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: 811-02281
THE HARTFORD INCOME SHARES 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: July 31st
Date of reporting period: August 1, 2006 - January 31, 2007
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 stockholders 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. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
THE HARTFORD INCOME SHARES FUND, INC. SEMIANNUAL REPORT
CONTENTS
MANAGER DISCUSSION 1
SCHEDULE OF INVESTMENTS 2
STATEMENT OF ASSETS AND
LIABILITIES 6
STATEMENT OF OPERATIONS 6
STATEMENTS OF CHANGES IN NET
ASSETS 7
NOTES TO FINANCIAL STATEMENTS 8
FINANCIAL HIGHLIGHTS 12
DIRECTORS AND OFFICERS 13
SHAREHOLDER MEETING RESULTS 15
IMPORTANT TAX INFORMATION 15
APPROVAL OF INVESTMENT
MANAGEMENT AND INVESTMENT
SUB-ADVISORY AGREEMENTS 16
- - TOLL-FREE PERSONAL ASSISTANCE
-Customer Service
-(888) 843-7824
- 7:00 a.m. to 6:00 p.m. CT,
Monday through Thursday
8:15 a.m. to 5:00 p.m. CT, Friday
- - TOLL-FREE INFORMATION LINE
- For daily account balances, transaction activity or net asset value
information
-(888) 843-7824
-24 hours a day
HOW TO USE THIS REPORT
For a quick overview of the Fund's performance during the past twelve months,
refer to the Highlights box below. The letter from the portfolio manager
provides a more detailed analysis of the Fund and financial markets.
The charts alongside the letter are useful because they provide more information
about your investments. The top holdings chart shows the types of securities in
which the fund invests, and the pie chart shows a breakdown of the Fund's assets
by sector. Additional information concerning Fund performance and policies can
be found in the Notes to Financial Statements.
This report is just one of several tools you can use to learn more about your
investment in The Hartford Income Shares Fund, Inc. (the "Fund"). Your
investment representative, who understands your personal financial situation,
can best explain the features of your investment and how it's designed to help
you meet your financial goals.
HIGHLIGHTS
<Table>
<Caption>
THE HARTFORD
INCOME SHARES FUND,
INC.
-------------------
JANUARY 31, 2007
TOTAL NET ASSETS (000'S OMITTED)................... $105,518
MARKET PRICE PER SHARE............................. $ 8.12
SHARES OUTSTANDING (000'S OMITTED)................. 13,021
FOR THE SIX MONTH PERIOD ENDED JANUARY 31, 2007:
NET ASSET VALUE PER SHARE:
Beginning of period.............................. $ 7.70
End of period.................................... $ 8.10
DISTRIBUTIONS FROM NET INVESTMENT INCOME:
Total dividends paid (000's Omitted)............. $ 3,592
Dividends per share.............................. $ 0.28
</Table>
CERTIFICATIONS
In December 2006, the Fund's principal executive officer submitted his annual
certification as to compliance with the New York Stock Exchange (NYSE) Corporate
Governance Listing Standards pursuant to Section 303A.12(a) of the NYSE Listed
Company Manual. The Fund's principal executive and principal financial officer
certifications pursuant to Rule 30a-2 under the Investment Company Act of 1940
are filed with the Fund's Form N-CSR filings and are available on the SEC's
website at http://www.sec.gov.
HOW TO OBTAIN A COPY OF THE FUND'S PROXY VOTING POLICIES AND PROXY VOTING RECORD
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, 2006, is available
(1) without charge, upon request, by calling 1-888-843-7824 and (2) on the SEC's
website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION
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 Form N-Q is
available (1) without charge, upon request, by calling 1-888-843-7824 and (2) on
the SEC's website at http://www.sec.gov. The Form N-Q may be reviewed and copied
at the Commission'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 INCOME SHARES FUND, INC.
PORTFOLIO COMPOSITION BY SECTOR AS
OF 1/31/2007
(PORTFOLIO COMPOSITION PIE CHART)
<Table>
<Caption>
ASSET AND COMMERCIAL
CORPORATE BONDS - NON- MORTGAGE BACKED CASH AND OTHER ASSETS, U.S. GOVERNMENT
CORPORATE BONDS - INVESTMENT GRADE INVESTMENT GRADE SECURITIES NET OF LIABILITIES AGENCIES
- ---------------------------------- ---------------------- -------------------- ---------------------- ---------------
64.5 24.3 6.3 4.3 0.6
</Table>
TOP 10 HOLDINGS AS OF 1/31/2007
Percent of
Bonds Net Assets
- --------------------------------------------------------------------------------
1. General Motors Acceptance Corp.
(8.00%) 11-1-2031 3.9%
2. Time Warner Entertainment Co. L.P.
(8.38%) 7-15-2033 2.9%
3. Farmers Exchange Capital
(7.20%) 7-15-2048 2.9%
4. American Airlines, Inc.
(7.86%) 10-1-2011 2.6%
5. Continental Airlines, Inc.
(8.05%) 11-1-2020 2.3%
6. Charter Communications Holdings LLC
(9.92%) 4-1-2011 2.3%
7. AT&T Corp.
(8.00%) 11-15-2031 2.1%
8. Embarq Corp.
(8.00%) 6-1-2036 2.0%
9. Union Carbide Corp.
(7.75%) 10-1-2096 1.9%
10. Ford Capital B.V.
(9.50)% 6-1-2010 1.9%
HOW DID THE FUND PERFORM?
The Fund gained 8.87% at NAV and 16.44% at market price for the six-month period
ended January 31, 2007, outperforming the Lehman Brothers Aggregate Bond Index,
a benchmark for domestic investment grade bonds, which returned 3.66% over the
same period. Adjusted for fees, the Fund placed at the sixth percentile within
the Lipper Closed End Corporate BBB Rated Debt Funds peer group, a group of
funds with investment strategies similar to those of the Fund.
WHY DID THE FUND PERFORM THIS WAY?
The Fund's outperformance versus the benchmark was driven by both sector
allocation and security selection. Overweights to investment grade corporate and
high yield securities drove the bulk of the sector allocation return. Both
sectors benefited from continued double-digit quarterly earnings increases which
have helped ensure that credit metrics remain strong, as evidenced by
persistently low default rates and a steady rise in the asset values supporting
our securities. Security selection within these two sectors further enhanced
returns. In the high yield sector, the acquisition of a controlling interest in
General Motors Acceptance Corp's (GMAC) by Cerberus was completed before
year-end, instilling confidence that it would be substantially insulated from
any potentially deeper problems at General Motors. Charter Communications'
ongoing efforts to strengthen its balance sheet and its improved operating
performance led to a sharp appreciation in its debt securities. Within the
Fund's asset-backed securities holdings, strengthening fundamentals for the
airline industry led to a sharp rebound in the prices of our two holdings in
deeply subordinated tranches of equipment trust certificates.
Avoidance of problems has been the main theme in our investment grade holdings.
We have proactively ensured that our exposure to issuers vulnerable to leveraged
buy-outs is minimized through a proprietary screening process that highlights
the specific issuers that are at risk. This process proved fruitful during the
last six months as we were able to avoid a number of credits that fell
significantly in value due to a leveraged buy-out or re-capitalization. In
addition, our holdings in "hybrid" securities (which are deeply subordinated
debt instruments) issued by banks, brokers and insurance companies benefited
from the fact that these sectors have proven resilient to the wave of event risk
that has gripped segments of the industrial universe. Also boosting performance
during the course of the last six months was the relative out-performance of the
REIT (Real Estate Investment Trust) sector. The Fund's duration positioning also
contributed modestly to the Fund's outperformance versus the benchmark.
WHAT IS YOUR OUTLOOK?
Economic leading indicators suggest that we are entering an environment of
sub-par, though non-recessionary, growth. Employment and income data have offset
weakness in housing. Monetary policy should remain on hold in the near future
given the Federal Open Market Committee's cautious outlook on inflation amidst
moderating growth. The Fund continues to maintain an overweight to investment
grade and high yield corporate bonds. The Fund is positioned long on duration,
which we view as a natural hedge to our relative overweight in the high yield
sector. We will maintain this stance unless more evidence arises that either
inflation is out of hand or that leading indicators of growth point to a
recession. If either of these unlikely scenarios becomes more apparent, we would
be quick to protect the portfolio's performance by migrating toward safer bonds
such as U.S. Government Treasuries and Agencies. In the interim, given the
amount of excess liquidity driven by foreign demand for U.S. assets, we remain
optimistic on the prospects for credit to perform.
