UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. _____________)
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The Hartford Mutual Funds, Inc.
(Name of Registrant as Specified in Its Charter)
_____________________________________________________________________
(Name of Person(s) Filing Proxy Statement if Other than the Registrant)
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MARCH 10, 2006
THE HARTFORD SMALL COMPANY FUND
THE HARTFORD MUTUAL FUNDS, INC.,
ON BEHALF OF
THE HARTFORD SMALL COMPANY FUND
MARCH [__], 2006
THE HARTFORD SMALL COMPANY FUND
Dear Shareholders:
You are cordially invited to attend a Special Meeting of Shareholders (the
"Meeting") of The Hartford Small Company Fund (the "Fund"), a series of The
Hartford Mutual Funds, Inc. (the "Company"). The Meeting will take place on May
23, 2006 at 10:00 a.m. Eastern Time at the offices of Hartford Investment
Financial Services, LLC ("HIFSCO"), 200 Hopmeadow Street, Simsbury, Connecticut
06089.
At the Meeting, shareholders will be asked to vote on the matters listed in the
attached Notice of Special Meeting of Shareholders. As explained in the enclosed
Proxy Statement, the purpose of the Meeting is (i) to vote on the approval of a
sub-advisory agreement between HIFSCO, the Fund's investment manager, and
Hartford Investment Management Company ("Hartford Investment Management"), an
affiliate of HIFSCO, pursuant to which Hartford Investment Management will serve
as an additional sub-adviser to the Fund and manage a portion of the Fund's
assets; and (ii) to transact such other business as may properly come before the
Meeting, or any adjournment(s) or postponement(s) thereof.
The Company's Board of Directors has reviewed and approved this proposal and
recommends that you vote FOR the proposal. The Proxy Statement provides more
information on the proposed sub-advisory agreement. Please read it carefully,
complete the enclosed proxy card, and return your completed proxy card in the
enclosed, addressed, postage-paid envelope; or take advantage of the telephonic
or internet voting procedures described in the Proxy Statement. YOUR VOTE IS
IMPORTANT. If we do not hear from you after a reasonable period of time, you may
receive a telephone call from a representative of The Hartford Financial
Services Group, Inc. ("The Hartford") or from our proxy solicitor, MIS, an ADP
Company, reminding you to vote your shares.
Very truly yours,
/s/ David M. Znamierowski
- -------------------------------------
David M. Znamierowski
President and Chief Executive Officer
IMPORTANT INFORMATION
We encourage you to read the enclosed Proxy Statement. However, we thought it
would be helpful to provide brief answers to some questions.
Q. WHAT PROPOSALS ARE SHAREHOLDERS BEING ASKED TO CONSIDER AT THE UPCOMING
SPECIAL MEETING?
A. Shareholders of The Hartford Small Company Fund (the "Fund"), a series of The
Hartford Mutual Funds, Inc. (the "Company"), are being asked to consider one
proposal (the "Proposal"): to approve a proposed sub-advisory agreement (the
"Agreement") between Hartford Investment Financial Services, LLC ("HIFSCO"), the
Fund's investment manager, and Hartford Investment Management Company ("Hartford
Investment Management"), an affiliate of HIFSCO, pursuant to which Hartford
Investment Management will serve as an additional sub-adviser to the Fund and
manage a portion of the Fund's assets. Wellington Management Company, LLP
("Wellington Management"), the Fund's current sole sub-adviser, will continue to
manage a portion of the Fund's assets.
Q. HOW WILL ADDING HARTFORD INVESTMENT MANAGEMENT AS A NEW SUB-ADVISER BENEFIT
THE FUND AND ITS SHAREHOLDERS?
A. Wellington Management, which currently serves as the Fund's sole sub-adviser,
has limited capacity to manage additional assets in the small cap growth
strategy. As a result, with limited exceptions, the Fund no longer offers its
Class A, Class B or Class C shares for investment to the public, including to
the Fund's existing shareholders. Adding an additional sub-adviser to the Fund
would permit the Fund to re-open its Class A, Class B and Class C shares to new
investments.
The appointment of a new sub-adviser and anticipated increase in the Fund's
asset size resulting from sales of Class A, Class B and Class C shares of the
Fund are expected to benefit Fund shareholders by: (1) providing existing
holders of Class A, Class B, and Class C shares with renewed access to the
highly demanded small-cap growth asset class within a fund and operational
structure with which they are already familiar; (2) providing access to a
talented and experienced portfolio manager with a complementary investment style
to the current sub-adviser while achieving greater diversification; and (3)
offering the opportunity to achieve lower expenses through a lower management
fee schedule at certain asset levels.
Q. WHY ARE SHAREHOLDERS BEING ASKED TO APPROVE A NEW SUB-ADVISORY AGREEMENT WITH
HARTFORD INVESTMENT MANAGEMENT COMPANY?
A. The laws governing mutual funds require a Fund to obtain shareholder approval
before entering into a new advisory or sub-advisory agreement. The Fund operates
pursuant to an order from the U.S. Securities and Exchange Commission ("SEC")
that permits its investment manager to implement new investment sub-advisory
agreements with sub-advisers for the Fund that are not affiliated with the
investment manager with the approval of the Fund's Board of Directors but
without shareholder approval (the "Order"). Under the Order, the investment
manager may not enter into a sub-advisory agreement with a sub-adviser that is
an "affiliated person," as defined in the Investment Company Act of 1940, as
amended, of the Fund or the investment manager without that sub-advisory
agreement being approved by Fund shareholders. Because Hartford Investment
Management is affiliated with HIFSCO, shareholder approval of the proposed
sub-advisory agreement is required.
Q. WILL THE FUND'S INVESTMENT GOAL CHANGE IF THE PROPOSAL IS APPROVED?
A. No. The Fund's investment goal of seeking growth of capital, as well as its
policy of investing primarily in small capitalization companies, will remain the
same. However, Hartford Investment Management may use different strategies to
achieve this goal than Wellington Management currently uses.
With Hartford Investment Management's appointment to manage a portion of the
Fund's portfolio, the Fund's investment strategy overall will reflect a blend of
Hartford Investment Management's and Wellington Management's investment
approaches, with each sub-adviser responsible for the assets allocated to it by
HIFSCO. Please refer to the enclosed Proxy Statement for information regarding
Hartford Investment Management's investment approach and how it complements
Wellington Management's investment approach.
Q. WILL THE PROPOSAL RESULT IN HIGHER FUND EXPENSES?
A. No. The Proposal will not increase Fund expenses. Pursuant to the Agreement,
HIFSCO, and not the Fund, will pay the sub-advisory fees charged by Hartford
Investment Management. If the Proposal is approved, HIFSCO has agreed to reduce
the Fund's investment advisory fee schedule by adding breakpoints at certain
asset levels while the Fund's other fees will remain the same. Please refer to
the Proxy Statement for further information on the reductions to the
investment advisory fee schedule.
Q. HAS THE BOARD OF DIRECTORS APPROVED THE PROPOSAL?
A. Yes. The Board of Directors has reviewed and approved the Proposal, and
recommends that you vote FOR the Proposal.
Q. HOW CAN I VOTE?
A. You can vote:
- By mail: complete and return your proxy card in the addressed
envelope.
- By telephone, call the toll-free number listed on your proxy card
and follow the recorded instructions.
- By internet: log on to the website listed on your proxy card and
follow the on-screen instructions.
Whichever method you choose, please take the time to read the Proxy
Statement before you vote.
Q. WHEN SHOULD I VOTE?
A. Please vote as soon as possible. Representatives of The Hartford or MIS, an
ADP Company, a firm authorized by The Hartford to assist in the solicitation of
proxies, may be contacting you to urge you to vote on this important matter.
Q. WHERE CAN I OBTAIN ADDITIONAL INFORMATION ABOUT THIS PROXY STATEMENT?
A. For information about voting, please call toll-free 1-877-333-2297.
To view The Hartford Mutual Funds' 2005 Annual Report or a copy of this
Proxy Statement, or to obtain additional information about the Proxy Statement:
Please go to www.hartfordinvestor.com and select "Newsroom" at the bottom
of the page. Next, select "Annual Reports/Proxy Statements" on the left side of
the new page.
Or call 1-888-843-7824 to request a copy.
