 | |
| * | Investments are transferred into and out of Level 3 for a variety of reasons including, but not limited to: |
| 1) | Investments where trading has been halted (transfer into Level 3) or investments where trading has resumed (transfer out of Level 3). |
| 2) | Broker quoted investments (transfer into Level 3) or quoted prices in active markets (transfer out of Level 3). |
| 3) | Investments that have certain restrictions on trading (transfer into Level 3) or investments where trading restrictions have expired (transfer out of Level 3). |
| † | Change in unrealized appreciation (depreciation) in the current period relating to assets still held at December 31, 2012 was $(3). |
| ‡ | Change in unrealized appreciation (depreciation) in the current period relating to assets still held at December 31, 2012 was $(7). |
The accompanying notes are an integral part of these financial statements.
| Hartford Global Research HLS Fund |
Statement of Assets and Liabilities |
December 31, 2012 |
(000’s Omitted) |
| Assets: | | | | |
| Investments in securities, at market value (cost $69,153) | | $ | 76,092 | |
| Foreign currency on deposit with custodian (cost $58) | | | 58 | |
| Unrealized appreciation on foreign currency contracts | | | 43 | |
| Receivables: | | | | |
| Investment securities sold | | | 717 | |
| Fund shares sold | | | 11 | |
| Dividends and interest | | | 106 | |
| Other assets | | | 2 | |
| Total assets | | | 77,029 | |
| Liabilities: | | | | |
| Unrealized depreciation on foreign currency contracts | | | 2 | |
| Bank overdraft | | | 70 | |
| Payables: | | | | |
| Investment securities purchased | | | 544 | |
| Fund shares redeemed | | | 483 | |
| Investment management fees | | | 13 | |
| Distribution fees | | | 1 | |
| Accrued expenses | | | 22 | |
| Total liabilities | | | 1,135 | |
| Net assets | | $ | 75,894 | |
| Summary of Net Assets: | | | | |
| Capital stock and paid-in-capital | | $ | 82,613 | |
| Undistributed net investment income | | | 1,044 | |
| Accumulated net realized loss | | | (14,744 | ) |
| Unrealized appreciation of investments and the translations of assets and liabilities denominated in foreign currency | | | 6,981 | |
| Net assets | | $ | 75,894 | |
| Shares authorized | | | 800,000 | |
| Par value | | $ | 0.001 | |
| Class IA: Net asset value per share | | $ | 10.56 | |
| Shares outstanding | | | 5,001 | |
| Net assets | | $ | 52,785 | |
| Class IB: Net asset value per share | | $ | 10.52 | |
| Shares outstanding | | | 2,198 | |
| Net assets | | $ | 23,109 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Global Research HLS Fund |
Statement of Operations |
For the Year Ended December 31, 2012 |
(000’s Omitted) |
| Investment Income: | | | | |
| Dividends | | $ | 2,005 | |
| Interest | | | 2 | |
| Less: Foreign tax withheld | | | (112 | ) |
| Total investment income, net | | | 1,895 | |
| | | | | |
| Expenses: | | | | |
| Investment management fees | | | 736 | |
| Distribution fees - Class IB | | | 66 | |
| Custodian fees | | | 58 | |
| Accounting services fees | | | 15 | |
| Board of Directors' fees | | | 2 | |
| Audit fees | | | 18 | |
| Other expenses | | | 23 | |
| Total expenses (before fees paid indirectly) | | | 918 | |
| Commission recapture | | | (3 | ) |
| Total fees paid indirectly | | | (3 | ) |
| Total expenses, net | | | 915 | |
| Net Investment Income | | | 980 | |
| | | | | |
| Net Realized Gain on Investments, Other Financial Instruments and Foreign Currency Transactions: | | | | |
| Net realized gain on investments | | | 3,828 | |
| Net realized gain on futures | | | 10 | |
| Net realized loss on foreign currency contracts | | | (23 | ) |
| Net realized gain on other foreign currency transactions | | | 4 | |
| Net Realized Gain on Investments, Other Financial Instruments and Foreign Currency Transactions | | | 3,819 | |
| | | | | |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions: | | | | |
| Net unrealized appreciation of investments | | | 8,598 | |
| Net unrealized appreciation of foreign currency contracts | | | 55 | |
| Net unrealized appreciation on translation of other assets and liabilities in foreign currencies | | | 3 | |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions | | | 8,656 | |
| Net Gain on Investments, Other Financial Instruments and Foreign Currency Transactions | | | 12,475 | |
| Net Increase in Net Assets Resulting from Operations | | $ | 13,455 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Global Research HLS Fund |
Statement of Changes in Net Assets |
|
(000’s Omitted) |
| | | For the
Year Ended
December 31, 2012 | | | For the
Year Ended
December 31, 2011 | |
| Operations: | | | | | | | | |
| Net investment income | | $ | 980 | | | $ | 882 | |
| Net realized gain on investments, other financial instruments and foreign currency transactions | | | 3,819 | | | | 8,126 | |
| Net unrealized appreciation (depreciation) of investments and foreign currency transactions | | | 8,656 | | | | (17,710 | ) |
| Net Increase (Decrease) in Net Assets Resulting from Operations | | | 13,455 | | | | (8,702 | ) |
| Distributions to Shareholders: | | | | | | | | |
| From net investment income | | | | | | | | |
| Class IA | | | (627 | ) | | | (9 | ) |
| Class IB | | | (228 | ) | | | (4 | ) |
| Total distributions | | | (855 | ) | | | (13 | ) |
| Capital Share Transactions: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 10,859 | | | | 15,571 | |
| Issued on reinvestment of distributions | | | 627 | | | | 9 | |
| Redeemed | | | (20,019 | ) | | | (26,693 | ) |
| Total capital share transactions | | | (8,533 | ) | | | (11,113 | ) |
| Class IB | | | | | | | | |
| Sold | | | 5,524 | | | | 6,048 | |
| Issued on reinvestment of distributions | | | 228 | | | | 4 | |
| Redeemed | | | (12,440 | ) | | | (13,223 | ) |
| Total capital share transactions | | | (6,688 | ) | | | (7,171 | ) |
| Net decrease from capital share transactions | | | (15,221 | ) | | | (18,284 | ) |
| Net Decrease in Net Assets | | | (2,621 | ) | | | (26,999 | ) |
| Net Assets: | | | | | | | | |
| Beginning of period | | | 78,515 | | | | 105,514 | |
| End of period | | $ | 75,894 | | | $ | 78,515 | |
| Undistributed (distribution in excess of) | | | | | | | | |
| net investment income | | $ | 1,044 | | | $ | 828 | |
| Shares: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 1,084 | | | | 1,546 | |
| Issued on reinvestment of distributions | | | 63 | | | | 1 | |
| Redeemed | | | (1,997 | ) | | | (2,710 | ) |
| Total share activity | | | (850 | ) | | | (1,163 | ) |
| Class IB | | | | | | | | |
| Sold | | | 557 | | | | 600 | |
| Issued on reinvestment of distributions | | | 23 | | | | 1 | |
| Redeemed | | | (1,249 | ) | | | (1,338 | ) |
| Total share activity | | | (669 | ) | | | (737 | ) |
The accompanying notes are an integral part of these financial statements.
| Hartford Global Research HLS Fund |
Notes to Financial Statements |
December 31, 2012 |
(000’s Omitted) |
Hartford Global Research HLS Fund (the “Fund”) serves as an underlying investment option for certain variable annuity and variable life insurance separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates and certain qualified retirement plans. The Fund may also serve as an underlying investment option for certain variable annuity and variable life separate accounts of other insurance companies. Owners of variable annuity contracts and policyholders of variable life insurance contracts may choose the funds permitted in the variable insurance contract prospectus. In addition, participants in certain qualified retirement plans may choose the Fund if permitted by their plans.
Hartford Series Fund, Inc. (the “Company”) is an open-end registered management investment company comprised of thirty portfolios. Financial Statements for the Fund, a series of the Company, are included in this report.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund is a diversified open-end management investment company.
The Fund is divided into Class IA and Class IB shares. Each class is offered at the per share net asset value (“NAV”) without a sales charge and is subject to the same expenses, except that the Class IB shares are subject to distribution and service fees charged pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act.
| 2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Fund in the preparation of its financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| a) | Determination of Net Asset Value – The NAV of each class of the Fund’s shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| b) | Investment Valuation and Fair Value Measurements – For purposes of calculating the NAV, portfolio investments and other assets held by the Fund's portfolio for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of last reported sales prices or official close price. If no sales are reported, market value is based on quotes obtained from a quotation reporting system, established market makers, or independent pricing services. If market prices are not readily available or are deemed unreliable, the Fund will use the fair value of the investment as determined in good faith under policies and procedures established by and under the supervision of the Company’s Board of Directors. Market quotes are considered not readily available where there is an absence of current or reliable market-based data (e.g., trade information or indicative market quotes), including where events occur after the close of the relevant market, but prior to the NYSE Close that materially affect the values of the Fund’s portfolio investments or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the investments trade do not open for trading for the entire day and no other market prices are available. In addition, prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close. Investments that are primarily traded on foreign markets may trade on days that are not business days of the Fund. The |
| Hartford Global Research HLS Fund |
Notes to Financial Statements – (continued) |
December 31, 2012 |
(000’s Omitted) |
value of the foreign investments in which the Fund invests may change on days when a shareholder will not be able to purchase or redeem shares of the Fund. Fair value pricing is subjective in nature and the use of fair value pricing by the Fund may cause the NAV of its shares to differ significantly from the NAV that would have been calculated using market prices at the close of the exchange on which a portfolio investment is primarily traded. There can be no assurance that the Fund could obtain the fair market value assigned to an investment if the Fund were to sell the investment at approximately the time at which the Fund determines its NAV.
Fixed income investments (other than short term obligations) and non-exchange traded derivatives held by the Fund are normally valued on the basis of quotes obtained from brokers and dealers or independent pricing services in accordance with procedures established by the Company’s Board of Directors. Prices obtained from independent pricing services use information provided by market makers or estimates of market values through accepted market modeling and trading and pricing conventions. Inputs to the models may include, but are not limited to, prepayment speeds, pricing spread, yield, trade information, dealer quotes, market color, cash flow models and the bond’s terms and conditions. Generally, the Fund may use fair valuation in regard to fixed income investments when the Fund holds defaulted or distressed investments or investments in a company in which a reorganization is pending. Short-term investments maturing in 60 days or less are generally valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days.
Exchange traded options, futures and options on futures are valued at the settlement price determined by the relevant exchange as of the NYSE Close. If such instruments do not trade on an exchange, values may be supplied by an independent pricing service using a formula or other objective method that may take into consideration the style, direction, expiration, strike price, notional value and volatility or other adjustments.
Investments valued in currencies other than U.S. dollars are converted to U.S. dollars using exchange rates obtained from independent pricing services for calculation of the NAV. As a result, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of investments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the NYSE is closed and the market value may change on days when an investor is not able to purchase, redeem or exchange shares of the Fund.
Foreign currency contracts represent agreements to exchange currencies on specific future dates at predetermined rates. Foreign currency contracts are valued using foreign currency exchange rates and forward rates as provided by an independent pricing service on the Valuation Date.
Financial instruments for which prices are not available from an independent pricing service may be valued using market quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with procedures established by the Company’s Board of Directors.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| · | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange traded funds, rights and warrants. |
| · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 may include debt investments that are traded less frequently than exchange traded |
instruments and which are valued using independent pricing services; foreign equities, which are principally traded on certain foreign markets and are adjusted daily pursuant to a fair value pricing service in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close; and short-term investments, which are valued at amortized cost.
| · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price. |
The Board of Directors of the Company generally reviews and approves the “Procedures for Valuation of Portfolio Securities” on an annual basis. These procedures define how investments are to be valued, including the formation and activities of a Valuation Committee. The Valuation Committee is responsible for determining in good faith the fair value of investments when the value cannot be obtained from primary pricing services or alternative sources or if the valuation of an investment as provided by the primary pricing service or alternative source is believed not to reflect the investment’s fair value as of the Valuation Date. Members of the Valuation Committee include the Fund’s Treasurer or designee, a Vice President of the Fund with legal expertise or designee, and a Vice President of the investment manager or designee. In addition, the Fund’s Chief Compliance Officer shall designate a member of the compliance group to attend Valuation Committee meetings as a non-voting resource, to monitor for and provide guidance with respect to compliance with these procedures. Two members of the Valuation Committee or their designees, representing different departments, shall constitute a quorum for purposes of permitting the Valuation Committee to take action. The Valuation Committee will consider all relevant factors in determining an investment’s fair value, and may seek the advice of the Fund’s sub-adviser, knowledgeable brokers, and legal counsel in making such determination. The Valuation Committee reports to the Audit Committee of the Company’s Board of Directors. The Audit Committee receives quarterly written reports which include details of all fair-valued investments, including the reason for the fair valuation, and an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such investments (the “look-back” test). The Board of Directors then must consider for ratification all of the fair value determinations made during the previous quarter.
Valuation levels are not necessarily indicative of the risk associated with investing in such investments. Individual investments within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
For additional information, refer to the Investment Valuation Hierarchy Level Summary and the Level 3 roll-forward reconciliation, if applicable, which follow the Schedule of Investments.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period.
| c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Investments purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses are determined on the basis of identified cost. |
| Hartford Global Research HLS Fund |
Notes to Financial Statements – (continued) |
December 31, 2012 |
(000’s Omitted) |
Dividend income from domestic securities is accrued on the ex-dividend date. In general, dividend income from foreign securities is recorded on the ex-date; however, dividend notifications in certain foreign jurisdictions may not be available in a timely manner and as a result, the Fund will record the dividend as soon as the relevant details (i.e., rate per share, payment date, shareholders of record, etc.) are publicly available. Interest income, including amortization of premium and accretion of discounts, is accrued on a daily basis.
| d) | Foreign Currency Transactions – Assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investments, income, and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. |
The Fund does not isolate that portion of portfolio investment valuation resulting from fluctuations in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of investments held. Exchange rate fluctuations are included with the net realized and unrealized gain or loss on investments in the accompanying financial statements.
Net realized foreign exchange gains or losses arise from sales of foreign currencies and the difference between asset and liability amounts initially stated in foreign currencies and the U.S. dollar value of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of other assets and liabilities at the end of the reporting period, resulting from changes in the exchange rates.
| e) | Joint Trading Account – The Fund may invest cash balances into a joint trading account that may be invested in one or more repurchase agreements. |
| f) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Fund’s shares are executed in accordance with the investment instructions of the contract holders and plan participants. The NAV of the Fund’s shares is determined as of the close of business on each business day of the Exchange. The NAV is determined separately for each class of shares of the Fund by dividing the Fund’s net assets attributable to that class by the number of shares of the class outstanding. Each class of shares offered by the Fund has equal rights as to assets and voting privileges (except that shareholders of a class have exclusive voting rights regarding any matter relating solely to that class of shares). Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets of the class. Realized and unrealized capital gains and losses are allocated daily based on the relative net assets of each class of shares of the Fund. |
Orders for the purchase of the Fund’s shares received prior to the close of the Exchange on any day the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Fund. The policy of the Fund is to pay dividends from net investment income and realized capital gains, if any, at least once a year.
Distributions from net investment income, net realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These differences may include but are not limited to losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to Passive Foreign Investment Companies (“PFICs”), Real Estate Investment Trusts (“REITs”), Regulated Investment Companies (“RICs”), certain derivatives and partnerships. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Fund’s capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| 3. | Securities and Other Investments: |
| a) | Repurchase Agreements – A repurchase agreement is an agreement by which a counterparty agrees to sell an investment and agrees to repurchase the investment sold from the buyer at a mutually agreed upon time and price. At the time the Fund enters into a repurchase agreement, the value of the underlying collateral, including accrued interest, will be equal to or exceed the value of the repurchase agreement. Repurchase agreements expose the Fund to counterparty risk - that is, the risk that the counterparty will not fulfill its obligations. To minimize counterparty risk, the investments that serve to collateralize the repurchase agreement are held by the Fund’s custodian in book entry or physical form in the custodial account of the Fund or in a third party custodial account. Repurchase agreements are valued at cost plus accrued interest, which approximates fair value. The Fund, as shown on the Schedule of Investments, had outstanding repurchase agreements as of December 31, 2012. |
| b) | Illiquid and Restricted Investments – The Fund is permitted to invest up to 15% of its net assets in illiquid investments. Illiquid investments are those that may not be sold or disposed of in the ordinary course of business within seven days, at approximately the price used to determine the Fund’s NAV. The Fund may not be able to sell illiquid investments when its sub-adviser considers it desirable to do so or may have to sell such investments at a price that is lower than the price that could be obtained if the investments were more liquid. A sale of illiquid investments may require more time and may result in higher dealer discounts and other selling expenses than does the sale of those that are liquid. Illiquid investments also may be more difficult to value due to the unavailability of reliable market quotations for such investments, and an investment in them may have an adverse impact on the Fund’s NAV. The Fund may also purchase certain restricted investments that can only be resold to certain qualified investors and may be determined to be liquid pursuant to policies and guidelines established by the Company’s Board of Directors. The Fund, as shown on the Schedule of Investments, had illiquid and/or restricted investments as of December 31, 2012. |
| c) | Investments Purchased on a When-Issued or Delayed-Delivery Basis – Delivery and payment for investments that have been purchased by the Fund on a forward commitment, or when-issued or delayed-delivery basis, take place beyond the customary settlement period. A fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell delayed-delivery investments before they are delivered, which may result in a realized gain or loss. During this period, such investments are subject to market fluctuations, and the Fund identifies investments segregated in its records with a value at least equal to the amount of the commitment. The Fund, as shown on the Schedule of Investments, had when-issued or delayed-delivery investments as of December 31, 2012. |
| 4. | Financial Derivative Instruments: |
The following disclosures contain information on how and why the Fund uses derivative instruments, the credit-risk-related contingent features in certain derivative instruments, and how derivative instruments affect the Fund’s financial position and results of operations. The location and fair value amounts of these instruments on the Statement of Assets and Liabilities and the realized gains and losses and changes in unrealized gains and losses on the Statement of Operations, each categorized by type of derivative contract, are included in the following Additional Derivative Instrument Information footnote. The derivative instruments outstanding as of year-end are disclosed in the notes to or within the Schedule of Investments for purchased options, if applicable. The amounts of realized gains and losses and changes in unrealized gains and losses on derivative instruments during the year are disclosed in the Statement of Operations.
| a) | Foreign Currency Contracts – The Fund may enter into foreign currency contracts that obligate the Fund to purchase or sell currencies at specified future dates. Foreign currency contracts are used to hedge the currency exposure associated with some or all of the Fund’s investments and/or as part of an investment strategy. Foreign currency contracts are marked to market daily and the change in value is recorded by the Fund as an unrealized gain or loss. The Fund will record a realized gain or loss when the foreign currency contract is settled. |
| Hartford Global Research HLS Fund |
Notes to Financial Statements – (continued) |
December 31, 2012 |
(000’s Omitted) |
Foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. In addition, risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of the contracts and from unanticipated movements in the value of the foreign currencies relative to the U.S. dollar. The Fund had outstanding foreign currency contracts as shown on the Schedule of Investments as of December 31, 2012.
| b) | Futures Contracts – The Fund may enter into futures contracts. A futures contract is an agreement between two parties to buy or sell an asset at a set price on a future date. The Fund uses futures contracts to manage or obtain exposure to the investment markets, commodities, or movements in interest rates and currency values. The primary risks associated with the use of futures contracts are the imperfect correlation between the change in market value of the investments held by the Fund and the prices of futures contracts and the possibility of an illiquid market. Upon entering into a futures contract, the Fund is required to deposit with a futures commission merchant (“FCM”) an amount of cash or U.S. Government or Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily at the most recent settlement price reported by an exchange on which, over time, they are traded most extensively, and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statement of Assets and Liabilities; however, the Fund seeks to reduce this risk through the use of an FCM. As of December 31, 2012, the Fund had no outstanding futures contracts. |
| c) | Additional Derivative Instrument Information: |
Fair Value of Derivative Instruments on the Statement of Assets and Liabilities as of December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized appreciation on foreign currency contracts | | $ | — | | | $ | 43 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 43 | |
| Total | | $ | — | | | $ | 43 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 43 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized depreciation on foreign currency contracts | | $ | — | | | $ | 2 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 2 | |
| Total | | $ | — | | | $ | 2 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 2 | |
The volume of derivatives that is presented in the Schedule of Investments is consistent with the derivative activity during the year ended December 31, 2012.
The Effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Realized Gain (Loss) on Derivatives Recognized as a Result of Operations: |
| Net realized gain on futures | | $ | — | | | $ | — | | | $ | — | | | $ | 10 | | | $ | — | | | $ | — | | | $ | 10 | |
| Net realized loss on foreign currency contracts | | | — | | | | (23 | ) | | | — | | | | — | | | | — | | | | — | | | | (23 | ) |
| Total | | $ | — | | | $ | (23 | ) | | $ | — | | | $ | 10 | | | $ | — | | | $ | — | | | $ | (13 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Change in Unrealized Appreciation on Derivatives Recognized as a Result of Operations: |
| Net change in unrealized appreciation of foreign currency contracts | | $ | — | | | $ | 55 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 55 | |
| Total | | $ | — | | | $ | 55 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 55 | |
| a) | Counterparty Risk – The Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will default. |
| b) | Market Risks – If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities, such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund. The market values of equity securities, such as common stocks and preferred stocks, or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The market value of equity securities may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities. |
| a) | Federal Income Taxes – For federal income tax purposes, the Fund intends to continue to qualify as a RIC under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders and otherwise complying with the requirements of the IRC. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains prior to the next fiscal year-end. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend |
| Hartford Global Research HLS Fund |
Notes to Financial Statements – (continued) |
December 31, 2012 |
(000’s Omitted) |
distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund.
| c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Fund for the periods indicated is as follows (as adjusted for dividends payable, if applicable): |
| | | For the Year Ended
December 31, 2012 | | | For the Year Ended
December 31, 2011 | |
| Ordinary Income | | $ | 855 | | | $ | 13 | |
As of December 31, 2012, the Fund’s components of distributable earnings (deficit) on a tax basis were as follows:
| | | Amount | |
| Undistributed Ordinary Income | | $ | 1,099 | |
| Accumulated Capital and Other Losses* | | | (13,597 | ) |
| Unrealized Appreciation† | | | 5,779 | |
| Total Accumulated Deficit | | $ | (6,719 | ) |
| * | The Fund has capital loss carryforwards that are identified in the Capital Loss Carryforward note that follows. |
| † | Differences between book-basis and tax-basis unrealized appreciation (depreciation) may be attributable to the losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. |
| d) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as foreign currency, PFICs, expiration or utilization of capital loss carryforwards or net operating losses. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Fund’s distributions may be shown in the accompanying Statement of Changes in Net Assets as from undistributed net investment income, from accumulated net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Fund recorded reclassifications to increase (decrease) the accounts listed below: |
| | | Amount | |
| Undistributed Net Investment Income | | $ | 91 | |
| Accumulated Net Realized Gain (Loss) | | | (91 | ) |
| e) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation. |
At December 31, 2012 (tax-year-end), the Fund had capital loss carryforwards for U.S. federal income tax purposes as follows:
| Year of Expiration | | Amount | |
| 2017 | | $ | 13,597 | |
| Total | | $ | 13,597 | |
During the year ended December 31, 2012, the Fund utilized $3,364 of prior year capital loss carryforwards.
| f) | Accounting for Uncertainty in Income Taxes – The Fund has adopted financial reporting rules that require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Fund does not have an examination in progress. |
The Fund has reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules had no effect on the Fund’s financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2012. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Fund’s investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Fund pursuant to an Investment Management Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Fund’s investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees payable under, the Fund’s investment management agreements; or (ii) the day-to-day management of the Fund. The investment manager has overall investment supervisory responsibility for the Fund. In addition, the investment manager provides administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. The investment manager has contracted with Wellington Management Company, LLP (“Wellington Management”) under a sub-advisory agreement for the provision of day-to-day investment management services to the Fund in accordance with the Fund’s investment objective and policies. The Fund pays a fee to the investment manager, a portion of which may be used to compensate Wellington Management. |
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered as of December 31, 2012; the rates are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee | |
| On first $500 million | | | 0.9000% | |
| On next $500 million | | | 0.8750% | |
| On next $4 billion | | | 0.8500% | |
| On next $5 billion | | | 0.8475% | |
| Over $10 billion | | | 0.8450% | |
| Hartford Global Research HLS Fund |
Notes to Financial Statements – (continued) |
December 31, 2012 |
(000’s Omitted) |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Fund. HLIC provided accounting services for the Fund for the fiscal year ended December 31, 2012. The replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Fund or the fees charged to the Fund for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Fund, HFMC provides accounting services to the Fund and receives monthly compensation based on the Fund’s average daily net assets at the rates set forth below. The Fund’s accounting services fees are accrued daily and paid monthly. |
| Average Daily Net Assets | | Annual Fee | |
| On first $5 billion | | | 0.018% | |
| On next $5 billion | | | 0.016% | |
| Over $10 billion | | | 0.014% | |
| c) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund and allocated to classes within a Fund in proportion to the average daily net assets of the Fund and each class, except where allocation of certain expenses is more fairly made directly to the Fund or to specific classes within a Fund. |
| d) | Fees Paid Indirectly – The Company, on behalf of the Fund, has entered into agreements with State Street Global Markets, LLC and Russell Implementation Services, Inc. to partially recapture non-discounted trade commissions. Such rebates are used to pay a portion of the Fund’s expenses. In addition, the Fund’s custodian banks have agreed to reduce its fees when the Fund maintains cash on deposit in a non-interest-bearing custody account. For the year ended December 31, 2012, these amounts, if any, are included in the Statement of Operations. |
The ratio of expenses to average net assets in the accompanying financial highlights excludes the reduction in expenses related to fees paid indirectly. The annualized expense ratio after waivers for the period listed below reflecting the reduction for fees paid indirectly is as follows:
| | | Year Ended
December 31, 2012 | |
| Class IA | | | 1.04% | |
| Class IB | | | 1.29 | |
| e) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Fund's principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD with HIFSCO did not result in any changes to the distribution services provided to the Fund. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Fund, has adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, 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, subject to the review and approval of the Company’s Board of Directors. |
The Distribution Plan provides that the Fund may pay annually up to 0.25% of the average daily net assets of the Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, the Fund is authorized to make payments monthly to the Distributor that may be used to pay or compensate 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. These fees are accrued daily and paid monthly.
| f) | Other Related Party Transactions – Certain officers of the Fund are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Fund’s Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Fund rounds to zero. These fees are accrued daily and paid monthly. |
| g) | Payments from Affiliates – In July of 2007, The Hartford entered into a settlement with the Attorneys General of the states of New York, Connecticut and Illinois relating to market timing and the company's individual variable annuity contracts in which certain payments would be made directly to the variable annuity contract holders. The distribution plan provided that unclaimed money from the settlement would be distributed to certain HLS Funds that are investment options through a Hartford individual variable annuity contract. The unclaimed money was distributed to the Fund on September 18, 2009. |
The total return in the accompanying financial highlights includes payments from an affiliate. Had the payments from the affiliate been excluded, the impact and total return for the periods listed below would have been as follows:
| | | For the Year Ended December 31, 2009 | |
| | | Class IA | | | Class IB | |
| Impact from Payment from Affiliate for Attorneys General Settlement | | | 0.02% | | | | 0.02% | |
| Total Return Excluding Payment from Affiliate | | | 42.10% | | | | 41.76% | |
| 8. | Investment Transactions: |
For the year ended December 31, 2012, the Fund's aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
| | | Amount | |
| Cost of Purchases Excluding U.S. Government Obligations | | $ | 68,231 | |
| Sales Proceeds Excluding U.S. Government Obligations | | | 82,807 | |
The Fund is one of several Hartford funds that participate in a $500 million committed revolving line of credit facility. The facility is to be used for temporary or emergency purposes. Under the arrangement, the funds are required to own securities having a market value in excess of 300% of the total bank borrowings. The interest rate on borrowings varies depending on the nature of the loan. The facility also requires a fee to be paid based on the amount of the commitment. This commitment fee is allocated to all of the funds participating in the line of credit based on the average net assets of the funds. During the year ended December 31, 2012, the Fund did not have any borrowings under this facility.
| 10. | Industry Classifications: |
Other than the industry classifications “Other Investment Pools and Funds” and “Exchange Traded Funds,” equity industry classifications used in this report are the Global Industry Classification Standard, which was developed by and is the exclusive property and service mark of MSCI, Inc. and Standard & Poor’s.
| Hartford Global Research HLS Fund |
Notes to Financial Statements – (continued) |
December 31, 2012 |
(000’s Omitted) |
Under the Company’s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
| 12. | Recent Accounting Pronouncement: |
Disclosures about Offsetting Assets and Liabilities - In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The objective of the ASU is to enhance current disclosure requirements on offsetting of certain assets and liabilities and to enable financial statement users to compare financial statements prepared under U.S. GAAP and International Financial Reporting Standards.
Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
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| Hartford Global Research HLS Fund |
Financial Highlights |
- Selected Per-Share Data (A) - |
| Class | | Net Asset Value at
Beginning of
Period | | | Net Investment
Income (Loss) | | | Net Realized and
Unrealized Gain
(Loss) on
Investments | | | Total from
Investment
Operations | | | Dividends from Net
Investment Income | | | Distributions from
Realized Capital
Gains | | | Distributions from
Capital | | | Total Distributions | | | Net Asset Value at
End of Period | |
| |
| For the Year Ended December 31, 2012 |
| IA | | $ | 9.02 | | | $ | 0.15 | | | $ | 1.51 | | | $ | 1.66 | | | $ | (0.12 | ) | | $ | – | | | $ | – | | | $ | (0.12 | ) | | $ | 10.56 | |
| IB | | | 8.98 | | | | 0.13 | | | | 1.50 | | | | 1.63 | | | | (0.09 | ) | | | – | | | | – | | | | (0.09 | ) | | | 10.52 | |
| |
| For the Year Ended December 31, 2011 |
| IA | | | 9.94 | | | | 0.11 | | | | (1.03 | ) | | | (0.92 | ) | | | – | | | | – | | | | – | | | | – | | | | 9.02 | |
| IB | | | 9.93 | | | | 0.09 | | | | (1.04 | ) | | | (0.95 | ) | | | – | | | | – | | | | – | | | | – | | | | 8.98 | |
| |
| For the Year Ended December 31, 2010 |
| IA | | | 8.67 | | | | 0.10 | | | | 1.28 | | | | 1.38 | | | | (0.11 | ) | | | – | | | | – | | | | (0.11 | ) | | | 9.94 | |
| IB | | | 8.66 | | | | 0.08 | | | | 1.28 | | | | 1.36 | | | | (0.09 | ) | | | – | | | | – | | | | (0.09 | ) | | | 9.93 | |
| |
| For the Year Ended December 31, 2009 |
| IA | | | 6.16 | | | | 0.08 | | | | 2.51 | | | | 2.59 | | | | (0.08 | ) | | | – | | | | – | | | | (0.08 | ) | | | 8.67 | |
| IB | | | 6.15 | | | | 0.07 | | | | 2.50 | | | | 2.57 | | | | (0.06 | ) | | | – | | | | – | | | | (0.06 | ) | | | 8.66 | |
| |
| From January 31, 2008 (commencement of operations) through December 31, 2008 |
| IA(F) | | | 10.00 | | | | – | | | | (3.78 | ) | | | (3.78 | ) | | | (0.05 | ) | | | – | | | | (0.01 | ) | | | (0.06 | ) | | | 6.16 | |
| IB(F) | | | 10.00 | | | | (0.08 | ) | | | (3.72 | ) | | | (3.80 | ) | | | (0.04 | ) | | | – | | | | (0.01 | ) | | | (0.05 | ) | | | 6.15 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include 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 would lower the Fund's performance. |
| (C) | Ratios do not reflect reductions for fees paid indirectly. Please see Fees Paid Indirectly in the Notes to Financial Statements. |
| (D) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
| (E) | Total return without the inclusion of the Payment from (to) Affiliate can be found in Expenses in the accompanying Notes to Financial Statements. |
| (F) | Commenced operations on January 31, 2008. |
| (I) | During the year ended December 31, 2008, the Fund incurred $95.4 million in sales associated with the transition of assets from Hartford Global Communications HLS Fund, Hartford Global Financial Services HLS Fund and Hartford Global Technology HLS Fund, which merged into the Fund on August 22, 2008. These sales were excluded from the portfolio turnover rate calculation. |
| - Ratios and Supplemental Data - |
| Total Return(B) | | | Net Assets at End of Period | | | Ratio of Expenses to Average Net Assets
Before Waivers(C) | | | Ratio of Expenses to Average Net Assets
After Waivers(C) | | | Ratio of Net Investment
Income (Loss) to Average Net
Assets | | | Portfolio
Turnover
Rate(D) | |
| | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 18.39 | % | | $ | 52,785 | | | | 1.04 | % | | | 1.04 | % | | | 1.28 | % | | | 85 | % |
| | 18.10 | | | | 23,109 | | | | 1.29 | | | | 1.29 | | | | 1.03 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (9.28 | ) | | | 52,768 | | | | 1.03 | | | | 1.03 | | | | 1.01 | | | | 86 | |
| | (9.51 | ) | | | 25,747 | | | | 1.28 | | | | 1.28 | | | | 0.76 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 16.01 | | | | 69,740 | | | | 1.01 | | | | 0.98 | | | | 1.03 | | | | 92 | |
| | 15.72 | | | | 35,774 | | | | 1.26 | | | | 1.23 | | | | 0.78 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 42.13 | (E) | | | 67,012 | | | | 1.16 | | | | 1.06 | | | | 1.17 | | | | 124 | |
| | 41.79 | (E) | | | 37,695 | | | | 1.41 | | | | 1.31 | | | | 0.93 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (37.87 | )(G) | | | 48,627 | | | | 1.02 | (H) | | | 0.94 | (H) | | | 1.29 | (H) | | | 335 | (I) |
| | (38.01 | )(G) | | | 31,008 | | | | 1.27 | (H) | | | 1.19 | (H) | | | 0.99 | (H) | | | – | |
| Report of Independent Registered Accounting Firm |
The Board of Directors and Shareholders of |
Hartford Series Fund, Inc. |
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Hartford Global Research HLS Fund (one of the portfolios constituting Hartford Series Fund, Inc. (the Fund)) as of December 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Hartford Global Research HLS Fund ( one of the portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
| | |
| Minneapolis, MN | |
| February 15, 2013 | |
| Hartford Global Research HLS Fund |
Directors and Officers (Unaudited) |
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Fund pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Fund. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Fund’s statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Fund pays to The Hartford a portion of the Chief Compliance Officer’s compensation, but does not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
| Hartford Global Research HLS Fund |
Directors and Officers (Unaudited) – (continued) |
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010 (4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and a record of how the Fund voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
| Hartford Global Research HLS Fund |
Expense Example (Unaudited) |
Your Fund's Expenses
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on a Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Actual return | | | Hypothetical (5% return before expenses) | | | | | | | | | | |
| | | Beginning
Account Value
June 30, 2012 | | | Ending Account Value
December 31, 2012 | | | Expenses paid during the period
June 30, 2012
through
December 31, 2012 | | | Beginning
Account Value
June 30, 2012 | | | Ending Account Value
December 31, 2012 | | | Expenses paid during the period
June 30, 2012
through
December 31, 2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2
year | | | Days
in the
full
year | |
| Class IA | | $ | 1,000.00 | | | $ | 1,010.00 | | | $ | 5.28 | | | $ | 1,000.00 | | | $ | 1,019.88 | | | $ | 5.30 | | | | 1.04% | | | | 184 | | | | 366 | |
| Class IB | | $ | 1,000.00 | | | $ | 1,009.86 | | | $ | 6.53 | | | $ | 1,000.00 | | | $ | 1,018.64 | | | $ | 6.56 | | | | 1.29% | | | | 184 | | | | 366 | |
| Hartford Global Research HLS Fund |
Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) |
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory and sub-advisory agreements. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for Hartford Global Research HLS Fund (the “Fund”) with HL Investment Advisors, LLC (“HL Advisors”) and the continuation of the investment sub-advisory agreement between HL Advisors and the Fund’s sub-adviser, Wellington Management Company, LLP (the “Sub-adviser,” and together with HL Advisors, the “Advisers”) (collectively, the “Agreements”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from the Advisers to questions posed to them on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreements at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by the Advisers and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreements.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreements with respect to the Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Fund’s contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Fund’s management fees, sub-advisory fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement.
In determining to continue the Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreements. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreements is provided below.
Nature, Extent, and Quality of Services Provided by the Advisers
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Fund by the Advisers. The Board considered, among other things, the terms of the Agreements and the range of services provided by the Advisers. The Board considered the Advisers’ professional personnel who provide services to the Fund, including each Adviser’s ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered each Adviser’s reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to the Fund. In addition, the Board considered the quality of each Adviser’s communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning each Adviser’s regulatory and compliance environment. In this regard, the Board requested and reviewed information on each Adviser’s compliance policies and procedures, compliance history, and a report from the Fund’s Chief Compliance Officer on each Adviser’s compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. The Board also noted the Advisers’ support of the Fund’s compliance control structure, particularly the resources devoted by the Advisers in support of the Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act.
| Hartford Global Research HLS Fund |
Approval of Investment Management and Investment Subadvisory Agreements (Unaudited) – (continued) |
With respect to HL Advisors, the Board noted that under the Agreements, HL Advisors is responsible for the management of the Fund, including overseeing fund operations and service providers, as well as investment advisory services in connection with selecting, monitoring and supervising the Sub-adviser. The Board considered HL Advisors’ ongoing monitoring of people, process and performance, including its quarterly reviews of each of the Hartford HLS Funds, semi-annual meetings with the leaders of each Fund’s portfolio management team, and oversight of the Funds’ approximately 40 portfolio managers. The Board recognized that HL Advisors has demonstrated a record of making changes to the management and/or strategies of the Funds when warranted. The Board considered HL Advisors’ oversight of the Sub-adviser’s investment approach and results, process for monitoring best execution of portfolio trades by the Sub-adviser, and approach to risk management with respect to the Fund and the service providers to the Fund. The Board also considered HL Advisors’ oversight of compliance with the Fund’s objective and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led to an increase in the scope of HL Advisors’ services in this regard. In addition, the Board considered HL Advisors’ ongoing commitment to review and rationalize the Hartford fund family’s product line-up and the expenses that HL Advisors had incurred in connection with fund combinations in recent years. The Board considered that HL Advisors or its affiliates are responsible for providing the Fund’s officers. The Board also noted that Hartford Life Insurance Company (“HLIC”) provides administrative services to the Fund. The Board considered its experiences with HL Advisors and HLIC with respect to each of these services.
With respect to the Sub-adviser, who provides day-to-day portfolio management services, the Board considered the quality of the Fund’s portfolio managers, the Sub-adviser’s other investment personnel, its investment philosophy and process, investment research capabilities and resources, performance record, trade execution capabilities and experience. The Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers, and the Sub-adviser’s method for compensating the portfolio managers.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Fund by HL Advisors and the Sub-adviser.
Performance of the Fund and the Advisers
The Board considered the investment performance of the Fund. In this regard, the Board reviewed the performance of the Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of the Fund’s performance for these time periods. The Board considered information and materials provided to the Board by the Advisers concerning Fund performance, as well as information from Lipper comparing the investment performance of the Fund to an appropriate benchmark and universe of peer funds. The Board noted that the performance of the Fund was within expectations.
The Board considered the detailed investment analytics reports provided by The Hartford’s Investment Advisory Group throughout the year. These reports include, among other things, information on the Fund’s gross and net returns, the Fund’s investment performance relative to an appropriate benchmark and peer group, various statistics concerning the Fund’s portfolio, and a narrative summary of various factors affecting Fund performance. The Board considered the Advisers’ cooperation with the Investment Committee, which assists the Board in evaluating the performance of the Fund at periodic meetings throughout the year. The Board also considered the analysis provided by the Consultant relating to the Fund’s performance track record.
In light of all the considerations noted above, the Board concluded that it had continued confidence in HL Advisors’ and the Sub-adviser’s overall capabilities to manage the Fund.
Costs of the Services and Profitability of the Advisers
The Board reviewed information regarding HL Advisors’ cost to provide investment management and related services to the Fund and HL Advisors’ profitability, both overall and for the Fund, on a pre-tax basis without regard to distribution expenses. The Board also requested and reviewed information about the profitability to HL Advisors and its affiliates from all services provided to the Fund and all aspects of their relationship with the Fund. The Board also requested and received information relating to the operations and profitability of the Sub-adviser.
The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement, noting the Consultant’s view that The Hartford’s process for calculating
and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by the Advisers and their affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by the Advisers
The Board considered comparative information with respect to the management fees to be paid by the Fund to HL Advisors and the total expense ratios of the Fund. The Board also considered comparative information with respect to the sub-advisory fees to be paid by HL Advisors to the Sub-adviser, to the extent applicable. In this regard, the Board requested and reviewed information from HL Advisors and the Sub-adviser relating to the management and sub-advisory fees, including the sub-advisory fee schedule for the Fund, and total operating expenses for the Fund. The Board considered that the management fee for the Fund includes the fee paid to HLIC for providing certain administrative services to the Fund. With respect to the sub-advisory fee schedule, the Board considered representations from HL Advisors and the Sub-adviser that the Sub-adviser’s fees were negotiated at arm’s length. The Board also reviewed information from Lipper comparing the Fund’s contractual management fees, actual management fees and overall expense ratios relative to a group of funds selected by Lipper, in consultation with the Consultant, and a broader universe of funds selected by Lipper.
While the Board recognized that comparisons between the Fund and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business models and cost structures of the Advisers, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of the Fund’s management and sub-advisory fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to the Fund’s management and sub-advisory fees and total operating expenses.
Based on these considerations, the Board concluded that the Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding the Advisers’ realization of economies of scale with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. The Board reviewed the breakpoints in the management fee schedule for the Fund, which reduce fee rates as Fund assets grow over time. The Board recognized that a fund with assets beyond the last breakpoint level will continue to benefit from economies of scale because additional assets are charged the lowest breakpoint fee resulting in lower overall effective management fee rates. The Board also recognized that a fee schedule that reaches a lower breakpoint quickly provides shareholders with the benefit of anticipated or potential economies of scale.
The Board reviewed and evaluated materials from Lipper showing how management fee schedules of peer funds reflect economies of scale for the benefit of shareholders as a peer fund’s assets hypothetically increase over time. Based on information provided by HL Advisors, Lipper, and the Consultant, the Board recognized that there is no uniform methodology for establishing breakpoints or uniform pattern in asset levels that trigger breakpoints or the amounts of breakpoints triggered.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Fund’s shareholders based on currently available information and the effective advisory fees and expense ratios for the Fund at its current and reasonably anticipated asset levels. The Board noted, however, that it would continue to monitor future growth in Fund assets and the appropriateness of additional breakpoints.
Other Benefits
The Board considered other benefits to the Advisers and their affiliates from their relationships with the Fund, including the role of the Fund in supporting the variable life insurance and variable annuity products offered by The Hartford. The Board reviewed
| Hartford Global Research HLS Fund |
Approval of Investment Management and Investment Subadvisory Agreements (Unaudited) – (continued) |
information noting that HLIC, an affiliate of HL Advisors, receives fees for providing certain administrative services to the Fund, and that HLIC also receives fees for fund accounting and related services from the Fund, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Fund’s transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Fund, and the Board reviewed information on the profitability of the Fund’s transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Fund were fair and reasonable based on publicly available information.
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Fund, receives 12b-1 fees from the Fund. The Board also noted that certain affiliates of HL Advisors distribute shares of the Fund and receive compensation in that connection.
The Board considered benefits to the Sub-adviser from its use of the Fund’s brokerage commissions to obtain soft dollar research, and representations from HL Advisors and the Sub-adviser that the Sub-adviser would not make any revenue-sharing payments or any other type of distribution payments to HL Advisors or its affiliates.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the Agreements for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory and sub-advisory agreements. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreements for the Fund and approve a new investment management agreement for the Fund with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser, and a new investment sub-advisory agreement between HFMC and the Fund’s existing Sub-adviser, Wellington Management Company, LLP (together with HFMC, the “Post-Restructuring Advisers”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Fund. In order to implement the Restructuring, the Fund would terminate the existing Agreements and enter into a new investment management agreement with HFMC, with HFMC also entering into a new investment sub-advisory agreement with the Sub-adviser (collectively, the “New Agreements”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreements at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by HL Advisors and the Sub-adviser and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreements.
In determining to approve the New Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain
factors differently, the Board’s determination to approve the New Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreements.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Fund and the performance of investment management personnel to the Fund. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Fund prior to the Restructuring would continue to provide such services to the Fund, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreements would involve no changes to (i) the contractual terms of, including the management fees payable under, the Fund’s investment management and investment sub-advisory agreements; (ii) the investment processes and strategies employed in the management of the Fund’s assets; (iii) the nature and level of services provided under the Fund’s investment management and investment sub-advisory agreements; and (iv) the day-to-day management of the Fund and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Fund.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Fund.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Fund, the investment management arrangement for the Fund following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreements: (i) nature, extent and quality of services provided by HL Advisors and the Sub-adviser; (ii) performance of the Fund, HL Advisors and the Sub-adviser; (iii) costs of the services and profitability of HL Advisors and the Sub-adviser; (iv) comparative services rendered and comparative investment management and sub-advisory fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors and the Sub-adviser with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. With respect to the other benefits to the Post-Restructuring Advisers and their affiliates from their relationships with the Fund, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting and related services from the Fund.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the New Agreements. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
| Hartford Global Research HLS Fund |
Principal Risks (Unaudited) |
The principal risks of investing in the Fund are described below.
Market and Selection Risk: The Fund’s share price may fluctuate due to market risk and/or security selections that may underperform compared to the market or relevant benchmarks.
Foreign Investment and Emerging Markets Risk: Foreign investments can be riskier than U.S. investments. Potential risks include currency risk that may result from unfavorable exchange rates, liquidity risk if decreased demand for a security makes it difficult to sell at the desired price, and risks that stem from substantially lower trading volume on foreign markets. These risks are generally greater for investments in emerging markets, which are also subject to greater price volatility, and custodial and regulatory risks.
Small/Mid-cap Stock Risk: Small- and mid-cap stocks are generally more volatile and risky and may be less liquid than large-cap stocks because they may have limited operating histories, narrow product lines, and focus on niche markets.
Active Trading Risk: Actively trading investments may result in higher costs and higher taxable income.
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
HLSAR-GR12 2-13 113540 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 | |
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford Growth HLS Fund
Table of Contents
This report is prepared for the general information of contract owners and qualified retirement plan participants. It is not an offer of contracts or of qualified retirement plans. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent information including the applicable sales, administrative and other charges.
The views expressed in the Fund’s Manager Discussion under ‘‘Why did the Fund perform this way?’’ and ‘‘What is the outlook?’’ are views of the Fund’s sub-adviser and portfolio management team through the end of the period and are subject to change based on market and other conditions.
| Hartford Growth HLS Fund inception 04/30/2002 |
| (sub-advised by Wellington Management Company, LLP) |
| |
| Investment objective – Seeks long-term capital appreciation. |
Performance Overview 12/31/02 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IA. Growth results in classes other than Class IA will vary from what is seen above due to differences in the expenses charged to those share classes.
| Average Annual Total Returns (as of 12/31/12) |
| |
| | | 1 Year | | | 5 Year | | | 10 Year | |
| Growth IA | | | 18.42% | | | | 0.11% | | | | 6.75% | |
| Growth IB | | | 18.12% | | | | -0.14% | | | | 6.48% | |
| Russell 1000 Growth Index | | | 15.26% | | | | 3.12% | | | | 7.52% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
| Total returns presented above were calculated using the Fund's net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses. |
Russell 1000 Growth Index is an unmanaged index which measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. (The Russell 1000 Index is an unmanaged index that measures the performance of the 1,000 largest companies in the Russell 3000 Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization.)
You cannot invest directly in an index.
As of the Fund’s current prospectus dated May 1, 2012, the net total annual operating expense ratios for Class IA and Class IB shares were 0.82% and 1.07%, respectively, and the gross total annual operating expense ratios for Class IA and Class IB shares were 0.82% and 1.07%, respectively. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect until April 30, 2013, and automatically renew for one-year terms unless terminated by the Fund’s Investment Advisor (Hartford Funds Management Company, LLC). For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
| Hartford Growth HLS Fund |
| Manager Discussion |
| December 31, 2012 (Unaudited) |
| |
| Portfolio Manager | | |
| Andrew J. Shilling, CFA | | |
| Senior Vice President and Equity Portfolio Manager | | |
| | | |
How did the Fund perform?
The Class IA shares of the Hartford Growth HLS Fund returned 18.42% for the twelve-month period ended December 31, 2012, outperforming its benchmark, the Russell 1000 Growth Index, which returned 15.26% for the same period. The Fund outperformed the 15.03% return of the average fund in the Lipper VP-UF Multi-Cap Growth Funds peer group, a group of funds with investment strategies similar to those of the Fund.
Why did the Fund perform this way?
U.S. equities moved higher in the period, in part due to a strengthening housing market and central bank interventions around the globe. Although Europe continued to grapple with economic and structural challenges, investors’ risk appetites surged after European Central Bank (ECB) President Mario Draghi revealed a comprehensive plan to support struggling sovereigns, including direct purchases of government bonds in the open market. Additionally, the U.S. Federal Reserve’s (Fed) announcement of a third round of quantitative easing (QE3) was well received by the market, boosting stock prices. Despite concerns about the looming U.S. fiscal cliff, tepid corporate revenue results, and economic malaise in Europe, investors bid up risk assets amid further signs of recovery in China and signs that the U.S. housing market may bolster the U.S. economy for the first time in seven years. Risk sentiment also ticked up on continued hopes that the ECB’s bond-buying plan will succeed, essentially reducing the tail risks in Europe.
Nine out of ten sectors of the Russell 1000 Growth Index had positive returns for the period. Health Care (+23.8%), Financials (+22.2%), and Consumer Discretionary (+20.1%) performed the best, while Utilities (-4.2%) and Energy (+8.8%) lagged. Growth stocks (+15.3%) underperformed Value stocks (+17.5%), as measured by the Russell 1000 Growth and Russell 1000 Value Indices.
The Fund’s relative performance benefited from strong security selection in Information Technology, Consumer Discretionary, and Health Care. Security selection in Consumer Staples and Industrials detracted from relative returns. Sector allocation, which is a residual of bottom-up stock selection, contributed positively to relative performance. Positive effects from an overweight (i.e. the Fund’s sector position was greater than the benchmark position) to Information Technology and an underweight to Energy was enough to offset the negative effects of the Fund’s underweight exposure to Health Care, Financials, and Industrials. A modest cash position also detracted from performance in an upward-trending market.
eBay (Information Technology), Apple (Information Technology), and Gilead Sciences (Health Care) were the top contributors to relative and absolute performance during the period. Shares of eBay, a provider of online marketplaces and payment solutions, saw its share price steadily increase over the period. Continued improvements in its marketplace segment and increased adoption of PayPal by retailers helped drive earnings growth. Shares of Apple moved sharply higher in the first half of the year after the company reported better-than-expected quarterly revenue and earnings, led by robust sales of the iPhone 4S. Shares of Gilead Sciences, a biotechnology company, rose after the company continued to post strong clinical data for their Hepatitis C combination treatment.
Top detractors from relative performance during the period were Altera (Information Technology), Acme Packet (Information Technology), and Tempur-Pedic International (Consumer Discretionary). Shares of Altera, a semiconductor company specializing in programmable logic devices, continued to lag amid fears that the company may lose market share to competitor Xilinx; additionally, investors grew concerned over the company’s exposure to Europe and China. Acme Packet, a leading provider of session border control solutions, saw its shares fall after the company lowered its earnings guidance for the 2012 fiscal year. Tempur-Pedic International, a leading global manufacturer and distributor of premium mattresses and pillows, fell sharply after the company lowered its full-year guidance due to competitive pressures and disappointing demand for their new Simplicity product. Expeditors International (Industrials) was also among the top detractors from absolute performance.
What is the outlook?
In 2013, we expect slow but steady growth in the U.S. We remain cautiously optimistic and believe that the U.S. should avoid recession in 2013. A last minute deal averted a full dive off the fiscal cliff on January 1, 2013; however, the temporary payroll tax cut of the past two years was allowed to expire, which will raise taxes 2% on most Americans. We believe that housing, autos, and employment should continue to improve, and corporate earnings should also demonstrate moderate growth this year. Households have enjoyed a boost to their net
| Hartford Growth HLS Fund |
| Manager Discussion – (continued) |
| December 31, 2012 (Unaudited) |
| |
worth from the recession lows, and the improving housing market should cushion the negative impact of higher taxation. Household formation is still positive in the U.S. and housing starts have just started to normalize. It appears that interest rates are slowly creeping higher, which in our view is a sign that the economy is improving.
Our investment discipline is focused on finding proven companies with attractive valuations, solid fundamentals, and sustainable growth business models. At the end of the period, our largest overweights were to Consumer Discretionary and Information Technology, while we remained underweight Industrials and Consumer Staples, relative to the benchmark.
| Diversification by Industry |
| as of December 31, 2012 |
| Industry (Sector) | | Percentage of
Net Assets | |
| Automobiles and Components (Consumer Discretionary) | | | 1.3 | % |
| Capital Goods (Industrials) | | | 3.7 | |
| Commercial and Professional Services (Industrials) | | | 1.0 | |
| Consumer Durables and Apparel (Consumer Discretionary) | | | 3.4 | |
| Consumer Services (Consumer Discretionary) | | | 3.5 | |
| Diversified Financials (Financials) | | | 2.0 | |
| Energy (Energy) | | | 3.5 | |
| Food and Staples Retailing (Consumer Staples) | | | 1.7 | |
| Food, Beverage and Tobacco (Consumer Staples) | | | 5.8 | |
| Health Care Equipment and Services (Health Care) | | | 5.1 | |
| Materials (Materials) | | | 1.9 | |
| Media (Consumer Discretionary) | | | 7.7 | |
| Pharmaceuticals, Biotechnology and Life Sciences (Health Care) | | | 7.0 | |
| Real Estate (Financials) | | | 0.3 | |
| Retailing (Consumer Discretionary) | | | 10.8 | |
| Semiconductors and Semiconductor Equipment (Information Technology) | | | 2.6 | |
| Software and Services (Information Technology) | | | 23.9 | |
| Technology Hardware and Equipment (Information Technology) | | | 11.5 | |
| Transportation (Industrials) | | | 3.0 | |
| Short-Term Investments | | | 0.4 | |
| Other Assets and Liabilities | | | (0.1 | ) |
| Total | | | 100.0 | % |
|
| Hartford Growth HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| |
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 99.7% | |
| | | | | Automobiles and Components - 1.3% | | | | |
| | 79 | | | Harley-Davidson, Inc. | | $ | 3,871 | |
| | | | | | | | | |
| | | | | Capital Goods - 3.7% | | | | |
| | 106 | | | AMETEK, Inc. | | | 3,981 | |
| | 18 | | | Cummins, Inc. | | | 1,917 | |
| | 57 | | | Eaton Corp. plc | | | 3,081 | |
| | 5 | | | Rockwell Automation, Inc. | | | 430 | |
| | 37 | | | Safran S.A. ADR ● | | | 1,608 | |
| | | | | | | | 11,017 | |
| | | | | Commercial and Professional Services - 1.0% | | | | |
| | 31 | | | IHS, Inc. ● | | | 2,983 | |
| | | | | | | | | |
| | | | | Consumer Durables and Apparel - 3.4% | | | | |
| | 151 | | | D.R. Horton, Inc. | | | 2,992 | |
| | 52 | | | Lennar Corp. | | | 2,000 | |
| | 26 | | | Michael Kors Holdings Ltd. ● | | | 1,325 | |
| | 29 | | | PVH Corp. | | | 3,195 | |
| | 5 | | | Ralph Lauren Corp. | | | 752 | |
| | | | | | | | 10,264 | |
| | | | | Consumer Services - 3.5% | | | | |
| | 135 | | | Dunkin' Brands Group, Inc. | | | 4,471 | |
| | 60 | | | Starwood Hotels & Resorts, Inc. | | | 3,467 | |
| | 41 | | | Yum! Brands, Inc. | | | 2,704 | |
| | | | | | | | 10,642 | |
| | | | | Diversified Financials - 2.0% | | | | |
| | 51 | | | American Express Co. | | | 2,934 | |
| | 72 | | | JP Morgan Chase & Co. | | | 3,157 | |
| | | | | | | | 6,091 | |
| | | | | Energy - 3.5% | | | | |
| | 42 | | | Anadarko Petroleum Corp. | | | 3,086 | |
| | 34 | | | Cameron International Corp. ● | | | 1,942 | |
| | 75 | | | Cobalt International Energy, Inc. ● | | | 1,841 | |
| | 32 | | | National Oilwell Varco, Inc. | | | 2,218 | |
| | 19 | | | Schlumberger Ltd. | | | 1,326 | |
| | | | | | | | 10,413 | |
| | | | | Food and Staples Retailing - 1.7% | | | | |
| | 71 | | | CVS Caremark Corp. | | | 3,456 | |
| | 25 | | | Wal-Mart Stores, Inc. | | | 1,682 | |
| | | | | | | | 5,138 | |
| | | | | Food, Beverage and Tobacco - 5.8% | | | | |
| | 219 | | | Green Mountain Coffee Roasters, Inc. ● | | | 9,042 | |
| | 24 | | | Lorillard, Inc. | | | 2,854 | |
| | 84 | | | PepsiCo, Inc. | | | 5,721 | |
| | | | | | | | 17,617 | |
| | | | | Health Care Equipment and Services - 5.1% | | | | |
| | 60 | | | Covidien plc | | | 3,439 | |
| | 53 | | | Edwards Lifesciences Corp. ● | | | 4,755 | |
| | 223 | | | Hologic, Inc. ● | | | 4,462 | |
| | 50 | | | UnitedHealth Group, Inc. | | | 2,691 | |
| | | | | | | | 15,347 | |
| | | | | Materials - 1.9% | | | | |
| | 62 | | | Monsanto Co. | | | 5,862 | |
| | | | | | | | | |
| | | | | Media - 7.7% | | | | |
| | 125 | | | Comcast Corp. Class A | | | 4,677 | |
| | 189 | | | News Corp. Class A | | | 4,839 | |
| | 1,543 | | | Sirius XM Radio, Inc. w/ Rights ● | | | 4,458 | |
| | 85 | | | Time Warner, Inc. | | | 4,074 | |
| | 102 | | | Walt Disney Co. | | | 5,076 | |
| | | | | | | | 23,124 | |
| | | | | Pharmaceuticals, Biotechnology and Life Sciences - 7.0% | | | | |
| | 69 | | | Agilent Technologies, Inc. | | | 2,831 | |
| | 27 | | | Biogen Idec, Inc. ● | | | 4,020 | |
| | 88 | | | Gilead Sciences, Inc. ● | | | 6,428 | |
| | 43 | | | Johnson & Johnson | | | 3,044 | |
| | 66 | | | Merck & Co., Inc. | | | 2,712 | |
| | 11 | | | Regeneron Pharmaceuticals, Inc. ● | | | 1,901 | |
| | | | | | | | 20,936 | |
| | | | | Real Estate - 0.3% | | | | |
| | 12 | | | American Tower Corp. REIT | | | 960 | |
| | | | | | | | | |
| | | | | Retailing - 10.8% | | | | |
| | 65 | | | Abercrombie & Fitch Co. Class A | | | 3,138 | |
| | 27 | | | Amazon.com, Inc. ● | | | 6,750 | |
| | 11 | | | AutoZone, Inc. ● | | | 3,925 | |
| | 62 | | | Dollar General Corp. ● | | | 2,720 | |
| | 67 | | | Family Dollar Stores, Inc. | | | 4,218 | |
| | 209 | | | Lowe's Co., Inc. | | | 7,411 | |
| | 7 | | | Priceline.com, Inc. ● | | | 4,265 | |
| | | | | | | | 32,427 | |
| | | | | Semiconductors and Semiconductor Equipment - 2.6% | | | | |
| | 148 | | | Altera Corp. | | | 5,092 | |
| | 81 | | | Broadcom Corp. Class A | | | 2,685 | |
| | | | | | | | 7,777 | |
| | | | | Software and Services - 23.9% | | | | |
| | 28 | | | Alliance Data Systems Corp. ● | | | 4,077 | |
| | 68 | | | BMC Software, Inc. ● | | | 2,715 | |
| | 44 | | | Citrix Systems, Inc. ● | | | 2,876 | |
| | 56 | | | Cognizant Technology Solutions Corp. ● | | | 4,126 | |
| | 152 | | | eBay, Inc. ● | | | 7,772 | |
| | 172 | | | Facebook, Inc. ● | | | 4,583 | |
| | 13 | | | Google, Inc. ● | | | 9,350 | |
| | 26 | | | IBM Corp. | | | 5,072 | |
| | 14 | | | LinkedIn Corp. Class A ● | | | 1,615 | |
| | 10 | | | Mastercard, Inc. | | | 5,001 | |
| | 82 | | | Microsoft Corp. | | | 2,194 | |
| | 251 | | | Oracle Corp. | | | 8,379 | |
| | 22 | | | Salesforce.com, Inc. ● | | | 3,660 | |
| | 65 | | | ServiceNow, Inc. ● | | | 1,953 | |
| | 82 | | | Splunk, Inc. ● | | | 2,366 | |
| | 46 | | | Tibco Software, Inc. ● | | | 1,023 | |
| | 29 | | | Visa, Inc. | | | 4,428 | |
| | 7 | | | VMware, Inc. ● | | | 666 | |
| | 1 | | | Workday, Inc. Class A ● | | | 55 | |
| | | | | | | | 71,911 | |
| | | | | Technology Hardware and Equipment - 11.5% | | | | |
| | 146 | | | Acme Packet, Inc. ● | | | 3,224 | |
| | 34 | | | Apple, Inc. | | | 18,107 | |
| | 129 | | | EMC Corp. ● | | | 3,264 | |
| | 188 | | | Juniper Networks, Inc. ● | | | 3,692 | |
| | 65 | | | NetApp, Inc. ● | | | 2,169 | |
| | 65 | | | Qualcomm, Inc. | | | 4,001 | |
| | | | | | | | 34,457 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Growth HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| |
| Shares or Principal Amount | | | | | Market Value ╪ | |
| COMMON STOCKS - 99.7% - (continued) | | | | | | | | |
| | | | | Transportation - 3.0% | | | | | | | | |
| | 51 | | | J.B. Hunt Transport Services, Inc. | | | | | | $ | 3,016 | |
| | 30 | | | Kansas City Southern | | | | | | | 2,509 | |
| | 55 | | | Norfolk Southern Corp. | | | | | | | 3,403 | |
| | | | | | | | | | | | 8,928 | |
| | | | | Total common stocks | | | | | | | | |
| | | | | (cost $260,975) | | | | | | $ | 299,765 | |
| | | | | | | | | | | | | |
| | | | | Total long-term investments
(cost $260,975) | | | | | | $ | 299,765 | |
| | | | | | | | | | | | | |
| SHORT-TERM INVESTMENTS - 0.4% | | | | | | | | |
| Repurchase Agreements - 0.4% | | | | | | | | |
| | | | | Bank of America Merrill Lynch TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $24,
collateralized by FHLMC 3.00%, 2042,
FNMA 4.00%, 2042, value of $25) | | | | | | | | |
| $ | 24 | | | 0.19%, 12/31/2012 | | | | | | $ | 24 | |
| | | | | Bank of Montreal TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $173, collateralized by FHLMC
2.50% - 5.50%, 2019 - 2042, FNMA 0.76%
- 6.11%, 2016 - 2042, GNMA 3.50%, 2042,
value of $176) | | | | | | | | |
| | 173 | | | 0.23%, 12/31/2012 | | | | | | | 173 | |
| | | | | Barclays Capital TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $54, collateralized by U.S.
Treasury Note 2.00% - 2.13%, 2016, value
of $55) | | | | | | | | |
| | 54 | | | 0.20%, 12/31/2012 | | | | | | | 54 | |
| | | | | Citigroup Global Markets, Inc. TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $340,
collateralized by U.S. Treasury Note 1.88%
- 4.13%, 2015 - 2018, value of $347) | | | | | | | | |
| | 340 | | | 0.17%, 12/31/2012 | | | | | | | 340 | |
| | | | | Deutsche Bank Securities TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $7, collateralized by FNMA
3.00%, 2032, value of $7) | | | | | | | | |
| | 7 | | | 0.25%, 12/31/2012 | | | | | | | 7 | |
| | | | | RBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $240, collateralized by U.S.
Treasury Note 0.50% - 2.75%, 2013 - 2019,
value of $244) | | | | | | | | |
| | 240 | | | 0.20%, 12/31/2012 | | | | | | | 240 | |
| | | | | TD Securities TriParty Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$210, collateralized by FHLMC 3.50% -
6.00%, 2036 - 2042, FNMA 0.22% - 5.50%,
2013 - 2042, value of $214) | | | | | | | | |
| | 210 | | | 0.21%, 12/31/2012 | | | | | | | 210 | |
| | | | | UBS Securities, Inc. Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$4, collateralized by U.S. Treasury Bill
0.75%, 2013, value of $4) | | | | | | | | |
| 4 | | | 0.17%, 12/31/2012 | | | | | | | 4 | |
| | | | | UBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $14, collateralized by FNMA
2.50%, 2027, GNMA 3.00%, 2042, value of
$15) | | | | | | | | |
| | 14 | | | 0.25%, 12/31/2012 | | | | | | | 14 | |
| | | | | | | | | | | | 1,066 | |
| | | | | Total short-term investments | | | | | | | | |
| | | | | (cost $1,066) | | | | | | $ | 1,066 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $262,041) ▲ | | | 100.1 | % | | $ | 300,831 | |
| | | | | Other assets and liabilities | | | (0.1 | )% | | | (339 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 300,492 | |
The accompanying notes are an integral part of these financial statements.
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $263,307 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 47,395 | |
| Unrealized Depreciation | | | (9,871 | ) |
| Net Unrealized Appreciation | | $ | 37,524 | |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
| GLOSSARY: (abbreviations used in preceding Schedule of Investments) |
| |
| Other Abbreviations: |
| ADR | American Depositary Receipt |
| FHLMC | Federal Home Loan Mortgage Corp. |
| FNMA | Federal National Mortgage Association |
| GNMA | Government National Mortgage Association |
| REIT | Real Estate Investment Trust |
| Hartford Growth HLS Fund |
| Investment Valuation Hierarchy Level Summary |
| December 31, 2012 |
| (000’s Omitted) |
| |
| | | Total | | | Level 1 ♦ | | | Level 2 ♦ | | | Level 3 | |
| Assets: | | | | | | | | | | | | | | | | |
| Common Stocks ‡ | | $ | 299,765 | | | $ | 299,765 | | | $ | – | | | $ | – | |
| Short-Term Investments | | | 1,066 | | | | – | | | | 1,066 | | | | – | |
| Total | | $ | 300,831 | | | $ | 299,765 | | | $ | 1,066 | | | $ | – | |
| ♦ | For the year ended December 31, 2012, there were no transfers between Level 1 and Level 2. |
| ‡ | The Fund has all or primarily all of the equity securities categorized in a particular level. Refer to the Schedule of Investments for further industry breakout. |
The accompanying notes are an integral part of these financial statements.
| Hartford Growth HLS Fund |
| Statement of Assets and Liabilities |
| December 31, 2012 |
| (000’s Omitted) |
| |
| Assets: | | | | |
| Investments in securities, at market value (cost $262,041) | | $ | 300,831 | |
| Cash | | | — | |
| Receivables: | | | | |
| Investment securities sold | | | 175 | |
| Fund shares sold | | | 219 | |
| Dividends and interest | | | 119 | |
| Total assets | | | 301,344 | |
| Liabilities: | | | | |
| Payables: | | | | |
| Investment securities purchased | | | 548 | |
| Fund shares redeemed | | | 235 | |
| Investment management fees | | | 45 | |
| Distribution fees | | | 3 | |
| Accrued expenses | | | 21 | |
| Total liabilities | | | 852 | |
| Net assets | | $ | 300,492 | |
| Summary of Net Assets: | | | | |
| Capital stock and paid-in-capital | | $ | 273,633 | |
| Undistributed net investment income | | | 108 | |
| Accumulated net realized loss | | | (12,039 | ) |
| Unrealized appreciation of investments | | | 38,790 | |
| Net assets | | $ | 300,492 | |
| Shares authorized | | | 800,000 | |
| Par value | | $ | 0.001 | |
| Class IA: Net asset value per share | | $ | 12.93 | |
| Shares outstanding | | | 18,023 | |
| Net assets | | $ | 233,089 | |
| Class IB: Net asset value per share | | $ | 12.67 | |
| Shares outstanding | | | 5,321 | |
| Net assets | | $ | 67,403 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Growth HLS Fund |
| Statement of Operations |
| For the Year Ended December 31, 2012 |
| (000’s Omitted) |
| Investment Income: | | | | |
| Dividends | | $ | 3,060 | |
| Interest | | | 12 | |
| Total investment income, net | | | 3,072 | |
| | | | | |
| Expenses: | | | | |
| Investment management fees | | | 2,608 | |
| Transfer agent fees | | | 5 | |
| Distribution fees - Class IB | | | 194 | |
| Custodian fees | | | 7 | |
| Accounting services fees | | | 33 | |
| Board of Directors' fees | | | 9 | |
| Audit fees | | | 12 | |
| Other expenses | | | 80 | |
| Total expenses (before fees paid indirectly) | | | 2,948 | |
| Commission recapture | | | (8 | ) |
| Total fees paid indirectly | | | (8 | ) |
| Total expenses, net | | | 2,940 | |
| Net Investment Income | | | 132 | |
| | | | | |
| Net Realized Gain on Investments: | | | | |
| Net realized gain on investments | | | 41,625 | |
| Net Realized Gain on Investments | | | 41,625 | |
| | | | | |
| Net Changes in Unrealized Appreciation of Investments: | | | | |
| Net unrealized appreciation of investments | | | 13,554 | |
| Net Changes in Unrealized Appreciation of Investments | | | 13,554 | |
| Net Gain on Investments | | | 55,179 | |
| Net Increase in Net Assets Resulting from Operations | | $ | 55,311 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Growth HLS Fund |
| Statement of Changes in Net Assets |
| (000’s Omitted) |
| | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| Operations: | | | | | | | | |
| Net investment income (loss) | | $ | 132 | | | $ | (10 | ) |
| Net realized gain on investments | | | 41,625 | | | | 37,324 | |
| Net unrealized appreciation (depreciation) of investments | | | 13,554 | | | | (68,361 | ) |
| Net Increase (Decrease) in Net Assets Resulting from Operations | | | 55,311 | | | | (31,047 | ) |
| Distributions to Shareholders: | | | | | | | | |
| From net investment income | | | | | | | | |
| Class IA | | | — | | | | (460 | ) |
| Total distributions | | | — | | | | (460 | ) |
| Capital Share Transactions: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 35,467 | | | | 50,505 | |
| Issued on reinvestment of distributions | | | — | | | | 460 | |
| Redeemed | | | (88,213 | ) | | | (100,832 | ) |
| Total capital share transactions | | | (52,746 | ) | | | (49,867 | ) |
| Class IB | | | | | | | | |
| Sold | | | 7,707 | | | | 13,615 | |
| Redeemed | | | (29,736 | ) | | | (38,523 | ) |
| Total capital share transactions | | | (22,029 | ) | | | (24,908 | ) |
| Net decrease from capital share transactions | | | (74,775 | ) | | | (74,775 | ) |
| Net Decrease in Net Assets | | | (19,464 | ) | | | (106,282 | ) |
| Net Assets: | | | | | | | | |
| Beginning of period | | | 319,956 | | | | 426,238 | |
| End of period | | $ | 300,492 | | | $ | 319,956 | |
| Undistributed (distribution in excess of) net investment income | | $ | 108 | | | $ | — | |
| Shares: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 2,848 | | | | 4,162 | |
| Issued on reinvestment of distributions | | | — | | | | 41 | |
| Redeemed | | | (7,121 | ) | | | (8,326 | ) |
| Total share activity | | | (4,273 | ) | | | (4,123 | ) |
| Class IB | | | | | | | | |
| Sold | | | 629 | | | | 1,144 | |
| Redeemed | | | (2,436 | ) | | | (3,227 | ) |
| Total share activity | | | (1,807 | ) | | | (2,083 | ) |
The accompanying notes are an integral part of these financial statements.
| Hartford Growth HLS Fund |
| Notes to Financial Statements |
| December 31, 2012 |
| (000’s Omitted) |
Hartford Growth HLS Fund (the “Fund”) serves as an underlying investment option for certain variable annuity and variable life insurance separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates and certain qualified retirement plans. The Fund may also serve as an underlying investment option for certain variable annuity and variable life separate accounts of other insurance companies. Owners of variable annuity contracts and policyholders of variable life insurance contracts may choose the funds permitted in the variable insurance contract prospectus. In addition, participants in certain qualified retirement plans may choose the Fund if permitted by their plans.
Hartford Series Fund, Inc. (the “Company”) is an open-end registered management investment company comprised of thirty portfolios. Financial Statements for the Fund, a series of the Company, are included in this report.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund is a diversified open-end management investment company.
The Fund is divided into Class IA and Class IB shares. Each class is offered at the per share net asset value (“NAV”) without a sales charge and is subject to the same expenses, except that the Class IB shares are subject to distribution and service fees charged pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act.
| 2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Fund in the preparation of its financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| a) | Determination of Net Asset Value – The NAV of each class of the Fund’s shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| b) | Investment Valuation and Fair Value Measurements – For purposes of calculating the NAV, portfolio investments and other assets held by the Fund's portfolio for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of last reported sales prices or official close price. If no sales are reported, market value is based on quotes obtained from a quotation reporting system, established market makers, or independent pricing services. If market prices are not readily available or are deemed unreliable, the Fund will use the fair value of the investment as determined in good faith under policies and procedures established by and under the supervision of the Company’s Board of Directors. Market quotes are considered not readily available where there is an absence of current or reliable market-based data (e.g., trade information or indicative market quotes), including where events occur after the close of the relevant market, but prior to the NYSE Close that materially affect the values of the Fund’s portfolio investments or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the investments trade do not open for trading for the entire day and no other market prices are available. In addition, prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to |
reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close. Investments that are primarily traded on foreign markets may trade on days that are not business days of the Fund. The value of the foreign investments in which the Fund invests may change on days when a shareholder will not be able to purchase or redeem shares of the Fund. Fair value pricing is subjective in nature and the use of fair value pricing by the Fund may cause the NAV of its shares to differ significantly from the NAV that would have been calculated using market prices at the close of the exchange on which a portfolio investment is primarily traded. There can be no assurance that the Fund could obtain the fair market value assigned to an investment if the Fund were to sell the investment at approximately the time at which the Fund determines its NAV.
Investments valued in currencies other than U.S. dollars are converted to U.S. dollars using exchange rates obtained from independent pricing services for calculation of the NAV. As a result, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of investments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the NYSE is closed and the market value may change on days when an investor is not able to purchase, redeem or exchange shares of the Fund.
Financial instruments for which prices are not available from an independent pricing service may be valued using market quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with procedures established by the Company’s Board of Directors.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| · | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange traded funds, rights and warrants. |
| · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 may include debt investments that are traded less frequently than exchange traded instruments and which are valued using independent pricing services; foreign equities, which are principally traded on certain foreign markets and are adjusted daily pursuant to a fair value pricing service in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close; and short-term investments, which are valued at amortized cost. |
| · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price. |
The Board of Directors of the Company generally reviews and approves the “Procedures for Valuation of Portfolio Securities” on an annual basis. These procedures define how investments are to be valued, including the formation and activities of a Valuation Committee. The Valuation Committee is responsible for determining in good faith the fair value of investments when the value cannot be obtained from primary pricing services or
| Hartford Growth HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
alternative sources or if the valuation of an investment as provided by the primary pricing service or alternative source is believed not to reflect the investment’s fair value as of the Valuation Date. Members of the Valuation Committee include the Fund’s Treasurer or designee, a Vice President of the Fund with legal expertise or designee, and a Vice President of the investment manager or designee. In addition, the Fund’s Chief Compliance Officer shall designate a member of the compliance group to attend Valuation Committee meetings as a non-voting resource, to monitor for and provide guidance with respect to compliance with these procedures. Two members of the Valuation Committee or their designees, representing different departments, shall constitute a quorum for purposes of permitting the Valuation Committee to take action. The Valuation Committee will consider all relevant factors in determining an investment’s fair value, and may seek the advice of the Fund’s sub-adviser, knowledgeable brokers, and legal counsel in making such determination. The Valuation Committee reports to the Audit Committee of the Company’s Board of Directors. The Audit Committee receives quarterly written reports which include details of all fair-valued investments, including the reason for the fair valuation, and an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such investments (the “look-back” test). The Board of Directors then must consider for ratification all of the fair value determinations made during the previous quarter.
Valuation levels are not necessarily indicative of the risk associated with investing in such investments. Individual investments within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
For additional information, refer to the Investment Valuation Hierarchy Level Summary and the Level 3 roll-forward reconciliation, if applicable, which follow the Schedule of Investments.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period.
| c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Investments purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses are determined on the basis of identified cost. |
Dividend income from domestic securities is accrued on the ex-dividend date. In general, dividend income from foreign securities is recorded on the ex-date; however, dividend notifications in certain foreign jurisdictions may not be available in a timely manner and as a result, the Fund will record the dividend as soon as the relevant details (i.e., rate per share, payment date, shareholders of record, etc.) are publicly available. Interest income, including amortization of premium and accretion of discounts, is accrued on a daily basis.
| d) | Joint Trading Account – The Fund may invest cash balances into a joint trading account that may be invested in one or more repurchase agreements. |
| e) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Fund’s shares are executed in accordance with the investment instructions of the contract holders and plan participants. The NAV of the Fund’s shares is determined as of the close of business on each business day of the Exchange. The NAV is determined separately for each class of shares of the Fund by dividing the Fund’s net assets attributable to that class by the number of shares of the class outstanding. Each class of shares offered by the Fund has equal rights as to assets and voting privileges (except that shareholders of a class have exclusive voting rights regarding any matter relating solely to that class of shares). Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets of the class. Realized and unrealized capital gains and losses are allocated daily based on the relative net assets of each class of shares of the Fund. |
Orders for the purchase of the Fund’s shares received prior to the close of the Exchange on any day the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Fund. The policy of the Fund is to pay dividends from net investment income and realized capital gains, if any, at least once a year.
Distributions from net investment income, net realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These differences may include but are not limited to losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to Passive Foreign Investment Companies (“PFICs”), Real Estate Investment Trusts (“REITs”), Regulated Investment Companies (“RICs”), certain derivatives and partnerships. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Fund’s capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| 3. | Securities and Other Investments: |
| a) | Repurchase Agreements – A repurchase agreement is an agreement by which a counterparty agrees to sell an investment and agrees to repurchase the investment sold from the buyer at a mutually agreed upon time and price. At the time the Fund enters into a repurchase agreement, the value of the underlying collateral, including accrued interest, will be equal to or exceed the value of the repurchase agreement. Repurchase agreements expose the Fund to counterparty risk - that is, the risk that the counterparty will not fulfill its obligations. To minimize counterparty risk, the investments that serve to collateralize the repurchase agreement are held by the Fund’s custodian in book entry or physical form in the custodial account of the Fund or in a third party custodial account. Repurchase agreements are valued at cost plus accrued interest, which approximates fair value. The Fund, as shown on the Schedule of Investments, had outstanding repurchase agreements as of December 31, 2012. |
| b) | Investments Purchased on a When-Issued or Delayed-Delivery Basis – Delivery and payment for investments that have been purchased by the Fund on a forward commitment, or when-issued or delayed-delivery basis, take place beyond the customary settlement period. A fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell delayed-delivery investments before they are delivered, which may result in a realized gain or loss. During this period, such investments are subject to market fluctuations, and the Fund identifies investments segregated in its records with a value at least equal to the amount of the commitment. As of December 31, 2012, the Fund had no outstanding when-issued or delayed-delivery investments. |
| a) | Counterparty Risk – The Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will default. |
| b) | Market Risks – If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities, such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United |
| Hartford Growth HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund. The market values of equity securities, such as common stocks and preferred stocks, or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The market value of equity securities may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities.
| a) | Federal Income Taxes – For federal income tax purposes, the Fund intends to continue to qualify as a RIC under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders and otherwise complying with the requirements of the IRC. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains prior to the next fiscal year-end. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. |
| c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Fund for the periods indicated is as follows (as adjusted for dividends payable, if applicable): |
| | | For the Year Ended
December 31, 2012 | | | For the Year Ended
Dece mber 31, 2011 | |
| Ordinary Income | | $ | — | | | $ | 460 | |
As of December 31, 2012, the Fund’s components of distributable earnings (deficit) on a tax basis were as follows:
| | | Amount | |
| Undistributed Ordinary Income | | $ | 108 | |
| Accumulated Capital and Other Losses* | | | (10,773 | ) |
| Unrealized Appreciation† | | | 37,524 | |
| Total Accumulated Earnings | | $ | 26,859 | |
| * | The Fund has capital loss carryforwards that are identified in the Capital Loss Carryforward note that follows. |
| † | Differences between book-basis and tax-basis unrealized appreciation (depreciation) may be attributable to the losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. |
| d) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as expiration or utilization of capital loss carryforwards or net operating losses. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Fund’s distributions may be shown in the accompanying Statement of Changes in Net Assets as from undistributed net investment income, from accumulated net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Fund recorded reclassifications to increase (decrease) the accounts listed below: |
| | | Amount | |
| Undistributed Net Investment Income | | $ | (24 | ) |
| Accumulated Net Realized Gain (Loss) | | | 300 | |
| Capital Stock and Paid-in-Capital | | | (276 | ) |
| | | | | |
| e) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation. |
At December 31, 2012 (tax-year-end), the Fund had capital loss carryforwards for U.S. federal income tax purposes as follows:
| Year of Expiration | | Amount | |
| 2017 | | $ | 10,773 | |
| Total | | $ | 10,773 | |
During the year ended December 31, 2012, the Fund utilized $42,065 of prior year capital loss carryforwards.
| f) | Accounting for Uncertainty in Income Taxes – The Fund has adopted financial reporting rules that require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Fund does not have an examination in progress. |
The Fund has reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules had no effect on the Fund’s financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2012. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Fund’s investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Fund pursuant to an Investment Management Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Fund’s investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL |
Hartford Growth HLS Fund
Notes to Financial Statements – (continued)
December 31, 2012
(000’s Omitted)
Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees payable under, the Fund’s investment management agreements; or (ii) the day-to-day management of the Fund. The investment manager has overall investment supervisory responsibility for the Fund. In addition, the investment manager provides administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. The investment manager has contracted with Wellington Management Company, LLP (“Wellington Management”) under a sub-advisory agreement for the provision of day-to-day investment management services to the Fund in accordance with the Fund’s investment objective and policies. The Fund pays a fee to the investment manager, a portion of which may be used to compensate Wellington Management.
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered as of December 31, 2012; the rates are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee | |
| On first $250 million | | | 0.8000 | % |
| On next $250 million | | | 0.7500 | % |
| On next $500 million | | | 0.7000 | % |
| On next $4 billion | | | 0.6750 | % |
| On next $5 billion | | | 0.6725 | % |
| Over $10 billion | | | 0.6700 | % |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Fund. HLIC provided accounting services for the Fund for the fiscal year ended December 31, 2012. The replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Fund or the fees charged to the Fund for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Fund, HFMC provides accounting services to the Fund and receives monthly compensation based on the Fund’s average daily net assets at the rates set forth below. The Fund’s accounting services fees are accrued daily and paid monthly. |
| Average Daily Net Assets | | Annual Fee | |
| All Assets | | | 0.010 | % |
| c) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund and allocated to classes within a Fund in proportion to the average daily net assets of the Fund and each class, except where allocation of certain expenses is more fairly made directly to the Fund or to specific classes within a Fund. |
| d) | Fees Paid Indirectly – The Company, on behalf of the Fund, has entered into agreements with State Street Global Markets, LLC and Russell Implementation Services, Inc. to partially recapture non-discounted trade commissions. Such rebates are used to pay a portion of the Fund’s expenses. In addition, the Fund’s custodian banks have agreed to reduce its fees when the Fund maintains cash on deposit in a non-interest-bearing custody account. For the year ended December 31, 2012, these amounts, if any, are included in the Statement of Operations. |
The ratio of expenses to average net assets in the accompanying financial highlights excludes the reduction in expenses related to fees paid indirectly. The annualized expense ratio after waivers for the period listed below reflecting the reduction for fees paid indirectly is as follows:
| | | Year Ended
December 31, 2012 | |
| Class IA | | | 0.83 | % |
| Class IB | | | 1.08 | |
| e) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Fund's principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD with HIFSCO did not result in any changes to the distribution services provided to the Fund. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Fund, has adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, 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, subject to the review and approval of the Company’s Board of Directors. |
The Distribution Plan provides that the Fund may pay annually up to 0.25% of the average daily net assets of the Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, the Fund is authorized to make payments monthly to the Distributor that may be used to pay or compensate 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. These fees are accrued daily and paid monthly.
| f) | Other Related Party Transactions – Certain officers of the Fund are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Fund’s Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Fund rounds to zero. Hartford Administrative Services Company (“HASCO”), an indirect wholly owned subsidiary of The Hartford, provides transfer agent services to the Fund. The amount paid to HASCO can be found in the Statement of Operations. These fees are accrued daily and paid monthly. |
| 7. | Investment Transactions: |
For the year ended December 31, 2012, the Fund's aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
| | | Amount | |
| Cost of Purchases Excluding U.S. Government Obligations | | $ | 206,769 | |
| Sales Proceeds Excluding U.S. Government Obligations | | | 278,359 | |
The Fund is one of several Hartford funds that participate in a $500 million committed revolving line of credit facility. The facility is to be used for temporary or emergency purposes. Under the arrangement, the funds are required to own securities having a market value in excess of 300% of the total bank borrowings. The interest rate on borrowings varies depending on the nature of the loan. The facility also requires a fee to be paid based on the amount of the commitment. This commitment fee is allocated to all of the funds participating in the line of credit based on the average net assets of the funds. During the year ended December 31, 2012, the Fund did not have any borrowings under this facility.
| 9. | Industry Classifications: |
Other than the industry classifications “Other Investment Pools and Funds” and “Exchange Traded Funds,” equity industry classifications used in this report are the Global Industry Classification Standard, which was developed by and is the exclusive property and service mark of MSCI, Inc. and Standard & Poor’s.
Under the Company’s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on
Hartford Growth HLS Fund
Notes to Financial Statements – (continued)
December 31, 2012
(000’s Omitted)
behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
| 11. | Recent Accounting Pronouncement: |
Disclosures about Offsetting Assets and Liabilities - In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The objective of the ASU is to enhance current disclosure requirements on offsetting of certain assets and liabilities and to enable financial statement users to compare financial statements prepared under U.S. GAAP and International Financial Reporting Standards.
Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
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Hartford Growth HLS Fund
Financial Highlights
- Selected Per-Share Data (A) -
| Class | | Net Asset Value at
Beginning of
Period | | | Net Investment
Income (Loss) | | | Net Realized and
Unrealized Gain
(Loss) on
Investments | | | Total from
Investment
Operations | | | Dividends from Net
Investment Income | | | Distributions from
Realized Capital
Gains | | | Distributions from
Capital | | | Total Distributions | | | Net Asset Value at
End of Period | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2012 | |
| IA | | $ | 10.92 | | | $ | 0.01 | | | $ | 2.00 | | | $ | 2.01 | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | 12.93 | |
| IB | | | 10.73 | | | | (0.02 | ) | | | 1.96 | | | | 1.94 | | | | – | | | | – | | | | – | | | | – | | | | 12.67 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2011 | |
| IA | | | 12.02 | | | | 0.01 | | | | (1.09 | ) | | | (1.08 | ) | | | (0.02 | ) | | | – | | | | – | | | | (0.02 | ) | | | 10.92 | |
| IB | | | 11.81 | | | | (0.03 | ) | | | (1.05 | ) | | | (1.08 | ) | | | – | | | | – | | | | – | | | | – | | | | 10.73 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2010 (E) | |
| IA | | | 10.07 | | | | 0.02 | | | | 1.93 | | | | 1.95 | | | | – | | | | – | | | | – | | | | – | | | | 12.02 | |
| IB | | | 9.92 | | | | – | | | | 1.89 | | | | 1.89 | | | | – | | | | – | | | | – | | | | – | | | | 11.81 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2009 | |
| IA | | | 7.53 | | | | 0.04 | | | | 2.54 | | | | 2.58 | | | | (0.04 | ) | | | – | | | | – | | | | (0.04 | ) | | | 10.07 | |
| IB | | | 7.42 | | | | 0.02 | | | | 2.49 | | | | 2.51 | | | | (0.01 | ) | | | – | | | | – | | | | (0.01 | ) | | | 9.92 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2008 | |
| IA | | | 13.39 | | | | 0.03 | | | | (5.47 | ) | | | (5.44 | ) | | | (0.03 | ) | | | (0.39 | ) | | | – | | | | (0.42 | ) | | | 7.53 | |
| IB | | | 13.18 | | | | – | | | | (5.37 | ) | | | (5.37 | ) | | | – | | | | (0.39 | ) | | | – | | | | (0.39 | ) | | | 7.42 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include 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 would lower the Fund's performance. |
| (C) | Ratios do not reflect reductions for fees paid indirectly. Please see Fees Paid Indirectly in the Notes to Financial Statements. |
| (D) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
| (E) | Per share amounts have been calculated using the average shares method. |
| (F) | During the year ended December 31, 2010, the Fund incurred $49.9 million in sales associated with the transition of assets from Hartford Fundamental Growth HLS Fund, which merged into the Fund on April 16, 2010. These sales were excluded from the portfolio turnover calculation. |
- Ratios and Supplemental Data -
| Total Return(B) | | | Net Assets at End of Period | | | Ratio of Expenses to Average Net Assets
Before Waivers(C) | | | Ratio of Expenses to Average Net Assets
After Waivers(C) | | | Ratio of Net Investment
Income (Loss) to Average Net
Assets | | | Portfolio
Turnover
Rate(D) | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | 18.42 | % | | $ | 233,089 | | | | 0.83 | % | | | 0.83 | % | | | 0.10 | % | | | 64 | % |
| | 18.12 | | | | 67,403 | | | | 1.08 | | | | 1.08 | | | | (0.16 | ) | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (8.95 | ) | | | 243,509 | | | | 0.82 | | | | 0.82 | | | | 0.06 | | | | 37 | |
| | (9.18 | ) | | | 76,447 | | | | 1.07 | | | | 1.07 | | | | (0.19 | ) | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 19.37 | | | | 317,464 | | | | 0.84 | | | | 0.84 | | | | 0.21 | | | | 74 | (F) |
| | 19.07 | | | | 108,774 | | | | 1.09 | | | | 1.09 | | | | (0.04 | ) | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 34.24 | | | | 242,406 | | | | 0.88 | | | | 0.88 | | | | 0.44 | | | | 85 | |
| | 33.90 | | | | 86,556 | | | | 1.13 | | | | 1.13 | | | | 0.20 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (41.79 | ) | | | 203,993 | | | | 0.84 | | | | 0.84 | | | | 0.27 | | | | 93 | |
| | (41.93 | ) | | | 81,720 | | | | 1.09 | | | | 1.09 | | | | 0.02 | | | | – | |
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of
Hartford Series Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Hartford Growth HLS Fund (one of the portfolios constituting Hartford Series Fund, Inc. (the Fund)) as of December 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Hartford Growth HLS Fund (one of the portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
| | |
| | |
| Minneapolis, MN | |
| February 15, 2013 | |
Hartford Growth HLS Fund
Directors and Officers (Unaudited)
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Fund pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Fund. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Fund’s statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Fund pays to The Hartford a portion of the Chief Compliance Officer’s compensation, but does not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
Hartford Growth HLS Fund
Directors and Officers (Unaudited) – (continued)
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010 (4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and a record of how the Fund voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Hartford Growth HLS Fund
Expense Example (Unaudited)
Your Fund's Expenses
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Actual return | | | Hypothetical (5% return before expenses) | | | | | | | | | | |
| | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31,
2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2
year | | | Days
in the
full
year | |
| Class IA | | $ | 1,000.00 | | | $ | 1,007.24 | | | $ | 4.21 | | | $ | 1,000.00 | | | $ | 1,020.94 | | | $ | 4.24 | | | | 0.83 | % | | | 184 | | | | 366 | |
| Class IB | | $ | 1,000.00 | | | $ | 1,007.10 | | | $ | 5.47 | | | $ | 1,000.00 | | | $ | 1,019.69 | | | $ | 5.50 | | | | 1.08 | % | | | 184 | | | | 366 | |
Hartford Growth HLS Fund
Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory and sub-advisory agreements. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for Hartford Growth HLS Fund (the “Fund”) with HL Investment Advisors, LLC (“HL Advisors”) and the continuation of the investment sub-advisory agreement between HL Advisors and the Fund’s sub-adviser, Wellington Management Company, LLP (the “Sub-adviser,” and together with HL Advisors, the “Advisers”) (collectively, the “Agreements”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from the Advisers to questions posed to them on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreements at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by the Advisers and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreements.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreements with respect to the Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Fund’s contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Fund’s management fees, sub-advisory fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement.
In determining to continue the Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreements. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreements is provided below.
Nature, Extent, and Quality of Services Provided by the Advisers
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Fund by the Advisers. The Board considered, among other things, the terms of the Agreements and the range of services provided by the Advisers. The Board considered the Advisers’ professional personnel who provide services to the Fund, including each Adviser’s ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered each Adviser’s reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to the Fund. In addition, the Board considered the quality of each Adviser’s communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning each Adviser’s regulatory and compliance environment. In this regard, the Board requested and reviewed information on each Adviser’s compliance policies and procedures, compliance history, and a report from the Fund’s Chief Compliance Officer on each Adviser’s compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. The Board also noted the Advisers’ support of the Fund’s compliance control structure, particularly the resources devoted by the Advisers in support of the Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act.
Hartford Growth HLS Fund
Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited)- (continued)
With respect to HL Advisors, the Board noted that under the Agreements, HL Advisors is responsible for the management of the Fund, including overseeing fund operations and service providers, as well as investment advisory services in connection with selecting, monitoring and supervising the Sub-adviser. The Board considered HL Advisors’ ongoing monitoring of people, process and performance, including its quarterly reviews of each of the Hartford HLS Funds, semi-annual meetings with the leaders of each Fund’s portfolio management team, and oversight of the Funds’ approximately 40 portfolio managers. The Board recognized that HL Advisors has demonstrated a record of making changes to the management and/or strategies of the Funds when warranted. The Board considered HL Advisors’ oversight of the Sub-adviser’s investment approach and results, process for monitoring best execution of portfolio trades by the Sub-adviser, and approach to risk management with respect to the Fund and the service providers to the Fund. The Board also considered HL Advisors’ oversight of compliance with the Fund’s objective and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led to an increase in the scope of HL Advisors’ services in this regard. In addition, the Board considered HL Advisors’ ongoing commitment to review and rationalize the Hartford fund family’s product line-up and the expenses that HL Advisors had incurred in connection with fund combinations in recent years. The Board considered that HL Advisors or its affiliates are responsible for providing the Fund’s officers. The Board also noted that Hartford Life Insurance Company (“HLIC”) provides administrative services to the Fund. The Board considered its experiences with HL Advisors and HLIC with respect to each of these services.
With respect to the Sub-adviser, who provides day-to-day portfolio management services, the Board considered the quality of the Fund’s portfolio manager, the Sub-adviser’s other investment personnel, its investment philosophy and process, investment research capabilities and resources, performance record, trade execution capabilities and experience. The Board considered the experience of the Fund’s portfolio manager, the number of accounts managed by the portfolio manager, and the Sub-adviser’s method for compensating the portfolio manager.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Fund by HL Advisors and the Sub-adviser.
Performance of the Fund and the Advisers
The Board considered the investment performance of the Fund. In this regard, the Board reviewed the performance of the Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of the Fund’s performance for these time periods. The Board considered information and materials provided to the Board by the Advisers concerning Fund performance, as well as information from Lipper comparing the investment performance of the Fund to an appropriate benchmark and universe of peer funds. The Board noted that the Fund had underperformed relative to its peer group for the 1-, 3- and 5-year periods. The Board also noted that the Fund had underperformed relative to its benchmark for the 1- and 3-year periods and that its performance was in line with the benchmark for the 5-year period. HL Advisors noted that it would continue to monitor the Fund’s performance.
The Board considered the detailed investment analytics reports provided by The Hartford’s Investment Advisory Group throughout the year. These reports include, among other things, information on the Fund’s gross and net returns, the Fund’s investment performance relative to an appropriate benchmark and peer group, various statistics concerning the Fund’s portfolio, and a narrative summary of various factors affecting Fund performance. The Board considered the Advisers’ cooperation with the Investment Committee, which assists the Board in evaluating the performance of the Fund at periodic meetings throughout the year. The Board also considered the analysis provided by the Consultant relating to the Fund’s performance track record.
In light of all the considerations noted above, the Board concluded that it had continued confidence in HL Advisors’ and the Sub-adviser’s overall capabilities to manage the Fund.
Costs of the Services and Profitability of the Advisers
The Board reviewed information regarding HL Advisors’ cost to provide investment management and related services to the Fund and HL Advisors’ profitability, both overall and for the Fund, on a pre-tax basis without regard to distribution expenses. The Board also requested and reviewed information about the profitability to HL Advisors and its affiliates from all services provided
to the Fund and all aspects of their relationship with the Fund. The Board also requested and received information relating to the operations and profitability of the Sub-adviser.
The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement, noting the Consultant’s view that The Hartford’s process for calculating and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by the Advisers and their affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by the Advisers
The Board considered comparative information with respect to the management fees to be paid by the Fund to HL Advisors and the total expense ratios of the Fund. The Board also considered comparative information with respect to the sub-advisory fees to be paid by HL Advisors to the Sub-adviser, to the extent applicable. In this regard, the Board requested and reviewed information from HL Advisors and the Sub-adviser relating to the management and sub-advisory fees, including the sub-advisory fee schedule for the Fund, and total operating expenses for the Fund. The Board considered that the management fee for the Fund includes the fee paid to HLIC for providing certain administrative services to the Fund. With respect to the sub-advisory fee schedule, the Board considered representations from HL Advisors and the Sub-adviser that the Sub-adviser’s fees were negotiated at arm’s length. The Board also reviewed information from Lipper comparing the Fund’s contractual management fees, actual management fees and overall expense ratios relative to a group of funds selected by Lipper, in consultation with the Consultant, and a broader universe of funds selected by Lipper.
While the Board recognized that comparisons between the Fund and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business models and cost structures of the Advisers, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of the Fund’s management and sub-advisory fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to the Fund’s management and sub-advisory fees and total operating expenses.
Based on these considerations, the Board concluded that the Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding the Advisers’ realization of economies of scale with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. The Board reviewed the breakpoints in the management fee schedule for the Fund, which reduce fee rates as Fund assets grow over time. The Board recognized that a fund with assets beyond the last breakpoint level will continue to benefit from economies of scale because additional assets are charged the lowest breakpoint fee resulting in lower overall effective management fee rates. The Board also recognized that a fee schedule that reaches a lower breakpoint quickly provides shareholders with the benefit of anticipated or potential economies of scale.
The Board reviewed and evaluated materials from Lipper showing how management fee schedules of peer funds reflect economies of scale for the benefit of shareholders as a peer fund’s assets hypothetically increase over time. Based on information provided by HL Advisors, Lipper, and the Consultant, the Board recognized that there is no uniform methodology for establishing breakpoints or uniform pattern in asset levels that trigger breakpoints or the amounts of breakpoints triggered.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Fund’s shareholders based on currently available information and the effective advisory fees and expense ratios for the Fund at its current and reasonably anticipated asset levels. The Board noted, however, that it would continue to monitor future growth in Fund assets and the appropriateness of additional breakpoints.
Hartford Growth HLS Fund
Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited)- (continued)
Other Benefits
The Board considered other benefits to the Advisers and their affiliates from their relationships with the Fund, including the role of the Fund in supporting the variable life insurance and variable annuity products offered by The Hartford. The Board reviewed information noting that HLIC, an affiliate of HL Advisors, receives fees for providing certain administrative services to the Fund, and that HLIC also receives fees for fund accounting and related services from the Fund, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Fund’s transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Fund, and the Board reviewed information on the profitability of the Fund’s transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Fund were fair and reasonable based on publicly available information.
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Fund, receives 12b-1 fees from the Fund. The Board also noted that certain affiliates of HL Advisors distribute shares of the Fund and receive compensation in that connection.
The Board considered benefits to the Sub-adviser from its use of the Fund’s brokerage commissions to obtain soft dollar research, and representations from HL Advisors and the Sub-adviser that the Sub-adviser would not make any revenue-sharing payments or any other type of distribution payments to HL Advisors or its affiliates.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the Agreements for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory and sub-advisory agreements. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreements for the Fund and approve a new investment management agreement for the Fund with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser, and a new investment sub-advisory agreement between HFMC and the Fund’s existing Sub-adviser, Wellington Management Company, LLP (together with HFMC, the “Post-Restructuring Advisers”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Fund. In order to implement the Restructuring, the Fund would terminate the existing Agreements and enter into a new investment management agreement with HFMC, with HFMC also entering into a new investment sub-advisory agreement with the Sub-adviser (collectively, the “New Agreements”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreements at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by HL Advisors and the Sub-adviser and their affiliates. In addition, the Board received in-person presentations by Fund
officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreements.
In determining to approve the New Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the New Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreements.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Fund and the performance of investment management personnel to the Fund. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Fund prior to the Restructuring would continue to provide such services to the Fund, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreements would involve no changes to (i) the contractual terms of, including the management fees payable under, the Fund’s investment management and investment sub-advisory agreements; (ii) the investment processes and strategies employed in the management of the Fund’s assets; (iii) the nature and level of services provided under the Fund’s investment management and investment sub-advisory agreements; and (iv) the day-to-day management of the Fund and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Fund.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Fund.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Fund, the investment management arrangement for the Fund following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreements: (i) nature, extent and quality of services provided by HL Advisors and the Sub-adviser; (ii) performance of the Fund, HL Advisors and the Sub-adviser; (iii) costs of the services and profitability of HL Advisors and the Sub-adviser; (iv) comparative services rendered and comparative investment management and sub-advisory fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors and the Sub-adviser with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. With respect to the other benefits to the Post-Restructuring Advisers and their affiliates from their relationships with the Fund, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting and related services from the Fund.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the New Agreements. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Hartford Growth HLS Fund
Principal Risks (Unaudited)
The principal risks of investing in the Fund are described below.
Market and Selection Risk: The Fund’s share price may fluctuate due to market risk and/or security selections that may underperform compared to the market or relevant benchmarks.
Growth Investing Risk: Growth investments can be volatile, and may fail to increase earnings or grow as quickly as anticipated. Growth-style investing falls in and out of favor, which may result in periods of underperformance.
Foreign Investment Risk: Foreign investments can be riskier than U.S. investments. Potential risks include currency risk that may result from unfavorable exchange rates, liquidity risk if decreased demand for a security makes it difficult to sell at the desired price, and risks that stem from substantially lower trading volume on foreign markets.
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
HLSAR-G12 2-13 113541 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 | |
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford Healthcare HLS Fund
Table of Contents
This report is prepared for the general information of contract owners and qualified retirement plan participants. It is not an offer of contracts or of qualified retirement plans. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent information including the applicable sales, administrative and other charges.
The views expressed in the Fund’s Manager Discussion under ‘‘Why did the Fund perform this way?’’ and ‘‘What is the outlook?’’ are views of the Fund’s sub-adviser and portfolio management team through the end of the period and are subject to change based on market and other conditions.
| Hartford Healthcare HLS Fund inception 05/01/2000 |
| (sub-advised by Wellington Management Company, LLP) |
| |
| Investment objective – Seeks long-term capital appreciation. |
Performance Overview 12/31/02 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IA. Growth results in classes other than Class IA will vary from what is seen above due to differences in the expenses charged to those share classes.
| Average Annual Total Returns (as of 12/31/12) |
| | | 1 Year | | | 5 Year | | | 10 Year | |
| Healthcare IA | | | 20.62% | | | | 5.08% | | | | 9.75% | |
| Healthcare IB | | | 20.32% | | | | 4.81% | | | | 9.48% | |
| S&P 500 Index | | | 16.03% | | | | 1.67% | | | | 7.10% | |
| S&P North American Health Care Sector Index | | | 19.78% | | | | 5.83% | | | | 8.32% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund's net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.
S&P North American Health Care Sector Index is a modified capitalization-weighted index based on United States headquartered health care companies. Stocks in the index are weighted such that each stock is no more than 7.5% of the market capitalization as of the most recent reconstitution date. The companies included in the index must be common stocks and be traded on the American Stock Exchange, Nasdaq or the New York Stock Exchange and meet certain established market capitalization levels.
You cannot invest directly in an index.
As of the Fund’s current prospectus dated May 1, 2012, the net total annual operating expense ratios for Class IA and Class IB shares were 0.91% and 1.16%, respectively, and the gross total annual operating expense ratios for Class IA and Class IB shares were 0.91% and 1.16%, respectively. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect until April 30, 2013, and automatically renew for one-year terms unless terminated by the Fund’s Investment Advisor (Hartford Funds Management Company, LLC). For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
| Hartford Healthcare HLS Fund |
| Manager Discussion |
| December 31, 2012 (Unaudited) |
| Portfolio Managers | | | |
| Ann C. Gallo | Jean M. Hynes, CFA | Robert L. Deresiewicz | Kirk J. Mayer, CFA |
Senior Vice President and Global Industry Analyst | Senior Vice President and Global Industry Analyst
| Senior Vice President and Global Industry Analyst
| Senior Vice President and Global Industry Analyst |
| | | | |
How did the Fund perform?
The Class IA shares of the Hartford Healthcare HLS Fund returned 20.62% for the twelve-month period ended December 31, 2012, outperforming its benchmark, the S&P North American Health Care Sector Index, which returned 19.78% for the same period. The Fund underperformed the 23.89% return of the average fund in the Lipper VP-UF Health and Biotechnology peer group, a group of funds with investment strategies similar to those of the Fund.
Why did the Fund perform this way?
U.S. equities moved higher in the period, in part due to a strengthening housing market and central bank interventions around the globe. Although Europe continued to grapple with economic and structural challenges, investors’ risk appetites surged after European Central Bank (ECB) President Mario Draghi revealed a comprehensive plan to support struggling sovereigns, including direct purchases of government bonds in the open market. Additionally, the U.S. Federal Reserve’s (Fed) announcement of a third round of quantitative easing (QE3) was well-received by the market, boosting stock prices. Despite concerns about the looming U.S. fiscal cliff, tepid corporate revenue results, and economic malaise in Europe, investors bid up risk assets amid further signs of recovery in China and signs that the U.S. housing market may bolster the U.S. economy for the first time in seven years. Risk sentiment also ticked up on continued hopes that the ECB’s bond-buying plan will succeed, essentially reducing the tail risks in Europe.
Health Care stocks (+19.8%) outperformed both the broader U.S. market (+16.0%) and the global equity market (+16.5%) during the period, as measured by the S&P North American Health Care Sector, S&P 500, and the MSCI World Indexes respectively. Within the S&P North American Health Care Sector Index, Biotechnology (+42.7%) and Life Sciences Tools & Services (+32.1%) led returns, while Pharmaceuticals (+13.7%), Health Care Providers & Services (+14.5%), and Health Care Technology (+14.8%) lagged the broader index returns.
The Fund’s outperformance versus its benchmark was primarily due to strong security selection within the Biotechnology and Life Sciences Tools and Services sub-sectors. This was partially offset by weaker selection within Health Care Equipment and Supplies and Pharmaceuticals. Sector allocation, a residual of our bottom up stock selection process, also contributed positively to relative returns, primarily due to an overweight (i.e. the Fund’s sector position was greater than the benchmark position) to strong performing Biotechnology sub-sector.
Top contributors to relative performance included Regeneron Pharmaceuticals (Specialty Pharmaceuticals/Biotechnology), Amylin Pharmaceuticals (Specialty Pharmaceuticals/Biotechnology), and Ardea Biosciences (Specialty Pharmaceuticals/Biotechnology). Shares of biopharmaceutical company, Regeneron Pharmaceuticals rose during the period as sales momentum continued for the macular degeneration drug, Eylea, and investors raised their outlooks for sales in the newly approved markets of Japan and Europe. Shares of Amylin Pharmaceuticals, a biopharmaceutical company focused on developing drugs for diabetes and other metabolic diseases, soared during the first half of the year when it was announced that the firm would be acquired by Bristol-Myers Squibb. Shares of Ardea Biosciences benefitted significantly during the first half of the year after Astra Zeneca announced it would acquire the company at a significant premium to the market price. Top contributors to absolute performance (i.e. total return) also included Gilead Sciences (Specialty Pharmaceuticals/Biotechnology).
Holdings of Elan (Specialty Pharmaceuticals/Biotechnology), Daiichi Sankyo (Major Pharmaceuticals) and Abiomed (Health Care Technology) detracted from benchmark-relative performance. Elan, an Ireland based biotechnology company which specializes in neuroscience, saw shares decline during the second half of the year after Alzheimer treatment Bapineuzumab failed to meet expectations during its second Phase III trial. Shares of Daiichi Sankyo, a major Japanese pharmaceutical company, fell during the period due to losses at the company’s Indian subsidiary, Ranbaxy Laboratories. Concern around the company’s pipeline given upcoming patent expirations also weighed on the stock price. Shares of Abiomed, a medical device technology company focused on cardiac treatment, declined significantly as a result of controversy regarding efficacy of and labeling for the company’s Impella ventricular support treatment. Vertex Pharmaceuticals (Specialty Pharmaceuticals/Biotechnology) also detracted from absolute performance.
| Hartford Healthcare HLS Fund |
| Manager Discussion – (continued) |
| December 31, 2012 (Unaudited) |
What is the outlook?
We continue to believe that there will be further Medicare and Medicaid cuts as the U.S. Congress will likely pass a comprehensive budget bill in either 2013 or 2014. While painful, this approach should result in more targeted, thoughtful changes than the 2% across the board cut to Medicare reimbursement currently dictated by sequestration policy adopted by the U.S. Congress. Consistent with our view to this point, we believe that the bar has been raised for companies seeking reimbursement for health care products and services in the U.S. and across the globe. Going forward, success will primarily accrue to those companies able to offer a demonstrable improvement over current standards of care, or alternatively, to those companies able to offer an equivalent level of care but at lower cost. This is one of the key tenets upon which we have structured our portfolio.
| Diversification by Industry |
| as of December 31, 2012 |
| Industry | | Percentage of
Net Assets | |
| Biotechnology | | | 24.3 | % |
| Drug Retail | | | 4.0 | |
| Health Care Distributors | | | 6.7 | |
| Health Care Equipment | | | 18.8 | |
| Health Care Facilities | | | 2.0 | |
| Health Care Technology | | | 0.5 | |
| Life Sciences Tools and Services | | | 3.2 | |
| Managed Health Care | | | 11.2 | |
| Pharmaceuticals | | | 28.7 | |
| Short-Term Investments | | | 0.9 | |
| Other Assets and Liabilities | | | (0.3 | ) |
| Total | | | 100.0 | % |
| Hartford Healthcare HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 99.4% | |
| | | | | Biotechnology - 24.3% | | | | |
| | 45 | | | 3SBio, Inc. ADR ● | | $ | 620 | |
| | 33 | | | Acorda Therapeutics, Inc. ● | | | 823 | |
| | 24 | | | Actelion Ltd. | | | 1,143 | |
| | 52 | | | Algeta ASA ● | | | 1,470 | |
| | 177 | | | Alkermes plc ● | | | 3,281 | |
| | 243 | | | Anacor Pharmaceuticals, Inc. ● | | | 1,262 | |
| | 146 | | | Arena Pharmaceuticals, Inc. ●‡ | | | 1,314 | |
| | 88 | | | Aveo Pharmaceuticals, Inc. ● | | | 710 | |
| | 24 | | | Biogen Idec, Inc. ● | | | 3,573 | |
| | 38 | | | Cubist Pharmaceuticals, Inc. ● | | | 1,607 | |
| | 390 | | | Elan Corp. plc ADR ● | | | 3,978 | |
| | 478 | | | Exelixis, Inc. ● | | | 2,183 | |
| | 122 | | | Gilead Sciences, Inc. ● | | | 8,940 | |
| | 83 | | | Immunogen, Inc. ● | | | 1,059 | |
| | 68 | | | Incyte Corp. ● | | | 1,125 | |
| | 79 | | | Ironwood Pharmaceuticals, Inc. ● | | | 872 | |
| | 70 | | | NPS Pharmaceuticals, Inc. ● | | | 632 | |
| | 37 | | | Onyx Pharmaceuticals, Inc. ● | | | 2,813 | |
| | 21 | | | Prothena Corp. plc ● | | | 152 | |
| | 16 | | | Puma Biotechnology, Inc. ● | | | 306 | |
| | 30 | | | Regeneron Pharmaceuticals, Inc. ● | | | 5,183 | |
| | 171 | | | Rigel Pharmaceuticals, Inc. ● | | | 1,114 | |
| | 67 | | | Seattle Genetics, Inc. ● | | | 1,557 | |
| | 41 | | | Vertex Pharmaceuticals, Inc. ● | | | 1,699 | |
| | | | | | | | 47,416 | |
| | | | | Drug Retail - 4.0% | | | | |
| | 74 | | | CVS Caremark Corp. | | | 3,580 | |
| | 113 | | | Walgreen Co. | | | 4,165 | |
| | | | | | | | 7,745 | |
| | | | | Health Care Distributors - 6.7% | | | | |
| | 151 | | | Cardinal Health, Inc. | | | 6,211 | |
| | 71 | | | McKesson Corp. | | | 6,840 | |
| | | | | | | | 13,051 | |
| | | | | Health Care Equipment - 18.8% | | | | |
| | 165 | | | ABIOMED, Inc. ● | | | 2,226 | |
| | 646 | | | Boston Scientific Corp. ● | | | 3,699 | |
| | 80 | | | Covidien plc | | | 4,641 | |
| | 93 | | | Globus Medical, Inc. ● | | | 978 | |
| | 39 | | | Heartware International, Inc. ● | | | 3,304 | |
| | 65 | | | Hologic, Inc. ● | | | 1,294 | |
| | 128 | | | Medtronic, Inc. | | | 5,255 | |
| | 50 | | | Orthofix International N.V. ● | | | 1,978 | |
| | 138 | | | St. Jude Medical, Inc. | | | 4,970 | |
| | 53 | | | Stryker Corp. | | | 2,916 | |
| | 81 | | | Tornier N.V. ● | | | 1,357 | |
| | 98 | | | Volcano Corp. ● | | | 2,311 | |
| | 28 | | | Zimmer Holdings, Inc. | | | 1,849 | |
| | | | | | | | 36,778 | |
| | | | | Health Care Facilities - 2.0% | | | | |
| | 75 | | | HCA Holdings, Inc. | | | 2,268 | |
| | 132 | | | NMC Health plc ● | | | 423 | |
| | 99 | | | Vanguard Health Systems, Inc. ● | | | 1,215 | |
| | | | | | | | 3,906 | |
| | | | | Health Care Technology - 0.5% | | | | |
| | 99 | | | Allscripts Healthcare Solutions, Inc. ● | | | 929 | |
| | | | | | | | | |
| | | | | Life Sciences Tools and Services - 3.2% | | | | |
| | 47 | | | Agilent Technologies, Inc. | | | 1,932 | |
| | 41 | | | Covance, Inc. ● | | | 2,393 | |
| | 52 | | | MorphoSys AG ● | | | 2,031 | |
| | | | | | | | 6,356 | |
| | | | | Managed Health Care - 11.2% | | | | |
| | 122 | | | Aetna, Inc. | | | 5,641 | |
| | 98 | | | CIGNA Corp. | | | 5,215 | |
| | 183 | | | Qualicorp S.A. ● | | | 1,890 | |
| | 161 | | | UnitedHealth Group, Inc. | | | 8,758 | |
| | 7 | | | Wellcare Health Plans, Inc. ● | | | 346 | |
| | | | | | | | 21,850 | |
| | | | | Pharmaceuticals - 28.7% | | | | |
| | 10 | | | Alk-Abello A/S | | | 660 | |
| | 58 | | | Almirall S.A. | | | 577 | |
| | 40 | | | Astellas Pharma, Inc. | | | 1,796 | |
| | 35 | | | AstraZeneca plc ADR | | | 1,650 | |
| | 45 | | | Auxilium Pharmaceuticals, Inc. ● | | | 828 | |
| | 128 | | | Bristol-Myers Squibb Co. | | | 4,156 | |
| | 78 | | | Cadence Pharmaceuticals, Inc. ● | | | 375 | |
| | 140 | | | Daiichi Sankyo Co., Ltd. | | | 2,146 | |
| | 43 | | | Dr. Reddy's Laboratories Ltd. ADR | | | 1,418 | |
| | 63 | | | Eisai Co., Ltd. | | | 2,633 | |
| | 105 | | | Eli Lilly & Co. | | | 5,158 | |
| | 124 | | | Forest Laboratories, Inc. ● | | | 4,365 | |
| | 24 | | | H. Lundbeck A/S ☼ | | | 348 | |
| | 44 | | | Johnson & Johnson | | | 3,117 | |
| | 108 | | | Medicines Co. ● | | | 2,596 | |
| | 119 | | | Merck & Co., Inc. | | | 4,886 | |
| | 82 | | | Mylan, Inc. ● | | | 2,258 | |
| | 9 | | | Ono Pharmaceutical Co., Ltd. | | | 470 | |
| | 78 | | | Optimer Pharmaceuticals, Inc. ● | | | 703 | |
| | 11 | | | Salix Pharmaceuticals Ltd. ● | | | 428 | |
| | 239 | | | Shionogi & Co., Ltd. | | | 3,984 | |
| | 26 | | | Simcere Pharmaceutical Group ADR ● | | | 207 | |
| | 139 | | | Teva Pharmaceutical Industries Ltd. ADR | | | 5,186 | |
| | 46 | | | UCB S.A. | | | 2,615 | |
| | 32 | | | Watson Pharmaceuticals, Inc. ● | | | 2,724 | |
| | 91 | | | Xenoport, Inc. ● | | | 707 | |
| | | | | | | | 55,991 | |
| | | | | Total common stocks | | | | |
| | | | | (cost $170,555) | | $ | 194,022 | |
| | | | | | | | | |
| | | | | Total long-term investments | | | | |
| | | | | (cost $170,555) | | $ | 194,022 | |
| | | | | | | | | |
| SHORT-TERM INVESTMENTS - 0.9% | | | | |
| | | | | Repurchase Agreements - 0.9% | | | | |
| | | | | Bank of America Merrill Lynch TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $38,
collateralized by FHLMC 3.00%, 2042,
FNMA 4.00%, 2042, value of $39) | | | | |
| $ | 38 | | | 0.19%, 12/31/2012 | | $ | 38 | |
| | | | | Bank of Montreal TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $272, collateralized by FHLMC
2.50% - 5.50%, 2019 - 2042, FNMA 0.76%
- 6.11%, 2016 - 2042, GNMA 3.50%, 2042,
value of $277) | | | | |
| | 272 | | | 0.23%, 12/31/2012 | | | 272 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Healthcare HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | | | | Market Value ╪ | |
| SHORT-TERM INVESTMENTS - 0.9% - (continued) | | | | | | | | |
| | | | | Repurchase Agreements - 0.9% - (continued) | | | | | | | | |
| | | | | Barclays Capital TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $85, collateralized by U.S.
Treasury Note 2.00% - 2.13%, 2016, value
of $87) | | | | | | | | |
| $ | 85 | | | 0.20%, 12/31/2012 | | | | | | $ | 85 | |
| | | | | Citigroup Global Markets, Inc. TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $535,
collateralized by U.S. Treasury Note 1.88%
- 4.13%, 2015 - 2018, value of $546) | | | | | | | | |
| | 535 | | | 0.17%, 12/31/2012 | | | | | | | 535 | |
| | | | | Deutsche Bank Securities TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $11, collateralized by FNMA
3.00%, 2032, value of $11) | | | | | | | | |
| | 11 | | | 0.25%, 12/31/2012 | | | | | | | 11 | |
| | | | | RBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $377, collateralized by U.S.
Treasury Note 0.50% - 2.75%, 2013 - 2019,
value of $384) | | | | | | | | |
| | 377 | | | 0.20%, 12/31/2012 | | | | | | | 377 | |
| | | | | TD Securities TriParty Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$330, collateralized by FHLMC 3.50% -
6.00%, 2036 - 2042, FNMA 0.22% - 5.50%,
2013 - 2042, value of $336) | | | | | | | | |
| | 330 | | | 0.21%, 12/31/2012 | | | | | | | 330 | |
| | | | | UBS Securities, Inc. Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$6, collateralized by U.S. Treasury Bill
0.75%, 2013, value of $7) | | | | | | | | |
| | 6 | | | 0.17%, 12/31/2012 | | | | | | | 6 | |
| | | | | UBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $23, collateralized by FNMA
2.50%, 2027, GNMA 3.00%, 2042, value of
$23) | | | | | | | | |
| | 23 | | | 0.25%, 12/31/2012 | | | | | | | 23 | |
| | | | | | | | | | | | 1,677 | |
| | | | | Total short-term investments | | | | | | | | |
| | | | | (cost $1,677) | | | | | | $ | 1,677 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $172,232) ▲ | | | 100.3 | % | | $ | 195,699 | |
| | | | | Other assets and liabilities | | | (0.3 | )% | | | (592 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 195,107 | |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| | |
| | Prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for factors occurring after the close of certain foreign markets but before the close of the New York Stock Exchange. |
The accompanying notes are an integral part of these financial statements.
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $173,401 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 31,322 | |
| Unrealized Depreciation | | | (9,024 | ) |
| Net Unrealized Appreciation | | $ | 22,298 | |
| ● | Non-income producing. |
| | |
| ☼ | This security, or a portion of this security, was purchased on a when-issued, delayed-delivery or delayed-draw basis. The cost of these securities was $119 at December 31, 2012. |
| | |
| ‡ | This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future. |
| Foreign Currency Contracts Outstanding at December 31, 2012 |
| |
| Currency | | Buy / Sell | | Delivery Date | | Counterparty | | | Contract Amount | | | Market Value ╪ | | | Unrealized
Appreciation/
(Depreciation) | |
| DKK | | Buy | | 01/02/2013 | | CBK | | | $ | 94 | | | $ | 94 | | | $ | – | |
| DKK | | Buy | | 01/03/2013 | | UBS | | | | 25 | | | | 25 | | | | – | |
| JPY | | Sell | | 02/01/2013 | | DEUT | | | | 6,127 | | | | 5,522 | | | | 605 | |
| | | | | | | | | | | | | | | | | | | $ | 605 | |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
| GLOSSARY: (abbreviations used in preceding Schedule of Investments) |
| |
| Counterparty Abbreviations: |
| CBK | Citibank NA | |
| DEUT | Deutsche Bank Securities, Inc. | |
| UBS | UBS AG | |
| | |
| Currency Abbreviations: |
| DKK | Denmark Krone | |
| JPY | Japanese Yen | |
| |
| Other Abbreviations: |
| ADR | American Depositary Receipt |
| FHLMC | Federal Home Loan Mortgage Corp. |
| FNMA | Federal National Mortgage Association |
| GNMA | Government National Mortgage Association |
| | |
| |
The accompanying notes are an integral part of these financial statements.
| Hartford Healthcare HLS Fund |
| Investment Valuation Hierarchy Level Summary |
| December 31, 2012 |
| (000’s Omitted) |
| | | Total | | | Level 1 ♦ | | | Level 2 ♦ | | | Level 3 | |
| Assets: | | | | | | | | | | | | | | | | |
| Common Stocks ‡ | | $ | 194,022 | | | $ | 174,734 | | | $ | 19,288 | | | $ | – | |
| Short-Term Investments | | | 1,677 | | | | – | | | | 1,677 | | | | – | |
| Total | | $ | 195,699 | | | $ | 174,734 | | | $ | 20,965 | | | $ | – | |
| Foreign Currency Contracts * | | | 605 | | | | – | | | | 605 | | | | – | |
| Total | | $ | 605 | | | $ | – | | | $ | 605 | | | $ | – | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Foreign Currency Contracts * | | | – | | | | – | | | | – | | | | – | |
| Total | | $ | – | | | $ | – | | | $ | – | | | $ | – | |
| ♦ | For the year ended December 31, 2012, investments valued at $572 were transferred from Level 2 to Level 1, and there were no transfers from Level 1 to Level 2. Investments are transferred between Level 1 and Level 2 for a variety of reasons including, but not limited to: |
| 1) | Foreign equities for which a fair value price is more representative of exit value than the local market close (transfer into Level 2). Foreign equities for which the local market close is more representative of exit value (transfer into Level 1). |
| 2) | U.S. Treasury securities that no longer represent the most recent issue (transfer into Level 2). |
| 3) | Equity investments with no observable trading but a bid or close price is used (transfer into Level 2). Equity investments using observable quoted prices in an active market (transfer into Level 1). |
| ‡ | The Fund has all or primarily all of the equity securities categorized in a particular level. Refer to the Schedule of Investments for further industry breakout. |
| * | Derivative instruments not reflected in the Schedule of Investments are valued at the unrealized appreciation/depreciation on the investments.
|
The accompanying notes are an integral part of these financial statements.
| Hartford Healthcare HLS Fund |
| Statement of Assets and Liabilities |
| December 31, 2012 |
| (000’s Omitted) |
| Assets: | | | | |
| Investments in securities, at market value (cost $172,232) | | $ | 195,699 | |
| Cash | | | 1 | |
| Foreign currency on deposit with custodian (cost $—) | | | — | |
| Unrealized appreciation on foreign currency contracts | | | 605 | |
| Receivables: | | | | |
| Investment securities sold | | | 46 | |
| Fund shares sold | | | 420 | |
| Dividends and interest | | | 188 | |
| Total assets | | | 196,959 | |
| Liabilities: | | | | |
| Unrealized depreciation on foreign currency contracts | | | — | |
| Payables: | | | | |
| Investment securities purchased | | | 999 | |
| Fund shares redeemed | | | 806 | |
| Investment management fees | | | 32 | |
| Distribution fees | | | 2 | |
| Accrued expenses | | | 13 | |
| Total liabilities | | | 1,852 | |
| Net assets | | $ | 195,107 | |
| Summary of Net Assets: | | | | |
| Capital stock and paid-in-capital | | $ | 155,185 | |
| Undistributed net investment income | | | 1,173 | |
| Accumulated net realized gain | | | 14,677 | |
| Unrealized appreciation of investments and the translations of assets and liabilities denominated in foreign currency | | | 24,072 | |
| Net assets | | $ | 195,107 | |
| Shares authorized | | | 800,000 | |
| Par value | | $ | 0.001 | |
| Class IA: Net asset value per share | | $ | 18.11 | |
| Shares outstanding | | | 8,273 | |
| Net assets | | $ | 149,801 | |
| Class IB: Net asset value per share | | $ | 17.71 | |
| Shares outstanding | | | 2,558 | |
| Net assets | | $ | 45,306 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Healthcare HLS Fund |
| Statement of Operations |
| For the Year Ended December 31, 2012 |
| (000’s Omitted) |
| Investment Income: | | | | |
| Dividends | | $ | 3,296 | |
| Interest | | | 3 | |
| Less: Foreign tax withheld | | | (86 | ) |
| Total investment income, net | | | 3,213 | |
| | | | | |
| Expenses: | | | | |
| Investment management fees | | | 1,722 | |
| Transfer agent fees | | | 5 | |
| Distribution fees - Class IB | | | 127 | |
| Custodian fees | | | 9 | |
| Accounting services fees | | | 20 | |
| Board of Directors' fees | | | 5 | |
| Audit fees | | | 11 | |
| Other expenses | | | 59 | |
| Total expenses (before fees paid indirectly) | | | 1,958 | |
| Commission recapture | | | (9 | ) |
| Total fees paid indirectly | | | (9 | ) |
| Total expenses, net | | | 1,949 | |
| Net Investment Income | | | 1,264 | |
| | | | | |
| Net Realized Gain on Investments and Foreign Currency Transactions: | | | | |
| Net realized gain on investments | | | 23,000 | |
| Net realized gain on foreign currency contracts | | | 65 | |
| Net realized gain on other foreign currency transactions | | | 19 | |
| Net Realized Gain on Investments and Foreign Currency Transactions | | | 23,084 | |
| | | | | |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions: | | | | |
| Net unrealized appreciation of investments | | | 12,253 | |
| Net unrealized appreciation of foreign currency contracts | | | 621 | |
| Net unrealized depreciation on translation of other assets and liabilities in foreign currencies | | | (2 | ) |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions | | | 12,872 | |
| Net Gain on Investments and Foreign Currency Transactions | | | 35,956 | |
| Net Increase in Net Assets Resulting from Operations | | $ | 37,220 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Healthcare HLS Fund |
| Statement of Changes in Net Assets |
| (000’s Omitted) |
| | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| Operations: | | | | | | | | |
| Net investment income | | $ | 1,264 | | | $ | 516 | |
| Net realized gain on investments and foreign currency transactions | | | 23,084 | | | | 20,256 | |
| Net unrealized appreciation (depreciation) of investments and foreign currency transactions | | | 12,872 | | | | (5,636 | ) |
| Net Increase in Net Assets Resulting from Operations | | | 37,220 | | | | 15,136 | |
| Distributions to Shareholders: | | | | | | | | |
| From net investment income | | | | | | | | |
| Class IA | | | (586 | ) | | | (68 | ) |
| Class IB | | | (64 | ) | | | — | |
| Total distributions | | | (650 | ) | | | (68 | ) |
| Capital Share Transactions: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 27,494 | | | | 30,285 | |
| Issued on reinvestment of distributions | | | 586 | | | | 68 | |
| Redeemed | | | (42,507 | ) | | | (41,445 | ) |
| Total capital share transactions | | | (14,427 | ) | | | (11,092 | ) |
| Class IB | | | | | | | | |
| Sold | | | 7,528 | | | | 11,253 | |
| Issued on reinvestment of distributions | | | 64 | | | | — | |
| Redeemed | | | (20,649 | ) | | | (21,415 | ) |
| Total capital share transactions | | | (13,057 | ) | | | (10,162 | ) |
| Net decrease from capital share transactions | | | (27,484 | ) | | | (21,254 | ) |
| Net Increase (Decrease) in Net Assets | | | 9,086 | | | | (6,186 | ) |
| Net Assets: | | | | | | | | |
| Beginning of period | | | 186,021 | | | | 192,207 | |
| End of period | | $ | 195,107 | | | $ | 186,021 | |
| Undistributed (distribution in excess of) | | | | | | | | |
| net investment income | | $ | 1,173 | | | $ | 578 | |
| Shares: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 1,592 | | | | 1,950 | |
| Issued on reinvestment of distributions | | | 34 | | | | 5 | |
| Redeemed | | | (2,450 | ) | | | (2,753 | ) |
| Total share activity | | | (824 | ) | | | (798 | ) |
| Class IB | | | | | | | | |
| Sold | | | 452 | | | | 747 | |
| Issued on reinvestment of distributions | | | 4 | | | | — | |
| Redeemed | | | (1,218 | ) | | | (1,449 | ) |
| Total share activity | | | (762 | ) | | | (702 | ) |
The accompanying notes are an integral part of these financial statements.
| Hartford Healthcare HLS Fund |
| Notes to Financial Statements |
| December 31, 2012 |
| (000’s Omitted) |
Hartford Healthcare HLS Fund (the “Fund”) serves as an underlying investment option for certain variable annuity and variable life insurance separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates and certain qualified retirement plans. The Fund may also serve as an underlying investment option for certain variable annuity and variable life separate accounts of other insurance companies. Owners of variable annuity contracts and policyholders of variable life insurance contracts may choose the funds permitted in the variable insurance contract prospectus. In addition, participants in certain qualified retirement plans may choose the Fund if permitted by their plans.
Hartford Series Fund, Inc. (the “Company”) is an open-end registered management investment company comprised of thirty portfolios. Financial Statements for the Fund, a series of the Company, are included in this report.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund is a diversified open-end management investment company.
The Fund is divided into Class IA and Class IB shares. Each class is offered at the per share net asset value (“NAV”) without a sales charge and is subject to the same expenses, except that the Class IB shares are subject to distribution and service fees charged pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act.
| 2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Fund in the preparation of its financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| a) | Determination of Net Asset Value – The NAV of each class of the Fund’s shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| b) | Investment Valuation and Fair Value Measurements – For purposes of calculating the NAV, portfolio investments and other assets held by the Fund's portfolio for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of last reported sales prices or official close price. If no sales are reported, market value is based on quotes obtained from a quotation reporting system, established market makers, or independent pricing services. If market prices are not readily available or are deemed unreliable, the Fund will use the fair value of the investment as determined in good faith under policies and procedures established by and under the supervision of the Company’s Board of Directors. Market quotes are considered not readily available where there is an absence of current or reliable market-based data (e.g., trade information or indicative market quotes), including where events occur after the close of the relevant market, but prior to the NYSE Close that materially affect the values of the Fund’s portfolio investments or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the investments trade do not open for trading for the entire day and no other market prices are available. In addition, prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close. Investments that are primarily traded on foreign markets may trade on days that are not business days of the Fund. The value of the foreign investments in which the Fund invests may change on days when a shareholder will not be able to purchase or redeem shares of the Fund. Fair value pricing is subjective in nature and the use of fair value pricing by the |
Fund may cause the NAV of its shares to differ significantly from the NAV that would have been calculated using market prices at the close of the exchange on which a portfolio investment is primarily traded. There can be no assurance that the Fund could obtain the fair market value assigned to an investment if the Fund were to sell the investment at approximately the time at which the Fund determines its NAV.
Investments valued in currencies other than U.S. dollars are converted to U.S. dollars using exchange rates obtained from independent pricing services for calculation of the NAV. As a result, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of investments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the NYSE is closed and the market value may change on days when an investor is not able to purchase, redeem or exchange shares of the Fund.
Foreign currency contracts represent agreements to exchange currencies on specific future dates at predetermined rates. Foreign currency contracts are valued using foreign currency exchange rates and forward rates as provided by an independent pricing service on the Valuation Date.
Financial instruments for which prices are not available from an independent pricing service may be valued using market quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with procedures established by the Company’s Board of Directors.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| · | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange traded funds, rights and warrants. |
| · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 may include debt investments that are traded less frequently than exchange traded instruments and which are valued using independent pricing services; foreign equities, which are principally traded on certain foreign markets and are adjusted daily pursuant to a fair value pricing service in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close; and short-term investments, which are valued at amortized cost. |
| · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price. |
The Board of Directors of the Company generally reviews and approves the “Procedures for Valuation of Portfolio Securities” on an annual basis. These procedures define how investments are to be valued, including the formation and activities of a Valuation Committee. The Valuation Committee is responsible for determining in good faith the fair value of investments when the value cannot be obtained from primary pricing services or alternative sources or if the valuation of an investment as provided by the primary pricing service or alternative
| Hartford Healthcare HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
source is believed not to reflect the investment’s fair value as of the Valuation Date. Members of the Valuation Committee include the Fund’s Treasurer or designee, a Vice President of the Fund with legal expertise or designee, and a Vice President of the investment manager or designee. In addition, the Fund’s Chief Compliance Officer shall designate a member of the compliance group to attend Valuation Committee meetings as a non-voting resource, to monitor for and provide guidance with respect to compliance with these procedures. Two members of the Valuation Committee or their designees, representing different departments, shall constitute a quorum for purposes of permitting the Valuation Committee to take action. The Valuation Committee will consider all relevant factors in determining an investment’s fair value, and may seek the advice of the Fund’s sub-adviser, knowledgeable brokers, and legal counsel in making such determination. The Valuation Committee reports to the Audit Committee of the Company’s Board of Directors. The Audit Committee receives quarterly written reports which include details of all fair-valued investments, including the reason for the fair valuation, and an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such investments (the “look-back” test). The Board of Directors then must consider for ratification all of the fair value determinations made during the previous quarter.
Valuation levels are not necessarily indicative of the risk associated with investing in such investments. Individual investments within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
For additional information, refer to the Investment Valuation Hierarchy Level Summary and the Level 3 roll-forward reconciliation, if applicable, which follow the Schedule of Investments.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period.
| c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Investments purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses are determined on the basis of identified cost. |
Dividend income from domestic securities is accrued on the ex-dividend date. In general, dividend income from foreign securities is recorded on the ex-date; however, dividend notifications in certain foreign jurisdictions may not be available in a timely manner and as a result, the Fund will record the dividend as soon as the relevant details (i.e., rate per share, payment date, shareholders of record, etc.) are publicly available. Interest income, including amortization of premium and accretion of discounts, is accrued on a daily basis.
| d) | Foreign Currency Transactions – Assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investments, income, and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. |
The Fund does not isolate that portion of portfolio investment valuation resulting from fluctuations in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of investments held. Exchange rate fluctuations are included with the net realized and unrealized gain or loss on investments in the accompanying financial statements.
Net realized foreign exchange gains or losses arise from sales of foreign currencies and the difference between asset and liability amounts initially stated in foreign currencies and the U.S. dollar value of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of other assets and liabilities at the end of the reporting period, resulting from changes in the exchange rates.
| e) | Joint Trading Account – The Fund may invest cash balances into a joint trading account that may be invested in one or more repurchase agreements. |
| f) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Fund’s shares are executed in accordance with the investment instructions of the contract holders and plan participants. The NAV of the Fund’s shares is determined as of the close of business on each business day of the Exchange. The NAV is determined separately for each class of shares of the Fund by dividing the Fund’s net assets attributable to that class by the number of shares of the class outstanding. Each class of shares offered by the Fund has equal rights as to assets and voting privileges (except that shareholders of a class have exclusive voting rights regarding any matter relating solely to that class of shares). Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets of the class. Realized and unrealized capital gains and losses are allocated daily based on the relative net assets of each class of shares of the Fund. |
Orders for the purchase of the Fund’s shares received prior to the close of the Exchange on any day the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Fund. The policy of the Fund is to pay dividends from net investment income and realized capital gains, if any, at least once a year.
Distributions from net investment income, net realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These differences may include but are not limited to losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to Passive Foreign Investment Companies (“PFICs”), Real Estate Investment Trusts (“REITs”), Regulated Investment Companies (“RICs”), certain derivatives and partnerships. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Fund’s capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| 3. | Securities and Other Investments: |
| a) | Repurchase Agreements – A repurchase agreement is an agreement by which a counterparty agrees to sell an investment and agrees to repurchase the investment sold from the buyer at a mutually agreed upon time and price. At the time the Fund enters into a repurchase agreement, the value of the underlying collateral, including accrued interest, will be equal to or exceed the value of the repurchase agreement. Repurchase agreements expose the Fund to counterparty risk - that is, the risk that the counterparty will not fulfill its obligations. To minimize counterparty risk, the investments that serve to collateralize the repurchase agreement are held by the Fund’s custodian in book entry or physical form in the custodial account of the Fund or in a third party custodial account. Repurchase agreements are valued at cost plus accrued interest, which approximates fair value. The Fund, as shown on the Schedule of Investments, had outstanding repurchase agreements as of December 31, 2012. |
| b) | Investments Purchased on a When-Issued or Delayed-Delivery Basis – Delivery and payment for investments that have been purchased by the Fund on a forward commitment, or when-issued or delayed-delivery basis, take place beyond the customary settlement period. A fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell delayed-delivery investments before they are delivered, which may result in a realized gain or loss. During this period, such investments are subject to market fluctuations, and the Fund identifies investments segregated in its records with a value at least equal to the amount of the commitment. The Fund, as shown on the Schedule of Investments, had when-issued or delayed-delivery investments as of December 31, 2012. |
Hartford Healthcare HLS Fund
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| 4. | Financial Derivative Instruments: |
The following disclosures contain information on how and why the Fund uses derivative instruments, the credit-risk-related contingent features in certain derivative instruments, and how derivative instruments affect the Fund’s financial position and results of operations. The location and fair value amounts of these instruments on the Statement of Assets and Liabilities and the realized gains and losses and changes in unrealized gains and losses on the Statement of Operations, each categorized by type of derivative contract, are included in the following Additional Derivative Instrument Information footnote. The derivative instruments outstanding as of year-end are disclosed in the notes to or within the Schedule of Investments for purchased options, if applicable. The amounts of realized gains and losses and changes in unrealized gains and losses on derivative instruments during the year are disclosed in the Statement of Operations.
| a) | Foreign Currency Contracts – The Fund may enter into foreign currency contracts that obligate the Fund to purchase or sell currencies at specified future dates. Foreign currency contracts are used to hedge the currency exposure associated with some or all of the Fund’s investments and/or as part of an investment strategy. Foreign currency contracts are marked to market daily and the change in value is recorded by the Fund as an unrealized gain or loss. The Fund will record a realized gain or loss when the foreign currency contract is settled. |
Foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. In addition, risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of the contracts and from unanticipated movements in the value of the foreign currencies relative to the U.S. dollar. The Fund had outstanding foreign currency contracts as shown on the Schedule of Investments as of December 31, 2012.
| b) | Additional Derivative Instrument Information: |
Fair Value of Derivative Instruments on the Statement of Assets and Liabilities as of December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized appreciation on foreign currency contracts | | $ | — | | | $ | 605 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 605 | |
| Total | | $ | — | | | $ | 605 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 605 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized depreciation on foreign currency contracts | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Total | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
The volume of derivatives that is presented in the Schedule of Investments is consistent with the derivative activity during the year ended December 31, 2012.
The Effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Realized Gain on Derivatives Recognized as a Result of Operations: |
| Net realized gain on foreign currency contracts | | $ | — | | | $ | 65 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 65 | |
| Total | | $ | — | | | $ | 65 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 65 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Change in Unrealized Appreciation on Derivatives Recognized as a Result of Operations: |
| Net change in unrealized appreciation of foreign currency contracts | | $ | — | | | $ | 621 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 621 | |
| Total | | $ | — | | | $ | 621 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 621 | |
| a) | Counterparty Risk – The Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will default. |
| b) | Market Risks – If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities, such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund. The market values of equity securities, such as common stocks and preferred stocks, or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The market value of equity securities may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities. |
| a) | Federal Income Taxes – For federal income tax purposes, the Fund intends to continue to qualify as a RIC under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders and otherwise complying with the requirements of the IRC. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains prior to the next fiscal year-end. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. |
Hartford Healthcare HLS Fund
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Fund for the periods indicated is as follows (as adjusted for dividends payable, if applicable): |
| | | For the Year Ended
December 31, 2012 | | | For the Year Ended
December 31, 2011 | |
| Ordinary Income | | $ | 650 | | | $ | 68 | |
As of December 31, 2012, the Fund’s components of distributable earnings (deficit) on a tax basis were as follows:
| | | Amount | |
| Undistributed Ordinary Income | | $ | 1,194 | |
| Undistributed Long-Term Capital Gain | | | 16,430 | |
| Unrealized Appreciation* | | | 22,298 | |
| Total Accumulated Earnings | | $ | 39,922 | |
| * | Differences between book-basis and tax-basis unrealized appreciation (depreciation) may be attributable to the losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. |
| d) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as foreign currency, PFICs, expiration or utilization of capital loss carryforwards or net operating losses. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Fund’s distributions may be shown in the accompanying Statement of Changes in Net Assets as from undistributed net investment income, from accumulated net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Fund recorded reclassifications to increase (decrease) the accounts listed below: |
| | | Amount | |
| Undistributed Net Investment Income | | $ | (19 | ) |
| Accumulated Net Realized Gain (Loss) | | | 19 | |
| e) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation. |
The Fund had no capital loss carryforward for U.S. federal income tax purposes as of December 31, 2012.
During the year ended December 31, 2012, the Fund utilized $6,976 of prior year capital loss carryforwards.
| f) | Accounting for Uncertainty in Income Taxes – The Fund has adopted financial reporting rules that require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Fund does not have an examination in progress. |
The Fund has reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules had no effect on the Fund’s financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2012. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Fund’s investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Fund pursuant to an Investment Management Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Fund’s investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees payable under, the Fund’s investment management agreements; or (ii) the day-to-day management of the Fund. The investment manager has overall investment supervisory responsibility for the Fund. In addition, the investment manager provides administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. The investment manager has contracted with Wellington Management Company, LLP (“Wellington Management”) under a sub-advisory agreement for the provision of day-to-day investment management services to the Fund in accordance with the Fund’s investment objective and policies. The Fund pays a fee to the investment manager, a portion of which may be used to compensate Wellington Management. |
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered as of December 31, 2012; the rates are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee | |
| On first $250 million | | | 0.8500 | % |
| On next $250 million | | | 0.8000 | % |
| On next $4.5 billion | | | 0.7500 | % |
| On next $5 billion | | | 0.7475 | % |
| Over $10 billion | | | 0.7450 | % |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Fund. HLIC provided accounting services for the Fund for the fiscal year ended December 31, 2012. The replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Fund or the fees charged to the Fund for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Fund, HFMC provides accounting services to the Fund and receives monthly compensation based on the Fund’s average daily net assets at the rates set forth below. The Fund’s accounting services fees are accrued daily and paid monthly. |
| Average Daily Net Assets | | Annual Fee | |
| All Assets | | | 0.010 | % |
| c) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund and allocated to classes within a Fund in proportion to the average daily net assets of the Fund and each class, except where allocation of certain expenses is more fairly made directly to the Fund or to specific classes within a Fund. |
| d) | Fees Paid Indirectly – The Company, on behalf of the Fund, has entered into agreements with State Street Global Markets, LLC and Russell Implementation Services, Inc. to partially recapture non-discounted trade commissions. Such |
Hartford Healthcare HLS Fund
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
rebates are used to pay a portion of the Fund’s expenses. In addition, the Fund’s custodian banks have agreed to reduce its fees when the Fund maintains cash on deposit in a non-interest-bearing custody account. For the year ended December 31, 2012, these amounts, if any, are included in the Statement of Operations.
The ratio of expenses to average net assets in the accompanying financial highlights excludes the reduction in expenses related to fees paid indirectly. The annualized expense ratio after waivers for the period listed below reflecting the reduction for fees paid indirectly is as follows:
| | | Year Ended
December 31, 2012 | |
| Class IA | | 0.90 | % |
| Class IB | | | 1.15 | |
| e) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Fund's principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD with HIFSCO did not result in any changes to the distribution services provided to the Fund. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Fund, has adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, 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, subject to the review and approval of the Company’s Board of Directors. |
The Distribution Plan provides that the Fund may pay annually up to 0.25% of the average daily net assets of the Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, the Fund is authorized to make payments monthly to the Distributor that may be used to pay or compensate 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. These fees are accrued daily and paid monthly.
| f) | Other Related Party Transactions – Certain officers of the Fund are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Fund’s Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Fund rounds to zero. Hartford Administrative Services Company (“HASCO”), an indirect wholly owned subsidiary of The Hartford, provides transfer agent services to the Fund. The amount paid to HASCO can be found in the Statement of Operations. These fees are accrued daily and paid monthly. |
| g) | Payments from Affiliates – In July of 2007, The Hartford entered into a settlement with the Attorneys General of the states of New York, Connecticut and Illinois relating to market timing and the company's individual variable annuity contracts in which certain payments would be made directly to the variable annuity contract holders. The distribution plan provided that unclaimed money from the settlement would be distributed to certain HLS Funds that are investment options through a Hartford individual variable annuity contract. The unclaimed money was distributed to the Fund on September 18, 2009. |
The total return in the accompanying financial highlights includes a payment from an affiliate. Had the payment from the affiliate been excluded, the impact and total return for the period listed below would have been as follows:
| | | | For the Year Ended December 31, 2009 | |
| | | | Class IA | | | | Class IB | |
| Impact from Payment from Affiliate for Attorneys General Settlement | | | 0.01 | % | | | 0.01 | % |
| Total Return Excluding Payment from Affiliate | | | 22.70 | % | | | 22.39 | % |
| 8. | Investment Transactions: |
For the year ended December 31, 2012, the Fund's aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
| | | Amount | |
| Cost of Purchases Excluding U.S. Government Obligations | | $ | 91,382 | |
| Sales Proceeds Excluding U.S. Government Obligations | | | 118,479 | |
The Fund is one of several Hartford funds that participate in a $500 million committed revolving line of credit facility. The facility is to be used for temporary or emergency purposes. Under the arrangement, the funds are required to own securities having a market value in excess of 300% of the total bank borrowings. The interest rate on borrowings varies depending on the nature of the loan. The facility also requires a fee to be paid based on the amount of the commitment. This commitment fee is allocated to all of the funds participating in the line of credit based on the average net assets of the funds. During the year ended December 31, 2012, the Fund did not have any borrowings under this facility.
| 10. | Industry Classifications: |
Other than the industry classifications “Other Investment Pools and Funds” and “Exchange Traded Funds,” equity industry classifications used in this report are the Global Industry Classification Standard, which was developed by and is the exclusive property and service mark of MSCI, Inc. and Standard & Poor’s.
Under the Company’s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
| 12. | Recent Accounting Pronouncement: |
Disclosures about Offsetting Assets and Liabilities - In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The objective of the ASU is to enhance current disclosure requirements on offsetting of certain assets and liabilities and to enable financial statement users to compare financial statements prepared under U.S. GAAP and International Financial Reporting Standards.
Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
| Hartford Healthcare HLS Fund |
| Financial Highlights |
| – Selected Per-Share Data – (A) |
Class | | Net Asset Value at
Beginning of
Period | | | Net Investment
Income (Loss) | | | Net Realized and
Unrealized Gain
(Loss) on
Investments | | | Total from
Investment
Operations | | | Dividends from Net
Investment Income | | | Distributions from
Realized Capital
Gains | | | Distributions from
Capital | | | Total Distributions | | | Net Asset Value at
End of Period | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| IA | | $ | 15.07 | | | $ | 0.13 | | | $ | 2.98 | | | $ | 3.11 | | | $ | (0.07 | ) | | $ | – | | | $ | – | | | $ | (0.07 | ) | | $ | 18.11 | |
| IB | | | 14.74 | | | | 0.09 | | | | 2.90 | | | | 2.99 | | | | (0.02 | ) | | | – | | | | – | | | | (0.02 | ) | | | 17.71 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2011 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| IA | | | 13.89 | | | | 0.06 | | | | 1.13 | | | | 1.19 | | | | (0.01 | ) | | | – | | | | – | | | | (0.01 | ) | | | 15.07 | |
| IB | | | 13.61 | | | | 0.02 | | | | 1.11 | | | | 1.13 | | | | – | | | | – | | | | – | | | | – | | | | 14.74 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2010 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| IA | | | 12.99 | | | | 0.08 | | | | 0.84 | | | | 0.92 | | | | (0.02 | ) | | | – | | | | – | | | | (0.02 | ) | | | 13.89 | |
| IB | | | 12.74 | | | | 0.04 | | | | 0.83 | | | | 0.87 | | | | – | | | | – | | | | – | | | | – | | | | 13.61 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2009 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| IA | | | 10.66 | | | | 0.07 | | | | 2.35 | | | | 2.42 | | | | (0.07 | ) | | | (0.02 | ) | | | – | | | | (0.09 | ) | | | 12.99 | |
| IB | | | 10.46 | | | | 0.03 | | | | 2.31 | | | | 2.34 | | | | (0.04 | ) | | | (0.02 | ) | | | – | | | | (0.06 | ) | | | 12.74 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2008 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| IA | | | 15.39 | | | | 0.06 | | | | (3.99 | ) | | | (3.93 | ) | | | (0.06 | ) | | | (0.74 | ) | | | – | | | | (0.80 | ) | | | 10.66 | |
| IB | | | 15.11 | | | | 0.02 | | | | (3.91 | ) | | | (3.89 | ) | | | (0.02 | ) | | | (0.74 | ) | | | – | | | | (0.76 | ) | | | 10.46 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include 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 would lower the Fund's performance. |
| (C) | Ratios do not reflect reductions for fees paid indirectly. Please see Fees Paid Indirectly in the Notes to Financial Statements. |
| (D) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
| (E) | Total return without the inclusion of the Payment from (to) Affiliate can be found in Expenses in the accompanying Notes to Financial Statements. |
| – Ratios and Supplemental Data – |
| Total Return(B) | | | Net Assets at End of Period | | | Ratio of Expenses to Average Net Assets
Before Waivers(C) | | | Ratio of Expenses to Average Net Assets
After Waivers(C) | | | Ratio of Net Investment
Income (Loss) to Average Net
Assets | | |
Portfolio
Turnover
Rate(D) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 20.62 | % | | $ | 149,801 | | | | 0.91 | % | | | 0.91 | % | | | 0.69 | % | | | 46 | % |
| | 20.32 | | | | 45,306 | | | | 1.16 | | | | 1.16 | | | | 0.43 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 8.54 | | | | 137,088 | | | | 0.91 | | | | 0.91 | | | | 0.33 | | | | 45 | |
| | 8.27 | | | | 48,933 | | | | 1.16 | | | | 1.16 | | | | 0.08 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 7.10 | | | | 137,454 | | | | 0.90 | | | | 0.90 | | | | 0.55 | | | | 32 | |
| | 6.84 | | | | 54,753 | | | | 1.15 | | | | 1.15 | | | | 0.30 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 22.72 | (E) | | | 154,216 | | | | 0.91 | | | | 0.91 | | | | 0.51 | | | | 73 | |
| | 22.41 | (E) | | | 63,065 | | | | 1.16 | | | | 1.16 | | | | 0.26 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (25.56 | ) | | | 179,087 | | | | 0.88 | | | | 0.88 | | | | 0.42 | | | | 57 | |
| | (25.75 | ) | | | 62,080 | | | | 1.13 | | | | 1.13 | | | | 0.17 | | | | – | |
| Report of Independent Registered Accounting Firm |
| The Board of Directors and Shareholders of |
| Hartford Series Fund, Inc. |
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Hartford Healthcare HLS Fund (one of the portfolios constituting Hartford Series Fund, Inc. (the Fund)) as of December 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Hartford Healthcare HLS Fund (one of the portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
|
| Minneapolis, MN |
| February 15, 2013 |
| Hartford Healthcare HLS Fund |
| Directors and Officers (Unaudited) |
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Fund pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Fund. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Fund’s statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Fund pays to The Hartford a portion of the Chief Compliance Officer’s compensation, but does not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
| Hartford Healthcare HLS Fund |
| Directors and Officers (Unaudited) – (continued) |
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010 (4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and a record of how the Fund voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
| Hartford Healthcare HLS Fund |
| Expense Example (Unaudited) |
Your Fund's Expenses
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Actual return | | | Hypothetical (5% return before expenses) | | | | | | | | | | |
| | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid during the period
June 30, 2012
through
December 31, 2012 | | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid during the period
June 30, 2012
through
December 31, 2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2
year | | | Days
in the
full
year | |
| Class IA | | $ | 1,000.00 | | | $ | 1,003.54 | | | $ | 4.55 | | | $ | 1,000.00 | | | $ | 1,020.60 | | | $ | 4.59 | | | | 0.90 | % | | | 184 | | | | 366 | |
| Class IB | | $ | 1,000.00 | | | $ | 1,003.41 | | | $ | 5.80 | | | $ | 1,000.00 | | | $ | 1,019.34 | | | $ | 5.85 | | | | 1.15 | % | | | 184 | | | | 366 | |
| Hartford Healthcare HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) |
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory and sub-advisory agreements. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for Hartford Healthcare HLS Fund (the “Fund”) with HL Investment Advisors, LLC (“HL Advisors”) and the continuation of the investment sub-advisory agreement between HL Advisors and the Fund’s sub-adviser, Wellington Management Company, LLP (the “Sub-adviser,” and together with HL Advisors, the “Advisers”) (collectively, the “Agreements”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from the Advisers to questions posed to them on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreements at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by the Advisers and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreements.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreements with respect to the Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Fund’s contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Fund’s management fees, sub-advisory fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement.
