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Hartford Life Insurance Company
Stag Variable Life Product Portfolio
1997 Separate Accounts
and Mutual Funds
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ANNUAL REPORT
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Table of Contents
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PAGE
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Letter to Client................................................................ 1
Performance Summary of Hartford Mutual Funds.................................... 2
Investment Review............................................................... 3
HARTFORD LIFE INSURANCE COMPANIES SEPARATE ACCOUNT FINANCIAL STATEMENTS AND
NOTES TO FINANCIAL STATEMENTS
Hartford Life Insurance Company Separate Account Variable Life One............ 10
Hartford Life Insurance Company Separate Account Variable Life Two............ 18
Hartford Life Insurance Company Separate Account One.......................... 26
ITT Hartford Life and Annuity Insurance Company Separate Account Variable Life
One......................................................................... 34
ITT Hartford Life and Annuity Insurance Company Separate Account Variable Life
Two......................................................................... 42
HARTFORD MUTUAL FUNDS
Statements of Net Assets as of December 31, 1997:
Hartford Bond Fund, Inc..................................................... MF-1
Hartford Stock Fund, Inc.................................................... MF-4
HVA Money Market Fund, Inc.................................................. MF-6
Hartford Advisers Fund, Inc................................................. MF-8
Hartford Capital Appreciation Fund, Inc..................................... MF-11
Hartford Mortgage Securities Fund, Inc...................................... MF-14
Hartford Index Fund, Inc.................................................... MF-16
Hartford International Opportunities Fund, Inc.............................. MF-21
Hartford Dividend and Growth Fund, Inc...................................... MF-24
Hartford International Advisers Fund, Inc................................... MF-26
Hartford Small Company Fund, Inc............................................ MF-31
Hartford MidCap Fund, Inc................................................... MF-33
Statement of Operations for the Year Ended December 31, 1997:
Hartford Mutual Funds....................................................... MF-36
Statement of Changes in Net Assets for the Years Ended December 31, 1997 and
December 31, 1996:
Hartford Mutual Funds....................................................... MF-38
Notes to Financial Statements:
Hartford Mutual Funds....................................................... MF-42
Hartford Mutual Funds Financial Highlights...................................... MF-50
</TABLE>
Contract owners should refer to the prospectus provided to them at the time of
purchase of their contract for a description of investment alternatives
available in the Separate Accounts. This prospectus, along with the financial
information contained in this report, provides them with complete and
up-to-date financial information regarding the Separate Accounts.
This report is prepared for the general information of contract owners and is
not an offer of contracts. It should not be used in connection with any offer,
except in conjunction with the appropriate prospectus which contains all
pertinent information including the applicable sales, administrative and other
charges.
<PAGE>
A Message From The President
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Dear Valued Client:
In a recent public address, Abby Joseph Cohen, Investment Policy Committee
co-chair at Goldman, Sachs & Co., addressed the question "Whither Wall
Street?" this way:
"WE HAVE TO BECOME ACCUSTOMED, ONCE AGAIN, TO NORMAL."
Certainly, we are seeing the market move from a period of sustained,
record-breaking performance to one where normalcy reigns. But while a return
to normalcy may affect "quick hit" stock pickers, it should not phase
investors focused on the long-term.
Perhaps that is one reason why Hartford Life insurance products have continued
to experience a level of popularity and recognition that is anything BUT
normal. During 1997, we ranked amoung the top five sellers of variable life
insurance in the nation. And our total assets broke the $100 billion mark.
The point: even in an abnormally heady environment, Hartford Life has proven
it can rise to the top by providing the service and value our policyholders
deserve. As you review this report, I hope you'll be pleased with the
outstanding results produced by our investment managers. And as we move into
the years ahead, we pledge to stay focused on exceeding the norm in every way
we can -- because that's the best way we know of to thank you for your
business.
[SIG]
Lowndes A. Smith
PRESIDENT & CEO
Hartford Life
[LOGO]
1
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Performance Summary of Hartford Mutual Funds
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<TABLE>
<CAPTION>
FUNDS
TOTAL RETURNS FOR THE YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bond Fund........... 11.35% 3.54% 18.49% (3.95)% 10.24% 5.53% 16.43% 8.39% 12.10% 7.60% (0.01)% 12.19% 20.62%
Stock Fund.......... 31.38 24.33 34.10 (1.89) 14.34 10.04 24.58 (3.87) 26.02 19.00 5.41 12.33 31.49
HVA Money Market
Fund............... 5.31 5.09 5.74 3.95 2.94 3.63 6.01 8.09 9.10 7.40 6.49 6.77 8.53
Advisers Fund....... 24.51 16.62 28.34 (2.74) 12.25 8.30 20.33 1.26 21.72 14.24 6.08 12.70 26.85
Capital Appreciation
Fund............... 22.34 20.70 30.25 2.50 20.80 16.98 53.99 (10.90) 24.11 26.37 (4.31) 9.03 36.18
Mortgage Securities
Fund............... 9.01 4.99 16.17 (1.61) 6.31 4.64 14.71 9.70 13.13 8.38 2.64 11.13 20.61
Index Fund.......... 32.61 22.09 36.55 0.94 9.12 6.82 29.53 (3.99) 30.47 16.35 (8.67)* -- --
International
Opportunities
Fund............... 0.34 12.91 13.93 (1.94) 33.73 (4.43) 13.00 (5.93)* -- -- -- -- --
Dividend and Growth
Fund............... 31.89 22.91 36.37 1.96* 1.60 -- -- -- -- -- -- -- --
International
Advisers Fund...... 5.52 12.25 13.24* -- -- -- -- -- -- -- -- -- --
Small Company
Fund............... 18.38 7.15* -- -- -- -- -- -- -- -- -- -- --
MidCap Fund......... 13.81* -- -- -- -- -- -- -- -- -- -- -- --
MARKET INDICES
Standard & Poor's
500 Stock Index.... 33.35% 22.95% 37.52% 1.31% 10.06% 7.61% 30.39% (3.11)% 31.62% 16.60% 5.49% 18.66% 31.70%
Lehman Brothers
Government/
Corporate Bond
Index.............. 9.76 2.90 19.24 (3.51) 11.03 7.58 16.13 8.28 14.24 7.58 2.29 15.62 21.30
90-Day Treasury
Bills.............. 5.33 5.29 5.80 4.14 3.12 3.70 5.90 7.95 8.67 6.56 5.97 6.41 7.97
EAFEGDP............. 5.77 7.63 11.16 7.81 33.56 (9.65) 10.73 -- -- -- -- -- --
Frank Russell 2000
Index.............. 22.38 16.51 28.45 (1.82) 18.71 18.41 46.04 (19.48) 16.26 25.02 (8.80) 5.68 31.04
Frank Russell 2500
Index.............. 24.43 19.04 31.70 (1.07) 16.54 16.18 46.69 (14.88) 19.43 21.39 1.75 12.62 --
Shearson Lehman
Brothers Mortgage
Backed Bond
Index.............. 9.49 5.35 16.80 (1.61) 6.84 8.96 15.72 10.72 15.35 8.55 2.81 -- --
Standard & Poor's
MidCap 400 Stock
Index.............. 32.26 -- -- -- -- -- -- -- -- -- -- -- --
</TABLE>
The inception dates of the Funds are as follows: Bond and Stock--August 31,
1977, HVA Money Market--June 30, 1980, Advisers--March 31, 1983, Capital
Appreciation--April 2, 1984, Mortgage Securities--January 1, 1985, Index--May
1, 1987, International Opportunities--July 2, 1990, Dividend and Growth--March
8, 1994, International Advisers--March 1, 1995, Small Company--August 9, 1996
and MidCap--July 15, 1997.
*Partial-year returns are calculated from the Fund's commencement date through
year-end.
The performance figures for mutual funds do not include insurance charges that
are included in the unit values of individual plans.
Total return consists of any change in the market price of securities owned by
the various mutual funds, as well as income from dividends or interest.
Calculations assume reinvestment of all distributions. Performance figures
represent past results and are not a guarantee of future performance. An
investor's unit, when redeemed, may be worth more or less than the original
cost. Results do not take into account personal income taxes and capital gains
taxes where applicable. Market indices are included as a broad measure of
market performance and no direct comparison with the Funds is intended.
2
<PAGE>
HARTFORD
CAPITAL APPRECIATION FUND
PORTFOLIO MANAGER
Q. HOW DID THE FUND PERFORM?
The Hartford Capital Appreciation Fund
outperformed its Lipper peer group for
the year ended 12/31/97. The Capital
Appreciation Fund returned 22.3% versus
21.5% for the Lipper Capital
Appreciation VA-underlying fund average.
SAUL J. PANNELL, CFA Q. WHY DID THE FUND PERFORM THIS WAY?
Senior Vice President and Partner
Wellington Management Company, LLP Much of the Portfolio's success during
the year can be attributed to stock
selection. With help from our
proprietary research analysts and
diligent company-specific research, we
were able to identify companies across
all sectors and market capitalizations
that significantly outperformed the
market, such as PHILLIPS ELECTRONICS, a
Dutch electronics conglomerate,
MULTICARE COMPANIES, a provider of
nursing homes, and DIME BANCORP, a
Savings & Loan. The Portfolio also
experienced some volatility late in the
year as several of our technology
holdings were negatively impacted due
to the turmoil in Asia.
PERFORMANCE
OVERVIEW
1/1/88 - 12/31/97
GROWTH OF A $10,000 INVESTMENT.
$59,833 Q. WHAT IS YOUR OUTLOOK FOR 1998?
$52,448
In an environment of lower projected
interest rates, we have increased our
finance sector weighting by adding to
holdings as they came under pressure.
In light of our long-term positive view
on the technology sector we are
maintaining a significant weighting in
this sector. We continue to find good
investment ideas outside the US, and
foreign investments levels were
approximately 16% at year end. Our
overall strategy for the Portfolio
remains dual faceted. We maintain an
emphasis on smaller companies with
dynamic earnings growth prospects, and
coupled with an opportunistic trading
approach to larger cap stocks where we
typically see a catalyst for
outperformance.
- -- Capital Appreciation Fund -- S&P 500
ANNUALIZED RETURNS
AVERAGE ANNUAL RETURNS
PERIOD ENDED DECEMBER 31, 1997
1 YEAR 5 YEAR 10 YEAR
Cap Ap 22.34% 18.95% 19.60%
S&P 500 33.35% 20.25% 18.03%
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE CAPITAL APPRECIATION FUND.
(THE ANNUALIZED RETURNS INCLUDE THE FUND LEVEL EXPENSES, BUT EXCLUDE THE
INSURANCE CHARGES). PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE
VALUE OF THE CONTRACT WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE
OR LESS THAN THE ORIGINAL INVESTMENT.
<PAGE>
HARTFORD
INTERNATIONAL OPPORTUNITIES FUND
LEAD PORTFOLIO MANAGER Q. HOW DID THE FUND PERFORM?
For the year ended 12/31/97, the Hartford
International Opportunities Fund returned
0.3% versus 5.2% for the Lipper
International VA-underlying fund average.
TROND SKRAMSTAD Q. WHY DID THE FUND PERFORM THIS WAY?
Senior Vice President and Partner
Wellington Management Company, LLP While the broadly diversified approach of
the Portfolio limited some of the volatility
experienced in the Asian markets, it's our
significant position in Japan negatively
impacted performance. Our view that the
Japanese economy would experience a slow
recovery in 1997 hurt performance as the
problems within the Japanese economy
continued. On a positive note, with 67% of
assets invested in Europe, the Portfolio
benefited from the strong performance in
this region during much of the year. We
find European managements increasingly
focused on profitability and earnings
growth, with global competition and the
move to a monetary union accelerating
this process.
PERFORMANCE
OVERVIEW
7/2/90 - 12/31/97
GROWTH OF A $10,000 INVESTMENT.
Q. WHAT IS YOUR OUTLOOK FOR 1998?
Given the continued weakness in the
Japanese market and our view that it
will take considerable time and effort
to work out its problems, we have
further reduced the Portfolio's weight
in Japan and have taken a more
defensive posture. While growth in
Europe in 1998 will likely feel the
impact of the Asian crisis, we believe
that low inflation, solid profit growth
and the impending monetary union will
support the European equity markets.
Given this outlook, we believe that
larger and stronger companies are
likely to do relatively better and we
$16,130 are currently adding to more defensive,
larger capitalization stocks.
$15,440
- -- International Opportunities -- EAFE GDP Fund
ANNUALIZED RETURNS
AVERAGE ANNUAL RETURNS
PERIOD ENDED DECEMBER 31, 1997
1 YEAR 5 YEAR SINCE INCEPT.
Int'l Opp 0.34% 11.10% 6.58%
EAFE GDP* 5.77% 12.75% 5.96%
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE INTERNATIONAL
OPPORTUNITIES FUND. (THE ANNUALIZED RETURNS INCLUDE THE FUND LEVEL EXPENSES, BUT
EXCLUDE THE INSURANCE CHARGES). PAST PERFORMANCE DOES NOT GUARANTEE FUTURE
RESULTS. THE VALUE OF THE CONTRACT WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY
BE WORTH MORE OR LESS THAN THE ORIGINAL INVESTMENT.
* THE MORGAN STANLEY EUROPE AUSTRALIA FAR EAST GDP-NET INDEX
<PAGE>
HARTFORD
STOCK FUND
PORTFOLIO MANAGER Q. HOW DID THE FUND PERFORM?
The Hartford Stock Fund outperformed
its Lipper peer group during the year
ended 12/31/97. The Stock Fund
provided a total return of 31.4% versus
25.4% for the Lipper Growth
VA-underlying fund average, placing the
Fund in the first quartile of
performance for funds in the group.
RAND L. ALEXANDER, CFA Q. WHY DID THE FUND PERFORM THIS WAY?
Senior Vice President and Partner
Wellington Management Company, LLP The performance of the Portfolio was
once again helped by our emphasis on
large, high quality growth companies
and our overweights in the health care,
retail, financial, and energy sectors.
The Portfolio also benefited from
strong performance by several of our
top 10 holdings, including GENERAL
ELECTRIC, TRAVELERS, MERRILL LYNCH,
GANNETT, PROCTOR & GAMBLE, WAL-MART and
IBM. We also had our share of
disappointments in BOEING, COLUMBIA/HCA
and PHARMACIA & UPJOHN.
PERFORMANCE Q. WHAT IS YOUR OUTLOOK FOR 1998?
