-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ro59PF7PiXqzYN223FIDEm20mUf5yVQenzySnLUbBjQiW+aUQYuzOTHiK/dncQX0 VdEHT1EerUNtpGa+V8tMjw== 0000950135-03-005036.txt : 20031002 0000950135-03-005036.hdr.sgml : 20031002 20031002144807 ACCESSION NUMBER: 0000950135-03-005036 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030731 FILED AS OF DATE: 20031002 EFFECTIVENESS DATE: 20031002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARTFORD INCOME SHARES FUND INC CENTRAL INDEX KEY: 0000086317 IRS NUMBER: 410988154 STATE OF INCORPORATION: MN FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-02281 FILM NUMBER: 03923778 BUSINESS ADDRESS: STREET 1: P O BOX 64284 CITY: ST PAUL STATE: MN ZIP: 55164 BUSINESS PHONE: 6127384000 MAIL ADDRESS: STREET 1: P O BOX 64284 CITY: ST PAUL STATE: MN ZIP: 55164 FORMER COMPANY: FORMER CONFORMED NAME: FORTIS SECURITIES INC DATE OF NAME CHANGE: 19930518 FORMER COMPANY: FORMER CONFORMED NAME: AMEV SECURITIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SAINT PAUL SECURITIES INC DATE OF NAME CHANGE: 19860428 N-CSR 1 b47898innvcsr.txt THE HARTFORD INCOME SHARES ANNUAL REPORT 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) Kevin J. Carr, Esquire Investment Law Unit The Hartford Financial Services Group, Inc. 55 Farmington Avenue Hartford, Connecticut 06105 (Name and Address of Agent for Service) Registrant's telephone number, including area code: (860) 297-6443 Date of fiscal year end: July 31, 2003 Date of reporting period: August 1, 2002 to July 31, 2003 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 FUND GRAPHIC] JULY 31, 2003 THE HARTFORD INCOME SHARES FUND, INC. ---------------------------------------- Annual Report [THE HARTFORD LOGO] THE HARTFORD INCOME SHARES FUND, INC. ANNUAL REPORT CONTENTS LETTER TO SHAREHOLDERS 1 SCHEDULE OF INVESTMENTS 2 STATEMENT OF ASSETS AND LIABILITIES 7 STATEMENT OF OPERATIONS 7 STATEMENTS OF CHANGES IN NET ASSETS 8 NOTES TO FINANCIAL STATEMENTS 9 INDEPENDENT AUDITORS' REPORT 11 DIRECTORS AND OFFICERS 12 - - TOLL-FREE PERSONAL ASSISTANCE -Customer Service -(888) 843-7824 - 7:00 a.m. to 6:00 p.m. CT, Monday thru Thursday 7 a.m. - 5 p.m. Friday CT - - TOLL-FREE INFORMATION LINE - For daily account balances, transaction activity or net asset value information -(888) 843-7824 x14344 -24 hours a day A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling 888-843-7824 and (2) on the Securities and Exchange Commission's website at http:www.sec.gov. 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. 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
THE HARTFORD INCOME SHARES FUND, INC. ------------------- JULY 31, 2003 TOTAL NET ASSETS (000'S OMITTED)................... $99,045 MARKET PRICE PER SHARE............................. $ 6.99 SHARES OUTSTANDING (000'S OMITTED)................. 12,979 FOR THE YEAR ENDED JULY 31, 2003: NET ASSET VALUE PER SHARE: Beginning of year................................ $ 6.66 End of year...................................... $ 7.63 DISTRIBUTIONS FROM NET INVESTMENT INCOME: Total dividends paid (000's Omitted)............. $ 7,751 Dividends per share.............................. $ 0.60
MONTHLY DIVIDENDS PAID
DATE AMOUNT ---- ------ August 2002........................................... 0.053 Income September 2002........................................ 0.053 Income October 2002.......................................... 0.050 Income November 2002......................................... 0.050 Income December 2002......................................... 0.050 Income January 2003.......................................... 0.050 Income February 2003......................................... 0.050 Income March 2003............................................ 0.050 Income April 2003............................................ 0.050 Income May 2003.............................................. 0.050 Income June 2003............................................. 0.046 Income July 2003............................................. 0.046 Income
PORTFOLIO COMPOSITION BY SECTOR AS OF 7/31/2003 [PORTFOLIO COMPOSITION PIE CHART]
CASH U.S. GOVERNMENT CORPORATE BONDS - CORPORATE BONDS - NON-INVESTMENT GRADE EQUIVALENTS/RECEIVABLES AGENCIES COMMON STOCKS INVESTMENT GRADE - -------------------------------------- ----------------------- --------------- ------------- ----------------- 28.4 1.70 1.40 0.40 68.10
TOP 10 HOLDINGS AS OF 7/31/2003 Percent of Bonds Net Assets - -------------------------------------------------------------------------------- 1. Ford Motor Co. (7.45%) 2031 2.6% 2. General Motors Acceptance Corp. (8.00%) 2031 2.5% 3. Time Warner Entertainment Co. (8.375%) 2033 2.1% 4. Tele-Communications, Inc. (9.80%) 2012 1.9% 5. AT&T Corp. (8.50%) 2031 1.9% 6. News America Holdings, Inc. (8.875%) 2023 1.8% 7. AT&T Wireless Services, Inc. (8.75%) 2031 1.7% 8. Farmers Exchange Capital (7.20%) 2048 1.6% 9. Columbia Energy Group (7.62%) 2025 1.6% 10. TXU Corp. (6.375%) 2006 1.4% HOW DID THE FUND PERFORM? The Hartford Income Shares Fund, Inc. placed in the 6th percentile of its Lipper peer group for the one year ended July 31, 2003, producing a net return of 11.63% at market and 24.36% at net asset value versus the 11.96% net return of the Lipper BBB-Rated Corporate Debt Closed-End Funds Universe. WHY DID THE FUND PERFORM THIS WAY? In recent months there has been a considerable amount of volatility in the Treasury market. In May and early June, speculation over the possibility of the Federal Reserve purchasing Treasuries combined with talk of deflation on the part of the Fed, pushed yields on 10-year Treasuries down to roughly 3.1%. However, signs of a rebound in the economy (and Mr. Greenspan's comments downplaying the prospects for both deflation and market intervention) caused this mini bubble to burst, with 10-year Treasuries falling by almost 9% between mid-June and the end of July, as the yield rose to nearly 4.5%. This correction was worse than any comparable period during the Treasury market rout of 1994 and one would have to go back to 1980 to find a sharper sell-off in Treasuries. While the Fund is not invested in Treasuries at this point, the volatility in that market has important implications for the corporate and high yield bonds that the Fund does own. Through June 2003, the investment grade and high yield markets experienced their best nine-month excess total return performance (relative to Treasuries) in recent history. The Fund's strong performance over the past year can be attributed to its significant holdings in the investment grade and high yield segments of the corporate bond market. The Fund's concentration in the telecommunications, media and cable industries have been among the best performers. The crisis of confidence sparked by Enron, Adelphia, WorldCom and others, gradually faded as the Sarbanes-Oxley Act certification procedure instilled some confidence in the numbers reported by corporations. In addition, a general trend toward more prudent financial management led to an improvement in credit quality in the form of companies focusing on cash flow generation, debt reduction and liquidity management. As yield spreads to Treasuries tightened in investment grade and high yield bonds, total return performance further accelerated as a result of the aforementioned May to mid-June rally in Treasuries. The negative implication of this low yield environment was the fact that reinvesting principal proceeds generated by sales and maturities resulted in a lower portfolio yield. Our primary focus remains on delivering a relatively high yield, while keeping a close eye on the total return of the Fund. We have been focused mainly on opportunities in the auto and communications sectors, as these sectors still offer relatively high yields with some potential for price appreciation. We have been actively searching for alternatives and, in fact, we recently made our first purchase of an asset-backed structure in years. We are looking for opportunities to further diversify our risk profile, while maintaining the portfolio's yield. THE HARTFORD INCOME SHARES FUND, INC. Schedule of Investments July 31, 2003 (000's Omitted) CORPORATE BONDS - INVESTMENT GRADE - 68.1% - --------------------------------------------------------------------------------
Standard & Poor's Principal Rating Market Amount (Unaudited) Value(c) - --------- ----------- -------- BASIC MATERIALS - 3.7% $ 250 Ferro Corp., 9.125%, 1-1-2009............................... BBB- $ 282 500 Newmont Mining Corp., 8.625%, 5-15-2011..................... BBB 591 250 Noranda, Inc., 8.375%, 2-15-2011 (d)........................ BBB- 266 300 Olin Corp., 9.125%, 12-15-2011.............................. BBB- 344 685 Phelps Dodge Corp., 8.75%, 6-1-2011......................... BBB- 774 250 Phelps Dodge Corp., 9.50%, 6-1-2031......................... BBB- 279 1,000 Westvaco Corp., 8.20%, 1-15-2030............................ BBB 1,123 ------- 3,659 ------- CAPITAL GOODS - 1.2% 1,250 Tyco International Group S.A., 7.00%, 6-15-2028............. BBB- 1,162 ------- CONSUMER CYCLICAL - 7.7% 1,000 Albertson's, Inc., 8.70%, 5-1-2030.......................... BBB 1,185 1,000 Federated Department Stores, Inc., 8.50%, 6-1-2010.......... BBB+ 1,180 3,000 Ford Motor Co., 7.45%, 7-16-2031............................ BBB 2,562 1,000 General Motors Corp., 8.25%, 7-15-2023...................... BBB 948 500 May Department Stores Co., 8.50%, 6-1-2019.................. BBB+ 582 1,000 TRW, Inc., 7.75%, 6-1-2029.................................. BBB- 1,148 ------- 7,605 ------- ENERGY - 7.0% 850 Burlington Resources, Inc., 9.125%, 10-1-2021............... BBB+ 1,074 1,500 Columbia Energy Group, 7.62%, Ser G 11-28-2025.............. BBB 1,553 1,000 Conoco, Inc., 6.95%, 4-15-2029.............................. A- 1,081 750 Halliburton Co., 5.625%, 12-1-2008.......................... BBB 765 1,000 Occidental Petroleum Corp., 8.45%, 2-15-2029................ BBB+ 1,258 1,000 Valero Energy Corp., 8.75%, 6-15-2030....................... BBB 1,158 ------- 6,889 ------- FINANCE - 15.1% 200 Aon Capital Trust, 8.205%, 1-1-2027......................... BBB 216 500 AQ Finance CEB Trust Notes, 6.01%, Series 2003-CE1 8-26-2034 (f)......................................................... NR 490 500 Bombardier Capital, Inc., 6.125%, 6-29-2006 (g)............. BBB- 515 500 Bombardier Capital, Inc., 7.50%, 8-15-2004 (g).............. BBB- 515 500 Capital One Bank, 6.50%, 7-30-2004.......................... BBB- 520 500 Capital One Bank, 8.25%, 6-15-2005.......................... BBB- 545 1,000 EOP Operating L.P., 7.50%, 4-19-2029........................ BBB+ 1,055 1,000 ERAC USA Finance Co., 8.00%, 1-15-2011 (g).................. BBB+ 1,130 2,000 Farmers Exchange Capital, 7.20%, 7-15-2048 (g).............. BBB+ 1,557 2,650 General Motors Acceptance Corp., 8.00%, 11-1-2031........... BBB 2,445 500 Household Finance Corp., 7.00%, 5-15-2012................... A 555 1,000 Mony Group, Inc., 8.35%, 3-15-2010.......................... BBB+ 1,055 1,000 ReliaStar Financial Corp., 8.00%, 10-30-2006................ A+ 1,140 1,000 Sears Roebuck Acceptance Corp., 6.25%, 5-1-2009............. BBB 1,069 1,000 Spieker Properties, Inc., 7.50%, 10-1-2027.................. BBB+ 1,000 1,000 Travelers Property Casualty Corp., 7.75%, 4-15-2026......... A- 1,125 ------- 14,932 ------- SERVICES - 13.3% 1,000 Belo Corp., 7.25%, 9-15-2027................................ BBB- 1,026 750 Clear Channel Communications, Inc., 7.65%, 9-15-2010........ BBB- 858 1,000 Comcast Cable Communications, Inc., 8.50%, 5-1-2027......... BBB 1,163 1,000 Cox Enterprises, Inc., 8.00%, 2-15-2007 (g)................. BBB 1,139 750 Electronic Data Systems Corp., 7.45%, 10-15-2029............ BBB 727 1,000 FedEx Corp., 7.84%, Ser 1996-B2 1-30-2018................... BBB+ 1,031 1,000 Hearst-Argyle Television, Inc., 7.00%, 1-15-2018............ BBB- 1,068 750 Hilton Hotels Corp., 8.25%, 2-15-2011....................... BBB- 817