In determining to continue the Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreements. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreements is provided below.
Nature, Extent, and Quality of Services Provided by the Advisers
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Fund by the Advisers. The Board considered, among other things, the terms of the Agreements and the range of services provided by the Advisers. The Board considered the Advisers’ professional personnel who provide services to the Fund, including each Adviser’s ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered each Adviser’s reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to the Fund. In addition, the Board considered the quality of each Adviser’s communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning each Adviser’s regulatory and compliance environment. In this regard, the Board requested and reviewed information on each Adviser’s compliance policies and procedures, compliance history, and a report from the Fund’s Chief Compliance Officer on each Adviser’s compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. The Board also noted the Advisers’ support of the Fund’s compliance control structure, particularly the resources devoted by the Advisers in support of the Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act.
| Hartford Healthcare HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
With respect to HL Advisors, the Board noted that under the Agreements, HL Advisors is responsible for the management of the Fund, including overseeing fund operations and service providers, as well as investment advisory services in connection with selecting, monitoring and supervising the Sub-adviser. The Board considered HL Advisors’ ongoing monitoring of people, process and performance, including its quarterly reviews of each of the Hartford HLS Funds, semi-annual meetings with the leaders of each Fund’s portfolio management team, and oversight of the Funds’ approximately 40 portfolio managers. The Board recognized that HL Advisors has demonstrated a record of making changes to the management and/or strategies of the Funds when warranted. The Board considered HL Advisors’ oversight of the Sub-adviser’s investment approach and results, process for monitoring best execution of portfolio trades by the Sub-adviser, and approach to risk management with respect to the Fund and the service providers to the Fund. The Board also considered HL Advisors’ oversight of compliance with the Fund’s objective and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led to an increase in the scope of HL Advisors’ services in this regard. In addition, the Board considered HL Advisors’ ongoing commitment to review and rationalize the Hartford fund family’s product line-up and the expenses that HL Advisors had incurred in connection with fund combinations in recent years. The Board considered that HL Advisors or its affiliates are responsible for providing the Fund’s officers. The Board also noted that Hartford Life Insurance Company (“HLIC”) provides administrative services to the Fund. The Board considered its experiences with HL Advisors and HLIC with respect to each of these services.
With respect to the Sub-adviser, who provides day-to-day portfolio management services, the Board considered the quality of the Fund’s portfolio managers, the Sub-adviser’s other investment personnel, its investment philosophy and process, investment research capabilities and resources, performance record, trade execution capabilities and experience. The Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers, and the Sub-adviser’s method for compensating the portfolio managers.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Fund by HL Advisors and the Sub-adviser.
Performance of the Fund and the Advisers
The Board considered the investment performance of the Fund. In this regard, the Board reviewed the performance of the Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of the Fund’s performance for these time periods. The Board considered information and materials provided to the Board by the Advisers concerning Fund performance, as well as information from Lipper comparing the investment performance of the Fund to an appropriate benchmark and universe of peer funds. The Board noted that the performance of the Fund was within expectations.
The Board considered the detailed investment analytics reports provided by The Hartford’s Investment Advisory Group throughout the year. These reports include, among other things, information on the Fund’s gross and net returns, the Fund’s investment performance relative to an appropriate benchmark and peer group, various statistics concerning the Fund’s portfolio, and a narrative summary of various factors affecting Fund performance. The Board considered the Advisers’ cooperation with the Investment Committee, which assists the Board in evaluating the performance of the Fund at periodic meetings throughout the year. The Board also considered the analysis provided by the Consultant relating to the Fund’s performance track record.
In light of all the considerations noted above, the Board concluded that it had continued confidence in HL Advisors’ and the Sub-adviser’s overall capabilities to manage the Fund.
Costs of the Services and Profitability of the Advisers
The Board reviewed information regarding HL Advisors’ cost to provide investment management and related services to the Fund and HL Advisors’ profitability, both overall and for the Fund, on a pre-tax basis without regard to distribution expenses. The Board also requested and reviewed information about the profitability to HL Advisors and its affiliates from all services provided to the Fund and all aspects of their relationship with the Fund. The Board also requested and received information relating to the operations and profitability of the Sub-adviser.
The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement, noting the Consultant’s view that The Hartford’s process for calculating
and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by the Advisers and their affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by the Advisers
The Board considered comparative information with respect to the management fees to be paid by the Fund to HL Advisors and the total expense ratios of the Fund. The Board also considered comparative information with respect to the sub-advisory fees to be paid by HL Advisors to the Sub-adviser, to the extent applicable. In this regard, the Board requested and reviewed information from HL Advisors and the Sub-adviser relating to the management and sub-advisory fees, including the sub-advisory fee schedule for the Fund, and total operating expenses for the Fund. The Board considered that the management fee for the Fund includes the fee paid to HLIC for providing certain administrative services to the Fund. With respect to the sub-advisory fee schedule, the Board considered representations from HL Advisors and the Sub-adviser that the Sub-adviser’s fees were negotiated at arm’s length. The Board also reviewed information from Lipper comparing the Fund’s contractual management fees, actual management fees and overall expense ratios relative to a group of funds selected by Lipper, in consultation with the Consultant, and a broader universe of funds selected by Lipper.
While the Board recognized that comparisons between the Fund and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business models and cost structures of the Advisers, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of the Fund’s management and sub-advisory fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to the Fund’s management and sub-advisory fees and total operating expenses.
Based on these considerations, the Board concluded that the Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding the Advisers’ realization of economies of scale with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. The Board reviewed the breakpoints in the management fee schedule for the Fund, which reduces fee rates as Fund assets grow over time. The Board recognized that a fund with assets beyond the last breakpoint level will continue to benefit from economies of scale because additional assets are charged the lowest breakpoint fee resulting in lower overall effective management fee rates. The Board also recognized that a fee schedule that reaches a lower breakpoint quickly provides shareholders with the benefit of anticipated or potential economies of scale.
The Board reviewed and evaluated materials from Lipper showing how management fee schedules of peer funds reflect economies of scale for the benefit of shareholders as a peer fund’s assets hypothetically increase over time. Based on information provided by HL Advisors, Lipper, and the Consultant, the Board recognized that there is no uniform methodology for establishing breakpoints or uniform pattern in asset levels that trigger breakpoints or the amounts of breakpoints triggered.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Fund’s shareholders based on currently available information and the effective advisory fees and expense ratios for the Fund at its current and reasonably anticipated asset levels. The Board noted, however, that it would continue to monitor future growth in Fund assets and the appropriateness of additional breakpoints.
Other Benefits
The Board considered other benefits to the Advisers and their affiliates from their relationships with the Fund, including the role of the Fund in supporting the variable life insurance and variable annuity products offered by The Hartford. The Board reviewed
| Hartford Healthcare HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
information noting that HLIC, an affiliate of HL Advisors, receives fees for providing certain administrative services to the Fund, and that HLIC also receives fees for fund accounting and related services from the Fund, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Fund’s transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Fund, and the Board reviewed information on the profitability of the Fund’s transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Fund were fair and reasonable based on publicly available information.
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Fund, receives 12b-1 fees from the Fund. The Board also noted that certain affiliates of HL Advisors distribute shares of the Fund and receive compensation in that connection.
The Board considered benefits to the Sub-adviser from its use of the Fund’s brokerage commissions to obtain soft dollar research, and representations from HL Advisors and the Sub-adviser that the Sub-adviser would not make any revenue-sharing payments or any other type of distribution payments to HL Advisors or its affiliates.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the Agreements for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory and sub-advisory agreements. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreements for the Fund and approve a new investment management agreement for the Fund with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser, and a new investment sub-advisory agreement between HFMC and the Fund’s existing Sub-adviser, Wellington Management Company, LLP (together with HFMC, the “Post-Restructuring Advisers”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Fund. In order to implement the Restructuring, the Fund would terminate the existing Agreements and enter into a new investment management agreement with HFMC, with HFMC also entering into a new investment sub-advisory agreement with the Sub-adviser (collectively, the “New Agreements”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreements at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by HL Advisors and the Sub-adviser and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreements.
In determining to approve the New Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain
factors differently, the Board’s determination to approve the New Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreements.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Fund and the performance of investment management personnel to the Fund. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Fund prior to the Restructuring would continue to provide such services to the Fund, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreements would involve no changes to (i) the contractual terms of, including the management fees payable under, the Fund’s investment management and investment sub-advisory agreements; (ii) the investment processes and strategies employed in the management of the Fund’s assets; (iii) the nature and level of services provided under the Fund’s investment management and investment sub-advisory agreements; and (iv) the day-to-day management of the Fund and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Fund.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Fund.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Fund, the investment management arrangement for the Fund following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreements: (i) nature, extent and quality of services provided by HL Advisors and the Sub-adviser; (ii) performance of the Fund, HL Advisors and the Sub-adviser; (iii) costs of the services and profitability of HL Advisors and the Sub-adviser; (iv) comparative services rendered and comparative investment management and sub-advisory fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors and the Sub-adviser with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. With respect to the other benefits to the Post-Restructuring Advisers and their affiliates from their relationships with the Fund, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting and related services from the Fund.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the New Agreements. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
| Hartford Healthcare HLS Fund |
| Principal Risks (Unaudited) |
The principal risks of investing in the Fund are described below.
Market and Selection Risk: The Fund’s share price may fluctuate due to market risk and/or security selections that may underperform compared to the market or relevant benchmarks.
Health Sector Risk: Risks of focusing investments on the health care sector include regulatory and legal developments, patent considerations, intense competitive pressures, rapid technological changes and potential product obsolescence, and liquidity risk.
Foreign Investment and Emerging Markets Risk: Foreign investments can be riskier than U.S. investments. Potential risks include currency risk that may result from unfavorable exchange rates, liquidity risk if decreased demand for a security makes it difficult to sell at the desired price, and risks that stem from substantially lower trading volume on foreign markets. These risks are generally greater for investments in emerging markets, which are also subject to greater price volatility, and custodial and regulatory risks.
Small/Mid-cap Stock Risk: Small- and mid-cap stocks are generally more volatile and risky and may be less liquid than large-cap stocks because they may have limited operating histories, narrow product lines, and focus on niche markets.
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
HLSAR-HC12 2-13 113543 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 | |
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford High Yield HLS Fund
Table of Contents
This report is prepared for the general information of contract owners and qualified retirement plan participants. It is not an offer of contracts or of qualified retirement plans. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent information including the applicable sales, administrative and other charges.
The views expressed in the Fund’s Manager Discussion under ‘‘Why did the Fund perform this way?’’ and ‘‘What is the outlook?’’ are views of the Fund’s sub-adviser and portfolio management team through the end of the period and are subject to change based on market and other conditions.
Hartford High Yield HLS Fund inception 09/30/1998
(sub-advised by Wellington Management Company, LLP)
Investment objective – Seeks to provide high current income, and long-term total return.
Performance Overview 12/31/02 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IA. Growth results in classes other than Class IA will vary from what is seen above due to differences in the expenses charged to those share classes.
| Average Annual Total Returns (as of 12/31/12) |
| |
| | | 1 Year | | 5 Year | | 10 Year |
| High Yield IA | | | 14.31% | | | | 9.35% | | | | 9.21% | |
| High Yield IB | | | 14.03% | | | | 9.08% | | | | 8.94% | |
| Barclays U.S. Corporate High-Yield Index | | | 15.81% | | | | 10.34% | | | | 10.62% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund’s net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
Performance information includes performance of the Fund’s previous sub-adviser, Hartford Investment Management Company. As of March 5, 2012, Hartford Investment Management Company no longer serves as the sub-adviser to the Fund.
Barclays U.S. Corporate High-Yield Index (formerly known as Barclays Capital U.S. Corporate High-Yield Index) is an unmanaged 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 Securities and Exchange Commission.
You cannot invest directly in an index.
As of the Fund’s current prospectus dated May 1, 2012, the net total annual operating expense ratios for Class IA and Class IB shares were 0.74% and 0.99%, respectively, and the gross total annual operating expense ratios for Class IA and Class IB shares were 0.74% and 0.99%, respectively. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect until April 30, 2013, and automatically renew for one-year terms unless terminated by the Fund’s Investment Advisor (Hartford Funds Management Company, LLC). For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
| Hartford High Yield HLS Fund |
| Manager Discussion |
| December 31, 2012 (Unaudited) |
| |
| Portfolio Managers |
| Christopher A. Jones, CFA |
| Senior Vice President and Fixed Income Portfolio Manager |
| |
As of March 5, 2012, Wellington Management Company, LLP became the sub-adviser for the Fund. As of the same date, Hartford Investment Management Company no longer serves as the sub-adviser to the Fund. |
| |
How did the Fund perform?
The Class IA shares of the Hartford High Yield HLS Fund returned 14.31% for the twelve-month period ended December 31, 2012, underperforming its benchmark, the Barclays U.S. Corporate High- Yield Index, which returned 15.81% for the same period. The Fund outperformed the 14.09% return of the average fund in the Lipper VP-UF High Current Yield Funds peer group, a group of funds with investment strategies similar to those of the Fund.
Why did the Fund perform this way?
Risk assets performed well in 2012 owing to aggressive central bank actions, modest economic growth in the U.S., and reduced tail risks in Europe. In particular, the European Central Bank (ECB)’s rate cut and announced outright monetary transactions (OMT) helped calm investor fears over a potentially large, negative outcome in the European debt crisis. An agreement by eurozone finance ministers on a bailout deal for Greece, which signaled their commitment to ensure Greece remains in the eurozone, further fanned market optimism.
The year was also marked by important political events in the U.S. including the elections in November and the fiscal cliff negotiations, which kept markets on edge particularly in December, as it threatened to push the economy back into recession. On January 1, 2013, the House of Representatives passed legislation averting tax increases for most U.S. taxpayers while delaying spending cuts.
The U.S. Federal Reserve (Fed) remained extremely accommodative throughout the year given the fragile state of the global economic recovery. The Fed announced plans to purchase additional mortgage-backed securities through a third round of quantitative easing (QE3) and Treasury securities, significantly expanding the size of its balance sheet. Additionally, the Fed adopted inflation and unemployment-rate thresholds in place of its mid-2015 forward rate guidance, noting that it would keep rates unchanged for at least as long as unemployment remains above 6.5% and inflation projections stay near the Fed’s 2% target.
U.S. economic releases generally showed modest improvement throughout the period, highlighted by a recovery in the housing market. Home prices showed their first year-over-year gain (excluding short-term blips caused by homebuyer tax credits) since late 2006, aided by increased home sales and reduced inventory. Meanwhile, the unemployment rate declined by 0.70 percentage points to 7.8% as the labor market continued its slow recovery. Manufacturing activity slowed over the year, service sector growth picked up some, and consumer confidence edged up amid a healing jobs market.
Treasury yields were mixed over the period as the 30-year yield rose 6 basis points, while 5-year and 10-year yields fell 11 and 12 basis points, respectively. All of the major fixed income spread sectors posted strong absolute gains and outperformed Treasuries on a duration-adjusted basis.
The Fund underperformed its benchmark, the Barclays U.S. Corporate High-Yield Index, during the period due to a combination of sector allocation and security selection decisions.
Industry Allocation
In aggregate industry allocation detracted from benchmark relative results. Overweight allocations to the Media Cable and Technology sectors detracted from relative returns. We remain constructive on both sectors due to the Media Cable sector’s strong free cash flow generation as well as the continued need for data storage and processing in the Technology sector. Conversely, underweight allocations to the Energy and Metals sectors contributed positively to relative performance during the period. In general, we are not constructive on the Energy sector as these companies tend to have large capital expenditure budgets and be free cash flow negative. With depressed natural gas prices, many energy companies are in the process of switching operations to start drilling for oil, which gives us caution from a credit standpoint.
Security Selection
In aggregate security selection detracted from benchmark relative results. Among issuers within the Automotive sector, exposure to out of benchmark General Motors Corp and an overweight (i.e. the Fund’s position was greater than the benchmark position) to TRW Automotive hurt relative performance. Among issuers in the Wireless sector, our underweight position in Sprint and Clearwire Communications detracted from relative returns. Additionally, an allocation to high yield credit default swaps indices, which are used to manage overall portfolio risk and enhance return, also detracted from relative returns over the period. Within the Energy sector, an overweight to Everest Acquisition and exposure to out of benchmark First Reserve Corp represented the primary contributors to relative results. Overweight positions in Lloyds TSB Bank and Ally Financial benefitted relative performance in the Financial Services sector.
Quality Attribution
Lower quality bonds (CCC and Below) slightly outperformed their higher rated counterparts (BB and B) during the period. The Fund’s underweight to lower quality B rated and CCC rated bonds detracted modestly from relative results. Security selection within BB rated bonds also hurt relative performance. A modest cash position detracted from relative performance in an upward trending market.
| Hartford High Yield HLS Fund |
| Manager Discussion – (continued) |
| December 31, 2012 (Unaudited) |
| |
What is the outlook?
High yield bonds are still attractive in our view, given strong fundamentals, attractive yield advantage, and supportive technical backdrop. The trailing 12-month par-weighted default rate declined to 1.14% in December 2012, the lowest since October 2011, and well below the 25-year average of 4.20%. Issuers have meaningfully strengthened their balance sheets and liquidity positions since the 2008 credit crisis, and proceeds from new issuance have been used mainly to refinance existing debt, which should help mitigate default risk over the next few years. The sector’s average yield of 6.13% compares favorably to other fixed income sectors. However, with many issues trading above par, capital appreciation is likely to be limited because of the callable nature of high yield debt.
In aggregate, we recognize the risks of a severe macro economic backdrop, however, with average spreads currently in the 54th percentile (only 46% of months since 1994 have U.S. high yield valuations been cheaper), high yield still offers an attractive entry point for investors with a longer-time horizon. Over the course of 2013, we expect to see continued demand for high yield from investors seeking yield and from crossover investors looking to high yield as an equity-substitute.
Against this backdrop, the Fund ended the period underweight bonds rated B relative to the benchmark. From a sector perspective, we ended the quarter most overweight in Media Cable and Technology and most underweight in Energy and Metal/Mining companies relative to the benchmark. The Fund ended the period with a neutral duration posture relative the benchmark.
Distribution by Credit Quality
as of December 31, 2012
| Credit Rating * | | Percentage of
Net Assets | |
| Baa / BBB | | | 1.0 | % |
| Ba / BB | | | 30.2 | |
| B | | | 43.9 | |
| Caa / CCC or Lower | | | 17.1 | |
| Unrated | | | 3.4 | |
| Non-Debt Securities and Other Short-Term Instruments | | | 1.7 | |
| Other Assets & Liabilities | | | 2.7 | |
| Total | | | 100.0 | % |
| * | Does not apply to the Fund itself. Based upon Moody’s and S&P long-term credit ratings for the Fund’s holdings as of the date noted. If Moody's and S&P assign different ratings to a holding, the lower rating is used. "Unrated" includes fixed-income securities (other than cash-like short-term instruments and U.S. Government securities) for which Moody’s and S&P have not issued long-term credit ratings. |
Diversification by Industry
as of December 31, 2012
| Industry | | Percentage of
Net Assets | |
| Fixed Income Securities | | | | |
| Accommodation and Food Services | | | 2.5 | % |
| Administrative Waste Management and Remediation | | | 1.7 | |
| Arts, Entertainment and Recreation | | | 7.2 | |
| Beverage and Tobacco Product Manufacturing | | | 0.7 | |
| Chemical Manufacturing | | | 2.8 | |
| Computer and Electronic Product Manufacturing | | | 2.6 | |
| Construction | | | 3.4 | |
| Fabricated Metal Product Manufacturing | | | 0.8 | |
| Finance and Insurance | | | 11.9 | |
| Food Services | | | 0.6 | |
| Furniture and Related Product Manufacturing | | | 0.1 | |
| Health Care and Social Assistance | | | 8.1 | |
| Information | | | 18.0 | |
| Machinery Manufacturing | | | 1.2 | |
| Mining | | | 3.6 | |
| Miscellaneous Manufacturing | | | 2.0 | |
| Motor Vehicle and Parts Manufacturing | | | 1.3 | |
| Nonmetallic Mineral Product Manufacturing | | | 0.6 | |
| Other Services | | | 1.4 | |
| Paper Manufacturing | | | 0.2 | |
| Petroleum and Coal Products Manufacturing | | | 5.6 | |
| Pipeline Transportation | | | 2.4 | |
| Plastics and Rubber Products Manufacturing | | | 0.7 | |
| Primary Metal Manufacturing | | | 0.4 | |
| Professional, Scientific and Technical Services | | | 1.2 | |
| Real Estate and Rental and Leasing | | | 4.3 | |
| Retail Trade | | | 4.7 | |
| Soap, Cleaning Compound and Toilet Manufacturing | | | 0.5 | |
| Transportation Equipment Manufacturing | | | 0.3 | |
| Utilities | | | 3.2 | |
| Water Transportation | | | 0.6 | |
| Wholesale Trade | | | 1.0 | |
| Total | | | 95.6 | % |
| Equity Securities | | | | |
| Diversified Financials | | | 1.4 | |
| Energy | | | 0.2 | |
| Software and Services | | | 0.0 | |
| Total | | | 1.6 | % |
| Short-Term Investments | | | 0.1 | |
| Other Assets and Liabilities | | | 2.7 | |
| Total | | | 100.0 | % |
|
| Hartford High Yield HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount ╬ | | Market Value ╪ | |
ASSET & COMMERCIAL MORTGAGE BACKED SECURITIES - 0.0% | | | | |
| | | | | Finance and Insurance - 0.0% | | | | |
| | | | | Soundview NIM Trust | | | | |
| $ | 2,490 | | | 0.00%, 12/25/2036 ■● | | $ | — | |
| | | | | | | | | |
| | | | | Total asset & commercial mortgage backed securities | | | | |
| | | | | (cost $2,479) | | $ | — | |
| | | | | | | | | |
CORPORATE BONDS - 92.3% | | | | |
| | | | | Accommodation and Food Services - 2.5% | | | | |
| | | | | Caesars Operating Escrow | | | | |
| $ | 3,505 | | | 9.00%, 02/15/2020 ■ | | $ | 3,505 | |
| | | | | Ceasers Entertainment Operating Co., Inc. | | | | |
| | 4,180 | | | 8.50%, 02/15/2020 | | | 4,149 | |
| | | | | Choice Hotels International, Inc. | | | | |
| | 306 | | | 5.70%, 08/28/2020 | | | 332 | |
| | 2,295 | | | 5.75%, 07/01/2022 | | | 2,542 | |
| | | | | Starwood Hotels & Resorts, Inc. | | | | |
| | 3,905 | | | 7.15%, 12/01/2019 | | | 4,828 | |
| | | | | Wynn Las Vegas LLC | | | | |
| | 825 | | | 5.38%, 03/15/2022 | | | 876 | |
| | | | | | | | 16,232 | |
| | | | | Administrative Waste Management and Remediation - 1.7% | | | | |
| | | | | Carlson Wagonlit B.V. | | | | |
| | 1,675 | | | 6.88%, 06/15/2019 ■ | | | 1,767 | |
| | | | | Clean Harbors, Inc. | | | | |
| | 1,071 | | | 5.25%, 08/01/2020 | | | 1,117 | |
| | | | | Equinix, Inc. | | | | |
| | 2,050 | | | 7.00%, 07/15/2021 | | | 2,275 | |
| | | | | Iron Mountain, Inc. | | | | |
| | 1,350 | | | 5.75%, 08/15/2024 | | | 1,367 | |
| | 3,816 | | | 7.75%, 10/01/2019 | | | 4,303 | |
| | | | | | | | 10,829 | |
| | | | | Arts, Entertainment and Recreation - 7.2% | | | | |
| | | | | AMC Entertainment, Inc. | | | | |
| | 1,814 | | | 8.75%, 06/01/2019 | | | 2,009 | |
| | 4,944 | | | 9.75%, 12/01/2020 | | | 5,710 | |
| | | | | CCO Holdings LLC | | | | |
| | 4,021 | | | 5.25%, 09/30/2022 | | | 4,071 | |
| | 3,600 | | | 7.25%, 10/30/2017 | | | 3,924 | |
| | 4,972 | | | 7.38%, 06/01/2020 | | | 5,519 | |
| | | | | Chester Downs & Marina LLC | | | | |
| | 1,040 | | | 9.25%, 02/01/2020 ■ | | | 1,022 | |
| | | | | Cinemark USA, Inc. | | | | |
| | 430 | | | 5.13%, 12/15/2022 ■ | | | 436 | |
| | | | | Emdeon, Inc. | | | | |
| | 1,640 | | | 11.00%, 12/31/2019 | | | 1,894 | |
| | | | | Fidelity National Information Services, Inc. | | | | |
| | 2,505 | | | 5.00%, 03/15/2022 | | | 2,687 | |
| | | | | Gray Television, Inc. | | | | |
| | 2,621 | | | 7.50%, 10/01/2020 ■ | | | 2,680 | |
| | | | | Great Canadian Gaming Co. | | | | |
| CAD | 1,361 | | | 6.63%, 07/25/2022 ■ | | | 1,420 | |
| | | | | Greektown Superholdings, Inc. | | | | |
| | 1,650 | | | 13.00%, 07/01/2015 | | | 1,761 | |
| | | | | Isle of Capri Casinos, Inc. | | | | |
| | 2,690 | | | 8.88%, 06/15/2020 | | | 2,932 | |
| | | | | NAI Entertainment Holdings LLC | | | | |
| | 1,345 | | | 8.25%, 12/15/2017 ■ | | | 1,481 | |
| | | | | NCR Corp. | | | | |
| | 2,020 | | | 4.63%, 02/15/2021 ■ | | | 2,020 | |
| | | | | Regal Entertainment Group | | | | |
| | 3,455 | | | 9.13%, 08/15/2018 | | | 3,852 | |
| | | | | Sirius XM Radio, Inc. | | | | |
| | 1,021 | | | 5.25%, 08/15/2022 ■ | | | 1,031 | |
| | | | | Univision Communications, Inc. | | | | |
| | 2,695 | | | 6.75%, 09/15/2022 ■ | | | 2,783 | |
| | | | | | | | 47,232 | |
| | | | | Beverage and Tobacco Product Manufacturing - 0.7% | | | | |
| | | | | Constellation Brands, Inc. | | | | |
| | 3,965 | | | 6.00%, 05/01/2022 | | | 4,540 | |
| | | | | | | | | |
| | | | | Chemical Manufacturing - 2.8% | | | | |
| | | | | Ferro Corp. | | | | |
| | 3,873 | | | 7.88%, 08/15/2018 | | | 3,495 | |
| | | | | Hexion Specialty Chemicals | | | | |
| | 3,055 | | | 8.88%, 02/01/2018 | | | 3,139 | |
| | | | | Hexion U.S. Finance Corp. | | | | |
| | 1,245 | | | 6.63%, 04/15/2020 | | | 1,266 | |
| | | | | Ineos Group Holdings plc | | | | |
| | 5,630 | | | 8.50%, 02/15/2016 ■ | | | 5,602 | |
| | | | | LyondellBasell Industries N.V. | | | | |
| | 1,715 | | | 6.00%, 11/15/2021 | | | 2,011 | |
| | | | | Momentive Performance Materials, Inc. | | | | |
| | 2,045 | | | 9.00%, 01/15/2021 | | | 1,493 | |
| | | | | MPM Escrow LLC/MPM Finance Corp. | | | | |
| | 1,580 | | | 8.88%, 10/15/2020 ■ | | | 1,596 | |
| | | | | | | | 18,602 | |
| | | | | Computer and Electronic Product Manufacturing - 2.6% | | | | |
| | | | | CDW Escrow Corp. | | | | |
| | 6,355 | | | 8.50%, 04/01/2019 | | | 6,879 | |
| | | | | CDW LLC/CDW Finance | | | | |
| | 2,775 | | | 8.00%, 12/15/2018 | | | 3,070 | |
| | | | | Freescale Semiconductor, Inc. | | | | |
| | 3,791 | | | 8.05%, 02/01/2020 | | | 3,772 | |
| | 1,645 | | | 9.25%, 04/15/2018 ■ | | | 1,797 | |
| | | | | Sorenson Communications, Inc. | | | | |
| | 2,000 | | | 10.50%, 02/01/2015 ■ | | | 1,650 | |
| | | | | | | | 17,168 | |
| | | | | Construction - 3.4% | | | | |
| | | | | D.R. Horton, Inc. | | | | |
| | 2,520 | | | 6.50%, 04/15/2016 | | | 2,797 | |
| | | | | K Hovnanian Enterprises, Inc. | | | | |
| | 1,775 | | | 9.13%, 11/15/2020 ■ | | | 1,882 | |
| | | | | KB Home | | | | |
| | 2,206 | | | 7.50%, 09/15/2022 | | | 2,405 | |
| | 3,750 | | | 8.00%, 03/15/2020 | | | 4,256 | |
| | | | | Lennar Corp. | | | | |
| | 6,475 | | | 4.75%, 12/15/2017 - 11/15/2022 ■ | | | 6,638 | |
| | | | | Pulte Homes, Inc. | | | | |
| | 615 | | | 6.38%, 05/15/2033 | | | 613 | |
| | 2,446 | | | 7.88%, 06/15/2032 | | | 2,660 | |
| | | | | Ryland Group, Inc. | | | | |
| | 910 | | | 5.38%, 10/01/2022 | | | 932 | |
| | | | | | | | 22,183 | |
The accompanying notes are an integral part of these financial statements.
| Hartford High Yield HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount ╬ | | Market Value ╪ | |
CORPORATE BONDS - 92.3% - (continued) | | | | |
| | | | | Fabricated Metal Product Manufacturing - 0.8% | | | | |
| | | | | BWAY Holding Co. | | | | |
| $ | 2,162 | | | 10.00%, 06/15/2018 | | $ | 2,400 | |
| | | | | Masco Corp. | | | | |
| | 1,135 | | | 5.95%, 03/15/2022 | | | 1,258 | |
| | 320 | | | 7.13%, 03/15/2020 | | | 372 | |
| | | | | Ply Gem Industries, Inc. | | | | |
| | 1,155 | | | 9.38%, 04/15/2017 ■ | | | 1,230 | |
| | | | | | | | 5,260 | |
| | | | | Finance and Insurance - 10.8% | | | | |
| | | | | Ally Financial, Inc. | | | | |
| | 5,766 | | | 5.50%, 02/15/2017 | | | 6,168 | |
| | 1,930 | | | 7.50%, 09/15/2020 | | | 2,330 | |
| | | | | CIT Group, Inc. | | | | |
| | 3,011 | | | 5.25%, 03/15/2018 | | | 3,222 | |
| | 3,320 | | | 6.63%, 04/01/2018 ■ | | | 3,752 | |
| | | | | Community Choice Financial, Inc. | | | | |
| | 3,810 | | | 10.75%, 05/01/2019 | | | 3,667 | |
| | | | | Credit Acceptance Corp. | | | | |
| | 390 | | | 9.13%, 02/01/2017 | | | 426 | |
| | | | | Felcor Lodging L.P. | | | | |
| | 1,450 | | | 5.63%, 03/01/2023 ■ | | | 1,443 | |
| | | | | Fibria Overseas Finance Ltd. | | | | |
| | 3,535 | | | 7.50%, 05/04/2020 ■ | | | 3,924 | |
| | | | | Ineos Finance plc | | | | |
| | 1,220 | | | 7.50%, 05/01/2020 ■ | | | 1,278 | |
| | 715 | | | 8.38%, 02/15/2019 ■ | | | 770 | |
| | 4,085 | | | 9.00%, 05/15/2015 ■ | | | 4,340 | |
| | | | | Ladder Capital Finance Holdings LLC | | | | |
| | 2,430 | | | 7.38%, 10/01/2017 ■ | | | 2,497 | |
| | | | | Lloyds Banking Group plc | | | | |
| | 6,180 | | | 7.88%, 11/01/2020 ■ | | | 6,648 | |
| | | | | Nuveen Investments, Inc. | | | | |
| | 1,020 | | | 9.13%, 10/15/2017 ■ | | | 1,002 | |
| | 2,446 | | | 9.50%, 10/15/2020 ■ | | | 2,434 | |
| | | | | Provident Funding Associates L.P. | | | | |
| | 5,422 | | | 10.25%, 04/15/2017 ■ | | | 5,978 | |
| | | | | Royal Bank of Scotland Group plc | | | | |
| | 5,075 | | | 6.13%, 12/15/2022 | | | 5,357 | |
| | | | | SLM Corp. | | | | |
| | 2,515 | | | 6.25%, 01/25/2016 | | | 2,735 | |
| | 1,960 | | | 7.25%, 01/25/2022 | | | 2,161 | |
| | 2,335 | | | 8.45%, 06/15/2018 | | | 2,732 | |
| | | | | TitleMax, Inc. | | | | |
| | 5,155 | | | 13.25%, 07/15/2015 | | | 5,722 | |
| | | | | UBS AG Stamford CT | | | | |
| | 1,665 | | | 7.63%, 08/17/2022 | | | 1,839 | |
| | | | | | | | 70,425 | |
| | | | | Food Services - 0.6% | | | | |
| | | | | ARAMARK Holdings Corp. | | | | |
| | 3,615 | | | 8.63%, 05/01/2016 ■Þ | | | 3,701 | |
| | | | | | | | | |
| | | | | Furniture and Related Product Manufacturing - 0.1% | | | | |
| | | | | Tempur-Pedic International, Inc. | | | | |
| | 375 | | | 6.88%, 12/15/2020 ■ | | | 386 | |
| | | | | | | | | |
| | | | | Health Care and Social Assistance - 8.0% | | | | |
| | | | | Alere, Inc. | | | | |
| | 2,850 | | | 9.00%, 05/15/2016 | | | 3,007 | |
| | | | | American Renal Holdings, Inc. | | | | |
| | 3,490 | | | 8.38%, 05/15/2018 | | | 3,673 | |
| | | | | Biomet, Inc. | | | | |
| | 2,710 | | | 6.50%, 08/01/2020 - 10/01/2020 ■ | | | 2,791 | |
| | | | | Community Health Systems, Inc. | | | | |
| | 1,681 | | | 5.13%, 08/15/2018 | | | 1,752 | |
| | 2,935 | | | 7.13%, 07/15/2020 | | | 3,133 | |
| | | | | DaVita, Inc. | | | | |
| | 2,645 | | | 6.63%, 11/01/2020 | | | 2,876 | |
| | | | | Fresenius Medical Care US Finance II, Inc. | | | | |
| | 2,875 | | | 5.88%, 01/31/2022 ■ | | | 3,119 | |
| | | | | HCA Holdings, Inc. | | | | |
| | 1,835 | | | 6.25%, 02/15/2021 | | | 1,881 | |
| | | | | HCA, Inc. | | | | |
| | 4,260 | | | 7.25%, 09/15/2020 | | | 4,718 | |
| | 9,184 | | | 7.50%, 11/15/2095 | | | 7,921 | |
| | 2,531 | | | 8.50%, 04/15/2019 | | | 2,822 | |
| | | | | Health Management Associates, Inc. | | | | |
| | 2,070 | | | 7.38%, 01/15/2020 | | | 2,236 | |
| | | | | HealthSouth Corp. | | | | |
| | 3,149 | | | 7.25%, 10/01/2018 | | | 3,417 | |
| | | | | Hologic, Inc. | | | | |
| | 455 | | | 6.25%, 08/01/2020 ■ | | | 490 | |
| | | | | Radiation Therapy Services, Inc. | | | | |
| | 4,360 | | | 8.88%, 01/15/2017 | | | 4,273 | |
| | 3,700 | | | 9.88%, 04/15/2017 | | | 2,609 | |
| | | | | Savient Pharmaceuticals, Inc. | | | | |
| | 3,885 | | | 4.75%, 02/01/2018 ۞ | | | 687 | |
| | | | | Valeant Pharmaceuticals International, Inc. | | | | |
| | 865 | | | 6.75%, 08/15/2021 ■ | | | 928 | |
| | | | | | | | 52,333 | |
| | | | | Information - 18.0% | | | | |
| | | | | Altice Financing S.A. | | | | |
| | 1,500 | | | 7.88%, 12/15/2019 ■ | | | 1,586 | |
| | | | | Altice Finco S.A. | | | | |
| | 1,080 | | | 9.88%, 12/15/2020 ■ | | | 1,164 | |
| | | | | Audatex North America, Inc. | | | | |
| | 3,150 | | | 6.75%, 06/15/2018 ■ | | | 3,371 | |
| | | | | Cricket Communications, Inc. | | | | |
| | 3,810 | | | 7.75%, 10/15/2020 | | | 3,886 | |
| | | | | DISH DBS Corp. | | | | |
| | 2,170 | | | 5.00%, 03/15/2023 ■ | | | 2,170 | |
| | 3,725 | | | 5.88%, 07/15/2022 | | | 4,004 | |
| | 4,886 | | | 7.88%, 09/01/2019 | | | 5,790 | |
| | | | | First Data Corp. | | | | |
| | 1,800 | | | 6.75%, 11/01/2020 ■ | | | 1,818 | |
| | 5,425 | | | 7.38%, 06/15/2019 ■ | | | 5,615 | |
| | 2,265 | | | 8.25%, 01/15/2021 ■ | | | 2,265 | |
| | 1,564 | | | 10.55%, 09/24/2015 Þ | | | 1,602 | |
| | | | | GCI, Inc. | | | | |
| | 1,465 | | | 6.75%, 06/01/2021 | | | 1,436 | |
| | | | | Harron Communications L.P. | | | | |
| | 2,830 | | | 9.13%, 04/01/2020 ■ | | | 3,099 | |
| | | | | Inmarsat Finance plc | | | | |
| | 860 | | | 7.38%, 12/01/2017 ■ | | | 924 | |
| | | | | Intelsat Bermuda Ltd. | | | | |
| | 9,882 | | | 11.50%, 02/04/2017 Þ | | | 10,499 | |
| | | | | Intelsat Jackson Holdings S.A. | | | | |
| | 5,920 | | | 8.50%, 11/01/2019 | | | 6,630 | |
| | | | | InterActiveCorp | | | | |
| | 1,180 | | | 4.75%, 12/15/2022 ■ | | | 1,174 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount ╬ | | Market Value ╪ | |
CORPORATE BONDS - 92.3% - (continued) | | | | |
| | | | | Information - 18.0% - (continued) | | | | |
| | | | | Lawson Software | | | | |
| $ | 1,890 | | | 9.38%, 04/01/2019 | | $ | 2,122 | |
| | | | | Level 3 Communications, Inc. | | | | |
| | 590 | | | 8.88%, 06/01/2019 ■ | | | 628 | |
| | | | | Level 3 Escrow, Inc. | | | | |
| | 750 | | | 8.13%, 07/01/2019 | | | 818 | |
| | | | | Level 3 Financing, Inc. | | | | |
| | 1,550 | | | 7.00%, 06/01/2020 ■ | | | 1,620 | |
| | 6,401 | | | 10.00%, 02/01/2018 | | | 7,137 | |
| | | | | Mediacom LLC | | | | |
| | 3,470 | | | 9.13%, 08/15/2019 | | | 3,843 | |
| | | | | MetroPCS Wireless, Inc. | | | | |
| | 2,225 | | | 6.63%, 11/15/2020 | | | 2,364 | |
| | 4,710 | | | 7.88%, 09/01/2018 | | | 5,099 | |
| | | | | Nara Cable Funding Ltd. | | | | |
| | 3,615 | | | 8.88%, 12/01/2018 ■ | | | 3,678 | |
| | | | | NII Capital Corp. | | | | |
| | 1,255 | | | 7.63%, 04/01/2021 | | | 951 | |
| | | | | Paetec Holding Corp. | | | | |
| | 2,127 | | | 9.88%, 12/01/2018 | | | 2,435 | |
| | | | | SBA Communications Corp. | | | | |
| | 1,020 | | | 5.63%, 10/01/2019 ■ | | | 1,071 | |
| | | | | SBA Telecommunications, Inc. | | | | |
| | 990 | | | 5.75%, 07/15/2020 ■ | | | 1,052 | |
| | | | | Sprint Nextel Corp. | | | | |
| | 507 | | | 7.00%, 03/01/2020 ■ | | | 589 | |
| | 3,092 | | | 9.00%, 11/15/2018 ■ | | | 3,819 | |
| | | | | Syniverse Holdings, Inc. | | | | |
| | 3,470 | | | 9.13%, 01/15/2019 | | | 3,704 | |
| | | | | Unitymedia Hessen GmbH & Co. | | | | |
| | 2,555 | | | 5.50%, 01/15/2023 ■ | | | 2,638 | |
| | 2,496 | | | 7.50%, 03/15/2019 ■ | | | 2,746 | |
| | | | | UPCB Finance III Ltd. | | | | |
| | 2,868 | | | 6.63%, 07/01/2020 ■ | | | 3,072 | |
| | | | | UPCB Finance VI Ltd. | | | | |
| | 1,845 | | | 6.88%, 01/15/2022 ■ | | | 1,997 | |
| | | | | Videotron Ltee | | | | |
| | 2,430 | | | 9.13%, 04/15/2018 | | | 2,588 | |
| | | | | Wind Acquisition Finance S.A. | | | | |
| | 1,915 | | | 7.25%, 02/15/2018 ■ | | | 1,925 | |
| | | | | Windstream Corp. | | | | |
| | 3,400 | | | 7.50%, 04/01/2023 | | | 3,578 | |
| | | | | Zayo Group LLC | | | | |
| | 660 | | | 8.13%, 01/01/2020 | | | 734 | |
| | 480 | | | 10.13%, 07/01/2020 | | | 546 | |
| | | | | | | | 117,787 | |
| | | | | Machinery Manufacturing - 1.2% | | | | |
| | | | | Case New Holland, Inc. | | | | |
| | 6,921 | | | 7.88%, 12/01/2017 | | | 8,184 | |
| | | | | | | | | |
| | | | | Mining - 3.0% | | | | |
| | | | | American Rock Salt Co. LLC | | | | |
| | 1,171 | | | 8.25%, 05/01/2018 ■ | | | 1,060 | |
| | | | | FMG Resources Pty Ltd. | | | | |
| | 3,500 | | | 6.00%, 04/01/2017 ■ | | | 3,570 | |
| | 6,887 | | | 7.00%, 11/01/2015 ■ | | | 7,232 | |
| | 1,434 | | | 8.25%, 11/01/2019 ■ | | | 1,527 | |
| | | | | Peabody Energy Corp. | | | | |
| | 4,020 | | | 6.00%, 11/15/2018 | | | 4,271 | |
| | 1,572 | | | 6.50%, 09/15/2020 | | | 1,686 | |
| | | | | | | | 19,346 | |
| | | | | Miscellaneous Manufacturing - 2.0% | | | | |
| | | | | BE Aerospace, Inc. | | | | |
| | 4,041 | | | 5.25%, 04/01/2022 | | | 4,284 | |
| | | | | Reynolds Group Issuer, Inc. | | | | |
| | 1,995 | | | 7.88%, 08/15/2019 | | | 2,219 | |
| | | | | TransDigm Group, Inc. | | | | |
| | 551 | | | 5.50%, 10/15/2020 ■ | | | 573 | |
| | 5,140 | | | 7.75%, 12/15/2018 | | | 5,686 | |
| | | | | | | | 12,762 | |
| | | | | Motor Vehicle and Parts Manufacturing - 1.3% | | | | |
| | | | | American Axle & Manufacturing Holdings, Inc. | | | | |
| | 1,870 | | | 6.63%, 10/15/2022 | | | 1,898 | |
| | | | | Tenneco, Inc. | | | | |
| | 3,500 | | | 7.75%, 08/15/2018 | | | 3,798 | |
| | | | | TRW Automotive, Inc. | | | | |
| | 1,721 | | | 7.25%, 03/15/2017 ■ | | | 1,981 | |
| | 550 | | | 8.88%, 12/01/2017 ■ | | | 605 | |
| | | | | | | | 8,282 | |
| | | | | Nonmetallic Mineral Product Manufacturing - 0.6% | | | | |
| | | | | Ardagh Packaging Finance plc | | | | |
| | 480 | | | 7.38%, 10/15/2017 ■ | | | 522 | |
| | 511 | | | 9.13%, 10/15/2020 ■ | | | 557 | |
| | | | | Silgan Holdings, Inc. | | | | |
| | 2,910 | | | 5.00%, 04/01/2020 | | | 3,019 | |
| | | | | | | | 4,098 | |
| | | | | Other Services - 1.4% | | | | |
| | | | | Service Corp. International | | | | |
| | 7,975 | | | 7.63%, 10/01/2018 | | | 9,490 | |
| | | | | | | | | |
| | | | | Paper Manufacturing - 0.2% | | | | |
| | | | | Boise Cascade LLC | | | | |
| | 920 | | | 6.38%, 11/01/2020 ■ | | | 948 | |
| | | | | P.H. Glatfelter Co. | | | | |
| | 530 | | | 5.38%, 10/15/2020 ■ | | | 543 | |
| | | | | | | | 1,491 | |
| | | | | Petroleum and Coal Products Manufacturing - 5.6% | | | | |
| | | | | Antero Resources Finance Corp. | | | | |
| | 2,700 | | | 6.00%, 12/01/2020 ■ | | | 2,734 | |
| | 3,605 | | | 7.25%, 08/01/2019 | | | 3,929 | |
| | | | | Continental Resources, Inc. | | | | |
| | 2,655 | | | 5.00%, 09/15/2022 | | | 2,861 | |
| | | | | Endeavour International Corp. | | | | |
| | 3,048 | | | 12.00%, 03/01/2018 ■ | | | 3,185 | |
| | | | | EPE Holding/EP Energy Bond | | | | |
| | 1,385 | | | 8.13%, 12/15/2017 ■ | | | 1,373 | |
| | | | | Everest Acquisition LLC | | | | |
| | 570 | | | 6.88%, 05/01/2019 | | | 618 | |
| | 5,467 | | | 9.38%, 05/01/2020 | | | 6,164 | |
| | | | | Ferrellgas Partners L.P. | | | | |
| | 891 | | | 6.50%, 05/01/2021 | | | 882 | |
| | | | | Harvest Operations Corp. | | | | |
| | 1,315 | | | 6.88%, 10/01/2017 | | | 1,460 | |
| | | | | MEG Energy Corp. | | | | |
| | 1,716 | | | 6.38%, 01/30/2023 ■ | | | 1,789 | |
The accompanying notes are an integral part of these financial statements.
| Hartford High Yield HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount ╬ | | Market Value ╪ | |
CORPORATE BONDS - 92.3% - (continued) | | | | |
| | | | | Petroleum and Coal Products Manufacturing - 5.6% - (continued) | | | | |
| | | | | Newfield Exploration Co. | | | | |
| $ | 2,176 | | | 5.75%, 01/30/2022 | | $ | 2,393 | |
| | | | | Plains Exploration & Production Co. | | | | |
| | 675 | | | 6.75%, 02/01/2022 | | | 758 | |
| | | | | Rosetta Resources, Inc. | | | | |
| | 3,468 | | | 9.50%, 04/15/2018 | | | 3,849 | |
| | | | | Seadrill Ltd. | | | | |
| | 2,585 | | | 5.63%, 09/15/2017 ■ | | | 2,566 | |
| | | | | Shelf Drilling Holdings Ltd. | | | | |
| | 1,750 | | | 8.63%, 11/01/2018 ■ | | | 1,794 | |
| | | | | | | | 36,355 | |
| | | | | Pipeline Transportation - 2.4% | | | | |
| | | | | El Paso Corp. | | | | |
| | 955 | | | 7.75%, 01/15/2032 | | | 1,122 | |
| | 3,260 | | | 7.80%, 08/01/2031 | | | 3,801 | |
| | | | | Energy Transfer Equity L.P. | | | | |
| | 2,588 | | | 7.50%, 10/15/2020 | | | 2,989 | |
| | | | | Kinder Morgan Finance Co. | | | | |
| | 2,850 | | | 6.00%, 01/15/2018 ■ | | | 3,132 | |
| | | | | MarkWest Energy Partners L.P. | | | | |
| | 1,160 | | | 5.50%, 02/15/2023 | | | 1,259 | |
| | 1,024 | | | 6.25%, 06/15/2022 | | | 1,116 | |
| | | | | NGPL Pipeco LLC | | | | |
| | 2,075 | | | 7.12%, 12/15/2017 ■ | | | 2,262 | |
| | | | | | | | 15,681 | |
| | | | | Plastics and Rubber Products Manufacturing - 0.7% | | | | |
| | | | | Continental Rubber of America Corp. | | | | |
| | 3,180 | | | 4.50%, 09/15/2019 ■ | | | 3,254 | |
| | | | | Nortek, Inc. | | | | |
| | 1,135 | | | 8.50%, 04/15/2021 ■ | | | 1,257 | |
| | | | | | | | 4,511 | |
| | | | | Primary Metal Manufacturing - 0.4% | | | | |
| | | | | Novelis, Inc. | | | | |
| | 2,513 | | | 8.75%, 12/15/2020 | | | 2,802 | |
| | | | | | | | | |
| | | | | Professional, Scientific and Technical Services - 1.2% | | | | |
| | | | | Lamar Media Corp. | | | | |
| | 1,465 | | | 7.88%, 04/15/2018 | | | 1,619 | |
| | | | | SunGard Data Systems, Inc. | | | | |
| | 490 | | | 6.63%, 11/01/2019 ■ | | | 501 | |
| | 3,685 | | | 7.38%, 11/15/2018 | | | 3,947 | |
| | 1,520 | | | 7.63%, 11/15/2020 | | | 1,661 | |
| | | | | | | | 7,728 | |
| | | | | Real Estate and Rental and Leasing - 4.3% | | | | |
| | | | | Air Lease Corp. | | | | |
| | 4,215 | | | 5.63%, 04/01/2017 | | | 4,468 | |
| | | | | Ashtead Capital, Inc. | | | | |
| | 455 | | | 6.50%, 07/15/2022 ■ | | | 494 | |
| | | | | HDTFS, Inc. | | | | |
| | 1,075 | | | 5.88%, 10/15/2020 ■ | | | 1,123 | |
| | 695 | | | 6.25%, 10/15/2022 ■ | | | 740 | |
| | | | | International Lease Finance Corp. | | | | |
| | 10,126 | | | 5.88%, 04/01/2019 - 08/15/2022 | | | 10,676 | |
| | 1,720 | | | 6.25%, 05/15/2019 | | | 1,832 | |
| | 3,335 | | | 8.88%, 09/01/2017 | | | 3,919 | |
| | | | | United Rental Financing Escrow Corp. | | | | |
| | 292 | | | 5.75%, 07/15/2018 ■ | | | 315 | |
| | 531 | | | 7.38%, 05/15/2020 ■ | | | 583 | |
| | 529 | | | 7.63%, 04/15/2022 ■ | | | 591 | |
| | | | | UR Merger Sub Corp. | | | | |
| | 2,823 | | | 8.38%, 09/15/2020 | | | 3,126 | |
| | | | | | | | 27,867 | |
| | | | | Retail Trade - 3.9% | | | | |
| | | | | 99 Cents Only Stores | | | | |
| | 3,545 | | | 11.00%, 12/15/2019 | | | 4,041 | |
| | | | | AmeriGas Partners L.P. | | | | |
| | 3,336 | | | 6.25%, 08/20/2019 | | | 3,570 | |
| | | | | Building Materials Corp. | | | | |
| | 2,948 | | | 7.50%, 03/15/2020 ■ | | | 3,243 | |
| | | | | GRD Holding III Corp. | | | | |
| | 2,860 | | | 10.75%, 06/01/2019 ■ | | | 2,867 | |
| | | | | J.C. Penney Co., Inc. | | | | |
| | 225 | | | 6.38%, 10/15/2036 | | | 169 | |
| | 400 | | | 7.13%, 11/15/2023 | | | 345 | |
| | 1,290 | | | 7.40%, 04/01/2037 | | | 1,077 | |
| | 210 | | | 7.95%, 04/01/2017 | | | 202 | |
| | | | | Michaels Stores, Inc. | | | | |
| | 5,245 | | | 7.75%, 11/01/2018 | | | 5,756 | |
| | | | | PC Merger Sub, Inc. | | | | |
| | 1,080 | | | 8.88%, 08/01/2020 ■ | | | 1,158 | |
| | | | | Sally Holdings LLC | | | | |
| | 1,425 | | | 5.75%, 06/01/2022 | | | 1,546 | |
| | 1,395 | | | 6.88%, 11/15/2019 | | | 1,542 | |
| | | | | | | | 25,516 | |
| | | | | Soap, Cleaning Compound and Toilet Manufacturing - 0.5% | | | | |
| | | | | Revlon Consumer Products Corp. | | | | |
| | 3,430 | | | 9.75%, 11/15/2015 | | | 3,610 | |
| | | | | | | | | |
| | | | | Transportation Equipment Manufacturing - 0.3% | | | | |
| | | | | Huntington Ingalls Industries, Inc. | | | | |
| | 1,785 | | | 7.13%, 03/15/2021 | | | 1,941 | |
| | | | | | | | | |
| | | | | Utilities - 2.5% | | | | |
| | | | | AES (The) Corp. | | | | |
| | 3,230 | | | 8.00%, 10/15/2017 ╦ | | | 3,731 | |
| | 2,409 | | | 9.75%, 04/15/2016 | | | 2,879 | |
| | | | | Ainsworth Lumber Ltd. | | | | |
| | 1,195 | | | 7.50%, 12/15/2017 ■ | | | 1,252 | |
| | | | | Calpine Corp. | | | | |
| | 3,078 | | | 7.88%, 01/15/2023 ■ | | | 3,478 | |
| | | | | Dolphin Subsidiary II, Inc. | | | | |
| | 2,615 | | | 7.25%, 10/15/2021 | | | 2,798 | |
| | | | | Texas Competitive Electric Co. | | | | |
| | 2,765 | | | 11.50%, 10/01/2020 ■ | | | 2,163 | |
| | | | | | | | 16,301 | |
| | | | | Water Transportation - 0.6% | | | | |
| | | | | ACL I Corp. | | | | |
| | 3,851 | | | 10.63%, 02/15/2016 Þ | | | 3,735 | |
| | | | | | | | | |
| | | | | Wholesale Trade - 1.0% | | | | |
| | | | | HD Supply, Inc. | | | | |
| | 2,395 | | | 8.13%, 04/15/2019 ■ | | | 2,730 | |
| | | | | J.M. Huber Corp. | | | | |
| | 3,415 | | | 9.88%, 11/01/2019 ■ | | | 3,791 | |
| | | | | | | | 6,521 | |
| | | | | Total corporate bonds | | | | |
| | | | | (cost $574,325) | | $ | 602,899 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount ╬ | | Market Value ╪ | |
SENIOR FLOATING RATE INTERESTS ♦ - 3.3% | | | | |
| | | | | Finance and Insurance - 1.1% | | | | |
| | | | | Asurion Corp., 2nd Lien Term Loan | | | | |
| $ | 1,057 | | | 9.00%, 05/24/2019 | | $ | 1,087 | |
| | | | | Asurion LLC | | | | |
| | 2,356 | | | 5.50%, 05/24/2018 | | | 2,378 | |
| | | | | Macquarie Aircraft Leasing Finance S.A., 2nd Lien Term Loan | | | | |
| | 3,444 | | | 4.21%, 11/29/2013 | | | 3,392 | |
| | | | | | | | 6,857 | |
| | | | | Health Care and Social Assistance - 0.1% | | | | |
| | | | | Hologic, Inc. | | | | |
| | 908 | | | 4.50%, 08/01/2019 | | | 918 | |
| | | | | | | | | |
| | | | | Mining - 0.6% | | | | |
| | | | | Arch Coal, Inc. | | | | |
| | 3,817 | | | 5.75%, 05/16/2018 | | | 3,851 | |
| | | | | | | | | |
| | | | | Retail Trade - 0.8% | | | | |
| | | | | EB Sports Corp. | | | | |
| | 5,436 | | | 11.50%, 12/31/2015 Þ | | | 5,409 | |
| | | | | | | | | |
| | | | | Utilities - 0.7% | | | | |
| | | | | Texas Competitive Electric Holdings Co. LLC | | | | |
| | 7,000 | | | 4.75%, 10/10/2017 | | | 4,650 | |
| | | | | | | | | |
| | | | | Total senior floating rate interests | | | | |
| | | | | (cost $21,084) | | $ | 21,685 | |
| | | | �� | | | | | |
COMMON STOCKS - 0.2% | | | | |
| | | | | Energy - 0.2% | | | | |
| | 206,275 | | | KCA Deutag ⌂●† | | $ | 999 | |
| | | | | | | | | |
| | | | | Software and Services - 0.0% | | | | |
| | 38 | | | Stratus Technologies, Inc. ⌂●† | | | 74 | |
| | | | | | | | | |
| | | | | Total common stocks | | | | |
| | | | | (cost $2,796) | | $ | 1,073 | |
| | | | | | | | | |
PREFERRED STOCKS - 1.4% | | | | |
| | | | | Diversified Financials - 1.4% | | | | |
| | 124 | | | Citigroup Capital XIII | | $ | 3,471 | |
| | 200 | | | GMAC Capital Trust I ۞ | | | 5,330 | |
| | | | | | | | 8,801 | |
| | | | | Software and Services - 0.0% | | | | |
| | 9 | | | Stratus Technologies, Inc. ⌂† | | | 149 | |
| | | | | | | | | |
| | | | | Total preferred stocks | | | | |
| | | | | (cost $7,943) | | $ | 8,950 | |
| | | | | | | | | |
| | | | | Total long-term investments
(cost $608,627) | | $ | 634,607 | |
| | | | | | | | | |
| SHORT-TERM INVESTMENTS - 0.1% | | | | |
| Repurchase Agreements - 0.1% | | | | |
| | | | | Bank of America Merrill Lynch TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $21,
collateralized by FHLMC 3.00%, 2042,
FNMA 4.00%, 2042, value of $21) | | | | |
| 21 | | | 0.19%, 12/31/2012 | | | 21 | |
| | | | | Bank of Montreal TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $146, collateralized by FHLMC
2.50% - 5.50%, 2019 - 2042, FNMA
0.76% - 6.11%, 2016 - 2042, GNMA
3.50%, 2042, value of $149) | | | | |
| | 146 | | | 0.23%, 12/31/2012 | | | 146 | |
| | | | | Barclays Capital TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $46, collateralized by U.S.
Treasury Note 2.00% - 2.13%, 2016, value
of $47) | | | | |
| | 46 | | | 0.20%, 12/31/2012 | | | 46 | |
| | | | | Citigroup Global Markets, Inc. TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $287,
collateralized by U.S. Treasury Note 1.88%
- 4.13%, 2015 - 2018, value of $293) | | | | |
| | 287 | | | 0.17%, 12/31/2012 | | | 287 | |
| | | | | Deutsche Bank Securities TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $6,
collateralized by FNMA 3.00%, 2032,
value of $6) | | | | |
| | 6 | | | 0.25%, 12/31/2012 | | | 6 | |
| | | | | RBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $202, collateralized by U.S.
Treasury Note 0.50% - 2.75%, 2013 -
2019, value of $206) | | | | |
| | 202 | | | 0.20%, 12/31/2012 | | | 202 | |
| | | | | TD Securities TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $177, collateralized by FHLMC
3.50% - 6.00%, 2036 - 2042, FNMA
0.22% - 5.50%, 2013 - 2042, value of
$181) | | | | |
| | 177 | | | 0.21%, 12/31/2012 | | | 177 | |
| | | | | UBS Securities, Inc. Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$3, collateralized by U.S. Treasury Bill
0.75%, 2013, value of $3) | | | | |
| | 3 | | | 0.17%, 12/31/2012 | | | 3 | |
The accompanying notes are an integral part of these financial statements.
| Hartford High Yield HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount ╬ | | | | | | Market Value ╪ | |
| SHORT-TERM INVESTMENTS - 0.1% - (continued) | | | | | | | |
| Repurchase Agreements - 0.1% - (continued) | | | | | | | |
| | | | | UBS Securities, Inc. TriParty Repurchase Agreement (maturing on 01/02/2013 in the
amount of $12, collateralized by FNMA
2.50%, 2027, GNMA 3.00%, 2042, value
of $12) | | | | | | | |
| | 12 | | | 0.25%, 12/31/2012 | | | | | | 12 | |
| | | | | | | | | | | 900 | |
| | | | | Total short-term investments | | | | | | | |
| | | | | (cost $900) | | | | | $ | 900 | |
| | | | | | | | | | | | |
| | | | | Total investments | | | | | | | |
| | | | | (cost $609,527) ▲ | | 97.3 | % | | $ | 635,507 | |
| | | | | Other assets and liabilities | | 2.7 | % | | | 17,585 | |
| | | | | Total net assets | | 100.0 | % | | $ | 653,092 | |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $610,016 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 33,371 | |
| Unrealized Depreciation | | | (7,880 | ) |
| Net Unrealized Appreciation | | $ | 25,491 | |
| † | These securities are valued in good faith at fair value as determined under policies and procedures established by and under the supervision of the Company's Board of Directors. At December 31, 2012, the aggregate value of these securities was $1,222, which represents 0.2% of total net assets. |
| ● | Non-income producing. For long-term debt securities, items identified are in default as to payment of interest and/or principal. |
| ♦ | Senior floating rate interests generally pay interest rates which are periodically adjusted by reference to a base short-term, floating lending rate plus a premium. These base lending rates are generally (i) the lending rate offered by one or more major European banks, such as the LIBOR, (ii) the prime rate offered by one or more major United States Banks, or (iii) the bank's certificate of deposit rate. Senior floating rate interests often require prepayments from excess cash flows or permit the borrower to repay at its election. The rate at which the borrower repays cannot be predicted with accuracy. As a result, the actual remaining maturity may be substantially less than the stated maturities shown. Unless otherwise noted, the interest rate disclosed for these securities represents the average coupon as of December 31, 2012. |
| ■ | Securities issued within terms of a private placement memorandum, exempt from registration under Rule 144A under the Securities Act of 1933, as amended, and may be sold only to qualified institutional buyers. Unless otherwise indicated, these holdings are determined to be liquid. At December 31, 2012, the aggregate value of these securities was $199,535, which represents 30.6% of total net assets. |
| ⌂ | The following securities are considered illiquid. Illiquid securities are often purchased in private placement transactions, are often not registered under the Securities Act of 1933 and may have contractual restrictions on resale. A security may also be considered illiquid if the security lacks a readily available market or if its valuation has not changed for a certain period of time. |
| Period Acquired | | Shares/ Par | | | Security | | Cost Basis | |
| 03/2011 | | | 206,275 | | | KCA Deutag | | $ | 2,796 | |
| 03/2010 - 04/2010 | | | 38 | | | Stratus Technologies, Inc. | | | – | |
| 03/2010 - 04/2010 | | | 9 | | | Stratus Technologies, Inc. Preferred | | | – | |
At December 31, 2012, the aggregate value of these securities was $1,222, which represents 0.2% of total net assets.
| ╬ | All principal amounts are in U.S. dollars unless otherwise indicated. |
The accompanying notes are an integral part of these financial statements.
| ╦ | This security, or a portion of this security, has been pledged as collateral in connection with swap contracts. Securities valued at $214, held on behalf of the Fund at the custody bank, were received from broker(s) as collateral in connection with swap contracts. |
| Þ | This security may pay interest in additional principal instead of cash. |
| Foreign Currency Contracts Outstanding at December 31, 2012 |
| |
| Currency | | Buy / Sell | | Delivery Date | | Counterparty | | Contract Amount | | | Market Value ╪ | | | Unrealized
Appreciation/
(Depreciation) | |
| CAD | | Sell | | 01/18/2013 | | CSFB | | $ | 1,376 | | | $ | 1,368 | | | $ | 8 | |
|
| Credit Default Swap Contracts Outstanding at December 31, 2012 |
| |
| Reference Entity | | Counterparty | | Notional
Amount (a) | | | (Pay)/Receive
Fixed Rate | | | Expiration
Date | | Upfront
Premiums
Paid/
(Received) | | | Market
Value ╪ | | | Unrealized
Appreciation/
(Depreciation) | |
| Credit default swaps on traded indices: | | | | | | | | | | | | | | | | | | | | | | | | |
| Buy protection: | | | | | | | | | | | | | | | | | | | | | | | | |
| CDX.NA.HY.19 | | BOA | | $ | 16,275 | | | | (5.00 | )% | | 12/20/17 | | $ | (36 | ) | | $ | 50 | | | $ | 86 | |
| (a) | The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement. Notional shown in U.S. dollars unless otherwise noted. |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
| GLOSSARY: (abbreviations used in preceding Schedule of Investments) |
| |
| Counterparty Abbreviations: |
| BOA | Banc of America Securities LLC |
| CSFB | Credit Suisse First Boston Corp. |
| |
| Currency Abbreviations: |
| CAD | Canadian Dollar |
| |
| Index Abbreviations: |
| CDX.NA.HY | Credit Derivatives North American High Yield |
| |
| Other Abbreviations: |
| FHLMC | Federal Home Loan Mortgage Corp. |
| FNMA | Federal National Mortgage Association |
| GNMA | Government National Mortgage Association |
| LIBOR | London Interbank Offered Rate |
The accompanying notes are an integral part of these financial statements.
| Hartford High Yield HLS Fund |
| Investment Valuation Hierarchy Level Summary |
| December 31, 2012 |
| (000’s Omitted) |
| | | Total | | | Level 1 ♦ | | | Level 2 ♦ | | | Level 3 | |
| Assets: | | | | | | | | | | | | | | | | |
| Asset & Commercial Mortgage Backed Securities | | $ | – | | | $ | – | | | $ | – | | | $ | – | |
| Common Stocks ‡ | | | 1,073 | | | | – | | | | – | | | | 1,073 | |
| Corporate Bonds | | | 602,899 | | | | – | | | | 602,899 | | | | – | |
| Preferred Stocks | | | 8,950 | | | | 8,801 | | | | – | | | | 149 | |
| Senior Floating Rate Interests | | | 21,685 | | | | – | | | | 21,685 | | | | – | |
| Short-Term Investments | | | 900 | | | | – | | | | 900 | | | | – | |
| Total | | $ | 635,507 | | | $ | 8,801 | | | $ | 625,484 | | | $ | 1,222 | |
| Credit Default Swaps * | | | 86 | | | | – | | | | 86 | | | | – | |
| Foreign Currency Contracts * | | | 8 | | | | – | | | | 8 | | | | – | |
| Total | | $ | 94 | | | $ | – | | | $ | 94 | | | $ | – | |
| ♦ | For the year ended December 31, 2012, there were no transfers between Level 1 and Level 2. |
| ‡ | The Fund has all or primarily all of the equity securities categorized in a particular level. Refer to the Schedule of Investments for further industry breakout. |
| * | Derivative instruments not reflected in the Schedule of Investments are valued at the unrealized appreciation/depreciation on the investments.
|
Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:
| | | Balance as
of
December
31, 2011 | | | Realized
Gain
(Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Net
Amortization | | | Purchases | | | Sales | | | Transfers
Into
Level 3 * | | | Transfers
Out of
Level 3 * | | | Balance as
of
December
31, 2012 | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Asset & Commercial Mortgage Backed Securities | | $ | — | | | $ | — | | | $ | — | † | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Common Stocks | | | 1,720 | | | | — | | | | (647 | )‡ | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,073 | |
| Corporate Bonds | | | 5,167 | | | | (25 | ) | | | 52 | | | | (1 | ) | | | — | | | | (1,946 | ) | | | — | | | | (3,247 | ) | | | — | |
| Preferred Stocks | | | — | | | | — | | | | 149 | § | | | — | | | | — | | | | — | | | | — | | | | — | | | | 149 | |
| Total | | $ | 6,887 | | | $ | (25 | ) | | $ | (446 | ) | | $ | (1 | ) | | $ | — | | | $ | (1,946 | ) | | $ | — | | | $ | (3,247 | ) | | $ | 1,222 | |
| * | Investments are transferred into and out of Level 3 for a variety of reasons including, but not limited to: |
| 1) | Investments where trading has been halted (transfer into Level 3) or investments where trading has resumed (transfer out of Level 3). |
| 2) | Broker quoted investments (transfer into Level 3) or quoted prices in active markets (transfer out of Level 3). |
| 3) | Investments that have certain restrictions on trading (transfer into Level 3) or investments where trading restrictions have expired (transfer out of Level 3). |
| † | Change in unrealized appreciation (depreciation) in the current period relating to assets still held at December 31, 2012 was zero. |
| ‡ | Change in unrealized appreciation (depreciation) in the current period relating to assets still held at December 31, 2012 was $(647). |
| § | Change in unrealized appreciation (depreciation) in the current period relating to assets still held at December 31, 2012 was $149. |
The accompanying notes are an integral part of these financial statements.
| Hartford High Yield HLS Fund |
| Statement of Assets and Liabilities |
| December 31, 2012 |
| (000’s Omitted) |
| Assets: | | | | |
| Investments in securities, at market value (cost $609,527) | | $ | 635,507 | |
| Cash | | | 141 | |
| Unrealized appreciation on foreign currency contracts | | | 8 | |
| Unrealized appreciation on swap contracts | | | 86 | |
| Receivables: | | | | |
| Investment securities sold | | | 6,908 | |
| Fund shares sold | | | 453 | |
| Dividends and interest | | | 11,114 | |
| Total assets | | | 654,217 | |
| Liabilities: | | | | |
| Payables: | | | | |
| Fund shares redeemed | | | 942 | |
| Investment management fees | | | 87 | |
| Distribution fees | | | 7 | |
| Accrued expenses | | | 53 | |
| Swap premiums received | | | 36 | |
| Total liabilities | | | 1,125 | |
| Net assets | | $ | 653,092 | |
| Summary of Net Assets: | | | | |
| Capital stock and paid-in-capital | | $ | 616,699 | |
| Undistributed net investment income | | | 43,954 | |
| Accumulated net realized loss | | | (33,635 | ) |
| Unrealized appreciation of investments and the translations of assets and liabilities denominated in foreign currency | | | 26,074 | |
| Net assets | | $ | 653,092 | |
| Shares authorized | | | 2,800,000 | |
| Par value | | $ | 0.001 | |
| Class IA: Net asset value per share | | $ | 9.09 | |
| Shares outstanding | | | 55,467 | |
| Net assets | | $ | 504,042 | |
| Class IB: Net asset value per share | | $ | 8.96 | |
| Shares outstanding | | | 16,636 | |
| Net assets | | $ | 149,050 | |
The accompanying notes are an integral part of these financial statements.
| Hartford High Yield HLS Fund |
| Statement of Operations |
| For the Year Ended December 31, 2012 |
| (000’s Omitted) |
| Investment Income: | | | | |
| Dividends | | $ | 618 | |
| Interest | | | 48,664 | |
| Less: Foreign tax withheld | | | — | |
| Total investment income, net | | | 49,282 | |
| | | | | |
| Expenses: | | | | |
| Investment management fees | | | 4,796 | |
| Transfer agent fees | | | 4 | |
| Distribution fees - Class IB | | | 391 | |
| Custodian fees | | | 8 | |
| Accounting services fees | | | 138 | |
| Board of Directors' fees | | | 20 | |
| Audit fees | | | 15 | |
| Other expenses | | | 195 | |
| Total expenses (before fees paid indirectly) | | | 5,567 | |
| Custodian fee offset | | | — | |
| Total fees paid indirectly | | | — | |
| Total expenses, net | | | 5,567 | |
| Net Investment Income | | | 43,715 | |
| | | | | |
| Net Realized Gain on Investments, Other Financial Instruments and Foreign Currency Transactions: | | | | |
| Net realized gain on investments | | | 14,069 | |
| Net realized loss on swap contracts | | | (930 | ) |
| Net realized loss on foreign currency contracts | | | (47 | ) |
| Net realized gain on other foreign currency transactions | | | 13 | |
| Net Realized Gain on Investments, Other Financial Instruments and Foreign Currency Transactions | | | 13,105 | |
| | | | | |
| Net Changes in Unrealized Appreciation of Investments, Other Financial Instruments and Foreign Currency Transactions: | | | | |
| Net unrealized appreciation of investments | | | 33,458 | |
| Net unrealized appreciation of swap contracts | | | 86 | |
| Net unrealized appreciation of foreign currency contracts | | | 8 | |
| Net unrealized appreciation on translation of other assets and liabilities in foreign currencies | | | — | |
| Net Changes in Unrealized Appreciation of Investments, Other Financial Instruments and Foreign Currency Transactions | | | 33,552 | |
| Net Gain on Investments, Other Financial Instruments and Foreign Currency Transactions | | | 46,657 | |
| Net Increase in Net Assets Resulting from Operations | | $ | 90,372 | |
The accompanying notes are an integral part of these financial statements.
| Hartford High Yield HLS Fund |
| Statement of Changes in Net Assets |
| |
| (000’s Omitted) |
| | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| Operations: | | | | | | | | |
| Net investment income | | $ | 43,715 | | | $ | 57,280 | |
| Net realized gain on investments, other financial instruments and foreign currency transactions | | | 13,105 | | | | 22,098 | |
| Net unrealized appreciation (depreciation) of investments and other financial instruments | | | 33,552 | | | | (44,423 | ) |
| Net Increase in Net Assets Resulting from Operations | | | 90,372 | | | | 34,955 | |
| Distributions to Shareholders: | | | | | | | | |
| From net investment income | | | | | | | | |
| Class IA | | | (44,027 | ) | | | (49,277 | ) |
| Class IB | | | (13,154 | ) | | | (14,302 | ) |
| Total distributions | | | (57,181 | ) | | | (63,579 | ) |
| Capital Share Transactions: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 117,583 | | | | 148,789 | |
| Issued on reinvestment of distributions | | | 44,027 | | | | 49,277 | |
| Redeemed | | | (232,004 | ) | | | (229,731 | ) |
| Total capital share transactions | | | (70,394 | ) | | | (31,665 | ) |
| Class IB | | | | | | | | |
| Sold | | | 28,736 | | | | 42,743 | |
| Issued on reinvestment of distributions | | | 13,154 | | | | 14,302 | |
| Redeemed | | | (60,263 | ) | | | (76,938 | ) |
| Total capital share transactions | | | (18,373 | ) | | | (19,893 | ) |
| Net decrease from capital share transactions | | | (88,767 | ) | | | (51,558 | ) |
| Net Decrease in Net Assets | | | (55,576 | ) | | | (80,182 | ) |
| Net Assets: | | | | | | | | |
| Beginning of period | | | 708,668 | | | | 788,850 | |
| End of period | | $ | 653,092 | | | $ | 708,668 | |
| Undistributed (distribution in excess of) | | | | | | | | |
| net investment income | | $ | 43,954 | | | $ | 57,146 | |
| Shares: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 12,934 | | | | 16,247 | |
| Issued on reinvestment of distributions | | | 5,076 | | | | 5,892 | |
| Redeemed | | | (25,580 | ) | | | (24,914 | ) |
| Total share activity | | | (7,570 | ) | | | (2,775 | ) |
| Class IB | | | | | | | | |
| Sold | | | 3,207 | | | | 4,716 | |
| Issued on reinvestment of distributions | | | 1,537 | | | | 1,731 | |
| Redeemed | | | (6,746 | ) | | | (8,423 | ) |
| Total share activity | | | (2,002 | ) | | | (1,976 | ) |
The accompanying notes are an integral part of these financial statements.
| Hartford High Yield HLS Fund |
| Notes to Financial Statements |
| December 31, 2012 |
| (000’s Omitted) |
Hartford High Yield HLS Fund (the “Fund”) serves as an underlying investment option for certain variable annuity and variable life insurance separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates and certain qualified retirement plans. The Fund may also serve as an underlying investment option for certain variable annuity and variable life separate accounts of other insurance companies. Owners of variable annuity contracts and policyholders of variable life insurance contracts may choose the funds permitted in the variable insurance contract prospectus. In addition, participants in certain qualified retirement plans may choose the Fund if permitted by their plans.
Hartford Series Fund, Inc. (the “Company”) is an open-end registered management investment company comprised of thirty portfolios. Financial Statements for the Fund, a series of the Company, are included in this report.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund is a diversified open-end management investment company.
The Fund is divided into Class IA and Class IB shares. Each class is offered at the per share net asset value (“NAV”) without a sales charge and is subject to the same expenses, except that the Class IB shares are subject to distribution and service fees charged pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act.
| 2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Fund in the preparation of its financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| a) | Determination of Net Asset Value – The NAV of each class of the Fund’s shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| b) | Investment Valuation and Fair Value Measurements – For purposes of calculating the NAV, portfolio investments and other assets held by the Fund's portfolio for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of last reported sales prices or official close price. If no sales are reported, market value is based on quotes obtained from a quotation reporting system, established market makers, or independent pricing services. If market prices are not readily available or are deemed unreliable, the Fund will use the fair value of the investment as determined in good faith under policies and procedures established by and under the supervision of the Company’s Board of Directors. Market quotes are considered not readily available where there is an absence of current or reliable market-based data (e.g., trade information or indicative market quotes), including where events occur after the close of the relevant market, but prior to the NYSE Close that materially affect the values of the Fund’s portfolio investments or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the investments trade do not open for trading for the entire day and no other market prices are available. In addition, prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close. Investments that are primarily traded on foreign markets may trade on days that are not business days of the Fund. The |
value of the foreign investments in which the Fund invests may change on days when a shareholder will not be able to purchase or redeem shares of the Fund. Fair value pricing is subjective in nature and the use of fair value pricing by the Fund may cause the NAV of its shares to differ significantly from the NAV that would have been calculated using market prices at the close of the exchange on which a portfolio investment is primarily traded. There can be no assurance that the Fund could obtain the fair market value assigned to an investment if the Fund were to sell the investment at approximately the time at which the Fund determines its NAV.
Fixed income investments (other than short term obligations) and non-exchange traded derivatives held by the Fund are normally valued on the basis of quotes obtained from brokers and dealers or independent pricing services in accordance with procedures established by the Company’s Board of Directors. Prices obtained from independent pricing services use information provided by market makers or estimates of market values through accepted market modeling and trading and pricing conventions. Inputs to the models may include, but are not limited to, prepayment speeds, pricing spread, yield, trade information, dealer quotes, market color, cash flow models and the bond’s terms and conditions. Generally, the Fund may use fair valuation in regard to fixed income investments when the Fund holds defaulted or distressed investments or investments in a company in which a reorganization is pending. Senior floating rate interests generally trade in over-the-counter (“OTC”) markets and are priced through an independent pricing service utilizing independent market quotations from loan dealers or financial institutions. A composite bid price is used, which averages the dealer marks and dealer runs. Short-term investments maturing in 60 days or less are generally valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days.
Exchange traded options, futures and options on futures are valued at the settlement price determined by the relevant exchange as of the NYSE Close. If such instruments do not trade on an exchange, values may be supplied by an independent pricing service using a formula or other objective method that may take into consideration the style, direction, expiration, strike price, notional value and volatility or other adjustments.
Investments valued in currencies other than U.S. dollars are converted to U.S. dollars using exchange rates obtained from independent pricing services for calculation of the NAV. As a result, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of investments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the NYSE is closed and the market value may change on days when an investor is not able to purchase, redeem or exchange shares of the Fund.
Foreign currency contracts represent agreements to exchange currencies on specific future dates at predetermined rates. Foreign currency contracts are valued using foreign currency exchange rates and forward rates as provided by an independent pricing service on the Valuation Date.
Investments in open-end mutual funds are valued at the respective NAV of each open-end mutual fund on the Valuation Date.
Financial instruments for which prices are not available from an independent pricing service may be valued using market quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with procedures established by the Company’s Board of Directors.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| Hartford High Yield HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| · | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange traded funds, rights and warrants. |
| · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 may include debt investments that are traded less frequently than exchange traded instruments and which are valued using independent pricing services; foreign equities, which are principally traded on certain foreign markets and are adjusted daily pursuant to a fair value pricing service in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close; and short-term investments, which are valued at amortized cost. |
| · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price. |
The Board of Directors of the Company generally reviews and approves the “Procedures for Valuation of Portfolio Securities” on an annual basis. These procedures define how investments are to be valued, including the formation and activities of a Valuation Committee. The Valuation Committee is responsible for determining in good faith the fair value of investments when the value cannot be obtained from primary pricing services or alternative sources or if the valuation of an investment as provided by the primary pricing service or alternative source is believed not to reflect the investment’s fair value as of the Valuation Date. Members of the Valuation Committee include the Fund’s Treasurer or designee, a Vice President of the Fund with legal expertise or designee, and a Vice President of the investment manager or designee. In addition, the Fund’s Chief Compliance Officer shall designate a member of the compliance group to attend Valuation Committee meetings as a non-voting resource, to monitor for and provide guidance with respect to compliance with these procedures. Two members of the Valuation Committee or their designees, representing different departments, shall constitute a quorum for purposes of permitting the Valuation Committee to take action. The Valuation Committee will consider all relevant factors in determining an investment’s fair value, and may seek the advice of the Fund’s sub-adviser, knowledgeable brokers, and legal counsel in making such determination. The Valuation Committee reports to the Audit Committee of the Company’s Board of Directors. The Audit Committee receives quarterly written reports which include details of all fair-valued investments, including the reason for the fair valuation, and an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such investments (the “look-back” test). The Board of Directors then must consider for ratification all of the fair value determinations made during the previous quarter.
Valuation levels are not necessarily indicative of the risk associated with investing in such investments. Individual investments within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
For additional information, refer to the Investment Valuation Hierarchy Level Summary and the Level 3 roll-forward reconciliation which follow the Schedule of Investments.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period.
| c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Investments purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses are determined on the basis of identified cost. |
Trade date for senior floating rate interests purchased in the primary loan market is considered the date on which the loan allocations are determined. Trade date for senior floating rate interests purchased in the secondary loan market is the date on which the transaction is entered into.
Dividend income from domestic securities is accrued on the ex-dividend date. In general, dividend income from foreign securities is recorded on the ex-date; however, dividend notifications in certain foreign jurisdictions may not be available in a timely manner and as a result, the Fund will record the dividend as soon as the relevant details (i.e., rate per share, payment date, shareholders of record, etc.) are publicly available. Interest income, including amortization of premium and accretion of discounts, is accrued on a daily basis. Paydown gains and losses on mortgage-related and other asset-backed securities are included in interest income in the Statement of Operations, as applicable.
| d) | Foreign Currency Transactions – Assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investments, income, and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. |
The Fund does not isolate that portion of portfolio investment valuation resulting from fluctuations in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of investments held. Exchange rate fluctuations are included with the net realized and unrealized gain or loss on investments in the accompanying financial statements.
Net realized foreign exchange gains or losses arise from sales of foreign currencies and the difference between asset and liability amounts initially stated in foreign currencies and the U.S. dollar value of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of other assets and liabilities at the end of the reporting period, resulting from changes in the exchange rates.
| e) | Joint Trading Account – The Fund may invest cash balances into a joint trading account that may be invested in one or more repurchase agreements. |
| f) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Fund’s shares are executed in accordance with the investment instructions of the contract holders and plan participants. The NAV of the Fund’s shares is determined as of the close of business on each business day of the Exchange. The NAV is determined separately for each class of shares of the Fund by dividing the Fund’s net assets attributable to that class by the number of shares of the class outstanding. Each class of shares offered by the Fund has equal rights as to assets and voting privileges (except that shareholders of a class have exclusive voting rights regarding any matter relating solely to that class of shares). Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets of the class. Realized and unrealized capital gains and losses are allocated daily based on the relative net assets of each class of shares of the Fund. |
Orders for the purchase of the Fund’s shares received prior to the close of the Exchange on any day the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
| Hartford High Yield HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Fund. The policy of the Fund is to pay dividends from net investment income and realized capital gains, if any, at least once a year.
Distributions from net investment income, net realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These differences may include but are not limited to losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to Passive Foreign Investment Companies (“PFICs”), Real Estate Investment Trusts (“REITs”), Regulated Investment Companies (“RICs”), certain derivatives and partnerships. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Fund’s capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| 3. | Securities and Other Investments: |
| a) | Repurchase Agreements – A repurchase agreement is an agreement by which a counterparty agrees to sell an investment and agrees to repurchase the investment sold from the buyer at a mutually agreed upon time and price. At the time the Fund enters into a repurchase agreement, the value of the underlying collateral, including accrued interest, will be equal to or exceed the value of the repurchase agreement. Repurchase agreements expose the Fund to counterparty risk - that is, the risk that the counterparty will not fulfill its obligations. To minimize counterparty risk, the investments that serve to collateralize the repurchase agreement are held by the Fund’s custodian in book entry or physical form in the custodial account of the Fund or in a third party custodial account. Repurchase agreements are valued at cost plus accrued interest, which approximates fair value. The Fund, as shown on the Schedule of Investments, had outstanding repurchase agreements as of December 31, 2012. |
| b) | Illiquid and Restricted Investments – The Fund is permitted to invest up to 15% of its net assets in illiquid investments. Illiquid investments are those that may not be sold or disposed of in the ordinary course of business within seven days, at approximately the price used to determine the Fund’s NAV. The Fund may not be able to sell illiquid investments when its sub-adviser considers it desirable to do so or may have to sell such investments at a price that is lower than the price that could be obtained if the investments were more liquid. A sale of illiquid investments may require more time and may result in higher dealer discounts and other selling expenses than does the sale of those that are liquid. Illiquid investments also may be more difficult to value due to the unavailability of reliable market quotations for such investments, and an investment in them may have an adverse impact on the Fund’s NAV. The Fund may also purchase certain restricted investments that can only be resold to certain qualified investors and may be determined to be liquid pursuant to policies and guidelines established by the Company’s Board of Directors. The Fund, as shown on the Schedule of Investments, had illiquid and/or restricted investments as of December 31, 2012. |
| c) | Investments Purchased on a When-Issued or Delayed-Delivery Basis – Delivery and payment for investments that have been purchased by the Fund on a forward commitment, or when-issued or delayed-delivery basis, take place beyond the customary settlement period. A fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell delayed-delivery investments before they are delivered, which may result in a realized gain or loss. During this period, such investments are subject to market fluctuations, and the Fund identifies investments segregated in its records with a value at least equal to the amount of the commitment. As of December 31, 2012, the Fund had no outstanding when-issued or delayed-delivery investments. |
| d) | Senior Floating Rate Interests – The Fund, as shown on the Schedule of Investments, invests in senior floating rate interests. Senior floating rate interests hold the most senior position in the capital structure of a business entity (the “Borrower”), are typically secured by specific collateral and have a claim on the assets and/or stock of the Borrower that is senior to that held by subordinated debtholders and stockholders of the Borrower. Senior floating rate interests are typically structured and administered by a financial institution that acts as the agent of the lenders participating in the senior floating rate interest. The Fund may invest in multiple series or tranches of a senior floating rate interest, which |
may have varying terms and carry different associated risks. The Fund may also enter into unfunded loan commitments, which are contractual obligations for future funding. Unfunded loan commitments may include revolving credit facilities, which may obligate the Fund to supply additional cash to the borrower on demand. Unfunded loan commitments represent a future obligation in full. The Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a senior floating rate interest. In certain circumstances, the Fund may receive various fees upon the restructure of a senior floating rate interest by a borrower. Fees earned/paid may be recorded as a component of income or realized gain/loss in the Statement of Operations.
Senior floating rate interests are typically rated below-investment-grade, which suggests they are more likely to default and generally pay higher interest rates than investment-grade loans. A default could lead to non-payment of income, which would result in a reduction of income to the Fund, and there can be no assurance that the liquidation of any collateral would satisfy the Borrower’s obligation in the event of non-payment of scheduled interest or principal payments, or that such collateral could be readily liquidated.
| e) | Mortgage Related and Other Asset Backed Securities – The Fund may invest in mortgage related and other asset backed securities. These securities include mortgage pass-through securities, collateralized mortgage obligations, commercial mortgage backed securities, stripped mortgage backed securities, asset backed securities, collateralized debt obligations and other securities that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property. Mortgage related securities are created from pools of residential or commercial mortgage loans, including mortgage loans made by savings and loan institutions, mortgage bankers, commercial banks and others. Asset backed securities are created from many types of assets, including auto loans, credit card receivables, home equity loans, and student loans. These securities provide a monthly payment that consists of both interest and principal payments. Interest payments may be determined by fixed or adjustable rates. The rate of pre-payments on underlying mortgages will affect the price and volatility of a mortgage related security, and may have the effect of shortening or extending the effective duration of the security relative to what was anticipated at the time of purchase. The timely payment of principal and interest of certain mortgage related securities is guaranteed by the full faith and credit of the United States Government. Mortgage related and other asset backed securities created and guaranteed by non-governmental issuers, including government-sponsored corporations, may be supported by various forms of insurance or guarantees, but there can be no assurance that the private insurers or guarantors can meet their obligations under the insurance policies or guarantee arrangements. The Fund, as shown on the Schedule of Investments, had mortgage related and other asset backed securities as of December 31, 2012. |
| 4. | Financial Derivative Instruments: |
The following disclosures contain information on how and why the Fund uses derivative instruments, the credit-risk-related contingent features in certain derivative instruments, and how derivative instruments affect the Fund’s financial position and results of operations. The location and fair value amounts of these instruments on the Statement of Assets and Liabilities and the realized gains and losses and changes in unrealized gains and losses on the Statement of Operations, each categorized by type of derivative contract, are included in the following Additional Derivative Instrument Information footnote. The derivative instruments outstanding as of year-end are disclosed in the notes to or within the Schedule of Investments for purchased options, if applicable. The amounts of realized gains and losses and changes in unrealized gains and losses on derivative instruments during the year are disclosed in the Statement of Operations.
| a) | Foreign Currency Contracts – The Fund may enter into foreign currency contracts that obligate the Fund to purchase or sell currencies at specified future dates. Foreign currency contracts are used to hedge the currency exposure associated with some or all of the Fund’s investments and/or as part of an investment strategy. Foreign currency contracts are marked to market daily and the change in value is recorded by the Fund as an unrealized gain or loss. The Fund will record a realized gain or loss when the foreign currency contract is settled. |
| Hartford High Yield HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
Foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. In addition, risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of the contracts and from unanticipated movements in the value of the foreign currencies relative to the U.S. dollar. The Fund had outstanding foreign currency contracts as shown on the Schedule of Investments as of December 31, 2012.
| b) | Swap Contracts – The Fund may invest in swap contracts. Swap contracts are privately negotiated agreements between the Fund and a counterparty to exchange or swap investment cash flows, assets, foreign currencies or market-linked returns at specified future intervals. The Fund may enter into credit default, total return, cross-currency, interest rate, inflation and other forms of swap contracts to manage its exposure to credit, currency, interest rate, commodity and inflation risk. Swap contracts are also used to gain exposure to certain markets. In connection with these contracts, investments or cash may be identified as collateral in accordance with the terms of the respective swap contracts to provide assets of value and recourse in the event of default or bankruptcy/insolvency. Swaps are valued based on custom valuations furnished by an independent pricing service. Swaps for which prices are not available from an independent pricing service are valued in accordance with procedures established by the Company’s Board of Directors, and the change in value, if any, is recorded as an unrealized gain or loss on the Statement of Assets and Liabilities. Payments received or made at the beginning of the measurement period are reflected as such on the Statement of Assets and Liabilities and represent payments made or received upon entering into the swap contract to compensate for differences between the stated terms of the swap contract and prevailing market conditions (credit spreads, currency exchange rates, interest rates, and other relevant factors). These upfront payments are recorded as realized gains or losses on the Statement of Operations upon termination or maturity of the swap. A liquidation payment received or made at the termination of the swap and net periodic payments received or paid by the Fund are recorded as realized gains or losses on the Statement of Operations. Entering into these contracts involves, to varying degrees, elements of credit and market risk in excess of the amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these contracts, that the counterparty to the contracts may default on its obligation to perform or disagree as to the meaning of contractual terms in the contracts, and that there may be unfavorable changes in interest rates. The Fund’s maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from the counterparty over the contract’s remaining life, to the extent that amount is positive. The risk is mitigated by having a master netting arrangement between the Fund and the counterparty, which allows for the netting of payments made or received (although such amounts are presented on a gross basis within the Statement of Assets and Liabilities, as applicable) as well as the posting of collateral to the Fund to cover the Fund’s exposure to the counterparty. |
Credit Default Swap Contracts – The credit default swap market allows the Fund to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and sovereign issuers, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. Certain credit default swaps involve the exchange of a fixed rate premium for protection against the loss in value of an underlying investment or index in the event of a credit event, such as payment default or bankruptcy.
Under a credit default swap contract, one party acts as guarantor by receiving the fixed periodic payment in exchange for the commitment to purchase the underlying investment at par if the defined credit event occurs. Upon the occurrence of a defined credit event, the difference between the value of the reference obligation and the swap’s notional amount is recorded as realized gain or loss on swap transactions in the Statement of Operations. A “buyer” of credit protection agrees to pay a counterparty to assume the credit risk of an issuer upon the occurrence of certain events. The “seller” of the protection receives periodic payments and agrees to assume the credit risk of an issuer upon the occurrence of certain events. Although specified events are contract specific, credit events are generally defined as bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium. A “seller’s” exposure is limited to the total notional amount of the credit default swap contract. These potential amounts would be partially offset by any recovery values of the respective referenced obligations or upfront payments received upon entering into the contract.
Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap contracts on corporate issues, sovereign government issues or U.S. municipal issues as of year-end are disclosed in the notes to the Schedule of Investments, as applicable, and serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the contract. Wider credit spreads represent a deterioration of the referenced entity’s soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract. For credit default swap contracts on asset-backed securities and credit indices, the quoted market prices and resulting values serve as the indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced equity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract. The Fund, as shown on the Schedule of Investments, had outstanding credit default swaps as of December 31, 2012.
| c) | Additional Derivative Instrument Information: |
Fair Value of Derivative Instruments on the Statement of Assets and Liabilities as of December 31, 2012: |
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized appreciation on foreign currency contracts | | $ | — | | | $ | 8 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 8 | |
| Unrealized appreciation on swap contracts | | | — | | | | — | | | | 86 | | | | — | | | | — | | | | — | | | | 86 | |
| Total | | $ | — | | | $ | 8 | | | $ | 86 | | | $ | — | | | $ | — | | | $ | — | | | $ | 94 | |
The volume of derivatives that is presented in the Schedule of Investments is consistent with the derivative activity during the year ended December 31, 2012.
The Effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2012: |
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Realized Loss on Derivatives Recognized as a Result of Operations: |
| Net realized loss on swap contracts | | $ | — | | | $ | — | | | $ | (930 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | (930 | ) |
| Net realized loss on foreign currency contracts | | | — | | | | (47 | ) | | | — | | | | — | | | | — | | | | — | | | | (47 | ) |
| Total | | $ | — | | | $ | (47 | ) | | $ | (930 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | (977 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Change in Unrealized Appreciation on Derivatives Recognized as a Result of Operations: | |
| Net change in unrealized appreciation of swap contracts | | $ | — | | | $ | — | | | $ | 86 | | | $ | — | | | $ | — | | | $ | — | | | $ | 86 | |
| Net change in unrealized appreciation of foreign currency contracts | | | — | | | | 8 | | | | — | | | | — | | | | — | | | | — | | | | 8 | |
| Total | | $ | — | | | $ | 8 | | | $ | 86 | | | $ | — | | | $ | — | | | $ | — | | | $ | 94 | |
| a) | Credit and Counterparty Risks – Credit risk depends largely on the perceived financial health of bond issuers. In general, the credit rating is inversely related to the credit risk of the issuer. Higher rated bonds generally are deemed to have less |
| Hartford High Yield HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
credit risk, while lower or unrated bonds are deemed to have higher risk of default. The share price, yield and total return of a fund that holds securities with higher credit risk may be more volatile than those of a fund that holds bonds with lower credit risk. Similar to credit risk, the Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will default.
| b) | Market Risks – The Fund’s investments expose the Fund to various risks including, but not limited to, interest rate, prepayment, extension, foreign currency, and equity risks. Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the values of certain fixed income securities held by the Fund are likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a fixed income security’s market price to interest rate (i.e., yield) movements. Senior floating rate interests and securities subject to prepayment and extension risk generally offer less potential for gains when interest rates decline. In addition, securities are subject to extension risk. Rising interest rates may cause prepayments to occur at a slower than expected rate, thereby effectively lengthening the maturity of the security and making the security more sensitive to interest rate changes. Prepayment and extension risk are major risks of mortgage backed securities, senior floating rate interests, and certain asset backed securities. For certain asset backed securities, the actual maturity may be less than the stated maturity shown in the Schedule of Investments, if applicable. As a result, the timing of income recognition relating to these securities may vary based upon the actual maturity. If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities, such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund. The market values of equity securities, such as common stocks and preferred stocks, or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The market value of equity securities may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities. |
| a) | Federal Income Taxes – For federal income tax purposes, the Fund intends to continue to qualify as a RIC under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders and otherwise complying with the requirements of the IRC. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains prior to the next fiscal year-end. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend |
distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund.
| c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Fund for the periods indicated is as follows (as adjusted for dividends payable, if applicable): |
| | | For the Year Ended
December 31, 2012 | | | For the Year Ended
December 31, 2011 | |
| Ordinary Income | | $ | 57,181 | | | $ | 63,579 | |
As of December 31, 2012, the Fund’s components of distributable earnings (deficit) on a tax basis were as follows:
| | | Amount | |
| Undistributed Ordinary Income | | $ | 43,989 | |
| Accumulated Capital and Other Losses* | | | (33,139 | ) |
| Unrealized Appreciation† | | | 25,577 | |
| Total Accumulated Earnings | | $ | 36,427 | |
| * | The Fund has capital loss carryforwards that are identified in the Capital Loss Carryforward note that follows. |
| † | Differences between book-basis and tax-basis unrealized appreciation (depreciation) may be attributable to the losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. |
| d) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as foreign currency, PFICs, expiration or utilization of capital loss carryforwards or net operating losses. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Fund’s distributions may be shown in the accompanying Statement of Changes in Net Assets as from undistributed net investment income, from accumulated net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Fund recorded reclassifications to increase (decrease) the accounts listed below: |
| | | Amount | |
| Undistributed Net Investment Income | | $ | 274 | |
| Accumulated Net Realized Gain (Loss) | | | (274 | ) |
| e) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation. |
| Hartford High Yield HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
At December 31, 2012 (tax-year-end), the Fund had capital loss carryforwards for U.S. federal income tax purposes as follows:
| Year of Expiration | | Amount | |
| 2017 | | $ | 33,139 | |
| Total | | $ | 33,139 | |
During the year ended December 31, 2012, the Fund utilized $11,018 of prior year capital loss carryforwards.
| f) | Accounting for Uncertainty in Income Taxes – The Fund has adopted financial reporting rules that require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Fund does not have an examination in progress. |
The Fund has reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules had no effect on the Fund’s financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2012. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Fund’s investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Fund pursuant to an Investment Management Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Fund’s investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees payable under, the Fund’s investment management agreements; or (ii) the day-to-day management of the Fund. The investment manager has overall investment supervisory responsibility for the Fund. In addition, the investment manager provides administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. Effective March 5, 2012, the investment manager contracted with Wellington Management Company, LLP (“Wellington Management”) under a sub-advisory agreement for the provision of day-to-day investment management services to the Fund in accordance with the Fund’s investment objective and policies. Prior to March 5, 2012, Hartford Investment Management Company was the sub-adviser for the Fund. The Fund pays a fee to the investment manager, a portion of which may be used to compensate the sub-advisers. |
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered as of December 31, 2012, (paid for the period March 1, 2012 through December 31, 2012); the rates are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee | |
| On first $500 million | | | 0.7000 | % |
| On next $500 million | | | 0.6750 | % |
| On next $1.5 billion | | | 0.6250 | % |
| On next $2.5 billion | | | 0.6150 | % |
| On next $5 billion | | | 0.6050 | % |
| Over $10 billion | | | 0.5950 | % |
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered during the period January 1, 2012, through February 29, 2012.
| Average Daily Net Assets | | Annual Fee | |
| On first $500 million | | | 0.7000 | % |
| On next $500 million | | | 0.6750 | % |
| On next $4 billion | | | 0.6250 | % |
| On next $5 billion | | | 0.6050 | % |
| Over $10 billion | | | 0.5950 | % |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Fund. HLIC provided accounting services for the Fund for the fiscal year ended December 31, 2012. The replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Fund or the fees charged to the Fund for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Fund, HFMC provides accounting services to the Fund and receives monthly compensation based on the Fund’s average daily net assets at the rates set forth below. The Fund’s accounting services fees are accrued daily and paid monthly. |
| Average Daily Net Assets | | Annual Fee | |
| On first $5 billion | | | 0.020 | % |
| On next $5 billion | | | 0.018 | % |
| Over $10 billion | | | 0.016 | % |
| c) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund and allocated to classes within a Fund in proportion to the average daily net assets of the Fund and each class, except where allocation of certain expenses is more fairly made directly to the Fund or to specific classes within a Fund. |
| d) | Fees Paid Indirectly – The Fund’s custodian banks have agreed to reduce its fees when the Fund maintains cash on deposit in a non-interest-bearing custody account. For the year ended December 31, 2012, these amounts, if any, are included in the Statement of Operations. |
The ratio of expenses to average net assets in the accompanying financial highlights excludes the reduction in expenses related to fees paid indirectly. The annualized expense ratio after waivers for the period listed below reflecting the reduction for fees paid indirectly is as follows:
| | | Year Ended
December 31,
2012 | |
| Class IA | | | 0.75% | |
| Class IB | | | 1.00 | |
| e) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Fund's principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD with HIFSCO did not result in any changes to the distribution services provided to the Fund. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Fund, has adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, from assets attributable to the |
| Hartford High Yield HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
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, subject to the review and approval of the Company’s Board of Directors.
The Distribution Plan provides that the Fund may pay annually up to 0.25% of the average daily net assets of the Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, the Fund is authorized to make payments monthly to the Distributor that may be used to pay or compensate 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. These fees are accrued daily and paid monthly.
| f) | Other Related Party Transactions – Certain officers of the Fund are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Fund’s Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Fund was in the amount of $1. Hartford Administrative Services Company (“HASCO”), an indirect wholly owned subsidiary of The Hartford, provides transfer agent services to the Fund. The amount paid to HASCO can be found in the Statement of Operations. These fees are accrued daily and paid monthly. |
| g) | Payment from Affiliate – In July of 2007, The Hartford entered into a settlement with the Attorneys General of the states of New York, Connecticut and Illinois relating to market timing and the company's individual variable annuity contracts in which certain payments would be made directly to the variable annuity contract holders. The distribution plan provided that unclaimed money from the settlement would be distributed to certain HLS Funds that are investment options through a Hartford individual variable annuity contract. The unclaimed money was distributed to the Fund on September 18, 2009. |
The total return in the accompanying financial highlights includes a payment from an affiliate. Had the payment from the affiliate been excluded, the impact and total return for the period listed below would have been as follows:
| | | For the Year Ended December 31, 2009 | |
| | | Class IA | | | Class IB | |
| Impact from Payment from Affiliate for Attorneys General Settlement | | | 0.03% | | | | 0.03% | |
| Total Return Excluding Payment from Affiliate | | | 50.41% | | | | 50.04% | |
| 8. | Investment Transactions: |
For the year ended December 31, 2012, the Fund's aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
| | | Amount | |
| Cost of Purchases Excluding U.S. Government Obligations | | $ | 613,460 | |
| Sales Proceeds Excluding U.S. Government Obligations | | | 695,213 | |
| Cost of Purchases for U.S. Government Obligations | | | 41,786 | |
| Sales Proceeds for U.S. Government Obligations | | | 79,157 | |
The Fund is one of several Hartford funds that participate in a $500 million committed revolving line of credit facility. The facility is to be used for temporary or emergency purposes. Under the arrangement, the funds are required to own securities having a market value in excess of 300% of the total bank borrowings. The interest rate on borrowings varies depending on the nature of the loan. The facility also requires a fee to be paid based on the amount of the commitment. This commitment
fee is allocated to all of the funds participating in the line of credit based on the average net assets of the funds. During the year ended December 31, 2012, the Fund did not have any borrowings under this facility.
| 10. | Industry Classifications: |
Other than the industry classifications “Other Investment Pools and Funds” and “Exchange Traded Funds,” equity industry classifications used in this report are the Global Industry Classification Standard, which was developed by and is the exclusive property and service mark of MSCI, Inc. and Standard & Poor’s.
Under the Company’s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
| 12. | Recent Accounting Pronouncement: |
Disclosures about Offsetting Assets and Liabilities - In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The objective of the ASU is to enhance current disclosure requirements on offsetting of certain assets and liabilities and to enable financial statement users to compare financial statements prepared under U.S. GAAP and International Financial Reporting Standards.
Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
| Hartford High Yield HLS Fund |
| Financial Highlights |
| - Selected Per-Share Data (A) - |
Class | | Net Asset Value at
Beginning of
Period | | | Net Investment
Income (Loss) | | | Net Realized and
Unrealized Gain
(Loss) on
Investments | | | Total from
Investment
Operations | | | Dividends from Net
Investment Income | | | Distributions from
Realized Capital
Gains | | | Distributions from
Capital | | | Total Distributions | | | Net Asset Value at
End of Period | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2012 (E) |
| IA | | $ | 8.70 | | | $ | 0.58 | | | $ | 0.63 | | | $ | 1.21 | | | $ | (0.82 | ) | | $ | – | | | $ | – | | | $ | (0.82 | ) | | $ | 9.09 | |
| IB | | | 8.59 | | | | 0.55 | | | | 0.62 | | | | 1.17 | | | | (0.80 | ) | | | – | | | | – | | | | (0.80 | ) | | | 8.96 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2011 (E) |
| IA | | | 9.15 | | | | 0.71 | | | | (0.31 | ) | | | 0.40 | | | | (0.85 | ) | | | – | | | | – | | | | (0.85 | ) | | | 8.70 | |
| IB | | | 9.04 | | | | 0.67 | | | | (0.30 | ) | | | 0.37 | | | | (0.82 | ) | | | – | | | | – | | | | (0.82 | ) | | | 8.59 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2010 (E) |
| IA | | | 7.94 | | | | 0.75 | | | | 0.52 | | | | 1.27 | | | | (0.06 | ) | | | – | | | | – | | | | (0.06 | ) | | | 9.15 | |
| IB | | | 7.86 | | | | 0.72 | | | | 0.52 | | | | 1.24 | | | | (0.06 | ) | | | – | | | | – | | | | (0.06 | ) | | | 9.04 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2009 (E) |
| IA | | | 5.73 | | | | 0.73 | | | | 2.16 | | | | 2.89 | | | | (0.68 | ) | | | – | | | | – | | | | (0.68 | ) | | | 7.94 | |
| IB | | | 5.68 | | | | 0.70 | | | | 2.14 | | | | 2.84 | | | | (0.66 | ) | | | – | | | | – | | | | (0.66 | ) | | | 7.86 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2008 |
| IA | | | 8.87 | | | | 0.83 | | | | (3.12 | ) | | | (2.29 | ) | | | (0.85 | ) | | | – | | | | – | | | | (0.85 | ) | | | 5.73 | |
| IB | | | 8.78 | | | | 0.83 | | | | (3.11 | ) | | | (2.28 | ) | | | (0.82 | ) | | | – | | | | – | | | | (0.82 | ) | | | 5.68 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include 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 would lower the Fund's performance. |
| (C) | Ratios do not reflect reductions for fees paid indirectly. Please see Fees Paid Indirectly in the Notes to Financial Statements. |
| (D) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
| (E) | Per share amounts have been calculated using the average shares method. |
| (F) | Total return without the inclusion of the Payment from (to) Affiliate can be found in Expenses in the accompanying Notes to Financial Statements. |
| - Ratios and Supplemental Data - |
Total Return(B) | | | Net Assets at End of Period | | | Ratio of Expenses to Average Net Assets
Before Waivers(C) | | | Ratio of Expenses to Average Net Assets
After Waivers(C) | | | Ratio of Net Investment
Income (Loss) to Average Net
Assets | | | Portfolio
Turnover
Rate(D) | |
| | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 14.31 | % | | $ | 504,042 | | | | 0.75 | % | | | 0.75 | % | | | 6.37 | % | | | 94 | % |
| | 14.03 | | | | 149,050 | | | | 1.00 | | | | 1.00 | | | | 6.12 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| |
| | 4.69 | | | | 548,608 | | | | 0.74 | | | | 0.74 | | | | 7.68 | | | | 88 | |
| | 4.44 | | | | 160,060 | | | | 0.99 | | | | 0.99 | | | | 7.43 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| |
| | 16.15 | | | | 602,493 | | | | 0.75 | | | | 0.75 | | | | 8.80 | | | | 139 | |
| | 15.86 | | | | 186,357 | | | | 1.00 | | | | 1.00 | | | | 8.57 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| |
| | 50.46 | (F) | | | 527,000 | | | | 0.75 | | | | 0.75 | | | | 10.32 | | | | 173 | |
| | 50.08 | (F) | | | 188,832 | | | | 1.00 | | | | 1.00 | | | | 10.08 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| |
| | (25.23 | ) | | | 293,839 | | | | 0.74 | | | | 0.74 | | | | 9.05 | | | | 101 | |
| | (25.42 | ) | | | 124,701 | | | | 0.99 | | | | 0.99 | | | | 8.76 | | | | – | |
| Report of Independent Registered Accounting Firm |
| The Board of Directors and Shareholders of |
| Hartford Series Fund, Inc. |
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Hartford High Yield HLS Fund (one of the portfolios constituting Hartford Series Fund, Inc. (the Fund)) as of December 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian, agent banks, and brokers or by other appropriate auditing procedures where replies from agent banks and brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Hartford High Yield HLS Fund (one of the portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Minneapolis, MN
February 15, 2013
| Hartford High Yield HLS Fund |
| Directors and Officers (Unaudited) |
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Fund pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Fund. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Fund’s statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Fund pays to The Hartford a portion of the Chief Compliance Officer’s compensation, but does not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
| Hartford High Yield HLS Fund |
| Directors and Officers (Unaudited) – (continued) |
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010 (4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and a record of how the Fund voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
| Hartford High Yield HLS Fund |
| Expense Example (Unaudited) |
Your Fund's Expenses
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Actual return | | | Hypothetical (5% return before expenses) | | | | | | | | | | |
| | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2
year | | | Days
in the
full
year | |
| Class IA | | $ | 1,000.00 | | | $ | 1,006.97 | | | $ | 3.79 | | | $ | 1,000.00 | | | $ | 1,021.36 | | | $ | 3.82 | | | | 0.75 | % | | | 184 | | | | 366 | |
| Class IB | | $ | 1,000.00 | | | $ | 1,006.84 | | | $ | 5.05 | | | $ | 1,000.00 | | | $ | 1,020.10 | | | $ | 5.09 | | | | 1.00 | % | | | 184 | | | | 366 | |
| Hartford High Yield HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) |
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory and sub-advisory agreements. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for Hartford High Yield HLS Fund (the “Fund”) with HL Investment Advisors, LLC (“HL Advisors”) and the continuation of the investment sub-advisory agreement between HL Advisors and the Fund’s sub-adviser, Wellington Management Company, LLP (“Wellington Management” or the “Sub-adviser,” and together with HL Advisors, the “Advisers”) (collectively, the “Agreements”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from the Advisers to questions posed to them on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreements at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by the Advisers and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreements.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreements with respect to the Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Fund’s contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Fund’s management fees, sub-advisory fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement.
In determining to continue the Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreements. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreements is provided below.
Nature, Extent, and Quality of Services Provided by the Advisers
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Fund by the Advisers. The Board considered, among other things, the terms of the Agreements and the range of services provided by the Advisers. The Board considered the Advisers’ professional personnel who provide services to the Fund, including each Adviser’s ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered each Adviser’s reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to the Fund. In addition, the Board considered the quality of each Adviser’s communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning each Adviser’s regulatory and compliance environment. In this regard, the Board requested and reviewed information on each Adviser’s compliance policies and procedures, compliance history, and a report from the Fund’s Chief Compliance Officer on each Adviser’s compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. The Board also noted the Advisers’ support of the Fund’s compliance control structure, particularly the resources devoted by the Advisers in support of the Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act.
| Hartford High Yield HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
With respect to HL Advisors, the Board noted that under the Agreements, HL Advisors is responsible for the management of the Fund, including overseeing fund operations and service providers, as well as investment advisory services in connection with selecting, monitoring and supervising the Sub-adviser. The Board considered HL Advisors’ ongoing monitoring of people, process and performance, including its quarterly reviews of each of the Hartford HLS Funds, semi-annual meetings with the leaders of each Fund’s portfolio management team, and oversight of the Funds’ approximately 40 portfolio managers. The Board recognized that HL Advisors has demonstrated a record of making changes to the management and/or strategies of the Funds when warranted. The Board considered HL Advisors’ oversight of the Sub-adviser’s investment approach and results, process for monitoring best execution of portfolio trades by the Sub-adviser, and approach to risk management with respect to the Fund and the service providers to the Fund. The Board also considered HL Advisors’ oversight of compliance with the Fund’s objective and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led to an increase in the scope of HL Advisors’ services in this regard. In addition, the Board considered HL Advisors’ ongoing commitment to review and rationalize the Hartford fund family’s product line-up and the expenses that HL Advisors had incurred in connection with fund combinations in recent years. The Board considered that HL Advisors or its affiliates are responsible for providing the Fund’s officers. The Board also noted that Hartford Life Insurance Company (“HLIC”) provides administrative services to the Fund. The Board considered its experiences with HL Advisors and HLIC with respect to each of these services.
With respect to the Sub-adviser, who provides day-to-day portfolio management services, the Board considered the quality of the Fund’s portfolio manager, the Sub-adviser’s other investment personnel, its investment philosophy and process, investment research capabilities and resources, performance record, trade execution capabilities and experience. The Board considered the experience of the Fund’s portfolio manager, the number of accounts managed by the portfolio manager, and the Sub-adviser’s method for compensating the portfolio manager. The Board noted that the Fund’s sub-adviser had recently changed from Hartford Investment Management Company to Wellington Management.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Fund by HL Advisors and the Sub-adviser.
Performance of the Fund and the Advisers
The Board considered the investment performance of the Fund. In this regard, the Board reviewed the performance of the Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of the Fund’s performance for these time periods. The Board considered information and materials provided to the Board by the Advisers concerning Fund performance, as well as information from Lipper comparing the investment performance of the Fund to an appropriate benchmark and universe of peer funds. The Board noted that the performance of the Fund was within expectations.
The Board considered the detailed investment analytics reports provided by The Hartford’s Investment Advisory Group throughout the year. These reports include, among other things, information on the Fund’s gross and net returns, the Fund’s investment performance relative to an appropriate benchmark and peer group, various statistics concerning the Fund’s portfolio, and a narrative summary of various factors affecting Fund performance. The Board considered the Advisers’ cooperation with the Investment Committee, which assists the Board in evaluating the performance of the Fund at periodic meetings throughout the year. The Board also considered the analysis provided by the Consultant relating to the Fund’s performance track record.
In light of all the considerations noted above, the Board concluded that it had continued confidence in HL Advisors’ and the Sub-adviser’s overall capabilities to manage the Fund.
Costs of the Services and Profitability of the Advisers
The Board reviewed information regarding HL Advisors’ cost to provide investment management and related services to the Fund and HL Advisors’ profitability, both overall and for the Fund, on a pre-tax basis without regard to distribution expenses. The Board also requested and reviewed information about the profitability to HL Advisors and its affiliates from all services provided to the Fund and all aspects of their relationship with the Fund. The Board also requested and received information relating to the operations and profitability of the Sub-adviser.
The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement, noting the Consultant’s view that The Hartford’s process for calculating and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by the Advisers and their affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by the Advisers
The Board considered comparative information with respect to the management fees to be paid by the Fund to HL Advisors and the total expense ratios of the Fund. The Board also considered comparative information with respect to the sub-advisory fees to be paid by HL Advisors to the Sub-adviser, to the extent applicable. In this regard, the Board requested and reviewed information from HL Advisors and the Sub-adviser relating to the management and sub-advisory fees, including the sub-advisory fee schedule for the Fund, and total operating expenses for the Fund. The Board considered that the management fee for the Fund includes the fee paid to HLIC for providing certain administrative services to the Fund. With respect to the sub-advisory fee schedule, the Board considered representations from HL Advisors and the Sub-adviser that the Sub-adviser’s fees were negotiated at arm’s length. The Board also reviewed information from Lipper comparing the Fund’s contractual management fees, actual management fees and overall expense ratios relative to a group of funds selected by Lipper, in consultation with the Consultant, and a broader universe of funds selected by Lipper. The Board noted that, in connection with the recent sub-adviser change, an additional breakpoint had been added to the Fund’s management fee schedule.
While the Board recognized that comparisons between the Fund and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business models and cost structures of the Advisers, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of the Fund’s management and sub-advisory fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to the Fund’s management and sub-advisory fees and total operating expenses.
Based on these considerations, the Board concluded that the Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding the Advisers’ realization of economies of scale with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. The Board reviewed the breakpoints in the management fee schedule for the Fund, which reduce fee rates as Fund assets grow over time, and noted that an additional breakpoint had recently been added to the Fund’s management fee schedule. The Board recognized that a fund with assets beyond the last breakpoint level will continue to benefit from economies of scale because additional assets are charged the lowest breakpoint fee resulting in lower overall effective management fee rates. The Board also recognized that a fee schedule that reaches a lower breakpoint quickly provides shareholders with the benefit of anticipated or potential economies of scale.
The Board reviewed and evaluated materials from Lipper showing how management fee schedules of peer funds reflect economies of scale for the benefit of shareholders as a peer fund’s assets hypothetically increase over time. Based on information provided by HL Advisors, Lipper, and the Consultant, the Board recognized that there is no uniform methodology for establishing breakpoints or uniform pattern in asset levels that trigger breakpoints or the amounts of breakpoints triggered.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Fund’s shareholders based on currently available information and the effective advisory fees and expense ratios for the Fund at its current and reasonably anticipated asset levels. The Board noted, however, that it would continue to monitor future growth in Fund assets and the appropriateness of additional breakpoints.
| Hartford High Yield HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
Other Benefits
The Board considered other benefits to the Advisers and their affiliates from their relationships with the Fund, including the role of the Fund in supporting the variable life insurance and variable annuity products offered by The Hartford. The Board reviewed information noting that HLIC, an affiliate of HL Advisors, receives fees for providing certain administrative services to the Fund, and that HLIC also receives fees for fund accounting and related services from the Fund, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Fund’s transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Fund, and the Board reviewed information on the profitability of the Fund’s transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Fund were fair and reasonable based on publicly available information.
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Fund, receives 12b-1 fees from the Fund. The Board also noted that certain affiliates of HL Advisors distribute shares of the Fund and receive compensation in that connection.
The Board considered the benefits, if any, to the Sub-adviser from any use of the Fund’s brokerage commissions to obtain soft dollar research, and representations from HL Advisors and the Sub-adviser that the Sub-adviser would not make any revenue-sharing payments or any other type of distribution payments to HL Advisors or its affiliates.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the Agreements for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory and sub-advisory agreements. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreements for the Fund and approve a new investment management agreement for the Fund with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser, and a new investment sub-advisory agreement between HFMC and the Fund’s existing Sub-adviser, Wellington Management Company, LLP (together with HFMC, the “Post-Restructuring Advisers”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Fund. In order to implement the Restructuring, the Fund would terminate the existing Agreements and enter into a new investment management agreement with HFMC, with HFMC also entering into a new investment sub-advisory agreement with the Sub-adviser (collectively, the “New Agreements”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreements at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by HL Advisors and the Sub-adviser and their affiliates. In addition, the Board received in-person presentations by Fund
officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreements.
In determining to approve the New Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the New Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreements.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Fund and the performance of investment management personnel to the Fund. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Fund prior to the Restructuring would continue to provide such services to the Fund, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreements would involve no changes to (i) the contractual terms of, including the management fees payable under, the Fund’s investment management and investment sub-advisory agreements; (ii) the investment processes and strategies employed in the management of the Fund’s assets; (iii) the nature and level of services provided under the Fund’s investment management and investment sub-advisory agreements; and (iv) the day-to-day management of the Fund and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Fund.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Fund.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Fund, the investment management arrangement for the Fund following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreements: (i) nature, extent and quality of services provided by HL Advisors and the Sub-adviser; (ii) performance of the Fund, HL Advisors and the Sub-adviser; (iii) costs of the services and profitability of HL Advisors and the Sub-adviser; (iv) comparative services rendered and comparative investment management and sub-advisory fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors and the Sub-adviser with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. With respect to the other benefits to the Post-Restructuring Advisers and their affiliates from their relationships with the Fund, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting and related services from the Fund.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the New Agreements. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
| Hartford High Yield HLS Fund |
| Principal Risks (Unaudited) |
The principal risks of investing in the Fund are described below.
Market and Selection Risk: The Fund’s share price may fluctuate due to market risk and/or security selections that may underperform compared to the market or relevant benchmarks.
Junk Bond Risk: Investments in junk bonds involve greater risk of price volatility, illiquidity, and default than higher-rated debt securities.
Fixed Income Risk: The Fund is subject to interest rate risk (the risk that the value of an investment decreases when interest rates rise) and credit risk (the risk that the issuing company of a security is unable to pay interest and principal when due) and call risk (the risk that an investment may be redeemed early).
Foreign Investment Risk: Foreign investments can be riskier than U.S. investments. Potential risks include currency risk that may result from unfavorable exchange rates, liquidity risk if decreased demand for a security makes it difficult to sell at the desired price, and risks that stem from substantially lower trading volume on foreign markets.
Active Trading Risk: Actively trading investments may result in higher costs and higher taxable income.
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
HLSAR-HY12 2-13 113544 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 | |
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford Index HLS Fund
Table of Contents
This report is prepared for the general information of contract owners and qualified retirement plan participants. It is not an offer of contracts or of qualified retirement plans. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent information including the applicable sales, administrative and other charges.
The views expressed in the Fund’s Manager Discussion under ‘‘Why did the Fund perform this way?’’ and ‘‘What is the outlook?’’ are views of the Fund’s sub-adviser and portfolio management team through the end of the period and are subject to change based on market and other conditions.
| Hartford Index HLS Fund inception 05/01/1987 |
| (sub-advised by Hartford Investment Management Company) |
| |
| Investment objective – Seeks to provide investment results which approximate the price and yield performance of publicly traded common stocks in the aggregate. |
Performance Overview 12/31/02 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IA. Growth results in classes other than Class IA will vary from what is seen above due to differences in the expenses charged to those share classes.
| Average Annual Total Returns (as of 12/31/12) |
| | | 1 Year | | | 5 Year | | | 10 Year | |
| Index IA | | | 15.63% | | | | 1.39% | | | | 6.76% | |
| Index IB | | | 15.34% | | | | 1.14% | | | | 6.50% | |
| S&P 500 Index | | | 15.99% | | | | 1.66% | | | | 7.09% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund's net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.
You cannot invest directly in an index.
As of the Fund’s current prospectus dated May 1, 2012, the net total annual operating expense ratios for Class IA and Class IB shares were 0.33% and 0.58%, respectively, and the gross total annual operating expense ratios for Class IA and Class IB shares were 0.33% and 0.58%, respectively. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect until April 30, 2013, and automatically renew for one-year terms unless terminated by the Fund’s Investment Advisor (Hartford Funds Management Company, LLC). For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
| Hartford Index HLS Fund |
| Manager Discussion |
| December 31, 2012 (Unaudited) |
| Portfolio Manager | | |
| Deane Gyllenhaal | | |
| Vice President | | |
How did the Fund perform?
The Class IA shares of the Hartford Index HLS Fund returned 15.63% for the twelve-month period ended December 31, 2012, underperforming its benchmark, the S&P 500 Index, which returned 15.99%. The Fund outperformed the Lipper VP-UF S&P 500 Index Funds category, a group of funds with investment strategies similar to those of the Fund, which returned 15.39%.
Why did the Fund perform this way?
By design, the Fund is managed to mimic the performance of the S&P 500 Index. Due to this approach, the Fund is expected to perform in line with the Index. However, we do not purchase the stock of our parent, The Hartford Financial Services Group, Inc. (HIG). This exposure to HIG is reallocated across the Life/Health, Property/Casualty and Multi-line Insurance industries. The performance of the Fund tends to marginally differ from the benchmark, primarily due to trading in futures contracts, index events, minimal cash exposure, and lack of exposure to HIG.
All ten of the sectors within the S&P 500 Index had positive returns during the calendar year 2012. Financials led the way up 28.8%. Consumer Discretionary and Telecom Services followed, up 24.1% and 19.1% respectively. The sectors with the lowest returns were Utilities, which gained 1.6%, and Energy ended up 4.6%.
On the stock level, the best index performers for the year included Pulte Group, a home builder, which gained 187.8%, followed by Telcom provider SprintNextel, which returned 142.3%. Whirlpool Corp. rounded out the top three advancing 120.2%. The laggards for the year included Apollo Group, an education company, which fell 61.2%. Alpha Natural Resources, an energy supplier, declined 58.1%.
What is the outlook?
The Fund will continue to be invested in the securities comprising the S&P 500 Index, with a focus on risk control and efficient trading. Performance of the Fund is expected to be similar to that of the index.
| Diversification by Industry |
| as of December 31, 2012 |
| Industry (Sector) | | Percentage of
Net Assets | |
| Automobiles and Components (Consumer Discretionary) | | | 0.8 | % |
| Banks (Financials) | | | 2.8 | |
| Capital Goods (Industrials) | | | 7.8 | |
| Commercial and Professional Services (Industrials) | | | 0.7 | |
| Consumer Durables and Apparel (Consumer Discretionary) | | | 1.1 | |
| Consumer Services (Consumer Discretionary) | | | 1.9 | |
| Diversified Financials (Financials) | | | 6.4 | |
| Energy (Energy) | | | 10.9 | |
| Food and Staples Retailing (Consumer Staples) | | | 2.3 | |
| Food, Beverage and Tobacco (Consumer Staples) | | | 5.9 | |
| Health Care Equipment and Services (Health Care) | | | 4.6 | |
| Household and Personal Products (Consumer Staples) | | | 2.3 | |
| Insurance (Financials) | | | 4.0 | |
| Materials (Materials) | | | 3.6 | |
| Media (Consumer Discretionary) | | | 3.5 | |
| Pharmaceuticals, Biotechnology and Life Sciences (Health Care) | | | 7.4 | |
| Real Estate (Financials) | | | 2.2 | |
| Retailing (Consumer Discretionary) | | | 4.1 | |
| Semiconductors and Semiconductor Equipment (Information Technology) | | | 2.0 | |
| Software and Services (Information Technology) | | | 9.5 | |
| Technology Hardware and Equipment (Information Technology) | | | 7.5 | |
| Telecommunication Services (Services) | | | 3.0 | |
| Transportation (Industrials) | | | 1.6 | |
| Utilities (Utilities) | | | 3.4 | |
| Short-Term Investments | | | 1.0 | |
| Other Assets and Liabilities | | | (0.3 | ) |
| Total | | | 100.0 | % |
| Hartford Index HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
Shares or Principal Amount | | | Market Value ╪ | |
| COMMON STOCKS - 99.3% |
| | | | | Automobiles and Components - 0.8% | | | | |
| | 9 | | | BorgWarner, Inc. ● | | $ | 654 | |
| | 23 | | | Delphi Automotive plc ● | | | 880 | |
| | 297 | | | Ford Motor Co. w/ rights | | | 3,845 | |
| | 19 | | | Goodyear (The) Tire & Rubber Co. ● | | | 263 | |
| | 18 | | | Harley-Davidson, Inc. | | | 862 | |
| | 53 | | | Johnson Controls, Inc. | | | 1,635 | |
| | | | | | | | 8,139 | |
| | | | | Banks - 2.8% | | | | |
| | 55 | | | BB&T Corp. | | | 1,587 | |
| | 15 | | | Comerica, Inc. | | | 451 | |
| | 70 | | | Fifth Third Bancorp | | | 1,061 | |
| | 19 | | | First Horizon National Corp. | | | 191 | |
| | 37 | | | Hudson City Bancorp, Inc. | | | 300 | |
| | 67 | | | Huntington Bancshares, Inc. | | | 427 | |
| | 73 | | | KeyCorp | | | 612 | |
| | 9 | | | M&T Bank Corp. | | | 934 | |
| | 27 | | | People's United Financial, Inc. | | | 328 | |
| | 41 | | | PNC Financial Services Group, Inc. | | | 2,404 | |
| | 110 | | | Regions Financial Corp. | | | 783 | |
| | 42 | | | SunTrust Banks, Inc. | | | 1,190 | |
| | 146 | | | US Bancorp | | | 4,678 | |
| | 381 | | | Wells Fargo & Co. | | | 13,032 | |
| | 14 | | | Zions Bancorporation | | | 307 | |
| | | | | | | | 28,285 | |
| | | | | Capital Goods - 7.8% | | | | |
| | 50 | | | 3M Co. | | | 4,606 | |
| | 53 | | | Boeing Co. | | | 3,983 | |
| | 51 | | | Caterpillar, Inc. | | | 4,559 | |
| | 14 | | | Cummins, Inc. | | | 1,495 | |
| | 45 | | | Danaher Corp. | | | 2,532 | |
| | 31 | | | Deere & Co. | | | 2,640 | |
| | 14 | | | Dover Corp. | | | 915 | |
| | 36 | | | Eaton Corp. plc | | | 1,952 | |
| | 56 | | | Emerson Electric Co. | | | 2,984 | |
| | 21 | | | Fastenal Co. | | | 982 | |
| | 4 | | | Flowserve Corp. | | | 576 | |
| | 13 | | | Fluor Corp. | | | 760 | |
| | 26 | | | General Dynamics Corp. | | | 1,790 | |
| | 817 | | | General Electric Co. | | | 17,143 | |
| | 61 | | | Honeywell International, Inc. | | | 3,870 | |
| | 33 | | | Illinois Tool Works, Inc. | | | 2,021 | |
| | 22 | | | Ingersoll-Rand plc | | | 1,043 | |
| | 10 | | | Jacobs Engineering Group, Inc. ● | | | 433 | |
| | 8 | | | Joy Global, Inc. | | | 524 | |
| | 7 | | | L-3 Communications Holdings, Inc. | | | 561 | |
| | 21 | | | Lockheed Martin Corp. | | | 1,933 | |
| | 28 | | | Masco Corp. | | | 463 | |
| | 19 | | | Northrop Grumman Corp. | | | 1,295 | |
| | 28 | | | PACCAR, Inc. | | | 1,244 | |
| | 9 | | | Pall Corp. | | | 522 | |
| | 12 | | | Parker-Hannifin Corp. | | | 985 | |
| | 16 | | | Pentair Ltd. | | | 807 | |
| | 11 | | | Precision Castparts Corp. | | | 2,150 | |
| | 17 | | | Quanta Services, Inc. ● | | | 452 | |
| | 26 | | | Raytheon Co. | | | 1,477 | |
| | 11 | | | Rockwell Automation, Inc. | | | 913 | |
| | 11 | | | Rockwell Collins, Inc. | | | 633 | |
| | 8 | | | Roper Industries, Inc. | | | 851 | |
| | 5 | | | Snap-On, Inc. | | | 358 | |
| | 13 | | | Stanley Black & Decker, Inc. | | | 975 | |
| | 22 | | | Textron, Inc. | | | 545 | |
| | 66 | | | United Technologies Corp. | | | 5,385 | |
| | 5 | | | W.W. Grainger, Inc. | | | 934 | |
| | 14 | | | Xylem, Inc. | | | 392 | |
| | | | | | | | 77,683 | |
| | | | | Commercial and Professional Services - 0.7% | | | | |
| | 18 | | | ADT (The) Corp. ● | | | 840 | |
| | 8 | | | Avery Dennison Corp. | | | 271 | |
| | 8 | | | Cintas Corp. | | | 338 | |
| | 3 | | | Dun & Bradstreet Corp. | | | 272 | |
| | 9 | | | Equifax, Inc. ● | | | 505 | |
| | 13 | | | Iron Mountain, Inc. | | | 403 | |
| | 16 | | | Pitney Bowes, Inc. | | | 166 | |
| | 23 | | | Republic Services, Inc. | | | 682 | |
| | 11 | | | Robert Half International, Inc. | | | 348 | |
| | 7 | | | Stericycle, Inc. ● | | | 619 | |
| | 36 | | | Tyco International Ltd. | | | 1,060 | |
| | 34 | | | Waste Management, Inc. | | | 1,147 | |
| | | | | | | | 6,651 | |
| | | | | Consumer Durables and Apparel - 1.1% | | | | |
| | 22 | | | Coach, Inc. | | | 1,224 | |
| | 22 | | | D.R. Horton, Inc. | | | 431 | |
| | 4 | | | Fossil, Inc. ● | | | 391 | |
| | 9 | | | Garmin Ltd. | | | 347 | |
| | 5 | | | Harman International Industries, Inc. | | | 235 | |
| | 9 | | | Hasbro, Inc. | | | 324 | |
| | 11 | | | Leggett & Platt, Inc. | | | 298 | |
| | 13 | | | Lennar Corp. | | | 496 | |
| | 27 | | | Mattel, Inc. | | | 978 | |
| | 22 | | | Newell Rubbermaid, Inc. | | | 498 | |
| | 57 | | | NIKE, Inc. Class B | | | 2,933 | |
| | 26 | | | Pulte Group, Inc. ● | | | 480 | |
| | 5 | | | Ralph Lauren Corp. | | | 710 | |
| | 7 | | | V.F. Corp. | | | 1,030 | |
| | 6 | | | Whirlpool Corp. | | | 617 | |
| | | | | | | | 10,992 | |
| | | | | Consumer Services - 1.9% | | | | |
| | 8 | | | Apollo Group, Inc. Class A ● | | | 164 | |
| | 35 | | | Carnival Corp. | | | 1,275 | |
| | 2 | | | Chipotle Mexican Grill, Inc. ● | | | 732 | |
| | 10 | | | Darden Restaurants, Inc. | | | 453 | |
| | 21 | | | H & R Block, Inc. | | | 392 | |
| | 21 | | | International Game Technology | | | 293 | |
| | 19 | | | Marriott International, Inc. Class A | | | 715 | |
| | 78 | | | McDonald's Corp. | | | 6,896 | |
| | 58 | | | Starbucks Corp. | | | 3,106 | |
| | 15 | | | Starwood Hotels & Resorts, Inc. | | | 876 | |
| | 11 | | | Wyndham Worldwide Corp. | | | 580 | |
| | 6 | | | Wynn Resorts Ltd. | | | 695 | |
| | 35 | | | Yum! Brands, Inc. | | | 2,339 | |
| | | | | | | | 18,516 | |
| | | | | Diversified Financials - 6.4% | | | | |
| | 76 | | | American Express Co. | | | 4,356 | |
| | 16 | | | Ameriprise Financial, Inc. | | | 1,005 | |
| | 839 | | | Bank of America Corp. | | | 9,737 | |
| | 91 | | | Bank of New York Mellon Corp. | | | 2,338 | |
| | 10 | | | BlackRock, Inc. | | | 2,029 | |
| | 45 | | | Capital One Financial Corp. | | | 2,627 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | | Market Value ╪ | |
| COMMON STOCKS - 99.3% - (continued) |
| | | | | Diversified Financials - 6.4% - (continued) | | | | |
| | 85 | | | Charles Schwab Corp. | | $ | 1,227 | |
| | 228 | | | Citigroup, Inc. | | | 9,035 | |
| | 24 | | | CME Group, Inc. | | | 1,211 | |
| | 39 | | | Discover Financial Services, Inc. | | | 1,516 | |
| | 20 | | | E*Trade Financial Corp. ● | | | 180 | |
| | 11 | | | Franklin Resources, Inc. | | | 1,352 | |
| | 34 | | | Goldman Sachs Group, Inc. | | | 4,382 | |
| | 6 | | | IntercontinentalExchange, Inc. ● | | | 703 | |
| | 35 | | | Invesco Ltd. | | | 902 | |
| | 296 | | | JP Morgan Chase & Co. | | | 13,016 | |
| | 9 | | | Legg Mason, Inc. | | | 233 | |
| | 15 | | | Leucadia National Corp. | | | 367 | |
| | 15 | | | Moody's Corp. | | | 761 | |
| | 108 | | | Morgan Stanley | | | 2,057 | |
| | 9 | | | Nasdaq OMX Group, Inc. | | | 228 | |
| | 17 | | | Northern Trust Corp. | | | 854 | |
| | 19 | | | NYSE Euronext | | | 596 | |
| | 36 | | | SLM Corp. | | | 617 | |
| | 36 | | | State Street Corp. | | | 1,703 | |
| | 20 | | | T. Rowe Price Group, Inc. | | | 1,290 | |
| | | | | | | | 64,322 | |
| | | | | Energy - 10.9% | | | | |
| | 39 | | | Anadarko Petroleum Corp. | | | 2,892 | |
| | 30 | | | Apache Corp. | | | 2,391 | |
| | 34 | | | Baker Hughes, Inc. | | | 1,398 | |
| | 16 | | | Cabot Oil & Gas Corp. | | | 815 | |
| | 19 | | | Cameron International Corp. ● | | | 1,086 | |
| | 40 | | | Chesapeake Energy Corp. | | | 671 | |
| | 152 | | | Chevron Corp. | | | 16,487 | |
| | 95 | | | ConocoPhillips Holding Co. | | | 5,481 | |
| | 18 | | | Consol Energy, Inc. | | | 571 | |
| | 30 | | | Denbury Resources, Inc. ● | | | 488 | |
| | 29 | | | Devon Energy Corp. | | | 1,528 | |
| | 5 | | | Diamond Offshore Drilling, Inc. | | | 369 | |
| | 18 | | | Ensco plc | | | 1,073 | |
| | 21 | | | EOG Resources, Inc. | | | 2,552 | |
| | 12 | | | EQT Corp. | | | 687 | |
| | 355 | | | Exxon Mobil Corp. | | | 30,737 | |
| | 19 | | | FMC Technologies, Inc. ● | | | 792 | |
| | 72 | | | Halliburton Co. | | | 2,508 | |
| | 8 | | | Helmerich & Payne, Inc. | | | 459 | |
| | 23 | | | Hess Corp. | | | 1,226 | |
| | 49 | | | Kinder Morgan, Inc. | | | 1,739 | |
| | 55 | | | Marathon Oil Corp. | | | 1,687 | |
| | 26 | | | Marathon Petroleum Corp. | | | 1,662 | |
| | 14 | | | Murphy Oil Corp. | | | 856 | |
| | 23 | | | Nabors Industries Ltd. ● | | | 327 | |
| | 33 | | | National Oilwell Varco, Inc. | | | 2,271 | |
| | 11 | | | Newfield Exploration Co. ● | | | 282 | |
| | 20 | | | Noble Corp. | | | 686 | |
| | 14 | | | Noble Energy, Inc. | | | 1,405 | |
| | 63 | | | Occidental Petroleum Corp. | | | 4,832 | |
| | 21 | | | Peabody Energy Corp. | | | 556 | |
| | 49 | | | Phillips 66 | | | 2,587 | |
| | 10 | | | Pioneer Natural Resources Co. | | | 1,027 | |
| | 14 | | | QEP Resources, Inc. | | | 421 | |
| | 13 | | | Range Resources Corp. | | | 799 | |
| | 10 | | | Rowan Cos. plc Class A ● | | | 304 | |
| | 103 | | | Schlumberger Ltd. | | | 7,162 | |
| | 27 | | | Southwestern Energy Co. ● | | | 908 | |
| | 52 | | | Spectra Energy Corp. | | | 1,420 | |
| | 11 | | | Tesoro Corp. | | | 483 | |
| | 43 | | | Valero Energy Corp. | | | 1,471 | |
| | 52 | | | Williams Cos., Inc. | | | 1,717 | |
| | 15 | | | WPX Energy, Inc. ● | | | 230 | |
| | | | | | | | 109,043 | |
| | | | | Food and Staples Retailing - 2.3% | | | | |
| | 34 | | | Costco Wholesale Corp. | | | 3,327 | |
| | 97 | | | CVS Caremark Corp. | | | 4,692 | |
| | 40 | | | Kroger (The) Co. | | | 1,042 | |
| | 19 | | | Safeway, Inc. | | | 338 | |
| | 46 | | | Sysco Corp. | | | 1,450 | |
| | 67 | | | Walgreen Co. | | | 2,478 | |
| | 130 | | | Wal-Mart Stores, Inc. | | | 8,888 | |
| | 13 | | | Whole Foods Market, Inc. | | | 1,229 | |
| | | | | | | | 23,444 | |
| | | | | Food, Beverage and Tobacco - 5.9% | | | | |
| | 158 | | | Altria Group, Inc. | | | 4,955 | |
| | 51 | | | Archer-Daniels-Midland Co. | | | 1,404 | |
| | 12 | | | Beam, Inc. | | | 760 | |
| | 12 | | | Brown-Forman Corp. | | | 745 | |
| | 14 | | | Campbell Soup Co. | | | 488 | |
| | 300 | | | Coca-Cola Co. | | | 10,889 | |
| | 21 | | | Coca-Cola Enterprises, Inc. | | | 668 | |
| | 32 | | | ConAgra Foods, Inc. | | | 938 | |
| | 12 | | | Constellation Brands, Inc. Class A ● | | | 418 | |
| | 14 | | | Dean Foods Co. ● | | | 238 | |
| | 16 | | | Dr. Pepper Snapple Group | | | 716 | |
| | 50 | | | General Mills, Inc. | | | 2,030 | |
| | 25 | | | H.J. Heinz Co. | | | 1,442 | |
| | 12 | | | Hershey Co. | | | 840 | |
| | 10 | | | Hormel Foods Corp. | | | 326 | |
| | 8 | | | J.M. Smucker Co. | | | 730 | |
| | 19 | | | Kellogg Co. | | | 1,075 | |
| | 46 | | | Kraft Foods Group, Inc. ● | | | 2,098 | |
| | 10 | | | Lorillard, Inc. | | | 1,178 | |
| | 10 | | | McCormick & Co., Inc. | | | 656 | |
| | 16 | | | Mead Johnson Nutrition Co. | | | 1,045 | |
| | 12 | | | Molson Coors Brewing Co. | | | 521 | |
| | 138 | | | Mondelez International, Inc. | | | 3,526 | |
| | 12 | | | Monster Beverage Corp. ● | | | 613 | |
| | 121 | | | PepsiCo, Inc. | | | 8,246 | |
| | 130 | | | Philip Morris International, Inc. | | | 10,880 | |
| | 25 | | | Reynolds American, Inc. | | | 1,045 | |
| | 22 | | | Tyson Foods, Inc. Class A | | | 434 | |
| | | | | | | | 58,904 | |
| | | | | Health Care Equipment and Services - 4.6% | | | | |
| | 123 | | | Abbott Laboratories | | | 8,066 | |
| | 26 | | | Aetna, Inc. | | | 1,206 | |
| | 18 | | | AmerisourceBergen Corp. | | | 791 | |
| | 6 | | | Bard (C.R.), Inc. | | | 578 | |
| | 43 | | | Baxter International, Inc. | | | 2,855 | |
| | 15 | | | Becton, Dickinson & Co. | | | 1,200 | |
| | 107 | | | Boston Scientific Corp. ● | | | 613 | |
| | 26 | | | Cardinal Health, Inc. | | | 1,088 | |
| | 17 | | | CareFusion Corp. ● | | | 494 | |
| | 11 | | | Cerner Corp. ● | | | 882 | |
| | 22 | | | CIGNA Corp. | | | 1,189 | |
| | 10 | | | Coventry Health Care, Inc. | | | 468 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Index HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | | Market Value ╪ | |
| COMMON STOCKS - 99.3% - (continued) |
| | | | | Health Care Equipment and Services - 4.6% - (continued) | | | | |
| | 37 | | | Covidien plc | | $ | 2,129 | |
| | 7 | | | DaVita HealthCare Partners, Inc. ● | | | 720 | |
| | 11 | | | Dentsply International, Inc. | | | 437 | |
| | 9 | | | Edwards Lifesciences Corp. ● | | | 808 | |
| | 64 | | | Express Scripts Holding Co. ● | | | 3,436 | |
| | 12 | | | Humana, Inc. | | | 847 | |
| | 3 | | | Intuitive Surgical, Inc. ● | | | 1,522 | |
| | 7 | | | Laboratory Corp. of America Holdings ● | | | 636 | |
| | 18 | | | McKesson Corp. | | | 1,781 | |
| | 79 | | | Medtronic, Inc. | | | 3,233 | |
| | 7 | | | Patterson Cos., Inc. | | | 224 | |
| | 12 | | | Quest Diagnostics, Inc. | | | 724 | |
| | 24 | | | St. Jude Medical, Inc. | | | 867 | |
| | 22 | | | Stryker Corp. | | | 1,233 | |
| | 8 | | | Tenet Healthcare Corp. | | | 268 | |
| | 80 | | | UnitedHealth Group, Inc. | | | 4,315 | |
| | 9 | | | Varian Medical Systems, Inc. ● | | | 601 | |
| | 24 | | | Wellpoint, Inc. | | | 1,438 | |
| | 13 | | | Zimmer Holdings, Inc. | | | 900 | |
| | | | | | | | 45,549 | |
| | | | | Household and Personal Products - 2.3% | | | | |
| | 34 | | | Avon Products, Inc. | | | 484 | |
| | 10 | | | Clorox Co. | | | 746 | |
| | 35 | | | Colgate-Palmolive Co. | | | 3,618 | |
| | 19 | | | Estee Lauder Co., Inc. | | | 1,121 | |
| | 30 | | | Kimberly-Clark Corp. | | | 2,570 | |
| | 213 | | | Procter & Gamble Co. | | | 14,456 | |
| | | | | | | | 22,995 | |
| | | | | Insurance - 4.0% | | | | |
| | 27 | | | ACE Ltd. | | | 2,139 | |
| | 38 | | | Aflac, Inc. | | | 2,034 | |
| | 38 | | | Allstate Corp. | | | 1,525 | |
| | 116 | | | American International Group, Inc. ● | | | 4,111 | |
| | 25 | | | Aon plc | | | 1,382 | |
| | 6 | | | Assurant, Inc. | | | 216 | |
| | 144 | | | Berkshire Hathaway, Inc. Class B ● | | | 12,903 | |
| | 21 | | | Chubb Corp. | | | 1,559 | |
| | 12 | | | Cincinnati Financial Corp. | | | 451 | |
| | 39 | | | Genworth Financial, Inc. ● | | | 291 | |
| | 22 | | | Lincoln National Corp. | | | 581 | |
| | 24 | | | Loews Corp. | | | 997 | |
| | 42 | | | Marsh & McLennan Cos., Inc. | | | 1,460 | |
| | 89 | | | MetLife, Inc. | | | 2,933 | |
| | 22 | | | Principal Financial Group, Inc. | | | 641 | |
| | 44 | | | Progressive Corp. | | | 925 | |
| | 38 | | | Prudential Financial, Inc. | | | 2,020 | |
| | 8 | | | Torchmark Corp. | | | 402 | |
| | 30 | | | Travelers Cos., Inc. | | | 2,162 | |
| | 22 | | | Unum Group | | | 468 | |
| | 24 | | | XL Group plc | | | 595 | |
| | | | | | | | 39,795 | |
| | | | | Materials - 3.6% | | | | |
| | 17 | | | Air Products & Chemicals, Inc. | | | 1,394 | |
| | 6 | | | Airgas, Inc. | | | 504 | |
| | 83 | | | Alcoa, Inc. | | | 721 | |
| | 8 | | | Allegheny Technologies, Inc. | | | 252 | |
| | 12 | | | Ball Corp. | | | 536 | |
| | 8 | | | Bemis Co., Inc. | | | 270 | |
| | 5 | | | CF Industries Holdings, Inc. | | | 997 | |
| | 11 | | | Cliff's Natural Resources, Inc. | | | 430 | |
| | 93 | | | Dow Chemical Co. | | | 3,020 | |
| | 73 | | | E.I. DuPont de Nemours & Co. | | | 3,264 | |
| | 12 | | | Eastman Chemical Co. | | | 811 | |
| | 20 | | | Ecolab, Inc. | | | 1,473 | |
| | 11 | | | FMC Corp. | | | 626 | |
| | 74 | | | Freeport-McMoRan Copper & Gold, Inc. | | | 2,530 | |
| | 6 | | | International Flavors & Fragrances, Inc. | | | 420 | |
| | 34 | | | International Paper Co. | | | 1,361 | |
| | 30 | | | LyondellBasell Industries Class A | | | 1,690 | |
| | 14 | | | MeadWestvaco Corp. | | | 434 | |
| | 42 | | | Monsanto Co. | | | 3,941 | |
| | 22 | | | Mosaic Co. | | | 1,218 | |
| | 39 | | | Newmont Mining Corp. | | | 1,796 | |
| | 25 | | | Nucor Corp. | | | 1,067 | |
| | 13 | | | Owens-Illinois, Inc. ● | | | 273 | |
| | 12 | | | PPG Industries, Inc. | | | 1,615 | |
| | 23 | | | Praxair, Inc. | | | 2,538 | |
| | 15 | | | Sealed Air Corp. | | | 265 | |
| | 7 | | | Sherwin-Williams Co. | | | 1,032 | |
| | 9 | | | Sigma-Aldrich Corp. | | | 689 | |
| | 11 | | | United States Steel Corp. | | | 268 | |
| | 10 | | | Vulcan Materials Co. | | | 524 | |
| | | | | | | | 35,959 | |
| | | | | Media - 3.5% | | | | |
| | 17 | | | Cablevision Systems Corp. | | | 251 | |
| | 46 | | | CBS Corp. Class B | | | 1,750 | |
| | 207 | | | Comcast Corp. Class A | | | 7,735 | |
| | 47 | | | DirecTV ● | | | 2,362 | |
| | 19 | | | Discovery Communications, Inc. ● | | | 1,179 | |
| | 18 | | | Gannett Co., Inc. | | | 323 | |
| | 34 | | | Interpublic Group of Cos., Inc. | | | 370 | |
| | 22 | | | McGraw-Hill Cos., Inc. | | | 1,183 | |
| | 157 | | | News Corp. Class A | | | 4,011 | |
| | 21 | | | Omnicom Group, Inc. | | | 1,029 | |
| | 7 | | | Scripps Networks Interactive Class A | | | 394 | |
| | 23 | | | Time Warner Cable, Inc. | | | 2,283 | |
| | 74 | | | Time Warner, Inc. | | | 3,529 | |
| | 36 | | | Viacom, Inc. Class B | | | 1,895 | |
| | 138 | | | Walt Disney Co. | | | 6,872 | |
| | – | | | Washington Post Co. Class B | | | 143 | |
| | | | | | | | 35,309 | |
| | | | | Pharmaceuticals, Biotechnology and Life Sciences - 7.4% | | | | |
| | 27 | | | Agilent Technologies, Inc. | | | 1,111 | |
| | 15 | | | Alexion Pharmaceuticals, Inc. ● | | | 1,417 | |
| | 24 | | | Allergan, Inc. | | | 2,200 | |
| | 60 | | | Amgen, Inc. | | | 5,154 | |
| | 18 | | | Biogen Idec, Inc. ● | | | 2,707 | |
| | 129 | | | Bristol-Myers Squibb Co. | | | 4,191 | |
| | 33 | | | Celgene Corp. ● | | | 2,590 | |
| | 80 | | | Eli Lilly & Co. | | | 3,922 | |
| | 18 | | | Forest Laboratories, Inc. ● | | | 642 | |
| | 59 | | | Gilead Sciences, Inc. ● | | | 4,331 | |
| | 13 | | | Hospira, Inc. ● | | | 402 | |
| | 216 | | | Johnson & Johnson | | | 15,127 | |
| | 13 | | | Life Technologies Corp. ● | | | 659 | |
| | 237 | | | Merck & Co., Inc. | | | 9,694 | |
| | 32 | | | Mylan, Inc. ● | | | 872 | |
| | 9 | | | PerkinElmer, Inc. | | | 285 | |
| | 7 | | | Perrigo Co. | | | 716 | |
| | 573 | | | Pfizer, Inc. | | | 14,382 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | | Market Value ╪ | |
| COMMON STOCKS - 99.3% - (continued) |
| | | | | Pharmaceuticals, Biotechnology and Life Sciences - 7.4% - (continued) | | | | |
| | 28 | | | Thermo Fisher Scientific, Inc. | | $ | 1,792 | |
| | 7 | | | Waters Corp. ● | | | 592 | |
| | 10 | | | Watson Pharmaceuticals, Inc. ● | | | 859 | |
| | | | | | | | 73,645 | |
| | | | | Real Estate - 2.2% | | | | |
| | 31 | | | American Tower Corp. REIT | | | 2,378 | |
| | 11 | | | Apartment Investment & Management Co. Class A REIT | | | 306 | |
| | 9 | | | AvalonBay Communities, Inc. REIT | | | 1,210 | |
| | 12 | | | Boston Properties, Inc. REIT | | | 1,248 | |
| | 24 | | | CBRE Group, Inc. ● | | | 468 | |
| | 25 | | | Equity Residential Properties Trust REIT | | | 1,419 | |
| | 35 | | | HCP, Inc. REIT | | | 1,592 | |
| | 20 | | | Health Care, Inc. REIT | | | 1,237 | |
| | 56 | | | Host Hotels & Resorts, Inc. REIT | | | 884 | |
| | 32 | | | Kimco Realty Corp. REIT | | | 614 | |
| | 13 | | | Plum Creek Timber Co., Inc. REIT | | | 558 | |
| | 36 | | | ProLogis L.P. REIT | | | 1,311 | |
| | 11 | | | Public Storage REIT | | | 1,634 | |
| | 24 | | | Simon Property Group, Inc. REIT | | | 3,808 | |
| | 23 | | | Ventas, Inc. REIT | | | 1,490 | |
| | 13 | | | Vornado Realty Trust REIT | | | 1,054 | |
| | 42 | | | Weyerhaeuser Co. REIT | | | 1,173 | |
| | | | | | | | 22,384 | |
| | | | | Retailing - 4.1% | | | | |
| | 6 | | | Abercrombie & Fitch Co. Class A | | | 298 | |
| | 28 | | | Amazon.com, Inc. ● | | | 7,095 | |
| | 3 | | | AutoNation, Inc. ● | | | 122 | |
| | 3 | | | AutoZone, Inc. ● | | | 1,032 | |
| | 18 | | | Bed Bath & Beyond, Inc. ● | | | 998 | |
| | 21 | | | Best Buy Co., Inc. | | | 246 | |
| | 5 | | | Big Lots, Inc. ● | | | 128 | |
| | 18 | | | CarMax, Inc. ● | | | 670 | |
| | 21 | | | Dollar General Corp. ● | | | 904 | |
| | 18 | | | Dollar Tree, Inc. ● | | | 718 | |
| | 7 | | | Expedia, Inc. | | | 444 | |
| | 8 | | | Family Dollar Stores, Inc. | | | 476 | |
| | 9 | | | GameStop Corp. Class A | | | 238 | |
| | 23 | | | Gap, Inc. | | | 718 | |
| | 12 | | | Genuine Parts Co. | | | 766 | |
| | 116 | | | Home Depot, Inc. | | | 7,203 | |
| | 11 | | | J.C. Penney Co., Inc. | | | 220 | |
| | 16 | | | Kohl's Corp. | | | 708 | |
| | 19 | | | Limited Brands, Inc. | | | 876 | |
| | 88 | | | Lowe's Co., Inc. | | | 3,110 | |
| | 31 | | | Macy's, Inc. | | | 1,202 | |
| | 4 | | | Netflix, Inc. ● | | | 398 | |
| | 12 | | | Nordstrom, Inc. | | | 633 | |
| | 9 | | | O'Reilly Automotive, Inc. ● | | | 796 | |
| | 8 | | | PetSmart, Inc. | | | 574 | |
| | 4 | | | Priceline.com, Inc. ● | | | 2,397 | |
| | 17 | | | Ross Stores, Inc. | | | 939 | |
| | 52 | | | Staples, Inc. | | | 598 | |
| | 51 | | | Target Corp. | | | 2,997 | |
| | 9 | | | Tiffany & Co. | | | 533 | |
| | 57 | | | TJX Cos., Inc. | | | 2,412 | |
| | 9 | | | TripAdvisor, Inc. ● | | | 358 | |
| | 9 | | | Urban Outfitters, Inc. ● | | | 335 | |
| | | | | | | | 41,142 | |
| | | | | Semiconductors and Semiconductor Equipment - 2.0% | | | | |
| | 47 | | | Advanced Micro Devices, Inc. ● | | | 113 | |
| | 25 | | | Altera Corp. | | | 859 | |
| | 23 | | | Analog Devices, Inc. | | | 986 | |
| | 93 | | | Applied Materials, Inc. | | | 1,067 | |
| | 40 | | | Broadcom Corp. Class A | | | 1,341 | |
| | 5 | | | First Solar, Inc. ● | | | 144 | |
| | 388 | | | Intel Corp. | | | 7,994 | |
| | 13 | | | KLA-Tencor Corp. | | | 621 | |
| | 13 | | | Lam Research Corp. ● | | | 483 | |
| | 18 | | | Linear Technology Corp. | | | 619 | |
| | 43 | | | LSI Corp. ● | | | 305 | |
| | 15 | | | Microchip Technology, Inc. | | | 494 | |
| | 79 | | | Micron Technology, Inc. ● | | | 503 | |
| | 49 | | | NVIDIA Corp. ● | | | 598 | |
| | 15 | | | Teradyne, Inc. ● | | | 247 | |
| | 87 | | | Texas Instruments, Inc. | | | 2,700 | |
| | 20 | | | Xilinx, Inc. | | | 730 | |
| | | | | | | | 19,804 | |
| | | | | Software and Services - 9.5% | | | | |
| | 50 | | | Accenture plc | | | 3,309 | |
| | 39 | | | Adobe Systems, Inc. ● | | | 1,452 | |
| | 14 | | | Akamai Technologies, Inc. ● | | | 566 | |
| | 17 | | | Autodesk, Inc. ● | | | 618 | |
| | 38 | | | Automatic Data Processing, Inc. | | | 2,153 | |
| | 11 | | | BMC Software, Inc. ● | | | 439 | |
| | 26 | | | CA, Inc. | | | 575 | |
| | 15 | | | Citrix Systems, Inc. ● | | | 953 | |
| | 23 | | | Cognizant Technology Solutions Corp. ● | | | 1,730 | |
| | 12 | | | Computer Sciences Corp. | | | 485 | |
| | 91 | | | eBay, Inc. ● | | | 4,625 | |
| | 24 | | | Electronic Arts, Inc. ● | | | 345 | |
| | 19 | | | Fidelity National Information Services, Inc. | | | 676 | |
| | 10 | | | Fiserv, Inc. ● | | | 819 | |
| | 21 | | | Google, Inc. ● | | | 14,690 | |
| | 83 | | | IBM Corp. | | | 15,837 | |
| | 22 | | | Intuit, Inc. | | | 1,290 | |
| | 8 | | | Mastercard, Inc. | | | 4,104 | |
| | 590 | | | Microsoft Corp. | | | 15,769 | |
| | 293 | | | Oracle Corp. | | | 9,753 | |
| | 25 | | | Paychex, Inc. | | | 784 | |
| | 15 | | | Red Hat, Inc. ● | | | 800 | |
| | 22 | | | SAIC, Inc. | | | 250 | |
| | 10 | | | Salesforce.com, Inc. ● | | | 1,716 | |
| | 54 | | | Symantec Corp. ● | | | 1,017 | |
| | 13 | | | Teradata Corp. ● | | | 815 | |
| | 13 | | | Total System Services, Inc. | | | 269 | |
| | 12 | | | VeriSign, Inc. ● | | | 471 | |
| | 41 | | | Visa, Inc. | | | 6,160 | |
| | 47 | | | Western Union Co. | | | 633 | |
| | 81 | | | Yahoo!, Inc. ● | | | 1,613 | |
| | | | | | | | 94,716 | |
| | | | | Technology Hardware and Equipment - 7.5% | | | | |
| | 13 | | | Amphenol Corp. Class A | | | 810 | |
| | 73 | | | Apple, Inc. | | | 39,029 | |
| | 414 | | | Cisco Systems, Inc. | | | 8,126 | |
| | 115 | | | Corning, Inc. | | | 1,452 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Index HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | | | | | | Market Value ╪ | |
| COMMON STOCKS - 99.3% - (continued) |
| | | | | Technology Hardware and Equipment - 7.5% - (continued) | | | | | | | | |
| | 114 | | | Dell, Inc. | | | | | | $ | 1,151 | |
| | 164 | | | EMC Corp. ● | | | | | | | 4,152 | |
| | 6 | | | F5 Networks, Inc. ● | | | | | | | 594 | |
| | 12 | | | FLIR Systems, Inc. | | | | | | | 260 | |
| | 9 | | | Harris Corp. | | | | | | | 431 | |
| | 153 | | | Hewlett-Packard Co. | | | | | | | 2,182 | |
| | 15 | | | Jabil Circuit, Inc. | | | | | | | 281 | |
| | 18 | | | JDS Uniphase Corp. ● | | | | | | | 247 | |
| | 40 | | | Juniper Networks, Inc. ● | | | | | | | 789 | |
| | 11 | | | Molex, Inc. | | | | | | | 295 | |
| | 22 | | | Motorola Solutions, Inc. | | | | | | | 1,215 | |
| | 28 | | | NetApp, Inc. ● | | | | | | | 935 | |
| | 133 | | | Qualcomm, Inc. | | | | | | | 8,231 | |
| | 19 | | | SanDisk Corp. ● | | | | | | | 821 | |
| | 26 | | | Seagate Technology plc | | | | | | | 799 | |
| | 33 | | | TE Connectivity Ltd. | | | | | | | 1,220 | |
| | 17 | | | Western Digital Corp. | | | | | | | 724 | |
| | 98 | | | Xerox Corp. | | | | | | | 671 | |
| | | | | | | | | | | | 74,415 | |
| | | | | Telecommunication Services - 3.0% | | | | | | | | |
| | 442 | | | AT&T, Inc. | | | | | | | 14,911 | |
| | 49 | | | CenturyLink, Inc. | | | | | | | 1,900 | |
| | 23 | | | Crown Castle International Corp. ● | | | | | | | 1,645 | |
| | 78 | | | Frontier Communications Co. | | | | | | | 332 | |
| | 25 | | | MetroPCS Communications, Inc. ● | | | | | | | 245 | |
| | 234 | | | Sprint Nextel Corp. ● | | | | | | | 1,327 | |
| | 222 | | | Verizon Communications, Inc. | | | | | | | 9,618 | |
| | 46 | | | Windstream Corp. | | | | | | | 379 | |
| | | | | | | | | | | | 30,357 | |
| | | | | Transportation - 1.6% | | | | | | | | |
| | 13 | | | C.H. Robinson Worldwide, Inc. | | | | | | | 791 | |
| | 80 | | | CSX Corp. | | | | | | | 1,584 | |
| | 16 | | | Expeditors International of Washington, Inc. | | | | | | | 642 | |
| | 23 | | | FedEx Corp. | | | | | | | 2,086 | |
| | 25 | | | Norfolk Southern Corp. | | | | | | | 1,520 | |
| | 4 | | | Ryder System, Inc. | | | | | | | 198 | |
| | 57 | | | Southwest Airlines Co. | | | | | | | 589 | |
| | 37 | | | Union Pacific Corp. | | | | | | | 4,606 | |
| | 56 | | | United Parcel Service, Inc. Class B | | | | | | | 4,110 | |
| | | | | | | | | | | | 16,126 | |
| | | | | Utilities - 3.4% | | | | | | | | |
| | 48 | | | AES (The) Corp. | | | | | | | 514 | |
| | 9 | | | AGL Resources, Inc. | | | | | | | 367 | |
| | 19 | | | Ameren Corp. | | | | | | | 580 | |
| | 38 | | | American Electric Power Co., Inc. | | | | | | | 1,613 | |
| | 33 | | | CenterPoint Energy, Inc. | | | | | | | 641 | |
| | 21 | | | CMS Energy Corp. | | | | | | | 502 | |
| | 23 | | | Consolidated Edison, Inc. | | | | | | | 1,267 | |
| | 45 | | | Dominion Resources, Inc. | | | | | | | 2,320 | |
| | 13 | | | DTE Energy Co. | | | | | | | 805 | |
| | 55 | | | Duke Energy Corp. | | | | | | | 3,498 | |
| | 25 | | | Edison International | | | | | | | 1,149 | |
| | 14 | | | Entergy Corp. | | | | | | | 883 | |
| | 67 | | | Exelon Corp. | | | | | | | 1,980 | |
| | 33 | | | FirstEnergy Corp. | | | | | | | 1,360 | |
| | 6 | | | Integrys Energy Group, Inc. | | | | | | | 317 | |
| | 33 | | | NextEra Energy, Inc. | | | | | | | 2,278 | |
| | 24 | | | NiSource, Inc. | | | | | | | 600 | |
| | 24 | | | Northeast Utilities | | | | | | | 954 | |
| | 25 | | | NRG Energy, Inc. | | | | | | | 578 | |
| | 16 | | | Oneok, Inc. | | | | | | | 681 | |
| | 18 | | | Pepco Holdings, Inc. | | | | | | | 351 | |
| | 34 | | | PG&E Corp. | | | | | | | 1,346 | |
| | 9 | | | Pinnacle West Capital Corp. | | | | | | | 435 | |
| | 45 | | | PPL Corp. | | | | | | | 1,296 | |
| | 39 | | | Public Service Enterprise Group, Inc. | | | | | | | 1,206 | |
| | 10 | | | SCANA Corp. | | | | | | | 469 | |
| | 18 | | | Sempra Energy | | | | | | | 1,242 | |
| | 68 | | | Southern Co. | | | | | | | 2,914 | |
| | 16 | | | TECO Energy, Inc. | | | | | | | 265 | |
| | 18 | | | Wisconsin Energy Corp. | | | | | | | 661 | |
| | 38 | | | Xcel Energy, Inc. | | | | | | | 1,014 | |
| | | | | | | | | | | | 34,086 | |
| | | | | Total common stocks | | | | | | | | |
| | | | | (cost $789,976) | | | | | | $ | 992,261 | |
| | | | | | | | | | | | | |
| | | | | Total long-term investments | | | | | | | | |
| | | | | (cost $789,976) | | | | | | $ | 992,261 | |
| | | | | | | | | | | | | |
| SHORT-TERM INVESTMENTS - 1.0% |
| Repurchase Agreements - 0.9% |
| | | | | Royal Bank of Canada TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $8,564, collateralized by 2013,
U.S. Treasury Note 0.25%, 2015, value of
$8,735) | | | | | | | | |
| $ | 8,564 | | | 0.15%, 12/31/2012 | | | | | | $ | 8,564 | |
| | | | | | | | | | | | | |
| U.S. Treasury Bills - 0.1% | | | | | | | | |
| | 800 | | | 0.09%, 02/07/2013 □○ | | | | | | $ | 800 | |
| | | | | | | | | | | | | |
| | | | | Total short-term investments | | | | | | | | |
| | | | | (cost $9,364) | | | | | | $ | 9,364 | |
| | | | | | | | | | | | | |
| | | | Total investments | | | | | | | | |
| | | | | (cost $799,340) ▲ | | | 100.3 | % | | $ | 1,001,625 | |
| | | | | Other assets and liabilities | | | (0.3 | )% | | | (2,710 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 998,915 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Index HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $843,067 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 308,798 | |
| Unrealized Depreciation | | | (150,240 | ) |
| Net Unrealized Appreciation | | $ | 158,558 | |
| ○ | The interest rate disclosed for these securities represents the effective yield on the date of the acquisition. |
| □ | This security, or a portion of this security, is pledged as initial margin deposit and collateral for daily variation margin loss on open futures contracts held at December 31, 2012 as listed in the table below: |
| Description | | Number of
Contracts* | | | Expiration
Date | | Notional Amount | | | Market Value ╪ | | | Unrealized
Appreciation/
(Depreciation) | |
| Long position contracts: | | | | | | | | | | | | | | | | | | |
| S&P 500 Futures | | | 30 | | | 03/14/2013 | | $ | 10,652 | | | $ | 10,651 | | | $ | (1 | ) |
* The number of contracts does not omit 000's.