OVERVIEW
1/1/88 - 12/31/97 Turning to 1998, it is difficult to
GROWTH OF A $10,000 INVESTMENT. predict a fourth straight year of
$52,448 record returns for the US equity
$48,701 market, but we continue to see reasons
for optimism. The economy continues to
grow and the problems in Asia and the
Pacific Rim should help keep a lid on
inflation. Money continues to flow
into mutual funds at what we believe to
be sustainable levels based on
demographics and corporate America is
in sound financial shape. So, unless
interest rates rise substantially or
corporate profits fall precipitously
over the next six months, we see no
reason to alter our view. We continue
to look for companies with great brand
franchises, large market shares, high
returns on equity, low debt to total
capital, and strong managements selling
at reasonable multiples. While
price-to-earnings multiples have
certainly expanded in the last five
years, that expansion has been
supported by falling inflation and
declining interest rates, a trend we
expect to continue.
- -- Stock Fund S&P 500
ANNUALIZED RETURNS
AVERAGE ANNUAL RETURNS
PERIOD ENDED DECEMBER 31, 1997
1 YEAR 5 YEAR 10 YEAR
Stock 31.38% 19.70% 17.15%
S&P 500 33.35% 20.25% 18.03%
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE STOCK FUND. (THE
ANNUALIZED RETURNS INCLUDE THE FUND LEVEL EXPENSES, BUT EXCLUDE THE INSURANCE
CHARGES). PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE VALUE OF THE
CONTRACT WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN
THE ORIGINAL INVESTMENT.
<PAGE>
HARTFORD
DIVIDEND AND GROWTH FUND
PORTFOLIO MANAGER Q. HOW DID THE FUND PERFORM?
The Hartford Dividend and Growth Fund
outperformed its Lipper peer group for
the year ended 12/31/97. The Dividend
and Growth Fund provided a total return
of 31.9% versus 29.1% for the Lipper
Equity Income VA-underlying fund
average, placing the Fund in the first
quartile of performance for funds in
the group.
LAURIE A. GABRIEL, CFA Q. WHY DID THE FUND PERFORM THIS WAY?
Senior Vice President and Partner
Wellington Management Company, LLP The Portfolio's performance during the
year benefited from its overweighting
in the utility sector which experienced
a particularly strong year. This
sector's performance picked up during
the last half of the year as the
turmoil in Asia led investors to seek
companies with predictable earnings.
The Portfolio also benefited from its
underweighting versus the competition
in technology stocks. For the same
reasons that investors shifted assets
into sectors like utilities, they took
money out of the technology sector,
which tends to have more volatile
earnings. Because of the Portfolio's
mandate for a higher-than-average
dividend yield, it is consistently
underweighted in this sector which has
served us well in the recent
environment. Lastly, the financial
sector was the best performing sector
in the S&P 500 and the Portfolio's
holdings in this sector, such as
CITICORP, FIRST BANK SYSTEMS and FANNIE
PERFORMANCE MAE were significant contributors to
OVERVIEW performance.
3/9/94 - 12/31/97
GROWTH OF A $10,000 INVESTMENT.
Q. WHAT IS YOUR OUTLOOK FOR 1998?
Looking forward, our expectations for
$23,396 the US equity market are somewhat
subdued. The deteriorating economic
$22,687 conditions in Asia have caused us to
lower our growth expectations for the
US economy. Sharply reduced exports to
Asia combined with a rising US Dollar
exchange rate, intense pricing pressure
and continued upward pressure on wages
have caused us to reduce our 1998
corporate profits outlook. On a
positive note, this competitive pricing
environment will also ensure a very low
inflation rate for the year. As a
result of this outlook we believe the
Portfolio is well-positioned given its
emphasis on companies with an
above-average yield, a below average
price-to-earnings ratio and risk.
- -- Dividend & Growth Fund S&P 500
ANNUALIZED RETURNS
AVERAGE ANNUAL RETURNS
PERIOD ENDED DECEMBER 31, 1997
1 YEAR SINCE INCEPTION
Div & Grow 31.89% 23.73%
S&P 500 33.35% 23.94%
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE DIVIDEND AND GROWTH FUND.
(THE ANNUALIZED RETURNS INCLUDE THE FUND LEVEL EXPENSES, BUT EXCLUDE THE
INSURANCE CHARGES). PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE
VALUE OF THE CONTRACT WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE
OR LESS THAN THE ORIGINAL INVESTMENT.
<PAGE>
HARTFORD
ADVISERS FUND
PORTFOLIO MANAGERS
Q. HOW DID THE FUND PERFORM?
The Hartford Advisers Fund outperformed
its Lipper peer group for the year
ending 12/31/97. The Advisers Fund
provided a total return of 24.5% versus
18.9% for the Lipper Flexible
VA-underlying fund average, placing the
RAND L. ALEXANDER, CFA Fund in the first quartile of
Senior Vice President and Partner performance and ranking the Fund 7 out
Wellington Management Company, LLP of 75 funds in the group.
Q. WHY DID THE FUND PERFORM THIS WAY?
The outperformance of the Portfolio
during the year can be largely
attributed to our high relative
weighting in equities. During 1997,
the equity portion of the Portfolio
benefited from our emphasis on large,
high quality growth companies and our
overweights in the health care, retail,
financial, and energy sectors. The
bond market provided a favorable
environment for the fixed income
portion of the Portfolio. In light of
our view that interest rates may
decline further, we have reduced our
holdings of mortgage-backed securities
which can suffer in a falling interest
rate environment as a result of
PAUL D. KAPLAN refinancing. Corporate bonds remain
Senior Vice President and Partner unattractive, particularly if the
Wellington Management Company, LLP economy slows.
PERFORMANCE
OVERVIEW
1/1/88 - 12/31/97
GROWTH OF A $10,000 INVESTMENT.
$52,448 Q. WHAT IS YOUR OUTLOOK FOR 1998?
The asset allocation at the end of the
$37,294 year was 62% stocks, 37% bonds and 1%
cash. We recently reduced the equity
weighting of the Portfolio from a high
of nearly 70% due to our belief that
the relative value of stocks versus
bonds is narrowing. While we continue
$23,988 to believe that in the longer-term
equities deserve to be emphasized,
bonds have become more attractive in
today's market environment. We believe
strongly that inflation remains on a
downward path. The world-wide
competitive environment, the
strengthening US dollar, falling
commodity prices, and a general slowing
in the world's economies make the
likelihood of an upward move in the
inflation rate remote. We continue to
keep cash balances at a minimum.
- -- Advisers Fund -- S&P 500 -- Lehman Govt/Corp
ANNUALIZED RETURNS
AVERAGE ANNUAL RETURNS
PERIOD ENDED DECEMBER 31, 1997
1 YEAR 5 YEAR 10 YEAR
Advisers 24.51% 15.26% 14.07%
S&P 500 33.35% 20.25% 18.03%
Lehman 9.76% 7.61% 9.14%
Govt/Corp
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE ADVISERS FUND. (THE
ANNUALIZED RETURNS INCLUDE THE FUND LEVEL EXPENSES, BUT EXCLUDE THE INSURANCE
CHARGES). PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE VALUE OF THE
CONTRACT WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN
THE ORIGINAL INVESTMENT.
<PAGE>
HARTFORD
BOND FUND
PORTFOLIO MANAGER
Q. HOW DID THE FUND PERFORM?
The Hartford Bond Fund placed in the
first quartile of its Lipper peer group
for the year ended December 31, 1997,
producing a total return of 11.4%
versus the 10.0% return of the Lipper
Corporate Debt "BBB" Rated
VA-underlying fund average.
ALISON D. GRANGER, CFA Q. WHY DID THE FUND PERFORM THIS WAY?
Senior Vice President
The Hartford Investment - Longer Portfolio Average Maturity and
Management Company (HIMCO) Duration Position for most of 1997.
Since mid-April the portfolio's
duration ranged between 10% and 20%
longer than the benchmark index.
Long-term Treasury yields declined more
than 100 basis points from then through
year-end, resulting in a price rally
which benefited the portfolio.
- A higher average credit quality than
our peers. At mid-year we increased
the Fund's allocation to Treasuries, Aa
and Aaa-rated corporates, discount
mortgages and cash to a combined 50% of
the total portfolio due to our concerns
that credit risk was inadequately
priced. This contributed to the
Portfolio's outperformance during the
second half of the year.
- A reallocation of some of the Fund's
high yield holdings to non-Asian
Emerging Market debt during the fourth
quarter. When Emerging Market fixed
income debt experienced extreme
volatility beginning in October and
November, we viewed this repricing of
credit risk as a buying opportunity,
especially relative to the valuation of
PERFORMANCE domestic high yield debt. We sold some
OVERVIEW of the Fund's most fully-valued high
yield holdings and used the proceeds to
1/1/88 - 12/31/97 purchase Brady bonds and Emerging
GROWTH OF A $10,000 INVESTMENT. Market sovereign global debt. This
reallocation yielded outperformance
from mid-November through year-end.
$23,988 Q. WHAT IS YOUR OUTLOOK FOR 1998?
$23,242 High inflation-adjusted Treasury
yields, the perceived safety of US
investments amidst recent global
volatility, and the continually
improving deficit situation, all
contribute to our expectation that over
the course of 1998, Treasury yields
will continue to decline. As such, the
duration of the Fund remains longer
than that of our benchmark index. We
continue to hold a higher-than-average
percentage of the Hartford Bond Fund in
Treasury securities, as we believe that
the corporate market, on average, will
continue to be threatened with
underperformance throughout 1998 due to
changing global economic and individual
company fundamentals, as well as
increased supply. Having said this,
opportunities in the corporate market
remain in carefully chosen credits
which we will work closely with our
analysts to identify. We believe that
opportunities remain in certain areas
of the mortgage market, such as
discount 15 year passthroughs, and have
maintained an overweight in these
securities. Finally, we view the total
return potential of Emerging Market
debt to be attractive, recognizing that
significant volatility could be
experienced over the near-term.
- -- Bond Income Strategy Fund -- Lehman
Govt/Corp
ANNUALIZED RETURNS
AVERAGE ANNUAL RETURNS
PERIOD ENDED DECEMBER 31, 1997
1 YEAR 5 YEAR 10 YEAR
Bond 11.35% 7.66% 8.80%
Lehman 9.76% 7.61% 9.14%
Govt/Corp
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE BOND FUND. (THE ANNUALIZED
RETURNS INCLUDE THE FUND LEVEL EXPENSES, BUT EXCLUDE THE INSURANCE CHARGES).
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE VALUE OF THE CONTRACT
WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL INVESTMENT.
<PAGE>
HARTFORD
MORTGAGE SECURITIES FUND
PORTFOLIO MANAGER
Q. HOW DID THE FUND PERFORM?
The Hartford Mortgage Securities Fund
provided a total return of 9.0% for the
year ended December 31, 1997, slightly
underperforming the Lipper U.S.
Mortgage VA-underlying fund average
which returned 9.1%.
TIMOTHY J. WILHIDE Q. WHY DID THE FUND PERFORM THIS WAY?
Senior Vice President and Partner
Wellington Management Company, LLP The Lehman Mortgage-Backed Securities
Index outperformed both the Lehman
Treasury and Lehman Corporate Indices
on a cash flow adjusted basis during
1997. This outperformance resulted
from a near perfect fixed income
environment for mortgages: relatively
stable interest rates, excellent
institutional demand for mortgage
securities and a highly liquid market.
Because about three quarters of the
portfolio is positioned similarly to
the MBS Index it enjoyed the same
return profile.
During the year the Fund continued to
seek attractive mortgage related assets
apart from standard U.S. Agency issued
single family residential mortgages.
One ongoing focus of interest was the
commercial mortgage-backed securities
market. This market has matured over
the last few years from a relatively
small and highly individualized class
of assets to a widely accepted, readily
traded and standardized group of fixed
income securities. The portfolio buys
only highly rated, liquid securities
PERFORMANCE which our team of CMBS specialists
OVERVIEW believes offer excellent value.
1/1/88 - 12/31/97
GROWTH OF A $10,000 INVESTMENT.
Q. WHAT IS YOUR OUTLOOK FOR 1998?
As the new year begins, mortgage
investors have reason to be more
concerned about the threat of
$24,340 refinancing to their portfolios. The
Asian crisis of 1997's fourth quarter
$22,447 has led to a sharp drop in interest
rates. Most of the mortgage securities
universe is now "in the money", that
is, most homeowners can realize a
refinancings savings. Historically
such periods have been difficult ones
for the sector. Nevertheless, mortgage
portfolios that carefully monitor
relative exposure to risk, and make
timely and appropriate adjustments to
deal with it, offer the prospect of
solid relative performance. Going into
the new year the portfolio will focus
on the risk to the portfolio from
refinancings, seeking securities that
offer the best relative value should
interest rates stay in their new, lower
range. Examples of securities that
meet this criteria are discount
mortgages as well as high quality,
liquid commercial mortgage-backed
securities.
- -- Mortgage Securities Fund -- Lehman Mortgage
Backed Securities
ANNUALIZED RETURNS
AVERAGE ANNUAL RETURNS
PERIOD ENDED DECEMBER 31, 1997
1 YEAR 5 YEAR 10 YEAR
Mortgage 9.01% 6.81% 8.45%
LEH MBS 9.49% 7.21% 9.30%
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE MORTGAGE SECURITIES FUND.
(THE ANNUALIZED RETURNS INCLUDE THE FUND LEVEL EXPENSES, BUT EXCLUDE THE
INSURANCE CHARGES). PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE
VALUE OF THE CONTRACT WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE
OR LESS THAN THE ORIGINAL INVESTMENT.
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 6,126,697
Cost $ 6,175,275
Market Value......... $6,431,524 -- -- --
Hartford Stock Fund,
Inc.
Shares 5,633,636
Cost $21,694,200
Market Value......... -- $28,862,960 -- --
HVA Money Market Fund,
Inc.
Shares 28,396,174
Cost $28,396,174
Market Value......... -- -- $28,396,174 --
Hartford Advisers Fund,
Inc.
Shares 8,606,167
Cost $18,229,999
Market Value......... -- -- -- $21,745,596
Hartford Capital
Appreciation Fund,
Inc.
Shares 8,287,312
Cost $30,089,636
Market Value......... -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 1,367,449
Cost $ 1,415,536
Market Value......... -- -- -- --
Hartford Index Fund,
Inc.