THE ATTACHED PROXY STATEMENT CONTAINS MORE DETAILED INFORMATION ABOUT THE
PROPOSAL. PLEASE READ IT CAREFULLY
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
A Special Meeting of Shareholders (the "Meeting") of The Hartford Small
Company Fund (the "Fund") a series of The Hartford Mutual Funds, Inc. (the
"Company"), will take place on May 23, 2006 at 10:00 a.m. Eastern Time at the
offices of Hartford Investment Financial Services, LLC ("HIFSCO"), 200 Hopmeadow
Street, Simsbury, Connecticut 06089 for the following purposes:
1. To approve a sub-advisory agreement between HIFSCO, the Fund's
investment manager, and Hartford Investment Management Company
("Hartford Investment Management"), an affiliate of HIFSCO, pursuant
to which Hartford Investment Management will serve as an additional
sub-adviser of the Fund and manage a portion of the Fund's assets; and
2. To transact such other additional matters as may properly come before
the Meeting.
The Board of Directors of the Company recommends that you vote FOR the
proposal listed in this notice. Shareholders of record on March 1, 2006 are
entitled to notice of and to vote at the Meeting.
Please read the enclosed Proxy Statement carefully for information
concerning the proposal to be placed before the Meeting or any adjournments or
postponements thereof. Additional matters would include only matters that were
not anticipated as of the date of the enclosed Proxy Statement.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE
MEETING, PLEASE FILL IN, SIGN, DATE, AND MAIL THE ENCLOSED PROXY CARD AS
PROMPTLY AS POSSIBLE, OR TAKE ADVANTAGE OF THE TELEPHONIC OR INTERNET VOTING
PROCEDURES DESCRIBED IN THE PROXY STATEMENT, IN ORDER TO SAVE ANY FURTHER
SOLICITATION EXPENSE. AN ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED.
By order of the Board of Directors,
/s/
----------------------------------------
Edward P. Macdonald
Secretary
Dated: March [_], 2006
THE HARTFORD MUTUAL FUNDS, INC.
500 BIELENBERG DRIVE
WOODBURY, MINNESOTA 55125-4401
THE HARTFORD SMALL COMPANY FUND
(THE "FUND")
PROXY STATEMENT
MARCH [__], 2006
The enclosed proxy card is solicited by the Board of Directors (the
"Board") of The Hartford Mutual Funds, Inc. (the "Company"), in connection with
the Special Meeting of Shareholders of The Hartford Small Company Fund (the
"Fund"), to be held May 23, 2006, at 10:00 a.m., Eastern Time, at the offices of
Hartford Investment Financial Services, LLC ("HIFSCO"), 200 Hopmeadow Street,
Simsbury, Connecticut 06089, and at any adjournment(s) or postponement(s) of the
Meeting.
The costs of solicitation, including the cost of preparing and mailing the
Notice of the Special Meeting of Shareholders and this Proxy Statement, will be
paid by HIFSCO, the Fund's investment manager. The approximate mailing date of
this Proxy Statement is March 27, 2006. Representatives of The Hartford
Financial Services Group, Inc. ("The Hartford") or MIS, an ADP Company ("MIS"),
a firm authorized by The Hartford to assist in the solicitation of proxies, may
contact you to solicit your proxy by mail or by telephone. As the meeting date
approaches, shareholders of the Fund may receive a telephone call from a
representative of MIS if their votes have not yet been received. Proxies that
are obtained telephonically will be recorded in accordance with the procedures
described below. These procedures are reasonably designed to ensure that both
the identity of the shareholder casting the vote and the voting instructions of
the shareholder are accurately determined.
HIFSCO serves as the Fund's investment manager and the Company's
administrator and principal underwriter. HIFSCO is principally located at 200
Hopmeadow Street, Simsbury, Connecticut 06089.
Shareholders may revoke authority to vote their shares by giving written
notice of revocation to the Secretary of the Company. Unless revoked, properly
executed proxy cards that have been returned by shareholders without
instructions will be voted "FOR" the proposal to approve a sub-advisory
agreement between HIFSCO and Hartford Investment Management Company ("Hartford
Investment Management") pursuant to which Hartford Investment Management will
serve as an additional sub-adviser of the Fund and manage a portion of the
Fund's assets (the "Proposal"). In instances where choices are specified by the
shareholders in the proxy card, those shareholders' votes will be voted or the
votes will be withheld in accordance with the shareholders' choices. Votes can
be cast to approve or disapprove the Proposal. Abstentions and broker non-votes
(proxy cards received by the Company from brokers or nominees when the broker or
nominee has not received instructions from the beneficial owner or other persons
entitled to vote and has no discretion to vote on a particular matter) will be
counted as present for purposes of determining whether a quorum of shares is
present at the Meeting, and will have the same effect as a vote "AGAINST" the
Proposal. So far as the Board is aware, no matters other than those described in
this Proxy Statement will be acted upon at the Meeting. Should any other matters
properly come before the Meeting calling for a vote of shareholders, the persons
named as proxies intend to vote upon such matters according to their best
judgment.
Shareholders may vote by completing and returning the enclosed proxy card.
Shareholders may also vote by touchtone telephone or by internet by following
the instructions on the proxy card. To vote by internet or by telephone,
shareholders will need the "control number" that appears on the proxy card.
After inputting this number, shareholders will be prompted to provide their
voting instructions on the Proposal.
Shareholders will have an opportunity to review the voting instructions and make
any necessary changes before submitting the voting instructions and terminating
the telephone call or internet link.
In all cases where a telephonic proxy is solicited by MIS, the MIS
representative is required to ask for each shareholder's full name and address,
or the ZIP code or employer identification number, and to confirm that the
shareholder has received the proxy materials in the mail. If the shareholder is
a corporation or other entity, the MIS representative is required to ask for the
person's title and for confirmation that the person is authorized to direct the
voting of the shares. If the information solicited agrees with the information
previously provided to the MIS representative, then the MIS representative will
explain the proxy voting process, read the Proposal listed on the proxy card and
ask for the shareholder's instructions on the Proposal. Although the MIS
representative is permitted to answer questions about the process, he or she is
not permitted to recommend to the shareholder how to vote, other than to
read any recommendation set forth in this Proxy Statement. The MIS
representative will record the shareholder's instructions on the card. Within 72
hours, the shareholder will be sent a letter or mailgram to confirm his or her
vote and asking the shareholder to call the MIS immediately if his or her
instructions are not correctly reflected in the confirmation.
Although a shareholder's vote may be solicited and taken by telephone, each
shareholder will also receive a copy of this Proxy Statement and may vote by
mail using the enclosed proxy card or by touchtone telephone or the internet as
set forth on the proxy card. The last proxy vote received in time to be voted,
whether by proxy card, touchtone telephone or internet, will be the vote that is
counted and will revoke all previous votes by the shareholder.
Only those shareholders owning shares as of the close of business on March
1, 2006 (the "Record Date") may vote at the Meeting or any adjournment(s) or
postponement(s) of the Meeting. Appendix A sets forth the issued and
outstanding shares of the Fund as of the Record Date. Each shareholder is
entitled to one vote for each share held. As a shareholder, you will not have
appraisal rights in connection with the Proposal described in this Proxy
Statement.
The presence, either in person or by proxy, of shareholders owning a
majority of shares of the Fund entitled to vote at the Meeting shall constitute
a quorum. If a quorum is not present at the Meeting, or if a quorum is present
but sufficient votes to approve any proposal are not received, the persons named
as proxies may propose one or more adjournments of the Meeting to permit further
solicitation of votes. In determining whether to adjourn the Meeting, the
following factors may be considered: the nature of the proposals that are the
subject of the Meeting, the percentage of votes actually cast, the percentage of
negative votes actually cast, the nature of any further solicitation, and the
information to be provided to shareholders with respect to the reasons for the
solicitation. Any adjournment will require the affirmative vote of a majority of
those shares represented at the Meeting in person or by proxy. If the Proposal
receives a sufficient number of votes for approval prior to any adjournment, the
Proposal shall be deemed adopted and shall not require any further shareholder
approval at any adjournment or otherwise.