The accompanying notes are an integral part of this financial statement. 2 CORPORATE BONDS - INVESTMENT GRADE - CONTINUED - --------------------------------------------------------------------------------
Standard & Poor's Principal Rating Market Amount (Unaudited) Value(c) - --------- ----------- -------- $1,000 MGM Mirage, Inc., 8.50%, 9-15-2010.......................... BBB- $ 1,115 1,500 News America Holdings, Inc., 8.875%, 4-26-2023.............. BBB- 1,812 1,250 Park Place Entertainment Corp., 8.50%, 11-15-2006........... BBB- 1,356 500 USA Networks, Inc., 6.75%, 11-15-2005....................... BBB- 537 500 USA Waste Management, Inc., 7.125%, 12-15-2017.............. BBB 542 ------- 13,191 ------- TECHNOLOGY - 14.0% 1,750 AT&T Corp., 8.50%, 11-15-2031............................... BBB+ 1,851 1,500 AT&T Wireless Services, Inc., 8.75%, 3-1-2031............... BBB 1,729 500 Citizens Communications Co., 9.00%, 8-15-2031............... BBB 609 1,130 Computer Associates International, Inc., 6.375%, Ser B 4-15-2005................................................... BBB+ 1,198 500 Cox Communications, Inc., 6.80%, 8-1-2028................... BBB 494 1,000 Raytheon Co., 7.20%, 8-15-2027.............................. BBB- 1,054 270 Rogers Cable, Inc., 6.25%, 6-15-2013 (d)(g)................. BBB- 259 250 Sprint Capital Corp., 6.00%, 1-15-2007...................... BBB- 262 1,500 Sprint Capital Corp., 6.875%, 11-15-2028.................... BBB- 1,346 1,500 Tele-Communications, Inc., 9.80%, 2-1-2012.................. BBB 1,889 400 Telus Corp., 8.00%, 6-1-2011 (d)............................ BBB 447 1,800 Time Warner Entertainment Co., 8.375%, 7-15-2033............ BBB+ 2,091 700 Time Warner, Inc., 6.625%, 5-15-2029........................ BBB+ 649 # VoiceStream Wireless Corp., 10.375%, 11-15-2009............. BBB+ # # VoiceStream Wireless Corp., (Baby Bonds) 10.375%, 11-15-2009.................................................. BBB+ # ------- 13,878 ------- TRANSPORTATION - 1.2% 1,000 Norfolk Southern Corp., 8.625%, 5-15-2010................... BBB 1,194 ------- UTILITIES - 4.9% 750 Alliant Energy Resources, Inc., 9.75%, 1-15-2013............ BBB 906 1,000 American Electric Power Co., Inc., 6.125%, 5-15-2006........ BBB 1,079 1,000 CMS Panhandle Holding Co., 7.00%, 7-15-2029................. BBB 999 500 FirstEnergy Corp., 6.45%, Ser B 11-15-2011.................. BBB- 510 1,400 TXU Corp., 6.375%, Ser J 6-15-2006.......................... BBB- 1,432 ------- 4,926 ------- TOTAL CORPORATE BONDS - INVESTMENT GRADE (COST $59,299)..... $67,436 =======
CORPORATE BONDS - NON-INVESTMENT GRADE - 28.4% - --------------------------------------------------------------------------------
Standard & Poor's Principal Rating Market Amount (Unaudited) Value(c) - --------- ----------- -------- BASIC MATERIALS 4.2% $1,000 Abitibi-Consolidated, Inc., 8.85%, 8-1-2030 (d)............. BB+ $ 976 750 Equistar Chemicals L.P., 10.125%, 9-1-2008.................. BB 742 1,150 Georgia-Pacific Corp., 9.625%, 3-15-2022.................... BB+ 1,092 500 Hercules, Inc., 11.125%, 11-15-2007......................... BB- 580 235 Nova Chemicals Corp., 7.00%, 5-15-2006 (d).................. BB+ 249 250 Stone Container Corp., 9.75%, 2-1-2011...................... B 265 250 United States Steel LLC, 10.75%, 8-1-2008................... BB- 249 ------- 4,153 ------- CAPITAL GOODS - 0.4% 170 Briggs & Stratton Corp., 8.875%, 3-15-2011.................. BB+ 194 200 Jorgensen (Earle M.) Co., 9.75%, 6-1-2012................... B- 210 ------- 404 -------
3 THE HARTFORD INCOME SHARES FUND, INC. Schedule of Investments July 31, 2003 (000's Omitted) CORPORATE BONDS - NON-INVESTMENT GRADE - CONTINUED - --------------------------------------------------------------------------------
Standard & Poor's Principal Rating Market Amount (Unaudited) Value(c) - --------- ----------- -------- CONSUMER CYCLICAL - 0.9% $ 500 Delhaize America, Inc., 9.00%, 4-15-2031.................... BB+ $ 521 120 Dillard's, Inc., 6.625%, 1-15-2018.......................... BB+ 98 85 Dillard's, Inc., 7.13%, 8-1-2018............................ BB+ 72 225 Navistar International Corp., 9.375%, Ser B 6-1-2006........ BB- 246 ------- 937 ------- ENERGY - 1.6% 200 Swift Energy Co., 10.25%, 8-1-2009.......................... B 210 500 Williams Companies, Inc., 7.125%, 9-1-2011.................. B+ 460 1,000 Williams Companies, Inc., 7.625%, 7-15-2019................. B+ 890 ------- 1,560 ------- FINANCE - 2.0% 300 Brazil (Republic of), 11.625%, 4-15-2004 (d)................ B+ 318 100 IPC Acquisition Corp., 11.50%, 12-15-2009................... B- 104 750 Qwest Capital Funding, Inc., 6.50%, 11-15-2018.............. CCC+ 488 25 Sandia Mortgage Corp., 9.14% 1991-A Variable Rate Pass Thru Certificate Class B 8-1-2018................................ NR 19 115 Western Financial Bank, 9.625%, 5-15-2012................... BB- 124 890 Xerox Credit Corp., 6.10%, 12-16-2003....................... B+ 893 ------- 1,946 ------- HEALTH CARE - 1.8% 155 IASIS Healthcare Corp., 13.00%, 10-15-2009.................. CCC+ 172 540 Select Medical Corp., 9.50%, 6-15-2009...................... B 580 925 Tenet Healthcare Corp., 5.00%, 7-1-2007..................... BB 856 150 United Surgical Partners International, Inc., 10.00%, 12-15-2011.................................................. B- 162 ------- 1,770 ------- SERVICES - 2.5% 250 Mandalay Resort Group, 7.625%, 7-15-2013.................... BB- 252 750 Service Corp. International, 6.50%, 3-15-2008............... BB- 728 650 Six Flags, Inc., 9.50%, 2-1-2009............................ B 601 750 Starwood Hotels & Resorts Worldwide, Inc., 7.375%, 5-1-2007.................................................... BB+ 776 150 Stewart Enterprises, Inc., 10.75%, 7-1-2008................. B+ 167 ------- 2,524 ------- TECHNOLOGY - 9.5% 675 Charter Communications Holdings, 10.00%, 5-15-2011.......... CCC- 506 260 Charter Communications Holdings, 8.25%, 4-1-2007............ CCC- 207 750 Dobson Communications Corp., 10.875%, 7-1-2010.............. CCC 788 500 EchoStar DBS Corp., 10.375%, 10-1-2007...................... BB- 544 750 Global Crossing Holdings Ltd., 9.50%, 11-15-2009 (a)(d)(e)................................................... NR 26 375 Hyperion Telecommunications, 12.25%, Ser B 9-1-2004 (a)..... NR 79 250 Level 3 Communications, Inc., 11.00%, 3-15-2008............. CC 222 595 Level 3 Communications, Inc., 11.25%, 3-15-2010............. CC 524 145 Level 3 Communications, Inc., 9.125%, 5-1-2008.............. CC 122 1,500 Lucent Technologies, Inc., 6.45%, 3-15-2029................. B- 968 77 Marconi Corp. plc, 10.00%, 10-31-2008 (d)................... NR 77 113 Marconi Corp. plc, 8.00%, 4-30-2008 (d)..................... NR 105 130 Metromedia Fiber Network, Inc., 10.00%, 12-15-2009 (a)(e)... NR 10 1,205 Metromedia Fiber Network, Inc., 10.00%, Ser B 11-15-2008 (a)(e)...................................................... NR 90 175 Nextel Communications, Inc., 10.65%, 9-15-2007.............. B+ 180 310 Nextel Communications, Inc., 9.375%, 11-15-2009............. B+ 329 325 Nextel Communications, Inc., 9.75%, 10-31-2007.............. B+ 335 650 Nortel Networks Corp., 6.125%, 2-15-2006 (d)................ B 621 650 Nortel Networks Corp., 6.875%, 9-1-2023 (d)................. B 569 500 PanAmSat Corp., 6.875%, 1-15-2028........................... BB- 475 650 Qwest Capital Funding, Inc., 5.875%, 8-3-2004............... CCC+ 611
The accompanying notes are an integral part of this financial statement. 4 CORPORATE BONDS - NON-INVESTMENT GRADE - CONTINUED - --------------------------------------------------------------------------------
Standard & Poor's Principal Rating Market Amount (Unaudited) Value(c) - --------- ----------- -------- $ 100 Qwest Corp., 6.875%, 9-15-2033.............................. B- $ 83 125 RCN Corp., 11.125%, 10-15-2007.............................. CCC- 52 584 RCN Corp., 9.80%, Ser B 2-15-2008........................... CCC- 239 1,000 Rogers Cantel, Inc., 9.75%, 6-1-2016 (d).................... BB+ 1,139 1,500 WorldCom, Inc. -- WorldCom Group, 8.25%, 5-15-2010 (a)...... NR 396 250 WorldCom, Inc. -- WorldCom Group, 8.25%, 5-15-2031 (a)...... NR 66 ------- 9,363 ------- TRANSPORTATION - 1.5% 170 CP Ships Ltd., 10.375%, 7-15-2012 (d)....................... BB+ 185 1,200 Delta Air Lines, Inc., 10.50%, 4-30-2016 (e)................ BB+ 963 500 Northwest Airlines Trust, 13.875%, Ser D 6-21-2008.......... Ba3* 360 ------- 1,508 ------- UTILITIES - 4.0% 190 Calpine Corp., 7.875%, 4-1-2008............................. CCC+ 140 310 Calpine Corp., 8.50%, 2-15-2011............................. CCC+ 225 1,000 El Paso Corp., 8.05%, 10-15-2030............................ Caa1* 720 500 Kansas Gas & Electric Co., 7.60%, 12-15-2003................ BB+ 496 1,285 Mission Energy Holding Co., 13.50%, 7-15-2008............... B- 642 720 Sierra Pacific Power Co., 8.00%, Ser A 6-1-2008............. BB 742 1,000 TECO Energy, Inc., 7.20%, 5-1-2011.......................... BB+ 950 ------- 3,915 ------- TOTAL CORPORATE BONDS - NON-INVESTMENT GRADE (COST $31,488).................................................... $28,080 =======
U.S. GOVERNMENT AGENCIES - 1.4% - --------------------------------------------------------------------------------
Principal Market Amount Value(c) - --------- -------- FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.3% $ 29 9.00% 2022.................................................. $ 33 91 10.50% 2017................................................. 102 50 11.25% 2010................................................. 56 42 11.50% 2015................................................. 48 60 11.75% 2010................................................. 68 ------- 307 ------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.8% 270 8.0% 2024-2025.............................................. 292 177 10.50% 2014-2020............................................ 199 150 11.00% 2011-2018............................................ 170 2 11.25% 2011................................................. 2 18 12.00% 2014................................................. 21 35 12.50% 2015................................................. 40 ------- 724 ------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.3% 194 9.00% 2021.................................................. 216 84 9.50% 2020.................................................. 93 ------- 309 ------- TOTAL U.S. GOVERNMENT AGENCIES (COST $1,244)................ $ 1,340 =======