Shares 6,345,629
Cost $15,029,978
Market Value......... -- -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 8,114,031
Cost $10,441,260
Market Value......... -- -- -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 6,065,007
Cost $10,161,421
Market Value......... -- -- -- --
Fidelity VIP Equity
Income Fund
Shares 436,568
Cost $ 8,912,437
Market Value......... -- -- -- --
Fidelity VIP Overseas
Fund
Shares 119,117
Cost $ 2,203,337
Market Value......... -- -- -- --
Fidelity VIP II Asset
Manager Fund
Shares 79,720
Cost $ 1,297,633
Market Value......... -- -- -- --
Due from Hartford Life
Insurance Company.... 2,220 33,585 2,250,671 6,292
Receivable from fund
shares sold.......... -- -- -- --
----------- ----------- ----------- -------------
Total Assets........... 6,433,744 28,896,545 30,646,845 21,751,888
----------- ----------- ----------- -------------
LIABILITIES:
Due to Hartford Life
Insurance Company.... -- -- -- --
Payable for fund shares
purchased............ 2,212 39,158 2,235,168 6,288
----------- ----------- ----------- -------------
Total Liabilities...... 2,212 39,158 2,235,168 6,288
----------- ----------- ----------- -------------
Net Assets (variable
life contract
liabilities)......... $6,431,532 $28,857,387 $28,411,677 $21,745,600
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
Units Owned by
Participants......... 4,682,927 12,274,396 22,938,171 11,168,239
Unit Values............ $ 1.373400 $ 2.351023 $ 1.238620 $ 1.947093
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
10
<PAGE>
<TABLE>
<CAPTION>
FIDELITY VIP
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND EQUITY-INCOME
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 6,126,697
Cost $ 6,175,275
Market Value......... -- -- -- -- -- --
Hartford Stock Fund,
Inc.
Shares 5,633,636
Cost $21,694,200
Market Value......... -- -- -- -- -- --
HVA Money Market Fund,
Inc.
Shares 28,396,174
Cost $28,396,174
Market Value......... -- -- -- -- -- --
Hartford Advisers Fund,
Inc.
Shares 8,606,167
Cost $18,229,999
Market Value......... -- -- -- -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 8,287,312
Cost $30,089,636
Market Value......... $36,544,702 -- -- -- --
---
Hartford Mortgage
Securities Fund, Inc.
Shares 1,367,449
Cost $ 1,415,536
Market Value......... -- $1,482,016 -- -- -- --
Hartford Index Fund,
Inc.
Shares 6,345,629
Cost $15,029,978
Market Value......... -- -- $18,260,874 -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 8,114,031
Cost $10,441,260
Market Value......... -- -- -- $10,503,264 -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 6,065,007
Cost $10,161,421
Market Value......... -- -- -- -- $11,840,883 --
Fidelity VIP Equity
Income Fund
Shares 436,568
Cost $ 8,912,437
Market Value......... -- -- -- -- -- $10,599,872
Fidelity VIP Overseas
Fund
Shares 119,117
Cost $ 2,203,337
Market Value......... -- -- -- -- -- --
Fidelity VIP II Asset
Manager Fund
Shares 79,720
Cost $ 1,297,633
Market Value......... -- -- -- -- -- --
Due from Hartford Life
Insurance Company.... -- 24 1,192,005 9,093 -- 13,828
Receivable from fund
shares sold.......... 190,884 -- -- -- 332,178 --
----------------- --------------- ----------- ------------------ ------------ ------------------
Total Assets........... 36,735,586 1,482,040 19,452,879 10,512,357 12,173,061 10,613,700
----------------- --------------- ----------- ------------------ ------------ ------------------
LIABILITIES:
Due to Hartford Life
Insurance Company.... 214,772 -- -- -- 389,143 --
Payable for fund shares
purchased............ -- 23 1,139,289 15,847 -- 12,185
----------------- --------------- ----------- ------------------ ------------ ------------------
Total Liabilities...... 214,772 23 1,139,289 15,847 389,143 12,185
----------------- --------------- ----------- ------------------ ------------ ------------------
Net Assets (variable
life contract
liabilities)......... $36,520,814 $1,482,017 $18,313,590 $10,496,510 $11,783,918 $10,601,515
----------------- --------------- ----------- ------------------ ------------ ------------------
----------------- --------------- ----------- ------------------ ------------ ------------------
Units Owned by
Participants......... 17,097,936 1,098,266 7,883,666 6,990,394 5,895,844 6,040,099
Unit Values............ $ 2.135978 $ 1.349414 $ 2.322979 $ 1.501562 $ 1.998682 $ 1.755189
<CAPTION>
FIDELITY VIP FIDELITY VIP II
OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford Stock Fund,
Inc.
Shares
Cost
Market Value......... -- --
HVA Money Market Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford Advisers Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford Mortgage
Securities Fund, Inc.
Shares
Cost
Market Value......... -- --
Hartford Index Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford International
Opportunities Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford Dividend and
Growth Fund, Inc.
Shares
Cost
Market Value......... -- --
Fidelity VIP Equity
Income Fund
Shares
Cost
Market Value......... -- --
Fidelity VIP Overseas
Fund
Shares
Cost
Market Value......... $2,287,053 --
Fidelity VIP II Asset
Manager Fund
Shares
Cost
Market Value......... -- $1,435,755
Due from Hartford Life
Insurance Company.... -- 464
Receivable from fund
shares sold.......... -- --
------------- ------------------
Total Assets........... 2,287,053 1,436,219
------------- ------------------
LIABILITIES:
Due to Hartford Life
Insurance Company.... 405 --
Payable for fund shares
purchased............ 30,709 464
------------- ------------------
Total Liabilities...... 31,114 464
------------- ------------------
Net Assets (variable
life contract
liabilities)......... $2,255,939 $1,435,755
------------- ------------------
------------- ------------------
Units Owned by
Participants......... 1,663,544 943,170
Unit Values............ $ 1.356104 $ 1.522265
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
11
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $294,913 $ 246,080 $1,060,601 $ 409,507
----------- ----------- ----------- -------------
Net investment income
(loss).............. 294,913 246,080 1,060,601 409,507
----------- ----------- ----------- -------------
CAPITAL GAINS INCOME..... -- 827,575 -- 507,384
----------- ----------- ----------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 4,795 (3,225) -- 6,559
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 202,163 4,386,067 -- 2,125,547
----------- ----------- ----------- -------------
Net gain (loss) on
investments......... 206,958 4,382,842 -- 2,132,106
----------- ----------- ----------- -------------
Net increase
(decrease) in net
assets resulting
from operations..... $501,871 $ 5,456,497 $1,060,601 $3,048,997
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
12
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 167,160 $ 88,963 $ 179,138 $ 97,324 $ 149,562
----------------- --------------- ----------- ---------- ------------
Net investment income
(loss).............. 167,160 88,963 179,138 97,324 149,562
----------------- --------------- ----------- ---------- ------------
CAPITAL GAINS INCOME..... 1,675,075 -- 620,188 745,516 100,558
----------------- --------------- ----------- ---------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... (30,085) 5,516 25,769 (13,764) (9,177)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 3,560,780 35,955 2,403,244 (801,996) 1,368,764
----------------- --------------- ----------- ---------- ------------
Net gain (loss) on
investments......... 3,530,695 41,471 2,429,013 (815,760) 1,359,587
----------------- --------------- ----------- ---------- ------------
Net increase
(decrease) in net
assets resulting
from operations..... $5,372,930 $130,434 $ 3,228,339 $ 27,080 $1,609,707
----------------- --------------- ----------- ---------- ------------
----------------- --------------- ----------- ---------- ------------
<CAPTION>
FIDELITY VIP FIDELITY VIP FIDELITY VIP II
EQUITY-INCOME OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------- ------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 88,466 $ 18,168 $ 25,384
------------------ ------------- --------
Net investment income
(loss).............. 88,466 18,168 25,384
------------------ ------------- --------
CAPITAL GAINS INCOME..... 444,785 72,122 63,674
------------------ ------------- --------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... (1,923) (23,358) 984
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 1,316,248 9,449 102,910
------------------ ------------- --------
Net gain (loss) on
investments......... 1,314,325 (13,909) 103,894
------------------ ------------- --------
Net increase
(decrease) in net
assets resulting
from operations..... $1,847,576 $ 76,381 $192,952
------------------ ------------- --------
------------------ ------------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
13
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment
income............... $ 294,913 $ 246,080 $ 1,060,601 $ 409,507
Capital gains income... -- 827,575 -- 507,384
Net realized gain
(loss) on security
transactions......... 4,795 (3,225) -- 6,559
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 202,163 4,386,067 -- 2,125,547
----------- ------------ ------------- -------------
Net increase in net
assets resulting from
operations........... 501,871 5,456,497 1,060,601 3,048,997
----------- ------------ ------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 865,251 3,217,829 77,604,898 3,078,132
Net transfers.......... 2,817,986 7,642,427 (68,585,939) 7,033,474
Surrenders............. (293,925) (880,386) (2,421,703) (470,532)
Net loan withdrawals... 61,034 (337,905) 1,030,682 (227,083)
Cost of insurance...... (205,795) (763,967) (1,739,916) (611,387)
----------- ------------ ------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 3,244,551 8,877,998 5,888,022 8,802,604
----------- ------------ ------------- -------------
Total increase in net
assets............... 3,746,422 14,334,495 6,948,623 11,851,601
NET ASSETS:
Beginning of period.... 2,685,110 14,522,892 21,463,054 9,893,999
----------- ------------ ------------- -------------
End of period.......... $6,431,532 $ 28,857,387 $ 28,411,677 $21,745,600
----------- ------------ ------------- -------------
----------- ------------ ------------- -------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ ------------- -------------
OPERATIONS:
Net investment
income............... $ 130,339 $ 166,505 $ 617,137 $ 203,460
Capital gains income... -- 309,113 -- 107,033
Net realized (loss)
gain on security
transactions......... (2,539) (10,306) -- 1,174
Net unrealized
(depreciation)
appreciation of
investments during
the period........... (35,847) 1,824,641 -- 815,705
----------- ------------ ------------- -------------
Net increase in net
assets resulting from
operations........... 91,953 2,289,953 617,137 1,127,372
----------- ------------ ------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 177,130 1,770,443 78,140,461 1,889,169
Net transfers.......... 932,335 4,457,656 (62,761,807) 2,840,668
Surrenders............. (69,207) (362,933) (814,963) (264,048)
Net loan withdrawals... (22,111) (179,201) (2,187,733) (50,031)
Cost of insurance...... (76,606) (391,509) (1,139,390) (289,178)
----------- ------------ ------------- -------------
Net increase in net
assets resulting from
unit transactions.... 941,541 5,294,456 11,236,568 4,126,580
----------- ------------ ------------- -------------
Total increase in net
assets............... 1,033,494 7,584,409 11,853,705 5,253,952
NET ASSETS:
Beginning of period.... 1,651,616 6,938,483 9,609,349 4,640,047
----------- ------------ ------------- -------------
End of period.......... $2,685,110 $ 14,522,892 $ 21,463,054 $9,893,999
----------- ------------ ------------- -------------
----------- ------------ ------------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
14
<PAGE>
<TABLE>
<CAPTION>
CAPTIAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ------------ ------------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income............... $ 167,160 $ 88,963 $ 179,138 $ 97,324 $ 149,562
Capital gains income... 1,675,075 -- 620,188 745,516 100,558
Net realized gain
(loss) on security
transactions......... (30,085) 5,516 25,769 (13,764) (9,177)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 3,560,780 35,955 2,403,244 (801,996) 1,368,764
----------------- --------------- ------------ ------------------ ------------
Net increase in net
assets resulting from
operations........... 5,372,930 130,434 3,228,339 27,080 1,609,707
----------------- --------------- ------------ ------------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 6,237,688 230,306 2,753,450 2,796,551 1,254,044
Net transfers.......... 7,660,280 (149,006) 7,278,662 124,941 6,522,655
Surrenders............. (1,305,489) (182,238) (1,605,500) (577,418) (387,945)
Net loan withdrawals... (478,850) 130,625 1,102,289 (142,130) (239,637)
Cost of insurance...... (1,155,528) (54,693) (509,686) (453,153) (208,258)
----------------- --------------- ------------ ------------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 10,958,101 (25,006) 9,019,215 1,748,791 6,940,859
----------------- --------------- ------------ ------------------ ------------
Total increase in net
assets............... 16,331,031 105,428 12,247,554 1,775,871 8,550,566
NET ASSETS:
Beginning of period.... 20,189,783 1,376,589 6,066,036 8,720,639 3,233,352
----------------- --------------- ------------ ------------------ ------------
End of period.......... $36,520,814 $1,482,017 $ 18,313,590 $10,496,510 $11,783,918
----------------- --------------- ------------ ------------------ ------------
----------------- --------------- ------------ ------------------ ------------
FOR THE YEAR ENDED DECEMBER 31, 1996
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ------------ ------------------ ------------
OPERATIONS:
Net investment
income............... $ 94,066 $ 61,146 $ 80,193 $ 120,669 $ 41,572
Capital gains income... 567,054 -- 33,058 118,054 2,804
Net realized (loss)
gain on security
transactions......... (15,665) 21 2,355 (1,547) 678
Net unrealized
(depreciation)
appreciation of
investments during
the period........... 1,913,546 195 656,725 544,630 305,389
----------------- --------------- ------------ ------------------ ------------
Net increase in net
assets resulting from
operations........... 2,559,001 61,362 772,331 781,806 350,443
----------------- --------------- ------------ ------------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 3,679,346 125,959 2,296,903 1,694,971 278,275
Net transfers.......... 7,290,692 552,359 3,171,094 2,966,744 2,674,253
Surrenders............. (485,609) (13,643) (96,179) (285,131) (20,374)
Net loan withdrawals... (245,321) (8,001) (1,375,343) (69,836) (67,575)
Cost of insurance...... (644,012) (28,469) (200,560) (306,356) (42,548)
----------------- --------------- ------------ ------------------ ------------
Net increase in net
assets resulting from
unit transactions.... 9,595,096 628,205 3,795,915 4,000,392 2,822,031
----------------- --------------- ------------ ------------------ ------------
Total increase in net
assets............... 12,154,097 689,567 4,568,246 4,782,198 3,172,474
NET ASSETS:
Beginning of period.... 8,035,686 687,022 1,497,790 3,938,441 60,878
----------------- --------------- ------------ ------------------ ------------
End of period.......... $20,189,783 $1,376,589 $ 6,066,036 $8,720,639 $ 3,233,352
----------------- --------------- ------------ ------------------ ------------
----------------- --------------- ------------ ------------------ ------------
<CAPTION>
FIDELITY VIP FIDELITY VIP FIDELITY VIP II
EQUITY-INCOME OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ --------------- ------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment
income............... $ 88,466 $ 18,168 $ 25,384
Capital gains income... 444,785 72,122 63,674
Net realized gain
(loss) on security
transactions......... (1,923) (23,358) 984
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 1,316,248 9,449 102,910
------------------ --------------- ------------------
Net increase in net
assets resulting from
operations........... 1,847,576 76,381 192,952
------------------ --------------- ------------------
UNIT TRANSACTIONS:
Purchases.............. 1,658,043 500,149 217,641
Net transfers.......... 2,905,832 1,020,704 437,030
Surrenders............. (177,782) (148,574) (18,402)
Net loan withdrawals... (108,547) (85,928) (4,843)
Cost of insurance...... (334,701) (93,690) (43,442)
------------------ --------------- ------------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 3,942,845 1,192,661 587,984
------------------ --------------- ------------------
Total increase in net
assets............... 5,790,421 1,269,042 780,936
NET ASSETS:
Beginning of period.... 4,811,094 986,897 654,819
------------------ --------------- ------------------
End of period.......... $10,601,515 $2,255,939 $1,435,755
------------------ --------------- ------------------
------------------ --------------- ------------------
FOR THE YEAR ENDED DECEMB
FIDELITY VIP FIDELITY VIP FIDELITY VIP II
EQUITY-INCOME OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ --------------- ------------------
OPERATIONS:
Net investment
income............... $ 28,598 $ 2,647 $ 4,226
Capital gains income... 11,171 2,911 --
Net realized (loss)
gain on security
transactions......... (3,448) 1,350 884
Net unrealized
(depreciation)
appreciation of
investments during
the period........... 333,297 71,916 32,712
------------------ --------------- ------------------
Net increase in net
assets resulting from
operations........... 369,618 78,824 37,822
------------------ --------------- ------------------
UNIT TRANSACTIONS:
Purchases.............. 889,845 203,728 94,706
Net transfers.......... 3,109,762 760,222 513,253
Surrenders............. (64,856) (18,172) (14,935)
Net loan withdrawals... (111,464) (91,281) (1,047)
Cost of insurance...... (97,433) (22,781) (11,950)
------------------ --------------- ------------------
Net increase in net
assets resulting from
unit transactions.... 3,725,854 831,716 580,027
------------------ --------------- ------------------
Total increase in net
assets............... 4,095,472 910,540 617,849
NET ASSETS:
Beginning of period.... 715,622 76,357 36,970
------------------ --------------- ------------------
End of period.......... $ 4,811,094 $ 986,897 $ 654,819
------------------ --------------- ------------------
------------------ --------------- ------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
15
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION:
Separate Account Variable Life One (the Account) is a separate investment
account within Hartford Life Insurance Company (the Company) and is
registered with the Securities and Exchange Commission (SEC) as a unit
investment trust under the Investment Company Act of 1940, as amended. The
Account consists of twenty two sub-accounts. These financial statements
include twelve sub-accounts which invest solely in the Hartford and Fidelity
Mutual Funds (the Funds). The other ten sub-accounts, which invest in the
Putnam VT Funds, are presented in separate financial statements. Both the
Company and the Account are subject to supervision and regulation by the
Department of Insurance of the State of Connecticut and the SEC. The Account
invests deposits by variable life contractholders of the Company in the
Funds as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividend and capital
gains income are accrued as of the ex-dividend date. Capital gains
income represents dividends from the Funds which are characterized as
capital gains under tax regulations.