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PROPOSAL
APPROVAL OF A SUB-ADVISORY
AGREEMENT WITH HARTFORD INVESTMENT MANAGEMENT COMPANY
GENERAL OVERVIEW
The Board is proposing that shareholders approve, with respect to The
Hartford Small Company Fund ("the Fund"), a sub-advisory agreement between
Hartford Investment Financial Services, LLC ("HIFSCO") and Hartford Investment
Management Company ("Hartford Investment Management") (the "Agreement"),
pursuant to which Hartford Investment Management will serve as an additional
sub-adviser to the Fund and will provide investment sub-advisory services to the
Fund with respect to a portion of the Fund's assets(1).
HIFSCO serves as the Fund's investment manager pursuant to an investment
management agreement between HIFSCO and the Company on behalf of the Fund.
Pursuant to the investment management agreement, HIFSCO establishes the Fund's
investment program and selects, supervises and evaluates the sub-adviser or
sub-advisers who, in turn, make the Fund's investment decisions, subject to the
oversight of the Fund's Board. HIFSCO recommends sub-advisers it believes will
provide the Fund with high quality investment services consistent with the
Fund's objective of investing primarily in common stocks of small capitalization
companies with potential for capital appreciation. HIFSCO is also responsible
for the overall monitoring of the Fund's sub-adviser(s). HIFSCO does not make
the day-to-day investment management decisions for the Fund.
Wellington Management Company LLP ("Wellington Management"), currently
serves as the Fund's sole sub-adviser. Wellington Management is not affiliated
with HIFSCO and discharges its responsibilities subject to HIFSCO's oversight
and supervision. Wellington Management is paid by HIFSCO, and not by the Fund,
from the investment management fees HIFSCO receives from the Fund.
Wellington Management has limited capacity to manage additional assets in
the small cap growth strategy. As a result, the Fund closed its Class A, Class
B, and Class C shares to most new investments, including investments by existing
holders of these classes. Accordingly, since August 16, 2004, the Fund has not
offered Class A, Class B or Class C shares, except: (1) through systematic
investment facilities to investors who established plans to invest through such
facilities prior to August 16, 2004; (2) for reinvestment of capital gains
distributions and income dividends; and (3) to certain qualified retirement
plans that included (or offered) the Fund as an investment option prior to
August 16, 2004. The Fund's Class Y (institutional) shares remain open for
investment.
After an extensive review of the current market demands for the small-cap
growth asset class and the limited access to good managers in the small-cap
growth field, HIFSCO recommended that the Board approve the engagement of
Hartford Investment Management to serve as an additional sub-adviser to the Fund
and the re-opening of the Fund's Class A, Class B, and Class C shares for
investment contingent upon shareholder approval of the Agreement. In making
these recommendations, HIFSCO believes that re-opening of the Fund's Class A,
Class B and Class C shares to new investors will benefit Fund shareholders by:
(1) providing existing shareholders of these classes with renewed access to the
highly demanded small-
- ----------
(1) Hartford Investment Management currently serves as sub-adviser to several
other funds advised by HIFSCO pursuant to the same Agreement. Pursuant to
its terms, and subject to approval by the relevant fund shareholders, the
Agreement may be modified from time to time to apply to additional funds
for which Hartford Investment Management will serve as sub-adviser. If the
Agreement is approved on behalf of the Fund by the Fund's shareholders,
HIFSCO and Hartford Investment Management will amend the Agreement to
extend it to the Fund.
3
cap growth asset class within a fund and operational structure with which they
are already familiar; (2) providing access to a talented and experienced
portfolio manager with a complementary investment style to the current
sub-adviser while achieving greater diversification; and (3) offering the
opportunity to achieve lower expenses through a lower management fee schedule.
HIFSCO made this recommendation to appoint Hartford Investment Management as an
additional sub-adviser to the Fund based on its confidence in Hartford
Investment Management and in the investment expertise of the portfolio
management team that will manage the Fund.
The Board, including a majority of those Directors who are not "interested
persons" of the Fund (as that term is defined in the Investment Company Act of
1940, as amended, (the "1940 Act")), the Company or the investment manager
("Independent Directors"), approved HIFSCO's proposal to enter into the
Agreement. The Agreement is subject to approval by the Funds' shareholders. More
information about the Board's considerations is set forth below.
The 1940 Act requires a fund to obtain shareholder approval of any
investment advisory or investment sub-advisory agreement. The Company has
received, and shareholders have approved reliance upon, an exemptive order from
the U.S. Securities and Exchange Commission that permits HIFSCO to implement new
investment sub-advisory agreements with sub-advisers for the Fund and to make
changes to existing investment sub-advisory agreements with the approval of the
Board but without shareholder approval (the "Order"), as long as the sub-adviser
is not an affiliate of HIFSCO. The Order does not eliminate the shareholder
approval requirement where HIFSCO hires an affiliated person to serve as
sub-adviser to the Fund. Since Hartford Investment Management is a subsidiary
of The Hartford Financial Services Group, Inc. ("The Hartford"), which also
controls HIFSCO, Hartford Investment Management is affiliated with HIFSCO.
Therefore, shareholder approval of the proposed Agreement, which is described
more fully below, is required.
DESCRIPTION OF THE AGREEMENT
The following discussion of the terms of the Agreement is qualified in its
entirety by reference to the Agreement, a form of which is attached hereto as
Appendix B.
Under the Agreement, Hartford Investment Management would serve as
sub-adviser and provide investment sub-advisory services to the Fund with
respect to a portion of the Fund's portfolio. Wellington Management would
continue to serve as a sub-adviser to the Fund with respect to a portion of the
Fund's portfolio. HIFSCO's responsibilities as the Fund's investment manager
would generally remain unchanged. HIFSCO will continue to be responsible for
overseeing and reviewing the performance of the Fund's sub-advisers and will be
responsible for allocating the Fund's assets between the sub-advisers.
If the Proposal is approved, and as set forth in the Agreement, Hartford
Investment Management will perform investment management services with respect
to a portion of the Fund's assets in conformity with the Company's Articles of
Incorporation and By-Laws, each as amended from time to time, the 1940 Act and
other applicable laws. The Agreement will require Hartford Investment Management
to provide advisory services in accordance with the investment objectives,
policies and restrictions of the Fund as set forth in the Fund's prospectus and
statement of additional information, and in accordance with any investment
guidelines or other instructions received in writing from HIFSCO, and subject
further to such policies and instructions as the Board or HIFSCO may from time
to time establish and deliver to Hartford Investment Management.
The Agreement will provide that, with respect to that portion of the
portfolio allocated to Hartford Investment Management, Hartford Investment
Management, in consultation with HIFSCO as appropriate, will make all
determinations with respect to the investment of Fund assets and the purchase or
sale of
4
portfolio securities. The Agreement requires Hartford Investment Management to
report to the Board at its regular periodic meetings. These reports would cover
Hartford Investment Management's economic outlook and investment strategy and a
discussion of the portfolio activity and the performance of that portion of the
Fund allocated to Hartford Investment Management. Copies of all such reports
would be furnished to HIFSCO for examination and review within a reasonable time
prior to the presentation of such reports to the Company's Board.
Consistent with the terms of the Agreement, Hartford Investment Management
would be permitted, in its discretion, to select broker-dealers that would
execute the purchases and sales of portfolio securities for the Fund. In
selecting broker-dealers, Hartford Investment Management would be required to
use its best efforts to obtain the best net security price available for the
Fund. Additionally, subject to and in accordance with any directions that the
Board may issue from time to time, Hartford Investment Management may also be
authorized to effect individual securities transactions at commission rates in
excess of the minimum commission rates available, if Hartford Investment
Management determines in good faith that such amount of commission is reasonable
in relation to the value of the brokerage or research services provided by such
broker or dealer, viewed in terms of either that particular transaction or
\Hartford Investment Management's overall responsibilities with respect to the
Fund and Hartford Investment Management's other advisory clients. Hartford
Investment Management will promptly communicate to the Board such information
relating to portfolio transactions as it may reasonably request.
The Agreement will not prevent Hartford Investment Management from acting
as investment manager or manager for any other investment companies or other
clients, whether or not the investment objectives or policies of any such other
clients are similar to those of the Fund, provided that the provision of such
services to those other clients does not impair Hartford Investment Management's
ability to provide services to the Fund under the Agreement.
The Agreement will provide that, as compensation for the performance of the
services by Hartford Investment Management, HIFSCO shall, as promptly as
possible after the last day of each calendar quarter, pay Hartford
Investment Management the equivalent of all direct and indirect expenses
incurred in the performance of its duties under this Agreement. This will be
Hartford Investment Management's sole compensation for sub-advisory services
provided to the Fund. Hartford Investment Management will not be entitled to a
fee calculated on the basis of the Fund's average daily net assets.