5 THE HARTFORD INCOME SHARES FUND, INC. Schedule of Investments July 31, 2003 (000's Omitted) COMMON STOCKS - 0.4% - --------------------------------------------------------------------------------
Market Shares Value(c) - ------ -------- CONSUMER CYCLICAL - 0.0% 1 Hosiery Corp. of America, Inc. Class A (a)(e)............... # ------- TECHNOLOGY - 0.4% 16 Marconi Corp. plc (a)(d).................................... 184 7 McLeod USA, Inc. (Warrants) (a)............................. 2 1 Minorplanet Systems USA, Inc. (Warrants) (a)(e)(h).......... # 5 NTL, Inc. (a)............................................... 210 1 RSL (Warrants) (a)(e)....................................... # # WilTel Communications, Inc. (a)............................. 5 1 XO Communications, Inc. (a)................................. 4 1 XO Communications, Inc. Class A (Warrants) (a).............. 4 1 XO Communications, Inc. Class B (Warrants) (a).............. 3 1 XO Communications, Inc. Class C (Warrants) (a).............. 2 ------- TOTAL COMMON STOCKS (COST $297)............................. $ 414 =======
PREFERRED STOCKS - 0.0% - --------------------------------------------------------------------------------
Market Shares Value (c) - ------ --------- TECHNOLOGY - 0.0% 3 McLeod USA, Inc. Conv. Pfd., 2.50% Ser A 4-18-2012.......... 15 ------- TOTAL PREFERRED STOCKS (COST $21)........................... $ 15 ------- TOTAL INVESTMENTS IN SECURITIES (COST $92,349)(b)........... $97,285 =======
- -------------------------------------------------------------------------------- (a) Presently non-income producing. For long-term debt securities, items identified are in default as to payment of interest and/or principal. (b) At July 31, 2003, the cost of securities for federal income tax purposes was $92,537 and the aggregate gross unrealized appreciation and depreciation based on that cost were: Unrealized appreciation..................................... $ 10,710 Unrealized depreciation..................................... (5,962) -------- Net unrealized appreciation................................. $ 4,748 --------
(c) See Note 2b of accompanying Notes to Financial Statements regarding valuation of securities. (d) 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 5.47% of total net assets as of July 31, 2003. (e) 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 dealers in that program or to other "accredited investors". These investments have been identified by portfolio management as illiquid securities:
YEAR ACQUIRED SHARES/PAR SECURITY COST BASIS - ------------- ---------- -------- ---------- 1996 1,200 Delta Air Lines, Inc. due 2016.............................. $1,415 2000 750 Global Crossing Holdings Ltd. due 2009...................... 723 1994 1 Hosiery Corp. of America, Inc. Class A - 144A............... 8 2001 130 Metromedia Fiber Network, Inc. due 2009..................... 96 2001 1,205 Metromedia Fiber Network, Inc. due 2008..................... 865 1998 1 Minorplanet Systems USA, Inc. (Warrants) - 144A............. 5 1996 1 RSL (Warrants) - 144A....................................... 1
The aggregate value of these securities at July 31, 2003, was $1,089 which represents 1.10% of total net assets. (f) The cost of securities purchased on a when-issued basis at July 31, 2003, was $490. (g) 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 dealers in that program or to other "accredited investors". Pursuant to guidelines adopted by the Board of Directors, these issues are determined to be liquid. The aggregate value of these securities at July 31, 2003, was $5,115, which represents 5.16% of total net assets. (h) Securities are valued at fair value under guidelines established and approved by the Board of Directors. Total fair value securities had a value of $0, which represents 0.0% of total net assets at July 31, 2003. See Note 2b of accompanying Notes to Financial Statements. # Due to the presentation of the financial statements in thousands, the number of shares and/or dollars round to zero. * Moody's Rating. The accompanying notes are an integral part of this financial statement. 6 THE HARTFORD INCOME SHARES FUND, INC. Statement of Assets and Liabilities July 31, 2003 (000's Omitted) - -------------------------------------------------------------------------------- ASSETS Investments in securities, as detailed in the accompanying schedule, at market (cost $92,349) (Note 2)............. $ 97,285 Cash on deposit with custodian............................ 1,106 Receivables: Investment securities sold.............................. 2 Interest and dividends.................................. 1,823 -------- TOTAL ASSETS................................................ 100,216 -------- LIABILITIES Dividend payable ($0.046 per share)....................... 597 Payable for investment securities purchased............... 490 Payable for investment advisory and management fees (Note 3)...................................................... 53 Accounts payable and accrued expenses..................... 31 -------- TOTAL LIABILITIES........................................... 1,171 -------- NET ASSETS.................................................. $ 99,045 ======== COMPOSITION OF NET ASSETS Net proceeds of capital stock, par value $.01 per share-authorized 15,000 shares; 12,979 shares outstanding............................................. $124,949 Unrealized appreciation of investments.................... 4,936 Distributions in excess of net investment income.......... (314) Accumulated net realized loss from sale of investments.... (30,526) -------- TOTAL NET ASSETS............................................ $ 99,045 -------- NET ASSET VALUE PER SHARE................................... $ 7.63 ========
THE HARTFORD INCOME SHARES FUND, INC. Statement of Operations For the year ended July 31, 2003 (000's Omitted) - -------------------------------------------------------------------------------- NET INVESTMENT INCOME: Interest income........................................... $ 8,333 ------- EXPENSES: Investment advisory and management fees (Note 3).......... 593 Legal and auditing fees................................... 85 Custodian fees............................................ 7 Shareholders' notices and reports......................... 65 Directors' fees and expenses.............................. 2 Exchange listing fees..................................... 44 Other..................................................... 18 ------- Total expenses............................................ 814 ------- NET INVESTMENT INCOME....................................... 7,519 ------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized loss on investments.......................... (6,297) Net change in unrealized appreciation of investments...... 19,151 ------- NET GAIN ON INVESTMENTS..................................... 12,854 ------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $20,373 =======
The accompanying notes are an integral part of this financial statement. 7 THE HARTFORD INCOME SHARES FUND, INC. Statements of Changes in Net Assets (000's Omitted) - --------------------------------------------------------------------------------
For the For the Year Ended Year Ended July 31, 2003 July 31, 2002 ------------- ------------- OPERATIONS: Net investment income..................................... $ 7,519 $ 8,160 Net realized loss on investments.......................... (6,297) (715) Net change in unrealized appreciation (depreciation) of investments............................................. 19,151 (15,873) ------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................ 20,373 (8,428) ------- -------- DISTRIBUTIONS TO SHAREHOLDERS: From net investment income................................ (7,751) (8,195) ------- -------- CAPITAL SHARE TRANSACTIONS: Proceeds from 92 and 142 shares issued as a result of reinvested dividends, respectively...................... 651 1,076 ------- -------- TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 13,273 (15,547) NET ASSETS: Beginning of year......................................... 85,772 101,319 ------- -------- End of year............................................... $99,045 $ 85,772 ======= ======== DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME............ $ (314) $ (82) ======= ========
The accompanying notes are an integral part of this financial statement. 8 THE HARTFORD INCOME SHARES FUND, INC. Notes to Financial Statements July 31, 2003 ($000's Omitted) - -------------------------------------------------------------------------------- 1. ORGANIZATION: The Hartford Income Shares Fund, Inc., (formerly Fortis Securities, Inc.) ("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. 