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
| GLOSSARY: (abbreviations used in preceding Schedule of Investments) |
| |
| Index Abbreviations: |
| S&P | Standard & Poors |
| |
| Other Abbreviations: |
| REIT | Real Estate Investment Trust |
The accompanying notes are an integral part of these financial statements.
| Hartford Index HLS Fund |
| Investment Valuation Hierarchy Level Summary |
| December 31, 2012 |
| (000’s Omitted) |
| | | Total | | | Level 1 ♦ | | | Level 2 ♦ | | | Level 3 | |
| Assets: | | | | | | | | | | | | | | | | |
| Common Stocks ‡ | | $ | 992,261 | | | $ | 992,261 | | | $ | – | | | $ | – | |
| Short-Term Investments | | | 9,364 | | | | – | | | | 9,364 | | | | – | |
| Total | | $ | 1,001,625 | | | $ | 992,261 | | | $ | 9,364 | | | $ | – | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Futures * | | | 1 | | | | 1 | | | | – | | | | – | |
| Total | | $ | 1 | | | $ | 1 | | | $ | – | | | $ | – | |
| ♦ | For the year ended December 31, 2012, there were no transfers between Level 1 and Level 2. |
| ‡ | The Fund has all or primarily all of the equity securities categorized in a particular level. Refer to the Schedule of Investments for further industry breakout. |
| * | Derivative instruments not reflected in the Schedule of Investments are valued at the unrealized appreciation/depreciation on the investments. |
The accompanying notes are an integral part of these financial statements.
| Hartford Index HLS Fund |
| Statement of Assets and Liabilities |
| December 31, 2012 |
| (000’s Omitted) |
| Assets: | | | | |
| Investments in securities, at market value (cost $799,340) | | $ | 1,001,625 | |
| Receivables: | | | | |
| Investment securities sold | | | 148 | |
| Fund shares sold | | | 803 | |
| Dividends and interest | | | 1,094 | |
| Variation margin | | | 268 | |
| Total assets | | | 1,003,938 | |
| Liabilities: | | | | |
| Bank overdraft | | | 4 | |
| Payables: | | | | |
| Fund shares redeemed | | | 4,897 | |
| Investment management fees | | | 57 | |
| Distribution fees | | | 15 | |
| Accrued expenses | | | 50 | |
| Total liabilities | | | 5,023 | |
| Net assets | | $ | 998,915 | |
| Summary of Net Assets: | | | | |
| Capital stock and paid-in-capital | | $ | 842,505 | |
| Undistributed net investment income | | | 821 | |
| Accumulated net realized loss | | | (46,695 | ) |
| Unrealized appreciation of investments | | | 202,284 | |
| Net assets | | $ | 998,915 | |
| Shares authorized | | | 4,000,000 | |
| Par value | | $ | 0.001 | |
| Class IA: Net asset value per share | | $ | 29.69 | |
| Shares outstanding | | | 23,300 | |
| Net assets | | $ | 691,786 | |
| Class IB: Net asset value per share | | $ | 29.56 | |
| Shares outstanding | | | 10,390 | |
| Net assets | | $ | 307,129 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Index HLS Fund |
| Statement of Operations |
| For the Year Ended December 31, 2012 |
| (000’s Omitted) |
| Investment Income: | | | | |
| Dividends | | $ | 23,010 | |
| Interest | | | 16 | |
| Less: Foreign tax withheld | | | (13 | ) |
| Total investment income, net | | | 23,013 | |
| | | | | |
| Expenses: | | | | |
| Investment management fees | | | 2,982 | |
| Distribution fees - Class IB | | | 727 | |
| Custodian fees | | | 13 | |
| Accounting services fees | | | 100 | |
| Board of Directors' fees | | | 25 | |
| Audit fees | | | 16 | |
| Other expenses | | | 156 | |
| Total expenses (before fees paid indirectly) | | | 4,019 | |
| Custodian fee offset | | | — | |
| Total fees paid indirectly | | | — | |
| Total expenses, net | | | 4,019 | |
| Net Investment Income | | | 18,994 | |
| | | | | |
| Net Realized Gain on Investments and Other Financial Instruments: | | | | |
| Net realized gain on investments | | | 7,278 | |
| Net realized gain on futures | | | 1,644 | |
| Net Realized Gain on Investments and Other Financial Instruments | | | 8,922 | |
| | | | | |
| Net Changes in Unrealized Appreciation of Investments and Other Financial Instruments: | | | | |
| Net unrealized appreciation of investments | | | 111,774 | |
| Net unrealized depreciation of futures | | | (12 | ) |
| Net Changes in Unrealized Appreciation of Investments and Other Financial Instruments | | | 111,762 | |
| Net Gain on Investments and Other Financial Instruments | | | 120,684 | |
| Net Increase in Net Assets Resulting from Operations | | $ | 139,678 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Index HLS Fund |
| Statement of Changes in Net Assets |
| |
| (000’s Omitted) |
| | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| Operations: | | | | | | | | |
| Net investment income | | $ | 18,994 | | | $ | 16,452 | |
| Net realized gain (loss) on investments and other financial instruments | | | 8,922 | | | | (789 | ) |
| Net unrealized appreciation of investments and other financial instruments | | | 111,762 | | | | 4,269 | |
| Net Increase in Net Assets Resulting from Operations | | | 139,678 | | | | 19,932 | |
| Distributions to Shareholders: | | | | | | | | |
| From net investment income | | | | | | | | |
| Class IA | | | (13,809 | ) | | | (11,907 | ) |
| Class IB | | | (5,486 | ) | | | (3,567 | ) |
| Total distributions | | | (19,295 | ) | | | (15,474 | ) |
| Capital Share Transactions: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 67,728 | | | | 49,488 | |
| Issued on reinvestment of distributions | | | 13,809 | | | | 11,907 | |
| Redeemed | | | (150,607 | ) | | | (202,307 | ) |
| Total capital share transactions | | | (69,070 | ) | | | (140,912 | ) |
| Class IB | | | | | | | | |
| Sold | | | 138,040 | | | | 103,660 | |
| Issued on reinvestment of distributions | | | 5,486 | | | | 3,567 | |
| Redeemed | | | (101,658 | ) | | | (83,928 | ) |
| Total capital share transactions | | | 41,868 | | | | 23,299 | |
| Net decrease from capital share transactions | | | (27,202 | ) | | | (117,613 | ) |
| Net Increase (Decrease) in Net Assets | | | 93,181 | | | | (113,155 | ) |
| Net Assets: | | | | | | | | |
| Beginning of period | | | 905,734 | | | | 1,018,889 | |
| End of period | | $ | 998,915 | | | $ | 905,734 | |
| Undistributed (distribution in excess of) net investment income | | $ | 821 | | | $ | 1,451 | |
| Shares: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 2,335 | | | | 1,855 | |
| Issued on reinvestment of distributions | | | 467 | | | | 458 | |
| Redeemed | | | (5,199 | ) | | | (7,518 | ) |
| Total share activity | | | (2,397 | ) | | | (5,205 | ) |
| Class IB | | | | | | | | |
| Sold | | | 4,800 | | | | 3,893 | |
| Issued on reinvestment of distributions | | | 186 | | | | 138 | |
| Redeemed | | | (3,505 | ) | | | (3,145 | ) |
| Total share activity | | | 1,481 | | | | 886 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Index HLS Fund |
| Notes to Financial Statements |
| December 31, 2012 |
| (000’s Omitted) |
Hartford Index HLS Fund (the “Fund”) serves as an underlying investment option for certain variable annuity and variable life insurance separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates and certain qualified retirement plans. The Fund may also serve as an underlying investment option for certain variable annuity and variable life separate accounts of other insurance companies. Owners of variable annuity contracts and policyholders of variable life insurance contracts may choose the funds permitted in the variable insurance contract prospectus. In addition, participants in certain qualified retirement plans may choose the Fund if permitted by their plans.
Hartford Series Fund, Inc. (the “Company”) is an open-end registered management investment company comprised of thirty portfolios. Financial Statements for the Fund, a series of the Company, are included in this report.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund is a diversified open-end management investment company.
The Fund is divided into Class IA and Class IB shares. Each class is offered at the per share net asset value (“NAV”) without a sales charge and is subject to the same expenses, except that the Class IB shares are subject to distribution and service fees charged pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act.
| 2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Fund in the preparation of its financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| | a) | Determination of Net Asset Value – The NAV of each class of the Fund’s shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| | b) | Investment Valuation and Fair Value Measurements – For purposes of calculating the NAV, portfolio investments and other assets held by the Fund's portfolio for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of last reported sales prices or official close price. If no sales are reported, market value is based on quotes obtained from a quotation reporting system, established market makers, or independent pricing services. If market prices are not readily available or are deemed unreliable, the Fund will use the fair value of the investment as determined in good faith under policies and procedures established by and under the supervision of the Company's Board of Directors. Market quotes are considered not readily available where there is an absence of current or reliable market-based data (e.g., trade information or indicative market quotes), including where events occur after the close of the relevant market, but prior to the NYSE Close that materially affect the values of the Fund's portfolio investments or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the investments trade do not open for trading for the entire day and no other market prices are available. There can be no assurance that the Fund could obtain the fair market value assigned to an investment if the Fund were to sell the investment at approximately the time at which the Fund determines its NAV. |
Short-term investments maturing in 60 days or less are generally valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days.
Exchange traded options, futures and options on futures are valued at the settlement price determined by the relevant exchange as of the NYSE Close. If such instruments do not trade on an exchange, values may be supplied by an independent pricing service using a formula or other objective method that may take into consideration the style, direction, expiration, strike price, notional value and volatility or other adjustments.
Financial instruments for which prices are not available from an independent pricing service may be valued using market quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with procedures established by the Company’s Board of Directors.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| | · | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange traded funds, rights and warrants. |
| | · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 may include debt investments that are traded less frequently than exchange traded instruments and which are valued using independent pricing services; foreign equities, which are principally traded on certain foreign markets and are adjusted daily pursuant to a fair value pricing service in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close; and short-term investments, which are valued at amortized cost. |
| | · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price. |
The Board of Directors of the Company generally reviews and approves the “Procedures for Valuation of Portfolio Securities” on an annual basis. These procedures define how investments are to be valued, including the formation and activities of a Valuation Committee. The Valuation Committee is responsible for determining in good faith the fair value of investments when the value cannot be obtained from primary pricing services or alternative sources or if the valuation of an investment as provided by the primary pricing service or alternative source is believed not to reflect the investment’s fair value as of the Valuation Date. Members of the Valuation Committee include the Fund’s Treasurer or designee, a Vice President of the Fund with legal expertise or designee, and a Vice President of the investment manager or designee. In addition, the Fund’s Chief Compliance Officer shall designate a member of the compliance group to attend Valuation Committee meetings as a non-voting resource, to monitor for and provide guidance with respect to compliance with these procedures. Two members of the Valuation Committee or their designees, representing different departments, shall constitute a quorum for purposes of permitting the Valuation Committee to take action. The Valuation Committee will consider all relevant factors in determining an investment’s fair value, and may seek the advice of the Fund’s sub-adviser, knowledgeable brokers, and legal counsel in making such determination. The Valuation
| Hartford Index HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
Committee reports to the Audit Committee of the Company’s Board of Directors. The Audit Committee receives quarterly written reports which include details of all fair-valued investments, including the reason for the fair valuation, and an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such investments (the “look-back” test). The Board of Directors then must consider for ratification all of the fair value determinations made during the previous quarter.
Valuation levels are not necessarily indicative of the risk associated with investing in such investments. Individual investments within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
For additional information, refer to the Investment Valuation Hierarchy Level Summary and the Level 3 roll-forward reconciliation, if applicable, which follow the Schedule of Investments.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period.
| | c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Investments purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses are determined on the basis of identified cost. |
Dividend income from domestic securities is accrued on the ex-dividend date. In general, dividend income from foreign securities is recorded on the ex-date; however, dividend notifications in certain foreign jurisdictions may not be available in a timely manner and as a result, the Fund will record the dividend as soon as the relevant details (i.e., rate per share, payment date, shareholders of record, etc.) are publicly available. Interest income, including amortization of premium and accretion of discounts, is accrued on a daily basis.
| | d) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Fund’s shares are executed in accordance with the investment instructions of the contract holders and plan participants. The NAV of the Fund’s shares is determined as of the close of business on each business day of the Exchange. The NAV is determined separately for each class of shares of the Fund by dividing the Fund’s net assets attributable to that class by the number of shares of the class outstanding. Each class of shares offered by the Fund has equal rights as to assets and voting privileges (except that shareholders of a class have exclusive voting rights regarding any matter relating solely to that class of shares). Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets of the class. Realized and unrealized capital gains and losses are allocated daily based on the relative net assets of each class of shares of the Fund. |
Orders for the purchase of the Fund’s shares received prior to the close of the Exchange on any day the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Fund. The policy of the Fund is to pay dividends from net investment income and realized capital gains, if any, at least once a year.
Distributions from net investment income, net realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These
differences may include but are not limited to losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to Passive Foreign Investment Companies (“PFICs”), Real Estate Investment Trusts (“REITs”), Regulated Investment Companies (“RICs”), certain derivatives and partnerships. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Fund’s capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| 3. | Securities and Other Investments: |
| | a) | Repurchase Agreements – A repurchase agreement is an agreement by which a counterparty agrees to sell an investment and agrees to repurchase the investment sold from the buyer at a mutually agreed upon time and price. At the time the Fund enters into a repurchase agreement, the value of the underlying collateral, including accrued interest, will be equal to or exceed the value of the repurchase agreement. Repurchase agreements expose the Fund to counterparty risk - that is, the risk that the counterparty will not fulfill its obligations. To minimize counterparty risk, the investments that serve to collateralize the repurchase agreement are held by the Fund’s custodian in book entry or physical form in the custodial account of the Fund or in a third party custodial account. Repurchase agreements are valued at cost plus accrued interest, which approximates fair value. The Fund, as shown on the Schedule of Investments, had outstanding repurchase agreements as of December 31, 2012. |
| 4. | Financial Derivative Instruments: |
The following disclosures contain information on how and why the Fund uses derivative instruments, the credit-risk-related contingent features in certain derivative instruments, and how derivative instruments affect the Fund’s financial position and results of operations. The location and fair value amounts of these instruments on the Statement of Assets and Liabilities and the realized gains and losses and changes in unrealized gains and losses on the Statement of Operations, each categorized by type of derivative contract, are included in the following Additional Derivative Instrument Information footnote. The derivative instruments outstanding as of year-end are disclosed in the notes to or within the Schedule of Investments for purchased options, if applicable. The amounts of realized gains and losses and changes in unrealized gains and losses on derivative instruments during the year are disclosed in the Statement of Operations.
| | a) | Futures Contracts – The Fund may enter into futures contracts. A futures contract is an agreement between two parties to buy or sell an asset at a set price on a future date. The Fund uses futures contracts to manage or obtain exposure to the investment markets, commodities, or movements in interest rates and currency values. The primary risks associated with the use of futures contracts are the imperfect correlation between the change in market value of the investments held by the Fund and the prices of futures contracts and the possibility of an illiquid market. Upon entering into a futures contract, the Fund is required to deposit with a futures commission merchant (“FCM”) an amount of cash or U.S. Government or Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily at the most recent settlement price reported by an exchange on which, over time, they are traded most extensively, and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statement of Assets and Liabilities; however, the Fund seeks to reduce this risk through the use of an FCM. The Fund, as shown on the Schedule of Investments, had outstanding futures contracts as of December 31, 2012. |
| Hartford Index HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| | b) | Additional Derivative Instrument Information: |
Fair Value of Derivative Instruments on the Statement of Assets and Liabilities as of December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Variation margin receivable * | | $ | — | | | $ | — | | | $ | — | | | $ | 268 | | | $ | — | | | $ | — | | | $ | 268 | |
| Total | | $ | �� | | | $ | — | | | $ | — | | | $ | 268 | | | $ | — | | | $ | — | | | $ | 268 | |
| * | Only current day's variation margin is reported within the Statement of Assets and Liabilities. The variation margin is included in the open futures cumulative appreciation (depreciation) of $(1) as reported in the Schedule of Investments. |
The volume of derivatives that is presented in the Schedule of Investments is consistent with the derivative activity during the year ended December 31, 2012.
The Effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Realized Gain on Derivatives Recognized as a Result of Operations: |
| Net realized gain on futures | | $ | — | | | $ | — | | | $ | — | | | $ | 1,644 | | | $ | — | | | $ | — | | | $ | 1,644 | |
| Total | | $ | — | | | $ | — | | | $ | — | | | $ | 1,644 | | | $ | — | | | $ | — | | | $ | 1,644 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Change in Unrealized Depreciation on Derivatives Recognized as a Result of Operations: |
| Net change in unrealized depreciation of futures | | $ | — | | | $ | — | | | $ | — | | | $ | (12 | ) | | $ | — | | | $ | — | | | $ | (12 | ) |
| Total | | $ | — | | | $ | — | | | $ | — | | | $ | (12 | ) | | $ | — | | | $ | — | | | $ | (12 | ) |
| a) | Counterparty Risk – The Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will default. |
| b) | Market Risks – The market values of equity securities, such as common stocks and preferred stocks, or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The market value of equity securities may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities. |
| a) | Federal Income Taxes – For federal income tax purposes, the Fund intends to continue to qualify as a RIC under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders and otherwise complying with the requirements of the IRC. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains prior to the next fiscal year-end. Accordingly, no provision for federal |
income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes.
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. |
| c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Fund for the periods indicated is as follows (as adjusted for dividends payable, if applicable): |
| | | For the Year Ended
December 31, 2012 | | | For the Year Ended
December 31, 2011 | |
| Ordinary Income | | $ | 19,295 | | | $ | 15,474 | |
As of December 31, 2012, the Fund’s components of distributable earnings (deficit) on a tax basis were as follows:
| | | Amount | |
| Undistributed Ordinary Income | | $ | 821 | |
| Accumulated Capital and Other Losses* | | | (2,969 | ) |
| Unrealized Appreciation† | | | 158,558 | |
| Total Accumulated Earnings | | $ | 156,410 | |
| | * | The Fund has capital loss carryforwards that are identified in the Capital Loss Carryforward note that follows. |
| | † | Differences between book-basis and tax-basis unrealized appreciation (depreciation) may be attributable to the losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. |
| d) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as foreign currency, PFICs, expiration or utilization of capital loss carryforwards or net operating losses. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Fund’s distributions may be shown in the accompanying Statement of Changes in Net Assets as from undistributed net investment income, from accumulated net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Fund recorded reclassifications to increase (decrease) the accounts listed below: |
| | | Amount | |
| Undistributed Net Investment Income | | $ | (329 | ) |
| Accumulated Net Realized Gain (Loss) | | | 329 | |
| e) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss |
| Hartford Index HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation.
At December 31, 2012 (tax-year-end), the Fund had capital loss carryforwards for U.S. federal income tax purposes as follows:
| Year of Expiration | | Amount | |
| 2017 | | $ | 2,969 | |
| Total | | $ | 2,969 | |
During the year ended December 31, 2012, the Fund utilized $19,123 of prior year capital loss carryforwards.
| f) | Accounting for Uncertainty in Income Taxes – The Fund has adopted financial reporting rules that require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Fund does not have an examination in progress. |
The Fund has reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules had no effect on the Fund’s financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2012. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Fund’s investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Fund pursuant to an Investment Management Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Fund’s investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees payable under, the Fund’s investment management agreements; or (ii) the day-to-day management of the Fund. The investment manager has overall investment supervisory responsibility for the Fund. In addition, the investment manager provides administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. The investment manager has contracted with Hartford Investment Management Company (“Hartford Investment Management”) under a sub-advisory agreement for the provision of day-to-day investment management services to the Fund in accordance with the Fund’s investment objective and policies. The Fund pays a fee to the investment manager, a portion of which may be used to compensate Hartford Investment Management. |
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered as of December 31, 2012; the rates are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee | |
| On first $2 billion | | | 0.3000 | % |
| On next $3 billion | | | 0.2000 | % |
| On next $5 billion | | | 0.1800 | % |
| Over $10 billion | | | 0.1700 | % |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Fund. HLIC provided accounting services for the Fund for the fiscal year ended December 31, 2012. The |
replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Fund or the fees charged to the Fund for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Fund, HFMC provides accounting services to the Fund and receives monthly compensation based on the Fund’s average daily net assets at the rates set forth below. The Fund’s accounting services fees are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee | |
| All Assets | | | 0.010 | % |
| c) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund and allocated to classes within a Fund in proportion to the average daily net assets of the Fund and each class, except where allocation of certain expenses is more fairly made directly to the Fund or to specific classes within a Fund. |
| d) | Fees Paid Indirectly – The Fund’s custodian banks have agreed to reduce its fees when the Fund maintains cash on deposit in a non-interest-bearing custody account. For the year ended December 31, 2012, these amounts, if any, are included in the Statement of Operations. |
The ratio of expenses to average net assets in the accompanying financial highlights excludes the reduction in expenses related to fees paid indirectly. The annualized expense ratio after waivers for the period listed below reflecting the reduction for fees paid indirectly is as follows:
| | | Year Ended
December 31, 2012 | |
| Class IA | | | 0.33 | % |
| Class IB | | | 0.58 | |
| e) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Fund's principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD with HIFSCO did not result in any changes to the distribution services provided to the Fund. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Fund, has adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, 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, subject to the review and approval of the Company’s Board of Directors. |
The Distribution Plan provides that the Fund may pay annually up to 0.25% of the average daily net assets of the Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, the Fund is authorized to make payments monthly to the Distributor that may be used to pay or compensate 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. These fees are accrued daily and paid monthly.
| f) | Other Related Party Transactions – Certain officers of the Fund are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Fund’s Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Fund was in the amount of $1. These fees are accrued daily and paid monthly. |
| Hartford Index HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| 8. | Investment Transactions: |
For the year ended December 31, 2012, the Fund's aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
| | | Amount | |
| Cost of Purchases Excluding U.S. Government Obligations | | $ | 65,193 | |
| Sales Proceeds Excluding U.S. Government Obligations | | | 85,748 | |
The Fund is one of several Hartford funds that participate in a $500 million committed revolving line of credit facility. The facility is to be used for temporary or emergency purposes. Under the arrangement, the funds are required to own securities having a market value in excess of 300% of the total bank borrowings. The interest rate on borrowings varies depending on the nature of the loan. The facility also requires a fee to be paid based on the amount of the commitment. This commitment fee is allocated to all of the funds participating in the line of credit based on the average net assets of the funds. During the year ended December 31, 2012, the Fund did not have any borrowings under this facility.
| 10. | Industry Classifications: |
Other than the industry classifications “Other Investment Pools and Funds” and “Exchange Traded Funds,” equity industry classifications used in this report are the Global Industry Classification Standard, which was developed by and is the exclusive property and service mark of MSCI, Inc. and Standard & Poor’s.
Under the Company’s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
| 12. | Recent Accounting Pronouncement: |
Disclosures about Offsetting Assets and Liabilities - In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The objective of the ASU is to enhance current disclosure requirements on offsetting of certain assets and liabilities and to enable financial statement users to compare financial statements prepared under U.S. GAAP and International Financial Reporting Standards.
Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
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| Hartford Index HLS Fund |
| Financial Highlights |
| - Selected Per-Share Data (A) - |
Class | | Net Asset Value at
Beginning of
Period | | | Net Investment
Income (Loss) | | | Net Realized and
Unrealized Gain
(Loss) on
Investments | | | Total from
Investment
Operations | | | Dividends from Net
Investment Income | | | Distributions from
Realized Capital
Gains | | | Distributions from
Capital | | | Total Distributions | | | Net Asset Value at
End of Period | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2012 |
| IA | | $ | 26.20 | | | $ | 0.61 | | | $ | 3.48 | | | $ | 4.09 | | | $ | (0.60 | ) | | $ | – | | | $ | – | | | $ | (0.60 | ) | | $ | 29.69 | |
| IB | | | 26.09 | | | | 0.49 | | | | 3.51 | | | | 4.00 | | | | (0.53 | ) | | | – | | | | – | | | | (0.53 | ) | | | 29.56 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2011 |
| IA | | | 26.20 | | | | 0.52 | | | | (0.05 | ) | | | 0.47 | | | | (0.47 | ) | | | – | | | | – | | | | (0.47 | ) | | | 26.20 | |
| IB | | | 26.08 | | | | 0.39 | | | | 0.03 | | | | 0.42 | | | | (0.41 | ) | | | – | | | | – | | | | (0.41 | ) | | | 26.09 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2010 |
| IA | | | 23.22 | | | | 0.44 | | | | 2.97 | | | | 3.41 | | | | (0.43 | ) | | | – | | | | – | | | | (0.43 | ) | | | 26.20 | |
| IB | | | 23.12 | | | | 0.34 | | | | 2.99 | | | | 3.33 | | | | (0.37 | ) | | | – | | | | – | | | | (0.37 | ) | | | 26.08 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2009 |
| IA | | | 18.75 | | | | 0.42 | | | | 4.48 | | | | 4.90 | | | | (0.42 | ) | | | (0.01 | ) | | | – | | | | (0.43 | ) | | | 23.22 | |
| IB | | | 18.69 | | | | 0.35 | | | | 4.46 | | | | 4.81 | | | | (0.37 | ) | | | (0.01 | ) | | | – | | | | (0.38 | ) | | | 23.12 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2008 |
| IA | | | 31.54 | | | | 0.59 | | | | (12.16 | ) | | | (11.57 | ) | | | (0.58 | ) | | | (0.64 | ) | | | – | | | | (1.22 | ) | | | 18.75 | |
| IB | | | 31.40 | | | | 0.51 | | | | (12.07 | ) | | | (11.56 | ) | | | (0.51 | ) | | | (0.64 | ) | | | – | | | | (1.15 | ) | | | 18.69 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include 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 would lower the Fund's performance. |
| (C) | Ratios do not reflect reductions for fees paid indirectly. Please see Fees Paid Indirectly in the Notes to Financial Statements. |
| (D) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
| - Ratios and Supplemental Data - |
Total Return(B) | | | Net Assets at End of Period | | | Ratio of Expenses to Average Net Assets
Before Waivers(C) | | | Ratio of Expenses to Average Net Assets
After Waivers(C) | | | Ratio of Net Investment
Income (Loss) to Average Net
Assets | | | Portfolio
Turnover
Rate(D) | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 15.63 | % | | $ | 691,786 | | | | 0.33 | % | | | 0.33 | % | | | 1.98 | % | | | 7 | % |
| | 15.34 | | | | 307,129 | | | | 0.58 | | | | 0.58 | | | | 1.75 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 1.81 | | | | 673,275 | | | | 0.33 | | | | 0.33 | | | | 1.74 | | | | 3 | |
| | 1.60 | | | | 232,459 | | | | 0.58 | | | | 0.58 | | | | 1.51 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 14.73 | | | | 809,629 | | | | 0.34 | | | | 0.34 | | | | 1.73 | | | | 4 | |
| | 14.45 | | | | 209,260 | | | | 0.59 | | | | 0.59 | | | | 1.48 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 26.15 | | | | 811,634 | | | | 0.35 | | | | 0.35 | | | | 2.00 | | | | 6 | |
| | 25.81 | | | | 166,162 | | | | 0.60 | | | | 0.60 | | | | 1.75 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (37.11 | ) | | | 718,081 | | | | 0.32 | | | | 0.32 | | | | 2.02 | | | | 4 | |
| | (37.27 | ) | | | 138,014 | | | | 0.57 | | | | 0.57 | | | | 1.77 | | | | – | |
| Report of Independent Registered Accounting Firm |
| The Board of Directors and Shareholders of |
| Hartford Series Fund, Inc. |
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Hartford Index HLS Fund (one of the portfolios constituting Hartford Series Fund, Inc. (the Fund)) as of December 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Hartford Index HLS Fund (one of the portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
| | |
Minneapolis, MN
February 15, 2013 | |
| Hartford Index HLS Fund |
| Directors and Officers (Unaudited) |
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Fund pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Fund. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Fund’s statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Fund pays to The Hartford a portion of the Chief Compliance Officer’s compensation, but does not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
| Hartford Index HLS Fund |
| Directors and Officers (Unaudited) – (continued) |
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010 (4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and a record of how the Fund voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
| Hartford Index HLS Fund |
| Expense Example (Unaudited) |
Your Fund's Expenses
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Actual return | | | Hypothetical (5% return before expenses) | | | | | | | | | | |
| | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2
year | | | Days
in the
full
year | |
| Class IA | | $ | 1,000.00 | | | $ | 1,005.78 | | | $ | 1.67 | | | $ | 1,000.00 | | | $ | 1,023.47 | | | $ | 1.69 | | | | 0.33 | % | | | 184 | | | | 366 | |
| Class IB | | $ | 1,000.00 | | | $ | 1,005.64 | | | $ | 2.93 | | | $ | 1,000.00 | | | $ | 1,022.21 | | | $ | 2.96 | | | | 0.58 | % | | | 184 | | | | 366 | |
| Hartford Index HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) |
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory and sub-advisory agreements. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for Hartford Index HLS Fund (the “Fund”) with HL Investment Advisors, LLC (“HL Advisors”) and the continuation of the investment sub-advisory agreement between HL Advisors and the Fund’s sub-adviser, Hartford Investment Management Company (the “Sub-adviser,” and together with HL Advisors, the “Advisers”) (collectively, the “Agreements”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from the Advisers to questions posed to them on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreements at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by the Advisers and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreements.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreements with respect to the Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Fund’s contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Fund’s management fees, sub-advisory fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement.
In determining to continue the Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreements. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreements is provided below.
Nature, Extent, and Quality of Services Provided by the Advisers
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Fund by the Advisers. The Board considered, among other things, the terms of the Agreements and the range of services provided by the Advisers. The Board considered the Advisers’ professional personnel who provide services to the Fund, including each Adviser’s ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered each Adviser’s reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to the Fund. In addition, the Board considered the quality of each Adviser’s communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning each Adviser’s regulatory and compliance environment. In this regard, the Board requested and reviewed information on each Adviser’s compliance policies and procedures, compliance history, and a report from the Fund’s Chief Compliance Officer on each Adviser’s compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. The Board also noted the Advisers’ support of the Fund’s compliance control structure, particularly the resources devoted by the Advisers in support of the Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act.
| Hartford Index HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
With respect to HL Advisors, the Board noted that under the Agreements, HL Advisors is responsible for the management of the Fund, including overseeing fund operations and service providers, as well as investment advisory services in connection with selecting, monitoring and supervising the Sub-adviser. The Board considered HL Advisors’ ongoing monitoring of people, process and performance, including its quarterly reviews of each of the Hartford HLS Funds, semi-annual meetings with the leaders of each Fund’s portfolio management team, and oversight of the Funds’ approximately 40 portfolio managers. The Board recognized that HL Advisors has demonstrated a record of making changes to the management and/or strategies of the Funds when warranted. The Board considered HL Advisors’ oversight of the Sub-adviser’s investment approach and results, process for monitoring best execution of portfolio trades by the Sub-adviser, and approach to risk management with respect to the Fund and the service providers to the Fund. The Board also considered HL Advisors’ oversight of compliance with the Fund’s objective and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led to an increase in the scope of HL Advisors’ services in this regard. In addition, the Board considered HL Advisors’ ongoing commitment to review and rationalize the Hartford fund family’s product line-up and the expenses that HL Advisors had incurred in connection with fund combinations in recent years. The Board considered that HL Advisors or its affiliates are responsible for providing the Fund’s officers. The Board also noted that Hartford Life Insurance Company (“HLIC”) provides administrative services to the Fund. The Board considered its experiences with HL Advisors and HLIC with respect to each of these services.
With respect to the Sub-adviser, who provides day-to-day portfolio management services, the Board considered the quality of the Fund’s portfolio manager, the Sub-adviser’s other investment personnel, its investment philosophy and process, investment research capabilities and resources, performance record, trade execution capabilities and experience. The Board considered the experience of the Fund’s portfolio manager, the number of accounts managed by the portfolio manager, and the Sub-adviser’s method for compensating the portfolio manager.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Fund by HL Advisors and the Sub-adviser.
Performance of the Fund and the Advisers
The Board considered the investment performance of the Fund. In this regard, the Board reviewed the performance of the Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of the Fund’s performance for these time periods, noting that the Fund is managed to approximate the performance of the S&P 500 Index. The Board considered information and materials provided to the Board by the Advisers concerning Fund performance, as well as information from Lipper comparing the investment performance of the Fund to an appropriate benchmark and universe of peer funds. The Board noted that the performance of the Fund was within expectations.
The Board considered the detailed investment analytics reports provided by The Hartford’s Investment Advisory Group throughout the year. These reports include, among other things, information on the Fund’s gross and net returns, the Fund’s investment performance relative to an appropriate benchmark and peer group, various statistics concerning the Fund’s portfolio, and a narrative summary of various factors affecting Fund performance. The Board considered the Advisers’ cooperation with the Investment Committee, which assists the Board in evaluating the performance of the Fund at periodic meetings throughout the year. The Board also considered the analysis provided by the Consultant relating to the Fund’s performance track record.
In light of all the considerations noted above, the Board concluded that it had continued confidence in HL Advisors’ and the Sub-adviser’s overall capabilities to manage the Fund.
Costs of the Services and Profitability of the Advisers
The Board reviewed information regarding HL Advisors’ cost to provide investment management and related services to the Fund and HL Advisors’ profitability, both overall and for the Fund, on a pre-tax basis without regard to distribution expenses. The Board also requested and reviewed information about the profitability to HL Advisors and its affiliates from all services provided to the Fund and all aspects of their relationship with the Fund. The Board noted that the fees payable to the Sub-adviser are equal to its estimated costs in providing sub-advisory services. Accordingly, the costs and profitability for the Sub-adviser and HL Advisors were considered in the aggregate.
The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement, noting the Consultant’s view that The Hartford’s process for calculating and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by the Advisers and their affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by the Advisers
The Board considered comparative information with respect to the management fees to be paid by the Fund to HL Advisors and the total expense ratios of the Fund. The Board also considered comparative information with respect to the sub-advisory fees to be paid by HL Advisors to the Sub-adviser, to the extent applicable. In this regard, the Board requested and reviewed information from HL Advisors and the Sub-adviser relating to the management and sub-advisory fees and total operating expenses for the Fund. The Board considered that the management fee for the Fund includes the fee paid to HLIC for providing certain administrative services to the Fund. The Board also reviewed information from Lipper comparing the Fund’s contractual management fees, actual management fees and overall expense ratios relative to a group of funds selected by Lipper, in consultation with the Consultant, and a broader universe of funds selected by Lipper.
While the Board recognized that comparisons between the Fund and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business models and cost structures of the Advisers, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of the Fund’s management and sub-advisory fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to the Fund’s management and sub-advisory fees and total operating expenses.
Based on these considerations, the Board concluded that the Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding the Advisers’ realization of economies of scale with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. The Board reviewed the breakpoints in the management fee schedule for the Fund, which reduce fee rates as Fund assets grow over time. The Board recognized that a fund with assets beyond the last breakpoint level will continue to benefit from economies of scale because additional assets are charged the lowest breakpoint fee resulting in lower overall effective management fee rates. The Board also recognized that a fee schedule that reaches a lower breakpoint quickly provides shareholders with the benefit of anticipated or potential economies of scale.
The Board reviewed and evaluated materials from Lipper showing how management fee schedules of peer funds reflect economies of scale for the benefit of shareholders as a peer fund’s assets hypothetically increase over time. Based on information provided by HL Advisors, Lipper, and the Consultant, the Board recognized that there is no uniform methodology for establishing breakpoints or uniform pattern in asset levels that trigger breakpoints or the amounts of breakpoints triggered.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Fund’s shareholders based on currently available information and the effective advisory fees and expense ratios for the Fund at its current and reasonably anticipated asset levels. The Board noted, however, that it would continue to monitor future growth in Fund assets and the appropriateness of additional breakpoints.
| Hartford Index HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
Other Benefits
The Board considered other benefits to the Advisers and their affiliates from their relationships with the Fund, including the role of the Fund in supporting the variable life insurance and variable annuity products offered by The Hartford. The Board reviewed information noting that HLIC, an affiliate of HL Advisors, receives fees for providing certain administrative services to the Fund, and that HLIC also receives fees for fund accounting and related services from the Fund, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Fund’s transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Fund, and the Board reviewed information on the profitability of the Fund’s transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Fund were fair and reasonable based on publicly available information.
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Fund, receives 12b-1 fees from the Fund. The Board also noted that certain affiliates of HL Advisors distribute shares of the Fund and receive compensation in that connection.
The Board considered the benefits, if any, to the Sub-adviser from any use of the Fund’s brokerage commissions to obtain soft dollar research.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the Agreements for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory and sub-advisory agreements. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreements for the Fund and approve a new investment management agreement for the Fund with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser, and a new investment sub-advisory agreement between HFMC and the Fund’s existing Sub-adviser, Wellington Management Company, LLP (together with HFMC, the “Post-Restructuring Advisers”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Fund. In order to implement the Restructuring, the Fund would terminate the existing Agreements and enter into a new investment management agreement with HFMC, with HFMC also entering into a new investment sub-advisory agreement with the Sub-adviser (collectively, the “New Agreements”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreements at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by HL Advisors and the Sub-adviser and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreements.
In determining to approve the New Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the New Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreements.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Fund and the performance of investment management personnel to the Fund. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Fund prior to the Restructuring would continue to provide such services to the Fund, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreements would involve no changes to (i) the contractual terms of, including the management fees payable under, the Fund’s investment management and investment sub-advisory agreements; (ii) the investment processes and strategies employed in the management of the Fund’s assets; (iii) the nature and level of services provided under the Fund’s investment management and investment sub-advisory agreements; and (iv) the day-to-day management of the Fund and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Fund.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Fund.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Fund, the investment management arrangement for the Fund following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreements: (i) nature, extent and quality of services provided by HL Advisors and the Sub-adviser; (ii) performance of the Fund, HL Advisors and the Sub-adviser; (iii) costs of the services and profitability of HL Advisors and the Sub-adviser; (iv) comparative services rendered and comparative investment management and sub-advisory fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors and the Sub-adviser with respect to
the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. With respect to the other benefits to the Post-Restructuring Advisers and their affiliates from their relationships with the Fund, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting and related services from the Fund.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the New Agreements. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
| Hartford Index HLS Fund |
| Principal Risks (Unaudited) |
The principal risks of investing in the Fund are described below.
Market and Selection Risk: The Fund’s share price may fluctuate due to market risk and/or security selections that may underperform compared to the market or relevant benchmarks.
Passive Management Risk: The Fund is not actively managed, and will generally remain fully invested even when stock prices are falling.
Index Tracking Risk: The Fund’s performance may not match or correlate to that of its index, which may cause the Fund’s performance to be lower than expected.
S&P Disclosure: "Standard & Poor's," "S&P®," "S&P 500®," "Standard & Poor's," and "500®" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Hartford Life Insurance Company and Hartford Life and Annuity Insurance Company. Investment Options are not sponsored, endorsed, sold or promoted by Standard and Poor's and Standard & Poor's makes no representation regarding the advisability of investing in the Investment Options.
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
HLSAR-IX12 2-13 113545 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 | |
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford International Opportunities HLS Fund
Table of Contents
This report is prepared for the general information of contract owners and qualified retirement plan participants. It is not an offer of contracts or of qualified retirement plans. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent information including the applicable sales, administrative and other charges.
The views expressed in the Fund’s Manager Discussion under ‘‘Why did the Fund perform this way?’’ and ‘‘What is the outlook?’’ are views of the Fund’s sub-adviser and portfolio management team through the end of the period and are subject to change based on market and other conditions.
| Hartford International Opportunities HLS Fund inception 07/02/1990 |
| (sub-advised by Wellington Management Company, LLP) |
| |
| Investment objective – Seeks long-term growth of capital. |
Performance Overview 12/31/02 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IA. Growth results in classes other than Class IA will vary from what is seen above due to differences in the expenses charged to those share classes.
Average Annual Total Returns (as of 12/31/12)
| | 1 Year | 5 Year | 10 Year |
| International Opportunities IA | 20.20% | -1.82% | 10.06% |
| International Opportunities IB | 19.89% | -2.06% | 9.78% |
| MSCI All Country World ex USA Index | 17.39% | -2.44% | 10.22% |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund's net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
MSCI All Country World ex USA Index is a broad-based, unmanaged, market capitalization weighted, total return index that measures the performance of both developed and emerging stock markets, excluding the U.S. The index is calculated to exclude companies and share classes which cannot be freely purchased by foreigners.
You cannot invest directly in an index.
As of the Fund’s current prospectus dated May 1, 2012, the net total annual operating expense ratios for Class IA and Class IB shares were 0.73% and 0.98%, respectively, and the gross total annual operating expense ratios for Class IA and Class IB shares were 0.73% and 0.98%, respectively. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect until April 30, 2013, and automatically renew for one-year terms unless terminated by the Fund’s Investment Advisor (Hartford Funds Management Company, LLC). For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
Hartford International Opportunities HLS Fund
Manager Discussion
| December 31, 2012 (Unaudited) |
| Portfolio Managers | |
| Nicolas M. Choumenkovitch | Tara Connolly Stilwell, CFA |
| Senior Vice President and Equity Portfolio Manager | Vice President and Equity Portfolio Manager |
| | |
How did the Fund perform?
The Class IA shares of the Hartford International Opportunities HLS Fund returned 20.20% for the twelve-month period ended December 31, 2012 outperforming its benchmark, the MSCI All Country World ex USA Index, which returned 17.39% for the same period. The Fund also outperformed the 19.45% return of the average fund in the Lipper VP-UF International Growth Funds peer group, a group of funds with investment strategies similar to those of the Fund.
Why did the Fund perform this way?
Global equities moved higher in the period, in part due to central bank interventions around the globe. Although Europe continued to grapple with economic and structural challenges, investors’ risk appetites surged after European Central Bank (ECB) President Mario Draghi revealed a comprehensive plan to support struggling sovereigns, including direct purchases of government bonds in the open market. Additionally, the U.S. Federal Reserve’s (Fed) announcement of a third round of quantitative easing (QE3) was well received by the market, boosting stock prices. Despite concerns about the looming U.S. fiscal cliff, tepid corporate revenue results, and economic malaise in Europe, investors bid up risk assets toward the end of the period amid further signs of recovery in China and a strengthening U.S. housing market. Global risk sentiment also ticked up on continued hopes that the ECB’s bond-buying plan will succeed, essentially reducing the tail risks in Europe.
During the twelve-month period all ten sectors in the benchmark posted positive returns, led by Financials (+30%), Consumer Discretionary (+23%), and Consumer Staples (+19%).
The Fund’s outperformance versus its benchmark was primarily due to strong stock selection, particularly within Industrials, Utilities, and Information Technology. This was modestly offset by weaker selection in Consumer Staples and Health Care. Allocation among sectors, a result of the bottom-up stock selection process, also contributed to positive relative returns, largely due to underweight positions (i.e. the Fund’s sector position was less than the benchmark position) in Energy and Materials.
Top contributors to relative performance during the period included Continental (Industrials), Assa Abloy (Industrials), and Swiss Reinsurance (Financials). Shares of Continental, a Germany-based manufacturer of products, technology, and services used in the automotive industry, outperformed as the company reported strong results during the year and investors seemed to conclude that concerns over the company's debt level and the European automobile market were overblown. The company also announced a dividend payout greater than consensus expectations. Shares of Assa Abloy, a Sweden-based manufacturer of locks and other high security products, rose during the period as the company beat consensus expectations in a weak operating environment. The positive margins and overall results sent the company’s shares higher. Shares of Swiss Reinsurance, a Zurich-based global reinsurer, climbed during the period amid favorable operating results and better optimization of capital structure. Samsung Electronics (Information Technology) and Unibail-Rodamco (Financials) also contributed to absolute performance (i.e. total return) .
The largest detractors from relative returns were BG Group (Energy), Tim Hortons (Consumer Discretionary), and Elan (Health Care). Shares of BG Group, a U.K.-based natural gas company, fell during the period on news the company had agreed to sell its Brazilian gas distribution business as well as due to lower production guidance for 2013. Shares of Tim Horton’s, a fast food casual restaurant chain, fell during the period as the company reported volumes lower than expected due to slowing same store sales. Shares of Elan, an Ireland-based biotechnology company specializing in neuroscience, underperformed after the firm released disappointing results for a North American phase 3 trial for Bapineuzumad, a treatment for Alzheimer’s disease. Check Point Software (Information Technology) and Tesco (Consumer Staples) also detracted from absolute performance.
What is the outlook?
At a macro level, we continue to see signs of economic improvement in the developed world, which we expect to remain in a low growth environment and with low interest rates. We believe this low growth environment could drive consolidation, and we are working to identify companies with the potential to surprise on the upside and where we see the potential for better capital discipline and improved industry structure. In this economic environment, we expect companies with exposure to hard assets, such as real estate, may do particularly well. While we believe the risk of a sharp economic decline is reduced, we strive to maintain a well-
Hartford International Opportunities HLS Fund
Manager Discussion – (continued)
| December 31, 2012 (Unaudited) |
balanced portfolio with investments that represent diverse economic drivers.
As is consistent with the investment approach, we continue to look for opportunities at a company-by-company level, focusing on those companies that can deliver improvements in return on investment capital (ROIC) or sustain ROIC for longer than the market anticipates.
At the end of the period, relative to the benchmark we were most overweight to the Industrials, Health Care, and Utilities sectors and most underweight in Energy, Consumer Staples, and Telecommunication Services. On a regional basis, we ended the period with an overweight to select European countries, including France, Switzerland, and the U.K., and underweight positions in Australia, Canada, Germany, and Japan.
Diversification by Industry
as of December 31, 2012
| Industry (Sector) | | Percentage of
Net Assets | |
| Automobiles and Components (Consumer Discretionary) | | | 4.3 | % |
| Banks (Financials) | | | 4.5 | |
| Capital Goods (Industrials) | | | 11.8 | |
| Commercial and Professional Services (Industrials) | | | 0.9 | |
| Consumer Durables and Apparel (Consumer Discretionary) | | | 0.5 | |
| Consumer Services (Consumer Discretionary) | | | 4.8 | |
| Diversified Financials (Financials) | | | 3.5 | |
| Energy (Energy) | | | 6.9 | |
| Food and Staples Retailing (Consumer Staples) | | | 1.2 | |
| Food, Beverage and Tobacco (Consumer Staples) | | | 6.2 | |
| Health Care Equipment and Services (Health Care) | | | 1.6 | |
| Household and Personal Products (Consumer Staples) | | | 0.0 | |
| Insurance (Financials) | | | 7.3 | |
| Materials (Materials) | | | 11.3 | |
| Pharmaceuticals, Biotechnology and Life Sciences (Health Care) | | | 6.9 | |
| Real Estate (Financials) | | | 9.9 | |
| Retailing (Consumer Discretionary) | | | 0.7 | |
| Semiconductors and Semiconductor Equipment (Information Technology) | | | 4.8 | |
| Software and Services (Information Technology) | | | 0.5 | |
| Technology Hardware and Equipment (Information Technology) | | | 0.4 | |
| Telecommunication Services (Services) | | | 2.7 | |
| Transportation (Industrials) | | | 4.2 | |
| Utilities (Utilities) | | | 4.7 | |
| Short-Term Investments | | | 0.1 | |
| Other Assets and Liabilities | | | 0.3 | |
| Total | | | 100.0 | % |
Currency Concentration of Securities
as of December 31, 2012
| | | Percentage of | |
| Description | | Net Assets | |
| Australian Dollar | | | 2.5 | % |
| Brazilian Real | | | 2.3 | |
| British Pound | | | 18.0 | |
| Canadian Dollar | | | 5.2 | |
| Euro | | | 26.9 | |
| Hong Kong Dollar | | | 9.0 | |
| Indian Rupee | | | 1.1 | |
| Japanese Yen | | | 10.6 | |
| Malaysian Ringgit | | | 0.2 | |
| Mexican New Peso | | | 0.3 | |
| Norwegian Krone | | | 0.6 | |
| Polish New Zloty | | | 0.2 | |
| Republic of Korea Won | | | 3.6 | |
| Swedish Krona | | | 4.1 | |
| Swiss Franc | | | 9.7 | |
| Taiwanese Dollar | | | 1.5 | |
| United States Dollar | | | 3.9 | |
| Other Assets and Liabilities | | | 0.3 | |
| Total | | | 100.0 | % |
Hartford International Opportunities HLS Fund
Schedule of Investments
December 31, 2012
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 99.2% | |
| | | | | Australia - 2.5% | | | | |
| | 2,296 | | | Transurban Group | | $ | 14,597 | |
| | 2,144 | | | Westfield Group REIT | | | 23,681 | |
| | | | | | | | 38,278 | |
| | | | | Austria - 0.9% | | | | |
| | 444 | | | Erste Group Bank AG | | | 14,130 | |
| | | | | | | | | |
| | | | | Belgium - 1.5% | | | | |
| | 415 | | | Umicore S.A. | | | 23,001 | |
| | | | | | | | | |
| | | | | Brazil - 2.6% | | | | |
| | 678 | | | Banco Santander Brasil S.A. | | | 4,931 | |
| | 949 | | | BR Malls Participacoes S.A. | | | 12,529 | |
| | 163 | | | BR Properties S.A. | | | 2,025 | |
| | 424 | | | CCR S.A. | | | 4,026 | |
| | 302 | | | JSL S.A. | | | 2,063 | |
| | 357 | | | Localiza Rent a Car S.A. | | | 6,538 | |
| | 290 | | | Mills Estruturas e Servicos de Engenharia S.A. | | | 4,812 | |
| | 260 | | | Raia Drogasil S.A. | | | 2,926 | |
| | | | | | | | 39,850 | |
| | | | | Canada - 5.2% | | | | |
| | 372 | | | Canadian National Railway Co. | | | 33,773 | |
| | 153 | | | MEG Energy Corp. ● | | | 4,667 | |
| | 44 | | | MEG Energy Corp. ■ | | | 1,343 | |
| | 435 | | | Suncor Energy, Inc. | | | 14,311 | |
| | 506 | | | Tim Hortons, Inc. | | | 24,845 | |
| | | | | | | | 78,939 | |
| | | | | China - 3.0% | | | | |
| | 1,107 | | | Anhui Conch Cement Co., Ltd. | | | 4,135 | |
| | 14,488 | | | China Construction Bank | | | 11,840 | |
| | 6,536 | | | China Pacific Insurance Co., Ltd. | | | 24,643 | |
| | 2,000 | | | Shandong Weigao Group Medical Polymer Co., Ltd. | | | 2,007 | |
| | 859 | | | Sinopharm Medicine Holding Co., Ltd. | | | 2,728 | |
| | | | | | | | 45,353 | |
| | | | | Finland - 0.9% | | | | |
| | 69 | | | Kone Oyj Class B | | | 5,125 | |
| | 197 | | | Nokian Rendaat Oyj | | | 7,891 | |
| | | | | | | | 13,016 | |
| | | | | France - 14.9% | | | | |
| | 386 | | | Accor S.A. | | | 13,783 | |
| | 287 | | | Air Liquide | | | 36,300 | |
| | 1,816 | | | AXA S.A. | | | 32,612 | |
| | 121 | | | BNP Paribas | | | 6,913 | |
| | 90 | | | Bureau Veritas S.A. | | | 10,089 | |
| | 162 | | | Cie Generale d'Optique Essilor International S.A. | | | 16,343 | |
| | 132 | | | Groupe Danone | | | 8,691 | |
| | 194 | | | Pernod-Ricard S.A. | | | 22,553 | |
| | 283 | | | Renault S.A. | | | 15,356 | |
| | 638 | | | Rexel S.A. | | | 13,059 | |
| | 337 | | | Safran S.A. | | | 14,581 | |
| | 151 | | | Unibail-Rodamco SE REIT | | | 36,659 | |
| | | | | | | | 226,939 | |
| | | | | Germany - 2.1% | | | | |
| | 60 | | | Brenntag AG | | | 7,850 | |
| | 85 | | | Continental AG | | | 9,859 | |
| | 184 | | | GSW Immobilien AG | | | 7,777 | |
| | 819 | | | Infineon Technologies AG | | | 6,670 | |
| | | | | | | | 32,156 | |
| | | | | Hong Kong - 6.0% | | | | |
| | 7,321 | | | AIA Group Ltd. | | | 29,036 | |
| | 1,670 | | | ENN Energy Holdings Ltd. | | | 7,318 | |
| | 5 | | | Hengan International Group Co., Ltd. | | | 46 | |
| | 6,458 | | | Legend Holdings Ltd. | | | 5,955 | |
| | 2,994 | | | Sands China Ltd. § | | | 13,383 | |
| | 1,268 | | | Shanghai Fosun Parmaceutical Co., Ltd. ● | | | 1,917 | |
| | 4,517 | | | Shangri-La Asia Ltd. | | | 9,100 | |
| | 1,362 | | | Sun Hung Kai Properties Ltd. | | | 20,652 | |
| | 2,252 | | | Zhongsheng Group Holdings Ltd. | | | 3,456 | |
| | | | | | | | 90,863 | |
| | | | | India - 1.1% | | | | |
| | 811 | | | Bharti Infratel Ltd. | | | 2,868 | |
| | 1,902 | | | ITC Ltd. | | | 10,017 | |
| | 128 | | | United Spirits Ltd. | | | 4,425 | |
| | | | | | | | 17,310 | |
| | | | | Ireland - 1.2% | | | | |
| | 881 | | | CRH plc | | | 18,193 | |
| | | | | | | | | |
| | | | | Israel - 0.6% | | | | |
| | 247 | | | Teva Pharmaceutical Industries Ltd. ADR | | | 9,215 | |
| | | | | | | | | |
| | | | | Italy - 3.2% | | | | |
| | 174 | | | Saipem S.p.A. | | | 6,762 | |
| | 8,081 | | | Snam S.p.A. | | | 37,718 | |
| | 903 | | | Unicredit S.p.A. | | | 4,446 | |
| | | | | | | | 48,926 | |
| | | | | Japan - 10.6% | | | | |
| | 320 | | | Daiichi Sankyo Co., Ltd. | | | 4,908 | |
| | 301 | | | Daito Trust Construction Co., Ltd. | | | 28,476 | |
| | 290 | | | Eisai Co., Ltd. | | | 12,122 | |
| | 360 | | | FamilyMart Co., Ltd. | | | 14,835 | |
| | 185 | | | Fanuc Corp. | | | 34,345 | |
| | 16 | | | Fast Retailing Co., Ltd. | | | 4,007 | |
| | 872 | | | Fuji Heavy Industries Ltd. | | | 10,996 | |
| | 149 | | | Honda Motor Co., Ltd. | | | 5,526 | |
| | 2,648 | | | Mitsubishi UFJ Financial Group, Inc. | | | 14,326 | |
| | 571 | | | Mitsui Fudosan Co., Ltd. | | | 13,968 | |
| | 467 | | | Rakuten, Inc. | | | 3,640 | |
| | 379 | | | SoftBank Corp. | | | 13,872 | |
| | | | | | | | 161,021 | |
| | | | | Luxembourg - 0.8% | | | | |
| | 701 | | | ArcelorMittal | | | 12,222 | |
| | | | | | | | | |
| | | | | Malaysia - 0.2% | | | | |
| | 4,225 | | | AirAsia Berhad | | | 3,801 | |
| | | | | | | | | |
| | | | | Mexico - 0.3% | | | | |
| | 860 | | | Fibra Uno Administracion S.A. REIT ● | | | 2,595 | |
| | 1,068 | | | Macquarie Mexico Real Estate Management S.A. de C. V. REIT | | | 2,115 | |
| | | | | | | | 4,710 | |
| | | | | Netherlands - 0.8% | | | | |
| | 76 | | | ASML Holding N.V. ‡ | | | 4,869 | |
| | 329 | | | Yandex N.V. ● | | | 7,090 | |
| | | | | | | | 11,959 | |
The accompanying notes are an integral part of these financial statements.
Hartford International Opportunities HLS Fund
Schedule of Investments – (continued)
December 31, 2012
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 99.2% - (continued) | |
| | | | | Norway - 0.6% | | | | |
| | 212 | | | Algeta ASA ● | | $ | 5,926 | |
| | 128 | | | Telenor ASA | | | 2,605 | |
| | | | | | | | 8,531 | |
| | | | | Poland - 0.2% | | | | |
| | 166 | | | Alior Bank S.A. ● | | | 3,363 | |
| | | | | | | | | |
| | | | | Portugal - 0.8% | | | | |
| | 902 | | | Banco Espirito Santo S.A. ● | | | 1,072 | |
| | 193 | | | Galp Energia SGPS S.A. | | | 2,995 | |
| | 1,573 | | | Portugal Telecom SGPS S.A. | | | 7,833 | |
| | | | | | | | 11,900 | |
| | | | | Russia - 0.5% | | | | |
| | 604 | | | Sberbank ADR | | | 7,591 | |
| | | | | | | | | |
| | | | | South Korea - 3.6% | | | | |
| | 79 | | | Hyundai Motor Co., Ltd. | | | 16,237 | |
| | 27 | | | Samsung Electronics Co., Ltd. | | | 38,531 | |
| | | | | | | | 54,768 | |
| | | | | Spain - 1.8% | | | | |
| | 625 | | | Repsol S.A. | | | 12,755 | |
| | 625 | | | Repsol S.A. Rights | | | 381 | |
| | 1,015 | | | Telefonica S.A. | | | 13,743 | |
| | | | | | | | 26,879 | |
| | | | | Sweden - 4.1% | | | | |
| | 792 | | | Assa Abloy Ab | | | 29,819 | |
| | 702 | | | SKF AB Class B | | | 17,787 | |
| | 1,056 | | | Volvo AB B Shares | | | 14,558 | |
| | | | | | | | 62,164 | |
| | | | | Switzerland - 9.7% | | | | |
| | 133 | | | Actelion Ltd. | | | 6,382 | |
| | 106 | | | Cie Financiere Richemont S.A. | | | 8,309 | |
| | 14 | | | Givaudan | | | 14,819 | |
| | 602 | | | Julius Baer Group Ltd. | | | 21,417 | |
| | 3 | | | Partners Group ☼ | | | 654 | |
| | 260 | | | Roche Holding AG | | | 52,476 | |
| | 2 | | | SGS S.A. | | | 3,598 | |
| | 278 | | | Swiss Re Ltd. | | | 20,181 | |
| | 1,254 | | | UBS AG | | | 19,622 | |
| | | | | | | | 147,458 | |
| | | | | Taiwan - 1.5% | | | | |
| | 6,946 | | | Taiwan Semiconductor Manufacturing Co., Ltd. | | | 23,233 | |
| | | | | | | | | |
| | | | | United Kingdom - 17.3% | | | | |
| | 2,034 | | | Aberdeen Asset Management plc | | | 12,242 | |
| | 62 | | | Antofagasta plc | | | 1,352 | |
| | 261 | | | AstraZeneca plc | | | 12,392 | |
| | 1,724 | | | BG Group plc | | | 28,758 | |
| | 552 | | | BHP Billiton plc | | | 19,472 | |
| | 3,600 | | | BP plc | | | 25,030 | |
| | 340 | | | British American Tobacco plc | | | 17,278 | |
| | 1,232 | | | Direct Line Insurance Group plc ● | | | 4,330 | |
| | 130 | | | Ensco plc | | | 7,683 | |
| | 806 | | | Imperial Tobacco Group plc | | | 31,238 | |
| | 2,317 | | | National Grid plc | | | 26,570 | |
| | 911 | | | NMC Health plc ● | | | 2,921 | |
| | 1,728 | | | Rexam plc | | | 12,368 | |
| | 531 | | | Rio Tinto plc | | | 30,965 | |
| | 2,195 | | | Rolls-Royce Holdings plc | | | 31,478 | |
| | | | | | | | 264,077 | |
| | | | | United States - 0.7% | | | | |
| | 310 | | | Carnival Corp. | | | 11,406 | |
| | | | | | | | | |
| | | | | Total common stocks | | | | |
| | | | | (cost $1,347,239) | | $ | 1,511,252 | |
| | | | | | | | | |
WARRANTS - 0.4% | | | | |
| | | | | Colombia - 0.4% | | | | |
| | 888 | | | Cemex AP Generis ■ | | $ | 5,719 | |
| | | | | | | | | |
| | | | | Total warrants | | | | |
| | | | | (cost $5,994) | | $ | 5,719 | |
| | | | | | | | | |
| | | | | Total long-term investments
(cost $1,353,233) | | $ | 1,516,971 | |
| | | | | | | | | |
| SHORT-TERM INVESTMENTS - 0.1% | | | | |
| | | | | Repurchase Agreements - 0.1% | | | | |
| | | | | Bank of America Merrill Lynch TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $50,
collateralized by FHLMC 3.00%, 2042,
FNMA 4.00%, 2042, value of $51) | | | | |
| $ | 50 | | | 0.19%, 12/31/2012 | | $ | 50 | |
| | | | | Bank of Montreal TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $355, collateralized by FHLMC
2.50% - 5.50%, 2019 - 2042, FNMA 0.76%
- 6.11%, 2016 - 2042, GNMA 3.50%,
2042, value of $362) | | | | |
| | 355 | | | 0.23%, 12/31/2012 | | | 355 | |
| | | | | Barclays Capital TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $111, collateralized by U.S.
Treasury Note 2.00% - 2.13%, 2016, value
of $113) | | | | |
| | 111 | | | 0.20%, 12/31/2012 | | | 111 | |
| | | | | Citigroup Global Markets, Inc. TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $699,
collateralized by U.S. Treasury Note 1.88%
- 4.13%, 2015 - 2018, value of $713) | | | | |
| | 699 | | | 0.17%, 12/31/2012 | | | 699 | |
| | | | | Deutsche Bank Securities TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $14,
collateralized by FNMA 3.00%, 2032,
value of $15) | | | | |
| | 14 | | | 0.25%, 12/31/2012 | | | 14 | |
| | | | | RBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $492, collateralized by U.S.
Treasury Note 0.50% - 2.75%, 2013 -
2019, value of $501) | | | | |
| | 492 | | | 0.20%, 12/31/2012 | | | 492 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | | | | | | Market Value ╪ | |
| SHORT-TERM INVESTMENTS - 0.1% - (continued) | | | | | | | | |
| | | | | Repurchase Agreements - 0.1% - (continued) | | | | | | | | |
| | | | | TD Securities TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $430, collateralized by FHLMC
3.50% - 6.00%, 2036 - 2042, FNMA 0.22%
- 5.50%, 2013 - 2042, value of $439) | | | | | | | | |
| $ | 430 | | | 0.21%, 12/31/2012 | | | | | | $ | 430 | |
| | | | | UBS Securities, Inc. Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$8, collateralized by U.S. Treasury Bill
0.75%, 2013, value of $8) | | | | | | | | |
| | 8 | | | 0.17%, 12/31/2012 | | | | | | | 8 | |
| | | | | UBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $29, collateralized by FNMA
2.50%, 2027, GNMA 3.00%, 2042, value
of $30) | | | | | | | | |
| | 29 | | | 0.25%, 12/31/2012 | | | | | | | 29 | |
| | | | | | | | | | | | 2,188 | |
| | | | | Total short-term investments | | | | | | | | |
| | | | | (cost $2,188) | | | | | | $ | 2,188 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $1,355,421) ▲ | | | 99.7 | % | | $ | 1,519,159 | |
| | | | | Other assets and liabilities | | | 0.3 | % | | | 4,749 | |
| | | | | Total net assets | | | 100.0 | % | | $ | 1,523,908 | |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| | |
| | Prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for factors occurring after the close of certain foreign markets but before the close of the New York Stock Exchange. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $1,369,986 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 184,181 | |
| Unrealized Depreciation | | | (35,008 | ) |
| Net Unrealized Appreciation | | $ | 149,173 | |
| ● | Non-income producing. |
| | |
| ■ | Securities issued within terms of a private placement memorandum, exempt from registration under Rule 144A under the Securities Act of 1933, as amended, and may be sold only to qualified institutional buyers. Unless otherwise indicated, these holdings are determined to be liquid. At December 31, 2012, the aggregate value of these securities was $7,062, which represents 0.5% of total net assets. |
| | |
| § | These securities were sold to the Fund under Regulation S, rules governing offers and sales made outside the United States without registration under the Securities Act of 1933. The Fund may only be able to resell these securities in the United States if an exemption from registration under the federal and state securities laws is available, or the Fund may only be able to sell these securities outside of the United States (such as on a foreign exchange) to a non-U.S. person. Unless otherwise indicated, these holdings are determined to be liquid. At December 31, 2012, the aggregate value of these securities was $13,383, which represents 0.9% of total net assets. |
| | |
| ☼ | This security, or a portion of this security, was purchased on a when-issued, delayed-delivery or delayed-draw basis. The cost of these securities was $113 at December 31, 2012. |
| | |
| ‡ | This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future. |
The accompanying notes are an integral part of these financial statements.
Hartford International Opportunities HLS Fund
Schedule of Investments – (continued)
December 31, 2012
Foreign Currency Contracts Outstanding at December 31, 2012
| Currency | | Buy / Sell | | Delivery Date | | Counterparty | | | Contract Amount | | | Market Value ╪ | | | Unrealized
Appreciation/
(Depreciation) | |
| CAD | | Sell | | 01/02/2013 | | | BCLY | | | $ | 200 | | | $ | 200 | | | $ | – | |
| CAD | | Sell | | 01/03/2013 | | | JPM | | | | 248 | | | | 248 | | | | – | |
| CHF | | Buy | | 01/03/2013 | | | CSFB | | | | 88 | | | | 88 | | | | – | |
| CHF | | Buy | | 01/04/2013 | | | UBS | | | | 25 | | | | 25 | | | | – | |
| EUR | | Buy | | 01/03/2013 | | | DEUT | | | | 147 | | | | 146 | | | | (1 | ) |
| EUR | | Buy | | 01/02/2013 | | | UBS | | | | 1,028 | | | | 1,026 | | | | (2 | ) |
| HKD | | Buy | | 01/02/2013 | | | SCB | | | | 86 | | | | 86 | | | | – | |
| | | | | | | | | | | | | | | | | | | $ | (3 | ) |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
| GLOSSARY: (abbreviations used in preceding Schedule of Investments) | |
| | |
| Counterparty Abbreviations: | |
| BCLY | Barclays | |
| CSFB | Credit Suisse First Boston Corp. |
| DEUT | Deutsche Bank Securities, Inc. | |
| JPM | JP Morgan Chase & Co. | |
| SCB | Standard Chartered Bank | |
| UBS | UBS AG | |
| | |
| Currency Abbreviations: | |
| CAD | Canadian Dollar | |
| CHF | Swiss Franc | |
| EUR | EURO | |
| HKD | Hong Kong Dollar | |
| | | |
| Other Abbreviations: | |
| ADR | American Depositary Receipt |
| FHLMC | Federal Home Loan Mortgage Corp. |
| FNMA | Federal National Mortgage Association |
| GNMA | Government National Mortgage Association |
| REIT | Real Estate Investment Trust |
The accompanying notes are an integral part of these financial statements.
Hartford International Opportunities HLS Fund
Investment Valuation Hierarchy Level Summary
December 31, 2012
| | | Total | | | Level 1 ♦ | | | Level 2 ♦ | | | Level 3 | |
| Assets: | | | | | | | | | | | | | | | | |
| Common Stocks | | | | | | | | | | | | | | | | |
| Australia | | $ | 38,278 | | | $ | – | | | $ | 38,278 | | | $ | – | |
| Austria | | | 14,130 | | | | – | | | | 14,130 | | | | – | |
| Belgium | | | 23,001 | | | | – | | | | 23,001 | | | | – | |
| Brazil | | | 39,850 | | | | 39,850 | | | | – | | | | – | |
| Canada | | | 78,939 | | | | 78,939 | | | | – | | | | – | |
| China | | | 45,353 | | | | – | | | | 45,353 | | | | – | |
| Finland | | | 13,016 | | | | – | | | | 13,016 | | | | – | |
| France | | | 226,939 | | | | 8,691 | | | | 218,248 | | | | – | |
| Germany | | | 32,156 | | | | – | | | | 32,156 | | | | – | |
| Hong Kong | | | 90,863 | | | | 1,917 | | | | 88,946 | | | | – | |
| India | | | 17,310 | | | | 7,293 | | | | 10,017 | | | | – | |
| Ireland | | | 18,193 | | | | – | | | | 18,193 | | | | – | |
| Israel | | | 9,215 | | | | 9,215 | | | | – | | | | – | |
| Italy | | | 48,926 | | | | – | | | | 48,926 | | | | – | |
| Japan | | | 161,021 | | | | – | | | | 161,021 | | | | – | |
| Luxembourg | | | 12,222 | | | | – | | | | 12,222 | | | | – | |
| Malaysia | | | 3,801 | | | | – | | | | 3,801 | | | | – | |
| Mexico | | | 4,710 | | | | 4,710 | | | | – | | | | – | |
| Netherlands | | | 11,959 | | | | 11,959 | | | | – | | | | – | |
| Norway | | | 8,531 | | | | – | | | | 8,531 | | | | – | |
| Poland | | | 3,363 | | | | 3,363 | | | | – | | | | – | |
| Portugal | | | 11,900 | | | | 2,995 | | | | 8,905 | | | | – | |
| Russia | | | 7,591 | | | | 7,591 | | | | – | | | | – | |
| South Korea | | | 54,768 | | | | – | | | | 54,768 | | | | – | |
| Spain | | | 26,879 | | | | 381 | | | | 26,498 | | | | – | |
| Sweden | | | 62,164 | | | | – | | | | 62,164 | | | | – | |
| Switzerland | | | 147,458 | | | | – | | | | 147,458 | | | | – | |
| Taiwan | | | 23,233 | | | | – | | | | 23,233 | | | | – | |
| United Kingdom | | | 264,077 | | | | 12,013 | | | | 252,064 | | | | – | |
| United States | | | 11,406 | | | | 11,406 | | | | – | | | | – | |
| Total | | | 1,511,252 | | | | 200,323 | | | | 1,310,929 | | | | – | |
| Warrants | | | 5,719 | | | | – | | | | 5,719 | | | | – | |
| Short-Term Investments | | | 2,188 | | | | – | | | | 2,188 | | | | – | |
| Total | | $ | 1,519,159 | | | $ | 200,323 | | | $ | 1,318,836 | | | $ | – | |
| Foreign Currency Contracts* | | | – | | | | – | | | | – | | | | – | |
| Total | | $ | – | | | $ | – | | | $ | – | | | $ | – | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Foreign Currency Contracts* | | | 3 | | | | – | | | | 3 | | | | – | |
| Total | | $ | 3 | | | $ | – | | | $ | 3 | | | $ | – | |
| ♦ | For the year ended December 31, 2012, investments valued at $35,834 were transferred from Level 2 to Level 1, and there were no transfers from Level 1 to Level 2. Investments are transferred between Level 1 and Level 2 for a variety of reasons including, but not limited to: |
| | 1) | Foreign equities for which a fair value price is more representative of exit value than the local market close (transfer into Level 2). Foreign equities for which the local market close is more representative of exit value (transfer into Level 1). |
| | 2) | U.S. Treasury securities that no longer represent the most recent issue (transfer into Level 2). |
| | 3) | Equity investments with no observable trading but a bid or close price is used (transfer into Level 2). Equity investments using observable quoted prices in an active market (transfer into Level 1). |
| * | Derivative instruments not reflected in the Schedule of Investments are valued at the unrealized appreciation/depreciation on the investments. |
The accompanying notes are an integral part of these financial statements.
Hartford International Opportunities HLS Fund
Statement of Assets and Liabilities
December 31, 2012
| Assets: | | | | |
| Investments in securities, at market value (cost $1,355,421) | | $ | 1,519,159 | |
| Cash | | | 5,219 | |
| Foreign currency on deposit with custodian (cost $1,525) | | | 1,509 | |
| Unrealized appreciation on foreign currency contracts | | | — | |
| Receivables: | | | | |
| Investment securities sold | | | 4,346 | |
| Fund shares sold | | | 633 | |
| Dividends and interest | | | 2,011 | |
| Total assets | | | 1,532,877 | |
| Liabilities: | | | | |
| Unrealized depreciation on foreign currency contracts | | | 3 | |
| Payables: | | | | |
| Investment securities purchased | | | 7,581 | |
| Fund shares redeemed | | | 1,051 | |
| Investment management fees | | | 198 | |
| Distribution fees | | | 10 | |
| Accrued expenses | | | 126 | |
| Total liabilities | | | 8,969 | |
| Net assets | | $ | 1,523,908 | |
| Summary of Net Assets: | | | | |
| Capital stock and paid-in-capital | | $ | 2,053,554 | |
| Undistributed net investment income | | | 28,599 | |
| Accumulated net realized loss | | | (721,986 | ) |
| Unrealized appreciation of investments and the translations of assets and liabilities denominated in foreign currency | | | 163,741 | |
| Net assets | | $ | 1,523,908 | |
| Shares authorized | | | 2,625,000 | |
| Par value | | $ | 0.001 | |
| Class IA: Net asset value per share | | $ | 12.63 | |
| Shares outstanding | | | 103,186 | |
| Net assets | | $ | 1,303,209 | |
| Class IB: Net asset value per share | | $ | 12.76 | |
| Shares outstanding | | | 17,291 | |
| Net assets | | $ | 220,699 | |
The accompanying notes are an integral part of these financial statements.
Hartford International Opportunities HLS Fund
Statement of Operations
For the Year Ended December 31, 2012
| Investment Income: | | | | |
| Dividends | | $ | 44,662 | |
| Interest | | | 45 | |
| Less: Foreign tax withheld | | | (4,708 | ) |
| Total investment income, net | | | 39,999 | |
| | | | | |
| Expenses: | | | | |
| Investment management fees | | | 10,429 | |
| Transfer agent fees | | | 5 | |
| Distribution fees - Class IB | | | 572 | |
| Custodian fees | | | 135 | |
| Accounting services fees | | | 244 | |
| Board of Directors' fees | | | 40 | |
| Audit fees | | | 31 | |
| Other expenses | | | 374 | |
| Total expenses (before fees paid indirectly) | | | 11,830 | |
| Commission recapture | | | (44 | ) |
| Total fees paid indirectly | | | (44 | ) |
| Total expenses, net | | | 11,786 | |
| Net Investment Income | | | 28,213 | |
| | | | | |
| Net Realized Gain on Investments and Foreign Currency Transactions: | | | | |
| Net realized gain on investments | | | 20,407 | |
| Net realized loss on foreign currency contracts | | | (845 | ) |
| Net realized loss on other foreign currency transactions | | | (891 | ) |
| Net Realized Gain on Investments and Foreign Currency Transactions | | | 18,671 | |
| | | | | |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions: | | | | |
| Net unrealized appreciation of investments | | | 235,533 | |
| Net unrealized appreciation of foreign currency contracts | | | 5 | |
| Net unrealized appreciation on translation of other assets and liabilities in foreign currencies | | | 56 | |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions | | | 235,594 | |
| Net Gain on Investments and Foreign Currency Transactions | | | 254,265 | |
| Net Increase in Net Assets Resulting from Operations | | $ | 282,478 | |
The accompanying notes are an integral part of these financial statements.
Hartford International Opportunities HLS Fund
Statement of Changes in Net Assets
| | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| Operations: | | | | | | | | |
| Net investment income | | $ | 28,213 | | | $ | 29,682 | |
| Net realized gain on investments and foreign currency transactions | | | 18,671 | | | | 5,344 | |
| Net unrealized appreciation (depreciation) of investments and foreign currency transactions | | | 235,594 | | | | (293,187 | ) |
| Net Increase (Decrease) in Net Assets Resulting from Operations | | | 282,478 | | | | (258,161 | ) |
| Distributions to Shareholders: | | | | | | | | |
| From net investment income | | | | | | | | |
| Class IA | | | (24,562 | ) | | | (686 | ) |
| Class IB | | | (3,573 | ) | | | (122 | ) |
| Total distributions | | | (28,135 | ) | | | (808 | ) |
| Capital Share Transactions: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 85,672 | | | | 151,842 | |
| Issued on reinvestment of distributions | | | 24,562 | | | | 686 | |
| Redeemed | | | (311,056 | ) | | | (351,186 | ) |
| Total capital share transactions | | | (200,822 | ) | | | (198,658 | ) |
| Class IB | | | | | | | | |
| Sold | | | 23,016 | | | | 34,174 | |
| Issued on reinvestment of distributions | | | 3,573 | | | | 122 | |
| Redeemed | | | (76,826 | ) | | | (90,473 | ) |
| Total capital share transactions | | | (50,237 | ) | | | (56,177 | ) |
| Net decrease from capital share transactions | | | (251,059 | ) | | | (254,835 | ) |
| Net Increase (Decrease) in Net Assets | | | 3,284 | | | | (513,804 | ) |
| Net Assets: | | | | | | | | |
| Beginning of period | | | 1,520,624 | | | | 2,034,428 | |
| End of period | | $ | 1,523,908 | | | $ | 1,520,624 | |
| Undistributed (distribution in excess of) net investment income | | $ | 28,599 | | | $ | 28,134 | |
| Shares: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 7,362 | | | | 12,594 | |
| Issued on reinvestment of distributions | | | 2,110 | | | | 62 | |
| Redeemed | | | (26,480 | ) | | | (29,342 | ) |
| Total share activity | | | (17,008 | ) | | | (16,686 | ) |
| Class IB | | | | | | | | |
| Sold | | | 1,956 | | | | 2,865 | |
| Issued on reinvestment of distributions | | | 303 | | | | 11 | |
| Redeemed | | | (6,476 | ) | | | (7,424 | ) |
| Total share activity | | | (4,217 | ) | | | (4,548 | ) |
The accompanying notes are an integral part of these financial statements.
Hartford International Opportunities HLS Fund
Notes to Financial Statements
December 31, 2012
Hartford International Opportunities HLS Fund (the “Fund”) serves as an underlying investment option for certain variable annuity and variable life insurance separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates and certain qualified retirement plans. The Fund may also serve as an underlying investment option for certain variable annuity and variable life separate accounts of other insurance companies. Owners of variable annuity contracts and policyholders of variable life insurance contracts may choose the funds permitted in the variable insurance contract prospectus. In addition, participants in certain qualified retirement plans may choose the Fund if permitted by their plans.
Hartford Series Fund, Inc. (the “Company”) is an open-end registered management investment company comprised of thirty portfolios. Financial Statements for the Fund, a series of the Company, are included in this report.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund is a diversified open-end management investment company.
The Fund is divided into Class IA and Class IB shares. Each class is offered at the per share net asset value (“NAV”) without a sales charge and is subject to the same expenses, except that the Class IB shares are subject to distribution and service fees charged pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act.
| 2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Fund in the preparation of its financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| a) | Determination of Net Asset Value – The NAV of each class of the Fund’s shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| b) | Investment Valuation and Fair Value Measurements – For purposes of calculating the NAV, portfolio investments and other assets held by the Fund's portfolio for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of last reported sales prices or official close price. If no sales are reported, market value is based on quotes obtained from a quotation reporting system, established market makers, or independent pricing services. If market prices are not readily available or are deemed unreliable, the Fund will use the fair value of the investment as determined in good faith under policies and procedures established by and under the supervision of the Company’s Board of Directors. Market quotes are considered not readily available where there is an absence of current or reliable market-based data (e.g., trade information or indicative market quotes), including where events occur after the close of the relevant market, but prior to the NYSE Close that materially affect the values of the Fund’s portfolio investments or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the investments trade do not open for trading for the entire day and no other market prices are available. In addition, prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close. Investments that are primarily traded on foreign markets may trade on days that are not business days of the Fund. The value of the foreign investments in which the Fund invests may change on days when a shareholder will not be able to |
Hartford International Opportunities HLS Fund
Notes to Financial Statements – (continued)
December 31, 2012
purchase or redeem shares of the Fund. Fair value pricing is subjective in nature and the use of fair value pricing by the Fund may cause the NAV of its shares to differ significantly from the NAV that would have been calculated using market prices at the close of the exchange on which a portfolio investment is primarily traded. There can be no assurance that the Fund could obtain the fair market value assigned to an investment if the Fund were to sell the investment at approximately the time at which the Fund determines its NAV.
Investments valued in currencies other than U.S. dollars are converted to U.S. dollars using exchange rates obtained from independent pricing services for calculation of the NAV. As a result, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of investments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the NYSE is closed and the market value may change on days when an investor is not able to purchase, redeem or exchange shares of the Fund.
Foreign currency contracts represent agreements to exchange currencies on specific future dates at predetermined rates. Foreign currency contracts are valued using foreign currency exchange rates and forward rates as provided by an independent pricing service on the Valuation Date.
Financial instruments for which prices are not available from an independent pricing service may be valued using market quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with procedures established by the Company’s Board of Directors.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| · | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange traded funds, rights and warrants. |
| · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 may include debt investments that are traded less frequently than exchange traded instruments and which are valued using independent pricing services; foreign equities, which are principally traded on certain foreign markets and are adjusted daily pursuant to a fair value pricing service in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close; and short-term investments, which are valued at amortized cost. |
| · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price. |
The Board of Directors of the Company generally reviews and approves the “Procedures for Valuation of Portfolio Securities” on an annual basis. These procedures define how investments are to be valued, including the formation and activities of a Valuation Committee. The Valuation Committee is responsible for determining
in good faith the fair value of investments when the value cannot be obtained from primary pricing services or alternative sources or if the valuation of an investment as provided by the primary pricing service or alternative source is believed not to reflect the investment’s fair value as of the Valuation Date. Members of the Valuation Committee include the Fund’s Treasurer or designee, a Vice President of the Fund with legal expertise or designee, and a Vice President of the investment manager or designee. In addition, the Fund’s Chief Compliance Officer shall designate a member of the compliance group to attend Valuation Committee meetings as a non-voting resource, to monitor for and provide guidance with respect to compliance with these procedures. Two members of the Valuation Committee or their designees, representing different departments, shall constitute a quorum for purposes of permitting the Valuation Committee to take action. The Valuation Committee will consider all relevant factors in determining an investment’s fair value, and may seek the advice of the Fund’s sub-adviser, knowledgeable brokers, and legal counsel in making such determination. The Valuation Committee reports to the Audit Committee of the Company’s Board of Directors. The Audit Committee receives quarterly written reports which include details of all fair-valued investments, including the reason for the fair valuation, and an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such investments (the “look-back” test). The Board of Directors then must consider for ratification all of the fair value determinations made during the previous quarter.
Valuation levels are not necessarily indicative of the risk associated with investing in such investments. Individual investments within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
For additional information, refer to the Investment Valuation Hierarchy Level Summary and the Level 3 roll-forward reconciliation, if applicable, which follow the Schedule of Investments.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period.
| c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Investments purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses are determined on the basis of identified cost. |
Dividend income from domestic securities is accrued on the ex-dividend date. In general, dividend income from foreign securities is recorded on the ex-date; however, dividend notifications in certain foreign jurisdictions may not be available in a timely manner and as a result, the Fund will record the dividend as soon as the relevant details (i.e., rate per share, payment date, shareholders of record, etc.) are publicly available. Interest income, including amortization of premium and accretion of discounts, is accrued on a daily basis.
| d) | Foreign Currency Transactions – Assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investments, income, and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. |
The Fund does not isolate that portion of portfolio investment valuation resulting from fluctuations in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of investments held. Exchange rate fluctuations are included with the net realized and unrealized gain or loss on investments in the accompanying financial statements.
Net realized foreign exchange gains or losses arise from sales of foreign currencies and the difference between asset and liability amounts initially stated in foreign currencies and the U.S. dollar value of the amounts actually received or paid.
Hartford International Opportunities HLS Fund
Notes to Financial Statements – (continued)
December 31, 2012
Net unrealized foreign exchange gains or losses arise from changes in the value of other assets and liabilities at the end of the reporting period, resulting from changes in the exchange rates.
| e) | Joint Trading Account – The Fund may invest cash balances into a joint trading account that may be invested in one or more repurchase agreements. |
| f) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Fund’s shares are executed in accordance with the investment instructions of the contract holders and plan participants. The NAV of the Fund’s shares is determined as of the close of business on each business day of the Exchange. The NAV is determined separately for each class of shares of the Fund by dividing the Fund’s net assets attributable to that class by the number of shares of the class outstanding. Each class of shares offered by the Fund has equal rights as to assets and voting privileges (except that shareholders of a class have exclusive voting rights regarding any matter relating solely to that class of shares). Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets of the class. Realized and unrealized capital gains and losses are allocated daily based on the relative net assets of each class of shares of the Fund. |
Orders for the purchase of the Fund’s shares received prior to the close of the Exchange on any day the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Fund. The policy of the Fund is to pay dividends from net investment income and realized capital gains, if any, at least once a year.
Distributions from net investment income, net realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These differences may include but are not limited to losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to Passive Foreign Investment Companies (“PFICs”), Real Estate Investment Trusts (“REITs”), Regulated Investment Companies (“RICs”), certain derivatives and partnerships. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Fund’s capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| 3. | Securities and Other Investments: |
| a) | Repurchase Agreements – A repurchase agreement is an agreement by which a counterparty agrees to sell an investment and agrees to repurchase the investment sold from the buyer at a mutually agreed upon time and price. At the time the Fund enters into a repurchase agreement, the value of the underlying collateral, including accrued interest, will be equal to or exceed the value of the repurchase agreement. Repurchase agreements expose the Fund to counterparty risk - that is, the risk that the counterparty will not fulfill its obligations. To minimize counterparty risk, the investments that serve to collateralize the repurchase agreement are held by the Fund’s custodian in book entry or physical form in the custodial account of the Fund or in a third party custodial account. Repurchase agreements are valued at cost plus accrued interest, which approximates fair value. The Fund, as shown on the Schedule of Investments, had outstanding repurchase agreements as of December 31, 2012. |
| b) | Illiquid and Restricted Investments – The Fund is permitted to invest up to 15% of its net assets in illiquid investments. Illiquid investments are those that may not be sold or disposed of in the ordinary course of business within seven days, at approximately the price used to determine the Fund’s NAV. The Fund may not be able to sell illiquid investments when its sub-adviser considers it desirable to do so or may have to sell such investments at a price that is lower than the price that could be obtained if the investments were more liquid. A sale of illiquid investments may require more time and |
may result in higher dealer discounts and other selling expenses than does the sale of those that are liquid. Illiquid investments also may be more difficult to value due to the unavailability of reliable market quotations for such investments, and an investment in them may have an adverse impact on the Fund’s NAV. The Fund may also purchase certain restricted investments that can only be resold to certain qualified investors and may be determined to be liquid pursuant to policies and guidelines established by the Company’s Board of Directors. The Fund, as shown on the Schedule of Investments, had illiquid and/or restricted investments as of December 31, 2012.
| c) | Investments Purchased on a When-Issued or Delayed-Delivery Basis – Delivery and payment for investments that have been purchased by the Fund on a forward commitment, or when-issued or delayed-delivery basis, take place beyond the customary settlement period. A fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell delayed-delivery investments before they are delivered, which may result in a realized gain or loss. During this period, such investments are subject to market fluctuations, and the Fund identifies investments segregated in its records with a value at least equal to the amount of the commitment. The Fund, as shown on the Schedule of Investments, had when-issued or delayed-delivery investments as of December 31, 2012. |
| 4. | Financial Derivative Instruments: |
The following disclosures contain information on how and why the Fund uses derivative instruments, the credit-risk-related contingent features in certain derivative instruments, and how derivative instruments affect the Fund’s financial position and results of operations. The location and fair value amounts of these instruments on the Statement of Assets and Liabilities and the realized gains and losses and changes in unrealized gains and losses on the Statement of Operations, each categorized by type of derivative contract, are included in the following Additional Derivative Instrument Information footnote. The derivative instruments outstanding as of year-end are disclosed in the notes to or within the Schedule of Investments for purchased options, if applicable. The amounts of realized gains and losses and changes in unrealized gains and losses on derivative instruments during the year are disclosed in the Statement of Operations.
| a) | Foreign Currency Contracts – The Fund may enter into foreign currency contracts that obligate the Fund to purchase or sell currencies at specified future dates. Foreign currency contracts are used to hedge the currency exposure associated with some or all of the Fund’s investments and/or as part of an investment strategy. Foreign currency contracts are marked to market daily and the change in value is recorded by the Fund as an unrealized gain or loss. The Fund will record a realized gain or loss when the foreign currency contract is settled. |
Foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. In addition, risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of the contracts and from unanticipated movements in the value of the foreign currencies relative to the U.S. dollar. The Fund had outstanding foreign currency contracts as shown on the Schedule of Investments as of December 31, 2012.
Hartford International Opportunities HLS Fund
Notes to Financial Statements – (continued)
December 31, 2012
| b) | Additional Derivative Instrument Information: |
Fair Value of Derivative Instruments on the Statement of Assets and Liabilities as of December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized appreciation on foreign currency contracts | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Total | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized depreciation on foreign currency contracts | | $ | — | | | $ | 3 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 3 | |
| Total | | $ | — | | | $ | 3 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 3 | |
The volume of derivatives that is presented in the Schedule of Investments is consistent with the derivative activity during the year ended December 31, 2012.
The Effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Realized Loss on Derivatives Recognized as a Result of Operations: | |
| Net realized loss on foreign currency contracts | | $ | — | | | $ | (845 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (845 | ) |
| Total | | $ | — | | | $ | (845 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (845 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Change in Unrealized Appreciation on Derivatives Recognized as a Result of Operations: | |
| Net change in unrealized appreciation of foreign currency contracts | | $ | — | | | $ | 5 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 5 | |
| Total | | $ | — | | | $ | 5 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 5 | |
| a) | Counterparty Risk – The Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will default. |
| b) | Market Risks – If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities, such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund. The market values of equity securities, such as common stocks and preferred stocks, or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The market value of equity securities may also decline due to factors which affect a particular industry or industries, such as labor shortages |
or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities.
| a) | Federal Income Taxes – For federal income tax purposes, the Fund intends to continue to qualify as a RIC under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders and otherwise complying with the requirements of the IRC. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains prior to the next fiscal year-end. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. |
| c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Fund for the periods indicated is as follows (as adjusted for dividends payable, if applicable): |
| | | For the Year Ended
December 31, 2012 | | | For the Year Ended
December 31, 2011 | |
| Ordinary Income | | $ | 28,135 | | | $ | 808 | |
As of December 31, 2012, the Fund’s components of distributable earnings (deficit) on a tax basis were as follows:
| | | Amount | |
| Undistributed Ordinary Income | | $ | 32,158 | |
| Accumulated Capital and Other Losses* | �� | | (710,980 | ) |
| Unrealized Appreciation† | | | 149,176 | |
| Total Accumulated Deficit | | $ | (529,646 | ) |
| | * | The Fund has capital loss carryforwards that are identified in the Capital Loss Carryforward note that follows. |
| | † | Differences between book-basis and tax-basis unrealized appreciation (depreciation) may be attributable to the losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. |
| d) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as foreign currency, PFICs, expiration or utilization of capital loss carryforwards or net operating losses. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Fund’s distributions may be shown in the accompanying Statement of Changes in Net Assets as from undistributed net investment income, from accumulated net |
Hartford International Opportunities HLS Fund
Notes to Financial Statements – (continued)
December 31, 2012
realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Fund recorded reclassifications to increase (decrease) the accounts listed below:
| | | Amount | |
| Undistributed Net Investment Income | | $ | 387 | |
| Accumulated Net Realized Gain (Loss) | | | (387 | ) |
| e) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation. |
At December 31, 2012 (tax-year-end), the Fund had capital loss carryforwards for U.S. federal income tax purposes as follows:
| Year of Expiration | | Amount | |
| 2015 | | $ | 26,254 | |
| 2016 | | | 397,126 | |
| 2017 | | | 287,600 | |
| Total | | $ | 710,980 | |
During the year ended December 31, 2012, the Fund utilized $10,830 of prior year capital loss carryforwards.
| f) | Accounting for Uncertainty in Income Taxes – The Fund has adopted financial reporting rules that require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Fund does not have an examination in progress. |
The Fund has reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules had no effect on the Fund’s financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2012. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Fund’s investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Fund pursuant to an Investment Management Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Fund’s investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees payable under, the Fund’s investment management agreements; or (ii) the day-to-day management of the Fund. The investment manager has overall investment supervisory responsibility for the Fund. In addition, the investment manager provides administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. The investment manager has contracted with Wellington Management Company, LLP (“Wellington Management”) under a sub-advisory agreement for the provision of day-to-day investment management services to the Fund in accordance with |
the Fund’s investment objective and policies. The Fund pays a fee to the investment manager, a portion of which may be used to compensate Wellington Management.
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered as of December 31, 2012, (paid for the period March 1, 2012 through December 31, 2012); the rates are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee | |
| On first $250 million | | | 0.7750 | % |
| On next $250 million | | | 0.7250 | % |
| On next $500 million | | | 0.6750 | % |
| On next $1.5 billion | | | 0.6250 | % |
| On next $2.5 billion | | | 0.6200 | % |
| On next $5 billion | | | 0.6150 | % |
| Over $10 billion | | | 0.6100 | % |
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered during the period January 1, 2012, through February 29, 2012.
| Average Daily Net Assets | | Annual Fee | |
| On first $250 million | | | 0.7750 | % |
| On next $250 million | | | 0.7250 | % |
| On next $500 million | | | 0.6750 | % |
| On next $4 billion | | | 0.6250 | % |
| On next $5 billion | | | 0.6225 | % |
| Over $10 billion | | | 0.6200 | % |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Fund. HLIC provided accounting services for the Fund for the fiscal year ended December 31, 2012. The replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Fund or the fees charged to the Fund for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Fund, HFMC provides accounting services to the Fund and receives monthly compensation based on the Fund’s average daily net assets at the rates set forth below. The Fund’s accounting services fees are accrued daily and paid monthly. |
| Average Daily Net Assets | | Annual Fee | |
| On first $5 billion | | | 0.016 | % |
| On next $5 billion | | | 0.014 | % |
| Over $10 billion | | | 0.012 | % |
| c) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund and allocated to classes within a Fund in proportion to the average daily net assets of the Fund and each class, except where allocation of certain expenses is more fairly made directly to the Fund or to specific classes within a Fund. |
| d) | Fees Paid Indirectly – The Company, on behalf of the Fund, has entered into agreements with State Street Global Markets, LLC and Russell Implementation Services, Inc. to partially recapture non-discounted trade commissions. Such rebates are used to pay a portion of the Fund’s expenses. In addition, the Fund’s custodian banks have agreed to reduce |
Hartford International Opportunities HLS Fund
Notes to Financial Statements – (continued)
December 31, 2012
its fees when the Fund maintains cash on deposit in a non-interest-bearing custody account. For the year ended December 31, 2012, these amounts, if any, are included in the Statement of Operations.
The ratio of expenses to average net assets in the accompanying financial highlights excludes the reduction in expenses related to fees paid indirectly. The annualized expense ratio after waivers for the period listed below reflecting the reduction for fees paid indirectly is as follows:
| | | Year Ended
December 31, 2012 | |
| Class IA | | | 0.73 | % |
| Class IB | | | 0.98 | |
| e) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Fund's principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD with HIFSCO did not result in any changes to the distribution services provided to the Fund. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Fund, has adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, 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, subject to the review and approval of the Company’s Board of Directors. |
The Distribution Plan provides that the Fund may pay annually up to 0.25% of the average daily net assets of the Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, the Fund is authorized to make payments monthly to the Distributor that may be used to pay or compensate 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. These fees are accrued daily and paid monthly.
| f) | Other Related Party Transactions – Certain officers of the Fund are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Fund’s Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Fund was in the amount of $2. Hartford Administrative Services Company (“HASCO”), an indirect wholly owned subsidiary of The Hartford, provides transfer agent services to the Fund. The amount paid to HASCO can be found in the Statement of Operations. These fees are accrued daily and paid monthly. |
| g) | Payment from Affiliate – In July of 2007, The Hartford entered into a settlement with the Attorneys General of the states of New York, Connecticut and Illinois relating to market timing and the company's individual variable annuity contracts in which certain payments would be made directly to the variable annuity contract holders. The distribution plan provided that unclaimed money from the settlement would be distributed to certain HLS Funds that are investment options through a Hartford individual variable annuity contract. The unclaimed money was distributed to the Fund on September 18, 2009. |
The total return in the accompanying financial highlights includes a payment from an affiliate. Had the payment from the affiliate been excluded, the impact and total return for the period listed below would have been as follows:
| | | For the Year Ended December 31, 2009 | |
| | | Class IA | | | Class IB | |
| Impact from Payment from Affiliate for Attorneys General Settlement | | | 0.23 | % | | | 0.23 | % |
| Total Return Excluding Payment from Affiliate | | | 33.15 | % | | | 32.83 | % |
| 8. | Investment Transactions: |
For the year ended December 31, 2012, the Fund's aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
| | | Amount | |
| Cost of Purchases Excluding U.S. Government Obligations | | $ | 1,417,959 | |
| Sales Proceeds Excluding U.S. Government Obligations | | | 1,615,402 | |
The Fund is one of several Hartford funds that participate in a $500 million committed revolving line of credit facility. The facility is to be used for temporary or emergency purposes. Under the arrangement, the funds are required to own securities having a market value in excess of 300% of the total bank borrowings. The interest rate on borrowings varies depending on the nature of the loan. The facility also requires a fee to be paid based on the amount of the commitment. This commitment fee is allocated to all of the funds participating in the line of credit based on the average net assets of the funds. During the year ended December 31, 2012, the Fund did not have any borrowings under this facility.
| 10. | Industry Classifications: |
Other than the industry classifications “Other Investment Pools and Funds” and “Exchange Traded Funds,” equity industry classifications used in this report are the Global Industry Classification Standard, which was developed by and is the exclusive property and service mark of MSCI, Inc. and Standard & Poor’s.
Under the Company’s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
| 12. | Recent Accounting Pronouncement: |
Disclosures about Offsetting Assets and Liabilities - In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The objective of the ASU is to enhance current disclosure requirements on offsetting of certain assets and liabilities and to enable financial statement users to compare financial statements prepared under U.S. GAAP and International Financial Reporting Standards.
Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
Hartford International Opportunities HLS Fund
Financial Highlights
| - Selected Per-Share Data (A) - |
| Class | | Net Asset Value at Beginning of Period | | | Net Investment Income (Loss) | | | Net Realized and Unrealized Gain (Loss) on Investments | | | Total from Investment Operations | | | Dividends from Net Investment Income | | | Distributions from Realized Capital Gains | | | Distributions from Capital | | | Total Distributions | | | Net Asset Value at End of Period | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2012 |
| IA | | $ | 10.72 | | | $ | 0.26 | | | $ | 1.88 | | | $ | 2.14 | | | $ | (0.23 | ) | | $ | – | | | $ | – | | | $ | (0.23 | ) | | $ | 12.63 | |
| IB | | | 10.82 | | | | 0.25 | | | | 1.88 | | | | 2.13 | | | | (0.19 | ) | | | – | | | | – | | | | (0.19 | ) | | | 12.76 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2011 |
| IA | | | 12.46 | | | | 0.21 | | | | (1.94 | ) | | | (1.73 | ) | | | (0.01 | ) | | | – | | | | – | | | | (0.01 | ) | | | 10.72 | |
| IB | | | 12.61 | | | | 0.19 | | | | (1.97 | ) | | | (1.78 | ) | | | (0.01 | ) | | | – | | | | – | | | | (0.01 | ) | | | 10.82 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2010 (E) |
| IA | | | 11.01 | | | | 0.13 | | | | 1.46 | | | | 1.59 | | | | (0.14 | ) | | | – | | | | – | | | | (0.14 | ) | | | 12.46 | |
| IB | | | 11.15 | | | | 0.11 | | | | 1.46 | | | | 1.57 | | | | (0.11 | ) | | | – | | | | – | | | | (0.11 | ) | | | 12.61 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2009 |
| IA | | | 8.40 | | | | 0.19 | (G) | | | 2.61 | | | | 2.80 | | | | (0.19 | ) | | | – | | | | – | | | | (0.19 | ) | | | 11.01 | |
| IB | | | 8.51 | | | | 0.17 | (G) | | | 2.64 | | | | 2.81 | | | | (0.17 | ) | | | – | | | | – | | | | (0.17 | ) | | | 11.15 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2008 |
| IA | | | 15.62 | | | | 0.28 | | | | (6.68 | ) | | | (6.40 | ) | | | (0.28 | ) | | | (0.54 | ) | | | – | | | | (0.82 | ) | | | 8.40 | |
| IB | | | 15.78 | | | | 0.27 | | | | (6.76 | ) | | | (6.49 | ) | | | (0.24 | ) | | | (0.54 | ) | | | – | | | | (0.78 | ) | | | 8.51 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include 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 would lower the Fund's performance. |
| (C) | Ratios do not reflect reductions for fees paid indirectly. Please see Fees Paid Indirectly in the Notes to Financial Statements. |
| (D) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
| (E) | Per share amounts have been calculated using the average shares method. |
| (F) | During the year ended December 31, 2010, the Fund incurred $456.2 million in sales associated with the transition of assets from Hartford International Growth HLS Fund and Hartford International Small Company HLS Fund, which merged into the Fund on April 16, 2010. These sales were excluded from the portfolio turnover calculation. |
| (G) | The impact of Payment from Affiliate per share was $0.03. |
| (H) | Total return without the inclusion of the Payment from (to) Affiliate can be found in Expenses in the accompanying Notes to Financial Statements. |
| - Ratios and Supplemental Data - |
| Total Return(B) | | | Net Assets at End of Period | | | Ratio of Expenses to Average Net Assets Before Waivers(C) | | | Ratio of Expenses to Average Net Assets After Waivers(C) | | | Ratio of Net Investment Income (Loss) to Average Net Assets | | | Portfolio Turnover Rate(D) | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 20.20 | % | | $ | 1,303,209 | | | | 0.74 | % | | | 0.74 | % | | | 1.88 | % | | | 95 | % |
| | 19.89 | | | | 220,699 | | | | 0.99 | | | | 0.99 | | | | 1.64 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (13.97 | ) | | | 1,287,917 | | | | 0.73 | | | | 0.73 | | | | 1.66 | | | | 111 | |
| | (14.19 | ) | | | 232,707 | | | | 0.98 | | | | 0.98 | | | | 1.41 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 14.49 | | | | 1,705,757 | | | | 0.74 | | | | 0.74 | | | | 1.19 | | | | 128 | (F) |
| | 14.20 | | | | 328,671 | | | | 0.99 | | | | 0.99 | | | | 0.94 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 33.46 | (H) | | | 1,247,179 | | | | 0.76 | | | | 0.76 | | | | 1.68 | | | | 152 | |
| | 33.13 | (H) | | | 216,882 | | | | 1.01 | | | | 1.01 | | | | 1.43 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (42.25 | ) | | | 1,046,234 | | | | 0.71 | | | | 0.71 | | | | 2.21 | | | | 158 | |
| | (42.39 | ) | | | 189,221 | | | | 0.96 | | | | 0.96 | | | | 1.96 | | | | – | |
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of
| Hartford Series Fund, Inc. |
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Hartford International Opportunities HLS Fund (one of the portfolios constituting Hartford Series Fund, Inc. (the Fund)) as of December 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Hartford International Opportunities Fund (one of the portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Minneapolis, MN
February 15, 2013
Hartford International Opportunities HLS Fund
| Directors and Officers (Unaudited) |
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Fund pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Fund. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Fund’s statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Fund pays to The Hartford a portion of the Chief Compliance Officer’s compensation, but does not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
Hartford International Opportunities HLS Fund
| Directors and Officers (Unaudited) – (continued) |
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010 (4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and a record of how the Fund voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Hartford International Opportunities HLS Fund
| Expense Example (Unaudited) |
Your Fund's Expenses
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Actual return | | | Hypothetical (5% return before expenses) | | | | | | | | | | |
| | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2
year | | | Days
in the
full
year | |
| Class IA | | $ | 1,000.00 | | | $ | 1,012.23 | | | $ | 3.72 | | | $ | 1,000.00 | | | $ | 1,021.44 | | | $ | 3.74 | | | | 0.74 | % | | | 184 | | | | 366 | |
| Class IB | | $ | 1,000.00 | | | $ | 1,012.09 | | | $ | 4.99 | | | $ | 1,000.00 | | | $ | 1,020.18 | | | $ | 5.01 | | | | 0.99 | % | | | 184 | | | | 366 | |
Hartford International Opportunities HLS Fund
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) |
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory and sub-advisory agreements. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for Hartford International Opportunities HLS Fund (the “Fund”) with HL Investment Advisors, LLC (“HL Advisors”) and the continuation of the investment sub-advisory agreement between HL Advisors and the Fund’s sub-adviser, Wellington Management Company, LLP (the “Sub-adviser,” and together with HL Advisors, the “Advisers”) (collectively, the “Agreements”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from the Advisers to questions posed to them on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreements at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by the Advisers and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreements.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreements with respect to the Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Fund’s contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Fund’s management fees, sub-advisory fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement.
In determining to continue the Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreements. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreements is provided below.
Nature, Extent, and Quality of Services Provided by the Advisers
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Fund by the Advisers. The Board considered, among other things, the terms of the Agreements and the range of services provided by the Advisers. The Board considered the Advisers’ professional personnel who provide services to the Fund, including each Adviser’s ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered each Adviser’s reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to the Fund. In addition, the Board considered the quality of each Adviser’s communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning each Adviser’s regulatory and compliance environment. In this regard, the Board requested and reviewed information on each Adviser’s compliance policies and procedures, compliance history, and a report from the Fund’s Chief Compliance Officer on each Adviser’s compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. The Board also noted the Advisers’ support of the Fund’s compliance control structure, particularly the resources devoted by the Advisers in support of the Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act.
With respect to HL Advisors, the Board noted that under the Agreements, HL Advisors is responsible for the management of the Fund, including overseeing fund operations and service providers, as well as investment advisory services in connection with selecting, monitoring and supervising the Sub-adviser. The Board considered HL Advisors’ ongoing monitoring of people, process and performance, including its quarterly reviews of each of the Hartford HLS Funds, semi-annual meetings with the leaders of each Fund’s
Hartford International Opportunities HLS Fund
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
portfolio management team, and oversight of the Funds’ approximately 40 portfolio managers. The Board recognized that HL Advisors has demonstrated a record of making changes to the management and/or strategies of the Funds when warranted. The Board considered HL Advisors’ oversight of the Sub-adviser’s investment approach and results, process for monitoring best execution of portfolio trades by the Sub-adviser, and approach to risk management with respect to the Fund and the service providers to the Fund. The Board also considered HL Advisors’ oversight of compliance with the Fund’s objective and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led to an increase in the scope of HL Advisors’ services in this regard. In addition, the Board considered HL Advisors’ ongoing commitment to review and rationalize the Hartford fund family’s product line-up and the expenses that HL Advisors had incurred in connection with fund combinations in recent years. The Board considered that HL Advisors or its affiliates are responsible for providing the Fund’s officers. The Board also noted that Hartford Life Insurance Company (“HLIC”) provides administrative services to the Fund. The Board considered its experiences with HL Advisors and HLIC with respect to each of these services.
With respect to the Sub-adviser, who provides day-to-day portfolio management services, the Board considered the quality of the Fund’s portfolio managers, the Sub-adviser’s other investment personnel, its investment philosophy and process, investment research capabilities and resources, performance record, trade execution capabilities and experience. The Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers, and the Sub-adviser’s method for compensating the portfolio managers.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Fund by HL Advisors and the Sub-adviser.
Performance of the Fund and the Advisers
The Board considered the investment performance of the Fund. In this regard, the Board reviewed the performance of the Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of the Fund’s performance for these time periods. The Board considered information and materials provided to the Board by the Advisers concerning Fund performance, as well as information from Lipper comparing the investment performance of the Fund to an appropriate benchmark and universe of peer funds. The Board noted that although the Fund has had some performance challenges, the overall performance of the Fund was within expectations.
The Board considered the detailed investment analytics reports provided by The Hartford’s Investment Advisory Group throughout the year. These reports include, among other things, information on the Fund’s gross and net returns, the Fund’s investment performance relative to an appropriate benchmark and peer group, various statistics concerning the Fund’s portfolio, and a narrative summary of various factors affecting Fund performance. The Board considered the Advisers’ cooperation with the Investment Committee, which assists the Board in evaluating the performance of the Fund at periodic meetings throughout the year. The Board also considered the analysis provided by the Consultant relating to the Fund’s performance track record.
In light of all the considerations noted above, the Board concluded that it had continued confidence in HL Advisors’ and the Sub-adviser’s overall capabilities to manage the Fund.
Costs of the Services and Profitability of the Advisers
The Board reviewed information regarding HL Advisors’ cost to provide investment management and related services to the Fund and HL Advisors’ profitability, both overall and for the Fund, on a pre-tax basis without regard to distribution expenses. The Board also requested and reviewed information about the profitability to HL Advisors and its affiliates from all services provided to the Fund and all aspects of their relationship with the Fund. The Board also requested and received information relating to the operations and profitability of the Sub-adviser.
The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement, noting the Consultant’s view that The Hartford’s process for calculating and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by the Advisers and their affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by the Advisers
The Board considered comparative information with respect to the management fees to be paid by the Fund to HL Advisors and the total expense ratios of the Fund. The Board also considered comparative information with respect to the sub-advisory fees to be paid by HL Advisors to the Sub-adviser, to the extent applicable. In this regard, the Board requested and reviewed information from HL Advisors and the Sub-adviser relating to the management and sub-advisory fees, including the sub-advisory fee schedule for the Fund, and total operating expenses for the Fund. The Board considered that the management fee for the Fund includes the fee paid to HLIC for providing certain administrative services to the Fund. With respect to the sub-advisory fee schedule, the Board considered representations from HL Advisors and the Sub-adviser that the Sub-adviser’s fees were negotiated at arm’s length. The Board also reviewed information from Lipper comparing the Fund’s contractual management fees, actual management fees and overall expense ratios relative to a group of funds selected by Lipper, in consultation with the Consultant, and a broader universe of funds selected by Lipper. The Board noted that, in connection with The Hartford’s preferred partnership agreement with the Sub-adviser, an additional breakpoint had been added to the Fund’s management fee schedule.
While the Board recognized that comparisons between the Fund and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business models and cost structures of the Advisers, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of the Fund’s management and sub-advisory fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to the Fund’s management and sub-advisory fees and total operating expenses.
Based on these considerations, the Board concluded that the Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding the Advisers’ realization of economies of scale with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. The Board reviewed the breakpoints in the management fee schedule for the Fund, which reduce fee rates as Fund assets grow over time, and noted that an additional breakpoint had recently been added to the Fund’s management fee schedule. The Board recognized that a fund with assets beyond the last breakpoint level will continue to benefit from economies of scale because additional assets are charged the lowest breakpoint fee resulting in lower overall effective management fee rates. The Board also recognized that a fee schedule that reaches a lower breakpoint quickly provides shareholders with the benefit of anticipated or potential economies of scale.
The Board reviewed and evaluated materials from Lipper showing how management fee schedules of peer funds reflect economies of scale for the benefit of shareholders as a peer fund’s assets hypothetically increase over time. Based on information provided by HL Advisors, Lipper, and the Consultant, the Board recognized that there is no uniform methodology for establishing breakpoints or uniform pattern in asset levels that trigger breakpoints or the amounts of breakpoints triggered.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Fund’s shareholders based on currently available information and the effective advisory fees and expense ratios for the Fund at its current and reasonably anticipated asset levels. The Board noted, however, that it would continue to monitor future growth in Fund assets and the appropriateness of additional breakpoints.
Other Benefits
The Board considered other benefits to the Advisers and their affiliates from their relationships with the Fund, including the role of the Fund in supporting the variable life insurance and variable annuity products offered by The Hartford. The Board reviewed information noting that HLIC, an affiliate of HL Advisors, receives fees for providing certain administrative services to the Fund, and that HLIC also receives fees for fund accounting and related services from the Fund, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Fund’s transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Fund, and the Board reviewed information on the profitability of the Fund’s transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Fund were fair and reasonable based on publicly available information.
Hartford International Opportunities HLS Fund
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Fund, receives 12b-1 fees from the Fund. The Board also noted that certain affiliates of HL Advisors distribute shares of the Fund and receive compensation in that connection.
The Board considered benefits to the Sub-adviser from its use of the Fund’s brokerage commissions to obtain soft dollar research, and representations from HL Advisors and the Sub-adviser that the Sub-adviser would not make any revenue-sharing payments or any other type of distribution payments to HL Advisors or its affiliates.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the Agreements for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory and sub-advisory agreements. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreements for the Fund and approve a new investment management agreement for the Fund with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser, and a new investment sub-advisory agreement between HFMC and the Fund’s existing Sub-adviser, Wellington Management Company, LLP (together with HFMC, the “Post-Restructuring Advisers”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Fund. In order to implement the Restructuring, the Fund would terminate the existing Agreements and enter into a new investment management agreement with HFMC, with HFMC also entering into a new investment sub-advisory agreement with the Sub-adviser (collectively, the “New Agreements”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreements at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by HL Advisors and the Sub-adviser and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreements.
In determining to approve the New Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the New Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreements.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Fund and the performance of investment management personnel to the Fund. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Fund prior to the Restructuring would continue to provide such services to the Fund, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreements would involve no changes to (i) the contractual terms of, including the management fees payable under, the Fund’s investment management and investment sub-advisory agreements; (ii) the investment processes and strategies employed in the management of the Fund’s assets; (iii) the nature and level of
services provided under the Fund’s investment management and investment sub-advisory agreements; and (iv) the day-to-day management of the Fund and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Fund.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Fund.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Fund, the investment management arrangement for the Fund following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreements: (i) nature, extent and quality of services provided by HL Advisors and the Sub-adviser; (ii) performance of the Fund, HL Advisors and the Sub-adviser; (iii) costs of the services and profitability of HL Advisors and the Sub-adviser; (iv) comparative services rendered and comparative investment management and sub-advisory fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors and the Sub-adviser with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. With respect to the other benefits to the Post-Restructuring Advisers and their affiliates from their relationships with the Fund, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting and related services from the Fund.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the New Agreements. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Hartford International Opportunities HLS Fund
| Principal Risks (Unaudited) |
The principal risks of investing in the Fund are described below.
Market and Selection Risk: The Fund’s share price may fluctuate due to market risk and/or security selections that may underperform compared to the market or relevant benchmarks.
Foreign Investment and Emerging Markets Risk: Foreign investments can be riskier than U.S. investments. Potential risks include currency risk that may result from unfavorable exchange rates, liquidity risk if decreased demand for a security makes it difficult to sell at the desired price, and risks that stem from substantially lower trading volume on foreign markets. These risks are generally greater for investments in emerging markets, which are also subject to greater price volatility, and custodial and regulatory risks.
Mid-cap Stock Risk: Mid-cap stocks are generally more volatile and risky and may be less liquid than large-cap stocks because they may have limited operating histories, narrow product lines, and focus on niche markets.
Active Trading Risk: Actively trading investments may result in higher costs and higher taxable income.
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
HLSAR-IO12 2-13 113546 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 | |
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford MidCap HLS Fund
Table of Contents
This report is prepared for the general information of contract owners and qualified retirement plan participants. It is not an offer of contracts or of qualified retirement plans. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent information including the applicable sales, administrative and other charges.
The views expressed in the Fund’s Manager Discussion under ‘‘Why did the Fund perform this way?’’ and ‘‘What is the outlook?’’ are views of the Fund’s sub-adviser and portfolio management team through the end of the period and are subject to change based on market and other conditions.
| Hartford MidCap HLS Fund* inception 07/14/1997 |
| (sub-advised by Wellington Management Company, LLP) | |
| | |
| Investment objective – Seeks long-term growth of capital. | |
Performance Overview 12/13/02 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IA. Growth results in classes other than class IA will vary from what is seen above due to differences in the expenses charged to those share classes.
Average Annual Total Returns (as of 12/31/12)
| | | 1 Year | | | 5 Year | | | 10 Year | |
| MidCap IA | | | 19.44% | | | | 2.83% | | | | 10.74% | |
| MidCap IB | | | 19.14% | | | | 2.57% | | | | 10.46% | |
| S&P MidCap 400 Index | | | 17.88% | | | | 5.15% | | | | 10.53% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund's net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
S&P MidCap 400 Index is an unmanaged index of common stocks of companies chosen by S&P designed to represent price movements in the mid-cap U.S. equity market.
You cannot invest directly in an index.
As of the Fund’s current prospectus dated May 1, 2012, the net total annual operating expense ratios for Class IA and Class IB shares were 0.71% and 0.96%, respectively, and the gross total annual operating expense ratios for Class IA and Class IB shares were 0.71% and 0.96%, respectively. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect until April 30, 2013, and automatically renew for one-year terms unless terminated by the Fund’s Investment Advisor (Hartford Funds Management Company, LLC). For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
| * | The Fund has restrictions on the purchase of shares. A description of the restrictions can be found in the prospectus. |
| Hartford MidCap HLS Fund |
| Manager Discussion |
| December 31, 2012 (Unaudited) |
| |
| Portfolio Managers | |
| Philip W. Ruedi, CFA | Mark A. Whitaker, CFA |
| Senior Vice President and Equity Portfolio Manager | Vice President and Equity Portfolio Manager |
| | |
How did the Fund perform?
The Class IA shares of the Hartford MidCap HLS Fund returned 19.44% for the twelve-month period ended December 31, 2012, outperforming its benchmark, the S&P MidCap 400 Index, which returned 17.88% for the same period. The Fund also outperformed the 16.07% return of the average fund in the Lipper VP-UF Mid-Cap Core Funds peer group, a group of funds with investment strategies similar to those of the Fund.
Why did the Fund perform this way?
U.S. equities moved higher in the period, in part due to a strengthening housing market and central bank interventions around the globe. Although Europe continued to grapple with economic and structural challenges, investors’ risk appetites surged after European Central Bank (ECB) President Mario Draghi revealed a comprehensive plan to support struggling sovereigns, including direct purchases of government bonds in the open market. Additionally, the U.S. Federal Reserve’s (Fed) announcement of a third round of quantitative easing (QE3) was well received by the market, boosting stock prices. Despite concerns about the looming U.S. fiscal cliff, tepid corporate revenue results, and economic malaise in Europe, investors bid up risk assets amid further signs of recovery in China and signs that the U.S. housing market may bolster the U.S. economy for the first time in seven years. Risk sentiment also ticked up on continued hopes that the ECB’s bond-buying plan will succeed, essentially reducing the tail risks in Europe.
Mid cap stocks (+17.9%) outperformed small cap stocks (+16.4%) and large cap stocks (+16.0%) during the period, as measured by the S&P MidCap 400, Russell 2000, and S&P 500 Indices, respectively. Growth stocks (+16.1%) trailed Value stocks (+19.2%) during the period, as measured by the Russell 2500 Growth and Russell 2500 Value Indices. Within the S&P MidCap 400 Index, all ten sectors posted positive returns during the twelve-month period. The Health Care (+25.7%), Consumer Discretionary (+22.9%), and Materials (+22.3%) sectors performed best while the Energy (+0.5%), and Utilities (+5.5%) sectors lagged the broader index.
Outperformance versus the benchmark was driven by strong security selection in the Health Care, Energy, and Financials sectors, which more than offset weak stock selection in the Information Technology and Consumer Staples sectors. Sector allocation, which is driven by our bottom-up stock selection process, contributed modestly to relative outperformance during the period primarily based on our overweight allocation (i.e. the Fund’s sector position was greater than the benchmark position) to Health Care and an underweight allocation to Utilities.
Top contributors to relative performance were Amylin Pharmaceuticals (Health Care) Lincare Holdings (Health Care), and Skyworks Solutions (Information Technology). U.S.-based diabetes drug developer Amylin Pharmaceutical’s shares rose on news that the company rejected a $3.5 billion takeover bid by Bristol-Myers Squibb, which later reported that it would acquire Amylin for $5.3 billion, sending Amylin's share price higher. Lincare Holdings is a respiratory illness treatment company that has been a leader in a growing niche market and generates strong free cash flow. Shares rose dramatically based on the premium acquisition price offered by medical gas company Linde. We eliminated our position after the transaction was announced. Shares of Skyworks Solutions, a semiconductor manufacturer, climbed based on strong earning results. We eliminated the position during the period. Regeneron Pharmaceuticals (Health Care) was another top contributor to absolute performance (i.e. total return).
Top detractors from relative performance were Newfield Exploration (Energy), Western Union (Information Technology), and Rovi Corporation (Information Technology). Shares of U.S.-based oil & gas exploration and production company Newfield Exploration declined after the company missed earnings expectations based on lower production volumes. The company also provided mixed guidance for liquids-rich growth and lower natural gas volumes year-over-year. Shares of Western Union, a U.S.-based electronic payments company, declined during the period after the company reduced earnings guidance as it took aggressive pricing actions in certain key geographies to grow market share. Digital media technology company Rovi offers a wide range of solutions for digital content licensing, protection, and distribution. Shares declined due to a slow ramp up and additional capital requirements for the successful launch of the Rovi Entertainment Store (RES) platform. ADTRAN (Information Technology) also detracted from absolute performance.
What is the outlook?
In keeping with our philosophy, we will continue to emphasize company-specific strengths in our bottom-up stock
| Hartford MidCap HLS Fund |
| Manager Discussion – (continued) |
| December 31, 2012 (Unaudited) |
| |
selection approach. We are cautiously optimistic looking forward to the first quarter of 2013; as of December 31, 2012, the portfolio is balanced and well-positioned with high conviction names we believe should be resilient under a variety of economic circumstances.
At the end of the period, our largest overweights relative to the benchmark were in the Health Care and Industrials sectors. Our largest underweights were Financials and Materials.
| Diversification by Industry |
| as of December 31, 2012 |
| Industry (Sector) | | Percentage of
Net Assets | |
| Automobiles and Components (Consumer Discretionary) | | | 2.6 | % |
| Banks (Financials) | | | 4.7 | |
| Capital Goods (Industrials) | | | 9.8 | |
| Commercial and Professional Services (Industrials) | | | 8.4 | |
| Consumer Durables and Apparel (Consumer Discretionary) | | | 3.5 | |
| Consumer Services (Consumer Discretionary) | | | 0.9 | |
| Diversified Financials (Financials) | | | 6.2 | |
| Energy (Energy) | | | 10.0 | |
| Food and Staples Retailing (Consumer Staples) | | | 0.6 | |
| Food, Beverage and Tobacco (Consumer Staples) | | | 1.1 | |
| Health Care Equipment and Services (Health Care) | | | 6.0 | |
| Household and Personal Products (Consumer Staples) | | | 0.7 | |
| Insurance (Financials) | | | 2.5 | |
| Materials (Materials) | | | 2.6 | |
| Media (Consumer Discretionary) | | | 2.2 | |
| Pharmaceuticals, Biotechnology and Life Sciences (Health Care) | | | 11.3 | |
| Retailing (Consumer Discretionary) | | | 5.7 | |
| Semiconductors and Semiconductor Equipment (Information Technology) | | | 1.0 | |
| Software and Services (Information Technology) | | | 11.2 | |
| Technology Hardware and Equipment (Information Technology) | | | 3.3 | |
| Transportation (Industrials) | | | 3.2 | |
| Utilities (Utilities) | | | 2.4 | |
| Short-Term Investments | | | 0.2 | |
| Other Assets and Liabilities | | | (0.1 | ) |
| Total | | | 100.0 | % |
| Hartford MidCap HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 99.9% | | | | |
| | | | | Automobiles and Components - 2.6% | | | | |
| | 711 | | | Allison Transmission Holdings, Inc. | | $ | 14,528 | |
| | 459 | | | Harley-Davidson, Inc. | | | 22,426 | |
| | | | | | | | 36,954 | |
| | | | | Banks - 4.7% | | | | |
| | 114 | | | Cullen/Frost Bankers, Inc. | | | 6,200 | |
| | 246 | | | East West Bancorp, Inc. | | | 5,278 | |
| | 1,133 | | | First Niagara Financial Group, Inc. | | | 8,986 | |
| | 388 | | | First Republic Bank | | | 12,720 | |
| | 290 | | | M&T Bank Corp. | | | 28,569 | |
| | 47 | | | Signature Bank ● | | | 3,339 | |
| | | | | | | | 65,092 | |
| | | | | Capital Goods - 9.8% | | | | |
| | 203 | | | AMETEK, Inc. | | | 7,624 | |
| | 222 | | | Carlisle Cos., Inc. | | | 13,017 | |
| | 331 | | | IDEX Corp. | | | 15,417 | |
| | 511 | | | Jacobs Engineering Group, Inc. ● | | | 21,770 | |
| | 502 | | | Lennox International, Inc. | | | 26,353 | |
| | 230 | | | MSC Industrial Direct Co., Inc. | | | 17,369 | |
| | 504 | | | PACCAR, Inc. | | | 22,798 | |
| | 197 | | | Pall Corp. | | | 11,861 | |
| | | | | | | | 136,209 | |
| | | | | Commercial and Professional Services - 8.4% | | | | |
| | 283 | | | Corrections Corp. of America | | | 10,035 | |
| | 453 | | | Equifax, Inc. ● | | | 24,521 | |
| | 89 | | | IHS, Inc. ● | | | 8,504 | |
| | 564 | | | Manpower, Inc. | | | 23,942 | |
| | 925 | | | Robert Half International, Inc. | | | 29,439 | |
| | 634 | | | Waste Connections, Inc. | | | 21,421 | |
| | | | | | | | 117,862 | |
| | | | | Consumer Durables and Apparel - 3.5% | | | | |
| | 461 | | | Hasbro, Inc. | | | 16,557 | |
| | 28 | | | NVR, Inc. ● | | | 25,984 | |
| | 194 | | | Ryland Group, Inc. | | | 7,064 | |
| | | | | | | | 49,605 | |
| | | | | Consumer Services - 0.9% | | | | |
| | 233 | | | Weight Watchers International, Inc. | | | 12,219 | |
| | | | | | | | | |
| | | | | Diversified Financials - 6.2% | | | | |
| | 191 | | | Greenhill & Co., Inc. | | | 9,922 | |
| | 756 | | | Invesco Ltd. | | | 19,717 | |
| | 309 | | | LPL Financial Holdings, Inc. | | | 8,710 | |
| | 231 | | | Moody's Corp. | | | 11,620 | |
| | 1,034 | | | SEI Investments Co. | | | 24,143 | |
| | 191 | | | T. Rowe Price Group, Inc. | | | 12,440 | |
| | | | | | | | 86,552 | |
| | | | | Energy - 10.0% | | | | |
| | 411 | | | Atwood Oceanics, Inc. ● | | | 18,827 | |
| | 118 | | | Cabot Oil & Gas Corp. | | | 5,863 | |
| | 418 | | | Chesapeake Energy Corp. | | | 6,955 | |
| | 742 | | | Cobalt International Energy, Inc. ● | | | 18,214 | |
| | 485 | | | Consol Energy, Inc. | | | 15,582 | |
| | 662 | | | Denbury Resources, Inc. ● | | | 10,727 | |
| | 233 | | | Ensco plc | | | 13,830 | |
| | 757 | | | Newfield Exploration Co. ● | | | 20,284 | |
| | 113 | | | Pioneer Natural Resources Co. | | | 12,027 | |
| | 86 | | | Range Resources Corp. | | | 5,384 | |
| | 558 | | | Superior Energy Services, Inc. ● | | | 11,559 | |
| | | | | | | | 139,252 | |
| | | | | Food and Staples Retailing - 0.6% | | | | |
| | 117 | | | PriceSmart, Inc. | | | 8,991 | |
| | | | | | | | | |
| | | | | Food, Beverage and Tobacco - 1.1% | | | | |
| | 351 | | | Molson Coors Brewing Co. | | | 15,018 | |
| | | | | | | | | |
| | | | | Health Care Equipment and Services - 6.0% | | | | |
| | 1,077 | | | Allscripts Healthcare Solutions, Inc. ● | | | 10,148 | |
| | 438 | | | AmerisourceBergen Corp. | | | 18,909 | |
| | 476 | | | Cardinal Health, Inc. | | | 19,599 | |
| | 374 | | | Catamaran Corp. ● | | | 17,608 | |
| | 511 | | | Patterson Cos., Inc. | | | 17,507 | |
| | | | | | | | 83,771 | |
| | | | | Household and Personal Products - 0.7% | | | | |
| | 286 | | | Herbalife Ltd. | | | 9,407 | |
| | | | | | | | | |
| | | | | Insurance - 2.5% | | | | |
| | 46 | | | Alleghany Corp. ● | | | 15,409 | |
| | 20 | | | Markel Corp. ● | | | 8,525 | |
| | 279 | | | W.R. Berkley Corp. | | | 10,529 | |
| | | | | | | | 34,463 | |
| | | | | Materials - 2.6% | | | | |
| | 172 | | | FMC Corp. | | | 10,087 | |
| | 214 | | | Packaging Corp. of America | | | 8,235 | |
| | 63 | | | Sherwin-Williams Co. | | | 9,663 | |
| | 203 | | | Silgan Holdings, Inc. | | | 8,446 | |
| | | | | | | | 36,431 | |
| | | | | Media - 2.2% | | | | |
| | 367 | | | AMC Networks, Inc. Class A ● | | | 18,144 | |
| | 797 | | | DreamWorks Animation SKG, Inc. ● | | | 13,213 | |
| | | | | | | | 31,357 | |
| | | | | Pharmaceuticals, Biotechnology and Life Sciences - 11.3% | | | | |
| | 648 | | | Alkermes plc ● | | | 12,000 | |
| | 301 | | | Cubist Pharmaceuticals, Inc. ● | | | 12,658 | |
| | 679 | | | Elan Corp. plc ADR ● | | | 6,932 | |
| | 429 | | | Incyte Corp. ● | | | 7,118 | |
| | 460 | | | Ironwood Pharmaceuticals, Inc. ● | | | 5,106 | |
| | 991 | | | Mylan, Inc. ● | | | 27,219 | |
| | 96 | | | Regeneron Pharmaceuticals, Inc. ● | | | 16,465 | |
| | 153 | | | Salix Pharmaceuticals Ltd. ● | | | 6,203 | |
| | 184 | | | Seattle Genetics, Inc. ● | | | 4,278 | |
| | 387 | | | Vertex Pharmaceuticals, Inc. ● | | | 16,237 | |
| | 190 | | | Waters Corp. ● | | | 16,520 | |
| | 313 | | | Watson Pharmaceuticals, Inc. ● | | | 26,905 | |
| | | | | | | | 157,641 | |
| | | | | Retailing - 5.7% | | | | |
| | 339 | | | Advance Automotive Parts, Inc. | | | 24,540 | |
| | 597 | | | CarMax, Inc. ● | | | 22,416 | |
| | 209 | | | Joseph A. Bank Clothiers, Inc. ● | | | 8,914 | |
| | 119 | | | Tiffany & Co. | | | 6,803 | |
| | 396 | | | TripAdvisor, Inc. ● | | | 16,627 | |
| | | | | | | | 79,300 | |
| | | | | Semiconductors and Semiconductor Equipment - 1.0% | | | | |
| | 462 | | | Maxim Integrated Products, Inc. | | | 13,572 | |
| | | | | | | | | |
| | | | | Software and Services - 11.2% | | | | |
| | 195 | | | ANSYS, Inc. ● | | | 13,111 | |
| | 210 | | | Autodesk, Inc. ● | | | 7,430 | |
| | 229 | | | Citrix Systems, Inc. ● | | | 15,026 | |
| | 140 | | | Factset Research Systems, Inc. | | | 12,307 | |
The accompanying notes are an integral part of these financial statements.
| Hartford MidCap HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 99.9% - (continued) | | | | |
| | | | | Software and Services - 11.2% - (continued) | | | | |
| | 212 | | | FleetCor Technologies, Inc. ● | | $ | 11,377 | |
| | 165 | | | Gartner, Inc. Class A ● | | | 7,584 | |
| | 2,117 | | | Genpact Ltd. | | | 32,812 | |
| | 39 | | | LinkedIn Corp. Class A ● | | | 4,493 | |
| | 368 | | | Micros Systems ● | | | 15,637 | |
| | 811 | | | Vantiv, Inc. ● | | | 16,566 | |
| | 267 | | | VeriSign, Inc. ● | | | 10,349 | |
| | 139 | | | WEX, Inc. | | | 10,448 | |
| | | | | | | | 157,140 | |
| | | | | Technology Hardware and Equipment - 3.3% | | | | |
| | 226 | | | Amphenol Corp. Class A | | | 14,609 | |
| | 66 | | | FEI Co. | | | 3,640 | |
| | 502 | | | National Instruments Corp. | | | 12,949 | |
| | 247 | | | Trimble Navigation Ltd. ● | | | 14,769 | |
| | | | | | | | 45,967 | |
| | | | | Transportation - 3.2% | | | | |
| | 355 | | | C.H. Robinson Worldwide, Inc. | | | 22,457 | |
| | 364 | | | Expeditors International of Washington, Inc. | | | 14,405 | |
| | 122 | | | J.B. Hunt Transport Services, Inc. | | | 7,265 | |
| | | | | | | | 44,127 | |
| | | | | Utilities - 2.4% | | | | |
| | 174 | | | Northeast Utilities | | | 6,792 | |
| | 595 | | | UGI Corp. | | | 19,451 | |
| | 210 | | | Wisconsin Energy Corp. | | | 7,753 | |
| | | | | | | | 33,996 | |
| | | | | Total common stocks | | | | |
| | | | | (cost $1,234,111) | | $ | 1,394,926 | |
| | | | | | | | | |
| | | | | Total long-term investments | | | | |
| | | | | (cost $1,234,111) | | $ | 1,394,926 | |
| | | | | | | | | |
| SHORT-TERM INVESTMENTS - 0.2% | | | | |
| Repurchase Agreements - 0.2% | | | | |
| | | | | Bank of America Merrill Lynch TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $64,
collateralized by FHLMC 3.00%, 2042,
FNMA 4.00%, 2042, value of $65) | | | | |
| $ | 64 | | | 0.19%, 12/31/2012 | | $ | 64 | |
| | | | | Bank of Montreal TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $453, collateralized by FHLMC
2.50% - 5.50%, 2019 - 2042, FNMA 0.76%
- 6.11%, 2016 - 2042, GNMA 3.50%,
2042, value of $462) | | | | |
| | 453 | | | 0.23%, 12/31/2012 | | | 453 | |
| | | | | Barclays Capital TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $142, collateralized by U.S.
Treasury Note 2.00% - 2.13%, 2016, value
of $145) | | | | |
| | 142 | | | 0.20%, 12/31/2012 | | | 142 | |
| | | | | Citigroup Global Markets, Inc. TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $893,
collateralized by U.S. Treasury Note 1.88%
- 4.13%, 2015 - 2018, value of $911) | | | | |
| | 893 | | | 0.17%, 12/31/2012 | | | 893 | |
| | | | | Deutsche Bank Securities TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $18,
collateralized by FNMA 3.00%, 2032,
value of $19) | | | | |
| | 18 | | | 0.25%, 12/31/2012 | | | 18 | |
| | | | | RBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $628, collateralized by U.S.
Treasury Note 0.50% - 2.75%, 2013 - 2019,
value of $641) | | | | |
| | 628 | | | 0.20%, 12/31/2012 | | | 628 | |
| | | | | TD Securities TriParty Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$550, collateralized by FHLMC 3.50% -
6.00%, 2036 - 2042, FNMA 0.22% -
5.50%, 2013 - 2042, value of $561) | | | | |
| | 550 | | | 0.21%, 12/31/2012 | | | 550 | |
| | | | | UBS Securities, Inc. Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$11, collateralized by U.S. Treasury Bill
0.75%, 2013, value of $11) | | | | |
| | 11 | | | 0.17%, 12/31/2012 | | | 11 | |
| | | | | UBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $37, collateralized by FNMA
2.50%, 2027, GNMA 3.00%, 2042, value
of $38) | | | | |
| | 37 | | | 0.25%, 12/31/2012 | | | 37 | |
| | | | | | | | 2,796 | |
| | | | | Total short-term investments | | | | |
| | | | | (cost $2,796) | | $ | 2,796 | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $1,236,907) ▲ | | | 100.1 | % | | $ | 1,397,722 | |
| | | | | Other assets and liabilities | | | (0.1 | )% | | | (1,504 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 1,396,218 | |
The accompanying notes are an integral part of these financial statements.