Pursuant to the Agreement, Hartford Investment Management will not be
liable for any loss or losses suffered by the Fund by reason of any investment
made by Hartford Investment Management in the performance of its duties under
the Agreement, except for those losses resulting from (i) willful misfeasance,
bad faith or gross negligence on Hartford Investment Management's part in the
performance of its duties or (ii) reckless disregard by Hartford Investment
Management of its obligations under the Agreement.
Subject to shareholder approval, the Agreement will take effect on or about
May 31, 2006. The Agreement will provide that it will remain in effect for its
initial term and will continue thereafter from year to year, if the Board or a
majority of the outstanding voting securities of the Fund, in either case with
the support of a majority of the Independent Directors, specifically approves
its continuance at least annually. The Agreement will provide that it can be
terminated at any time, without the payment of any penalty, by the Board, by a
majority of the Fund's outstanding voting securities, or by HIFSCO, on sixty
days' written notice to Hartford Investment Management. The Agreement would also
be terminable by Hartford Investment Management on sixty days' written notice to
HIFSCO, but such termination would not be effective until (i) HIFSCO shall have
contracted with one or more persons to serve as a successor to Hartford
Investment Management in its role as sub-adviser to the Fund and (ii) those
person(s) have assumed that position. The Agreement will terminate automatically
in the event of its assignment or in the
5
event of an assignment or termination, for any reason, of the investment
management agreement between HIFSCO and the Company.
The form of the Agreement is attached as Appendix B to this Proxy
Statement. The above description of the terms of the Agreement is qualified in
its entirety by reference to Appendix B.
INFORMATION ABOUT HARTFORD INVESTMENT MANAGEMENT COMPANY
Hartford Investment Management, a Delaware corporation with its main
offices located at 55 Farmington Avenue, Hartford, Connecticut 06105, is a
professional money management firm that provides services to investment
companies, employee benefit plans, its affiliated insurance companies and other
institutional accounts. Hartford Investment Management is a wholly owned
subsidiary of The Hartford, which is located at Hartford Plaza, 690 Asylum
Avenue, Hartford, Connecticut 06115. As of December 31, 2005, Hartford
Investment Management had investment management authority over approximately
$116 billion in assets. As of December 31, 2005, Hartford Investment Management
provided sub-advisory services for mutual funds advised by HIFSCO or its
affiliate with assets of approximately $13 billion, representing 20 fixed
income and one passively managed equity index fund.
Currently, Hartford Investment Management is primarily a fixed income
manager, although it also engages in passive equity index management and asset
allocation for certain Hartford-sponsored mutual funds. In 2005, recognizing
capacity constraints in various significant actively managed equity classes,
which could negatively affect HIFSCO's ability to find qualified
sub-advisers with sufficient capacity for the Hartford-sponsored mutual funds,
Hartford Investment Management undertook to develop an active equity management
capability. After an extensive search, Hartford Investment Management hired Mark
Waterhouse, who will be the portfolio manager for Hartford Investment
Management's portion of the Fund's assets. Mr. Waterhouse previously served as a
portfolio manager for the Fund from June 1997 through December 31, 1999 as an
employee of Wellington Management, which has served as the sole sub-adviser to
the Fund since its inception. From January 2000 through October 2000, Mr.
Waterhouse was a partner and Chief Investment Officer of Thomas Weisel Asset
Management. From February 2001 until March 2003, Mr. Waterhouse was a Managing
Director for Moore Capital Management LLC. Prior to joining Hartford Investment
Management, Mr. Waterhouse was the Chief Investment Officer of ThinkEquity
Capital LLC. Mr. Waterhouse received a B.S. in Finance from Boston College in
1984 and an M.B.A. from the Wharton School of Finance, University of
Pennsylvania, in 1988.
Hartford Investment Management and Mr. Waterhouse have assembled a team of
research analysts and other investment personnel to support its active equity
management function. Hartford Investment Management will conduct its equity
investment management activities by assigning sector teams. Each sector team
consists of experienced portfolio management, research, trading and risk
management professionals. Sector teams have in-depth knowledge in all aspects of
their market sector and are committed to traditional fundamental research and
sophisticated quantitative analysis.
During the Fund's last fiscal year, Hartford Investment Management did not
receive any fees, commissions or other payments from the Fund. Appendix C to
this Proxy Statement sets forth information regarding the principal executive
officers and directors of Hartford Investment Management. As of December 31,
2005, Hartford Investment Management does not advise other investment
companies that have investment objectives similar to the investment objectives
of the Fund.
David M. Znamierowski currently serves as President of Hartford Investment
Management. Mr. Znamierowski is also the President and Chief Executive Officer
of the Company and has been a director of the Company since 1999. No other
officer or director of the Fund is currently an officer, employee, director or
shareholder of Hartford Investment Management. Mr. Znamierowski, Thomas Marra
and Lowndes
6
Smith, the interested directors of the Fund and each of the Fund's officers,
each have an equity ownership interest in The Hartford, the parent company of
Hartford Investment Management.
MORE INFORMATION ABOUT ANTICIPATED BENEFITS TO THE FUND
If shareholders approve the Proposal, the Fund will be a "multi-managed"
fund and Wellington Management and Hartford Investment Company will each manage
a portion of the assets of the Fund, as determined by HIFSCO with oversight by
the Fund's Board of Directors. The addition of Hartford Investment Management as
a sub-adviser will permit the Fund to sell additional Class A, Class B and Class
C shares, which is expected to bring new assets into the Fund.
Wellington Management will continue to manage its portion of the Fund's
assets in accordance with its current investment objectives, policies and
strategies, as described in the Fund's current prospectus. Like Wellington
Management, Hartford Investment Management will seek growth of capital as its
investment goal, through investing primarily in small capitalization companies,
and will evaluate securities using what is sometimes referred to as a
"bottom-up" approach (the use of fundamental analysis to identify specific
securities for purchase or sale) However, Hartford Investment Management will do
so with an investment strategy that complements Wellington Management's
investment strategy. It is anticipated that Hartford Investment Management will
focus on small capitalization companies with a lower average market
capitalization than Wellington, using a team of investment professionals who may
invest in different securities than Wellington, leading to a more diverse
portfolio of investments. Accordingly, the Fund's performance will reflect a
blend of Wellington Management's and Hartford Investment Management's investment
strategies and performance, in proportion to the assets that HL Advisors
allocates to each of them.
In connection with the Proposal to add Hartford Investment Management as a
sub-adviser to the Fund, HIFSCO has agreed to a new management fee schedule,
which provides reductions in the management fees the Fund will pay at certain
asset levels. The current and proposed fee schedules are set forth below under
"Fees and Expenses."
BOARD OF DIRECTORS' CONSIDERATIONS
Based upon its review of various factors, the Board, including each of the
Independent Directors, concluded that it is in the best interest of the Fund and
its shareholders to approve the subadvisory agreement with Hartford Investment
Management. Appendix D to this Proxy Statement contains a description of the
material factors and conclusions with respect thereto which form the basis of
the Board's recommendation that shareholders approve the Agreement with
Hartford Investment Management.
REQUIRED VOTE
Approval of the Agreement by the Fund's shareholders requires
an affirmative vote of the lesser of (i) 67% or more of the Fund's shares
present at the Meeting, if more than 50% of the outstanding shares of the Fund
are present or represented by proxy, or (ii) more than 50% of the outstanding
shares of the Fund.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL.
7
OTHER MATTERS
Management does not intend to present any business to the Meeting not
mentioned in this Proxy Statement and currently knows of no other business to be
presented. If any other matters are brought before the Meeting, the persons
named as proxies will vote on such matters in accordance with their judgment of
the best interests of the Company.
BENEFICIAL OWNERS
As of January 31, 2006, all directors and officers as a group owned less
than 1% of the outstanding shares of each class of the Fund's shares. As of
March 1, 2006, to the knowledge of the Company, no person owned beneficially
more than 5% of the outstanding shares of any class of shares of the Fund,
except as listed in Appendix E.