2. SIGNIFICANT ACCOUNTING POLICIES: The following is a summary of significant accounting policies of the fund, which are in accordance with accounting principles generally accepted in the United States in the investment company industry: (a) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Security transactions are accounted for on the trade date. Interest income including level-yield amortization of premium and discount is recorded on the accrual basis. Realized security gains and losses are determined using the identified cost method. For the year ended July 31, 2003, the cost of purchases and proceeds from sales of securities (other than short-term securities) aggregated $32,418 and $31,372, respectively. (b) SECURITY VALUATION: Debt securities (other than short-term obligations) are valued on the basis of valuations furnished by an unaffiliated pricing service, which determines valuations for normal institutional size trading units of debt securities. Mortgage securities are valued at the bid price. Short-term investments with a maturity of 60 days or less when purchased are valued at amortized cost, which approximates market value. Short-term investments purchased with a maturity of more than 60 days when purchased are valued based on market quotations until the remaining days to maturity becomes less than 61 days. From such time until maturity, the investments are valued at amortized cost. Equity securities are valued at the last sales price reported on the principal securities exchange on which such securities are traded (domestic or foreign) or on the principal over-the counter market on which such securities are traded, as of the close of business on the day the securities are being valued. If no sale took place on a particular day then securities are valued at the mean between the bid and asked prices. Securities for which market quotations are not readily available and all other assets are valued in good faith at fair value by, or under the direction of, the fund's Board of Directors. (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 which serve to collateralize the repurchase agreement are held by the fund's custodian in book entry form in the custodial account of the fund. Repurchase agreements are valued at cost plus accrued interest receivable. All repurchase agreements are executed through the fund's custodian, State Street Bank. As of July 31, 2003, there were no outstanding repurchase agreements. (d) CREDIT DEFAULT SWAPS: The fund may enter into credit default swaps, which are carried at market value. The credit default swap market allows the fund to manage credit risk through buying and selling credit protection on specific companies or a basket of companies. A buyer agrees to pay a counterparty to assume the credit risk of an issuer upon the occurrence of certain events. The seller of the protection receives a premium and agrees to assume the credit risk of an issuer upon the occurrence of certain events. The fund will limit credit default swap transactions to five percent (5%) of the fund's net assets at the time of purchase. As of July 31, 2003, there were no outstanding credit default swaps. (e) SECURITIES PURCHASED ON A WHEN-ISSUED BASIS: Delivery and payment for securities that have been purchased by the fund on a forward commitment or when-issued basis can take place a month or more after the transaction date. During this period, such securities are subject to market fluctuations and the fund maintains, in a segregated account with its custodian, assets with a market value equal to the amount of its purchase commitments. As of July 31, 2003, the fund had entered into outstanding when-issued or forward commitments of $490, for which cash has been segregated. (f) 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 or otherwise complying with the requirements of regulated investment companies. 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. Accordingly, no provision for federal income taxes has been made in the accompanying financial statements. 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. On the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, paid-in-capital has been decreased by $4,462 and accumulated net realized loss was decreased by $4,462. The tax character of distributions paid for the years ended July 31, 2003 and 2002,was ordinary income in the amount of $7,751 and $8,195, respectively. As of July 31, 2003, the components of distributable earnings on a tax basis are as follows:
July 31, 2003 ---------- Undistributed ordinary income................ $ 495 Accumulated loss............................. (30,468) Unrealized appreciation...................... 4,666 -------- Total accumulated earnings................... $(25,307) --------
The difference between book-basis and tax-basis unrealized appreciation is attributable primarily to the tax deferral of wash sales and differing treatments for the interest accrual on defaulted securities. For federal income tax purposes, the fund had capital loss carryover of $25,188 at July 31, 2003, which, if not offset by subsequent capital gains, will expire in 2004 through 2011. The fund will elect to defer its realized capital losses for the period subsequent to October 31 in the amount of $5,280. These losses will be recognized on the first day of the next fiscal year. (g) RESTRICTED SECURITIES: At July 31, 2003, investments in securities for the fund included issues that are illiquid. The fund currently limits investments in illiquid securities to 15% of net assets, at market value, at the date of purchase. The aggregate value of such securities at July 31, 2003, was $1,089, which represents 1.10% of net assets. Pursuant to guidelines adopted by the Board of Directors, certain unregistered securities are determined to be liquid and are not included in the 15% limitation specified above. 9 THE HARTFORD INCOME SHARES FUND, INC. Notes to Financial Statements July 31, 2003 ($000's Omitted) - -------------------------------------------------------------------------------- (h) DIVIDEND REINVESTMENT PLAN: A shareholder may choose to have his or her dividends and capital gains distributions reinvested in additional whole or fractional shares. 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 (See page 15). Notice to initiate or to terminate this plan must be received by Hartford Administrative Services 15 days prior to the dividend date for which it is to become effective. (i) USE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 period. Operating results in the future could vary from the amounts derived from management's estimates. 3. PAYMENTS TO RELATED PARTIES: Hartford Investment Financial Services Company ("HIFSCO") is the investment adviser for the fund. Investment advisory and management fees are computed at the annual rate of .45% for the first $100 million of average monthly net assets and at the annual rate of .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 ("HIMCO") to provide investment advice and, in general, to conduct the management investment program of the fund, subject to the general control of HIFSCO and the Board of Directors of The Hartford Income Shares Fund, Inc. Pursuant to the sub-advisory agreement, HIMCO will regularly provide the fund with investment research, advice and supervision and furnish an investment program consistent 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, HIMCO and/or The Hartford or its subsidiaries. No officer of the fund receives any compensation directly from the fund. 4. FUND NAME CHANGE: On July 24, 2002, the name of Fortis Securities, Inc. was changed to The Hartford Income Shares Fund, Inc. 5. CHANGE OF AUDITORS: On January 29, 2003, the shareholders of the fund ratified the selection of Ernst & Young LLP as auditors for the fiscal year ending July 31, 2003. During the most recent past fiscal year ended July 31, 2002, the audit report of KPMG LLP, contained no adverse opinion or disclaimer of opinion; nor was the report qualified or modified as to uncertainty, audit scope, or accounting principles. Further, there were no disagreements with KPMG LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of KPMG LLP would have caused them to make reference to the subject matter of the disagreements in connection with their reports on the financial statements for such year, and there were no "reportable events" of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. 6. FINANCIAL HIGHLIGHTS: Selected per share historical data was as follows: (000's omitted on table identified on specific line items)
Year Ended July 31, ---------------------------------------------------------- 2003 2002 2001* 2000 1999 - ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of year.......................... $ 6.66 $ 7.95 $ 8.17 $ 8.60 $ 9.55 Operations: Investment income - net................................... .58 .64 .67 .70 .70 Net realized and unrealized gain (loss) on investments.... .99 (1.29) (.20) (.44) (.93) ------- ------- -------- -------- -------- Total from operations....................................... 1.57 (.65) .47 .26 (.23) ------- ------- -------- -------- -------- Distributions to shareholders: From investment income - net.............................. (.60) (.64) (.69) (.69) (.72) ------- ------- -------- -------- -------- Net asset value, end of year................................ $ 7.63 $ 6.66 $ 7.95 $ 8.17 $ 8.60 ------- ------- -------- -------- -------- Per-share market value, end of year......................... $ 6.99 $ 6.80 $ 7.94 $ 7.63 $ 8.50 Total investment return, market value @..................... 11.63% (6.72%) 13.55% (1.59%) 2.34% Total investment return, net asset value @@................. 24.36% (8.75%) 6.18% 4.10% (2.43%) Net Assets, end of year (000s omitted)...................... $99,045 $85,772 $101,319 $103,464 $108,951 Ratio of expenses to average monthly net assets............. .86% .80% .77% .77% .73% Ratio of net investment income to average monthly net assets.................................................... 7.93% 8.45% 8.38% 8.42% 7.65% Portfolio turnover rate..................................... 34% 23% 57% 65% 33%
@ 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. * Effective April 2, 2001, the advisor was changed from Fortis Advisers, Inc. to Hartford Investment Financial Services Company. 10 THE HARTFORD INCOME SHARES FUND, INC. INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF THE HARTFORD INCOME SHARES FUND, INC. We have audited the accompanying statement of assets and liabilities of The Hartford Income Shares Fund, Inc. (the Fund), including the schedule of investments, as of July 31, 2003, and the related statements of operations and changes in net assets and financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets and financial highlights for the periods presented through July 31, 2002, were audited by other auditors whose report dated September 6, 2002, expressed an unqualified opinion on that financial statement and financial highlights. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of July 31, 2003, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of The Hartford Income Shares Fund, Inc. at July 31, 2003, the results of its operations, the changes in its net assets, and its financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States. (ERNST & YOUNG LLP LOGO) Minneapolis, Minnesota August 26, 2003 11 DIRECTOR AND OFFICER INFORMATION (UNAUDITED) The Board of Directors ("Board") is responsible for overall management of the Fund. The Board may exercise all powers of the Fund, except those powers that are conferred solely upon or reserved to the shareholders. The following table provides information about the Fund's directors and officers. The business address for all directors and officers is c/o The Hartford Income Shares Fund, Inc., P.O. Box 2999, Hartford, CT 06104-2999, except for Tamara L. Fagely and Robert W. Beltz, Jr., whose business address is 500 Bielenberg Dr., Woodbury, MN 55125. NON-INTERESTED DIRECTORS