b) SECURITY VALUATION--The investment in shares of the funds are valued at
the closing net asset value per share as determined by the appropriate
Fund as of December 31, 1997.
c) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as
an insurance company under the Internal Revenue Code. Under current law,
no federal income taxes are payable with respect to the operations of
the Account.
d) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the financial statements and
the reported amounts of income and expenses during the period. Operating
results in the future could vary from the amounts derived from
management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
In accordance with the terms of the contracts, the Company makes deductions
for mortality and expense undertakings, cost of insurance, administrative
fees, and state premium taxes. These charges are deducted through
termination of units of interest from applicable contract owners' accounts.
16
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VARIABLE LIFE ONE AND TO THE
OWNERS OF UNITS OF INTEREST THEREIN:
We have audited the accompanying statement of assets and liabilities of the
Bond Fund Sub-Account, Stock Fund Sub-Account, Money Market Fund Sub-Account,
Advisers Fund Sub-Account, Capital Appreciation Fund Sub-Account, Mortgage
Securities Fund Sub-Account, Index Fund Sub-Account, International
Opportunities Fund Sub-Account, Dividend and Growth Fund Sub-Account, Fidelity
VIP Equity Income Portfolio Sub-Account, Fidelity VIP Overseas Portfolio
Sub-Account and Fidelity VIP II Asset Manager Portfolio Sub-Account
(constituting Hartford Life Insurance Company Separate Account Variable Life
One) (the Accounts) as of December 31, 1997, the related statement of
operations for the year then ended and the statements of changes in net assets
for each of the two years in the period then ended. These financial statements
are the responsibility of the Accounts' management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Bond Fund Sub-Account,
Stock Fund Sub-Account, Money Market Fund Sub-Account, Advisers Fund Sub-
Account, Capital Appreciation Fund Sub-Account, Mortgage Securities Fund
Sub-Account, Index Fund Sub-Account, International Opportunities Fund
Sub-Account, Dividend and Growth Fund Sub-Account, Fidelity VIP Equity Income
Portfolio Sub-Account, Fidelity VIP Overseas Portfolio Sub-Account and Fidelity
VIP II Asset Manager Portfolio Sub-Account (constituting Hartford Life
Insurance Company Separate Account Variable Life One) as of December 31, 1997,
the results of its operations for the year then ended and the changes in its
net assets for each of the two years in the period then ended in conformity
with generally accepted accounting principles.
Hartford, Connecticut
February 16, 1998 ARTHUR ANDERSEN LLP
17
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 1,479,693
Cost $ 1,527,945
Market Value......... $1,553,313 -- -- --
Hartford Stock Fund,
Inc.
Shares 1,297,881
Cost $ 5,719,386
Market Value......... -- $6,649,467 -- --
HVA Money Market Fund,
Inc.
Shares 13,861,822
Cost $13,861,822
Market Value......... -- -- $13,861,822 --
Hartford Advisers Fund,
Inc.
Shares 1,589,222
Cost $ 3,539,208
Market Value......... -- -- -- $4,015,560
Hartford Capital
Appreciation Fund,
Inc.
Shares 1,877,432
Cost $ 7,397,445
Market Value......... -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 229,641
Cost $ 246,189
Market Value......... -- -- -- --
Hartford Index Fund,
Inc.
Shares 2,292,828
Cost $ 5,686,684
Market Value......... -- -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 2,391,343
Cost $ 3,206,426
Market Value......... -- -- -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 2,182,879
Cost $ 3,776,384
Market Value......... -- -- -- --
Fidelity VIP Equity
Income Fund
Shares 179,572
Cost $ 3,725,161
Market Value......... -- -- -- --
Fidelity VIP Overseas
Fund
Shares 50,494
Cost $ 962,062
Market Value......... -- -- -- --
Fidelity VIP II Asset
Manager Fund
Shares 50,526
Cost $ 843,566
Market Value......... -- -- -- --
Due from Hartford Life
Insurance Company.... -- -- 1,803,768 72
Receivable from fund
shares sold.......... -- 2,912 -- --
----------- ----------- ----------- -------------
Total Assets........... 1,553,313 6,652,379 15,665,590 4,015,632
----------- ----------- ----------- -------------
LIABILITIES:
Due to Hartford Life
Insurance Company.... 56 3,447 -- --
Payable for fund shares
purchased............ -- -- 1,803,550 --
----------- ----------- ----------- -------------
Total Liabilities...... 56 3,447 1,803,550 --
----------- ----------- ----------- -------------
Net Assets (variable
life contract
liabilities)......... $1,553,257 $6,648,932 $13,862,040 $4,015,632
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
Units Owned by
Participants........... 1,130,958 2,828,101 11,191,520 2,062,373
Unit Values.............. $ 1.373400 $ 2.351023 $ 1.238620 $ 1.947093
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
18
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 1,479,693
Cost $ 1,527,945
Market Value......... -- -- -- -- --
Hartford Stock Fund,
Inc.
Shares 1,297,881
Cost $ 5,719,386
Market Value......... -- -- -- -- --
HVA Money Market Fund,
Inc.
Shares 13,861,822
Cost $13,861,822
Market Value......... -- -- -- -- --
Hartford Advisers Fund,
Inc.
Shares 1,589,222
Cost $ 3,539,208
Market Value......... -- -- -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 1,877,432
Cost $ 7,397,445
Market Value......... $8,278,944 -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 229,641
Cost $ 246,189
Market Value......... -- $ 248,880 -- -- --
Hartford Index Fund,
Inc.
Shares 2,292,828
Cost $ 5,686,684
Market Value......... -- -- $6,598,092 -- --
Hartford International
Opportunities Fund,
Inc.
Shares 2,391,343
Cost $ 3,206,426
Market Value......... -- -- -- $3,095,492 --
Hartford Dividend and
Growth Fund, Inc.
Shares 2,182,879
Cost $ 3,776,384
Market Value......... -- -- -- -- $4,261,695
Fidelity VIP Equity
Income Fund
Shares 179,572
Cost $ 3,725,161
Market Value......... -- -- -- -- --
Fidelity VIP Overseas
Fund
Shares 50,494
Cost $ 962,062
Market Value......... -- -- -- -- --
Fidelity VIP II Asset
Manager Fund
Shares 50,526
Cost $ 843,566
Market Value......... -- -- -- -- --
Due from Hartford Life
Insurance Company.... 2,924 1 6,904 -- --
Receivable from fund
shares sold.......... -- -- -- 8 --
----------------- --------------- ----------- ------------------ -------------
Total Assets........... 8,281,868 248,881 6,604,996 3,095,500 4,261,695
----------------- --------------- ----------- ------------------ -------------
LIABILITIES:
Due to Hartford Life
Insurance Company.... -- -- -- 19 189
Payable for fund shares
purchased............ 3,870 -- 8,918 -- 1
----------------- --------------- ----------- ------------------ -------------
Total Liabilities...... 3,870 -- 8,918 19 190
----------------- --------------- ----------- ------------------ -------------
Net Assets (variable
life contract
liabilities)......... $8,277,998 $ 248,881 $6,596,078 $3,095,481 $4,261,505
----------------- --------------- ----------- ------------------ -------------
----------------- --------------- ----------- ------------------ -------------
Units Owned by
Participants........... 3,875,508 184,436 2,839,491 2,061,507 2,132,157
Unit Values.............. $ 2.135978 $ 1.349414 $ 2.322979 $ 1.501562 $ 1.998682
<CAPTION>
FIDELITY VIP FIDELITY VIP FIDELITY VIP II
EQUITY-INCOME OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ --------------- ------------------
<S> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
Hartford Stock Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
HVA Money Market Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
Hartford Advisers Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares
Cost
Market Value......... -- -- --
Hartford Index Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
Hartford Dividend and
Growth Fund, Inc.