As of March 1, 2006, none of the Independent Directors (or their immediate
family members) had share ownership in securities of the Company's investment
manager or principal underwriter or in an entity controlling, controlled by or
under common control with the investment manager or principal underwriter (not
including registered investment companies).
FEES AND EXPENSES
Currently, the Fund pays HIFSCO an investment advisory fee at the following
annual rates (calculated as a percentage of the Fund's average daily net
assets):
AVERAGE DAILY NET ASSETS ANNUAL RATE
- ------------------------ -----------
First $500 million 0.85%
Next $500 million 0.75%
Amount Over $1 billion 0.70%
If the sub-advisory agreement with Hartford Investment Management is
approved, HIFSCO has agreed to reduce its investment advisory fee in accordance
with the following schedule:
AVERAGE DAILY NET ASSETS ANNUAL RATE
- ------------------------ -----------
First $250 million 0.85%
Next $250 million 0.80%
Next $500 million 0.75%
Next $500 million 0.70%
Amount Over $1.5 billion 0.65%
As of February 28, 2006, net assets in the Fund were $371,478,133.08.
HIFSCO will pay all expenses relating to this Notice and Proxy Statement
and the Meeting, including the printing, mailing, solicitation and vote
tabulation expenses and out-of-pocket expenses.
Hartford Administrative Services Company ("HASCO"), an affiliate of
Hartford Investment Management, performs transfer agency services for the Fund.
As transfer agent, HASCO receives and processes purchase and redemption orders,
effects transfers of shares, prepares and transmits payments of dividends and
distributions, and maintains records of accounts. HASCO will continue to serve
as transfer agent of the Fund whether or not Fund shareholders approve the
sub-advisory agreement with Hartford Investment Management. For the fiscal year
ended October 31, 2005, the Fund paid HASCO a total of $994,975.00 for transfer
agency services.
8
Hartford Life Insurance Company ("Hartford Life"), an affiliate of Hartford
Investment Management, provides fund accounting services to the Fund. Hartford
Life will continue to provide fund accounting services to the Fund whether or
not Fund shareholders approve the Agreement with Hartford Investment Management.
For the fiscal year ended October 31, 2005, the Fund paid Hartford Life a total
of $59,719.36 for fund accounting services rendered and expenses assumed.
HIFSCO, an affiliate of Hartford Investment Management, provides investment
advisory services to the Fund. HIFSCO will continue to provide advisory services
to the Fund whether or not Fund shareholders approve the Agreement with Hartford
Investment Management. For the fiscal year ended October 31, 2005, the Fund paid
HIFSCO a total of $2,538,289.20 for advisory services.
In addition, HIFSCO serves as the Fund's principal underwriter and receives
12b-1 fees from the Fund. HIFSCO will continue to serve as the principal
underwriter of the Fund whether or not Fund shareholders approve the
Agreement with Hartford Investment Management. For the fiscal year ended
October 31, 2005, the Fund paid HIFSCO a total of $1,446,661.46 in 12b-1 fees.
SHAREHOLDER MAILINGS
To help lower the impact of operating costs, the Fund attempts to eliminate
mailing duplicate documents to the same address. When two or more Fund
shareholders have the same last name and address, the Fund may send only one
prospectus, annual report, semiannual report, general information statement or
proxy to that address, rather than mailing separate documents to each
shareholder. Shareholders may opt out of this single mailing at any time by
calling the Fund at 1-888-843-7824 or writing to the Fund at The Hartford Mutual
Funds, P.O. Box 64387 St. Paul, Minnesota 55164-0387, and requesting additional
copies of Fund documents. Shareholders sharing a single mailing address who are
currently receiving multiple copies of Fund documents can request delivery of a
single copy instead by calling the same telephone number or writing to the same
address.
A copy of the Company's most recent annual report, is available upon
request. If you would like to view a copy on the Internet, please go to
www.hartfordinvestor.com and select "Newsroom" at the bottom of the page. Next,
select "Annual Reports/Proxy Statement" on the left side of the new page.
Alternatively, if you would like to receive a copy, please contact the Fund at
500 Bielenberg Drive, Woodbury, Minnesota 55125-4401 or call 1-888-843-7824, and
a copy will be sent, without charge, by first class mail within three business
days of your request.
SHAREHOLDER PROPOSALS
The Fund is not required to hold annual meetings of shareholders and
currently does not intend to hold such meetings, unless shareholder action is
required in accordance with the 1940 Act. To be considered for inclusion in the
proxy statement at any subsequent meeting of shareholders, a shareholder
proposal must be submitted to the Fund at the address above at a reasonable time
before the proxy statement for that meeting is mailed. Whether a proposal is
included in the proxy statement will be determined in accordance with applicable
federal and state laws. The timely submission of a proposal does not guarantee
its inclusion.
By order of the Board of Directors,
/s/
----------------------------------------
Edward P. Macdonald
March [__], 2006 Secretary
9
[FORM OF PROXY CARD]
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
THE HARTFORD SMALL COMPANY FUND
C/O PROXY TABULATOR
P.O. BOX 9112
FARMINGDALE, NY 11735
VOTING BY TELEPHONE. Call toll-free 1-888-221-0697 and follow the recorded
instructions.
VOTING BY INTERNET. Log on to www.proxyweb.com and follow the on-screen
instructions.
VOTING BY MAIL. Complete and return your proxy card in the addressed
envelope.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE HARTFORD
MUTUAL FUNDS, INC. ON BEHALF OF THE HARTFORD SMALL COMPANY FUND
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD MAY 23, 2006
The undersigned appoints Tamara Fagely, Edward Macdonald and Michael Phillips or
each of them separately with power to act without the other and with the right
of substitution in each, the proxies of the undersigned, to vote, as designated
herein, all shares of The Hartford Small Company Fund (the "Fund") held by the
undersigned on March 1, 2006, at a Special Meeting of Shareholders (the
"Meeting") to be held at the offices of Hartford Investment Financial Services,
LLC, 200 Hopmeadow Street, Simsbury, Connecticut, on May 23, 2006 at 10:00 a.m,
Eastern Time, and at any adjournments or postponements thereof, upon the matters
on the reverse as set forth in the Notice of Special Meeting of Shareholders and
Proxy Statement, with all powers the undersigned would possess if present in
person.
By executing this proxy, the undersigned revokes all previous proxies with
respect to the Meeting and acknowledges receipt of the Notice of Special Meeting
of Shareholders and Proxy Statement. This proxy may be revoked at any time
before it is exercised by giving written notice of revocation to the Secretary
of the Fund or by executing a superceding proxy.
Date
-----------------------------------
----------------------------------------
Signature(s) (Please sign in box)
Please sign exactly as name appears to
the left. When signing as attorney,
executor, administrator, trustee, or
guardian, please give full title as
such. If signing for a corporation,
please sign in full corporate name by
authorized person. If signing for a
partnership, please sign in partnership
name by authorized person.
10
THIS PROXY WILL BE VOTED AS INSTRUCTED ON THE MATTER SET FORTH BELOW. IT IS
UNDERSTOOD THAT IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED "FOR" SUCH
MATTER.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS OF
THE MEETING. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE RECOMMENDATION OF THE
BOARD OF DIRECTORS, SIMPLY SIGN AND DATE THIS PROXY CARD AND RETURN IT IN THE
ENVELOPE PROVIDED.
PLEASE FILL IN BOXES AS SHOWN USING BLACK OR BLUE INK OR NUMBER 2 PENCIL.
PLEASE DO NOT USE FINE POINT PENS.
[ ] [ ] [ ] PROPOSAL TO APPROVE A SUB-ADVISORY AGREEMENT WITH
FOR AGAINST ABSTAIN HARTFORD INVESTMENT MANAGEMENT COMPANY.
PLEASE VOTE, SIGN, DATE AND PROMPLY RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
THANK YOU!
11
APPENDIX A
FUND SHARES OUTSTANDING ON MARCH 1, 2006
The Hartford Small Company Fund
CLASS SHARES OUTSTANDING ON RECORD DATE
----------- ---------------------------------
Class A 8,391,479.244
Class B 3,053,775.626
Class C 2,417,402.723
Class Y 3,443,415.812
TOTAL All classes 17,306,073.405
12
APPENDIX B
FORM OF SUB-ADVISORY AGREEMENT
INVESTMENT SERVICES AGREEMENT
This investment services agreement is made by and between Hartford
Investment Financial Services, LLC, a Delaware limited liability company
("HIFSCO") and Hartford Investment Management Company, a Delaware corporation
("Hartford Investment Management").