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $1,246,737 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| | Unrealized Appreciation | | $ | 207,890 | |
| | Unrealized Depreciation | | | (56,905 | ) |
| | Net Unrealized Appreciation | | $ | 150,985 | |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
| GLOSSARY: (abbreviations used in preceding Schedule of Investments) |
| |
| Other Abbreviations: |
| ADR | American Depositary Receipt |
| FHLMC | Federal Home Loan Mortgage Corp. |
| FNMA | Federal National Mortgage Association |
| GNMA | Government National Mortgage Association |
The accompanying notes are an integral part of these financial statements.
| Hartford MidCap HLS Fund |
| Investment Valuation Hierarchy Level Summary |
| December 31, 2012 |
| (000’s Omitted) |
| | | Total | | | Level 1 ♦ | | | Level 2 ♦ | | | Level 3 | |
| Assets: | | | | | | | | | | | | | | | | |
| Common Stocks ‡ | | $ | 1,394,926 | | | $ | 1,394,926 | | | $ | — | | | $ | — | |
| Short-Term Investments | | | 2,796 | | | | — | | | | 2,796 | | | | — | |
| Total | | $ | 1,397,722 | | | $ | 1,394,926 | | | $ | 2,796 | | | $ | — | |
| ♦ | For the year ended December 31, 2012, there were no transfers between Level 1 and Level 2. |
| ‡ | The Fund has all or primarily all of the equity securities categorized in a particular level. Refer to the Schedule of Investments for further industry breakout. |
The accompanying notes are an integral part of these financial statements.
| Hartford MidCap HLS Fund |
| Statement of Assets and Liabilities |
| December 31, 2012 |
| (000’s Omitted) |
| Assets: | | | | |
| Investments in securities, at market value (cost $1,236,907) | | $ | 1,397,722 | |
| Cash | | | 6 | |
| Receivables: | | | | |
| Investment securities sold | | | 1,481 | |
| Fund shares sold | | | 639 | |
| Dividends and interest | | | 360 | |
| Total assets | | | 1,400,208 | |
| Liabilities: | | | | |
| Payables: | | | | |
| Investment securities purchased | | | 1,796 | |
| Fund shares redeemed | | | 1,966 | |
| Investment management fees | | | 183 | |
| Distribution fees | | | 3 | |
| Accrued expenses | | | 42 | |
| Total liabilities | | | 3,990 | |
| Net assets | | $ | 1,396,218 | |
| Summary of Net Assets: | | | | |
| Capital stock and paid-in-capital | | $ | 1,199,691 | |
| Undistributed net investment income | | | 260 | |
| Accumulated net realized gain | | | 35,452 | |
| Unrealized appreciation of investments | | | 160,815 | |
| Net assets | | $ | 1,396,218 | |
| Shares authorized | | | 2,400,000 | |
| Par value | | $ | 0.001 | |
| Class IA: Net asset value per share | | $ | 28.16 | |
| Shares outstanding | | | 47,069 | |
| Net assets | | $ | 1,325,221 | |
| Class IB: Net asset value per share | | $ | 27.95 | |
| Shares outstanding | | | 2,540 | |
| Net assets | | $ | 70,997 | |
The accompanying notes are an integral part of these financial statements.
| Hartford MidCap HLS Fund |
| Statement of Operations |
| For the Year Ended December 31, 2012 |
| (000’s Omitted) |
| Investment Income: | | | | |
| Dividends | | $ | 21,465 | |
| Interest | | | 12 | |
| Less: Foreign tax withheld | | | (4 | ) |
| Total investment income, net | | | 21,473 | |
| | | | | |
| Expenses: | | | | |
| Investment management fees | | | 9,554 | |
| Transfer agent fees | | | 5 | |
| Distribution fees - Class IB | | | 186 | |
| Custodian fees | | | 11 | |
| Accounting services fees | | | 139 | |
| Board of Directors' fees | | | 38 | |
| Audit fees | | | 16 | |
| Other expenses | | | 142 | |
| Total expenses (before fees paid indirectly) | | | 10,091 | |
| Commission recapture | | | (72 | ) |
| Total fees paid indirectly | | | (72 | ) |
| Total expenses, net | | | 10,019 | |
| Net Investment Income | | | 11,454 | |
| | | | | |
| Net Realized Gain on Investments and Foreign Currency Transactions: | | | | |
| Net realized gain on investments | | | 115,870 | |
| Net realized loss on foreign currency contracts | | | (14 | ) |
| Net realized gain on other foreign currency transactions | | | 44 | |
| Net Realized Gain on Investments and Foreign Currency Transactions | | | 115,900 | |
| | | | | |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions: | | | | |
| Net unrealized appreciation of investments | | | 113,137 | |
| Net unrealized appreciation on translation of other assets and liabilities in foreign currencies | | | — | |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions | | | 113,137 | |
| Net Gain on Investments and Foreign Currency Transactions | | | 229,037 | |
| Net Increase in Net Assets Resulting from Operations | | $ | 240,491 | |
The accompanying notes are an integral part of these financial statements.
| Hartford MidCap HLS Fund |
| Statement of Changes in Net Assets |
| |
| (000’s Omitted) |
| | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| Operations: | | | | | | | | |
| Net investment income | | $ | 11,454 | | | $ | 7,763 | |
| Net realized gain on investments and foreign currency transactions | | | 115,900 | | | | 236,884 | |
| Net unrealized appreciation (depreciation) of investments | | | 113,137 | | | | (382,149 | ) |
| Net Increase (Decrease) in Net Assets Resulting from Operations | | | 240,491 | | | | (137,502 | ) |
| Distributions to Shareholders: | | �� | | | | | | |
| From net investment income | | | | | | | | |
| Class IA | | | (10,752 | ) | | | (10,115 | ) |
| Class IB | | | (400 | ) | | | (147 | ) |
| Total distributions | | | (11,152 | ) | | | (10,262 | ) |
| Capital Share Transactions: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 143,048 | | | | 178,223 | |
| Issued on reinvestment of distributions | | | 10,752 | | | | 10,115 | |
| Redeemed | | | (257,552 | ) | | | (554,640 | ) |
| Total capital share transactions | | | (103,752 | ) | | | (366,302 | ) |
| Class IB | | | | | | | | |
| Sold | | | 15,835 | | | | 16,499 | |
| Issued on reinvestment of distributions | | | 400 | | | | 147 | |
| Redeemed | | | (28,049 | ) | | | (66,782 | ) |
| Total capital share transactions | | | (11,814 | ) | | | (50,136 | ) |
| Net decrease from capital share transactions | | | (115,566 | ) | | | (416,438 | ) |
| Net Increase (Decrease) in Net Assets | | | 113,773 | | | | (564,202 | ) |
| Net Assets: | | | | | | | | |
| Beginning of period | | | 1,282,445 | | | | 1,846,647 | |
| End of period | | $ | 1,396,218 | | | $ | 1,282,445 | |
| Undistributed (distribution in excess of) | | | | | | | | |
| net investment income | | $ | 260 | | | $ | 896 | |
| Shares: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 5,211 | | | | 6,643 | |
| Issued on reinvestment of distributions | | | 384 | | | | 433 | |
| Redeemed | | | (9,535 | ) | | | (22,270 | ) |
| Total share activity | | | (3,940 | ) | | | (15,194 | ) |
| Class IB | | | | | | | | |
| Sold | | | 600 | | | | 621 | |
| Issued on reinvestment of distributions | | | 14 | | | | 6 | |
| Redeemed | | | (1,049 | ) | | | (2,487 | ) |
| Total share activity | | | (435 | ) | | | (1,860 | ) |
The accompanying notes are an integral part of these financial statements.
| Hartford MidCap HLS Fund |
| Notes to Financial Statements |
| December 31, 2012 |
| (000’s Omitted) |
Hartford MidCap HLS Fund (the “Fund”) serves as an underlying investment option for certain variable annuity and variable life insurance separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates and certain qualified retirement plans. The Fund may also serve as an underlying investment option for certain variable annuity and variable life separate accounts of other insurance companies. Owners of variable annuity contracts and policyholders of variable life insurance contracts may choose the funds permitted in the variable insurance contract prospectus. In addition, participants in certain qualified retirement plans may choose the Fund if permitted by their plans.
Hartford Series Fund, Inc. (the “Company”) is an open-end registered management investment company comprised of thirty portfolios. Financial Statements for the Fund, a series of the Company, are included in this report.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund is a diversified open-end management investment company.
The Fund is divided into Class IA and Class IB shares. Each class is offered at the per share net asset value (“NAV”) without a sales charge and is subject to the same expenses, except that the Class IB shares are subject to distribution and service fees charged pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act.
| 2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Fund in the preparation of its financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| a) | Determination of Net Asset Value – The NAV of each class of the Fund’s shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| b) | Investment Valuation and Fair Value Measurements – For purposes of calculating the NAV, portfolio investments and other assets held by the Fund's portfolio for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of last reported sales prices or official close price. If no sales are reported, market value is based on quotes obtained from a quotation reporting system, established market makers, or independent pricing services. If market prices are not readily available or are deemed unreliable, the Fund will use the fair value of the investment as determined in good faith under policies and procedures established by and under the supervision of the Company’s Board of Directors. Market quotes are considered not readily available where there is an absence of current or reliable market-based data (e.g., trade information or indicative market quotes), including where events occur after the close of the relevant market, but prior to the NYSE Close that materially affect the values of the Fund’s portfolio investments or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the investments trade do not open for trading for the entire day and no other market prices are available. In addition, prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close. Investments that are primarily traded on foreign markets may trade on days that are not business days of the Fund. The |
value of the foreign investments in which the Fund invests may change on days when a shareholder will not be able to purchase or redeem shares of the Fund. Fair value pricing is subjective in nature and the use of fair value pricing by the Fund may cause the NAV of its shares to differ significantly from the NAV that would have been calculated using market prices at the close of the exchange on which a portfolio investment is primarily traded. There can be no assurance that the Fund could obtain the fair market value assigned to an investment if the Fund were to sell the investment at approximately the time at which the Fund determines its NAV.
Investments valued in currencies other than U.S. dollars are converted to U.S. dollars using exchange rates obtained from independent pricing services for calculation of the NAV. As a result, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of investments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the NYSE is closed and the market value may change on days when an investor is not able to purchase, redeem or exchange shares of the Fund.
Foreign currency contracts represent agreements to exchange currencies on specific future dates at predetermined rates. Foreign currency contracts are valued using foreign currency exchange rates and forward rates as provided by an independent pricing service on the Valuation Date.
Financial instruments for which prices are not available from an independent pricing service may be valued using market quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with procedures established by the Company’s Board of Directors.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| · | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange traded funds, rights and warrants. |
| · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 may include debt investments that are traded less frequently than exchange traded instruments and which are valued using independent pricing services; foreign equities, which are principally traded on certain foreign markets and are adjusted daily pursuant to a fair value pricing service in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close; and short-term investments, which are valued at amortized cost. |
| · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price. |
The Board of Directors of the Company generally reviews and approves the “Procedures for Valuation of Portfolio Securities” on an annual basis. These procedures define how investments are to be valued, including
| Hartford MidCap HLS Fund |
Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
the formation and activities of a Valuation Committee. The Valuation Committee is responsible for determining in good faith the fair value of investments when the value cannot be obtained from primary pricing services or alternative sources or if the valuation of an investment as provided by the primary pricing service or alternative source is believed not to reflect the investment’s fair value as of the Valuation Date. Members of the Valuation Committee include the Fund’s Treasurer or designee, a Vice President of the Fund with legal expertise or designee, and a Vice President of the investment manager or designee. In addition, the Fund’s Chief Compliance Officer shall designate a member of the compliance group to attend Valuation Committee meetings as a non-voting resource, to monitor for and provide guidance with respect to compliance with these procedures. Two members of the Valuation Committee or their designees, representing different departments, shall constitute a quorum for purposes of permitting the Valuation Committee to take action. The Valuation Committee will consider all relevant factors in determining an investment’s fair value, and may seek the advice of the Fund’s sub-adviser, knowledgeable brokers, and legal counsel in making such determination. The Valuation Committee reports to the Audit Committee of the Company’s Board of Directors. The Audit Committee receives quarterly written reports which include details of all fair-valued investments, including the reason for the fair valuation, and an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such investments (the “look-back” test). The Board of Directors then must consider for ratification all of the fair value determinations made during the previous quarter.
Valuation levels are not necessarily indicative of the risk associated with investing in such investments. Individual investments within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
For additional information, refer to the Investment Valuation Hierarchy Level Summary.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period.
| c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Investments purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses are determined on the basis of identified cost. |
Dividend income from domestic securities is accrued on the ex-dividend date. In general, dividend income from foreign securities is recorded on the ex-date; however, dividend notifications in certain foreign jurisdictions may not be available in a timely manner and as a result, the Fund will record the dividend as soon as the relevant details (i.e., rate per share, payment date, shareholders of record, etc.) are publicly available. Interest income, including amortization of premium and accretion of discounts, is accrued on a daily basis.
| d) | Foreign Currency Transactions – Assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investments, income, and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. |
The Fund does not isolate that portion of portfolio investment valuation resulting from fluctuations in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of investments held. Exchange rate fluctuations are included with the net realized and unrealized gain or loss on investments in the accompanying financial statements.
Net realized foreign exchange gains or losses arise from sales of foreign currencies and the difference between asset and liability amounts initially stated in foreign currencies and the U.S. dollar value of the amounts actually received or paid.
Net unrealized foreign exchange gains or losses arise from changes in the value of other assets and liabilities at the end of the reporting period, resulting from changes in the exchange rates.
| e) | Joint Trading Account – The Fund may invest cash balances into a joint trading account that may be invested in one or more repurchase agreements. |
| f) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Fund’s shares are executed in accordance with the investment instructions of the contract holders and plan participants. The NAV of the Fund’s shares is determined as of the close of business on each business day of the Exchange. The NAV is determined separately for each class of shares of the Fund by dividing the Fund’s net assets attributable to that class by the number of shares of the class outstanding. Each class of shares offered by the Fund has equal rights as to assets and voting privileges (except that shareholders of a class have exclusive voting rights regarding any matter relating solely to that class of shares). Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets of the class. Realized and unrealized capital gains and losses are allocated daily based on the relative net assets of each class of shares of the Fund. |
Orders for the purchase of the Fund’s shares received prior to the close of the Exchange on any day the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Fund. The policy of the Fund is to pay dividends from net investment income and realized capital gains, if any, at least once a year.
Distributions from net investment income, net realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These differences may include but are not limited to losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to Passive Foreign Investment Companies (“PFICs”), Real Estate Investment Trusts (“REITs”), Regulated Investment Companies (“RICs”), certain derivatives and partnerships. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Fund’s capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| 3. | Securities and Other Investments: |
| a) | Repurchase Agreements – A repurchase agreement is an agreement by which a counterparty agrees to sell an investment and agrees to repurchase the investment sold from the buyer at a mutually agreed upon time and price. At the time the Fund enters into a repurchase agreement, the value of the underlying collateral, including accrued interest, will be equal to or exceed the value of the repurchase agreement. Repurchase agreements expose the Fund to counterparty risk - that is, the risk that the counterparty will not fulfill its obligations. To minimize counterparty risk, the investments that serve to collateralize the repurchase agreement are held by the Fund’s custodian in book entry or physical form in the custodial account of the Fund or in a third party custodial account. Repurchase agreements are valued at cost plus accrued interest, which approximates fair value. The Fund, as shown on the Schedule of Investments, had outstanding repurchase agreements as of December 31, 2012. |
| 4. | Financial Derivative Instruments: |
The following disclosures contain information on how and why the Fund uses derivative instruments, the credit-risk-related contingent features in certain derivative instruments, and how derivative instruments affect the Fund’s financial position and results of operations. The location and fair value amounts of these instruments on the Statement of Assets
| Hartford MidCap HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
and Liabilities and the realized gains and losses and changes in unrealized gains and losses on the Statement of Operations, each categorized by type of derivative contract, are included in the following Additional Derivative Instrument Information footnote. The derivative instruments outstanding as of year-end are disclosed in the notes to or within the Schedule of Investments for purchased options, if applicable. The amounts of realized gains and losses and changes in unrealized gains and losses on derivative instruments during the year are disclosed in the Statement of Operations.
| a) | Foreign Currency Contracts – The Fund may enter into foreign currency contracts that obligate the Fund to purchase or sell currencies at specified future dates. Foreign currency contracts are used to hedge the currency exposure associated with some or all of the Fund’s investments and/or as part of an investment strategy. Foreign currency contracts are marked to market daily and the change in value is recorded by the Fund as an unrealized gain or loss. The Fund will record a realized gain or loss when the foreign currency contract is settled. |
Foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. In addition, risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of the contracts and from unanticipated movements in the value of the foreign currencies relative to the U.S. dollar. The Fund had no outstanding foreign currency contracts as of December 31, 2012.
| b) | Additional Derivative Instrument Information: |
The volume of derivative activity was minimal during the year ended December 31, 2012.
| The Effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2012: |
| |
| | | Risk Exposure Category | |
| | | Interest
Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Realized Loss on Derivatives Recognized as a Result of Operations: |
| Net realized loss on foreign currency contracts | | $ | — | | | $ | (14 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (14 | ) |
| Total | | $ | — | | | $ | (14 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (14 | ) |
| a) | Counterparty Risk – The Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will default. |
| b) | Market Risks – If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities, such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund. The market values of equity securities, such as common stocks and preferred stocks, or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The market value of equity securities may also decline due to factors which affect a particular industry or industries, such as labor shortages |
or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities.
| a) | Federal Income Taxes – For federal income tax purposes, the Fund intends to continue to qualify as a RIC under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders and otherwise complying with the requirements of the IRC. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains prior to the next fiscal year-end. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. |
| c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Fund for the periods indicated is as follows (as adjusted for dividends payable, if applicable): |
| | | For the Year Ended
December 31, 2012 | | | For the Year Ended
December 31, 2011 | |
| Ordinary Income | | $ | 11,152 | | | $ | 10,262 | |
As of December 31, 2012, the Fund’s components of distributable earnings (deficit) on a tax basis were as follows:
| | | Amount | |
| Undistributed Ordinary Income | | $ | 260 | |
| Undistributed Long-Term Capital Gain | | | 45,282 | |
| Unrealized Appreciation* | | | 150,985 | |
| Total Accumulated Earnings | | $ | 196,527 | |
| * | Differences between book-basis and tax-basis unrealized appreciation (depreciation) may be attributable to the losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. |
| Hartford MidCap HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| d) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as foreign currency, PFICs, expiration or utilization of capital loss carryforwards or net operating losses. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Fund’s distributions may be shown in the accompanying Statement of Changes in Net Assets as from undistributed net investment income, from accumulated net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Fund recorded reclassifications to increase (decrease) the accounts listed below: |
| | | Amount | |
| Undistributed Net Investment Income | | $ | (938 | ) |
| Accumulated Net Realized Gain (Loss) | | | 2,401 | |
| Capital Stock and Paid-in-Capital | | | (1,463 | ) |
| e) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation. |
The Fund had no capital loss carryforward for U.S. federal income tax purposes as of December 31, 2012.
During the year ended December 31, 2012, the Fund utilized $59,008 of prior year capital loss carryforwards.
| f) | Accounting for Uncertainty in Income Taxes – The Fund has adopted financial reporting rules that require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Fund does not have an examination in progress. |
The Fund has reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules had no effect on the Fund’s financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2012. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Fund’s investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Fund pursuant to an Investment Management Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Fund’s investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees payable under, the Fund’s investment management agreements; or (ii) the day-to-day management of the Fund. The investment manager has overall investment supervisory responsibility for the Fund. In addition, the investment manager provides administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. The investment manager has contracted with Wellington Management Company, LLP (“Wellington Management”) under a |
sub-advisory agreement for the provision of day-to-day investment management services to the Fund in accordance with the Fund’s investment objective and policies. The Fund pays a fee to the investment manager, a portion of which may be used to compensate Wellington Management.
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered as of December 31, 2012; the rates are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee | |
| On first $250 million | | | 0.7750 | % |
| On next $250 million | | | 0.7250 | % |
| On next $500 million | | | 0.6750 | % |
| On next $4 billion | | | 0.6250 | % |
| On next $5 billion | | | 0.6225 | % |
| Over $10 billion | | | 0.6200 | % |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Fund. HLIC provided accounting services for the Fund for the fiscal year ended December 31, 2012. The replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Fund or the fees charged to the Fund for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Fund, HFMC provides accounting services to the Fund and receives monthly compensation based on the Fund’s average daily net assets at the rates set forth below. The Fund’s accounting services fees are accrued daily and paid monthly. |
| Average Daily Net Assets | | Annual Fee | |
| All assets | | | 0.010 | % |
| c) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund and allocated to classes within a Fund in proportion to the average daily net assets of the Fund and each class, except where allocation of certain expenses is more fairly made directly to the Fund or to specific classes within a Fund. |
| d) | Fees Paid Indirectly – The Company, on behalf of the Fund, has entered into agreements with State Street Global Markets, LLC and Russell Implementation Services, Inc. to partially recapture non-discounted trade commissions. Such rebates are used to pay a portion of the Fund’s expenses. In addition, the Fund’s custodian banks have agreed to reduce its fees when the Fund maintains cash on deposit in a non-interest-bearing custody account. For the year ended December 31, 2012, these amounts, if any, are included in the Statement of Operations. |
The ratio of expenses to average net assets in the accompanying financial highlights excludes the reduction in expenses related to fees paid indirectly. The annualized expense ratio after waivers for the period listed below reflecting the reduction for fees paid indirectly is as follows:
| | | Year Ended
December 31, 2012 | |
| Class IA | | | 0.71 | % |
| Class IB | | | 0.96 | |
| e) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Fund's principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD with HIFSCO did not result in any changes to the distribution services provided to the Fund. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Fund, has adopted a Distribution |
| Hartford MidCap HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, 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, subject to the review and approval of the Company’s Board of Directors.
The Distribution Plan provides that the Fund may pay annually up to 0.25% of the average daily net assets of the Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, the Fund is authorized to make payments monthly to the Distributor that may be used to pay or compensate 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. These fees are accrued daily and paid monthly.
| f) | Other Related Party Transactions – Certain officers of the Fund are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Fund’s Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Fund was in the amount of $2. Hartford Administrative Services Company (“HASCO”), an indirect wholly owned subsidiary of The Hartford, provides transfer agent services to the Fund. The amount paid to HASCO can be found in the Statement of Operations. These fees are accrued daily and paid monthly. |
| g) | Payment from Affiliate – In July of 2007, The Hartford entered into a settlement with the Attorneys General of the states of New York, Connecticut and Illinois relating to market timing and the company's individual variable annuity contracts in which certain payments would be made directly to the variable annuity contract holders. The distribution plan provided that unclaimed money from the settlement would be distributed to certain HLS Funds that are investment options through a Hartford individual variable annuity contract. The unclaimed money was distributed to the Fund on September 18, 2009. |
The total return in the accompanying financial highlights includes a payment from an affiliate. Had the payment from the affiliate been excluded, the impact and total return for the period listed below would have been as follows:
| | | For the Year Ended December 31, 2009 | |
| | | Class IA | | | Class IB | |
| Impact from Payment from Affiliate for Attorneys General Settlement | | | 0.03 | % | | | 0.03 | % |
| Total Return Excluding Payment from Affiliate | | | 30.92 | % | | | 30.59 | % |
| 8. | Investment Transactions: |
For the year ended December 31, 2012, the Fund's aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
| | | Amount | |
| Cost of Purchases Excluding U.S. Government Obligations | | $ | 698,630 | |
| Sales Proceeds Excluding U.S. Government Obligations | | | 803,735 | |
The Fund is one of several Hartford funds that participate in a $500 million committed revolving line of credit facility. The facility is to be used for temporary or emergency purposes. Under the arrangement, the funds are required to own securities having a market value in excess of 300% of the total bank borrowings. The interest rate on borrowings varies depending on the nature of the loan. The facility also requires a fee to be paid based on the amount of the commitment. This commitment fee is allocated to all of the funds participating in the line of credit based on the average net assets of the funds. During the year ended December 31, 2012, the Fund did not have any borrowings under this facility.
| 10. | Industry Classifications: |
Other than the industry classifications “Other Investment Pools and Funds” and “Exchange Traded Funds,” equity industry classifications used in this report are the Global Industry Classification Standard, which was developed by and is the exclusive property and service mark of MSCI, Inc. and Standard & Poor’s.
Under the Company’s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
| 12. | Recent Accounting Pronouncement: |
Disclosures about Offsetting Assets and Liabilities - In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The objective of the ASU is to enhance current disclosure requirements on offsetting of certain assets and liabilities and to enable financial statement users to compare financial statements prepared under U.S. GAAP and International Financial Reporting Standards.
Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
| Hartford MidCap HLS Fund |
| Financial Highlights |
| - Selected Per-Share Data (A) - |
| Class | | Net Asset Value at
Beginning of
Period | | | Net Investment
Income (Loss) | | | Net Realized and
Unrealized Gain
(Loss) on
Investments | | | Total from
Investment
Operations | | | Dividends from Net
Investment Income | | | Distributions from
Realized Capital
Gains | | | Distributions from
Capital | | | Total Distributions | | | Net Asset Value at
End of Period | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2012 | | | | | | | | | | | | | | | | | | | | | | | | | |
| IA | | $ | 23.77 | | | $ | 0.24 | | | $ | 4.38 | | | $ | 4.62 | | | $ | (0.23 | ) | | $ | – | | | $ | – | | | $ | (0.23 | ) | | $ | 28.16 | |
| IB | | | 23.59 | | | | 0.17 | | | | 4.35 | | | | 4.52 | | | | (0.16 | ) | | | – | | | | – | | | | (0.16 | ) | | | 27.95 | |
| For the Year Ended December 31, 2011 | | | | | | | | | | | | | | | | | | | | | | | | | |
| IA | | | 26.01 | | | | 0.15 | | | | (2.20 | ) | | | (2.05 | ) | | | (0.19 | ) | | | – | | | | – | | | | (0.19 | ) | | | 23.77 | |
| IB | | | 25.74 | | | | 0.07 | | | | (2.17 | ) | | | (2.10 | ) | | | (0.05 | ) | | | – | | | | – | | | | (0.05 | ) | | | 23.59 | |
| For the Year Ended December 31, 2010 | | | | | | | | | | | | | | | | | | | | | | | | | |
| IA | | | 21.12 | | | | 0.10 | | | | 4.85 | | | | 4.95 | | | | (0.06 | ) | | | – | | | | – | | | | (0.06 | ) | | | 26.01 | |
| IB | | | 20.92 | | | | 0.04 | | | | 4.79 | | | | 4.83 | | | | (0.01 | ) | | | – | | | | – | | | | (0.01 | ) | | | 25.74 | |
| For the Year Ended December 31, 2009 | | | | | | | | | | | | | | | | | | | | | | | | | |
| IA | | | 16.21 | | | | 0.12 | (E) | | | 4.89 | | | | 5.01 | | | | (0.10 | ) | | | – | | | | – | | | | (0.10 | ) | | | 21.12 | |
| IB | | | 16.06 | | | | 0.05 | (E) | | | 4.86 | | | | 4.91 | | | | (0.05 | ) | | | – | | | | – | | | | (0.05 | ) | | | 20.92 | |
| For the Year Ended December 31, 2008 | | | | | | | | | | | | | | | | | | | | | | | | | |
| IA | | | 26.34 | | | | 0.12 | | | | (9.03 | ) | | | (8.91 | ) | | | (0.12 | ) | | | (1.10 | ) | | | – | | | | (1.22 | ) | | | 16.21 | |
| IB | | | 26.08 | | | | 0.06 | | | | (8.92 | ) | | | (8.86 | ) | | | (0.06 | ) | | | (1.10 | ) | | | – | | | | (1.16 | ) | | | 16.06 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include 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 would lower the Fund's performance. |
| (C) | Ratios do not reflect reductions for fees paid indirectly. Please see Fees Paid Indirectly in the Notes to Financial Statements. |
| (D) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
| (E) | The impact of Payment from Affiliate per share was $0.01. |
| (F) | Total return without the inclusion of the Payment from (to) Affiliate can be found in Expenses in the accompanying Notes to Financial Statements. |
| - Ratios and Supplemental Data - |
| Total Return(B) | | | Net Assets at End of Period | | | Ratio of Expenses to Average Net Assets
Before Waivers(C) | | | Ratio of Expenses to Average Net Assets
After Waivers(C) | | | Ratio of Net Investment
Income (Loss) to Average Net
Assets | | | Portfolio
Turnover
Rate(D) | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 19.44 | % | | $ | 1,325,221 | | | | 0.71 | % | | | 0.71 | % | | | 0.84 | % | | | 51 | % |
| | 19.14 | | | | 70,997 | | | | 0.96 | | | | 0.96 | | | | 0.59 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (7.92 | ) | | | 1,212,257 | | | | 0.71 | | | | 0.71 | | | | 0.48 | | | | 69 | |
| | (8.16 | ) | | | 70,188 | | | | 0.96 | | | | 0.96 | | | | 0.18 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 23.45 | | | | 1,722,182 | | | | 0.70 | | | | 0.70 | | | | 0.44 | | | | 52 | |
| | 23.15 | | | | 124,465 | | | | 0.95 | | | | 0.95 | | | | 0.12 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 30.96 | (F) | | | 1,490,852 | | | | 0.72 | | | | 0.72 | | | | 0.48 | | | | 82 | |
| | 30.62 | (F) | | | 173,205 | | | | 0.97 | | | | 0.97 | | | | 0.23 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (35.32 | ) | | | 1,552,741 | | | | 0.69 | | | | 0.69 | | | | 0.51 | | | | 92 | |
| | (35.49 | ) | | | 169,328 | | | | 0.94 | | | | 0.94 | | | | 0.26 | | | | – | |
| Report of Independent Registered Public Accounting Firm |
| The Board of Directors and Shareholders of |
| Hartford Series Fund, Inc. |
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Hartford MidCap HLS Fund (one of the portfolios constituting Hartford Series Fund, Inc. (the Fund)) as of December 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Hartford MidCap HLS Fund (one of the portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
| | |
Minneapolis, MN February 15, 2013 | |
| Hartford MidCap HLS Fund |
| Directors and Officers (Unaudited) |
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Fund pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Fund. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Fund’s statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Fund pays to The Hartford a portion of the Chief Compliance Officer’s compensation, but does not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
| Hartford MidCap HLS Fund |
| Directors and Officers (Unaudited) – (continued) |
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010 (4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and a record of how the Fund voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
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QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
| Hartford MidCap HLS Fund |
| Expense Example (Unaudited) |
Your Fund's Expenses
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Actual return | | | Hypothetical (5% return before expenses) | | | | | | | | | | |
| | | Beginning
Account Value
June 30, 2012 | | | Ending Account Value
December 31, 2012 | | | Expenses paid during the period
June 30, 2012
through
December 31, 2012 | | | Beginning
Account Value
June 30, 2012 | | | Ending Account Value
December 31, 2012 | | | Expenses paid during the period
June 30, 2012
through
December 31, 2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2
year | | | Days
in the
full
year | |
| Class IA | | $ | 1,000.00 | | | $ | 1,007.21 | | | $ | 3.58 | | | $ | 1,000.00 | | | $ | 1,021.56 | | | $ | 3.61 | | | | 0.71 | % | | | 184 | | | | 366 | |
| Class IB | | $ | 1,000.00 | | | $ | 1,007.08 | | | $ | 4.84 | | | $ | 1,000.00 | | | $ | 1,020.31 | | | $ | 4.88 | | | | 0.96 | % | | | 184 | | | | 366 | |
| Hartford MidCap HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) |
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory and sub-advisory agreements. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for Hartford MidCap HLS Fund (the “Fund”) with HL Investment Advisors, LLC (“HL Advisors”) and the continuation of the investment sub-advisory agreement between HL Advisors and the Fund’s sub-adviser, Wellington Management Company, LLP (the “Sub-adviser,” and together with HL Advisors, the “Advisers”) (collectively, the “Agreements”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from the Advisers to questions posed to them on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreements at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by the Advisers and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreements.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreements with respect to the Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Fund’s contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Fund’s management fees, sub-advisory fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement.
In determining to continue the Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreements. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreements is provided below.
Nature, Extent, and Quality of Services Provided by the Advisers
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Fund by the Advisers. The Board considered, among other things, the terms of the Agreements and the range of services provided by the Advisers. The Board considered the Advisers’ professional personnel who provide services to the Fund, including each Adviser’s ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered each Adviser’s reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to the Fund. In addition, the Board considered the quality of each Adviser’s communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning each Adviser’s regulatory and compliance environment. In this regard, the Board requested and reviewed information on each Adviser’s compliance policies and procedures, compliance history, and a report from the Fund’s Chief Compliance Officer on each Adviser’s compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. The Board also noted the Advisers’ support of the Fund’s compliance control structure, particularly the resources devoted by the Advisers in support of the Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act.
| Hartford MidCap HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
With respect to HL Advisors, the Board noted that under the Agreements, HL Advisors is responsible for the management of the Fund, including overseeing fund operations and service providers, as well as investment advisory services in connection with selecting, monitoring and supervising the Sub-adviser. The Board considered HL Advisors’ ongoing monitoring of people, process and performance, including its quarterly reviews of each of the Hartford HLS Funds, semi-annual meetings with the leaders of each Fund’s portfolio management team, and oversight of the Funds’ approximately 40 portfolio managers. The Board recognized that HL Advisors has demonstrated a record of making changes to the management and/or strategies of the Funds when warranted. The Board considered HL Advisors’ oversight of the Sub-adviser’s investment approach and results, process for monitoring best execution of portfolio trades by the Sub-adviser, and approach to risk management with respect to the Fund and the service providers to the Fund. The Board also considered HL Advisors’ oversight of compliance with the Fund’s objective and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led to an increase in the scope of HL Advisors’ services in this regard. In addition, the Board considered HL Advisors’ ongoing commitment to review and rationalize the Hartford fund family’s product line-up and the expenses that HL Advisors had incurred in connection with fund combinations in recent years. The Board considered that HL Advisors or its affiliates are responsible for providing the Fund’s officers. The Board also noted that Hartford Life Insurance Company (“HLIC”) provides administrative services to the Fund. The Board considered its experiences with HL Advisors and HLIC with respect to each of these services.
With respect to the Sub-adviser, who provides day-to-day portfolio management services, the Board considered the quality of the Fund’s portfolio managers, the Sub-adviser’s other investment personnel, its investment philosophy and process, investment research capabilities and resources, performance record, trade execution capabilities and experience. The Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers, and the Sub-adviser’s method for compensating the portfolio managers. The Board noted recent changes to the Fund’s portfolio management team.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Fund by HL Advisors and the Sub-adviser.
Performance of the Fund and the Advisers
The Board considered the investment performance of the Fund. In this regard, the Board reviewed the performance of the Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of the Fund’s performance for these time periods. The Board considered information and materials provided to the Board by the Advisers concerning Fund performance, as well as information from Lipper comparing the investment performance of the Fund to an appropriate benchmark and universe of peer funds. The Board noted that the Fund had underperformed relative to its peer group and benchmark for the 1- and 3-year periods and that its performance was in line with the peer group and benchmark for the 5-year period. HL Advisors noted that it would continue to monitor the Fund’s performance.
The Board considered the detailed investment analytics reports provided by The Hartford’s Investment Advisory Group throughout the year. These reports include, among other things, information on the Fund’s gross and net returns, the Fund’s investment performance relative to an appropriate benchmark and peer group, various statistics concerning the Fund’s portfolio, and a narrative summary of various factors affecting Fund performance. The Board considered the Advisers’ cooperation with the Investment Committee, which assists the Board in evaluating the performance of the Fund at periodic meetings throughout the year. The Board also considered the analysis provided by the Consultant relating to the Fund’s performance track record.
In light of all the considerations noted above, the Board concluded that it had continued confidence in HL Advisors’ and the Sub-adviser’s overall capabilities to manage the Fund.
Costs of the Services and Profitability of the Advisers
The Board reviewed information regarding HL Advisors’ cost to provide investment management and related services to the Fund and HL Advisors’ profitability, both overall and for the Fund, on a pre-tax basis without regard to distribution expenses. The Board also requested and reviewed information about the profitability to HL Advisors and its affiliates from all services provided
to the Fund and all aspects of their relationship with the Fund. The Board also requested and received information relating to the operations and profitability of the Sub-adviser.
The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement, noting the Consultant’s view that The Hartford’s process for calculating and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by the Advisers and their affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by the Advisers
The Board considered comparative information with respect to the management fees to be paid by the Fund to HL Advisors and the total expense ratios of the Fund. The Board also considered comparative information with respect to the sub-advisory fees to be paid by HL Advisors to the Sub-adviser, to the extent applicable. In this regard, the Board requested and reviewed information from HL Advisors and the Sub-adviser relating to the management and sub-advisory fees, including the sub-advisory fee schedule for the Fund, and total operating expenses for the Fund. The Board considered that the management fee for the Fund includes the fee paid to HLIC for providing certain administrative services to the Fund. With respect to the sub-advisory fee schedule, the Board considered representations from HL Advisors and the Sub-adviser that the Sub-adviser’s fees were negotiated at arm’s length. The Board also reviewed information from Lipper comparing the Fund’s contractual management fees, actual management fees and overall expense ratios relative to a group of funds selected by Lipper, in consultation with the Consultant, and a broader universe of funds selected by Lipper.
While the Board recognized that comparisons between the Fund and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business models and cost structures of the Advisers, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of the Fund’s management and sub-advisory fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to the Fund’s management and sub-advisory fees and total operating expenses.
Based on these considerations, the Board concluded that the Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding the Advisers’ realization of economies of scale with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. The Board reviewed the breakpoints in the management fee schedule for the Fund, which reduce fee rates as Fund assets grow over time. The Board recognized that a fund with assets beyond the last breakpoint level will continue to benefit from economies of scale because additional assets are charged the lowest breakpoint fee resulting in lower overall effective management fee rates. The Board also recognized that a fee schedule that reaches a lower breakpoint quickly provides shareholders with the benefit of anticipated or potential economies of scale.
The Board reviewed and evaluated materials from Lipper showing how management fee schedules of peer funds reflect economies of scale for the benefit of shareholders as a peer fund’s assets hypothetically increase over time. Based on information provided by HL Advisors, Lipper, and the Consultant, the Board recognized that there is no uniform methodology for establishing breakpoints or uniform pattern in asset levels that trigger breakpoints or the amounts of breakpoints triggered.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Fund’s shareholders based on currently available information and the
| Hartford MidCap HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
effective advisory fees and expense ratios for the Fund at its current and reasonably anticipated asset levels. The Board noted, however, that it would continue to monitor future growth in Fund assets and the appropriateness of additional breakpoints.
Other Benefits
The Board considered other benefits to the Advisers and their affiliates from their relationships with the Fund, including the role of the Fund in supporting the variable life insurance and variable annuity products offered by The Hartford. The Board reviewed information noting that HLIC, an affiliate of HL Advisors, receives fees for providing certain administrative services to the Fund, and that HLIC also receives fees for fund accounting and related services from the Fund, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Fund’s transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Fund, and the Board reviewed information on the profitability of the Fund’s transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Fund were fair and reasonable based on publicly available information.
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Fund, receives 12b-1 fees from the Fund. The Board also noted that certain affiliates of HL Advisors distribute shares of the Fund and receive compensation in that connection.
The Board considered benefits to the Sub-adviser from its use of the Fund’s brokerage commissions to obtain soft dollar research, and representations from HL Advisors and the Sub-adviser that the Sub-adviser would not make any revenue-sharing payments or any other type of distribution payments to HL Advisors or its affiliates.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the Agreements for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory and sub-advisory agreements. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreements for the Fund and approve a new investment management agreement for the Fund with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser, and a new investment sub-advisory agreement between HFMC and the Fund’s existing Sub-adviser, Wellington Management Company, LLP (together with HFMC, the “Post-Restructuring Advisers”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Fund. In order to implement the Restructuring, the Fund would terminate the existing Agreements and enter into a new investment management agreement with HFMC, with HFMC also entering into a new investment sub-advisory agreement with the Sub-adviser (collectively, the “New Agreements”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreements at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund
performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by HL Advisors and the Sub-adviser and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreements.
In determining to approve the New Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the New Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreements.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Fund and the performance of investment management personnel to the Fund. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Fund prior to the Restructuring would continue to provide such services to the Fund, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreements would involve no changes to (i) the contractual terms of, including the management fees payable under, the Fund’s investment management and investment sub-advisory agreements; (ii) the investment processes and strategies employed in the management of the Fund’s assets; (iii) the nature and level of services provided under the Fund’s investment management and investment sub-advisory agreements; and (iv) the day-to-day management of the Fund and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Fund.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Fund.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Fund, the investment management arrangement for the Fund following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreements: (i) nature, extent and quality of services provided by HL Advisors and the Sub-adviser; (ii) performance of the Fund, HL Advisors and the Sub-adviser; (iii) costs of the services and profitability of HL Advisors and the Sub-adviser; (iv) comparative services rendered and comparative investment management and sub-advisory fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors and the Sub-adviser with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. With respect to the other benefits to the Post-Restructuring Advisers and their affiliates from their relationships with the Fund, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting and related services from the Fund.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the New Agreements. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
| Hartford MidCap HLS Fund |
| Principal Risks (Unaudited) |
The principal risks of investing in the Fund are described below.
Market and Selection Risk: The Fund’s share price may fluctuate due to market risk and/or security selections that may underperform compared to the market or relevant benchmarks.
Mid-cap Stock Risk: Mid-cap stocks are generally more volatile and risky and may be less liquid than large-cap stocks because they may have limited operating histories, narrow product lines, and focus on niche markets.
Foreign Investment Risk: Foreign investments can be riskier than U.S. investments. Potential risks include currency risk that may result from unfavorable exchange rates, liquidity risk if decreased demand for a security makes it difficult to sell at the desired price, and risks that stem from substantially lower trading volume on foreign markets.
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
HLSAR-MC12 2-13 113547 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 | |
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford MidCap Value HLS Fund
Table of Contents
This report is prepared for the general information of contract owners and qualified retirement plan participants. It is not an offer of contracts or of qualified retirement plans. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent information including the applicable sales, administrative and other charges.
The views expressed in the Fund’s Manager Discussion under ‘‘Why did the Fund perform this way?’’ and ‘‘What is the outlook?’’ are views of the Fund’s sub-adviser and portfolio management team through the end of the period and are subject to change based on market and other conditions.
| Hartford MidCap Value HLS Fund* inception 04/30/2001 |
| (sub-advised by Wellington Management Company, LLP) |
| |
| Investment objective – Seeks long-term capital appreciation. |
| |
Performance Overview 12/31/02 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IA. Growth results in classes other than Class IA will vary from what is seen above due to differences in the expenses charged to those share classes.
| Average Annual Total Returns (as of 12/31/12) |
| | | 1 Year | | | 5 Year | | | 10 Year | |
| MidCap Value IA | | | 24.95% | | | | 4.19% | | | | 10.48% | |
| MidCap Value IB | | | 24.64% | | | | 3.93% | | | | 10.21% | |
| Russell 2500 Value Index | | | 19.21% | | | | 4.54% | | | | 10.20% | |
| Russell Midcap Value Index | | | 16.07% | | | | 3.36% | | | | 10.40% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund's net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
Russell 2500 Value Index is an unmanaged index measuring the performance of those Russell 2500 Index companies with lower price-to-book ratios and lower forecasted growth values. (The Russell 2500 Index is an unmanaged index that measures the performance of the 2,500 smallest U.S. companies based on total market capitalization.)
Russell Midcap Value Index measures the performance of the mid-cap value segment of the U.S. equity universe. It includes those Russell Midcap Index companies with lower price-to-book ratios and lower forecasted growth values.
You cannot invest directly in an index.
As of the Fund’s current prospectus dated May 1, 2012, the net total annual operating expense ratios for Class IA and Class IB shares were 0.83% and 1.08%, respectively, and the gross total annual operating expense ratios for Class IA and Class IB shares were 0.83% and 1.08%, respectively. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect until April 30, 2013, and automatically renew for one-year terms unless terminated by the Fund’s Investment Advisor (Hartford Funds Management Company, LLC). For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
| * | The Fund has restrictions on the purchase of shares. A description of the restrictions can be found in the prospectus |
| Hartford MidCap Value HLS Fund |
| Manager Discussion |
| December 31, 2012 (Unaudited) |
| Portfolio Manager |
| James N. Mordy |
| Senior Vice President and Equity Portfolio Manager |
| |
How did the Fund perform?
The Class IA shares of the Hartford MidCap Value HLS Fund returned 24.95% for the twelve-month period ended December 31, 2012 outperforming its benchmark, the Russell 2500 Value Index, which returned 19.21% for the same period. The Fund also outperformed the 17.33% return of the average fund in the Lipper VP-UF Mid-Cap Value Fund peer group, a group of funds with investment strategies similar to those of the Fund.
Why did the Fund perform this way?
U.S. equities moved higher in the period, in part due to a strengthening housing market and central bank interventions around the globe. Although Europe continued to grapple with economic and structural challenges, investors’ risk appetites surged after European Central Bank (ECB) President Mario Draghi revealed a comprehensive plan to support struggling sovereigns, including direct purchases of government bonds in the open market. Additionally, the U.S. Federal Reserve’s (Fed) announcement of a third round of quantitative easing (QE3) was well-received by the market, boosting stock prices. Despite concerns about the looming U.S. fiscal cliff, tepid corporate revenue results, and economic malaise in Europe, investors bid up risk assets amid further signs of recovery in China and signs that the U.S. housing market may bolster the U.S. economy for the first time in seven years. Risk sentiment also ticked up on continued hopes that the ECB’s bond-buying plan will succeed, essentially reducing the tail risks in Europe.
During the period, mid cap equities (+18%) outperformed small caps (+16%) and large caps (+16%) as represented by the S&P MidCap 400, Russell 2000, S&P 500 Indices, respectively. All ten sectors in the Russell 2500 Value Index gained during the period, with Consumer Discretionary (+35%), Health Care (+22%), and Industrials (+20%) performing the best. Energy (+3%) and Utilities (+6%) lagged on a relative basis.
The Fund’s relative outperformance versus the index was primarily driven by strong stock selection within the Financials, Materials, and Information Technology sectors, which substantially outweighed modestly weaker stock selection within Consumer Staples and Energy. Overall sector allocation, a result of bottom-up security selection, detracted modestly from relative returns, in part due to our overweight position (i.e. the Fund’s sector position was greater than the benchmark position) in Energy and our underweight to Financials. A modest cash position was also a detractor in an upward trending market.
The largest contributors to benchmark-relative performance included Louisiana Pacific (Materials), PHH (Financials), and Lennar (Consumer Discretionary). While these companies are grouped in three different sectors, each stock was in the portfolio for a very similar reason over the year; our anticipated recovery in the U.S. housing market. Shares of Louisiana Pacific, a building product manufacturer focused on oriented strand board (OSB) siding and panel products, moved higher due to an increase in OSB prices compared to last year and improving home construction data. Shares of PHH, a mortgage originator, gained during the period after closing on a $250 million convertible senior note offering and announcing new appointments to its board of directors. Shares of Lennar, a U.S. homebuilder, rose during the period as housing fundamentals across the U.S. began to improve.
The largest detractors from benchmark-relative returns included Lone Pine Resources (Energy), Arrow Electronics (Information Technology), and Newfield Exploration (Energy). Shares of Lone Pine Resources, a Canada-based company engaged in the exploration, development, and production of oil and gas properties, declined during the period after it reported weak first and second quarter results. Investors were also concerned that its bank line of credit would be reduced during August as well as the potential that the company could face a debt covenant issue during 2013. Arrow Electronics is a provider of products, services and solutions to industrial and commercial users of electronic components and enterprise computing solutions. Weak component demand in Europe and Asia led to disappointing quarterly results and a cautious outlook. This, combined with negative macroeconomic data, weighed on Arrow's shares. Shares of Newfield Exploration, an independent oil and natural gas exploration and production company, declined after the company reported that international oil production may drop by as much as 25% next year. Sealed Air (Materials) detracted from the Fund’s absolute returns.
What is the outlook?
The fiscal cliff package recently signed into law resolved uncertainty around individual taxes but not much else. The upcoming debate on spending cuts and the debt ceiling will be highly contentious, but we believe it will ultimately produce a
| Hartford MidCap Value HLS Fund |
| Manager Discussion – (continued) |
| December 31, 2012 (Unaudited) |
solution that results in modest Gross Domestic Product growth for 2013. The odds of meaningful entitlement reform have dropped in our view.
Economic data have strengthened, as evidenced by the rise in the global Purchasing Manager Index over the past several months. Industrial momentum in China is rebounding, Europe is expected to recover gradually, and the U.S. has some offsets to higher taxes from rebuilding post- Hurricane Sandy, housing recovery, and a bit more clarity for Chief Executive Officers considering hiring and investment decisions. The fourth quarters of 2012 earnings expectations have been lowered creating a healthier backdrop for the upcoming reporting period. We expect the Fed will continue QE3 until jobs growth reaches 200,000/month on a sustainable basis.
As of the end of the period we were most overweight in the Health Care, Materials, and Information Technology sectors and most underweight in the Financials, Utilities, and Consumer Discretionary sectors.
Diversification by Industry
as of December 31, 2012
| Industry (Sector) | | | Percentage of
Net Assets | |
| Banks (Financials) | | | 7.6 | % |
| Capital Goods (Industrials) | | | 14.0 | |
| Consumer Durables and Apparel (Consumer Discretionary) | | | 7.0 | |
| Diversified Financials (Financials) | | | 2.9 | |
| Energy (Energy) | | | 7.0 | |
| Food, Beverage and Tobacco (Consumer Staples) | | | 3.0 | |
| Health Care Equipment and Services (Health Care) | | | 5.9 | |
| Insurance (Financials) | | | 8.6 | |
| Materials (Materials) | | | 8.9 | |
| Media (Consumer Discretionary) | | | 0.8 | |
| Pharmaceuticals, Biotechnology and Life Sciences (Health Care) | | | 4.0 | |
| Real Estate (Financials) | | | 8.2 | |
| Retailing (Consumer Discretionary) | | | 1.7 | |
| Semiconductors and Semiconductor Equipment (Information Technology) | | | 4.9 | |
| Software and Services (Information Technology) | | | 1.6 | |
| Technology Hardware and Equipment (Information Technology) | | | 4.5 | |
| Transportation (Industrials) | | | 1.2 | |
| Utilities (Utilities) | | | 6.5 | |
| Short-Term Investments | | | 1.0 | |
| Other Assets and Liabilities | | | 0.7 | |
| Total | | | 100.0 | % |
|
| Hartford MidCap Value HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 98.3% | |
| | | | | Banks - 7.6% | | | | |
| | 187 | | | BankUnited, Inc. | | $ | 4,580 | |
| | 243 | | | Beneficial Mutual Bancorp, Inc. ● | | | 2,309 | |
| | 162 | | | Comerica, Inc. | | | 4,918 | |
| | 78 | | | EverBank Financial Corp. | | | 1,166 | |
| | 247 | | | First Midwest Bancorp, Inc. | | | 3,090 | |
| | 45 | | | Iberiabank Corp. | | | 2,186 | |
| | 85 | | | Popular, Inc. ● | | | 1,774 | |
| | 921 | | | Regions Financial Corp. | | | 6,558 | |
| | 307 | | | Zions Bancorporation | | | 6,570 | |
| | | | | | | | 33,151 | |
| | | | | Capital Goods - 14.0% | | | | |
| | 113 | | | AGCO Corp. ● | | | 5,541 | |
| | 261 | | | Barnes Group, Inc. | | | 5,854 | |
| | 56 | | | Chicago Bridge & Iron Co. N.V. | | | 2,605 | |
| | 62 | | | Dover Corp. | | | 4,048 | |
| | 98 | | | Esterline Technologies Corp. ● | | | 6,252 | |
| | 97 | | | Hubbell, Inc. Class B | | | 8,217 | |
| | 151 | | | KBR, Inc. | | | 4,524 | |
| | 171 | | | Pentair Ltd. | | | 8,419 | |
| | 86 | | | Teledyne Technologies, Inc. ● | | | 5,563 | |
| | 69 | | | URS Corp. | | | 2,713 | |
| | 111 | | | WESCO International, Inc. ● | | | 7,485 | |
| | | | | | | | 61,221 | |
| | | | | Consumer Durables and Apparel - 7.0% | | | | |
| | 163 | | | Lennar Corp. | | | 6,311 | |
| | 177 | | | Mattel, Inc. | | | 6,467 | |
| | 276 | | | Newell Rubbermaid, Inc. | | | 6,155 | |
| | 2,777 | | | Samsonite International S.A. | | | 5,829 | |
| | 182 | | | Toll Brothers, Inc. ● | | | 5,884 | |
| | | | | | | | 30,646 | |
| | | | | Diversified Financials - 2.9% | | | | |
| | 179 | | | Invesco Ltd. | | | 4,667 | |
| | 355 | | | PHH Corp. ● | | | 8,065 | |
| | 452 | | | Solar Cayman Ltd. ⌂■●† | | | 32 | |
| | | | | | | | 12,764 | |
| | | | | Energy - 7.0% | | | | |
| | 347 | | | Cobalt International Energy, Inc. ● | | | 8,515 | |
| | 114 | | | Consol Energy, Inc. | | | 3,672 | |
| | 58 | | | Japan Petroleum Exploration Co., Ltd. | | | 2,038 | |
| | 102 | | | Newfield Exploration Co. ● | | | 2,737 | |
| | 317 | | | Ocean Rig UDW, Inc. ● | | | 4,742 | |
| | 155 | | | QEP Resources, Inc. | | | 4,677 | |
| | 326 | | | Trican Well Service Ltd. | | | 4,305 | |
| | | | | | | | 30,686 | |
| | | | | Food, Beverage and Tobacco - 3.0% | | | | |
| | 88 | | | Bunge Ltd. Finance Corp. | | | 6,368 | |
| | 35 | | | Dr. Pepper Snapple Group | | | 1,546 | |
| | 81 | | | Ingredion, Inc. | | | 5,225 | |
| | | | | | | | 13,139 | |
| | | | | Health Care Equipment and Services - 5.9% | | | | |
| | 90 | | | AmerisourceBergen Corp. | | | 3,903 | |
| | 613 | | | Boston Scientific Corp. ● | | | 3,513 | |
| | 289 | | | Brookdale Senior Living, Inc. ● | | | 7,310 | |
| | 126 | | | CIGNA Corp. | | | 6,752 | |
| | 47 | | | Universal Health Services, Inc. Class B | | | 2,292 | |
| | 176 | | | Vanguard Health Systems, Inc. ● | | | 2,153 | |
| | | | | | | | 25,923 | |
| | | | | Insurance - 8.6% | | | | |
| | 51 | | | Everest Re Group Ltd. | | | 5,586 | |
| | 24 | | | Hanover Insurance Group, Inc. | | | 945 | |
| | 77 | | | Platinum Underwriters Holdings Ltd. | | | 3,540 | |
| | 188 | | | Principal Financial Group, Inc. | | | 5,370 | |
| | 166 | | | Reinsurance Group of America, Inc. | | | 8,890 | |
| | 377 | | | Unum Group | | | 7,849 | |
| | 221 | | | XL Group plc | | | 5,538 | |
| | | | | | | | 37,718 | |
| | | | | Materials - 8.9% | | | | |
| | 69 | | | Cabot Corp. | | | 2,745 | |
| | 73 | | | Celanese Corp. | | | 3,246 | |
| | 54 | | | FMC Corp. | | | 3,154 | |
| | 769 | | | Incitec Pivot Ltd. | | | 2,621 | |
| | 289 | | | Louisiana-Pacific Corp. ● | | | 5,587 | |
| | 232 | | | Methanex Corp. ADR | | | 7,394 | |
| | 95 | | | Owens-Illinois, Inc. ● | | | 2,019 | |
| | 199 | | | Packaging Corp. of America | | | 7,648 | |
| | 252 | | | Rexam plc | | | 1,802 | |
| | 2,507 | | | Yingde Gases | | | 2,570 | |
| | | | | | | | 38,786 | |
| | | | | Media - 0.8% | | | | |
| | 97 | | | Virgin Media, Inc. | | | 3,554 | |
| | | | | | | | | |
| | | | | Pharmaceuticals, Biotechnology and Life Sciences - 4.0% | | | | |
| | 718 | | | Almirall S.A. | | | 7,095 | |
| | 263 | | | Impax Laboratories, Inc. ● | | | 5,397 | |
| | 83 | | | UCB S.A. | | | 4,764 | |
| | | | | | | | 17,256 | |
| | | | | Real Estate - 8.2% | | | | |
| | 181 | | | American Assets Trust, Inc. REIT | | | 5,050 | |
| | 579 | | | BR Properties S.A. | | | 7,210 | |
| | 79 | | | Equity Lifestyle Properties, Inc. REIT | | | 5,316 | |
| | 255 | | | Forest City Enterprises, Inc. Class A ● | | | 4,120 | |
| | 167 | | | Hatteras Financial Corp. REIT | | | 4,153 | |
| | 107 | | | Iguatemi Empresa de Shopping Centers S.A. | | | 1,422 | |
| | 300 | | | Weyerhaeuser Co. REIT | | | 8,352 | |
| | | | | | | | 35,623 | |
| | | | | Retailing - 1.7% | | | | |
| | 5,788 | | | Buck Holdings L.P. ⌂●† | | | 4,140 | |
| | 9 | | | Family Dollar Stores, Inc. | | | 583 | |
| | 72 | | | Men's Wearhouse, Inc. | | | 2,241 | |
| | 11 | | | Ross Stores, Inc. | | | 574 | |
| | | | | | | | 7,538 | |
| | | | | Semiconductors and Semiconductor Equipment - 4.9% | | | | |
| | 225 | | | Avago Technologies Ltd. | | | 7,111 | |
| | 338 | | | Microsemi Corp. ● | | | 7,116 | |
| | 426 | | | Teradyne, Inc. ● | | | 7,186 | |
| | | | | | | | 21,413 | |
| | | | | Software and Services - 1.6% | | | | |
| | 206 | | | Booz Allen Hamilton Holding Corp. | | | 2,873 | |
| | 85 | | | Check Point Software Technologies Ltd. ADR ● | | | 4,068 | |
| | | | | | | | 6,941 | |
| | | | | Technology Hardware and Equipment - 4.5% | | | | |
| | 298 | | | Arrow Electronics, Inc. ● | | | 11,352 | |
| | 71 | | | Harris Corp. | | | 3,466 | |
| | 114 | | | SanDisk Corp. ● | | | 4,966 | |
| | | | | | | | 19,784 | |
The accompanying notes are an integral part of these financial statements.
| Hartford MidCap Value HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | | | | | Market Value ╪ | |
| COMMON STOCKS - 98.3% - (continued) | |
| | | | | Transportation - 1.2% | | | | | | | | |
| | 427 | | | Delta Air Lines, Inc. ● | | | | | | $ | 5,070 | |
| | | | | | | | | | | | | |
| | | | | Utilities - 6.5% | | | | | | | | |
| | 104 | | | Alliant Energy Corp. | | | | | | | 4,554 | |
| | 124 | | | Great Plains Energy, Inc. | | | | | | | 2,527 | |
| | 350 | | | N.V. Energy, Inc. | | | | | | | 6,345 | |
| | 155 | | | Northeast Utilities | | | | | | | 6,061 | |
| | 189 | | | UGI Corp. | | | | | | | 6,179 | |
| | 70 | | | Wisconsin Energy Corp. | | | | | | | 2,568 | |
| | | | | | | | | | | | 28,234 | |
| | | | | Total common stocks | | | | | | | | |
| | | | | (cost $355,142) | | | | | | $ | 429,447 | |
| | | | | | | | | | | | | |
| | | | | Total long-term investments | | | | | | | | |
| | | | | (cost $355,142) | | | | | | $ | 429,447 | |
| | | | | | | | | | | | | |
| SHORT-TERM INVESTMENTS - 1.0% | | | | | | | | |
| Repurchase Agreements - 1.0% | | | | | | | | |
| | | | | Bank of America Merrill Lynch TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $101,
collateralized by FHLMC 3.00%, 2042,
FNMA 4.00%, 2042, value of $103) | | | | | | | | |
| $ | 101 | | | 0.19%, 12/31/2012 | | | | | | $ | 101 | |
| | | | | Bank of Montreal TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $720, collateralized by FHLMC
2.50% - 5.50%, 2019 - 2042, FNMA 0.76%
- 6.11%, 2016 - 2042, GNMA 3.50%, 2042,
value of $735) | | | | | | | | |
| | 720 | | | 0.23%, 12/31/2012 | | | | | | | 720 | |
| | | | | Barclays Capital TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $225, collateralized by U.S.
Treasury Note 2.00% - 2.13%, 2016, value
of $230) | | | | | | | | |
| | 225 | | | 0.20%, 12/31/2012 | | | | | | | 225 | |
| | | | | Citigroup Global Markets, Inc. TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $1,419,
collateralized by U.S. Treasury Note 1.88%
- 4.13%, 2015 - 2018, value of $1,447) | | | | | | | | |
| | 1,419 | | | 0.17%, 12/31/2012 | | | | | | | 1,419 | |
| | | | | Deutsche Bank Securities TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $29, collateralized by FNMA
3.00%, 2032, value of $30) | | | | | | | | |
| | 29 | | | 0.25%, 12/31/2012 | | | | | | | 29 | |
| | | | | RBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $999, collateralized by U.S.
Treasury Note 0.50% - 2.75%, 2013 - 2019,
value of $1,018) | | | | | | | | |
| | 999 | | | 0.20%, 12/31/2012 | | | | | | | 999 | |
| | | | | TD Securities TriParty Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$874, collateralized by FHLMC 3.50% -
6.00%, 2036 - 2042, FNMA 0.22% - 5.50%,
2013 - 2042, value of $892) | | | | | | | | |
| | 874 | | | 0.21%, 12/31/2012 | | | | | | | 874 | |
| | | | | UBS Securities, Inc. Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$17, collateralized by U.S. Treasury Bill
0.75%, 2013, value of $17) | | | | | | | | |
| | 17 | | | 0.17%, 12/31/2012 | | | | | | | 17 | |
| | | | | UBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $60, collateralized by FNMA
2.50%, 2027, GNMA 3.00%, 2042, value of
$61) | | | | | | | | |
| | 60 | | | 0.25%, 12/31/2012 | | | | | | | 60 | |
| | | | | | | | | | | | 4,444 | |
| | | | | Total short-term investments | | | | | | | | |
| | | | | (cost $4,444) | | | | | | $ | 4,444 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $359,586) ▲ | | | 99.3 | % | | $ | 433,891 | |
| | | | | Other assets and liabilities | | | 0.7 | % | | | 3,039 | |
| | | | | Total net assets | | | 100.0 | % | | $ | 436,930 | |
The accompanying notes are an integral part of these financial statements.
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| | |
| | Prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for factors occurring after the close of certain foreign markets but before the close of the New York Stock Exchange. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $365,745 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 81,830 | |
| Unrealized Depreciation | | | (13,684 | ) |
| Net Unrealized Appreciation | | $ | 68,146 | |
| † | These securities were valued in good faith at fair value as determined under policies and procedures established by and under the supervision of the Company's Board of Directors. At December 31, 2012, the aggregate value of these securities was $4,172, which represents 1.0% of total net assets. This amount excludes securities that are principally traded in certain foreign markets and whose prices are adjusted pursuant to a third party pricing service methodology approved by the Board of Directors. |
| ■ | Securities issued within terms of a private placement memorandum, exempt from registration under Rule 144A under the Securities Act of 1933, as amended, and may be sold only to qualified institutional buyers. Unless otherwise indicated, these issues are determined to be liquid. At December 31, 2012, the aggregate value of these securities was $32, which rounds to zero percent of total net assets. |
| ⌂ | The following securities are considered illiquid. Illiquid securities are often purchased in private placement transactions, are often not registered under the Securities Act of 1933 and may have contractual restrictions on resale. A security may also be considered illiquid if the security lacks a readily available market or if its valuation has not changed for a certain period of time. |
| Period Acquired | | | Shares/ Par | | | Security | | Cost Basis | |
| 06/2007 | | | | 5,788 | | | Buck Holdings L.P. | | $ | 1,035 | |
| 03/2007 | | | | 452 | | | Solar Cayman Ltd. - 144A | | | 132 | |
| | | | | | | | | | | | | |
At December 31, 2012, the aggregate value of these securities was $4,172, which represents 1.0% of total net assets.
| Foreign Currency Contracts Outstanding at December 31, 2012 |
| Currency | | | Buy / Sell | | Delivery Date | | Counterparty | | | Contract Amount | | | Market Value ╪ | | | Unrealized
Appreciation/
(Depreciation) | |
| AUD | | | Sell | | 01/04/2013 | | UBS | | | $ | 11 | | | $ | 11 | | | $ | – | |
| CAD | | | Sell | | 01/03/2013 | | JPM | | | | 18 | | | | 18 | | | | – | |
| EUR | | | Sell | | 01/03/2013 | | DEUT | | | | 28 | | | | 28 | | | | – | |
| EUR | | | Sell | | 01/04/2013 | | DEUT | | | | 8 | | | | 8 | | | | – | |
| GBP | | | Sell | | 01/03/2013 | | DEUT | | | | 4 | | | | 4 | | | | – | |
| GBP | | | Sell | | 01/04/2013 | | DEUT | | | | 3 | | | | 3 | | | | – | |
| HKD | | | Sell | | 01/03/2013 | | DEUT | | | | 33 | | | | 33 | | | | – | |
| | | | | | | | | | | | | | | | | | | $ | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
The accompanying notes are an integral part of these financial statements.
| Hartford MidCap Value HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| GLOSSARY: (abbreviations used in preceding Schedule of Investments) |
| |
| Counterparty Abbreviations: |
| DEUT | Deutsche Bank Securities, Inc. | |
| JPM | JP Morgan Chase & Co. | |
| UBS | UBS AG | |
| | |
| Currency Abbreviations: |
| AUD | Australian Dollar | |
| CAD | Canadian Dollar | |
| EUR | EURO | |
| GBP | British Pound | |
| HKD | Hong Kong Dollar | |
| |
| Other Abbreviations: |
| ADR | American Depositary Receipt |
| FHLMC | Federal Home Loan Mortgage Corp. |
| FNMA | Federal National Mortgage Association |
| GNMA | Government National Mortgage Association |
| REIT | Real Estate Investment Trust |
The accompanying notes are an integral part of these financial statements.
| Hartford MidCap Value HLS Fund |
| Investment Valuation Hierarchy Level Summary |
| December 31, 2012 |
| (000’s Omitted) |
| | | Total | | | Level 1 ♦ | | | Level 2 ♦ | | | Level 3 | |
| Assets: | | | | | | | | | | | | | | | | |
| Common Stocks ‡ | | $ | 429,447 | | | $ | 398,556 | | | $ | 26,719 | | | $ | 4,172 | |
| Short-Term Investments | | | 4,444 | | | | – | | | | 4,444 | | | | – | |
| Total | | $ | 433,891 | | | $ | 398,556 | | | $ | 31,163 | | | $ | 4,172 | |
| Foreign Currency Contracts * | | | – | | | | – | | | | – | | | | – | |
| Total | | $ | – | | | $ | – | | | $ | – | | | $ | – | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Foreign Currency Contracts * | | | – | | | | – | | | | – | | | | – | |
| Total | | $ | – | | | $ | – | | | $ | – | | | $ | – | |
| ♦ | For the year ended December 31, 2012, there were no transfers between Level 1 and Level 2. |
| ‡ | The Fund has all or primarily all of the equity securities categorized in a particular level. Refer to the Schedule of Investments for further industry breakout. |
| * | Derivative instruments not reflected in the Schedule of Investments are valued at the unrealized appreciation/depreciation on the investments. |
Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:
| | | Balance as
of
December
31, 2011 | | | Realized
Gain
(Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Net
Amortization | | | Purchases | | | Sales | | | Transfers
Into
Level 3 | | | Transfers
Out of
Level 3 | | | Balance as
of
December
31, 2012 | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stocks | | $ | 13,116 | | | $ | 3,262 | | | $ | (660 | )* | | $ | — | | | $ | — | | | $ | (11,546 | ) | | $ | — | | | $ | — | | | $ | 4,172 | |
| Total | | $ | 13,116 | | | $ | 3,262 | | | $ | (660 | ) | | $ | — | | | $ | — | | | $ | (11,546 | ) | | $ | — | | | $ | — | | | $ | 4,172 | |
| * | Change in unrealized appreciation (depreciation) in the current period relating to assets still held at December 31, 2012 was $(6,438). |
The accompanying notes are an integral part of these financial statements.
| Hartford MidCap Value HLS Fund |
| Statement of Assets and Liabilities |
| December 31, 2012 |
| (000’s Omitted) |
| Assets: | | | | |
| Investments in securities, at market value (cost $359,586) | | $ | 433,891 | |
| Cash | | | 5 | |
| Foreign currency on deposit with custodian (cost $13) | | | 13 | |
| Unrealized appreciation on foreign currency contracts | | | — | |
| Receivables: | | | | |
| Investment securities sold | | | 3,828 | |
| Fund shares sold | | | 132 | |
| Dividends and interest | | | 336 | |
| Total assets | | | 438,205 | |
| Liabilities: | | | | |
| Unrealized depreciation on foreign currency contracts | | | — | |
| Payables: | | | | |
| Investment securities purchased | | | 698 | |
| Fund shares redeemed | | | 469 | |
| Investment management fees | | | 66 | |
| Distribution fees | | | 5 | |
| Accrued expenses | | | 37 | |
| Total liabilities | | | 1,275 | |
| Net assets | | $ | 436,930 | |
| Summary of Net Assets: | | | | |
| Capital stock and paid-in-capital | | $ | 385,889 | |
| Undistributed net investment income | | | 4,238 | |
| Accumulated net realized loss | | | (27,502 | ) |
| Unrealized appreciation of investments and the translations of assets and liabilities denominated in foreign currency | | | 74,305 | |
| Net assets | | $ | 436,930 | |
| Shares authorized | | | 1,200,000 | |
| Par value | | $ | 0.001 | |
| Class IA: Net asset value per share | | $ | 11.65 | |
| Shares outstanding | | | 27,797 | |
| Net assets | | $ | 323,934 | |
| Class IB: Net asset value per share | | $ | 11.59 | |
| Shares outstanding | | | 9,751 | |
| Net assets | | $ | 112,996 | |
The accompanying notes are an integral part of these financial statements.
| Hartford MidCap Value HLS Fund |
| Statement of Operations |
| For the Year Ended December 31, 2012 |
| (000’s Omitted) |
| Investment Income: | | | | |
| Dividends | | $ | 8,625 | |
| Interest | | | 13 | |
| Less: Foreign tax withheld | | | (94 | ) |
| Total investment income, net | | | 8,544 | |
| | | | | |
| Expenses: | | | | |
| Investment management fees | | | 3,638 | |
| Transfer agent fees | | | 2 | |
| Distribution fees - Class IB | | | 294 | |
| Custodian fees | | | 21 | |
| Accounting services fees | | | 45 | |
| Board of Directors' fees | | | 13 | |
| Audit fees | | | 13 | |
| Other expenses | | | 122 | |
| Total expenses (before fees paid indirectly) | | | 4,148 | |
| Commission recapture | | | (20 | ) |
| Total fees paid indirectly | | | (20 | ) |
| Total expenses, net | | | 4,128 | |
| Net Investment Income | | | 4,416 | |
| | | | | |
| Net Realized Gain on Investments and Foreign Currency Transactions: | | | | |
| Net realized gain on investments | | | 41,891 | |
| Net realized gain on foreign currency contracts | | | 32 | |
| Net realized loss on other foreign currency transactions | | | (39 | ) |
| Net Realized Gain on Investments and Foreign Currency Transactions | | | 41,884 | |
| | | | | |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions: | | | | |
| Net unrealized appreciation of investments | | | 57,148 | |
| Net unrealized appreciation of foreign currency contracts | | | — | |
| Net unrealized appreciation on translation of other assets and liabilities in foreign currencies | | | 1 | |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions | | | 57,149 | |
| Net Gain on Investments and Foreign Currency Transactions | | | 99,033 | |
| Net Increase in Net Assets Resulting from Operations | | $ | 103,449 | |
The accompanying notes are an integral part of these financial statements.
| Hartford MidCap Value HLS Fund |
| Statement of Changes in Net Assets |
| |
| (000’s Omitted) |
| | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| Operations: | | | | | | | | |
| Net investment income | | $ | 4,416 | | | $ | 2,772 | |
| Net realized gain on investments and foreign currency transactions | | | 41,884 | | | | 74,878 | |
| Net unrealized appreciation (depreciation) of investments and foreign currency transactions | | | 57,149 | | | | (123,016 | ) |
| Net Increase (Decrease) in Net Assets Resulting from Operations | | | 103,449 | | | | (45,366 | ) |
| Distributions to Shareholders: | | | | | | | | |
| From net investment income | | | | | | | | |
| Class IA | | | (3,876 | ) | | | (40 | ) |
| Class IB | | | (1,020 | ) | | | (14 | ) |
| Total distributions | | | (4,896 | ) | | | (54 | ) |
| Capital Share Transactions: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 20,918 | | | | 30,432 | |
| Issued on reinvestment of distributions | | | 3,876 | | | | 40 | |
| Redeemed | | | (116,036 | ) | | | (117,488 | ) |
| Total capital share transactions | | | (91,242 | ) | | | (87,016 | ) |
| Class IB | | | | | | | | |
| Sold | | | 7,023 | | | | 11,942 | |
| Issued on reinvestment of distributions | | | 1,020 | | | | 14 | |
| Redeemed | | | (36,570 | ) | | | (47,153 | ) |
| Total capital share transactions | | | (28,527 | ) | | | (35,197 | ) |
| Net decrease from capital share transactions | | | (119,769 | ) | | | (122,213 | ) |
| Net Decrease in Net Assets | | | (21,216 | ) | | | (167,633 | ) |
| Net Assets: | | | | | | | | |
| Beginning of period | | | 458,146 | | | | 625,779 | |
| End of period | | $ | 436,930 | | | $ | 458,146 | |
| Undistributed (distribution in excess of) net investment income | | $ | 4,238 | | | $ | 3,414 | |
| Shares: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 1,942 | | | | 2,960 | |
| Issued on reinvestment of distributions | | | 357 | | | | 4 | |
| Redeemed | | | (10,694 | ) | | | (11,556 | ) |
| Total share activity | | | (8,395 | ) | | | (8,592 | ) |
| Class IB | | | | | | | | |
| Sold | | | 652 | | | | 1,173 | |
| Issued on reinvestment of distributions | | | 94 | | | | 1 | |
| Redeemed | | | (3,421 | ) | | | (4,645 | ) |
| Total share activity | | | (2,675 | ) | | | (3,471 | ) |
The accompanying notes are an integral part of these financial statements.
| Hartford MidCap Value HLS Fund |
| Notes to Financial Statements |
| December 31, 2012 |
| (000’s Omitted) |
Hartford MidCap Value HLS Fund (the “Fund”) serves as an underlying investment option for certain variable annuity and variable life insurance separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates and certain qualified retirement plans. The Fund may also serve as an underlying investment option for certain variable annuity and variable life separate accounts of other insurance companies. Owners of variable annuity contracts and policyholders of variable life insurance contracts may choose the funds permitted in the variable insurance contract prospectus. In addition, participants in certain qualified retirement plans may choose the Fund if permitted by their plans.
Hartford Series Fund, Inc. (the “Company”) is an open-end registered management investment company comprised of thirty portfolios. Financial Statements for the Fund, a series of the Company, are included in this report.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund is a diversified open-end management investment company.
The Fund is divided into Class IA and Class IB shares. Each class is offered at the per share net asset value (“NAV”) without a sales charge and is subject to the same expenses, except that the Class IB shares are subject to distribution and service fees charged pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act.
| 2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Fund in the preparation of its financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| a) | Determination of Net Asset Value – The NAV of each class of the Fund’s shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| b) | Investment Valuation and Fair Value Measurements – For purposes of calculating the NAV, portfolio investments and other assets held by the Fund's portfolio for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of last reported sales prices or official close price. If no sales are reported, market value is based on quotes obtained from a quotation reporting system, established market makers, or independent pricing services. If market prices are not readily available or are deemed unreliable, the Fund will use the fair value of the investment as determined in good faith under policies and procedures established by and under the supervision of the Company’s Board of Directors. Market quotes are considered not readily available where there is an absence of current or reliable market-based data (e.g., trade information or indicative market quotes), including where events occur after the close of the relevant market, but prior to the NYSE Close that materially affect the values of the Fund’s portfolio investments or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the investments trade do not open for trading for the entire day and no other market prices are available. In addition, prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close. Investments that are primarily traded on foreign markets may trade on days that are not business days of the Fund. The value of the foreign investments in which the Fund invests may change on days when a shareholder will not be able to |
| Hartford MidCap Value HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
purchase or redeem shares of the Fund. Fair value pricing is subjective in nature and the use of fair value pricing by the Fund may cause the NAV of its shares to differ significantly from the NAV that would have been calculated using market prices at the close of the exchange on which a portfolio investment is primarily traded. There can be no assurance that the Fund could obtain the fair market value assigned to an investment if the Fund were to sell the investment at approximately the time at which the Fund determines its NAV.
Investments valued in currencies other than U.S. dollars are converted to U.S. dollars using exchange rates obtained from independent pricing services for calculation of the NAV. As a result, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of investments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the NYSE is closed and the market value may change on days when an investor is not able to purchase, redeem or exchange shares of the Fund.
Foreign currency contracts represent agreements to exchange currencies on specific future dates at predetermined rates. Foreign currency contracts are valued using foreign currency exchange rates and forward rates as provided by an independent pricing service on the Valuation Date.
Financial instruments for which prices are not available from an independent pricing service may be valued using market quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with procedures established by the Company’s Board of Directors.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| · | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange traded funds, rights and warrants. |
| · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 may include debt investments that are traded less frequently than exchange traded instruments and which are valued using independent pricing services; foreign equities, which are principally traded on certain foreign markets and are adjusted daily pursuant to a fair value pricing service in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close; and short-term investments, which are valued at amortized cost. |
| · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price. |
The Board of Directors of the Company generally reviews and approves the “Procedures for Valuation of Portfolio Securities” on an annual basis. These procedures define how investments are to be valued, including the formation and activities of a Valuation Committee. The Valuation Committee is responsible for determining in good faith the fair value of investments when the value cannot be obtained from primary pricing services or
alternative sources or if the valuation of an investment as provided by the primary pricing service or alternative source is believed not to reflect the investment’s fair value as of the Valuation Date. Members of the Valuation Committee include the Fund’s Treasurer or designee, a Vice President of the Fund with legal expertise or designee, and a Vice President of the investment manager or designee. In addition, the Fund’s Chief Compliance Officer shall designate a member of the compliance group to attend Valuation Committee meetings as a non-voting resource, to monitor for and provide guidance with respect to compliance with these procedures. Two members of the Valuation Committee or their designees, representing different departments, shall constitute a quorum for purposes of permitting the Valuation Committee to take action. The Valuation Committee will consider all relevant factors in determining an investment’s fair value, and may seek the advice of the Fund’s sub-adviser, knowledgeable brokers, and legal counsel in making such determination. The Valuation Committee reports to the Audit Committee of the Company’s Board of Directors. The Audit Committee receives quarterly written reports which include details of all fair-valued investments, including the reason for the fair valuation, and an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such investments (the “look-back” test). The Board of Directors then must consider for ratification all of the fair value determinations made during the previous quarter.
Valuation levels are not necessarily indicative of the risk associated with investing in such investments. Individual investments within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
For additional information, refer to the Investment Valuation Hierarchy Level Summary and the Level 3 roll-forward reconciliation, if applicable, which follow the Schedule of Investments.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period.
| c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Investments purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses are determined on the basis of identified cost. |
Dividend income from domestic securities is accrued on the ex-dividend date. In general, dividend income from foreign securities is recorded on the ex-date; however, dividend notifications in certain foreign jurisdictions may not be available in a timely manner and as a result, the Fund will record the dividend as soon as the relevant details (i.e., rate per share, payment date, shareholders of record, etc.) are publicly available. Interest income, including amortization of premium and accretion of discounts, is accrued on a daily basis.
| d) | Foreign Currency Transactions – Assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investments, income, and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. |
The Fund does not isolate that portion of portfolio investment valuation resulting from fluctuations in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of investments held. Exchange rate fluctuations are included with the net realized and unrealized gain or loss on investments in the accompanying financial statements.
Net realized foreign exchange gains or losses arise from sales of foreign currencies and the difference between asset and liability amounts initially stated in foreign currencies and the U.S. dollar value of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of other assets and liabilities at the end of the reporting period, resulting from changes in the exchange rates.
| Hartford MidCap Value HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| e) | Joint Trading Account – The Fund may invest cash balances into a joint trading account that may be invested in one or more repurchase agreements. |
| f) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Fund’s shares are executed in accordance with the investment instructions of the contract holders and plan participants. The NAV of the Fund’s shares is determined as of the close of business on each business day of the Exchange. The NAV is determined separately for each class of shares of the Fund by dividing the Fund’s net assets attributable to that class by the number of shares of the class outstanding. Each class of shares offered by the Fund has equal rights as to assets and voting privileges (except that shareholders of a class have exclusive voting rights regarding any matter relating solely to that class of shares). Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets of the class. Realized and unrealized capital gains and losses are allocated daily based on the relative net assets of each class of shares of the Fund. |
Orders for the purchase of the Fund’s shares received prior to the close of the Exchange on any day the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Fund. The policy of the Fund is to pay dividends from net investment income and realized capital gains, if any, at least once a year.
Distributions from net investment income, net realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These differences may include but are not limited to losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to Passive Foreign Investment Companies (“PFICs”), Real Estate Investment Trusts (“REITs”), Regulated Investment Companies (“RICs”), certain derivatives and partnerships. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Fund’s capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| 3. | Securities and Other Investments: |
| a) | Repurchase Agreements – A repurchase agreement is an agreement by which a counterparty agrees to sell an investment and agrees to repurchase the investment sold from the buyer at a mutually agreed upon time and price. At the time the Fund enters into a repurchase agreement, the value of the underlying collateral, including accrued interest, will be equal to or exceed the value of the repurchase agreement. Repurchase agreements expose the Fund to counterparty risk - that is, the risk that the counterparty will not fulfill its obligations. To minimize counterparty risk, the investments that serve to collateralize the repurchase agreement are held by the Fund’s custodian in book entry or physical form in the custodial account of the Fund or in a third party custodial account. Repurchase agreements are valued at cost plus accrued interest, which approximates fair value. The Fund, as shown on the Schedule of Investments, had outstanding repurchase agreements as of December 31, 2012. |
| b) | Illiquid and Restricted Investments – The Fund is permitted to invest up to 15% of its net assets in illiquid investments. Illiquid investments are those that may not be sold or disposed of in the ordinary course of business within seven days, at approximately the price used to determine the Fund’s NAV. The Fund may not be able to sell illiquid investments when its sub-adviser considers it desirable to do so or may have to sell such investments at a price that is lower than the price that could be obtained if the investments were more liquid. A sale of illiquid investments may require more time and may result in higher dealer discounts and other selling expenses than does the sale of those that are liquid. Illiquid investments also may be more difficult to value due to the unavailability of reliable market quotations for such investments, and an investment in them may have an adverse impact on the Fund’s NAV. The Fund may also purchase |
certain restricted investments that can only be resold to certain qualified investors and may be determined to be liquid pursuant to policies and guidelines established by the Company’s Board of Directors. The Fund, as shown on the Schedule of Investments, had illiquid and/or restricted investments as of December 31, 2012.
| c) | Investments Purchased on a When-Issued or Delayed-Delivery Basis – Delivery and payment for investments that have been purchased by the Fund on a forward commitment, or when-issued or delayed-delivery basis, take place beyond the customary settlement period. A fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell delayed-delivery investments before they are delivered, which may result in a realized gain or loss. During this period, such investments are subject to market fluctuations, and the Fund identifies investments segregated in its records with a value at least equal to the amount of the commitment. As of December 31, 2012, the Fund had no outstanding when-issued or delayed-delivery investments. |
| 4. | Financial Derivative Instruments: |
The following disclosures contain information on how and why the Fund uses derivative instruments, the credit-risk-related contingent features in certain derivative instruments, and how derivative instruments affect the Fund’s financial position and results of operations. The location and fair value amounts of these instruments on the Statement of Assets and Liabilities and the realized gains and losses and changes in unrealized gains and losses on the Statement of Operations, each categorized by type of derivative contract, are included in the following Additional Derivative Instrument Information footnote. The derivative instruments outstanding as of year-end are disclosed in the notes to or within the Schedule of Investments for purchased options, if applicable. The amounts of realized gains and losses and changes in unrealized gains and losses on derivative instruments during the year are disclosed in the Statement of Operations.
| a) | Foreign Currency Contracts – The Fund may enter into foreign currency contracts that obligate the Fund to purchase or sell currencies at specified future dates. Foreign currency contracts are used to hedge the currency exposure associated with some or all of the Fund’s investments and/or as part of an investment strategy. Foreign currency contracts are marked to market daily and the change in value is recorded by the Fund as an unrealized gain or loss. The Fund will record a realized gain or loss when the foreign currency contract is settled. |
Foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. In addition, risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of the contracts and from unanticipated movements in the value of the foreign currencies relative to the U.S. dollar. The Fund had outstanding foreign currency contracts as shown on the Schedule of Investments as of December 31, 2012.
| Hartford MidCap Value HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| b) | Additional Derivative Instrument Information: |
Fair Value of Derivative Instruments on the Statement of Assets and Liabilities as of December 31, 2012:
| | | | Risk Exposure Category | |
| | | | Interest Rate
Contracts | | | | Foreign
Exchange
Contracts | | | | Credit
Contracts | | | | Equity
Contracts | | | | Commodity
Contracts | | | | Other
Contracts | | | | Total | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized appreciation on foreign currency contracts | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Total | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized depreciation on foreign currency contracts | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Total | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
The volume of derivative activity was minimal during the year ended December 31, 2012.
The Effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Realized Gain on Derivatives Recognized as a Result of Operations: | | | | | | | | | | | | | |
| Net realized gain on foreign currency contracts | | $ | — | | | $ | 32 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 32 | |
| Total | | $ | — | | | $ | 32 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 32 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Change in Unrealized Appreciation on Derivatives Recognized as a Result of Operations: | |
| Net change in unrealized appreciation of foreign currency contracts | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Total | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| a) | Counterparty Risk – The Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will default. |
| b) | Market Risks – If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities, such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund. The market values of equity securities, such as common stocks and preferred stocks, or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The market value of equity securities may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities. |
| a) | Federal Income Taxes – For federal income tax purposes, the Fund intends to continue to qualify as a RIC under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders and otherwise complying with the requirements of the IRC. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains prior to the next fiscal year-end. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. |
| c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Fund for the periods indicated is as follows (as adjusted for dividends payable, if applicable): |
| | | For the Year Ended
December 31, 2012 | | | For the Year Ended
December 31, 2011 | |
| Ordinary Income | | $ | 4,896 | | | $ | 54 | |
As of December 31, 2012, the Fund’s components of distributable earnings (deficit) on a tax basis were as follows:
| | | Amount | |
| Undistributed Ordinary Income | | $ | 6,257 | |
| Accumulated Capital and Other Losses* | | | (23,362 | ) |
| Unrealized Appreciation† | | | 68,146 | |
| Total Accumulated Earnings | | $ | 51,041 | |
| | * | The Fund has capital loss carryforwards that are identified in the Capital Loss Carryforward note that follows. |
| | † | Differences between book-basis and tax-basis unrealized appreciation (depreciation) may be attributable to the losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. |
| Hartford MidCap Value HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| d) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as foreign currency, PFICs, expiration or utilization of capital loss carryforwards or net operating losses. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Fund’s distributions may be shown in the accompanying Statement of Changes in Net Assets as from undistributed net investment income, from accumulated net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Fund recorded reclassifications to increase (decrease) the accounts listed below: |
| | | Amount | |
| Undistributed Net Investment Income | | $ | 1,304 | |
| Accumulated Net Realized Gain (Loss) | | | (1,304 | ) |
| e) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation. |
At December 31, 2012 (tax-year-end), the Fund had capital loss carryforwards for U.S. federal income tax purposes as follows:
| Year of Expiration | | Amount | |
| 2016 | | $ | 4,700 | |
| 2017 | | | 18,662 | |
| Total | | $ | 23,362 | |
As a result of current or past mergers in the Fund, certain provisions in the Internal Revenue Code may limit the future utilization of capital losses. During the year ended December 31, 2012, the Fund utilized $37,899 of prior year capital loss carryforwards.
| f) | Accounting for Uncertainty in Income Taxes – The Fund has adopted financial reporting rules that require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Fund does not have an examination in progress. |
The Fund has reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules had no effect on the Fund’s financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2012. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Fund’s investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Fund pursuant to an Investment Management Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Fund’s |
investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees payable under, the Fund’s investment management agreements; or (ii) the day-to-day management of the Fund. The investment manager has overall investment supervisory responsibility for the Fund. In addition, the investment manager provides administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. The investment manager has contracted with Wellington Management Company, LLP (“Wellington Management”) under a sub-advisory agreement for the provision of day-to-day investment management services to the Fund in accordance with the Fund’s investment objective and policies. The Fund pays a fee to the investment manager, a portion of which may be used to compensate Wellington Management.
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered as of December 31, 2012, (paid for the period March 1, 2012 through December 31, 2012); the rates are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee |
| On first $500 million | | | 0.8000 | % |
| On next $500 million | | | 0.7250 | % |
| On next $1.5 billion | | | 0.6750 | % |
| On next $2.5 billion | | | 0.6700 | % |
| On next $5 billion | | | 0.6650 | % |
| Over $10 billion | | | 0.6600 | % |
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered during the period January 1, 2012, through February 29, 2012.
| Average Daily Net Assets | | Annual Fee | |
| On first $250 million | | | 0.8250 | % |
| On next $250 million | | | 0.7750 | % |
| On next $500 million | | | 0.7250 | % |
| On next $4 billion | | | 0.6750 | % |
| On next $5 billion | | | 0.6725 | % |
| Over $10 billion | | | 0.6700 | % |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Fund. HLIC provided accounting services for the Fund for the fiscal year ended December 31, 2012. The replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Fund or the fees charged to the Fund for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Fund, HFMC provides accounting services to the Fund and receives monthly compensation based on the Fund’s average daily net assets at the rates set forth below. The Fund’s accounting services fees are accrued daily and paid monthly. |
| Average Daily Net Assets | | Annual Fee | |
| All Assets | | | 0.010 | % |
| c) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund and allocated to classes within a Fund in proportion to the average daily net assets of the Fund and each class, except where allocation of certain expenses is more fairly made directly to the Fund or to specific classes within a Fund. |
| d) | Fees Paid Indirectly – The Company, on behalf of the Fund, has entered into agreements with State Street Global Markets, LLC and Russell Implementation Services, Inc. to partially recapture non-discounted trade commissions. Such rebates are used to pay a portion of the Fund’s expenses. In addition, the Fund’s custodian banks have agreed to reduce |
| Hartford MidCap Value HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
its fees when the Fund maintains cash on deposit in a non-interest-bearing custody account. For the year ended December 31, 2012, these amounts, if any, are included in the Statement of Operations.
The ratio of expenses to average net assets in the accompanying financial highlights excludes the reduction in expenses related to fees paid indirectly. The annualized expense ratio after waivers for the period listed below reflecting the reduction for fees paid indirectly is as follows:
| | | Year Ended
December 31, 2012 | |
| Class IA | | | 0.84 | % |
| Class IB | | | 1.09 | |
| e) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Fund's principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD with HIFSCO did not result in any changes to the distribution services provided to the Fund. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Fund, has adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, 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, subject to the review and approval of the Company’s Board of Directors. |
The Distribution Plan provides that the Fund may pay annually up to 0.25% of the average daily net assets of the Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, the Fund is authorized to make payments monthly to the Distributor that may be used to pay or compensate 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. These fees are accrued daily and paid monthly.
| f) | Other Related Party Transactions – Certain officers of the Fund are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Fund’s Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Fund was in the amount of $1. Hartford Administrative Services Company (“HASCO”), an indirect wholly owned subsidiary of The Hartford, provides transfer agent services to the Fund. The amount paid to HASCO can be found in the Statement of Operations. These fees are accrued daily and paid monthly. |
| g) | Payment from Affiliate – In July of 2007, The Hartford entered into a settlement with the Attorneys General of the states of New York, Connecticut and Illinois relating to market timing and the company's individual variable annuity contracts in which certain payments would be made directly to the variable annuity contract holders. The distribution plan provided that unclaimed money from the settlement would be distributed to certain HLS Funds that are investment options through a Hartford individual variable annuity contract. The unclaimed money was distributed to the Fund on September 18, 2009. |
The total return in the accompanying financial highlights includes a payment from an affiliate. Had the payment from the affiliate been excluded, the impact and total return for the period listed below would have been as follows:
| | | For the Year Ended December 31, 2009 | |
| | | Class IA | | | Class IB | |
| Impact from Payment from Affiliate for Attorneys General Settlement | | | 0.01 | % | | | 0.01 | % |
| Total Return Excluding Payment from Affiliate | | | 44.18 | % | | | 43.82 | % |
| 8. | Investment Transactions: |
For the year ended December 31, 2012, the Fund's aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
| | | Amount | |
| Cost of Purchases Excluding U.S. Government Obligations | | $ | 199,154 | |
| Sales Proceeds Excluding U.S. Government Obligations | | | 321,054 | |
The Fund is one of several Hartford funds that participate in a $500 million committed revolving line of credit facility. The facility is to be used for temporary or emergency purposes. Under the arrangement, the funds are required to own securities having a market value in excess of 300% of the total bank borrowings. The interest rate on borrowings varies depending on the nature of the loan. The facility also requires a fee to be paid based on the amount of the commitment. This commitment fee is allocated to all of the funds participating in the line of credit based on the average net assets of the funds. During the year ended December 31, 2012, the Fund did not have any borrowings under this facility.
| 10. | Industry Classifications: |
Other than the industry classifications “Other Investment Pools and Funds” and “Exchange Traded Funds,” equity industry classifications used in this report are the Global Industry Classification Standard, which was developed by and is the exclusive property and service mark of MSCI, Inc. and Standard & Poor’s.
Under the Company’s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
| 12. | Recent Accounting Pronouncement: |
Disclosures about Offsetting Assets and Liabilities - In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The objective of the ASU is to enhance current disclosure requirements on offsetting of certain assets and liabilities and to enable financial statement users to compare financial statements prepared under U.S. GAAP and International Financial Reporting Standards.
Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
| Hartford MidCap Value HLS Fund |
| Financial Highlights |
| - Selected Per-Share Data (A) - |
| Class | | Net Asset Value at
Beginning of
Period | | | Net Investment
Income (Loss) | | | Net Realized and
Unrealized Gain
(Loss) on
Investments | | | Total from
Investment
Operations | | | Dividends from Net
Investment Income | | | Distributions from
Realized Capital
Gains | | | Distributions from
Capital | | | Total Distributions | | | Net Asset Value at
End of Period | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2012 |
| IA | | $ | 9.44 | | | $ | 0.14 | | | $ | 2.20 | | | $ | 2.34 | | | $ | (0.13 | ) | | $ | – | | | $ | – | | | $ | (0.13 | ) | | $ | 11.65 | |
| IB | | | 9.38 | | | | 0.10 | | | | 2.21 | | | | 2.31 | | | | (0.10 | ) | | | – | | | | – | | | | (0.10 | ) | | | 11.59 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2011 |
| IA | | | 10.32 | | | | 0.07 | | | | (0.95 | ) | | | (0.88 | ) | | | – | | | | – | | | | – | | | | – | | | | 9.44 | |
| IB | | | 10.29 | | | | 0.04 | | | | (0.95 | ) | | | (0.91 | ) | | | – | | | | – | | | | – | | | | – | | | | 9.38 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2010 (E) |
| IA | | | 8.33 | | | | 0.05 | | | | 2.00 | | | | 2.05 | | | | (0.06 | ) | | | – | | | | – | | | | (0.06 | ) | | | 10.32 | |
| IB | | | 8.30 | | | | 0.03 | | | | 1.99 | | | | 2.02 | | | | (0.03 | ) | | | – | | | | – | | | | (0.03 | ) | | | 10.29 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2009 |
| IA | | | 5.82 | | | | 0.07 | | | | 2.50 | | | | 2.57 | | | | (0.06 | ) | | | – | | | | – | | | | (0.06 | ) | | | 8.33 | |
| IB | | | 5.80 | | | | 0.05 | | | | 2.49 | | | | 2.54 | | | | (0.04 | ) | | | – | | | | – | | | | (0.04 | ) | | | 8.30 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2008 |
| IA | | | 12.34 | | | | 0.07 | | | | (4.35 | ) | | | (4.28 | ) | | | (0.06 | ) | | | (2.18 | ) | | | – | | | | (2.24 | ) | | | 5.82 | |
| IB | | | 12.30 | | | | 0.05 | | | | (4.33 | ) | | | (4.28 | ) | | | (0.04 | ) | | | (2.18 | ) | | | – | | | | (2.22 | ) | | | 5.80 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include 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 would lower the Fund's performance. |
| (C) | Ratios do not reflect reductions for fees paid indirectly. Please see Fees Paid Indirectly in the Notes to Financial Statements. |
| (D) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
| (E) | Per share amounts have been calculated using the average shares method. |
| (F) | During the year ended December 31, 2010, the Fund incurred $89.7 million in purchases associated with the transition of assets from Hartford SmallCap Value HLS Fund, which merged into the Fund on July 30, 2010. These purchases were excluded from the portfolio turnover calculation. |
| (G) | Total return without the inclusion of the Payment from (to) Affiliate can be found in Expenses in the accompanying Notes to Financial Statements. |
| - Ratios and Supplemental Data - |
| Total Return(B) | | | Net Assets at End of Period | | | Ratio of Expenses to Average Net Assets
Before Waivers(C) | | | Ratio of Expenses to Average Net Assets
After Waivers(C) | | | Ratio of Net Investment
Income (Loss) to Average Net
Assets | | | Portfolio
Turnover
Rate(D) | |
|
| |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 24.95 | % | | $ | 323,934 | | | | 0.85 | % | | | 0.85 | % | | | 1.03 | % | | | 45 | % |
| | 24.64 | | | | 112,996 | | | | 1.10 | | | | 1.10 | | | | 0.79 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (8.56 | ) | | | 341,583 | | | | 0.83 | | | | 0.83 | | | | 0.57 | | | | 43 | |
| | (8.79 | ) | | | 116,563 | | | | 1.08 | | | | 1.08 | | | | 0.32 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 24.67 | | | | 462,281 | | | | 0.85 | | | | 0.85 | | | | 0.57 | | | | 57 | (F) |
| | 24.36 | | | | 163,498 | | | | 1.10 | | | | 1.10 | | | | 0.30 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 44.19 | (G) | | | 348,742 | | | | 0.86 | | | | 0.86 | | | | 0.87 | | | | 50 | |
| | 43.83 | (G) | | | 145,920 | | | | 1.11 | | | | 1.11 | | | | 0.62 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (40.21 | ) | | | 301,896 | | | | 0.81 | | | | 0.81 | | | | 0.82 | | | | 51 | |
| | (40.36 | ) | | | 128,483 | | | | 1.06 | | | | 1.06 | | | | 0.57 | | | | – | |
Report of Independent Registered Public Accounting Firm |
| The Board of Directors and Shareholders of |
| Hartford Series Fund, Inc. |
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Hartford MidCap Value HLS Fund (one of the portfolios constituting Hartford Series Fund, Inc. (the Fund)) as of December 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Hartford MidCap Value HLS Fund (one of the portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
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| Minneapolis, MN | |
| February 15, 2013 | |
| Hartford MidCap Value HLS Fund |
| Directors and Officers (Unaudited) |
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Fund pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Fund. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Fund’s statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Fund pays to The Hartford a portion of the Chief Compliance Officer’s compensation, but does not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
| Hartford MidCap Value HLS Fund |
| Directors and Officers (Unaudited) – (continued) |
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010 (4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and a record of how the Fund voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
| Hartford MidCap Value HLS Fund |
| Expense Example (Unaudited) |
Your Fund's Expenses
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Actual return | | | Hypothetical (5% return before expenses) | | | | | | | | | | |
| | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2
year | | | Days
in the
full
year | |
| Class IA | | $ | 1,000.00 | | | $ | 1,011.90 | | | $ | 4.30 | | | $ | 1,000.00 | | | $ | 1,020.86 | | | $ | 4.32 | | | | 0.85 | % | | 184 | | | 366 | |
| Class IB | | $ | 1,000.00 | | | $ | 1,011.76 | | | $ | 5.56 | | | $ | 1,000.00 | | | $ | 1,019.61 | | | $ | 5.58 | | | | 1.10 | % | | 184 | | | 366 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Hartford MidCap Value HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) |
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory and sub-advisory agreements. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for Hartford MidCap Value HLS Fund (the “Fund”) with HL Investment Advisors, LLC (“HL Advisors”) and the continuation of the investment sub-advisory agreement between HL Advisors and the Fund’s sub-adviser, Wellington Management Company, LLP (the “Sub-adviser,” and together with HL Advisors, the “Advisers”) (collectively, the “Agreements”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from the Advisers to questions posed to them on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreements at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by the Advisers and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreements.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreements with respect to the Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Fund’s contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Fund’s management fees, sub-advisory fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement.
In determining to continue the Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreements. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreements is provided below.
Nature, Extent, and Quality of Services Provided by the Advisers
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Fund by the Advisers. The Board considered, among other things, the terms of the Agreements and the range of services provided by the Advisers. The Board considered the Advisers’ professional personnel who provide services to the Fund, including each Adviser’s ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered each Adviser’s reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to the Fund. In addition, the Board considered the quality of each Adviser’s communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning each Adviser’s regulatory and compliance environment. In this regard, the Board requested and reviewed information on each Adviser’s compliance policies and procedures, compliance history, and a report from the Fund’s Chief Compliance Officer on each Adviser’s compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. The Board also noted the Advisers’ support of the Fund’s compliance control structure, particularly the resources devoted by the Advisers in support of the Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act.
| Hartford MidCap Value HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
With respect to HL Advisors, the Board noted that under the Agreements, HL Advisors is responsible for the management of the Fund, including overseeing fund operations and service providers, as well as investment advisory services in connection with selecting, monitoring and supervising the Sub-adviser. The Board considered HL Advisors’ ongoing monitoring of people, process and performance, including its quarterly reviews of each of the Hartford HLS Funds, semi-annual meetings with the leaders of each Fund’s portfolio management team, and oversight of the Funds’ approximately 40 portfolio managers. The Board recognized that HL Advisors has demonstrated a record of making changes to the management and/or strategies of the Funds when warranted. The Board considered HL Advisors’ oversight of the Sub-adviser’s investment approach and results, process for monitoring best execution of portfolio trades by the Sub-adviser, and approach to risk management with respect to the Fund and the service providers to the Fund. The Board also considered HL Advisors’ oversight of compliance with the Fund’s objective and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led to an increase in the scope of HL Advisors’ services in this regard. In addition, the Board considered HL Advisors’ ongoing commitment to review and rationalize the Hartford fund family’s product line-up and the expenses that HL Advisors had incurred in connection with fund combinations in recent years. The Board considered that HL Advisors or its affiliates are responsible for providing the Fund’s officers. The Board also noted that Hartford Life Insurance Company (“HLIC”) provides administrative services to the Fund. The Board considered its experiences with HL Advisors and HLIC with respect to each of these services.
With respect to the Sub-adviser, who provides day-to-day portfolio management services, the Board considered the quality of the Fund’s portfolio manager, the Sub-adviser’s other investment personnel, its investment philosophy and process, investment research capabilities and resources, performance record, trade execution capabilities and experience. The Board considered the experience of the Fund’s portfolio manager, the number of accounts managed by the portfolio manager, and the Sub-adviser’s method for compensating the portfolio manager.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Fund by HL Advisors and the Sub-adviser.
Performance of the Fund and the Advisers
The Board considered the investment performance of the Fund. In this regard, the Board reviewed the performance of the Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of the Fund’s performance for these time periods. The Board considered information and materials provided to the Board by the Advisers concerning Fund performance, as well as information from Lipper comparing the investment performance of the Fund to an appropriate benchmark and universe of peer funds. The Board noted that the performance of the Fund was within expectations.
The Board considered the detailed investment analytics reports provided by The Hartford’s Investment Advisory Group throughout the year. These reports include, among other things, information on the Fund’s gross and net returns, the Fund’s investment performance relative to an appropriate benchmark and peer group, various statistics concerning the Fund’s portfolio, and a narrative summary of various factors affecting Fund performance. The Board considered the Advisers’ cooperation with the Investment Committee, which assists the Board in evaluating the performance of the Fund at periodic meetings throughout the year. The Board also considered the analysis provided by the Consultant relating to the Fund’s performance track record.
In light of all the considerations noted above, the Board concluded that it had continued confidence in HL Advisors’ and the Sub-adviser’s overall capabilities to manage the Fund.
Costs of the Services and Profitability of the Advisers
The Board reviewed information regarding HL Advisors’ cost to provide investment management and related services to the Fund and HL Advisors’ profitability, both overall and for the Fund, on a pre-tax basis without regard to distribution expenses. The Board also requested and reviewed information about the profitability to HL Advisors and its affiliates from all services provided to the Fund and all aspects of their relationship with the Fund. The Board also requested and received information relating to the operations and profitability of the Sub-adviser.
The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement, noting the Consultant’s view that The Hartford’s process for calculating and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by the Advisers and their affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by the Advisers
The Board considered comparative information with respect to the management fees to be paid by the Fund to HL Advisors and the total expense ratios of the Fund. The Board also considered comparative information with respect to the sub-advisory fees to be paid by HL Advisors to the Sub-adviser, to the extent applicable. In this regard, the Board requested and reviewed information from HL Advisors and the Sub-adviser relating to the management and sub-advisory fees, including the sub-advisory fee schedule for the Fund, and total operating expenses for the Fund. The Board considered that the management fee for the Fund includes the fee paid to HLIC for providing certain administrative services to the Fund. With respect to the sub-advisory fee schedule, the Board considered representations from HL Advisors and the Sub-adviser that the Sub-adviser’s fees were negotiated at arm’s length. The Board also reviewed information from Lipper comparing the Fund’s contractual management fees, actual management fees and overall expense ratios relative to a group of funds selected by Lipper, in consultation with the Consultant, and a broader universe of funds selected by Lipper. The Board noted that, in connection with The Hartford’s preferred partnership agreement with the Sub-adviser, an additional breakpoint had been added to the Fund’s management fee schedule.
While the Board recognized that comparisons between the Fund and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business models and cost structures of the Advisers, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of the Fund’s management and sub-advisory fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to the Fund’s management and sub-advisory fees and total operating expenses.
Based on these considerations, the Board concluded that the Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding the Advisers’ realization of economies of scale with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. The Board reviewed the breakpoints in the management fee schedule for the Fund, which reduce fee rates as Fund assets grow over time, and noted that an additional breakpoint had recently been added to the Fund’s management fee schedule. The Board recognized that a fund with assets beyond the last breakpoint level will continue to benefit from economies of scale because additional assets are charged the lowest breakpoint fee resulting in lower overall effective management fee rates. The Board also recognized that a fee schedule that reaches a lower breakpoint quickly provides shareholders with the benefit of anticipated or potential economies of scale.
The Board reviewed and evaluated materials from Lipper showing how management fee schedules of peer funds reflect economies of scale for the benefit of shareholders as a peer fund’s assets hypothetically increase over time. Based on information provided by HL Advisors, Lipper, and the Consultant, the Board recognized that there is no uniform methodology for establishing breakpoints or uniform pattern in asset levels that trigger breakpoints or the amounts of breakpoints triggered.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Fund’s shareholders based on currently available information and the effective advisory fees and expense ratios for the Fund at its current and reasonably anticipated asset levels. The Board noted, however, that it would continue to monitor future growth in Fund assets and the appropriateness of additional breakpoints.
| Hartford MidCap Value HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
Other Benefits
The Board considered other benefits to the Advisers and their affiliates from their relationships with the Fund, including the role of the Fund in supporting the variable life insurance and variable annuity products offered by The Hartford. The Board reviewed information noting that HLIC, an affiliate of HL Advisors, receives fees for providing certain administrative services to the Fund, and that HLIC also receives fees for fund accounting and related services from the Fund, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Fund’s transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Fund, and the Board reviewed information on the profitability of the Fund’s transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Fund were fair and reasonable based on publicly available information.
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Fund, receives 12b-1 fees from the Fund. The Board also noted that certain affiliates of HL Advisors distribute shares of the Fund and receive compensation in that connection.
The Board considered benefits to the Sub-adviser from its use of the Fund’s brokerage commissions to obtain soft dollar research, and representations from HL Advisors and the Sub-adviser that the Sub-adviser would not make any revenue-sharing payments or any other type of distribution payments to HL Advisors or its affiliates.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the Agreements for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory and sub-advisory agreements. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreements for the Fund and approve a new investment management agreement for the Fund with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser, and a new investment sub-advisory agreement between HFMC and the Fund’s existing Sub-adviser, Wellington Management Company, LLP (together with HFMC, the “Post-Restructuring Advisers”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Fund. In order to implement the Restructuring, the Fund would terminate the existing Agreements and enter into a new investment management agreement with HFMC, with HFMC also entering into a new investment sub-advisory agreement with the Sub-adviser (collectively, the “New Agreements”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreements at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by HL Advisors and the Sub-adviser and their affiliates. In addition, the Board received in-person presentations by Fund
officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreements.
In determining to approve the New Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the New Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreements.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Fund and the performance of investment management personnel to the Fund. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Fund prior to the Restructuring would continue to provide such services to the Fund, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreements would involve no changes to (i) the contractual terms of, including the management fees payable under, the Fund’s investment management and investment sub-advisory agreements; (ii) the investment processes and strategies employed in the management of the Fund’s assets; (iii) the nature and level of services provided under the Fund’s investment management and investment sub-advisory agreements; and (iv) the day-to-day management of the Fund and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Fund.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Fund.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Fund, the investment management arrangement for the Fund following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreements: (i) nature, extent and quality of services provided by HL Advisors and the Sub-adviser; (ii) performance of the Fund, HL Advisors and the Sub-adviser; (iii) costs of the services and profitability of HL Advisors and the Sub-adviser; (iv) comparative services rendered and comparative investment management and sub-advisory fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors and the Sub-adviser with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. With respect to the other benefits to the Post-Restructuring Advisers and their affiliates from their relationships with the Fund, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting and related services from the Fund.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the New Agreements. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
| Hartford MidCap Value HLS Fund |
| Principal Risks (Unaudited) |
The principal risks of investing in the Fund are described below.
Market and Selection Risk: The Fund’s share price may fluctuate due to market risk and/or security selections that may underperform compared to the market or relevant benchmarks.
Mid-cap Stock Risk: Mid-cap stocks are generally more volatile and risky and may be less liquid than large-cap stocks because they may have limited operating histories, narrow product lines, and focus on niche markets.
Value Investing Risk: Value investments are considered to be undervalued, but they may never attain their potential value. Value-style investing falls in and out of favor, which may result in periods of underperformance.
Foreign Investment Risk: Foreign investments can be riskier than U.S. investments. Potential risks include currency risk that may result from unfavorable exchange rates, liquidity risk if decreased demand for a security makes it difficult to sell at the desired price, and risks that stem from substantially lower trading volume on foreign markets.
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
HLSAR-MCV12 2-13 113548 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 | |
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford Money Market HLS Fund
Table of Contents
This report is prepared for the general information of contract owners and qualified retirement plan participants. It is not an offer of contracts or of qualified retirement plans. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent information including the applicable sales, administrative and other charges.
| Hartford Money Market HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| CERTIFICATES OF DEPOSIT - 9.7% | | | | |
| Finance and Insurance - 9.7% | | | | |
| | | | | Commercial Banking - 2.5% | | | | |
| | | | | Sumitomo Mitsui Banking Corp. | | | | |
| $ | 24,000 | | | 0.28%, 02/07/2013 | | $ | 24,000 | |
| | 24,000 | | | 0.33%, 03/07/2013 | | | 24,000 | |
| | | | | | | | 48,000 | |
| | | | | Depository Credit Banking - 3.1% | | | | |
| | | | | Toronto-Dominion Bank New York | | | | |
| | 19,500 | | | 0.19%, 01/28/2013 | | | 19,500 | |
| | 19,500 | | | 0.31%, 07/26/2013 Δ | | | 19,500 | |
| | 19,500 | | | 0.40%, 09/13/2013 Δ | | | 19,500 | |
| | | | | | | | 58,500 | |
| | | | | International Trade Financing (Foreign Banks) - 1.9% | | | | |
| | | | | Royal Bank of Canada | | | | |
| | 15,500 | | | 0.40%, 01/03/2014 Δ | | | 15,500 | |
| | 19,500 | | | 0.50%, 07/30/2013 Δ | | | 19,500 | |
| | | | | | | | 35,000 | |
| | | | | Real Estate Credit (Mortgage Banking) - 2.2% | | | | |
| | | | | Svenska Handelsbanken, Inc. | | | | |
| | 41,000 | | | 0.24%, 03/05/2013 - 03/27/2013 | | | 41,000 | |
| | | | | | | | | |
| | | | | Total certificates of deposit | | | | |
| | | | | (cost $182,500) | | $ | 182,500 | |
| | | | | | | | | |
| COMMERCIAL PAPER - 25.1% | | | | |
| Beverage and Tobacco Product Manufacturing - 2.0% | | | | |
| | | | | Beverage Manufacturing - 2.0% | | | | |
| | | | | Coca-Cola Co. | | | | |
| $ | 12,500 | | | 0.23%, 03/22/2013 | | $ | 12,494 | |
| | 12,500 | | | 0.24%, 03/01/2013 | | | 12,495 | |
| | 11,500 | | | 0.27%, 02/04/2013 | | | 11,497 | |
| | | | | | | | 36,486 | |
| Finance and Insurance - 23.1% | | | | |
| | | | | Commercial Banking - 13.3% | | | | |
| | | | | Bank of Tokyo-Mitsubishi UFJ Ltd. | | | | |
| | 19,400 | | | 0.27%, 04/04/2013 | | | 19,386 | |
| | 19,400 | | | 0.37%, 01/23/2013 | | | 19,396 | |
| | 19,500 | | | 0.39%, 02/27/2013 | | | 19,488 | |
| | | | | Commonwealth Bank of Australia | | | | |
| | 20,750 | | | 0.22%, 02/21/2013 | | | 20,744 | |
| | 20,750 | | | 0.27%, 05/08/2013 | | | 20,730 | |
| | | | | Nordea North America, Inc. | | | | |
| | 32,250 | | | 0.22%, 03/13/2013 | | | 32,236 | |
| | | | | Old Line Funding LLC | | | | |
| | 13,750 | | | 0.21%, 03/18/2013 ■ | | | 13,744 | |
| | 9,750 | | | 0.22%, 01/22/2013 | | | 9,748 | |
| | 19,250 | | | 0.22%, 04/24/2013 ■ | | | 19,237 | |
| | | | | State Street Corp. | | | | |
| | 19,500 | | | 0.14%, 01/04/2013 | | | 19,500 | |
| | 21,000 | | | 0.22%, 04/03/2013 | | | 20,988 | |
| | 15,250 | | | 0.24%, 04/05/2013 | | | 15,240 | |
| | | | | U.S. Bank | | | | |
| | 20,000 | | | 0.29%, 01/16/2013 | | | 19,998 | |
| | | | | | | | 250,435 | |
| | | | | Consumer Lending - 2.5% | | | | |
| | | | | Straight-A Funding LLC | | | | |
| | 20,000 | | | 0.17%, 01/17/2013 ■ | | | 19,998 | |
| | 27,000 | | | 0.19%, 03/18/2013 ■ | | | 26,989 | |
| | | | | | | | 46,987 | |
| | | | | International Trade Financing (Foreign Banks) - 3.5% | | | | |
| | | | | Export Development Canada | | | | |
| 16,250 | | | 0.17%, 02/26/2013 | | | 16,245 | |
| | | | | Kreditanstalt fuer Wiederaufbau | | | | |
| | 19,250 | | | 0.13%, 01/10/2013 | | | 19,249 | |
| | 29,500 | | | 0.21%, 02/19/2013 ■ | | | 29,492 | |
| | | | | | | | 64,986 | |
| | | | | Nondepository Credit Banking - 3.8% | | | | |
| | | | | General Electric Capital Corp. | | | | |
| | 15,500 | | | 0.22%, 04/02/2013 | | | 15,492 | |
| | 15,500 | | | 0.32%, 02/11/2013 | | | 15,494 | |
| | | | | Toyota Motor Credit Corp. | | | | |
| | 19,500 | | | 0.21%, 02/26/2013 | | | 19,494 | |
| | 21,000 | | | 0.28%, 03/19/2013 | | | 20,987 | |
| | | | | | | | 71,467 | |
| | | | | | | | 433,875 | |
| | | | | Total commercial paper | | | | |
| | | | | (cost $470,361) | | $ | 470,361 | |
| | | | | | | | | |
| CORPORATE NOTES - 8.5% | | | | |
| Finance and Insurance - 8.5% | | | | |
| | | | | Depository Credit Banking - 1.1% | | | | |
| | | | | Wells Fargo Bank NA | | | | |
| $ | 10,000 | | | 0.36%, 01/17/2014 Δ | | $ | 10,000 | |
| | 10,250 | | | 0.38%, 01/22/2014 Δ | | | 10,250 | |
| | | | | | | | 20,250 | |
| | | | | Insurance Carriers - 1.0% | | | | |
| | | | | MetLife Global Funding I | | | | |
| | 19,500 | | | 0.52%, 06/10/2013 ■ Δ | | | 19,500 | |
| | | | | | | | | |
| | | | | International Trade Financing (Foreign Banks) - 3.1% | | | | |
| | | | | Export Development Canada | | | | |
| | 38,400 | | | 0.21%, 01/29/2013 - 02/15/2013 ■ | | | 38,420 | |
| | | | | International Bank for Reconstruction & Development | | | | |
| | 19,250 | | | 0.11%, 01/22/2013 | | | 19,249 | |
| | | | | | | | 57,669 | |
| | | | | Nondepository Credit Banking - 0.8% | | | | |
| | | | | General Electric Capital Corp. | | | | |
| | 15,929 | | | 0.33%, 05/01/2013 | | | 16,166 | |
| | | | | | | | | |
| | | | | Securities and Commodity Contracts and Brokerage - 2.5% | | | | |
| | | | | JP Morgan Chase & Co. | | | | |
| | 30,000 | | | 0.34%, 05/01/2013 | | | 30,442 | |
| | | | | JP Morgan Chase Bank | | | | |
| | 15,750 | | | 0.39%, 06/18/2013 Δ | | | 15,750 | |
| | | | | | | | 46,192 | |
| | | | | | | | 159,777 | |
| | | | | Total corporate notes | | | | |
| | | | | (cost $159,777) | | $ | 159,777 | |
| | | | | | | | | |
| FOREIGN GOVERNMENT OBLIGATIONS - 3.6% | | | | |
| | | | | Canada - 3.6% | | | | |
| | | | | Ontario (Province of) | | | | |
| $ | 10,000 | | | 0.14%, 01/16/2013 | | $ | 9,999 | |
| | 15,500 | | | 0.16%, 02/14/2013 | | | 15,497 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | Market Value ╪ | |
| FOREIGN GOVERNMENT OBLIGATIONS - 3.6% - (continued) | | | | |
| | | | | Canada - 3.6% - (continued) | | | | |
| | | | | Quebec (Province of) | | | | |
| $ | 41,000 | | | 0.17%, 02/21/2013 - 03/01/2013 | | $ | 40,990 | |
| | | | | | | | 66,486 | |
| | | | | Total foreign government obligations | | | | |
| | | | | (cost $66,486) | | $ | 66,486 | |
| | | | | | | | | |
| OTHER POOLS AND FUNDS - 0.0% | | | | |
| | — | | | JP Morgan U.S. Government Money Market Fund | | $ | — | |
| | | | | | | | | |
| | | | | Total other pools and funds | | | | |
| | | | | (cost $–) | | $ | — | |
| | | | | | | | | |
| REPURCHASE AGREEMENTS - 27.3% | | | | |
| | | | | Deutsche Bank Securities TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $30,000,
collateralized by U.S. Treasury Note
0.63%, 2017, value of $30,600) | | | | |
| $ | 30,000 | | | 0.15% dated 12/31/2012 | | $ | 30,000 | |
| | | | | RBS Greenwich Capital Markets TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $162,702,
collateralized by U.S. Treasury Note
0.38% - 1.25%, 2011 - 2012, value of
$165,959) | | | | |
| | 162,700 | | | 0.18% dated 12/31/2012 | | | 162,700 | |
| | | | | Royal Bank of Canada TriParty Repurchase
Agreement (maturing on 01/02/2013 in
the amount of $160,001, collateralized by
U.S. Treasury Bill 0.14%, 2013, U.S.
Treasury Note 0.25%, 2015, value of
$163,200) | | | | |
| | 160,000 | | | 0.15% dated 12/31/2012 | | | 160,000 | |
| | | | | UBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in
the amount of $160,002, collateralized by
U.S. Treasury Note 0.25%, 2014, value of
$163,200) | | | | |
| | 160,000 | | | 0.17% dated 12/31/2012 | | | 160,000 | |
| | | | | | | | | |
| | | | | Total repurchase agreements | | | | |
| | | | | (cost $512,700) | | $ | 512,700 | |
| | | | | | | | | |
| U.S. GOVERNMENT AGENCIES - 3.4% | | | | |
| | | | | FHLMC - 1.0% | | | | |
| $ | 19,000 | | | 0.15%, 02/28/2013 | | $ | 18,995 | |
| | | | | | | | | |
| | | | | FNMA - 2.4% | | | | |
| | 34,500 | | | 0.12%, 02/27/2013 | | | 34,493 | |
| | 10,800 | | | 0.13%, 01/16/2013 | | | 10,800 | |
| | | | | | | | 45,293 | |
| | | | | | | | | |
| | | | | Total U.S. government agencies | | | | |
| | | | | (cost $64,288) | | $ | 64,288 | |
| | | | | | | | | |
| U.S. GOVERNMENT SECURITIES - 22.9% | |
| | | | | Other Direct Federal Obligations - 4.1% | | | | | | | | |
| | | | | FHLB | | | | | | | | |
| $ | 38,500 | | | 0.13%, 03/01/2013 | | | | | | $ | 38,492 | |
| | 19,500 | | | 0.13%, 02/01/2013 | | | | | | | 19,498 | |
| | 19,000 | | | 0.14%, 01/18/2013 | | | | | | | 18,998 | |
| | | | | | | | | | | | 76,988 | |
| | | | | U.S. Treasury Notes - 18.8% | | | | | | | | |
| | 85,000 | | | 0.14%, 02/28/2013 | | | | | | | 85,067 | |
| | 57,750 | | | 0.15%, 02/15/2013 - 04/30/2013 | | | | | | | 57,840 | |
| | 38,750 | | | 0.16%, 03/15/2013 | | | | | | | 38,846 | |
| | 85,000 | | | 0.18%, 04/15/2013 | | | | | | | 85,386 | |
| | 85,000 | | | 0.22%, 01/15/2013 | | | | | | | 85,040 | |
| | | | | | | | | | | | 352,179 | |
| | | | | Total U.S. government securities | | | | | | | | |
| | | | | (cost $429,167) | | | | | | $ | 429,167 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $1,885,279) ▲ | | | 100.5 | % | | | $ | 1,885,279 | |
| | | | | Other assets and liabilities | | | (0.5 | )% | | | | (9,157 | ) |
| | | | | Total net assets | | | 100.0 | % | | | $ | 1,876,122 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Money Market HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. The rates presented in this Schedule of Investments are yields, unless otherwise noted. Market value of investments in U.S. dollar denominated securities of foreign issuers represents 20.0% of total net assets at December 31, 2012. |
| ▲ | Also represents cost for tax purposes. |
| | |
| Δ | Variable rate securities; the rate reported is the coupon rate in effect at December 31, 2012. |
| | |
| ■ | Securities issued within terms of a private placement memorandum, exempt from registration under Rule 144A under the Securities Act of 1933, as amended, and may be sold only to qualified institutional buyers. Unless otherwise indicated, these holdings are determined to be liquid. At December 31, 2012, the aggregate value of these securities was $167,380, which represents 8.9% of total net assets. |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
| GLOSSARY: (abbreviations used in preceding Schedule of Investments) |
| |
| Other Abbreviations: |
| FHLB | Federal Home Loan Bank |
| FHLMC | Federal Home Loan Mortgage Corp. |
| FNMA | Federal National Mortgage Association |
The accompanying notes are an integral part of these financial statements.
| Hartford Money Market HLS Fund |
| Investment Valuation Hierarchy Level Summary |
| December 31, 2012 |
| (000’s Omitted) |
| | | Total | | | Level 1 ♦ | | | Level 2 ♦ | | | Level 3 | |
| Assets: | | | | | | | | | | | | | | | | |
| Certificates of Deposit | | $ | 182,500 | | | $ | – | | | $ | 182,500 | | | $ | – | |
| Commercial Paper | | | 470,361 | | | | – | | | | 470,361 | | | | – | |
| Corporate Notes | | | 159,777 | | | | – | | | | 159,777 | | | | – | |
| Foreign Government Obligations | | | 66,486 | | | | – | | | | 66,486 | | | | – | |
| Other Pools and Funds | | | – | | | | – | | | | – | | | | – | |
| Repurchase Agreements | | | 512,700 | | | | – | | | | 512,700 | | | | – | |
| U.S. Government Agencies | | | 64,288 | | | | – | | | | 64,288 | | | | – | |
| U.S. Government Securities | | | 429,167 | | | | – | | | | 429,167 | | | | – | |
| Total | | $ | 1,885,279 | | | $ | – | | | $ | 1,885,279 | | | $ | – | |
| ♦ | For the year ended December 31, 2012, there were no transfers between Level 1 and Level 2. |
The accompanying notes are an integral part of these financial statements.
| Hartford Money Market HLS Fund |
| Statement of Assets and Liabilities |
| December 31, 2012 |
| (000’s Omitted) |
| Assets: | | | | |
| Investments in securities, at market value (cost $1,372,579) | | $ | 1,372,579 | |
| Investments in repurchase agreements, at market value (cost $512,700) | | | 512,700 | |
| Cash | | | 1 | |
| Receivables: | | | | |
| Fund shares sold | | | 3,195 | |
| Dividends and interest | | | 2,026 | |
| Other assets | | | 80 | |
| Total assets | | | 1,890,581 | |
| Liabilities: | | | | |
| Payables: | | | | |
| Fund shares redeemed | | | 14,250 | |
| Investment management fees | | | 144 | |
| Accrued expenses | | | 65 | |
| Total liabilities | | | 14,459 | |
| Net assets | | $ | 1,876,122 | |
| Summary of Net Assets: | | | | |
| Capital stock and paid-in-capital | | $ | 1,876,122 | |
| Accumulated net realized gain | | | — | |
| Net assets | | $ | 1,876,122 | |
| Shares authorized | | | 14,000,000 | |
| Par value | | $ | 0.001 | |
| Class IA: Net asset value per share | | $ | 1.00 | |
| Shares outstanding | | | 1,603,657 | |
| Net assets | | $ | 1,603,657 | |
| Class IB: Net asset value per share | | $ | 1.00 | |
| Shares outstanding | | | 272,465 | |
| Net assets | | $ | 272,465 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Money Market HLS Fund |
| Statement of Operations |
| For the Year Ended December 31, 2012 |
| (000’s Omitted) |
| Investment Income: | | | | |
| Dividends | | $ | — | |
| Interest | | | 3,694 | |
| Total investment income, net | | | 3,694 | |
| | | | | |
| Expenses: | | | | |
| Investment management fees | | | 8,220 | |
| Transfer agent fees | | | 2 | |
| Custodian fees | | | 4 | |
| Accounting services fees | | | 205 | |
| Board of Directors' fees | | | 55 | |
| Audit fees | | | 14 | |
| Other expenses | | | 216 | |
| Total expenses (before waivers and fees paid indirectly) | | | 8,716 | |
| Expense waivers | | | (5,017 | ) |
| Custodian fee offset | | | — | |
| Total waivers and fees paid indirectly | | | (5,017 | ) |
| Total expenses, net | | | 3,699 | |
| Net Investment Loss | | | (5 | ) |
| | | | | |
| Net Realized Gain on Investments: | | | | |
| Net realized gain on investments | | | 5 | |
| Net Realized Gain on Investments | | | 5 | |
| Net Gain on Investments | | | 5 | |
| Net Increase in Net Assets Resulting from Operations | | $ | — | |
The accompanying notes are an integral part of these financial statements.
| Hartford Money Market HLS Fund |
| Statement of Changes in Net Assets |
| |
| (000’s Omitted) |
| | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| Operations: | | | | | | | | |
| Net investment loss | | $ | (5 | ) | | $ | — | |
| Net realized gain on investments | | | 5 | | | | — | |
| Net Increase in Net Assets Resulting from Operations | | | — | | | | — | |
| Capital Share Transactions: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 1,183,777 | | | | 1,775,191 | |
| Redeemed | | | (1,550,432 | ) | | | (1,890,893 | ) |
| Total capital share transactions | | | (366,655 | ) | | | (115,702 | ) |
| Class IB | | | | | | | | |
| Sold | | | 156,549 | | | | 267,452 | |
| Redeemed | | | (260,732 | ) | | | (310,323 | ) |
| Total capital share transactions | | | (104,183 | ) | | | (42,871 | ) |
| Net decrease from capital share transactions | | | (470,838 | ) | | | (158,573 | ) |
| Net Decrease in Net Assets | | | (470,838 | ) | | | (158,573 | ) |
| Net Assets: | | | | | | | | |
| Beginning of period | | | 2,346,960 | | | | 2,505,533 | |
| End of period | | $ | 1,876,122 | | | $ | 2,346,960 | |
| Undistributed (distribution in excess of) net investment income | | $ | — | | | $ | — | |
| Shares: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 1,183,777 | | | | 1,775,191 | |
| Redeemed | | | (1,550,432 | ) | | | (1,890,893 | ) |
| Total share activity | | | (366,655 | ) | | | (115,702 | ) |
| Class IB | | | | | | | | |
| Sold | | | 156,549 | | | | 267,452 | |
| Redeemed | | | (260,732 | ) | | | (310,323 | ) |
| Total share activity | | | (104,183 | ) | | | (42,871 | ) |
The accompanying notes are an integral part of these financial statements.
| Hartford Money Market HLS Fund |
| Notes to Financial Statements |
| December 31, 2012 |
| (000’s Omitted) |
1. Organization:
Hartford Money Market HLS Fund (the “Fund”) serves as an underlying investment option for certain variable annuity and variable life insurance separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates and certain qualified retirement plans. The Fund may also serve as an underlying investment option for certain variable annuity and variable life separate accounts of other insurance companies. Owners of variable annuity contracts and policyholders of variable life insurance contracts may choose the funds permitted in the variable insurance contract prospectus. In addition, participants in certain qualified retirement plans may choose the Fund if permitted by their plans.
Hartford Series Fund, Inc. (the “Company”) is an open-end registered management investment company comprised of thirty portfolios. Financial Statements for the Fund, a series of the Company, are included in this report.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund is a diversified open-end management investment company.
The Fund is divided into Class IA and Class IB shares. Each class is offered at the per share net asset value (“NAV”) without a sales charge and is subject to the same expenses, except that the Class IB shares are subject to distribution and service fees charged pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies of the Fund in the preparation of its financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| a) | Determination of Net Asset Value – The NAV of each class of the Fund’s shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| b) | Investment Valuation and Fair Value Measurements – The Fund’s investments are valued at amortized cost, which approximates market value. Investments in open-end mutual funds are valued at the respective NAV of each open-end mutual fund as determined on the Valuation Date. |
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| · | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange traded funds, rights and warrants. |
| · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable |
| Hartford Money Market HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| | market data. Level 2 may include debt investments that are traded less frequently than exchange traded instruments and which are valued using independent pricing services; foreign equities, which are principally traded on certain foreign markets and are adjusted daily pursuant to a fair value pricing service in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close; and short-term investments, which are valued at amortized cost. |
| · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price. |
The Board of Directors of the Company generally reviews and approves the “Procedures for Valuation of Portfolio Securities” on an annual basis. These procedures define how investments are to be valued, including the formation and activities of a Valuation Committee. The Valuation Committee is responsible for determining in good faith the fair value of investments when the value cannot be obtained from primary pricing services or alternative sources or if the valuation of an investment as provided by the primary pricing service or alternative source is believed not to reflect the investment’s fair value as of the Valuation Date. Members of the Valuation Committee include the Fund’s Treasurer or designee, a Vice President of the Fund with legal expertise or designee, and a Vice President of the investment manager or designee. In addition, the Fund’s Chief Compliance Officer shall designate a member of the compliance group to attend Valuation Committee meetings as a non-voting resource, to monitor for and provide guidance with respect to compliance with these procedures. Two members of the Valuation Committee or their designees, representing different departments, shall constitute a quorum for purposes of permitting the Valuation Committee to take action. The Valuation Committee will consider all relevant factors in determining an investment’s fair value, and may seek the advice of the Fund’s sub-adviser, knowledgeable brokers, and legal counsel in making such determination. The Valuation Committee reports to the Audit Committee of the Company’s Board of Directors. The Audit Committee receives quarterly written reports which include details of all fair-valued investments, including the reason for the fair valuation, and an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such investments (the “look-back” test). The Board of Directors then must consider for ratification all of the fair value determinations made during the previous quarter.
Valuation levels are not necessarily indicative of the risk associated with investing in such investments. Individual investments within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
For additional information, refer to the Investment Valuation Hierarchy Level Summary and the Level 3 roll-forward reconciliation, if applicable, which follow the Schedule of Investments.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period.
| c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Realized gains and losses are determined on the basis of identified cost. |
Interest income, including amortization of premium and accretion of discounts, is accrued on a daily basis.
| d) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Fund’s shares are executed in accordance with the investment instructions of the contract holders and plan participants. The NAV of the Fund’s shares is determined as of the close of business on each business day of the Exchange. The NAV is determined separately for each class of shares of the Fund by dividing the Fund’s net assets attributable to that class by the number of shares of the class outstanding. Each class of shares offered by the Fund has equal rights as to assets and voting privileges (except that shareholders of a class have exclusive voting rights regarding any matter relating solely to that class of shares). Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets of the class. Realized and unrealized capital gains and losses are allocated daily based on the relative net assets of each class of shares of the Fund. |
Orders for the purchase of the Fund’s shares received prior to the close of the Exchange on any day the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Fund. Normally, dividends from net investment income are declared daily and paid monthly. Dividends from realized capital gains, if any, are paid at least once a year.
Distributions from net investment income, net realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These differences may include but are not limited to losses deferred due to wash sale adjustments and short-term capital gain adjustments. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Fund’s capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| 3. | Securities and Other Investments: |
| a) | Repurchase Agreements – A repurchase agreement is an agreement by which a counterparty agrees to sell an investment and agrees to repurchase the investment sold from the buyer at a mutually agreed upon time and price. At the time the Fund enters into a repurchase agreement, the value of the underlying collateral, including accrued interest, will be equal to or exceed the value of the repurchase agreement. Repurchase agreements expose the Fund to counterparty risk - that is, the risk that the counterparty will not fulfill its obligations. To minimize counterparty risk, the investments that serve to collateralize the repurchase agreement are held by the Fund’s custodian in book entry or physical form in the custodial account of the Fund or in a third party custodial account. Repurchase agreements are valued at cost plus accrued interest, which approximates fair value. The Fund, as shown on the Schedule of Investments, had outstanding repurchase agreements as of December 31, 2012. |
| b) | Illiquid and Restricted Investments – The Fund is permitted to invest up to 5% of its net assets in illiquid investments. Illiquid investments are those that may not be sold or disposed of in the ordinary course of business within seven days, at approximately the price used to determine the Fund’s NAV. The Fund may not be able to sell illiquid investments when its sub-adviser considers it desirable to do so or may have to sell such investments at a price that is lower than the price that could be obtained if the investments were more liquid. A sale of illiquid investments may require more time and may result in higher dealer discounts and other selling expenses than does the sale of those that are liquid. Illiquid investments also may be more difficult to value due to the unavailability of reliable market quotations for such investments, and an investment in them may have an adverse impact on the Fund’s NAV. The Fund may also purchase certain restricted investments that can only be resold to certain qualified investors and may be determined to be liquid pursuant to policies and guidelines established by the Company’s Board of Directors. The Fund, as shown on the Schedule of Investments, had illiquid and/or restricted investments as of December 31, 2012. |
| Hartford Money Market HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| c) | Investments Purchased on a When-Issued or Delayed-Delivery Basis – Delivery and payment for investments that have been purchased by the Fund on a forward commitment, or when-issued or delayed-delivery basis, take place beyond the customary settlement period. A fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell delayed-delivery investments before they are delivered, which may result in a realized gain or loss. During this period, such investments are subject to market fluctuations, and the Fund identifies investments segregated in its records with a value at least equal to the amount of the commitment. As of December 31, 2012, the Fund had no outstanding when-issued or delayed-delivery investments. |
| a) | Credit and Counterparty Risks – Credit risk depends largely on the perceived financial health of bond issuers. In general, the credit rating is inversely related to the credit risk of the issuer. Higher rated bonds generally are deemed to have less credit risk, while lower or unrated bonds are deemed to have higher risk of default. The share price, yield and total return of a fund that holds securities with higher credit risk may be more volatile than those of a fund that holds bonds with lower credit risk. Similar to credit risk, the Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will default. |
| b) | Market Risks – The Fund’s investments expose the Fund to various risks including, but not limited to, interest rate risk. Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the value of certain fixed income securities held by the Fund is likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. |
| a) | Federal Income Taxes – For federal income tax purposes, the Fund intends to continue to qualify as a Regulated Investment Company (“RIC”) under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders and otherwise complying with the requirements of the IRC. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains prior to the next fiscal year-end. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments and short-term capital gain adjustments. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. No distributions were made in the current or prior year. |
| c) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as foreign currency, Passive Foreign Investment Companies (PFIC), expiration or utilization of capital loss carryforwards or net operating losses. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Fund’s distributions may be shown in the accompanying Statement of Changes in Net Assets as from undistributed net investment income, from accumulated net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Fund recorded reclassifications to increase (decrease) the accounts listed below: |
| | | Amount | |
| Undistributed Net Investment Income | | $ | 5 | |
| Accumulated Net Realized Gain (Loss) | | | (5 | ) |
| d) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation. |
The Fund had no capital loss carryforward for U.S. federal income tax purposes as of December 31, 2012.
| e) | Accounting for Uncertainty in Income Taxes – The Fund has adopted financial reporting rules that require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Fund does not have an examination in progress. |
The Fund has reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules had no effect on the Fund’s financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2012. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Fund’s investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Fund pursuant to an Investment Management Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Fund’s investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees payable under, the Fund’s investment management agreements; or (ii) the day-to-day management of the Fund. The investment manager has overall investment supervisory responsibility for the Fund. In addition, the investment manager provides administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. The investment manager has contracted with Hartford Investment Management Company (“Hartford Investment Management”) under a sub-advisory agreement for the provision of day-to-day investment management services to the Fund in accordance with the Fund’s investment objective and policies. The Fund pays a fee to the investment manager, a portion of which may be used to compensate Hartford Investment Management. |
| Hartford Money Market HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered as of December 31, 2012; the rates are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee | |
| On first $5 billion | | | 0.4000 | % |
| On next $5 billion | | | 0.3800 | % |
| Over $10 billion | | | 0.3700 | % |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Fund. HLIC provided accounting services for the Fund for the fiscal year ended December 31, 2012. The replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Fund or the fees charged to the Fund for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Fund, HFMC provides accounting services to the Fund and receives monthly compensation based on the Fund’s average daily net assets at the rates set forth below. The Fund’s accounting services fees are accrued daily and paid monthly. |
| Average Daily Net Assets | | Annual Fee | |
| All Assets | | | 0.010 | % |
| c) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund and allocated to classes within a Fund in proportion to the average daily net assets of the Fund and each class, except where allocation of certain expenses is more fairly made directly to the Fund or to specific classes within a Fund. |
The Investment Manager has agreed to reimburse expenses or waive fees to the extent necessary to prevent earnings from falling below the level of expenses. Any such expense reimbursement or waiver is voluntary and can be changed or terminated at any time without notice. There is no guarantee that the Fund will maintain a $1.00 net asset value per share or any particular level of yield.
| d) | Fees Paid Indirectly – The Fund’s custodian banks have agreed to reduce its fees when the Fund maintains cash on deposit in a non-interest-bearing custody account. For the year ended December 31, 2012, these amounts, if any, are included in the Statement of Operations. |
The ratio of expenses to average net assets in the accompanying financial highlights excludes the reduction in expenses related to fees paid indirectly. The annualized expense ratio after waivers for the period listed below reflecting the reduction for fees paid indirectly is as follows:
| | | Year Ended
December 31, 2012 | |
| Class IA | | | 0.18 | % |
| Class IB | | | 0.18 | |
| e) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Fund's principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD with HIFSCO did not result in any changes to the distribution services provided to the Fund. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Fund, has adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, 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, subject to the review and approval of the Company’s Board of Directors. |
The Distribution Plan provides that the Fund may pay annually up to 0.25% of the average daily net assets of the Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, the Fund is authorized to make payments monthly to the Distributor that may be used to pay or compensate 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. These fees are accrued daily and paid monthly.
At a meeting held on February 4, 2009, the Board of Directors approved the temporary reduction of distribution and service fees under the Fund’s 12b-1 Plan of Distribution to zero for Class IB for a period of six months, effective March 1, 2009. The Board of Directors has extended the reduction of payment of distribution and service fees through February 28, 2013. The Fund’s action results in a corresponding temporary reduction of 12b-1 payments of amounts paid to financial intermediaries by the Fund’s distributor to zero for Class IB during this time period. The Board of Directors’ action can be changed at any time.
| f) | Other Related Party Transactions – Certain officers of the Fund are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Fund’s Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Fund was in the amount of $3. Hartford Administrative Services Company (“HASCO”), an indirect wholly owned subsidiary of The Hartford, provides transfer agent services to the Fund. The amount paid to HASCO can be found in the Statement of Operations. These fees are accrued daily and paid monthly. |
| 7. | Investment Transactions: |
For the year ended December 31, 2012, the costs of purchases and sales of securities (including U.S. Government Obligations) for the Fund were $151,059,800 and $151,521,088, respectively.
Under the Company’s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
| Hartford Money Market HLS Fund |
| Financial Highlights |
| - Selected Per-Share Data (A) - |
| Class | | | Net Asset Value at
Beginning of
Period | | | | Net Investment
Income (Loss) | | | | Net Realized and
Unrealized Gain
(Loss) on
Investments | | | | Total from
Investment
Operations | | | | Dividends from Net
Investment Income | | | | Distributions from
Realized Capital
Gains | | | | Distributions from
Capital | | | | Total Distributions | | | | Net Asset Value at
End of Period | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2012 | | | | | | | | | | | | | | | | |
| IA | | $ | 1.00 | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | 1.00 | |
| IB | | | 1.00 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2011 | | | | | | | | | | | | | | | | |
| IA | | | 1.00 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1.00 | |
| IB | | | 1.00 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2010 | | | | | | | | | | | | | | | | |
| IA | | | 1.00 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1.00 | |
| IB | | | 1.00 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2009 | | | | | | | | | | | | | | | | |
| IA | | | 1.00 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1.00 | |
| IB | | | 1.00 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2008 | | | | | | | | | | | | | | | | |
| IA | | | 1.00 | | | | 0.02 | | | | – | | | | 0.02 | | | | (0.02 | ) | | | – | | | | – | | | | (0.02 | ) | | | 1.00 | |
| IB | | | 1.00 | | | | 0.02 | | | | – | | | | 0.02 | | | | (0.02 | ) | | | – | | | | – | | | | (0.02 | ) | | | 1.00 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include 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 would lower the Fund's performance. |
| (C) | Ratios do not reflect reductions for fees paid indirectly. Please see Fees Paid Indirectly in the Notes to Financial Statements. |
| - Ratios and Supplemental Data - |
| Total Return(B) | | | Net Assets at End of Period | | | Ratio of Expenses to Average Net
Assets Before Waivers(C) | | | Ratio of Expenses to Average Net
Assets After Waivers(C) | | | Ratio of Net Investment Income
(Loss) to Average Net Assets | | | Portfolio Turnover Rate | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | – | % | | $ | 1,603,657 | | | | 0.42 | % | | | 0.18 | % | | | – | % | | | N/A | |
| | – | | | | 272,465 | | | | 0.42 | | | | 0.18 | | | | – | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | – | | | | 1,970,312 | | | | 0.42 | | | | 0.16 | | | | – | | | | N/A | |
| | – | | | | 376,648 | | | | 0.42 | | | | 0.16 | | | | – | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | – | | | | 2,086,014 | | | | 0.43 | | | | 0.22 | | | | – | | | | N/A | |
| | – | | | | 419,519 | | | | 0.43 | | | | 0.22 | | | | – | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 0.06 | | | | 2,820,121 | | | | 0.48 | | | | 0.32 | | | | 0.02 | | | | N/A | |
| | 0.05 | | | | 548,134 | | | | 0.53 | | | | 0.34 | | | | 0.00 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 2.15 | | | | 4,427,230 | | | | 0.47 | | | | 0.42 | | | | 2.01 | | | | N/A | |
| | 1.89 | | | | 774,432 | | | | 0.72 | | | | 0.67 | | | | 1.80 | | | | – | |
| Report of Independent Registered Public Accounting Firm |
| The Board of Directors and Shareholders of |
| Hartford Series Fund, Inc. |
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Hartford Money Market HLS Fund (one of the portfolios constituting Hartford Series Fund, Inc. (the Fund)) as of December 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodians and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Hartford Money Market HLS Fund (one of the portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Minneapolis, MN
February 15, 2013
| Hartford Money Market HLS Fund |
| Directors and Officers (Unaudited) |
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Fund pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Fund. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Fund’s statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Fund pays to The Hartford a portion of the Chief Compliance Officer’s compensation, but does not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
| Hartford Money Market HLS Fund |
| Directors and Officers (Unaudited) – (continued) |
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010 (4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and a record of how the Fund voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
| Hartford Money Market HLS Fund |
| Expense Example (Unaudited) |
Your Fund's Expenses
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Actual return | | | Hypothetical (5% return before expenses) | | | | | | | | | | |
| | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2
year | | | Days
in the
full
year | |
| Class IA | | $ | 1,000.00 | | | $ | 1,000.00 | | | $ | 1.02 | | | $ | 1,000.00 | | | $ | 1,024.12 | | | $ | 1.03 | | | | 0.20 | % | | | 184 | | | | 366 | |
| Class IB | | $ | 1,000.00 | | | $ | 1,000.00 | | | $ | 1.01 | | | $ | 1,000.00 | | | $ | 1,024.12 | | | $ | 1.03 | | | | 0.20 | % | | | 184 | | | | 366 | |
| Hartford Money Market HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) |
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory and sub-advisory agreements. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for Hartford Money Market HLS Fund (the “Fund”) with HL Investment Advisors, LLC (“HL Advisors”) and the continuation of the investment sub-advisory agreement between HL Advisors and the Fund’s sub-adviser, Hartford Investment Management Company (the “Sub-adviser,” and together with HL Advisors, the “Advisers”) (collectively, the “Agreements”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from the Advisers to questions posed to them on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreements at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by the Advisers and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreements.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreements with respect to the Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Fund’s contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Fund’s management fees, sub-advisory fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement.
In determining to continue the Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreements. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreements is provided below.
Nature, Extent, and Quality of Services Provided by the Advisers
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Fund by the Advisers. The Board considered, among other things, the terms of the Agreements and the range of services provided by the Advisers. The Board considered the Advisers’ professional personnel who provide services to the Fund, including each Adviser’s ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered each Adviser’s reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to the Fund. In addition, the Board considered the quality of each Adviser’s communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning each Adviser’s regulatory and compliance environment. In this regard, the Board requested and reviewed information on each Adviser’s compliance policies and procedures, compliance history, and a report from the Fund’s Chief Compliance Officer on each Adviser’s compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. The Board also noted the Advisers’ support of the Fund’s compliance control structure, particularly the resources devoted by the Advisers in support of the Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act.
| Hartford Money Market HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
With respect to HL Advisors, the Board noted that under the Agreements, HL Advisors is responsible for the management of the Fund, including overseeing fund operations and service providers, as well as investment advisory services in connection with selecting, monitoring and supervising the Sub-adviser. The Board considered HL Advisors’ ongoing monitoring of people, process and performance, including its quarterly reviews of each of the Hartford HLS Funds, semi-annual meetings with the leaders of each Fund’s portfolio management team, and oversight of the Funds’ approximately 40 portfolio managers. The Board recognized that HL Advisors has demonstrated a record of making changes to the management and/or strategies of the Funds when warranted. The Board considered HL Advisors’ oversight of the Sub-adviser’s investment approach and results, process for monitoring best execution of portfolio trades by the Sub-adviser, and approach to risk management with respect to the Fund and the service providers to the Fund. The Board also considered HL Advisors’ oversight of compliance with the Fund’s objective and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led to an increase in the scope of HL Advisors’ services in this regard. In addition, the Board considered HL Advisors’ ongoing commitment to review and rationalize the Hartford fund family’s product line-up and the expenses that HL Advisors had incurred in connection with fund combinations in recent years. The Board considered that HL Advisors or its affiliates are responsible for providing the Fund’s officers. The Board also noted that Hartford Life Insurance Company (“HLIC”) provides administrative services to the Fund. The Board considered its experiences with HL Advisors and HLIC with respect to each of these services.
With respect to the Sub-adviser, who provides day-to-day portfolio management services, the Board considered the quality of the Fund’s portfolio managers, the Sub-adviser’s other investment personnel, its investment philosophy and process, investment research capabilities and resources, performance record, trade execution capabilities and experience. The Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers, and the Sub-adviser’s method for compensating the portfolio managers.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Fund by HL Advisors and the Sub-adviser.
Performance of the Fund and the Advisers
The Board considered the investment performance of the Fund. In this regard, the Board reviewed the performance of the Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of the Fund’s performance for these time periods. The Board considered information and materials provided to the Board by the Advisers concerning Fund performance, as well as information from Lipper comparing the investment performance of the Fund to an appropriate benchmark and universe of peer funds. The Board noted that the performance of the Fund was within expectations given the Fund’s focus on liquidity and preservation of capital.
The Board considered the detailed investment analytics reports provided by The Hartford’s Investment Advisory Group throughout the year. These reports include, among other things, information on the Fund’s gross and net returns, the Fund’s investment performance relative to an appropriate benchmark and peer group, various statistics concerning the Fund’s portfolio, and a narrative summary of various factors affecting Fund performance. The Board considered the Advisers’ cooperation with the Investment Committee, which assists the Board in evaluating the performance of the Fund at periodic meetings throughout the year. The Board also considered the analysis provided by the Consultant relating to the Fund’s performance track record.
In light of all the considerations noted above, the Board concluded that it had continued confidence in HL Advisors’ and the Sub-adviser’s overall capabilities to manage the Fund.
Costs of the Services and Profitability of the Advisers
The Board reviewed information regarding HL Advisors’ cost to provide investment management and related services to the Fund and HL Advisors’ profitability, both overall and for the Fund, on a pre-tax basis without regard to distribution expenses. The Board also requested and reviewed information about the profitability to HL Advisors and its affiliates from all services provided to the Fund and all aspects of their relationship with the Fund. The Board noted that the fees payable to the Sub-adviser are equal to its estimated costs in providing sub-advisory services. Accordingly, the costs and profitability for the Sub-adviser and HL Advisors were considered in the aggregate.
The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement, noting the Consultant’s view that The Hartford’s process for calculating and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by the Advisers and their affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by the Advisers
The Board considered comparative information with respect to the management fees to be paid by the Fund to HL Advisors and the total expense ratios of the Fund. The Board also considered comparative information with respect to the sub-advisory fees to be paid by HL Advisors to the Sub-adviser, to the extent applicable. In this regard, the Board requested and reviewed information from HL Advisors and the Sub-adviser relating to the management and sub-advisory fees and total operating expenses for the Fund. The Board considered that the management fee for the Fund includes the fee paid to HLIC for providing certain administrative services to the Fund. The Board also reviewed information from Lipper comparing the Fund’s contractual management fees, actual management fees and overall expense ratios relative to a group of funds selected by Lipper, in consultation with the Consultant, and a broader universe of funds selected by Lipper. The Board also considered that it had approved a temporary reduction of the distribution and service fees for the Fund’s Class IB shares through February 28, 2013.
While the Board recognized that comparisons between the Fund and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business models and cost structures of the Advisers, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of the Fund’s management and sub-advisory fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to the Fund’s management and sub-advisory fees and total operating expenses.
Based on these considerations, the Board concluded that the Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding the Advisers’ realization of economies of scale with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. The Board reviewed the breakpoints in the management fee schedule for the Fund, which reduce fee rates as Fund assets grow over time. The Board recognized that a fund with assets beyond the last breakpoint level will continue to benefit from economies of scale because additional assets are charged the lowest breakpoint fee resulting in lower overall effective management fee rates. The Board also recognized that a fee schedule that reaches a lower breakpoint quickly provides shareholders with the benefit of anticipated or potential economies of scale.