Shares
Cost
Market Value......... -- -- --
Fidelity VIP Equity
Income Fund
Shares
Cost
Market Value......... $4,360,020 -- --
Fidelity VIP Overseas
Fund
Shares
Cost
Market Value......... -- $ 969,480 --
Fidelity VIP II Asset
Manager Fund
Shares
Cost
Market Value......... -- -- $ 909,979
Due from Hartford Life
Insurance Company.... 550 -- --
Receivable from fund
shares sold.......... -- -- --
------------------ --------------- ----------
Total Assets........... 4,360,570 969,480 909,979
------------------ --------------- ----------
LIABILITIES:
Due to Hartford Life
Insurance Company.... -- 121 5,483
Payable for fund shares
purchased............ 2,617 -- --
------------------ --------------- ----------
Total Liabilities...... 2,617 121 5,483
------------------ --------------- ----------
Net Assets (variable
life contract
liabilities)......... $4,357,953 $ 969,359 $ 904,496
------------------ --------------- ----------
------------------ --------------- ----------
Units Owned by
Participants........... 2,482,896 714,812 594,178
Unit Values.............. $ 1.755189 $ 1.356104 $ 1.522265
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
19
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $60,722 $ 50,976 $380,235 $ 72,777
----------- ----------- ----------- -------------
Net investment
income.............. 60,722 50,976 380,235 72,777
----------- ----------- ----------- -------------
CAPITAL GAINS INCOME..... -- 103,392 -- 75,982
----------- ----------- ----------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 344 4,792 -- 2,197
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 23,137 785,883 -- 382,569
----------- ----------- ----------- -------------
Net gain (loss) on
investments......... 23,481 790,675 -- 384,766
----------- ----------- ----------- -------------
Net increase
(decrease) in net
assets resulting
from operations..... $84,203 $945,043 $380,235 $533,525
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
20
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 34,129 $ 10,759 $61,758 $ 27,817 $ 50,755
-------- ------- ----------- ---------- ------------
Net investment
income.............. 34,129 10,759 61,758 27,817 50,755
-------- ------- ----------- ---------- ------------
CAPITAL GAINS INCOME..... 219,489 -- 128,080 128,065 33,614
-------- ------- ----------- ---------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 2,152 288 (284) 2,089 (751)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 705,479 2,161 799,655 (168,332) 446,847
-------- ------- ----------- ---------- ------------
Net gain (loss) on
investments......... 707,631 2,449 799,371 (166,243) 446,096
-------- ------- ----------- ---------- ------------
Net increase
(decrease) in net
assets resulting
from operations..... $961,249 $ 13,208 $989,209 $(10,361) $530,465
-------- ------- ----------- ---------- ------------
-------- ------- ----------- ---------- ------------
<CAPTION>
FIDELITY VIP FIDELITY VIP FIDELITY VIP II
EQUITY-INCOME OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------- ------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 28,391 $ 3,585 $12,026
-------- ------------- -------
Net investment
income.............. 28,391 3,585 12,026
-------- ------------- -------
CAPITAL GAINS INCOME..... 142,745 14,231 30,166
-------- ------------- -------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 2,925 (2,477) 4,849
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 514,150 (1,284) 45,529
-------- ------------- -------
Net gain (loss) on
investments......... 517,075 (3,761) 50,378
-------- ------------- -------
Net increase
(decrease) in net
assets resulting
from operations..... $688,211 $14,055 $92,570
-------- ------------- -------
-------- ------------- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
21
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment
income............... $ 60,722 $ 50,976 $ 380,235 $ 72,777
Capital gains income... -- 103,392 -- 75,982
Net realized gain
(loss) on security
transactions......... 344 4,792 -- 2,197
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 23,137 785,883 -- 382,569
----------- ----------- ------------ -------------
Net increase (decrease)
in net assets
resulting from
operations........... 84,203 945,043 380,235 533,525
----------- ----------- ------------ -------------
UNIT TRANSACTIONS:
Purchases.............. 224,575 691,357 43,540,050 899,022
Net transfers.......... 1,114,603 3,645,966 (32,385,194) 1,480,789
Surrenders............. (20,975) (141,324) (504,402) (123,087)
Loan withdrawals....... (25,999) (85,662) (685,736) (78,047)
Cost of insurance...... (33,000) (141,765) (494,906) (108,782)
----------- ----------- ------------ -------------
Net increase in net
assets resulting from
unit transactions.... 1,259,204 3,968,572 9,469,812 2,069,895
----------- ----------- ------------ -------------
Total increase in net
assets............... 1,343,407 4,913,615 9,850,047 2,603,420
NET ASSETS:
Beginning of period.... 209,850 1,735,317 4,011,993 1,412,212
----------- ----------- ------------ -------------
End of period.......... $1,553,257 $6,648,932 $ 13,862,040 $4,015,632
----------- ----------- ------------ -------------
----------- ----------- ------------ -------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ------------ -------------
OPERATIONS:
Net investment
income............... $ 4,617 $ 9,981 $ 56,534 $ 16,365
Net realized gain
(loss) on security
transactions......... 9 (88) -- 975
Net unrealized
appreciation of
investments during
the period........... 2,231 144,184 -- 93,783
----------- ----------- ------------ -------------
Net increase in net
assets resulting from
operations........... 6,857 154,077 56,534 111,123
----------- ----------- ------------ -------------
UNIT TRANSACTIONS:
Purchases.............. 24,540 128,400 21,595,898 163,384
Net transfers.......... 184,962 1,479,101 (17,911,483) 1,195,723
Surrenders............. (2,166) (4,782) (350,401) (21,798)
Loan withdrawals....... -- (22,053) (23,407) (21,530)
Cost of insurance...... (4,343) (21,092) (286,663) (14,690)
----------- ----------- ------------ -------------
Net increase in net
assets resulting from
unit transactions.... 202,993 1,559,574 3,023,944 1,301,089
----------- ----------- ------------ -------------
Total increase in net
assets............... 209,850 1,713,651 3,080,478 1,412,212
NET ASSETS:
Beginning of period.... -- 21,666 931,515 --
----------- ----------- ------------ -------------
End of period.......... $ 209,850 $1,735,317 $ 4,011,993 $1,412,212
----------- ----------- ------------ -------------
----------- ----------- ------------ -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
22
<PAGE>
<TABLE>
<CAPTION>
CAPTIAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income............... $ 34,129 $ 10,759 $ 61,758 $ 27,817 $ 50,755
Capital gains income... 219,489 -- 128,080 128,065 33,614
Net realized gain
(loss) on security
transactions......... 2,152 288 (284) 2,089 (751)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 705,479 2,161 799,655 (168,332) 446,847
----------------- --------------- ----------- ------------------ ------------
Net increase (decrease)
in net assets
resulting from
operations........... 961,249 13,208 989,209 (10,361) 530,465
----------------- --------------- ----------- ------------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 1,340,476 41,748 1,525,193 948,086 360,484
Net transfers.......... 4,197,271 159,978 3,225,273 1,088,413 3,059,353
Surrenders............. (203,529) (4,181) (120,518) (78,919) (71,909)
Loan withdrawals....... (112,292) -- (84,328) (61,840) (74,405)
Cost of insurance...... (225,833) (5,854) (138,997) (77,690) (91,491)
----------------- --------------- ----------- ------------------ ------------
Net increase in net
assets resulting from
unit transactions.... 4,996,093 191,691 4,406,623 1,818,050 3,182,032
----------------- --------------- ----------- ------------------ ------------
Total increase in net
assets............... 5,957,342 204,899 5,395,832 1,807,689 3,712,497
NET ASSETS:
Beginning of period.... 2,320,656 43,982 1,200,246 1,287,792 549,008
----------------- --------------- ----------- ------------------ ------------
End of period.......... $8,277,998 $248,881 $6,596,078 $3,095,481 $4,261,505
----------------- --------------- ----------- ------------------ ------------
----------------- --------------- ----------- ------------------ ------------
CAPTIAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------
OPERATIONS:
Net investment
income............... $ 5,970 $ 1,084 $ 9,179 $ 9,122 $ 4,704
Net realized gain
(loss) on security
transactions......... 512 -- 2,901 296 938
Net unrealized
appreciation of
investments during
the period........... 176,020 530 111,747 57,397 38,465
----------------- --------------- ----------- ------------------ ------------
Net increase in net
assets resulting from
operations........... 182,502 1,614 123,827 66,815 44,107
----------------- --------------- ----------- ------------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 341,337 6,471 50,114 95,211 13,008
Net transfers.......... 1,756,480 37,915 1,092,579 1,031,056 560,046
Surrenders............. (21,886) (1,050) (92,837) (3,592) (47,416)
Loan withdrawals....... (21,502) -- -- (8,130) (12,999)
Cost of insurance...... (38,858) (968) (21,363) (33,663) (7,738)
----------------- --------------- ----------- ------------------ ------------
Net increase in net
assets resulting from
unit transactions.... 2,015,571 42,368 1,028,493 1,080,882 504,901
----------------- --------------- ----------- ------------------ ------------
Total increase in net
assets............... 2,198,073 43,982 1,152,320 1,147,697 549,008
NET ASSETS:
Beginning of period.... 122,583 -- 47,926 140,095 --
----------------- --------------- ----------- ------------------ ------------
End of period.......... $2,320,656 $ 43,982 $1,200,246 $1,287,792 $ 549,008
----------------- --------------- ----------- ------------------ ------------
----------------- --------------- ----------- ------------------ ------------
<CAPTION>
FIDELITY VIP FIDELITY VIP FIDELITY VIP II
EQUITY-INCOME OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------- ------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment
income............... $ 28,391 $ 3,585 $ 12,026
Capital gains income... 142,745 14,231 30,166
Net realized gain
(loss) on security
transactions......... 2,925 (2,477) 4,849
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 514,150 (1,284) 45,529
------------------ ------------- --------
Net increase (decrease)
in net assets
resulting from
operations........... 688,211 14,055 92,570
------------------ ------------- --------
UNIT TRANSACTIONS:
Purchases.............. 626,240 80,330 187,210
Net transfers.......... 1,691,959 754,893 350,249
Surrenders............. (115,305) (17,526) (19,442)
Loan withdrawals....... (620) (18,863) --
Cost of insurance...... (98,277) (10,590) (18,932)
------------------ ------------- --------
Net increase in net
assets resulting from
unit transactions.... 2,103,997 788,244 499,085
------------------ ------------- --------
Total increase in net
assets............... 2,792,208 802,299 591,655
NET ASSETS:
Beginning of period.... 1,565,745 167,060 312,841
------------------ ------------- --------
End of period.......... $4,357,953 $969,359 $904,496
------------------ ------------- --------
------------------ ------------- --------
FIDELITY VIP FIDELITY VIP FIDELITY VIP II
EQUITY-INCOME OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------- ------------------
OPERATIONS:
Net investment
income............... $ -- $ -- $--
Net realized gain
(loss) on security
transactions......... 77 7 (450)
Net unrealized
appreciation of
investments during
the period........... 120,671 8,702 20,884
------------------ ------------- --------
Net increase in net
assets resulting from
operations........... 120,748 8,709 20,434
------------------ ------------- --------
UNIT TRANSACTIONS:
Purchases.............. 116,685 12,350 1,532
Net transfers.......... 1,369,018 146,928 299,311
Surrenders............. (27,120) 361 (5,819)
Loan withdrawals....... (4) -- --
Cost of insurance...... (17,752) (1,288) (2,617)
------------------ ------------- --------
Net increase in net
assets resulting from
unit transactions.... 1,440,827 158,351 292,407
------------------ ------------- --------
Total increase in net
assets............... 1,561,575 167,060 312,841
NET ASSETS:
Beginning of period.... 4,170 -- --
------------------ ------------- --------
End of period.......... $1,565,745 $167,060 $312,841
------------------ ------------- --------
------------------ ------------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
23
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION:
Separate Account Variable Life Two (the Account) is a separate investment
account within Hartford Life Insurance Company (the Company) and is
registered with the Securities and Exchange Commission (SEC) as a unit
investment trust under the Investment Company Act of 1940, as amended. The
Account consists of twenty two sub-accounts. These financial statements
include twelve sub-accounts which invest solely in the Hartford and Fidelity
Mutual Funds (the Funds). The other ten sub-accounts, which invest in Putnam
VT Funds, are presented in separate financial statements. Both the company
and the Account are subject to supervision and regulation by the Department
of Insurance of the State of Connecticut and the SEC. The Account invests
deposits by variable life contractholders of the company in the Funds as
directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividend and capital
gains income are accrued as of the ex-dividend date. Capital gains
income represents dividends from the Funds which are characterized as
capital gains under tax regulations.
b) SECURITY VALUATION--The investment in shares of the Hartford, and
Fidelity mutual funds are valued at the closing net asset value per
share as determined by the appropriate Fund as of December 31, 1997.
c) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as
an insurance company under the Internal Revenue Code. Under current law,
no federal income taxes are payable with respect to the operations of
the Account.
d) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the financial statements and
the reported amounts of income and expenses during the period. Operating
results in the future could vary from the amounts derived from
management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
In accordance with the terms of the contracts, the Company makes deductions
for mortality and expense undertakings, cost of insurance, administrative
fees, and state premium taxes. These charges are deducted through
termination of units of interest from applicable contract owners' accounts.
24
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VARIABLE LIFE TWO AND TO THE
OWNERS OF UNITS OF INTEREST THEREIN:
We have audited the accompanying statement of assets and liabilities of the
Bond Fund Sub-Account, Stock Fund Sub-Account, Money Market Fund Sub-Account,
Advisers Fund Sub-Account, Capital Appreciation Fund Sub-Account, Mortgage
Securities Fund Sub-Account, Index Fund Sub-Account, International
Opportunities Fund Sub-Account, Dividend and Growth Fund Sub-Account, Fidelity
VIP Equity Income Portfolio Sub-Account, Fidelity VIP Overseas Portfolio
Sub-Account and Fidelity VIP II Asset Manager Portfolio Sub-Account
(constituting Hartford Life Insurance Company Separate Account Variable Life
Two) (the Accounts) as of December 31, 1997, and the related statement of
operations for the year then ended and statements of changes in net assets for
each of the two years in the period then ended. These financial statements are
the responsibility of the Accounts' management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Bond Fund Sub-Account,
Stock Fund Sub-Account, Money Market Fund Sub-Account, Advisers Fund Sub-
Account, Capital Appreciation Fund Sub-Account, Mortgage Securities Fund
Sub-Account, Index Fund Sub-Account, International Opportunities Fund
Sub-Account, Dividend and Growth Fund Sub-Account, Fidelity VIP Equity Income
Portfolio Sub-Account, Fidelity VIP Overseas Portfolio Sub-Account and Fidelity
VIP II Asset Manager Portfolio Sub-Account (constituting Hartford Life
Insurance Company Separate Account Variable Life Two) as of December 31, 1997,
the results of its operations for the year then ended and the changes in its
net assets for each of the two years in the period then ended, in conformity
with generally accepted accounting principles.
Hartford, Connecticut
February 16, 1998 ARTHUR ANDERSEN LLP
25
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 1,439,808
Cost $1,439,007
Market Value......... $ 1,511,444 --
Hartford Stock Fund,
Inc.
Shares 1,344,101
Cost $3,333,877
Market Value......... -- $ 6,886,269
HVA Money Market Fund,
Inc.
Shares 2,288,858
Cost $2,288,858
Market Value......... -- --
Hartford Advisers Fund,
Inc.
Shares 7,289,433
Cost $9,457,945
Market Value......... -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 1,943,516
Cost $3,769,277
Market Value......... -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 3,168,740
Cost $3,432,162
Market Value......... -- --
Hartford Index Fund,
Inc.
Shares 145,964
Cost $ 259,351
Market Value......... -- --
Due from Hartford Life
Insurance Company...... 86,352 --
Receivable from fund
shares sold............ -- 155,622
----------- -----------
Total Assets............. 1,597,796 7,041,891
----------- -----------
LIABILITIES:
Due to Hartford Life
Insurance Company.... -- 155,622
Payable for fund shares
purchased............ 86,352 --
----------- -----------
Total Liabilities...... 86,352 155,622
----------- -----------
Net Assets (variable
life contract
liabilities)......... $ 1,511,444 $ 6,886,269
----------- -----------
----------- -----------
Units Owned by
Participants......... 645,530 1,325,075
Unit Price............. $ 2.341400 $ 5.196891
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
26
<PAGE>
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- ----------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 1,439,808
Cost $1,439,007
Market Value......... -- -- -- -- --
Hartford Stock Fund,
Inc.
Shares 1,344,101
Cost $3,333,877
Market Value......... -- -- -- -- --
HVA Money Market Fund,
Inc.
Shares 2,288,858
Cost $2,288,858
Market Value......... $2,288,858 -- -- -- --
Hartford Advisers Fund,
Inc.
Shares 7,289,433
Cost $9,457,945
Market Value......... -- $18,418,546 -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 1,943,516
Cost $3,769,277
Market Value......... -- -- $8,570,354 -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 3,168,740
Cost $3,432,162
Market Value......... -- -- -- $ 3,434,221 --
Hartford Index Fund,
Inc.