THE HARTFORD INCOME SHARES FUND, INC.
Schedule of Investments
January 31, 2007 (Unaudited)
(000's Omitted)
ASSET & COMMERCIAL MORTGAGE BACKED SECURITIES - 6.3%
- --------------------------------------------------------------------------------
<Table>
<Caption>
Principal Market
Amount Value (W)
- --------- ---------
FINANCE - 1.4%
$8,761 Bayview Commercial Asset Trust, 7.18%, 01/25/2037 (P)(L).... $ 933
4,864 CBA Commercial Small Balance Commercial Mortgage, 9.75%,
01/25/2039 (I)(P)(L)........................................ 501
--------
1,434
--------
TRANSPORTATION - 4.9%
1,114 Continental Airlines, Inc., 6.80%, 08/02/2018............... 1,114
1,491 Continental Airlines, Inc., 7.71%, 04/02/2021............... 1,629
2,182 Continental Airlines, Inc., 8.05%, 11/01/2020............... 2,435
--------
5,178
--------
TOTAL ASSET & COMMERCIAL MORTGAGE BACKED SECURITIES (COST
$6,227)..................................................... $ 6,612
========
</Table>
CORPORATE BONDS: INVESTMENT GRADE - 64.5%
- --------------------------------------------------------------------------------
<Table>
<Caption>
Principal Market
Amount Value (W)
- --------- ---------
BASIC MATERIALS - 4.9%
$ 500 Newmont Mining Corp., 8.63%, 05/15/2011..................... $ 557
234 Olin Corp., 6.75%, 06/15/2016 (I)........................... 233
66 Olin Corp., 9.13%, 12/15/2011............................... 74
685 Phelps Dodge Corp., 8.75%, 06/01/2011....................... 764
250 Phelps Dodge Corp., 9.50%, 06/01/2031....................... 314
2,000 Union Carbide Corp., 7.75%, 10/01/2096...................... 2,046
1,000 Westvaco Corp., 8.20%, 01/15/2030........................... 1,136
--------
5,124
--------
CAPITAL GOODS - 2.8%
170 Briggs & Stratton Corp., 8.88%, 03/15/2011.................. 183
1,000 Northrop Grumman Space & Mission Systems Corp., 7.75%,
06/01/2029.................................................. 1,213
1,250 Tyco International Group S.A., 7.00%, 06/15/2028............ 1,470
93 Xerox Corp., 6.75%, 02/01/2017.............................. 95
--------
2,961
--------
CONSUMER CYCLICAL - 1.0%
1,000 Federated Department Stores, Inc., 8.50%, 06/01/2010........ 1,087
--------
ENERGY - 4.2%
235 Anadarko Petroleum Corp., 6.45%, 09/15/2036................. 233
850 Burlington Resources, Inc., 9.13%, 10/01/2021............... 1,115
1,000 ConocoPhillips Holding Co., 6.95%, 04/15/2029............... 1,125
750 Halliburton Co., 5.63%, 12/01/2008.......................... 750
1,000 Valero Energy Corp., 8.75%, 06/15/2030...................... 1,254
--------
4,477
--------
FINANCE - 18.4%
735 American Express Credit Corp., 6.80%, 09/01/2066............ 784
885 Ameriprise Financial, Inc., 7.52%, 06/01/2066............... 966
494 Capital One Capital IV, 6.75%, 02/17/2037................... 497
1,049 CIT Group, Inc., 6.10%, 03/15/2067 (L)...................... 1,046
1,000 CNA Financial Corp., 7.25%, 11/15/2023...................... 1,073
1,000 EOP Operating L.P., 7.50%, 04/19/2029....................... 1,228
1,000 ERAC USA Finance Co., 8.00%, 01/15/2011 (I)................. 1,084
3,000 Farmers Exchange Capital, 7.20%, 07/15/2048 (I)............. 3,068
333 Financial Security Assurance Holdings, 6.40%, 12/15/2066
(I)(L)...................................................... 334
500 HSBC Finance Corp., 7.00%, 05/15/2012....................... 536
250 Liberty Mutual Group, Inc., 7.00%, 03/15/2034 (I)........... 256
490 Lincoln National Corp., 7.00%, 05/17/2066 (L)............... 518
1,405 Metlife Inc., 6.40%, 12/15/2036............................. 1,408
1,000 MONY Group, Inc., 8.35%, 03/15/2010......................... 1,077
1,000 Spieker Properties, Inc., 7.50%, 10/01/2027................. 1,261
433 Suntrust Capital VIII, 6.10%, 12/01/2066.................... 421
1,000 Travelers Property Casualty Corp., 7.75%, 04/15/2026........ 1,182
400 US Bank Realty Corp., 6.09%, 12/22/2049 (I)(L).............. 401
2,000 Washington Mutual Preferred Funding, 6.53%, 12/29/2049
(I)......................................................... 1,967
206 Wells Fargo Capital X, 5.95%, 12/15/2036.................... 202
115 Western Financial Bank, 9.63%, 05/15/2012................... 125
--------
19,434
--------
SERVICES - 13.9%
1,500 Belo Corp., 7.25%, 09/15/2027............................... 1,456
750 Clear Channel Communication, Inc., 7.65%, 09/15/2010........ 793
1,500 Cox Communications, Inc., 6.80%, 08/01/2028................. 1,546
1,000 Cox Enterprises, Inc., 8.00%, 02/15/2007 (I)................ 1,001
750 Electronic Data Systems Corp., 7.45%, 10/15/2029............ 808
1,000 FedEx Corp., 7.84%, 01/30/2018.............................. 1,127
1,000 Hearst-Argyle Television, Inc., 7.00%, 01/15/2018........... 1,033
1,500 News America Holdings, Inc., 8.88%, 04/26/2023.............. 1,833
</Table>
2
The accompanying notes are an integral part of this financial statement.
THE HARTFORD INCOME SHARES FUND, INC.
Schedule of Investments
January 31, 2007 (Unaudited)
(000's Omitted)
CORPORATE BONDS: INVESTMENT GRADE - CONTINUED
- --------------------------------------------------------------------------------
<Table>
<Caption>
Principal Market
Amount Value (W)
- --------- ---------
$ 750 Starwood Hotels & Resorts Worldwide, Inc., 7.38%,
05/01/2007.................................................. $ 753
2,550 Time Warner Entertainment Co. L.P., 8.38%, 07/15/2033....... 3,103
700 Time Warner, Inc., 6.63%, 05/15/2029........................ 708
500 Waste Management, Inc., 7.13%, 12/15/2017................... 545
--------
14,706
--------
TECHNOLOGY - 12.1%
1,750 AT&T Corp., 8.00%, 11/15/2031............................... 2,171
1,500 Cingular Wireless Services, Inc., 8.75%, 03/01/2031......... 1,940
1,000 Comcast Cable Communications, Inc., 8.50%, 05/01/2027....... 1,230
2,000 Embarq Corp., 8.00%, 06/01/2036............................. 2,079
1,000 Raytheon Co., 7.20%, 08/15/2027............................. 1,157
480 Siemens Finance, 6.13%, 08/17/2026 (I)...................... 488
1,500 Sprint Capital Corp., 6.88%, 11/15/2028..................... 1,493
1,500 Tele-Communications, Inc., 9.80%, 02/01/2012................ 1,764
400 TELUS Corp., 8.00%, 06/01/2011.............................. 435
--------
12,757
--------
TRANSPORTATION - 4.9%
2,500 American Airlines, Inc., 7.86%, 10/01/2011.................. 2,719
1,000 Continental Airlines, Inc., 7.92%, 05/01/2010............... 1,060
1,000 Norfolk Southern Corp., 8.63%, 05/15/2010................... 1,094
250 Royal Caribbean Cruises Ltd., 7.00%, 06/15/2013............. 257
--------
5,130
--------
UTILITIES - 2.3%
1,000 CMS Panhandle Holding Co., 7.00%, 07/15/2029................ 1,008
750 FirstEnergy Corp., 6.45%, 11/15/2011........................ 781
140 Kinder Morgan Energy Partners L.P., 6.50%, 02/01/2037....... 140
500 Kinder Morgan, Inc., 7.25%, 03/01/2028...................... 496
--------
2,425
--------
TOTAL CORPORATE BONDS: INVESTMENT GRADE (COST $59,363)...... $ 68,101
========
</Table>
CORPORATE BONDS: NON-INVESTMENT GRADE - 24.3%
- --------------------------------------------------------------------------------
<Table>
<Caption>
Principal Market
Amount Value (W)
- --------- ---------
BASIC MATERIALS - 1.5%
$ 750 Equistar Chemicals L.P., 10.13%, 09/01/2008................. $ 795
500 Hercules, Inc., 11.13%, 11/15/2007.......................... 523
250 Smurfit-Stone Container Enterprises, Inc., 9.75%,
02/01/2011.................................................. 258
--------
1,576
--------
CONSUMER CYCLICAL - 2.7%
500 Delhaize America, Inc., 9.00%, 04/15/2031................... 595
120 Dillard's, Inc., 6.63%, 01/15/2018.......................... 117
85 Dillard's, Inc., 7.13%, 08/01/2018.......................... 84
2,000 Ford Capital B.V., 9.50%, 06/01/2010........................ 2,030
--------
2,826
--------
FINANCE - 5.7%
1,000 Ford Motor Credit Co., 9.75%, 09/15/2010 (I)................ 1,067
150 Ford Motor Credit Co., 9.81%, 04/15/2012 (L)................ 163
3,650 General Motors Acceptance Corp., 8.00%, 11/01/2031.......... 4,108
750 Qwest Capital Funding, Inc., 6.50%, 11/15/2018.............. 705
--------
6,043
--------
SERVICES - 3.7%
750 Hilton Hotels Corp., 8.25%, 02/15/2011...................... 797
1,000 Liberty Media Corp., 8.50%, 07/15/2029...................... 1,012
250 Mandalay Resort Group, 7.63%, 07/15/2013.................... 248
1,000 MGM Mirage, Inc., 8.50%, 09/15/2010......................... 1,073
750 Service Corp. International, 6.50%, 03/15/2008.............. 752
--------
3,882
--------
</Table>
3
The accompanying notes are an integral part of this financial statement.