WHEREAS, HIFSCO has entered into an agreement for the provision of
investment management services (the "Principal Advisory Contract") to The
Hartford Mutual Funds, Inc. (the "Company"), and,
WHEREAS, HIFSCO wishes to engage Hartford Investment Management to provide
investment management services to The Hartford Small Company Fund (the
"Portfolio"), a series of the Company, and
WHEREAS, Hartford Investment Management is willing to perform such
services on behalf of the Portfolio upon the terms and conditions and for the
compensation hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and mutual agreements
herein contained, the parties hereto agree as follows:
1. HIFSCO hereby employs Hartford Investment Management to provide investment
management services with respect to the assets of the Portfolio and to
perform the services hereinafter set forth subject to the terms and
conditions of the investment objectives, policies and restrictions of the
Portfolio, and Hartford Investment Management hereby accepts such
employment and agrees during such period to assume the obligations herein
set forth for the compensation herein provided.
2. Hartford Investment Management shall evaluate and implement an investment
program appropriate for the Portfolio which shall be amended and updated
from time to time as financial and other economic conditions change as
determined by HIFSCO and Hartford Investment Management .
3. Hartford Investment Management, in consultation with HIFSCO when
appropriate, will make all determinations with respect to the investment of
the assets of the Portfolio and the purchase or sale of portfolio
securities, and shall take such steps as may be necessary to implement the
same. Such determinations and services shall include advising the Company's
Board of Directors of the manner in which voting rights, rights to consent
to corporate action, and any other non-investment decisions pertaining to
the Portfolio's securities should be exercised.
4. Hartford Investment Management will regularly furnish reports with respect
to the Portfolio at periodic meetings of the Company's Board of Directors
and at such other times as may be reasonably requested by the Company's
Board of Directors, which reports shall include Hartford Investment
Management's
13
economic outlook and investment strategy and a discussion of the portfolio
activity and the performance of the Portfolio since the last report. Copies
of all such reports shall be furnished to HIFSCO for examination and review
within a reasonable time prior to the presentation of such reports to the
Company's Board of Directors.
5. Hartford Investment Management shall manage the Portfolio in conformity
with the Company's Articles of Incorporation and By-laws, each as amended
from time to time, and the Investment Company Act of 1940, as amended,
other applicable laws, and to the investment objectives, policies and
restrictions of the Portfolio as set forth in the Portfolio's prospectus
and statement of additional information, or any investment guidelines or
other instructions received in writing from HIFSCO, and subject further to
such policies and instructions as the Company's Board of Directors may from
time to time establish and deliver to Hartford Investment Management.
6. Hartford Investment Management will select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Portfolio
and place, in the name of the Portfolio or its nominees, all such orders.
When placing such orders, Hartford Investment Management shall use its best
efforts to obtain the best net security price available for the Portfolio.
Subject to and in accordance with any directions that the Board of
Directors may issue from time to time, Hartford Investment Management may
also be authorized to effect individual securities transactions at
commission rates in excess of the minimum commission rates available, if
Hartford Investment Management determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage or
research services provided by such broker or dealer, viewed in terms of
either that particular transaction or Hartford Investment Management's
overall responsibilities with respect to the Portfolio and Hartford
Investment Management's other advisory clients. The execution of such
transactions shall not be deemed to represent an unlawful act or breach of
any duty created by this Agreement or otherwise. Hartford Investment
Management will promptly communicate to the Board of Directors such
information relating to portfolio transactions as they may reasonably
request.
7. As compensation for the performance of the services by Hartford Investment
Management hereunder, HIFSCO shall, as promptly as possible after the last
day of each calendar year quarter, pay Hartford Investment Management the
equivalent of all direct and indirect expenses incurred in the performance
of its duties under this Agreement.
8. Hartford Investment Management shall not be liable for any loss or losses
sustained by reason of any investment including the purchase, holding or
sale of any security as long as Hartford Investment Management shall have
acted in good faith and with due care; provided, however, that no provision
in this Agreement shall be deemed to protect Hartford Investment Management
against any liability to the Company or its shareholders by reason of its
willful misfeasance, bad faith or gross negligence in the performance of
its duties or by reason of its reckless disregard of its obligations and
duties under this Agreement.
14
9. (a) This Agreement shall be effective on [_________,] 2006, shall continue
in effect for the same term as the Principal Advisory Contract and
shall be submitted to the Company's Board of Directors for reapproval
at the same time as the Principal Advisory Contract. This Agreement,
unless sooner terminated in accordance with 9(b) below, shall continue
in effect from year to year thereafter provided that its continuance
is specifically approved at least annually (1) by a vote of the
majority of the members of the Board of Directors of the Company or by
a vote of a majority of the outstanding voting securities of the
Portfolio, and (2) in either event, by the vote of a majority of the
members of the Company's Board of Directors who are not parties to
this Agreement or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on this Agreement.
(b) This Agreement (1) may be terminated with respect to the Portfolio at
any time without the payment of any penalty either by vote of the
members of the Board of Directors of the Company or by a vote of a
majority of the Portfolio's outstanding voting securities, or by
HIFSCO on sixty days' prior written notice to Hartford Investment
Management, (2) shall immediately terminate in the event of its
assignment, (3) may be terminated by Hartford Investment Management on
sixty days' prior written notice to HIFSCO, but such termination will
not be effective until HIFSCO shall have contracted with one or more
persons to serve as a successor to Hartford Investment Management for
the Portfolio (or Hartford Investment Management or an affiliate of
Hartford Investment Management agrees to manage the Portfolio) and
such person(s) shall have assumed such position, and (4) will
terminate automatically upon termination of the investment management
agreement between HIFSCO and the Company.
(c) As used in this Agreement, the terms "assignment," "interested
parties" and "vote of a majority of the Company's outstanding voting
securities" shall have the meanings set forth for such terms in the
Investment Company Act of 1940, as amended.
(d) Any notice under this Agreement shall be given in writing, addressed
and delivered, or mailed postpaid, to the other party or parties at
the current office address provided by each party.
10. Nothing in this Agreement shall limit or restrict the right of any partner,
officer, or employee of Hartford Investment Management to engage in any
business or to devote his or her time and attention in part to the
management or other aspects of any other business, whether of a similar
nature or a dissimilar nature, nor to limit or restrict the right of
Hartford Investment Management to engage in any other business or to
render services of any kind to any other corporation, firm, individual or
association.
11. It is the intention of the parties hereto that by this Agreement Hartford
Investment Management shall provide HIFSCO with such investment management
and advisory services as may be required by HIFSCO in managing and advising
the Portfolio pursuant to the terms of the Principal
15
Advisory Contract. No provision of this Agreement shall be construed or
interpreted to grant Hartford Investment Management any right or authority
not granted to HIFSCO under the Principal Advisory Contract, or to impose
on Hartford Investment Management any duty or obligation not otherwise
imposed on HIFSCO under the Principal Advisory Contract.
12. HIFSCO agrees that neither it nor any affiliate of HIFSCO will use Hartford
Investment Management's name or refer to Hartford Investment Management or
Hartford Investment Management's clients in marketing and promotional
materials without prior notification to and authorization by Hartford
Investment Management, such authorization not to be unreasonably withheld.
13. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby.
14. The amendment of this Agreement for the sole purpose of adding one or more
Portfolios shall not be deemed an amendment affecting an already existing
Portfolio and requiring the approval of shareholders of that Portfolio.
15. To the extent that federal securities laws do not apply, this Agreement and
all performance hereunder shall be governed by the laws of the State of
Connecticut which apply to contracts made and to be performed in the State
of Connecticut.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the [_____] day of [____________], 2006.