Shares 145,964
Cost $ 259,351
Market Value......... -- -- -- -- $ 420,042
Due from Hartford Life
Insurance Company...... 533,051 324 -- 211 --
Receivable from fund
shares sold............ -- -- 208,966 -- 180,693
----------- ------------- ----------------- --------------- -----------
Total Assets............. 2,821,909 18,418,870 8,779,320 3,434,432 600,735
----------- ------------- ----------------- --------------- -----------
LIABILITIES:
Due to Hartford Life
Insurance Company.... -- -- 209,057 -- 180,693
Payable for fund shares
purchased............ 535,742 325 -- 3,240 --
----------- ------------- ----------------- --------------- -----------
Total Liabilities...... 535,742 325 209,057 3,240 180,693
----------- ------------- ----------------- --------------- -----------
Net Assets (variable
life contract
liabilities)......... $2,286,167 $18,418,545 $8,570,263 $ 3,431,192 $ 420,042
----------- ------------- ----------------- --------------- -----------
----------- ------------- ----------------- --------------- -----------
Units Owned by
Participants......... 1,283,154 4,592,250 1,530,939 1,488,026 108,520
Unit Price............. $ 1.781678 $ 4.010789 $ 5.598043 $ 2.305869 $ 3.870630
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
27
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 85,116 $ 66,144
EXPENSES:
Mortality and expense
undertakings......... (13,321) (57,929)
----------- -----------
Net investment income
(loss).............. 71,795 8,215
----------- -----------
CAPITAL GAINS INCOME..... -- 288,640
----------- -----------
NET REALIZED AND
UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on
security
transactions......... 7,245 51,904
Net unrealized
appreciation of
investments during
the period........... 66,093 1,292,997
----------- -----------
Net gain on
investments......... 73,338 1,344,901
----------- -----------
Net increase in net
assets resulting
from operations..... $145,133 $ 1,641,756
----------- -----------
----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
28
<PAGE>
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- ----------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $106,103 $ 402,385 $ 44,624 $200,920 $ 7,335
EXPENSES:
Mortality and expense
undertakings......... (18,349) (161,637) (76,189) (30,148) (4,761)
----------- ------------- ----------------- --------------- -----------
Net investment income
(loss).............. 87,754 240,748 (31,565) 170,772 2,574
----------- ------------- ----------------- --------------- -----------
CAPITAL GAINS INCOME..... -- 731,667 587,118 -- 35,941
----------- ------------- ----------------- --------------- -----------
NET REALIZED AND
UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on
security
transactions......... 508,849 202,014 1,486 22,222
Net unrealized
appreciation of
investments during
the period........... -- 2,262,927 891,144 87,119 65,629
----------- ------------- ----------------- --------------- -----------
Net gain on
investments......... -- 2,771,776 1,093,158 88,605 87,851
----------- ------------- ----------------- --------------- -----------
Net increase in net
assets resulting
from operations..... $ 87,754 $3,744,191 $1,648,711 $259,377 $126,366
----------- ------------- ----------------- --------------- -----------
----------- ------------- ----------------- --------------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
29
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ 71,795 $ 8,215
Capital gains income... -- 288,640
Net realized gain on
security
transactions......... 7,245 51,904
Net unrealized
appreciation of
investments during
the period........... 66,093 1,292,997
------------- -----------
Net increase in net
assets resulting from
operations........... 145,133 1,641,756
------------- -----------
UNIT TRANSACTIONS:
Purchases.............. 784,609 1,421,887
Net transfers.......... (66,546) 286,315
Surrenders............. (288,440) (688,071)
Net loan withdrawals... (679,536) (1,039,721)
Cost of insurance and
other fees........... (15,437) (36,874)
------------- -----------
Total (decrease)
increase in net
assets resulting from
unit transactions.... (265,350) (56,464)
------------- -----------
Total (decrease)
increase in net
assets............... (120,217) 1,585,292
NET ASSETS:
Beginning of period.... 1,631,661 5,300,977
------------- -----------
End of period.......... $ 1,511,444 $ 6,886,269
------------- -----------
------------- -----------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- -----------
OPERATIONS:
Net investment income
(loss)............... $ 85,877 $ 33,239
Capital gains income... -- 195,246
Net realized (loss)
gain on security
transactions......... (3,746) 23,047
Net unrealized
(depreciation)
appreciation of
investments during
the period........... (43,706) 761,366
------------- -----------
Net increase in net
assets resulting from
operations........... 38,425 1,012,898
------------- -----------
UNIT TRANSACTIONS:
Net transfers.......... (173,115) 102,684
Surrenders............. (7,288) (132,660)
Net loan withdrawals... (21,258) (86,390)
Cost of insurance and
other fees........... (18,325) (36,723)
------------- -----------
Net (decrease) increase
in net assets
resulting from unit
transactions......... (219,986) (153,089)
------------- -----------
Total (decrease)
increase in net
assets............... (181,561) 859,809
NET ASSETS:
Beginning of period.... 1,813,222 4,441,168
------------- -----------
End of period.......... $ 1,631,661 $ 5,300,977
------------- -----------
------------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
30
<PAGE>
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- ----------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ 87,754 $ 240,748 $ (31,565) $ 170,772 $ 2,574
Capital gains income... -- 731,667 587,118 -- 35,941
Net realized gain on
security
transactions......... -- 508,849 202,014 1,486 22,222
Net unrealized
appreciation of
investments during
the period........... -- 2,262,927 891,144 87,119 65,629
----------- ------------- ----------------- --------------- -----------
Net increase in net
assets resulting from
operations........... 87,754 3,744,191 1,648,711 259,377 126,366
----------- ------------- ----------------- --------------- -----------
UNIT TRANSACTIONS:
Purchases.............. 837,735 5,805,878 1,313,089 1,040,366 335,550
Net transfers.......... (158,936) (268,159) 54,530 (52,290) 201,194
Surrenders............. (39,806) (2,029,515) (982,045) (52,364) (220,245)
Net loan withdrawals... (860,395) (5,120,268) (1,247,165) (1,104,813) (41,858)
Cost of insurance and
other fees........... (33,231) (125,426) (42,477) (32,362) (213,232)
----------- ------------- ----------------- --------------- -----------
Total (decrease)
increase in net
assets resulting from
unit transactions.... (254,633) (1,737,490) (904,068) (201,463) 61,409
----------- ------------- ----------------- --------------- -----------
Total (decrease)
increase in net
assets............... (166,879) 2,006,701 744,643 57,914 187,775
NET ASSETS:
Beginning of period.... 2,453,046 16,411,844 7,825,620 3,373,278 232,267
----------- ------------- ----------------- --------------- -----------
End of period.......... $2,286,167 $18,418,545 $8,570,263 $3,431,192 $420,042
----------- ------------- ----------------- --------------- -----------
----------- ------------- ----------------- --------------- -----------
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- ----------------- --------------- -----------
OPERATIONS:
Net investment income
(loss)............... $ 107,643 $ 318,810 $ (15,548) $ 186,732 $ 2,317
Capital gains income... -- 359,796 443,649 -- 2,992
Net realized (loss)
gain on security
transactions......... -- 431,574 42,830 687 3,779
Net unrealized
(depreciation)
appreciation of
investments during
the period........... -- 1,204,135 856,429 (50,978) 28,647
----------- ------------- ----------------- --------------- -----------
Net increase in net
assets resulting from
operations........... 107,643 2,314,315 1,327,360 136,441 37,735
----------- ------------- ----------------- --------------- -----------
UNIT TRANSACTIONS:
Net transfers.......... 641,843 (504,209) (235,710) (48,159) 69,128
Surrenders............. (1,102,403) (1,032,859) 114,483 (111,600) (29,698)
Net loan withdrawals... (114,450) (229,470) (137,347) (65,890) --
Cost of insurance and
other fees........... (40,348) (159,464) (44,885) (37,139) (1,839)
----------- ------------- ----------------- --------------- -----------
Net (decrease) increase
in net assets
resulting from unit
transactions......... (615,358) (1,926,002) (303,459) (262,788) 37,591
----------- ------------- ----------------- --------------- -----------
Total (decrease)
increase in net
assets............... (507,715) 388,313 1,023,901 (126,347) 75,326
NET ASSETS:
Beginning of period.... 2,960,761 16,023,531 6,801,719 3,499,625 156,941
----------- ------------- ----------------- --------------- -----------
End of period.......... $2,453,046 $16,411,844 $7,825,620 $3,373,278 $232,267
----------- ------------- ----------------- --------------- -----------
----------- ------------- ----------------- --------------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
31
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION:
Separate Account One (the Account) is a separate investment account within
Hartford Life Insurance Company (the Company) and is registered with the
Securities and Exchange Commission (SEC) as a unit investment trust under
the Investment Company Act of 1940, as amended. Both the Company and the
Account are subject to supervision and regulation by the Department of
Insurance of the State of Connecticut and the SEC. The Account invests
deposits by variable life contractholders of the Company in various mutual
funds (the Funds) as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividend and capital
gains income are accrued as of the ex-dividend date. Capital gains
income represents dividends from the Funds which are characterized as
capital gains under tax regulations.
b) SECURITY VALUATION--The investment in shares of the funds are valued at
the closing net asset value per share as determined by the appropriate
Fund as of December 31, 1997.
c) FEDERAL INCOME TAXES--The operations of the account form a part of, and
are taxed with, the total operations of the company, which is taxed as
an insurance company under the Internal Revenue Code. Under current law,
no federal income taxes are payable with respect to the operations of
the Account.
d) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the financial statements and
the reported amounts of income and expenses during the period. Operating
results in the future could vary from the amounts derived from
management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
a) MORTALITY AND EXPENSE UNDERTAKINGS--The Company, as issuer of variable
life insurance contracts, provides the mortality and expense
undertakings and, with respect to the Account, receives an annual fee of
0.90% of the Account's average daily net assets.
b) DEDUCTION OF OTHER FEES--In accordance with the terms of the contracts,
the Company makes deductions for the cost of insurance, administrative
fees, and state premium taxes. These charges are deducted through
termination of units of interest from applicable contract owners'
accounts.
32
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT ONE AND TO THE
OWNERS OF UNITS OF INTEREST THEREIN:
We have audited the accompanying statement of assets and liabilities of
Hartford Life Insurance Company Separate Account One (the Account) as of
December 31, 1997, and the related statement of operations for the year then
ended and statements of changes in net assets for each of the two years in the
period then ended. These financial statements are the responsibility of the
Account's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hartford Life Insurance
Company Separate Account One as of December 31, 1997, the results of its
operations for the year then ended and the changes in its net assets for each
of the two years in the period then ended in conformity with generally accepted
accounting principles.
Hartford, Connecticut
February 16, 1998 ARTHUR ANDERSEN LLP
33
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 726,781
Cost $ 752,661
Market Value......... $ 762,941 -- -- --
Hartford Stock Fund,
Inc.
Shares 355,432
Cost $1,729,015
Market Value......... -- $1,820,995 -- --
HVA Money Market Fund,
Inc.
Shares 7,024,335
Cost $7,024,335
Market Value......... -- -- $7,024,335 --
Hartford Advisers Fund,
Inc.
Shares 455,334
Cost $1,128,250
Market Value......... -- -- -- $1,150,514
Hartford Capital
Appreciation Fund,
Inc.
Shares 621,102
Cost $2,649,504
Market Value......... -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 80,974
Cost $ 89,083
Market Value......... -- -- -- --
Hartford Index Fund,
Inc.
Shares 617,728
Cost $1,677,079
Market Value......... -- -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 596,106
Cost $ 808,867
Market Value......... -- -- -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 654,867
Cost $1,213,451
Market Value......... -- -- -- --
Fidelity VIP Equity
Income Fund
Shares 26,642
Cost $ 598,135
Market Value......... -- -- -- --
Fidelity VIP Overseas
Fund
Shares 14,251
Cost $ 272,653
Market Value......... -- -- -- --
Fidelity VIP II Asset
Manager Fund
Shares 7,420
Cost $ 126,004
Market Value......... -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company.... 23,405 20,347 982,081 17,467
Receivable from fund
shares sold.......... -- -- -- --
----------- ----------- ----------- -------------
Total Assets........... 786,346 1,841,342 8,006,416 1,167,981
----------- ----------- ----------- -------------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company.... -- -- -- --
Payable for fund shares
purchased............ 23,436 20,281 981,999 17,448
----------- ----------- ----------- -------------
Total Liabilities...... 23,436 20,281 981,999 17,448
----------- ----------- ----------- -------------
Net Assets (variable
life contract
liabilities)......... $ 762,910 $1,821,061 $7,024,417 $1,150,533
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
Units Owned by
Participants......... 555,490 774,582 5,671,164 590,898
Unit Values............ $1.373400 $2.351023 $1.238620 $ 1.947093
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
34
<PAGE>
<TABLE>
<CAPTION>
FIDELITY VIP
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND EQUITY-INCOME
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 726,781
Cost $ 752,661
Market Value......... -- -- -- -- -- --
Hartford Stock Fund,
Inc.
Shares 355,432
Cost $1,729,015
Market Value......... -- -- -- -- -- --
HVA Money Market Fund,
Inc.
Shares 7,024,335
Cost $7,024,335
Market Value......... -- -- -- -- -- --
Hartford Advisers Fund,
Inc.
Shares 455,334
Cost $1,128,250
Market Value......... -- -- -- -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 621,102
Cost $2,649,504
Market Value......... $2,738,886 -- -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 80,974
Cost $ 89,083
Market Value......... -- $ 87,758 -- -- -- --
Hartford Index Fund,
Inc.
Shares 617,728
Cost $1,677,079
Market Value......... -- -- $1,777,642 -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 596,106
Cost $ 808,867
Market Value......... -- -- -- $ 771,633 -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 654,867
Cost $1,213,451
Market Value......... -- -- -- -- $1,278,515 --
Fidelity VIP Equity
Income Fund
Shares 26,642
Cost $ 598,135
Market Value......... -- -- -- -- -- $ 646,875
Fidelity VIP Overseas
Fund
Shares 14,251
Cost $ 272,653
Market Value......... -- -- -- -- -- --
Fidelity VIP II Asset
Manager Fund
Shares 7,420
Cost $ 126,004
Market Value......... -- -- -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company.... 45,039 -- -- 23,694 20,591 --
Receivable from fund
shares sold.......... -- -- 46,923 -- -- 3
----------------- --------------- ----------- ---------- ------------ ----------
Total Assets........... 2,783,925 87,758 1,824,565 795,327 1,299,106 646,878
----------------- --------------- ----------- ---------- ------------ ----------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company.... -- -- 47,271 -- -- 37
Payable for fund shares
purchased............ 44,867 -- -- 23,696 20,654 --
----------------- --------------- ----------- ---------- ------------ ----------
Total Liabilities...... 44,867 -- 47,271 23,696 20,654 37
----------------- --------------- ----------- ---------- ------------ ----------
Net Assets (variable
life contract
liabilities)......... $2,739,058 $ 87,758 $1,777,294 $ 771,631 $1,278,452 $ 646,841
----------------- --------------- ----------- ---------- ------------ ----------
----------------- --------------- ----------- ---------- ------------ ----------
Units Owned by
Participants......... 1,282,344 65,034 765,093 513,886 639,647 368,530
Unit Values............ $ 2.135978 $ 1.349414 $2.322979 $1.501562 $1.998682 $1.755189
<CAPTION>
FIDELITY VIP FIDELITY VIP II
OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford Stock Fund,
Inc.
Shares
Cost
Market Value......... -- --
HVA Money Market Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford Advisers Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford Mortgage
Securities Fund, Inc.
Shares
Cost
Market Value......... -- --
Hartford Index Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford International
Opportunities Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford Dividend and
Growth Fund, Inc.