THE HARTFORD INCOME SHARES FUND, INC.
Schedule of Investments
January 31, 2007 (Unaudited)
(000's Omitted)
CORPORATE BONDS: NON-INVESTMENT GRADE - CONTINUED
- --------------------------------------------------------------------------------
<Table>
<Caption>
Principal Market
Amount Value (W)
- --------- ---------
TECHNOLOGY - 7.8%
$2,500 Charter Communications Holdings LLC, 9.92%, 04/01/2011...... $ 2,375
500 Citizens Communications Co., 9.00%, 08/15/2031.............. 539
1,000 Intelsat Bermuda Ltd., 11.25%, 06/15/2016 (I)............... 1,130
250 Level 3 Communications, Inc., 11.00%, 03/15/2008............ 258
595 Level 3 Communications, Inc., 11.25%, 03/15/2010............ 608
1,500 Lucent Technologies, Inc., 6.45%, 03/15/2029................ 1,365
650 Nortel Networks Corp., 6.88%, 09/01/2023.................... 572
100 PanAmSat Corp., 6.88%, 01/15/2028........................... 92
100 Qwest Corp., 6.88%, 09/15/2033.............................. 95
1,000 Rogers Wireless, Inc., 9.75%, 06/01/2016.................... 1,240
--------
8,274
--------
TRANSPORTATION - 0.9%
850 Delta Air Lines, Inc., 10.50%, 04/30/2016 (H)(F)............ 888
10 NWA Trust, 13.88%, 06/21/2008 (H)(F)........................ 10
--------
898
--------
UTILITIES - 2.0%
1,000 El Paso Corp., 8.05%, 10/15/2030............................ 1,100
1,000 TECO Energy, Inc., 7.20%, 05/01/2011........................ 1,050
--------
2,150
--------
TOTAL CORPORATE BONDS: NON-INVESTMENT GRADE (COST
$21,961).................................................... $ 25,649
--------
</Table>
U.S. GOVERNMENT AGENCIES - 0.6%
- --------------------------------------------------------------------------------
<Table>
<Caption>
Principal Market
Amount Value (W)
- --------- ---------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.1%
$ 11 9.00% 2022.................................................. $ 12
27 10.50% 2017................................................. 31
6 11.25% 2010................................................. 7
9 11.50% 2015................................................. 9
22 11.75% 2010................................................. 23
--------
82
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.2%
72 8.00% 2024-2025............................................. 76
23 10.50% 2017-2020............................................ 26
47 11.00% 2011-2018............................................ 51
13 12.00% 2014................................................. 14
16 12.50% 2015................................................. 17
--------
184
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.1%
78 9.00% 2021.................................................. 84
71 9.50% 2020.................................................. 78
--------
162
--------
SMALL BUSINESS ADMINISTRATION PARTICIPATION
CERTIFICATES - 0.2%
229 5.54% 2026.................................................. 230
--------
TOTAL U.S. GOVERNMENT AGENCIES (COST $635).................. $ 658
--------
</Table>
COMMON STOCK - 0.0%
- --------------------------------------------------------------------------------
<Table>
<Caption>
Market
Shares Value (W)
- --------- ---------
CONSUMER CYCLICAL - 0.0%
1 Hosiery Corp. of America, Inc. Class A (A)(D)(H)............ $ --
--------
TECHNOLOGY - 0.0%
2 Global Crossing Ltd.(D)..................................... 39
-- XO Holdings, Inc.(D)(H)..................................... --
--------
39
--------
TOTAL COMMON STOCK (COST $60)............................... $ 39
--------
</Table>
WARRANTS - 0.0%
- --------------------------------------------------------------------------------
<Table>
<Caption>
Market
Shares Value (W)
- --------- ---------
TECHNOLOGY - 0.0%
-- XO Holdings, Inc............................................ $ --
--------
TOTAL WARRANTS (COST $-).................................... $ --
--------
</Table>
4
The accompanying notes are an integral part of this financial statement.
THE HARTFORD INCOME SHARES FUND, INC.
Schedule of Investments
January 31, 2007 (Unaudited)
(000's Omitted)
SHORT - TERM INVESTMENTS - 2.5%
- --------------------------------------------------------------------------------
<Table>
<Caption>
Principal Market
Amount Value (W)
- --------- ---------
FINANCE - 2.5%
$2,646 Rabobank USA Finance Corp., 5.26%, 02/01/2007............... $ 2,646
--------
TOTAL SHORT - TERM INVESTMENTS (COST $2,646)................ $ 2,646
--------
TOTAL INVESTMENTS IN SECURITIES (COST $90,892) (C).......... $103,705
========
</Table>
- --------------------------------------------------------------------------------
Note: Percentage of investments as shown is the ratio of the total market value
to total net assets.
Market value of investments in foreign securities represents 6.15% of
total net assets at January 31, 2007.
<Table>
(A) The aggregate value of securities valued in good faith at fair value by, or under the direction of, the Funds' Board of
Directors at January 31, 2007, rounds to zero.
(C) At January 31, 2007, the cost of securities for federal income tax purposes was $90,951 and the aggregate gross
unrealized appreciation and depreciation based on that cost were:
</Table>
<Table>
Unrealized appreciation............................................................................................ $12,860
Unrealized depreciation............................................................................................ (106)
-------
Net unrealized appreciation........................................................................................ $12,754
-------
</Table>
<Table>
(D) Currently non-income producing. For long-term debt securities, items identified are in default as to payment of interest
and/or principal.
(F) The company is in bankruptcy. The bank loan or bond held by the fund is not in default and interest payments are
expected in the future.
(H) The following securities are considered illiquid. Illiquid securities are often purchased in private placement
transactions, which are 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.
</Table>
<Table>
<Caption>
PERIOD ACQUIRED SHARES/PAR SECURITY COST BASIS
- --------------- ---------- -------- ----------
10/1996 850 Delta Airlines, Inc. due 2016............................... $947
6/1994 1 Hoisery Corp. of America, Inc. Class A -- 144A.............. 8
3/1995 10 NWA Trust due 2008.......................................... 10
5/2006 -- XO Holdings, Inc. .......................................... --
</Table>
<Table>
The aggregate value of these securities at December 31, 2006 was $898, which represents 0.85% of total net assets.
(I) Securities issued within terms of a private placement memorandum, exempt from registration under Section 144A of the
Securities Act of 1933, as amended, and may be sold only to qualified institutional buyers. Pursuant to guidelines
adopted by the Board of Directors, these issues are determined to be liquid. The aggregate value of these securities at
January 31, 2007, was $11,530, which represents 10.93% of total net assets.
(L) Variable rate securities; the rate reported is the coupon rate in effect at January 31, 2007.
(P) The interest rates disclosed for interest only strips represent effective yields based upon estimated future cash flows
at January 31, 2007.