The Board reviewed and evaluated materials from Lipper showing how management fee schedules of peer funds reflect economies of scale for the benefit of shareholders as a peer fund’s assets hypothetically increase over time. Based on information provided by HL Advisors, Lipper, and the Consultant, the Board recognized that there is no uniform methodology for establishing breakpoints or uniform pattern in asset levels that trigger breakpoints or the amounts of breakpoints triggered.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Fund’s shareholders based on currently available information and the effective advisory fees and expense ratios for the Fund at its current and reasonably anticipated asset levels. The Board noted, however, that it would continue to monitor future growth in Fund assets and the appropriateness of additional breakpoints.
| Hartford Money Market HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
Other Benefits
The Board considered other benefits to the Advisers and their affiliates from their relationships with the Fund, including the role of the Fund in supporting the variable life insurance and variable annuity products offered by The Hartford. The Board reviewed information noting that HLIC, an affiliate of HL Advisors, receives fees for providing certain administrative services to the Fund, and that HLIC also receives fees for fund accounting and related services from the Fund, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Fund’s transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Fund, and the Board reviewed information on the profitability of the Fund’s transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Fund were fair and reasonable based on publicly available information.
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Fund, receives 12b-1 fees from the Fund. The Board also noted that certain affiliates of HL Advisors distribute shares of the Fund and receive compensation in that connection.
The Board considered the benefits, if any, to the Sub-adviser from any use of the Fund’s brokerage commissions to obtain soft dollar research.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the Agreements for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory and sub-advisory agreements. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreements for the Fund and approve a new investment management agreement for the Fund with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser, and a new investment sub-advisory agreement between HFMC and the Fund’s existing Sub-adviser, Wellington Management Company, LLP (together with HFMC, the “Post-Restructuring Advisers”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Fund. In order to implement the Restructuring, the Fund would terminate the existing Agreements and enter into a new investment management agreement with HFMC, with HFMC also entering into a new investment sub-advisory agreement with the Sub-adviser (collectively, the “New Agreements”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreements at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by HL Advisors and the Sub-adviser and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreements.
In determining to approve the New Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the New Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreements.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Fund and the performance of investment management personnel to the Fund. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Fund prior to the Restructuring would continue to provide such services to the Fund, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreements would involve no changes to (i) the contractual terms of, including the management fees payable under, the Fund’s investment management and investment sub-advisory agreements; (ii) the investment processes and strategies employed in the management of the Fund’s assets; (iii) the nature and level of services provided under the Fund’s investment management and investment sub-advisory agreements; and (iv) the day-to-day management of the Fund and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Fund.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Fund.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Fund, the investment management arrangement for the Fund following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreements: (i) nature, extent and quality of services provided by HL Advisors and the Sub-adviser; (ii) performance of the Fund, HL Advisors and the Sub-adviser; (iii) costs of the services and profitability of HL Advisors and the Sub-adviser; (iv) comparative services rendered and comparative investment management and sub-advisory fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors and the Sub-adviser with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. With respect to the other benefits to the Post-Restructuring Advisers and their affiliates from their relationships with the Fund, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting and related services from the Fund.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the New Agreements. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
| Hartford Money Market HLS Fund |
| Principal Risks (Unaudited) |
The principal risks of investing in the Fund are described below.
Money market funds are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although the Fund seeks to preserve the value of the investment at $1.00 per share, it is possible to lose money by investing in the Fund. There can be no guarantee that the Fund will achieve or maintain any particular level of yield.
Fixed Income Risk: The Fund is subject to interest rate risk (the risk that the value of an investment decreases when interest rates rise) and credit risk (the risk that the issuing company of a security is unable to pay interest and principal when due).
Foreign Debt Risk (Money Market): Investments in foreign money market securities may be riskier than investments in U.S. securities.
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
HLSAR-MM12 2-13 113549 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 | |
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford Portfolio Diversifier HLS Fund
Table of Contents
This report is prepared for the general information of contract owners and qualified retirement plan participants. It is not an offer of contracts or of qualified retirement plans. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent information including the applicable sales, administrative and other charges.
The views expressed in the Fund’s Manager Discussion under ‘‘Why did the Fund perform this way?’’ and ‘‘What is the outlook?’’ are views of the Fund’s sub-adviser and portfolio management team through the end of the period and are subject to change based on market and other conditions.
| Hartford Portfolio Diversifier HLS Fund inception 06/06/2011 |
| (sub-advised by Hartford Investment Management Company) |
| |
| Investment objective – Seeks to produce investment performance that mitigates against significant declines in the aggregate value of investment allocations to equity mutual funds under certain variable annuity contracts issued by Hartford Life Insurance Company and its affiliates, while also preserving the potential for modest appreciation in the Fund’s net asset value when markets are appreciating. |
Performance Overview 6/06/11 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IB.
Average Annual Total Returns (as of 12/31/12)
| | | 1 Year | | | Since
Inception▲ | |
| Portfolio Diversifier IB | | | -7.58% | | | | -3.45% | |
| Barclays U.S. Aggregate Bond Index | | | 4.22% | | | | 5.59% | |
| S&P 500 Index | | | 15.99% | | | | 9.20% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund’s net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
Barclays U.S. Aggregate Bond Index (formerly known as Barclays Capital U.S. Aggregate Bond Index) is an unmanaged index and is composed of securities from the Barclays Government/Credit Bond Index, Mortgage-Backed Securities Index, Asset-Backed Securities Index and Commercial Mortgage-Backed Securities Index.
S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.
You cannot invest directly in an index.
As of the Fund’s current prospectus dated May 1, 2012, the net total annual operating expense ratio for Class IB shares was 0.85%, and the gross total annual operating expense ratio for Class IB shares was 0.93%. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect until April 30, 2013, and automatically renew for one-year terms unless terminated by the Fund’s Investment Advisor (Hartford Funds Management Company, LLC). For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
| Hartford Portfolio Diversifier HLS Fund |
| Manager Discussion |
| December 31, 2012 (Unaudited) |
| Portfolio Managers | |
| Paul Bukowski, CFA | James Ong, CFA |
| Executive Vice President and Head of Quantitative Equities | Vice President |
| | |
How did the Fund perform?
The Class IB Shares of the Hartford Portfolio Diversifier HLS Fund returned (-7.58%) for the twelve-month period ended December 31, 2012, compared to the returns of the Barclays U.S. Aggregate Bond Index which returned 4.22% and the S&P 500 Index which returned 15.99% for the same period.
Why did the Fund perform this way?
The Fund performed in line with expectations. The Fund generally invests in securities, which increase in value as the S&P 500 Index declines (protection), and securities, which are expected to approximate the performance of the Barclays U.S. Aggregate Bond and S&P 500 Indices.
Overall, the Fund declined in value as it is designed to achieve performance generally “contra” to that of the S&P 500 Index, which posted strong performance appreciating 15.99% during 2012. The Fund’s protection securities, short S&P futures and a modest long-term S&P put options position, declined in value, providing a head wind (i.e. negative impact) to performance during the year. The fixed income sleeve offset some of this decline as it contributed modest positive performance returning over 4%.
What is your outlook?
Equity sentiment and flows continue to be challenged as has been the case for 2012. Investors still seem soured by equities and legitimately concerned about the after-shocks of the Global Financial Crisis and its impact on the U.S. economy and the fiscal condition of the government. And yet, led by a surging Financial sector (+26.3%), the S&P 500 returned 15.99% for the year. Resolving, or fading, macro issues and attendant margin expansion were a part of this drive as were healthy margins.
Going forward, we see both these forces being primary influences on market returns; however, we also see an inflection point. The relative importance of macro issues and risk perception is waning and underlying individual company economic value is gradually increasing. This is observed quantitatively in stabilizing correlations, but also anecdotally. For example, we see a lot more discussion regarding whether current margin levels are sustainable versus discussions on Greece, Europe, etc. There are risks to both drivers, but on balance we are cautiously optimistic about each and in combination; and thus expect the equity markets to be moderately positive in the year ahead.
Distribution by Credit Quality
as of December 31, 2012
| Credit Rating * | | Percentage of
Net Assets | |
| Aaa / AAA | | | 1.0 | % |
| Aa / AA | | | 0.9 | |
| A | | | 3.6 | |
| Baa / BBB | | | 3.8 | |
| Ba / BB | | | 0.1 | |
| Unrated | | | 0.0 | |
| U.S. Government Agencies and Securities | | | 62.8 | |
| Non-Debt Securities and Other Short-Term Instruments | | | 32.9 | |
| Other Assets & Liabilities | | | (5.1 | ) |
| Total | | | 100.0 | % |
| * | Does not apply to the Fund itself. Based upon Moody’s and S&P long-term credit ratings for the Fund’s holdings as of the date noted. If Moody's and S&P assign different ratings to a holding, the lower rating is used. "Unrated" includes fixed-income securities (other than cash-like short-term instruments and U.S. Government securities) for which Moody’s and S&P have not issued long-term credit ratings. |
| Hartford Portfolio Diversifier HLS Fund |
| Manager Discussion – (continued) |
| December 31, 2012 (Unaudited) |
Diversification by Industry
as of December 31, 2012
| Industry (Sector) | | Percentage of
Net Assets | |
| Equity Securities | | | | |
| Automobiles and Components (Consumer Discretionary) | | | 0.1 | % |
| Banks (Financials) | | | 0.5 | |
| Capital Goods (Industrials) | | | 1.3 | |
| Commercial and Professional Services (Industrials) | | | 0.1 | |
| Consumer Durables and Apparel (Consumer Discretionary) | | | 0.2 | |
| Consumer Services (Consumer Discretionary) | | | 0.3 | |
| Diversified Financials (Financials) | | | 1.1 | |
| Energy (Energy) | | | 1.8 | |
| Food and Staples Retailing (Consumer Staples) | | | 0.4 | |
| Food, Beverage and Tobacco (Consumer Staples) | | | 1.0 | |
| Health Care Equipment and Services (Health Care) | | | 0.7 | |
| Household and Personal Products (Consumer Staples) | | | 0.4 | |
| Insurance (Financials) | | | 0.7 | |
| Materials (Materials) | | | 0.6 | |
| Media (Consumer Discretionary) | | | 0.6 | |
| Other Investment Pools and Funds (Financials) | | | 0.7 | |
| Pharmaceuticals, Biotechnology and Life Sciences (Health Care) | | | 1.2 | |
| Real Estate (Financials) | | | 0.4 | |
| Retailing (Consumer Discretionary) | | | 0.7 | |
| Semiconductors and Semiconductor Equipment (Information Technology) | | | 0.3 | |
| Software and Services (Information Technology) | | | 1.6 | |
| Technology Hardware and Equipment (Information Technology) | | | 1.2 | |
| Telecommunication Services (Services) | | | 0.5 | |
| Transportation (Industrials) | | | 0.3 | |
| Utilities (Utilities) | | | 0.6 | |
| Total | | | 17.3 | % |
| Fixed Income Securities | | | | |
| Administrative Waste Management and Remediation (Services) | | | 0.0 | % |
| Airport Revenues (Airport Revenues) | | | 0.0 | |
| Arts, Entertainment and Recreation (Services) | | | 0.4 | |
| Beverage and Tobacco Product Manufacturing (Consumer Staples) | | | 0.3 | |
| Chemical Manufacturing (Basic Materials) | | | 0.2 | |
| Computer and Electronic Product Manufacturing (Technology) | | | 0.2 | |
| Construction (Consumer Cyclical) | | | 0.0 | |
| Couriers and Messengers (Services) | | | 0.0 | |
| Electrical Equipment and Appliance Manufacturing (Technology) | | | 0.1 | |
| Finance and Insurance (Finance) | | | 3.9 | |
| Food Manufacturing (Consumer Staples) | | | 0.1 | |
| Food Services (Consumer Cyclical) | | | 0.0 | |
| General Obligations (General Obligations) | | | 0.1 | |
| Health Care and Social Assistance (Health Care) | | | 0.6 | |
| Higher Education (Univ., Dorms, etc.) (Higher Education (Univ., Dorms, etc.)) | | | 0.0 | |
| Information (Technology) | | | 0.5 | |
| Machinery Manufacturing (Capital Goods) | | | 0.1 | |
| Mining (Basic Materials) | | | 0.2 | |
| Miscellaneous (Miscellaneous) | | | 0.0 | |
| Miscellaneous Manufacturing (Capital Goods) | | | 0.2 | |
| Motor Vehicle and Parts Manufacturing (Consumer Cyclical) | | | 0.0 | |
| Other Services (Services) | | | 0.0 | |
| Paper Manufacturing (Basic Materials) | | | 0.1 | |
| Petroleum and Coal Products Manufacturing (Energy) | | | 0.7 | |
| Pipeline Transportation (Utilities) | | | 0.2 | |
| Primary Metal Manufacturing (Basic Materials) | | | 0.0 | |
| Professional, Scientific and Technical Services (Services) | | | 0.0 | |
| Public Administration (Services) | | | 0.0 | |
| Rail Transportation (Transportation) | | | 0.1 | |
| Real Estate, Rental and Leasing (Finance) | | | 0.0 | |
| Retail Trade (Consumer Cyclical) | | | 0.3 | |
| Soap, Cleaning Compound and Toilet Manufacturing (Consumer Staples) | | | 0.0 | |
| Transportation (Transportation) | | | 0.1 | |
| Transportation Equipment Manufacturing (Transportation) | | | 0.0 | |
| Utilities (Utilities) | | | 0.5 | |
| Utilities - Electric (Utilities - Electric) | | | 0.0 | |
| Utilities - Water and Sewer (Utilities - Water and Sewer) | | | 0.0 | |
| Total | | | 8.9 | % |
| Foreign Government Obligations | | | 0.5 | % |
| Put Options Purchased | | | 4.8 | |
| U.S. Government Agencies | | | 10.8 | |
| U.S. Government Securities | | | 13.1 | |
| Short-Term Investments | | | 49.7 | |
| Other Assets and Liabilities | | | (5.1 | ) |
| Total | | | 100.0 | % |
| Hartford Portfolio Diversifier HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 16.6% | |
| | | | | Automobiles and Components - 0.1% | | | | |
| | — | | | BorgWarner, Inc. ● | | $ | 32 | |
| | 1 | | | Delphi Automotive plc ● | | | 44 | |
| | 15 | | | Ford Motor Co. | | | 190 | |
| | 1 | | | Goodyear (The) Tire & Rubber Co. ● | | | 13 | |
| | 1 | | | Harley-Davidson, Inc. | | | 43 | |
| | 3 | | | Johnson Controls, Inc. | | | 81 | |
| | | | | | | | 403 | |
| | | | | Banks - 0.5% | | | | |
| | 3 | | | BB&T Corp. | | | 79 | |
| | 1 | | | Comerica, Inc. | | | 22 | |
| | 3 | | | Fifth Third Bancorp | | | 53 | |
| | 1 | | | First Horizon National Corp. | | | 10 | |
| | 2 | | | Hudson City Bancorp, Inc. | | | 15 | |
| | 3 | | | Huntington Bancshares, Inc. | | | 21 | |
| | 4 | | | KeyCorp | | | 30 | |
| | — | | | M&T Bank Corp. | | | 46 | |
| | 1 | | | People's United Financial, Inc. | | | 16 | |
| | 2 | | | PNC Financial Services Group, Inc. | | | 119 | |
| | 5 | | | Regions Financial Corp. | | | 39 | |
| | 2 | | | SunTrust Banks, Inc. | | | 59 | |
| | 7 | | | US Bancorp | | | 232 | |
| | 19 | | | Wells Fargo & Co. | | | 646 | |
| | 1 | | | Zions Bancorporation | | | 15 | |
| | | | | | | | 1,402 | |
| | | | | Capital Goods - 1.3% | | | | |
| | 2 | | | 3M Co. | | | 228 | |
| | 3 | | | Boeing Co. | | | 197 | |
| | 3 | | | Caterpillar, Inc. | | | 226 | |
| | 1 | | | Cummins, Inc. | | | 74 | |
| | 2 | | | Danaher Corp. | | | 126 | |
| | 2 | | | Deere & Co. | | | 131 | |
| | 1 | | | Dover Corp. | | | 45 | |
| | 2 | | | Eaton Corp. plc | | | 97 | |
| | 3 | | | Emerson Electric Co. | | | 148 | |
| | 1 | | | Fastenal Co. | | | 49 | |
| | — | | | Flowserve Corp. | | | 28 | |
| | 1 | | | Fluor Corp. | | | 38 | |
| | 1 | | | General Dynamics Corp. | | | 89 | |
| | 40 | | | General Electric Co. | | | 850 | |
| | 3 | | | Honeywell International, Inc. | | | 192 | |
| | 2 | | | Illinois Tool Works, Inc. | | | 100 | |
| | 1 | | | Ingersoll-Rand plc | | | 52 | |
| | 1 | | | Jacobs Engineering Group, Inc. ● | | | 21 | |
| | — | | | Joy Global, Inc. | | | 26 | |
| | — | | | L-3 Communications Holdings, Inc. | | | 28 | |
| | 1 | | | Lockheed Martin Corp. | | | 96 | |
| | 1 | | | Masco Corp. | | | 23 | |
| | 1 | | | Northrop Grumman Corp. | | | 64 | |
| | 1 | | | PACCAR, Inc. | | | 62 | |
| | — | | | Pall Corp. | | | 26 | |
| | 1 | | | Parker-Hannifin Corp. | | | 49 | |
| | 1 | | | Pentair Ltd. | | | 40 | |
| | 1 | | | Precision Castparts Corp. | | | 106 | |
| | 1 | | | Quanta Services, Inc. ● | | | 22 | |
| | 1 | | | Raytheon Co. | | | 73 | |
| | 1 | | | Rockwell Automation, Inc. | | | 45 | |
| | 1 | | | Rockwell Collins, Inc. | | | 31 | |
| | — | | | Roper Industries, Inc. | | | 42 | |
| | — | | | Snap-On, Inc. | | | 18 | |
| | 1 | | | Stanley Black & Decker, Inc. | | | 48 | |
| | 1 | | | Textron, Inc. | | | 27 | |
| | 3 | | | United Technologies Corp. | | | 267 | |
| | — | | | W.W. Grainger, Inc. | | | 47 | |
| | 1 | | | Xylem, Inc. | | | 19 | |
| | | | | | | | 3,850 | |
| | | | | Commercial and Professional Services - 0.1% | | | | |
| | 1 | | | ADT (The) Corp. ● | | | 42 | |
| | — | | | Avery Dennison Corp. | | | 13 | |
| | — | | | Cintas Corp. | | | 17 | |
| | — | | | Dun & Bradstreet Corp. | | | 13 | |
| | — | | | Equifax, Inc. ● | | | 25 | |
| | 1 | | | Iron Mountain, Inc. | | | 20 | |
| | 1 | | | Pitney Bowes, Inc. | | | 8 | |
| | 1 | | | Republic Services, Inc. | | | 34 | |
| | 1 | | | Robert Half International, Inc. | | | 17 | |
| | — | | | Stericycle, Inc. ● | | | 31 | |
| | 2 | | | Tyco International Ltd. | | | 53 | |
| | 2 | | | Waste Management, Inc. | | | 57 | |
| | | | | | | | 330 | |
| | | | | Consumer Durables and Apparel - 0.2% | | | | |
| | 1 | | | Coach, Inc. | | | 61 | |
| | 1 | | | D.R. Horton, Inc. | | | 21 | |
| | — | | | Fossil, Inc. ● | | | 19 | |
| | — | | | Garmin Ltd. | | | 17 | |
| | — | | | Harman International Industries, Inc. | | | 12 | |
| | — | | | Hasbro, Inc. | | | 16 | |
| | 1 | | | Leggett & Platt, Inc. | | | 15 | |
| | 1 | | | Lennar Corp. | | | 24 | |
| | 1 | | | Mattel, Inc. | | | 49 | |
| | 1 | | | Newell Rubbermaid, Inc. | | | 25 | |
| | 3 | | | NIKE, Inc. Class B | | | 145 | |
| | 1 | | | Pulte Group, Inc. ● | | | 24 | |
| | — | | | Ralph Lauren Corp. | | | 36 | |
| | — | | | V.F. Corp. | | | 51 | |
| | — | | | Whirlpool Corp. | | | 31 | |
| | | | | | | | 546 | |
| | | | | Consumer Services - 0.3% | | | | |
| | — | | | Apollo Group, Inc. Class A ● | | | 8 | |
| | 2 | | | Carnival Corp. | | | 63 | |
| | — | | | Chipotle Mexican Grill, Inc. ● | | | 36 | |
| | — | | | Darden Restaurants, Inc. | | | 22 | |
| | 1 | | | H & R Block, Inc. | | | 20 | |
| | 1 | | | International Game Technology | | | 15 | |
| | 1 | | | Marriott International, Inc. Class A | | | 35 | |
| | 4 | | | McDonald's Corp. | | | 342 | |
| | 3 | | | Starbucks Corp. | | | 154 | |
| | 1 | | | Starwood Hotels & Resorts, Inc. | | | 43 | |
| | 1 | | | Wyndham Worldwide Corp. | | | 29 | |
| | — | | | Wynn Resorts Ltd. | | | 35 | |
| | 2 | | | Yum! Brands, Inc. | | | 116 | |
| | | | | | | | 918 | |
| | | | | Diversified Financials - 1.1% | | | | |
| | 4 | | | American Express Co. | | | 216 | |
| | 1 | | | Ameriprise Financial, Inc. | | | 50 | |
| | 42 | | | Bank of America Corp. | | | 483 | |
| | 5 | | | Bank of New York Mellon Corp. | | | 116 | |
| | — | | | BlackRock, Inc. | | | 100 | |
| | 2 | | | Capital One Financial Corp. | | | 130 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Portfolio Diversifier HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 16.6% - (continued) | |
| | | | | Diversified Financials - 1.1% - (continued) | | | | |
| | 4 | | | Charles Schwab Corp. | | $ | 61 | |
| | 11 | | | Citigroup, Inc. | | | 448 | |
| | 1 | | | CME Group, Inc. | | | 60 | |
| | 2 | | | Discover Financial Services, Inc. | | | 75 | |
| | 1 | | | E*Trade Financial Corp. ● | | | 9 | |
| | 1 | | | Franklin Resources, Inc. | | | 67 | |
| | 2 | | | Goldman Sachs Group, Inc. | | | 217 | |
| | — | | | IntercontinentalExchange, Inc. ● | | | 35 | |
| | 2 | | | Invesco Ltd. | | | 45 | |
| | 15 | | | JP Morgan Chase & Co. | | | 645 | |
| | — | | | Legg Mason, Inc. | | | 12 | |
| | 1 | | | Leucadia National Corp. | | | 18 | |
| | 1 | | | Moody's Corp. | | | 38 | |
| | 5 | | | Morgan Stanley | | | 102 | |
| | — | | | Nasdaq OMX Group, Inc. | | | 11 | |
| | 1 | | | Northern Trust Corp. | | | 42 | |
| | 1 | | | NYSE Euronext | | | 30 | |
| | 2 | | | SLM Corp. | | | 30 | |
| | 2 | | | State Street Corp. | | | 84 | |
| | 1 | | | T. Rowe Price Group, Inc. | | | 64 | |
| | | | | | | | 3,188 | |
| | | | | Energy - 1.8% | | | | |
| | 2 | | | Anadarko Petroleum Corp. | | | 143 | |
| | 2 | | | Apache Corp. | | | 119 | |
| | 2 | | | Baker Hughes, Inc. | | | 69 | |
| | 1 | | | Cabot Oil & Gas Corp. | | | 40 | |
| | 1 | | | Cameron International Corp. ● | | | 54 | |
| | 2 | | | Chesapeake Energy Corp. | | | 33 | |
| | 8 | | | Chevron Corp. | | | 817 | |
| | 5 | | | ConocoPhillips Holding Co. | | | 272 | |
| | 1 | | | Consol Energy, Inc. | | | 28 | |
| | 1 | | | Denbury Resources, Inc. ● | | | 24 | |
| | 1 | | | Devon Energy Corp. | | | 76 | |
| | — | | | Diamond Offshore Drilling, Inc. | | | 18 | |
| | 1 | | | Ensco plc | | | 53 | |
| | 1 | | | EOG Resources, Inc. | | | 126 | |
| | 1 | | | EQT Corp. | | | 34 | |
| | 18 | | | Exxon Mobil Corp. | | | 1,523 | |
| | 1 | | | FMC Technologies, Inc. ● | | | 39 | |
| | 4 | | | Halliburton Co. | | | 124 | |
| | — | | | Helmerich & Payne, Inc. | | | 23 | |
| | 1 | | | Hess Corp. | | | 61 | |
| | 2 | | | Kinder Morgan, Inc. | | | 86 | |
| | 3 | | | Marathon Oil Corp. | | | 84 | |
| | 1 | | | Marathon Petroleum Corp. | | | 83 | |
| | 1 | | | Murphy Oil Corp. | | | 43 | |
| | 1 | | | Nabors Industries Ltd. ● | | | 16 | |
| | 2 | | | National Oilwell Varco, Inc. | | | 113 | |
| | 1 | | | Newfield Exploration Co. ● | | | 14 | |
| | 1 | | | Noble Corp. | | | 34 | |
| | 1 | | | Noble Energy, Inc. | | | 70 | |
| | 3 | | | Occidental Petroleum Corp. | | | 240 | |
| | 1 | | | Peabody Energy Corp. | | | 28 | |
| | 2 | | | Phillips 66 | | | 128 | |
| | — | | | Pioneer Natural Resources Co. | | | 51 | |
| | 1 | | | QEP Resources, Inc. | | | 21 | |
| | 1 | | | Range Resources Corp. | | | 39 | |
| | — | | | Rowan Cos. plc Class A ● | | | 15 | |
| | 5 | | | Schlumberger Ltd. | | | 355 | |
| | 1 | | | Southwestern Energy Co. ● | | | 45 | |
| | 3 | | | Spectra Energy Corp. | | | 70 | |
| | 1 | | | Tesoro Corp. | | | 24 | |
| | 2 | | | Valero Energy Corp. | | | 73 | |
| | 3 | | | Williams Cos., Inc. | | | 85 | |
| | 1 | | | WPX Energy, Inc. ● | | | 11 | |
| | | | | | | | 5,404 | |
| | | | | Food and Staples Retailing - 0.4% | | | | |
| | 2 | | | Costco Wholesale Corp. | | | 165 | |
| | 5 | | | CVS Caremark Corp. | | | 233 | |
| | 2 | | | Kroger (The) Co. | | | 51 | |
| | 1 | | | Safeway, Inc. | | | 17 | |
| | 2 | | | Sysco Corp. | | | 72 | |
| | 3 | | | Walgreen Co. | | | 123 | |
| | 6 | | | Wal-Mart Stores, Inc. | | | 440 | |
| | 1 | | | Whole Foods Market, Inc. | | | 61 | |
| | | | | | | | 1,162 | |
| | | | | Food, Beverage and Tobacco - 1.0% | | | | |
| | 8 | | | Altria Group, Inc. | | | 246 | |
| | 3 | | | Archer-Daniels-Midland Co. | | | 70 | |
| | 1 | | | Beam, Inc. | | | 37 | |
| | 1 | | | Brown-Forman Corp. | | | 37 | |
| | 1 | | | Campbell Soup Co. | | | 24 | |
| | 15 | | | Coca-Cola Co. | | | 540 | |
| | 1 | | | Coca-Cola Enterprises, Inc. | | | 33 | |
| | 2 | | | ConAgra Foods, Inc. | | | 46 | |
| | 1 | | | Constellation Brands, Inc. Class A ● | | | 21 | |
| | 1 | | | Dean Foods Co. ● | | | 12 | |
| | 1 | | | Dr. Pepper Snapple Group | | | 35 | |
| | 2 | | | General Mills, Inc. | | | 101 | |
| | 1 | | | H.J. Heinz Co. | | | 71 | |
| | 1 | | | Hershey Co. | | | 42 | |
| | 1 | | | Hormel Foods Corp. | | | 16 | |
| | — | | | J.M. Smucker Co. | | | 36 | |
| | 1 | | | Kellogg Co. | | | 53 | |
| | 2 | | | Kraft Foods Group, Inc. ● | | | 104 | |
| | 1 | | | Lorillard, Inc. | | | 58 | |
| | 1 | | | McCormick & Co., Inc. | | | 33 | |
| | 1 | | | Mead Johnson Nutrition Co. | | | 52 | |
| | 1 | | | Molson Coors Brewing Co. | | | 26 | |
| | 7 | | | Mondelez International, Inc. | | | 175 | |
| | 1 | | | Monster Beverage Corp. ● | | | 30 | |
| | 6 | | | PepsiCo, Inc. | | | 409 | |
| | 6 | | | Philip Morris International, Inc. | | | 539 | |
| | 1 | | | Reynolds American, Inc. | | | 52 | |
| | 1 | | | Tyson Foods, Inc. Class A | | | 21 | |
| | | | | | | | 2,919 | |
| | | | | Health Care Equipment and Services - 0.7% | | | | |
| | 6 | | | Abbott Laboratories | | | 400 | |
| | 1 | | | Aetna, Inc. | | | 60 | |
| | 1 | | | AmerisourceBergen Corp. | | | 39 | |
| | — | | | Bard (C.R.), Inc. | | | 29 | |
| | 2 | | | Baxter International, Inc. | | | 141 | |
| | 1 | | | Becton, Dickinson & Co. | | | 59 | |
| | 5 | | | Boston Scientific Corp. ● | | | 30 | |
| | 1 | | | Cardinal Health, Inc. | | | 54 | |
| | 1 | | | CareFusion Corp. ● | | | 25 | |
| | 1 | | | Cerner Corp. ● | | | 44 | |
| | 1 | | | CIGNA Corp. | | | 59 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 16.6% - (continued) | |
| | | | | Health Care Equipment and Services - 0.7% - (continued) | | | | |
| | 1 | | | Coventry Health Care, Inc. | | $ | 23 | |
| | 2 | | | Covidien plc | | | 105 | |
| | — | | | DaVita HealthCare Partners, Inc. ● | | | 36 | |
| | 1 | | | Dentsply International, Inc. | | | 22 | |
| | — | | | Edwards Lifesciences Corp. ● | | | 40 | |
| | 3 | | | Express Scripts Holding Co. ● | | | 170 | |
| | 1 | | | Humana, Inc. | | | 42 | |
| | — | | | Intuitive Surgical, Inc. ● | | | 75 | |
| | — | | | Laboratory Corp. of America Holdings ● | | | 32 | |
| | 1 | | | McKesson Corp. | | | 88 | |
| | 4 | | | Medtronic, Inc. | | | 160 | |
| | — | | | Patterson Cos., Inc. | | | 11 | |
| | 1 | | | Quest Diagnostics, Inc. | | | 36 | |
| | 1 | | | St. Jude Medical, Inc. | | | 43 | |
| | 1 | | | Stryker Corp. | | | 61 | |
| | — | | | Tenet Healthcare Corp. | | | 13 | |
| | 4 | | | UnitedHealth Group, Inc. | | | 214 | |
| | — | | | Varian Medical Systems, Inc. ● | | | 30 | |
| | 1 | | | Wellpoint, Inc. | | | 71 | |
| | 1 | | | Zimmer Holdings, Inc. | | | 45 | |
| | | | | | | | 2,257 | |
| | | | | Household and Personal Products - 0.4% | | | | |
| | 2 | | | Avon Products, Inc. | | | 24 | |
| | 1 | | | Clorox Co. | | | 37 | |
| | 2 | | | Colgate-Palmolive Co. | | | 179 | |
| | 1 | | | Estee Lauder Co., Inc. | | | 55 | |
| | 2 | | | Kimberly-Clark Corp. | | | 127 | |
| | 11 | | | Procter & Gamble Co. | | | 717 | |
| | | | | | | | 1,139 | |
| | | | | Insurance - 0.7% | | | | |
| | 1 | | | ACE Ltd. | | | 106 | |
| | 2 | | | Aflac, Inc. | | | 101 | |
| | 2 | | | Allstate Corp. | | | 76 | |
| | 6 | | | American International Group, Inc. ● | | | 204 | |
| | 1 | | | Aon plc | | | 68 | |
| | — | | | Assurant, Inc. | | | 11 | |
| | 7 | | | Berkshire Hathaway, Inc. Class B ● | | | 639 | |
| | 1 | | | Chubb Corp. | | | 77 | |
| | 1 | | | Cincinnati Financial Corp. | | | 22 | |
| | 2 | | | Genworth Financial, Inc. ● | | | 15 | |
| | 1 | | | Lincoln National Corp. | | | 29 | |
| | 1 | | | Loews Corp. | | | 50 | |
| | 2 | | | Marsh & McLennan Cos., Inc. | | | 72 | |
| | 4 | | | MetLife, Inc. | | | 145 | |
| | 1 | | | Principal Financial Group, Inc. | | | 32 | |
| | 2 | | | Progressive Corp. | | | 46 | |
| | 2 | | | Prudential Financial, Inc. | | | 100 | |
| | — | | | Torchmark Corp. | | | 20 | |
| | 1 | | | Travelers Cos., Inc. | | | 107 | |
| | 1 | | | Unum Group | | | 23 | |
| | 1 | | | XL Group plc | | | 29 | |
| | | | | | | | 1,972 | |
| | | | | Materials - 0.6% | | | | |
| | 1 | | | Air Products & Chemicals, Inc. | | | 69 | |
| | — | | | Airgas, Inc. | | | 25 | |
| | 4 | | | Alcoa, Inc. | | | 36 | |
| | — | | | Allegheny Technologies, Inc. | | | 13 | |
| | 1 | | | Ball Corp. | | | 27 | |
| | — | | | Bemis Co., Inc. | | | 13 | |
| | — | | | CF Industries Holdings, Inc. | | | 49 | |
| | 1 | | | Cliff's Natural Resources, Inc. | | | 21 | |
| | 5 | | | Dow Chemical Co. | | | 150 | |
| | 4 | | | E.I. DuPont de Nemours & Co. | | | 162 | |
| | 1 | | | Eastman Chemical Co. | | | 40 | |
| | 1 | | | Ecolab, Inc. | | | 73 | |
| | 1 | | | FMC Corp. | | | 31 | |
| | 4 | | | Freeport-McMoRan Copper & Gold, Inc. | | | 125 | |
| | — | | | International Flavors & Fragrances, Inc. | | | 21 | |
| | 2 | | | International Paper Co. | | | 68 | |
| | 1 | | | LyondellBasell Industries Class A | | | 84 | |
| | 1 | | | MeadWestvaco Corp. | | | 22 | |
| | 2 | | | Monsanto Co. | | | 195 | |
| | 1 | | | Mosaic Co. | | | 60 | |
| | 2 | | | Newmont Mining Corp. | | | 89 | |
| | 1 | | | Nucor Corp. | | | 53 | |
| | 1 | | | Owens-Illinois, Inc. ● | | | 13 | |
| | 1 | | | PPG Industries, Inc. | | | 80 | |
| | 1 | | | Praxair, Inc. | | | 126 | |
| | 1 | | | Sealed Air Corp. | | | 13 | |
| | — | | | Sherwin-Williams Co. | | | 51 | |
| | — | | | Sigma-Aldrich Corp. | | | 34 | |
| | 1 | | | United States Steel Corp. | | | 13 | |
| | 1 | | | Vulcan Materials Co. | | | 26 | |
| | | | | | | | 1,782 | |
| | | | | Media - 0.6% | | | | |
| | 1 | | | Cablevision Systems Corp. | | | 12 | |
| | 2 | | | CBS Corp. Class B | | | 87 | |
| | 10 | | | Comcast Corp. Class A | | | 383 | |
| | 2 | | | DirecTV ● | | | 117 | |
| | 1 | | | Discovery Communications, Inc. ● | | | 59 | |
| | 1 | | | Gannett Co., Inc. | | | 16 | |
| | 2 | | | Interpublic Group of Cos., Inc. | | | 18 | |
| | 1 | | | McGraw-Hill Cos., Inc. | | | 59 | |
| | 8 | | | News Corp. Class A | | | 199 | |
| | 1 | | | Omnicom Group, Inc. | | | 51 | |
| | — | | | Scripps Networks Interactive Class A | | | 19 | |
| | 1 | | | Time Warner Cable, Inc. | | | 113 | |
| | 4 | | | Time Warner, Inc. | | | 175 | |
| | 2 | | | Viacom, Inc. Class B | | | 94 | |
| | 7 | | | Walt Disney Co. | | | 341 | |
| | — | | | Washington Post Co. Class B | | | 6 | |
| | | | | | | | 1,749 | |
| | | | | Pharmaceuticals, Biotechnology and Life Sciences - 1.2% | | | | |
| | 1 | | | Agilent Technologies, Inc. | | | 55 | |
| | 1 | | | Alexion Pharmaceuticals, Inc. ● | | | 70 | |
| | 1 | | | Allergan, Inc. | | | 109 | |
| | 3 | | | Amgen, Inc. | | | 256 | |
| | 1 | | | Biogen Idec, Inc. ● | | | 134 | |
| | 6 | | | Bristol-Myers Squibb Co. | | | 208 | |
| | 2 | | | Celgene Corp. ● | | | 129 | |
| | 4 | | | Eli Lilly & Co. | | | 194 | |
| | 1 | | | Forest Laboratories, Inc. ● | | | 32 | |
| | 3 | | | Gilead Sciences, Inc. ● | | | 215 | |
| | 1 | | | Hospira, Inc. ● | | | 20 | |
| | 11 | | | Johnson & Johnson | | | 750 | |
| | 1 | | | Life Technologies Corp. ● | | | 33 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Portfolio Diversifier HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 16.6% - (continued) | |
| | | | | Pharmaceuticals, Biotechnology and Life Sciences - 1.2% - (continued) | | | | |
| | 12 | | | Merck & Co., Inc. | | $ | 480 | |
| | 2 | | | Mylan, Inc. ● | | | 43 | |
| | — | | | PerkinElmer, Inc. | | | 14 | |
| | — | | | Perrigo Co. | | | 35 | |
| | 28 | | | Pfizer, Inc. | | | 713 | |
| | 1 | | | Thermo Fisher Scientific, Inc. | | | 89 | |
| | — | | | Waters Corp. ● | | | 29 | |
| | — | | | Watson Pharmaceuticals, Inc. ● | | | 42 | |
| | | | | | | | 3,650 | |
| | | | | Real Estate - 0.4% | | | | |
| | 2 | | | American Tower Corp. REIT | | | 118 | |
| | 1 | | | Apartment Investment & Management Co. Class A REIT | | | 15 | |
| | — | | | AvalonBay Communities, Inc. REIT | | | 60 | |
| | 1 | | | Boston Properties, Inc. REIT | | | 62 | |
| | 1 | | | CBRE Group, Inc. ● | | | 23 | |
| | 1 | | | Equity Residential Properties Trust REIT | | | 70 | |
| | 2 | | | HCP, Inc. REIT | | | 79 | |
| | 1 | | | Health Care, Inc. REIT | | | 61 | |
| | 3 | | | Host Hotels & Resorts, Inc. REIT | | | 44 | |
| | 2 | | | Kimco Realty Corp. REIT | | | 30 | |
| | 1 | | | Plum Creek Timber Co., Inc. REIT | | | 28 | |
| | 2 | | | ProLogis L.P. REIT | | | 65 | |
| | 1 | | | Public Storage REIT | | | 81 | |
| | 1 | | | Simon Property Group, Inc. REIT | | | 189 | |
| | 1 | | | Ventas, Inc. REIT | | | 74 | |
| | 1 | | | Vornado Realty Trust REIT | | | 52 | |
| | 2 | | | Weyerhaeuser Co. REIT | | | 58 | |
| | | | | | | | 1,109 | |
| | | | | Retailing - 0.7% | | | | |
| | — | | | Abercrombie & Fitch Co. Class A | | | 15 | |
| | 1 | | | Amazon.com, Inc. ● | | | 351 | |
| | — | | | AutoNation, Inc. ● | | | 6 | |
| | — | | | AutoZone, Inc. ● | | | 51 | |
| | 1 | | | Bed Bath & Beyond, Inc. ● | | | 49 | |
| | 1 | | | Best Buy Co., Inc. | | | 12 | |
| | — | | | Big Lots, Inc. ● | | | 6 | |
| | 1 | | | CarMax, Inc. ● | | | 33 | |
| | 1 | | | Dollar General Corp. ● | | | 45 | |
| | 1 | | | Dollar Tree, Inc. ● | | | 36 | |
| | — | | | Expedia, Inc. | | | 22 | |
| | — | | | Family Dollar Stores, Inc. | | | 23 | |
| | — | | | GameStop Corp. Class A | | | 12 | |
| | 1 | | | Gap, Inc. | | | 36 | |
| | 1 | | | Genuine Parts Co. | | | 38 | |
| | 6 | | | Home Depot, Inc. | | | 357 | |
| | 1 | | | J.C. Penney Co., Inc. | | | 11 | |
| | 1 | | | Kohl's Corp. | | | 35 | |
| | 1 | | | Limited Brands, Inc. | | | 43 | |
| | 4 | | | Lowe's Co., Inc. | | | 154 | |
| | 2 | | | Macy's, Inc. | | | 60 | |
| | — | | | Netflix, Inc. ● | | | 20 | |
| | 1 | | | Nordstrom, Inc. | | | 31 | |
| | — | | | O'Reilly Automotive, Inc. ● | | | 40 | |
| | — | | | PetSmart, Inc. | | | 28 | |
| | — | | | Priceline.com, Inc. ● | | | 119 | |
| | 1 | | | Ross Stores, Inc. | | | 46 | |
| | 3 | | | Staples, Inc. | | | 30 | |
| | 3 | | | Target Corp. | | | 149 | |
| | — | | | Tiffany & Co. | | | 26 | |
| | 3 | | | TJX Cos., Inc. | | | 120 | |
| | — | | | TripAdvisor, Inc. ● | | | 18 | |
| | — | | | Urban Outfitters, Inc. ● | | | 17 | |
| | | | | | | | 2,039 | |
| | | | | Semiconductors and Semiconductor Equipment - 0.3% | | | | |
| | 2 | | | Advanced Micro Devices, Inc. ● | | | 6 | |
| | 1 | | | Altera Corp. | | | 43 | |
| | 1 | | | Analog Devices, Inc. | | | 49 | |
| | 5 | | | Applied Materials, Inc. | | | 53 | |
| | 2 | | | Broadcom Corp. Class A | | | 66 | |
| | — | | | First Solar, Inc. ● | | | 7 | |
| | 19 | | | Intel Corp. | | | 396 | |
| | 1 | | | KLA-Tencor Corp. | | | 31 | |
| | 1 | | | Lam Research Corp. ● | | | 24 | |
| | 1 | | | Linear Technology Corp. | | | 31 | |
| | 2 | | | LSI Corp. ● | | | 15 | |
| | 1 | | | Microchip Technology, Inc. | | | 24 | |
| | 4 | | | Micron Technology, Inc. ● | | | 25 | |
| | 2 | | | NVIDIA Corp. ● | | | 30 | |
| | 1 | | | Teradyne, Inc. ● | | | 12 | |
| | 4 | | | Texas Instruments, Inc. | | | 134 | |
| | 1 | | | Xilinx, Inc. | | | 36 | |
| | | | | | | | 982 | |
| | | | | Software and Services - 1.6% | | | | |
| | 2 | | | Accenture plc | | | 164 | |
| | 2 | | | Adobe Systems, Inc. ● | | | 72 | |
| | 1 | | | Akamai Technologies, Inc. ● | | | 28 | |
| | 1 | | | Autodesk, Inc. ● | | | 31 | |
| | 2 | | | Automatic Data Processing, Inc. | | | 107 | |
| | 1 | | | BMC Software, Inc. ● | | | 22 | |
| | 1 | | | CA, Inc. | | | 28 | |
| | 1 | | | Citrix Systems, Inc. ● | | | 47 | |
| | 1 | | | Cognizant Technology Solutions Corp. ● | | | 86 | |
| | 1 | | | Computer Sciences Corp. | | | 24 | |
| | 4 | | | eBay, Inc. ● | | | 229 | |
| | 1 | | | Electronic Arts, Inc. ● | | | 17 | |
| | 1 | | | Fidelity National Information Services, Inc. | | | 34 | |
| | 1 | | | Fiserv, Inc. ● | | | 41 | |
| | 1 | | | Google, Inc. ● | | | 729 | |
| | 4 | | | IBM Corp. | | | 785 | |
| | 1 | | | Intuit, Inc. | | | 64 | |
| | — | | | Mastercard, Inc. | | | 203 | |
| | 29 | | | Microsoft Corp. | | | 782 | |
| | 15 | | | Oracle Corp. | | | 483 | |
| | 1 | | | Paychex, Inc. | | | 39 | |
| | 1 | | | Red Hat, Inc. ● | | | 40 | |
| | 1 | | | SAIC, Inc. | | | 12 | |
| | 1 | | | Salesforce.com, Inc. ● | | | 85 | |
| | 3 | | | Symantec Corp. ● | | | 50 | |
| | 1 | | | Teradata Corp. ● | | | 40 | |
| | 1 | | | Total System Services, Inc. | | | 13 | |
| | 1 | | | VeriSign, Inc. ● | | | 23 | |
| | 2 | | | Visa, Inc. | | | 305 | |
| | 2 | | | Western Union Co. | | | 31 | |
| | 4 | | | Yahoo!, Inc. ● | | | 80 | |
| | | | | | | | 4,694 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 16.6% - (continued) | |
| | | | | Technology Hardware and Equipment - 1.2% | | | | |
| | 1 | | | Amphenol Corp. Class A | | $ | 40 | |
| | 4 | | | Apple, Inc. | | | 1,935 | |
| | 20 | | | Cisco Systems, Inc. | | | 403 | |
| | 6 | | | Corning, Inc. | | | 72 | |
| | 6 | | | Dell, Inc. | | | 57 | |
| | 8 | | | EMC Corp. ● | | | 206 | |
| | — | | | F5 Networks, Inc. ● | | | 30 | |
| | 1 | | | FLIR Systems, Inc. | | | 13 | |
| | — | | | Harris Corp. | | | 21 | |
| | 8 | | | Hewlett-Packard Co. | | | 108 | |
| | 1 | | | Jabil Circuit, Inc. | | | 14 | |
| | 1 | | | JDS Uniphase Corp. ● | | | 12 | |
| | 2 | | | Juniper Networks, Inc. ● | | | 39 | |
| | 1 | | | Molex, Inc. | | | 15 | |
| | 1 | | | Motorola Solutions, Inc. | | | 60 | |
| | 1 | | | NetApp, Inc. ● | | | 46 | |
| | 7 | | | Qualcomm, Inc. | | | 408 | |
| | 1 | | | SanDisk Corp. ● | | | 41 | |
| | 1 | | | Seagate Technology plc | | | 40 | |
| | 2 | | | TE Connectivity Ltd. | | | 61 | |
| | 1 | | | Western Digital Corp. | | | 36 | |
| | 5 | | | Xerox Corp. | | | 33 | |
| | | | | | | | 3,690 | |
| | | | | Telecommunication Services - 0.5% | | | | |
| | 22 | | | AT&T, Inc. | | | 739 | |
| | 2 | | | CenturyLink, Inc. | | | 94 | |
| | 1 | | | Crown Castle International Corp. ● | | | 82 | |
| | 4 | | | Frontier Communications Co. | | | 16 | |
| | 1 | | | MetroPCS Communications, Inc. ● | | | 12 | |
| | 12 | | | Sprint Nextel Corp. ● | | | 66 | |
| | 11 | | | Verizon Communications, Inc. | | | 477 | |
| | 2 | | | Windstream Corp. | | | 19 | |
| | | | | | | | 1,505 | |
| | | | | Transportation - 0.3% | | | | |
| | 1 | | | C.H. Robinson Worldwide, Inc. | | | 39 | |
| | 4 | | | CSX Corp. | | | 79 | |
| | 1 | | | Expeditors International of Washington, Inc. | | | 32 | |
| | 1 | | | FedEx Corp. | | | 104 | |
| | 1 | | | Norfolk Southern Corp. | | | 75 | |
| | — | | | Ryder System, Inc. | | | 10 | |
| | 3 | | | Southwest Airlines Co. | | | 29 | |
| | 2 | | | Union Pacific Corp. | | | 228 | |
| | 3 | | | United Parcel Service, Inc. Class B | | | 204 | |
| | | | | | | | 800 | |
| | | | | Utilities - 0.6% | | | | |
| | 2 | | | AES (The) Corp. | | | 25 | |
| | — | | | AGL Resources, Inc. | | | 18 | |
| | 1 | | | Ameren Corp. | | | 29 | |
| | 2 | | | American Electric Power Co., Inc. | | | 80 | |
| | 2 | | | CenterPoint Energy, Inc. | | | 32 | |
| | 1 | | | CMS Energy Corp. | | | 25 | |
| | 1 | | | Consolidated Edison, Inc. | | | 63 | |
| | 2 | | | Dominion Resources, Inc. | | | 115 | |
| | 1 | | | DTE Energy Co. | | | 40 | |
| | 3 | | | Duke Energy Corp. | | | 173 | |
| | 1 | | | Edison International | | | 57 | |
| | 1 | | | Entergy Corp. | | | 44 | |
| | 3 | | | Exelon Corp. | | | 98 | |
| | 2 | | | FirstEnergy Corp. | | | 67 | |
| | — | | | Integrys Energy Group, Inc. | | | 16 | |
| | 2 | | | NextEra Energy, Inc. | | | 113 | |
| | 1 | | | NiSource, Inc. | | | 30 | |
| | 1 | | | Northeast Utilities | | | 47 | |
| | 1 | | | NRG Energy, Inc. | | | 29 | |
| | 1 | | | Oneok, Inc. | | | 34 | |
| | 1 | | | Pepco Holdings, Inc. | | | 17 | |
| | 2 | | | PG&E Corp. | | | 67 | |
| | — | | | Pinnacle West Capital Corp. | | | 21 | |
| | 2 | | | PPL Corp. | | | 64 | |
| | 2 | | | Public Service Enterprise Group, Inc. | | | 60 | |
| | 1 | | | SCANA Corp. | | | 23 | |
| | 1 | | | Sempra Energy | | | 62 | |
| | 3 | | | Southern Co. | | | 144 | |
| | 1 | | | TECO Energy, Inc. | | | 13 | |
| | 1 | | | Wisconsin Energy Corp. | | | 33 | |
| | 2 | | | Xcel Energy, Inc. | | | 50 | |
| | | | | | | | 1,689 | |
| | | | | Total common stocks | | | | |
| | | | | (cost $45,694) | | $ | 49,179 | |
| | | | | | | | | |
EXCHANGE TRADED FUNDS - 0.7% | | | | |
| | | | | Other Investment Pools and Funds - 0.7% | | | | |
| | 31 | | | Vanguard S&P 500 ETF | | $ | 2,010 | |
| | | | | | | | | |
| | | | | Total exchange traded funds | | | | |
| | | | | (cost $2,014) | | $ | 2,010 | |
| | | | | | | | | |
ASSET & COMMERCIAL MORTGAGE BACKED SECURITIES - 0.7% | | | | |
| | | | | Finance and Insurance - 0.7% | | | | |
| | | | | Ally Automotive Receivables Trust | | | | |
| $ | 20 | | | 0.93%, 02/16/2016 | | $ | 20 | |
| | | | | Banc of America Commercial Mortgage, Inc. | | | | |
| | 25 | | | 5.41%, 09/10/2047 | | | 28 | |
| | 25 | | | 5.45%, 01/15/2049 | | | 29 | |
| | 20 | | | 5.49%, 02/10/2051 Δ | | | 23 | |
| | 25 | | | 5.89%, 07/10/2044 Δ | | | 29 | |
| | 15 | | | 5.92%, 05/10/2045 Δ | | | 17 | |
| | | | | Bear Stearns Commercial Mortgage Securities, Inc. | | | | |
| | 25 | | | 5.33%, 02/11/2044 | | | 28 | |
| | | | | Citibank Credit Card Issuance Trust | | | | |
| | 110 | | | 4.85%, 03/10/2017 | | | 120 | |
| | | | | Citigroup Commercial Mortgage Trust | | | | |
| | 35 | | | 5.70%, 12/10/2049 Δ | | | 41 | |
| | | | | Citigroup/Deutsche Bank Commercial Mortgage Trust | | | | |
| | 25 | | | 5.32%, 12/11/2049 | | | 29 | |
| | 35 | | | 5.39%, 07/15/2044 Δ | | | 39 | |
| | 25 | | | 5.62%, 10/15/2048 | | | 29 | |
| | 35 | | | 5.89%, 11/15/2044 | | | 41 | |
| | | | | Commercial Mortgage Pass-Through Certificates | | | | |
| | 20 | | | 5.31%, 12/10/2046 | | | 23 | |
| | 15 | | | 5.99%, 12/10/2049 Δ | | | 18 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Portfolio Diversifier HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| ASSET & COMMERCIAL MORTGAGE BACKED SECURITIES - 0.7% - (continued) | |
| | | | | Finance and Insurance - 0.7% - (continued) | | | | |
| | | | | Credit Suisse Mortgage Capital Certificates | | | | |
| $ | 25 | | | 5.31%, 12/15/2039 | | $ | 28 | |
| | 30 | | | 5.47%, 09/15/2039 | | | 34 | |
| | | | | CW Capital Cobalt Ltd. | | | | |
| | 40 | | | 5.22%, 08/15/2048 | | | 45 | |
| | 25 | | | 5.48%, 04/15/2047 | | | 29 | |
| | | | | Federal National Mortgage Association | | | | |
| | 230 | | | 0.88%, 08/28/2017 | | | 231 | |
| | | | | Goldman Sachs Mortgage Securities Corp. | | | | |
| | 45 | | | 5.98%, 08/10/2045 Δ | | | 52 | |
| | | | | Goldman Sachs Mortgage Securities Corp. II | | | | |
| | 35 | | | 4.75%, 07/10/2039 | | | 38 | |
| | 15 | | | 5.40%, 08/10/2038 | | | 16 | |
| | 25 | | | 5.56%, 11/10/2039 | | | 29 | |
| | | | | Greenwich Capital Commercial Funding Corp. | | | | |
| | 40 | | | 5.22%, 04/10/2037 Δ | | | 44 | |
| | 35 | | | 5.44%, 03/10/2039 Δ | | | 40 | |
| | 25 | | | 5.74%, 08/10/2017 | | | 30 | |
| | | | | Honda Automotive Receivables Owner Trust | | | | |
| | 75 | | | 0.77%, 01/15/2016 | | | 75 | |
| | | | | JP Morgan Chase Commercial Mortgage Securities Corp. | | | | |
| | 25 | | | 5.34%, 05/15/2047 | | | 29 | |
| | 20 | | | 5.42%, 01/15/2049 | | | 23 | |
| | 40 | | | 5.43%, 12/12/2043 | | | 46 | |
| | 35 | | | 5.44%, 06/12/2047 Δ | | | 40 | |
| | 20 | | | 5.48%, 12/12/2044 Δ | | | 23 | |
| | 38 | | | 5.79%, 02/12/2051 Δ | | | 45 | |
| | 20 | | | 5.92%, 02/12/2049 Δ | | | 23 | |
| | 25 | | | 6.00%, 06/15/2049 Δ | | | 29 | |
| | | | | LB-UBS Commercial Mortgage Trust | | | | |
| | 25 | | | 5.37%, 09/15/2039 Δ | | | 29 | |
| | 20 | | | 5.43%, 02/15/2040 | | | 23 | |
| | 25 | | | 5.86%, 07/15/2040 Δ | | | 30 | |
| | 20 | | | 5.87%, 09/15/2045 | | | 24 | |
| | | | | Merrill Lynch/Countrywide Commercial Mortgage Trust | | | | |
| | 25 | | | 5.17%, 12/12/2049 Δ | | | 28 | |
| | 25 | | | 5.38%, 08/12/2048 | | | 29 | |
| | | | | Morgan Stanley Capital I | | | | |
| | 25 | | | 6.08%, 06/11/2049 Δ | | | 29 | |
| | | | | Morgan Stanley Capital I Trust | | | | |
| | 25 | | | 5.69%, 04/15/2049 Δ | | | 29 | |
| | | | | Morgan Stanley Capital Investments | | | | |
| | 25 | | | 5.81%, 12/12/2049 | | | 30 | |
| | | | | Wachovia Bank Commercial Mortgage Trust | | | | |
| | 25 | | | 5.29%, 12/15/2044 Δ | | | 28 | |
| | 25 | | | 5.31%, 11/15/2048 | | | 29 | |
| | 25 | | | 5.34%, 12/15/2043 | | | 29 | |
| | 24 | | | 5.42%, 01/15/2045 Δ | | | 27 | |
| | 25 | | | 5.51%, 04/15/2047 | | | 29 | |
| | 40 | | | 5.57%, 10/15/2048 | | | 46 | |
| | 25 | | | 5.92%, 06/15/2049 Δ | | | 29 | |
| | | | | | | | 1,931 | |
| | | | | | | | | |
| | | | | Total asset & commercial mortgage backed securities | | | | |
| | | | | (cost $1,859) | | $ | 1,931 | |
| | | | | | | | | |
CORPORATE BONDS - 8.0% | | | | |
| | | | | Administrative Waste Management and Remediation - 0.0% | | | | |
| | | | | Republic Services, Inc. | | | | |
| $ | 45 | | | 5.00%, 03/01/2020 | | $ | 52 | |
| | | | | | | | | |
| | | | | Arts, Entertainment and Recreation - 0.4% | | | | |
| | | | | CBS Corp. | | | | |
| | 25 | | | 7.88%, 07/30/2030 | | | 34 | |
| | | | | Comcast Corp. | | | | |
| | 165 | | | 5.15%, 03/01/2020 | | | 195 | |
| | 30 | | | 7.05%, 03/15/2033 | | | 40 | |
| | | | | DirecTV Holdings LLC | | | | |
| | 30 | | | 3.50%, 03/01/2016 | | | 32 | |
| | 95 | | | 5.00%, 03/01/2021 | | | 106 | |
| | | | | Discovery Communications, Inc. | | | | |
| | 50 | | | 5.05%, 06/01/2020 | | | 58 | |
| | | | | NBC Universal Media LLC | | | | |
| | 100 | | | 4.38%, 04/01/2021 | | | 112 | |
| | | | | News America, Inc. | | | | |
| | 71 | | | 6.40%, 12/15/2035 | | | 88 | |
| | | | | Time Warner Cable, Inc. | | | | |
| | 150 | | | 4.00%, 09/01/2021 | | | 165 | |
| | | | | Time Warner, Inc. | | | | |
| | 130 | | | 4.88%, 03/15/2020 | | | 152 | |
| | 30 | | | 6.50%, 11/15/2036 | | | 38 | |
| | 65 | | | 6.75%, 07/01/2018 | | | 81 | |
| | | | | Viacom, Inc. | | | | |
| | 28 | | | 4.38%, 03/15/2043 ■ | | | 28 | |
| | | | | Walt Disney Co. | | | | |
| | 20 | | | 4.13%, 12/01/2041 | | | 22 | |
| | 50 | | | 5.63%, 09/15/2016 | | | 58 | |
| | | | | | | | 1,209 | |
| | | | | Beverage and Tobacco Product Manufacturing - 0.3% | | | | |
| | | | | Altria Group, Inc. | | | | |
| | 115 | | | 4.75%, 05/05/2021 | | | 130 | |
| | 9 | | | 9.70%, 11/10/2018 | | | 13 | |
| | | | | Anheuser-Busch InBev Worldwide, Inc. | | | | |
| | 35 | | | 3.75%, 07/15/2042 | | | 35 | |
| | 125 | | | 5.38%, 01/15/2020 | | | 152 | |
| | | | | Coca-Cola Co. | | | | |
| | 40 | | | 1.65%, 03/14/2018 | | | 41 | |
| | 30 | | | 3.15%, 11/15/2020 | | | 33 | |
| | | | | Diageo Capital plc | | | | |
| | 75 | | | 5.50%, 09/30/2016 | | | 87 | |
| | | | | Dr. Pepper Snapple Group | | | | |
| | 40 | | | 2.90%, 01/15/2016 | | | 42 | |
| | | | | PepsiCo, Inc. | | | | |
| | 140 | | | 3.13%, 11/01/2020 | | | 150 | |
| | 15 | | | 5.50%, 01/15/2040 | | | 19 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | Market Value ╪ | |
| CORPORATE BONDS - 8.0% - (continued) | |
| | | | | Beverage and Tobacco Product Manufacturing - 0.3% - (continued) | | | | |
| | | | | Philip Morris International, Inc. | | | | |
| $ | 80 | | | 4.50%, 03/26/2020 - 03/20/2042 | | $ | 92 | |
| | | | | | | | 794 | |
| | | | | Chemical Manufacturing - 0.2% | | | | |
| | | | | Dow Chemical Co. | | | | |
| | 65 | | | 4.13%, 11/15/2021 | | | 71 | |
| | 90 | | | 8.55%, 05/15/2019 | | | 122 | |
| | | | | E.I. DuPont de Nemours & Co. | | | | |
| | 75 | | | 3.63%, 01/15/2021 | | | 82 | |
| | | | | Ecolab, Inc. | | | | |
| | 45 | | | 4.35%, 12/08/2021 | | | 50 | |
| | | | | Potash Corp. of Saskatchewan, Inc. | | | | |
| | 35 | | | 6.50%, 05/15/2019 | | | 44 | |
| | | | | PPG Industries, Inc. | | | | |
| | 20 | | | 3.60%, 11/15/2020 | | | 22 | |
| | | | | Praxair, Inc. | | | | |
| | 30 | | | 2.45%, 02/15/2022 | | | 30 | |
| | 25 | | | 5.38%, 11/01/2016 | | | 29 | |
| | | | | | | | 450 | |
| | | | | Computer and Electronic Product Manufacturing - 0.2% | | | | |
| | | | | Cingular Wireless LLC | | | | |
| | 25 | | | 7.13%, 12/15/2031 | | | 34 | |
| | | | | Cisco Systems, Inc. | | | | |
| | 105 | | | 4.45%, 01/15/2020 | | | 122 | |
| | 40 | | | 5.50%, 02/22/2016 | | | 45 | |
| | | | | Dell, Inc. | | | | |
| | 20 | | | 5.88%, 06/15/2019 | | | 23 | |
| | | | | Hewlett-Packard Co. | | | | |
| | 45 | | | 4.30%, 06/01/2021 | | | 45 | |
| | 50 | | | 5.50%, 03/01/2018 | | | 54 | |
| | | | | Intel Corp. | | | | |
| | 40 | | | 2.70%, 12/15/2022 | | | 40 | |
| | 50 | | | 3.30%, 10/01/2021 | | | 53 | |
| | | | | Lockheed Martin Corp. | | | | |
| | 45 | | | 4.25%, 11/15/2019 | | | 51 | |
| | 15 | | | 4.85%, 09/15/2041 | | | 16 | |
| | | | | Raytheon Co. | | | | |
| | 25 | | | 3.13%, 10/15/2020 | | | 27 | |
| | | | | Texas Instruments, Inc. | | | | |
| | 25 | | | 2.38%, 05/16/2016 | | | 26 | |
| | | | | Thermo Fisher Scientific, Inc. | | | | |
| | 65 | | | 2.25%, 08/15/2016 | | | 67 | |
| | | | | | | | 603 | |
| | | | | Construction - 0.0% | | | | |
| | | | | CRH America, Inc. | | | | |
| | 60 | | | 6.00%, 09/30/2016 | | | 67 | |
| | | | | | | | | |
| | | | | Couriers and Messengers - 0.0% | | | | |
| | | | | United Parcel Service, Inc. | | | | |
| | 35 | | | 3.13%, 01/15/2021 | | | 38 | |
| | 45 | | | 3.88%, 04/01/2014 | | | 47 | |
| | | | | | | | 85 | |
| | | | | Electrical Equipment and Appliance Manufacturing - 0.1% | | | | |
| | | | | Emerson Electric Co. | | | | |
| | 30 | | | 4.88%, 10/15/2019 | | | 36 | |
| | | | | General Electric Co. | | | | |
| 15 | | | 4.13%, 10/09/2042 | | | 15 | |
| | 105 | | | 5.25%, 12/06/2017 | | | 124 | |
| | | | | Koninklijke Philips Electronics N.V. | | | | |
| | 18 | | | 6.88%, 03/11/2038 | | | 24 | |
| | | | | | | | 199 | |
| | | | | Finance and Insurance - 3.2% | | | | |
| | | | | Aetna, Inc. | | | | |
| | 55 | | | 3.95%, 09/01/2020 | | | 60 | |
| | | | | Allstate Corp. | | | | |
| | 35 | | | 5.00%, 08/15/2014 | | | 38 | |
| | 29 | | | 5.95%, 04/01/2036 | | | 37 | |
| | | | | American Express Co. | | | | |
| | 103 | | | 2.65%, 12/02/2022 ■ | | | 103 | |
| | | | | American Express Credit Corp. | | | | |
| | 75 | | | 2.75%, 09/15/2015 | | | 79 | |
| | | | | American International Group, Inc. | | | | |
| | 140 | | | 6.40%, 12/15/2020 | | | 174 | |
| | | | | Aon Corp. | | | | |
| | 20 | | | 5.00%, 09/30/2020 | | | 23 | |
| | | | | Asian Development Bank | | | | |
| | 195 | | | 2.50%, 03/15/2016 | | | 207 | |
| | | | | Bank of America Corp. | | | | |
| | 120 | | | 5.00%, 05/13/2021 | | | 137 | |
| | 380 | | | 5.65%, 05/01/2018 | | | 442 | |
| | | | | Bank of New York Mellon Corp. | | | | |
| | 25 | | | 2.30%, 07/28/2016 | | | 26 | |
| | 50 | | | 3.55%, 09/23/2021 | | | 55 | |
| | | | | Bank of Nova Scotia | | | | |
| | 35 | | | 4.38%, 01/13/2021 | | | 41 | |
| | | | | Barclays Bank plc | | | | |
| | 100 | | | 5.20%, 07/10/2014 | | | 106 | |
| | | | | BB&T Corp. | | | | |
| | 80 | | | 3.20%, 03/15/2016 | | | 85 | |
| | | | | Berkshire Hathaway Finance Corp. | | | | |
| | 135 | | | 5.40%, 05/15/2018 | | | 162 | |
| | | | | BlackRock, Inc. | | | | |
| | 60 | | | 5.00%, 12/10/2019 | | | 72 | |
| | | | | Boston Properties L.P. | | | | |
| | 40 | | | 5.88%, 10/15/2019 | | | 48 | |
| | | | | BP Capital Markets plc | | | | |
| | 70 | | | 2.25%, 11/01/2016 | | | 73 | |
| | 40 | | | 3.25%, 05/06/2022 | | | 42 | |
| | | | | Capital One Financial Corp. | | | | |
| | 110 | | | 6.15%, 09/01/2016 | | | 126 | |
| | | | | Caterpillar Financial Services Corp. | | | | |
| | 45 | | | 6.13%, 02/17/2014 | | | 48 | |
| | | | | Chubb Corp. | | | | |
| | 45 | | | 5.75%, 05/15/2018 | | | 55 | |
| | | | | Cigna Corp. | | | | |
| | 10 | | | 5.38%, 02/15/2042 | | | 12 | |
| | | | | Citigroup, Inc. | | | | |
| | 75 | | | 5.00%, 09/15/2014 | | | 79 | |
| | 220 | | | 5.38%, 08/09/2020 | | | 259 | |
| | 65 | | | 6.63%, 06/15/2032 | | | 75 | |
| | | | | Credit Suisse First Boston USA, Inc. | | | | |
| | 180 | | | 5.13%, 08/15/2015 | | | 200 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Portfolio Diversifier HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| CORPORATE BONDS - 8.0% - (continued) | |
| | | | | Finance and Insurance - 3.2% - (continued) | | | | |
| | | | | Deutsche Bank AG | | | | |
| $ | 40 | | | 3.25%, 01/11/2016 | | $ | 42 | |
| | | | | European Bank for Reconstruction & Development | | | | |
| | 65 | | | 2.50%, 03/15/2016 | | | 69 | |
| | | | | European Investment Bank | | | | |
| | 185 | | | 1.25%, 10/14/2016 | | | 188 | |
| | 160 | | | 2.88%, 09/15/2020 | | | 173 | |
| | 200 | | | 3.13%, 06/04/2014 | | | 208 | |
| | | | | Fifth Third Bancorp | | | | |
| | 35 | | | 3.63%, 01/25/2016 | | | 37 | |
| | | | | Ford Motor Credit Co. LLC | | | | |
| | 170 | | | 6.63%, 08/15/2017 | | | 199 | |
| | | | | General Electric Capital Corp. | | | | |
| | 215 | | | 4.38%, 09/16/2020 | | | 240 | |
| | 240 | | | 5.30%, 02/11/2021 | | | 279 | |
| | | | | Goldman Sachs Group, Inc. | | | | |
| | 280 | | | 5.38%, 03/15/2020 | | | 321 | |
| | 74 | | | 6.25%, 02/01/2041 | | | 91 | |
| | | | | HCP, Inc. | | | | |
| | 60 | | | 6.70%, 01/30/2018 | | | 72 | |
| | | | | Health Care, Inc. | | | | |
| | 20 | | | 5.25%, 01/15/2022 | | | 22 | |
| | | | | HSBC Finance Corp. | | | | |
| | 40 | | | 5.00%, 06/30/2015 | | | 43 | |
| | | | | HSBC Holdings plc | | | | |
| | 195 | | | 5.10%, 04/05/2021 | | | 230 | |
| | | | | Inter-American Development Bank | | | | |
| | 145 | | | 2.25%, 07/15/2015 | | | 152 | |
| | 70 | | | 3.88%, 02/14/2020 | | | 82 | |
| | | | | International Bank for Reconstruction & Development | | | | |
| | 150 | | | 1.13%, 08/25/2014 | | | 152 | |
| | 47 | | | 7.63%, 01/19/2023 | | | 71 | |
| | | | | John Deere Capital Corp. | | | | |
| | 35 | | | 1.85%, 09/15/2016 | | | 36 | |
| | 35 | | | 2.80%, 09/18/2017 | | | 38 | |
| | | | | JP Morgan Chase & Co. | | | | |
| | 275 | | | 4.95%, 03/25/2020 | | | 319 | |
| | 75 | | | 5.13%, 09/15/2014 | | | 80 | |
| | 80 | | | 6.00%, 01/15/2018 | | | 96 | |
| | 130 | | | 6.30%, 04/23/2019 | | | 160 | |
| | | | | KeyCorp | | | | |
| | 70 | | | 3.75%, 08/13/2015 | | | 75 | |
| | | | | Kreditanstalt fuer Wiederaufbau | | | | |
| | 350 | | | 1.25%, 10/26/2015 - 02/15/2017 | | | 357 | |
| | 75 | | | 2.63%, 01/25/2022 | | | 79 | |
| | 111 | | | 4.00%, 01/27/2020 | | | 129 | |
| | | | | Landwirtschaftliche Rentenbank | | | | |
| | 60 | | | 2.50%, 02/15/2016 | | | 63 | |
| | 100 | | | 3.13%, 07/15/2015 | | | 107 | |
| | | | | Lincoln National Corp. | | | | |
| | 60 | | | 4.85%, 06/24/2021 | | | 67 | |
| | | | | Marsh & McLennan Cos., Inc. | | | | |
| | 35 | | | 4.80%, 07/15/2021 | | | 39 | |
| | | | | MetLife, Inc. | | | | |
| | 35 | | | 5.70%, 06/15/2035 | | | 43 | |
| | 50 | | | 7.72%, 02/15/2019 | | | 65 | |
| | | | | Morgan Stanley | | | | |
| 50 | | | 4.75%, 04/01/2014 | | | 52 | |
| | 100 | | | 5.45%, 01/09/2017 | | | 111 | |
| | 130 | | | 5.50%, 07/28/2021 | | | 147 | |
| | | | | National Rural Utilities Cooperative Finance Corp. | | | | |
| | 30 | | | 5.45%, 04/10/2017 | | | 35 | |
| | | | | Nomura Holdings, Inc. | | | | |
| | 50 | | | 4.13%, 01/19/2016 | | | 52 | |
| | | | | Oesterreichische Kontrollbank AG | | | | |
| | 95 | | | 4.88%, 02/16/2016 | | | 107 | |
| | | | | PNC Funding Corp. | | | | |
| | 100 | | | 5.13%, 02/08/2020 | | | 119 | |
| | | | | Principal Financial Group, Inc. | | | | |
| | 30 | | | 3.30%, 09/15/2022 | | | 30 | |
| | | | | Prudential Financial, Inc. | | | | |
| | 155 | | | 5.38%, 06/21/2020 | | | 181 | |
| | | | | Rabobank Nederland | | | | |
| | 55 | | | 4.50%, 01/11/2021 | | | 62 | |
| | | | | Royal Bank of Canada | | | | |
| | 35 | | | 2.30%, 07/20/2016 | | | 37 | |
| | | | | Royal Bank of Scotland plc | | | | |
| | 35 | | | 6.13%, 01/11/2021 | | | 42 | |
| | | | | Simon Property Group L.P. | | | | |
| | 110 | | | 5.65%, 02/01/2020 | | | 132 | |
| | | | | SLM Corp. | | | | |
| | 130 | | | 6.25%, 01/25/2016 | | | 141 | |
| | | | | Toyota Motor Credit Corp. | | | | |
| | 40 | | | 3.20%, 06/17/2015 | | | 42 | |
| | 50 | | | 3.40%, 09/15/2021 | | | 55 | |
| | | | | Travelers Cos., Inc. | | | | |
| | 60 | | | 3.90%, 11/01/2020 | | | 68 | |
| | | | | U.S. Bancorp | | | | |
| | 110 | | | 2.45%, 07/27/2015 | | | 115 | |
| | | | | UBS AG Stamford CT | | | | |
| | 100 | | | 5.88%, 07/15/2016 | | | 112 | |
| | | | | UnitedHealth Group, Inc. | | | | |
| | 65 | | | 6.88%, 02/15/2038 | | | 89 | |
| | | | | Wellpoint, Inc. | | | | |
| | 15 | | | 4.65%, 01/15/2043 | | | 16 | |
| | 25 | | | 5.25%, 01/15/2016 | | | 28 | |
| | 20 | | | 5.80%, 08/15/2040 | | | 23 | |
| | | | | Wells Fargo & Co. | | | | |
| | 190 | | | 2.10%, 05/08/2017 | | | 196 | |
| | 165 | | | 4.60%, 04/01/2021 | | | 190 | |
| | | | | Westpac Banking Corp. | | | | |
| | 40 | | | 3.00%, 12/09/2015 | | | 42 | |
| | | | | | | | 9,512 | |
| | | | | Food Manufacturing - 0.1% | | | | |
| | | | | Archer-Daniels-Midland Co. | | | | |
| | 33 | | | 4.02%, 04/16/2043 ■ | | | 32 | |
| | | | | ConAgra Foods, Inc. | | | | |
| | 40 | | | 7.00%, 04/15/2019 | | | 49 | |
| | | | | General Mills, Inc. | | | | |
| | 20 | | | 5.65%, 02/15/2019 | | | 24 | |
| | | | | Kellogg Co. | | | | |
| | 40 | | | 4.00%, 12/15/2020 | | | 45 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | Market Value ╪ | |
| CORPORATE BONDS - 8.0% - (continued) | |
| | | | | Food Manufacturing - 0.1% - (continued) | | | | |
| | | | | Kraft Foods Group, Inc. | | | | |
| $ | 42 | | | 5.38%, 02/10/2020 | | $ | 51 | |
| | 83 | | | 5.38%, 02/10/2020 ■ | | | 99 | |
| | 47 | | | 6.88%, 02/01/2038 | | | 65 | |
| | | | | Unilever Capital Corp. | | | | |
| | 20 | | | 5.90%, 11/15/2032 | | | 27 | |
| | | | | | | | 392 | |
| | | | | Food Services - 0.0% | | | | |
| | | | | McDonald's Corp. | | | | |
| | 14 | | | 3.70%, 02/15/2042 | | | 14 | |
| | 80 | | | 5.35%, 03/01/2018 | | | 96 | |
| | | | | Yum! Brands, Inc. | | | | |
| | 7 | | | 6.88%, 11/15/2037 | | | 10 | |
| | | | | | | | 120 | |
| | | | | Health Care and Social Assistance - 0.6% | | | | |
| | | | | AbbVie, Inc. | | | | |
| | 145 | | | 2.90%, 11/06/2022 ■ | | | 148 | |
| | | | | Amgen, Inc. | | | | |
| | 85 | | | 3.88%, 11/15/2021 | | | 94 | |
| | 47 | | | 5.75%, 03/15/2040 | | | 57 | |
| | | | | AstraZeneca plc | | | | |
| | 80 | | | 5.90%, 09/15/2017 | | | 97 | |
| | | | | Baxter International, Inc. | | | | |
| | 25 | | | 2.40%, 08/15/2022 | | | 25 | |
| | 30 | | | 4.50%, 08/15/2019 | | | 34 | |
| | | | | Boston Scientific Corp. | | | | |
| | 40 | | | 6.00%, 01/15/2020 | | | 47 | |
| | | | | Bristol-Myers Squibb Co. | | | | |
| | 20 | | | 5.45%, 05/01/2018 | | | 24 | |
| | | | | Celgene Corp. | | | | |
| | 30 | | | 3.25%, 08/15/2022 | | | 31 | |
| | | | | Covidien International Finance S.A. | | | | |
| | 25 | | | 6.00%, 10/15/2017 | | | 30 | |
| | | | | CVS Caremark Corp. | | | | |
| | 30 | | | 6.13%, 09/15/2039 | | | 38 | |
| | | | | Eli Lilly & Co. | | | | |
| | 20 | | | 5.20%, 03/15/2017 | | | 23 | |
| | | | | Express Scripts Holding Co. | | | | |
| | 75 | | | 4.75%, 11/15/2021 ■ | | | 85 | |
| | | | | Gilead Sciences, Inc. | | | | |
| | 20 | | | 4.40%, 12/01/2021 | | | 23 | |
| | | | | GlaxoSmithKline Capital, Inc. | | | | |
| | 110 | | | 5.65%, 05/15/2018 | | | 134 | |
| | 12 | | | 6.38%, 05/15/2038 | | | 17 | |
| | | | | Johnson & Johnson | | | | |
| | 75 | | | 2.15%, 05/15/2016 | | | 78 | |
| | 10 | | | 5.95%, 08/15/2037 | | | 14 | |
| | | | | McKesson Corp. | | | | |
| | 10 | | | 4.75%, 03/01/2021 | | | 12 | |
| | | | | Medtronic, Inc. | | | | |
| | 50 | | | 4.45%, 03/15/2020 | | | 58 | |
| | | | | Merck & Co., Inc. | | | | |
| | 15 | | | 3.60%, 09/15/2042 | | | 15 | |
| | 85 | | | 3.88%, 01/15/2021 | | | 95 | |
| | | | | Novartis Securities Investment Ltd. | | | | |
| | 75 | | | 5.13%, 02/10/2019 | | | 90 | |
| | | | | Pfizer, Inc. | | | | |
| | 180 | | | 6.20%, 03/15/2019 | | | 227 | |
| | | | | Quest Diagnostics, Inc. | | | | |
| 40 | | | 4.70%, 04/01/2021 | | | 45 | |
| | | | | Sanofi-Aventis S.A. | | | | |
| | 20 | | | 4.00%, 03/29/2021 | | | 23 | |
| | | | | Teva Pharmaceutical Finance IV B.V. | | | | |
| | 60 | | | 3.65%, 11/10/2021 | | | 64 | |
| | | | | Walgreen Co. | | | | |
| | 30 | | | 3.10%, 09/15/2022 | | | 30 | |
| | | | | | | | 1,658 | |
| | | | | Information - 0.5% | | | | |
| | | | | America Movil S.A.B. de C.V. | | | | |
| | 110 | | | 5.63%, 11/15/2017 | | | 132 | |
| | 15 | | | 6.13%, 11/15/2037 | | | 19 | |
| | | | | AT&T, Inc. | | | | |
| | 40 | | | 2.63%, 12/01/2022 | | | 40 | |
| | 59 | | | 4.35%, 06/15/2045 ■ | | | 59 | |
| | 73 | | | 5.35%, 09/01/2040 | | | 85 | |
| | 160 | | | 5.80%, 02/15/2019 | | | 197 | |
| | | | | British Telecommunications plc | | | | |
| | 18 | | | 9.62%, 12/15/2030 Δ | | | 29 | |
| | | | | Cellco Partnership - Verizon Wireless Capital LLC | | | | |
| | 50 | | | 8.50%, 11/15/2018 | | | 69 | |
| | | | | CenturyLink, Inc. | | | | |
| | 51 | | | 7.60%, 09/15/2039 | | | 53 | |
| | | | | Deutsche Telekom International Finance B.V. | | | | |
| | 27 | | | 8.75%, 06/15/2030 | | | 40 | |
| | | | | eBay, Inc. | | | | |
| | 25 | | | 2.60%, 07/15/2022 | | | 25 | |
| | | | | France Telecom S.A. | | | | |
| | 40 | | | 5.38%, 07/08/2019 | | | 47 | |
| | | | | Google, Inc. | | | | |
| | 65 | | | 2.13%, 05/19/2016 | | | 68 | |
| | | | | Microsoft Corp. | | | | |
| | 60 | | | 1.63%, 09/25/2015 | | | 62 | |
| | 40 | | | 5.20%, 06/01/2039 | | | 49 | |
| | | | | Oracle Corp. | | | | |
| | 60 | | | 5.38%, 07/15/2040 | | | 75 | |
| | 60 | | | 5.75%, 04/15/2018 | | | 73 | |
| | | | | Telecom Italia Capital | | | | |
| | 30 | | | 7.00%, 06/04/2018 | | | 34 | |
| | | | | Telefonica Emisiones SAU | | | | |
| | 60 | | | 5.46%, 02/16/2021 | | | 64 | |
| | | | | Verizon Communications, Inc. | | | | |
| | 70 | | | 6.00%, 04/01/2041 | | | 92 | |
| | 130 | | | 6.35%, 04/01/2019 | | | 164 | |
| | | | | Vodafone Group plc | | | | |
| | 95 | | | 5.45%, 06/10/2019 | | | 115 | |
| | | | | | | | 1,591 | |
| | | | | Machinery Manufacturing - 0.1% | | | | |
| | | | | Baker Hughes, Inc. | | | | |
| | 31 | | | 5.13%, 09/15/2040 | | | 37 | |
| | | | | Caterpillar, Inc. | | | | |
| | 15 | | | 3.80%, 08/15/2042 | | | 15 | |
| | 85 | | | 3.90%, 05/27/2021 | | | 95 | |
| | | | | Deere & Co. | | | | |
| | 15 | | | 3.90%, 06/09/2042 | | | 16 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Portfolio Diversifier HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| CORPORATE BONDS - 8.0% - (continued) | |
| | | | | Machinery Manufacturing - 0.1% - (continued) | | | | |
| | | | | Joy Global, Inc. | | | | |
| $ | 10 | | | 5.13%, 10/15/2021 | | $ | 11 | |
| | | | | Xerox Corp. | | | | |
| | 20 | | | 6.35%, 05/15/2018 | | | 23 | |
| | | | | | | | 197 | |
| | | | | Mining - 0.2% | | | | |
| | | | | Barrick Gold Corp. | | | | |
| | 110 | | | 6.95%, 04/01/2019 | | | 137 | |
| | | | | BHP Billiton Finance USA Ltd. | | | | |
| | 15 | | | 4.13%, 02/24/2042 | | | 16 | |
| | 30 | | | 6.50%, 04/01/2019 | | | 38 | |
| | | | | Newmont Mining Corp. | | | | |
| | 18 | | | 6.25%, 10/01/2039 | | | 22 | |
| | | | | Rio Tinto Finance USA Ltd. | | | | |
| | 115 | | | 3.75%, 09/20/2021 | | | 123 | |
| | 40 | | | 6.50%, 07/15/2018 | | | 50 | |
| | | | | Southern Copper Corp. | | | | |
| | 30 | | | 6.75%, 04/16/2040 | | | 36 | |
| | | | | Teck Resources Ltd. | | | | |
| | 40 | | | 4.50%, 01/15/2021 | | | 43 | |
| | 15 | | | 5.40%, 02/01/2043 | | | 16 | |
| | | | | Vale Overseas Ltd. | | | | |
| | 55 | | | 6.88%, 11/10/2039 | | | 69 | |
| | | | | | | | 550 | |
| | | | | Miscellaneous Manufacturing - 0.2% | | | | |
| | | | | 3M Co. | | | | |
| | 75 | | | 1.38%, 09/29/2016 | | | 77 | |
| | | | | Boeing Co. | | | | |
| | 65 | | | 4.88%, 02/15/2020 | | | 78 | |
| | | | | Honeywell International, Inc. | | | | |
| | 70 | | | 4.25%, 03/01/2021 | | | 82 | |
| | | | | Northrop Grumman Corp. | | | | |
| | 20 | | | 5.05%, 08/01/2019 | | | 23 | |
| | | | | United Technologies Corp. | | | | |
| | 110 | | | 4.50%, 04/15/2020 - 06/01/2042 | | | 127 | |
| | 25 | | | 6.13%, 02/01/2019 | | | 31 | |
| | | | | | | | 418 | |
| | | | | Motor Vehicle and Parts Manufacturing - 0.0% | | | | |
| | | | | DaimlerChrysler NA Holdings Corp. | | | | |
| | 18 | | | 8.50%, 01/18/2031 | | | 28 | |
| | | | | Johnson Controls, Inc. | | | | |
| | 40 | | | 5.00%, 03/30/2020 | | | 45 | |
| | | | | | | | 73 | |
| | | | | Other Services - 0.0% | | | | |
| | | | | Illinois Tool Works, Inc. | | | | |
| | 15 | | | 3.90%, 09/01/2042 | | | 15 | |
| | | | | | | | | |
| | | | | Paper Manufacturing - 0.1% | | | | |
| | | | | International Paper Co. | | | | |
| | 60 | | | 7.50%, 08/15/2021 | | | 79 | |
| | | | | Kimberly-Clark Corp. | | | | |
| | 12 | | | 5.30%, 03/01/2041 | | | 15 | |
| | 40 | | | 6.13%, 08/01/2017 | | | 49 | |
| | | | | | | | 143 | |
| | | | | Petroleum and Coal Products Manufacturing - 0.7% | | | | |
| | | | | Anadarko Petroleum Corp. | | | | |
| | 40 | | | 5.95%, 09/15/2016 | | | 46 | |
| | | | | Apache Corp. | | | | |
| | 65 | | | 5.10%, 09/01/2040 | | | 74 | |
| | | | | Atmos Energy Corp. | | | | |
| 8 | | | 5.50%, 06/15/2041 | | | 10 | |
| | | | | Canadian Natural Resources Ltd. | | | | |
| | 60 | | | 5.70%, 05/15/2017 | | | 71 | |
| | | | | Cenovus Energy, Inc. | | | | |
| | 15 | | | 4.45%, 09/15/2042 | | | 16 | |
| | 25 | | | 5.70%, 10/15/2019 | | | 30 | |
| | | | | ConocoPhillips | | | | |
| | 78 | | | 6.50%, 02/01/2039 | | | 111 | |
| | | | | Devon Financing Corp. | | | | |
| | 35 | | | 7.88%, 09/30/2031 | | | 51 | |
| | | | | EnCana Corp. | | | | |
| | 25 | | | 6.50%, 02/01/2038 | | | 31 | |
| | | | | Ensco plc | | | | |
| | 50 | | | 4.70%, 03/15/2021 | | | 56 | |
| | | | | Hess Corp. | | | | |
| | 23 | | | 5.60%, 02/15/2041 | | | 27 | |
| | | | | Kerr-McGee Corp. | | | | |
| | 50 | | | 6.95%, 07/01/2024 | | | 63 | |
| | | | | Marathon Oil Corp. | | | | |
| | 15 | | | 6.60%, 10/01/2037 | | | 20 | |
| | | | | Marathon Petroleum Corp. | | | | |
| | 15 | | | 5.13%, 03/01/2021 | | | 18 | |
| | | | | Nabors Industries, Inc. | | | | |
| | 20 | | | 5.00%, 09/15/2020 | | | 22 | |
| | | | | National Oilwell Varco, Inc. | | | | |
| | 15 | | | 3.95%, 12/01/2042 | | | 15 | |
| | | | | Nexen, Inc. | | | | |
| | 10 | | | 7.50%, 07/30/2039 | | | 14 | |
| | | | | Noble Energy, Inc. | | | | |
| | 20 | | | 6.00%, 03/01/2041 | | | 24 | |
| | | | | Occidental Petroleum Corp. | | | | |
| | 40 | | | 4.10%, 02/01/2021 | | | 46 | |
| | | | | Pemex Project Funding Master Trust | | | | |
| | 95 | | | 5.75%, 03/01/2018 | | | 111 | |
| | | | | Petrobras International Finance Co. | | | | |
| | 170 | | | 5.38%, 01/27/2021 | | | 191 | |
| | | | | Petroleos Mexicanos | | | | |
| | 60 | | | 6.50%, 06/02/2041 | | | 75 | |
| | | | | Phillips 66 | | | | |
| | 45 | | | 4.30%, 04/01/2022 ■ | | | 50 | |
| | | | | Sempra Energy | | | | |
| | 10 | | | 6.00%, 10/15/2039 | | | 13 | |
| | 35 | | | 6.50%, 06/01/2016 | | | 41 | |
| | | | | Shell International Finance B.V. | | | | |
| | 125 | | | 4.30%, 09/22/2019 | | | 145 | |
| | | | | Southern Natural Gas Co. LLC | | | | |
| | 60 | | | 5.90%, 04/01/2017 ■ | | | 71 | |
| | | | | Statoilhydro ASA | | | | |
| | 100 | | | 5.25%, 04/15/2019 | | | 120 | |
| | | | | Suncor Energy, Inc. | | | | |
| | 55 | | | 6.50%, 06/15/2038 | | | 73 | |
| | | | | Talisman Energy, Inc. | | | | |
| | 25 | | | 7.75%, 06/01/2019 | | | 32 | |
| | | | | Total Capital International S.A. | | | | |
| | 45 | | | 1.50%, 02/17/2017 | | | 45 | |
| | | | | Total Capital S.A. | | | | |
| | 30 | | | 4.25%, 12/15/2021 | | | 35 | |
| | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | Market Value ╪ | |
CORPORATE BONDS - 8.0% - (continued) | | | | |
| | | | | Petroleum and Coal Products Manufacturing - 0.7% - (continued) | | | | |
| | | | | Transocean, Inc. | | | | |
| $ | 80 | | | 6.50%, 11/15/2020 | | $ | 97 | |
| | | | | TXU Electric Delivery Co. | | | | |
| | 55 | | | 7.00%, 09/01/2022 | | | 70 | |
| | | | | Valero Energy Corp. | | | | |
| | 60 | | | 6.13%, 02/01/2020 | | | 73 | |
| | | | | Weatherford International Ltd. | | | | |
| | 60 | | | 5.13%, 09/15/2020 | | | 66 | |
| | | | | Williams Partners L.P. | | | | |
| | 45 | | | 5.25%, 03/15/2020 | | | 52 | |
| | | | | | | | 2,105 | |
| | | | | Pipeline Transportation - 0.2% | | | | |
| | | | | Enterprise Products Operating LLC | | | | |
| | 15 | | | 4.45%, 02/15/2043 | | | 15 | |
| | 90 | | | 5.20%, 09/01/2020 | | | 108 | |
| | | | | Kinder Morgan Energy Partners L.P. | | | | |
| | 62 | | | 6.38%, 03/01/2041 | | | 77 | |
| | | | | Oneok Partners L.P. | | | | |
| | 25 | | | 6.65%, 10/01/2036 | | | 31 | |
| | | | | Plains All American Pipeline L.P. | | | | |
| | 30 | | | 6.65%, 01/15/2037 | | | 39 | |
| | | | | TransCanada Pipelines Ltd. | | | | |
| | 80 | | | 3.80%, 10/01/2020 | | | 89 | |
| | 50 | | | 7.13%, 01/15/2019 | | | 64 | |
| | | | | | | | 423 | |
| | | | | Primary Metal Manufacturing - 0.0% | | | | |
| | | | | Alcoa, Inc. | | | | |
| | 30 | | | 6.15%, 08/15/2020 | | | 33 | |
| | | | | | | | | |
| | | | | Professional, Scientific and Technical Services - 0.0% | | | | |
| | | | | IBM Corp. | | | | |
| | 55 | | | 5.60%, 11/30/2039 | | | 71 | |
| | | | | Omnicom Group, Inc. | | | | |
| | 30 | | | 3.63%, 05/01/2022 | | | 31 | |
| | | | | | | | 102 | |
| | | | | Public Administration - 0.0% | | | | |
| | | | | Waste Management, Inc. | | | | |
| | 55 | | | 4.75%, 06/30/2020 | | | 63 | |
| | | | | | | | | |
| | | | | Rail Transportation - 0.1% | | | | |
| | | | | Burlington Northern Santa Fe Corp. | | | | |
| | 15 | | | 4.38%, 09/01/2042 | | | 16 | |
| | 80 | | | 4.70%, 10/01/2019 | | | 92 | |
| | | | | Canadian National Railway Co. | | | | |
| | 40 | | | 2.85%, 12/15/2021 | | | 42 | |
| | | | | Canadian Pacific Railway Co. | | | | |
| | 8 | | | 7.13%, 10/15/2031 | | | 10 | |
| | | | | CSX Corp. | | | | |
| | 25 | | | 3.70%, 10/30/2020 | | | 27 | |
| | 55 | | | 4.25%, 06/01/2021 | | | 62 | |
| | | | | Norfolk Southern Corp. | | | | |
| | 40 | | | 4.84%, 10/01/2041 | | | 45 | |
| | | | | Union Pacific Corp. | | | | |
| | 34 | | | 6.63%, 02/01/2029 | | | 46 | |
| | | | | | | | 340 | |
| | | | | Real Estate, Rental and Leasing - 0.0% | | | | |
| | | | | COX Communications, Inc. | | | | |
| | 19 | | | 5.45%, 12/15/2014 | | | 21 | |
| | | | | ERP Operating L.P. | | | | |
| | 25 | | | 5.75%, 06/15/2017 | | | 29 | |
| | | | | | | | 50 | |
| | | | | Retail Trade - 0.3% | | | | |
| | | | | Energy Transfer Partners | | | | |
| | 15 | | | 6.50%, 02/01/2042 | | | 18 | |
| | 64 | | | 9.00%, 04/15/2019 | | | 85 | |
| | | | | Federated Retail Holdings, Inc. | | | | |
| | 28 | | | 5.90%, 12/01/2016 | | | 33 | |
| | | | | Home Depot, Inc. | | | | |
| | 125 | | | 4.40%, 04/01/2021 | | | 147 | |
| | | | | Kroger (The) Co. | | | | |
| | 40 | | | 3.90%, 10/01/2015 | | | 43 | |
| | 40 | | | 6.80%, 12/15/2018 | | | 50 | |
| | | | | Lowe's Cos., Inc. | | | | |
| | 50 | | | 6.65%, 09/15/2037 | | | 69 | |
| | | | | Target Corp. | | | | |
| | 140 | | | 3.88%, 07/15/2020 | | | 157 | |
| | | | | Turlock Corp. | | | | |
| | 50 | | | 2.75%, 11/02/2022 ■ | | | 50 | |
| | | | | Wal-Mart Stores, Inc. | | | | |
| | 115 | | | 3.25%, 10/25/2020 | | | 125 | |
| | 30 | | | 4.25%, 04/15/2021 | | | 35 | |
| | 58 | | | 5.63%, 04/15/2041 | | | 76 | |
| | | | | | | | 888 | |
| | | | | Soap, Cleaning Compound and Toilet Manufacturing - 0.0% | | | | |
| | | | | Procter & Gamble Co. | | | | |
| | 75 | | | 4.70%, 02/15/2019 | | | 88 | |
| | 20 | | | 5.55%, 03/05/2037 | | | 27 | |
| | | | | | | | 115 | |
| | | | | Transportation Equipment Manufacturing - 0.0% | | | | |
| | | | | General Dynamics Corp. | | | | |
| | 15 | | | 3.88%, 07/15/2021 | | | 17 | |
| | | | | | | | | |
| | | | | Utilities - 0.5% | | | | |
| | | | | CenterPoint Energy Houston Electric LLC | | | | |
| | 15 | | | 3.55%, 08/01/2042 | | | 14 | |
| | | | | Consolidated Edison Co. of NY | | | | |
| | 25 | | | 5.50%, 12/01/2039 | | | 31 | |
| | 40 | | | 6.65%, 04/01/2019 | | | 51 | |
| | | | | Dominion Resources, Inc. | | | | |
| | 120 | | | 4.45%, 03/15/2021 | | | 138 | |
| | | | | Duke Energy Corp. | | | | |
| | 60 | | | 5.30%, 02/15/2040 | | | 72 | |
| | | | | Entergy Corp. | | | | |
| | 40 | | | 3.63%, 09/15/2015 | | | 42 | |
| | | | | Exelon Generation Co. LLC | | | | |
| | 100 | | | 4.00%, 10/01/2020 | | | 105 | |
| | 35 | | | 6.25%, 10/01/2039 | | | 41 | |
| | | | | FirstEnergy Solutions Co. | | | | |
| | 80 | | | 6.05%, 08/15/2021 | | | 92 | |
| | | | | Florida Power & Light Co. | | | | |
| | 45 | | | 5.69%, 03/01/2040 | | | 59 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Portfolio Diversifier HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
CORPORATE BONDS - 8.0% - (continued) | | | | |
| | | | | Utilities - 0.5% - (continued) | | | | |
| | | | | Georgia Power Co. | | | | |
| $ | 60 | | | 2.85%, 05/15/2022 | | $ | 62 | |
| | 35 | | | 4.75%, 09/01/2040 | | | 38 | |
| | | | | Hydro-Quebec | | | | |
| | 50 | | | 1.38%, 06/19/2017 | | | 51 | |
| | 30 | | | 8.40%, 01/15/2022 | | | 43 | |
| | | | | Kentucky Utilities Co. | | | | |
| | 20 | | | 5.13%, 11/01/2040 | | | 24 | |
| | | | | MidAmerican Energy Holdings Co. | | | | |
| | 80 | | | 6.13%, 04/01/2036 | | | 101 | |
| | | | | Nevada Power Co. | | | | |
| | 25 | | | 6.75%, 07/01/2037 | | | 35 | |
| | | | | Northern States Power Co. | | | | |
| | 25 | | | 3.40%, 08/15/2042 | | | 24 | |
| | | | | Ohio Power Co. | | | | |
| | 65 | | | 5.38%, 10/01/2021 | | | 79 | |
| | | | | Pacific Gas & Electric Co. | | | | |
| | 55 | | | 6.05%, 03/01/2034 | | | 71 | |
| | | | | Progress Energy, Inc. | | | | |
| | 100 | | | 4.40%, 01/15/2021 | | | 111 | |
| | | | | PSEG Power LLC | | | | |
| | 25 | | | 5.13%, 04/15/2020 | | | 29 | |
| | | | | Public Service Electric & Gas Co. | | | | |
| | 10 | | | 3.95%, 05/01/2042 | | | 10 | |
| | | | | San Diego Gas & Electric Co. | | | | |
| | 12 | | | 4.50%, 08/15/2040 | | | 13 | |
| | | | | South Carolina Electric & Gas Co. | | | | |
| | 10 | | | 6.05%, 01/15/2038 | | | 13 | |
| | | | | Southern California Edison Co. | | | | |
| | 35 | | | 4.50%, 09/01/2040 | | | 39 | |
| | | | | Xcel Energy, Inc. | | | | |
| | 65 | | | 4.70%, 05/15/2020 | | | 76 | |
| | | | | | | | 1,464 | |
| | | | | Total corporate bonds | | | | |
| | | | | (cost $22,741) | | $ | 23,728 | |
| | | | | | | | | |
FOREIGN GOVERNMENT OBLIGATIONS - 0.5% | | | | |
| | | | | Brazil - 0.1% | | | | |
| | | | | Brazil (Republic of) | | | | |
| $ | 125 | | | 5.88%, 01/15/2019 | | $ | 154 | |
| | 90 | | | 7.13%, 01/20/2037 | | | 138 | |
| | | | | | | $ | 292 | |
| | | | | Canada - 0.2% | | | | |
| | | | | British Columbia (Province of) | | | | |
| | 60 | | | 2.10%, 05/18/2016 | | | 63 | |
| | 30 | | | 2.65%, 09/22/2021 | | | 32 | |
| | | | | Canada (Government of) | | | | |
| | 35 | | | 0.88%, 02/14/2017 | | | 35 | |
| | 40 | | | 2.38%, 09/10/2014 | | | 42 | |
| | | | | Manitoba (Province of) | | | | |
| | 75 | | | 2.63%, 07/15/2015 | | | 79 | |
| | | | | Nova Scotia (Province of) | | | | |
| | 35 | | | 5.13%, 01/26/2017 | | | 41 | |
| | | | | Ontario (Province of) | | | | |
| | 175 | | | 4.40%, 04/14/2020 | | | 206 | |
| | | | | Quebec (Province of) | | | | |
| | 140 | | | 3.50%, 07/29/2020 | | | 155 | |
| | | | | | | | 653 | |
| | | | | Colombia - 0.1% | | | | |
| | | | | Colombia (Republic of) | | | | |
| 76 | | | 8.13%, 05/21/2024 | | | 114 | |
| | | | | | | | | |
| | | | | Italy - 0.0% | | | | |
| | | | | Italy (Republic of) | | | | |
| | 25 | | | 5.38%, 06/15/2033 | | | 25 | |
| | | | | | | | | |
| | | | | Mexico - 0.1% | | | | |
| | | | | United Mexican States | | | | |
| | 140 | | | 5.13%, 01/15/2020 | | | 167 | |
| | 96 | | | 6.05%, 01/11/2040 | | | 129 | |
| | | | | | | | 296 | |
| | | | | Panama - 0.0% | | | | |
| | | | | Panama (Republic of) | | | | |
| | 30 | | | 6.70%, 01/26/2036 | | | 43 | |
| | | | | | | | | |
| | | | | Peru - 0.0% | | | | |
| | | | | Peru (Republic of) | | | | |
| | 30 | | | 5.63%, 11/18/2050 | | | 39 | |
| | 30 | | | 7.13%, 03/30/2019 | | | 39 | |
| | | | | | | | 78 | |
| | | | | Poland - 0.0% | | | | |
| | | | | Poland (Republic of) | | | | |
| | 70 | | | 5.00%, 03/23/2022 | | | 83 | |
| | | | | | | | | |
| | | | | Total foreign government obligations | | | | |
| | | | | (cost $1,492) | | $ | 1,584 | |
| | | | | | | | | |
MUNICIPAL BONDS - 0.2% | | | | |
| | | | | Airport Revenues - 0.0% | | | | |
| | | | | Clark County, NV, Airport Rev, | | | | |
| $ | 5 | | | 6.82%, 07/01/2045 | | $ | 7 | |
| | | | | | | | | |
| | | | | General Obligations - 0.1% | | | | |
| | | | | California State GO, | | | | |
| | 70 | | | 7.60%, 11/01/2040 | | | 102 | |
| | | | | California State GO, Taxable, | | | | |
| | 30 | | | 7.55%, 04/01/2039 | | | 43 | |
| | | | | Connecticut State GO, | | | | |
| | 15 | | | 5.85%, 03/15/2032 | | | 19 | |
| | | | | Illionis State, GO, | | | | |
| | 100 | | | 5.10%, 06/01/2033 | | | 99 | |
| | | | | Massachusetts State GO, | | | | |
| | 15 | | | 5.46%, 12/01/2039 | | | 19 | |
| | | | | Mississippi State GO, | | | | |
| | 25 | | | 5.25%, 11/01/2034 | | | 30 | |
| | | | | New York, NY, GO, | | | | |
| | 15 | | | 5.85%, 06/01/2040 | | | 20 | |
| | | | | Texas State GO, | | | | |
| | 10 | | | 5.52%, 04/01/2039 | | | 13 | |
| | | | | | | | 345 | |
| | | | | Higher Education (Univ., Dorms, etc.) - 0.0% | | | | |
| | | | | New York, NY, Dormitory Auth Rev, | | | | |
| | 20 | | | 5.60%, 03/15/2040 | | | 25 | |
| | | | | University of California, Build America Bonds Rev, | | | | |
| | 25 | | | 5.77%, 05/15/2043 | | | 31 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | Market Value ╪ | |
MUNICIPAL BONDS - 0.2% - (continued) | | | | |
| | | | | Higher Education (Univ., Dorms, etc.) - 0.0% - (continued) | | | | |
| | | | | University of Texas, | | | | |
| $ | 25 | | | 4.79%, 08/15/2046 | | $ | 30 | |
| | | | | | | | 86 | |
| | | | | Miscellaneous - 0.0% | | | | |
| | | | | New Jersey State Econ DA Lease Rev, | | | | |
| | 15 | | | 7.43%, 02/15/2029 | | | 19 | |
| | | | | | | | | |
| | | | | Transportation - 0.1% | | | | |
| | | | | Bay Area, CA, Toll Auth Bridge Rev, | | | | |
| | 30 | | | 6.26%, 04/01/2049 | | | 41 | |
| | | | | Metropolitan Transportation Auth, NY, Rev, | | | | |
| | 20 | | | 5.87%, 11/15/2039 | | | 24 | |
| | 15 | | | 6.65%, 11/15/2039 | | | 19 | |
| | | | | New Jersey State Turnpike Auth, | | | | |
| | 15 | | | 7.10%, 01/01/2041 | | | 22 | |
| | | | | New Jersey State Turnpike Auth, Taxable, | | | | |
| | 15 | | | 7.41%, 01/01/2040 | | | 22 | |
| | | | | New York & New Jersey PA, | | | | |
| | 15 | | | 4.93%, 10/01/2051 | | | 17 | |
| | | | | | | | 145 | |
| | | | | Utilities - Electric - 0.0% | | | | |
| | | | | Municipal Elec Auth Georgia, | | | | |
| | 15 | | | 6.64%, 04/01/2057 | | | 18 | |
| | | | | | | | | |
| | | | | Utilities - Water and Sewer - 0.0% | | | | |
| | | | | New York City, NY, Municipal Water FA, | | | | |
| | 25 | | | 5.88%, 06/15/2044 | | | 33 | |
| | | | | | | | | |
| | | | | Total municipal bonds | | | | |
| | | | | (cost $610) | | $ | 653 | |
| | | | | | | | | |
U.S. GOVERNMENT AGENCIES - 10.8% | | | | |
| | �� | | | FHLMC - 3.3% | | | | |
| $ | 60 | | | 2.38%, 01/13/2022 | | $ | 63 | |
| | 470 | | | 2.50%, 01/07/2014 - 01/15/2028 ☼ | | | 483 | |
| | 360 | | | 2.88%, 02/09/2015 | | | 379 | |
| | 697 | | | 3.00%, 12/01/2025 - 01/15/2043 ☼ | | | 733 | |
| | 1,180 | | | 3.50%, 04/01/2026 - 04/01/2042 ☼ | | | 1,255 | |
| | 380 | | | 3.75%, 03/27/2019 | | | 439 | |
| | 1,313 | | | 4.00%, 06/01/2024 - 02/01/2042 | | | 1,401 | |
| | 1,787 | | | 4.50%, 03/01/2015 - 06/01/2041 | | | 1,936 | |
| | 1,265 | | | 5.00%, 05/01/2023 - 08/01/2041 | | | 1,369 | |
| | 360 | | | 5.13%, 10/18/2016 | | | 422 | |
| | 120 | | | 5.25%, 04/18/2016 | | | 139 | |
| | 720 | | | 5.50%, 01/01/2038 - 08/01/2038 | | | 778 | |
| | 284 | | | 6.00%, 06/01/2036 - 10/01/2037 | | | 310 | |
| | 10 | | | 6.25%, 07/15/2032 | | | 15 | |
| | | | | | | | 9,722 | |
| | | | | FNMA - 5.2% | | | | |
| | 490 | | | 1.63%, 10/26/2015 | | | 507 | |
| | 583 | | | 2.50%, 07/01/2027 - 01/12/2028 ☼ | | | 609 | |
| | 330 | | | 2.63%, 11/20/2014 | | | 345 | |
| | 630 | | | 2.75%, 03/13/2014 | | | 649 | |
| | 1,673 | | | 3.00%, 08/01/2021 - 01/15/2043 ☼ | | | 1,760 | |
| | 2,103 | | | 3.50%, 09/01/2025 - 09/01/2042 ☼ | | | 2,246 | |
| | 2,302 | | | 4.00%, 04/01/2025 - 02/01/2042 ☼ | | | 2,490 | |
| | 2,620 | | | 4.50%, 05/01/2025 - 05/01/2041 | | | 2,834 | |
| | 1,565 | | | 5.00%, 02/01/2022 - 01/01/2040 | | | 1,697 | |
| | 1,018 | | | 5.50%, 05/01/2037 - 05/01/2040 | | | 1,109 | |
| | 70 | | | 5.63%, 07/15/2037 | | | 101 | |
| | 581 | | | 6.00%, 04/01/2036 - 07/01/2037 | | | 636 | |
| | 159 | | | 6.50%, 06/01/2039 | | | 178 | |
| | 53 | | | 6.63%, 11/15/2030 | | | 81 | |
| | | | | | | | 15,242 | |
| | | | | GNMA - 2.3% | | | | |
| | 644 | | | 3.00%, 04/15/2027 - 01/15/2043 ☼ | | | 685 | |
| | 1,182 | | | 3.50%, 09/15/2025 - 06/20/2042 | | | 1,286 | |
| | 1,221 | | | 4.00%, 08/15/2026 - 06/15/2042 | | | 1,342 | |
| | 1,600 | | | 4.50%, 09/15/2039 - 07/20/2041 | | | 1,767 | |
| | 878 | | | 5.00%, 09/15/2039 - 12/20/2041 | | | 970 | |
| | 488 | | | 5.50%, 05/20/2038 - 08/20/2041 | | | 535 | |
| | 199 | | | 6.00%, 02/15/2036 - 08/20/2041 | | | 223 | |
| | | | | | | | 6,808 | |
| | | | | Total U.S. government agencies | | | | |
| | | | | (cost $31,370) | | $ | 31,772 | |
| | | | | | | | | |
| U.S. GOVERNMENT SECURITIES - 13.1% | | | | |
| Other Direct Federal Obligations - 0.3% | | | | |
| | | | | FFCB - 0.0% | | | | |
| $ | 20 | | | 3.88%, 10/07/2013 | | $ | 21 | |
| | 65 | | | 4.88%, 12/16/2015 - 01/17/2017 | | | 75 | |
| | | | | | | | 96 | |
| | | | | FHLB - 0.3% | | | | |
| | 340 | | | 4.75%, 12/16/2016 | | | 394 | |
| | 210 | | | 5.00%, 11/17/2017 | | | 252 | |
| | 100 | | | 5.25%, 06/18/2014 | | | 107 | |
| | | | | | | | 753 | |
| | | | | Tennessee Valley Authority - 0.0% | | | | |
| | 95 | | | 6.75%, 11/01/2025 | | | 139 | |
| | | | | | | | | |
| | | | | | | | 988 | |
| U.S. Treasury Securities - 12.8% | | | | |
| | | | | U.S. Treasury Bonds - 2.0% | | | | |
| | 1,944 | | | 3.13%, 11/15/2041 | | | 2,035 | |
| | 305 | | | 3.75%, 08/15/2041 | | | 358 | |
| | 728 | | | 4.25%, 11/15/2040 | | | 929 | |
| | 1,950 | | | 5.38%, 02/15/2031 | | | 2,784 | |
| | | | | | | | 6,106 | |
| | | | | U.S. Treasury Notes - 10.8% | | | | |
| | 3,580 | | | 0.25%, 11/30/2014 | | | 3,580 | |
| | 400 | | | 0.50%, 07/31/2017 | | | 398 | |
| | 2,500 | | | 0.63%, 05/31/2017 - 11/30/2017 | | | 2,495 | |
| | 485 | | | 0.88%, 11/30/2016 ‡ | | | 492 | |
| | 1,912 | | | 1.00%, 08/31/2016 ‡ | | | 1,948 | |
| | 3,970 | | | 1.25%, 02/15/2014 - 08/31/2015 | | | 4,062 | |
| | 2,314 | | | 1.75%, 05/31/2016 - 05/15/2022 | | | 2,360 | |
| | 3,878 | | | 1.88%, 09/30/2017 | | | 4,095 | |
| | 345 | | | 2.13%, 08/15/2021 | | | 363 | |
| | 11,300 | | | 2.38%, 08/31/2014 Ø | | | 11,700 | |
| | 215 | | | 3.13%, 05/15/2021 | | | 244 | |
| | | | | | | | 31,737 | |
| | | | | | | | 37,843 | |
| | | | | Total U.S. government securities | | | | |
| | | | | (cost $38,439) | | $ | 38,831 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Portfolio Diversifier HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | | | | | Market Value ╪ | |
U.S. GOVERNMENT SECURITIES - 13.1% - (continued) | | | | | | | | |
| U.S. Treasury Securities - 12.8% - (continued) | | | | | | | | |
| | | | | U.S. Treasury Notes - 10.8% - (continued) | | | | | | | | |
| Contracts | | | | | | | | | | | |
PUT OPTIONS PURCHASED - 4.8% | | | | | | | | |
| Equity Contracts - 4.8% | | | | | | | | |
| | | | | S&P 500 Option | | | | | | | | |
| | 97 | | | Expiration: 06/06/2016, Exercise Price: | | | | | | | | |
| | | | | $1,170.00 | | | | | | $ | 14,274 | |
| | | | | | | | | | | | | |
| | | | | Total put options purchased | | | | | | | | |
| | | | | (cost $22,592) | | | | | | $ | 14,274 | |
| | | | | | | | | | | | | |
| | | | | Total long-term investments | | | | | | | | |
| | | | | (cost $166,811) | | | | | | $ | 163,962 | |
| Shares or Principal Amount | | | | | | | |
| SHORT-TERM INVESTMENTS - 49.7% |
| Commercial Paper - 22.0% |
| | | | | Mortgage Backed Securities - 15.2% | | | | | | | | |
| | | | | FHLMC | | | | | | | | |
| $ | 25,000 | | | 0.13%, 1/7/2013 ○ | | | | | | $ | 24,999 | |
| | | | | FNMA | | | | | | | | |
| | 20,000 | | | 0.13%, 1/9/2013 ○ | | | | | | | 20,000 | |
| | | | | | | | | | | | 44,999 | |
| | | | | U.S. Government Securities - 6.8% | | | | | | | | |
| | | | | FHLB | | | | | | | | |
| | 20,000 | | | 0.14%, 2/1/2013 ○ | | | | | | | 19,999 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 64,998 | |
| Other Investment Pools and Funds - 0.0% |
| | 1 | | | JP Morgan U.S. Government Money Market Fund | | | | | | $ | 1 | |
| | | | | | | | | | | | | |
| Repurchase Agreements - 10.8% |
| | | | | RBS Greenwich Capital Markets TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $12,478,
collateralized by U.S. Treasury Note 0.38%
- 2.75%, 2008 - 2012, value of $12,728) | | | | | | | | |
| $ | 12,478 | | | 0.18%, 12/31/2012 | | | | | | $ | 12,478 | |
| | | | | Royal Bank of Canada TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $8,880, collateralized by U.S.
Treasury Note 0.25%, 2015, value of
$9,058) | | | | | | | | |
| | 8,880 | | | 0.15%, 12/31/2012 | | | | | | | 8,880 | |
| | | | | UBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $10,458, collateralized by U.S.
Treasury Note 2.63%, 2014, value of
$10,667) | | | | | | | | |
| | 10,458 | | | 0.17%, 12/31/2012 | | | | | | | 10,458 | |
| | | | | | | | | | | | 31,816 | |
| U.S. Treasury Bills - 16.9% |
| | 10,000 | | | 0.06%, 02/07/2013 □○ | | | | | | | 9,999 | |
| | 40,000 | | | 0.09%, 03/07/2013 ○ | | | | | | | 39,998 | |
| | | | | | | | | | | | 49,997 | |
| | | | | Total short-term investments | | | | | | | | |
| | | | | (cost $146,807) | | | | | | $ | 146,812 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $313,618) ▲ | | | 105.1 | % | | $ | 310,774 | |
| | | | | Other assets and liabilities | | | (5.1 | )% | | | (15,012 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 295,762 | |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
The accompanying notes are an integral part of these financial statements.
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $306,019 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 14,607 | |
| Unrealized Depreciation | | | (9,852 | ) |
| Net Unrealized Appreciation | | $ | 4,755 | |
| Δ | Variable rate securities; the rate reported is the coupon rate in effect at December 31, 2012. |
| ○ | The interest rate disclosed for these securities represents the effective yield on the date of the acquisition. |
| ■ | Securities issued within terms of a private placement memorandum, exempt from registration under Rule 144A under the Securities Act of 1933, as amended, and may be sold only to qualified institutional buyers. Unless otherwise indicated, these issues are determined to be liquid. At December 31, 2012, the aggregate value of these securities was $725, which represents 0.2% of total net assets. |
| ☼ | This security, or a portion of this security, was purchased on a when-issued, delayed-delivery or delayed-draw basis. The cost of these securities was $2,124 at December 31, 2012. |
| ‡ | This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future. |
| □ | This security, or a portion of this security, is pledged as initial margin deposit and collateral for daily variation margin loss on open futures contracts held at December 31, 2012 as listed in the table below: |
| Description | | Number of
Contracts* | | | Expiration
Date | | Notional Amount | | | Market Value ╪ | | | Unrealized
Appreciation/
(Depreciation) | |
| Short position contracts: | | | | | | | | | | | | | | | | | | |
| S&P 500 (E-Mini) Future | | | 2,642 | | | 03/15/2013 | | $ | 187,721 | | | $ | 187,595 | | | $ | 126 | |
* The number of contracts does not omit 000's.
| Ø | At December 31, 2012, this security, or a portion of this security, collateralized the written put options in the table below: |
| Description (Counterparty) | | Option Type | | Exercise
Price/ Rate | | | Expiration
Date | | Number of
Contracts* | | | Market
Value ╪ | | | Premiums
Received | | | Unrealized
Appreciation
(Depreciation) | |
| S&P 500 Option (BCLY) | | Equity | | $ | 910.00 | | | 06/06/2016 | | | 32,964 | | | $ | 2,385 | | | $ | 4,457 | | | $ | 2,072 | |
| S&P 500 Option (JPM) | | Equity | | $ | 910.00 | | | 06/06/2016 | | | 31,850 | | | | 2,304 | | | | 4,298 | | | | 1,994 | |
| S&P 500 Option (BOA) | | Equity | | $ | 910.00 | | | 06/06/2016 | | | 20,282 | | | | 1,467 | | | | 2,564 | | | | 1,097 | |
| S&P 500 Option (CSI) | | Equity | | $ | 910.00 | | | 06/06/2016 | | | 3,348 | | | | 242 | | | | 509 | | | | 267 | |
| S&P 500 Option (UBS) | | Equity | | $ | 910.00 | | | 06/06/2016 | | | 8,811 | | | | 638 | | | | 1,390 | | | | 752 | |
| | | | | | | | | | | | | | | $ | 7,036 | | | $ | 13,218 | | | $ | 6,182 | |
* The number of contracts does not omit 000's. Number of contracts shown in U.S. dollars unless otherwise noted.
The broker deposited securities valued at $7,723 with the custodian to serve as collateral for the options purchased by the Fund. The collateral is maintained in a segregated account at the custodian on behalf of the Fund.
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
| GLOSSARY: (abbreviations used in preceding Schedule of Investments) | | Index Abbreviations: |
| | S&P | Standard & Poors |
| | | | | |
| Counterparty Abbreviations: | | Municipal Bond Abbreviations: |
| BCLY | Barclays | | DA | Development Authority |
| BOA | Banc of America Securities LLC | | FA | Finance Authority |
| CSI | Credit Suisse International | | GO | General Obligation |
| JPM | JP Morgan Chase & Co. | | PA | Port Authority |
| UBS | UBS AG | | Rev | Revenue |
The accompanying notes are an integral part of these financial statements.
| Hartford Portfolio Diversifier HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Other Abbreviations: | | | |
| ETF | Exchange Traded Fund | | | |
| FFCB | Federal Farm Credit Bank | | | |
| FHLB | Federal Home Loan Bank | | | |
| FHLMC | Federal Home Loan Mortgage Corp. | | | |
| FNMA | Federal National Mortgage Association | | | |
| GNMA | Government National Mortgage Association | | | |
| REIT | Real Estate Investment Trust | | | |
The accompanying notes are an integral part of these financial statements.
| Hartford Portfolio Diversifier HLS Fund |
| Investment Valuation Hierarchy Level Summary |
| December 31, 2012 |
| (000’s Omitted) |
| | | Total | | | Level 1 ♦ | | | Level 2 ♦ | | | Level 3 | |
| Assets: | | | | | | | | | | | | | | | | |
| Asset & Commercial Mortgage Backed Securities | | $ | 1,931 | | | $ | – | | | $ | 1,931 | | | $ | – | |
| Common Stocks ‡ | | | 49,179 | | | | 49,179 | | | | – | | | | – | |
| Corporate Bonds | | | 23,728 | | | | – | | | | 23,728 | | | | – | |
| Exchange Traded Funds | | | 2,010 | | | | 2,010 | | | | – | | | | – | |
| Foreign Government Obligations | | | 1,584 | | | | – | | | | 1,584 | | | | – | |
| Municipal Bonds | | | 653 | | | | – | | | | 653 | | | | – | |
| Put Options Purchased | | | 14,274 | | | | – | | | | 14,274 | | | | – | |
| U.S. Government Agencies | | | 31,772 | | | | – | | | | 31,772 | | | | – | |
| U.S. Government Securities | | | 38,831 | | | | – | | | | 38,831 | | | | – | |
| Short-Term Investments | | | 146,812 | | | | 1 | | | | 146,811 | | | | – | |
| Total | | $ | 310,774 | | | $ | 51,190 | | | $ | 259,584 | | | $ | – | |
| Futures * | | | 126 | | | | 126 | | | | – | | | | – | |
| Written Options * | | | 6,182 | | | | – | | | | 6,182 | | | | – | |
| Total | | $ | 6,308 | | | $ | 126 | | | $ | 6,182 | | | $ | – | |
| ♦ | For the year ended December 31, 2012, investments valued at $180 were transferred from Level 1 to Level 2, and there were no transfers from Level 2 to Level 1. Investments are transferred between Level 1 and Level 2 for a variety of reasons including, but not limited to: |
| 1) | Foreign equities for which a fair value price is more representative of exit value than the local market close (transfer into Level 2). Foreign equities for which the local market close is more representative of exit value (transfer into Level 1). |
| 2) | U.S. Treasury securities that no longer represent the most recent issue (transfer into Level 2). |
| 3) | Equity investments with no observable trading but a bid or close price is used (transfer into Level 2). Equity investments using observable quoted prices in an active market (transfer into Level 1). |
| ‡ | The Fund has all or primarily all of the equity securities categorized in a particular level. Refer to the Schedule of Investments for further industry breakout. |
| * | Derivative instruments not reflected in the Schedule of Investments are valued at the unrealized appreciation/depreciation on the investments. |
Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:
| | | Balance as
of
December
31, 2011 | | | Realized
Gain
(Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Net
Amortization | | | Purchases | | | Sales | | | Transfers
Into
Level 3 * | | | Transfers Out of
Level 3 * | | | Balance as
of
December
31, 2012 | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. Government Agencies | | $ | 54 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (54 | ) | | $ | — | |
| Total | | $ | 54 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (54 | ) | | $ | — | |
| * | Investments are transferred into and out of Level 3 for a variety of reasons including, but not limited to: |
1) Investments where trading has been halted (transfer into Level 3) or investments where trading has resumed (transfer out of Level 3).
2) Broker quoted investments (transfer into Level 3) or quoted prices in active markets (transfer out of Level 3).
3) Investments that have certain restrictions on trading (transfer into Level 3) or investments where trading restrictions have expired (transfer out of Level 3).
The accompanying notes are an integral part of these financial statements.
| Hartford Portfolio Diversifier HLS Fund |
| Statement of Assets and Liabilities |
| December 31, 2012 |
| (000’s Omitted) |
| Assets: | | | | |
| Investments in securities, at market value (cost $281,802) | | $ | 278,958 | |
| Investments in repurchase agreements, at market value (cost $31,816) | | | 31,816 | |
| Receivables: | | | | |
| Investment securities sold | | | 528 | |
| Fund shares sold | | | 750 | |
| Dividends and interest | | | 691 | |
| Other assets | | | 15 | |
| Total assets | | | 312,758 | |
| Liabilities: | | | | |
| Bank overdraft | | | 1 | |
| Payables: | | | | |
| Investment securities purchased | | | 5,104 | |
| Fund shares redeemed | | | 17 | |
| Variation margin | | | 4,765 | |
| Investment management fees | | | 34 | |
| Distribution fees | | | 14 | |
| Other liabilities | | | 9 | |
| Accrued expenses | | | 16 | |
| Written options (proceeds $13,218) | | | 7,036 | |
| Total liabilities | | | 16,996 | |
| Net assets | | $ | 295,762 | |
| Summary of Net Assets: | | | | |
| Capital stock and paid-in-capital | | $ | 308,625 | |
| Undistributed net investment income | | | — | |
| Accumulated net realized loss | | | (16,327 | ) |
| Unrealized appreciation of investments | | | 3,464 | |
| Net assets | | $ | 295,762 | |
| Shares authorized | | | 1,000,000 | |
| Par value | | $ | 0.001 | |
| Class IB: Net asset value per share | | $ | 9.38 | |
| Shares outstanding | | | 31,531 | |
| Net assets | | $ | 295,762 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Portfolio Diversifier HLS Fund |
| Statement of Operations |
| For the Year Ended December 31, 2012 |
| (000’s Omitted) |
| Investment Income: | | | | |
| Dividends | | $ | 906 | |
| Interest | | | 1,450 | |
| Less: Foreign tax withheld | | | — | |
| Total investment income, net | | | 2,356 | |
| | | | | |
| Expenses: | | | | |
| Investment management fees | | | 1,262 | |
| Distribution fees - Class IB | | | 526 | |
| Custodian fees | | | 45 | |
| Accounting services fees | | | 38 | |
| Board of Directors' fees | | | 5 | |
| Audit fees | | | 13 | |
| Other expenses | | | 36 | |
| Total expenses (before waivers) | | | 1,925 | |
| Expense waivers | | | (136 | ) |
| Total waivers | | | (136 | ) |
| Total expenses, net | | | 1,789 | |
| Net Investment Income | | | 567 | |
| | | | | |
| Net Realized Loss on Investments and Other Financial Instruments: | | | | |
| Net realized gain on investments | | | 1,065 | |
| Net realized loss on purchased options | | | (4,192 | ) |
| Net realized loss on futures | | | (12,756 | ) |
| Net Realized Loss on Investments and Other Financial Instruments | | | (15,883 | ) |
| | | | | |
| Net Changes in Unrealized Appreciation of Investments and Other Financial Instruments: | | | | |
| Net unrealized appreciation of investments | | | 4,299 | |
| Net unrealized depreciation of purchased options | | | (9,608 | ) |
| Net unrealized appreciation of futures | | | 78 | |
| Net unrealized appreciation of written options | | | 8,203 | |
| Net Changes in Unrealized Appreciation of Investments and Other Financial Instruments | | | 2,972 | |
| Net Loss on Investments and Other Financial Instruments | | | (12,911 | ) |
| Net Decrease in Net Assets Resulting from Operations | | $ | (12,344 | ) |
The accompanying notes are an integral part of these financial statements.
| Hartford Portfolio Diversifier HLS Fund |
| Statement of Changes in Net Assets |
| |
| (000’s Omitted) |
| | | For the
Year Ended
December 31,
2012 | | | For the Period June 6, 2011* through December 31, 2011 | |
| Operations: | | | | | | | | |
| Net investment income | | $ | 567 | | | $ | 245 | |
| Net realized gain (loss) on investments and other financial instruments | | | (15,883 | ) | | | 272 | |
| Net unrealized appreciation of investments and other financial instruments | | | 2,972 | | | | 492 | |
| Net Increase (Decrease) in Net Assets Resulting from Operations | | | (12,344 | ) | | | 1,009 | |
| Distributions to Shareholders: | | | | | | | | |
| From net investment income | | | | | | | | |
| Class IB | | | (1,025 | ) | | | (352 | ) |
| Total from net investment income | | | (1,025 | ) | | | (352 | ) |
| From net realized gain on investments | | | | | | | | |
| Class IB | | | — | | | | (191 | ) |
| Total from net realized gain on investments | | | — | | | | (191 | ) |
| Total distributions | | | (1,025 | ) | | | (543 | ) |
| Capital Share Transactions: | | | | | | | | |
| Class IB | | | | | | | | |
| Sold | | | 218,964 | | | | 106,671 | |
| Issued on reinvestment of distributions | | | 1,025 | | | | 543 | |
| Redeemed | | | (17,439 | ) | | | (1,099 | ) |
| Total capital share transactions | | | 202,550 | | | | 106,115 | |
| Net increase from capital share transactions | | | 202,550 | | | | 106,115 | |
| Net Increase in Net Assets | | | 189,181 | | | | 106,581 | |
| Net Assets: | | | | | | | | |
| Beginning of period | | | 106,581 | | | | — | |
| End of period | | $ | 295,762 | | | $ | 106,581 | |
| Undistributed (distribution in excess of) | | | | | | | | |
| net investment income | | $ | — | | | $ | — | |
| Shares: | | | | | | | | |
| Class IB | | | | | | | | |
| Sold | | | 22,772 | | | | 10,517 | |
| Issued on reinvestment of distributions | | | 109 | | | | 53 | |
| Redeemed | | | (1,815 | ) | | | (105 | ) |
| Total share activity | | | 21,066 | | | | 10,465 | |
| * | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
| Hartford Portfolio Diversifier HLS Fund |
| Notes to Financial Statements |
| December 31, 2012 |
| (000’s Omitted) |
Hartford Portfolio Diversifier HLS Fund (the “Fund”) serves as an underlying investment option for certain variable annuity separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates. The Fund’s shares are available only to separate accounts of HLIC and its affiliates as a required investment option for variable annuity contracts whose holders have elected a guaranteed benefit rider subject to an allocation requiring investment in the Fund.
Hartford Series Fund, Inc. (the “Company”) is an open-end registered management investment company comprised of thirty portfolios. Financial Statements for the Fund, a series of the Company, are included in this report.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund is a diversified open-end management investment company.
Class IB shares of the Fund are offered at the per share net asset value (“NAV”) without a sales charge and are subject to distribution and service fees charged pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act.
| 2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Fund in the preparation of its financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| a) | Determination of Net Asset Value – The NAV of the Fund’s shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| b) | Investment Valuation and Fair Value Measurements – For purposes of calculating the NAV, portfolio investments and other assets held by the Fund's portfolio for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of last reported sales prices or official close price. If no sales are reported, market value is based on quotes obtained from a quotation reporting system, established market makers, or independent pricing services. If market prices are not readily available or are deemed unreliable, the Fund will use the fair value of the investment as determined in good faith under policies and procedures established by and under the supervision of the Company’s Board of Directors. Market quotes are considered not readily available where there is an absence of current or reliable market-based data (e.g., trade information or indicative market quotes), including where events occur after the close of the relevant market, but prior to the NYSE Close that materially affect the values of the Fund’s portfolio investments or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the investments trade do not open for trading for the entire day and no other market prices are available. In addition, prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close. Investments that are primarily traded on foreign markets may trade on days that are not business days of the Fund. The value of the foreign investments in which the Fund invests may change on days when a shareholder will not be able to purchase or redeem shares of the Fund. Fair value pricing is subjective in nature and the use of fair value pricing by the |
| Hartford Portfolio Diversifier HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
Fund may cause the NAV of its shares to differ significantly from the NAV that would have been calculated using market prices at the close of the exchange on which a portfolio investment is primarily traded. There can be no assurance that the Fund could obtain the fair market value assigned to an investment if the Fund were to sell the investment at approximately the time at which the Fund determines its NAV.
Fixed income investments (other than short term obligations) and non-exchange traded derivatives held by the Fund are normally valued on the basis of quotes obtained from brokers and dealers or independent pricing services in accordance with procedures established by the Company’s Board of Directors. Prices obtained from independent pricing services use information provided by market makers or estimates of market values through accepted market modeling and trading and pricing conventions. Inputs to the models may include, but are not limited to, prepayment speeds, pricing spread, yield, trade information, dealer quotes, market color, cash flow models and the bond’s terms and conditions. Generally, the Fund may use fair valuation in regard to fixed income investments when the Fund holds defaulted or distressed investments or investments in a company in which a reorganization is pending. Short-term investments maturing in 60 days or less are generally valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days.
Exchange traded options, futures and options on futures are valued at the settlement price determined by the relevant exchange as of the NYSE Close. If such instruments do not trade on an exchange, values may be supplied by an independent pricing service using a formula or other objective method that may take into consideration the style, direction, expiration, strike price, notional value and volatility or other adjustments.
Investments in open-end mutual funds are valued at the respective NAV of each open-end mutual fund on the Valuation Date.
Financial instruments for which prices are not available from an independent pricing service may be valued using market quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with procedures established by the Company’s Board of Directors.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| · | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange traded funds, rights and warrants. |
| · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 may include debt investments that are traded less frequently than exchange traded instruments and which are valued using independent pricing services; foreign equities, which are principally traded on certain foreign markets and are adjusted daily pursuant to a fair value pricing service in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close; and short-term investments, which are valued at amortized cost. |
| · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the |
valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price.
The Board of Directors of the Company generally reviews and approves the “Procedures for Valuation of Portfolio Securities” on an annual basis. These procedures define how investments are to be valued, including the formation and activities of a Valuation Committee. The Valuation Committee is responsible for determining in good faith the fair value of investments when the value cannot be obtained from primary pricing services or alternative sources or if the valuation of an investment as provided by the primary pricing service or alternative source is believed not to reflect the investment’s fair value as of the Valuation Date. Members of the Valuation Committee include the Fund’s Treasurer or designee, a Vice President of the Fund with legal expertise or designee, and a Vice President of the investment manager or designee. In addition, the Fund’s Chief Compliance Officer shall designate a member of the compliance group to attend Valuation Committee meetings as a non-voting resource, to monitor for and provide guidance with respect to compliance with these procedures. Two members of the Valuation Committee or their designees, representing different departments, shall constitute a quorum for purposes of permitting the Valuation Committee to take action. The Valuation Committee will consider all relevant factors in determining an investment’s fair value, and may seek the advice of the Fund’s sub-adviser, knowledgeable brokers, and legal counsel in making such determination. The Valuation Committee reports to the Audit Committee of the Company’s Board of Directors. The Audit Committee receives quarterly written reports which include details of all fair-valued investments, including the reason for the fair valuation, and an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such investments (the “look-back” test). The Board of Directors then must consider for ratification all of the fair value determinations made during the previous quarter.
Valuation levels are not necessarily indicative of the risk associated with investing in such investments. Individual investments within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
For additional information, refer to the Investment Valuation Hierarchy Level Summary and the Level 3 roll-forward reconciliation, if applicable, which follow the Schedule of Investments.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period.
| c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Investments purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses are determined on the basis of identified cost. |
Dividend income from domestic securities is accrued on the ex-dividend date. In general, dividend income from foreign securities is recorded on the ex-date; however, dividend notifications in certain foreign jurisdictions may not be available in a timely manner and as a result, the Fund will record the dividend as soon as the relevant details (i.e., rate per share, payment date, shareholders of record, etc.) are publicly available. Interest income, including amortization of premium and accretion of discounts, is accrued on a daily basis. Paydown gains and losses on mortgage-related and other asset-backed securities are included in interest income in the Statement of Operations, as applicable.
| d) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Fund’s shares are executed in accordance with the investment instructions of the contract holders. The NAV of the Fund’s shares is determined as of the close of business on each business day of the Exchange. The NAV is determined by dividing the Fund’s net assets by the number of shares outstanding. |
| Hartford Portfolio Diversifier HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
Orders for the purchase of the Fund’s shares received prior to the close of the Exchange on any day the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Fund. The policy of the Fund is to pay dividends from net investment income and realized capital gains, if any, at least once a year.
Distributions from net investment income, net realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These differences may include but are not limited to losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to Passive Foreign Investment Companies (“PFICs”), Real Estate Investment Trusts (“REITs”), Regulated Investment Companies (“RICs”), certain derivatives and partnerships. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Fund’s capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| 3. | Securities and Other Investments: |
| a) | Repurchase Agreements – A repurchase agreement is an agreement by which a counterparty agrees to sell an investment and agrees to repurchase the investment sold from the buyer at a mutually agreed upon time and price. At the time the Fund enters into a repurchase agreement, the value of the underlying collateral, including accrued interest, will be equal to or exceed the value of the repurchase agreement. Repurchase agreements expose the Fund to counterparty risk - that is, the risk that the counterparty will not fulfill its obligations. To minimize counterparty risk, the investments that serve to collateralize the repurchase agreement are held by the Fund’s custodian in book entry or physical form in the custodial account of the Fund or in a third party custodial account. Repurchase agreements are valued at cost plus accrued interest, which approximates fair value. The Fund, as shown on the Schedule of Investments, had outstanding repurchase agreements as of December 31, 2012. |
| b) | Illiquid and Restricted Investments – The Fund is permitted to invest up to 15% of its net assets in illiquid investments. Illiquid investments are those that may not be sold or disposed of in the ordinary course of business within seven days, at approximately the price used to determine the Fund’s NAV. The Fund may not be able to sell illiquid investments when its sub-adviser considers it desirable to do so or may have to sell such investments at a price that is lower than the price that could be obtained if the investments were more liquid. A sale of illiquid investments may require more time and may result in higher dealer discounts and other selling expenses than does the sale of those that are liquid. Illiquid investments also may be more difficult to value due to the unavailability of reliable market quotations for such investments, and an investment in them may have an adverse impact on the Fund’s NAV. The Fund may also purchase certain restricted investments that can only be resold to certain qualified investors and may be determined to be liquid pursuant to policies and guidelines established by the Company’s Board of Directors. The Fund, as shown on the Schedule of Investments, had illiquid and/or restricted investments as of December 31, 2012. |
| c) | Investments Purchased on a When-Issued or Delayed-Delivery Basis – Delivery and payment for investments that have been purchased by the Fund on a forward commitment, or when-issued or delayed-delivery basis, take place beyond the customary settlement period. A fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell delayed-delivery investments before they are delivered, which may result in a realized gain or loss. During this period, such investments are subject to market fluctuations, and the Fund identifies investments segregated in its records with a value at least equal to the amount of the commitment. The Fund, as shown on the Schedule of Investments, had when-issued or delayed-delivery investments as of December 31, 2012. |
| d) | Mortgage Related and Other Asset Backed Securities – The Fund may invest in mortgage related and other asset backed securities. These securities include mortgage pass-through securities, collateralized mortgage obligations, commercial mortgage backed securities, stripped mortgage backed securities, asset backed securities, collateralized debt obligations and other securities that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property. Mortgage related securities are created from pools of residential or commercial mortgage loans, including mortgage loans made by savings and loan institutions, mortgage bankers, commercial banks and others. Asset backed securities are created from many types of assets, including auto loans, credit card receivables, home equity loans, and student loans. These securities provide a monthly payment that consists of both interest and principal payments. Interest payments may be determined by fixed or adjustable rates. The rate of pre-payments on underlying mortgages will affect the price and volatility of a mortgage related security, and may have the effect of shortening or extending the effective duration of the security relative to what was anticipated at the time of purchase. The timely payment of principal and interest of certain mortgage related securities is guaranteed by the full faith and credit of the United States Government. Mortgage related and other asset backed securities created and guaranteed by non-governmental issuers, including government-sponsored corporations, may be supported by various forms of insurance or guarantees, but there can be no assurance that the private insurers or guarantors can meet their obligations under the insurance policies or guarantee arrangements. The Fund, as shown on the Schedule of Investments, had mortgage related and other asset backed securities as of December 31, 2012. |
| 4. | Financial Derivative Instruments: |
The following disclosures contain information on how and why the Fund uses derivative instruments, the credit-risk-related contingent features in certain derivative instruments, and how derivative instruments affect the Fund’s financial position and results of operations. The location and fair value amounts of these instruments on the Statement of Assets and Liabilities and the realized gains and losses and changes in unrealized gains and losses on the Statement of Operations, each categorized by type of derivative contract, are included in the following Additional Derivative Instrument Information footnote. The derivative instruments outstanding as of year-end are disclosed in the notes to or within the Schedule of Investments for purchased options, if applicable. The amounts of realized gains and losses and changes in unrealized gains and losses on derivative instruments during the year are disclosed in the Statement of Operations.
| a) | Futures Contracts – The Fund may enter into futures contracts. A futures contract is an agreement between two parties to buy or sell an asset at a set price on a future date. The Fund uses futures contracts to manage or obtain exposure to the investment markets, commodities, or movements in interest rates. The primary risks associated with the use of futures contracts are the imperfect correlation between the change in market value of the investments held by the Fund and the prices of futures contracts and the possibility of an illiquid market. Upon entering into a futures contract, the Fund is required to deposit with a futures commission merchant (“FCM”) an amount of cash or U.S. Government or Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily at the most recent settlement price reported by an exchange on which, over time, they are traded most extensively, and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statement of Assets and Liabilities; however, the Fund seeks to reduce this risk through the use of an FCM. The Fund, as shown on the Schedule of Investments, had outstanding futures contracts as of December 31, 2012. |
| b) | Options Contracts – An option contract is a contract sold by one party to another party that offers the buyer the right, but not the obligation, to buy (call) or sell (put) an investment or other financial asset at an agreed-upon price during a specific period of time or on a specific date. The Fund may write (sell) covered call and put options on futures, swaps (“swaptions”), securities or commodities. “Covered” means that so long as the Fund is obligated as the writer of an option, it will own either the underlying investments or currency or an option to purchase the same underlying investments or currency having an expiration date of the covered option and an exercise price equal to or less than the exercise price of the covered option, or will pledge cash or other liquid investments having a value equal to or greater |
| Hartford Portfolio Diversifier HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
than the fluctuating market value of the option investment or currency. Writing put options increases the Fund’s exposure to the underlying instrument. Writing call options decreases the Fund’s exposure to the underlying instrument. Premiums received from writing options that expire are treated as realized gains. Premiums received from writing options that are exercised or closed are added to the proceeds or offset amounts paid on the underlying futures, swap, investment or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying instrument may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the instrument underlying the written option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. The Fund may also purchase put and call options. Purchasing call options increases the Fund’s exposure to the underlying instrument. Purchasing put options decreases the Fund’s exposure to the underlying instrument. The Fund pays a premium, which is included on the Fund’s Statement of Assets and Liabilities as an investment and is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options that expire are treated as realized losses. Certain options may be purchased with premiums to be determined on a future date. The premiums for these options are based upon implied volatility parameters at specified terms. The risk associated with purchasing put and call options is generally limited to the premium paid. Premiums paid for purchasing options that are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying investment transaction to determine the realized gain or loss. Entering into over-the-counter options also exposes the Fund to counterparty risk. Counterparty risk is the possibility that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements. The Fund, as shown on the Schedule of Investments, had outstanding purchased options contracts as of December 31, 2012. There were no transactions involving written options contracts during the year ended December 31, 2012.
| | | Options Contract Activity During the
Year Ended December 31, 2012 | |
| Put Options Written During the Year | | Number of Contracts* | | | Premium Amounts | |
| Beginning of the year | | | 97,255 | | | $ | 13,218 | |
| Written | | | — | | | | — | |
| Expired | | | — | | | | — | |
| Closed | | | — | | | | — | |
| Exercised | | | — | | | | — | |
| End of year | | | 97,255 | | | $ | 13,218 | |
* The number of contracts does not omit 000's.
| c) | Additional Derivative Instrument Information: |
| Fair Value of Derivative Instruments on the Statement of Assets and Liabilities as of December 31, 2012: |
| |
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Investments in securities, at value (purchased options), market value | | $ | — | | | $ | — | | | $ | — | | | $ | 14,274 | | | $ | — | | | $ | — | | | $ | 14,274 | |
| Total | | $ | — | | | $ | — | | | $ | — | | | $ | 14,274 | | | $ | — | | | $ | — | | | $ | 14,274 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Variation margin payable * | | $ | — | | | $ | — | | | $ | — | | | $ | 4,765 | | | $ | — | | | $ | — | | | $ | 4,765 | |
| Written options, market value | | | — | | | | — | | | | — | | | | 7,036 | | | | — | | | | — | | | | 7,036 | |
| Total | | $ | — | | | $ | — | | | $ | — | | | $ | 11,801 | | | $ | — | | | $ | — | | | $ | 11,801 | |
* Only current day's variation margin is reported within the Statement of Assets and Liabilities. The variation margin is included in the open futures cumulative appreciation (depreciation) of $126 as reported in the Schedule of Investments.
The volume of derivatives that is presented in the Schedule of Investments is consistent with the derivative activity during the year ended December 31, 2012.
| The Effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2012: |
| |
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Realized Loss on Derivatives Recognized as a Result of Operations: |
| Net realized loss on purchased options | | $ | — | | | $ | — | | | $ | — | | | $ | (4,192 | ) | | $ | — | | | $ | — | | | $ | (4,192 | ) |
| Net realized loss on futures | | | — | | | | — | | | | — | | | | (12,756 | ) | | | — | | | | — | | | | (12,756 | ) |
| Total | | $ | — | | | $ | — | | | $ | — | | | $ | (16,948 | ) | | $ | — | | | $ | — | | | $ | (16,948 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized as a Result of Operations: |
| Net change in unrealized depreciation of investments in purchased options | | $ | — | | | $ | — | | | $ | — | | | $ | (9,608 | ) | | $ | — | | | $ | — | | | $ | (9,608 | ) |
| Net change in unrealized appreciation of futures | | | — | | | | — | | | | — | | | | 78 | | | | — | | | | — | | | | 78 | |
| Net change in unrealized appreciation of written options | | | — | | | | — | | | | — | | | | 8,203 | | | | — | | | | — | | | | 8,203 | |
| Total | | $ | — | | | $ | — | | | $ | — | | | $ | (1,327 | ) | | $ | — | | | $ | — | | | $ | (1,327 | ) |
| a) | Credit and Counterparty Risks – Credit risk depends largely on the perceived financial health of bond issuers. In general, the credit rating is inversely related to the credit risk of the issuer. Higher rated bonds generally are deemed to have less credit risk, while lower or unrated bonds are deemed to have higher risk of default. The share price, yield and total return of a fund that holds securities with higher credit risk may be more volatile than those of a fund that holds bonds with lower credit risk. Similar to credit risk, the Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will default. |
| b) | Market Risks – The Fund’s investments expose the Fund to various risks including, but not limited to, interest rate, prepayment, extension, and equity risks. Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the values of certain fixed income securities held by the Fund are likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a fixed income security’s market price to interest rate (i.e., yield) movements. In addition, securities are subject to extension risk. Rising interest rates may cause prepayments to occur at a slower than expected rate, thereby effectively lengthening the maturity of the security and making the security more sensitive to interest rate changes. Prepayment and extension risk are major risks of mortgage backed securities and certain asset backed securities. For certain asset backed securities, the actual maturity may be less than the stated maturity shown in the Schedule of Investments, if applicable. As a result, the timing of income recognition relating to these securities may vary based upon the actual maturity. The market values of equity securities, such as common stocks and preferred stocks, or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The market value of equity securities may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities. |
| Hartford Portfolio Diversifier HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| a) | Federal Income Taxes – For federal income tax purposes, the Fund intends to continue to qualify as a RIC under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders and otherwise complying with the requirements of the IRC. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains prior to the next fiscal year-end. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. |
| c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Fund for the periods indicated is as follows (as adjusted for dividends payable, if applicable): |
| | | For the Year Ended
December 31, 2012 | | | For the Period June 6,
2011 (Commencement
of Operations) through
December 31, 2011 | |
| Ordinary Income | | $ | 1,025 | | | $ | 486 | |
| Long-Term Capital Gains* | | | — | | | | 57 | |
| * | The Fund designates these distributions as long-term capital dividends pursuant to IRC Sec. 852(b)(3)(C). |
As of December 31, 2012, the Fund’s components of distributable earnings (deficit) on a tax basis were as follows:
| | | Amount | |
| Accumulated Capital and Other Losses | | $ | (15,482 | ) |
| Unrealized Appreciation* | | | 2,619 | |
| Total Accumulated Deficit | | $ | (12,863 | ) |
| * | Differences between book-basis and tax-basis unrealized appreciation (depreciation) may be attributable to the losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. |
| d) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as foreign currency, PFICs, expiration or utilization of capital loss carryforwards or net operating losses. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Fund’s distributions may be shown in the accompanying Statement of Changes in Net Assets as from undistributed net investment income, from accumulated net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Fund recorded reclassifications to increase (decrease) the accounts listed below: |
| | | Amount | |
| Undistributed Net Investment Income | | $ | 458 | |
| Accumulated Net Realized Gain (Loss) | | | (454 | ) |
| Capital Stock and Paid-in-Capital | | | (4 | ) |
| e) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. Additionally, capital loss carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation. |
At December 31, 2012 (tax-year-end), the Fund had capital loss carryforwards for U.S. federal income tax purposes as follows:
Capital loss carryforwards with no expiration:
| | | Amount | |
| Short-Term Capital Loss Carryforward | | $ | 8,688 | |
| Long-Term Capital Loss Carryforward | | | 6,794 | |
| Total | | $ | 15,482 | |
| f) | Accounting for Uncertainty in Income Taxes – The Fund has adopted financial reporting rules that require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Fund does not have an examination in progress. |
The Fund has reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules had no effect on the Fund’s financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2012. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Fund’s investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Fund pursuant to an Investment Management Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Fund’s investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees payable under, the Fund’s investment management agreements; or (ii) the day-to-day management of the Fund. The investment manager has overall investment supervisory responsibility for the Fund. In addition, the investment manager provides |
| Hartford Portfolio Diversifier HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. The investment manager has contracted with Hartford Investment Management Company (“Hartford Investment Management”) under a sub-advisory agreement for the provision of day-to-day investment management services to the Fund in accordance with the Fund’s investment objective and policies. The Fund pays a fee to the investment manager, a portion of which may be used to compensate Hartford Investment Management.
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered as of December 31, 2012; the rates are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee | |
| On first $500 million | | | 0.60 | % |
| On next $500 million | | | 0.55 | % |
| On next $4 billion | | | 0.50 | % |
| On next $5 billion | | | 0.48 | % |
| Over $10 billion | | | 0.47 | % |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Fund. HLIC provided accounting services for the Fund for the fiscal year ended December 31, 2012. The replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Fund or the fees charged to the Fund for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Fund, HFMC provides accounting services to the Fund and receives monthly compensation based on the Fund’s average daily net assets at the rates set forth below. The Fund’s accounting services fees are accrued daily and paid monthly. |
| Average Daily Net Assets | | Annual Fee | |
| On first $5 billion | | | 0.018 | % |
| On next $5 billion | | | 0.016 | % |
| Over $10 billion | | | 0.014 | % |
| c) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund in proportion to the average daily net assets of the Fund, except where allocation of certain expenses is more fairly made directly to the Fund. HFMC has contractually agreed to reimburse expenses (exclusive of taxes, interest expense, brokerage commissions, acquired fund fees and expenses and extraordinary expenses) to the extent necessary to maintain total annual operating expenses for the Class IB shares of the Fund at the annual rate of 0.85% of the Fund’s average daily net assets. This contractual arrangement will remain in effect until April 30, 2013, and shall renew automatically for one-year terms unless HFMC provides written notice of termination prior to the start date of the next term or upon approval of the Board of Directors of the Company. |
| d) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Fund's principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD with HIFSCO did not result in any changes to the distribution services provided to the Fund. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Fund, has adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, 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, subject to the review and approval of the Company’s Board of Directors. |
The Distribution Plan provides that the Fund may pay annually up to 0.25% of the average daily net assets of the Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, the Fund is authorized to make payments monthly to the Distributor that may be used
to pay or compensate 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. These fees are accrued daily and paid monthly.
| e) | Other Related Party Transactions – Certain officers of the Fund are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Fund’s Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Fund rounds to zero. These fees are accrued daily and paid monthly. |
As of December 31, 2012, affiliates of The Hartford had ownership of shares in the Fund as follows:
| | | Percentage
of Class | |
| Class IB | | | 17 | % |
| 9. | Investment Transactions: |
For the year ended December 31, 2012, the cost of purchases and proceeds from sales of investment securities (excluding short-term investments) were as follows:
| | | Amount | |
| Cost of Purchases Excluding U.S. Government Obligations | | $ | 132,089 | |
| Sales Proceeds Excluding U.S. Government Obligations | | | 73,387 | |
| Cost of Purchases for U.S. Government Obligations | | | 44,329 | |
| Sales Proceeds for U.S. Government Obligations | | | 21,555 | |
| 10. | Industry Classifications: |
Other than the industry classifications “Other Investment Pools and Funds” and “Exchange Traded Funds,” equity industry classifications used in this report are the Global Industry Classification Standard, which was developed by and is the exclusive property and service mark of MSCI, Inc. and Standard & Poor’s.