HARTFORD INVESTMENT
FINANCIAL SERVICES, LLC
By:
------------------------------------
Title:
---------------------------------
HARTFORD INVESTMENT
MANAGEMENT COMPANY
By:
------------------------------------
Title:
---------------------------------
16
APPENDIX C
PRINCIPAL EXECUTIVE OFFICERS AND DIRECTORS OF HARTFORD INVESTMENT MANAGEMENT
COMPANY
NAME POSITION AND PRINCIPAL OCCUPATION ADDRESS
---- --------------------------------- -------
David M. Znamierowski President and Director 55 Farmington Avenue
Hartford, CT 06105
Kevin M. Scarrozzo Executive Vice President and 55 Farmington Avenue
Chief Financial Officer Hartford, CT 06105
Edmund V. Mahoney Senior Vice President and 55 Farmington Avenue
Chief Compliance Officer Hartford, CT 06105
Leonard J. Saltiel Chief Operating Officer, 55 Farmington Avenue
Managing Director and Director Hartford, CT 06105
Andrew W. Kohnke Managing Director 55 Farmington Avenue
Hartford, CT 06105
M. Timothy Corbett Managing Director and Director 55 Farmington Avenue
Hartford, CT 06105
William H. Davison, Jr. Managing Director and Director 55 Farmington Avenue
Hartford, CT 06105
Nasri A. Toutoungi Managing Director 55 Farmington Avenue
Hartford, CT 06105
Michael J. Bacevich Managing Director 55 Farmington Avenue
Hartford, CT 06105
William P. Meaney Managing Director 55 Farmington Avenue
Hartford, CT 06105
David N. Levenson Managing Director 55 Farmington Avenue
Hartford, CT 06105
Ronald A. Mendel Managing Director 55 Farmington Avenue
Hartford, CT 06105
Walter F. Garger Secretary and Chief Legal Officer 55 Farmington Avenue
Hartford, CT 06105
17
APPENDIX D
BOARD OF DIRECTORS CONSIDERATIONS
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 ("Independent Directors"), review and approve each new
investment advisory and sub-advisory agreement.
At a special meeting held on February 8, 2006, the Board of Directors of
the Fund, including each of the Independent Directors, voted to approve the
investment sub-advisory agreement between Hartford Investment Financial
Services, LLC ("HIFSCO") and Hartford Investment Management Company ("Hartford
Investment Management") (the "Agreement").
In advance of the February meeting, the Board requested, received, and
reviewed written responses from HIFSCO and Hartford Investment Management to
questions posed to them on behalf of the Independent Directors and supporting
materials relating to those questions and responses. In addition, the Board
received in-person presentations about the Fund and the Agreement by Fund
officers and representatives of HIFSCO and Hartford Investment Management at the
Board's meetings on November 2, 2005 and February 1, 2006. The Board's
Investment Committee also received in-person presentations regarding the
capabilities of Hartford Investment Management's small cap growth equity
management team and the associated benefits to the Fund and its shareholders at
its meetings on November 1, 2005, December 20, 2005 and January 31, 2006. In
addition, the Board had previously received information with respect to the Fund
and Hartford Investment Management when Hartford Investment Management was
re-approved as a sub-adviser to certain of the Company's other funds on August
3, 2005.
In connection with the Board's deliberations, HIFSCO agreed to reduce its
fee schedule for the Fund. In determining to approve the Agreement, the Board
determined that the Agreement, including the appointment of Hartford Investment
Management as sub-adviser, was fair and reasonable and in the best interests of
the Fund and its shareholders.
In determining to approve the Agreement, the Board considered the following
categories of material factors, among others, relating to the Agreement.
Nature, Extent and Quality of Services
The Board requested and considered information and data concerning the
nature, extent, and quality of the services to be provided to the Fund by
Hartford Investment Management. The Board considered, among other things, the
terms of the Agreement, the range of services to be provided, and Hartford
Investment Management's organizational structure, systems and personnel. The
Board received information on the background and experience of senior management
and relevant investment and other personnel at Hartford Investment Management,
and the adequacy of the time and attention that they would devote to the Fund.
The Board considered Hartford Investment Management's reputation and overall
financial strength, noting that Hartford Investment Management's current
reputation and the Board's past experience with Hartford Investment Management
was predominantly based on Hartford Investment Management's performance as a
fixed income manager. The Board also considered the experience and reputation of
equity personnel hired by Hartford Investment Management to service the Fund,
and the level of support provided by the organization as a whole. The Board met
with Mark Waterhouse, the proposed portfolio manager for the Fund, and members
of his management team. The Board considered
18
HIFSCO's and Hartford Investment Management's willingness to hire additional
personnel designed to improve services to the Fund, and their investments in
infrastructure in light of increased regulatory requirements, other
developments, and the needs of Hartford Investment Management's proposed active
equity management function.
The Board also requested and evaluated information concerning Hartford
Investment Management's regulatory and compliance environment. Taking note that
such material was recently reviewed in August 2005 in connection with the
renewal of Hartford Investment Management's agreements with respect to certain
of the Company's other funds, the Board focused on regulatory and compliance
matters particular to the management of equity securities as opposed to fixed
income securities. In this regard, the Board requested and reviewed information
on Hartford Investment Management's compliance policies and procedures,
compliance history, and reports from the Fund's Chief Compliance Officer on
Hartford Investment Management's compliance with applicable laws and
regulations, including its responses to regulatory developments and compliance
issues raised by regulators. The Board also noted HIFSCO's and Hartford
Investment Management's support of the Company's compliance control structure,
particularly the resources devoted by HIFSCO and Hartford Investment Management
in support of the Company's obligations pursuant to Rule 38a-1 under the 1940
Act.
With respect to the day-to-day portfolio management services to be provided
by Hartford Investment Management, the Board considered the quality of Hartford
Investment Management's investment personnel (including Hartford Investment
Management's ability to attract and retain qualified investment professionals),
Hartford Investment Management's investment philosophy and process (and
adherence to that philosophy and process), investment research capabilities and
resources, performance record, and trade execution capabilities and experience.
The Board noted the quality of the presentations to and communications with the
Board, and responsiveness to Board inquiries, of Hartford Investment Management,
including in particular Mr. Waterhouse and his team and senior management of
Hartford Investment Management in their in-person discussions with the Board and
their discussions with the Investment Committee. The Board recognized that
HIFSCO is responsible for the overall management of the Fund, provides
investment advisory services in connection with selecting, monitoring and
supervising the Fund's sub-advisers, and had recommended to the Board that
Hartford Investment Management be appointed as a sub-adviser to the Fund.
In considering this information, the Board evaluated not only the
information presented to the Board in connection with its consideration of the
Agreement, but also the Board's experience through past interactions with HIFSCO
and Hartford Investment Management. Based on these considerations, the Board
concluded that it was satisfied with the nature, extent and quality of the
services to be provided to the Fund by HIFSCO and Hartford Investment
Management.
Performance
The Board considered the investment performance of the Fund as managed by
Wellington Management. In this regard, the Board considered information and
materials provided to the Board from HIFSCO comparing the Fund's investment
performance over various periods of time with appropriate benchmark indices, and
with a performance universe of funds selected by Lipper, Inc., an independent
provider of investment company data ("Lipper"), which demonstrated that the Fund
had a strong performance record under Wellington Management's management.
As Hartford Investment Management does not have a performance track record
for active equity management, HIFSCO presented information regarding the
performance record of Mr. Waterhouse. This
19
information included the performance record for the Fund during the period from
June 30, 1997 through December 31, 1999, when Mr. Waterhouse, as an employee of
Wellington Management, was a portfolio manager for the Fund, and the performance
record for another mutual fund for which Mr. Waterhouse had served as portfolio
manager, prior to his experience at Wellington Management. The Board noted that
the period during which Mr. Waterhouse had previously served as portfolio
manager for the Fund was a period of significant asset growth and strong
performance for the Fund. HIFSCO and Hartford Investment Management provided
additional information about the broad range of Mr. Waterhouse's and his team's
recent investment experience and about their investment philosophy and process.
Based on these considerations, the Board concluded that, while there could
be no guarantee of future results, the Board was satisfied that Hartford
Investment Management has the capability of providing satisfactory investment
performance for the Fund.