(W) See Note 2b of accompanying Notes to Financial Statements regarding valuation of securities.
- -- Due to the presentation of the financial statements in thousands, the number of shares and/or dollars round to zero.
</Table>
DISTRIBUTION BY CREDIT QUALITY
AS OF JANUARY 31, 2007
<Table>
<Caption>
RATING PERCENTAGE OF LONG-TERM HOLDINGS*
- -------------------------------------------------------------------
AAA 2.1%
AA 1.3
A 16.1
BBB 52.4
BB 15.4
B 6.6
CCC 5.2
NR 0.9
- -------------------------------------------------------------------
Total 100.0%
===================================================================
</Table>
* Per the prospectus, split rated bonds are categorized using the highest
rating.
5
The accompanying notes are an integral part of this financial statement.
THE HARTFORD INCOME SHARES FUND, INC.
Statement of Assets and Liabilities
January 31, 2007
(000's Omitted)
(Unaudited)
- --------------------------------------------------------------------------------
<Table>
ASSETS
Investments in securities, as detailed in the accompanying
schedule, at market (cost $90,892) (Note 2(b)).......... $103,705
Cash on deposit with custodian............................ 234
Receivables:
Investment securities sold.............................. 1,316
Interest and dividends.................................. 1,907
Other receivables....................................... 4
--------
TOTAL ASSETS................................................ 107,166
--------
LIABILITIES
Dividend payable ($0.046 per share)....................... 599
Payable for investment securities purchased............... 977
Payable for investment advisory and management fees (Note
3)...................................................... 11
Accounts Payable and accrued expenses..................... 61
--------
TOTAL LIABILITIES........................................... 1,648
--------
NET ASSETS.................................................. $105,518
========
COMPOSITION OF NET ASSETS
Net proceeds of capital stock, par value $.001 per
share-authorized 1,000,000 shares; 13,021 shares
outstanding............................................. $117,999
Unrealized appreciation of investments.................... 12,813
Accumulated undistributed net investment income........... 89
Accumulated net realized loss from sale of investments.... (25,383)
--------
TOTAL NET ASSETS............................................ $105,518
========
NET ASSET VALUE PER SHARE................................... $ 8.10
========
</Table>
THE HARTFORD INCOME SHARES FUND, INC.
Statement of Operations
For the Six-Month Period Ended January 31, 2007
(000's Omitted)
(Unaudited)
- --------------------------------------------------------------------------------
<Table>
NET INVESTMENT INCOME:
Interest income........................................... $ 4,007
-------
EXPENSES:
Investment advisory and management fees (Note 3).......... 315
Legal and auditing fees................................... 41
Custodian fees............................................ 4
Shareholders' notices and reports......................... 26
Directors' fees and expenses.............................. 1
Exchange listing fees..................................... 13
Other..................................................... 4
-------
Total expenses............................................ 404
-------
Fees paid indirectly (Note 3)............................. (4)
-------
Total net expenses........................................ 400
-------
NET INVESTMENT INCOME....................................... 3,607
-------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments.......................... 975
Net change in unrealized appreciation (depreciation) of
investments............................................. 4,227
-------
NET GAIN ON INVESTMENTS..................................... 5,202
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 8,809
=======
</Table>
The accompanying notes are an integral part of this financial statement.
6
THE HARTFORD INCOME SHARES FUND, INC.
Statements of Changes in Net Assets
(000's Omitted)
(Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
For the Six-Month
Period Ended For the Year Ended
January 31, 2007 July 31, 2006
----------------- ------------------
OPERATIONS:
Net investment income..................................... $ 3,607 $ 7,256
Net realized gain (loss) on investments................... 975 (1,045)
Net change in unrealized appreciation (depreciation) of
investments............................................. 4,227 (5,038)
-------- --------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ 8,809 1,173
-------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income................................ (3,592) (7,162)
-------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from 7 and 25 shares issued as a result of
reinvested dividends, respectively..................... 60 196
-------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 5,277 (5,793)
NET ASSETS:
Beginning of period....................................... 100,241 106,034
-------- --------
End of period............................................. $105,518 $100,241
======== ========
Accumulated undistributed net investment income............. $ 89 $ 74
======== ========
</Table>
The accompanying notes are an integral part of this financial statement.
7
THE HARTFORD INCOME SHARES FUND, INC.
Notes to Financial Statements
January 31, 2007
($000's Omitted)
(Unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION: The Fund is a closed-end diversified management investment
company. The primary investment objective of the Fund is to seek a high level
of current income through investment in a diversified portfolio of debt
securities, some of which may be privately placed and some of which may have
equity features. Capital appreciation is a secondary objective.
INDEMNIFICATIONS: Under the Fund's organizational documents, its directors and
officers are indemnified against certain liabilities arising out of the
performance of their duties to the Fund.
In addition, the Fund enters into contracts that contain a variety of
indemnifications. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had any prior claims or losses pursuant to
these contracts and expects the risk of loss to be remote.
2. SIGNIFICANT ACCOUNTING POLICIES: The following is a summary of significant
accounting policies of the Fund, which are in accordance with U. S. generally
accepted accounting principles:
(A) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security
transactions are accounted for on trade date. Interest income, including
level-yield amortization of premium and discount, is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date. Interest income,
including amortization of premium and accretion of discounts, is accrued on a
daily basis. Realized security gains and losses are determined on the basis of
identified cost. For the period ended January 31, 2007, the cost of purchases
and proceeds from sales of securities (including maturities but excluding
short-term securities) were as follows:
<Table>
Cost of purchases excluding U.S. Government
obligations: $16,862
Sales proceeds excluding U.S. Government
obligations: $17,226
Cost of purchases for U.S. Government
obligations: $ 229
Sales proceeds for U.S. Government obligations: $ -
</Table>
(B) SECURITY VALUATION -- The Fund generally uses market prices in valuing
portfolio securities. If market quotations are not readily available or are
deemed unreliable, a Fund will use the fair value of the security as
determined in good faith under policies and procedures established by and
under the supervision of the Fund's Board of Directors. Market prices may be
deemed unreliable, for example, if a security is thinly traded or if an event
has occurred after the close of the exchange on which a portfolio security is
primarily traded but before the close of the New York Stock Exchange (the
"Exchange") (normally 4:00 p.m. Eastern Time, referred to as the "Valuation
Time") that is expected to affect the value of the portfolio security. The
circumstances in which a Fund may use fair value pricing include, among
others: (i) the occurrence of events that are significant to a particular
issuer, such as mergers, restructuring or defaults; (ii) the occurrence of
events that are significant to an entire market, such as natural disasters in
a particular region or governmental actions; (iii) trading restrictions on
securities; (iv) thinly traded securities and (v) market events such as
trading halts and early market closings. In addition, with respect to the
valuation of securities principally traded on foreign markets, the Fund, uses
a fair value pricing service approved by the Fund's Board of Directors which
employs quantitative models to adjust for "stale" prices caused by the
movement of other markets and other factors occurring after the close of the
foreign markets but before the close of the Exchange. Securities that are
primarily traded on foreign markets may trade on days that are not business
days of the Funds. Because the NAV of the Fund's shares is determined only on
business days of the Funds, the value of the portfolio securities of a Fund
that invests in foreign securities 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 net asset value of the respective shares to differ significantly from the
net asset value that would have been calculated using prevailing market prices
at the close of the exchange on which a portfolio is primarily traded but
before the close of the Exchange. There can be no assurance that the Fund
could obtain the fair value assigned to a security if the Fund were to sell
the security at approximately the time at which that Fund determines its NAV
per share.
Debt securities (other than short-term investments), held by the Fund are
valued on the basis of valuations furnished by an unaffiliated pricing service
which determines valuations for normal institutional size trading units of
debt securities. Securities for which prices are not available from an
independent pricing service, but where an active market exists, are valued
using market quotations obtained from one or more dealers that make markets in
securities or from a widely-used quotation system in accordance with
procedures established by that Fund's Board of Directors. Generally, the Fund
may use fair valuation in regards to debt securities when the Fund holds
defaulted or distressed securities or securities in a company in which
reorganization is pending. Short term investments with a maturity of more than
60 days when purchased are valued based on market quotations until the
remaining days to maturity become less than 61 days.
Exchange traded equity securities shall be valued at the last reported sale
price on the exchange or market on which the security is primarily traded (the
"Primary Market") at the Valuation Time. If the security did not trade on the
Primary Market, it may be valued at the Valuation Time at the last reported
sale price on another exchange where it trades. The value of an equity
security not traded on any exchange but traded on the Nasdaq Stock Market,
Inc. System ("Nasdaq") or another over-the-counter ("OTC") market shall be
valued at the last reported sale price or official closing price on the
exchange or market on which the security is traded as of the Valuation Time.