Number of Position Term of Portfolios in Held with Office* and Fund Complex the Has Served Principal Occupation(s) Overseen by Name and Age Company Since: During Past 5 Years Director - ------------ --------- ------------- ---------------------------------- ------------- LYNN S. BIRDSONG(1) (age 56) Director 2003 From 1979 to 2002, Mr. Birdsong 70 was a managing director of Zurich Scudder Investments, an investment management firm. In 2003, Mr. Birdsong became an independent director of the Atlantic Whitehall Funds and The Japan Fund; during his employment with Scudder, he was an interested director of The Japan Fund. Since 1981, Mr. Birdsong has been a partner in Birdsong Company, an advertising specialty firm. WINIFRED E. COLEMAN (age 70) Director 2002 Ms. Coleman has served as 70 President of Saint Joseph College since 1991 and President of Cashel House, Ltd. (retail) since 1985. DR. ROBERT M. GAVIN (age 62) Director 1986 Dr. Gavin is an educational 70 consultant. Prior to September 1, 2001, he was President of Cranbrook Education Community; and prior to July 1996, he was President of Macalester College, St. Paul Minnesota. DUANE E. HILL (age 57) Director 2002 Mr. Hill is Partner Emeritus and a 70 founding partner of TSG Capital Group, a private equity investment firm that serves as sponsor and lead investor in leveraged buyouts of middle market companies. Mr. Hill is also a Partner of TSG Ventures L.P., a private equity investment company that invests primarily in minority-owned small businesses. PHILLIP O. PETERSON (age 58) Director 2000 Mr. Peterson is a mutual fund 70 industry consultant. He was a partner of KPMG LLP until July 1999. MILLARD H. PRYOR, JR. (age 70) Director 2002 Mr. Pryor has served as Managing 70 Director of Pryor & Clark Company (real estate investment), Hartford, Connecticut, since June 1992. JOHN K. SPRINGER(2) (age 72) Director 2002 Mr. Springer served as Chairman of 70 Medspan, Inc. (health maintenance organization) until March 2002. Other Directorships Name and Age Held by Director - ------------ ------------------------------------- LYNN S. BIRDSONG(1) (age 56) N/A WINIFRED E. COLEMAN (age 70) N/A DR. ROBERT M. GAVIN (age 62) Dr. Gavin is a Director of Systems & Computer Technology Corporation. DUANE E. HILL (age 57) N/A PHILLIP O. PETERSON (age 58) N/A MILLARD H. PRYOR, JR. (age 70) Mr. Pryor is a Director of Infodata Systems, Inc. (software company) and CompuDyne Corporation (security products and services) and August Financial Holding Company (advisory services) JOHN K. SPRINGER(2) (age 72) N/A
12 INTERESTED DIRECTORS AND OFFICERS
Number of Position Term of Portfolios in Held with Office* and Fund Complex the Has Served Principal Occupation(s) Overseen by Name and Age Company Since: During Past 5 Years Director - ------------ --------- ----------- ---------------------------------- ------------- THOMAS M. MARRA(3) (age 45) Director 2002 Mr. Marra is President and Chief 70 and Operating Officer of Hartford Chairman Life, Inc. He is also a member of of the the Board of Directors and a Board 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 COO in 2000, and served as Director of Hartford Life's Investment Products Division from 1998 to 2000. He was head of the company's Individual Life and Annuities Division from 1994 to 1998 after being promoted to Senior Vice President in 1994 and to Executive Vice President in 1996. Mr. Marra is also a Managing Member and President of Hartford Investment Financial Services, LLC ("HIFSCO") and HL Investment Advisors, LLC ("HL Advisors"). LOWNDES A. SMITH(3) (age 63) Director 2002 Mr. Smith served as Vice Chairman 70 of Hartford Financial Services Group, Inc. 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. DAVID M. ZNAMIEROWSKI(3) (age President 2001 Mr. Znamierowski currently serves N/A 42) as President of Hartford Investment Management Company ("HIMCO"), Senior Vice President for Hartford Life, Inc., and Senior Vice President and Chief Investment Officer for Hartford Life Insurance Company. Mr. Znamierowski is also a Managing Member and Senior Vice President of HIFSCO and HL Advisors. Mr. Znamierowski is Group Senior Vice President and Chief Investment Officer for The Hartford. ROBERT W. BELTZ, JR. (age 53) Vice 1993 Mr. Beltz currently serves as Vice N/A President President Securities Operations of Hartford Administrative Services Company ("HASCO"). Since December 2001, he has served as Assistant Vice President of Hartford Life Insurance Company. KEVIN J. CARR (age 48) Vice 2001 Mr. Carr has served as The N/A President Hartford's Assistant General and Counsel since 1999, Counsel since Secretary November 1996 and Associate Counsel since November 1995. Mr. Carr is also Vice President and Assistant Secretary of HL Advisors and HIFSCO and Assistant Secretary of HIMCO. WILLIAM H. DAVISON, JR. (age Vice 2002 Mr. Davison is a Managing Director N/A 46) President and Director of the Funds Management Group of HIMCO. Mr. Davison is also a Senior Vice President of HIFSCO and HL Advisors. Other Directorships Name and Age Held by Director - ------------ ---------------------------------- THOMAS M. MARRA(3) (age 45) Mr. Marra is a member of the Board of Directors of The Hartford Financial Services Group, Inc. LOWNDES A. SMITH(3) (age 63) N/A DAVID M. ZNAMIEROWSKI(3) (age N/A 42) ROBERT W. BELTZ, JR. (age 53) N/A KEVIN J. CARR (age 48) N/A WILLIAM H. DAVISON, JR. (age N/A 46)
13
Number of Position Term of Portfolios in Held with Office* and Fund Complex the Has Served Principal Occupation(s) Overseen by Name and Age Company Since: During Past 5 Years Director - ------------ --------- ----------- ---------------------------------- ------------- TAMARA L. FAGELY (age 45) Vice 1993 Ms. Fagely has been Vice President N/A President, of HASCO since 1998. Prior to Controller 1998, she was Second Vice and President of HASCO. Ms. Fagely is Treasurer also Controller for HIFSCO, Vice President, Controller and Treasurer of Hartford Mutual Funds, Inc. and Hartford Mutual Funds II, Inc. She has also served as Assistant Vice President of Hartford Life Insurance Company since December 2001. BRUCE FERRIS (age 47) Vice 2002 Mr. Ferris serves as Senior Vice N/A President President and a Director of Sales and Marketing in the Investment Products Division of Hartford Life Insurance Company. Mr. Ferris is also a Managing Member of HL Advisors. MARY JANE FORTIN(1) (age 38) Vice 2003 Ms. Fortin is Senior Vice N/A President President and Director of Mutual Funds and 529 Programs for Hartford Life. Previously, she served as Senior Vice President and Chief Accounting Officer of Hartford Life. Ms. Fortin joined Hartford Life in 1997. GEORGE R. JAY (age 51) Vice 2001 Mr. Jay serves as Assistant Vice N/A President President of Hartford Life Insurance Company's Equity Products Department. He is also Controller of HL Advisors and Vice President, Controller and Treasurer of Hartford Series Fund, Inc. and Hartford HLS Series Fund II, Inc. RYAN JOHNSON (age 42) Vice 2002 Mr. Johnson serves as Senior Vice N/A President President and a Director of Sales and Marketing in the Investment Products Division of Hartford Life Insurance Company since 1999. Mr. Johnson is also a Managing Member of HL Advisors. He was previously with Guardian Insurance Company in New York City. STEPHEN T. JOYCE (age 44) Vice 2001 Mr. Joyce currently serves as N/A President Senior Vice President and Director of the Institutional Products Group for Hartford Life Insurance Company. Previously he served as Vice President (1997-1999) and Assistant Vice President (1994-1997) of Hartford Life Insurance Company. Mr. Joyce is also Senior Vice President of HL Advisors. DAVID N. LEVENSON (age 37) Vice 2001 Mr. Levenson serves as Senior Vice N/A President President of Hartford Life Insurance Company's Retail Product Management Group and is responsible for all retail product management and profitability. He is also a Senior Vice President of HIFSCO and HL Advisors. Mr. Levenson joined The Hartford in 1995. JOHN C. WALTERS (age 41) Vice 2001 Mr. Walters serves as Executive N/A President Vice President and Director of the Investment Products Division of Hartford Life Insurance Company. Previously, Mr. Walters was with First Union Securities. He is also a Managing Member and Executive Vice President of HIFSCO and HL Advisors. Other Directorships Name and Age Held by Director - ------------ ---------------------------------- TAMARA L. FAGELY (age 45) N/A BRUCE FERRIS (age 47) N/A MARY JANE FORTIN(1) (age 38) N/A GEORGE R. JAY (age 51) N/A RYAN JOHNSON (age 42) N/A STEPHEN T. JOYCE (age 44) N/A DAVID N. LEVENSON (age 37) N/A JOHN C. WALTERS (age 41) N/A
* Each director and officer may serve until his or her successor is elected and qualifies. (1) Elected May 13, 2003. (2) Retired May 13, 2003. (3) "Interested person" of the Company as defined in the Investment Company Act of 1940 because of the person's affiliation with or equity ownership of Hartford Investment Financial Services, LLC or affiliated companies. 14 INVESTMENT ADVISER 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, Minnesota 55164 REGISTRAR Wells Fargo Bank Minnesota, N.A. Minneapolis, Minnesota CUSTODIAN State Street Bank and Trust Company Boston, Massachusetts INDEPENDENT AUDITORS Ernst & Young LLP Minneapolis, Minnesota
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 weeks' net asset value, market price and the percentage difference between net asset value and market price for the fund under the name Hartford Income Shrsfd. 15 ITEM 2. CODE OF ETHICS. Registrant has adopted a code of ethics which is attached as Exhibit 10(a). ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Board of Directors of the Registrant has designated Phillip O. Peterson as an Audit Committee Financial Expert. Mr. Peterson is considered by the Board to be an independent director. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. The information required by this item is incorporated by reference from Registrant's definitive proxy statement which involves the election of directors and which will be filed within 120 days after the end of Registrant's fiscal year. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Registrant has an Audit Committee comprised of all independent directors of the Board of Directors. The members of the Audit Committee are listed below. Lynn S. Birdsong Winifred E. Coleman Robert M. Gavin Duane E. Hill Phillip O. Peterson Millard H. Pryor. Jr. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Registrant has delegated the authority to vote proxies to Hartford Investment Management Company, Registrant's sub-adviser. The policies of Hartford Investment Management Company are attached. ITEM 9. 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 were no significant changes in the Registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 10. EXHIBITS. (a) Registrant's Code of Ethics in response to Item 2. (b) Section 302 certifications of the principal executive officer and principal financial officer of Registrant. 99 Section 906 certification. 99 Registrant's proxy voting polices in response to Item 7. 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: September 9, 2003 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: September 9, 2003 By: /s/ David M. Znamierowski --------------------------------- David M. Znamierowski Its: President Date: September 9, 2003 By: /s/ Tamara L. Fagely --------------------------------- Tamara L. Fagely Its: Vice President, Controller and Treasurer