Under the Company’s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
| Hartford Portfolio Diversifier HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| 12. | Recent Accounting Pronouncement: |
Disclosures about Offsetting Assets and Liabilities - In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The objective of the ASU is to enhance current disclosure requirements on offsetting of certain assets and liabilities and to enable financial statement users to compare financial statements prepared under U.S. GAAP and International Financial Reporting Standards.
Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
[This page is intentionally left blank]
| Hartford Portfolio Diversifier HLS Fund |
| Financial Highlights |
| - Selected Per-Share Data (A) - |
| Class | | Net Asset Value at
Beginning of
Period | | | Net Investment
Income (Loss) | | | Net Realized and
Unrealized Gain
(Loss) on
Investments | | | Total from
Investment
Operations | | | Dividends from Net
Investment Income | | | Distributions from
Realized Capital
Gains | | | Distributions from
Capital | | | Total Distributions | | | Net Asset Value at
End of Period | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| IB | | $ | 10.18 | | | $ | 0.02 | | | $ | (0.79 | ) | | $ | (0.77 | ) | | $ | (0.03 | ) | | $ | – | | | $ | – | | | $ | (0.03 | ) | | $ | 9.38 | |
| From June 6, 2011 (commencement of operations) through December 31, 2011 (C) | | | | | | | | | | | | | | | | | | | | | | | | | |
| IB(D) | | | 10.00 | | | | 0.04 | | | | 0.19 | | | | 0.23 | | | | (0.03 | ) | | | (0.02 | ) | | | – | | | | (0.05 | ) | | | 10.18 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include sales charges or other fees which may be applied at the variable annuity product level. Any such additional sales charges or other fees would lower the Fund's performance. |
| (C) | Per share amounts have been calculated using the average shares method. |
| (D) | Commenced operations on June 6, 2011. |
| (E) | Not annualized. |
| (F) | Annualized. |
| - Ratios and Supplemental Data - |
| Total Return(B) | | | Net Assets at End of Period | | | Ratio of Expenses to Average Net Assets
Before Waivers | | | Ratio of Expenses to Average Net Assets
After Waivers | | | Ratio of Net Investment
Income (Loss) to Average Net
Assets | | | Portfolio
Turnover Rate | |
| | |
| | |
| | (7.58 | )% | | $ | 295,762 | | | | 0.91 | % | | | 0.85 | % | | | 0.27 | % | | | 61 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 2.38 | (E) | | | 106,581 | | | | 0.93 | (F) | | | 0.85 | (F) | | | 0.58 | (F) | | | 43 | |
| Report of Independent Registered Public Accounting Firm |
| The Board of Directors and Shareholders of |
| Hartford Series Fund, Inc. |
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Hartford Portfolio Diversifier HLS Fund (one of the portfolios constituting Hartford Series Fund, Inc. (the Fund)) as of December 31, 2012, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Hartford Portfolio Diversifier HLS Fund ( one of the portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
Minneapolis, MN
February 15, 2013
| Hartford Portfolio Diversifier HLS Fund |
| Directors and Officers (Unaudited) |
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Fund pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Fund. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Fund’s statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Fund pays to The Hartford a portion of the Chief Compliance Officer’s compensation, but does not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
| Hartford Portfolio Diversifier HLS Fund |
| Directors and Officers (Unaudited) – (continued) |
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010 (4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and a record of how the Fund voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
| Hartford Portfolio Diversifier HLS Fund |
| Expense Example (Unaudited) |
Your Fund's Expenses
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Actual return | | | Hypothetical (5% return before expenses) | | | | | | | | | | |
| | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2
year | | | Days
in the
full
year | |
| Class IB | | $ | 1,000.00 | | | $ | 997.18 | | | $ | 4.27 | | | $ | 1,000.00 | | | $ | 1,020.86 | | | $ | 4.32 | | | | 0.85 | % | | | 184 | | | | 366 | |
| Hartford Portfolio Diversifier HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) |
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory and sub-advisory agreements. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for Hartford Portfolio Diversifier HLS Fund (the “Fund”) with HL Investment Advisors, LLC (“HL Advisors”) and the continuation of the investment sub-advisory agreement between HL Advisors and the Fund’s sub-adviser, Hartford Investment Management Company (the “Sub-adviser,” and together with HL Advisors, the “Advisers”) (collectively, the “Agreements”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from the Advisers to questions posed to them on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreements at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by the Advisers and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreements.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreements with respect to the Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Fund’s contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Fund’s management fees, sub-advisory fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement.
In determining to continue the Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreements. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreements is provided below.
Nature, Extent, and Quality of Services Provided by the Advisers
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Fund by the Advisers. The Board considered, among other things, the terms of the Agreements and the range of services provided by the Advisers. The Board considered the Advisers’ professional personnel who provide services to the Fund, including each Adviser’s ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered each Adviser’s reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to the Fund. In addition, the Board considered the quality of each Adviser’s communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning each Adviser’s regulatory and compliance environment. In this regard, the Board requested and reviewed information on each Adviser’s compliance policies and procedures, compliance history, and a report from the Fund’s Chief Compliance Officer on each Adviser’s compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. In addition, the Board noted that it had previously approved a compliance policy and procedures specific to the Fund to provide safeguards and controls designed to assure that the Fund is operated in accordance with its stated objectives and strategies, and not in a manner intended to inappropriately benefit the Advisers’ affiliates to the detriment of the Fund and its shareholders. The Board also noted the
| Hartford Portfolio Diversifier HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
Advisers’ support of the Fund’s compliance control structure, particularly the resources devoted by the Advisers in support of the Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act.
With respect to HL Advisors, the Board noted that under the Agreements, HL Advisors is responsible for the management of the Fund, including overseeing fund operations and service providers, as well as investment advisory services in connection with selecting, monitoring and supervising the Sub-adviser. The Board considered HL Advisors’ ongoing monitoring of people, process and performance, including its quarterly reviews of each of the Hartford HLS Funds, semi-annual meetings with the leaders of each Fund’s portfolio management team, and oversight of the Funds’ approximately 40 portfolio managers. The Board recognized that HL Advisors has demonstrated a record of making changes to the management and/or strategies of the Funds when warranted. The Board considered HL Advisors’ oversight of the Sub-adviser’s investment approach and results, process for monitoring best execution of portfolio trades by the Sub-adviser, and approach to risk management with respect to the Fund and the service providers to the Fund. The Board also considered HL Advisors’ oversight of compliance with the Fund’s objective and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led to an increase in the scope of HL Advisors’ services in this regard. In addition, the Board considered HL Advisors’ ongoing commitment to review and rationalize the Hartford fund family’s product line-up and the expenses that HL Advisors had incurred in connection with fund combinations in recent years. The Board considered that HL Advisors or its affiliates are responsible for providing the Fund’s officers. The Board also noted that Hartford Life Insurance Company (“HLIC”) provides administrative services to the Fund. The Board considered its experiences with HL Advisors and HLIC with respect to each of these services.
With respect to the Sub-adviser, who provides day-to-day portfolio management services, the Board considered the quality of the Fund’s portfolio managers, the Sub-adviser’s other investment personnel, its investment philosophy and process, investment research capabilities and resources, performance record, trade execution capabilities and experience. The Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers, and the Sub-adviser’s method for compensating the portfolio managers.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Fund by HL Advisors and the Sub-adviser.
Performance of the Fund and the Advisers
The Board considered the investment performance of the Fund. In this regard, the Board reviewed the performance of the Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of the Fund’s performance for these time periods. The Board considered information and materials provided to the Board by the Advisers concerning Fund performance, as well as information from Lipper comparing the investment performance of the Fund to an appropriate benchmark and universe of peer funds. The Board noted that the Fund has a limited performance history.
The Board considered the detailed investment analytics reports provided by The Hartford’s Investment Advisory Group throughout the year. These reports include, among other things, information on the Fund’s gross and net returns, the Fund’s investment performance relative to an appropriate benchmark and peer group, various statistics concerning the Fund’s portfolio, and a narrative summary of various factors affecting Fund performance. The Board considered the Advisers’ cooperation with the Investment Committee, which assists the Board in evaluating the performance of the Fund at periodic meetings throughout the year. The Board also considered the analysis provided by the Consultant relating to the Fund’s performance track record.
In light of all the considerations noted above, the Board concluded that it had continued confidence in HL Advisors’ and the Sub-adviser’s overall capabilities to manage the Fund.
Costs of the Services and Profitability of the Advisers
The Board reviewed information regarding HL Advisors’ cost to provide investment management and related services to the Fund and HL Advisors’ profitability, both overall and for the Fund, on a pre-tax basis without regard to distribution expenses. The Board also requested and reviewed information about the profitability to HL Advisors and its affiliates from all services provided to the Fund and all aspects of their relationship with the Fund. The Board noted that the fees payable to the Sub-adviser are equal
to its estimated costs in providing sub-advisory services. Accordingly, the costs and profitability for the Sub-adviser and HL Advisors were considered in the aggregate.
The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement, noting the Consultant’s view that The Hartford’s process for calculating and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by the Advisers and their affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by the Advisers
The Board considered comparative information with respect to the management fees to be paid by the Fund to HL Advisors and the total expense ratios of the Fund. The Board also considered comparative information with respect to the sub-advisory fees to be paid by HL Advisors to the Sub-adviser, to the extent applicable. In this regard, the Board requested and reviewed information from HL Advisors and the Sub-adviser relating to the management and sub-advisory fees and total operating expenses for the Fund. The Board considered that the management fee for the Fund includes the fee paid to HLIC for providing certain administrative services to the Fund. The Board also reviewed information from Lipper comparing the Fund’s contractual management fees, actual management fees and overall expense ratios relative to a group of funds selected by Lipper, in consultation with the Consultant, and a broader universe of funds selected by Lipper.
While the Board recognized that comparisons between the Fund and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business models and cost structures of the Advisers, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of the Fund’s management and sub-advisory fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to the Fund’s management and sub-advisory fees and total operating expenses.
Based on these considerations, the Board concluded that the Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding the Advisers’ realization of economies of scale with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. The Board reviewed the breakpoints in the management fee schedule for the Fund, which reduce fee rates as Fund assets grow over time. The Board recognized that a fund with assets beyond the last breakpoint level will continue to benefit from economies of scale because additional assets are charged the lowest breakpoint fee resulting in lower overall effective management fee rates. The Board also recognized that a fee schedule that reaches a lower breakpoint quickly provides shareholders with the benefit of anticipated or potential economies of scale.
The Board reviewed and evaluated materials from Lipper showing how management fee schedules of peer funds reflect economies of scale for the benefit of shareholders as a peer fund’s assets hypothetically increase over time. Based on information provided by HL Advisors, Lipper, and the Consultant, the Board recognized that there is no uniform methodology for establishing breakpoints or uniform pattern in asset levels that trigger breakpoints or the amounts of breakpoints triggered.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Fund’s shareholders based on currently available information and the effective advisory fees and expense ratios for the Fund at its current and reasonably anticipated asset levels. The Board noted, however, that it would continue to monitor future growth in Fund assets and the appropriateness of additional breakpoints.
| Hartford Portfolio Diversifier HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
Other Benefits
The Board considered other benefits to the Advisers and their affiliates from their relationships with the Fund, including the role of the Fund in supporting the variable annuity products offered by The Hartford. The Board noted that HLIC, an affiliate of HL Advisors, and its affiliates benefit from the Fund’s strategy of seeking to replicate the performance of the Portfolio Diversifier Index through a reduced need to hedge their obligations under certain guaranteed benefit riders (each, a “Rider”) in their general accounts, the reduced potential risk of loss, and the potential for additional assets garnered due to the appeal to investors of the Riders combined with a particular asset allocation model. The Board also noted, on the other hand, that investors benefit from the ability to elect the Rider at a comparatively reduced guarantee price (in light of the performance profile of the Fund) and on comparatively better terms, than would be available in the absence of the Fund, while maintaining a decreased possibility of downside risk as well as decreased volatility of an investor’s overall fund allocation. The Board considered the reports of the Advisers and the Fund’s Chief Compliance Officer that demonstrated that the Fund continues to be managed in the interests of contract holders, and not in the interests of HLIC to the detriment of contract holders.
The Board reviewed information noting that HLIC receives fees for providing certain administrative services to the Fund, and that HLIC also receives fees for fund accounting and related services from the Fund, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Fund’s transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Fund, and the Board reviewed information on the profitability of the Fund’s transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Fund were fair and reasonable based on publicly available information.
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Fund, receives 12b-1 fees from the Fund. The Board also noted that certain affiliates of HL Advisors distribute shares of the Fund and receive compensation in that connection.
The Board considered the benefits, if any, to the Sub-adviser from any use of the Fund’s brokerage commissions to obtain soft dollar research.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the Agreements for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory and sub-advisory agreements. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreements for the Fund and approve a new investment management agreement for the Fund with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser, and a new investment sub-advisory agreement between HFMC and the Fund’s existing Sub-adviser, Wellington Management Company, LLP (together with HFMC, the “Post-Restructuring Advisers”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Fund. In order to implement the Restructuring, the
Fund would terminate the existing Agreements and enter into a new investment management agreement with HFMC, with HFMC also entering into a new investment sub-advisory agreement with the Sub-adviser (collectively, the “New Agreements”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreements at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by HL Advisors and the Sub-adviser and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreements.
In determining to approve the New Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the New Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreements.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Fund and the performance of investment management personnel to the Fund. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Fund prior to the Restructuring would continue to provide such services to the Fund, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreements would involve no changes to (i) the contractual terms of, including the management fees payable under, the Fund’s investment management and investment sub-advisory agreements; (ii) the investment processes and strategies employed in the management of the Fund’s assets; (iii) the nature and level of services provided under the Fund’s investment management and investment sub-advisory agreements; and (iv) the day-to-day management of the Fund and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Fund.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Fund.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Fund, the investment management arrangement for the Fund following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreements: (i) nature, extent and quality of services provided by HL Advisors and the Sub-adviser; (ii) performance of the Fund, HL Advisors and the Sub-adviser; (iii) costs of the services and profitability of HL Advisors and the Sub-adviser; (iv) comparative services rendered and comparative investment management and sub-advisory fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors and the Sub-adviser with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. With respect to the other benefits to the Post-Restructuring Advisers and their affiliates from their relationships with the Fund, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting and related services from the Fund.
* * * *
| Hartford Portfolio Diversifier HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the New Agreements. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
| Hartford Portfolio Diversifier HLS Fund |
| Principal Risks (Unaudited) |
The principal risks of investing in the Fund are described below.
Market and Selection Risk: The Fund’s share price may fluctuate due to market risk and/or security selections that may underperform compared to the market or relevant benchmarks.
Derivatives Risk: Investments in derivatives can be volatile. Potential risks include currency risk, leverage risk (the risk that small market movements may result in large changes in the value of an investment), liquidity risk, index risk, pricing risk, and counterparty risk (the risk that the counterparty may be unwilling or unable to honor its obligations).
Fixed Income Risk: The Fund is subject to interest rate risk (the risk that the value of an investment decreases when interest rates rise) and credit risk (the risk that the issuing company of a security is unable to pay interest and principal when due) and call risk (the risk that an investment may be redeemed early). These risks also apply to the Fund’s investments in U.S. government securities, which may not be guaranteed by the U.S. government.
Fund Strategy Risk: The Fund is available solely to holders of variable annuity contracts issued by Hartford Life and its affiliates who have elected a Rider. The Fund is designed to replicate the Index, which is designed to produce investment performance that may mitigate against significant declines in the values of the Allocated Funds held by Rider holders. Hartford Life and its affiliates have financial obligations to holders of the Riders arising from guarantee obligations under the Riders. To the extent that the Fund’s strategy is successful, Hartford Life and its affiliates will benefit from a reduction of the risk arising from their guarantee obligations under the Riders, and they will have less risk to hedge under the Riders than would be the case if holders did not allocate to the Fund.
As a holder of a Rider, you also will have exposure to changes in the values of the Allocated Funds, although your particular exposure will differ from the aggregated exposure that the Index is designed to address, depending on your allocations and investment activity, among other factors. Although the Fund may have the effect of mitigating declines in your contract value under a Rider in the event of a significant decline in equity market valuations, the strategy followed by the Fund, if successful, will also generally result in your contract value increasing to a lesser degree than the equity markets, or decreasing, when the values of equity investments are stable or rising. This may deprive you of some or all of the benefit of increases in equity market values under your contract and could also result in a decrease in the value of your variable annuity contract. Depending on future market conditions, you might benefit more from selecting alternative allocations under a guaranteed benefit rider (if available) or alternate investments. In addition, there is no guarantee that the Fund’s strategy will have its intended effect, and it may not work as effectively as is intended. Depending on your particular allocation to the Allocated Funds under a Rider, the Fund’s strategy may be more or less effective in mitigating potential losses under your variable annuity contract than may be the case for others who elect a Rider and allocate contract value differently among the Allocated Funds. In particular, the Fund’s investment strategy is not as likely to be as effective with respect to allocations that have relatively lower anticipated correlation to the investment performance of the S&P 500 Index.
Hartford Life’s financial interest in reducing the volatility of overall contract value invested under the Riders, in light of its obligations under the Riders, may be deemed to present a potential conflict of interest with respect to the interests of the holders of the Riders, in that Hartford Life’s interest may at times conflict with the Fund’s goal of preserving the potential for modest appreciation in the Fund’s net asset value when markets are appreciating. Hartford Life, HL Advisors and the Fund have developed procedures designed to address this potential conflict by (i) specifying the processes for developing and communicating the data used to calculate the Index, calculating the Index and managing the Fund to replicate the performance of the Index and (ii) monitoring for compliance with the specified processes.
| The Hartford Portfolio Diversifier HLS Fund |
| Principal Risks (Unaudited) – (continued) |
Index and Information Risk: The data used by HL Advisors to calculate the Index may not always be current. To the extent the data, and in particular the market-related data, is outdated or inaccurate, the Derivative Sleeve may fail to hedge or may hedge less effectively against equity market declines. In addition, when the values of investments are increasing, the Fund’s value could increase to a lesser extent, or decrease to a greater extent, than would be the case if the data used to calculate the Index were current.
In addition, the Index is intended to hedge against the aggregate allocations of holders of the Riders to the Allocated Funds and not the allocation of any individual contract owner. The Derivative Sleeve may not be successful in providing an effective hedge, and the hedge, even if effective, will benefit some Rider holders more than others, depending upon the allocations to funds selected by the holders. In particular, contract owners whose allocations have a relatively higher anticipated correlation to the investment performance of the S&P 500 Index will benefit to a greater extent from the hedge during periods of equity market declines.
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
HLSAR-PD12 2-13 113550 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 | |
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford Small Company HLS Fund
Table of Contents
This report is prepared for the general information of contract owners and qualified retirement plan participants. It is not an offer of contracts or of qualified retirement plans. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent information including the applicable sales, administrative and other charges.
The views expressed in the Fund’s Manager Discussion under ‘‘Why did the Fund perform this way?’’ and ‘‘What is the outlook?’’ are views of the Fund’s sub-adviser and portfolio management team through the end of the period and are subject to change based on market and other conditions.
| Hartford Small Company HLS Fund inception 08/09/1996 |
| (sub-advised by Wellington Management Company, LLP) |
| |
| Investment objective – Seeks growth of capital. |
Performance Overview 12/31/02 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IA. Growth results in classes other than Class IA will vary from what is seen above due to differences in the expenses charged to those share classes.
| Average Annual Total Returns (as of 12/31/12) |
| | | 1 Year | | | 5 Year | | | 10 Year | |
| Small Company IA | | | 15.64% | | | | 1.27% | | | | 11.41% | |
| Small Company IB | | | 15.35% | | | | 1.03% | | | | 11.14% | |
| Russell 2000 Growth Index | | | 14.59% | | | | 3.49% | | | | 9.80% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund's net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
Russell 2000 Growth Index is an unmanaged index of those Russell 2000 Index growth companies with higher price-to-book ratios and higher forecasted growth values. (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.)
You cannot invest directly in an index.
As of the Fund’s current prospectus dated May 1, 2012, the net total annual operating expense ratios for Class IA and Class IB shares were 0.71% and 0.96%, respectively, and the gross total annual operating expense ratios for Class IA and Class IB shares were 0.71% and 0.96%, respectively. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect until April 30, 2013, and automatically renew for one-year terms unless terminated by the Fund’s Investment Advisor (Hartford Funds Management Company, LLC). For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
| Hartford Small Company HLS Fund |
| Manager Discussion |
| December 31, 2012 (Unaudited) |
| Portfolio Managers | | | | |
| Steven C. Angeli, CFA | | Stephen C. Mortimer | | Jamie A. Rome, CFA |
| Senior Vice President and Equity Portfolio Manager | | Senior Vice President and Equity Portfolio Manager | | Senior Vice President and Equity Portfolio Manager |
| | | | | |
| Mario E. Abularach, CFA | | Mammen Chally, CFA | | |
| Senior Vice President and Equity Research Analyst | | Vice President and Equity Portfolio Manager | | |
| | | | | |
How did the Fund perform?
The Class IA shares of the Hartford Small Company HLS Fund returned 15.64% for the twelve-month period ended December 31, 2012 outperforming its benchmark, the Russell 2000 Growth Index which returned 14.59% for the same period. The Fund also outperformed the 14.09% return of the average fund in the Lipper VP-UF Small-Cap Growth Funds peer group, a group of funds with investment strategies similar to those of the Fund.
Why did the Fund perform this way?
U.S. equities moved higher in the period, in part due to a strengthening housing market and central bank interventions around the globe. Although Europe continued to grapple with economic and structural challenges, investors’ risk appetites surged after European Central Bank (ECB) President Mario Draghi revealed a comprehensive plan to support struggling sovereigns, including direct purchases of government bonds in the open market. Additionally, the U.S. Federal Reserve’s (Fed) announcement of a third round of quantitative easing (QE3) was well-received by the market, boosting stock prices. Despite concerns about the looming U.S. fiscal cliff, tepid corporate revenue results, and economic malaise in Europe, investors bid up risk assets amid further signs of recovery in China and signs that the U.S. housing market may bolster the U.S. economy for the first time in seven years. Risk sentiment also ticked up on continued hopes that the ECB’s bond-buying plan will succeed, essentially reducing the tail risks in Europe.
Small cap (+16.4%) stocks modestly outperformed large cap stocks (+16.0%) during the period, as measured by the Russell 2000 and S&P 500 Indices, respectively. Value (+18.1%) stocks outperformed Growth (+14.6%) stocks during the period, as measured by the Russell 2000 Value and Russell 2000 Growth Indices. Eight of ten sectors in the Russell 2000 Growth Index had positive returns during the period. Consumer Discretionary (+21.0%), Materials (+20.8%), and Telecommunication Services (+19.1%) performed best, while Energy (-9.4%) and Utilities (-5.2%) lagged.
Stock selection was the main driver of relative outperformance versus the benchmark, primarily in the Industrials, Energy, and Consumer Discretionary sectors; this was somewhat offset by weak stock selection in the Information Technology, Financials, and Telecommunication Services sectors. Sector allocation, which is the residual result of bottom-up stock selection, also detracted from relative returns, primarily due to an underweight (i.e. the Fund’s sector position was less than the benchmark position) to Health Care and an overweight to Information Technology.
Top contributors to relative and absolute performance during the period included PulteGroup (Consumer Discretionary), SXC Health Solutions (Health Care), and DSW (Consumer Discretionary). Shares of PulteGroup, a large U.S. homebuilder, performed well as signs of stabilization in housing began to turn sentiment toward the housing sector and investors began contemplating future home price appreciation. The combination of record home affordability, an improving jobs picture, and low levels of new home construction have provided a powerful backdrop for U.S. homebuilders following their seven-year recession. Shares of SXC Health Solutions, a pharmacy benefit management (PBM) company, moved higher following the announcement in April 2012 that the company planned to merge with competitor Catalyst Health Solutions. Shares of shoe retailer DSW climbed during the period, following strong earnings and profits based on higher U.S. consumer demand for affordable branded shoes.
Stocks that detracted the most from relative returns during the period included Deckers Outdoor (Consumer Discretionary), Salix Pharmaceutical (Health Care), and Pharmacyclics (Health Care). Shares of Deckers Outdoor, a designer and marketer of fashion-oriented footwear, fell as elevated inventory levels of UGG boots and waning customer demand led to price reductions. Additionally, margin pressure from higher product costs led to a reduction in consensus earnings expectations. Salix Pharmaceutical, a pharmaceutical firm focused on the treatment of gastrointestinal diseases, saw its stock price decline following news that Relistor, which is approved for opioid-induced constipation in cancer patients, received a complete response letter requesting additional
| Hartford Small Company HLS Fund |
| Manager Discussion – (continued) |
| December 31, 2012 (Unaudited) |
clinical data before approval in a broader patient population. Shares of Pharmacyclics, a pharmaceutical company, performed well during the period as the company announced positive results from two clinical trials of a new drug for the treatment of patients with chronic lymphocytic leukemia. Not owning this benchmark-component security for the duration of the period detracted from relative returns. Knight Capital Group (Financials) and Riverbed Technology (Information Technology) also detracted from absolute returns during the period.
What is the outlook?
We continue to challenge ourselves to discover emerging growth companies and to be opportunistic to uncover re-emerging growth companies. Market volatility over the past year has validated our long-standing focus on fundamental research, which we continue to apply with rigor.
As a residual of our bottom-up, stock-by-stock investment decisions, the Fund ended the period most overweight in the Consumer Discretionary, Energy, and Materials sectors relative to the Russell 2000 Growth Index. The Fund ended the period most underweight in the Health Care, Consumer Staples, and Telecommunication Services sectors.
Diversification by Industry
as of December 31, 2012
| Industry (Sector) | | Percentage of
Net Assets | |
| Automobiles and Components (Consumer Discretionary) | | | 2.0 | % |
| Banks (Financials) | | | 2.5 | |
| Capital Goods (Industrials) | | | 13.2 | |
| Commercial and Professional Services (Industrials) | | | 1.8 | |
| Consumer Durables and Apparel (Consumer Discretionary) | | | 4.8 | |
| Consumer Services (Consumer Discretionary) | | | 3.3 | |
| Diversified Financials (Financials) | | | 1.2 | |
| Energy (Energy) | | | 7.2 | |
| Food and Staples Retailing (Consumer Staples) | | | 0.9 | |
| Food, Beverage and Tobacco (Consumer Staples) | | | 0.3 | |
| Health Care Equipment and Services (Health Care) | | | 6.4 | |
| Household and Personal Products (Consumer Staples) | | | 1.9 | |
| Insurance (Financials) | | | 0.3 | |
| Materials (Materials) | | | 6.1 | |
| Media (Consumer Discretionary) | | | 0.9 | |
| Pharmaceuticals, Biotechnology and Life Sciences (Health Care) | | | 9.9 | |
| Real Estate (Financials) | | | 3.8 | |
| Retailing (Consumer Discretionary) | | | 7.1 | |
| Semiconductors and Semiconductor Equipment (Information Technology) | | | 1.8 | |
| Software and Services (Information Technology) | | | 17.3 | |
| Technology Hardware and Equipment (Information Technology) | | | 3.6 | |
| Transportation (Industrials) | | | 3.0 | |
| Utilities (Utilities) | | | 0.3 | |
| Short-Term Investments | | | 2.1 | |
| Other Assets and Liabilities | | | (1.7 | ) |
| Total | | | 100.0 | % |
| Hartford Small Company HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
COMMON STOCKS - 99.5% | | | | |
| | | | | Automobiles and Components - 2.0% | | | | |
| | 365 | | | Allison Transmission Holdings, Inc. | | $ | 7,447 | |
| | 448 | | | Tenneco Automotive, Inc. ● | | | 15,719 | |
| | 37 | | | Tesla Motors, Inc. ● | | | 1,268 | |
| | | | | | | | 24,434 | |
| | | | | Banks - 2.5% | | | | |
| | 193 | | | Boston Private Financial Holdings, Inc. | | | 1,738 | |
| | 319 | | | East West Bancorp, Inc. | | | 6,861 | |
| | 81 | | | EverBank Financial Corp. | | | 1,208 | |
| | 79 | | | First Merchants Corp. | | | 1,165 | |
| | 144 | | | Flushing Financial Corp. | | | 2,209 | |
| | 57 | | | Home Loan Servicing Solutions Ltd. | | | 1,072 | |
| | 67 | | | Hudson Valley Holding Corp. | | | 1,041 | |
| | 231 | | | Ocwen Financial Corp. ● | | | 7,996 | |
| | 142 | | | Umpqua Holdings Corp. | | | 1,676 | |
| | 513 | | | Western Alliance Bancorp ● | | | 5,397 | |
| | 28 | | | Wintrust Financial Corp. | | | 1,011 | |
| | | | | | | | 31,374 | |
| | | | | Capital Goods - 13.2% | | | | |
| | 38 | | | A.O. Smith Corp. | | | 2,426 | |
| | 42 | | | AAON, Inc. | | | 875 | |
| | 139 | | | Acuity Brands, Inc. | | | 9,412 | |
| | 21 | | | AGCO Corp. ● | | | 1,032 | |
| | 153 | | | Altra Holdings, Inc. | | | 3,382 | |
| | 170 | | | Applied Industrial Technologies, Inc. | | | 7,151 | |
| | 121 | | | Astronics Corp. ● | | | 2,774 | |
| | 18 | | | Astronics Corp. Class B ● | | | 388 | |
| | 63 | | | AZZ, Inc. | | | 2,412 | |
| | 52 | | | Belden, Inc. | | | 2,342 | |
| | 51 | | | CAI International, Inc. ● | | | 1,119 | |
| | 18 | | | Carlisle Cos., Inc. | | | 1,030 | |
| | 48 | | | Chart Industries, Inc. ● | | | 3,180 | |
| | 133 | | | Colfax Corp. ● | | | 5,363 | |
| | 24 | | | Crane Co. | | | 1,132 | |
| | 508 | | | DigitalGlobe, Inc. ● | | | 12,425 | |
| | 103 | | | DXP Enterprises, Inc. ● | | | 5,037 | |
| | 28 | | | EMCOR Group, Inc. | | | 963 | |
| | 30 | | | Esterline Technologies Corp. ● | | | 1,927 | |
| | 35 | | | Franklin Electric Co., Inc. | | | 2,164 | |
| | 26 | | | GeoEye, Inc. ● | | | 799 | |
| | 107 | | | GrafTech International Ltd. ● | | | 1,004 | |
| | 68 | | | H & E Equipment Services, Inc. | | | 1,031 | |
| | 62 | | | Heico Corp. | | | 2,783 | |
| | 132 | | | IDEX Corp. | | | 6,120 | |
| | 56 | | | John Bean Technologies Corp. | | | 997 | |
| | 204 | | | Kennametal, Inc. | | | 8,156 | |
| | 51 | | | Lennox International, Inc. | | | 2,664 | |
| | 26 | | | Lindsay Corp. | | | 2,096 | |
| | 78 | | | Luxfer Holdings plc ● | | | 953 | |
| | 25 | | | Middleby Corp. ● | | | 3,222 | |
| | 235 | | | Moog, Inc. Class A ● | | | 9,651 | |
| | 42 | | | Nordson Corp. | | | 2,676 | |
| | 282 | | | Owens Corning, Inc. ● | | | 10,419 | |
| | 324 | | | Polypore International, Inc. ● | | | 15,052 | |
| | 52 | | | Sun Hydraulics Corp. | | | 1,347 | |
| | 31 | | | TAL International Group, Inc. | | | 1,128 | |
| | 159 | | | Teledyne Technologies, Inc. ● | | | 10,347 | |
| | 35 | | | Textainer Group Holdings Ltd. | | | 1,098 | |
| | 52 | | | Titan International, Inc. | | | 1,129 | |
| | 67 | | | Trex Co., Inc. ● | | | 2,489 | |
| | 90 | | | Trimas Corp. ● | | | 2,524 | |
| | 142 | | | WESCO International, Inc. ● | | | 9,551 | |
| | | | | | | | 163,770 | |
| | | | | Commercial and Professional Services - 1.8% | | | | |
| | 66 | | | Deluxe Corp. | | | 2,142 | |
| | 55 | | | Exponent, Inc. ● | | | 3,071 | |
| | 72 | | | GP Strategies Corp. ● | | | 1,480 | |
| | 82 | | | Interface, Inc. | | | 1,324 | |
| | 454 | | | On Assignment, Inc. ● | | | 9,198 | |
| | 323 | | | Wageworks, Inc. ● | | | 5,753 | |
| | | | | | | | 22,968 | |
| | | | | Consumer Durables and Apparel - 4.7% | | | | |
| | 64 | | | Arctic Cat, Inc. ● | | | 2,150 | |
| | 256 | | | Brunswick Corp. | | | 7,452 | |
| | 179 | | | Fifth & Pacific Cos., Inc. ● | | | 2,228 | |
| | 294 | | | Hanesbrands, Inc. ● | | | 10,530 | |
| | 32 | | | Helen of Troy Ltd. ● | | | 1,079 | |
| | 4,299 | | | Samsonite International S.A. | | | 9,021 | |
| | 56 | | | Skechers USA, Inc. Class A ● | | | 1,040 | |
| | 1,220 | | | Standard-Pacific Corp. ● | | | 8,966 | |
| | 279 | | | Steven Madden Ltd. ● | | | 11,799 | |
| | 53 | | | True Religion Apparel, Inc. | | | 1,357 | |
| | 44 | | | Warnaco Group, Inc. ● | | | 3,151 | |
| | | | | | | | 58,773 | |
| | | | | Consumer Services - 3.3% | | | | |
| | 202 | | | Bloomin' Brands, Inc. ● | | | 3,158 | |
| | 93 | | | Brinker International, Inc. | | | 2,881 | |
| | 132 | | | Buffalo Wild Wings, Inc. ● | | | 9,647 | |
| | 668 | | | Burger King Worldwide, Inc. ● | | | 10,985 | |
| | 280 | | | Cheesecake Factory, Inc. | | | 9,175 | |
| | 96 | | | Ignite Restaurant Group, Inc. ● | | | 1,243 | |
| | 57 | | | Sotheby's Holdings | | | 1,915 | |
| | 21 | | | Steiner Leisure Ltd. ● | | | 1,027 | |
| | 70 | | | Whistler Blackcomb Holdings, Inc. | | | 864 | |
| | | | | | | | 40,895 | |
| | | | | Diversified Financials - 1.2% | | | | |
| | 299 | | | BGC Partners, Inc. | | | 1,034 | |
| | 200 | | | DFC Global Corp. ● | | | 3,709 | |
| | 96 | | | Fifth Street Finance Corp. | | | 1,002 | |
| | 116 | | | Gain Capital Holdings, Inc. | | | 473 | |
| | 270 | | | Netspend Holdings, Inc. ● | | | 3,191 | |
| | 30 | | | Portfolio Recovery Associates, Inc. ● | | | 3,175 | |
| | 448 | | | Wisdomtree Investment, Inc. ● | | | 2,744 | |
| | | | | | | | 15,328 | |
| | | | | Energy - 7.2% | | | | |
| | 2,328 | | | Alberta Oilsands, Inc. ● | | | 117 | |
| | 110 | | | Atwood Oceanics, Inc. ● | | | 5,017 | |
| | 93 | | | Berry Petroleum Co. | | | 3,117 | |
| | 438 | | | BPZ Resources, Inc. ● | | | 1,381 | |
| | 85 | | | C&J Energy Services, Inc. ■● | | | 1,816 | |
| | 252 | | | Cloud Peak Energy, Inc. ● | | | 4,881 | |
| | 42 | | | CVR Energy, Inc. ● | | | 2,031 | |
| | 59 | | | Diamondback Energy, Inc. ● | | | 1,130 | |
| | 76 | | | Energy XXI (Bermuda) Ltd. | | | 2,462 | |
| | 58 | | | EPL Oil & Gas, Inc. ● | | | 1,303 | |
| | 64 | | | Gulfmark Offshore, Inc. ● | | | 2,194 | |
| | 41 | | | Gulfport Energy Corp. ● | | | 1,575 | |
| | 14 | | | Hornbeck Offshore Services, Inc. ● | | | 482 | |
| | 354 | | | ION Geophysical Corp. ● | | | 2,301 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Small Company HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
COMMON STOCKS - 99.5% - (continued) | | | | |
| | | | | Energy - 7.2% - (continued) | | | | |
| | 170 | | | Karoon Gas Australia Ltd. ● | | $ | 966 | |
| | 129 | | | Midstates Petroleum Co., Inc. ● | | | 888 | |
| | 437 | | | Painted Pony Petroleum Ltd. ● | | | 4,611 | |
| | 541 | | | Patterson-UTI Energy, Inc. | | | 10,087 | |
| | 78 | | | PBF Energy, Inc. ● | | | 2,275 | |
| | 42 | | | PDC Energy, Inc. ● | | | 1,395 | |
| | 491 | | | Rex Energy Corp. ● | | | 6,393 | |
| | 252 | | | Rosetta Resources, Inc. ● | | | 11,453 | |
| | 262 | | | SemGroup Corp. ● | | | 10,255 | |
| | 2,700 | | | Sunshine Oilsands Ltd. ● | | | 1,076 | |
| | 68 | | | Swift Energy Co. ● | | | 1,040 | |
| | 682 | | | Trican Well Service Ltd. | | | 8,990 | |
| | | | | | | | 89,236 | |
| | | | | Food and Staples Retailing - 0.9% | | | | |
| | 196 | | | Casey's General Stores, Inc. | | | 10,405 | |
| | 77 | | | Natural Grocers by Vitamin Cottage, Inc. ● | | | 1,465 | |
| | | | | | | | 11,870 | |
| | | | | Food, Beverage and Tobacco - 0.3% | | | | |
| | 10 | | | Boston Beer Co., Inc. Class A ● | | | 1,390 | |
| | 135 | | | Darling International, Inc. ● | | | 2,168 | |
| | | | | | | | 3,558 | |
| | | | | Health Care Equipment and Services - 6.4% | | | | |
| | 208 | | | Air Methods Corp. ● | | | 7,667 | |
| | 32 | | | AmSurg Corp. ● | | | 954 | |
| | 7 | | | Atrion Corp. | | | 1,360 | |
| | 185 | | | Catamaran Corp. ● | | | 8,730 | |
| | 32 | | | Corvel Corp. ● | | | 1,445 | |
| | 42 | | | Cyberonics, Inc. ● | | | 2,205 | |
| | 166 | | | Dexcom, Inc. ● | | | 2,255 | �� |
| | 38 | | | Ensign Group, Inc. | | | 1,028 | |
| | 169 | | | Globus Medical, Inc. ● | | | 1,774 | |
| | 49 | | | Greatbatch, Inc. ● | | | 1,127 | |
| | 354 | | | HealthSouth Corp. ● | | | 7,475 | |
| | 95 | | | Heartware International, Inc. ● | | | 8,002 | |
| | 63 | | | ICU Medical, Inc. ● | | | 3,851 | |
| | 255 | | | Insulet Corp. ● | | | 5,421 | |
| | 56 | | | LHC Group, Inc. ● | | | 1,187 | |
| | 69 | | | Masimo Corp. ● | | | 1,453 | |
| | 14 | | | MEDNAX, Inc. ● | | | 1,082 | |
| | 315 | | | Merge Healthcare, Inc. ● | | | 779 | |
| | 67 | | | Merit Medical Systems, Inc. ● | | | 931 | |
| | 52 | | | Owens & Minor, Inc. | | | 1,487 | |
| | 304 | | | Team Health Holdings ● | | | 8,741 | |
| | 73 | | | U.S. Physical Therapy, Inc. | | | 2,001 | |
| | 63 | | | Volcano Corp. ● | | | 1,476 | |
| | 140 | | | Wellcare Health Plans, Inc. ● | | | 6,829 | |
| | | | | | | | 79,260 | |
| | | | | Household and Personal Products - 1.9% | | | | |
| | 357 | | | Elizabeth Arden, Inc. ● | | | 16,057 | |
| | 51 | | | Nu Skin Enterprises, Inc. Class A | | | 1,882 | |
| | 129 | | | Spectrum Brands Holdings, Inc. ● | | | 5,802 | |
| | | | | | | | 23,741 | |
| | | | | Insurance - 0.3% | | | | |
| | 61 | | | Amerisafe, Inc. ● | | | 1,653 | |
| | 54 | | | Protective Life Corp. | | | 1,548 | |
| | | | | | | | 3,201 | |
| | | | | Materials - 6.1% | | | | |
| | 63 | | | ADA-ES, Inc. ● | | | 1,055 | |
| | 30 | | | Allied Nevada Gold Corp. ● | | | 898 | |
| | 780 | | | Aurcana Corp. ● | | | 729 | |
| | 255 | | | Graphic Packaging Holding Co. ● | | | 1,649 | |
| | 1,093 | | | Headwaters, Inc. ● | | | 9,354 | |
| | 28 | | | Innospec, Inc. ● | | | 948 | |
| | 524 | | | KapStone Paper & Packaging Corp. ● | | | 11,627 | |
| | 561 | | | Louisiana-Pacific Corp. ● | | | 10,845 | |
| | 25 | | | LSB Industries, Inc. ● | | | 868 | |
| | 359 | | | Methanex Corp. ADR | | | 11,436 | |
| | 93 | | | New Gold, Inc. ● | | | 1,020 | |
| | 85 | | | Olin Corp. | | | 1,829 | |
| | 227 | | | Packaging Corp. of America | | | 8,728 | |
| | 144 | | | PolyOne Corp. | | | 2,942 | |
| | 881 | | | Romarco Minerals, Inc. ● | | | 682 | |
| | 227 | | | Silgan Holdings, Inc. | | | 9,439 | |
| | 26 | | | Universal Stainless & Alloy Products, Inc. ● | | | 971 | |
| | 24 | | | Winpak Ltd. | | | 351 | |
| | | | | | | | 75,371 | |
| | | | | Media - 0.9% | | | | |
| | 711 | | | Pandora Media, Inc. ● | | | 6,526 | |
| | 169 | | | Shutterstock, Inc. ● | | | 4,393 | |
| | | | | | | | 10,919 | |
| | | | | Pharmaceuticals, Biotechnology and Life Sciences - 9.9% | | | | |
| | 68 | | | 3SBio, Inc. ADR ● | | | 926 | |
| | 93 | | | Acorda Therapeutics, Inc. ● | | | 2,323 | |
| | 127 | | | Algeta ASA ●☼ | | | 3,550 | |
| | 185 | | | Alkermes plc ● | | | 3,431 | |
| | 590 | | | Arena Pharmaceuticals, Inc. ●‡ | | | 5,324 | |
| | 178 | | | Auxilium Pharmaceuticals, Inc. ● | | | 3,296 | |
| | 487 | | | Aveo Pharmaceuticals, Inc. ● | | | 3,917 | |
| | 136 | | | Bruker Corp. ● | | | 2,070 | |
| | 214 | | | Cadence Pharmaceuticals, Inc. ● | | | 1,026 | |
| | 179 | | | Covance, Inc. ● | | | 10,368 | |
| | 214 | | | Cubist Pharmaceuticals, Inc. ● | | | 9,015 | |
| | 1,050 | | | Exelixis, Inc. ● | | | 4,798 | |
| | 453 | | | Immunogen, Inc. ● | | | 5,781 | |
| | 380 | | | Incyte Corp. ● | | | 6,306 | |
| | 659 | | | Ironwood Pharmaceuticals, Inc. ● | | | 7,313 | |
| | 451 | | | Medicines Co. ● | | | 10,807 | |
| | 130 | | | Neurocrine Biosciences, Inc. ● | | | 971 | |
| | 832 | | | NPS Pharmaceuticals, Inc. ● | | | 7,575 | |
| | 69 | | | Onyx Pharmaceuticals, Inc. ● | | | 5,240 | |
| | 139 | | | Optimer Pharmaceuticals, Inc. ● | | | 1,262 | |
| | 76 | | | PAREXEL International Corp. ● | | | 2,241 | |
| | 43 | | | Puma Biotechnology, Inc. ● | | | 815 | |
| | 708 | | | Rigel Pharmaceuticals, Inc. ● | | | 4,605 | |
| | 205 | | | Salix Pharmaceuticals Ltd. ● | | | 8,298 | |
| | 405 | | | Seattle Genetics, Inc. ● | | | 9,387 | |
| | 84 | | | Tesaro, Inc. ● | | | 1,416 | |
| | 152 | | | Trius Therapeutics, Inc. ● | | | 728 | |
| | | | | | | | 122,789 | |
| | | | | Real Estate - 3.8% | | | | |
| | 65 | | | American Campus Communities, Inc. REIT | | | 3,009 | |
| | 67 | | | Capstead Mortgage Corp. REIT | | | 773 | |
| | 71 | | | Colonial Properties Trust REIT | | | 1,514 | |
| | 65 | | | Coresite Realty Corp. REIT | | | 1,787 | |
| | 172 | | | Glimcher Realty Trust REIT | | | 1,904 | |
| | 32 | | | Hatteras Financial Corp. REIT | | | 784 | |
| | 97 | | | Medical Properties Trust, Inc. REIT | | | 1,157 | |
| | 106 | | | MFA Mortgage Investments, Inc. REIT | | | 862 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | Market Value ╪ | |
COMMON STOCKS - 99.5% - (continued) | | | | |
| | | | | Real Estate - 3.8% - (continued) | | | | |
| | 450 | | | Pebblebrook Hotel Trust REIT | | $ | 10,394 | |
| | 254 | | | Potlatch Corp. REIT | | | 9,935 | |
| | 59 | | | PS Business Parks, Inc. REIT | | | 3,808 | |
| | 123 | | | Summit Hotel Properties, Inc. REIT | | | 1,169 | |
| | 713 | | | Sunstone Hotel Investors, Inc. REIT ● | | | 7,640 | |
| | 66 | | | Whitestone REIT | | | 920 | |
| | 57 | | | Zillow, Inc. ● | | | 1,595 | |
| | | | | | | | 47,251 | |
| | | | | Retailing - 7.1% | | | | |
| | 5,016 | | | Allstar LLC ⌂† | | | 7,074 | |
| | 150 | | | Ascena Retail Group, Inc. ● | | | 2,770 | |
| | 39 | | | Cato Corp. | | | 1,057 | |
| | 55 | | | Core-Mark Holding Co., Inc. | | | 2,594 | |
| | 495 | | | Debenhams plc | | | 924 | |
| | 155 | | | DSW, Inc. | | | 10,199 | |
| | 89 | | | Express, Inc. ● | | | 1,348 | |
| | 288 | | | Francescas Holding Corp. ● | | | 7,479 | |
| | 35 | | | Group 1 Automotive, Inc. | | | 2,156 | |
| | 42 | | | Guess?, Inc. | | | 1,036 | |
| | 91 | | | Hibbett Sports, Inc. ● | | | 4,807 | |
| | 363 | | | HomeAway, Inc. ● | | | 7,977 | |
| | 143 | | | HSN, Inc. | | | 7,869 | |
| | 40 | | | Lumber Liquidators Holdings, Inc. ● | | | 2,124 | |
| | 103 | | | Mattress Firm Holding Corp. ● | | | 2,535 | |
| | 338 | | | Pier 1 Imports, Inc. | | | 6,757 | |
| | 328 | | | rue21, Inc. ● | | | 9,326 | |
| | 58 | | | The Finish Line, Inc. | | | 1,088 | |
| | 227 | | | Urban Outfitters, Inc. ● | | | 8,948 | |
| | | | | | | | 88,068 | |
| | | | | Semiconductors and Semiconductor Equipment - 1.8% | | | | |
| | 1,501 | | | Lattice Semiconductor Corp. ● | | | 5,987 | |
| | 359 | | | Mindspeed Technologies, Inc. ● | | | 1,678 | |
| | 112 | | | Nanometrics, Inc. ● | | | 1,614 | |
| | 349 | | | Ultratech Stepper, Inc. ● | | | 13,021 | |
| | | | | | | | 22,300 | |
| | | | | Software and Services - 17.3% | | | | |
| | 96 | | | Aspen Technology, Inc. ● | | | 2,661 | |
| | 54 | | | Bazaarvoice, Inc. ● | | | 505 | |
| | 297 | | | Broadsoft, Inc. ● | | | 10,806 | |
| | 1,012 | | | Cadence Design Systems, Inc. ● | | | 13,671 | |
| | 50 | | | Cass Information Systems, Inc. | | | 2,099 | |
| | 9 | | | Commvault Systems, Inc. ● | | | 620 | |
| | 141 | | | Concur Technologies, Inc. ● | | | 9,539 | |
| | 52 | | | Constant Contact, Inc. ● | | | 744 | |
| | 62 | | | CoStar Group, Inc. ● | | | 5,548 | |
| | 333 | | | DealerTrack Technologies, Inc. ● | | | 9,552 | |
| | 144 | | | Earthlink, Inc. | | | 929 | |
| | 71 | | | Ebix, Inc. | | | 1,139 | |
| | 243 | | | Fair Isaac, Inc. | | | 10,203 | |
| | 287 | | | Fleetmatics Group Ltd. ● | | | 7,213 | |
| | 181 | | | Higher One Holdings, Inc. ● | | | 1,911 | |
| | 298 | | | IAC/InterActiveCorp. | | | 14,110 | |
| | 357 | | | Imperva, Inc. ● | | | 11,258 | |
| | 128 | | | j2 Global, Inc. | | | 3,916 | |
| | 97 | | | Keynote Systems, Inc. | | | 1,366 | |
| | 632 | | | LivePerson, Inc. ● | | | 8,304 | |
| | 176 | | | Micros Systems ● | | | 7,460 | |
| | 18 | | | MicroStrategy, Inc. ● | | | 1,646 | |
| | 346 | | | Mitek Systems, Inc. ● | | | 1,110 | |
| | 73 | | | Netscout Systems, Inc. ● | | | 1,905 | |
| | 42 | | | Nuance Communications, Inc. ● | | | 935 | |
| | 458 | | | Parametric Technology Corp. ● | | | 10,310 | |
| | 80 | | | QLIK Technologies, Inc. ● | | | 1,735 | |
| | 607 | | | Sapient Corp. ● | | | 6,408 | |
| | 275 | | | ServiceNow, Inc. ● | | | 8,251 | |
| | 21 | | | Solarwinds, Inc. ● | | | 1,092 | |
| | 287 | | | Solera Holdings, Inc. | | | 15,332 | |
| | 32 | | | Sourcefire, Inc. ● | | | 1,530 | |
| | 217 | | | Splunk, Inc. ● | | | 6,302 | |
| | 64 | | | Syntel, Inc. | | | 3,447 | |
| | 72 | | | Tyler Corp. ● | | | 3,478 | |
| | 35 | | | Ultimate (The) Software Group, Inc. ● | | | 3,288 | |
| | 57 | | | VeriFone Systems, Inc. ● | | | 1,701 | |
| | 580 | | | Web.com Group, Inc. ● | | | 8,590 | |
| | 189 | | | WEX, Inc. | | | 14,238 | |
| | | | | | | | 214,852 | |
| | | | | Technology Hardware and Equipment - 3.6% | | | | |
| | 51 | | | Acme Packet, Inc. ● | | | 1,128 | |
| | 56 | | | Arris Group, Inc. ● | | | 843 | |
| | 301 | | | Aruba Networks, Inc. ● | | | 6,250 | |
| | 174 | | | Coherent, Inc. ● | | | 8,822 | |
| | 163 | | | Emulex Corp. ● | | | 1,190 | |
| | 331 | | | Extreme Networks, Inc. ● | | | 1,205 | |
| | 116 | | | Fabrinet ● | | | 1,529 | |
| | 30 | | | Ixia ● | | | 505 | |
| | 531 | | | JDS Uniphase Corp. ● | | | 7,189 | |
| | 296 | | | Mitel Networks Corp. ● | | | 930 | |
| | 33 | | | Netgear, Inc. ● | | | 1,305 | |
| | 114 | | | Oplink Communications, Inc. ● | | | 1,773 | |
| | 39 | | | Palo Alto Networks, Inc. ● | | | 2,087 | |
| | 46 | | | Park Electrochemical Corp. | | | 1,173 | |
| | 57 | | | Plantronics, Inc. | | | 2,110 | |
| | 82 | | | Rogers Corp. ● | | | 4,085 | |
| | 102 | | | TTM Technologies, Inc. ● | | | 937 | |
| | 122 | | | Ubiquiti Networks, Inc. ● | | | 1,486 | |
| | | | | | | | 44,547 | |
| | | | | Transportation - 3.0% | | | | |
| | 148 | | | Avis Budget Group, Inc. ● | | | 2,935 | |
| | 158 | | | Landstar System, Inc. | | | 8,314 | |
| | 43 | | | Marten Transport Ltd. | | | 796 | |
| | 315 | | | Old Dominion Freight Line, Inc. ● | | | 10,794 | |
| | 689 | | | Spirit Airlines, Inc. ● | | | 12,214 | |
| | 110 | | | Werner Enterprises, Inc. | | | 2,373 | |
| | | | | | | | 37,426 | |
| | | | | Utilities - 0.3% | | | | |
| | 30 | | | Portland General Electric Co. | | | 818 | |
| | 66 | | | UNS Energy Corp. | | | 2,817 | |
| | 27 | | | Westar Energy, Inc. | | | 776 | |
| | | | | | | | 4,411 | |
| | | | | Total common stocks | | | | |
| | | | | (cost $1,126,752) | | $ | 1,236,342 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Small Company HLS Fund |
Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | | | | Market Value ╪ | |
| PREFERRED STOCKS - 0.1% | | | | | | | | |
| | | | | Consumer Durables and Apparel - 0.1% | | | | | | | | |
| | 14 | | | Callaway Golf Co., 7.50% ۞ | | | | | | $ | 1,394 | |
| | | | | | | | | | | | | |
| | | | | Total preferred stocks | | | | | | | | |
| | | | | (cost $1,579) | | | | | | $ | 1,394 | |
| | | | | | | | | | | | | |
| | | | | Total long-term investments | | | | | | | | |
| | | | | (cost $1,128,331) | | | | | | $ | 1,237,736 | |
| | | | | | | | | | | | | |
| SHORT-TERM INVESTMENTS - 2.1% | | | | | | | | |
| Repurchase Agreements - 2.1% | | | | | | | | |
| | | | | Bank of America Merrill Lynch TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $602,
collateralized by FHLMC 3.00%, 2042,
FNMA 4.00%, 2042, value of $614) | | | | | | | | |
| $ | 602 | | | 0.19%, 12/31/2012 | | | | | | $ | 602 | |
| | | | | Bank of Montreal TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $4,282, collateralized by
FHLMC 2.50% - 5.50%, 2019 - 2042,
FNMA 0.76% - 6.11%, 2016 - 2042,
GNMA 3.50%, 2042, value of $4,367) | | | | | | | | |
| | 4,282 | | | 0.23%, 12/31/2012 | | | | | | | 4,282 | |
| | | | | Barclays Capital TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $1,339, collateralized by U.S.
Treasury Note 2.00% - 2.13%, 2016, value
of $1,366) | | | | | | | | |
| | 1,339 | | | 0.20%, 12/31/2012 | | | | | | | 1,339 | |
| | | | | Citigroup Global Markets, Inc. TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $8,435,
collateralized by U.S. Treasury Note 1.88%
- 4.13%, 2015 - 2018, value of $8,604) | | | | | | | | |
| | 8,435 | | | 0.17%, 12/31/2012 | | | | | | | 8,435 | |
| | | | | Deutsche Bank Securities TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $174, collateralized by FNMA
3.00%, 2032, value of $177) | | | | | | | | |
| | 174 | | | 0.25%, 12/31/2012 | | | | | | | 174 | |
| | | | | RBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $5,935, collateralized by U.S.
Treasury Note 0.50% - 2.75%, 2013 - 2019,
value of $6,054) | | | | | | | | |
| | 5,935 | | | 0.20%, 12/31/2012 | | | | | | | 5,935 | |
| | | | | TD Securities TriParty Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$5,196, collateralized by FHLMC 3.50% -
6.00%, 2036 - 2042, FNMA 0.22% -
5.50%, 2013 - 2042, value of $5,300) | | | | | | | | |
| | 5,196 | | | 0.21%, 12/31/2012 | | | | | | | 5,196 | |
| | | | | UBS Securities, Inc. Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$100, collateralized by U.S. Treasury Bill
0.75%, 2013, value of $103) | | | | | | | | |
| | 100 | | | 0.17%, 12/31/2012 | | | | | | | 100 | |
| | | | | UBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $354, collateralized by FNMA
2.50%, 2027, GNMA 3.00%, 2042, value
of $361) | | | | | | | | |
| 354 | | | 0.25%, 12/31/2012 | | | | | | $ | 354 | |
| | | | | | | | | | | | 26,417 | |
| | | | | Total short-term investments | | | | | | | | |
| | | | | (cost $26,417) | | | | | | $ | 26,417 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $1,154,748) ▲ | | | 101.7 | % | | $ | 1,264,153 | |
| | | | | Other assets and liabilities | | | (1.7 | )% | | | (20,670 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 1,243,483 | |
The accompanying notes are an integral part of these financial statements.
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
Prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for factors occurring after the close of certain foreign markets but before the close of the New York Stock Exchange.
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $1,162,394 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 151,336 | |
| Unrealized Depreciation | | | (49,577 | ) |
| Net Unrealized Appreciation | | $ | 101,759 | |
| † | These securities were valued in good faith at fair value as determined under policies and procedures established by and under the supervision of the Company's Board of Directors. At December 31, 2012, the aggregate value of these securities was $7,074, which represents 0.6% of total net assets. This amount excludes securities that are principally traded in certain foreign markets and whose prices are adjusted pursuant to a third party pricing service methodology approved by the Board of Directors. |
| ■ | Securities issued within terms of a private placement memorandum, exempt from registration under Rule 144A under the Securities Act of 1933, as amended, and may be sold only to qualified institutional buyers. Unless otherwise indicated, these issues are determined to be liquid. At December 31, 2012, the aggregate value of these securities was $1,816, which represents 0.1% of total net assets. |
| ⌂ | The following securities are considered illiquid. Illiquid securities are often purchased in private placement transactions, are often not registered under the Securities Act of 1933 and may have contractual restrictions on resale. A security may also be considered illiquid if the security lacks a readily available market or if its valuation has not changed for a certain period of time. |
| Period Acquired | | Shares/ Par | | | Security | | Cost Basis | |
| 08/2011 | | | 5,016 | | | Allstar LLC | | $ | 2,964 | |
At December 31, 2012, the aggregate value of these securities was $7,074, which represents 0.6% of total net assets.
| ☼ | This security, or a portion of this security, was purchased on a when-issued, delayed-delivery or delayed-draw basis. The cost of these securities was $98 at December 31, 2012. |
| ‡ | This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future.
|
Foreign Currency Contracts Outstanding at December 31, 2012
| Currency | | Buy / Sell | | Delivery Date | | Counterparty | | Contract Amount | | | Market Value ╪ | | | Unrealized
Appreciation/
(Depreciation) | |
| CAD | | Buy | | 01/02/2013 | | BCLY | | $ | 854 | | | $ | 854 | | | $ | – | |
| CAD | | Buy | | 01/03/2013 | | JPM | | | 1,141 | | | | 1,143 | | | | 2 | |
| GBP | | Sell | | 01/02/2013 | | DEUT | | | 22 | | | | 22 | | | | – | |
| HKD | | Buy | | 01/03/2013 | | DEUT | | | 155 | | | | 155 | | | | – | |
| HKD | | Buy | | 01/03/2013 | | MSC | | | 88 | | | | 88 | | | | – | |
| HKD | | Sell | | 01/02/2013 | | DEUT | | | 20 | | | | 20 | | | | – | |
| NOK | | Buy | | 01/04/2013 | | JPM | | | 97 | | | | 98 | | | | 1 | |
| | | | | | | | | | | | | | | | | $ | 3 | |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
The accompanying notes are an integral part of these financial statements.
| Hartford Small Company HLS Fund |
Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| GLOSSARY: (abbreviations used in preceding Schedule of Investments) |
| |
| Counterparty Abbreviations: |
| BCLY | Barclays |
| DEUT | Deutsche Bank Securities, Inc. |
| JPM | JP Morgan Chase & Co. |
| MSC | Morgan Stanley |
| |
| Currency Abbreviations: |
| CAD | Canadian Dollar |
| GBP | British Pound |
| HKD | Hong Kong Dollar |
| NOK | Norwegian Krone |
| |
| Other Abbreviations: |
| ADR | American Depositary Receipt |
| FHLMC | Federal Home Loan Mortgage Corp. |
| FNMA | Federal National Mortgage Association |
| GNMA | Government National Mortgage Association |
| REIT | Real Estate Investment Trust |
The accompanying notes are an integral part of these financial statements.
| Hartford Small Company HLS Fund |
| Investment Valuation Hierarchy Level Summary |
| December 31, 2012 |
| (000’s Omitted) |
| | | Total | | | Level 1 ♦ | | | Level 2 ♦ | | | Level 3 | |
| Assets: | | | | | | | | | | | | | | | | |
| Common Stocks ‡ | | $ | 1,236,342 | | | $ | 1,214,807 | | | $ | 14,461 | | | $ | 7,074 | |
| Preferred Stocks | | | 1,394 | | | | – | | | | 1,394 | | | | – | |
| Short-Term Investments | | | 26,417 | | | | – | | | | 26,417 | | | | – | |
| Total | | $ | 1,264,153 | | | $ | 1,214,807 | | | $ | 42,272 | | | $ | 7,074 | |
| Foreign Currency Contracts * | | | 3 | | | | – | | | | 3 | | | | – | |
| Total | | $ | 3 | | | $ | – | | | $ | 3 | | | $ | – | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Foreign Currency Contracts * | | | – | | | | – | | | | – | | | | – | |
| Total | | $ | – | | | $ | – | | | $ | – | | | $ | – | |
| ♦ | For the year ended December 31, 2012, investments valued at $6,961 were transferred from Level 1 to Level 2, and there were no transfers from Level 2 to Level 1. Investments are transferred between Level 1 and Level 2 for a variety of reasons including, but not limited to: |
| 1) | Foreign equities for which a fair value price is more representative of exit value than the local market close (transfer into Level 2). Foreign equities for which the local market close is more representative of exit value (transfer into Level 1). |
| 2) | U.S. Treasury securities that no longer represent the most recent issue (transfer into Level 2). |
| 3) | Equity investments with no observable trading but a bid or close price is used (transfer into Level 2). Equity investments using observable quoted prices in an active market (transfer into Level 1). |
| ‡ | The Fund has all or primarily all of the equity securities categorized in a particular level. Refer to the Schedule of Investments for further industry breakout. |
| * | Derivative instruments not reflected in the Schedule of Investments are valued at the unrealized appreciation/depreciation on the investments. |
Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:
| | | Balance as
of
December
31, 2011 | | | Realized
Gain
(Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Net
Amortization | | | Purchases | | | Sales | | | Transfers
Into
Level 3 * | | | Transfers
Out of
Level 3 * | | | Balance as
of
December
31, 2012 | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stocks | | $ | 5,630 | | | $ | — | | | $ | 4,022 | † | | $ | — | | | $ | — | | | $ | (2,142 | ) | | $ | — | | | $ | (436 | ) | | $ | 7,074 | |
| Total | | $ | 5,630 | | | $ | — | | | $ | 4,022 | | | $ | — | | | $ | — | | | $ | (2,142 | ) | | $ | — | | | $ | (436 | ) | | $ | 7,074 | |
| * | Investments are transferred into and out of Level 3 for a variety of reasons including, but not limited to: |
| 1) | Investments where trading has been halted (transfer into Level 3) or investments where trading has resumed (transfer out of Level 3). |
| 2) | Broker quoted investments (transfer into Level 3) or quoted prices in active markets (transfer out of Level 3). |
| 3) | Investments that have certain restrictions on trading (transfer into Level 3) or investments where trading restrictions have expired (transfer out of Level 3). |
| † | Change in unrealized appreciation (depreciation) in the current period relating to assets still held at December 31, 2012 was $4,022. |
The accompanying notes are an integral part of these financial statements.
| Hartford Small Company HLS Fund |
Statement of Assets and Liabilities |
| December 31, 2012 |
| (000’s Omitted) |
| Assets: | | | | |
| Investments in securities, at market value (cost $1,154,748) | | $ | 1,264,153 | |
| Cash | | | 2,777 | |
| Unrealized appreciation on foreign currency contracts | | | 3 | |
| Receivables: | | | | |
| Investment securities sold | | | 21,518 | |
| Fund shares sold | | | 1,403 | |
| Dividends and interest | | | 332 | |
| Other assets | | | — | |
| Total assets | | | 1,290,186 | |
| Liabilities: | | | | |
| Unrealized depreciation on foreign currency contracts | | | — | |
| Payables: | | | | |
| Investment securities purchased | | | 32,687 | |
| Fund shares redeemed | | | 13,784 | |
| Investment management fees | | | 164 | |
| Distribution fees | | | 6 | |
| Accrued expenses | | | 62 | |
| Total liabilities | | | 46,703 | |
| Net assets | | $ | 1,243,483 | |
| Summary of Net Assets: | | | | |
| Capital stock and paid-in-capital | | $ | 1,041,199 | |
| Undistributed net investment income | | | 1,412 | |
| Accumulated net realized gain | | | 91,466 | |
| Unrealized appreciation of investments and the translations of assets and liabilities denominated in foreign currency | | | 109,406 | |
| Net assets | | $ | 1,243,483 | |
| Shares authorized | | | 1,500,000 | |
| Par value | | $ | 0.001 | |
| Class IA: Net asset value per share | | $ | 19.74 | |
| Shares outstanding | | | 57,053 | |
| Net assets | | $ | 1,126,350 | |
| Class IB: Net asset value per share | | $ | 19.06 | |
| Shares outstanding | | | 6,145 | |
| Net assets | | $ | 117,133 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Small Company HLS Fund |
Statement of Operations |
For the Year Ended December 31, 2012 |
| (000’s Omitted) |
| Investment Income: | | | | |
| Dividends | | $ | 11,320 | |
| Interest | | | 41 | |
| Less: Foreign tax withheld | | | (66 | ) |
| Total investment income, net | | | 11,295 | |
| | | | | |
| Expenses: | | | | |
| Investment management fees | | | 8,999 | |
| Transfer agent fees | | | 6 | |
| Distribution fees - Class IB | | | 386 | |
| Custodian fees | | | 30 | |
| Accounting services fees | | | 158 | |
| Board of Directors' fees | | | 34 | |
| Audit fees | | | 22 | |
| Other expenses | | | 193 | |
| Total expenses (before fees paid indirectly) | | | 9,828 | |
| Commission recapture | | | (129 | ) |
| Total fees paid indirectly | | | (129 | ) |
| Total expenses, net | | | 9,699 | |
| Net Investment Income | | | 1,596 | |
| | | | | |
| Net Realized Gain on Investments and Foreign Currency Transactions: | | | | |
| Net realized gain on investments | | | 105,213 | |
| Net realized gain on foreign currency contracts | | | 28 | |
| Net realized loss on other foreign currency transactions | | | (71 | ) |
| Net Realized Gain on Investments and Foreign Currency Transactions | | | 105,170 | |
| | | | | |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions: | | | | |
| Net unrealized appreciation of investments | | | 81,684 | |
| Net unrealized appreciation of foreign currency contracts | | | 3 | |
| Net unrealized depreciation on translation of other assets and liabilities in foreign currencies | | | (4 | ) |
| Net Changes in Unrealized Appreciation of Investments and Foreign Currency Transactions | | | 81,683 | |
| Net Gain on Investments and Foreign Currency Transactions | | | 186,853 | |
| Net Increase in Net Assets Resulting from Operations | | $ | 188,449 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Small Company HLS Fund |
Statement of Changes in Net Assets |
| |
| (000’s Omitted) |
| | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| Operations: | | | | | | | | |
| Net investment income (loss) | | $ | 1,596 | | | $ | (2,311 | ) |
| Net realized gain on investments and foreign currency transactions | | | 105,170 | | | | 196,454 | |
| Net unrealized appreciation (depreciation) of investments and foreign currency transactions | | | 81,683 | | | | (237,202 | ) |
| Net Increase (Decrease) in Net Assets Resulting from Operations | | | 188,449 | | | | (43,059 | ) |
| Distributions to Shareholders: | | | | | | | | |
| From net realized gain on investments | | | | | | | | |
| Class IA | | | (70 | ) | | | — | |
| Class IB | | | (10 | ) | | | — | |
| Total distributions | | | (80 | ) | | | — | |
| Capital Share Transactions: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 86,327 | | | | 242,954 | |
| Issued on reinvestment of distributions | | | 70 | | | | — | |
| Redeemed | | | (217,332 | ) | | | (294,153 | ) |
| Total capital share transactions | | | (130,935 | ) | | | (51,199 | ) |
| Class IB | | | | | | | | |
| Sold | | | 17,856 | | | | 44,274 | |
| Issued on reinvestment of distributions | | | 10 | | | | — | |
| Redeemed | | | (78,670 | ) | | | (95,489 | ) |
| Total capital share transactions | | | (60,804 | ) | | | (51,215 | ) |
| Net decrease from capital share transactions | | | (191,739 | ) | | | (102,414 | ) |
| Net Decrease in Net Assets | | | (3,370 | ) | | | (145,473 | ) |
| Net Assets: | | | | | | | | |
| Beginning of period | | | 1,246,853 | | | | 1,392,326 | |
| End of period | | $ | 1,243,483 | | | $ | 1,246,853 | |
| Undistributed (distribution in excess of) net investment income | | $ | 1,412 | | | $ | (67 | ) |
| Shares: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 4,505 | | | | 13,058 | |
| Issued on reinvestment of distributions | | | 4 | | | | — | |
| Redeemed | | | (11,366 | ) | | | (15,958 | ) |
| Total share activity | | | (6,857 | ) | | | (2,900 | ) |
| Class IB | | | | | | | | |
| Sold | | | 962 | | | | 2,422 | |
| Issued on reinvestment of distributions | | | 1 | | | | — | |
| Redeemed | | | (4,236 | ) | | | (5,358 | ) |
| Total share activity | | | (3,273 | ) | | | (2,936 | ) |
The accompanying notes are an integral part of these financial statements.
| Hartford Small Company HLS Fund |
Notes to Financial Statements |
| December 31, 2012 |
| (000’s Omitted) |
Hartford Small Company HLS Fund (the “Fund”) serves as an underlying investment option for certain variable annuity and variable life insurance separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates and certain qualified retirement plans. The Fund may also serve as an underlying investment option for certain variable annuity and variable life separate accounts of other insurance companies. Owners of variable annuity contracts and policyholders of variable life insurance contracts may choose the funds permitted in the variable insurance contract prospectus. In addition, participants in certain qualified retirement plans may choose the Fund if permitted by their plans.
Hartford Series Fund, Inc. (the “Company”) is an open-end registered management investment company comprised of thirty portfolios. Financial Statements for the Fund, a series of the Company, are included in this report.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund is a diversified open-end management investment company.
The Fund is divided into Class IA and Class IB shares. Each class is offered at the per share net asset value (“NAV”) without a sales charge and is subject to the same expenses, except that the Class IB shares are subject to distribution and service fees charged pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act.
| 2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Fund in the preparation of its financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| a) | Determination of Net Asset Value – The NAV of each class of the Fund’s shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| b) | Investment Valuation and Fair Value Measurements – For purposes of calculating the NAV, portfolio investments and other assets held by the Fund's portfolio for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of last reported sales prices or official close price. If no sales are reported, market value is based on quotes obtained from a quotation reporting system, established market makers, or independent pricing services. If market prices are not readily available or are deemed unreliable, the Fund will use the fair value of the investment as determined in good faith under policies and procedures established by and under the supervision of the Company’s Board of Directors. Market quotes are considered not readily available where there is an absence of current or reliable market-based data (e.g., trade information or indicative market quotes), including where events occur after the close of the relevant market, but prior to the NYSE Close that materially affect the values of the Fund’s portfolio investments or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the investments trade do not open for trading for the entire day and no other market prices are available. In addition, prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close. Investments that are primarily traded on foreign markets may trade on days that are not business days of the Fund. The |
| Hartford Small Company HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
value of the foreign investments in which the Fund invests may change on days when a shareholder will not be able to purchase or redeem shares of the Fund. Fair value pricing is subjective in nature and the use of fair value pricing by the Fund may cause the NAV of its shares to differ significantly from the NAV that would have been calculated using market prices at the close of the exchange on which a portfolio investment is primarily traded. There can be no assurance that the Fund could obtain the fair market value assigned to an investment if the Fund were to sell the investment at approximately the time at which the Fund determines its NAV.
Investments valued in currencies other than U.S. dollars are converted to U.S. dollars using exchange rates obtained from independent pricing services for calculation of the NAV. As a result, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of investments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the NYSE is closed and the market value may change on days when an investor is not able to purchase, redeem or exchange shares of the Fund.
Foreign currency contracts represent agreements to exchange currencies on specific future dates at predetermined rates. Foreign currency contracts are valued using foreign currency exchange rates and forward rates as provided by an independent pricing service on the Valuation Date.
Investments in open-end mutual funds are valued at the respective NAV of each open-end mutual fund on the Valuation Date.
Financial instruments for which prices are not available from an independent pricing service may be valued using market quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with procedures established by the Company’s Board of Directors.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| · | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange traded funds, rights and warrants. |
| · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 may include debt investments that are traded less frequently than exchange traded instruments and which are valued using independent pricing services; foreign equities, which are principally traded on certain foreign markets and are adjusted daily pursuant to a fair value pricing service in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close; and short-term investments, which are valued at amortized cost. |
| · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price. |
The Board of Directors of the Company generally reviews and approves the “Procedures for Valuation of Portfolio Securities” on an annual basis. These procedures define how investments are to be valued, including the formation and activities of a Valuation Committee. The Valuation Committee is responsible for determining in good faith the fair value of investments when the value cannot be obtained from primary pricing services or alternative sources or if the valuation of an investment as provided by the primary pricing service or alternative source is believed not to reflect the investment’s fair value as of the Valuation Date. Members of the Valuation Committee include the Fund’s Treasurer or designee, a Vice President of the Fund with legal expertise or designee, and a Vice President of the investment manager or designee. In addition, the Fund’s Chief Compliance Officer shall designate a member of the compliance group to attend Valuation Committee meetings as a non-voting resource, to monitor for and provide guidance with respect to compliance with these procedures. Two members of the Valuation Committee or their designees, representing different departments, shall constitute a quorum for purposes of permitting the Valuation Committee to take action. The Valuation Committee will consider all relevant factors in determining an investment’s fair value, and may seek the advice of the Fund’s sub-adviser, knowledgeable brokers, and legal counsel in making such determination. The Valuation Committee reports to the Audit Committee of the Company’s Board of Directors. The Audit Committee receives quarterly written reports which include details of all fair-valued investments, including the reason for the fair valuation, and an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such investments (the “look-back” test). The Board of Directors then must consider for ratification all of the fair value determinations made during the previous quarter.
Valuation levels are not necessarily indicative of the risk associated with investing in such investments. Individual investments within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
For additional information, refer to the Investment Valuation Hierarchy Level Summary and the Level 3 roll-forward reconciliation, if applicable, which follow the Schedule of Investments.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period.
| c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Investments purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses are determined on the basis of identified cost. |
Dividend income from domestic securities is accrued on the ex-dividend date. In general, dividend income from foreign securities is recorded on the ex-date; however, dividend notifications in certain foreign jurisdictions may not be available in a timely manner and as a result, the Fund will record the dividend as soon as the relevant details (i.e., rate per share, payment date, shareholders of record, etc.) are publicly available. Interest income, including amortization of premium and accretion of discounts, is accrued on a daily basis.
| d) | Foreign Currency Transactions – Assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investments, income, and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. |
The Fund does not isolate that portion of portfolio investment valuation resulting from fluctuations in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of investments held. Exchange rate fluctuations are included with the net realized and unrealized gain or loss on investments in the accompanying financial statements.
| Hartford Small Company HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
Net realized foreign exchange gains or losses arise from sales of foreign currencies and the difference between asset and liability amounts initially stated in foreign currencies and the U.S. dollar value of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of other assets and liabilities at the end of the reporting period, resulting from changes in the exchange rates.
| e) | Joint Trading Account – The Fund may invest cash balances into a joint trading account that may be invested in one or more repurchase agreements. |
| f) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Fund’s shares are executed in accordance with the investment instructions of the contract holders and plan participants. The NAV of the Fund’s shares is determined as of the close of business on each business day of the Exchange. The NAV is determined separately for each class of shares of the Fund by dividing the Fund’s net assets attributable to that class by the number of shares of the class outstanding. Each class of shares offered by the Fund has equal rights as to assets and voting privileges (except that shareholders of a class have exclusive voting rights regarding any matter relating solely to that class of shares). Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets of the class. Realized and unrealized capital gains and losses are allocated daily based on the relative net assets of each class of shares of the Fund. |
Orders for the purchase of the Fund’s shares received prior to the close of the Exchange on any day the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Fund. The policy of the Fund is to pay dividends from net investment income and realized capital gains, if any, at least once a year.
Distributions from net investment income, net realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These differences may include but are not limited to losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to Passive Foreign Investment Companies (“PFICs”), Real Estate Investment Trusts (“REITs”), Regulated Investment Companies (“RICs”), certain derivatives and partnerships. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Fund’s capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| 3. | Securities and Other Investments: |
| a) | Repurchase Agreements – A repurchase agreement is an agreement by which a counterparty agrees to sell an investment and agrees to repurchase the investment sold from the buyer at a mutually agreed upon time and price. At the time the Fund enters into a repurchase agreement, the value of the underlying collateral, including accrued interest, will be equal to or exceed the value of the repurchase agreement. Repurchase agreements expose the Fund to counterparty risk - that is, the risk that the counterparty will not fulfill its obligations. To minimize counterparty risk, the investments that serve to collateralize the repurchase agreement are held by the Fund’s custodian in book entry or physical form in the custodial account of the Fund or in a third party custodial account. Repurchase agreements are valued at cost plus accrued interest, which approximates fair value. The Fund, as shown on the Schedule of Investments, had outstanding repurchase agreements as of December 31, 2012. |
| b) | Illiquid and Restricted Investments – The Fund is permitted to invest up to 15% of its net assets in illiquid investments. Illiquid investments are those that may not be sold or disposed of in the ordinary course of business within seven days, at approximately the price used to determine the Fund’s NAV. The Fund may not be able to sell illiquid investments when |
its sub-adviser considers it desirable to do so or may have to sell such investments at a price that is lower than the price that could be obtained if the investments were more liquid. A sale of illiquid investments may require more time and may result in higher dealer discounts and other selling expenses than does the sale of those that are liquid. Illiquid investments also may be more difficult to value due to the unavailability of reliable market quotations for such investments, and an investment in them may have an adverse impact on the Fund’s NAV. The Fund may also purchase certain restricted investments that can only be resold to certain qualified investors and may be determined to be liquid pursuant to policies and guidelines established by the Company’s Board of Directors. The Fund, as shown on the Schedule of Investments, had illiquid and/or restricted investments as of December 31, 2012.
| c) | Investments Purchased on a When-Issued or Delayed-Delivery Basis – Delivery and payment for investments that have been purchased by the Fund on a forward commitment, or when-issued or delayed-delivery basis, take place beyond the customary settlement period. A fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell delayed-delivery investments before they are delivered, which may result in a realized gain or loss. During this period, such investments are subject to market fluctuations, and the Fund identifies investments segregated in its records with a value at least equal to the amount of the commitment. The Fund, as shown on the Schedule of Investments, had when-issued or delayed-delivery investments as of December 31, 2012. |
| 4. | Financial Derivative Instruments: |
The following disclosures contain information on how and why the Fund uses derivative instruments, the credit-risk-related contingent features in certain derivative instruments, and how derivative instruments affect the Fund’s financial position and results of operations. The location and fair value amounts of these instruments on the Statement of Assets and Liabilities and the realized gains and losses and changes in unrealized gains and losses on the Statement of Operations, each categorized by type of derivative contract, are included in the following Additional Derivative Instrument Information footnote. The derivative instruments outstanding as of year-end are disclosed in the notes to or within the Schedule of Investments for purchased options, if applicable. The amounts of realized gains and losses and changes in unrealized gains and losses on derivative instruments during the year are disclosed in the Statement of Operations.
| a) | Foreign Currency Contracts – The Fund may enter into foreign currency contracts that obligate the Fund to purchase or sell currencies at specified future dates. Foreign currency contracts are used to hedge the currency exposure associated with some or all of the Fund’s investments and/or as part of an investment strategy. Foreign currency contracts are marked to market daily and the change in value is recorded by the Fund as an unrealized gain or loss. The Fund will record a realized gain or loss when the foreign currency contract is settled. |
Foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. In addition, risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of the contracts and from unanticipated movements in the value of the foreign currencies relative to the U.S. dollar. The Fund had outstanding foreign currency contracts as shown on the Schedule of Investments as of December 31, 2012.
| Hartford Small Company HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| b) | Additional Derivative Instrument Information: |
Fair Value of Derivative Instruments on the Statement of Assets and Liabilities as of December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized appreciation on foreign currency contracts | | $ | — | | | $ | 3 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 3 | |
| Total | | $ | — | | | $ | 3 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized depreciation on foreign currency contracts | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Total | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
The volume of derivatives that is presented in the Schedule of Investments is consistent with the derivative activity during the year ended December 31, 2012.
The Effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Realized Gain on Derivatives Recognized as a Result of Operations: | | | | | | | | |
| Net realized gain on foreign currency contracts | | $ | — | | | $ | 28 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 28 | |
| Total | | $ | — | | | $ | 28 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 28 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Change in Unrealized Appreciation on Derivatives Recognized as a Result of Operations: | | | | | | | | |
| Net change in unrealized appreciation of foreign currency contracts | | $ | — | | | $ | 3 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 3 | |
| Total | | $ | — | | | $ | 3 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 3 | |
| a) | Counterparty Risk – The Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will default. |
| b) | Market Risks – If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities, such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund. The market values of equity securities, such as common stocks and preferred stocks, or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The market value of equity securities may also decline due to factors which affect a particular industry or industries, such as labor shortages |
or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities.
| a) | Federal Income Taxes – For federal income tax purposes, the Fund intends to continue to qualify as a RIC under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders and otherwise complying with the requirements of the IRC. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains prior to the next fiscal year-end. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. |
| c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Fund for the periods indicated is as follows (as adjusted for dividends payable, if applicable): |
| | | For the Year Ended
December 31, 2012 | | | For the Year Ended
December 31, 2011 | |
| Long-Term Capital Gains* | | $ | 80 | | | $ | — | |
| * | The Fund designates these distributions as long-term capital dividends pursuant to IRC Sec. 852(b)(3)(C). |
| | | Amount | |
| Undistributed Ordinary Income | | $ | 2,065 | |
| Undistributed Long-Term Capital Gain | | | 98,459 | |
| Unrealized Appreciation* | | | 101,760 | |
| Total Accumulated Earnings | | $ | 202,284 | |
| * | Differences between book-basis and tax-basis unrealized appreciation (depreciation) may be attributable to the losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. |
| Hartford Small Company HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| d) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as foreign currency, PFICs, expiration or utilization of capital loss carryforwards or net operating losses. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Fund’s distributions may be shown in the accompanying Statement of Changes in Net Assets as from undistributed net investment income, from accumulated net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Fund recorded reclassifications to increase (decrease) the accounts listed below: |
| | | Amount | |
| Undistributed Net Investment Income | | $ | (117 | ) |
| Accumulated Net Realized Gain (Loss) | | | 746 | |
| Capital Stock and Paid-in-Capital | | | (629 | ) |
| e) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation. |
The Fund had no capital loss carryforward for U.S. federal income tax purposes as of December 31, 2012.
| f) | Accounting for Uncertainty in Income Taxes – The Fund has adopted financial reporting rules that require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Fund does not have an examination in progress. |
The Fund has reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules had no effect on the Fund’s financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2012. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Fund’s investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Fund pursuant to an Investment Management Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Fund’s investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees payable under, the Fund’s investment management agreements; or (ii) the day-to-day management of the Fund. The investment manager has overall investment supervisory responsibility for the Fund. In addition, the investment manager provides administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. The investment manager has contracted with Wellington Management Company, LLP (“Wellington Management”) under a sub-advisory agreement for the provision of day-to-day investment management services to the Fund in accordance with |
the Fund’s investment objective and policies. The Fund pays a fee to the investment manager, a portion of which may be used to compensate Wellington Management.
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered as of December 31, 2012; the rates are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee | |
| On first $250 million | | | 0.7750 | % |
| On next $250 million | | | 0.7250 | % |
| On next $500 million | | | 0.6750 | % |
| On next $500 million | | | 0.6000 | % |
| On next $3.5 billion | | | 0.5500 | % |
| On next $5 billion | | | 0.5300 | % |
| Over $10 billion | | | 0.5200 | % |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Fund. HLIC provided accounting services for the Fund for the fiscal year ended December 31, 2012. The replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Fund or the fees charged to the Fund for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Fund, HFMC provides accounting services to the Fund and receives monthly compensation based on the Fund’s average daily net assets at the rates set forth below. The Fund’s accounting services fees are accrued daily and paid monthly. |
| Average Daily Net Assets | | Annual Fee | |
| On first $5 billion | | | 0.012 | % |
| Over $5 billion | | | 0.010 | % |
| c) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund and allocated to classes within a Fund in proportion to the average daily net assets of the Fund and each class, except where allocation of certain expenses is more fairly made directly to the Fund or to specific classes within a Fund. |
| d) | Fees Paid Indirectly – The Company, on behalf of the Fund, has entered into agreements with State Street Global Markets, LLC and Russell Implementation Services, Inc. to partially recapture non-discounted trade commissions. Such rebates are used to pay a portion of the Fund’s expenses. In addition, the Fund’s custodian banks have agreed to reduce its fees when the Fund maintains cash on deposit in a non-interest-bearing custody account. For the year ended December 31, 2012, these amounts, if any, are included in the Statement of Operations. |
The ratio of expenses to average net assets in the accompanying financial highlights excludes the reduction in expenses related to fees paid indirectly. The annualized expense ratio after waivers for the period listed below reflecting the reduction for fees paid indirectly is as follows:
| | | Year Ended
December 31, 2012 | |
| Class IA | | | 0.71 | % |
| Class IB | | | 0.96 | |
| Hartford Small Company HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| e) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Fund's principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD with HIFSCO did not result in any changes to the distribution services provided to the Fund. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Fund, has adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, 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, subject to the review and approval of the Company’s Board of Directors. |
The Distribution Plan provides that the Fund may pay annually up to 0.25% of the average daily net assets of the Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, the Fund is authorized to make payments monthly to the Distributor that may be used to pay or compensate 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. These fees are accrued daily and paid monthly.
| f) | Other Related Party Transactions – Certain officers of the Fund are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Fund’s Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Fund was in the amount of $2. Hartford Administrative Services Company (“HASCO”), an indirect wholly owned subsidiary of The Hartford, provides transfer agent services to the Fund. The amount paid to HASCO can be found in the Statement of Operations. These fees are accrued daily and paid monthly. |
| g) | Payments from Affiliates – In July of 2007, The Hartford entered into a settlement with the Attorneys General of the states of New York, Connecticut and Illinois relating to market timing and the company's individual variable annuity contracts in which certain payments would be made directly to the variable annuity contract holders. The distribution plan provided that unclaimed money from the settlement would be distributed to certain HLS Funds that are investment options through a Hartford individual variable annuity contract. The unclaimed money was distributed to the Fund on September 18, 2009. |
The total return in the accompanying financial highlights includes payments from affiliates. Had the payments from the affiliates been excluded, the impact and total return for the periods listed below would have been as follows:
| | | For the Year Ended December 31, 2009 | |
| | | Class IA | | | Class IB | |
| Impact from Payment from Affiliate for Attorneys General Settlement | | | 0.08 | % | | | 0.09 | % |
| Total Return Excluding Payment from Affiliate | | | 29.18 | % | | | 28.90 | % |
| 8. | Investment Transactions: |
For the year ended December 31, 2012, the Fund's aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
| | | Amount | |
| Cost of Purchases Excluding U.S. Government Obligations | | $ | 1,412,129 | |
| Sales Proceeds Excluding U.S. Government Obligations | | | 1,585,808 | |
The Fund is one of several Hartford funds that participate in a $500 million committed revolving line of credit facility. The facility is to be used for temporary or emergency purposes. Under the arrangement, the funds are required to own securities having a market value in excess of 300% of the total bank borrowings. The interest rate on borrowings varies depending on the nature of the loan. The facility also requires a fee to be paid based on the amount of the commitment. This commitment fee is allocated to all of the funds participating in the line of credit based on the average net assets of the funds. During the year ended December 31, 2012, the Fund did not have any borrowings under this facility.
| 10. | Industry Classifications: |
Other than the industry classifications “Other Investment Pools and Funds” and “Exchange Traded Funds,” equity industry classifications used in this report are the Global Industry Classification Standard, which was developed by and is the exclusive property and service mark of MSCI, Inc. and Standard & Poor’s.
Under the Company’s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
| 12. | Recent Accounting Pronouncement: |
Disclosures about Offsetting Assets and Liabilities - In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The objective of the ASU is to enhance current disclosure requirements on offsetting of certain assets and liabilities and to enable financial statement users to compare financial statements prepared under U.S. GAAP and International Financial Reporting Standards.
Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
| Hartford Small Company HLS Fund |
| Financial Highlights |
| - Selected Per-Share Data (A) - |
| Class | | Net Asset Value at
Beginning of
Period | | | Net Investment
Income (Loss) | | | Net Realized and
Unrealized Gain
(Loss) on
Investments | | | Total from
Investment
Operations | | | Dividends from Net
Investment Income | | | Distributions from
Realized Capital
Gains | | | Distributions from
Capital | | | Total Distributions | | | Net Asset Value at
End of Period | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2012 | | | | | | | | | | | | | | | | |
| IA | | | $ 17.07 | | | | $ 0.03 | | | | $ 2.64 | | | | $ 2.67 | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | | $ 19.74 | |
| IB | | | 16.56 | | | | (0.03 | ) | | | 2.53 | | | | 2.50 | | | | – | | | | – | | | | – | | | | – | | | | 19.06 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2011 | | | | | | | | | | | | | | | | |
| IA | | | 17.66 | | | | (0.02 | ) | | | (0.57 | ) | | | (0.59 | ) | | | – | | | | – | | | | – | | | | – | | | | 17.07 | |
| IB | | | 17.18 | | | | (0.09 | ) | | | (0.53 | ) | | | (0.62 | ) | | | – | | | | – | | | | – | | | | – | | | | 16.56 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2010 | | | | | | | | | | | | | | | | |
| IA | | | 14.23 | | | | (0.01 | ) | | | 3.44 | | | | 3.43 | �� | | | – | | | | – | | | | – | | | | ��� | | | | 17.66 | |
| IB | | | 13.88 | | | | (0.06 | ) | | | 3.36 | | | | 3.30 | | | | – | | | | – | | | | – | | | | – | | | | 17.18 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2009 | | | | | | | | | | | | | | | | |
| IA | | | 11.01 | | | | – | (E) | | | 3.22 | | | | 3.22 | | | | – | | | | – | | | | – | | | | – | | | | 14.23 | |
| IB | | | 10.76 | | | | (0.03 | )(E) | | | 3.15 | | | | 3.12 | | | | – | | | | – | | | | – | | | | – | | | | 13.88 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2008 | | | | | | | | | | | | | | | | |
| IA | | | 18.62 | | | | 0.02 | | | | (7.56 | ) | | | (7.54 | ) | | | (0.02 | ) | | | (0.05 | ) | | | – | | | | (0.07 | ) | | | 11.01 | |
| IB | | | 18.20 | | | | (0.01 | ) | | | (7.38 | ) | | | (7.39 | ) | | | – | | | | (0.05 | ) | | | – | | | | (0.05 | ) | | | 10.76 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include 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 would lower the Fund's performance. |
| (C) | Ratios do not reflect reductions for fees paid indirectly. Please see Fees Paid Indirectly in the Notes to Financial Statements. |
| (D) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
| (E) | The impact of Payment from Affiliate per share was $0.01. |
| (F) | Total return without the inclusion of the Payment from (to) Affiliate can be found in Expenses in the accompanying Notes to Financial Statements. |
| - Ratios and Supplemental Data - |
| Total Return(B) | | | Net Assets at End of Period | | | Ratio of Expenses to Average Net Assets
Before Waivers(C) | | | Ratio of Expenses to Average Net Assets
After Waivers(C) | | | Ratio of Net Investment
Income (Loss) to Average Net
Assets | | | Portfolio
Turnover
Rate(D) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 15.64 | % | | $ | 1,126,350 | | | | 0.72 | % | | | 0.72 | % | | | 0.16 | % | | | 110 | % |
| | 15.10 | | | | 117,133 | | | | 0.97 | | | | 0.97 | | | | (0.13 | ) | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (3.36 | ) | | | 1,090,883 | | | | 0.71 | | | | 0.71 | | | | (0.13 | ) | | | 99 | |
| | (3.62 | ) | | | 155,970 | | | | 0.96 | | | | 0.96 | | | | (0.38 | ) | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 24.13 | | | | 1,180,045 | | | | 0.73 | | | | 0.73 | | | | (0.08 | ) | | | 171 | |
| | 23.83 | | | | 212,281 | | | | 0.98 | | | | 0.98 | | | | (0.33 | ) | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 29.29 | (F) | | | 1,026,150 | | | | 0.75 | | | | 0.75 | | | | (0.07 | ) | | | 184 | |
| | 29.01 | (F) | | | 208,358 | | | | 1.00 | | | | 1.00 | | | | (0.32 | ) | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (40.60 | ) | | | 793,078 | | | | 0.71 | | | | 0.71 | | | | 0.16 | | | | 194 | |
| | (40.73 | ) | | | 179,411 | | | | 0.96 | | | | 0.96 | | | | (0.09 | ) | | | – | |
| Report of Independent Registered Public Accounting Firm |
| The Board of Directors and Shareholders of |
| Hartford Series Funds, Inc. |
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Hartford Small Company HLS Fund (one of the portfolios constituting Hartford Series Fund, Inc. (the Fund)) as of December 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Hartford Small Company HLS Fund (one of the portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
| | |
| Minneapolis, MN | |
| February 15, 2013 | |
| Hartford Small Company HLS Fund |
| Directors and Officers (Unaudited) |
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Fund pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Fund. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Fund’s statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Fund pays to The Hartford a portion of the Chief Compliance Officer’s compensation, but does not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
| Hartford Small Company HLS Fund |
| Directors and Officers (Unaudited) – (continued) |
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
| Hartford Small Company HLS Fund |
| Directors and Officers (Unaudited) – (continued) |
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010(4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and a record of how the Fund voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
| Hartford Small Company HLS Fund |
| Expense Example (Unaudited) |
Your Fund's Expenses
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Actual return | | | Hypothetical (5% return before expenses) | | | | | | | | | | |
| | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2
year | | | Days
in the
full
year | |
| Class IA | | $ | 1,000.00 | | | $ | 1,004.09 | | | $ | 3.63 | | | $ | 1,000.00 | | | $ | 1,021.51 | | | $ | 3.67 | | | | 0.72 | % | | | 184 | | | | 366 | |
| Class IB | | $ | 1,000.00 | | | $ | 1,003.96 | | | $ | 4.89 | | | $ | 1,000.00 | | | $ | 1,020.26 | | | $ | 4.93 | | | | 0.97 | % | | | 184 | | | | 366 | |
| Hartford Small Company HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) |
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory and sub-advisory agreements. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for Hartford Small Company HLS Fund (the “Fund”) with HL Investment Advisors, LLC (“HL Advisors”) and the continuation of the investment sub-advisory agreement between HL Advisors and the Fund’s sub-adviser, Wellington Management Company, LLP (the “Sub-adviser,” and together with HL Advisors, the “Advisers”) (collectively, the “Agreements”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from the Advisers to questions posed to them on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreements at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by the Advisers and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreements.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreements with respect to the Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Fund’s contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Fund’s management fees, sub-advisory fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement.
In determining to continue the Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreements. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreements is provided below.
Nature, Extent, and Quality of Services Provided by the Advisers
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Fund by the Advisers. The Board considered, among other things, the terms of the Agreements and the range of services provided by the Advisers. The Board considered the Advisers’ professional personnel who provide services to the Fund, including each Adviser’s ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered each Adviser’s reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to the Fund. In addition, the Board considered the quality of each Adviser’s communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning each Adviser’s regulatory and compliance environment. In this regard, the Board requested and reviewed information on each Adviser’s compliance policies and procedures, compliance history, and a report from the Fund’s Chief Compliance Officer on each Adviser’s compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. The Board also noted the Advisers’ support of the Fund’s compliance control structure, particularly the resources devoted by the Advisers in support of the Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act.
| Hartford Small Company HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (Continued) |
With respect to HL Advisors, the Board noted that under the Agreements, HL Advisors is responsible for the management of the Fund, including overseeing fund operations and service providers, as well as investment advisory services in connection with selecting, monitoring and supervising the Sub-adviser. The Board considered HL Advisors’ ongoing monitoring of people, process and performance, including its quarterly reviews of each of the Hartford HLS Funds, semi-annual meetings with the leaders of each Fund’s portfolio management team, and oversight of the Funds’ approximately 40 portfolio managers. The Board recognized that HL Advisors has demonstrated a record of making changes to the management and/or strategies of the Funds when warranted. The Board considered HL Advisors’ oversight of the Sub-adviser’s investment approach and results, process for monitoring best execution of portfolio trades by the Sub-adviser, and approach to risk management with respect to the Fund and the service providers to the Fund. The Board also considered HL Advisors’ oversight of compliance with the Fund’s objective and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led to an increase in the scope of HL Advisors’ services in this regard. In addition, the Board considered HL Advisors’ ongoing commitment to review and rationalize the Hartford fund family’s product line-up and the expenses that HL Advisors had incurred in connection with fund combinations in recent years. The Board considered that HL Advisors or its affiliates are responsible for providing the Fund’s officers. The Board also noted that Hartford Life Insurance Company (“HLIC”) provides administrative services to the Fund. The Board considered its experiences with HL Advisors and HLIC with respect to each of these services.
With respect to the Sub-adviser, who provides day-to-day portfolio management services, the Board considered the quality of the Fund’s portfolio managers, the Sub-adviser’s other investment personnel, its investment philosophy and process, investment research capabilities and resources, performance record, trade execution capabilities and experience. The Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers, and the Sub-adviser’s method for compensating the portfolio managers.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Fund by HL Advisors and the Sub-adviser.
Performance of the Fund and the Advisers
The Board considered the investment performance of the Fund. In this regard, the Board reviewed the performance of the Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of the Fund’s performance for these time periods. The Board considered information and materials provided to the Board by the Advisers concerning Fund performance, as well as information from Lipper comparing the investment performance of the Fund to an appropriate benchmark and universe of peer funds. The Board noted that the performance of the Fund was within expectations.
The Board considered the detailed investment analytics reports provided by The Hartford’s Investment Advisory Group throughout the year. These reports include, among other things, information on the Fund’s gross and net returns, the Fund’s investment performance relative to an appropriate benchmark and peer group, various statistics concerning the Fund’s portfolio, and a narrative summary of various factors affecting Fund performance. The Board considered the Advisers’ cooperation with the Investment Committee, which assists the Board in evaluating the performance of the Fund at periodic meetings throughout the year. The Board also considered the analysis provided by the Consultant relating to the Fund’s performance track record.
In light of all the considerations noted above, the Board concluded that it had continued confidence in HL Advisors’ and the Sub-adviser’s overall capabilities to manage the Fund.
Costs of the Services and Profitability of the Advisers
The Board reviewed information regarding HL Advisors’ cost to provide investment management and related services to the Fund and HL Advisors’ profitability, both overall and for the Fund, on a pre-tax basis without regard to distribution expenses. The Board also requested and reviewed information about the profitability to HL Advisors and its affiliates from all services provided to the Fund and all aspects of their relationship with the Fund. The Board also requested and received information relating to the operations and profitability of the Sub-adviser.
The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement, noting the Consultant’s view that The Hartford’s process for calculating and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by the Advisers and their affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by the Advisers
The Board considered comparative information with respect to the management fees to be paid by the Fund to HL Advisors and the total expense ratios of the Fund. The Board also considered comparative information with respect to the sub-advisory fees to be paid by HL Advisors to the Sub-adviser, to the extent applicable. In this regard, the Board requested and reviewed information from HL Advisors and the Sub-adviser relating to the management and sub-advisory fees, including the sub-advisory fee schedule for the Fund, and total operating expenses for the Fund. The Board considered that the management fee for the Fund includes the fee paid to HLIC for providing certain administrative services to the Fund. With respect to the sub-advisory fee schedule, the Board considered representations from HL Advisors and the Sub-adviser that the Sub-adviser’s fees were negotiated at arm’s length. The Board also reviewed information from Lipper comparing the Fund’s contractual management fees, actual management fees and overall expense ratios relative to a group of funds selected by Lipper, in consultation with the Consultant, and a broader universe of funds selected by Lipper.
While the Board recognized that comparisons between the Fund and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business models and cost structures of the Advisers, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of the Fund’s management and sub-advisory fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to the Fund’s management and sub-advisory fees and total operating expenses.
Based on these considerations, the Board concluded that the Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding the Advisers’ realization of economies of scale with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. The Board reviewed the breakpoints in the management fee schedule for the Fund, which reduce fee rates as Fund assets grow over time. The Board recognized that a fund with assets beyond the last breakpoint level will continue to benefit from economies of scale because additional assets are charged the lowest breakpoint fee resulting in lower overall effective management fee rates. The Board also recognized that a fee schedule that reaches a lower breakpoint quickly provides shareholders with the benefit of anticipated or potential economies of scale.
The Board reviewed and evaluated materials from Lipper showing how management fee schedules of peer funds reflect economies of scale for the benefit of shareholders as a peer fund’s assets hypothetically increase over time. Based on information provided by HL Advisors, Lipper, and the Consultant, the Board recognized that there is no uniform methodology for establishing breakpoints or uniform pattern in asset levels that trigger breakpoints or the amounts of breakpoints triggered.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Fund’s shareholders based on currently available information and the effective advisory fees and expense ratios for the Fund at its current and reasonably anticipated asset levels. The Board noted, however, that it would continue to monitor future growth in Fund assets and the appropriateness of additional breakpoints.
| Hartford Small Company HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (Continued) |
Other Benefits
The Board considered other benefits to the Advisers and their affiliates from their relationships with the Fund, including the role of the Fund in supporting the variable life insurance and variable annuity products offered by The Hartford. The Board reviewed information noting that HLIC, an affiliate of HL Advisors, receives fees for providing certain administrative services to the Fund, and that HLIC also receives fees for fund accounting and related services from the Fund, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Fund’s transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Fund, and the Board reviewed information on the profitability of the Fund’s transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Fund were fair and reasonable based on publicly available information.
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Fund, receives 12b-1 fees from the Fund. The Board also noted that certain affiliates of HL Advisors distribute shares of the Fund and receive compensation in that connection.
The Board considered benefits to the Sub-adviser from its use of the Fund’s brokerage commissions to obtain soft dollar research, and representations from HL Advisors and the Sub-adviser that the Sub-adviser would not make any revenue-sharing payments or any other type of distribution payments to HL Advisors or its affiliates.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the Agreements for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory and sub-advisory agreements. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreements for the Fund and approve a new investment management agreement for the Fund with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser, and a new investment sub-advisory agreement between HFMC and the Fund’s existing Sub-adviser, Wellington Management Company, LLP (together with HFMC, the “Post-Restructuring Advisers”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Fund. In order to implement the Restructuring, the Fund would terminate the existing Agreements and enter into a new investment management agreement with HFMC, with HFMC also entering into a new investment sub-advisory agreement with the Sub-adviser (collectively, the “New Agreements”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreements at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by HL Advisors and the Sub-adviser and their affiliates. In addition, the Board received in-person presentations by Fund
officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreements.
In determining to approve the New Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the New Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreements.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Fund and the performance of investment management personnel to the Fund. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Fund prior to the Restructuring would continue to provide such services to the Fund, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreements would involve no changes to (i) the contractual terms of, including the management fees payable under, the Fund’s investment management and investment sub-advisory agreements; (ii) the investment processes and strategies employed in the management of the Fund’s assets; (iii) the nature and level of services provided under the Fund’s investment management and investment sub-advisory agreements; and (iv) the day-to-day management of the Fund and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Fund.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Fund.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Fund, the investment management arrangement for the Fund following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreements: (i) nature, extent and quality of services provided by HL Advisors and the Sub-adviser; (ii) performance of the Fund, HL Advisors and the Sub-adviser; (iii) costs of the services and profitability of HL Advisors and the Sub-adviser; (iv) comparative services rendered and comparative investment management and sub-advisory fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors and the Sub-adviser with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. With respect to the other benefits to the Post-Restructuring Advisers and their affiliates from their relationships with the Fund, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting and related services from the Fund.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the New Agreements. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
| Hartford Small Company HLS Fund |
| Principal Risks (Unaudited) |
The principal risks of investing in the Fund are described below.
Market and Selection Risk: The Fund’s share price may fluctuate due to market risk and/or security selections that may underperform compared to the market or relevant benchmarks.
Small-cap Stock Risk: Small-cap stocks are generally more volatile and risky and may be less liquid than large-cap stocks because they may have limited operating histories, narrow product lines, and focus on niche markets.
Foreign Investment Risk: Foreign investments can be riskier than U.S. investments. Potential risks include currency risk that may result from unfavorable exchange rates, liquidity risk if decreased demand for a security makes it difficult to sell at the desired price, and risks that stem from substantially lower trading volume on foreign markets.
Active Trading Risk: Actively trading investments may result in higher costs and higher taxable income.
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
HLSAR-SC12 2-13 113551 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 | |
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford Stock HLS Fund
Table of Contents
This report is prepared for the general information of contract owners and qualified retirement plan participants. It is not an offer of contracts or of qualified retirement plans. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent information including the applicable sales, administrative and other charges.
The views expressed in the Fund’s Manager Discussion under ‘‘Why did the Fund perform this way?’’ and ‘‘What is the outlook?’’ are views of the Fund’s sub-adviser and portfolio management team through the end of the period and are subject to change based on market and other conditions.
| Hartford Stock HLS Fund inception 08/31/1977 |
| (sub-advised by Wellington Management Company, LLP) |
| |
| Investment objective – Seeks long-term growth of capital. |
Performance Overview 12/31/02 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IA. Growth results in classes other than Class IA will vary from what is seen above due to differences in the expenses charged to those share classes.
| Average Annual Total Returns (as of 12/31/12) |
| | | 1 Year | | | 5 Year | | | 10 Year | |
| Stock IA | | | 14.38% | | | | 0.89% | | | | 6.25% | |
| Stock IB | | | 14.10% | | | | 0.64% | | | | 5.98% | |
| Russell 1000 Index | | | 16.42% | | | | 1.92% | | | | 7.52% | |
| S&P 500 Index | | | 15.99% | | | | 1.66% | | | | 7.09% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund's net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
Russell 1000 Index is an unmanaged index which measures the performance of the 1,000 largest companies in the Russell 3000 Index, which measures the performance of the 3,000 largest U.S. companies, based on total market capitalization.
S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.
The Fund has changed its benchmark from the S&P 500 Index to the Russell 1000 Index because the Fund’s investment manager believes that the Russell 1000 Index better reflects the Fund’s investment strategy.
You cannot invest directly in an index.
As of the Fund’s current prospectus dated May 1, 2012, the net total annual operating expense ratios for Class IA and Class IB shares were 0.50% and 0.75%, respectively, and the gross total annual operating expense ratios for Class IA and Class IB shares were 0.50% and 0.75%, respectively. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect until April 30, 2013, and automatically renew for one-year terms unless terminated by the Fund’s Investment Advisor (Hartford Funds Management Company, LLC). For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
| Hartford Stock HLS Fund |
| Manager Discussion |
| December 31, 2012 (Unaudited) |
Portfolio Managers
Donald J. Kilbride*
Senior Vice President and Equity Portfolio Manager
* Appointed as a Portfolio Manager for the Fund as of April 30, 2012. As of the same date, Steven T. Irons and Peter I. Higgins no longer serve as portfolio managers for the Fund.
How did the Fund perform?
The Class IA shares of the Hartford Stock HLS Fund returned 14.38% for the twelve-month period ended December 31, 2012, trailing both the S&P 500 Index, which returned 15.99%, and the Russell 1000 Index, which returned 16.42% for the same period. The Fund also underperformed the 15.02% return of the average fund in the Lipper VP-UF Large Cap Core Funds peer group, a group of funds with investment strategies similar to those of the Fund.
Why did the Fund perform this way?
U.S. equities moved higher in the period, in part due to a strengthening housing market and central bank interventions around the globe. Although Europe continued to grapple with economic and structural challenges, investors’ risk appetites surged after European Central Bank (ECB) President Mario Draghi revealed a comprehensive plan to support struggling sovereigns, including direct purchases of government bonds in the open market. Additionally, the U.S. Federal Reserve’s (Fed) announcement of a third round of quantitative easing (QE3) was well received by the market, boosting stock prices. Despite concerns about the looming U.S. fiscal cliff, tepid corporate revenue results, and economic malaise in Europe, investors bid up risk assets amid further signs of recovery in China and signs that the U.S. housing market may bolster the U.S. economy for the first time in seven years. Risk sentiment also ticked up on continued hopes that the ECB’s bond-buying plan will succeed, essentially reducing the tail risks in Europe.
Overall equity market performance was positive for the period across all market capitalizations: both large cap (+16%) and small cap equities (+16%) trailed mid caps (+18%), as represented by the Russell 1000, Russell 2000, and S&P MidCap 400 indices, respectively. During the twelve-month period all ten sectors rose within the Russell 1000 Index, led by Financials (+27%), Consumer Discretionary (+25%), and Health Care (+20%). Utilities (+2%) and Energy (+4%) lagged on a relative basis.
The Fund’s underperformance versus the benchmark was driven by challenged security selection in Energy, Information Technology, and Health Care. This was modestly offset by strong selection in Consumer Discretionary, as well as an underweight exposure (i.e. the Fund’s sector position was less than the benchmark position) to Utilities. Sector allocation overall was also a contributor to relative performance. Note that sector positioning is typically an indirect result of our deliberate bottom-up security selection.
Top detractors from relative and absolute performance during the period were BG Group (Energy), Western Union (Information Technology), and Occidental Petroleum (Energy). Global producer of oil and gas, BG Group, lowered its growth outlook primarily due to project delays in Brazil and weakness in Egypt production. This caused the stock to underperform. Money management and payment services company Western Union reduced earnings guidance as it cut pricing in certain key geographies to preserve remittance market share. Shares fell more than 20% during 2012. Occidental Petroleum is an exploration and production (E&P) company with attractive acreage positions in California, West Texas, and the Middle East. We added to our position.
Stocks that contributed the most to relative returns during the period were Apple (Information Technology), Lowe’s (Consumer Discretionary), and Allstar LLC (Consumer Discretionary). Apple, a leading provider of smartphones, tablets, and other personal technology items saw its shares fall in the fourth quarter of 2012 after slightly missed earnings expectations due to weaker-than-expected iPad sales. In addition, the company gave disappointing revenue and earnings guidance. Not holding Apple during this period helped relative performance. Shares of Lowe’s benefitted from continued signs that the U.S. housing market is gaining strength. Hurricane Sandy also caused investors to bid up the company’s share price on the belief that the rebuilding process for the U.S. east coast should boost materials purchases by individuals and companies. Allstar LLC, operates a chain of sporting good stores in the south and southwest United States. This is a private placement investment. The shares rose as the company has executed its plan well, resulting in increased gross margins and incrementally positive sales compared to prior periods. Our holdings in JPMorgan Chase (Financials) also contributed to returns on an absolute basis.
| Hartford Stock HLS Fund |
| Manager Discussion – (continued) |
| December 31, 2012 (Unaudited) |
What is the outlook?
While recent macroeconomic headlines are not uniformly bad, threats to an economic slowdown still persist today. Continued uncertainty in Washington, DC, looms over the market. The prospect of a U.S. slowdown is still worrisome in our view. That, we cannot control.
Instead, our efforts are focused on finding companies with above-average growth in dividends, which we believe is an effective and often overlooked indicator of high quality, shareholder-oriented companies. These companies tend to produce consistent, above-average returns over time and in order to grow dividends, they must produce not only growth in reported earnings but also growth in free cash flow. They also need to allocate free cash flow effectively by reinvesting capital selectively, and returning excess capital to shareholders. We believe that a portfolio of high-quality stocks with superior prospects for dividend growth, selling at reasonable valuation levels, can produce superior total returns over time.
At the end of the period, our bottom-up investment approach resulted in overweight exposures in Health Care, Consumer Discretionary, and Industrials as we continued to find attractive investment opportunities in these sectors. The Fund’s largest underweights relative to the Russell 1000 Index were in Financials, Information Technology, and Telecommunication Services.
| Diversification by Industry |
| as of December 31, 2012 |
| Industry (Sector) | | Percentage of
Net Assets | |
| Banks (Financials) | | | 3.6 | % |
| Capital Goods (Industrials) | | | 10.6 | |
| Consumer Durables and Apparel (Consumer Discretionary) | | | 3.7 | |
| Consumer Services (Consumer Discretionary) | | | 2.2 | |
| Diversified Financials (Financials) | | | 1.4 | |
| Energy (Energy) | | | 11.7 | |
| Food and Staples Retailing (Consumer Staples) | | | 3.5 | |
| Food, Beverage and Tobacco (Consumer Staples) | | | 4.4 | |
| Health Care Equipment and Services (Health Care) | | | 6.0 | |
| Household and Personal Products (Consumer Staples) | | | 4.3 | |
| Insurance (Financials) | | | 4.2 | |
| Materials (Materials) | | | 3.4 | |
| Media (Consumer Discretionary) | | | 4.5 | |
| Pharmaceuticals, Biotechnology and Life Sciences (Health Care) | | | 11.7 | |
| Retailing (Consumer Discretionary) | | | 6.2 | |
| Software and Services (Information Technology) | | | 11.6 | |
| Transportation (Industrials) | | | 4.1 | |
| Utilities (Utilities) | | | 1.5 | |
| Short-Term Investments | | | 1.4 | |
| Other Assets and Liabilities | | | 0.0 | |
| Total | | | 100.0 | % |
| Hartford Stock HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | | Market Value ╪ | |
| COMMON STOCKS - 98.6% |
| | | | | Banks - 3.6% | | | | |
| | 571 | | | PNC Financial Services Group, Inc. | | $ | 33,296 | |
| | 868 | | | Wells Fargo & Co. | | | 29,679 | |
| | | | | | | | 62,975 | |
| | | | | Capital Goods - 10.6% | | | | |
| | 410 | | | Emerson Electric Co. | | | 21,730 | |
| | 504 | | | General Dynamics Corp. | | | 34,943 | |
| | 454 | | | Honeywell International, Inc. | | | 28,820 | |
| | 390 | | | Lockheed Martin Corp. | | | 35,997 | |
| | 395 | | | Northrop Grumman Corp. | | | 26,662 | |
| | 429 | | | United Technologies Corp. | | | 35,187 | |
| | | | | | | | 183,339 | |
| | | | | Consumer Durables and Apparel - 3.7% | | | | |
| | 847 | | | Mattel, Inc. | | | 31,017 | |
| | 641 | | | NIKE, Inc. Class B | | | 33,085 | |
| | | | | | | | 64,102 | |
| | | | | Consumer Services - 2.2% | | | | |
| | 425 | | | McDonald's Corp. | | | 37,452 | |
| | | | | | | | | |
| | | | | Diversified Financials - 1.4% | | | | |
| | 120 | | | BlackRock, Inc. | | | 24,883 | |
| | | | | | | | | |
| | | | | Energy - 11.7% | | | | |
| | 2,132 | | | BG Group plc | | | 35,558 | |
| | 272 | | | Chevron Corp. | | | 29,372 | |
| | 804 | | | Enbridge, Inc. | | | 34,829 | |
| | 574 | | | Exxon Mobil Corp. | | | 49,692 | |
| | 705 | | | Occidental Petroleum Corp. | | | 54,011 | |
| | | | | | | | 203,462 | |
| | | | | Food and Staples Retailing - 3.5% | | | | |
| | 698 | | | CVS Caremark Corp. | | | 33,731 | |
| | 395 | | | Wal-Mart Stores, Inc. | | | 26,961 | |
| | | | | | | | 60,692 | |
| | | | | Food, Beverage and Tobacco - 4.4% | | | | |
| | 580 | | | Coca-Cola Co. | | | 21,025 | |
| | 799 | | | PepsiCo, Inc. | | | 54,679 | |
| | | | | | | | 75,704 | |
| | | | | Health Care Equipment and Services - 6.0% | | | | |
| | 951 | | | Cardinal Health, Inc. | | | 39,166 | |
| | 1,034 | | | Medtronic, Inc. | | | 42,427 | |
| | 428 | | | UnitedHealth Group, Inc. | | | 23,228 | |
| | | | | | | | 104,821 | |
| | | | | Household and Personal Products - 4.3% | | | | |
| | 296 | | | Colgate-Palmolive Co. | | | 30,991 | |
| | 634 | | | Procter & Gamble Co. | | | 43,074 | |
| | | | | | | | 74,065 | |
| | | | | Insurance - 4.2% | | | | |
| | 435 | | | ACE Ltd. | | | 34,713 | |
| | 253 | | | Chubb Corp. | | | 19,021 | |
| | 557 | | | Marsh & McLennan Cos., Inc. | | | 19,184 | |
| | | | | | | | 72,918 | |
| | | | | Materials - 3.4% | | | | |
| | 444 | | | Ecolab, Inc. | | | 31,928 | |
| | 242 | | | Praxair, Inc. | | | 26,433 | |
| | | | | | | | 58,361 | |
| | | | | Media - 4.5% | | | | |
| | 489 | | | Comcast Corp. Class A | | | 18,289 | |
| | 701 | | | Omnicom Group, Inc. | | | 35,003 | |
| | 493 | | | Walt Disney Co. | | | 24,552 | |
| | | | | | | | 77,844 | |
| | | | | Pharmaceuticals, Biotechnology and Life Sciences - 11.7% | | | | |
| | 392 | | | Amgen, Inc. | | | 33,862 | |
| | 804 | | | Johnson & Johnson | | | 56,384 | |
| | 1,575 | | | Pfizer, Inc. | | | 39,489 | |
| | 220 | | | Roche Holding AG | | | 44,436 | |
| | 754 | | | Teva Pharmaceutical Industries Ltd. ADR | | | 28,159 | |
| | | | | | | | 202,330 | |
| | | | | Retailing - 6.2% | | | | |
| | 9,440 | | | Allstar LLC ⌂† | | | 13,312 | |
| | 10,986 | | | Buck Holdings L.P. ⌂●† | | | 7,857 | |
| | 1,109 | | | Lowe's Co., Inc. | | | 39,399 | |
| | 801 | | | Target Corp. | | | 47,420 | |
| | | | | | | | 107,988 | |
| | | | | Software and Services - 11.6% | | | | |
| | 416 | | | Accenture plc | | | 27,696 | |
| | 740 | | | Automatic Data Processing, Inc. | | | 42,215 | |
| | 200 | | | IBM Corp. | | | 38,254 | |
| | 1,335 | | | Microsoft Corp. | | | 35,677 | |
| | 1,203 | | | Oracle Corp. | | | 40,076 | |
| | 1,309 | | | Western Union Co. | | | 17,819 | |
| | | | | | | | 201,737 | |
| | | | | Transportation - 4.1% | | | | |
| | 471 | | | C.H. Robinson Worldwide, Inc. | | | 29,801 | |
| | 562 | | | United Parcel Service, Inc. Class B | | | 41,431 | |
| | | | | | | | 71,232 | |
| | | | | Utilities - 1.5% | | | | |
| | 489 | | | Dominion Resources, Inc. | | | 25,329 | |
| | | | | | | | | |
| | | | | Total common stocks | | | | |
| | | | | (cost $1,597,847) | | $ | 1,709,234 | |
| | | | | | | | | |
| | | | | Total long-term investments | | | | |
| | | | | (cost $1,597,847) | | $ | 1,709,234 | |
| | | | | | | | | |
| SHORT-TERM INVESTMENTS - 1.4% |
| Repurchase Agreements - 1.4% |
| | | | | Bank of America Merrill Lynch TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $533,
collateralized by FHLMC 3.00%, 2042,
FNMA 4.00%, 2042, value of $544) | | | | |
| $ | 533 | | | 0.19%, 12/31/2012 | | $ | 533 | |
| | | | | Bank of Montreal TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $3,792, collateralized by
FHLMC 2.50% - 5.50%, 2019 - 2042,
FNMA 0.76% - 6.11%, 2016 - 2042,
GNMA 3.50%, 2042, value of $3,867) | | | | |
| | 3,792 | | | 0.23%, 12/31/2012 | | | 3,792 | |
| | | | | Barclays Capital TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $1,186, collateralized by U.S.
Treasury Note 2.00% - 2.13%, 2016, value
of $1,210) | | | | |
| | 1,186 | | | 0.20%, 12/31/2012 | | | 1,186 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Stock HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | | | | | | Market Value ╪ | |
| SHORT-TERM INVESTMENTS - 1.4% - (continued) |
| Repurchase Agreements - 1.4% - (continued) |
| | | | | Citigroup Global Markets, Inc. TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $7,470,
collateralized by U.S. Treasury Note
1.88% - 4.13%, 2015 - 2018, value of
$7,619) | | | | | | | | |
| $ | 7,470 | | | 0.17%, 12/31/2012 | | | | | | $ | 7,470 | |
| | | | | Deutsche Bank Securities TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $154,
collateralized by FNMA 3.00%, 2032,
value of $157) | | | | | | | | |
| | 154 | | | 0.25%, 12/31/2012 | | | | | | | 154 | |
| | | | | RBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $5,256, collateralized by U.S.
Treasury Note 0.50% - 2.75%, 2013 -
2019, value of $5,361) | | | | | | | | |
| | 5,256 | | | 0.20%, 12/31/2012 | | | | | | | 5,256 | |
| | | | | TD Securities TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $4,601, collateralized by
FHLMC 3.50% - 6.00%, 2036 - 2042,
FNMA 0.22% - 5.50%, 2013 - 2042, value
of $4,693) | | | | | | | | |
| | 4,601 | | | 0.21%, 12/31/2012 | | | | | | | 4,601 | |
| | | | | UBS Securities, Inc. Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$89, collateralized by U.S. Treasury Bill
0.75%, 2013, value of $91) | | | | | | | | |
| | 88 | | | 0.17%, 12/31/2012 | | | | | | | 88 | |
| | | | | UBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in the
amount of $314, collateralized by FNMA
2.50%, 2027, GNMA 3.00%, 2042, value
of $320) | | | | | | | | |
| | 314 | | | 0.25%, 12/31/2012 | | | | | | | 314 | |
| | | | | | | | | | | | 23,394 | |
| | | | | Total short-term investments | | | | | | | | |
| | | | | (cost $23,394) | | | | | | $ | 23,394 | |
| | | | | | | | | | | | | |
| | | | Total investments | | | | | | | | |
| | | | | (cost $1,621,241) ▲ | | | 100.0 | % | | $ | 1,732,628 | |
| | | | | Other assets and liabilities | | | – | % | | | (359 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 1,732,269 | |
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| | |
| | Prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for factors occurring after the close of certain foreign markets but before the close of the New York Stock Exchange. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $1,627,227 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 161,938 | |
| Unrealized Depreciation | | | (56,537 | ) |
| Net Unrealized Appreciation | | $ | 105,401 | |
The accompanying notes are an integral part of these financial statements.
| † | These securities were valued in good faith at fair value as determined under policies and procedures established by and under the supervision of the Company's Board of Directors. At December 31, 2012, the aggregate value of these securities was $21,169, which represents 1.2% of total net assets. This amount excludes securities that are principally traded in certain foreign markets and whose prices are adjusted pursuant to a third party pricing service methodology approved by the Board of Directors. |
| ⌂ | The following securities are considered illiquid. Illiquid securities are often purchased in private placement transactions, are often not registered under the Securities Act of 1933 and may have contractual restrictions on resale. A security may also be considered illiquid if the security lacks a readily available market or if its valuation has not changed for a certain period of time. |
| Period Acquired | | Shares/ Par | | | Security | | Cost Basis | |
| 08/2011 | | | 9,440 | | | Allstar LLC | | $ | 5,578 | |
| 06/2007 | | | 10,986 | | | Buck Holdings L.P. | | | 1,954 | |
At December 31, 2012, the aggregate value of these securities was $21,169, which represents 1.2% of total net assets.
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
| GLOSSARY: (abbreviations used in preceding Schedule of Investments) |
| |
| Other Abbreviations: |
| ADR | American Depositary Receipt |
| FHLMC | Federal Home Loan Mortgage Corp. |
| FNMA | Federal National Mortgage Association |
| GNMA | Government National Mortgage Association |
The accompanying notes are an integral part of these financial statements.
| Hartford Stock HLS Fund |
| Investment Valuation Hierarchy Level Summary |
| December 31, 2012 |
| (000’s Omitted) |
| | | Total | | | Level 1 ♦ | | | Level 2 ♦ | | | Level 3 | |
| Assets: | | | | | | | | | | | | | | | | |
| Common Stocks ‡ | | $ | 1,709,234 | | | $ | 1,608,071 | | | $ | 79,994 | | | $ | 21,169 | |
| Short-Term Investments | | | 23,394 | | | | – | | | | 23,394 | | | | – | |
| Total | | $ | 1,732,628 | | | $ | 1,608,071 | | | $ | 103,388 | | | $ | 21,169 | |
| ♦ | For the year ended December 31, 2012, there were no transfers between Level 1 and Level 2. |
| ‡ | The Fund has all or primarily all of the equity securities categorized in a particular level. Refer to the Schedule of Investments for further industry breakout. |
| Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value: |
| | | Balance as
of
December
31, 2011 | | | Realized
Gain
(Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Net
Amortization | | | Purchases | | | Sales | | | Transfers
Into
Level 3 | | | Transfers
Out of
Level 3 | | | Balance as
of
December
31, 2012 | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stocks | | $ | 34,362 | | | $ | 17,388 | | | $ | (4,630 | )* | | $ | — | | | $ | — | | | $ | (25,951 | ) | | $ | — | | | $ | — | | | $ | 21,169 | |
| Total | | $ | 34,362 | | | $ | 17,388 | | | $ | (4,630 | ) | | $ | — | | | $ | — | | | $ | (25,951 | ) | | $ | — | | | $ | — | | | $ | 21,169 | |
| * | Change in unrealized appreciation (depreciation) in the current period relating to assets still held at December 31, 2012 was $(4,630). |
The accompanying notes are an integral part of these financial statements.
| Hartford Stock HLS Fund |
| Statement of Assets and Liabilities |
| December 31, 2012 |
| (000’s Omitted) |
| Assets: | | | | |
| Investments in securities, at market value (cost $1,621,241) | | $ | 1,732,628 | |
| Cash | | | 1 | |
| Receivables: | | | | |
| Fund shares sold | | | 126 | |
| Dividends and interest | | | 1,524 | |
| Other assets | | | — | |
| Total assets | | | 1,734,279 | |
| Liabilities: | | | | |
| Payables: | | | | |
| Fund shares redeemed | | | 1,751 | |
| Investment management fees | | | 157 | |
| Distribution fees | | | 10 | |
| Accrued expenses | | | 92 | |
| Total liabilities | | | 2,010 | |
| Net assets | | $ | 1,732,269 | |
| Summary of Net Assets: | | | | |
| Capital stock and paid-in-capital | | $ | 2,345,358 | |
| Undistributed net investment income | | | 204 | |
| Accumulated net realized loss | | | (724,682 | ) |
| Unrealized appreciation of investments and the translations of assets and liabilities denominated in foreign currency | | | 111,389 | |
| Net assets | | $ | 1,732,269 | |
| Shares authorized | | | 4,000,000 | |
| Par value | | $ | 0.001 | |
| Class IA: Net asset value per share | | $ | 44.73 | |
| Shares outstanding | | | 34,253 | |
| Net assets | | $ | 1,532,116 | |
| Class IB: Net asset value per share | | $ | 44.71 | |
| Shares outstanding | | | 4,477 | |
| Net assets | | $ | 200,153 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Stock HLS Fund |
| Statement of Operations |
| For the Year Ended December 31, 2012 |
| (000’s Omitted) |
| Investment Income: | | | | |
| Dividends | | $ | 44,121 | |
| Interest | | | 41 | |
| Less: Foreign tax withheld | | | (413 | ) |
| Total investment income, net | | | 43,749 | |
| | | | | |
| Expenses: | | | | |
| Investment management fees | | | 8,756 | |
| Distribution fees - Class IB | | | 556 | |
| Custodian fees | | | 11 | |
| Accounting services fees | | | 185 | |
| Board of Directors' fees | | | 50 | |
| Audit fees | | | 21 | |
| Other expenses | | | 308 | |
| Total expenses (before fees paid indirectly) | | | 9,887 | |
| Commission recapture | | | (25 | ) |
| Total fees paid indirectly | | | (25 | ) |
| Total expenses, net | | | 9,862 | |
| Net Investment Income | | | 33,887 | |
| | | | | |
| Net Realized Gain on Investments and Foreign Currency Transactions: | | | | |
| Net realized gain on investments | | | 235,177 | |
| Net realized gain on foreign currency contracts | | | 1,412 | |
| Net realized gain on other foreign currency transactions | | | 368 | |
| Net Realized Gain on Investments and Foreign Currency Transactions | | | 236,957 | |
| | | | | |
| Net Changes in Unrealized Depreciation of Investments and Foreign Currency Transactions: | | | | |
| Net unrealized depreciation of investments | | | (18,712 | ) |
| Net unrealized depreciation of foreign currency contracts | | | (119 | ) |
| Net unrealized appreciation on translation of other assets and liabilities in foreign currencies | | | 6 | |
| Net Changes in Unrealized Depreciation of Investments and Foreign Currency Transactions | | | (18,825 | ) |
| Net Gain on Investments and Foreign Currency Transactions | | | 218,132 | |
| Net Increase in Net Assets Resulting from Operations | | $ | 252,019 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Stock HLS Fund |
| Statement of Changes in Net Assets |
| |
| (000’s Omitted) |
| | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| Operations: | | | | | | | | |
| Net investment income | | $ | 33,887 | | | $ | 27,545 | |
| Net realized gain on investments and foreign currency transactions | | | 236,957 | | | | 135,742 | |
| Net unrealized depreciation of investments and foreign currency transactions | | | (18,825 | ) | | | (182,032 | ) |
| Net Increase (Decrease) in Net Assets Resulting from Operations | | | 252,019 | | | | (18,745 | ) |
| Distributions to Shareholders: | | | | | | | | |
| From net investment income | | | | | | | | |
| Class IA | | | (32,577 | ) | | | (23,255 | ) |
| Class IB | | | (3,720 | ) | | | (2,687 | ) |
| Total distributions | | | (36,297 | ) | | | (25,942 | ) |
| Capital Share Transactions: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 24,409 | | | | 35,432 | |
| Issued on reinvestment of distributions | | | 32,577 | | | | 23,255 | |
| Redeemed | | | (328,593 | ) | | | (385,103 | ) |
| Total capital share transactions | | | (271,607 | ) | | | (326,416 | ) |
| Class IB | | | | | | | | |
| Sold | | | 8,307 | | | | 16,524 | |
| Issued on reinvestment of distributions | | | 3,720 | | | | 2,687 | |
| Redeemed | | | (70,038 | ) | | | (82,724 | ) |
| Total capital share transactions | | | (58,011 | ) | | | (63,513 | ) |
| Net decrease from capital share transactions | | | (329,618 | ) | | | (389,929 | ) |
| Net Decrease in Net Assets | | | (113,896 | ) | | | (434,616 | ) |
| Net Assets: | | | | | | | | |
| Beginning of period | | | 1,846,165 | | | | 2,280,781 | |
| End of period | | $ | 1,732,269 | | | $ | 1,846,165 | |
| Undistributed (distribution in excess of) net investment income | | $ | 204 | | | $ | 2,536 | |
| Shares: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 554 | | | | 862 | |
| Issued on reinvestment of distributions | | | 728 | | | | 588 | |
| Redeemed | | | (7,451 | ) | | | (9,352 | ) |
| Total share activity | | | (6,169 | ) | | | (7,902 | ) |
| Class IB | | | | | | | | |
| Sold | | | 190 | | | | 398 | |
| Issued on reinvestment of distributions | | | 83 | | | | 68 | |
| Redeemed | | | (1,592 | ) | | | (2,005 | ) |
| Total share activity | | | (1,319 | ) | | | (1,539 | ) |
The accompanying notes are an integral part of these financial statements.
| Hartford Stock HLS Fund |
| Notes to Financial Statements |
| December 31, 2012 |
| (000’s Omitted) |
Hartford Stock HLS Fund (the “Fund”) serves as an underlying investment option for certain variable annuity and variable life insurance separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates and certain qualified retirement plans. The Fund may also serve as an underlying investment option for certain variable annuity and variable life separate accounts of other insurance companies. Owners of variable annuity contracts and policyholders of variable life insurance contracts may choose the funds permitted in the variable insurance contract prospectus. In addition, participants in certain qualified retirement plans may choose the Fund if permitted by their plans.
Hartford Series Fund, Inc. (the “Company”) is an open-end registered management investment company comprised of thirty portfolios. Financial Statements for the Fund, a series of the Company, are included in this report.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund is a diversified open-end management investment company.
The Fund is divided into Class IA and Class IB shares. Each class is offered at the per share net asset value (“NAV”) without a sales charge and is subject to the same expenses, except that the Class IB shares are subject to distribution and service fees charged pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act.
| 2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Fund in the preparation of its financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| a) | Determination of Net Asset Value – The NAV of each class of the Fund’s shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| b) | Investment Valuation and Fair Value Measurements – For purposes of calculating the NAV, portfolio investments and other assets held by the Fund's portfolio for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of last reported sales prices or official close price. If no sales are reported, market value is based on quotes obtained from a quotation reporting system, established market makers, or independent pricing services. If market prices are not readily available or are deemed unreliable, the Fund will use the fair value of the investment as determined in good faith under policies and procedures established by and under the supervision of the Company’s Board of Directors. Market quotes are considered not readily available where there is an absence of current or reliable market-based data (e.g., trade information or indicative market quotes), including where events occur after the close of the relevant market, but prior to the NYSE Close that materially affect the values of the Fund’s portfolio investments or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the investments trade do not open for trading for the entire day and no other market prices are available. In addition, prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close. Investments that are primarily traded on foreign markets may trade on days that are not business days of the Fund. The |
value of the foreign investments in which the Fund invests may change on days when a shareholder will not be able to purchase or redeem shares of the Fund. Fair value pricing is subjective in nature and the use of fair value pricing by the Fund may cause the NAV of its shares to differ significantly from the NAV that would have been calculated using market prices at the close of the exchange on which a portfolio investment is primarily traded. There can be no assurance that the Fund could obtain the fair market value assigned to an investment if the Fund were to sell the investment at approximately the time at which the Fund determines its NAV.
Investments valued in currencies other than U.S. dollars are converted to U.S. dollars using exchange rates obtained from independent pricing services for calculation of the NAV. As a result, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of investments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the NYSE is closed and the market value may change on days when an investor is not able to purchase, redeem or exchange shares of the Fund.
Foreign currency contracts represent agreements to exchange currencies on specific future dates at predetermined rates. Foreign currency contracts are valued using foreign currency exchange rates and forward rates as provided by an independent pricing service on the Valuation Date.
Financial instruments for which prices are not available from an independent pricing service may be valued using market quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with procedures established by the Company’s Board of Directors.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| · | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange traded funds, rights and warrants. |
| · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 may include debt investments that are traded less frequently than exchange traded instruments and which are valued using independent pricing services; foreign equities, which are principally traded on certain foreign markets and are adjusted daily pursuant to a fair value pricing service in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close; and short-term investments, which are valued at amortized cost. |
| · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price. |
The Board of Directors of the Company generally reviews and approves the “Procedures for Valuation of Portfolio Securities” on an annual basis. These procedures define how investments are to be valued, including the formation and activities of a Valuation Committee. The Valuation Committee is responsible for determining
| Hartford Stock HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
in good faith the fair value of investments when the value cannot be obtained from primary pricing services or alternative sources or if the valuation of an investment as provided by the primary pricing service or alternative source is believed not to reflect the investment’s fair value as of the Valuation Date. Members of the Valuation Committee include the Fund’s Treasurer or designee, a Vice President of the Fund with legal expertise or designee, and a Vice President of the investment manager or designee. In addition, the Fund’s Chief Compliance Officer shall designate a member of the compliance group to attend Valuation Committee meetings as a non-voting resource, to monitor for and provide guidance with respect to compliance with these procedures. Two members of the Valuation Committee or their designees, representing different departments, shall constitute a quorum for purposes of permitting the Valuation Committee to take action. The Valuation Committee will consider all relevant factors in determining an investment’s fair value, and may seek the advice of the Fund’s sub-adviser, knowledgeable brokers, and legal counsel in making such determination. The Valuation Committee reports to the Audit Committee of the Company’s Board of Directors. The Audit Committee receives quarterly written reports which include details of all fair-valued investments, including the reason for the fair valuation, and an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such investments (the “look-back” test). The Board of Directors then must consider for ratification all of the fair value determinations made during the previous quarter.
Valuation levels are not necessarily indicative of the risk associated with investing in such investments. Individual investments within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
For additional information, refer to the Investment Valuation Hierarchy Level Summary and the Level 3 roll-forward reconciliation, if applicable, which follow the Schedule of Investments.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period.
| c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Investments purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses are determined on the basis of identified cost. |
Dividend income from domestic securities is accrued on the ex-dividend date. In general, dividend income from foreign securities is recorded on the ex-date; however, dividend notifications in certain foreign jurisdictions may not be available in a timely manner and as a result, the Fund will record the dividend as soon as the relevant details (i.e., rate per share, payment date, shareholders of record, etc.) are publicly available. Interest income, including amortization of premium and accretion of discounts, is accrued on a daily basis.
| d) | Foreign Currency Transactions – Assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investments, income, and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. |
The Fund does not isolate that portion of portfolio investment valuation resulting from fluctuations in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of investments held. Exchange rate fluctuations are included with the net realized and unrealized gain or loss on investments in the accompanying financial statements.
Net realized foreign exchange gains or losses arise from sales of foreign currencies and the difference between asset and liability amounts initially stated in foreign currencies and the U.S. dollar value of the amounts actually received or paid.
Net unrealized foreign exchange gains or losses arise from changes in the value of other assets and liabilities at the end of the reporting period, resulting from changes in the exchange rates.
| e) | Joint Trading Account – The Fund may invest cash balances into a joint trading account that may be invested in one or more repurchase agreements. |
| f) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Fund’s shares are executed in accordance with the investment instructions of the contract holders and plan participants. The NAV of the Fund’s shares is determined as of the close of business on each business day of the Exchange. The NAV is determined separately for each class of shares of the Fund by dividing the Fund’s net assets attributable to that class by the number of shares of the class outstanding. Each class of shares offered by the Fund has equal rights as to assets and voting privileges (except that shareholders of a class have exclusive voting rights regarding any matter relating solely to that class of shares). Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets of the class. Realized and unrealized capital gains and losses are allocated daily based on the relative net assets of each class of shares of the Fund. |
Orders for the purchase of the Fund’s shares received prior to the close of the Exchange on any day the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Fund. The policy of the Fund is to pay dividends from net investment income and realized capital gains, if any, at least once a year.
Distributions from net investment income, net realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These differences may include but are not limited to losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to Passive Foreign Investment Companies (“PFICs”), Real Estate Investment Trusts (“REITs”), Regulated Investment Companies (“RICs”), certain derivatives and partnerships. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Fund’s capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| 3. | Securities and Other Investments: |
| a) | Repurchase Agreements – A repurchase agreement is an agreement by which a counterparty agrees to sell an investment and agrees to repurchase the investment sold from the buyer at a mutually agreed upon time and price. At the time the Fund enters into a repurchase agreement, the value of the underlying collateral, including accrued interest, will be equal to or exceed the value of the repurchase agreement. Repurchase agreements expose the Fund to counterparty risk - that is, the risk that the counterparty will not fulfill its obligations. To minimize counterparty risk, the investments that serve to collateralize the repurchase agreement are held by the Fund’s custodian in book entry or physical form in the custodial account of the Fund or in a third party custodial account. Repurchase agreements are valued at cost plus accrued interest, which approximates fair value. The Fund, as shown on the Schedule of Investments, had outstanding repurchase agreements as of December 31, 2012. |
| b) | Illiquid and Restricted Investments – The Fund is permitted to invest up to 15% of its net assets in illiquid investments. Illiquid investments are those that may not be sold or disposed of in the ordinary course of business within seven days, at approximately the price used to determine the Fund’s NAV. The Fund may not be able to sell illiquid investments when its sub-adviser considers it desirable to do so or may have to sell such investments at a price that is lower than the price that could be obtained if the investments were more liquid. A sale of illiquid investments may require more time and |
| Hartford Stock HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
may result in higher dealer discounts and other selling expenses than does the sale of those that are liquid. Illiquid investments also may be more difficult to value due to the unavailability of reliable market quotations for such investments, and an investment in them may have an adverse impact on the Fund’s NAV. The Fund may also purchase certain restricted investments that can only be resold to certain qualified investors and may be determined to be liquid pursuant to policies and guidelines established by the Company’s Board of Directors. The Fund, as shown on the Schedule of Investments, had illiquid and/or restricted investments as of December 31, 2012.
| c) | Investments Purchased on a When-Issued or Delayed-Delivery Basis – Delivery and payment for investments that have been purchased by the Fund on a forward commitment, or when-issued or delayed-delivery basis, take place beyond the customary settlement period. A fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell delayed-delivery investments before they are delivered, which may result in a realized gain or loss. During this period, such investments are subject to market fluctuations, and the Fund identifies investments segregated in its records with a value at least equal to the amount of the commitment. As of December 31, 2012, the Fund had no outstanding when-issued or delayed-delivery investments. |
| 4. | Financial Derivative Instruments: |
The following disclosures contain information on how and why the Fund uses derivative instruments, the credit-risk-related contingent features in certain derivative instruments, and how derivative instruments affect the Fund’s financial position and results of operations. The location and fair value amounts of these instruments on the Statement of Assets and Liabilities and the realized gains and losses and changes in unrealized gains and losses on the Statement of Operations, each categorized by type of derivative contract, are included in the following Additional Derivative Instrument Information footnote. The derivative instruments outstanding as of year-end are disclosed in the notes to or within the Schedule of Investments for purchased options, if applicable. The amounts of realized gains and losses and changes in unrealized gains and losses on derivative instruments during the year are disclosed in the Statement of Operations.
| a) | Foreign Currency Contracts – The Fund may enter into foreign currency contracts that obligate the Fund to purchase or sell currencies at specified future dates. Foreign currency contracts are used to hedge the currency exposure associated with some or all of the Fund’s investments and/or as part of an investment strategy. Foreign currency contracts are marked to market daily and the change in value is recorded by the Fund as an unrealized gain or loss. The Fund will record a realized gain or loss when the foreign currency contract is settled. |
Foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. In addition, risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of the contracts and from unanticipated movements in the value of the foreign currencies relative to the U.S. dollar. The Fund had no outstanding foreign currency contracts as of December 31, 2012.
| b) | Additional Derivative Instrument Information: |
The volume of derivative activity was minimal during the year ended December 31, 2012.
The Effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Realized Gain on Derivatives Recognized as a Result of Operations: |
| Net realized gain on foreign currency contracts | | $ | — | | | $ | 1,412 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,412 | |
| Total | | $ | — | | | $ | 1,412 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,412 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Change in Unrealized Depreciation on Derivatives Recognized as a Result of Operations: |
| Net change in unrealized depreciation of foreign currency contracts | | $ | — | | | $ | (119 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (119 | ) |
| Total | | $ | — | | | $ | (119 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (119 | ) |
| a) | Counterparty Risk – The Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will default. |
| b) | Market Risks – If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities, such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund. The market values of equity securities, such as common stocks and preferred stocks, or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The market value of equity securities may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities. |
| a) | Federal Income Taxes – For federal income tax purposes, the Fund intends to continue to qualify as a RIC under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders and otherwise complying with the requirements of the IRC. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains prior to the next fiscal year-end. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend |
| Hartford Stock HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund.
| c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Fund for the periods indicated is as follows (as adjusted for dividends payable, if applicable): |
| | | For the Year Ended
December 31, 2012 | | | For the Year Ended
December 31, 2011 | |
| Ordinary Income | | $ | 36,297 | | | $ | 25,942 | |
As of December 31, 2012, the Fund’s components of distributable earnings (deficit) on a tax basis were as follows:
| | | Amount | |
| Undistributed Ordinary Income | | $ | 204 | |
| Accumulated Capital and Other Losses* | | | (718,694 | ) |
| Unrealized Appreciation† | | | 105,401 | |
| Total Accumulated Deficit | | $ | (613,089 | ) |
| * | The Fund has capital loss carryforwards that are identified in the Capital Loss Carryforward note that follows. |
| † | Differences between book-basis and tax-basis unrealized appreciation (depreciation) may be attributable to the losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. |
| d) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as foreign currency, PFICs, expiration or utilization of capital loss carryforwards or net operating losses. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Fund’s distributions may be shown in the accompanying Statement of Changes in Net Assets as from undistributed net investment income, from accumulated net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Fund recorded reclassifications to increase (decrease) the accounts listed below: |
| | | Amount | |
| Undistributed Net Investment Income | | $ | 78 | |
| Accumulated Net Realized Gain (Loss) | | | (78 | ) |
| e) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation. |
At December 31, 2012 (tax-year-end), the Fund had capital loss carryforwards for U.S. federal income tax purposes as follows:
| Year of Expiration | | Amount | |
| 2017 | | $ | 718,694 | |
| Total | | $ | 718,694 | |
During the year ended December 31, 2012, the Fund utilized $225,623 of prior year capital loss carryforwards.
| f) | Accounting for Uncertainty in Income Taxes – The Fund has adopted financial reporting rules that require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Fund does not have an examination in progress. |
The Fund has reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules had no effect on the Fund’s financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2012. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Fund’s investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Fund pursuant to an Investment Management Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Fund’s investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees payable under, the Fund’s investment management agreements; or (ii) the day-to-day management of the Fund. The investment manager has overall investment supervisory responsibility for the Fund. In addition, the investment manager provides administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. The investment manager has contracted with Wellington Management Company, LLP (“Wellington Management”) under a sub-advisory agreement for the provision of day-to-day investment management services to the Fund in accordance with the Fund’s investment objective and policies. The Fund pays a fee to the investment manager, a portion of which may be used to compensate Wellington Management. |
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered as of December 31, 2012; the rates are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee | |
| On first $250 million | | | 0.5250 | % |
| On next $250 million | | | 0.5000 | % |
| On next $500 million | | | 0.4750 | % |
| On next $4 billion | | | 0.4500 | % |
| On next $5 billion | | | 0.4475 | % |
| Over $10 billion | | | 0.4450 | % |
| Hartford Stock HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Fund. HLIC provided accounting services for the Fund for the fiscal year ended December 31, 2012. The replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Fund or the fees charged to the Fund for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Fund, HFMC provides accounting services to the Fund and receives monthly compensation based on the Fund’s average daily net assets at the rates set forth below. The Fund’s accounting services fees are accrued daily and paid monthly. |
| Average Daily Net Assets | | Annual Fee | |
| All assets | | | 0.010 | % |
| c) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund and allocated to classes within a Fund in proportion to the average daily net assets of the Fund and each class, except where allocation of certain expenses is more fairly made directly to the Fund or to specific classes within a Fund. |
| d) | Fees Paid Indirectly – The Company, on behalf of the Fund, has entered into agreements with State Street Global Markets, LLC and Russell Implementation Services, Inc. to partially recapture non-discounted trade commissions. Such rebates are used to pay a portion of the Fund’s expenses. In addition, the Fund’s custodian banks have agreed to reduce its fees when the Fund maintains cash on deposit in a non-interest-bearing custody account. For the year ended December 31, 2012, these amounts, if any, are included in the Statement of Operations. |
The ratio of expenses to average net assets in the accompanying financial highlights excludes the reduction in expenses related to fees paid indirectly. The annualized expense ratio after waivers for the period listed below reflecting the reduction for fees paid indirectly is as follows:
| | | Year Ended
December 31, 2012 | |
| Class IA | | | 0.50 | % |
| Class IB | | | 0.75 | |
| e) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Fund's principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD with HIFSCO did not result in any changes to the distribution services provided to the Fund. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Fund, has adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, 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, subject to the review and approval of the Company’s Board of Directors. |
The Distribution Plan provides that the Fund may pay annually up to 0.25% of the average daily net assets of the Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, the Fund is authorized to make payments monthly to the Distributor that may be used to pay or compensate 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. These fees are accrued daily and paid monthly.
| f) | Other Related Party Transactions – Certain officers of the Fund are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Fund’s Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Fund was in the amount of $2. These fees are accrued daily and paid monthly. |
| g) | Payment from Affiliate – In July of 2007, The Hartford entered into a settlement with the Attorneys General of the states of New York, Connecticut and Illinois relating to market timing and the company's individual variable annuity contracts in which certain payments would be made directly to the variable annuity contract holders. The distribution plan provided that unclaimed money from the settlement would be distributed to certain HLS Funds that are investment options through a Hartford individual variable annuity contract. The unclaimed money was distributed to the Fund on September 18, 2009. |
The total return in the accompanying financial highlights includes a payment from an affiliate. Had the payment from the affiliate been excluded, the impact and total return for the period listed below would have been as follows:
| | | For the Year Ended December 31, 2009 | |
| | | Class IA | | | Class IB | |
| Impact from Payment from Affiliate for Attorneys General Settlement | | | — | % | | | — | % |
| Total Return Excluding Payment from Affiliate | | | 41.53 | % | | | 41.18 | % |
| 8. | Investment Transactions: |
For the year ended December 31, 2012, the Fund's aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
| | | Amount | |
| Cost of Purchases Excluding U.S. Government Obligations | | $ | 1,481,998 | |
| Sales Proceeds Excluding U.S. Government Obligations | | | 1,822,000 | |
The Fund is one of several Hartford funds that participate in a $500 million committed revolving line of credit facility. The facility is to be used for temporary or emergency purposes. Under the arrangement, the funds are required to own securities having a market value in excess of 300% of the total bank borrowings. The interest rate on borrowings varies depending on the nature of the loan. The facility also requires a fee to be paid based on the amount of the commitment. This commitment fee is allocated to all of the funds participating in the line of credit based on the average net assets of the funds. During the year ended December 31, 2012, the Fund did not have any borrowings under this facility.
| 10. | Industry Classifications: |
Other than the industry classifications “Other Investment Pools and Funds” and “Exchange Traded Funds,” equity industry classifications used in this report are the Global Industry Classification Standard, which was developed by and is the exclusive property and service mark of MSCI, Inc. and Standard & Poor’s.
Under the Company’s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
| Hartford Stock HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| 12. | Recent Accounting Pronouncement: |
Disclosures about Offsetting Assets and Liabilities - In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The objective of the ASU is to enhance current disclosure requirements on offsetting of certain assets and liabilities and to enable financial statement users to compare financial statements prepared under U.S. GAAP and International Financial Reporting Standards.
Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
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| Hartford Stock HLS Fund |
| Financial Highlights |
| - Selected Per-Share Data (A) - |
Class | | Net Asset Value at
Beginning of
Period | | | Net Investment
Income (Loss) | | | Net Realized and
Unrealized Gain
(Loss) on
Investments | | | Total from
Investment
Operations | | | Dividends from Net
Investment Income | | | Distributions from
Realized Capital
Gains | | | Distributions from
Capital | | | Total Distributions | | | Net Asset Value at
End of Period | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2012 |
| IA | | $ | 39.95 | | | $ | 0.91 | | | $ | 4.83 | | | $ | 5.74 | | | $ | (0.96 | ) | | $ | – | | | $ | – | | | $ | (0.96 | ) | | $ | 44.73 | |
| IB | | | 39.92 | | | | 0.82 | | | | 4.81 | | | | 5.63 | | | | (0.84 | ) | | | – | | | | – | | | | (0.84 | ) | | | 44.71 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2011 |
| IA | | | 40.98 | | | | 0.62 | | | | (1.07 | ) | | | (0.45 | ) | | | (0.58 | ) | | | – | | | | – | | | | (0.58 | ) | | | 39.95 | |
| IB | | | 40.94 | | | | 0.51 | | | | (1.06 | ) | | | (0.55 | ) | | | (0.47 | ) | | | – | | | | – | | | | (0.47 | ) | | | 39.92 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2010 |
| IA | | | 36.10 | | | | 0.44 | | | | 4.89 | | | | 5.33 | | | | (0.45 | ) | | | – | | | | – | | | | (0.45 | ) | | | 40.98 | |
| IB | | | 36.06 | | | | 0.35 | | | | 4.88 | | | | 5.23 | | | | (0.35 | ) | | | – | | | | – | | | | (0.35 | ) | | | 40.94 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2009 |
| IA | | | 25.86 | | | | 0.48 | | | | 10.25 | | | | 10.73 | | | | (0.49 | ) | | | – | | | | – | | | | (0.49 | ) | | | 36.10 | |
| IB | | | 25.84 | | | | 0.39 | | | | 10.24 | | | | 10.63 | | | | (0.41 | ) | | | – | | | | – | | | | (0.41 | ) | | | 36.06 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2008 |
| IA | | | 47.11 | | | | 0.59 | | | | (20.79 | ) | | | (20.20 | ) | | | (0.81 | ) | | | (0.24 | ) | | | – | | | | (1.05 | ) | | | 25.86 | |
| IB | | | 47.00 | | | | 0.50 | | | | (20.72 | ) | | | (20.22 | ) | | | (0.70 | ) | | | (0.24 | ) | | | – | | | | (0.94 | ) | | | 25.84 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include 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 would lower the Fund's performance. |
| (C) | Ratios do not reflect reductions for fees paid indirectly. Please see Fees Paid Indirectly in the Notes to Financial Statements. |
| (D) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
| (E) | Total return without the inclusion of the Payment from (to) Affiliate can be found in Expenses in the accompanying Notes to Financial Statements. |
| - Ratios and Supplemental Data - |
Total Return(B) | | | Net Assets at End of Period | | | Ratio of Expenses to Average Net Assets
Before Waivers(C) | | | Ratio of Expenses to Average Net Assets
After Waivers(C) | | | Ratio of Net Investment
Income (Loss) to Average Net
Assets | | | Portfolio
Turnover
Rate(D) | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 14.38 | % | | $ | 1,532,116 | | | | 0.51 | % | | | 0.51 | % | | | 1.86 | % | | | 82 | % |
| | 14.10 | | | | 200,153 | | | | 0.76 | | | | 0.76 | | | | 1.61 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (1.09 | ) | | | 1,614,788 | | | | 0.50 | | | | 0.50 | | | | 1.37 | | | | 43 | |
| | (1.34 | ) | | | 231,377 | | | | 0.75 | | | | 0.75 | | | | 1.11 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 14.80 | | | | 1,980,502 | | | | 0.50 | | | | 0.50 | | | | 1.09 | | | | 77 | |
| | 14.51 | | | | 300,279 | | | | 0.75 | | | | 0.75 | | | | 0.84 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 41.54 | (E) | | | 2,055,227 | | | | 0.51 | | | | 0.51 | | | | 1.43 | | | | 84 | |
| | 41.18 | (E) | | | 328,275 | | | | 0.76 | | | | 0.76 | | | | 1.19 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (43.13 | ) | | | 1,810,864 | | | | 0.49 | | | | 0.49 | | | | 1.38 | | | | 89 | |
| | (43.27 | ) | | | 287,794 | | | | 0.74 | | | | 0.74 | | | | 1.13 | | | | – | |
| Report of Independent Registered Public Accounting Firm |
| The Board of Directors and Shareholders of |
| Hartford Series Fund, Inc. |
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Hartford Stock HLS Fund (one of the portfolios constituting Hartford Series Fund, Inc. (the Fund)) as of December 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Hartford Stock HLS Fund (one of the portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
| | |
Minneapolis, MN
February 15, 2013 | |
| Hartford Stock HLS Fund |
| Directors and Officers (Unaudited) |
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Fund pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Fund. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Fund’s statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Fund pays to The Hartford a portion of the Chief Compliance Officer’s compensation, but does not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
| Hartford Stock HLS Fund |
| Directors and Officers (Unaudited) – (continued) |
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010 (4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and a record of how the Fund voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
| Hartford Stock HLS Fund |
| Expense Example (Unaudited) |
Your Fund's Expenses
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Actual return | | | Hypothetical (5% return before expenses) | | | | | | | | | | |
| | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2 year | | | Days
in the
full
year | |
| Class IA | | $ | 1,000.00 | | | $ | 1,003.78 | | | $ | 2.55 | | | $ | 1,000.00 | | | $ | 1,022.59 | | | $ | 2.57 | | | | 0.51 | % | | | 184 | | | | 366 | |
| Class IB | | $ | 1,000.00 | | | $ | 1,003.65 | | | $ | 3.81 | | | $ | 1,000.00 | | | $ | 1,021.34 | | | $ | 3.84 | | | | 0.76 | % | | | 184 | | | | 366 | |
| Hartford Stock HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) |
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory and sub-advisory agreements. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for Hartford Stock HLS Fund (the “Fund”) with HL Investment Advisors, LLC (“HL Advisors”) and the continuation of the investment sub-advisory agreement between HL Advisors and the Fund’s sub-adviser, Wellington Management Company, LLP (the “Sub-adviser,” and together with HL Advisors, the “Advisers”) (collectively, the “Agreements”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from the Advisers to questions posed to them on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreements at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by the Advisers and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreements.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreements with respect to the Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Fund’s contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Fund’s management fees, sub-advisory fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement.
In determining to continue the Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreements. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreements is provided below.
Nature, Extent, and Quality of Services Provided by the Advisers
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Fund by the Advisers. The Board considered, among other things, the terms of the Agreements and the range of services provided by the Advisers. The Board considered the Advisers’ professional personnel who provide services to the Fund, including each Adviser’s ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered each Adviser’s reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to the Fund. In addition, the Board considered the quality of each Adviser’s communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning each Adviser’s regulatory and compliance environment. In this regard, the Board requested and reviewed information on each Adviser’s compliance policies and procedures, compliance history, and a report from the Fund’s Chief Compliance Officer on each Adviser’s compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. The Board also noted the Advisers’ support of the Fund’s compliance control structure, particularly the resources devoted by the Advisers in support of the Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act.
| The Hartford Stock HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
With respect to HL Advisors, the Board noted that under the Agreements, HL Advisors is responsible for the management of the Fund, including overseeing fund operations and service providers, as well as investment advisory services in connection with selecting, monitoring and supervising the Sub-adviser. The Board considered HL Advisors’ ongoing monitoring of people, process and performance, including its quarterly reviews of each of the Hartford HLS Funds, semi-annual meetings with the leaders of each Fund’s portfolio management team, and oversight of the Funds’ approximately 40 portfolio managers. The Board recognized that HL Advisors has demonstrated a record of making changes to the management and/or strategies of the Funds when warranted. The Board considered HL Advisors’ oversight of the Sub-adviser’s investment approach and results, process for monitoring best execution of portfolio trades by the Sub-adviser, and approach to risk management with respect to the Fund and the service providers to the Fund. The Board also considered HL Advisors’ oversight of compliance with the Fund’s objective and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led to an increase in the scope of HL Advisors’ services in this regard. In addition, the Board considered HL Advisors’ ongoing commitment to review and rationalize the Hartford fund family’s product line-up and the expenses that HL Advisors had incurred in connection with fund combinations in recent years. The Board considered that HL Advisors or its affiliates are responsible for providing the Fund’s officers. The Board also noted that Hartford Life Insurance Company (“HLIC”) provides administrative services to the Fund. The Board considered its experiences with HL Advisors and HLIC with respect to each of these services.
With respect to the Sub-adviser, who provides day-to-day portfolio management services, the Board considered the quality of the Fund’s portfolio manager, the Sub-adviser’s other investment personnel, its investment philosophy and process, investment research capabilities and resources, performance record, trade execution capabilities and experience. The Board considered the experience of the Fund’s portfolio manager, the number of accounts managed by the portfolio manager, and the Sub-adviser’s method for compensating the portfolio manager. The Board noted recent changes to the Fund’s portfolio management team.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Fund by HL Advisors and the Sub-adviser.
Performance of the Fund and the Advisers
The Board considered the investment performance of the Fund. In this regard, the Board reviewed the performance of the Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of the Fund’s performance for these time periods. The Board considered information and materials provided to the Board by the Advisers concerning Fund performance, as well as information from Lipper comparing the investment performance of the Fund to an appropriate benchmark and universe of peer funds. The Board noted that the performance of the Fund was within expectations.
The Board considered the detailed investment analytics reports provided by The Hartford’s Investment Advisory Group throughout the year. These reports include, among other things, information on the Fund’s gross and net returns, the Fund’s investment performance relative to an appropriate benchmark and peer group, various statistics concerning the Fund’s portfolio, and a narrative summary of various factors affecting Fund performance. The Board considered the Advisers’ cooperation with the Investment Committee, which assists the Board in evaluating the performance of the Fund at periodic meetings throughout the year. The Board also considered the analysis provided by the Consultant relating to the Fund’s performance track record.
In light of all the considerations noted above, the Board concluded that it had continued confidence in HL Advisors’ and the Sub-adviser’s overall capabilities to manage the Fund.
Costs of the Services and Profitability of the Advisers
The Board reviewed information regarding HL Advisors’ cost to provide investment management and related services to the Fund and HL Advisors’ profitability, both overall and for the Fund, on a pre-tax basis without regard to distribution expenses. The Board also requested and reviewed information about the profitability to HL Advisors and its affiliates from all services provided to the Fund and all aspects of their relationship with the Fund. The Board also requested and received information relating to the operations and profitability of the Sub-adviser.
The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement, noting the Consultant’s view that The Hartford’s process for calculating
and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by the Advisers and their affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by the Advisers
The Board considered comparative information with respect to the management fees to be paid by the Fund to HL Advisors and the total expense ratios of the Fund. The Board also considered comparative information with respect to the sub-advisory fees to be paid by HL Advisors to the Sub-adviser, to the extent applicable. In this regard, the Board requested and reviewed information from HL Advisors and the Sub-adviser relating to the management and sub-advisory fees, including the sub-advisory fee schedule for the Fund, and total operating expenses for the Fund. The Board considered that the management fee for the Fund includes the fee paid to HLIC for providing certain administrative services to the Fund. With respect to the sub-advisory fee schedule, the Board considered representations from HL Advisors and the Sub-adviser that the Sub-adviser’s fees were negotiated at arm’s length. The Board also reviewed information from Lipper comparing the Fund’s contractual management fees, actual management fees and overall expense ratios relative to a group of funds selected by Lipper, in consultation with the Consultant, and a broader universe of funds selected by Lipper.
While the Board recognized that comparisons between the Fund and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business models and cost structures of the Advisers, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of the Fund’s management and sub-advisory fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to the Fund’s management and sub-advisory fees and total operating expenses.
Based on these considerations, the Board concluded that the Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding the Advisers’ realization of economies of scale with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. The Board reviewed the breakpoints in the management fee schedule for the Fund, which reduces fee rates as Fund assets grow over time. The Board recognized that a fund with assets beyond the last breakpoint level will continue to benefit from economies of scale because additional assets are charged the lowest breakpoint fee resulting in lower overall effective management fee rates. The Board also recognized that a fee schedule that reaches a lower breakpoint quickly provides shareholders with the benefit of anticipated or potential economies of scale.
The Board reviewed and evaluated materials from Lipper showing how management fee schedules of peer funds reflect economies of scale for the benefit of shareholders as a peer fund’s assets hypothetically increase over time. Based on information provided by HL Advisors, Lipper, and the Consultant, the Board recognized that there is no uniform methodology for establishing breakpoints or uniform pattern in asset levels that trigger breakpoints or the amounts of breakpoints triggered.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Fund’s shareholders based on currently available information and the effective advisory fees and expense ratios for the Fund at its current and reasonably anticipated asset levels. The Board noted, however, that it would continue to monitor future growth in Fund assets and the appropriateness of additional breakpoints.
Other Benefits
The Board considered other benefits to the Advisers and their affiliates from their relationships with the Fund, including the role of the Fund in supporting the variable life insurance and variable annuity products offered by The Hartford. The Board reviewed information noting that HLIC, an affiliate of HL Advisors, receives fees for providing certain administrative services to the Fund,
| The Hartford Stock HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
and that HLIC also receives fees for fund accounting and related services from the Fund, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Fund’s transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Fund, and the Board reviewed information on the profitability of the Fund’s transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Fund were fair and reasonable based on publicly available information.
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Fund, receives 12b-1 fees from the Fund. The Board also noted that certain affiliates of HL Advisors distribute shares of the Fund and receive compensation in that connection.
The Board considered benefits to the Sub-adviser from its use of the Fund’s brokerage commissions to obtain soft dollar research, and representations from HL Advisors and the Sub-adviser that the Sub-adviser would not make any revenue-sharing payments or any other type of distribution payments to HL Advisors or its affiliates.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the Agreements for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory and sub-advisory agreements. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreements for the Fund and approve a new investment management agreement for the Fund with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser, and a new investment sub-advisory agreement between HFMC and the Fund’s existing Sub-adviser, Wellington Management Company, LLP (together with HFMC, the “Post-Restructuring Advisers”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Fund. In order to implement the Restructuring, the Fund would terminate the existing Agreements and enter into a new investment management agreement with HFMC, with HFMC also entering into a new investment sub-advisory agreement with the Sub-adviser (collectively, the “New Agreements”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreements at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by HL Advisors and the Sub-adviser and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreements.
In determining to approve the New Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the New Agreements was based on a comprehensive consideration of all
information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreements.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Fund and the performance of investment management personnel to the Fund. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Fund prior to the Restructuring would continue to provide such services to the Fund, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreements would involve no changes to (i) the contractual terms of, including the management fees payable under, the Fund’s investment management and investment sub-advisory agreements; (ii) the investment processes and strategies employed in the management of the Fund’s assets; (iii) the nature and level of services provided under the Fund’s investment management and investment sub-advisory agreements; and (iv) the day-to-day management of the Fund and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Fund.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Fund.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Fund, the investment management arrangement for the Fund following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreements: (i) nature, extent and quality of services provided by HL Advisors and the Sub-adviser; (ii) performance of the Fund, HL Advisors and the Sub-adviser; (iii) costs of the services and profitability of HL Advisors and the Sub-adviser; (iv) comparative services rendered and comparative investment management and sub-advisory fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors and the Sub-adviser with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. With respect to the other benefits to the Post-Restructuring Advisers and their affiliates from their relationships with the Fund, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting and related services from the Fund.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the New Agreements. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
| Hartford Stock HLS Fund |
| Principal Risks (Unaudited) |
The principal risks of investing in the Fund are described below.
Foreign Investment Risk: Foreign investments can be riskier than U.S. investments. Potential risks include currency risk that may result from unfavorable exchange rates, liquidity risk if decreased demand for a security makes it difficult to sell at the desired price, and risks that stem from substantially lower trading volume on foreign markets.
Market and Selection Risk: The Fund’s share price may fluctuate due to market risk and/or security selections that may underperform compared to the market or relevant benchmarks.
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
HLSAR-S12 2-13 113554 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 | |
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford Total Return Bond HLS Fund
Table of Contents
This report is prepared for the general information of contract owners and qualified retirement plan participants. It is not an offer of contracts or of qualified retirement plans. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent information including the applicable sales, administrative and other charges.
The views expressed in the Fund’s Manager Discussion under ‘‘Why did the Fund perform this way?’’ and ‘‘What is the outlook?’’ are views of the Fund’s sub-adviser and portfolio management team through the end of the period and are subject to change based on market and other conditions.
| Hartford Total Return Bond HLS Fund inception 08/31/1977 |
| (sub-advised by Wellington Management Company, LLP) |
| |
| Investment objective – Seeks a competitive total return, with income as a secondary objective. |
Performance Overview 12/31/02 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IA. Growth results in classes other than Class IA will vary from what is seen above due to differences in the expenses charged to those share classes.
Average Annual Total Returns (as of 12/31/12)
| | | 1 Year | | | 5 Year | | | 10 Year | |
| Total Return Bond IA | | | 7.54% | | | | 5.62% | | | | 5.24% | |
| Total Return Bond IB | | | 7.27% | | | | 5.35% | | | | 4.98% | |
| Barclays U.S. Aggregate Bond Index | | | 4.22% | | | | 5.95% | | | | 5.18% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund’s net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
Performance information includes performance of the Fund’s previous sub-adviser, Hartford Investment Management Company. As of March 5, 2012, Hartford Investment Management Company no longer serves as the sub-adviser to the Fund.
Barclays U.S. Aggregate Bond Index (formerly known as Barclays Capital U.S. Aggregate Bond Index) is an unmanaged index and is composed of securities from the Barclays Government/Credit Bond Index, Mortgage-Backed Securities Index, Asset-Backed Securities Index and Commercial Mortgage-Backed Securities Index.
You cannot invest directly in an index.
As of the Fund’s current prospectus dated May 1, 2012, the net total annual operating expense ratios for Class IA and Class IB shares were 0.49% and 0.74%, respectively, and the gross total annual operating expense ratios for Class IA and Class IB shares were 0.49% and 0.74%, respectively. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect until April 30, 2013, and automatically renew for one-year terms unless terminated by the Fund’s Investment Advisor (Hartford Funds Management Company, LLC). For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
| Hartford Total Return Bond HLS Fund |
| Manager Discussion |
| December 31, 2012 (Unaudited) |
| |
| Portfolio Managers | | |
| Joseph F. Marvan, CFA | Lucius T. Hill, III | Campe Goodman, CFA |
Senior Vice President and Fixed Income
Portfolio Manager | Senior Vice President and Fixed Income
Portfolio Manager | Vice President and Fixed Income
Portfolio Manager |
| |
| As of March 5, 2012, Wellington Management Company, LLP became the sub-adviser for the Fund. As of the same date, Hartford Investment Management Company no longer serves as the sub-adviser to the Fund. |
| |
How did the Fund perform?
The Class IA shares of the Hartford Total Return Bond HLS Fund returned 7.54% for the twelve-month period ended December 31, 2012, outperforming its benchmark, the Barclays U.S. Aggregate Bond Index, which returned 4.22% for the same period. The Fund also outperformed the 6.69% return of the average fund in the Lipper VP-UF Intermediate Investment Grade Debt Funds peer group, a group of funds with investment strategies similar to those of the Fund.
Why did the Fund perform this way?
Risk assets performed well in 2012 owing to aggressive central bank actions, modest economic growth in the U.S., and reduced tail risks in Europe. In particular, the European Central Bank (ECB)’s rate cut and announced outright monetary transactions (OMT) helped calm investor fears over a potentially large, negative outcome in the European debt crisis. An agreement by eurozone finance ministers on a bailout deal for Greece, which signaled their commitment to ensure Greece remains in the eurozone, further fanned market optimism.
The year was also marked by important political events in the U.S. including the elections in November and the fiscal cliff negotiations, which kept markets on edge particularly in December, as it threatened to push the economy back into recession. On January 1, 2013, the House of Representatives passed legislation averting tax increases for most U.S. taxpayers while delaying spending cuts.
The U.S. Federal Reserve (Fed) remained extremely accommodative throughout the year given the fragile state of the global economic recovery. The Fed announced plans to purchase additional mortgage-backed securities through a third round of quantitative easing (QE3) and Treasury securities, significantly expanding the size of its balance sheet. Additionally, the Fed adopted inflation and unemployment-rate thresholds in place of its mid-2015 forward rate guidance, noting that it would keep rates unchanged for at least as long as unemployment remains above 6.5% and inflation projections stay near the Fed’s 2% target.
U.S. economic releases generally showed modest improvement throughout the period, highlighted by a recovery in the housing market. Home prices showed their first year-over-year gain (excluding short-term blips caused by homebuyer tax credits) since late 2006, aided by increased home sales and reduced inventory. Meanwhile, the unemployment rate declined by 0.70 percentage points to 7.8% as the labor market continued its slow recovery. Manufacturing activity slowed over the year, service sector growth picked up some, and consumer confidence edged up amid a healing jobs market.
Treasury yields were mixed over the period as the 30-year yield rose 6 basis points, while 5-year and 10-year yields fell 11 and 12 basis points, respectively. All of the major fixed income spread sectors posted strong absolute gains and outperformed Treasuries on a duration-adjusted basis.
The primary drivers of the Fund’s outperformance were its mortgage-backed securities (MBS) and investment grade credit exposures. The Fund’s allocation to non-agency MBS was the top contributor to relative results as non-agencies performed strongly amid improved sentiment around U.S. housing, low long-term interest rates and strong investor demand. The Fund’s agency MBS pass-through exposure, particularly in lower coupons, was also a significant positive for performance as the entire sector experienced strong performance on the heels of the Fed’s third round of quantitative easing. Our investment grade credit exposure was also additive to relative results; in particular, our overweight to U.S. financials contributed to outperformance as this subsector benefitted following the reduction of tail risk from Europe. The Fund’s overweight to commercial mortgage-backed securities (CMBS) was also positive for performance as the sector rallied. The Fund’s Non-Dollar exposure, via forward foreign currency contracts and futures, also helped relative performance.
The Fund’s positioning in high yield credit detracted from performance overall. Positive results from an allocation to BB-rated high yield issuers were more than offset by the negative impact of high yield credit default swap index positions, which were used as a source of liquidity and to manage overall portfolio risk.
What is the outlook?
In the U.S., we continue to maintain a moderate pro-cyclical bias in the Fund based on attractive valuations, supportive Fed policy, and reduced tail risk in Europe. We expect U.S. economic momentum to be positive in 2013 as the recovery in housing continues to gain steam. Our positive economic view is tempered, however, by ongoing debates over deficit reduction and the debt ceiling.
| Hartford Total Return Bond HLS Fund |
| Manager Discussion – (continued) |
| December 31, 2012 (Unaudited) |
Within the portfolio we ended the period with a modest overweight to investment grade corporates, primarily via U.S. financials, based on strong credit fundamentals. Specifically, U.S. bank valuations remained attractive at the end of the period based on our view that balance sheets are less risky on improved capital ratios, declining non-performing assets and strong liquidity profiles. We also continued to like BB-rated high yield bonds at the end of the period. Aside from good corporate fundamentals, we expect defaults to remain low and data has been very supportive with strong inflows into the sector. We continued to favor non-agency Residential MBS based on our view of continued improvement in the U.S. housing market. While the non-agency market has experienced strong price performance in 2012, we believe there is still value remaining in these securities. Meanwhile, at the end of the period we positioned the portfolio with a market-neutral exposure to agency MBS based on the sector’s recent strong performance, while additional Fed purchases are making MBS more expensive. We continued to maintain an overweight to high-quality Commercial MBS. Additionally, we had a modest allocation to emerging market debt based on attractive valuations. Within non-dollar, we expect further rate cuts in Australia so we maintained a long Australian rates position versus Germany.
With improving economic data and Fed monetary policy now tied to specific economic targets, we believe rates could move modestly higher than markets expect. As of December 31, 2012, we currently have a neutral-to-short duration posture. We also believe that short term inflation expectations are too low and have positioned the portfolio based on our expectations for higher inflation.
Diversification by Industry
as of December 31, 2012
| Industry | | Percentage of
Net Assets | |
| Fixed Income Securities | | | | |
| Accommodation and Food Services | | | 0.2 | % |
| Administrative Waste Management and Remediation | | | 0.1 | |
| Air Transportation | | | 0.2 | |
| Apparel Manufacturing | | | 0.1 | |
| Arts, Entertainment and Recreation | | | 2.9 | |
| Beverage and Tobacco Product Manufacturing | | | 1.0 | |
| Chemical Manufacturing | | | 0.8 | |
| Computer and Electronic Product Manufacturing | | | 0.4 | |
| Construction | | | 0.1 | |
| Fabricated Metal Product Manufacturing | | | 0.2 | |
| Finance and Insurance | | | 28.7 | |
| Food Manufacturing | | | 0.0 | |
| Food Services | | | 0.0 | |
| Furniture and Related Product Manufacturing | | | 0.1 | |
| General Obligations | | | 0.7 | |
| Health Care and Social Assistance | | | 1.8 | |
| Higher Education (Univ., Dorms, etc.) | | | 0.1 | |
| Information | | | 3.1 | |
| Machinery Manufacturing | | | 0.3 | |
| Mining | | | 0.7 | |
| Miscellaneous Manufacturing | | | 0.5 | |
| Motor Vehicle and Parts Manufacturing | | | 0.3 | |
| Nonmetallic Mineral Product Manufacturing | | | 0.2 | |
| Paper Manufacturing | | | 0.1 | |
| Petroleum and Coal Products Manufacturing | | | 2.1 | |
| Pipeline Transportation | | | 0.7 | |
| Plastics and Rubber Products Manufacturing | | | 0.1 | |
| Primary Metal Manufacturing | | | 0.3 | |
| Professional, Scientific and Technical Services | | | 0.1 | |
| Real Estate, Rental and Leasing | | | 0.8 | |
| Retail Trade | | | 1.6 | |
| Tax Allocation | | | 0.0 | |
| Transportation Equipment Manufacturing | | | 0.1 | |
| Truck Transportation | | | 0.0 | |
| Utilities | | | 1.4 | |
| Utilities - Electric | | | 0.3 | |
| Utilities - Water and Sewer | | | 0.3 | |
| Wholesale Trade | | | 0.4 | |
| Total | | | 50.8 | % |
| Equity Securities | | | | |
| Diversified Banks | | | 0.0 | |
| Other Diversified Financial Services | | | 0.1 | |
| Total | | | 0.1 | % |
| Call Options Purchased | | | 0.0 | |
| Foreign Government Obligations | | | 0.3 | |
| Put Options Purchased | | | 0.1 | |
| U.S. Government Agencies | | | 38.6 | |
| U.S. Government Securities | | | 22.7 | |
| Short-Term Investments | | | 3.3 | |
| Other Assets and Liabilities | | | (15.9 | ) |
| Total | | | 100.0 | % |
The above table represents sub-industry investments by industry, which combines multiple sub-industries into one industry category. Detailed information on sub-industry breakdowns is available in the Schedule of Investments.
| Distribution by Credit Quality |
| as of December 31, 2012 |
| Credit Rating * | | Percentage of
Net Assets | |
| Aaa / AAA | | | 5.7 | % |
| Aa / AA | | | 3.1 | |
| A | | | 7.0 | |
| Baa / BBB | | | 17.0 | |
| Ba / BB | | | 9.5 | |
| B | | | 3.4 | |
| Caa / CCC or Lower | | | 4.9 | |
| Unrated | | | 0.5 | |
| U.S. Government Agencies and Securities | | | 61.3 | |
| Non-Debt Securities and Other Short-Term Instruments | | | 3.5 | |
| Other Assets & Liabilities | | | (15.9 | ) |
| Total | | | 100.0 | % |
| * | Does not apply to the Fund itself. Based upon Moody’s and S&P long-term credit ratings for the Fund’s holdings as of the date noted. If Moody's and S&P assign different ratings to a holding, the lower rating is used. "Unrated" includes fixed-income securities (other than cash-like short-term instruments and U.S. Government securities) for which Moody’s and S&P have not issued long-term credit ratings. |
| Hartford Total Return Bond HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| ASSET & COMMERCIAL MORTGAGE BACKED SECURITIES - 14.9% | | | | |
| | Finance and Insurance - 14.9% | | | | |
| | | | | Captive Auto Finance - 1.3% | | | | |
| | | | | Ally Automotive Receivables Trust | | | | |
| $ | 874 | | | 3.00%, 10/15/2015 ■ | | $ | 874 | |
| | 5,675 | | | 3.38%, 09/15/2017 ■ | | | 5,844 | |
| | 5,650 | | | 3.61%, 08/15/2016 ■ | | | 5,828 | |
| | | | | Bank of America Automotive Trust | | | | |
| | 1,835 | | | 3.03%, 10/15/2016 ■ | | | 1,843 | |
| | | | | Carnow Automotive Receivables Trust | | | | |
| | 1,117 | | | 2.09%, 01/15/2015 ■ | | | 1,117 | |
| | | | | CPS Automotive Trust | | | | |
| | 3,771 | | | 1.82%, 12/16/2019 ■ | | | 3,772 | |
| | | | | Credit Acceptance Automotive Loan Trust | | | | |
| | 1,860 | | | 2.21%, 09/15/2020 ■ | | | 1,880 | |
| | 5,115 | | | 3.12%, 03/16/2020 ■ | | | 5,156 | |
| | | | | Ford Credit Automotive Owner Trust | | | | |
| | 4,600 | | | 2.54%, 02/15/2016 | | | 4,750 | |
| | 3,680 | | | 3.21%, 07/15/2017 | | | 3,863 | |
| | 1,730 | | | 5.53%, 05/15/2016 ■ | | | 1,812 | |
| | | | | Harley-Davidson Motorcycle Trust | | | | |
| | 4,180 | | | 2.12%, 08/15/2017 | | | 4,226 | |
| | | | | Hyundai Automotive Receivables Trust | | | | |
| | 6,710 | | | 2.27%, 02/15/2017 | | | 6,912 | |
| | | | | Prestige Automotive Receivables Trust | | | | |
| | 3,855 | | | 2.49%, 04/16/2018 ■ | | | 3,913 | |
| | | | | SNAAC Automotive Receivables Trust | | | | |
| | 2,064 | | | 1.78%, 06/15/2016 ■ | | | 2,073 | |
| | | | | | | | 53,863 | |
| | | | | Captive Retail Finance - 0.1% | | | | |
| | | | | CNH Equipment Trust | | | | |
| | 3,075 | | | 2.97%, 05/15/2017 | | | 3,182 | |
| | | | | | | | | |
| | | | | Credit Card Issuing - 0.1% | | | | |
| | | | | GE Capital Credit Card Master Note Trust | | | | |
| | 3,230 | | | 2.21%, 06/15/2016 | | | 3,257 | |
| | | | | | | | | |
| | | | | Real Estate Credit (Mortgage Banking) - 13.4% | | | | |
| | | | | Argent Securities, Inc. | | | | |
| | 20,681 | | | 0.36%, 06/25/2036 Δ | | | 6,972 | |
| | | | | Asset Backed Funding Certificates | | | | |
| | 11,058 | | | 0.43%, 01/25/2037 Δ | | | 5,679 | |
| | | | | Banc of America Commercial Mortgage Trust, Inc. | | | | |
| | 11,725 | | | 5.17%, 11/10/2042 Δ | | | 12,803 | |
| | 6,070 | | | 5.36%, 09/10/2047 Δ | | | 6,762 | |
| | | | | Banc of America Funding Corp. | | | | |
| | 8,010 | | | 0.51%, 05/20/2047 Δ | | | 5,877 | |
| | 10,485 | | | 5.77%, 05/25/2037 | | | 9,028 | |
| | | | | BB-UBS Trust | | | | |
| | 11,170 | | | 3.43%, 11/05/2036 ■ | | | 11,473 | |
| | | | | BCAP LLC Trust | | | | |
| | 4,472 | | | 0.39%, 03/25/2037 Δ | | | 3,279 | |
| | | | | Bear Stearns Adjustable Rate Mortgage Trust | | | | |
| | 10,050 | | | 2.32%, 08/25/2035 Δ | | | 10,166 | |
| | 13,060 | | | 2.47%, 10/25/2035 Δ | | | 12,575 | |
| | | | | Bear Stearns Commercial Mortgage Securities, Inc. | | | | |
| | 1,405 | | | 4.93%, 02/13/2042 | | | 1,517 | |
| | 7,015 | | | 5.30%, 10/12/2042 Δ | | | 7,783 | |
| | 3,600 | | | 5.54%, 10/12/2041 | | | 4,146 | |
| | | | | Cal Funding II Ltd. | | | | |
| | 2,011 | | | 3.47%, 10/25/2027 ■ | | | 2,049 | |
| | | | | CFCRE Commercial Mortgage Trust | | | | |
| | 4,385 | | | 5.75%, 12/15/2047 ■Δ | | | 4,085 | |
| | | | | Citigroup/Deutsche Bank Commercial Mortgage Trust | | | | |
| | 7,950 | | | 5.32%, 12/11/2049 ‡ | | | 9,120 | |
| | 12,597 | | | 5.39%, 07/15/2044 ‡Δ | | | 13,979 | |
| | 3,840 | | | 5.40%, 12/11/2049 | | | 2,209 | |
| | | | | Commercial Mortgage Loan Trust | | | | |
| | 5,290 | | | 6.21%, 12/10/2049 Δ | | | 6,306 | |
| | | | | Commercial Mortgage Pass-Through Certificates | | | | |
| | 27,838 | | | 2.97%, 07/10/2046 ■► | | | 2,262 | |
| | 1,540 | | | 4.93%, 11/15/2045 ■ | | | 1,378 | |
| | | | | Community or Commercial Mortgage Trust | | | | |
| | 4,945 | | | 2.77%, 12/10/2045 | | | 5,048 | |
| | 1,190 | | | 4.33%, 12/10/2045 ■ | | | 1,012 | |
| | | | | Consumer Portfolio Services, Inc. | | | | |
| | 620 | | | 5.01%, 06/17/2019 ■ | | | 623 | |
| | | | | Countrywide Home Loans, Inc. | | | | |
| | 2,837 | | | 3.03%, 04/20/2036 Δ | | | 1,690 | |
| | 18,940 | | | 6.00%, 10/25/2037 | | | 18,353 | |
| | | | | Credit Suisse Mortgage Capital Certificates | | | | |
| | 2,375 | | | 5.31%, 12/15/2039 | | | 2,697 | |
| | 11,866 | | | 5.47%, 09/15/2039 | | | 13,471 | |
| | | | | CS First Boston Mortgage Securities Corp. | | | | |
| | 5,554 | | | 5.50%, 06/25/2035 | | | 5,419 | |
| | | | | CW Capital Cobalt Ltd. | | | | |
| | 12,236 | | | 5.22%, 08/15/2048 | | | 13,870 | |
| | | | | DBUBS Mortgage Trust | | | | |
| | 26,861 | | | 2.63%, 01/01/2021 ■► | | | 1,305 | |
| | 5,155 | | | 4.54%, 05/12/2021 ■ | | | 5,763 | |
| | | | | Fieldstone Mortgage Investment Corp. | | | | |
| | 4,183 | | | 0.48%, 05/25/2036 Δ | | | 2,170 | |
| | 3,385 | | | 0.55%, 04/25/2047 Δ | | | 1,837 | |
| | | | | First Franklin Mortgage Loan Trust | | | | |
| | 14,867 | | | 0.45%, 04/25/2036 Δ | | | 6,780 | |
| | | | | First Horizon Alternative Mortgage Securities | | | | |
| | 15,042 | | | 2.55%, 04/25/2036 Δ | | | 10,762 | |
| | 21,931 | | | 2.60%, 09/25/2035 Δ | | | 18,112 | |
| | | | | Ford Credit Floorplan Master Owner Trust | | | | |
| | 6,225 | | | 1.50%, 09/15/2015 | | | 6,268 | |
| | | | | Fremont Home Loan Trust | | | | |
| | 1,943 | | | 0.36%, 10/25/2036 Δ | | | 863 | |
| | | | | GE Business Loan Trust | | | | |
| | 6,134 | | | 1.21%, 05/15/2034 ■Δ | | | 4,003 | |
| | | | | GMAC Mortgage Corp. Loan Trust | | | | |
| | 7,166 | | | 3.71%, 09/19/2035 Δ | | | 6,868 | |
| | | | | Goldman Sachs Mortgage Securities Corp. II | | | | |
| | 805 | | | 3.38%, 05/10/2045 | | | 872 | |
| | 13,635 | | | 3.48%, 11/05/2034 ■ | | | 13,907 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Total Return Bond HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| ASSET & COMMERCIAL MORTGAGE BACKED SECURITIES - 14.9% - (continued) | | | | |
| | Finance and Insurance - 14.9% - (continued) | | | | |
| | | | | Real Estate Credit (Mortgage Banking) - 13.4% - (continued) | | | | |
| | | | | Goldman Sachs Mortgage Securities Trust | | | | |
| $ | 4,865 | | | 2.77%, 11/10/2045 | | $ | 4,982 | |
| | 9,180 | | | 3.55%, 04/10/2034 ■ | | | 9,917 | |
| | 3,180 | | | 4.86%, 11/10/2045 ■Δ | | | 2,780 | |
| | | | | Greenwich Capital Commercial Funding Corp. | | | | |
| | 2,350 | | | 5.87%, 07/10/2038 Δ | | | 2,699 | |
| | | | | GS Mortgage Securities Trust | | | | |
| | 5,920 | | | 2.93%, 06/05/2031 | | | 6,240 | |
| | | | | GSAA Home Equity Trust | | | | |
| | 6,282 | | | 0.29%, 02/25/2037 Δ | | | 2,939 | |
| | 2,722 | | | 0.37%, 07/25/2036 Δ | | | 1,294 | |
| | | | | GSAMP Trust | | | | |
| | 17,470 | | | 0.30%, 01/25/2037 Δ | | | 7,659 | |
| | | | | GSR Mortgage Loan Trust | | | | |
| | 14,145 | | | 2.75%, 01/25/2036 Δ | | | 11,029 | |
| | | | | Indymac Index Mortgage Loan Trust | | | | |
| | 3,404 | | | 2.54%, 01/25/2036 Δ | | | 3,028 | |
| | 2,017 | | | 2.62%, 08/25/2035 Δ | | | 1,336 | |
| | 12,461 | | | 2.81%, 03/25/2036 Δ | | | 7,812 | |
| | | | | JP Morgan Chase Commercial Mortgage Securities Corp. | | | | |
| | 2,070 | | | 2.75%, 10/15/2045 ■ | | | 1,156 | |
| | 6,660 | | | 2.84%, 12/15/2047 | | | 6,804 | |
| | 7,160 | | | 3.09%, 07/05/2032 ■ | | | 7,526 | |
| | 2,675 | | | 3.91%, 05/05/2030 ■Δ | | | 2,928 | |
| | 700 | | | 4.83%, 10/15/2045 ■Δ | | | 600 | |
| | 80 | | | 4.92%, 10/15/2042 | | | 87 | |
| | 9,995 | | | 5.20%, 12/15/2044 Δ | | | 11,140 | |
| | 6,876 | | | 5.47%, 01/12/2043 Δ | | | 7,570 | |
| | 1,890 | | | 5.49%, 08/15/2046 ■Δ | | | 1,782 | |
| | 5,880 | | | 5.77%, 06/12/2041 Δ | | | 6,250 | |
| | | | | JP Morgan Mortgage Trust | | | | |
| | 3,975 | | | 3.10%, 09/25/2035 Δ | | | 3,844 | |
| | 5,055 | | | 5.35%, 05/25/2036 Δ | | | 4,381 | |
| | | | | LB-UBS Commercial Mortgage Trust | | | | |
| | 8,695 | | | 4.95%, 09/15/2030 | | | 9,498 | |
| | 6,275 | | | 5.20%, 11/15/2030 Δ | | | 6,935 | |
| | 6,380 | | | 5.43%, 02/15/2040 | | | 7,322 | |
| | | | | Lehman Brothers Small Balance Commercial | | | | |
| | 1,661 | | | 5.52%, 09/25/2030 ■ | | | 1,496 | |
| | | | | Luminent Mortgage Trust | | | | |
| | 3,160 | | | 0.47%, 11/25/2035 Δ | | | 2,505 | |
| | | | | Merrill Lynch Mortgage Investors Trust | | | | |
| | 1,843 | | | 2.93%, 07/25/2035 Δ | | | 1,416 | |
| | 2,557 | | | 5.45%, 03/25/2036 Δ | | | 1,761 | |
| | | | | Merrill Lynch Mortgage Trust | | | | |
| | 5,135 | | | 5.20%, 09/12/2042 | | | 5,562 | |
| | 2,600 | | | 5.44%, 11/12/2037 Δ | | | 2,890 | |
| | | | | Morgan Stanley ABS Capital I | | | | |
| | 1,515 | | | 0.27%, 12/25/2036 Δ | | | 717 | |
| | | | | Morgan Stanley Capital I Trust | | | | |
| | 101,869 | | | 2.68%, 09/15/2047 ■► | | | 3,367 | |
| | 5,225 | | | 5.03%, 09/15/2047 ■ | | | 6,275 | |
| | 11,950 | | | 5.69%, 04/15/2049 ‡Δ | | | 13,876 | |
| | | | | National Credit Union Administration | | | | |
| | 3,851 | | | 1.84%, 10/07/2020 Δ | | | 3,914 | |
| | | | | Nationstar Home Equity Loan Trust | | | | |
| | 13,475 | | | 0.39%, 06/25/2037 Δ | | | 7,766 | |
| | | | | Option One Mortgage Loan Trust | | | | |
| | 2,455 | | | 0.46%, 03/25/2037 Δ | | | 1,000 | |
| | | | | Residential Funding Mortgage Securities, Inc. | | | | |
| | 1,776 | | | 6.00%, 07/25/2037 | | | 1,666 | |
| | | | | SBA Tower Trust | | | | |
| | 5,620 | | | 2.93%, 12/15/2017 ■ | | | 5,849 | |
| | | | | Soundview Home Equity Loan Trust, Inc. | | | | |
| | 3,900 | | | 0.39%, 07/25/2037 Δ | | | 1,651 | |
| | 7,820 | | | 0.46%, 06/25/2036 Δ | | | 4,523 | |
| | 15,460 | | | 0.49%, 05/25/2036 Δ | | | 8,699 | |
| | | | | Structured Adjustable Rate Mortgage Loan Trust | | | | |
| | 1,804 | | | 0.51%, 09/25/2034 Δ | | | 1,477 | |
| | | | | UBS-Barclays Commercial Mortgage Trust | | | | |
| | 4,045 | | | 2.85%, 12/10/2045 | | | 4,159 | |
| | 6,360 | | | 3.53%, 05/10/2063 | | | 6,890 | |
| | 8,516 | | | 4.96%, 08/10/2049 ■ | | | 6,970 | |
| | | | | Wachovia Bank Commercial Mortgage Trust | | | | |
| | 2,650 | | | 5.12%, 07/15/2042 | | | 2,909 | |
| | 1,748 | | | 5.42%, 10/15/2044 Δ | | | 1,934 | |
| | | | | Wells Fargo Alternative Loan Trust | | | | |
| | 7,766 | | | 6.25%, 11/25/2037 | | | 7,322 | |
| | | | | Wells Fargo Commercial Mortgage Trust | | | | |
| | 4,005 | | | 2.92%, 10/15/2045 | | | 4,151 | |
| | 1,660 | | | 4.78%, 10/15/2045 ■ | | | 1,498 | |
| | | | | Wells Fargo Mortgage Backed Securities Trust | | | | |
| | 2,811 | | | 5.16%, 10/25/2035 Δ | | | 2,792 | |
| | | | | WF-RBS Commercial Mortgage Trust | | | | |
| | 14,640 | | | 2.88%, 12/15/2045 | | | 15,115 | |
| | 1,960 | | | 3.00%, 08/15/2045 Δ | | | 2,047 | |
| | 1,825 | | | 4.87%, 02/15/2044 ■ | | | 2,160 | |
| | 2,780 | | | 5.00%, 06/15/2044 ■ | | | 2,141 | |
| | | | | | | | 557,177 | |
| | | | | | | | 617,479 | |
| | | | | Total asset & commercial mortgage backed securities | | | | |
| | | | | (cost $593,045) | | $ | 617,479 | |
| | | | | | | | | |
| CORPORATE BONDS - 32.7% | | | | |
| | Accommodation and Food Services - 0.2% | | | | |
| | | | | Traveler Accommodation - 0.2% | | | | |
| | | | | Choice Hotels International, Inc. | | | | |
| $ | 151 | | | 5.70%, 08/28/2020 | | $ | 164 | |
| | 1,140 | | | 5.75%, 07/01/2022 | | | 1,263 | |
| | | | | Wynn Las Vegas LLC | | | | |
| | 1,185 | | | 5.38%, 03/15/2022 | | | 1,259 | |
| | 5,415 | | | 7.75%, 08/15/2020 | | | 6,173 | |
| | | | | | | | 8,859 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | Market Value ╪ | |
| CORPORATE BONDS - 32.7% - (continued) | | | | |
| | Administrative Waste Management and Remediation - 0.1% | | | | |
| | | | | Other Support Services - 0.0% | | | | |
| | | | | Iron Mountain, Inc. | | | | |
| $ | 1,215 | | | 7.75%, 10/01/2019 | | $ | 1,370 | |
| | | | | | | | | |
| | | | | Waste Treatment and Disposal - 0.1% | | | | |
| | | | | Clean Harbors, Inc. | | | | |
| | 345 | | | 5.13%, 06/01/2021 ■ | | | 357 | |
| | 1,385 | | | 5.25%, 08/01/2020 | | | 1,444 | |
| | | | | | | | 1,801 | |
| | | | | | | | 3,171 | |
| | Air Transportation - 0.2% | | | | |
| | | | | Scheduled Air Transportation - 0.2% | | | | |
| | | | | Continental Airlines, Inc. | | | | |
| | 7,325 | | | 4.00%, 10/29/2024 | | | 7,709 | |
| | | | | US Airways Group, Inc. | | | | |
| | 944 | | | 6.25%, 04/22/2023 | | | 1,022 | |
| | | | | | | | 8,731 | |
| | Apparel Manufacturing - 0.1% | | | | |
| | | | | Accessories and Other Apparel Manufacturing - 0.0% | | | | |
| | | | | PVH Corp. | | | | |
| | 470 | | | 4.50%, 12/15/2022 | | | 475 | |
| | | | | | | | | |
| | | | | Cut and Sew Apparel Manufacturing - 0.1% | | | | |
| | | | | Hanesbrands, Inc. | | | | |
| | 1,530 | | | 6.38%, 12/15/2020 | | | 1,683 | |
| | | | | Phillips Van-Heusen Corp. | | | | |
| | 1,950 | | | 7.38%, 05/15/2020 | | | 2,186 | |
| | | | | | | | 3,869 | |
| | | | | | | | 4,344 | |
| | Arts, Entertainment and Recreation - 2.7% | | | | |
| | | | | Cable and Other Subscription Programming - 1.7% | | | | |
| | | | | CCO Holdings LLC | | | | |
| | 1,860 | | | 5.25%, 09/30/2022 | | | 1,883 | |
| | 10,860 | | | 6.63%, 01/31/2022 ‡ | | | 11,865 | |
| | 1,900 | | | 7.38%, 06/01/2020 ‡ | | | 2,109 | |
| | | | | DirecTV Holdings LLC | | | | |
| | 7,080 | | | 3.80%, 03/15/2022 | | | 7,304 | |
| | 4,200 | | | 5.00%, 03/01/2021 | | | 4,712 | |
| | | | | Time Warner Cable, Inc. | | | | |
| | 7,250 | | | 4.50%, 09/15/2042 ╦ | | | 7,071 | |
| | 3,500 | | | 5.88%, 11/15/2040 ╦ | | | 4,078 | |
| | | | | Time Warner Entertainment Co., L.P. | | | | |
| | 8,175 | | | 8.38%, 07/15/2033 ╦ | | | 11,931 | |
| | | | | Time Warner, Inc. | | | | |
| | 2,540 | | | 3.40%, 06/15/2022 | | | 2,649 | |
| | 3,800 | | | 6.10%, 07/15/2040 | | | 4,601 | |
| | 2,692 | | | 6.25%, 03/29/2041 | | | 3,324 | |
| | | | | Viacom, Inc. | | | | |
| | 7,000 | | | 5.63%, 09/15/2019 | | | 8,367 | |
| | | | | Virgin Media Finance plc | | | | |
| | 2,370 | | | 5.25%, 02/15/2022 | | | 2,512 | |
| | | | | | | | 72,406 | |
| | | | | Data Processing, Hosting and Related Services - 0.1% | | | | |
| | | | | Fidelity National Information Services, Inc. | | | | |
| | 3,230 | | | 5.00%, 03/15/2022 | | | 3,464 | |
| | | | | | | | | |
| | | | | Motion Picture and Video Industries - 0.0% | | | | |
| | | | | NAI Entertainment Holdings LLC | | | | |
| | 732 | | | 8.25%, 12/15/2017 ■ | | | 806 | |
| | | | | National CineMedia LLC | | | | |
| | 160 | | | 6.00%, 04/15/2022 | | | 170 | |
| | | | | | | | 976 | |
| | | | | Newspaper, Periodical, Book and Database Publisher - 0.2% | | | | |
| | | | | News America, Inc. | | | | |
| | 7,500 | | | 6.15%, 03/01/2037 - 02/15/2041 ‡ | | | 9,283 | |
| | | | | | | | | |
| | | | | Radio and Television Broadcasting - 0.7% | | | | |
| | | | | CBS Corp. | | | | |
| | 3,749 | | | 3.38%, 03/01/2022 | | | 3,898 | |
| | 3,810 | | | 4.85%, 07/01/2042 | | | 3,965 | |
| | | | | Liberty Media Corp. | | | | |
| | 4,047 | | | 8.25%, 02/01/2030 | | | 4,411 | |
| | | | | NBC Universal Media LLC | | | | |
| | 4,975 | | | 2.88%, 01/15/2023 ‡ | | | 4,996 | |
| | 4,665 | | | 5.15%, 04/30/2020 ‡ | | | 5,530 | |
| | 3,390 | | | 5.95%, 04/01/2041 ‡ | | | 4,157 | |
| | | | | Starz Financial Corp. | | | | |
| | 665 | | | 5.00%, 09/15/2019 ■ | | | 682 | |
| | | | | | | | 27,639 | |
| | | | | | | | 113,768 | |
| | Beverage and Tobacco Product Manufacturing - 1.0% | | | | |
| | | | | Beverage Manufacturing - 0.7% | | | | |
| | | | | Anheuser-Busch InBev Worldwide, Inc. | | | | |
| | 6,890 | | | 7.75%, 01/15/2019 | | | 9,203 | |
| | | | | Constellation Brands, Inc. | | | | |
| | 3,955 | | | 6.00%, 05/01/2022 | | | 4,529 | |
| | 5,535 | | | 7.25%, 05/15/2017 | | | 6,517 | |
| | | | | Molson Coors Brewing Co. | | | | |
| | 1,825 | | | 3.50%, 05/01/2022 | | | 1,927 | |
| | | | | Pernod-Ricard S.A. | | | | |
| | 8,665 | | | 2.95%, 01/15/2017 ■ | | | 9,113 | |
| | | | | | | | 31,289 | |
| | | | | Tobacco Manufacturing - 0.3% | | | | |
| | | | | Altria Group, Inc. | | | | |
| | 4,440 | | | 10.20%, 02/06/2039 | | | 7,427 | |
| | | | | Lorillard Tobacco Co. | | | | |
| | 3,865 | | | 8.13%, 06/23/2019 | | | 4,932 | |
| | | | | | | | 12,359 | |
| | | | | | | | 43,648 | |
| | Chemical Manufacturing - 0.7% | | | | |
| | | | | Agricultural Chemical Manufacturing - 0.0% | | | | |
| | | | | Nufarm Australia Ltd. | | | | |
| | 2,111 | | | 6.38%, 10/15/2019 ■ | | | 2,206 | |
| | | | | | | | | |
| | | | | Basic Chemical Manufacturing - 0.7% | | | | |
| | | | | Dow Chemical Co. | | | | |
| | 4,000 | | | 4.25%, 11/15/2020 | | | 4,447 | |
| | 13,145 | | | 8.55%, 05/15/2019 | | | 17,747 | |
| | | | | LyondellBasell Industries N.V. | | | | |
| | 5,695 | | | 6.00%, 11/15/2021 | | | 6,677 | |
| | | | | | | | 28,871 | |
| | | | | | | | 31,077 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Total Return Bond HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| CORPORATE BONDS - 32.7% - (continued) | | | | |
| | Computer and Electronic Product Manufacturing - 0.3% | | | | |
| | | | | Computer and Peripheral Equipment Manufacturing - 0.2% | | | | |
| | | | | Hewlett-Packard Co. | | | | |
| $ | 1,790 | | | 4.75%, 06/02/2014 | | $ | 1,866 | |
| | | | | Seagate HDD Cayman | | | | |
| | 6,495 | | | 6.88%, 05/01/2020 ‡ | | | 6,909 | |
| | | | | | | | 8,775 | |
| | | | | Navigational, Measuring and Control Instruments - 0.1% | | | | |
| | | | | Esterline Technologies Corp. | | | | |
| | 1,890 | | | 7.00%, 08/01/2020 | | | 2,093 | |
| | | | | | | | | |
| | | | | Semiconductor, Electronic Component Manufacturing - 0.0% | | | | |
| | | | | Jabil Circuit, Inc. | | | | |
| | 1,345 | | | 4.70%, 09/15/2022 | | | 1,414 | |
| | | | | | | | | |
| | | | | | | | 12,282 | |
| | Construction - 0.1% | | | | |
| | | | | Residential Building Construction - 0.1% | | | | |
| | | | | D.R. Horton, Inc. | | | | |
| | 1,245 | | | 6.50%, 04/15/2016 | | | 1,382 | |
| | | | | Pulte Homes, Inc. | | | | |
| | 800 | | | 7.88%, 06/15/2032 | | | 870 | |
| | | | | Ryland Group, Inc. | | | | |
| | 785 | | | 5.38%, 10/01/2022 | | | 804 | |
| | | | | | | | 3,056 | |
| | Fabricated Metal Product Manufacturing - 0.2% | | | | |
| | | | | Boiler, Tank and Shipping Container Manufacturing - 0.1% | | | | |
| | | | | Ball Corp. | | | | |
| | 2,080 | | | 5.00%, 03/15/2022 | | | 2,226 | |
| | 2,330 | | | 6.75%, 09/15/2020 | | | 2,569 | |
| | | | | | | | 4,795 | |
| | | | | Other Fabricated Metal Product Manufacturing - 0.1% | | | | |
| | | | | Crown Americas, Inc. | | | | |
| | 2,400 | | | 6.25%, 02/01/2021 | | | 2,631 | |
| | | | | Masco Corp. | | | | |
| | 575 | | | 5.95%, 03/15/2022 | | | 637 | |
| | | | | | | | 3,268 | |
| | | | | Spring and Wire Product Manufacturing - 0.0% | | | | |
| | | | | Anixter International, Inc. | | | | |
| | 805 | | | 5.63%, 05/01/2019 | | | 847 | |
| | | | | | | | | |
| | | | | | | | 8,910 | |
| | Finance and Insurance - 13.5% | | | | |
| | | | | Captive Auto Finance - 0.4% | | | | |
| | | | | Credit Acceptance Corp. | | | | |
| | 1,611 | | | 9.13%, 02/01/2017 | | | 1,760 | |
| | | | | Ford Motor Credit Co. LLC | | | | |
| | 12,925 | | | 2.75%, 05/15/2015 | | | 13,191 | |
| | | | | | | | 14,951 | |
| | | | | Captive Retail Finance - 0.0% | | | | |
| | | | | Dufry Finance SCA | | | | |
| | 605 | | | 5.50%, 10/15/2020 ■ | | | 626 | |
| | | | | | | | | |
| | | | | Commercial Banking - 0.6% | | | | |
| | | | | Barclays Bank plc | | | | |
| | 10,500 | | | 6.05%, 12/04/2017 ■ | | | 11,617 | |
| | | | | BNP Paribas | | | | |
| | 12,625 | | | 2.38%, 09/14/2017 | | | 12,806 | |
| | | | | Santander Holdings USA | | | | |
| | 2,116 | | | 4.63%, 04/19/2016 ‡ | | | 2,212 | |
| | | | | | | | 26,635 | |
| | | | | Depository Credit Banking - 3.0% | | | | |
| | | | | Bank of America Corp. | | | | |
| | 6,500 | | | 5.63%, 07/01/2020 ‡ | | | 7,707 | |
| | 6,365 | | | 5.75%, 12/01/2017 ‡ | | | 7,419 | |
| | 4,000 | | | 5.88%, 01/05/2021 ‡ | | | 4,789 | |
| | 3,700 | | | 7.63%, 06/01/2019 ‡ | | | 4,734 | |
| | | | | Citigroup, Inc. | | | | |
| | 2,000 | | | 2.25%, 08/07/2015 | | | 2,048 | |
| | 5,700 | | | 4.45%, 01/10/2017 | | | 6,314 | |
| | 7,800 | | | 4.59%, 12/15/2015 | | | 8,516 | |
| | 781 | | | 5.38%, 08/09/2020 | | | 920 | |
| | 4,102 | | | 6.13%, 08/25/2036 | | | 4,471 | |
| | 8,900 | | | 6.63%, 06/15/2032 | | | 10,280 | |
| | 595 | | | 6.88%, 03/05/2038 | | | 783 | |
| | 4,839 | | | 8.50%, 05/22/2019 | | | 6,507 | |
| | | | | HSBC Bank USA | | | | |
| | 3,271 | | | 2.38%, 02/13/2015 | | | 3,365 | |
| | | | | HSBC Holdings plc | | | | |
| | 5,900 | | | 4.00%, 03/30/2022 | | | 6,459 | |
| | 5,500 | | | 6.80%, 06/01/2038 | | | 7,034 | |
| | | | | HSBC USA, Inc. | | | | |
| | 4,515 | | | 1.63%, 01/16/2018 | | | 4,519 | |
| | | | | PNC Bank NA | | | | |
| | 2,275 | | | 2.70%, 11/01/2022 | | | 2,276 | |
| | 2,235 | | | 6.00%, 12/07/2017 | | | 2,690 | |
| | 2,924 | | | 6.88%, 04/01/2018 | | | 3,652 | |
| | | | | U.S. Bancorp | | | | |
| | 6,700 | | | 2.95%, 07/15/2022 ‡ | | | 6,769 | |
| | | | | Wells Fargo & Co. | | | | |
| | 10,140 | | | 1.50%, 01/16/2018 | | | 10,157 | |
| | 4,000 | | | 4.60%, 04/01/2021 | | | 4,601 | |
| | | | | Wells Fargo Bank NA | | | | |
| | 8,015 | | | 0.52%, 05/16/2016 Δ | | | 7,845 | |
| | | | | | | | 123,855 | |
| | | | | Insurance Carriers - 1.2% | | | | |
| | | | | Aetna, Inc. | | | | |
| | 2,635 | | | 2.75%, 11/15/2022 | | | 2,613 | |
| | | | | American International Group, Inc. | | | | |
| | 4,595 | | | 2.38%, 08/24/2015 | | | 4,729 | |
| | 5,565 | | | 3.80%, 03/22/2017 | | | 6,023 | |
| | | | | ING US, Inc. | | | | |
| | 1,995 | | | 5.50%, 07/15/2022 ■ | | | 2,165 | |
| | | | | Massachusetts Mutual Life Insurance Co. | | | | |
| | 2,993 | | | 8.88%, 06/01/2039 ■ | | | 4,520 | |
| | | | | Nationwide Financial Services, Inc. | | | | |
| | 4,280 | | | 5.38%, 03/25/2021 ■‡ | | | 4,567 | |
| | | | | Nationwide Mutual Insurance Co. | | | | |
| | 5,925 | | | 9.38%, 08/15/2039 ■‡ | | | 8,337 | |
| | | | | Principal Financial Group, Inc. | | | | |
| | 1,530 | | | 1.85%, 11/15/2017 | | | 1,538 | |
| | | | | Swiss Re Treasury U.S. Corp. | | | | |
| | 1,635 | | | 2.88%, 12/06/2022 ■ | | | 1,636 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | Market Value ╪ | |
| CORPORATE BONDS - 32.7% - (continued) | | | | |
| | Finance and Insurance - 13.5% - (continued) | | | | |
| | | | | Insurance Carriers - 1.2% - (continued) | | | | |
| | | | | Teachers Insurance & Annuity Association of America | | | | |
| $ | 6,248 | | | 6.85%, 12/16/2039 ■ | | $ | 8,474 | |
| | | | | Wellpoint, Inc. | | | | |
| | 4,120 | | | 1.88%, 01/15/2018 | | | 4,171 | |
| | | | | | | | 48,773 | |
| | | | | International Trade Financing (Foreign Banks) - 0.4% | | | | |
| | | | | Royal Bank of Scotland plc | | | | |
| | 5,875 | | | 2.55%, 09/18/2015 | | | 6,013 | |
| | 5,000 | | | 3.95%, 09/21/2015 | | | 5,309 | |
| | 4,995 | | | 6.13%, 12/15/2022 | | | 5,272 | |
| | | | | | | | 16,594 | |
| | | | | Monetary Authorities - Central Bank - 0.3% | | | | |
| | | | | Lloyds Banking Group plc | | | | |
| | 2,940 | | | 6.50%, 09/14/2020 ■ | | | 3,248 | |
| | | | | Santander U.S. Debt S.A. | | | | |
| | 10,100 | | | 3.72%, 01/20/2015 ■‡ | | | 10,146 | |
| | | | | | | | 13,394 | |
| | | | | Nondepository Credit Banking - 1.9% | | | | |
| | | | | Ally Financial, Inc. | | | | |
| | 2,085 | | | 5.50%, 02/15/2017 | | | 2,231 | |
| | | | | American Express Co. | | | | |
| | 2,673 | | | 2.65%, 12/02/2022 ■ | | | 2,662 | |
| | | | | Capital One Financial Corp. | | | | |
| | 2,000 | | | 4.75%, 07/15/2021 | | | 2,306 | |
| | 4,000 | | | 6.15%, 09/01/2016 | | | 4,576 | |
| | | | | CIT Group, Inc. | | | | |
| | 45 | | | 5.00%, 05/15/2017 | | | 48 | |
| | 75 | | | 5.38%, 05/15/2020 | | | 82 | |
| | 2,593 | | | 5.50%, 02/15/2019 ■ | | | 2,826 | |
| | 1,175 | | | 6.63%, 04/01/2018 ■ | | | 1,328 | |
| | | | | Discover Financial Services, Inc. | | | | |
| | 5,970 | | | 5.20%, 04/27/2022 | | | 6,798 | |
| | | | | General Electric Capital Corp. | | | | |
| | 10,029 | | | 4.38%, 09/16/2020 | | | 11,193 | |
| | 4,500 | | | 5.30%, 02/11/2021 | | | 5,224 | |
| | 7,810 | | | 5.55%, 05/04/2020 | | | 9,284 | |
| | 8,490 | | | 5.63%, 05/01/2018 | | | 10,082 | |
| | 3,900 | | | 6.25%, 12/15/2022 ♠ | | | 4,247 | |
| | | | | Provident Funding Associates L.P. | | | | |
| | 1,901 | | | 10.25%, 04/15/2017 ■ | | | 2,096 | |
| | | | | SLM Corp. | | | | |
| | 8,745 | | | 7.25%, 01/25/2022 | | | 9,642 | |
| | 3,755 | | | 8.45%, 06/15/2018 | | | 4,393 | |
| | | | | | | | 79,018 | |
| | | | | Other Financial Investment Activities - 0.5% | | | | |
| | | | | BAE Systems Holdings, Inc. | | | | |
| | 4,154 | | | 5.20%, 08/15/2015 ■ | | | 4,549 | |
| | | | | Fresenius Medical Care US Finance II, Inc. | | | | |
| | 3,185 | | | 5.63%, 07/31/2019 ■ | | | 3,420 | |
| | 596 | | | 9.00%, 07/15/2015 ■ | | | 687 | |
| | | | | Ladder Capital Finance Holdings LLC | | | | |
| | 3,146 | | | 7.38%, 10/01/2017 ■ | | | 3,232 | |
| | | | | State Street Corp. | | | | |
| | 7,610 | | | 4.96%, 03/15/2018 | | | 8,620 | |
| | | | | | | | 20,508 | |
| | | | | Other Investment Pools and Funds - 0.2% | | | | |
| | | | | Fibria Overseas Finance Ltd. | | | | |
| | 3,875 | | | 7.50%, 05/04/2020 ■ | | | 4,301 | |
| | | | | Ineos Finance plc | | | | |
| | 649 | | | 8.38%, 02/15/2019 ■ | | | 700 | |
| | 1,780 | | | 9.00%, 05/15/2015 ■ | | | 1,891 | |
| | | | | | | | 6,892 | |
| | | | | Real Estate Investment Trust (REIT) - 1.3% | | | | |
| | | | | Brandywine Operating Partnership L.P. | | | | |
| | 6,200 | | | 3.95%, 02/15/2023 | | | 6,145 | |
| | | | | DuPont Fabros Technology L.P. | | | | |
| | 1,900 | | | 8.50%, 12/15/2017 | | | 2,076 | |
| | | | | HCP, Inc. | | | | |
| | 4,200 | | | 2.63%, 02/01/2020 | | | 4,184 | |
| | 5,284 | | | 3.75%, 02/01/2016 | | | 5,608 | |
| | | | | Health Care, Inc. | | | | |
| | 6,155 | | | 2.25%, 03/15/2018 | | | 6,150 | |
| | 2,260 | | | 4.13%, 04/01/2019 | | | 2,431 | |
| | | | | Host Hotels & Resorts L.P. | | | | |
| | 5,900 | | | 6.00%, 11/01/2020 | | | 6,490 | |
| | | | | Kimco Realty Corp. | | | | |
| | 1,390 | | | 4.30%, 02/01/2018 | | | 1,528 | |
| | | | | Liberty Property L.P. | | | | |
| | 2,365 | | | 3.38%, 06/15/2023 | | | 2,340 | |
| | 1,930 | | | 4.13%, 06/15/2022 | | | 2,029 | |
| | | | | Realty Income Corp. | | | | |
| | 4,216 | | | 3.25%, 10/15/2022 | | | 4,127 | |
| | | | | Ventas Realty L.P. | | | | |
| | 2,895 | | | 2.00%, 02/15/2018 | | | 2,897 | |
| | 6,400 | | | 3.25%, 08/15/2022 | | | 6,275 | |
| | | | | | | | 52,280 | |
| | | | | Securities, Commodities and Brokerage - 3.7% | | | | |
| | | | | Bear Stearns & Co., Inc. | | | | |
| | 587 | | | 5.55%, 01/22/2017 | | | 662 | |
| | | | | Goldman Sachs Group, Inc. | | | | |
| | 10,955 | | | 5.75%, 01/24/2022 | | | 12,951 | |
| | 6,637 | | | 6.00%, 06/15/2020 | | | 7,886 | |
| | 4,400 | | | 6.45%, 05/01/2036 | | | 4,826 | |
| | 8,540 | | | 6.75%, 10/01/2037 | | | 9,679 | |
| | | | | JP Morgan Chase & Co. | | | | |
| | 14,970 | | | 3.15%, 07/05/2016 | | | 15,860 | |
| | 12,145 | | | 4.35%, 08/15/2021 | | | 13,581 | |
| | 1,800 | | | 4.50%, 01/24/2022 | | | 2,036 | |
| | 6,375 | | | 6.00%, 01/15/2018 | | | 7,632 | |
| | | | | Merrill Lynch & Co., Inc. | | | | |
| | 3,006 | | | 5.70%, 05/02/2017 | | | 3,299 | |
| | 24,775 | | | 6.05%, 05/16/2016 | | | 27,274 | |
| | | | | Morgan Stanley | | | | |
| | 8,505 | | | 3.80%, 04/29/2016 | | | 8,928 | |
| | 4,065 | | | 4.88%, 11/01/2022 | | | 4,209 | |
| | 2,850 | | | 5.63%, 09/23/2019 | | | 3,223 | |
| | 17,500 | | | 6.25%, 08/28/2017 | | | 20,030 | |
| | 5,000 | | | 6.38%, 07/24/2042 | | | 5,862 | |
| | | | | UBS AG Stamford CT | | | | |
| | 6,890 | | | 7.63%, 08/17/2022 | | | 7,610 | |
| | | | | | | | 155,548 | |
| | | | | | | | 559,074 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Total Return Bond HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| CORPORATE BONDS - 32.7% - (continued) | | | | |
| | Health Care and Social Assistance - 1.8% | | | | |
| | | | | General Medical and Surgical Hospitals - 0.5% | | | | |
| | | | | Community Health Systems, Inc. | | | | |
| $ | 4,445 | | | 5.13%, 08/15/2018 | | $ | 4,634 | |
| | | | | HCA, Inc. | | | | |
| | 4,160 | | | 6.50%, 02/15/2020 | | | 4,680 | |
| | 2,135 | | | 7.25%, 09/15/2020 | | | 2,365 | |
| | 3,177 | | | 7.50%, 11/15/2095 | | | 2,740 | |
| | 1,140 | | | 8.50%, 04/15/2019 | | | 1,271 | |
| | | | | Memorial Sloan-Kettering Cancer Center | | | | |
| | 4,710 | | | 5.00%, 07/01/2042 | | | 5,458 | |
| | | | | | | | 21,148 | |
| | | | | Health and Personal Care Stores - 0.3% | | | | |
| | | | | CVS Caremark Corp. | | | | |
| | 8,092 | | | 8.35%, 07/10/2031 ■ | | | 11,158 | |
| | | | | | | | | |
| | | | | Offices and Physicians - 0.1% | | | | |
| | | | | Partners Healthcare System, Inc. | | | | |
| | 2,815 | | | 3.44%, 07/01/2021 | | | 2,984 | |
| | | | | | | | | |
| | | | | Pharmaceutical and Medicine Manufacturing - 0.9% | | | | |
| | | | | AbbVie, Inc. | | | | |
| | 10,835 | | | 1.20%, 11/06/2015 ■ | | | 10,907 | |
| | 4,145 | | | 1.75%, 11/06/2017 ■ | | | 4,190 | |
| | 7,340 | | | 2.00%, 11/06/2018 ■ | | | 7,435 | |
| | | | | Express Scripts Holding Co. | | | | |
| | 4,610 | | | 2.10%, 02/12/2015 ■ | | | 4,696 | |
| | | | | Gilead Sciences, Inc. | | | | |
| | 9,439 | | | 4.40%, 12/01/2021 | | | 10,760 | |
| | | | | Valeant Pharmaceuticals International, Inc. | | | | |
| | 520 | | | 6.75%, 08/15/2021 ■ | | | 558 | |
| | | | | | | | 38,546 | |
| | | | | | | | 73,836 | |
| | Information - 2.8% | | | | |
| | | | | Cable and Other Program Distribution - 0.7% | | | | |
| | | | | CSC Holdings LLC | | | | |
| | 768 | | | 6.75%, 11/15/2021 ■ | | | 852 | |
| | | | | CSC Holdings, Inc. | | | | |
| | 3,985 | | | 7.63%, 07/15/2018 | | | 4,603 | |
| | | | | DISH DBS Corp. | | | | |
| | 7,130 | | | 5.88%, 07/15/2022 | | | 7,665 | |
| | 7,530 | | | 7.88%, 09/01/2019 | | | 8,923 | |
| | | | | Rogers Communications, Inc. | | | | |
| | 1,745 | | | 8.75%, 05/01/2032 | | | 2,682 | |
| | | | | TCI Communications, Inc. | | | | |
| | 2,025 | | | 8.75%, 08/01/2015 | | | 2,416 | |
| | | | | | | | 27,141 | |
| | | | | Data Processing Services - 0.1% | | | | |
| | | | | Audatex North America, Inc. | | | | |
| | 2,001 | | | 6.75%, 06/15/2018 ■ | | | 2,141 | |
| | | | | | | | | |
| | | | | Other Information Services - 0.1% | | | | |
| | | | | Cox Communications, Inc. | | | | |
| | 3,735 | | | 3.25%, 12/15/2022 ■ | | | 3,852 | |
| | | | | InterActiveCorp | | | | |
| | 505 | | | 4.75%, 12/15/2022 ■ | | | 502 | |
| | | | | | | | 4,354 | |
| | | | | Satellite Telecommunications - 0.1% | | | | |
| | | | | Hughes Satelite Systems Corp. | | | | |
| | 2,050 | | | 6.50%, 06/15/2019 | | | 2,260 | |
| | | | | Intelsat Jackson Holdings S.A. | | | | |
| | 2,665 | | | 8.50%, 11/01/2019 | | | 2,985 | |
| | | | | | | | 5,245 | |
| | | | | Telecommunications - Other - 0.6% | | | | |
| | | | | Sprint Nextel Corp. | | | | |
| | 3,745 | | | 7.00%, 03/01/2020 ■ | | | 4,354 | |
| | 1,306 | | | 9.00%, 11/15/2018 ■ | | | 1,613 | |
| | | | | Telefonica Emisiones SAU | | | | |
| | 3,520 | | | 3.99%, 02/16/2016 | | | 3,663 | |
| | | | | UPCB Finance III Ltd. | | | | |
| | 1,084 | | | 6.63%, 07/01/2020 ■ | | | 1,161 | |
| | | | | UPCB Finance VI Ltd. | | | | |
| | 3,070 | | | 6.88%, 01/15/2022 ■ | | | 3,323 | |
| | | | | Vivendi S.A. | | | | |
| | 8,080 | | | 2.40%, 04/10/2015 ■ | | | 8,241 | |
| | | | | Wind Acquisition Finance S.A. | | | | |
| | 3,470 | | | 7.25%, 02/15/2018 ■ | | | 3,498 | |
| | | | | | | | 25,853 | |
| | | | | Telecommunications - Wired Carriers - 0.6% | | | | |
| | | | | AT&T, Inc. | | | | |
| | 1,200 | | | 5.35%, 09/01/2040 | | | 1,397 | |
| | | | | Deutsche Telekom International Finance B.V. | | | | |
| | 9,065 | | | 3.13%, 04/11/2016 ■ | | | 9,588 | |
| | | | | Paetec Holding Corp. | | | | |
| | 698 | | | 9.88%, 12/01/2018 | | | 799 | |
| | | | | TW Telecom Holdings, Inc. | | | | |
| | 855 | | | 5.38%, 10/01/2022 ■ | | | 896 | |
| | | | | Unitymedia Hessen GmbH & Co. | | | | |
| | 1,650 | | | 5.50%, 01/15/2023 ■ | | | 1,704 | |
| | 2,539 | | | 7.50%, 03/15/2019 ■ | | | 2,793 | |
| | | | | Videotron Ltee | | | | |
| | 915 | | | 9.13%, 04/15/2018 | | | 974 | |
| | | | | Windstream Corp. | | | | |
| | 1,625 | | | 7.50%, 04/01/2023 | | | 1,710 | |
| | 1,475 | | | 7.75%, 10/15/2020 | | | 1,593 | |
| | 4,356 | | | 7.88%, 11/01/2017 | | | 4,901 | |
| | | | | | | | 26,355 | |
| | | | | Telecommunications - Wireless Carriers - 0.3% | | | | |
| | | | | Cricket Communications, Inc. | | | | |
| | 6,050 | | | 7.75%, 05/15/2016 | | | 6,406 | |
| | | | | Qwest Corp. | | | | |
| | 4,835 | | | 7.20%, 11/10/2026 | | | 4,862 | |
| | 1,906 | | | 7.25%, 10/15/2035 | | | 2,015 | |
| | | | | SBA Telecommunications, Inc. | | | | |
| | 310 | | | 5.75%, 07/15/2020 ■ | | | 329 | |
| | | | | | | | 13,612 | |
| | | | | Wireless Communications Services - 0.3% | | | | |
| | | | | Altice Financing S.A. | | | | |
| | 1,745 | | | 7.88%, 12/15/2019 ■ | | | 1,845 | |
| | | | | Verizon Communications, Inc. | | | | |
| | 4,000 | | | 2.45%, 11/01/2022 | | | 4,002 | |
| | 3,400 | | | 6.40%, 02/15/2038 | | | 4,603 | |
| | | | | | | | 10,450 | |
| | | | | | | | 115,151 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | Market Value ╪ | |
| CORPORATE BONDS - 32.7% - (continued) | | | | |
| | Machinery Manufacturing - 0.3% | | | | |
| | | | | Agriculture, Construction, Mining and Machinery - 0.3% | | | | |
| | | | | Case New Holland, Inc. | | | | |
| $ | 9,901 | | | 7.88%, 12/01/2017 | | $ | 11,708 | |
| | | | | | | | | |
| | Mining - 0.6% | | | | |
| | | | | Coal Mining - 0.3% | | | | |
| | | | | Consol Energy, Inc. | | | | |
| | 925 | | | 8.00%, 04/01/2017 | | | 1,001 | |
| | | | | Peabody Energy Corp. | | | | |
| | 1,370 | | | 6.00%, 11/15/2018 | | | 1,456 | |
| | 4,355 | | | 6.50%, 09/15/2020 | | | 4,671 | |
| | 5,250 | | | 7.38%, 11/01/2016 | | | 6,011 | |
| | | | | | | | 13,139 | |
| | | | | Metal Ore Mining - 0.1% | | | | |
| | | | | Rio Tinto Finance USA Ltd. | | | | |
| | 2,965 | | | 9.00%, 05/01/2019 | | | 4,073 | |
| | | | | | | | | |
| | | | | Nonmetallic Mineral Mining and Quarrying - 0.2% | | | | |
| | | | | FMG Resources Pty Ltd. | | | | |
| | 5,480 | | | 6.00%, 04/01/2017 ■ | | | 5,589 | |
| | 1,299 | | | 7.00%, 11/01/2015 ■ | | | 1,364 | |
| | | | | Vulcan Materials Co. | | | | |
| | 200 | | | 7.15%, 11/30/2037 | | | 197 | |
| | 220 | | | 7.50%, 06/15/2021 | | | 251 | |
| | | | | | | | 7,401 | |
| | | | | | | | 24,613 | |
| | Miscellaneous Manufacturing - 0.4% | | | | |
| | | | | Aerospace Product and Parts Manufacturing - 0.3% | | | | |
| | | | | BE Aerospace, Inc. | | | | |
| | 4,056 | | | 5.25%, 04/01/2022 | | | 4,299 | |
| | 3,059 | | | 6.88%, 10/01/2020 | | | 3,403 | |
| | | | | Bombardier, Inc. | | | | |
| | 4,540 | | | 7.75%, 03/15/2020 ■ | | | 5,153 | |
| | | | | | | | 12,855 | |
| | | | | Other Miscellaneous Manufacturing - 0.1% | | | | |
| | | | | Owens-Brockway Glass Container, Inc. | | | | |
| | 2,690 | | | 7.38%, 05/15/2016 | | | 3,067 | |
| | | | | | | | | |
| | | | | | | | 15,922 | |
| | Motor Vehicle and Parts Manufacturing - 0.2% | | | | |
| | | | | Motor Vehicle Parts Manufacturing - 0.2% | | | | |
| | | | | Tenneco, Inc. | | | | |
| | 2,110 | | | 6.88%, 12/15/2020 | | | 2,297 | |
| | | | | TRW Automotive, Inc. | | | | |
| | 5,010 | | | 7.25%, 03/15/2017 ■ | | | 5,768 | |
| | | | | | | | 8,065 | |
| | Nonmetallic Mineral Product Manufacturing - 0.2% | | | | |
| | | | | Glass and Glass Product Manufacturing - 0.2% | | | | |
| | | | | Ardagh Packaging Finance plc | | | | |
| | 1,985 | | | 7.38%, 10/15/2017 ■ | | | 2,159 | |
| | | | | Silgan Holdings, Inc. | | | | |
| | 5,315 | | | 5.00%, 04/01/2020 ‡ | | | 5,514 | |
| | | | | | | | 7,673 | |
| | Paper Manufacturing - 0.1% | | | | |
| | | | | Pulp, Paper and Paperboard Mills - 0.1% | | | | |
| | | | | P.H. Glatfelter Co. | | | | |
| | 745 | | | 5.38%, 10/15/2020 ■ | | | 764 | |
| | | | | Rock-Tenn Co. | | | | |
| | 360 | | | 3.50%, 03/01/2020 ■ | | | 369 | |
| | 2,690 | | | 4.00%, 03/01/2023 ■ | | | 2,733 | |
| | | | | | | | 3,866 | |
| | Petroleum and Coal Products Manufacturing - 2.1% | | | | |
| | | | | Natural Gas Distribution - 0.1% | | | | |
| | | | | Ferrellgas Partners L.P. | | | | |
| | 2,770 | | | 6.50%, 05/01/2021 | | | 2,742 | |
| | | | | | | | | |
| | | | | Oil and Gas Extraction - 1.6% | | | | |
| | | | | Anadarko Petroleum Corp. | | | | |
| | 3,565 | | | 6.38%, 09/15/2017 | | | 4,258 | |
| | | | | Chesapeake Energy Corp. | | | | |
| | 2,178 | | | 6.88%, 08/15/2018 | | | 2,298 | |
| | | | | Continental Resources, Inc. | | | | |
| | 2,775 | | | 5.00%, 09/15/2022 | | | 2,990 | |
| | | | | Everest Acquisition LLC | | | | |
| | 3,023 | | | 9.38%, 05/01/2020 | | | 3,408 | |
| | | | | Gazprom Neft OAO via GPN Capital S.A. | | | | |
| | 2,786 | | | 4.38%, 09/19/2022 ■ | | | 2,849 | |
| | | | | Harvest Operations Corp. | | | | |
| | 1,695 | | | 6.88%, 10/01/2017 | | | 1,881 | |
| | | | | Hornbeck Offshore Services, Inc. | | | | |
| | 3,595 | | | 5.88%, 04/01/2020 | | | 3,757 | |
| | | | | Newfield Exploration Co. | | | | |
| | 7,055 | | | 5.75%, 01/30/2022 | | | 7,761 | |
| | | | | Nexen, Inc. | | | | |
| | 2,735 | | | 7.50%, 07/30/2039 | | | 3,958 | |
| | | | | Pemex Project Funding Master Trust | | | | |
| | 6,205 | | | 6.63%, 06/15/2035 | | | 7,880 | |
| | | | | Petrobras International Finance Co. | | | | |
| | 2,155 | | | 5.38%, 01/27/2021 | | | 2,426 | |
| | 9,775 | | | 5.75%, 01/20/2020 | | | 11,127 | |
| | 3,975 | | | 6.75%, 01/27/2041 | | | 5,037 | |
| | | | | Pioneer Natural Resources Co. | | | | |
| | 660 | | | 6.65%, 03/15/2017 | | | 778 | |
| | 2,090 | | | 7.50%, 01/15/2020 | | | 2,648 | |
| | | | | Range Resources Corp. | | | | |
| | 1,950 | | | 6.75%, 08/01/2020 | | | 2,116 | |
| | | | | Seadrill Ltd. | | | | |
| | 2,440 | | | 5.63%, 09/15/2017 ■ | | | 2,422 | |
| | | | | | | | 67,594 | |
| | | | | Petroleum and Coal Products Manufacturing - 0.2% | | | | |
| | | | | MEG Energy Corp. | | | | |
| | 1,105 | | | 6.38%, 01/30/2023 ■ | | | 1,152 | |
| | | | | Rosneft Oil Co. | | | | |
| | 2,245 | | | 3.15%, 03/06/2017 ■ | | | 2,279 | |
| | | | | Valero Energy Corp. | | | | |
| | 4,791 | | | 9.38%, 03/15/2019 | | | 6,590 | |
| | | | | | | | 10,021 | |
| | | | | Support Activities For Mining - 0.2% | | | | |
| | | | | Transocean, Inc. | | | | |
| | 1,120 | | | 5.05%, 12/15/2016 | | | 1,247 | |
| | 4,375 | | | 6.38%, 12/15/2021 | | | 5,317 | |
| | | | | | | | 6,564 | |
| | | | | | | | 86,921 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Total Return Bond HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| CORPORATE BONDS - 32.7% - (continued) | | | | |
| | Pipeline Transportation - 0.6% | | | | |
| | | | | Pipeline Transportation of Natural Gas - 0.6% | | | | |
| | | | | El Paso Corp. | | | | |
| $ | 2,075 | | | 7.00%, 06/15/2017 | | $ | 2,370 | |
| | 1,602 | | | 7.80%, 08/01/2031 | | | 1,868 | |
| | | | | Energy Transfer Equity L.P. | | | | |
| | 6,377 | | | 7.50%, 10/15/2020 | | | 7,365 | |
| | | | | Kinder Morgan Energy Partners L.P. | | | | |
| | 4,335 | | | 6.85%, 02/15/2020 | | | 5,462 | |
| | | | | Kinder Morgan Finance Co. | | | | |
| | 3,980 | | | 6.00%, 01/15/2018 ■ | | | 4,375 | |
| | | | | MarkWest Energy Partners L.P. | | | | |
| | 685 | | | 5.50%, 02/15/2023 | | | 743 | |
| | 2,000 | | | 6.25%, 06/15/2022 | | | 2,180 | |
| | | | | | | | 24,363 | |
| | Plastics and Rubber Products Manufacturing - 0.1% | | | | |
| | | | | Rubber Product Manufacturing - 0.1% | | | | |
| | | | | Continental Rubber of America Corp. | | | | |
| | 2,995 | | | 4.50%, 09/15/2019 ■ | | | 3,065 | |
| | | | | | | | | |
| | Primary Metal Manufacturing - 0.3% | | | | |
| | | | | Foundries - 0.2% | | | | |
| | | | | Precision Castparts Corp. | | | | |
| | 5,290 | | | 1.25%, 01/15/2018 | | | 5,299 | |
| | 3,545 | | | 2.50%, 01/15/2023 | | | 3,567 | |
| | | | | | | | 8,866 | |
| | | | | Iron, Steel Mills and Ferroalloy Manufacturing - 0.1% | | | | |
| | | | | ArcelorMittal | | | | |
| | 2,975 | | | 9.50%, 02/15/2015 | | | 3,311 | |
| | | | | | | | | |
| | | | | | | | 12,177 | |
| | Professional, Scientific and Technical Services - 0.1% | | | | |
| | | | | Advertising and Related Services - 0.1% | | | | |
| | | | | Lamar Media Corp. | | | | |
| | 2,080 | | | 5.88%, 02/01/2022 | | | 2,257 | |
| | | | | | | | | |
| | | | | Computer Systems Design and Related Services - 0.0% | | | | |
| | | | | Lender Processing Services, Inc. | | | | |
| | 1,320 | | | 5.75%, 04/15/2023 | | | 1,369 | |
| | | | | | | | | |
| | | | | | | | 3,626 | |
| | Real Estate, Rental and Leasing - 0.8% | | | | |
| | | | | Automotive Equipment Rental and Leasing - 0.0% | | | | |
| | | | | Ashtead Capital, Inc. | | | | |
| | 295 | | | 6.50%, 07/15/2022 ■ | | | 320 | |
| | | | | United Rental Financing Escrow Corp. | | | | |
| | 139 | | | 5.75%, 07/15/2018 ■ | | | 150 | |
| | | | | | | | 470 | |
| | | | | General Rental Centers - 0.2% | | | | |
| | | | | ERAC USA Finance Co. | | | | |
| | 6,130 | | | 6.38%, 10/15/2017 ■ | | | 7,414 | |
| | | | | | | | | |
| | | | | Industrial Machinery, Equipment Rental and Leasing - 0.6% | | | | |
| | | | | Air Lease Corp. | | | | |
| | 2,575 | | | 4.50%, 01/15/2016 ■ | | | 2,601 | |
| | | | | International Lease Finance Corp. | | | | |
| | 1,585 | | | 5.75%, 05/15/2016 | | | 1,671 | |
| | 13,570 | | | 5.88%, 04/01/2019 | | | 14,303 | |
| | 3,060 | | | 6.25%, 05/15/2019 | | | 3,259 | |
| | 1,000 | | | 8.25%, 12/15/2020 | | | 1,192 | |
| | 1,597 | | | 8.88%, 09/01/2017 | | | 1,876 | |
| | | | | | | | 24,902 | |
| | | | | | | | 32,786 | |
| | Retail Trade - 1.3% | | | | |
| | | | | Automobile Dealers - 0.1% | | | | |
| | | | | AutoNation, Inc. | | | | |
| | 2,685 | | | 5.50%, 02/01/2020 | | | 2,883 | |
| | | | | | | | | |
| | | | | Automotive Parts, Accessories and Tire Stores - 0.3% | | | | |
| | | | | AutoZone, Inc. | | | | |
| | 11,985 | | | 3.70%, 04/15/2022 | | | 12,600 | |
| | | | | | | | | |
| | | | | Building Material and Supplies Dealers - 0.1% | | | | |
| | | | | Building Materials Corp. | | | | |
| | 3,474 | | | 6.75%, 05/01/2021 ■ | | | 3,839 | |
| | 1,962 | | | 7.50%, 03/15/2020 ■ | | | 2,158 | |
| | | | | | | | 5,997 | |
| | | | | Clothing Stores - 0.1% | | | | |
| | | | | Ltd. Brands, Inc. | | | | |
| | 5,470 | | | 5.63%, 02/15/2022 | | | 5,949 | |
| | | | | | | | | |
| | | | | Direct Selling Establishments - 0.2% | | | | |
| | | | | AmeriGas Partners L.P. | | | | |
| | 1,554 | | | 6.25%, 08/20/2019 | | | 1,663 | |
| | | | | Energy Transfer Partners | | | | |
| | 6,110 | | | 6.50%, 02/01/2042 | | | 7,480 | |
| | | | | | | | 9,143 | |
| | | | | Electronic Shopping and Mail-Order Houses - 0.1% | | | | |
| | | | | QVC, Inc. | | | | |
| | 3,760 | | | 7.50%, 10/01/2019 ■ | | | 4,148 | |
| | | | | | | | | |
| | | | | Other Miscellaneous Store Retailers - 0.4% | | | | |
| | | | | Hutchinson Whampoa International 12 II Ltd. | | | | |
| | 10,500 | | | 2.00%, 11/08/2017 ■ | | | 10,492 | |
| | | | | Sally Holdings LLC | | | | |
| | 1,515 | | | 5.75%, 06/01/2022 | | | 1,644 | |
| | | | | Sotheby's | | | | |
| | 2,390 | | | 5.25%, 10/01/2022 ■ | | | 2,414 | |
| | | | | | | | 14,550 | |
| | | | | | | | 55,270 | |
| | Transportation Equipment Manufacturing - 0.1% | | | | |
| | | | | Ship and Boat Building - 0.1% | | | | |
| | | | | Huntington Ingalls Industries, Inc. | | | | |
| | 3,925 | | | 6.88%, 03/15/2018 | | | 4,268 | |
| | | | | | | | | |
| | Utilities - 1.4% | | | | |
| | | | | Electric Generation, Transmission and Distribution - 1.4% | | | | |
| | | | | AES (The) Corp. | | | | |
| | 890 | | | 9.75%, 04/15/2016 | | | 1,064 | |
| | | | | AES El Salvador Trust | | | | |
| | 2,300 | | | 6.75%, 02/01/2016 § | | | 2,363 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | Market Value ╪ | |
| CORPORATE BONDS - 32.7% - (continued) | | | | |
| | Utilities - 1.4% - (continued) | | | | |
| | | | | Electric Generation, Transmission and Distribution - 1.4% - (continued) | | | | |
| | | | | American Electric Power Co., Inc. | | | | |
| $ | 2,530 | | | 1.65%, 12/15/2017 | | $ | 2,539 | |
| | | | | Calpine Corp. | | | | |
| | 4,860 | | | 7.50%, 02/15/2021 ■ | | | 5,370 | |
| | 621 | | | 7.50%, 02/15/2021 § | | | 686 | |
| | 2,083 | | | 7.88%, 01/15/2023 ■ | | | 2,354 | |
| | | | | Carolina Power & Light Co. | | | | |
| | 2,365 | | | 4.10%, 05/15/2042 | | | 2,420 | |
| | | | | CenterPoint Energy, Inc. | | | | |
| | 7,475 | | | 6.85%, 06/01/2015 | | | 8,437 | |
| | | | | Dolphin Subsidiary II, Inc. | | | | |
| | 8,795 | | | 7.25%, 10/15/2021 | | | 9,411 | |
| | | | | EDP Finance B.V. | | | | |
| | 2,520 | | | 4.90%, 10/01/2019 ■ | | | 2,497 | |
| | | | | MidAmerican Energy Holdings Co. | | | | |
| | 8,665 | | | 8.48%, 09/15/2028 | | | 12,738 | |
| | | | | Pacific Gas & Electric Co. | | | | |
| | 5,608 | | | 8.25%, 10/15/2018 | | | 7,635 | |
| | | | | | | | 57,514 | |
| | Wholesale Trade - 0.4% | | | | |
| | | | | Beer, Wine, Distilled Alcoholic Beverage Wholesalers - 0.4% | | | | |
| | | | | Heineken N.V. | | | | |
| | 3,080 | | | 1.40%, 10/01/2017 ■ | | | 3,071 | |
| | 2,225 | | | 2.75%, 04/01/2023 ■ | | | 2,185 | |
| | | | | SABMiller Holdings, Inc. | | | | |
| | 7,840 | | | 2.45%, 01/15/2017 ■ | | | 8,172 | |
| | 2,344 | | | 4.95%, 01/15/2042 ■ | | | 2,657 | |
| | | | | | | | 16,085 | |
| | | | | Total corporate bonds | | | | |
| | | | | (cost $1,259,102) | | $ | 1,353,829 | |
| | | | | | | | | |
| FOREIGN GOVERNMENT OBLIGATIONS - 0.3% | | | | |
| | | | | Mexico - 0.2% | | | | |
| | | | | United Mexican States | | | | |
| $ | 7,260 | | | 4.75%, 03/08/2044 | | $ | 8,204 | |
| | | | | | | | | |
| | | | | Russia - 0.1% | | | | |
| | | | | Russian Federation | | | | |
| | 4,400 | | | 3.25%, 04/04/2017 ■ | | | 4,675 | |
| | | | | | | | | |
| | | | | Total foreign government obligations | | | | |
| | | | | (cost $11,540) | | $ | 12,879 | |
| | | | | | | | | |
| MUNICIPAL BONDS - 1.4% | | | | |
| | | | | General Obligations - 0.7% | | | | |
| | | | | California State GO | | | | |
| $ | 3,180 | | | 7.50%, 04/01/2034 | | $ | 4,422 | |
| | 1,195 | | | 7.60%, 11/01/2040 | | | 1,746 | |
| | | | | California State GO, Taxable | | | | |
| | 10,720 | | | 7.55%, 04/01/2039 | | | 15,456 | |
| | | | | Oregon State GO | | | | |
| | 7,325 | | | 4.76%, 06/30/2028 | | | 8,657 | |
| | | | | | | | 30,281 | |
| | | | | Higher Education (Univ., Dorms, etc.) - 0.1% | | | | |
| | | | | Curators University, System Facs Rev Build America Bonds | | | | |
| 2,270 | | | 5.79%, 11/01/2041 | | | 3,054 | |
| | | | | | | | | |
| | | | | Tax Allocation - 0.0% | | | | |
| | | | | Industry, CA, Urban Development Agency | | | | |
| | 275 | | | 6.10%, 05/01/2024 | | | 269 | |
| | | | | | | | | |
| | | | | Utilities - Electric - 0.3% | | | | |
| | | | | Municipal Elec Auth Georgia | | | | |
| | 10,065 | | | 6.64%, 04/01/2057 ‡ | | | 12,023 | |
| | | | | | | | | |
| | | | | Utilities - Water and Sewer - 0.3% | | | | |
| | | | | San Franciso City & County, CA, Public Utilities | | | | |
| | 8,520 | | | 6.00%, 11/01/2040 ‡ | | | 10,602 | |
| | | | | | | | | |
| | | | | Total municipal bonds | | | | |
| | | | | (cost $48,357) | | $ | 56,229 | |
| | | | | | | | | |
| SENIOR FLOATING RATE INTERESTS♦ - 1.8% | | | | |
| | Accommodation and Food Services - 0.0% | | | | |
| | | | | Traveler Accommodation - 0.0% | | | | |
| | | | | Caesars Entertainment Operating Co., Inc. | | | | |
| $ | 1,880 | | | 4.46%, 01/28/2018 ☼ | | $ | 1,621 | |
| | | | | | | | | |
| | Administrative Waste Management and Remediation - 0.0% | | | | |
| | | | | Business Support Services - 0.0% | | | | |
| | | | | Audio Visual Services Group, Inc. | | | | |
| | 1,170 | | | 6.75%, 11/09/2018 | | | 1,147 | |
| | | | | | | | | |
| | Air Transportation - 0.0% | | | | |
| | | | | Scheduled Air Transportation - 0.0% | | | | |
| | | | | Delta Air Lines, Inc. | | | | |
| | 970 | | | 5.25%, 10/18/2018 | | | 977 | |
| | | | | | | | | |
| | Apparel Manufacturing - 0.0% | | | | |
| | | | | Apparel Knitting Mills - 0.0% | | | | |
| | | | | PVH Corp. | | | | |
| | 745 | | | 12/31/2019 ◊☼ | | | 748 | |
| | | | | | | | | |
| | Arts, Entertainment and Recreation - 0.2% | | | | |
| | | | | Cable and Other Subscription Programming - 0.1% | | | | |
| | | | | Kabel Deutschland GmbH | | | | |
| | 2,135 | | | 4.25%, 02/01/2019 | | | 2,149 | |
| | | | | | | | | |
| | | | | Gambling Industries - 0.0% | | | | |
| | | | | MGM Resorts International | | | | |
| | 1,385 | | | 12/20/2019 ◊☼ | | | 1,398 | |
| | | | | | | | | |
| | | | | Newspaper, Periodical, Book and Database Publisher - 0.1% | | | | |
| | | | | Tribune Co. | | | | |
| | 3,295 | | | 07/30/2019 ◊☼ | | | 3,287 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Total Return Bond HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| SENIOR FLOATING RATE INTERESTS♦ - 1.8% - (continued) | | | | |
| | Arts, Entertainment and Recreation - 0.2% - (continued) | | | | |
| | | | | Spectator Sports - 0.0% | | | | |
| | | | | Penn National Gaming, Inc. | | | | |
| $ | 439 | | | 3.75%, 07/16/2018 | | $ | 440 | |
| | | | | | | | | |
| | | | | | | | 7,274 | |
| | Chemical Manufacturing - 0.1% | | | | |
| | | | | Basic Chemical Manufacturing - 0.1% | | | | |
| | | | | Pinnacle Operating Corp. | | | | |
| | 900 | | | 6.75%, 11/15/2018 | | | 880 | |
| | | | | PQ Corp. | | | | |
| | 1,350 | | | 5.25%, 04/15/2017 | | | 1,356 | |
| | | | | | | | 2,236 | |
| | Computer and Electronic Product Manufacturing - 0.1% | | | | |
| | | | | Semiconductor, Electronic Components - 0.1% | | | | |
| | | | | NXP Semiconductors N.V. | | | | |
| | 1,585 | | | 01/10/2020 ◊☼ | | | 1,594 | |
| | | | | Spectrum Brands Holdings, Inc. | | | | |
| | 225 | | | 4.50%, 12/17/2019 | | | 227 | |
| | | | | | | | 1,821 | |
| | Construction - 0.0% | | | | |
| | | | | Construction - Other Specialty Trade Contractors - 0.0% | | | | |
| | | | | Brand Energy & Infrastructure Services, Inc. | | | | |
| | 660 | | | 6.25%, 10/23/2018 | | | 652 | |
| | | | | | | | | |
| | | | | Other Heavy Construction - 0.0% | | | | |
| | | | | Aluma Systems, Inc. | | | | |
| | 158 | | | 6.25%, 10/23/2018 | | | 156 | |
| | | | | | | | | |
| | | | | | | | 808 | |
| | Finance and Insurance - 0.3% | | | | |
| | | | | Agencies, Brokerages and Other Insurance - 0.0% | | | | |
| | | | | USI Insurance Services LLC | | | | |
| | 900 | | | 12/31/2019 ◊☼ | | | 897 | |
| | | | | | | | | |
| | | | | Captive Auto Finance - 0.2% | | | | |
| | | | | Chrysler Group LLC | | | | |
| | 7,842 | | | 6.00%, 05/24/2017 | | | 7,997 | |
| | | | | Macquarie Aircraft Leasing Finance S.A., 2nd Lien Term Loan | | | | |
| | 1,723 | | | 4.21%, 11/29/2013 | | | 1,697 | |
| | | | | | | | 9,694 | |
| | | | | Insurance Carriers - 0.0% | | | | |
| | | | | Asurion Corp., 2nd Lien Term Loan | | | | |
| | 524 | | | 9.00%, 05/24/2019 | | | 539 | |
| | | | | | | | | |
| | | | | Other Financial Investment Activities - 0.1% | | | | |
| | | | | BNY ConvergEX Group LLC | | | | |
| | 217 | | | 8.75%, 12/18/2017 | | | 205 | |
| | | | | BNY ConvergEX Group LLC, Term Loan 2 | | | | |
| | 518 | | | 8.75%, 12/18/2017 | | | 487 | |
| | | | | Nuveen Investments, Inc., Extended First Lien Term Loan | | | | |
| | 1,665 | | | 5.81%, 05/13/2017 | | | 1,671 | |
| | | | | | | | 2,363 | |
| | | | | | | | 13,493 | |
| | Food Manufacturing - 0.0% | | | | |
| | | | | Other Food Manufacturing - 0.0% | | | | |
| | | | | U.S. Foodservice, Inc. | | | | |
| | 1,160 | | | 5.75%, 03/31/2017 ☼ | | | 1,159 | |
| | | | | | | | | |
| | Food Services - 0.0% | | | | |
| | | | | Full-Service Restaurants - 0.0% | | | | |
| | | | | OSI Restaurant Partners LLC | | | | |
| | 1,310 | | | 4.80%, 10/28/2019 | | | 1,322 | |
| | | | | | | | | |
| | Furniture and Related Product Manufacturing - 0.1% | | | | |
| | | | | Household, Institution Furniture, Kitchen Cabinet - 0.1% | | | | |
| | | | | Tempur-Pedic International, Inc. | | | | |
| | 1,195 | | | 11/20/2019 ◊☼ | | | 1,209 | |
| | | | | | | | | |
| | | | | Other Furniture Related Product Manufacturing - 0.0% | | | | |
| | | | | Wilsonart International Holding LLC | | | | |
| | 715 | | | 5.50%, 10/31/2019 | | | 719 | |
| | | | | | | | | |
| | | | | | | | 1,928 | |
| | Health Care and Social Assistance - 0.0% | | | | |
| | | | | Medical Equipment and Supplies Manufacturing - 0.0% | | | | |
| | | | | Kinetic Concepts, Inc. | | | | |
| | 434 | | | 5.50%, 05/04/2018 | | | 438 | |
| | | | | | | | | |
| | | | | Scientific Research and Development Services - 0.0% | | | | |
| | | | | IMS Health, Inc. | | | | |
| | 658 | | | 4.50%, 08/26/2017 | | | 663 | |
| | | | | | | | | |
| | | | | | | | 1,101 | |
| | Information - 0.3% | | | | |
| | | | | Cable and Other Program Distribution - 0.0% | | | | |
| | | | | UPC Financing Partnership | | | | |
| | 760 | | | 4.00%, 01/31/2021 | | | 760 | |
| | | | | | | | | |
| | | | | Data Processing Services - 0.1% | | | | |
| | | | | First Data Corp., Extended 1st Lien Term Loan | | | | |
| | 3,090 | | | 4.21%, 03/23/2018 | | | 2,935 | |
| | | | | | | | | |
| | | | | Software Publishers - 0.2% | | | | |
| | | | | Kronos, Inc. | | | | |
| | 2,140 | | | 5.50%, 10/30/2019 | | | 2,163 | |
| | 410 | | | 9.75%, 04/30/2020 | | | 409 | |
| | | | | Lawson Software, Inc. | | | | |
| | 2,095 | | | 5.25%, 04/05/2018 | | | 2,112 | |
| | | | | Web.com Group, Inc. | | | | |
| | 1,676 | | | 5.50%, 10/27/2017 | | | 1,683 | |
| | | | | | | | 6,367 | |
| | | | | Telecommunications - Other - 0.0% | | | | |
| | | | | Warner Music Group Corp. | | | | |
| | 535 | | | 5.25%, 11/01/2018 | | | 541 | |
| | | | | | | | | |
| | | | | | | | 10,603 | |
| | Mining - 0.1% | | | | �� |
| | | | | Metal Ore Mining - 0.0% | | | | |
| | | | | Fortescue Metals Group Ltd. | | | | |
| | 2,643 | | | 5.25%, 10/18/2017 | | | 2,663 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | Market Value ╪ | |
| SENIOR FLOATING RATE INTERESTS♦ - 1.8% - (continued) | | | | |
| | Mining - 0.1% - (continued) | | | | |
| | | | | Mining and Quarrying Nonmetallic Mineral - 0.1% | | | | |
| | | | | Arch Coal, Inc. | | | | |
| $ | 3,228 | | | 5.75%, 05/16/2018 | | $ | 3,257 | |
| | | | | | | | | |
| | | | | | | | 5,920 | |
| | Miscellaneous Manufacturing - 0.1% | | | | |
| | | | | Aerospace Product and Parts Manufacturing - 0.0% | | | | |
| | | | | Hamilton Sundstrand Corp. | | | | |
| | 770 | | | 3.93%, 12/13/2019 ☼ | | | 776 | |
| | | | | TransDigm Group, Inc. | | | | |
| | 219 | | | 4.00%, 02/14/2017 | | | 221 | |
| | | | | | | | 997 | |
| | | | | Miscellaneous Manufacturing - 0.1% | | | | |
| | | | | Reynolds Group Holdings, Inc. | | | | |
| | 1,746 | | | 4.75%, 09/28/2018 | | | 1,765 | |
| | | | | | | | | |
| | | | | | | | 2,762 | |
| | Motor Vehicle and Parts Manufacturing - 0.1% | | | | |
| | | | | Motor Vehicle Parts Manufacturing - 0.1% | | | | |
| | | | | Federal Mogul Corp., Tranche B Term Loan | | | | |
| | 1,523 | | | 2.15%, 12/29/2014 ☼ | | | 1,399 | |
| | | | | Federal Mogul Corp., Tranche C Term Loan | | | | |
| | 777 | | | 2.15%, 12/28/2015 ☼ | | | 714 | |
| | | | | | | | 2,113 | |
| | Pipeline Transportation - 0.1% | | | | |
| | | | | Pipeline Transportation of Natural Gas - 0.1% | | | | |
| | | | | EP Energy LLC | | | | |
| | 3,745 | | | 4.50%, 04/30/2019 | | | 3,753 | |
| | | | | | | | | |
| | Plastics and Rubber Products Manufacturing - 0.0% | | | | |
| | | | | Plastics Product Manufacturing - 0.0% | | | | |
| | | | | Consolidated Container Co. | | | | |
| | 1,197 | | | 5.00%, 07/03/2019 | | | 1,198 | |
| | | | | | | | | |
| | Primary Metal Manufacturing - 0.0% | | | | |
| | | | | Alumina and Aluminum Production and Processing - 0.0% | | | | |
| | | | | Novelis, Inc. | | | | |
| | 1,050 | | | 4.00%, 03/10/2017 ☼ | | | 1,059 | |
| | | | | | | | | |
| | Professional, Scientific and Technical Services - 0.0% | | | | |
| | | | | Professional Services - Computer System Design and Related - 0.0% | | | | |
| | | | | SunGard Data Systems, Inc. | | | | |
| | 800 | | | 01/31/2020 ◊☼ | | | 806 | |
| | | | | | | | | |
| | Retail Trade - 0.3% | | | | |
| | | | | Department Stores - 0.1% | | | | |
| | | | | Neiman (The) Marcus Group, Inc. | | | | |
| | 2,635 | | | 05/16/2018 ◊ | | | 2,636 | |
| | | | | | | | | |
| | | | | Other Miscellaneous Store Retailers - 0.1% | | | | |
| | | | | Aramark Corp. | | | | |
| | 2,520 | | | 3.77%, 07/26/2016 ☼ | | | 2,521 | |
| | | | | | | | | |
| | | | | Sporting Goods, Hobby and Musical Instrument Store - 0.1% | | | | |
| | | | | EB Sports Corp. | | | | |
| 5,188 | | | 11.50%, 12/31/2015 Þ | | | 5,162 | |
| | | | | | | | | |
| | | | | | | | 10,319 | |
| | Truck Transportation - 0.0% | | | | |
| | | | | Freight Trucking - General - 0.0% | | | | |
| | | | | Nexeo Solutions LLC | | | | |
| | 653 | | | 5.00%, 09/09/2017 | | | 641 | |
| | | | | | | | | |
| | | | | Total senior floating rate interests | | | | |
| | | | | (cost $74,169) | | $ | 74,809 | |
| | | | | | | | | |
| U.S. GOVERNMENT AGENCIES - 38.6% | | | | |
| | | | | FHLMC - 7.9% | | | | |
| $ | 39,701 | | | 1.90%, 01/15/2041 ► | | $ | 5,967 | |
| | 33,597 | | | 2.64%, 08/25/2018 ► | | | 3,227 | |
| | 76,021 | | | 2.92%, 10/25/2020 ► | | | 1,536 | |
| | 43,600 | | | 3.00%, 01/15/2043 ☼ | | | 45,582 | |
| | 70,000 | | | 3.50%, 01/15/2041 ☼ | | | 74,435 | |
| | 19,706 | | | 4.00%, 08/01/2025 | | | 21,185 | |
| | 41,400 | | | 4.50%, 01/15/2040 ☼ | | | 44,421 | |
| | 9,806 | | | 4.85%, 05/15/2037 ► | | | 1,700 | |
| | 86,929 | | | 5.50%, 10/01/2018 - 06/01/2041 | | | 94,042 | |
| | 8,087 | | | 5.85%, 01/15/2039 ► | | | 1,243 | |
| | 26,399 | | | 6.00%, 04/01/2017 - 11/01/2037 | | | 28,883 | |
| | 17,762 | | | 6.16%, 12/15/2036 ► | | | 2,643 | |
| | 1,358 | | | 6.50%, 07/01/2031 - 12/01/2037 | | | 1,546 | |
| | 6 | | | 7.50%, 09/01/2029 - 11/01/2031 | | | 7 | |
| | | | | | | | 326,417 | |
| | | | | FNMA - 11.0% | | | | |
| | 7,815 | | | 2.14%, 11/01/2022 | | | 7,851 | |
| | 5,245 | | | 2.20%, 12/01/2022 | | | 5,292 | |
| | 3,041 | | | 2.28%, 11/01/2022 | | | 3,084 | |
| | 2,576 | | | 2.34%, 11/01/2022 | | | 2,622 | |
| | 14,480 | | | 2.40%, 10/01/2022 - 11/01/2022 | | | 14,812 | |
| | 2,032 | | | 2.42%, 11/01/2022 | | | 2,083 | |
| | 2,084 | | | 2.47%, 11/01/2022 | | | 2,141 | |
| | 36,600 | | | 2.50%, 01/12/2028 ☼ | | | 38,270 | |
| | 133,600 | | | 3.50%, 01/15/2026 - 01/15/2041 ☼ | | | 142,293 | |
| | 15,950 | | | 3.63%, 11/25/2039 ► | | | 2,955 | |
| | 14,448 | | | 4.00%, 06/01/2025 - 10/01/2025 | | | 15,672 | |
| | 18,669 | | | 4.50%, 04/01/2025 - 08/01/2040 | | | 20,518 | |
| | 95,549 | | | 5.00%, 02/01/2018 - 04/25/2038 | | | 103,931 | |
| | 11,514 | | | 5.24%, 06/25/2042 ► | | | 1,631 | |
| | 62,631 | | | 5.50%, 12/01/2013 - 01/01/2037 | | | 68,761 | |
| | 14,731 | | | 6.00%, 03/01/2013 - 02/01/2037 | | | 16,336 | |
| | 33 | | | 6.50%, 11/01/2014 - 07/01/2032 | | | 36 | |
| | 19,105 | | | 6.99%, 10/25/2036 ► | | | 3,423 | |
| | 950 | | | 7.00%, 02/01/2016 - 10/01/2037 | | | 1,131 | |
| | 460 | | | 7.50%, 11/01/2015 - 05/01/2032 | | | 539 | |
| | 2 | | | 8.00%, 04/01/2032 | | | 2 | |
| | 28,274 | | | 8.43%, 09/25/2040 ► | | | 4,149 | |
| | | | | | | | 457,532 | |
| | | | | GNMA - 19.7% | | | | |
| | 12,100 | | | 3.00%, 01/15/2043 ☼ | | | 12,862 | |
| | 116,000 | | | 3.50%, 01/15/2041 ☼ | | | 126,014 | |
| | 251,255 | | | 4.00%, 01/15/2040 - 01/15/2041 ☼ | | | 275,956 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Total Return Bond HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| U.S. GOVERNMENT AGENCIES - 38.6% - (continued) | | | | |
| | | | | GNMA - 19.7% - (continued) | | | | |
| $ | 185,033 | | | 4.50%, 11/15/2039 - 07/15/2041 | | $ | 204,222 | |
| | 76,613 | | | 5.00%, 08/15/2039 - 06/20/2040 | | | 84,784 | |
| | 42,679 | | | 5.50%, 03/15/2033 - 01/15/2038 ☼ | | | 47,120 | |
| | 48,974 | | | 6.00%, 12/15/2031 - 06/15/2041 ☼ | | | 54,680 | |
| | 7,133 | | | 6.50%, 06/15/2028 - 09/15/2032 | | | 8,359 | |
| | 22 | | | 7.00%, 06/20/2030 - 08/15/2031 | | | 26 | |
| | 4 | | | 8.50%, 11/15/2024 | | | 5 | |
| | | | | | | | 814,028 | |
| | | | | Total U.S. government agencies | | | | |
| | | | | (cost $1,557,833) | | $ | 1,597,977 | |
| | | | | | | | | |
U.S. GOVERNMENT SECURITIES - 22.7% | | | | |
| | U.S. Treasury Securities - 22.7% | | | | |
| | | | | U.S. Treasury Bonds - 6.4% | | | | |
| $ | 46,233 | | | 3.13%, 11/15/2041 ‡ | | $ | 48,393 | |
| | 1,309 | | | 3.75%, 08/15/2041 ‡ | | | 1,539 | |
| | 30,512 | | | 4.38%, 05/15/2041 ‡ | | | 39,751 | |
| | 49,873 | | | 4.75%, 02/15/2041 ‡ | | | 68,754 | |
| | 37,266 | | | 5.38%, 02/15/2031 ‡ | | | 53,197 | |
| | 35,425 | | | 6.25%, 05/15/2030 ‡ | | | 54,776 | |
| | | | | | | | 266,410 | |
| | | | | U.S. Treasury Notes - 16.3% | | | | |
| | 282,675 | | | 0.13%, 04/15/2016 - 04/15/2017 ◄ | | | 309,912 | |
| | 144,538 | | | 0.25%, 01/31/2014 - 10/31/2014 ‡ | | | 144,573 | |
| | 50,000 | | | 0.63%, 07/15/2014 ‡ | | | 50,307 | |
| | 3,158 | | | 0.88%, 11/30/2016 - 01/31/2017 ‡ | | | 3,200 | |
| | 34,319 | | | 1.00%, 10/31/2016 □ | | | 34,973 | |
| | 57,425 | | | 1.88%, 09/30/2017 ‡ | | | 60,637 | |
| | 62,425 | | | 3.13%, 04/30/2017 □ | | | 69,175 | |
| | | | | | | | 672,777 | |
| | | | | | | | 939,187 | |
| | | | | Total U.S. government securities | | | | |
| | | | | (cost $923,652) | | $ | 939,187 | |
| Contracts | | Market Value ╪ | |
CALL OPTIONS PURCHASED - 0.0% | | | | |
| | | | | Foreign Exchange Contracts - 0.0% | | | | |
| | | | | USD Call/CAD Put | | | | |
| | 48,900 | | | Expiration: 06/18/2013 | | $ | 1,009 | |
| | | | | | | | | |
| | | | | Total call options purchased | | | | |
| | | | | (cost $839) | | $ | 1,009 | |
| | | | | | | | | |
PUT OPTIONS PURCHASED - 0.1% | | | | |
| | | | | Interest Rate Contracts - 0.1% | | | | |
| | | | | Interest Rate Swaption USD | | | | |
| | 39,090 | | | Expiration: 06/11/2043, Exercise Rate: 2.90% | | $ | 1,485 | |
| | | | | | | | | |
| | | | | Total put options purchased | | | | |
| | | | | (cost $989) | | $ | 1,485 | |
| | | | | | | | | |
PREFERRED STOCKS - 0.1% | | | | |
| | | | | Diversified Banks - 0.0% | | | | |
| | 2 | | | US Bancorp | | $ | 2,004 | |
| | | | | | | | | |
| | | | | Other Diversified Financial Services - 0.1% | | | | |
| | 122 | | | Citigroup Capital XIII | | | 3,397 | |
| | | | | | | | | |
| | | | | Total preferred stocks | | | | |
| | | | | (cost $4,974) | | $ | 5,401 | |
| | | | | | | | | |
| | | | | Total long-term investments | | | | |
| | | | | (cost $4,474,500) | | $ | 4,660,284 | |
| | | | | | | | | |
| SHORT-TERM INVESTMENTS - 3.3% | | | | |
| | Repurchase Agreements - 3.3% | | | | |
| | | | | Bank of America Merrill Lynch TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $3,089,
collateralized by FHLMC 3.00%, 2042,
FNMA 4.00%, 2042, value of $3,151) | | | | |
| $ | 3,089 | | | 0.19%, 12/31/2012 | | $ | 3,089 | |
| | | | | Bank of Montreal TriParty Repurchase
Agreement (maturing on 01/02/2013 in
the amount of $21,961, collateralized by
FHLMC 2.50% - 5.50%, 2019 - 2042,
FNMA 0.76% - 6.11%, 2016 - 2042,
GNMA 3.50%, 2042, value of $22,400) | | | | |
| | 21,961 | | | 0.23%, 12/31/2012 | | | 21,961 | |
| | | | | Barclays Capital TriParty Repurchase
Agreement (maturing on 01/02/2013 in
the amount of $6,870, collateralized by
U.S. Treasury Note 2.00% - 2.13%, 2016,
value of $7,008) | | | | |
| | 6,870 | | | 0.20%, 12/31/2012 | | | 6,870 | |
| | | | | Citigroup Global Markets, Inc. TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $43,265,
collateralized by U.S. Treasury Note
1.88% - 4.13%, 2015 - 2018, value of
$44,129) | | | | |
| | 43,264 | | | 0.17%, 12/31/2012 | | | 43,264 | |
| | | | | Deutsche Bank Securities TriParty
Repurchase Agreement (maturing on
01/02/2013 in the amount of $891,
collateralized by FNMA 3.00%, 2032,
value of $909) | | | | |
| | 891 | | | 0.25%, 12/31/2012 | | | 891 | |
| | | | | RBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in
the amount of $30,441, collateralized by
U.S. Treasury Note 0.50% - 2.75%, 2013 -
2019, value of $31,050) | | | | |
| | 30,441 | | | 0.20%, 12/31/2012 | | | 30,441 | |
| | | | | TD Securities TriParty Repurchase
Agreement (maturing on 01/02/2013 in
the amount of $26,651, collateralized by
FHLMC 3.50% - 6.00%, 2036 - 2042,
FNMA 0.22% - 5.50%, 2013 - 2042, value
of $27,184) | | | | |
| | 26,651 | | | 0.21%, 12/31/2012 | | | 26,651 | |
The accompanying notes are an integral part of these financial statements.
| Shares or Principal Amount | | | | Market Value ╪ | |
| SHORT-TERM INVESTMENTS - 3.3% - (continued) | | | | | |
| Repurchase Agreements - 3.3% - (continued) | | | | | |
| | | | UBS Securities, Inc. Repurchase Agreement
(maturing on 01/02/2013 in the amount of
$513, collateralized by U.S. Treasury Bill
0.75%, 2013, value of $526) | | | | | |
| $ | 513 | | 0.17%, 12/31/2012 | | | | | | $ | 513 | |
| | | | UBS Securities, Inc. TriParty Repurchase
Agreement (maturing on 01/02/2013 in
the amount of $1,817, collateralized by
FNMA 2.50%, 2027, GNMA 3.00%,
2042, value of $1,853) | | | | | |
| | 1,817 | | 0.25%, 12/31/2012 | | | | | | | 1,817 | |
| | | | | | | | | | | 135,497 | |
| | | | Total short-term investments | | | | | | | | |
| | | | (cost $135,497) | | | | | | $ | 135,497 | |
| | | | | | | | | | | | |
| | | | Total investments | | | | | | | | |
| | | | (cost $4,609,997) ▲ | | | 115.9 | % | | $ | 4,795,781 | |
| | | | Other assets and liabilities | | | (15.9 | )% | | | (656,996 | ) |
| | | | Total net assets | | | 100.0 | % | | $ | 4,138,785 | |
Note: Percentage of investments as shown is the ratio of the total market value to total net assets.
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $4,619,310 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 193,172 | |
| Unrealized Depreciation | | | (16,701 | ) |
| Net Unrealized Appreciation | | $ | 176,471 | |
| Δ | Variable rate securities; the rate reported is the coupon rate in effect at December 31, 2012. |
| Þ | This security may pay interest in additional principal instead of cash. |
| ► | Securities disclosed are interest-only strips. The interest rates represent effective yields based upon estimated future cash flows at December 31, 2012. |
| ◄ | The principal amount for this security is adjusted for inflation and the interest payments equal a fixed percentage of the inflation-adjusted principal amount. |
| ◊ | All or a portion of this position represents unsettled loan commitment. The coupon rate will be determined at time of settlement. |
| ♦ | Senior floating rate interests generally pay interest rates which are periodically adjusted by reference to a base short-term, floating lending rate plus a premium. These base lending rates are generally (i) the lending rate offered by one or more major European banks, such as the LIBOR, (ii) the prime rate offered by one or more major United States Banks, or (iii) the bank's certificate of deposit rate. Senior floating rate interests often require prepayments from excess cash flows or permit the borrower to repay at its election. The rate at which the borrower repays cannot be predicted with accuracy. As a result, the actual remaining maturity may be substantially less than the stated maturities shown. Unless otherwise noted, the interest rate disclosed for these securities represents the average coupon as of December 31, 2012. |
| ■ | Securities issued within terms of a private placement memorandum, exempt from registration under Rule 144A under the Securities Act of 1933, as amended, and may be sold only to qualified institutional buyers. Unless otherwise indicated, these holdings are determined to be liquid. At December 31, 2012, the aggregate value of these securities was $424,803, which represents 10.3% of total net assets. |
| § | These securities were sold to the Fund under Regulation S, rules governing offers and sales made outside the United States without registration under the Securities Act of 1933. The Fund may only be able to resell these securities in the United States if an exemption from registration under the federal and state securities laws is available, or the Fund may only be able to sell these securities outside of the United States (such as on a foreign exchange) to a non-U.S. person. Unless otherwise indicated, these holdings are determined to be liquid. At December 31, 2012, the aggregate value of these securities was $3,049, which represents 0.1% of total net assets. |
The accompanying notes are an integral part of these financial statements.
| Hartford Total Return Bond HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| ♠ | Perpetual maturity security. Maturity date shown is the first call date. |
| ☼ | This security, or a portion of this security, was purchased on a when-issued, delayed-delivery or delayed-draw basis. The cost of these securities was $682,358 at December 31, 2012. |
| ‡ | This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future. |
| ╦ | This security, or a portion of this security, has been pledged as collateral in connection with swap contracts. In addition, cash of $22,426 was received from broker(s) as collateral in connection with swap contracts. Securities valued at $28,840, held on behalf of the Fund at the custody bank, were designated by broker(s) as collateral in connection with swap contracts. |
| □ | This security, or a portion of this security, is pledged as initial margin deposit and collateral for daily variation margin loss on open futures contracts held at December 31, 2012 as listed in the table below: |
| Description | | Number of
Contracts* | | | Expiration
Date | | Notional Amount | | | Market Value ╪ | | | Unrealized
Appreciation/
(Depreciation) | |
| Long position contracts: | | | | | | | | | | | | | | | | | | |
| Australian 10-Year Bond Future | | | 413 | | | 03/15/2013 | | $ | 52,581 | | | $ | 52,889 | | | $ | 308 | |
| U.S. Treasury 2-Year Note Future | | | 647 | | | 03/28/2013 | | | 142,604 | | | | 142,643 | | | | 39 | |
| U.S. Treasury 5-Year Note Future | | | 2,308 | | | 03/28/2013 | | | 287,491 | | | | 287,148 | | | | (343 | ) |
| | | | | | | | | | | | | | | | | $ | 4 | |
| Short position contracts: | | | | | | | | | | | | | | | | | | |
| Euro-BUND Future | | | 262 | | | 03/07/2013 | | $ | 50,018 | | | $ | 50,367 | | | $ | (349 | ) |
| U.S. Treasury 10-Year Note Future | | | 2,846 | | | 03/19/2013 | | | 379,971 | | | | 377,895 | | | | 2,076 | |
| U.S. Treasury 30-Year Bond Future | | | 395 | | | 03/19/2013 | | | 58,896 | | | | 58,263 | | | | 633 | |
| U.S. Treasury CME Ultra Long Term Bond Future | | | 132 | | | 03/19/2013 | | | 21,889 | | | | 21,462 | | | | 427 | |
| | | | | | | | | | | | | | | | | $ | 2,787 | |
| | | | | | | | | | | | | | | | | $ | 2,791 | |
* The number of contracts does not omit 000's.
Credit Default Swap Contracts Outstanding at December 31, 2012
| Reference Entity | | Counterparty | | | Notional
Amount (a) | | | (Pay)/Receive
Fixed Rate /
Implied Credit
Spread (b) | | | Expiration
Date | | Upfront
Premiums
Paid/
(Received) | | | Market
Value ╪ | | | Unrealized
Appreciation/
(Depreciation) | |
| Credit default swaps on traded indices: |
| Buy protection: | | | | | | | | | | | | | | | | | | | | |
| ABX.HE.AA.06 | | | BCLY | | | $ | 1,566 | | | | (0.32 | )% | | 07/25/45 | | $ | 884 | | | $ | 570 | | | $ | (314 | ) |
| ABX.HE.AAA.06 | | | BCLY | | | | 14,316 | | | | (0.18 | )% | | 07/25/45 | | | 1,497 | | | | 594 | | | | (903 | ) |
| ABX.HE.AAA.06 | | | BOA | | | | 7,178 | | | | (0.18 | )% | | 07/25/45 | | | 390 | | | | 298 | | | | (92 | ) |
| ABX.HE.AAA.06 | | | GSC | | | | 15,854 | | | | (0.18 | )% | | 07/25/45 | | | 1,387 | | | | 659 | | | | (728 | ) |
| ABX.HE.AAA.06 | | | MSC | | | | 5,434 | | | | (0.18 | )% | | 07/25/45 | | | 445 | | | | 226 | | | | (219 | ) |
| ABX.HE.PENAAA.06 | | | BCLY | | | | 8,748 | | | | (0.11 | )% | | 05/25/46 | | | 2,394 | | | | 1,750 | | | | (644 | ) |
| ABX.HE.PENAAA.06 | | | BOA | | | | 3,118 | | | | (0.11 | )% | | 05/25/46 | | | 709 | | | | 624 | | | | (85 | ) |
| ABX.HE.PENAAA.06 | | | GSC | | | | 2,935 | | | | (0.11 | )% | | 05/25/46 | | | 734 | | | | 587 | | | | (147 | ) |
| ABX.HE.PENAAA.06 | | | JPM | | | | 5,431 | | | | (0.11 | )% | | 05/25/46 | | | 1,326 | | | | 1,087 | | | | (239 | ) |
| ABX.HE.PENAAA.06 | | | MSC | | | | 3,697 | | | | (0.11 | )% | | 05/25/46 | | | 897 | | | | 740 | | | | (157 | ) |
| ABX.HE.PENAAA.07 | | | BCLY | | | | 7,739 | | | | (0.09 | )% | | 08/25/37 | | | 3,113 | | | | 2,863 | | | | (250 | ) |
| ABX.HE.PENAAA.07 | | | GSC | | | | 1,350 | | | | (0.09 | )% | | 08/25/37 | | | 558 | | | | 500 | | | | (58 | ) |
| ABX.HE.PENAAA.07 | | | JPM | | | | 12,407 | | | | (0.09 | )% | | 08/25/37 | | | 5,100 | | | | 4,589 | | | | (511 | ) |
| CDX.NA.HY.19 | | | BOA | | | | 98,410 | | | | (5.00 | )% | | 12/20/17 | | | (221 | ) | | | 300 | | | | 521 | |
| CDX.NA.HY.19 | | | CSI | | | | 48,520 | | | | (5.00 | )% | | 12/20/17 | | | 228 | | | | (148 | ) | | | (376 | ) |
| CDX.NA.HY.19 | | | JPM | | | | 162,905 | | | | (5.00 | )% | | 12/20/17 | | | (1,912 | ) | | | (497 | ) | | | 1,415 | |
| CDX.NA.HY.19 | | | MSC | | | | 23,210 | | | | (5.00 | )% | | 12/20/17 | | | (363 | ) | | | (71 | ) | | | 292 | |
| CMBX.NA.A.1 | | | DEUT | | | | 5,450 | | | | (0.35 | )% | | 10/12/52 | | | 2,517 | | | | 2,214 | | | | (303 | ) |
| CMBX.NA.A.1 | | | GSC | | | | 2,510 | | | | (0.35 | )% | | 10/12/52 | | | 1,136 | | | | 1,020 | | | | (116 | ) |
| CMBX.NA.AA.1 | | | UBS | | | | 6,550 | | | | (0.25 | )% | | 10/12/52 | | | 1,954 | | | | 1,467 | | | | (487 | ) |
| CMBX.NA.AJ.4 | | | DEUT | | | | 1,430 | | | | (0.96 | )% | | 02/17/51 | | | 571 | | | | 463 | | | | (108 | ) |
| CMBX.NA.AJ.4 | | | MSC | | | | 7,460 | | | | (0.96 | )% | | 02/17/51 | | | 2,919 | | | | 2,414 | | | | (505 | ) |
The accompanying notes are an integral part of these financial statements.
| Credit Default Swap Contracts Outstanding at December 31, 2012 - (continued) |
| |
| Reference Entity | | Counterparty | | | Notional
Amount (a) | | | (Pay)/Receive
Fixed Rate /
Implied Credit
Spread (b) | | | Expiration
Date | | Upfront
Premiums
Paid/
(Received) | | | Market
Value ╪ | | | Unrealized
Appreciation/
(Depreciation) | |
| Credit default swaps on traded indices: - (continued) |
| Buy protection: - (continued) | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CMBX.NA.AM.4 | | | BCLY | | | $ | 2,355 | | | | (0.50 | )% | | 02/17/51 | | $ | 412 | | | $ | 287 | | | $ | (125 | ) |
| CMBX.NA.AM.4 | | | MSC | | | | 12,150 | | | | (0.50 | )% | | 02/17/51 | | | 2,809 | | | | 1,480 | | | | (1,329 | ) |
| CMBX.NA.AM.4 | | | UBS | | | | 9,130 | | | | (0.50 | )% | | 02/17/51 | | | 1,667 | | | | 1,113 | | | | (554 | ) |
| Total | | | | | | | | | | | | | | | | $ | 31,151 | | | $ | 25,129 | | | $ | (6,022 | ) |
| Sell protection: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ABX.HE.PENAAA.07 | | | JPM | | | $ | 2,063 | | | | 0.76 | % | | 01/25/38 | | $ | (1,314 | ) | | $ | (958 | ) | | $ | 356 | |
| CDX.EM.ex-EU.18 | | | GSC | | | | 85,780 | | | | 5.00 | % | | 12/20/17 | | | 10,311 | | | | 11,499 | | | | 1,188 | |
| CDX.NA.IG.19 | | | MSC | | | | 300,535 | | | | 1.00 | % | | 12/20/17 | | | 310 | | | | 667 | | | | 357 | |
| CMBX.NA.AA.4 | | | MSC | | | | 11,130 | | | | 1.65 | % | | 02/17/51 | | | (7,009 | ) | | | (6,939 | ) | | | 70 | |
| CMBX.NA.AAA.2 | | | DEUT | | | | 13,570 | | | | 0.07 | % | | 03/15/49 | | | (763 | ) | | | (413 | ) | | | 350 | |
| CMBX.NA.AAA.2 | | | UBS | | | | 9,105 | | | | 0.07 | % | | 03/15/49 | | | (485 | ) | | | (277 | ) | | | 208 | |
| CMBX.NA.AAA.3 | | | CSI | | | | 3,830 | | | | 0.08 | % | | 12/13/49 | | | (248 | ) | | | (166 | ) | | | 82 | |
| CMBX.NA.AAA.3 | | | DEUT | | | | 25,875 | | | | 0.08 | % | | 12/13/49 | | | (1,854 | ) | | | (1,114 | ) | | | 740 | |
| CMBX.NA.AAA.3 | | | JPM | | | | 42,840 | | | | 0.08 | % | | 12/13/49 | | | (3,202 | ) | | | (1,843 | ) | | | 1,359 | |
| CMBX.NA.AAA.3 | | | UBS | | | | 14,270 | | | | 0.08 | % | | 12/13/49 | | | (1,240 | ) | | | (614 | ) | | | 626 | |
| CMBX.NA.AAA.5 | | | MSC | | | | 6,349 | | | | 0.35 | % | | 02/15/51 | | | (506 | ) | | | (239 | ) | | | 267 | |
| CMBX.NA.AJ.2 | | | JPM | | | | 13,120 | | | | 1.09 | % | | 03/15/49 | | | (3,235 | ) | | | (2,297 | ) | | | 938 | |
| CMBX.NA.AJ.3 | | | CSI | | | | 6,170 | | | | 1.47 | % | | 12/13/49 | | | (1,935 | ) | | | (1,927 | ) | | | 8 | |
| CMBX.NA.AJ.3 | | | MSC | | | | 1,290 | | | | 1.47 | % | | 12/13/49 | | | (403 | ) | | | (403 | ) | | | – | |
| CMBX.NA.AJ.3 | | | UBS | | | | 5,475 | | | | 1.47 | % | | 12/13/49 | | | (2,153 | ) | | | (1,710 | ) | | | 443 | |
| ITRX.EUR.18 | | | GSC | | | EUR | 53,480 | | | | 1.00 | % | | 12/20/17 | | | (458 | ) | | | (582 | ) | | | (124 | ) |
| ITRX.XOV.18 | | | GSC | | | EUR | 8,845 | | | | 5.00 | % | | 12/20/17 | | | 176 | | | | 82 | | | | (94 | ) |
| PrimeX.ARM.1 | | | MSC | | | | 3,217 | | | | 4.42 | % | | 06/25/36 | | | 93 | | | | 314 | | | | 221 | |
| PrimeX.ARM.2 | | | MSC | | | | 9,668 | | | | 4.58 | % | | 06/25/36 | | | (710 | ) | | | 184 | | | | 894 | |
| Total | | | | | | | | | | | | | | | | $ | (14,625 | ) | | $ | (6,736 | ) | | $ | 7,889 | |
| Total traded indices | | | | | | | | | | | | | | | | $ | 16,526 | | | $ | 18,393 | | | $ | 1,867 | |
| Credit default swaps on single-name issues: | | | | | | | | | | | | | | | | | | | | | | | |
| Buy protection: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Banco Santander S.A. | | | BCLY | | | $ | 10,100 | | | | (1.00)% / 1.79 | % | | 03/20/15 | | $ | 511 | | | $ | 174 | | | $ | (337 | ) |
| | | | | | | | | | | | | | | | | $ | 17,037 | | | $ | 18,567 | | | $ | 1,530 | |
| (a) | The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement. Notional shown in U.S. dollars unless otherwise noted. |
| (b) | Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate issues, U.S. municipal issues or sovereign government issues as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood of risk of default for the credit derivative. The implied credit spread of a particular entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the reference entity's credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. The percentage shown is the implied credit spread on December 31, 2012. For credit default swap agreements on indices, the quoted market prices and resulting values serve as the indicator of the current status of the payment/performance risk. |
Interest Rate Swap Contracts Outstanding at December 31, 2012
| Counterparty | | | Payments made by Fund | | Payments received by Fund | | Notional
Amount * | | | Expiration
Date | | Upfront
Premiums
Paid/
(Received) | | | Market
Value ╪ | | | Unrealized
Appreciation/
(Depreciation) | |
| JPM | | | 2.00% Fixed | | 3M LIBOR | | | 34,500 | | | 03/20/23 | | $ | (209 | ) | | $ | (390 | ) | | $ | (181 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
* Notional shown in U.S. dollars unless otherwise noted.
The accompanying notes are an integral part of these financial statements.
| Hartford Total Return Bond HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
Spreadlock Swap Contracts Outstanding at December 31, 2012
| Counterparty | | | Strike | | | Notional
Amount | | | Determination
Date | | Upfront
Premiums
Paid/
(Received) | | | Market
Value ╪ | | | Unrealized
Appreciation/
(Depreciation) | |
| BOA | | | | 0.71 | %* | | $ | 319,000 | | | 03/21/13 | | $ | – | | | $ | 224 | | | $ | 224 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| * | This is a spreadlock swap between the 10-Year interest rate swap curve and the yield to maturity on a 30-Year FNMA. If the rate on the 30-Year FNMA minus the 10-Year CMS (constant maturity swap) rate is greater than 0.71%, the Fund will receive money from the counterparty based on this differential. If the rate on the 30-Year FNMA minus the 10-Year CMS rate is less than 0.71%, the Fund will pay the counterparty. |
Foreign Currency Contracts Outstanding at December 31, 2012
| Currency | | Buy / Sell | | Delivery Date | | Counterparty | | | Contract Amount | | | Market Value ╪ | | | Unrealized
Appreciation/
(Depreciation) | |
| BRL | | Buy | | 01/03/2013 | | | GSC | | | $ | 20,759 | | | $ | 21,222 | | | $ | 463 | |
| BRL | | Buy | | 01/03/2013 | | | RBC | | | | 21,273 | | | | 21,222 | | | | (51 | ) |
| BRL | | Buy | | 02/04/2013 | | | RBC | | | | 20,962 | | | | 21,130 | | | | 168 | |
| BRL | | Sell | | 01/03/2013 | | | GSC | | | | 21,272 | | | | 21,222 | | | | 50 | |
| BRL | | Sell | | 02/04/2013 | | | GSC | | | | 10,590 | | | | 10,565 | | | | 25 | |
| BRL | | Sell | | 01/03/2013 | | | RBC | | | | 21,066 | | | | 21,222 | | | | (156 | ) |
| BRL | | Sell | | 02/04/2013 | | | RBC | | | | 10,549 | | | | 10,565 | | | | (16 | ) |
| EUR | | Sell | | 01/03/2013 | | | BCLY | | | | 624 | | | | 623 | | | | 1 | |
| MXN | | Buy | | 01/15/2013 | | | RBC | | | | 6,905 | | | | 6,932 | | | | 27 | |
| | | | | | | | | | | | | | | | | | | $ | 511 | |
Securities Sold Short Outstanding at December 31, 2012
| Description | | Principal
Amount | | | Maturity Date | | Market Value ╪ | | | Unrealized
Appreciation/
Depreciation | |
| FHLMC, 4.00% | | $ | 58,500 | | | 01/15/2040 | | $ | 62,449 | | | $ | (119 | ) |
| FNMA, 3.00% | | | 12,000 | | | 01/15/2043 | | | 12,574 | | | | (22 | ) |
| FNMA, 4.00% | | | 65,800 | | | 01/15/2040 | | | 70,529 | | | | (72 | ) |
| FNMA, 5.50% | | | 127,300 | | | 01/15/2040 | | | 138,300 | | | | 27 | |
| GNMA, 3.50% | | | 26,100 | | | 01/15/2042 | | | 28,357 | | | | (59 | ) |
| GNMA, 4.50% | | | 53,900 | | | 01/15/2040 | | | 59,012 | | | | (314 | ) |
| | | | | | | | | $ | 371,221 | | | $ | (559 | ) |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
The accompanying notes are an integral part of these financial statements.
| GLOSSARY: (abbreviations used in preceding Schedule of Investments) |
| |
| Counterparty Abbreviations: |
| BCLY | Barclays | |
| BOA | Banc of America Securities LLC | |
| CSI | Credit Suisse International | |
| DEUT | Deutsche Bank Securities, Inc. | |
| GSC | Goldman Sachs & Co. |
| JPM | JP Morgan Chase & Co. | |
| MSC | Morgan Stanley | |
| RBC | RBC Dominion Securities | |
| UBS | UBS AG | |
| | |
| Currency Abbreviations: |
| BRL | Brazilian Real | |
| EUR | EURO | |
| MXN | Mexican New Peso | |
| USD | U.S. Dollar | |
| |
| Index Abbreviations: |
| ABX.HE | Markit Asset Backed Security Home Equity |
| ABX.HE.PEN | Markit Asset Backed Security Home Equity Penultimate |
| CDX.EM | Credit Derivatives Emerging Markets |
| CDX.NA.HY | Credit Derivatives North American High Yield |
| CDX.NA.IG | Credit Derivatives North American Investment Grade |
| CMBX.NA | Markit Commercial Mortgage Backed North American |
| ITRX.EUR | Markit iTraxx - Europe |
| ITRX.XOV | Markit iTraxx Index - Europe Crossover |
| PrimeX.ARM | Markit PrimeX Mortgage Backed Security |
| |
| Municipal Bond Abbreviations: |
| GO | General Obligation | |
| Rev | Revenue | |
| | |
| Other Abbreviations: |
| FHLMC | Federal Home Loan Mortgage Corp. |
| FNMA | Federal National Mortgage Association |
| GNMA | Government National Mortgage Association |
| LIBOR | London Interbank Offered Rate |
| |
The accompanying notes are an integral part of these financial statements.
| Hartford Total Return Bond HLS Fund |
| Investment Valuation Hierarchy Level Summary |
| December 31, 2012 |
| (000’s Omitted) |
| | | Total | | | Level 1 ♦ | | | Level 2 ♦ | | | Level 3 | |
| Assets: | | | | | | | | | | | | | | | | |
| Asset & Commercial Mortgage Backed Securities | | $ | 617,479 | | | $ | – | | | $ | 526,853 | | | $ | 90,626 | |
| Call Options Purchased | | | 1,009 | | | | – | | | | 1,009 | | | | – | |
| Corporate Bonds | | | 1,353,829 | | | | – | | | | 1,344,901 | | | | 8,928 | |
| Foreign Government Obligations | | | 12,879 | | | | – | | | | 12,879 | | | | – | |
| Municipal Bonds | | | 56,229 | | | | – | | | | 56,229 | | | | – | |
| Preferred Stocks | | | 5,401 | | | | 3,397 | | | | 2,004 | | | | – | |
| Put Options Purchased | | | 1,485 | | | | – | | | | 1,485 | | | | – | |
| Senior Floating Rate Interests | | | 74,809 | | | | – | | | | 74,809 | | | | – | |
| U.S. Government Agencies | | | 1,597,977 | | | | – | | | | 1,597,977 | | | | – | |
| U.S. Government Securities | | | 939,187 | | | | 170,378 | | | | 768,809 | | | | – | |
| Short-Term Investments | | | 135,497 | | | | – | | | | 135,497 | | | | – | |
| Total | | $ | 4,795,781 | | | $ | 173,775 | | | $ | 4,522,452 | | | $ | 99,554 | |
| Credit Default Swaps * | | | 10,335 | | | | – | | | | 10,335 | | | | – | |
| Foreign Currency Contracts * | | | 734 | | | | – | | | | 734 | | | | – | |
| Futures * | | | 3,483 | | | | 3,483 | | | | – | | | | – | |
| Spreadlock Swaps * | | | 224 | | | | – | | | | 224 | | | | – | |
| Total | | $ | 14,776 | | | $ | 3,483 | | | $ | 11,293 | | | $ | – | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Securities Sold Short | | $ | 371,221 | | | $ | – | | | $ | 371,221 | | | $ | – | |
| Total | | $ | 371,221 | | | $ | – | | | $ | 371,221 | | | $ | – | |
| Credit Default Swaps * | | | 8,805 | | | | – | | | | 8,805 | | | | – | |
| Foreign Currency Contracts * | | | 223 | | | | – | | | | 223 | | | | – | |
| Futures * | | | 692 | | | | 692 | | | | – | | | | – | |
| Interest Rate Swaps * | | | 181 | | | | – | | | | 181 | | | | – | |
| Total | | $ | 9,901 | | | $ | 692 | | | $ | 9,209 | | | $ | – | |
| ♦ | For the year ended December 31, 2012, investments valued at $203,668 were transferred from Level 1 to Level 2, and there were no transfers from Level 2 to Level 1. Investments are transferred between Level 1 and Level 2 for a variety of reasons including, but not limited to: |
| 1) | Foreign equities for which a fair value price is more representative of exit value than the local market close (transfer into Level 2). Foreign equities for which the local market close is more representative of exit value (transfer into Level 1). |
| 2) | U.S. Treasury securities that no longer represent the most recent issue (transfer into Level 2). |
| 3) | Equity investments with no observable trading but a bid or close price is used (transfer into Level 2). Equity investments using observable quoted prices in an active market (transfer into Level 1). |
| * | Derivative instruments not reflected in the Schedule of Investments are valued at the unrealized appreciation/depreciation on the investments. |
Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:
| | | Balance as
of
December
31, 2011 | | | Realized
Gain
(Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Net
Amortization | | | Purchases | | | Sales | | | Transfers
Into
Level 3 * | | | Transfers
Out of
Level 3 * | | | Balance as
of
December
31, 2012 | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Asset & Commercial Mortgage Backed Securities | | $ | 24,100 | | | $ | (2,763 | ) | | $ | 10,466 | † | | $ | 4,731 | | | $ | 76,050 | | | $ | (20,453 | ) | | $ | 2,144 | | | $ | (3,649 | ) | | $ | 90,626 | |
| Corporate Bonds | | | 12,413 | | | | 858 | | | | 358 | ‡ | | | (38 | ) | | | 9,179 | | | | (12,416 | ) | | | — | | | | (1,426 | ) | | | 8,928 | |
| Total | | $ | 36,513 | | | $ | (1,905 | ) | | $ | 10,824 | | | $ | 4,693 | | | $ | 85,229 | | | $ | (32,869 | ) | | $ | 2,144 | | | $ | (5,075 | ) | | $ | 99,554 | |
| * | Investments are transferred into and out of Level 3 for a variety of reasons including, but not limited to: |
| 1) | Investments where trading has been halted (transfer into Level 3) or investments where trading has resumed (transfer out of Level 3). |
| 2) | Broker quoted investments (transfer into Level 3) or quoted prices in active markets (transfer out of Level 3). |
| 3) | Investments that have certain restrictions on trading (transfer into Level 3) or investments where trading restrictions have expired (transfer out of Level 3). |
| † | Change in unrealized appreciation (depreciation) in the current period relating to assets still held at December 31, 2012 was $6,219. |
| ‡ | Change in unrealized appreciation (depreciation) in the current period relating to assets still held at December 31, 2012 was $413. |
The accompanying notes are an integral part of these financial statements.
| Hartford Total Return Bond HLS Fund |
| Statement of Assets and Liabilities |
| December 31, 2012 |
| (000’s Omitted) |
| Assets: | | | | |
| Investments in securities, at market value (cost $4,609,997) | | $ | 4,795,781 | |
| Cash | | | 3,163 | |
| Foreign currency on deposit with custodian (cost $—) | | | — | |
| Unrealized appreciation on foreign currency contracts | | | 734 | |
| Unrealized appreciation on swap contracts | | | 10,559 | |
| Receivables: | | | | |
| Investment securities sold | | | 632,561 | |
| Fund shares sold | | | 874 | |
| Dividends and interest | | | 27,187 | |
| Variation margin | | | 1,284 | |
| Swap premiums paid | | | 45,048 | |
| Total assets | | | 5,517,191 | |
| Liabilities: | | | | |
| Unrealized depreciation on foreign currency contracts | | | 223 | |
| Unrealized depreciation on swap contracts | | | 8,986 | |
| Securities sold short, at market value (proceeds $370,662) | | | 371,221 | |
| Payables: | | | | |
| Investment securities purchased | | | 942,588 | |
| Fund shares redeemed | | | 4,073 | |
| Collateral received from broker | | | 22,426 | |
| Variation margin | | | 51 | |
| Investment management fees | | | 364 | |
| Distribution fees | | | 27 | |
| Other liabilities | | | 3 | |
| Accrued expenses | | | 224 | |
| Swap premiums received | | | 28,220 | |
| Total liabilities | | | 1,378,406 | |
| Net assets | | $ | 4,138,785 | |
| Summary of Net Assets: | | | | |
| Capital stock and paid-in-capital | | $ | 3,838,707 | |
| Undistributed net investment income | | | 150,659 | |
| Accumulated net realized loss | | | (40,680 | ) |
| Unrealized appreciation of investments and the translations of assets and liabilities denominated in foreign currency | | | 190,099 | |
| Net assets | | $ | 4,138,785 | |
| Shares authorized | | | 5,000,000 | |
| Par value | | $ | 0.001 | |
| Class IA: Net asset value per share | | $ | 11.99 | |
| Shares outstanding | | | 297,858 | |
| Net assets | | $ | 3,572,511 | |
| Class IB: Net asset value per share | | $ | 11.91 | |
| Shares outstanding | | | 47,552 | |
| Net assets | | $ | 566,274 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Total Return Bond HLS Fund |
| Statement of Operations |
| For the Year Ended December 31, 2012 |
| (000’s Omitted) |
| Investment Income: | | | | |
| Dividends | | $ | 225 | |
| Interest | | | 149,898 | |
| Less: Foreign tax withheld | | | (1 | ) |
| Total investment income, net | | | 150,122 | |
| | | | | |
| Expenses: | | | | |
| Investment management fees | | | 19,599 | |
| Transfer agent fees | | | 5 | |
| Distribution fees - Class IB | | | 1,500 | |
| Custodian fees | | | 24 | |
| Accounting services fees | | | 855 | |
| Board of Directors' fees | | | 108 | |
| Audit fees | | | 35 | |
| Other expenses | | | 784 | |
| Total expenses (before fees paid indirectly) | | | 22,910 | |
| Custodian fee offset | | | (1 | ) |
| Total fees paid indirectly | | | (1 | ) |
| Total expenses, net | | | 22,909 | |
| Net Investment Income | | | 127,213 | |
| | | | | |
| Net Realized Gain on Investments, Other Financial Instruments and Foreign Currency Transactions: | | | | |
| Net realized gain on investments | | | 203,319 | |
| Net realized gain on purchased options | | | 1,700 | |
| Net realized loss on securities sold short | | | (9,949 | ) |
| Net realized loss on futures | | | (13,200 | ) |
| Net realized gain on written options | | | 3,080 | |
| Net realized loss on swap contracts | | | (31,543 | ) |
| Net realized loss on foreign currency contracts | | | (3,346 | ) |
| Net realized gain on other foreign currency transactions | | | 112 | |
| Net Realized Gain on Investments, Other Financial Instruments and Foreign Currency Transactions | | | 150,173 | |
| | | | | |
| Net Changes in Unrealized Appreciation of Investments, Other Financial Instruments and Foreign Currency Transactions: | | | | |
| Net unrealized appreciation of investments | | | 37,886 | |
| Net unrealized depreciation of purchased options | | | (12,322 | ) |
| Net unrealized appreciation of securities sold short | | | 503 | |
| Net unrealized appreciation of futures | | | 3,492 | |
| Net unrealized appreciation of written options | | | 2,805 | |
| Net unrealized depreciation of swap contracts | | | (870 | ) |
| Net unrealized appreciation of foreign currency contracts | | | 525 | |
| Net unrealized appreciation on translation of other assets and liabilities in foreign currencies | | | 35 | |
| Net Changes in Unrealized Appreciation of Investments, Other Financial Instruments and Foreign Currency Transactions | | | 32,054 | |
| Net Gain on Investments, Other Financial Instruments and Foreign Currency Transactions | | | 182,227 | |
| Net Increase in Net Assets Resulting from Operations | | $ | 309,440 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Total Return Bond HLS Fund |
| Statement of Changes in Net Assets |
| |
| (000’s Omitted) |
| | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| Operations: | | | | | | | | |
| Net investment income | | $ | 127,213 | | | $ | 164,939 | |
| Net realized gain on investments, other financial instruments and foreign currency transactions | | | 150,173 | | | | 114,242 | |
| Net unrealized appreciation of investments, other financial instruments and foreign currency transactions | | | 32,054 | | | | 29,273 | |
| Net Increase in Net Assets Resulting from Operations | | | 309,440 | | | | 308,454 | |
| Distributions to Shareholders: | | | | | | | | |
| From net investment income | | | | | | | | |
| Class IA | | | (149,453 | ) | | | (8,287 | ) |
| Class IB | | | (22,764 | ) | | | (1,420 | ) |
| Total distributions | | | (172,217 | ) | | | (9,707 | ) |
| Capital Share Transactions: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 332,218 | | | | 425,018 | |
| Issued on reinvestment of distributions | | | 149,453 | | | | 8,287 | |
| Redeemed | | | (745,553 | ) | | | (997,652 | ) |
| Total capital share transactions | | | (263,882 | ) | | | (564,347 | ) |
| Class IB | | | | | | | | |
| Sold | | | 85,231 | | | | 103,223 | |
| Issued on reinvestment of distributions | | | 22,764 | | | | 1,420 | |
| Redeemed | | | (193,845 | ) | | | (236,649 | ) |
| Total capital share transactions | | | (85,850 | ) | | | (132,006 | ) |
| Net decrease from capital share transactions | | | (349,732 | ) | | | (696,353 | ) |
| Net Decrease in Net Assets | | | (212,509 | ) | | | (397,606 | ) |
| Net Assets: | | | | | | | | |
| Beginning of period | | | 4,351,294 | | | | 4,748,900 | |
| End of period | | $ | 4,138,785 | | | $ | 4,351,294 | |
| Undistributed (distribution in excess of) | | | | | | | | |
| net investment income | | $ | 150,659 | | | $ | 172,212 | |
| Shares: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 27,974 | | | | 38,022 | |
| Issued on reinvestment of distributions | | | 12,783 | | | | 727 | |
| Redeemed | | | (62,562 | ) | | | (88,636 | ) |
| Total share activity | | | (21,805 | ) | | | (49,887 | ) |
| Class IB | | | | | | | | |
| Sold | | | 7,217 | | | | 9,236 | |
| Issued on reinvestment of distributions | | | 1,959 | | | | 125 | |
| Redeemed | | | (16,407 | ) | | | (21,185 | ) |
| Total share activity | | | (7,231 | ) | | | (11,824 | ) |
The accompanying notes are an integral part of these financial statements.
| Hartford Total Return Bond HLS Fund |
| Notes to Financial Statements |
| December 31, 2012 |
| (000’s Omitted) |
Hartford Total Return Bond HLS Fund (the “Fund”) serves as an underlying investment option for certain variable annuity and variable life insurance separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates and certain qualified retirement plans. The Fund may also serve as an underlying investment option for certain variable annuity and variable life separate accounts of other insurance companies. Owners of variable annuity contracts and policyholders of variable life insurance contracts may choose the funds permitted in the variable insurance contract prospectus. In addition, participants in certain qualified retirement plans may choose the Fund if permitted by their plans.