If it is not possible to determine the last
8
THE HARTFORD INCOME SHARES FUND, INC.
Notes to Financial Statements
January 31, 2007
($000's Omitted)
(Unaudited)
- --------------------------------------------------------------------------------
reported sale price or official closing price on the relevant exchange or
market at the Valuation Time, the value of the security shall be the most
recent bid quotation on such exchange or market at the Valuation Time.
(C) REPURCHASE AGREEMENTS -- A repurchase agreement is an agreement by which
the seller of a security agrees to repurchase the security sold at a mutually
agreed upon time and price. At the time the Fund enters into a repurchase
agreement, the value of the underlying collateral security(ies), including
accrued interest, will be equal to or exceed the value of the repurchase
agreement. Securities that serve to collateralize the repurchase agreement are
held by each Fund's custodian in book entry or physical form in the custodial
account of the Funds or in a third party custodial account. Repurchase
agreements are valued at cost plus accrued interest receivable. As of January
31, 2007, there were no outstanding repurchase agreements.
(D) FEDERAL INCOME TAXES -- For federal income tax purposes, the Fund intends
to continue to qualify as a regulated investment company under Subchapter M of
the Internal Revenue Code 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 regulated investment companies.
The Fund has distributed substantially all of its income and capital gains in
prior years and intends to distribute substantially all of its income and
capital gains in the next fiscal year. Accordingly, no provision for federal
income taxes has been made in the accompanying financial statements. On a
calendar year basis, the Fund is subject to a 4% federal excise tax to the
extent it does not distribute substantially all of its net investment income
and realized gains, if any. Distributions from short-term capital gains are
treated as ordinary income distributions for federal income tax purposes.
Net investment income and net realized gains differ for financial statement
and tax purposes. The character of distributions made during the year from net
investment income or net realized gains may therefore 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.
The tax character of distributions paid for the fiscal years ended July 31,
2006 and 2005, were ordinary income in the amounts of $7,160 and $7,178,
respectively.
As of July 31, 2006, the components of distributable earnings on a tax basis
were as follows:
<Table>
Undistributed ordinary income................ $ 673
Accumulated gain (loss)...................... (26,300)
Unrealized appreciation (depreciation)....... 8,527
--------
Total accumulated earnings................... $(17,100)
--------
</Table>
The difference between book-basis and tax-basis unrealized appreciation is
attributable to tax deferral of wash sales.
For federal income tax purposes, the Fund had capital loss carryovers of
$25,208 at July 31, 2006, which, if not offset by subsequent capital gains,
will expire in 2007 through 2014 as follows:
<Table>
<Caption>
Carryover Year Expires
--------- ------------
$ 993 ....................................... 2007
5,416 ....................................... 2008
5,061 ....................................... 2009
4,710 ....................................... 2010
1,710 ....................................... 2011
5,026 ....................................... 2012
1,768 ....................................... 2013
524 ....................................... 2014
</Table>
For federal income tax purposes, the Fund elected to defer $1,092 of net
realized capital losses for the period from November 1, 2005 through July 31,
2006 in accordance with Federal income tax regulations. These losses will be
recognized on the first day of the next fiscal year.
(E) DIVIDEND REINVESTMENT PLAN -- The Fund intends to distribute income
dividends on a monthly basis and capital gains on an annual basis, if any.
Such distributions to shareholders are recorded on the ex-dividend date. A
shareholder may choose to have his or her dividends and capital gains
distributions reinvested in additional whole or fractional shares of the Fund.
Although reinvested, this distribution will still be taxable. Under this plan,
when the market price is greater than the net asset value, the reinvestment
price will be the greater of 95 percent of the month-end market price (plus
brokerage commissions) or the month-end net asset value. When the market price
is less than the net asset value, the reinvestment price will be the market
price (plus brokerage commissions) to the extent that shares can be purchased
in the open market.
Shareholders will automatically receive their dividends and capital gains
distributions in cash, unless they inform the Fund in writing that they desire
to have their distributions reinvested in additional shares. This may be done
by contacting Hartford Administrative Services Company ("HASCO") (See page
15). Notice to initiate or to terminate this plan must be received by HASCO 15
days prior to the dividend date for which it is to become effective.
(F) ILLIQUID AND RESTRICTED SECURITIES -- The Fund is permitted to invest up
to 15% of its net assets in illiquid securities. "Illiquid Securities" 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 a Fund's net
asset value per share. The Fund may not be able to sell illiquid securities or
other investments when its sub-adviser considers it desirable to do so or may
have to sell such securities or investments at a price that is lower than the
price that could be obtained if the
9
THE HARTFORD INCOME SHARES FUND, INC.
Notes to Financial Statements
January 31, 2007
($000's Omitted)
(Unaudited)
- --------------------------------------------------------------------------------
securities or investments were more liquid. A sale of illiquid securities or
other 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 securities and investments also may be more difficult to
value, due to the unavailability of reliable market quotations for such
securities or investments, and investments in them may have an adverse impact
on net asset value. Each Fund may also purchase certain restricted securities,
commonly known as Rule 144A securities, that can be resold to institutions and
which may be determined to be liquid pursuant to policies and guidelines
established by that Fund's Board of Directors.
(G) SECURITIES PURCHASED ON A WHEN-ISSUED OR DELAYED-DELIVERY
BASIS -- Delivery and payment for securities 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. During this period, such
securities are subject to market fluctuations, and the Funds identify
securities segregated in their records with value at least equal to the amount
of the commitment. As of January 31, 2007, the Fund had no outstanding
when-issued or forward commitments.
(H) CREDIT RISK -- Credit risk depends largely on the perceived financial
health of bond issuers. In general, lower rated bonds have higher credit risk.
High yield bond prices can fall on bad news about the economy, an industry or
a company. The share price, yield and total return of a fund which holds
securities with higher credit risk may fluctuate more than with less
aggressive bond funds.
(I) PREPAYMENT RISKS -- Certain debt securities allow for prepayment of
principal without penalty. Securities subject to prepayment risk generally
offer less potential for gains when interest rates decline, and may offer a
greater potential for loss when interest rates rise. In addition, 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 risk is a major
risk of mortgage-backed securities and certain asset-backed securities.
Accordingly, the potential for the value of a security to increase in response
to interest rate declines is limited. For certain asset-backed securities, the
actual maturity may be less than the stated maturity shown in the Schedule of
Investments. As a result, the timing of income recognition relating to these
securities may vary based upon the actual maturity. Debt securities purchased
to replace a prepaid loan or a debt security may have lower yields than the
yield on the prepaid debt security.
(J) USE OF ESTIMATES -- The preparation of financial statements in conformity
with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported
amounts of income and expenses during the year. Operating results in the
future could vary from the amounts derived from management's estimates.
(K) FINANCIAL ACCOUNTING STANDARDS BOARD INTERPRETATION NO. 48 -- On July 13,
2006, the Financial Accounting Standards Board (FASB) released FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48").
FIN 48 provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken or expected to be taken in the course of
preparing a Fund's tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet the more-likely-than-not threshold would be
recorded as a tax benefit or expense in the current year. Adoption of FIN 48
is required for fiscal years beginning after December 15, 2006, and is to be
applied to all open tax years as the effective date. At this time, management
is evaluating the implication of FIN 48 and its impact on the Fund's financial
statements has not yet been determined.
(L) FINANCIAL ACCOUNTING STANDARDS BOARD FINANCIAL ACCOUNTING STANDARDS NO.
157 -- In September 2006, FASB issued Statement of Financial Accounting
Standards No. 157, "Fair Value Measurements" ("FAS 157"). This standard
clarifies the definition of fair value for financial reporting, establishes a
framework for measuring fair value and requires additional disclosures about
the use of fair value measurements. FAS 157 is effective for the Fund's
financial statements issued for fiscal years beginning after November 15,
2007, and interim periods within those fiscal years. As of January 31, 2007,
the Fund does not believe the adoption of FAS 157 will impact the amounts
reported in the financial statements, however, additional disclosures will be
required about the inputs used to develop the measurements of fair value and
the effect of certain measurements reported in the Statements of Operations
for a fiscal period.