EXHIBIT LIST 10(a) Code of Ethics 99.CERT 10(b) Certifications (i) Section 302 certification of principal executive officer (ii) Section 302 certification of principal financial officer 99.906CERT 99 Section 906 certification of principal executive officer and principal financial officer 99 Proxy voting policies
Underwritten and Distributed Through Hartford Investment Financial Services, LLC 200 Hopmeadow Street Simsbury, CT 06070 Investment Manager Hartford Investment Financial Services, LLC 200 Hopmeadow Street Simsbury, CT 06070 Investment Sub-Adviser Hartford Investment Management Company 55 Farmington Avenue Hartford, CT 06105 - -------------------------------------------------------------------------------- THE HARTFORD INCOME SHARES FUND, INC. PRESORTED P.O. Box 64387 STANDARD St. Paul, MN 55164-0387 U.S. POSTAGE PAID ATKINSON, NH 03811 PERMIT NO. 27 [THE HARTFORD LOGO] EX-99.10(A) 3 b47898inexv99w10xay.txt CODE OF ETHICS THE HARTFORD MUTUAL FUNDS, INC. THE HARTFORD MUTUAL FUNDS II, INC. THE HARTFORD INCOME SHARES FUND, INC. HARTFORD SERIES FUND, INC. HARTFORD HLS SERIES FUND II, INC. CODE OF ETHICS I. INTRODUCTION The Boards of Directors 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. (each, a "Fund") have established this Code of Ethics ("Code") in accordance with the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. This Code does not supersede or otherwise affect the separate code of ethics that the Fund has adopted pursuant to Rule 17j-1 under the Investment Company Act of 1940, as amended ("1940 Act"). This Code is designed to deter wrongdoing and promote: (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (ii) full, fair, accurate, timely, and understandable disclosure in reports and documents that the Fund files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Funds; (iii) compliance with applicable governmental laws, rules, and regulations; (iv) the prompt internal reporting of violations of the Code to an appropriate person or persons; and (v) accountability for adherence to the Code. The Code applies to each Fund's Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer (collectively, "Covered Officers"). For the purposes of this Code, the Compliance Officer is Ned Watkins. II. PRINCIPLES OF HONEST AND ETHICAL CONDUCT A. General Objectives The Fund expects all Covered Officers to adhere to the highest possible standards of honest and ethical conduct. All Covered Officers are expected to handle actual or apparent conflicts of interest between personal and professional relationships in a manner that is above reproach. B. Conflicts of Interest All Covered Officers should be scrupulous in avoiding a conflict of interest with regard to the Fund's interests. A conflict of interest occurs when an individual's private interest interferes in any way -- or even appears to interfere -- with the interests of the Fund. A conflict situation can arise when a Covered Officer takes actions or has interests that may make it difficult to perform his or her work for the Fund objectively and effectively. Conflicts of interest also arise when a Covered Officer, or a member of his or her family, receives improper benefits as a result of his or her position with the Fund, whether such benefits are received from the Fund or a third party. ANY CONFLICT OF INTEREST THAT ARISES IN A SPECIFIC SITUATION OR TRANSACTION MUST BE DISCLOSED BY THE COVERED OFFICER AND RESOLVED BEFORE TAKING ANY ACTION. Conflicts of interest may not always be evident, and Covered Officers should consult with the Compliance Officer or the Fund's legal counsel if they are uncertain about any situation. Examples of possible conflicts of interest include: 1. Outside Employment or Activities Covered Officers may not engage in any outside employment or activity that interferes with their performance or responsibilities to the Fund or is otherwise in conflict with or prejudicial to the Fund. A Covered Officer must disclose to the Compliance Officer any outside employment or activity that may constitute a conflict of interest. 2. Gifts Covered Officers and their immediate families shall not accept any benefit, gift, personal favor, discount, remuneration or entertainment the nature of which goes beyond those courtesies usually associated with accepted business practice or which raise any implication that could be construed as affecting their judgment or decision-making process on behalf of the Fund or any person connected therewith. 3. Other Situations Because other conflicts of interest may arise, it would be impractical to attempt to list all possible situations in this Code. If a proposed transaction or situation raises any questions or doubts, a Covered Officer should consult with the Compliance Officer or Fund counsel. C. Corporate Opportunities Covered Officers may not exploit for their own personal gain opportunities that are discovered through the use of Fund property, information, or position, unless the opportunity is disclosed fully in writing to the Board of Directors and the Board of Directors declines to pursue such opportunity. III. FULL, FAIR, ACCURATE, TIMELY, AND UNDERSTANDABLE DISCLOSURE IN FUND DISCLOSURE AND REPORTING DOCUMENTS. As a registered investment company, it is of critical importance that the Fund's public communications, reports, and SEC filings contain full, fair, accurate, timely, and understandable disclosure. Accordingly, Covered Officers are expected to consider it central to their roles as officers of the Fund to promote full, fair, accurate, timely, and understandable disclosure in the Fund's public communications and reports, and in the documents that the Fund files with, or submits to, the SEC. Depending on his or her position with the Fund, a Covered Officer may be called upon to provide necessary information to make the Fund's public reports, communications, and SEC filings and submissions complete, fair, and understandable. The Fund expects Covered Officers to take this responsibility very seriously and to provide prompt and accurate answers to inquiries related to the Fund's public disclosure requirements. Covered Officers may be asked to certify the accuracy of all responses and information provided for inclusion in the Fund's public reports, communications, and SEC filings and submissions. IV. COMPLIANCE WITH APPLICABLE GOVERNMENTAL RULES AND REGULATIONS. The Fund expects its Covered Officers to comply with all laws, rules, and regulations applicable to the Fund's operations and business. Covered Officers should seek guidance whenever they are in doubt as to the applicability of any law, rule, or regulation, or regarding any contemplated course of action. Covered Officers should also make use of the various guidelines which the Fund and its service providers have prepared on specific laws and regulations. IF IN DOUBT ON A COURSE OF ACTION, A GOOD GUIDELINE IS "ALWAYS ASK FIRST, ACT LATER" - -- IF YOU ARE UNSURE OF WHAT TO DO IN ANY SITUATION, SEEK GUIDANCE BEFORE YOU ACT. 2 As a registered investment company, the Fund is subject to regulation by the SEC and must comply with Federal securities laws and regulations, as well as other applicable laws. The Fund insists on strict compliance with the spirit and the letter of these laws and regulations. Each Covered Officer shall cooperate with Fund counsel, the Fund's independent accountants, and the Fund's other service providers with the goal of maintaining the Fund's material compliance with applicable governmental rules and regulations. Covered Officers are encouraged to attend courses and seminars for the purpose of keeping themselves apprised of developments relating to those governmental statutes, rules, and regulations applicable to the Fund. Upon obtaining knowledge of any material violation of any applicable law, rule, or regulation by the Fund or a person acting with or on behalf of the Fund, a Covered Officer shall report such violation to the Compliance Officer, Fund counsel, or both. (See Section VI of the Code for a discussion of reporting Code violations.) Each Covered Officer shall cooperate or take such steps as may be necessary or appropriate to remedy any such material violation. V. CONFIDENTIALITY Covered Officers must maintain the confidentiality of information entrusted to them by the Fund, except when disclosure is authorized by Fund counsel or required by laws or regulations. Whenever possible, Covered Officers should consult with Fund counsel if they believe they have a legal obligation to disclose confidential information. Confidential information includes all non-public information that might be of use to competitors, or harmful to the Fund or its shareholders, if disclosed. The obligation to preserve confidential information continues even after employment as a Covered Officer ends. VI. PROMPT INTERNAL REPORTING OF VIOLATIONS OF THE CODE; EVALUATION OF POSSIBLE VIOLATIONS; DETERMINATION OF SANCTIONS A. Reporting to Compliance Officer. A Covered Officer shall promptly report knowledge of any material violation of this Code to the Compliance Officer. Any such report shall be in writing, and shall describe in reasonable detail the conduct that such Covered Officer believes to have violated this Code. The Compliance Officer shall also have the authority to draft a report of a suspected material violation of the Code, if no report is made by a Covered Officer. B. Evaluation of Reports. The Compliance Officer shall then consult with Fund counsel to the extent necessary to determine whether the reported conduct actually violates the Code, and, if there has been a violation of the Code, whether the violation causes, in the reasonable judgment of the Compliance Officer, a material adverse impact upon the Fund. 1. No Material Adverse Impact on the Fund. If the Compliance Officer determines that the violation has not caused a material adverse impact upon the Fund, the Compliance Officer shall determine what sanctions, if any, may be appropriate for the violation. (See Section VIII of the Code for a discussion of possible sanctions.) 2. Material Adverse Impact on the Fund. If the Compliance Officer determines that the violation has caused a material adverse impact upon the Fund, the Compliance Officer shall promptly notify the Board of such violation. The Board shall be entitled to consult with independent legal counsel to determine whether the violation actually has had a material adverse impact upon the Fund; to formulate sanctions, if any, appropriate for the violation; or for any other purpose that the Board, in its business judgment, determines to be necessary or advisable. (See Section VIII of the Code for a discussion of possible sanctions.) 