Hartford Series Fund, Inc. (the “Company”) is an open-end registered management investment company comprised of thirty portfolios. Financial Statements for the Fund, a series of the Company, are included in this report.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund is a diversified open-end management investment company.
The Fund is divided into Class IA and Class IB shares. Each class is offered at the per share net asset value (“NAV”) without a sales charge and is subject to the same expenses, except that the Class IB shares are subject to distribution and service fees charged pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act.
| 2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Fund in the preparation of its financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| | a) | Determination of Net Asset Value – The NAV of each class of the Fund’s shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| b) | Investment Valuation and Fair Value Measurements – For purposes of calculating the NAV, portfolio investments and other assets held by the Fund's portfolio for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of last reported sales prices or official close price. If no sales are reported, market value is based on quotes obtained from a quotation reporting system, established market makers, or independent pricing services. If market prices are not readily available or are deemed unreliable, the Fund will use the fair value of the investment as determined in good faith under policies and procedures established by and under the supervision of the Company’s Board of Directors. Market quotes are considered not readily available where there is an absence of current or reliable market-based data (e.g., trade information or indicative market quotes), including where events occur after the close of the relevant market, but prior to the NYSE Close that materially affect the values of the Fund’s portfolio investments or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the investments trade do not open for trading for the entire day and no other market prices are available. In addition, prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close. Investments that are primarily traded on foreign markets may trade on days that are not business days of the Fund. The value of the foreign investments in which the Fund invests may change on days when a shareholder will not be able to |
purchase or redeem shares of the Fund. Fair value pricing is subjective in nature and the use of fair value pricing by the Fund may cause the NAV of its shares to differ significantly from the NAV that would have been calculated using market prices at the close of the exchange on which a portfolio investment is primarily traded. There can be no assurance that the Fund could obtain the fair market value assigned to an investment if the Fund were to sell the investment at approximately the time at which the Fund determines its NAV.
Fixed income investments (other than short term obligations) and non-exchange traded derivatives held by the Fund are normally valued on the basis of quotes obtained from brokers and dealers or independent pricing services in accordance with procedures established by the Company’s Board of Directors. Prices obtained from independent pricing services use information provided by market makers or estimates of market values through accepted market modeling and trading and pricing conventions. Inputs to the models may include, but are not limited to, prepayment speeds, pricing spread, yield, trade information, dealer quotes, market color, cash flow models and the bond’s terms and conditions. Generally, the Fund may use fair valuation in regard to fixed income investments when the Fund holds defaulted or distressed investments or investments in a company in which a reorganization is pending. Senior floating rate interests generally trade in over-the-counter (“OTC”) markets and are priced through an independent pricing service utilizing independent market quotations from loan dealers or financial institutions. A composite bid price is used, which averages the dealer marks and dealer runs. Short-term investments maturing in 60 days or less are generally valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days.
Exchange traded options, futures and options on futures are valued at the settlement price determined by the relevant exchange as of the NYSE Close. If such instruments do not trade on an exchange, values may be supplied by an independent pricing service using a formula or other objective method that may take into consideration the style, direction, expiration, strike price, notional value and volatility or other adjustments.
Investments valued in currencies other than U.S. dollars are converted to U.S. dollars using exchange rates obtained from independent pricing services for calculation of the NAV. As a result, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of investments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the NYSE is closed and the market value may change on days when an investor is not able to purchase, redeem or exchange shares of the Fund.
Foreign currency contracts represent agreements to exchange currencies on specific future dates at predetermined rates. Foreign currency contracts are valued using foreign currency exchange rates and forward rates as provided by an independent pricing service on the Valuation Date.
Investments in open-end mutual funds are valued at the respective NAV of each open-end mutual fund on the Valuation Date.
Financial instruments for which prices are not available from an independent pricing service may be valued using market quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with procedures established by the Company’s Board of Directors.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| Hartford Total Return Bond HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| | · | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange traded funds, rights and warrants. |
| | · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 may include debt investments that are traded less frequently than exchange traded instruments and which are valued using independent pricing services; foreign equities, which are principally traded on certain foreign markets and are adjusted daily pursuant to a fair value pricing service in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close; and short-term investments, which are valued at amortized cost. |
| | · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price. For more information on specific valuation techniques and unobservable inputs, please see table below titled "Quantitative Information about Level 3 Fair Value Measurements". |
The Board of Directors of the Company generally reviews and approves the “Procedures for Valuation of Portfolio Securities” on an annual basis. These procedures define how investments are to be valued, including the formation and activities of a Valuation Committee. The Valuation Committee is responsible for determining in good faith the fair value of investments when the value cannot be obtained from primary pricing services or alternative sources or if the valuation of an investment as provided by the primary pricing service or alternative source is believed not to reflect the investment’s fair value as of the Valuation Date. Members of the Valuation Committee include the Fund’s Treasurer or designee, a Vice President of the Fund with legal expertise or designee, and a Vice President of the investment manager or designee. In addition, the Fund’s Chief Compliance Officer shall designate a member of the compliance group to attend Valuation Committee meetings as a non-voting resource, to monitor for and provide guidance with respect to compliance with these procedures. Two members of the Valuation Committee or their designees, representing different departments, shall constitute a quorum for purposes of permitting the Valuation Committee to take action. The Valuation Committee will consider all relevant factors in determining an investment’s fair value, and may seek the advice of the Fund’s sub-adviser, knowledgeable brokers, and legal counsel in making such determination. The Valuation Committee reports to the Audit Committee of the Company’s Board of Directors. The Audit Committee receives quarterly written reports which include details of all fair-valued investments, including the reason for the fair valuation, and an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such investments (the “look-back” test). The Board of Directors then must consider for ratification all of the fair value determinations made during the previous quarter.
Valuation levels are not necessarily indicative of the risk associated with investing in such investments. Individual investments within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
For additional information, refer to the Investment Valuation Hierarchy Level Summary and the Level 3 roll-forward reconciliation which follow the Schedule of Investments.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period.
Quantitative Information about Level 3 Fair Value Measurements:
| Security Type / Valuation Technique | | Unobservable Input(1) | | Range
(Weighted Average(2) ) | | Fair Value at
December 31,
2012 | |
| Asset & Commercial Mortgage Backed Securities: | | | | | | | | |
| Discounted cash flow | | Life expectancy (in months) | | 78 – 584 (176) | | $ | 85,216 | |
| | | Internal rate of return | | 2.78% - 10.0% (5.7%) | | | | |
| Evaluated bid | | Prior day valuation | | Not Applicable | | | 1,496 | |
| Indicative market quotes(3) | | Third party indicative quote methodologies can vary significantly | | Not Applicable | | | 3,914 | |
| Corporate Bonds: | | | | | | | | |
| Evaluated bid | | Prior day valuation | | Not Applicable | | | 197 | |
| Indicative market quotes(3) | | Third party indicative quote methodologies can vary significantly | | Not Applicable | | | 8,731 | |
| Total | | | | | | $ | 99,554 | |
| | | | | | | | | |
(1) Significant increases and decreases in these inputs may result in a significant change to the fair value.
(2) Inputs were weighted based on the fair value of the investments included in the range.
(3) For investments priced using indicative market quotes, those quotes represent the best available estimate of fair value as of December 31, 2012.
| | c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Investments purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses are determined on the basis of identified cost. |
Trade date for senior floating rate interests purchased in the primary loan market is considered the date on which the loan allocations are determined. Trade date for senior floating rate interests purchased in the secondary loan market is the date on which the transaction is entered into.
Dividend income from domestic securities is accrued on the ex-dividend date. In general, dividend income from foreign securities is recorded on the ex-date; however, dividend notifications in certain foreign jurisdictions may not be available in a timely manner and as a result, the Fund will record the dividend as soon as the relevant details (i.e., rate per share, payment date, shareholders of record, etc.) are publicly available. Interest income, including amortization of premium and accretion of discounts, is accrued on a daily basis. Paydown gains and losses on mortgage-related and other asset-backed securities are included in interest income in the Statement of Operations, as applicable.
| d) | Foreign Currency Transactions – Assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investments, income, and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. |
The Fund does not isolate that portion of portfolio investment valuation resulting from fluctuations in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of investments held. Exchange rate fluctuations are included with the net realized and unrealized gain or loss on investments in the accompanying financial statements.
Net realized foreign exchange gains or losses arise from sales of foreign currencies and the difference between asset and liability amounts initially stated in foreign currencies and the U.S. dollar value of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of other assets and liabilities at the end of the reporting period, resulting from changes in the exchange rates.
| | e) | Joint Trading Account – The Fund may invest cash balances into a joint trading account that may be invested in one or more repurchase agreements. |
| Hartford Total Return Bond HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| f) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Fund’s shares are executed in accordance with the investment instructions of the contract holders and plan participants. The NAV of the Fund’s shares is determined as of the close of business on each business day of the Exchange. The NAV is determined separately for each class of shares of the Fund by dividing the Fund’s net assets attributable to that class by the number of shares of the class outstanding. Each class of shares offered by the Fund has equal rights as to assets and voting privileges (except that shareholders of a class have exclusive voting rights regarding any matter relating solely to that class of shares). Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets of the class. Realized and unrealized capital gains and losses are allocated daily based on the relative net assets of each class of shares of the Fund. |
Orders for the purchase of the Fund’s shares received prior to the close of the Exchange on any day the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Fund. The policy of the Fund is to pay dividends from net investment income and realized capital gains, if any, at least once a year.
Distributions from net investment income, net realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These differences may include but are not limited to losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to Passive Foreign Investment Companies (“PFICs”), Real Estate Investment Trusts (“REITs”), Regulated Investment Companies (“RICs”), certain derivatives and partnerships. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Fund’s capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| 3. | Securities and Other Investments: |
| | a) | Repurchase Agreements – A repurchase agreement is an agreement by which a counterparty agrees to sell an investment and agrees to repurchase the investment sold from the buyer at a mutually agreed upon time and price. At the time the Fund enters into a repurchase agreement, the value of the underlying collateral, including accrued interest, will be equal to or exceed the value of the repurchase agreement. Repurchase agreements expose the Fund to counterparty risk - that is, the risk that the counterparty will not fulfill its obligations. To minimize counterparty risk, the investments that serve to collateralize the repurchase agreement are held by the Fund’s custodian in book entry or physical form in the custodial account of the Fund or in a third party custodial account. Repurchase agreements are valued at cost plus accrued interest, which approximates fair value. The Fund, as shown on the Schedule of Investments, had outstanding repurchase agreements as of December 31, 2012. |
| b) | Illiquid and Restricted Investments – The Fund is permitted to invest up to 15% of its net assets in illiquid investments. Illiquid investments are those that may not be sold or disposed of in the ordinary course of business within seven days, at approximately the price used to determine the Fund’s NAV. The Fund may not be able to sell illiquid investments when its sub-adviser considers it desirable to do so or may have to sell such investments at a price that is lower than the price that could be obtained if the investments were more liquid. A sale of illiquid investments may require more time and may result in higher dealer discounts and other selling expenses than does the sale of those that are liquid. Illiquid investments also may be more difficult to value due to the unavailability of reliable market quotations for such investments, and an investment in them may have an adverse impact on the Fund’s NAV. The Fund may also purchase certain restricted investments that can only be resold to certain qualified investors and may be determined to be liquid pursuant to policies and guidelines established by the Company’s Board of Directors. The Fund, as shown on the Schedule of Investments, had illiquid and/or restricted investments as of December 31, 2012. |
| c) | Investments Purchased on a When-Issued or Delayed-Delivery Basis – Delivery and payment for investments that have been purchased by the Fund on a forward commitment, or when-issued or delayed-delivery basis, take place beyond the customary settlement period. A fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell delayed-delivery investments before they are delivered, which may result in a realized gain or loss. During this period, such investments are subject to market fluctuations, and the Fund identifies investments segregated in its records with a value at least equal to the amount of the commitment. The Fund, as shown on the Schedule of Investments, had when-issued or delayed-delivery investments as of December 31, 2012. |
In connection with the Fund’s ability to purchase investments on a when-issued or forward commitment basis, the Fund may enter into to-be announced (“TBA”) commitments. TBA commitments are forward agreements for the purchase or sale of mortgage-backed securities for a fixed price, with payment and delivery on an agreed-upon future settlement date. The specific securities to be delivered are not identified at the trade date; however, delivered securities must meet specified terms, including issuer, rate and mortgage terms. Although the Fund may enter into TBA commitments with the intention of acquiring or delivering securities for its portfolio, the Fund can extend the settlement date, roll the transaction, or dispose of a commitment prior to settlement if deemed appropriate to do so. If the TBA commitment is closed through the acquisition of an offsetting TBA commitment, the Fund realizes a gain or loss. In a TBA roll transaction, the Fund generally purchases or sells the initial TBA commitment prior to the agreed upon settlement date and enters into a new TBA commitment for future delivery or receipt of the mortgage-backed securities. TBA commitments involve a risk of loss if the value of the security to be purchased or sold declines or increases, respectively, prior to settlement date.
The Fund may enter into “dollar rolls” in which the Fund sells securities and contracts with the same counterparty to repurchase substantially similar securities (for example, same issuer, coupon and maturity) on a specified future date at an agreed upon price. The Fund gives up the right to receive interest paid on the investments sold. The Fund would benefit to the extent of any differences between the price received for the security and the lower forward price for the future purchase. Dollar rolls involve the risk that the market value of the securities that the Fund is required to purchase may decline below the agreed upon repurchase price of those securities. The Fund records dollar roll transactions as purchases and sales and realizes gains and losses on these transactions. These transactions are excluded from the Fund’s portfolio turnover rate. The Fund had open dollar roll transactions as of December 31, 2012.
| | d) | Senior Floating Rate Interests – The Fund, as shown on the Schedule of Investments, invests in senior floating rate interests. Senior floating rate interests hold the most senior position in the capital structure of a business entity (the “Borrower”), are typically secured by specific collateral and have a claim on the assets and/or stock of the Borrower that is senior to that held by subordinated debtholders and stockholders of the Borrower. Senior floating rate interests are typically structured and administered by a financial institution that acts as the agent of the lenders participating in the senior floating rate interest. The Fund may invest in multiple series or tranches of a senior floating rate interest, which may have varying terms and carry different associated risks. The Fund may also enter into unfunded loan commitments, which are contractual obligations for future funding. Unfunded loan commitments may include revolving credit facilities, which may obligate the Fund to supply additional cash to the borrower on demand. Unfunded loan commitments represent a future obligation in full. The Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a senior floating rate interest. In certain circumstances, the Fund may receive various fees upon the restructure of a senior floating rate interest by a borrower. Fees earned/paid may be recorded as a component of income or realized gain/loss in the Statement of Operations. |
Senior floating rate interests are typically rated below-investment-grade, which suggests they are more likely to default and generally pay higher interest rates than investment-grade loans. A default could lead to non-payment of income, which would result in a reduction of income to the Fund, and there can be no assurance that the liquidation of any collateral would satisfy the Borrower’s obligation in the event of non-payment of scheduled interest or principal payments, or that such collateral could be readily liquidated.
| Hartford Total Return Bond HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| | e) | Inflation Indexed Bonds – The Fund may invest in inflation indexed bonds. Inflation indexed bonds are fixed income investments whose principal value is periodically adjusted to the rate of inflation. The interest rate on these bonds is generally fixed at issuance at a rate lower than typical bonds. Over the life of an inflation indexed bond, however, interest will be paid based on a principal value, which is adjusted for inflation. Any increase or decrease in the principal amount of an inflation indexed bond will be included as interest income on the Statement of Operations, even though investors do not receive the principal amount until maturity. The Fund, as shown on the Schedule of Investments, had inflation indexed bonds as of December 31, 2012. |
| | f) | Mortgage Related and Other Asset Backed Securities – The Fund may invest in mortgage related and other asset backed securities. These securities include mortgage pass-through securities, collateralized mortgage obligations, commercial mortgage backed securities, stripped mortgage backed securities, asset backed securities, collateralized debt obligations and other securities that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property. Mortgage related securities are created from pools of residential or commercial mortgage loans, including mortgage loans made by savings and loan institutions, mortgage bankers, commercial banks and others. Asset backed securities are created from many types of assets, including auto loans, credit card receivables, home equity loans, and student loans. These securities provide a monthly payment that consists of both interest and principal payments. Interest payments may be determined by fixed or adjustable rates. The rate of pre-payments on underlying mortgages will affect the price and volatility of a mortgage related security, and may have the effect of shortening or extending the effective duration of the security relative to what was anticipated at the time of purchase. The timely payment of principal and interest of certain mortgage related securities is guaranteed by the full faith and credit of the United States Government. Mortgage related and other asset backed securities created and guaranteed by non-governmental issuers, including government-sponsored corporations, may be supported by various forms of insurance or guarantees, but there can be no assurance that the private insurers or guarantors can meet their obligations under the insurance policies or guarantee arrangements. The Fund, as shown on the Schedule of Investments, had mortgage related and other asset backed securities as of December 31, 2012. |
| 4. | Financial Derivative Instruments: |
The following disclosures contain information on how and why the Fund uses derivative instruments, the credit-risk-related contingent features in certain derivative instruments, and how derivative instruments affect the Fund’s financial position and results of operations. The location and fair value amounts of these instruments on the Statement of Assets and Liabilities and the realized gains and losses and changes in unrealized gains and losses on the Statement of Operations, each categorized by type of derivative contract, are included in the following Additional Derivative Instrument Information footnote. The derivative instruments outstanding as of year-end are disclosed in the notes to or within the Schedule of Investments for purchased options, if applicable. The amounts of realized gains and losses and changes in unrealized gains and losses on derivative instruments during the year are disclosed in the Statement of Operations.
| | a) | Foreign Currency Contracts – The Fund may enter into foreign currency contracts that obligate the Fund to purchase or sell currencies at specified future dates. Foreign currency contracts are used to hedge the currency exposure associated with some or all of the Fund’s investments and/or as part of an investment strategy. Foreign currency contracts are marked to market daily and the change in value is recorded by the Fund as an unrealized gain or loss. The Fund will record a realized gain or loss when the foreign currency contract is settled. |
Foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. In addition, risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of the contracts and from unanticipated movements in the value of the foreign currencies relative to the U.S. dollar. The Fund had outstanding foreign currency contracts as shown on the Schedule of Investments as of December 31, 2012.
| | b) | Futures Contracts – The Fund may enter into futures contracts. A futures contract is an agreement between two parties to buy or sell an asset at a set price on a future date. The Fund uses futures contracts to manage or obtain exposure to the investment markets, commodities, or movements in interest rates and currency values. The primary risks associated with the use of futures contracts are the imperfect correlation between the change in market value of the investments held by the Fund and the prices of futures contracts and the possibility of an illiquid market. Upon entering into a futures contract, the Fund is required to deposit with a futures commission merchant (“FCM”) an amount of cash or U.S. Government or Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily at the most recent settlement price reported by an exchange on which, over time, they are traded most extensively, and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statement of Assets and Liabilities; however, the Fund seeks to reduce this risk through the use of an FCM. The Fund, as shown on the Schedule of Investments, had outstanding futures contracts as of December 31, 2012. |
| c) | Options Contracts – An option contract is a contract sold by one party to another party that offers the buyer the right, but not the obligation, to buy (call) or sell (put) an investment or other financial asset at an agreed-upon price during a specific period of time or on a specific date. The Fund may write (sell) covered call and put options on futures, swaps (“swaptions”), securities, commodities or currencies. “Covered” means that so long as the Fund is obligated as the writer of an option, it will own either the underlying investments or currency or an option to purchase the same underlying investments or currency having an expiration date of the covered option and an exercise price equal to or less than the exercise price of the covered option, or will pledge cash or other liquid investments having a value equal to or greater than the fluctuating market value of the option investment or currency. Writing put options increases the Fund’s exposure to the underlying instrument. Writing call options decreases the Fund’s exposure to the underlying instrument. Premiums received from writing options that expire are treated as realized gains. Premiums received from writing options that are exercised or closed are added to the proceeds or offset amounts paid on the underlying futures, swap, investment or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying instrument may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the instrument underlying the written option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. The Fund may also purchase put and call options. Purchasing call options increases the Fund’s exposure to the underlying instrument. Purchasing put options decreases the Fund’s exposure to the underlying instrument. The Fund pays a premium, which is included on the Fund’s Statement of Assets and Liabilities as an investment and is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options that expire are treated as realized losses. Certain options may be purchased with premiums to be determined on a future date. The premiums for these options are based upon implied volatility parameters at specified terms. The risk associated with purchasing put and call options is generally limited to the premium paid. Premiums paid for purchasing options that are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying investment transaction to determine the realized gain or loss. Entering into over-the-counter options also exposes the Fund to counterparty risk. Counterparty risk is the possibility that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements. The Fund, as shown on the Schedule of Investments, had outstanding purchased options contracts as of December 31, 2012. Transactions involving written options contracts during the year ended December 31, 2012, are summarized below: |
| Hartford Total Return Bond HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Call Options Written During the Year | | Number of Contracts* | | | Premium Amounts | |
| Beginning of the year | | | 178,200,000 | | | $ | 11,916 | |
| Written | | | — | | | | — | |
| Expired | | | — | | | | — | |
| Closed | | | (178,200,000 | ) | | | (11,916 | ) |
| Exercised | | | — | | | | — | |
| End of year | | | — | | | $ | — | |
| Put Options Written During the Year | | Number of Contracts* | | | Premium Amounts | |
| Beginning of the year | | | 63,500,907 | | | $ | 1,011 | |
| Written | | | 550 | | | | 1,099 | |
| Expired | | | (1,457 | ) | | | (1,312 | ) |
| Closed | | | (63,500,000 | ) | | | (798 | ) |
| Exercised | | | — | | | | — | |
| End of year | | | — | | | $ | — | |
| * | The number of contracts does not omit 000's. In the prior year, the number of contracts was displayed in U.S. dollars; currently all contracts are displayed in local currency. |
| d) | Swap Contracts – The Fund may invest in swap contracts. Swap contracts are privately negotiated agreements between the Fund and a counterparty to exchange or swap investment cash flows, assets, foreign currencies or market-linked returns at specified future intervals. The Fund may enter into credit default, total return, cross-currency, interest rate, inflation and other forms of swap contracts to manage its exposure to credit, currency, interest rate, commodity and inflation risk. Swap contracts are also used to gain exposure to certain markets. In connection with these contracts, investments or cash may be identified as collateral in accordance with the terms of the respective swap contracts to provide assets of value and recourse in the event of default or bankruptcy/insolvency. Swaps are valued based on custom valuations furnished by an independent pricing service. Swaps for which prices are not available from an independent pricing service are valued in accordance with procedures established by the Company’s Board of Directors, and the change in value, if any, is recorded as an unrealized gain or loss on the Statement of Assets and Liabilities. Payments received or made at the beginning of the measurement period are reflected as such on the Statement of Assets and Liabilities and represent payments made or received upon entering into the swap contract to compensate for differences between the stated terms of the swap contract and prevailing market conditions (credit spreads, currency exchange rates, interest rates, and other relevant factors). These upfront payments are recorded as realized gains or losses on the Statement of Operations upon termination or maturity of the swap. A liquidation payment received or made at the termination of the swap and net periodic payments received or paid by the Fund are recorded as realized gains or losses on the Statement of Operations. Entering into these contracts involves, to varying degrees, elements of credit and market risk in excess of the amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these contracts, that the counterparty to the contracts may default on its obligation to perform or disagree as to the meaning of contractual terms in the contracts, and that there may be unfavorable changes in interest rates. The Fund’s maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from the counterparty over the contract’s remaining life, to the extent that amount is positive. The risk is mitigated by having a master netting arrangement between the Fund and the counterparty, which allows for the netting of payments made or received (although such amounts are presented on a gross basis within the Statement of Assets and Liabilities, as applicable) as well as the posting of collateral to the Fund to cover the Fund’s exposure to the counterparty. |
Credit Default Swap Contracts – The credit default swap market allows the Fund to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and sovereign issuers, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. Certain credit default swaps involve the exchange of a fixed rate premium for protection against the loss in value of an underlying investment or index in the event of a credit event, such as payment default or bankruptcy.
Under a credit default swap contract, one party acts as guarantor by receiving the fixed periodic payment in exchange for the commitment to purchase the underlying investment at par if the defined credit event occurs. Upon the occurrence of a defined credit event, the difference between the value of the reference obligation and the swap’s notional amount is
recorded as realized gain or loss on swap transactions in the Statement of Operations. A “buyer” of credit protection agrees to pay a counterparty to assume the credit risk of an issuer upon the occurrence of certain events. The “seller” of the protection receives periodic payments and agrees to assume the credit risk of an issuer upon the occurrence of certain events. Although specified events are contract specific, credit events are generally defined as bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium. A “seller’s” exposure is limited to the total notional amount of the credit default swap contract. These potential amounts would be partially offset by any recovery values of the respective referenced obligations or upfront payments received upon entering into the contract.
Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap contracts on corporate issues, sovereign government issues or U.S. municipal issues as of year-end are disclosed in the notes to the Schedule of Investments, as applicable, and serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the contract. Wider credit spreads represent a deterioration of the referenced entity’s soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract. For credit default swap contracts on asset-backed securities and credit indices, the quoted market prices and resulting values serve as the indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced equity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract. The Fund, as shown on the Schedule of Investments, had outstanding credit default swaps as of December 31, 2012.
Interest Rate Swap Contracts – The Fund is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Fund holds fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, the Fund may enter into interest rate swap contracts. In a typical interest rate swap, one party agrees to make regular payments equal to a floating interest rate, based on a specified interest rate or inflation benchmark (e.g. London Interbank Offered Rate (“LIBOR”)), multiplied by a “notional principal amount”, in return for payments equal to a fixed rate multiplied by the same amount, for a specific period of time. The net interest received or paid on interest rate swap contracts is recorded as a realized gain or loss. Interest rate swaps are marked to market daily and the change, if any, is recorded as an unrealized gain or loss in the Statement of Operations. When the interest rate swap contract is terminated early, the Fund records a realized gain or loss equal to the difference between the current realized value and the expected cash flows.
If an interest rate swap contract provides for payments in different currencies, the parties might agree to exchange the notional principal amount as well. Interest rate swaps may also depend on other prices or rates, such as the value of an index or mortgage prepayment rates. The risks of interest rate swaps include changes in market conditions which will affect the value of the contract or the cash flows and the possible inability of the counterparty to fulfill its obligations under the contract. The Fund’s maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from the counterparty over the contract’s remaining life, to the extent that amount is positive. The Fund, as shown on the Schedule of Investments, had outstanding interest rate swaps as of December 31, 2012.
Spreadlock Swap Contracts – The Fund may invest in spreadlock swap contracts. These contracts involve commitments to pay or receive a settlement amount calculated as the difference between the swap spread and a fixed spread at a specific forward date. The Fund, as shown on the Schedule of Investments, had outstanding spreadlock swaps as of December 31, 2012.
| Hartford Total Return Bond HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| e) | Additional Derivative Instrument Information: |
Fair Value of Derivative Instruments on the Statement of Assets and Liabilities as of December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Investments in securities, at value (purchased options), market value | | $ | 1,485 | | | $ | 1,009 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,494 | |
| Unrealized appreciation on foreign currency contracts | | | — | | | | 734 | | | | — | | | | — | | | | — | | | | — | | | | 734 | |
| Unrealized appreciation on swap contracts | | | 224 | | | | — | | | | 10,335 | | | | — | | | | — | | | | — | | | | 10,559 | |
| Variation margin receivable * | | | 1,284 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,284 | |
| Total | | $ | 2,993 | | | $ | 1,743 | | | $ | 10,335 | | | $ | — | | | $ | — | | | $ | — | | | $ | 15,071 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized depreciation on foreign currency contracts | | $ | — | | | $ | 223 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 223 | |
| Unrealized depreciation on swap contracts | | | 181 | | | | — | | | | 8,805 | | | | — | | | | — | | | | — | | | | 8,986 | |
| Variation margin payable * | | | 51 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 51 | |
| Total | | $ | 130 | | | $ | 223 | | | $ | 8,805 | | | $ | — | | | $ | — | | | $ | — | | | $ | 9,260 | |
| * | Only current day's variation margin is reported within the Statement of Assets and Liabilities. The variation margin is included in the open futures cumulative appreciation (depreciation) of $2,791 as reported in the Schedule of Investments. |
The volume of derivatives that is presented in the Schedule of Investments is consistent with the derivative activity during the year ended December 31, 2012.
The Effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Realized Gain (Loss) on Derivatives Recognized as a Result of Operations: |
| Net realized gain (loss) on purchased options | | $ | (4,426 | ) | | $ | 6,126 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,700 | |
| Net realized loss on futures | | | (13,200 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (13,200 | ) |
| Net realized gain on written options | | | 1,312 | | | | 1,768 | | | | — | | | | — | | | | — | | | | — | | | | 3,080 | |
| Net realized gain (loss) on swap contracts | | | 1,113 | | | | — | | | | (32,656 | ) | | | — | | | | — | | | | — | | | | (31,543 | ) |
| Net realized loss on foreign currency contracts | | | — | | | | (3,346 | ) | | | — | | | | — | | | | — | | | | — | | | | (3,346 | ) |
| Total | | $ | (15,201 | ) | | $ | 4,548 | | | $ | (32,656 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | (43,309 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized as a Result of Operations: | |
| Net change in unrealized appreciation (depreciation) of investments in purchased options | | $ | 668 | | | $ | (12,990 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (12,322 | ) |
| Net change in unrealized appreciation of futures | | | 3,492 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 3,492 | |
| Net change in unrealized appreciation (depreciation) of written options | | | (140 | ) | | | 2,945 | | | | — | | | | — | | | | — | | | | — | | | | 2,805 | |
| Net change in unrealized appreciation (depreciation) of swap contracts | | | 43 | | | | — | | | | (913 | ) | | | — | | | | — | | | | — | | | | (870 | ) |
| Net change in unrealized appreciation of foreign currency contracts | | | — | | | | 525 | | | | — | | | | — | | | | — | | | | — | | | | 525 | |
| Total | | $ | 4,063 | | | $ | (9,520 | ) | | $ | (913 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | (6,370 | ) |
| a) | Credit and Counterparty Risks – Credit risk depends largely on the perceived financial health of bond issuers. In general, the credit rating is inversely related to the credit risk of the issuer. Higher rated bonds generally are deemed to have less credit risk, while lower or unrated bonds are deemed to have higher risk of default. The share price, yield and total return of a fund that holds securities with higher credit risk may be more volatile than those of a fund that holds bonds with lower credit risk. Similar to credit risk, the Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will default. |
| b) | Market Risks – The Fund’s investments expose the Fund to various risks including, but not limited to, interest rate, prepayment, extension, foreign currency, and equity risks. Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the values of certain fixed income securities held by the Fund are likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a fixed income security’s market price to interest rate (i.e., yield) movements. Senior floating rate interests and securities subject to prepayment and extension risk generally offer less potential for gains when interest rates decline. In addition, securities are subject to extension risk. Rising interest rates may cause prepayments to occur at a slower than expected rate, thereby effectively lengthening the maturity of the security and making the security more sensitive to interest rate changes. Prepayment and extension risk are major risks of mortgage backed securities, senior floating rate interests, and certain asset backed securities. For certain asset backed securities, the actual maturity may be less than the stated maturity shown in the Schedule of Investments, if applicable. As a result, the timing of income recognition relating to these securities may vary based upon the actual maturity. If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities, such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund. The market values of equity securities, such as common stocks and preferred stocks, or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The market value of equity securities may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities. |
| a) | Federal Income Taxes – For federal income tax purposes, the Fund intends to continue to qualify as a RIC under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders and otherwise complying with the requirements of the IRC. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains prior to the next fiscal year-end. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
| Hartford Total Return Bond HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. |
| c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Fund for the periods indicated is as follows (as adjusted for dividends payable, if applicable): |
| | | For the Year Ended
December 31, 2012 | | | For the Year Ended
December 31, 2011 | |
| Ordinary Income | | $ | 172,217 | | | $ | 9,707 | |
As of December 31, 2012, the Fund’s components of distributable earnings (deficit) on a tax basis were as follows:
| | | Amount | |
| Undistributed Ordinary Income | | $ | 150,659 | |
| Accumulated Capital and Other Losses* | | | (28,692 | ) |
| Unrealized Appreciation† | | | 178,111 | |
| Total Accumulated Earnings | | $ | 300,078 | |
| * | The Fund has capital loss carryforwards that are identified in the Capital Loss Carryforward note that follows. |
| † | Differences between book-basis and tax-basis unrealized appreciation (depreciation) may be attributable to the losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. |
| d) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as foreign currency, PFICs, expiration or utilization of capital loss carryforwards or net operating losses. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Fund’s distributions may be shown in the accompanying Statement of Changes in Net Assets as from undistributed net investment income, from accumulated net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Fund recorded reclassifications to increase (decrease) the accounts listed below: |
| | | Amount | |
| Undistributed Net Investment Income | | $ | 23,451 | |
| Accumulated Net Realized Gain (Loss) | | | (23,451 | ) |
| e) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation. |
At December 31, 2012 (tax-year-end), the Fund had capital loss carryforwards for U.S. federal income tax purposes as follows:
| Year of Expiration | | Amount | |
| 2017 | | $ | 28,692 | |
| Total | | $ | 28,692 | |
During the year ended December 31, 2012, the Fund utilized $121,285 of prior year capital loss carryforwards.
| f) | Accounting for Uncertainty in Income Taxes – The Fund has adopted financial reporting rules that require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Fund does not have an examination in progress. |
The Fund has reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules had no effect on the Fund’s financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2012. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Fund’s investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Fund pursuant to an Investment Management Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Fund’s investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees payable under, the Fund’s investment management agreements; or (ii) the day-to-day management of the Fund. The investment manager has overall investment supervisory responsibility for the Fund. In addition, the investment manager provides administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. Effective March 5, 2012, the investment manager contracted with Wellington Management Company, LLP (“Wellington Management”) under a sub-advisory agreement for the provision of day-to-day investment management services to the Fund in accordance with the Fund’s investment objective and policies. Prior to March 5, 2012, Hartford Investment Management Company was the sub-adviser for the Fund. The Fund pays a fee to the investment manager, a portion of which may be used to compensate the sub-advisers. |
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered as of December 31, 2012, (paid for the period March 1, 2012 through December 31, 2012); the rates are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee | |
| On first $250 million | | | 0.5250 | % |
| On next $250 million | | | 0.5000 | % |
| On next $500 million | | | 0.4750 | % |
| On next $1.5 billion | | | 0.4500 | % |
| On next $2.5 billion | | | 0.4450 | % |
| On next $5 billion | | | 0.4300 | % |
| Over $10 billion | | | 0.4200 | % |
| Hartford Total Return Bond HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered during the period January 1, 2012, through February 29, 2012.
| Average Daily Net Assets | | Annual Fee | |
| On first $250 million | | | 0.5250 | % |
| On next $250 million | | | 0.5000 | % |
| On next $500 million | | | 0.4750 | % |
| On next $4 billion | | | 0.4500 | % |
| On next $5 billion | | | 0.4300 | % |
| Over $10 billion | | | 0.4200 | % |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Fund. HLIC provided accounting services for the Fund for the fiscal year ended December 31, 2012. The replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Fund or the fees charged to the Fund for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Fund, HFMC provides accounting services to the Fund and receives monthly compensation based on the Fund’s average daily net assets at the rates set forth below. The Fund’s accounting services fees are accrued daily and paid monthly. |
| Average Daily Net Assets | | Annual Fee | |
| On first $5 billion | | | 0.020 | % |
| On next $5 billion | | | 0.018 | % |
| Over $10 billion | | | 0.016 | % |
| c) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund and allocated to classes within a Fund in proportion to the average daily net assets of the Fund and each class, except where allocation of certain expenses is more fairly made directly to the Fund or to specific classes within a Fund. |
| d) | Fees Paid Indirectly – The Fund’s custodian banks have agreed to reduce its fees when the Fund maintains cash on deposit in a non-interest-bearing custody account. For the year ended December 31, 2012, these amounts, if any, are included in the Statement of Operations. |
The ratio of expenses to average net assets in the accompanying financial highlights excludes the reduction in expenses related to fees paid indirectly. The annualized expense ratio after waivers for the period listed below reflecting the reduction for fees paid indirectly is as follows:
| | | Year Ended
December 31, 2012 | |
| Class IA | | | 0.50 | % |
| Class IB | | | 0.75 | |
| e) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Fund's principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD with HIFSCO did not result in any changes to the distribution services provided to the Fund. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Fund, has adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, 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, subject to the review and approval of the Company’s Board of Directors. |
The Distribution Plan provides that the Fund may pay annually up to 0.25% of the average daily net assets of the Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, the Fund is authorized to make payments monthly to the Distributor that may be used to pay or compensate 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. These fees are accrued daily and paid monthly.
| f) | Other Related Party Transactions – Certain officers of the Fund are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Fund’s Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Fund was in the amount of $5. Hartford Administrative Services Company (“HASCO”), an indirect wholly owned subsidiary of The Hartford, provides transfer agent services to the Fund. The amount paid to HASCO can be found in the Statement of Operations. These fees are accrued daily and paid monthly. |
| 8. | Investment Transactions: |
For the year ended December 31, 2012, the Fund's aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
| | | Amount | |
| Cost of Purchases Excluding U.S. Government Obligations | | $ | 25,284,496 | |
| Sales Proceeds Excluding U.S. Government Obligations | | | 25,488,317 | |
| Cost of Purchases for U.S. Government Obligations | | | 1,074,273 | |
| Sales Proceeds for U.S. Government Obligations | | | 846,509 | |
The Fund is one of several Hartford funds that participate in a $500 million committed revolving line of credit facility. The facility is to be used for temporary or emergency purposes. Under the arrangement, the funds are required to own securities having a market value in excess of 300% of the total bank borrowings. The interest rate on borrowings varies depending on the nature of the loan. The facility also requires a fee to be paid based on the amount of the commitment. This commitment fee is allocated to all of the funds participating in the line of credit based on the average net assets of the funds. During the year ended December 31, 2012, the Fund did not have any borrowings under this facility.
| 10. | Industry Classifications: |
Other than the industry classifications “Other Investment Pools and Funds” and “Exchange Traded Funds,” equity industry classifications used in this report are the Global Industry Classification Standard, which was developed by and is the exclusive property and service mark of MSCI, Inc. and Standard & Poor’s.
Under the Company’s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
| Hartford Total Return Bond HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| 12. | Recent Accounting Pronouncement: |
Disclosures about Offsetting Assets and Liabilities - In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The objective of the ASU is to enhance current disclosure requirements on offsetting of certain assets and liabilities and to enable financial statement users to compare financial statements prepared under U.S. GAAP and International Financial Reporting Standards.
Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
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| Hartford Total Return Bond HLS Fund |
| Financial Highlights |
| - Selected Per-Share Data (A) - |
| Class | | Net Asset Value at
Beginning of
Period | | | Net Investment
Income (Loss) | | | Net Realized and
Unrealized Gain
(Loss) on
Investments | | | Total from
Investment
Operations | | | Dividends from Net
Investment Income | | | Distributions from
Realized Capital
Gains | | | Distributions from
Capital | | | Total Distributions | | | Net Asset Value at
End of Period | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2012 |
| IA | | $ | 11.63 | | | $ | 0.41 | | | $ | 0.45 | | | $ | 0.86 | | | $ | (0.50 | ) | | $ | – | | | $ | – | | | $ | (0.50 | ) | | $ | 11.99 | |
| IB | | | 11.55 | | | | 0.40 | | | | 0.43 | | | | 0.83 | | | | (0.47 | ) | | | – | | | | – | | | | (0.47 | ) | | | 11.91 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2011 |
| IA | | | 10.90 | | | | 0.44 | | | | 0.31 | | | | 0.75 | | | | (0.02 | ) | | | – | | | | – | | | | (0.02 | ) | | | 11.63 | |
| IB | | | 10.84 | | | | 0.42 | | | | 0.31 | | | | 0.73 | | | | (0.02 | ) | | | – | | | | – | | | | (0.02 | ) | | | 11.55 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2010 |
| IA | | | 10.58 | | | | 0.45 | | | | 0.34 | | | | 0.79 | | | | (0.47 | ) | | | – | | | | – | | | | (0.47 | ) | | | 10.90 | |
| IB | | | 10.53 | | | | 0.44 | | | | 0.31 | | | | 0.75 | | | | (0.44 | ) | | | – | | | | – | | | | (0.44 | ) | | | 10.84 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2009 |
| IA | | | 9.54 | | | | 0.46 | | | | 0.98 | | | | 1.44 | | | | (0.40 | ) | | | – | | | | – | | | | (0.40 | ) | | | 10.58 | |
| IB | | | 9.50 | | | | 0.46 | | | | 0.95 | | | | 1.41 | | | | (0.38 | ) | | | – | | | | – | | | | (0.38 | ) | | | 10.53 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2008 |
| IA | | | 11.15 | | | | 0.62 | | | | (1.49 | ) | | | (0.87 | ) | | | (0.74 | ) | | | – | | | | – | | | | (0.74 | ) | | | 9.54 | |
| IB | | | 11.09 | | | | 0.67 | | | | (1.55 | ) | | | (0.88 | ) | | | (0.71 | ) | | | – | | | | – | | | | (0.71 | ) | | | 9.50 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include 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 would lower the Fund's performance. |
| (C) | Ratios do not reflect reductions for fees paid indirectly. Please see Fees Paid Indirectly in the Notes to Financial Statements. |
| (D) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
- Ratios and Supplemental Data -
| Total Return(B) | | | Net Assets at End of Period | | | Ratio of Expenses to Average Net Assets
Before Waivers(C) | | | Ratio of Expenses to Average Net Assets
After Waivers(C) | | | Ratio of Net Investment
Income (Loss) to Average Net
Assets | | | Portfolio
Turnover
Rate(D) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 7.54 | % | | $ | 3,572,511 | | | | 0.50 | % | | | 0.50 | % | | | 3.01 | % | | | 88 | % |
| | 7.27 | | | | 566,274 | | | | 0.75 | | | | 0.75 | | | | 2.76 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 6.99 | | | | 3,718,609 | | | | 0.49 | | | | 0.49 | | | | 3.60 | | | | 107 | |
| | 6.72 | | | | 632,685 | | | | 0.74 | | | | 0.74 | | | | 3.35 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 7.51 | | | | 4,026,583 | | | | 0.50 | | | | 0.50 | | | | 3.90 | | | | 188 | |
| | 7.25 | | | | 722,317 | | | | 0.75 | | | | 0.75 | | | | 3.65 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 15.01 | | | | 3,902,957 | | | | 0.51 | | | | 0.51 | | | | 4.67 | | | | 215 | |
| | 14.72 | | | | 789,541 | | | | 0.76 | | | | 0.76 | | | | 4.42 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (7.62 | ) | | | 3,167,919 | | | | 0.49 | | | | 0.49 | | | | 5.54 | | | | 173 | |
| | (7.85 | ) | | | 740,580 | | | | 0.74 | | | | 0.74 | | | | 5.27 | | | | – | |
| Report of Independent Registered Public Accounting Firm |
| The Board of Directors and Shareholders of |
| Hartford Series Fund, Inc. |
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Hartford Total Return Bond HLS Fund (one of the portfolios constituting Hartford Series Fund, Inc. (the Fund)) as of December 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian, agent banks, and brokers or by other appropriate auditing procedures where replies from agent banks and brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Hartford Total Return Bond HLS Fund (one of the portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Minneapolis, MN
February 15, 2013
| Hartford Total Return Bond HLS Fund |
| Directors and Officers (Unaudited) |
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Fund pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Fund. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Fund’s statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Fund pays to The Hartford a portion of the Chief Compliance Officer’s compensation, but does not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
| Hartford Total Return Bond HLS Fund |
| Directors and Officers (Unaudited) – (continued) |
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010 (4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and a record of how the Fund voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
| Hartford Total Return Bond HLS Fund |
| Expense Example (Unaudited) |
Your Fund's Expenses
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Actual return | | | Hypothetical (5% return before expenses) | | | | | | | | | | |
| | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2
year | | | Days
in the
full
year | |
| Class IA | | $ | 1,000.00 | | | $ | 1,003.88 | | | $ | 2.53 | | | $ | 1,000.00 | | | $ | 1,022.61 | | | $ | 2.56 | | | | 0.50 | % | | | 184 | | | | 366 | |
| Class IB | | $ | 1,000.00 | | | $ | 1,003.75 | | | $ | 3.79 | | | $ | 1,000.00 | | | $ | 1,021.35 | | | $ | 3.82 | | | | 0.75 | % | | | 184 | | | | 366 | |
| Hartford Total Return Bond HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) |
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory and sub-advisory agreements. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for Hartford Total Return Bond HLS Fund (the “Fund”) with HL Investment Advisors, LLC (“HL Advisors”) and the continuation of the investment sub-advisory agreement between HL Advisors and the Fund’s sub-adviser, Wellington Management Company, LLP (“Wellington Management” or the “Sub-adviser,” and together with HL Advisors, the “Advisers”) (collectively, the “Agreements”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from the Advisers to questions posed to them on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreements at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by the Advisers and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreements.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreements with respect to the Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Fund’s contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Fund’s management fees, sub-advisory fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement.
In determining to continue the Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreements. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreements is provided below.
Nature, Extent, and Quality of Services Provided by the Advisers
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Fund by the Advisers. The Board considered, among other things, the terms of the Agreements and the range of services provided by the Advisers. The Board considered the Advisers’ professional personnel who provide services to the Fund, including each Adviser’s ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered each Adviser’s reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to the Fund. In addition, the Board considered the quality of each Adviser’s communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning each Adviser’s regulatory and compliance environment. In this regard, the Board requested and reviewed information on each Adviser’s compliance policies and procedures, compliance history, and a report from the Fund’s Chief Compliance Officer on each Adviser’s compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. The Board also noted the Advisers’ support of the Fund’s compliance control structure, particularly the resources devoted by the Advisers in support of the Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act.
| Hartford Total Return Bond HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
With respect to HL Advisors, the Board noted that under the Agreements, HL Advisors is responsible for the management of the Fund, including overseeing fund operations and service providers, as well as investment advisory services in connection with selecting, monitoring and supervising the Sub-adviser. The Board considered HL Advisors’ ongoing monitoring of people, process and performance, including its quarterly reviews of each of the Hartford HLS Funds, semi-annual meetings with the leaders of each Fund’s portfolio management team, and oversight of the Funds’ approximately 40 portfolio managers. The Board recognized that HL Advisors has demonstrated a record of making changes to the management and/or strategies of the Funds when warranted. The Board considered HL Advisors’ oversight of the Sub-adviser’s investment approach and results, process for monitoring best execution of portfolio trades by the Sub-adviser, and approach to risk management with respect to the Fund and the service providers to the Fund. The Board also considered HL Advisors’ oversight of compliance with the Fund’s objective and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led to an increase in the scope of HL Advisors’ services in this regard. In addition, the Board considered HL Advisors’ ongoing commitment to review and rationalize the Hartford fund family’s product line-up and the expenses that HL Advisors had incurred in connection with fund combinations in recent years. The Board considered that HL Advisors or its affiliates are responsible for providing the Fund’s officers. The Board also noted that Hartford Life Insurance Company (“HLIC”) provides administrative services to the Fund. The Board considered its experiences with HL Advisors and HLIC with respect to each of these services.
With respect to the Sub-adviser, who provides day-to-day portfolio management services, the Board considered the quality of the Fund’s portfolio managers, the Sub-adviser’s other investment personnel, its investment philosophy and process, investment research capabilities and resources, performance record, trade execution capabilities and experience. The Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers, and the Sub-adviser’s method for compensating the portfolio managers. The Board noted that the Fund’s sub-adviser had recently changed from Hartford Investment Management Company to Wellington Management.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Fund by HL Advisors and the Sub-adviser.
Performance of the Fund and the Advisers
The Board considered the investment performance of the Fund. In this regard, the Board reviewed the performance of the Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of the Fund’s performance for these time periods. The Board considered information and materials provided to the Board by the Advisers concerning Fund performance, as well as information from Lipper comparing the investment performance of the Fund to an appropriate benchmark and universe of peer funds. The Board noted that the Fund had underperformed relative to its peer group and benchmark for the 5-year period and that its performance was in line with the peer group and benchmark for the 1- and 3-year periods. HL Advisors noted that it would continue to monitor the Fund’s performance.
The Board considered the detailed investment analytics reports provided by The Hartford’s Investment Advisory Group throughout the year. These reports include, among other things, information on the Fund’s gross and net returns, the Fund’s investment performance relative to an appropriate benchmark and peer group, various statistics concerning the Fund’s portfolio, and a narrative summary of various factors affecting Fund performance. The Board considered the Advisers’ cooperation with the Investment Committee, which assists the Board in evaluating the performance of the Fund at periodic meetings throughout the year. The Board also considered the analysis provided by the Consultant relating to the Fund’s performance track record.
In light of all the considerations noted above, the Board concluded that it had continued confidence in HL Advisors’ and the Sub-adviser’s overall capabilities to manage the Fund.
Costs of the Services and Profitability of the Advisers
The Board reviewed information regarding HL Advisors’ cost to provide investment management and related services to the Fund and HL Advisors’ profitability, both overall and for the Fund, on a pre-tax basis without regard to distribution expenses. The Board also requested and reviewed information about the profitability to HL Advisors and its affiliates from all services provided
to the Fund and all aspects of their relationship with the Fund. The Board also requested and received information relating to the operations and profitability of the Sub-adviser.
The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement, noting the Consultant’s view that The Hartford’s process for calculating and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by the Advisers and their affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by the Advisers
The Board considered comparative information with respect to the management fees to be paid by the Fund to HL Advisors and the total expense ratios of the Fund. The Board also considered comparative information with respect to the sub-advisory fees to be paid by HL Advisors to the Sub-adviser, to the extent applicable. In this regard, the Board requested and reviewed information from HL Advisors and the Sub-adviser relating to the management and sub-advisory fees, including the sub-advisory fee schedule for the Fund, and total operating expenses for the Fund. The Board considered that the management fee for the Fund includes the fee paid to HLIC for providing certain administrative services to the Fund. With respect to the sub-advisory fee schedule, the Board considered representations from HL Advisors and the Sub-adviser that the Sub-adviser’s fees were negotiated at arm’s length. The Board also reviewed information from Lipper comparing the Fund’s contractual management fees, actual management fees and overall expense ratios relative to a group of funds selected by Lipper, in consultation with the Consultant, and a broader universe of funds selected by Lipper. The Board noted that, in connection with the recent sub-adviser change, an additional breakpoint had been added to the Fund’s management fee schedule.
While the Board recognized that comparisons between the Fund and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business models and cost structures of the Advisers, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of the Fund’s management and sub-advisory fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to the Fund’s management and sub-advisory fees and total operating expenses.
Based on these considerations, the Board concluded that the Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding the Advisers’ realization of economies of scale with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. The Board reviewed the breakpoints in the management fee schedule for the Fund, which reduce fee rates as Fund assets grow over time, and noted that an additional breakpoint had recently been added to the Fund’s management fee schedule. The Board recognized that a fund with assets beyond the last breakpoint level will continue to benefit from economies of scale because additional assets are charged the lowest breakpoint fee resulting in lower overall effective management fee rates. The Board also recognized that a fee schedule that reaches a lower breakpoint quickly provides shareholders with the benefit of anticipated or potential economies of scale.
The Board reviewed and evaluated materials from Lipper showing how management fee schedules of peer funds reflect economies of scale for the benefit of shareholders as a peer fund’s assets hypothetically increase over time. Based on information provided by HL Advisors, Lipper, and the Consultant, the Board recognized that there is no uniform methodology for establishing breakpoints or uniform pattern in asset levels that trigger breakpoints or the amounts of breakpoints triggered.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Fund’s shareholders based on currently available information and the
| Hartford Total Return Bond HLS Fund |
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) – (continued) |
effective advisory fees and expense ratios for the Fund at its current and reasonably anticipated asset levels. The Board noted, however, that it would continue to monitor future growth in Fund assets and the appropriateness of additional breakpoints.
Other Benefits
The Board considered other benefits to the Advisers and their affiliates from their relationships with the Fund, including the role of the Fund in supporting the variable life insurance and variable annuity products offered by The Hartford. The Board reviewed information noting that HLIC, an affiliate of HL Advisors, receives fees for providing certain administrative services to the Fund, and that HLIC also receives fees for fund accounting and related services from the Fund, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Fund’s transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Fund, and the Board reviewed information on the profitability of the Fund’s transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Fund were fair and reasonable based on publicly available information.
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Fund, receives 12b-1 fees from the Fund. The Board also noted that certain affiliates of HL Advisors distribute shares of the Fund and receive compensation in that connection.
The Board considered the benefits, if any, to the Sub-adviser from any use of the Fund’s brokerage commissions to obtain soft dollar research, and representations from HL Advisors and the Sub-adviser that the Sub-adviser would not make any revenue-sharing payments or any other type of distribution payments to HL Advisors or its affiliates.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the Agreements for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory and sub-advisory agreements. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreements for the Fund and approve a new investment management agreement for the Fund with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser, and a new investment sub-advisory agreement between HFMC and the Fund’s existing Sub-adviser, Wellington Management Company, LLP (together with HFMC, the “Post-Restructuring Advisers”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Fund. In order to implement the Restructuring, the Fund would terminate the existing Agreements and enter into a new investment management agreement with HFMC, with HFMC also entering into a new investment sub-advisory agreement with the Sub-adviser (collectively, the “New Agreements”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreements at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund
performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by HL Advisors and the Sub-adviser and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreements.
In determining to approve the New Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the New Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreements.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Fund and the performance of investment management personnel to the Fund. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Fund prior to the Restructuring would continue to provide such services to the Fund, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreements would involve no changes to (i) the contractual terms of, including the management fees payable under, the Fund’s investment management and investment sub-advisory agreements; (ii) the investment processes and strategies employed in the management of the Fund’s assets; (iii) the nature and level of services provided under the Fund’s investment management and investment sub-advisory agreements; and (iv) the day-to-day management of the Fund and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Fund.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Fund.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Fund, the investment management arrangement for the Fund following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreements: (i) nature, extent and quality of services provided by HL Advisors and the Sub-adviser; (ii) performance of the Fund, HL Advisors and the Sub-adviser; (iii) costs of the services and profitability of HL Advisors and the Sub-adviser; (iv) comparative services rendered and comparative investment management and sub-advisory fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors and the Sub-adviser with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. With respect to the other benefits to the Post-Restructuring Advisers and their affiliates from their relationships with the Fund, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting and related services from the Fund.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the New Agreements. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
| Hartford Total Return Bond HLS Fund |
| Principal Risks (Unaudited) |
The principal risks of investing in the Fund are described below.
Market and Selection Risk: The Fund’s share price may fluctuate due to market risk and/or security selections that may underperform compared to the market or relevant benchmarks.
Fixed Income Risk: The Fund is subject to interest rate risk (the risk that the value of an investment decreases when interest rates rise) and credit risk (the risk that the issuing company of a security is unable to pay interest and principal when due) and call risk (the risk that an investment may be redeemed early). These risks also apply to the Fund’s investments in U.S. government securities, which may not be guaranteed by the U.S. government.
Mortgage-Backed Securities Risk: Mortgage-backed securities are subject to interest rate risk, credit risk, prepayment risk, extension risk, and the risk that an investment’s value may be reduced or become worthless if it receives interest or income payments only after other investments in the same pool.
Foreign Investment Risk: Foreign investments can be riskier than U.S. investments. Potential risks include currency risk that may result from unfavorable exchange rates, liquidity risk if decreased demand for a security makes it difficult to sell at the desired price, and risks that stem from substantially lower trading volume on foreign markets.
Derivatives Risk: Investments in derivatives can be volatile. Potential risks include currency risk, leverage risk (the risk that small market movements may result in large changes in the value of an investment), liquidity risk, index risk, pricing risk, and counterparty risk (the risk that the counterparty may be unwilling or unable to honor its obligations).
Active Trading Risk: Actively trading investments may result in higher costs and higher taxable income.
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
HLSAR-TRB12 2-13 113555 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 | |
A MESSAGE FROM THE PRESIDENT
Dear Fellow Shareholders:
I want to take this opportunity to say thank you for investing in the Hartford HLS Funds.
Market Review
U.S. equities continued their march higher in the second half of 2012, as the S&P 500 closed up 15.99% for the year, based on favorable policy developments in Europe and the announcement in September of another quantitative easing program (QE3) by the U.S. Federal Reserve. This third round of quantitative easing involves purchasing additional mortgage-backed securities at a pace of $40 billion per month in an effort to boost growth and reduce unemployment.
Consumers in the U.S. strengthened their balance sheets in 2012 as they continued to pay down debt and benefited from rising stock prices and improving home prices. Housing, in particular, has been a bright spot for the U.S. economy, as home prices showed year-over-year price appreciation for the first time in six years.
After a tight race, President Obama was re-elected, and he immediately had some difficult issues to tackle including the ramifications of the “fiscal cliff”—the combination of potential automatic tax increases and across-the-board government spending cuts that were scheduled to become effective December 31, 2012.
Now that the fiscal cliff situation has been resolved, the focus has shifted once again to raising the debt ceiling–the amount of money the nation needs to borrow to continue paying our bills. Negotiations around raising the debt limit will lead to another debate between Democrats and Republicans about the extent of spending cuts needed to get our fiscal house in order.
These political debates can leave investors uncertain about their next move. Perhaps now would be a good time to schedule a meeting with your financial adviser to examine your current investment strategy and determine whether you are on the right track:
| • | Is your portfolio fully diversified with an appropriate mix of stocks and bonds? |
| • | Is your portfolio still in line with your risk tolerance and investment time horizon? |
| • | Is your fixed-income portfolio positioned to take advantage of opportunities across the credit spectrum and fulfill your income needs? |
Your financial professional can help you choose options within our fund family to navigate today’s markets with confidence.
Thank you again for investing with the Hartford HLS Funds.
James Davey
President
Hartford HLS Funds
Hartford Value HLS Fund
Table of Contents
This report is prepared for the general information of contract owners and qualified retirement plan participants. It is not an offer of contracts or of qualified retirement plans. It should not be used in connection with any offer, except in conjunction with the appropriate product prospectus which contains all pertinent information including the applicable sales, administrative and other charges.
The views expressed in the Fund’s Manager Discussion under ‘‘Why did the Fund perform this way?’’ and ‘‘What is the outlook?’’ are views of the Fund’s sub-adviser and portfolio management team through the end of the period and are subject to change based on market and other conditions.
| Hartford Value HLS Fund inception 04/30/2001 |
| (sub-advised byWellington Management Company, LLP) |
| |
| Investment objective – Seeks long-term total return. |
Performance Overview 12/31/02 - 12/31/12
The chart above represents the hypothetical growth of a $10,000 investment in Class IA. Growth results in classes other than class IA will vary from what is seen above due to differences in the expenses charged to those share classes.
| Average Annual Total Returns (as of 12/31/12) |
| |
| | | 1 Year | | | 5 Year | | | 10 Year | |
| Value IA | | | 16.99% | | | | 1.53% | | | | 8.23% | |
| Value IB | | | 16.69% | | | | 1.28% | | | | 7.96% | |
| Russell 1000 Value Index | | | 17.51% | | | | 0.59% | | | | 7.38% | |
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of the investment will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website www.hartfordinvestor.com.
Total returns presented above were calculated using the Fund’s net asset value available to shareholders for sale or redemption of Fund shares on December 31, 2012, which may exclude investment transactions as of this date. All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all fund expenses.
Russell 1000 Value Index is an unmanaged index measuring the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values. The Russell 1000 Index is an unmanaged index that measures the performance of the 1,000 largest companies in the Russell 3000 Index, which measures the performance of the 3,000 largest U.S. companies, based on total market capitalizations.
You cannot invest directly in an index.
As of the Fund’s current prospectus dated May 1, 2012, the net total annual operating expense ratios for Class IA and Class IB shares were 0.75% and 1.00%, respectively, and the gross total annual operating expense ratios for Class IA and Class IB shares were 0.75% and 1.00%, respectively. Actual expenses may be higher. Please see the accompanying Financial Highlights for expense ratios for the year ended December 31, 2012.
Net operating expenses are the expenses paid to own the Fund. If the net operating expenses shown are lower than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that may not be renewed. Contractual waivers or reimbursements remain in effect until April 30, 2013, and automatically renew for one-year terms unless terminated by the Fund’s Investment Advisor (Hartford Funds Management Company, LLC). For more information about the fee arrangement and expiration dates, please see the expense table in the prospectus.
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee waivers and/or expense reimbursements, please see the expense table in the prospectus.
The chart and table do not reflect the deductions of taxes, 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 or expenses would lower the contract’s or plan’s performance.
All investments are subject to risk including the possible loss of principal. For a discussion of the Fund’s risks, please see the Principal Risks section. For more detailed information on the risks associated with an investment in the Fund, please see the prospectus.
| Hartford Value HLS Fund |
| Manager Discussion |
| December 31, 2012 (Unaudited) |
| Portfolio Managers | | |
| Karen H. Grimes, CFA | W. Michael Reckmeyer, III, CFA | Ian R. Link, CFA |
| Senior Vice President and Equity Portfolio Manager | Senior Vice President and Equity Portfolio Manager | Director and Equity Portfolio Manager |
| | | |
How did the Fund perform?
The Class IA shares of the Hartford Value HLS Fund returned 16.99% for the twelve-month period ended December 31, 2012, underperforming the benchmark, the Russell 1000 Value Index, which returned 17.51% for the same period. The Fund outperformed the 15.71% return of the average fund in the Lipper VP-UF Large Cap Value Funds peer group, a group of funds with investment strategies similar to those of the Fund.
Why did the Fund perform this way?
U.S. equities moved higher in the period, in part due to a strengthening housing market and central bank interventions around the globe. Although Europe continued to grapple with economic and structural challenges, investors’ risk appetites surged after European Central Bank (ECB) President Mario Draghi revealed a comprehensive plan to support struggling sovereigns, including direct purchases of government bonds in the open market. Additionally, the U.S. Federal Reserve’s (Fed) announcement of a third round of quantitative easing (QE3) was well received by the market, boosting stock prices. Despite concerns about the looming U.S. fiscal cliff (i.e. expiration of certain tax rate cuts combined with forced spending cuts), tepid corporate revenue results, and economic malaise in Europe, investors bid up risk assets amid further signs of recovery in China and signs that the U.S. housing market may bolster the U.S. economy for the first time in seven years. Risk sentiment also ticked up on continued hopes that the ECB’s bond-buying plan will succeed, essentially reducing the tail risks in Europe.
All of the ten sectors within the Russell 1000 Value Index posted positive returns during the period. Consumer Discretionary (+34%), Financials (+27%), and Industrials (+20%) gained the most while Utilities (+2%), Energy (+3%), and Information Technology (+7%) lagged on a relative basis.
The Fund’s underperformance versus its benchmark was primarily due to weak stock selection within financials. Underweight allocations (i.e. the Fund’s sector position was less than the benchmark position) to the Telecommunication Services and Financials sectors and an overweight allocation to the Information Technology sector also detracted from relative results. A modest cash position in a generally rising market also detracted from relative returns. These detractors were partially offset by favorable stock selection decisions within the Industrials, Health Care, and Materials sectors and an underweight to the Utilities sector.
Holding Bank of America (Financials), Intel Corp (Information Technology), and Occidental Petroleum (Energy) detracted most from benchmark-relative returns during the period. Bank of America is one of the nation’s largest banking and asset management firms. Shares moved higher during the period amid signs of an upturn in the U.S. residential housing market. Our underweight position in the holding detracted from relative performance. Shares of Intel Corp, a leading manufacturer of semiconductor chips, experienced a price decline during the period as a result of reduced Personal Computer demand in emerging markets. Shares of Occidental Petroleum, an oil and gas company, fell during the period due to the market’s concerns over performance in California and skepticism regarding large investments in Texas and the Middle East. The company’s management highlighted an improving growth outlook in California and is refocusing on cost reduction going forward. Hewlett-Packard and Baker Hughes were among the top detractors from absolute performance (i.e. total return).
Among the top contributors to benchmark-relative returns were Comcast (Consumer Discretionary) and Ingersoll-Rand (Industrials). The Fund’s relative performance also benefited by not holding Procter & Gamble (Consumer Staples), a component of the benchmark that declined during the period. Comcast is the largest U.S. cable communications company and the new owner of NBC Universal. Shares moved higher after the company continued to post strong earnings during the third quarter, in part due to better-than-expected ad revenue from the 2012 London Olympics. Ingersoll-Rand provides industrial machinery, climate control systems, and security products. Shares outperformed during the period after residential markets strengthened and the company beat consensus earnings estimates. Procter & Gamble is a provider of consumer packaged goods. Shares were volatile during the period, ultimately ending the year only slightly positive, underperforming the broader market; our zero-weight position contributed to relative performance. Top absolute contributors also included JPMorgan Chase (Financials) and Wells Fargo (Financials).
| Hartford Value HLS Fund |
| Manager Discussion – (continued) |
| December 31, 2012 (Unaudited) |
What is the outlook?
Global equities finished 2012 on a strong note, rising 3.4% for the fourth quarter and 16.5% for the year. In 2013, we expect the global economic recovery to continue, but at a slow rate and with varying degrees of recovery by region.
In Europe, the ECB bond buying plan has reduced the fears of a cataclysmic liquidity event, although the region remains in recession and still faces many challenges ahead. We believe that the worst may be behind Europe, but it will continue to be a slow improvement. The pledge of ECB President Mario Draghi to serve as a credible backstop for the embattled peripheral European countries has caused a sharp drop in credit spreads. We believe the recent upturn in money growth signals strong economic growth in coming quarters.
China’s economy continues to slow but recent positive economic data points have alleviated many investors’ fears of a hard landing. Iron ore and steel prices are up and accelerating manufacturing activity has been encouraging. However, we continue to grapple with the question of whether this is merely inventory replenishment or real economic growth. Regardless, it does appear that China’s economy is improving and the Chinese have shown early signs that they will stimulate their economy.
In 2013, we expect slow but steady growth in the U.S., somewhere around the 2.5% Gross Domestic Product area. A last minute deal averted a full dive off the fiscal cliff on January 1, 2013; however, the temporary payroll tax cut of the past two years was allowed to expire, which will raise taxes 2% on most Americans. We believe that housing and employment should continue to improve, and corporate earnings should also enjoy moderate growth this year. Households have enjoyed a nice boost to their net worth in recent years, which should cushion the negative impact of higher taxation. Household formation is still going strong in the U.S. and housing starts have just started to normalize. It appears that interest rates are slowly creeping higher, which in our view is a sign that the economy is improving. We remain cautiously optimistic and believe that the U.S. should avoid recession in 2013.
From a sector perspective, we have a slight cyclical tilt on the margin. Based on bottom-up stock decisions, our largest overweight exposures entering 2013 are in the Consumer Discretionary, Information Technology, and Industrials sectors relative to the Russell 1000 Value Index. We continue to see a supportive environment for equities and we view corrections in this environment as buying opportunities when the investment case aligns with our investment strategy.
| Diversification by Industry |
| as of December 31, 2012 |
| Industry (Sector) | | Percentage of
Net Assets | |
| Automobiles and Components (Consumer Discretionary) | | | 0.9 | % |
| Banks (Financials) | | | 7.0 | |
| Capital Goods (Industrials) | | | 10.6 | |
| Commercial and Professional Services (Industrials) | | | 0.6 | |
| Consumer Durables and Apparel (Consumer Discretionary) | | | 1.5 | |
| Diversified Financials (Financials) | | | 10.5 | |
| Energy (Energy) | | | 13.1 | |
| Food and Staples Retailing (Consumer Staples) | | | 1.4 | |
| Food, Beverage and Tobacco (Consumer Staples) | | | 4.6 | |
| Health Care Equipment and Services (Health Care) | | | 4.3 | |
| Insurance (Financials) | | | 8.7 | |
| Materials (Materials) | | | 5.3 | |
| Media (Consumer Discretionary) | | | 3.7 | |
| Pharmaceuticals, Biotechnology and Life Sciences (Health Care) | | | 8.0 | |
| Retailing (Consumer Discretionary) | | | 5.4 | |
| Semiconductors and Semiconductor Equipment (Information Technology) | | | 4.3 | |
| Software and Services (Information Technology) | | | 1.1 | |
| Technology Hardware and Equipment (Information Technology) | | | 3.3 | |
| Telecommunication Services (Services) | | | 2.2 | |
| Utilities (Utilities) | | | 3.4 | |
| Short-Term Investments | | | 0.2 | |
| Other Assets and Liabilities | | | (0.1 | ) |
| Total | | | 100.0 | % |
| Hartford Value HLS Fund |
| Schedule of Investments |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | Market Value ╪ | |
| COMMON STOCKS - 99.9% | | | | |
| | | | | Automobiles and Components - 0.9% | | | | |
| | 75 | | | General Motors Co. ● | | $ | 2,164 | |
| | 274 | | | Goodyear (The) Tire &Rubber Co. ● | | | 3,785 | |
| | | | | | | | 5,949 | |
| | | | | Banks - 7.0% | | | | |
| | 261 | | | BB&T Corp. | | | 7,607 | |
| | 236 | | | PNC Financial Services Group, Inc. | | | 13,739 | |
| | 704 | | | Wells Fargo & Co. | | | 24,048 | |
| | | | | | | | 45,394 | |
| | | | | Capital Goods - 10.6% | | | | |
| | 71 | | | 3M Co. | | | 6,581 | |
| | 96 | | | Boeing Co. | | | 7,265 | |
| | 164 | | | Eaton Corp. plc | | | 8,877 | |
| | 602 | | | General Electric Co. | | | 12,631 | |
| | 107 | | | Illinois Tool Works, Inc. | | | 6,531 | |
| | 135 | | | Ingersoll-Rand plc | | | 6,492 | |
| | 100 | | | PACCAR, Inc. | | | 4,515 | |
| | 102 | | | Spirit Aerosystems Holdings, Inc. ● | | | 1,738 | |
| | 108 | | | Stanley Black & Decker, Inc. | | | 8,015 | |
| | 82 | | | United Technologies Corp. | | | 6,765 | |
| | | | | | | | 69,410 | |
| | | | | Commercial and Professional Services - 0.6% | | | | |
| | 138 | | | Tyco International Ltd. | | | 4,034 | |
| | | | | | | | | |
| | | | | Consumer Durables and Apparel - 1.5% | | | | |
| | 100 | | | Mattel, Inc. | | | 3,653 | |
| | 265 | | | Newell Rubbermaid, Inc. | | | 5,895 | |
| | | | | | | | 9,548 | |
| | | | | Diversified Financials - 10.5% | | | | |
| | 121 | | | Ameriprise Financial, Inc. | | | 7,555 | |
| | 46 | | | BlackRock, Inc. | | | 9,571 | |
| | 289 | | | Citigroup, Inc. | | | 11,419 | |
| | 135 | | | Credit Suisse Group ADR | | | 3,327 | |
| | 70 | | | Goldman Sachs Group, Inc. | | | 8,979 | |
| | 26 | | | IntercontinentalExchange, Inc. ● | | | 3,219 | |
| | 560 | | | JP Morgan Chase & Co. | | | 24,631 | |
| | 230 | | | Solar Cayman Ltd. ⌂■●† | | | 16 | |
| | | | | | | | 68,717 | |
| | | | | Energy - 13.1% | | | | |
| | 87 | | | Anadarko Petroleum Corp. | | | 6,492 | |
| | 205 | | | Chevron Corp. | | | 22,155 | |
| | 31 | | | EOG Resources, Inc. | | | 3,684 | |
| | 178 | | | Exxon Mobil Corp. | | | 15,417 | |
| | 240 | | | Halliburton Co. | | | 8,340 | |
| | 163 | | | Marathon Oil Corp. | | | 4,984 | |
| | 100 | | | Noble Corp. | | | 3,471 | |
| | 133 | | | Occidental Petroleum Corp. | | | 10,165 | |
| | 77 | | | Royal Dutch Shell plc ADR | | | 5,455 | |
| | 149 | | | Southwestern Energy Co. ● | | | 4,980 | |
| | | | | | | | 85,143 | |
| | | | | Food and Staples Retailing - 1.4% | | | | |
| | 188 | | | CVS Caremark Corp. | | | 9,093 | |
| | | | | | | | | |
| | | | | Food, Beverage and Tobacco - 4.6% | | | | |
| | 78 | | | Anheuser-Busch InBev N.V. | | | 6,834 | |
| | 124 | | | General Mills, Inc. | | | 5,021 | |
| | 51 | | | Kraft Foods Group, Inc. ● | | | 2,321 | |
| | 98 | | | PepsiCo, Inc. | | | 6,677 | |
| | 112 | | | Philip Morris International, Inc. | | | 9,388 | |
| | | | | | | | 30,241 | |
| | | | | Health Care Equipment and Services - 4.3% | | | | |
| | 119 | | | Baxter International, Inc. | | | 7,914 | |
| | 142 | | | Covidien plc | | | 8,201 | |
| | 82 | | | HCA Holdings, Inc. | | | 2,488 | |
| | 170 | | | UnitedHealth Group, Inc. | | | 9,211 | |
| | | | | | | | 27,814 | |
| | | | | Insurance - 8.7% | | | | |
| | 171 | | | ACE Ltd. | | | 13,681 | |
| | 216 | | | American International Group, Inc. ● | | | 7,617 | |
| | 86 | | | Chubb Corp. | | | 6,483 | |
| | 300 | | | Marsh & McLennan Cos., Inc. | | | 10,342 | |
| | 163 | | | Principal Financial Group, Inc. | | | 4,638 | |
| | 89 | | | Swiss Re Ltd. | | | 6,482 | |
| | 345 | | | Unum Group | | | 7,176 | |
| | | | | | | | 56,419 | |
| | | | | Materials - 5.3% | | | | |
| | 200 | | | Dow Chemical Co. | | | 6,456 | |
| | 114 | | | E.I. DuPont de Nemours & Co. | | | 5,106 | |
| | 161 | | | International Paper Co. | | | 6,406 | |
| | 147 | | | Mosaic Co. | | | 8,347 | |
| | 93 | | | Nucor Corp. | | | 4,003 | |
| | 329 | | | Steel Dynamics, Inc. | | | 4,524 | |
| | | | | | | | 34,842 | |
| | | | | Media - 3.7% | | | | |
| | 112 | | | CBS Corp. Class B | | | 4,247 | |
| | 362 | | | Comcast Corp. Class A | | | 13,526 | |
| | 212 | | | Thomson Reuters Corp. | | | 6,147 | |
| | | | | | | | 23,920 | |
| | | | | Pharmaceuticals, Biotechnology and Life Sciences - 8.0% | | | | |
| | 83 | | | Amgen, Inc. | | | 7,203 | |
| | 88 | | | Johnson & Johnson | | | 6,202 | |
| | 307 | | | Merck & Co., Inc. | | | 12,579 | |
| | 479 | | | Pfizer, Inc. | | | 12,005 | |
| | 42 | | | Roche Holding AG | | | 8,538 | |
| | 150 | | | Teva Pharmaceutical Industries Ltd. ADR | | | 5,612 | |
| | | | | | | | 52,139 | |
| | | | | Retailing - 5.4% | | | | |
| | 18 | | | AutoZone, Inc. ● | | | 6,482 | |
| | 3,040 | | | Buck Holdings L.P. ⌂●† | | | 2,174 | |
| | 113 | | | Home Depot, Inc. | | | 7,000 | |
| | 133 | | | Kohl's Corp. | | | 5,721 | |
| | 237 | | | Lowe's Co., Inc. | | | 8,429 | |
| | 98 | | | Nordstrom, Inc. | | | 5,223 | |
| | | | | | | | 35,029 | |
| | | | | Semiconductors and Semiconductor Equipment - 4.3% | | | | |
| | 170 | | | Analog Devices, Inc. | | | 7,130 | |
| | 393 | | | Intel Corp. | | | 8,113 | |
| | 200 | | | Maxim Integrated Products, Inc. | | | 5,869 | |
| | 202 | | | Xilinx, Inc. | | | 7,235 | |
| | | | | | | | 28,347 | |
| | | | | Software and Services - 1.1% | | | | |
| | 278 | | | Microsoft Corp. | | | 7,426 | |
| | | | | | | | | |
| | | | | Technology Hardware and Equipment - 3.3% | | | | |
| | 867 | | | Cisco Systems, Inc. | | | 17,042 | |
| | 141 | | | Hewlett-Packard Co. | | | 2,009 | |
| | 72 | | | NetApp, Inc. ● | | | 2,409 | |
| | | | | | | | 21,460 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Value HLS Fund |
| Schedule of Investments – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
| Shares or Principal Amount | | | | | | Market Value ╪ | |
| COMMON STOCKS - 99.9% - (continued) | | | | | | | | |
| | | | | Telecommunication Services - 2.2% | | | | | | | | |
| | 434 | | | AT&T, Inc. | | | | | | $ | 14,622 | |
| | | | | | | | | | | | | |
| | | | | Utilities - 3.4% | | | | | | | | |
| | 132 | | | Edison International | | | | | | | 5,947 | |
| | 77 | | | Entergy Corp. | | | | | | | 4,924 | |
| | 48 | | | NextEra Energy, Inc. | | | | | | | 3,314 | |
| | 160 | | | Northeast Utilities | | | | | | | 6,241 | |
| | 72 | | | PPL Corp. | | | | | | | 2,048 | |
| | | | | | | | | | | | 22,474 | |
| | | | | Total common stocks | | | | | | | | |
| | | | | (cost $546,451) | | | | | | $ | 652,021 | |
| | | | | | | | | | | | | |
| | | | | Total long-term investments | | | | | | | | |
| | | | | (cost $546,451) | | | | | | $ | 652,021 | |
| | | | | | | | | | | | | |
| SHORT-TERM INVESTMENTS - 0.2% | | | | | | | | |
| Repurchase Agreements - 0.2% | | | | | | | | |
| | | | | Bank of America Merrill Lynch TriParty Repurchase Agreement (maturing on 01/02/2013 in the amount of $34, collateralized by FHLMC 3.00%, 2042, FNMA 4.00%, 2042, value of $34) | | | | | | | | |
| $ | 34 | | | 0.19%, 12/31/2012 | | | | | | $ | 34 | |
| | | | | Bank of Montreal TriParty Repurchase Agreement (maturing on 01/02/2013 in the amount of $240, collateralized by FHLMC 2.50% - 5.50%, 2019 - 2042, FNMA 0.76% - 6.11%, 2016 - 2042, GNMA 3.50%, 2042, value of $245) | | | | | | | | |
| | 240 | | | 0.23%, 12/31/2012 | | | | | | | 240 | |
| | | | | Barclays Capital TriParty Repurchase Agreement (maturing on 01/02/2013 in the amount of $75, collateralized by U.S. Treasury Note 2.00% - 2.13%, 2016, value of $77) | | | | | | | | |
| | 75 | | | 0.20%, 12/31/2012 | | | | | | | 75 | |
| | | | | Citigroup Global Markets, Inc. TriParty Repurchase Agreement (maturing on 01/02/2013 in the amount of $473, collateralized by U.S. Treasury Note 1.88% - 4.13%, 2015 - 2018, value of $482) | | | | | | | | |
| | 473 | | | 0.17%, 12/31/2012 | | | | | | | 473 | |
| | | | | Deutsche Bank Securities TriParty Repurchase Agreement (maturing on 01/02/2013 in the amount of $10, collateralized by FNMA 3.00%, 2032, value of $10) | | | | | | | | |
| | 10 | | | 0.25%, 12/31/2012 | | | | | | | 10 | |
| | | | | RBS Securities, Inc. TriParty Repurchase Agreement (maturing on 01/02/2013 in the amount of $333, collateralized by U.S. Treasury Note 0.50% - 2.75%, 2013 - 2019, value of $339) | | | | | | | | |
| | 333 | | | 0.20%, 12/31/2012 | | | | | | | 333 | |
| | | | | TD Securities TriParty Repurchase Agreement (maturing on 01/02/2013 in the amount of $291, collateralized by FHLMC 3.50% - 6.00%, 2036 - 2042, FNMA 0.22% - 5.50%, 2013 - 2042, value of $297) | | | | | | | | |
| | 291 | | | 0.21%, 12/31/2012 | | | | | | | 291 | |
| | | | | UBS Securities, Inc. Repurchase Agreement (maturing on 01/02/2013 in the amount of $6, collateralized by U.S. Treasury Bill 0.75%, 2013, value of $6) | | | | | | | | |
| 5 | | | 0.17%, 12/31/2012 | | | | | | | 5 | |
| | | | | UBS Securities, Inc. TriParty Repurchase Agreement (maturing on 01/02/2013 in the amount of $20, collateralized by FNMA 2.50%, 2027, GNMA 3.00%, 2042, value of $20) | | | | | | | | |
| | 20 | | | 0.25%, 12/31/2012 | | | | | | | 20 | |
| | | | | | | | | | | | 1,481 | |
| | | | | Total short-term investments | | | | | | | | |
| | | | | (cost $1,481) | | | | | | $ | 1,481 | |
| | | | | | | | | | | | | |
| | | | | Total investments | | | | | | | | |
| | | | | (cost $547,932) ▲ | | | 100.1 | % | | $ | 653,502 | |
| | | | | Other assets and liabilities | | | (0.1 | )% | | | (836 | ) |
| | | | | Total net assets | | | 100.0 | % | | $ | 652,666 | |
The accompanying notes are an integral part of these financial statements.
| Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
| | |
| | Prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for factors occurring after the close of certain foreign markets but before the close of the New York Stock Exchange. |
| ▲ | At December 31, 2012, the cost of securities for federal income tax purposes was $553,691 and the aggregate gross unrealized appreciation and depreciation based on that cost were: |
| Unrealized Appreciation | | $ | 124,158 | |
| Unrealized Depreciation | | | (24,347 | ) |
| Net Unrealized Appreciation | | $ | 99,811 | |
| † | These securities were valued in good faith at fair value as determined under policies and procedures established by and under the supervision of the Company's Board of Directors. At December 31, 2012, the aggregate value of these securities was $2,190, which represents 0.3% of total net assets. This amount excludes securities that are principally traded in certain foreign markets and whose prices are adjusted pursuant to a third party pricing service methodology approved by the Board of Directors. |
| | |
| ● | Non-income producing. |
| | |
| ■ | Securities issued within terms of a private placement memorandum, exempt from registration under Rule 144A under the Securities Act of 1933, as amended, and may be sold only to qualified institutional buyers. Unless otherwise indicated, these issues are determined to be liquid. At December 31, 2012, the aggregate value of these securities was $16, which rounds to zero percent of total net assets. |
| | |
| ⌂ | The following securities are considered illiquid. Illiquid securities are often purchased in private placement transactions, are often not registered under the Securities Act of 1933 and may have contractual restrictions on resale. A security may also be considered illiquid if the security lacks a readily available market or if its valuation has not changed for a certain period of time. |
| Period Acquired | | Shares/ Par | | | Security | | Cost Basis | |
| 06/2007 | | | 3,040 | | | Buck Holdings L.P. | | $ | 549 | |
| 03/2007 | | | 230 | | | Solar Cayman Ltd. - 144A | | | 67 | |
| | At December 31, 2012, the aggregate value of these securities was $2,190, which represents 0.3% of total net assets. |
| ╪ | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of securities. |
| GLOSSARY: (abbreviations used in preceding Schedule of Investments) |
| |
| Other Abbreviations: |
| ADR | American Depositary Receipt |
| FHLMC | Federal Home Loan Mortgage Corp. |
| FNMA | Federal National Mortgage Association |
| GNMA | Government National Mortgage Association |
The accompanying notes are an integral part of these financial statements.
| Hartford Value HLS Fund |
| Investment Valuation Hierarchy Level Summary |
| December 31, 2012 |
| (000’s Omitted) |
| | | Total | | | Level 1 ♦ | | | Level 2 ♦ | | | Level 3 | |
| Assets: | | | | | | | | | | | | | | | | |
| Common Stocks ‡ | | $ | 652,021 | | | $ | 634,811 | | | $ | 15,020 | | | $ | 2,190 | |
| Short-Term Investments | | | 1,481 | | | | – | | | | 1,481 | | | | – | |
| Total | | $ | 653,502 | | | $ | 634,811 | | | $ | 16,501 | | | $ | 2,190 | |
| ♦ | For the year ended December 31, 2012, there were no transfers between Level 1 and Level 2. |
| ‡ | The Fund has all or primarily all of the equity securities categorized in a particular level. Refer to the Schedule of Investments for further industry breakout. |
| Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value: |
| |
| | | Balance as
of
December
31, 2011 | | | Realized
Gain
(Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Net
Amortization | | | Purchases | | | Sales | | | Transfers
Into
Level 3 | | | Transfers
Out of
Level 3 | | | Balance as
of
December
31, 2012 | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stocks | | $ | 6,825 | | | $ | 4,812 | | | $ | (3,383 | )* | | $ | — | | | $ | — | | | $ | (6,064 | ) | | $ | — | | | $ | — | | | $ | 2,190 | |
| Total | | $ | 6,825 | | | $ | 4,812 | | | $ | (3,383 | ) | | $ | — | | | $ | — | | | $ | (6,064 | ) | | $ | — | | | $ | — | | | $ | 2,190 | |
| * | Change in unrealized appreciation (depreciation) in the current period relating to assets still held at December 31, 2012 was $(3,383). |
The accompanying notes are an integral part of these financial statements.
| Hartford Value HLS Fund |
| Statement of Assets and Liabilities |
| December 31, 2012 |
| (000’s Omitted) |
| Assets: | | | | |
| Investments in securities, at market value (cost $547,932) | | $ | 653,502 | |
| Cash | | | — | |
| Receivables: | | | | |
| Fund shares sold | | | 119 | |
| Dividends and interest | | | 768 | |
| Other assets | | | 16 | |
| Total assets | | | 654,405 | |
| Liabilities: | | | | |
| Payables: | | | | |
| Investment securities purchased | | | 1,130 | |
| Fund shares redeemed | | | 473 | |
| Investment management fees | | | 91 | |
| Distribution fees | | | 5 | |
| Accrued expenses | | | 40 | |
| Total liabilities | | | 1,739 | |
| Net assets | | $ | 652,666 | |
| Summary of Net Assets: | | | | |
| Capital stock and paid-in-capital | | $ | 679,106 | |
| Undistributed net investment income | | | — | |
| Accumulated net realized loss | | | (132,010 | ) |
| Unrealized appreciation of investments | | | 105,570 | |
| Net assets | | $ | 652,666 | |
| Shares authorized | | | 800,000 | |
| Par value | | $ | 0.001 | |
| Class IA: Net asset value per share | | $ | 11.86 | |
| Shares outstanding | | | 46,321 | |
| Net assets | | $ | 549,228 | |
| Class IB: Net asset value per share | | $ | 11.85 | |
| Shares outstanding | | | 8,731 | |
| Net assets | | $ | 103,438 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Value HLS Fund |
| Statement of Operations |
| For the Year Ended December 31, 2012 |
| (000’s Omitted) |
| Investment Income: | | | | |
| Dividends | | $ | 19,394 | |
| Interest | | | 8 | |
| Less: Foreign tax withheld | | | (75 | ) |
| Total investment income, net | | | 19,327 | |
| | | | | |
| Expenses: | | | | |
| Investment management fees | | | 5,061 | |
| Distribution fees - Class IB | | | 275 | |
| Custodian fees | | | 8 | |
| Accounting services fees | | | 69 | |
| Board of Directors' fees | | | 19 | |
| Audit fees | | | 14 | |
| Other expenses | | | 119 | |
| Total expenses (before fees paid indirectly) | | | 5,565 | |
| Commission recapture | | | (11 | ) |
| Total fees paid indirectly | | | (11 | ) |
| Total expenses, net | | | 5,554 | |
| Net Investment Income | | | 13,773 | |
| | | | | |
| Net Realized Gain on Investments and Foreign Currency Transactions: | | | | |
| Net realized gain on investments | | | 45,302 | |
| Net realized gain on foreign currency contracts | | | 55 | |
| Net realized loss on other foreign currency transactions | | | (55 | ) |
| Net Realized Gain on Investments and Foreign Currency Transactions | | | 45,302 | |
| | | | | |
| Net Changes in Unrealized Appreciation of Investments: | | | | |
| Net unrealized appreciation of investments | | | 51,181 | |
| Net Changes in Unrealized Appreciation of Investments | | | 51,181 | |
| Net Gain on Investments and Foreign Currency Transactions | | | 96,483 | |
| Net Increase in Net Assets Resulting from Operations | | $ | 110,256 | |
The accompanying notes are an integral part of these financial statements.
| Hartford Value HLS Fund |
| Statement of Changes in Net Assets |
| |
| (000’s Omitted) |
| | | For the
Year Ended
December 31,
2012 | | | For the
Year Ended
December 31,
2011 | |
| Operations: | | | | | | | | |
| Net investment income | | $ | 13,773 | | | $ | 12,796 | |
| Net realized gain on investments and foreign currency transactions | | | 45,302 | | | | 29,891 | |
| Net unrealized appreciation (depreciation) of investments | | | 51,181 | | | | (55,980 | ) |
| Net Increase (Decrease) in Net Assets Resulting from Operations | | | 110,256 | | | | (13,293 | ) |
| Distributions to Shareholders: | | | | | | | | |
| From net investment income | | | | | | | | |
| Class IA | | | (12,440 | ) | | | (10,698 | ) |
| Class IB | | | (2,077 | ) | | | (1,700 | ) |
| Total distributions | | | (14,517 | ) | | | (12,398 | ) |
| Capital Share Transactions: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 29,616 | | | | 31,406 | |
| Issued on reinvestment of distributions | | | 12,440 | | | | 10,698 | |
| Redeemed | | | (164,750 | ) | | | (170,093 | ) |
| Total capital share transactions | | | (122,694 | ) | | | (127,989 | ) |
| Class IB | | | | | | | | |
| Sold | | | 10,336 | | | | 12,495 | |
| Issued on reinvestment of distributions | | | 2,077 | | | | 1,700 | |
| Redeemed | | | (35,556 | ) | | | (53,712 | ) |
| Total capital share transactions | | | (23,143 | ) | | | (39,517 | ) |
| Net decrease from capital share transactions | | | (145,837 | ) | | | (167,506 | ) |
| Net Decrease in Net Assets | | | (50,098 | ) | | | (193,197 | ) |
| Net Assets: | | | | | | | | |
| Beginning of period | | | 702,764 | | | | 895,961 | |
| End of period | | $ | 652,666 | | | $ | 702,764 | |
| Undistributed (distribution in excess of) | | | | | | | | |
| net investment income | | $ | — | | | $ | 796 | |
| Shares: | | | | | | | | |
| Class IA | | | | | | | | |
| Sold | | | 2,604 | | | | 2,933 | |
| Issued on reinvestment of distributions | | | 1,054 | | | | 1,040 | |
| Redeemed | | | (14,358 | ) | | | (15,762 | ) |
| Total share activity | | | (10,700 | ) | | | (11,789 | ) |
| Class IB | | | | | | | | |
| Sold | | | 906 | | | | 1,155 | |
| Issued on reinvestment of distributions | | | 176 | | | | 166 | |
| Redeemed | | | (3,113 | ) | | | (4,943 | ) |
| Total share activity | | | (2,031 | ) | | | (3,622 | ) |
The accompanying notes are an integral part of these financial statements.
| Hartford Value HLS Fund |
| Notes to Financial Statements |
| December 31, 2012 |
| (000’s Omitted) |
Hartford Value HLS Fund (the “Fund”) serves as an underlying investment option for certain variable annuity and variable life insurance separate accounts of Hartford Life Insurance Company (“HLIC”) and its affiliates and certain qualified retirement plans. The Fund may also serve as an underlying investment option for certain variable annuity and variable life separate accounts of other insurance companies. Owners of variable annuity contracts and policyholders of variable life insurance contracts may choose the funds permitted in the variable insurance contract prospectus. In addition, participants in certain qualified retirement plans may choose the Fund if permitted by their plans.
Hartford Series Fund, Inc. (the “Company”) is an open-end registered management investment company comprised of thirty portfolios. Financial Statements for the Fund, a series of the Company, are included in this report.
The Company is organized under the laws of the State of Maryland and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund is a diversified open-end management investment company.
The Fund is divided into Class IA and Class IB shares. Each class is offered at the per share net asset value (“NAV”) without a sales charge and is subject to the same expenses, except that the Class IB shares are subject to distribution and service fees charged pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act.
| 2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Fund in the preparation of its financial statements, which are in accordance with the United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
| a) | Determination of Net Asset Value – The NAV of each class of the Fund’s shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern Time) (the “NYSE Close”) on each day that the New York Stock Exchange (the “Exchange”) is open (“Valuation Date”). Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
| b) | Investment Valuation and Fair Value Measurements – For purposes of calculating the NAV, portfolio investments and other assets held by the Fund's portfolio for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of last reported sales prices or official close price. If no sales are reported, market value is based on quotes obtained from a quotation reporting system, established market makers, or independent pricing services. If market prices are not readily available or are deemed unreliable, the Fund will use the fair value of the investment as determined in good faith under policies and procedures established by and under the supervision of the Company’s Board of Directors. Market quotes are considered not readily available where there is an absence of current or reliable market-based data (e.g., trade information or indicative market quotes), including where events occur after the close of the relevant market, but prior to the NYSE Close that materially affect the values of the Fund’s portfolio investments or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the investments trade do not open for trading for the entire day and no other market prices are available. In addition, prices of foreign equities that are principally traded on certain foreign markets may be adjusted daily pursuant to a fair value pricing service approved by the Board of Directors in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close. Investments that are primarily traded on foreign markets may trade on days that are not business days of the Fund. The value of the foreign investments in which the Fund invests may change on days when a shareholder will not be able to purchase or redeem shares of the Fund. Fair value pricing is subjective in nature and the use of fair value pricing by the |
Fund may cause the NAV of its shares to differ significantly from the NAV that would have been calculated using market prices at the close of the exchange on which a portfolio investment is primarily traded. There can be no assurance that the Fund could obtain the fair market value assigned to an investment if the Fund were to sell the investment at approximately the time at which the Fund determines its NAV.
Investments valued in currencies other than U.S. dollars are converted to U.S. dollars using exchange rates obtained from independent pricing services for calculation of the NAV. As a result, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of investments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the NYSE is closed and the market value may change on days when an investor is not able to purchase, redeem or exchange shares of the Fund.
Foreign currency contracts represent agreements to exchange currencies on specific future dates at predetermined rates. Foreign currency contracts are valued using foreign currency exchange rates and forward rates as provided by an independent pricing service on the Valuation Date.
Financial instruments for which prices are not available from an independent pricing service may be valued using market quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with procedures established by the Company’s Board of Directors.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| · | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange traded funds, rights and warrants. |
| · | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 may include debt investments that are traded less frequently than exchange traded instruments and which are valued using independent pricing services; foreign equities, which are principally traded on certain foreign markets and are adjusted daily pursuant to a fair value pricing service in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close; and short-term investments, which are valued at amortized cost. |
| · | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price. |
The Board of Directors of the Company generally reviews and approves the “Procedures for Valuation of Portfolio Securities” on an annual basis. These procedures define how investments are to be valued, including the formation and activities of a Valuation Committee. The Valuation Committee is responsible for determining in good faith the fair value of investments when the value cannot be obtained from primary pricing services or alternative sources or if the valuation of an investment as provided by the primary pricing service or alternative
| Hartford Value HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
| (000’s Omitted) |
source is believed not to reflect the investment’s fair value as of the Valuation Date. Members of the Valuation Committee include the Fund’s Treasurer or designee, a Vice President of the Fund with legal expertise or designee, and a Vice President of the investment manager or designee. In addition, the Fund’s Chief Compliance Officer shall designate a member of the compliance group to attend Valuation Committee meetings as a non-voting resource, to monitor for and provide guidance with respect to compliance with these procedures. Two members of the Valuation Committee or their designees, representing different departments, shall constitute a quorum for purposes of permitting the Valuation Committee to take action. The Valuation Committee will consider all relevant factors in determining an investment’s fair value, and may seek the advice of the Fund’s sub-adviser, knowledgeable brokers, and legal counsel in making such determination. The Valuation Committee reports to the Audit Committee of the Company’s Board of Directors. The Audit Committee receives quarterly written reports which include details of all fair-valued investments, including the reason for the fair valuation, and an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such investments (the “look-back” test). The Board of Directors then must consider for ratification all of the fair value determinations made during the previous quarter.
Valuation levels are not necessarily indicative of the risk associated with investing in such investments. Individual investments within any of the above mentioned asset classes may be assigned a different hierarchical level than those presented above, as individual circumstances dictate.
For additional information, refer to the Investment Valuation Hierarchy Level Summary and the Level 3 roll-forward reconciliation, if applicable, which follow the Schedule of Investments.
For purposes of reporting transfers between different hierarchy levels, both transfers in and out of each level, as applicable, are shown as if they occurred at the beginning of the period.
| c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Investments purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses are determined on the basis of identified cost. |
Dividend income from domestic securities is accrued on the ex-dividend date. In general, dividend income from foreign securities is recorded on the ex-date; however, dividend notifications in certain foreign jurisdictions may not be available in a timely manner and as a result, the Fund will record the dividend as soon as the relevant details (i.e., rate per share, payment date, shareholders of record, etc.) are publicly available. Interest income, including amortization of premium and accretion of discounts, is accrued on a daily basis.
| d) | Foreign Currency Transactions – Assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investments, income, and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. |
The Fund does not isolate that portion of portfolio investment valuation resulting from fluctuations in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of investments held. Exchange rate fluctuations are included with the net realized and unrealized gain or loss on investments in the accompanying financial statements.
Net realized foreign exchange gains or losses arise from sales of foreign currencies and the difference between asset and liability amounts initially stated in foreign currencies and the U.S. dollar value of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of other assets and liabilities at the end of the reporting period, resulting from changes in the exchange rates.
| e) | Joint Trading Account – The Fund may invest cash balances into a joint trading account that may be invested in one or more repurchase agreements. |
| f) | Fund Share Valuation and Dividend Distributions to Shareholders – Orders for the Fund’s shares are executed in accordance with the investment instructions of the contract holders and plan participants. The NAV of the Fund’s shares is determined as of the close of business on each business day of the Exchange. The NAV is determined separately for each class of shares of the Fund by dividing the Fund’s net assets attributable to that class by the number of shares of the class outstanding. Each class of shares offered by the Fund has equal rights as to assets and voting privileges (except that shareholders of a class have exclusive voting rights regarding any matter relating solely to that class of shares). Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets of the class. Realized and unrealized capital gains and losses are allocated daily based on the relative net assets of each class of shares of the Fund. |
Orders for the purchase of the Fund’s shares received prior to the close of the Exchange on any day the Exchange is open for business are priced at the NAV determined as of the close of the Exchange. Orders received after the close of the Exchange, or on a day on which the Exchange and/or the Fund is not open for business, are priced at the next determined NAV.
Dividends are declared pursuant to a policy adopted by the Company’s Board of Directors based upon the investment performance of the Fund. The policy of the Fund is to pay dividends from net investment income and realized capital gains, if any, at least once a year.
Distributions from net investment income, net realized capital gains and capital are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing. These differences may include but are not limited to losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to Passive Foreign Investment Companies (“PFICs”), Real Estate Investment Trusts (“REITs”), Regulated Investment Companies (“RICs”), certain derivatives and partnerships. Permanent book and federal income tax basis differences relating to shareholder distributions will result in reclassifications to certain of the Fund’s capital accounts (see Federal Income Taxes: Reclassification of Capital Accounts note).
| 3. | Securities and Other Investments: |
| a) | Repurchase Agreements – A repurchase agreement is an agreement by which a counterparty agrees to sell an investment and agrees to repurchase the investment sold from the buyer at a mutually agreed upon time and price. At the time the Fund enters into a repurchase agreement, the value of the underlying collateral, including accrued interest, will be equal to or exceed the value of the repurchase agreement. Repurchase agreements expose the Fund to counterparty risk - that is, the risk that the counterparty will not fulfill its obligations. To minimize counterparty risk, the investments that serve to collateralize the repurchase agreement are held by the Fund’s custodian in book entry or physical form in the custodial account of the Fund or in a third party custodial account. Repurchase agreements are valued at cost plus accrued interest. The Fund, as shown on the Schedule of Investments, had outstanding repurchase agreements as of December 31, 2012. |
| b) | Illiquid and Restricted Investments – The Fund is permitted to invest up to 15% of its net assets in illiquid investments. Illiquid investments are those that may not be sold or disposed of in the ordinary course of business within seven days, at approximately the price used to determine the Fund’s NAV. The Fund may not be able to sell illiquid investments when its sub-adviser considers it desirable to do so or may have to sell such investments at a price that is lower than the price that could be obtained if the investments were more liquid. A sale of illiquid investments may require more time and may result in higher dealer discounts and other selling expenses than does the sale of those that are liquid. Illiquid investments also may be more difficult to value due to the unavailability of reliable market quotations for such investments, and an investment in them may have an adverse impact on the Fund’s NAV. The Fund may also purchase certain restricted investments that can only be resold to certain qualified investors and may be determined to be liquid pursuant to policies and guidelines established by the Company’s Board of Directors. The Fund, as shown on the Schedule of Investments, had illiquid and/or restricted investments as of December 31, 2012. |
| Hartford Value HLS Fund |
| Notes to Financial Statements – (continued) |
| December 31, 2012 |
(000’s Omitted) |
| c) | Investments Purchased on a When-Issued or Delayed-Delivery Basis – Delivery and payment for investments that have been purchased by the Fund on a forward commitment, or when-issued or delayed-delivery basis, take place beyond the customary settlement period. A fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell delayed-delivery investments before they are delivered, which may result in a realized gain or loss. During this period, such investments are subject to market fluctuations, and the Fund identifies investments segregated in its records with a value at least equal to the amount of the commitment. As of December 31, 2012, the Fund had no outstanding when-issued or delayed-delivery investments. |
| 4. | Financial Derivative Instruments: |
The following disclosures contain information on how and why the Fund uses derivative instruments, the credit-risk-related contingent features in certain derivative instruments, and how derivative instruments affect the Fund’s financial position and results of operations. The location and fair value amounts of these instruments on the Statement of Assets and Liabilities and the realized gains and losses and changes in unrealized gains and losses on the Statement of Operations, each categorized by type of derivative contract, are included in the following Additional Derivative Instrument Information footnote. The derivative instruments outstanding as of year-end are disclosed in the notes to or within the Schedule of Investments for purchased options, if applicable. The amounts of realized gains and losses and changes in unrealized gains and losses on derivative instruments during the year are disclosed in the Statement of Operations.
| a) | Foreign Currency Contracts – The Fund may enter into foreign currency contracts that obligate the Fund to purchase or sell currencies at specified future dates. Foreign currency contracts are used to hedge the currency exposure associated with some or all of the Fund’s investments and/or as part of an investment strategy. Foreign currency contracts are marked to market daily and the change in value is recorded by the Fund as an unrealized gain or loss. The Fund will record a realized gain or loss when the foreign currency contract is settled. |
Foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. In addition, risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of the contracts and from unanticipated movements in the value of the foreign currencies relative to the U.S. dollar. The Fund had no outstanding foreign currency contracts as of December 31, 2012.
| b) | Additional Derivative Instrument Information: |
The volume of derivative activity was minimal during the year ended December 31, 2012.
The Effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2012:
| | | Risk Exposure Category | |
| | | Interest Rate
Contracts | | | Foreign
Exchange
Contracts | | | Credit
Contracts | | | Equity
Contracts | | | Commodity
Contracts | | | Other
Contracts | | | Total | |
| Realized Gain on Derivatives Recognized as a Result of Operations: |
| Net realized gain on foreign currency contracts | | $ | — | | | $ | 55 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 55 | |
| Total | | $ | — | | | $ | 55 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 55 | |
| a) | Counterparty Risk – The Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will default. |
| b) | Market Risks – If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the |
Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities, such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund. The market values of equity securities, such as common stocks and preferred stocks, or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The market value of equity securities may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities.
| a) | Federal Income Taxes – For federal income tax purposes, the Fund intends to continue to qualify as a RIC under Subchapter M of the Internal Revenue Code (“IRC”) by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders and otherwise complying with the requirements of the IRC. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains prior to the next fiscal year-end. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
| b) | Net Investment Income (Loss), Net Realized Gains (Losses), and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. |
| c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Fund for the periods indicated is as follows (as adjusted for dividends payable, if applicable): |
| | | For the Year Ended
December 31, 2012 | | | For the Year Ended
December 31, 2011 | |
| Ordinary Income | | $ | 14,517 | | | $ | 12,398 | |
As of December 31, 2012, the Fund’s components of distributable earnings (deficit) on a tax basis were as follows:
| | | Amount | |
| Accumulated Capital and Other Losses* | | $ | (126,251 | ) |
| Unrealized Appreciation† | | | 99,811 | |
| Total Accumulated Deficit | | $ | (26,440 | ) |
| | * | The Fund has capital loss carryforwards that are identified in the Capital Loss Carryforward note that follows. |
| | † | Differences between book-basis and tax-basis unrealized appreciation (depreciation) may be attributable to the losses deferred due to wash sale adjustments, foreign currency gains and losses, adjustments related to PFICs, REITs, RICs, certain derivatives and partnerships. |
Hartford Value HLS Fund
Notes to Financial Statements – (continued)
December 31, 2012
| d) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as foreign currency, PFICs, expiration or utilization of capital loss carryforwards or net operating losses. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Fund’s distributions may be shown in the accompanying Statement of Changes in Net Assets as from undistributed net investment income, from accumulated net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended December 31, 2012, the Fund recorded reclassifications to increase (decrease) the accounts listed below: |
| | | Amount | |
| Undistributed Net Investment Income | | $ | (52 | ) |
| Accumulated Net Realized Gain (Loss) | | | 56 | |
| Capital Stock and Paid-in-Capital | | | (4 | ) |
| e) | Capital Loss Carryforward – On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which made changes to the capital loss carryforward rules. The changes are effective for taxable years beginning after the date of enactment. Under the Act, funds are permitted to carry forward capital losses for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under prior regulation. |
At December 31, 2012 (tax-year-end), the Fund had capital loss carryforwards for U.S. federal income tax purposes as follows:
| Year of Expiration | | Amount | |
| 2016 | | $ | 82,242 | |
| 2017 | | | 44,009 | |
| Total | | $ | 126,251 | |
As a result of current or past mergers in the Fund, certain provisions in the Internal Revenue Code may limit the future utilization of capital losses. During the year ended December 31, 2012, the Fund utilized $43,923 of prior year capital loss carryforwards.
| f) | Accounting for Uncertainty in Income Taxes – The Fund has adopted financial reporting rules that require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Generally, tax authorities can examine all tax returns filed for the last three years. The Fund does not have an examination in progress. |
The Fund has reviewed all open tax years and major jurisdictions and concluded that these financial reporting rules had no effect on the Fund’s financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2012. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
| a) | Investment Management Agreement – Effective January 1, 2013, Hartford Funds Management Company, LLC (“HFMC”) replaced HL Investment Advisors, LLC (“HL Advisors”) as the Fund’s investment manager. HFMC and HL Advisors are both indirect wholly owned subsidiaries of The Hartford Financial Services Group, Inc. (“The Hartford”). As of January 1, 2013, HFMC serves as investment manager to the Fund pursuant to an Investment Management |
Agreement with the Company. For the fiscal year ended December 31, 2012, HL Advisors served as the Fund’s investment manager pursuant to a separate agreement between HL Advisors and the Company. The replacement of HL Advisors with HFMC did not result in any change to (i) the contractual terms of, including the fees payable under, the Fund’s investment management agreements; or (ii) the day-to-day management of the Fund. The investment manager has overall investment supervisory responsibility for the Fund. In addition, the investment manager provides administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. The investment manager has contracted with Wellington Management Company, LLP (“Wellington Management”) under a sub-advisory agreement for the provision of day-to-day investment management services to the Fund in accordance with the Fund’s investment objective and policies. The Fund pays a fee to the investment manager, a portion of which may be used to compensate Wellington Management.
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered as of December 31, 2012, (paid for the period March 1, 2012 through December 31, 2012); the rates are accrued daily and paid monthly.
| Average Daily Net Assets | | Annual Fee | |
| On first $250 million | | | 0.7750 | % |
| On next $250 million | | | 0.7250 | % |
| On next $500 million | | | 0.6750 | % |
| On next $1.5 billion | | | 0.6250 | % |
| On next $2.5 billion | | | 0.6200 | % |
| On next $5 billion | | | 0.6150 | % |
| Over $10 billion | | | 0.6100 | % |
The schedule below reflects the rates of compensation paid to HL Advisors for investment management services rendered during the period January 1, 2012, through February 29, 2012.
| Average Daily Net Assets | | Annual Fee | |
| On first $250 million | | | 0.7750 | % |
| On next $250 million | | | 0.7250 | % |
| On next $500 million | | | 0.6750 | % |
| On next $4 billion | | | 0.6250 | % |
| On next $5 billion | | | 0.6225 | % |
| Over $10 billion | | | 0.6200 | % |
| b) | Accounting Services Agreement – Effective January 1, 2013, HFMC replaced HLIC as provider of accounting services to the Fund. HLIC provided accounting services for the Fund for the fiscal year ended December 31, 2012. The replacement of HLIC with HFMC did not result in any changes to the fund accounting services provided to the Fund or the fees charged to the Fund for such services. Pursuant to the Fund Accounting Agreement between HFMC and the Company, on behalf of the Fund, HFMC provides accounting services to the Fund and receives monthly compensation based on the Fund’s average daily net assets at the rates set forth below. The Fund’s accounting services fees are accrued daily and paid monthly. |
| Average Daily Net Assets | | Annual Fee | |
| All Assets | | | 0.010 | % |
| c) | Operating Expenses – Allocable expenses incurred by the Company are allocated to each Fund and allocated to classes within a Fund in proportion to the average daily net assets of the Fund and each class, except where allocation of certain expenses is more fairly made directly to the Fund or to specific classes within a Fund. |
Hartford Value HLS Fund
Notes to Financial Statements – (continued)
December 31, 2012
| d) | Fees Paid Indirectly – The Company, on behalf of the Fund, has entered into agreements with State Street Global Markets, LLC and Russell Implementation Services, Inc. to partially recapture non-discounted trade commissions. Such rebates are used to pay a portion of the Fund’s expenses. In addition, the Fund’s custodian banks have agreed to reduce its fees when the Fund maintains cash on deposit in a non-interest-bearing custody account. For the year ended December 31, 2012, these amounts, if any, are included in the Statement of Operations. |
The ratio of expenses to average net assets in the accompanying financial highlights excludes the reduction in expenses related to fees paid indirectly. The annualized expense ratio after waivers for the period listed below reflecting the reduction for fees paid indirectly is as follows:
| | | Year Ended
December 31, 2012 | |
| Class IA | | | 0.76 | % |
| Class IB | | | 1.01 | |
| e) | Distribution Plan for Class IB shares – Effective January 1, 2013, Hartford Investment Financial Services, LLC (“HIFSCO”) replaced Hartford Securities Distribution Services Company, Inc. (“HSD”) as the Distributor. HSD served as the Fund's principal underwriter and distributor for the fiscal year ended December 31, 2012. The replacement of HSD with HIFSCO did not result in any changes to the distribution services provided to the Fund. HIFSCO and HSD are both wholly owned, ultimate subsidiaries of The Hartford. The Company, on behalf of the Fund, has adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act to compensate the Distributor, HIFSCO, 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, subject to the review and approval of the Company’s Board of Directors. |
The Distribution Plan provides that the Fund may pay annually up to 0.25% of the average daily net assets of the Fund attributable to its Class IB shares for activities primarily intended to result in the sale of Class IB shares. The Board has the authority to suspend or reduce these payments at any point in time. Under the terms of the Distribution Plan and the principal underwriting agreement, the Fund is authorized to make payments monthly to the Distributor that may be used to pay or compensate 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. These fees are accrued daily and paid monthly.
| f) | Other Related Party Transactions – Certain officers of the Fund are directors and/or officers of the investment manager and/or The Hartford or its subsidiaries. For the year ended December 31, 2012, a portion of the Fund’s Chief Compliance Officer’s salary was paid by all the investment companies in the Hartford fund complex. The portion allocated to the Fund was in the amount of $1. These fees are accrued daily and paid monthly. |
| g) | Payment from Affiliate – In July of 2007, The Hartford entered into a settlement with the Attorneys General of the states of New York, Connecticut and Illinois relating to market timing and the company's individual variable annuity contracts in which certain payments would be made directly to the variable annuity contract holders. The distribution plan provided that unclaimed money from the settlement would be distributed to certain HLS Funds that are investment options through a Hartford individual variable annuity contract. The unclaimed money was distributed to the Fund on September 18, 2009. |
The total return in the accompanying financial highlights includes a payment from an affiliate. Had the payment from the affiliate been excluded, the impact and total return for the period listed below would have been as follows:
| | | For the Year Ended December 31, 2009 | |
| | | Class IA | | | Class IB | |
| Impact from Payment from Affiliate for Attorneys General Settlement | | | — | % | | | — | % |
| Total Return Excluding Payment from Affiliate | | | 24.37 | % | | | 24.05 | % |
| 8. | Investment Transactions: |
For the year ended December 31, 2012, the Fund's aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
| | | Amount | |
| Cost of Purchases Excluding U.S. Government Obligations | | $ | 150,377 | |
| Sales Proceeds Excluding U.S. Government Obligations | | | 293,699 | |
The Fund is one of several Hartford funds that participate in a $500 million committed revolving line of credit facility. The facility is to be used for temporary or emergency purposes. Under the arrangement, the funds are required to own securities having a market value in excess of 300% of the total bank borrowings. The interest rate on borrowings varies depending on the nature of the loan. The facility also requires a fee to be paid based on the amount of the commitment. This commitment fee is allocated to all of the funds participating in the line of credit based on the average net assets of the funds. During the year ended December 31, 2012, the Fund did not have any borrowings under this facility.
| 10. | Industry Classifications: |
Other than the industry classifications “Other Investment Pools and Funds” and “Exchange Traded Funds,” equity industry classifications used in this report are the Global Industry Classification Standard, which was developed by and is the exclusive property and service mark of MSCI, Inc. and Standard & Poor’s.
Under the Company��s organizational documents, the Company shall indemnify its officers and directors to the full extent required or permitted under Maryland General Corporation Law and the federal securities laws. In addition, the Company, on behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
| 12. | Recent Accounting Pronouncement: |
Disclosures about Offsetting Assets and Liabilities - In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The objective of the ASU is to enhance current disclosure requirements on offsetting of certain assets and liabilities and to enable financial statement users to compare financial statements prepared under U.S. GAAP and International Financial Reporting Standards.
Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
Hartford Value HLS Fund
Financial Highlights
| - Selected Per-Share Data (A) - |
| Class | | Net Asset Value at Beginning of Period | | | Net Investment Income (Loss) | | | Net Realized and Unrealized Gain (Loss) on Investments | | | Total from Investment Operations | | | Dividends from Net Investment Income | | | Distributions from Realized Capital Gains | | | Distributions from Capital | | | Total Distributions | | | Net Asset Value at End of Period | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2012 |
| IA | | $ | 10.37 | | | $ | 0.26 | | | $ | 1.50 | | | $ | 1.76 | | | $ | (0.27 | ) | | $ | – | | | $ | – | | | $ | (0.27 | ) | | $ | 11.86 | |
| IB | | | 10.36 | | | | 0.23 | | | | 1.50 | | | | 1.73 | | | | (0.24 | ) | | | – | | | | – | | | | (0.24 | ) | | | 11.85 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2011 |
| IA | | | 10.77 | | | | 0.20 | | | | (0.41 | ) | | | (0.21 | ) | | | (0.19 | ) | | | – | | | | – | | | | (0.19 | ) | | | 10.37 | |
| IB | | | 10.76 | | | | 0.17 | | | | (0.41 | ) | | | (0.24 | ) | | | (0.16 | ) | | | – | | | | – | | | | (0.16 | ) | | | 10.36 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2010 (E) |
| IA | | | 9.50 | | | | 0.13 | | | | 1.26 | | | | 1.39 | | | | (0.12 | ) | | | – | | | | – | | | | (0.12 | ) | | | 10.77 | |
| IB | | | 9.50 | | | | 0.11 | | | | 1.25 | | | | 1.36 | | | | (0.10 | ) | | | – | | | | – | | | | (0.10 | ) | | | 10.76 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2009 |
| IA | | | 7.77 | | | | 0.14 | | | | 1.75 | | | | 1.89 | | | | (0.16 | ) | | | – | | | | – | | | | (0.16 | ) | | | 9.50 | |
| IB | | | 7.77 | | | | 0.13 | | | | 1.74 | | | | 1.87 | | | | (0.14 | ) | | | – | | | | – | | | | (0.14 | ) | | | 9.50 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2008 |
| IA | | | 12.83 | | | | 0.20 | | | | (4.36 | ) | | | (4.16 | ) | | | (0.20 | ) | | | (0.70 | ) | | | – | | | | (0.90 | ) | | | 7.77 | |
| IB | | | 12.81 | | | | 0.20 | | | | (4.37 | ) | | | (4.17 | ) | | | (0.17 | ) | | | (0.70 | ) | | | – | | | | (0.87 | ) | | | 7.77 | |
| (A) | Information presented relates to a share outstanding throughout the indicated period. |
| (B) | The figures do not include 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 would lower the Fund's performance. |
| (C) | Ratios do not reflect reductions for fees paid indirectly. Please see Fees Paid Indirectly in the Notes to Financial Statements. |
| (D) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
| (E) | Per share amounts have been calculated using the average shares method. |
| (F) | During the year ended December 31, 2010, the Fund incurred $269.8 million in sales associated with the transition of assets from Hartford Equity Income HLS Fund and Hartford Value Opportunities HLS Fund, which merged into the Fund on March 19, 2010. These sales were excluded from the portfolio turnover calculation. |
| (G) | Total return without the inclusion of the Payment from (to) Affiliate can be found in Expenses in the accompanying Notes to Financial Statements. |
| - Ratios and Supplemental Data - |
| Total Return(B) | | | Net Assets at End of Period | | | Ratio of Expenses to Average Net Assets
Before Waivers(C) | | | Ratio of Expenses to Average Net Assets
After Waivers(C) | | | Ratio of Net Investment
Income (Loss) to Average Net
Assets | | | Portfolio
Turnover
Rate(D) | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 16.99 | % | | $ | 549,228 | | | | 0.76 | % | | | 0.76 | % | | | 2.02 | % | | | 22 | % |
| | 16.69 | | | | 103,438 | | | | 1.01 | | | | 1.01 | | | | 1.77 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (1.96 | ) | | | 591,278 | | | | 0.75 | | | | 0.75 | | | | 1.65 | | | | 16 | |
| | (2.20 | ) | | | 111,486 | | | | 1.00 | | | | 1.00 | | | | 1.40 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 14.67 | | | | 741,230 | | | | 0.78 | | | | 0.78 | | | | 1.36 | | | | 47 | (F) |
| | 14.38 | | | | 154,731 | | | | 1.03 | | | | 1.03 | | | | 1.11 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 24.37 | (G) | | | 244,909 | | | | 0.87 | | | | 0.87 | | | | 1.65 | | | | 50 | |
| | 24.06 | (G) | | | 63,003 | | | | 1.12 | | | | 1.12 | | | | 1.40 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (34.03 | ) | | | 217,460 | | | | 0.84 | | | | 0.84 | | | | 1.87 | | | | 57 | |
| | (34.20 | ) | | | 63,338 | | | | 1.09 | | | | 1.09 | | | | 1.62 | | | | – | |
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of
| Hartford Series Fund, Inc. |
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Hartford Value HLS Fund (one of the portfolios constituting Hartford Series Fund, Inc. (the Fund)) as of December 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Hartford Value HLS Fund (one of the portfolios constituting the Hartford Series Fund, Inc.) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Minneapolis, MN
February 15, 2013
Hartford Value HLS Fund
| Directors and Officers (Unaudited) |
The Board of Directors of the Company appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies formulated by the Directors. Each director serves until his or her death, resignation, or retirement or until the next annual meeting of shareholders is held or until his or her successor is elected and qualifies.
Directors and officers who are employed by or who have a financial interest in The Hartford are considered “interested” persons of the Fund pursuant to the 1940 Act. Each officer and two of the Company’s directors, as noted in the chart below, are “interested” persons of the Fund. Each director serves as a director for The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., and as a trustee for The Hartford Alternative Strategies Fund, which, as of December 31, 2012, collectively consist of 91 funds. Correspondence may be sent to directors and officers c/o Hartford Mutual Funds, P.O. Box 2999, Hartford, Connecticut 06104-2999, except that correspondence to Mr. Annoni, Mr. Dressen, Ms. Fagely and Ms. Quade may be sent to 500 Bielenberg Drive, Woodbury, Minnesota 55125 and correspondence to Mr. Davey and Mr. Melcher may be sent to 100 Matsonford Road, Radnor, Pennsylvania 19087.
The table below sets forth, for each director and officer, his or her name, year of birth, current position with the Company and date first elected or appointed to Hartford Series Fund, Inc. (“HSF”), and Hartford HLS Series Fund II, Inc. (“HSF2”), principal occupation, and, for directors, other directorships held. The Fund’s statement of additional information contains further information on the directors and is available free of charge by calling 1-800-862-6668 or writing to Hartford HLS Funds, c/o Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085.
Information on the aggregate remuneration paid to the directors of the Company can be found in the Statement of Operations herein. The Fund pays to The Hartford a portion of the Chief Compliance Officer’s compensation, but does not pay salaries or compensation to any of their other officers or directors who are employed by The Hartford.
Non-Interested Directors
Lynn S. Birdsong (1946) Director since 2003, Co-Chairman of the Investment Committee
Mr. Birdsong is a private investor. Mr. Birdsong currently serves as a Director of the Sovereign High Yield Investment Company (April 2010 to current). Mr. Birdsong currently serves as an Independent Director of Nomura Partners Funds, Inc. (formerly, The Japan Fund) (March 2003 to current). From 1979 to 2002, Mr. Birdsong was a managing director of Zurich Scudder Investments, an investment management firm. During his employment with Scudder, Mr. Birdsong was an Interested Director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm.
Robert M. Gavin, Jr. (1940) Director since 2002 (HSF) and 1986 (HSF2), Chairman of the Board since 2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community and prior to July 1996, he was President of Macalester College, St. Paul, Minnesota.
Duane E. Hill (1945) Director since 2001 (HSF) and 2002 (HSF2), Chairman of the Nominating Committee
Mr. Hill is Partner of TSG Ventures L.P., a private equity investment company. Mr. Hill is a former partner of TSG Capital Group, a private equity investment firm that served as sponsor and lead investor in leveraged buyouts of middle market companies.
Sandra S. Jaffee (1941) Director since 2005
Ms. Jaffee is the founder and Chief Executive Officer of a private company, Homeworks Concierge, LLC, which provides residential property management services in Westchester County, New York (January 2012 to present). Ms. Jaffee served as Chairman (2008 to 2009) and Chief Executive Officer of Fortent (formerly Searchspace Group), a leading provider of compliance/regulatory technology to financial institutions from August 2005 to August 2009. Ms. Jaffee currently serves as a member of the Board of Directors of Broadridge Financial Solutions as well as a Trustee of Muhlenberg College.
William P. Johnston (1944) Director since 2005, Chairman of the Compliance Committee
In June 2006, Mr. Johnston was appointed as Senior Advisor to The Carlyle Group, a global private equity investment firm. In August 2007, Mr. Johnston was elected to the Board of Directors of LifeCare Holdings, Inc. In February 2008, Mr. Johnston was elected to the Board of Directors of HCR-ManorCare, Inc. In May 2006, Mr. Johnston was elected to the Supervisory Board of Fresenius Medical Care AG & Co. KGaA, after its acquisition of Renal Care Group, Inc. in March 2006.
Phillip O. Peterson (1944) Director since 2002 (HSF) and 2000 (HSF2), Chairman of the Audit Committee
Mr. Peterson is a mutual fund industry consultant. He was a partner of KPMG LLP (an accounting firm) until July 1999. Mr. Peterson joined William Blair Funds in February 2007 as a member of the Board of Trustees. Mr. Peterson also joined the Board of Trustees of Symetra Variable Mutual Funds Trust as a trustee in February 2012.
Hartford Value HLS Fund
| Directors and Officers (Unaudited) – (continued) |
Lemma W. Senbet (1946) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, at the University of Maryland, Robert H. Smith School of Business. He was chair of the Finance Department from 1998 to 2006. Previously he was a chaired professor of finance at the University of Wisconsin-Madison. Also, he was director of the Fortis Funds from March 2000 to July 2002. Dr. Senbet served the finance profession in various capacities, including as director of the American Finance Association and President of the Western Finance Association. In 2006, Dr. Senbet was inducted Fellow of Financial Management Association International for his career-long distinguished scholarship and professional service.
Interested Directors and Officers
James E. Davey (1964) Director since 2012, President and Chief Executive Officer since 2010
Mr. Davey serves as Executive Vice President of HLIC and The Hartford Financial Services Group, Inc. Additionally, Mr. Davey serves as President, Chairman of the Board, Chief Executive Officer and Manager of HIFSCO and President, Chief Executive Officer and Manager of HL Investment Advisors, LLC (“HL Advisors”). Mr. Davey also serves as Manager, President and Chairman of the Board for Hartford Funds Management Company, LLC (“HFMC”). Mr. Davey joined The Hartford in 2002.
Lowndes A. Smith (1939) Director since 1996 (HSF) and 2002 (HSF2), Co-Chairman of the Investment Committee
Mr. Smith served as Vice Chairman of The Hartford from February 1997 to January 2002, as President and Chief Executive Officer of HL Inc. from February 1997 to January 2002, and as President and Chief Operating Officer of The Hartford Life Insurance Companies from January 1989 to January 2002. Mr. Smith serves as a Director of White Mountains Insurance Group, Ltd., One Beacon Insurance and Symetra Financial and as Managing Director of Whittington Gray Associates.
Other Officers
Mark A. Annoni (1964) Vice President, Controller and Treasurer since 2012(1)
Mr. Annoni serves as the Assistant Vice President and Director of HLIC (February 2004 to present). Mr. Annoni joined The Hartford in April 2001 as part of The Hartford’s acquisition of Fortis Financial Group (“Fortis”). Prior to joining The Hartford, Mr. Annoni served as Manager of Mutual Fund Accounting at Fortis (July 1997 to April 2001).
(1) Mr. Annoni was named Vice President, Controller and Treasurer of the Fund on May 8, 2012.
Michael R. Dressen (1963) AML Compliance Officer since 2011
Mr. Dressen currently serves as Assistant Vice President of HLIC. He also serves as Chief Compliance Officer and AML Compliance Officer of Hartford Administrative Services Company (“HASCO”) and as Assistant Secretary and Compliance Officer of HIFSCO. Mr. Dressen joined The Hartford in 2005 from State Farm Insurance Companies where he held various positions related to mutual funds, variable products, and property casualty insurance.
Tamara L. Fagely (1958) Vice President, since 2002 (HSF) and 1993 (HSF2)(2)
Ms. Fagely has been a Vice President of HASCO since 1998 and Chief Financial Officer since 2006. Currently Ms. Fagely is Chief Administrative Officer and Manager of HFMC and a Vice President of HLIC. She served as Assistant Vice President of HLIC from December 2001 through March 2005. In addition, Ms. Fagely is Controller and Chief Financial Officer of HIFSCO.
(2) Ms. Fagely served as Vice President, Controller and Treasurer of the Fund until May 8, 2012.
Edward P. Macdonald (1967) Vice President, Secretary and Chief Legal Officer since 2005
Mr. Macdonald serves as Vice President of HLIC and Chief Legal Officer of Mutual Funds and Vice President of HIFSCO. Mr. Macdonald also serves as Manager, Vice President, Chief Legal Officer and Secretary of HFMC. He also serves as Vice President and Secretary of HASCO, and Chief Legal Officer, Secretary and Vice President of HL Advisors. Mr. Macdonald joined The Hartford in 2005.
Joseph G. Melcher (1973) Vice President and Chief Compliance Officer since 2013(3)
Mr. Melcher currently serves as Vice President of HFMC. Mr. Melcher joined The Hartford in 2012 from Touchstone Investments, a member of the Western & Southern Financial Group, where he held the position of Vice President and Chief Compliance Officer from 2010 through 2012 and Assistant Vice President, Compliance from 2005 to 2010.
(3) Mr. Melcher was named Vice President and Chief Compliance Officer of the Fund on February 6, 2013.
Vernon J. Meyer (1964) Vice President since 2006
Mr. Meyer serves as Senior Vice President of HLIC. He also serves as Senior Vice President of HFMC, HIFSCO and HL Advisors. Mr. Meyer joined The Hartford in 2004.
Colleen B. Pernerewski (1969) Vice President and Chief Compliance Officer since 2010 (4)
Ms. Pernerewski serves as Vice President and Chief Compliance Officer of Individual Annuity and Chief Compliance Officer of Separate Accounts of HLIC. Ms. Pernerewski served as Vice President and Chief Investment Advisor Compliance Officer of HIFSCO and as Vice President and Chief Compliance Officer of HL Advisors until September 2012. Ms. Pernerewski joined The Hartford in 2005 from Travelers Life and Annuity where she served as Counsel (2004-2005). Prior to Travelers Life and Annuity, Ms. Pernerewski held the position of Counsel at The Hartford (1998-2004).
(4) Ms. Pernerewski served as Vice President and Chief Compliance Officer of the Fund until February 6, 2013.
Laura S. Quade (1969) Vice President since 2012(5)
Ms. Quade currently serves as Assistant Vice President of HASCO and is a Director of Mutual Fund Service Operations. She also serves as Assistant Vice President of HIFSCO and HLIC. Ms. Quade joined The Hartford in 2001 as part of The Hartford’s acquisition of Fortis.
(5) Ms. Quade was named a Vice President of the Fund on November 8, 2012.
Elizabeth L. Schroeder (1966) Vice President since 2010
Ms. Schroeder currently serves as Assistant Vice President of HLIC. Ms. Schroeder joined HLIC in 1991. She is also an Assistant Vice President of HFMC, HASCO, HIFSCO and HL Advisors.
Martin Swanson (1962) Vice President since 2010
Mr. Swanson is a Vice President of HLIC. Mr. Swanson also serves as Vice President/Marketing for HIFSCO. Prior to joining HLIC in 1998, Mr. Swanson was a Vice President at PaineWebber, Inc.
HOW TO OBTAIN A COPY OF THE FUND’S PROXY VOTING POLICIES AND VOTING RECORDS (UNAUDITED)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and a record of how the Fund voted any proxies for the twelve-month period ended June 30, 2012 are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms are available (1) without charge, upon request, by calling 800-862-6668 and (2) on the SEC’s website at http://www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Hartford Value HLS Fund
| Expense Example (Unaudited) |
Your Fund's Expenses
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs including investment management fees, distribution fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period of June 30, 2012 through December 31, 2012.
Actual Expenses
The first set of columns of the table below provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second set of columns of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and CDSC. Therefore, the second set of columns of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher. Expenses are equal to the Fund's annualized expense ratios multiplied by average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| | | Actual return | | | Hypothetical (5% return before expenses) | | | | | | | | | | |
| | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Beginning
Account Value
June 30, 2012 | | | Ending
Account Value
December 31,
2012 | | | Expenses paid
during the period
June 30, 2012
through
December 31, 2012 | | | Annualized
expense
ratio | | | Days in
the
current
1/2
year | | | Days
in the
full
year | |
| Class IA | | $ | 1,000.00 | | | $ | 1,007.83 | | | $ | 3.86 | | | $ | 1,000.00 | | | $ | 1,021.29 | | | $ | 3.88 | | | | 0.76 | % | | | 184 | | | | 366 | |
| Class IB | | $ | 1,000.00 | | | $ | 1,007.70 | | | $ | 5.12 | | | $ | 1,000.00 | | | $ | 1,020.04 | | | $ | 5.15 | | | | 1.01 | % | | | 184 | | | | 366 | |
Hartford Value HLS Fund
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) |
Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of directors, including a majority of those directors who are not “interested persons” of the mutual fund, as defined in the 1940 Act (the “Independent Directors”), annually review and consider the continuation of the mutual fund’s investment advisory and sub-advisory agreements. At its meeting held on July 31-August 1, 2012, the Board of Directors (the “Board”) of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to approve the continuation of the investment management agreement for Hartford Value HLS Fund (the “Fund”) with HL Investment Advisors, LLC (“HL Advisors”) and the continuation of the investment sub-advisory agreement between HL Advisors and the Fund’s sub-adviser, Wellington Management Company, LLP (the “Sub-adviser,” and together with HL Advisors, the “Advisers”) (collectively, the “Agreements”).
In the months preceding the July 31-August 1, 2012 meeting, the Board requested, received, and reviewed written responses from the Advisers to questions posed to them on behalf of the Independent Directors and supporting materials relating to those questions and responses. The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the annual approval of the Agreements at the Board’s meetings held on June 19-20, 2012 and July 31-August 1, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by the Advisers and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors at the Board’s meetings on June 19-20, 2012 and July 31-August 1, 2012 concerning the Agreements.
The Independent Directors, advised by independent legal counsel, engaged two service providers to assist them with evaluating the Agreements with respect to the Fund. Lipper Inc. (“Lipper”), an independent provider of investment company data, was retained to provide the Board with reports on how the Fund’s contractual management fees, actual management fees, other non-management fees, overall expense ratios and investment performance compared to those of mutual funds with similar investment objectives. The Independent Directors also engaged an independent financial services consulting firm (the “Consultant”) to assist them in evaluating the Fund’s management fees, sub-advisory fees, other non-management fees, overall expense ratios and investment performance. In addition, the Consultant reviewed the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement.
In determining to continue the Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to continue the Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Agreements. A more detailed discussion of the factors the Board considered with respect to its approval of the Agreements is provided below.
Nature, Extent, and Quality of Services Provided by the Advisers
The Board requested and considered information concerning the nature, extent, and quality of the services provided to the Fund by the Advisers. The Board considered, among other things, the terms of the Agreements and the range of services provided by the Advisers. The Board considered the Advisers’ professional personnel who provide services to the Fund, including each Adviser’s ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered each Adviser’s reputation and overall financial strength, as well as its willingness to consider and implement organizational and operational changes designed to improve services to the Fund. In addition, the Board considered the quality of each Adviser’s communications with the Board and responsiveness to Board inquiries.
The Board also requested and evaluated information concerning each Adviser’s regulatory and compliance environment. In this regard, the Board requested and reviewed information on each Adviser’s compliance policies and procedures, compliance history, and a report from the Fund’s Chief Compliance Officer on each Adviser’s compliance with applicable laws and regulations, including responses to regulatory developments and compliance issues raised by regulators. The Board also noted the Advisers’ support of the Fund’s compliance control structure, particularly the resources devoted by the Advisers in support of the Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act.
Hartford Value HLS Fund
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) - (continued) |
With respect to HL Advisors, the Board noted that under the Agreements, HL Advisors is responsible for the management of the Fund, including overseeing fund operations and service providers, as well as investment advisory services in connection with selecting, monitoring and supervising the Sub-adviser. The Board considered HL Advisors’ ongoing monitoring of people, process and performance, including its quarterly reviews of each of the Hartford HLS Funds, semi-annual meetings with the leaders of each Fund’s portfolio management team, and oversight of the Funds’ approximately 40 portfolio managers. The Board recognized that HL Advisors has demonstrated a record of making changes to the management and/or strategies of the Funds when warranted. The Board considered HL Advisors’ oversight of the Sub-adviser’s investment approach and results, process for monitoring best execution of portfolio trades by the Sub-adviser, and approach to risk management with respect to the Fund and the service providers to the Fund. The Board also considered HL Advisors’ oversight of compliance with the Fund’s objective and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led to an increase in the scope of HL Advisors’ services in this regard. In addition, the Board considered HL Advisors’ ongoing commitment to review and rationalize the Hartford fund family’s product line-up and the expenses that HL Advisors had incurred in connection with fund combinations in recent years. The Board considered that HL Advisors or its affiliates are responsible for providing the Fund’s officers. The Board also noted that Hartford Life Insurance Company (“HLIC”) provides administrative services to the Fund. The Board considered its experiences with HL Advisors and HLIC with respect to each of these services.
With respect to the Sub-adviser, who provides day-to-day portfolio management services, the Board considered the quality of the Fund’s portfolio managers, the Sub-adviser’s other investment personnel, its investment philosophy and process, investment research capabilities and resources, performance record, trade execution capabilities and experience. The Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers, and the Sub-adviser’s method for compensating the portfolio managers.
Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Fund by HL Advisors and the Sub-adviser.
Performance of the Fund and the Advisers
The Board considered the investment performance of the Fund. In this regard, the Board reviewed the performance of the Fund over different time periods presented in the materials and evaluated HL Advisors’ analysis of the Fund’s performance for these time periods. The Board considered information and materials provided to the Board by the Advisers concerning Fund performance, as well as information from Lipper comparing the investment performance of the Fund to an appropriate benchmark and universe of peer funds. The Board noted that the performance of the Fund was within expectations.
The Board considered the detailed investment analytics reports provided by The Hartford’s Investment Advisory Group throughout the year. These reports include, among other things, information on the Fund’s gross and net returns, the Fund’s investment performance relative to an appropriate benchmark and peer group, various statistics concerning the Fund’s portfolio, and a narrative summary of various factors affecting Fund performance. The Board considered the Advisers’ cooperation with the Investment Committee, which assists the Board in evaluating the performance of the Fund at periodic meetings throughout the year. The Board also considered the analysis provided by the Consultant relating to the Fund’s performance track record.
In light of all the considerations noted above, the Board concluded that it had continued confidence in HL Advisors’ and the Sub-adviser’s overall capabilities to manage the Fund.
Costs of the Services and Profitability of the Advisers
The Board reviewed information regarding HL Advisors’ cost to provide investment management and related services to the Fund and HL Advisors’ profitability, both overall and for the Fund, on a pre-tax basis without regard to distribution expenses. The Board also requested and reviewed information about the profitability to HL Advisors and its affiliates from all services provided to the Fund and all aspects of their relationship with the Fund. The Board also requested and received information relating to the operations and profitability of the Sub-adviser.
The Board considered the Consultant’s review of the profitability calculations utilized by HL Advisors in connection with the continuation of the investment management agreement, noting the Consultant’s view that The Hartford’s process for calculating
and reporting Fund profitability is reasonable. In this regard, the Board noted that the Consultant had previously performed a full review of this process and reported that such process is sound and well within common industry practice.
Based on these considerations, the Board concluded that the profits anticipated to be realized by the Advisers and their affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by the Advisers
The Board considered comparative information with respect to the management fees to be paid by the Fund to HL Advisors and the total expense ratios of the Fund. The Board also considered comparative information with respect to the sub-advisory fees to be paid by HL Advisors to the Sub-adviser, to the extent applicable. In this regard, the Board requested and reviewed information from HL Advisors and the Sub-adviser relating to the management and sub-advisory fees, including the sub-advisory fee schedule for the Fund, and total operating expenses for the Fund. The Board considered that the management fee for the Fund includes the fee paid to HLIC for providing certain administrative services to the Fund. With respect to the sub-advisory fee schedule, the Board considered representations from HL Advisors and the Sub-adviser that the Sub-adviser’s fees were negotiated at arm’s length. The Board also reviewed information from Lipper comparing the Fund’s contractual management fees, actual management fees and overall expense ratios relative to a group of funds selected by Lipper, in consultation with the Consultant, and a broader universe of funds selected by Lipper. The Board noted that, in connection with The Hartford’s preferred partnership agreement with the Sub-adviser, an additional breakpoint had been added to the Fund’s management fee schedule.
While the Board recognized that comparisons between the Fund and peer funds are imprecise, given the differing service levels and characteristics of mutual funds and the different business models and cost structures of the Advisers, the comparative information provided by Lipper assisted the Board in evaluating the reasonableness of the Fund’s management and sub-advisory fees and total operating expenses. In addition, the Board considered the analysis and recommendations of the Consultant relating to the Fund’s management and sub-advisory fees and total operating expenses.
Based on these considerations, the Board concluded that the Fund’s fees and total operating expenses, in conjunction with the information about quality of services, profitability, economies of scale, and other matters discussed, were reasonable in light of the services provided.
Economies of Scale
The Board requested and considered information regarding the Advisers’ realization of economies of scale with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. The Board reviewed the breakpoints in the management fee schedule for the Fund, which reduce fee rates as Fund assets grow over time, and noted that an additional breakpoint had recently been added to the Fund’s management fee schedule. The Board recognized that a fund with assets beyond the last breakpoint level will continue to benefit from economies of scale because additional assets are charged the lowest breakpoint fee resulting in lower overall effective management fee rates. The Board also recognized that a fee schedule that reaches a lower breakpoint quickly provides shareholders with the benefit of anticipated or potential economies of scale.
The Board reviewed and evaluated materials from Lipper showing how management fee schedules of peer funds reflect economies of scale for the benefit of shareholders as a peer fund’s assets hypothetically increase over time. Based on information provided by HL Advisors, Lipper, and the Consultant, the Board recognized that there is no uniform methodology for establishing breakpoints or uniform pattern in asset levels that trigger breakpoints or the amounts of breakpoints triggered.
After considering all of the information available to it, the Board concluded that it was satisfied with the extent to which economies of scale would be shared for the benefit of the Fund’s shareholders based on currently available information and the effective advisory fees and expense ratios for the Fund at its current and reasonably anticipated asset levels. The Board noted, however, that it would continue to monitor future growth in Fund assets and the appropriateness of additional breakpoints.
Hartford Value HLS Fund
| Approval of Investment Management and Investment Sub-Advisory Agreements (Unaudited) - (continued) |
Other Benefits
The Board considered other benefits to the Advisers and their affiliates from their relationships with the Fund, including the role of the Fund in supporting the variable life insurance and variable annuity products offered by The Hartford. The Board reviewed information noting that HLIC, an affiliate of HL Advisors, receives fees for providing certain administrative services to the Fund, and that HLIC also receives fees for fund accounting and related services from the Fund, and the Board considered information on profits to HLIC or its affiliates for such services. The Board also considered that Hartford Administrative Services Company (“HASCO”), the Fund’s transfer agent and an affiliate of HL Advisors, receives transfer agency compensation from the Fund, and the Board reviewed information on the profitability of the Fund’s transfer agency function to HASCO. The Board considered information provided by HASCO indicating that the transfer agent fees charged by HASCO to the Fund were fair and reasonable based on publicly available information.
The Board also considered that Hartford Securities Distribution Company, Inc., as principal underwriter of the Fund, receives 12b-1 fees from the Fund. The Board also noted that certain affiliates of HL Advisors distribute shares of the Fund and receive compensation in that connection.
The Board considered benefits to the Sub-adviser from its use of the Fund’s brokerage commissions to obtain soft dollar research, and representations from HL Advisors and the Sub-adviser that the Sub-adviser would not make any revenue-sharing payments or any other type of distribution payments to HL Advisors or its affiliates.
The Board considered the benefits to shareholders of being part of the Hartford family of funds. The Board considered HL Advisors’ efforts to provide investors in the family with a broad range of investment styles and asset classes.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the Agreements for an additional year. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session on several occasions, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Approval of New Investment Management and Investment Sub-Advisory Agreements (Unaudited)
Section 15(c) of the 1940 Act requires that each mutual fund’s board of directors, including a majority of the Independent Directors approve the mutual fund’s investment advisory and sub-advisory agreements. In connection with a proposed corporate restructuring plan (the “Restructuring”), at its meeting held on November 8, 2012, the Board of Hartford Series Fund, Inc., including each of the Independent Directors, unanimously voted to terminate the existing Agreements for the Fund and approve a new investment management agreement for the Fund with Hartford Funds Management Company, LLC (“HFMC”), a newly formed registered investment adviser, and a new investment sub-advisory agreement between HFMC and the Fund’s existing Sub-adviser, Wellington Management Company, LLP (together with HFMC, the “Post-Restructuring Advisers”).
Prior to the November 8, 2012 meeting, the Board received and reviewed written materials regarding the Restructuring, which contemplated that HFMC replace HL Advisors as investment manager to the Fund. In order to implement the Restructuring, the Fund would terminate the existing Agreements and enter into a new investment management agreement with HFMC, with HFMC also entering into a new investment sub-advisory agreement with the Sub-adviser (collectively, the “New Agreements”).
The Board considered information furnished to the Board at its meetings throughout the year, as well as information specifically prepared in connection with the Restructuring and the approval of the New Agreements at the Board’s meeting held on November 8, 2012. Information provided to the Board at its meetings throughout the year included, among other things, reports on Fund performance, legal and compliance matters, sales and marketing activity, shareholder services, and the other services provided to the Fund by HL Advisors and the Sub-adviser and their affiliates. In addition, the Board received in-person presentations by Fund officers and representatives of HL Advisors and HFMC at the Board’s meeting on November 8, 2012 concerning the Restructuring and the New Agreements.
In determining to approve the New Agreements for the Fund, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate in light of the information that the Board deemed necessary and appropriate through the exercise of its reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the New Agreements was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the Restructuring and the approval of the New Agreements.
Specifically, the Board considered that the Restructuring is solely organizational in nature and is unrelated to the actual management of the Fund and the performance of investment management personnel to the Fund. The Board noted that, after the Restructuring, the investment management operations performed by HFMC will be functionally indistinguishable from those performed by HL Advisors prior to the Restructuring as the personnel primarily responsible for providing investment advisory or management services to the Fund prior to the Restructuring would continue to provide such services to the Fund, as employees of HFMC, immediately after the Restructuring. The Board also considered that the Restructuring and the New Agreements would involve no changes to (i) the contractual terms of, including the management fees payable under, the Fund’s investment management and investment sub-advisory agreements; (ii) the investment processes and strategies employed in the management of the Fund’s assets; (iii) the nature and level of services provided under the Fund’s investment management and investment sub-advisory agreements; and (iv) the day-to-day management of the Fund and the individuals primarily responsible for that management. The Board also noted that, although HFMC is a newly formed company, HFMC is expected to have sufficient capital to provide the services to the Fund.
The Board also considered HFMC’s Code of Ethics and Compliance Program and noted that there are no material changes as compared to the codes of ethics and compliance programs, respectively, currently in effect for the Fund.
Lastly, the Board considered that, because the Restructuring is unrelated to the actual management of the Fund, the investment management arrangement for the Fund following the Restructuring will be identical (but for the name of the entity providing investment management services) to the arrangement approved by the Board at its July-August 2012 meeting. In this regard, the Board noted that there have been no material changes with respect to the information provided to the Board in connection with the 2012 contract renewal process. Accordingly, the Board determined that the information it had considered with respect to the following factors in connection with the 2012 contract renewal process and its conclusions regarding those factors were applicable to its decision to approve the New Agreements: (i) nature, extent and quality of services provided by HL Advisors and the Sub-adviser; (ii) performance of the Fund, HL Advisors and the Sub-adviser; (iii) costs of the services and profitability of HL Advisors and the Sub-adviser; (iv) comparative services rendered and comparative investment management and sub-advisory fee rates and total expense ratios; and (v) the realization of economies of scale by HL Advisors and the Sub-adviser with respect to the Fund and whether the fee levels reflect these economies of scale for the benefit of the Fund’s shareholders. With respect to the other benefits to the Post-Restructuring Advisers and their affiliates from their relationships with the Fund, the Board noted that the Restructuring will not result in any material changes to such other benefits that were considered during the 2012 contract renewal process, except that, following the Restructuring, HFMC, and not Hartford Life Insurance Company, will receive fees for fund accounting and related services from the Fund.
* * * *
Based upon its review of these various factors, among others, the Board concluded that it is in the best interests of the Fund and its shareholders for the Board to approve the New Agreements. In reaching this decision, the Board did not assign relative weights to the factors discussed above or deem any one or group of them to be controlling in and of themselves. In connection with their deliberations, the Independent Directors met separately in executive session, with independent legal counsel, to review the relevant materials and consider their responsibilities under relevant laws and regulations.
Hartford Value HLS Fund
| Principal Risks (Unaudited) |
The principal risks of investing in the Fund are described below.
Market and Selection Risk: The Fund’s share price may fluctuate due to market risk and/or security selections that may underperform compared to the market or relevant benchmarks.
Value Investing Risk: Value investments are considered to be undervalued, but they may never attain their potential value. Value-style investing falls in and out of favor, which may result in periods of underperformance.
Foreign Investment Risk: Foreign investments can be riskier than U.S. investments. Potential risks include currency risk that may result from unfavorable exchange rates, liquidity risk if decreased demand for a security makes it difficult to sell at the desired price, and risks that stem from substantially lower trading volume on foreign markets.
HARTFORD HLS FUNDS c/o The Hartford Wealth Management - Global Annuities P.O. Box 14293 Lexington, KY 40512-4293 | |
Hartford Series Fund, Inc. is underwritten and distributed by Hartford Investment Financial Services, LLC.
“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Hartford Series Fund, Inc. inception dates range from 1977 to date. Hartford Series Fund, Inc. is not a subsidiary of The Hartford but is underwritten, distributed by and advised by subsidiaries of The Hartford. Investments in Hartford Series Fund, Inc. are not guaranteed by The Hartford or any other entity.
You should carefully consider investment objectives, risks, and charges and expenses of Hartford HLS Funds before investing. This and other information can be found in the Fund’s prospectus or summary prospectus, which can be obtained by calling 800-862-6668. Please read them carefully before you invest or send money.
HLSAR-V12 2-13 113557 Printed in U.S.A ©2012 The Hartford, Hartford, CT 06115 | |
Item 2. Code of Ethics.
Registrant has adopted a code of ethics that applies to Registrant’s principal executive officer, principal financial officer, and controller, which is attached as an exhibit.
Item 3. Audit Committee Financial Expert.
The Board of Directors of the Registrant has designated Phillip O. Peterson as an Audit Committee Financial Expert. Mr. Peterson is considered by the Board to be an independent director.
Item 4. Principal Accountant Fees and Services.
| (a) | Audit Fees: $412,850 for the fiscal year ended December 31, 2011; $430,041 for the fiscal year ended December 31, 2012. |
| (b) | Audit Related Fees: $35,515 for the fiscal year ended December 31, 2011; $13,567 for the fiscal year ended December 31, 2012. Audit-related services principally in connection with SEC Rule 17Ad-13 report. |
| (c) | Tax Fees: $85,500 for the fiscal year ended December 31, 2011; $85,500 for the fiscal year ended December 31, 2012. |
| (d) | All Other Fees: $0 for the fiscal year ended December 31, 2011; $0 for the fiscal year ended December 31, 2012. |
| (e) | (1) A copy of the Audit Committee’s pre-approval policies and procedures is attached as an exhibit. |
| (e) | (2) One hundred percent of the services described in items 4(b) through 4(d) were approved in accordance with the Audit Committee's Pre-Approval Policy. As a result, none of such services was approved pursuant to paragraph (c) (7) (i) (c) of Rule 2-01 of Regulation S-X. |
| (f) | None of the hours expended on the principal accountant's engagement to audit the Registrant's financial statements for the year ended December 31, 2012, were attributed to work performed by persons other than the principal accountant's full-time employees. |
| (g) | Non-Audit Fees: $1,331,880 for the fiscal year ended December 31, 2011; $2,267,351 for the fiscal year ended December 31, 2012. |
| (h) | The registrant's Audit Committee of the Board of Directors has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. |
Item 5. Audit Committee of Listed Registrants.
Not applicable to this Annual filing.
Item 6. Schedule of Investments
The Schedule of Investments is included as part of the Annual report filed under Item 1 of this form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of directors since registrant last provided disclosure in response to this requirement.
Item 11. Controls and Procedures.
| (a) | Based on an evaluation of the Registrant's Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report, the Disclosure Controls and Procedures are effectively designed to ensure that information required to be disclosed by the Registrant is recorded, processed, summarized and reported by the date of this report, including ensuring that information required to be disclosed in the report is accumulated and communicated to the Registrant's management, including the Registrant's officers, as appropriate, to allow timely decisions regarding required disclosure. |
| (b) | There was no change in the Registrant's internal control over financial reporting that occurred during the Registrant’s last fiscal half year that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Exhibits.
11(a) (2) Section 302 certifications of the principal executive officer and principal financial officer of Registrant.
(b) Section 906 certification.
12(a)(1) Code of Ethics
12(a)(2) Audit Committee Pre-Approved Policies and Procedures
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | HARTFORD SERIES FUND, INC. |
| | | |
| Date: February 11, 2013 | By: | /s/ James E. Davey |
| | | James E. Davey |
| | | Its: President |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Date: February 11, 2013 | By: | /s/ James E. Davey |
| | | James E. Davey |
| | | Its: President |
| | | |
| | | |
| Date: February 11, 2013 | By: | /s/ Mark. A. Annoni |
| | | Mark A. Annoni |
| | | Its: Vice President, Controller and Treasurer |
EXHIBIT LIST
| 99.CERT | 11(a)(2) | Certifications |
| | | |
| | | (i) Section 302 certification of principal executive officer |
| | | |
| | | (ii) Section 302 certification of principal financial officer |
| | | |
| 99.906CERT | 11(b) | Section 906 certification of principal executive officer and principal financial officer |
| | | |
| | | 12(a)(1) Code of Ethics |
| | | |
| | | 12(a)(2) Audit Committee Pre-Approved Policies and Procedures |