Shares
Cost
Market Value......... -- --
Fidelity VIP Equity
Income Fund
Shares
Cost
Market Value......... -- --
Fidelity VIP Overseas
Fund
Shares
Cost
Market Value......... $ 273,616 --
Fidelity VIP II Asset
Manager Fund
Shares
Cost
Market Value......... -- $ 133,636
Due from ITT Hartford
Life and Annuity
Insurance Company.... 45 --
Receivable from fund
shares sold.......... -- --
------------- ----------
Total Assets........... 273,661 133,636
------------- ----------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company.... 61 3
Payable for fund shares
purchased............ -- --
------------- ----------
Total Liabilities...... 61 3
------------- ----------
Net Assets (variable
life contract
liabilities)......... $ 273,600 $ 133,633
------------- ----------
------------- ----------
Units Owned by
Participants......... 201,754 87,786
Unit Values............ $1.356104 $1.522265
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
35
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $26,909 $ 11,815 $105,975 $16,534
----------- ----------- ----------- -------------
Net investment
income.............. 26,909 11,815 105,975 16,534
----------- ----------- ----------- -------------
CAPITAL GAINS INCOME..... -- 558 -- 584
----------- ----------- ----------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 148 (109) -- (232)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 10,267 91,919 -- 22,216
----------- ----------- ----------- -------------
Net gain (loss) on
investments......... 10,415 91,810 -- 21,984
----------- ----------- ----------- -------------
Net increase
(decrease) in net
assets resulting
from operations..... $37,324 $104,183 $105,975 $39,102
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
36
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 9,163 $ 3,444 $ 14,934 $ 6,510 $12,804
-------- ------- ----------- -------- ------------
Net investment
income.............. 9,163 3,444 14,934 6,510 12,804
-------- ------- ----------- -------- ------------
CAPITAL GAINS INCOME..... 10,410 -- 4,291 14,471 815
-------- ------- ----------- -------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 716 28 463 (828) 360
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 89,337 (1,336) 100,497 (37,302) 65,053
-------- ------- ----------- -------- ------------
Net gain (loss) on
investments......... 90,053 (1,308) 100,960 (38,130) 65,413
-------- ------- ----------- -------- ------------
Net increase
(decrease) in net
assets resulting
from operations..... $109,626 $ 2,136 $120,185 $(17,149) $79,032
-------- ------- ----------- -------- ------------
-------- ------- ----------- -------- ------------
<CAPTION>
FIDELITY VIP FIDELITY VIP FIDELITY VIP II
EQUITY-INCOME OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------- ------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 374 $ 373 $ 66
------- ------ ------
Net investment
income.............. 374 373 66
------- ------ ------
CAPITAL GAINS INCOME..... 1,882 1,481 165
------- ------ ------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 1,671 (138) 28
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 48,686 919 7,582
------- ------ ------
Net gain (loss) on
investments......... 50,357 781 7,610
------- ------ ------
Net increase
(decrease) in net
assets resulting
from operations..... $52,613 $2,635 $7,841
------- ------ ------
------- ------ ------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
37
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment
income............... $ 26,909 $ 11,815 $ 105,975 $ 16,534
Capital gains income... -- 558 -- 584
Net realized gain
(loss) on security
transactions......... 148 (109) -- (232)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 10,267 91,919 -- 22,216
----------- ----------- ------------ -------------
Net increase (decrease)
in net assets
resulting from
operations........... 37,324 104,183 105,975 39,102
----------- ----------- ------------ -------------
UNIT TRANSACTIONS:
Purchases.............. 58,303 110,273 26,348,230 17,300
Net transfers.......... 674,390 1,673,468 (17,219,898 ) 1,125,736
Surrenders............. (6,137) (12,105) (76,531 ) (8,960)
Net loan withdrawals... 11,825 (221) (2,085,251 ) (2,510)
Cost of insurance...... (13,939) (55,771) (460,124 ) (21,190)
----------- ----------- ------------ -------------
Net increase in net
assets resulting from
unit transactions.... 724,442 1,715,644 6,506,426 1,110,376
----------- ----------- ------------ -------------
Total increase in net
assets............... 761,766 1,819,827 6,612,401 1,149,478
NET ASSETS:
Beginning of period.... 1,144 1,234 412,016 1,055
----------- ----------- ------------ -------------
End of period.......... $762,910 $1,821,061 $ 7,024,417 $1,150,533
----------- ----------- ------------ -------------
----------- ----------- ------------ -------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION, OCTOBER 3, 1996 TO DECEMBER 31, 1996
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ------------ -------------
OPERATIONS:
Net investment
income............... $ 17 $ 3 $ 137 $ 7
Net unrealized
appreciation of
investments during
the period........... 12 61 -- 48
----------- ----------- ------------ -------------
Net increase in net
assets resulting from
operations........... 29 64 137 55
----------- ----------- ------------ -------------
UNIT TRANSACTIONS:
Purchases.............. 1,000 1,000 436,756 1,000
Net transfers.......... 115 170 (18,268 ) --
Surrenders............. -- -- (2,162 ) --
Cost of insurance...... -- -- (4,447 ) --
----------- ----------- ------------ -------------
Net increase in net
assets resulting from
unit transactions.... 1,115 1,170 411,879 1,000
----------- ----------- ------------ -------------
Total increase in net
assets............... 1,144 1,234 412,016 1,055
NET ASSETS:
Beginning of period.... -- -- -- --
----------- ----------- ------------ -------------
End of period.......... $ 1,144 $ 1,234 $ 412,016 $ 1,055
----------- ----------- ------------ -------------
----------- ----------- ------------ -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
38
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income............... $ 9,163 $ 3,444 $ 14,934 $ 6,510 $ 12,804
Capital gains income... 10,410 -- 4,291 14,471 815
Net realized gain
(loss) on security
transactions......... 716 28 463 (828) 360
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 89,337 (1,336) 100,497 (37,302) 65,053
----------------- ------- ----------- -------- ------------
Net increase (decrease)
in net assets
resulting from
operations........... 109,626 2,136 120,185 (17,149) 79,032
----------------- ------- ----------- -------- ------------
UNIT TRANSACTIONS:
Purchases.............. 308,974 1,853 68,957 176,177 62,971
Net transfers.......... 2,397,785 76,873 1,641,927 650,101 1,157,823
Surrenders............. (23,361) (640) (13,070) (15,973) (7,195)
Net loan withdrawals... 6,968 7,850 (7,681) 88 3,918
Cost of insurance...... (63,644) (1,339) (34,163) (25,871) (22,528)
----------------- ------- ----------- -------- ------------
Net increase in net
assets resulting from
unit transactions.... 2,626,722 84,597 1,655,970 784,522 1,194,989
----------------- ------- ----------- -------- ------------
Total increase in net
assets............... 2,736,348 86,733 1,776,155 767,373 1,274,021
NET ASSETS:
Beginning of period.... 2,710 1,025 1,139 4,258 4,431
----------------- ------- ----------- -------- ------------
End of period.......... $2,739,058 $87,758 $1,777,294 $771,631 $1,278,452
----------------- ------- ----------- -------- ------------
----------------- ------- ----------- -------- ------------
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------
OPERATIONS:
Net investment
income............... $ 3 $ 14 $ 5 $ 8 $ 11
Net unrealized
appreciation of
investments during
the period........... 46 11 65 68 12
----------------- ------- ----------- -------- ------------
Net increase in net
assets resulting from
operations........... 49 25 70 76 23
----------------- ------- ----------- -------- ------------
UNIT TRANSACTIONS:
Purchases.............. 1,000 1,000 1,000 1,000 1,000
Net transfers.......... 1,661 -- 69 3,182 3,436
Surrenders............. -- -- -- -- (11)
Cost of insurance...... -- -- -- -- (17)
----------------- ------- ----------- -------- ------------
Net increase in net
assets resulting from
unit transactions.... 2,661 1,000 1,069 4,182 4,408
----------------- ------- ----------- -------- ------------
Total increase in net
assets............... 2,710 1,025 1,139 4,258 4,431
NET ASSETS:
Beginning of period.... -- -- -- -- --
----------------- ------- ----------- -------- ------------
End of period.......... $ 2,710 $ 1,025 $ 1,139 $ 4,258 $ 4,431
----------------- ------- ----------- -------- ------------
----------------- ------- ----------- -------- ------------
<CAPTION>
FIDELITY VIP FIDELITY VIP FIDELITY VIP II
EQUITY-INCOME OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------- ------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment
income............... $ 374 $ 373 $ 66
Capital gains income... 1,882 1,481 165
Net realized gain
(loss) on security
transactions......... 1,671 (138) 28
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 48,686 919 7,582
-------- ------------- --------
Net increase (decrease)
in net assets
resulting from
operations........... 52,613 2,635 7,841
-------- ------------- --------
UNIT TRANSACTIONS:
Purchases.............. 43,181 22,743 8,385
Net transfers.......... 579,483 257,320 121,381
Surrenders............. (11,517) (3,860) (1,502)
Net loan withdrawals... (3,459) (12) --
Cost of insurance...... (15,244) (6,270) (3,522)
-------- ------------- --------
Net increase in net
assets resulting from
unit transactions.... 592,444 269,921 124,742
-------- ------------- --------
Total increase in net
assets............... 645,057 272,556 132,583
NET ASSETS:
Beginning of period.... 1,784 1,044 1,050
-------- ------------- --------
End of period.......... $646,841 $273,600 $133,633
-------- ------------- --------
-------- ------------- --------
FIDELITY VIP FIDELITY VIP FIDELITY VIP II
EQUITY-INCOME OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------- ------------------
OPERATIONS:
Net investment
income............... $-- $ -- $--
Net unrealized
appreciation of
investments during
the period........... 54 44 50
-------- ------------- --------
Net increase in net
assets resulting from
operations........... 54 44 50
-------- ------------- --------
UNIT TRANSACTIONS:
Purchases.............. 1,000 1,000 1,000
Net transfers.......... 760 -- --
Surrenders............. (13) -- --
Cost of insurance...... (17) -- --
-------- ------------- --------
Net increase in net
assets resulting from
unit transactions.... 1,730 1,000 1,000
-------- ------------- --------
Total increase in net
assets............... 1,784 1,044 1,050
NET ASSETS:
Beginning of period.... -- -- --
-------- ------------- --------
End of period.......... $ 1,784 $ 1,044 $ 1,050
-------- ------------- --------
-------- ------------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
39
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION:
Separate Account Variable Life One (the Account) is a separate investment
account within ITT Hartford Life and Annuity Insurance Company (the Company)
and is registered with the Securities and Exchange Commission (SEC) as a
unit investment trust under the Investment Company Act of 1940, as amended.
The Account consists of twenty two sub-accounts. These financial statements
include twelve sub-accounts which invest solely in the Hartford and Fidelity
Mutual Funds (the Funds). The other ten sub-accounts, which invest in the
Putnam VT Funds, are presented in separate financial statements. Both the
Company and the Account are subject to supervision and regulation by the
Department of Insurance of the State of Connecticut and the SEC. The Account
invests deposits by variable life contractholders of the Company in the
Funds as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividend and capital
gains income are accrued as of the ex-dividend date. Capital gains
income represents dividends from the Funds which are characterized as
capital gains under tax regulations.
b) SECURITY VALUATION--The investment in shares of the funds are valued at
the closing net asset value per share as determined by the appropriate
Fund as of December 31, 1997.
c) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as
an insurance company under the Internal Revenue Code. Under current law,
no federal income taxes are payable with respect to the operations of
the Account.
d) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the financial statements and
the reported amounts of income and expenses during the period. Operating
results in the future could vary from the amounts derived from
management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
In accordance with the terms of the contracts, the Company makes deductions
for mortality and expense undertakings, cost of insurance, administrative
fees, and state premium taxes. These charges are deducted through
termination of units of interest from applicable contract owners' accounts.
40
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT VARIABLE LIFE ONE AND TO THE
OWNERS OF UNITS OF INTEREST THEREIN:
We have audited the accompanying statement of assets and liabilities of the
Bond Fund Sub-Account, Stock Fund Sub-Account, Money Market Fund Sub-Account,
Advisers Fund Sub-Account, Capital Appreciation Fund Sub-Account, Mortgage
Securities Fund Sub-Account, Index Fund Sub-Account, International
Opportunities Fund Sub-Account, Dividend and Growth Fund Sub-Account, Fidelity
VIP Equity Income Portfolio Sub-Account, Fidelity VIP Overseas Portfolio
Sub-Account and Fidelity VIP II Asset Manager Portfolio Sub-Account
(constituting ITT Hartford Life and Annuity Insurance Company Separate Account
Variable Life One) (the Accounts) as of December 31, 1997, the related
statements of operations for the year then ended and statements of changes in
net assets for the year ended December 31, 1997 and the period from inception,
October 3, 1996, to December 31, 1996. These financial statements are the
responsibility of the Accounts' management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 referred to above present fairly, in
all material respects, the financial position of the Bond Fund Sub-Account,
Stock Fund Sub-Account, Money Market Fund Sub-Account, Advisers Fund Sub-
Account, Capital Appreciation Fund Sub-Account, Mortgage Securities Fund
Sub-Account, Index Fund Sub-Account, International Opportunities Fund
Sub-Account, Dividend and Growth Fund Sub-Account, Fidelity VIP Equity Income
Portfolio Sub-Account, Fidelity VIP Overseas Portfolio Sub-Account and Fidelity
VIP II Asset Manager Portfolio Sub-Account (constituting ITT Hartford Life and
Annuity Insurance Company Separate Account Variable Life One) as of December
31, 1997, the results of its operations for the year then ended, and the
changes in its net assets for the year then ended and the period from
inception, October 3, 1996, to December 31, 1996, in conformity with generally
accepted accounting principles.
Hartford, Connecticut
February 16, 1998 ARTHUR ANDERSEN LLP
41
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 235,252
Cost $ 244,230
Market Value......... $ 246,957 -- -- --
Hartford Stock Fund,
Inc.
Shares 45,309
Cost $ 229,324
Market Value......... -- $ 232,131 -- --
HVA Money Market Fund,
Inc.
Shares 1,438,143
Cost $1,438,143
Market Value......... -- -- $ 1,438,143 --
Hartford Advisers Fund,
Inc.
Shares 118,014
Cost $ 295,264
Market Value......... -- -- -- $ 298,191
Hartford Capital
Appreciation Fund,
Inc.
Shares 58,913
Cost $ 261,570
Market Value......... -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 71,157
Cost $ 78,225
Market Value......... -- -- -- --
Hartford Index Fund,
Inc.