3. EXPENSES:
(A) PAYMENTS TO RELATED PARTIES -- Hartford Investment Financial Services, LLC
("HIFSCO") is the investment adviser for the Fund. Investment advisory and
management fees are computed at the annual rate of 0.45% for the first $100
million of average monthly net assets and at the annual rate of 0.40% of
average monthly net assets over $100 million, plus 2% of investment income.
As adviser for the Fund, HIFSCO has retained Hartford Investment Management
Company ("Hartford Investment") to provide investment advice and, in general,
to conduct the investment management program of the Fund, subject to the
general control of HIFSCO and the Fund's Board of Directors. Pursuant to the
sub-advisory agreement, Hartford Investment will regularly provide the Fund
with investment research, advice and supervision and furnish an investment
program consistent
10
THE HARTFORD INCOME SHARES FUND, INC.
Notes to Financial Statements
January 31, 2007
($000's Omitted)
(Unaudited)
- --------------------------------------------------------------------------------
with the Fund's investment objectives and policies, including the purchase,
retention and disposition of securities.
The Hartford Financial Services Group, Inc. ("The Hartford") and its
subsidiaries provide facilities and office equipment and perform certain
services for the Fund, including Fund accounting and financial reporting.
Certain officers of the Fund are directors and/or officers of HIFSCO, Hartford
Investment and/or The Hartford or its subsidiaries. No officer of the Fund
receives any compensation directly from the Fund. HASCO, a wholly owned
subsidiary of The Hartford, provides transfer agent services to the Fund.
Transfer agent fees are paid by HIFSCO.
(B) EXPENSE OFFSET -- The Fund's custodian bank has agreed to reduce its fees
when the Fund maintains cash on deposit in the non-interest-bearing custody
account. For the period ended January 31, 2007, the custodian fee offset
arrangement reduced expenses by $4. The total expense reduction represents an
effective annual rate of 0.01% of the Fund's average daily net assets. This
amount is included on the fees paid indirectly line of the Statement of
Operations.
11
THE HARTFORD INCOME SHARES FUND, INC.
Financial Highlights
- --------------------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED JULY 31,
(Unaudited) --------------------------------------------------
2007** 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period........................ $ 7.70 $ 8.16 $ 7.93 $ 7.63 $ 6.66 $ 7.95
Operations:
Investment income -- net.................................. .28 .56 .56 .56 .58 .64
Net realized and unrealized gain (loss) on investments.... .40 (.47) .22 .29 .99 (1.29)
-------- -------- -------- -------- ------- -------
Total from operations....................................... .68 .09 .78 .85 1.57 (.65)
-------- -------- -------- -------- ------- -------
Distributions to shareholders:
From investment income -- net............................. (.28) (.55) (.55) (.55) (.60) (.64)
-------- -------- -------- -------- ------- -------
Net asset value, end of period.............................. $ 8.10 $ 7.70 $ 8.16 $ 7.93 $ 7.63 $ 6.66
-------- -------- -------- -------- ------- -------
Per-share market value, end of period....................... $ 8.12 $ 7.23 $ 7.88 $ 7.33 $ 6.99 $ 6.80
Total investment return, market value @..................... 16.44% (1.40%) 15.42% 12.75% 11.63% (6.72%)
Total investment return, net asset value @@................. 8.87% 1.36% 10.46% 11.69% 24.36% (8.75%)
Net assets end of year (000s omitted)....................... $105,518 $100,241 $106,034 $102,993 $99,045 $85,772
Ratio of gross expenses to average monthly net assets....... .78%* .78% .76% .82% .86% .80%
Ratio of net expenses (includes fees paid indirectly) to
average monthly net assets................................ .77%* .77% .75% .82% .86% .80%
Ratio of net investment income to average monthly net
assets.................................................... 6.89%* 7.12% 6.89% 7.05% 7.93% 8.45%
Portfolio turnover rate..................................... 17% 20% 17% 13% 34% 23%
</Table>
* Annualized.
** For the six-month period ended January 31, 2007.
@ Total investment return market value, is based on the change in market price
of a share during the year and assumes reinvestment of distributions at
actual prices pursuant to the fund's dividend reinvestment plan.
@@ Total investment return, net asset value, is based on the change in net
asset value of a share during the year and assumes reinvestment of
distributions at actual prices pursuant to the fund's dividend reinvestment
plan.
12
DIRECTORS AND OFFICERS (UNAUDITED)
The Board of Directors elects officers who are responsible for the day-to-day
operations of the Fund. 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
Investment Company Act of 1940, as amended. Each officer and three of the fund's
directors, as noted in the chart below, are "interested" persons of the fund.
Each director serves as a director of The Hartford Mutual Funds, Inc., The
Hartford Mutual Funds II, Inc., The Hartford Income Shares Fund, Inc., Hartford
Series Fund, Inc. and Hartford HLS Series Fund II, Inc., which collectively
consist of 87 funds. Correspondence may be sent to directors and officers c/o
The Hartford Income Shares Fund, P.O. Box 2999, Hartford, Connecticut
06104-2999, except that correspondence to Ms. Fagely and Ms. Settimi may be sent
to 500 Bielenberg Dr., Woodbury, Minnesota 55125.
The table below sets forth, for each director and officer, his or her name, age,
current position with the fund and date first elected or appointed, principal
occupation, and, for directors, other directorships held.
NON-INTERESTED DIRECTORS
LYNN S. BIRDSONG (age 60) Director since 2003, Chairman of the Litigation
Committee; Co-Chairman of the Investment Committee
Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an
advertising specialty firm. Since 2003, Mr. Birdsong has been an
independent director of The Japan Fund. From 2003 to March 2005, Mr.
Birdsong was an independent director of the Atlantic Whitehall Funds. 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.
ROBERT M. GAVIN, JR. (age 66) Director since 1986, Chairman of the Board since
2004
Dr. Gavin is an educational consultant. Prior to September 1, 2001, he was
President of Cranbrook Education Community. Prior to July 1996, he was
President of Macalester College, St. Paul, Minnesota.
DUANE E. HILL (age 61) Director since 2002, Chairman of the Nominating Committee
Mr. Hill is a Partner of TSG Ventures L.P., a private equity investment
company that invests primarily in minority-owned small businesses. Mr. Hill
is a former Partner of TSG Capital Group, a private equity investment firm
that serves as sponsor and lead investor in leveraged buyouts of middle
market companies.
SANDRA S. JAFFEE (age 65) Director since 2005
Ms. Jaffee is Chief Executive Officer of Fortent (formerly Searchspace
Group), a leading provider of compliance/regulatory technology to financial
institutions. Ms. Jaffee served as an Entrepreneur in Residence with
Warburg Pincus, a private equity firm, from August 2004 to August 2005.
From September 1995 to July 2004, Ms. Jaffee served as Executive Vice
President at Citigroup, where she was President and Chief Executive Officer
of Citibank's Global Securities from 1995 to 2003.
WILLIAM P. JOHNSTON (age 62) 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 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. Mr.
Johnston joined Renal Care Group in November 2002 as a member of the Board
of Directors and served as Chairman of the Board from March 2003 through
March 2006. From September 1987 to December 2002, Mr. Johnston was with
Equitable Securities Corporation (and its successors, SunTrust Equitable
Securities and SunTrust Robinson Humphrey) serving in various investment
banking and managerial positions, including Managing Director and Head of
Investment Banking, Chief Executive Officer and Vice Chairman.
PHILLIP O. PETERSON (age 62) Director since 2000, Chairman of the Audit
Committee
Mr. Peterson is a mutual fund industry consultant. Mr. Peterson joined
William Blair Funds in February 2007 as a member of their board of
directors. From January 2004 to April 2005, Mr. Peterson served as
Independent President of the Strong Mutual Funds. Mr. Peterson was a
partner of KPMG LLP (an accounting firm) until July 1999.
LEMMA W. SENBET (age 60) Director since 2005
Dr. Senbet is the William E. Mayer Chair Professor of Finance at the
University of Maryland, Robert H. Smith School of Business. He was chair of
the Finance Department during 1998-2006. Previously he was an endowed
professor of finance at the University of Wisconsin-Madison. Also, Dr.
Senbet was director of the Fortis Funds from March 2000 until July 2002.
Professor Senbet served the finance profession in various capacities,
including as director of the American Finance Association and President of
the Western Finance Association.
13
INTERESTED DIRECTORS AND OFFICERS
THOMAS M. MARRA (age 48) Director since 2002
Mr. Marra is President and Chief Operating Officer of Hartford Life, Inc.