Costs of the Services and Profitability of HIFSCO and Hartford Investment
Management
The Board reviewed information regarding HIFSCO's and Hartford Investment
Management's costs to provide investment management and related services to the
Fund and the profitability to them from managing the Fund. The Board considered
information related to both HIFSCO and Hartford Investment Management, because
it was proposed that Hartford Investment Management be reimbursed for its costs
rather than receive a set fee, with the result that any profitability from
managing the Fund would be realized only with respect to HIFSCO. The Board also
had information about the profitability to HIFSCO and its affiliates from all
services provided to the Fund and all aspects of its relationships with the
Fund. In evaluating HIFSCO's profitability, the Board considered that initially
HIFSCO did not anticipate making a profit on the portion of the Fund's assets
allocated to Hartford Investment Management, and that future profitability to HL
Advisors would depend on the growth of Hartford Investment Management's equity
assets under management. The Board reviewed with HIFSCO the assumptions and
allocation methods used in preparing the cost and profitability data provided to
the Board. The Board recognized that allocation methods are inherently
subjective, and different methods may be reasonable although they lead to
different results. The Board also recognized that HIFSCO is in the process of
enhancing its assumptions and methodology for determining profitability on an
organization-wide basis. The Board noted the difficulty in obtaining reliable
comparative data about adviser profitability, since such information is not
generally publicly available and is impacted by numerous factors, including the
structure of an adviser's organization, the types of funds it manages, and the
adviser's capital structure and costs of capital. The Board considered the
profitability of HIFSCO's relationship with the Fund on a pre-tax basis without
regard to distribution expenses.
Based on these considerations, the Board concluded that the profits
anticipated to be realized by HIFSCO, Hartford Investment Management and their
affiliates from their relationships with the Fund would not be excessive.
Comparison of Fees and Services Provided by HIFSCO and Hartford Investment
Management
The Board considered comparative information with respect to the investment
management fees to be paid by the Fund to HIFSCO and its affiliates. In this
regard, the Board requested and received information from HIFSCO and Hartford
Investment Management relating to the management fees, sub-advisory fees, and
total operating expenses for the Fund. HIFSCO also referenced information
comparing
20
the Fund's management fees and total operating expenses relative to those of a
peer universe of funds identified by Lipper as being in the small capitalization
growth category. 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 advisers, the comparative information assisted the Board in
evaluating the reasonableness of the Fund's management advisory and sub-advisory
fees.
In considering the reasonableness of the Fund's fees and total expense
ratios, the Board particularly considered that the overall management fee for
the Fund would be lower under the proposal as a result of HL Advisors' agreement
to downward adjustments in the Fund's management fees and expenses, as described
in these proxy materials under the caption "Fees and Expenses." These downward
adjustments would reduce contractual fees through additional breakpoints as
assets in the Fund grow, and confer an immediate benefit on existing
shareholders, based on current asset levels.
Based on these considerations, and after taking into account the fee
breakpoints described above, the Board concluded that the comparative
information reviewed indicates that the Fund's management fee and sub-advisory
fee and total operating expenses are within a range that is competitive and, in
conjunction with the information about quality of services, profitability,
economies of scale, and other matters discussed, supports the conclusion that
these fees and expenses are reasonable.
Economies of Scale
The Board considered the extent to which economies of scale would be
realized as the Fund grows and whether the fee levels reflect these economies of
scale for the benefit of the Fund's investors.
The Board reviewed the breakpoints in the management fee schedule,
including the additional breakpoints agreed to as described above, which reduce
fees as Fund assets grow over time. These breakpoints provide economies of scale
to the Fund and its shareholders in that, as the Fund grows in size, its
effective management fee rate declines. The Board recognized that the Fund would
continue to benefit from economies of scale with assets beyond the last
breakpoint, because additional assets are charged the lowest breakpoint fee,
resulting in a lower overall effective management fee rate. The Board considered
that the Fund may achieve some economies as certain fixed expenses are spread
over a larger asset base, noting that there is no precise way to measure such
economies, and that certain expenses do not necessarily decrease as assets
increase. The Board also considered that expense limitations and fee waivers
that reduce Fund expenses at all asset levels can have the same effect as
breakpoints in sharing economies of scale with shareholders, and that a schedule
that reaches a lower breakpoint quickly provides shareholders with the benefit
of anticipated or potential economies of scale. The Board noted that re-opening
the Fund for investment in Class A, Class B, and Class C shares increased the
likelihood that asset growth in the Fund would enable shareholders to benefit
from the breakpoints in the management fee schedule.
The Board received information regarding HIFSCO's and Hartford Investment
Management's realization of economies of scale with respect to the Fund. The
Board considered representations from HIFSCO that the initial start-up costs
Hartford Investment Management would incur in building its equity management
capability would be high relative to the small amount of assets under
21
management. However, The Board acknowledged that HIFSCO and Hartford Investment
Management were likely to realize economies of scale over time as Hartford
Investment Management's equity assets under management increased.
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 investors, 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 information regarding other benefits to HIFSCO,
Hartford Investment Management and their affiliates from their relationships
with the Fund. The Board considered Hartford Investment Management's
representations that it does not currently propose to use "soft dollars" in
connection with allocation of the Fund's brokerage commissions to obtain
research that would benefit all of Hartford Investment Management's clients and
reduce amounts Hartford Investment Management might otherwise have to pay for
such research. The Board also considered that Hartford Administrative Services
Company, the Fund's transfer agent and an affiliate of HIFSCO, receives transfer
agency compensation from the Fund, and that Hartford Life Insurance Company, an
affiliate of HIFSCO, provides fund accounting services to the Fund and receives
compensation for fund accounting services rendered. The Board considered that
HIFSCO also serves as the Fund's principal underwriter and receives 12b-1 fees
from the Fund. The Board also considered that, because HIFSCO intends to
allocate to Hartford Investment Management new inflows of assets into the
Fund, HIFSCO and Hartford Investment Management would benefit from the Fund's
existing strong performance record.
*****
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 to
approve the Agreement with Hartford Investment Management. 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 with
independent legal counsel to review the relevant materials and consider their
responsibilities under relevant laws and regulations.
22
APPENDIX E
5% BENEFICIAL OWNERS OF FUND SHARES AS OF MARCH 1, 2006
As of March 1, 2006, the following shareholders were beneficial owners of
the percentages of outstanding shares of the Fund indicated below.
THE HARTFORD SMALL COMPANY FUND
AMOUNT AND NATURE OF PERCENTAGE OF
CLASS OF SHARES NAME AND ADDRESS OF BENEFICIAL OWNER* BENEFICIAL OWNERSHIP CLASS OWNED
--------------- ------------------------------------- -------------------- -------------
Class A Edward D. Jones & Co. 3,175,145.978 37.80377%
Attn: Mutual Fund Shareholder Accounting
201 Progress Pkwy.
Maryland Hts., MO 63043-3009
Class B Edward D. Jones & Co. 286,329.004 9.37031%
Attn: Mutual Fund Shareholder Accounting
201 Progress Pkwy.
Maryland Hts., MO 63043-3009
Class B Citigroup Global Markets, Inc. 182,746.214 5.9805%
House Account 00109801250
Attn: Peter Booth 7th Floor
333 W. 34th St.
New York, NY 10001-2402
Class C Citigroup Global Markets, Inc. 211,198.436 8.73271%
House Account 00109801250
Attn: Peter Booth 7th Floor
333 W. 34th St.
New York, NY 10001-2402
Class C Edward D. Jones & Co. 143,236.561 5.92260%
Attn: Mutual Fund Shareholder Accounting
201 Progress Pkwy.
Maryland Hts., MO 63043-3009
Class Y State Street Bank Cust 1,459,249.004 42.38292%
FBO The Hartford Balanced Alloc
Attn: Marilyn Orr
500 Bielenberg Dr.
Woodbury, MN 55125-4401
Class Y State Street Bank Cust 1,266,872.407 36.79547%
FBO The Hartford Growth Alloc
Attn: Marilyn Orr
500 Bielenberg Dr.
Woodbury, MN 55125-4401
Class Y State Street Bank Cust 382,647.525 11.11374%
FBO The Hartford Aggressive Growth
500 Bielenberg Dr.
Woodbury, MN 55125-4401
23
AMOUNT AND NATURE OF PERCENTAGE OF
CLASS OF SHARES NAME AND ADDRESS OF BENEFICIAL OWNER* BENEFICIAL OWNERSHIP CLASS OWNED
--------------- ------------------------------------- -------------------- -------------
Class Y Saxon & Co. 220,400.27 6.40138%
FBO 20-42-002-3500639
PO Box 7780-1888
Philadelphia, PA 19182-001
* Each entity set forth in this column is the shareholder of record and may
be deemed to be the beneficial owner of certain of the shares listed for
certain purposes under the securities laws, although certain of the
entities generally do not have an economic interest in these shares and
would ordinarily disclaim any beneficial ownership therein.
24