3 C. Periodic Reports by Compliance Officer to Board of Directors. The Compliance Officer shall report to the Board at each regularly scheduled Board meeting all violations of the Code (whether or not they caused a material adverse impact upon the Fund) and all sanctions imposed. VII. WAIVERS OF PROVISIONS OF THE CODE A. Waivers. A waiver of a provision of this Code shall be requested whenever there is a reasonable likelihood that a contemplated action will violate the Code. Waivers will not be granted except under extraordinary or special circumstances. The process of requesting a waiver shall consist of the following steps: a. The Covered Officer shall set forth a request for waiver in writing. The request shall describe the conduct, activity, or transaction for which the Covered Officer seeks a waiver, and shall briefly explain the reason for engaging in the conduct, activity, or transaction. b. The determination with respect to the waiver shall be made in a timely fashion by the Compliance Officer, in consultation with Fund counsel, and submitted to the Board for ratification. c. The decision with respect to the waiver request shall be documented and kept in the Fund's records for the appropriate period mandated by applicable law or regulation. B. Disclosure of Waivers. To the extent required by applicable law, waivers (including "implicit waivers") shall be publicly disclosed on a timely basis. An "implicit waiver" is defined as the Fund's failure to take action within a reasonable period of time regarding a material departure from a provision of the Code that has been made known to an "executive officer" of the Fund. For this purpose, an "executive officer" is a Fund's President or Chief Executive Officer, Vice President (who is in charge of a principal policymaking function), or any other person who performs similar policymaking functions for the Fund. VIII. ACCOUNTABILITY FOR ADHERENCE TO THE CODE The matters covered in this Code are of the utmost importance to the Fund and its shareholders, and are essential to the Fund's ability to conduct its business in accordance with its stated values. Covered Officers are expected to adhere to these rules in carrying out their duties for the Fund. The Fund will, if appropriate, take action against any Covered Officer whose actions are found to violate this Code. Sanctions for violations of the Code may include, among other things, a requirement that the violator undergo training related to the violation, a letter of sanction, and/or suspension or termination of the employment of the violator. Where the Fund has suffered a loss because of violations of this Code or applicable laws, regulations, or rules, it may pursue its remedies against the individuals or entities responsible. IX. RECORDKEEPING A. General. The Fund requires accurate recording and reporting of information in order to make responsible business decisions. All of the Fund's books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect the Fund's transactions and must conform both to applicable legal requirements and to the Fund's system of internal controls. 4 B. Code of Ethics Records. A copy of this Code, any amendments hereto, and any reports or other records created in relation to waivers of or amendments to provisions of this Code shall be kept as records of the Fund for six years from the end of the fiscal year in which such document was created. Such records shall be furnished to the SEC or its staff upon request. X. AMENDMENTS TO THE CODE The Covered Officers and the Compliance Officer are encouraged to recommend improvements to this Code to the Board, and the Board may amend the Code in its discretion. In connection with any amendment to the Code, the Compliance Officer shall prepare a brief description of the amendment, in order that this description may be disclosed in accordance with applicable law and regulations. ADOPTED: MAY 13, 2003 5 EX-99.CERT 4 b47898inexv99wcert.txt CERTIFICATIONS CERTIFICATION I, David M. Znamierowski, certify that: 1. I have reviewed this report on Form N-CSR of The Hartford Income Shares Fund, Inc. (File Number 811-02281, CIK Number 0000086317); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial information included in this report, and the financial statements on which the financial information is based, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-2(c) under the Investment Company Act) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: September 9, 2003 /s/ David M. Znamierowski ------------------------------------ David M. Znamierowski President
CERTIFICATION I, Tamara L. Fagely, certify that: 1. I have reviewed this report on Form N-CSR of The Hartford Income Shares Fund, Inc. (File Number 811-02281, CIK Number 0000086317); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial information included in this report, and the financial statements on which the financial information is based, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-2(c) under the Investment Company Act) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: September 9, 2003 /s/ Tamara L. Fagely ------------------------------------ Tamara L. Fagely Vice President, Controller and Treasurer
EX-99.906CERT 5 b47898inexv99w906cert.txt SECTION 906 CERTIFICATIONS CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of The Hartford Income Shares Fund, Inc., do hereby certify, to such officer's knowledge, that: The annual report on Form N-CSR of The Hartford Income Shares Fund, Inc. for the period ending July 31, 2003 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Funds. Date: September 9, 2003 By: /s/ David M. Znamierowski -------------------------- David M. Znamierowski Its: President Date: September 9, 2003 By: /s/ Tamara L. Fagely -------------------------------- Tamara L. Fagely Its: Vice President, Controller and Treasurer
A signed original of this written statement required by Section 906 has been provided to The Hartford Income Shares Fund, Inc. and will be retained by The Hartford Income Shares Fund, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. HARTFORD INVESTMENT MANAGEMENT COMPANY PROXY VOTING POLICIES AND PROCEDURES INTRODUCTION Hartford Investment Management Company ("Hartford Investment Management") has adopted and implemented policies and procedures that it believes are reasonably designed to ensure that proxies are voted in the best interests of its clients, including investment companies registered under the Investment Company Act of 1940. These policies and procedures are intended to comply with Rule 206(4)-6 under the Investment Advisers Act of 1940 (the "Advisers Act"). In addition to Securities and Exchange Commission requirements governing advisers, Hartford Investment Management proxy voting policies reflect the fiduciary standards and responsibilities for ERISA accounts set out in Department of Labor Bulletin 94-2, 29 C.F.R. 2509.94-2 (July 29, 1994). Hartford Investment Management Proxy Voting Procedures set forth below contain the guidelines (the "Proxy Voting Guidelines") that Hartford Investment Management uses in voting specific proposals presented by the boards of directors or shareholders of companies whose securities are held in client portfolios for which Hartford Investment Management has voting discretion. While the Proxy Voting Procedures set forth general guidelines for voting proxies, each proposal is evaluated on its merits, and Hartford Investment Management reserves the right to vote proxies as deemed appropriate. The vote entered on a client's behalf with respect to a particular proposal may differ from the guidelines set forth in the Proxy Voting Procedures. PROXY VOTING POLICIES As a matter of policy, Hartford Investment Management: 1. Votes all proxies in the best interests of its clients as shareholders, i.e., to maximize economic value. 2. Develops and maintains broad guidelines setting out positions on common proxy issues, but also considers each proposal in the context of the issuer and industry in which it is involved. 3. Evaluates all factors it deems relevant when considering a vote, including client directions and other relevant facts and circumstances at the time of the vote, and may determine in certain instances that it is in the best interest of one or more clients to refrain from voting a given proxy ballot. 4. Identifies and resolves all material proxy-related conflicts of interest between the firm and its clients in the best interests of the client. 5. Believes that sound corporate governance practices may enhance shareholder value and therefore encourages consideration of an issuer's corporate governance as part of the investment process. 6. Believes that proxy voting is a valuable tool that may be used to promote sound corporate governance to the ultimate benefit of the client as shareholder. 7. Provides all clients, upon request, with copies of these Proxy Voting Policies and Procedures, as they may be updated from time to time, and related reports, with such frequency as required to fulfill obligations under applicable law or as reasonably requested by clients. 8. Reviews regularly the proxy voting record to ensure that proxies are voted in accordance with these Proxy Voting Policies and Procedures; and ensures that procedures, documentation, and reports relating to the voting of proxies are promptly and properly prepared and disseminated. Hartford Investment Management has established a Proxy Committee that is responsible for the review and approval of the firm's written Proxy Voting Policies and Procedures, and for providing advice and guidance on specific proxy votes for individual issuers. The Proxy Committee is comprised of a representative from each of the following areas of Hartford Investment Management: Investment Law, Investment Compliance, and Funds Management. A quorum of the Proxy Committee, which quorum shall consist of at least one representative from two of the three areas of Hartford Investment Management identified above, is necessary to conduct business at any meeting. All actions requiring the approval of the Proxy Committee must be approved by a simple majority of those Proxy Committee members present at a meeting at which business may be conducted. If a majority vote cannot be obtained, the President of Hartford Investment Management or his/her designee shall have the authority to decide the final vote. Meetings may be held in person, by telephone, written consent, or any other means deemed appropriate by the Proxy Committee. Day-to-day administration of the proxy voting process at Hartford Investment Management is the responsibility of the portfolio manager of the relevant client account. Investment Compliance is responsible for reviewing regularly the voting record to ensure that proxies are voted in accordance with these Proxy Voting Policies and Procedures and for ensuring that procedures, documentation, and reports relating to the voting of proxies are promptly and properly prepared and disseminated. PROXY VOTING PROCEDURES Hartford Investment Management is responsible for voting securities in response to proxies