He is also a member of the Board of Directors and a member of the Office of
the Chairman for The Hartford Financial Services Group, Inc. ("The
Hartford"), the parent company of Hartford Life. Mr. Marra was named
President of Hartford Life in 2001 and Chief Operating Officer in 2000, and
served as Director of Hartford Life's Investment Products Division from
1998 to 2000. Mr. Marra is also Chief Executive Officer, Managing Member
and President of Hartford Investment Financial Services, LLC ("HIFSCO") and
HL Investment Advisors, LLC ("HL Advisors").
LOWNDES A. SMITH (age 67) Director since 2002, 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 Hartford Life,
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 has served as a Director of White Mountains
Insurance Group since November 2003.
DAVID M. ZNAMIEROWSKI (age 46) Director since 2007(1), President since 2001,
Chief Executive Officer since 2005
Mr. Znamierowski currently serves as President of Hartford Investment
Management Company ("Hartford Investment") and Executive Vice President and
Chief Investment Officer for The Hartford, Hartford Life, Inc. and Hartford
Life Insurance Company. Mr. Znamierowski is also a Managing Member of HL
and Executive Vice President and Chief Investment Officer of HIFSCO and HL
Advisors.
ROBERT M. ARENA, JR. (age 38) Vice President since 2006
Mr. Arena serves as Senior Vice President of Hartford Life and heads its
Retail Product Management Group in the U.S. Wealth Management Division.
Prior to joining The Hartford in 2004, he was Senior Vice President in
charge of Product Management for American Skandia/Prudential in the
individual annuities division. Mr. Arena joined American Skandia in 1996.
Previously, he was with Paul Revere Insurance Group in its group insurance
division.
TAMARA L. FAGELY (age 48) Vice President since 1996, Controller since 2001 and
Treasurer since 1993
Ms. Fagely has been a Vice President of Hartford Administrative Services
Company (HASCO) since 1998 and Chief Financial Officer since 2006.
Currently, Ms. Fagely is a Vice President of Hartford Life. She served as
Assistant Vice President of Hartford Life from December 2001 through March
2005. In addition, she is Controller of HIFSCO.
SUSAN FLEEGE (age 47) AML Compliance Officer since 2005
Ms. Fleege has served as Chief Compliance Officer for Hartford
Administrative Services Company since 2005 and Hartford Investor Company,
LLC since 2006. Prior to joining Hartford Life in 2005, Ms. Fleege was
Counsel for Ameriprise Financial Corporation from 2000 to 2005.
THOMAS D. JONES III (age 41) Vice President and Chief Compliance Officer since
2006
Mr. Jones joined The Hartford as Vice President and Director of Securities
Compliance in 2006 from SEI Investments, where he served as Chief
Compliance Officer for its mutual funds and investment advisers. Prior to
joining SEI, Mr. Jones was First Vice President and Compliance Director for
Merrill Lynch Investment Managers (Americas) ("MLIM"), where he worked from
1992-2004. At MLIM, Mr. Jones was responsible for the compliance oversight
of various investment products, including mutual funds, wrap accounts,
institutional accounts and alternative investments.
EDWARD P. MACDONALD (age 39) Vice President, Secretary and Chief Legal Officer
since 2005
Mr. Macdonald serves as Assistant General Counsel of The Hartford. Prior to
joining The Hartford in 2005, Mr. Macdonald was Chief Counsel, Investment
Management for Prudential Financial (formerly American Skandia Investment
Services, Inc.). He joined Prudential in April 1999.
VERNON J. MEYER (age 42) Vice President since 2006
Mr. Meyer serves as Vice President of Hartford Life and Director of its
Investment Advisory Group in the U.S. Wealth Management Division. Prior to
joining The Hartford in 2004, Mr. Meyer was with MassMutual which he joined
in 1987.
DENISE A. SETTIMI (age 46) Vice President since 2005
Ms. Settimi currently serves as Chief Operating Officer and Assistant Vice
President of HASCO. Previously, Ms. Settimi was with American Express
Financial Advisors, where she was Director of Retirement Plan Services from
1997 to 2003.
JOHN C. WALTERS (age 45) Vice President since 2001
Mr. Walters serves as Executive Vice President and Director of Hartford
Life and President of the U.S. Wealth Management Division. He is also a
Managing Member and Executive Vice President of HIFSCO and HL Advisors.
Previously, Mr. Walters was with First Union Securities.
(1) Elected by shareholders on January 9, 2007
14
<Table>
INVESTMENT MANAGER Hartford Investment Financial Services, LLC
P.O. Box 1744, Hartford, CT 06144-1744
DIVIDEND DISBURSING AGENT Hartford Administrative Services Company
P.O. Box 64387, St. Paul, MN 55164
REGISTRAR Wells Fargo Bank, N.A.
Minneapolis, Minnesota
CUSTODIAN State Street Bank and Trust Company
Boston, Massachusetts
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP
Minneapolis, Minnesota
</Table>
MARKET PRICE The Hartford Income Shares Fund, Inc. is listed on
the New York Stock Exchange with the Ticker symbol
"HSF". The market price is carried daily in the
financial pages of most newspapers and carried on
Monday in the "Closed-End Funds" table which sets
forth on a per share basis the previous week's net
asset value, market price and the percentage
difference between net asset value and market price
for the fund under the name "HrtfrdIncoFd".
SHAREHOLDER MEETING RESULTS (UNAUDITED)
The following proposals were addressed and approved at the Annual Meeting of the
Shareholders of the Hartford Income Shares Fund Inc. (the "Company") held on
January 9, 2007.
1. Proposal to elect a Board of Directors consisting of the following ten
nominees: Lynn S. Birdsong, Robert M. Gavin, Duane E. Hill, Sandra S. Jaffee,
William P. Johnston, Phillip O. Peterson, Lemma W. Senbet, Thomas M. Marra,
Lowndes A. Smith and David M. Znamierowski.
<Table>
<Caption>
Affirmative Withheld
-------------- -----------
L. S. Birdsong.............................................. 10,675,133.808 196,767.974
R. M. Gavin ................................................ 10,658,179.968 213,721.814
D. E. Hill.................................................. 10,648,382.724 223,519.058
S. S. Jaffee................................................ 10,530,872.329 341,029.453
W. P. Johnston.............................................. 10,643,644.724 228,257.058
P. O. Peterson.............................................. 10,673,165.808 198,735.974
L. W. Senbet................................................ 10,644,099.489 227,802.293
T. M. Marra................................................. 10,674,711.490 197,190.292
L. A. Smith................................................. 10,673,866.808 198,034.974
D. M. Znamierowski.......................................... 10,683,803.330 188,098.452
</Table>
2. Proposal to ratify the selection by the Board of Directors of the Company of
Ernst and Young LLP as the Company's independent registered public accounting
firm for the fiscal year ending July 31, 2007.
<Table>
<Caption>
Affirmative Against Abstain
-------------- ---------- ----------
Selection of Ernst & Young LLP.............................. 10,696,549.984 78,474.981 96,876.817
</Table>
IMPORTANT TAX INFORMATION (UNAUDITED)
The information needed by shareholders for income tax purposes will be sent in
early 2008.
MONTHLY DIVIDENDS PAID
<Table>
<Caption>
DATE AMOUNT
- ---- -------
August 2006................................................. $0.046 Income
September 2006.............................................. 0.046 Income
October 2006................................................ 0.046 Income
November 2006............................................... 0.046 Income
December 2006............................................... 0.046 Income
January 2007................................................ 0.046 Income
-------
$0.276
=======
</Table>
INFORMATION APPLICABLE TO FOREIGN SHAREHOLDERS ONLY:
Pursuant to Internal Revenue Code Section 871(k)(1)(C), the percent of the
Fund's ordinary income distributions that are designated as interest-related
dividends is 93.5%
15
APPROVAL OF INVESTMENT MANAGEMENT AND INVESTMENT SUB-ADVISORY AGREEMENTS
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"), annually review and consider
the continuation of the mutual fund's investment advisory and sub-advisory
agreements, after an initial two year period.
At a meeting held on August 1-2, 2006, the Board of Directors of The Hartford
Income Shares Fund, Inc. ("Fund") including each of the Independent Directors,
unanimously voted to approve the investment management agreement for the Fund
with Hartford Investment Financial Services, LLC ("HIFSCO") and the investment
sub-advisory agreement between HIFSCO and Hartford Investment Management Company
("Hartford Investment") ("sub-adviser," and together with HIFSCO, "advisers")
(collectively, the "agreements"). In the months preceding this 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. In addition, the Board
received in-person presentations about the Fund and the related agreements by
Fund officers and representatives of HIFSCO at the Board's meetings on June
20-21, 2006 and August 1-2, 2006. In considering the approval of the agreements,
the Board also took into account information provided to the Board at its
meetings throughout the year, including reports on Fund performance, compliance,
shareholder services, and the other services provided to the Fund by the
advisers, and their affiliates.
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
management and sub-advisory fees, overall expense ratios, and investment
performance compared to those of funds with similar investment objectives in
various peer groups ("peer funds"). The Independent Directors also engaged an
independent financial services consulting firm ("Consultant") to assist them in
evaluating the Fund's management and sub-advisory fees, overall expense ratios
and investment performance.
The Board considered the agreements at the June and August meetings. In
determining to continue the agreements for the Fund, the Board determined that
the proposed management fee structure for the Fund was fair and reasonable and
that continuation of the agreements was in the best interests of the Fund and
its shareholders. In determining to re-approve the agreements, the Board
considered the following categories of material factors, among others, relating
to the agreements.
NATURE, EXTENT AND QUALITY OF SERVICES
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, the range of
services provided, and the advisers' organizational structure, systems and
personnel. The Board received information on the experience of senior management
and relevant investment and other personnel of the advisers, and the adequacy of
the time and attention devoted by them to 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, including
hiring additional personnel, designed to improve services to the Fund, and its
investments in infrastructure in light of increased regulatory requirements and
other developments. 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, their
compliance history, and a report from the Fund's Chief Compliance Officer on
each adviser's compliance with applicable laws and regulations, including their
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 HIFSCO, the Board noted that under the agreements, HIFSCO is
responsible for the management of the Fund, including overseeing fund operations
and service providers, and provides administrative services to the Fund, as well
as investment advisory services in connection with selecting, monitoring and
supervising Hartford Investment. The Board considered that HIFSCO or its
affiliates are responsible for providing the Fund's officers and paying their
salaries and expenses. In addition, the Board considered the nature and quality
of the services provided to the Fund and its shareholders by HIFSCO's
affiliates.
With respect to the Hartford Investment, who provides day-to-day portfolio
management services, the Board considered the quality of Hartford Investment's
investment personnel, its ability to attract and retain qualified investment
professionals, its investment philosophy and process, investment research
capabilities and resources, performance record, trade execution capabilities and
experience.
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 HIFSCO
and Hartford Investment.
16
PERFORMANCE OF THE FUND, HIFSCO, AND HARTFORD INVESTMENT
The Board considered the investment performance of the Fund. In this regard, the
Board considered information and materials provided to the Board from HIFSCO and
Lipper comparing the Fund's short-term and long-term and recent investment
performance over various periods of time with appropriate benchmark indices, and
with a performance universe of funds selected by Lipper. This information
included performance reports (provided by Lipper, HIFSCO and the Hartford
Investment) and discussions with portfolio managers and other representatives of
Hartford Investment at board meetings throughout the year, as well as the
information provided especially for the annual contract review. The Board also
considered the analysis provided by the Consultant relating to the Fund's
performance track record.
The Board considered HIFSCO's cooperation with the Investment Committee, which
assists the Board in evaluating the performance of the Fund at periodic meetings
throughout the year. The Board reviewed the performance of the Fund over the
different time periods presented in the materials and evaluated analysis of the
Fund's performance for these time periods.
Based on these considerations, the Board concluded that the Fund's performance
over time has been satisfactory, and that it had continued confidence in
HIFSCO's and Hartford Investment's overall capabilities to manage the Fund.
COSTS OF THE SERVICES AND PROFITABILITY OF HIFSCO AND HARTFORD INVESTMENT
The Board reviewed information regarding HIFSCO's cost to provide investment
management and related services to the Fund and HIFSCO's profitability, both
overall and for the Fund, on a pre-tax basis without regard to distribution
expenses. In this regard, the Board noted that HIFSCO had worked with
PriceWaterhouseCoopers to refine its methodology for calculating profitability.
The Board also requested and reviewed information about the profitability to
HIFSCO and its affiliates from all services provided to the Fund and all aspects
of their relationship with the Fund. With respect to Hartford Investment, an
affiliate of HIFSCO, the Board considered the costs and profitability
information for HIFSCO and Hartford Investment in the aggregate.
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 HIFSCO AND HARTFORD INVESTMENT
The Board considered comparative information with respect to the investment
management fees to be paid by the Fund to HIFSCO, the investment sub-advisory
fees to be paid by HIFSCO to Hartford Investment, and the total expense ratios
of the Fund. In this regard, the Board requested and reviewed information from
HIFSCO and Hartford Investment relating to the management and sub-advisory fees,
and total operating expenses, for the Fund. The Board also reviewed written
materials from Lipper providing comparative information about the Fund's
management and sub-advisory fees, total expense ratios and the components
thereof, relative to those of peer groups. While the Board recognized that
comparisons between the Fund and peer funds are imprecise, given the differing
service levels and characteristics of funds, and the different business models
and cost structures of advisers, the comparative information provided by Lipper
assisted the Board in evaluating the reasonableness of the Fund. 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 are within a range that is competitive with fees and
total operating expenses charged by peer funds, and, in conjunction with the
information about quality of services, profitability, economies of scale, and
other matters discussed, are reasonable.
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 each Fund's
investors. With respect to HIFSCO, the Board considered representations from
HIFSCO that it is difficult to anticipate whether and the extent to which
economies may be realized by HIFSCO as assets grow over time. The Board reviewed
the breakpoints in the advisory fee schedule for the Fund, which reduces fees as
Fund assets grow over time. The Board recognized that the Fund with assets
beyond the last breakpoint level 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 considered that the
Funds 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 reviewed and evaluated materials from Lipper showing how the fee
schedules of peer funds reflect economies of scale for the benefit of investors
as a peer fund's assets hypothetically increase over time. Based on information
provided by HIFSCO, 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.
17
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 other benefits to the advisers and their affiliates from
their relationships with the Fund.
The Board also reviewed the fact that Hartford Administrative Services Company
("HASCO"), the Fund's transfer agent and an affiliate of HIFSCO, receives
transfer agency compensation from HIFSCO, and the Board reviewed information on
the expected profitability of the Fund's transfer agency function to HASCO. The
Board noted, in this regard, that HASCO is a recognized leader in providing high
quality services to Fund shareholders. The Board considered information provided
by HASCO indicating that the per-account fees charged by HASCO are reasonable
and in line with industry standards.
The Board also considered the fact that Hartford Life had agreed, effective
January 1, 2007, to no longer charge the Fund for legal services provided to the
Fund by personnel of Hartford Life. Based upon expense information for the prior
calendar year, this change will result in savings to the Fund of approximately
$18,000 per year.
* * *
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 and the full
Board 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.
18
ITEM 2. CODE OF ETHICS.
Not applicable to this semi-annual filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to this semi-annual filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this semi-annual filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to this semi-annual filing.
ITEM 6. SCHEDULE OF INVESTMENTS
The Schedule of Investments is included as part of this semi-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 to this semi-annual filing.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable to this semi-annual filing.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
INCOME SHARES FUND
Total Average Shares purchased Maximum number
Period SHARES Price Paid as part of public of shares that may
PURCHASED per share announced plan yet be purchased
- --------------------------------------------------------------------------------------------------------------------
8/1/2006 11,820 7.3599 0 0
9/1/2006 11,130 7.8166 0 0
10/2/2006 11,005 7.9049 0 0
11/1/2006 10,760 7.9854 0 0
12/1/2006 10,220 8.1213 0 0
1/2/2007 3,210 8.0500 0 0
----------- ---------- ----------
Total 58,145 0 0
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures of the Nominating
Committee policy since registrant's last 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.
12(a)(2) Section 302 certifications of the principal executive officer and
principal financial officer of Registrant.
(b) Section 906 certification.
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.
THE HARTFORD INCOME SHARES FUND, INC.
Date: March 19, 2007 By: /s/ David M. Znamierowski
---------------------------
David M. Znamierowski
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: March 19, 2007 By: /s/ David M. Znamierowski
---------------------------
David M. Znamierowski
Its: President
Date: March 19, 2007 By: /s/ Tamara L. Fagely
---------------------------
Tamara L. Fagely
Its: Vice President, Controller
and Treasurer
EXHIBIT LIST
99.CERT 12(a)(2) Certifications
(i) Section 302 certification of principal executive
officer
(ii) Section 302 certification of principal financial
officer
99.906CERT 12(b) Section 906 certification of principal executive
officer and principal financial officer