solicited by the issuers of such securities. Hartford Investment Management has established these Proxy Voting Procedures to provide guidance in our voting of proxies. The Proxy Voting Guidelines contained in these Proxy Voting Procedures are based on our fiduciary obligation to act in the best long term interest of our clients as shareholders. Hence, our practice is to examine each proposal from an economic standpoint so that the long term effect of the vote will ultimately increase shareholder value for our client. Based on our experience in voting proposals, we have found that similar proposals often 2 have different consequences for different companies. Thus, we analyze every proposal to determine what impact it might have for the particular company as well as its industry. AUTHORIZATION TO VOTE. Hartford Investment Management will vote only those proxies for which it has proxy-voting authority. RECEIPT OF PROXY. Proxy materials from an issuer or its information agent are forwarded to registered owners of record, typically the client's custodian bank. Where Hartford Investment Management votes proxies on its client's behalf, the client must instruct its custodian bank to deliver all relevant voting material to Hartford Investment Management. Hartford Investment Management may receive this voting information by mail, fax, or other electronic means. PROXY VOTING. Each proxy is compared against the Proxy Voting Guidelines contained in these Proxy Voting Procedures, and handled as follows: - - Generally, issues for which explicit proxy voting guidance is provided in the Proxy Voting Guidelines (i.e., "For", "Against") are reviewed by the portfolio manager or his or her designee and voted in accordance with the Proxy Voting Guidelines. The portfolio manager may decide not to vote in accordance with the Proxy Voting Guidelines if the portfolio manager determines that such a vote is in the best interest of the client. - - Issues identified as "case-by-case" in the Proxy Voting Guidelines, and issues for which no guidance is provided in the Proxy Voting Guidelines, are reviewed by the portfolio manager, and voted as he or she determines. - - Absent a material conflict of interest, the portfolio manager will decide the final vote. Different portfolio managers holding the same securities may arrive at different voting conclusions for their clients' proxies. - - If the portfolio manager identifies an apparent conflict of interest, he or she will bring the matter to the Proxy Voting Committee, as described below. MATERIAL CONFLICT OF INTEREST IDENTIFICATION AND RESOLUTION PROCESSES. Hartford Investment Management's functional lines of responsibility serve to minimize the number of, but not prevent, material conflicts of interest it faces in voting proxies. The portfolio manager or their designee reviews each proxy to assess the extent to which there may be a potential conflict of interest. A potential conflict of interest situation may arise where, for example, Hartford Investment Management manages assets for, or otherwise has a material business relationship with, a company whose management is soliciting proxies, and failure to vote proxies in favor of management of the company may harm Hartford Investment Management's relationship with the company. In an effort to identify potential conflicts of interest, Investment Compliance will prepare a list of Hartford Investment Management's clients and vendors, and provide that list to those individuals involved in the proxy voting process. Investment Compliance will periodically update this list as new information becomes available. All personnel are required to contact the 3 Proxy Committee about any apparent conflicts of interest, including apparent conflicts of interest involving personal relationships. Apparent conflicts are reviewed by the Proxy Committee to determine if there is a conflict, and if so, whether the conflict is material. If a proxy is identified as presenting a material conflict of interest, the matter must be reviewed by the Proxy Committee, which will resolve the conflict and direct the vote. In order to avoid even the appearance of impropriety, the Proxy Committee will not take Hartford Investment Management's relationship with a company into account, and will vote the company's proxies in the best interest of Hartford Investment Management's clients, in accordance with the Proxy Voting Policies and Procedures. Any Proxy Committee member who is himself or herself subject to the identified conflict will not participate in the Proxy Committee's proxy voting activities regarding and any discussions of the particular proxy, including the decision on whether and how to vote the proxy in question. Investment Compliance will record and maintain minutes for the Proxy Committee meetings to document the factors that were considered to evidence that there was a reasonable basis for the Proxy Committee's decision. In certain instances, Hartford Investment Management may be unable to vote or may determine not to vote a proxy on behalf of one or more clients. While not exhaustive, the following list of considerations highlights some potential instances in which a proxy vote might not be entered. SECURITIES LENDING. Hartford Investment Management may be unable to vote proxies when the underlying securities have been lent out pursuant to a client's securities lending program. In general, Hartford Investment Management does not know when securities have been lent out and are therefore unavailable to be voted. Efforts to recall loaned securities are not always effective, but, in rare circumstances, Hartford Investment Management may recommend that a client attempt to have its custodian recall the security to permit voting of related proxies. LACK OF ADEQUATE INFORMATION OR UNTIMELY RECEIPT OF PROXY. Hartford Investment Management may be unable to enter an informed vote in certain circumstances due to the lack of information provided in the proxy statement or by the issuer or other resolution sponsor, and may abstain from voting in those instances. Proxy materials not delivered in a timely fashion may prevent analysis or entry of a vote by voting deadlines. RECORD KEEPING. Hartford Investment Management maintains records of proxies voted, research analysis, written requests from clients, and any written response from Hartford Investment Management (to either a written or an oral request) and other information pursuant to Section 204-2 of the Advisers Act, the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and other applicable laws. Hartford Investment Management will maintain these records in an easily accessible place for five years, the first two in an appropriate Hartford Investment Management office. With respect to its investment company clients, Hartford Investment Management will create and maintain (or cause to be created and maintained) records of each company's proxy voting record for 12-month periods ended June 30. Hartford Investment 4 Management will compile (or cause to be compiled) the following information for each matter relating to a portfolio security considered at any shareholder meeting held during the period covered by the report and with respect to which the company was entitled to vote: - The name of the issuer of the portfolio security; - The exchange ticker symbol of the portfolio security (if the symbol is available through reasonably practicable means); - The Council on Uniform Securities Identification Procedures number for the portfolio security (if the number is available through reasonably practicable means); - The shareholder meeting date; - A brief identification of the matter voted on; - Whether the matter was proposed by the issuer or by a security holder; - Whether the company cast its vote on the matter; - How the company cast its vote (e.g. for or against proposal, or abstain; for or withhold regarding election of directors); and - Whether the company cast its vote for or against management. Hartford Investment Management's Proxy Voting Policies and Procedures may be amended from time to time by Hartford Investment Management. Hartford Investment Management provides clients with a copy of its Proxy Voting Policies and Procedures, upon written request. In addition, Hartford Investment Management will make specific client information relating to proxy voting available to a client upon reasonable written request. PROXY VOTING GUIDELINES. Following is a list of common proposals and our guidelines on how to vote these proposals. The ("SP") after a proposal indicates that the proposal is usually presented as a Shareholder Proposal.
PROPOSAL GUIDELINE VOTING POSITION - -------- ------------------------- Election of Directors.................................... For Ratify Selection of Auditors............................. For Adopt/Amend Stock Option Plans........................... Case-by-Case Adopt/Amend Employee Stock Purchase Plans................ For Increase Authorized Common Stock......................... Case-by-Case Approve Merger or Acquisition............................ Case-by-Case
5 Approve Other Business................................... Case-by-Case Approve Technical Amendments to Charter.................. Case-by-Case Adopt Cumulative Voting (SP)............................. For Repeal Classified Boards (SP)............................ For Approve Reincorporation.................................. Case-by-Case Vote to Repeal Poison Pill (SP).......................... For Endorse the CERES Principles (SP)........................ Case-by-Case Require a Majority of Independent Directors (SP)......... Case-by-Case Authorize Blank Check Preferred Stock.................... Against Opt Out of State Takeover Statutes....................... For Adopt Director Tenure/Retirement Age (SP)................ Against Disclose Political and PAC Gifts (SP).................... Case-by-Case Eliminate Right to Call a Special Meeting................ Against Minimum Stock Ownership by Directors (SP)................ Case-by-Case Adopt Director & Officer Indemnification................. For Increase Supermajority Vote Requirement.................. Against Adopt Anti-Greenmail Provision........................... For Allow Special Interest Representation to Board (SP)...... Case-by-Case Create Independent Nominating Committee (SP)............. Case-by-Case Eliminate Golden Parachutes (SP)......................... For Restore Preemptive Rights................................ Against Adopt Confidential Voting (SP)........................... Case-by-Case Approve Unequal Voting Rights............................ Against Approve Binding Shareholder Proposals.................... Case-by-Case Requiring Companies to Expense Stock Options............. For Requiring Companies to Include Net Pension Expense in Calculation of Net Income............................. For
Approved: July 15, 2003 6 -----END PRIVACY-ENHANCED MESSAGE-----