Shares 130,521
Cost $ 371,495
Market Value......... -- -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 113,752
Cost $ 156,261
Market Value......... -- -- -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 62,762
Cost $ 118,541
Market Value......... -- -- -- --
Fidelity VIP Equity
Income Fund
Shares 2,430
Cost $ 54,864
Market Value......... -- -- -- --
Fidelity VIP Overseas
Fund
Shares 1,118
Cost $ 22,108
Market Value......... -- -- -- --
Fidelity VIP II Asset
Manager Fund
Shares 9,843
Cost $ 175,403
Market Value......... -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company.... 11,107 17 54,523 --
Receivable from shares
sold................. -- -- -- --
----------- ------------ ------------ -------------
Total Assets........... 258,064 232,148 1,492,666 298,191
----------- ------------ ------------ -------------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company.... -- -- -- --
Payable for fund shares
purchased............ 11,115 -- 54,334 --
----------- ------------ ------------ -------------
Total Liabilities...... 11,115 -- 54,334 --
----------- ------------ ------------ -------------
Net Assets (variable
life contract
liabilities)......... $ 246,949 $ 232,148 $ 1,438,332 $ 298,191
----------- ------------ ------------ -------------
----------- ------------ ------------ -------------
Units Owned by
Participants......... 179,809 98,743 1,161,238 153,147
Unit Values............ $ 1.373400 $ 2.351023 $ 1.238620 $ 1.947093
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
42
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 235,252
Cost $ 244,230
Market Value......... -- -- -- -- --
Hartford Stock Fund,
Inc.
Shares 45,309
Cost $ 229,324
Market Value......... -- -- -- -- --
HVA Money Market Fund,
Inc.
Shares 1,438,143
Cost $1,438,143
Market Value......... -- -- -- -- --
Hartford Advisers Fund,
Inc.
Shares 118,014
Cost $ 295,264
Market Value......... -- -- -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 58,913
Cost $ 261,570
Market Value......... $ 259,788 -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 71,157
Cost $ 78,225
Market Value......... -- $ 77,118 -- -- --
Hartford Index Fund,
Inc.
Shares 130,521
Cost $ 371,495
Market Value......... -- -- $ 375,602 -- --
Hartford International
Opportunities Fund,
Inc.
Shares 113,752
Cost $ 156,261
Market Value......... -- -- -- $ 147,248 --
Hartford Dividend and
Growth Fund, Inc.
Shares 62,762
Cost $ 118,541
Market Value......... -- -- -- -- $ 122,532
Fidelity VIP Equity
Income Fund
Shares 2,430
Cost $ 54,864
Market Value......... -- -- -- -- --
Fidelity VIP Overseas
Fund
Shares 1,118
Cost $ 22,108
Market Value......... -- -- -- -- --
Fidelity VIP II Asset
Manager Fund
Shares 9,843
Cost $ 175,403
Market Value......... -- -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company.... 11,210 -- -- 5,595 11,186
Receivable from shares
sold................. -- -- 115,954 -- --
----------------- --------------- ----------- ---------- ------------
Total Assets........... 270,998 77,118 491,556 152,843 133,718
----------------- --------------- ----------- ---------- ------------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company.... -- -- 116,326 -- --
Payable for fund shares
purchased............ 11,220 -- -- 5,596 11,192
----------------- --------------- ----------- ---------- ------------
Total Liabilities...... 11,220 -- 116,326 5,596 11,192
----------------- --------------- ----------- ---------- ------------
Net Assets (variable
life contract
liabilities)......... $ 259,778 $ 77,118 $ 375,230 $ 147,247 $ 122,526
----------------- --------------- ----------- ---------- ------------
----------------- --------------- ----------- ---------- ------------
Units Owned by
Participants......... 121,620 57,150 161,530 98,062 61,304
Unit Values............ $ 2.135978 $ 1.349414 $ 2.322979 $ 1.501562 $ 1.998682
<CAPTION>
FIDELITY VIP FIDELITY VIP FIDELITY VIP II
EQUITY-INCOME OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------- ------------------
<S> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
Hartford Stock Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
HVA Money Market Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
Hartford Advisers Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares
Cost
Market Value......... -- -- --
Hartford Index Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
Hartford Dividend and
Growth Fund, Inc.
Shares
Cost
Market Value......... -- -- --
Fidelity VIP Equity
Income Fund
Shares
Cost
Market Value......... $ 58,998 -- --
Fidelity VIP Overseas
Fund
Shares
Cost
Market Value......... -- $ 21,473 --
Fidelity VIP II Asset
Manager Fund
Shares
Cost
Market Value......... -- -- $ 177,276
Due from ITT Hartford
Life and Annuity
Insurance Company.... -- -- 1
Receivable from shares
sold................. -- -- --
---------- ------------- ----------
Total Assets........... 58,998 21,473 177,277
---------- ------------- ----------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company.... 2 1 --
Payable for fund shares
purchased............ -- -- --
---------- ------------- ----------
Total Liabilities...... 2 1 --
---------- ------------- ----------
Net Assets (variable
life contract
liabilities)......... $ 58,996 $ 21,472 $ 177,277
---------- ------------- ----------
---------- ------------- ----------
Units Owned by
Participants......... 33,612 15,833 116,456
Unit Values............ $ 1.755189 $1.356104 $1.522265
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
43
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $10,020 $1,517 $22,397 $4,523
----------- ----------- ----------- ------
Net investment
income.............. 10,020 1,517 22,397 4,523
----------- ----------- ----------- ------
CAPITAL GAINS INCOME..... -- 113 -- 1,075
----------- ----------- ----------- ------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 281 287 -- (3)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 3,212 2,743 -- 3,056
----------- ----------- ----------- ------
Net gain (loss) on
investments......... 3,493 3,030 -- 3,053
----------- ----------- ----------- ------
Net increase
(decrease) in net
assets resulting
from operations..... $13,513 $4,660 $22,397 $8,651
----------- ----------- ----------- ------
----------- ----------- ----------- ------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
44
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 817 $ 2,894 $3,998 $ 1,213 $1,121
------- ------- ----------- ------- ------
Net investment
income.............. 817 2,894 3,998 1,213 1,121
------- ------- ----------- ------- ------
CAPITAL GAINS INCOME..... 385 -- 574 2,408 30
------- ------- ----------- ------- ------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 2,118 25 911 1,535 12
Net unrealized
appreciation
(depreciation) of
investments during
the period........... (1,824) (1,118) 4,041 (9,304) 3,930
------- ------- ----------- ------- ------
Net gain (loss) on
investments......... 294 (1,093) 4,952 (7,769) 3,942
------- ------- ----------- ------- ------
Net increase
(decrease) in net
assets resulting
from operations..... $ 1,496 $ 1,801 $9,524 $(4,148) $5,093
------- ------- ----------- ------- ------
------- ------- ----------- ------- ------
<CAPTION>
FIDELITY VIP FIDELITY VIP FIDELITY VIP II
EQUITY-INCOME OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------- ------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 18 $ 38 $ 37
------ ----- ------
Net investment
income.............. 18 38 37
------ ----- ------
CAPITAL GAINS INCOME..... 91 150 92
------ ----- ------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 782 (6) --
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 4,077 (679) 1,822
------ ----- ------
Net gain (loss) on
investments......... 4,859 (685) 1,822
------ ----- ------
Net increase
(decrease) in net
assets resulting
from operations..... $4,968 $(497) $1,951
------ ----- ------
------ ----- ------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
45
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment
income............... $ 10,020 $ 1,517 $ 22,397 $ 4,523
Capital gains income... -- 113 -- 1,075
Net realized gain
(loss) on security
transactions......... 281 287 -- (3)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 3,212 2,743 -- 3,056
----------- ----------- ----------- -------------
Net increase (decrease)
in net assets
resulting from
operations........... 13,513 4,660 22,397 8,651
----------- ----------- ----------- -------------
UNIT TRANSACTIONS:
Purchases.............. 16,326 9,295 4,374,149 16,165
Net transfers.......... 161,664 224,575 (2,888,312) 256,828
Surrenders............. (4,558) (6,421) (61,718) (2,671)
Cost of insurance...... (4,584) (1,028) (55,698) (811)
----------- ----------- ----------- -------------
Total increase in net
assets resulting from
unit transactions.... 168,848 226,421 1,368,421 269,511
----------- ----------- ----------- -------------
Total increase in net
assets............... 182,361 231,081 1,390,818 278,162
NET ASSETS:
Beginning of period.... 64,588 1,067 47,514 20,029
----------- ----------- ----------- -------------
End of period.......... $246,949 $232,148 $ 1,438,332 $298,191
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION, OCTOBER 3, 1996 TO DECEMBER 31,
1996
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -------------
OPERATIONS:
Net investment
income............... $ 389 $ 3 $ 286 $ 53
Net unrealized
(depreciation)
appreciation of
investments during
the period........... (484) 64 -- (129)
----------- ----------- ----------- -------------
Net increase (decrease)
in net assets
resulting from
operations........... (95) 67 286 (76)
----------- ----------- ----------- -------------
UNIT TRANSACTIONS:
Purchases.............. 1,000 1,000 176,110 1,000
Net transfers.......... 63,683 -- (127,365) 19,105
Surrenders............. -- -- (1,225) --
Cost of insurance...... -- -- (292) --
----------- ----------- ----------- -------------
Net increase in net
assets resulting from
unit transactions.... 64,683 1,000 47,228 20,105
----------- ----------- ----------- -------------
Total increase in net
assets............... 64,588 1,067 47,514 20,029
NET ASSETS:
Beginning of period.... -- -- -- --
----------- ----------- ----------- -------------
End of period.......... $ 64,588 $ 1,067 $ 47,514 $ 20,029
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
46
<PAGE>
<TABLE>
<CAPTION>
CAPTIAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income............... $ 817 $ 2,894 $ 3,998 $ 1,213 $ 1,121
Capital gains income... 385 -- 574 2,408 30
Net realized gain
(loss) on security
transactions......... 2,118 25 911 1,535 12
Net unrealized
appreciation
(depreciation) of
investments during
the period........... (1,824) (1,118) 4,041 (9,304) 3,930
-------- ------- ----------- -------- ------------
Net increase (decrease)
in net assets
resulting from
operations........... 1,496 1,801 9,524 (4,148) 5,093
-------- ------- ----------- -------- ------------
UNIT TRANSACTIONS:
Purchases.............. 16,079 1,604 28,684 16,294 11,377
Net transfers.......... 253,669 76,343 352,567 125,494 109,235
Surrenders............. (7,630) (883) (9,226) (6,183) (2,933)
Cost of insurance...... (4,880) (2,772) (7,390) (4,631) (1,314)
-------- ------- ----------- -------- ------------
Total increase in net
assets resulting from
unit transactions.... 257,238 74,292 364,635 130,974 116,365
-------- ------- ----------- -------- ------------
Total increase in net
assets............... 258,734 76,093 374,159 126,826 121,458
NET ASSETS:
Beginning of period.... 1,044 1,025 1,071 20,421 1,068
-------- ------- ----------- -------- ------------
End of period.......... $259,778 $77,118 $375,230 $147,247 $122,526
-------- ------- ----------- -------- ------------
-------- ------- ----------- -------- ------------
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------
OPERATIONS:
Net investment
income............... $ 2 $ 14 $ 5 $ 25 $ 6
Net unrealized
(depreciation)
appreciation of
investments during
the period........... 42 11 66 291 62
-------- ------- ----------- -------- ------------
Net increase (decrease)
in net assets
resulting from
operations........... 44 25 71 316 68
-------- ------- ----------- -------- ------------
UNIT TRANSACTIONS:
Purchases.............. 1,000 1,000 1,000 1,000 1,000
Net transfers.......... -- -- -- 19,105 --
Surrenders............. -- -- -- -- --
Cost of insurance...... -- -- -- -- --
-------- ------- ----------- -------- ------------
Net increase in net
assets resulting from
unit transactions.... 1,000 1,000 1,000 20,105 1,000
-------- ------- ----------- -------- ------------
Total increase in net
assets............... 1,044 1,025 1,071 20,421 1,068
NET ASSETS:
Beginning of period.... -- -- -- -- --
-------- ------- ----------- -------- ------------
End of period.......... $ 1,044 $ 1,025 $ 1,071 $ 20,421 $ 1,068
-------- ------- ----------- -------- ------------
-------- ------- ----------- -------- ------------
<CAPTION>
FIDELITY VIP FIDELITY VIP FIDELITY VIP II
EQUITY INCOME FUND OVERSEAS FUND ASSET MANAGER FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------- ------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment
income............... $ 18 $ 38 $ 37
Capital gains income... 91 150 92
Net realized gain
(loss) on security
transactions......... 782 (6) --
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 4,077 (679) 1,822
------- ------------- --------
Net increase (decrease)
in net assets
resulting from
operations........... 4,968 (497) 1,951
------- ------------- --------
UNIT TRANSACTIONS:
Purchases.............. 2,252 1,594 10,283
Net transfers.......... 54,175 22,728 165,107
Surrenders............. (2,747) (1,120) (735)
Cost of insurance...... (708) (2,277) (379)
------- ------------- --------
Total increase in net
assets resulting from
unit transactions.... 52,972 20,925 174,276
------- ------------- --------
Total increase in net
assets............... 57,940 20,428 176,227
NET ASSETS:
Beginning of period.... 1,056 1,044 1,050
------- ------------- --------
End of period.......... $58,996 $21,472 $177,277
------- ------------- --------
------- ------------- --------
FIDELITY VIP FIDELITY VIP FIDELITY VIP II
EQUITY INCOME FUND OVERSEAS FUND ASSET MANAGER FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------- ------------------
OPERATIONS:
Net investment
income............... $-- $-- $--
Net unrealized
(depreciation)
appreciation of
investments during
the period........... 56 44 50
------- ------------- --------
Net increase (decrease)
in net assets
resulting from
operations........... 56 44 50
------- ------------- --------
UNIT TRANSACTIONS:
Purchases.............. 1,000 1,000 1,000
Net transfers.......... -- -- --
Surrenders............. -- -- --
Cost of insurance...... -- -- --
------- ------------- --------
Net increase in net
assets resulting from
unit transactions.... 1,000 1,000 1,000
------- ------------- --------
Total increase in net
assets............... 1,056 1,044 1,050
NET ASSETS:
Beginning of period.... -- -- --
------- ------------- --------
End of period.......... $ 1,056 $ 1,044 $ 1,050
------- ------------- --------
------- ------------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
47
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION:
Separate Account Variable Life Two (the Account) is a separate investment
account within ITT Hartford Life and Annuity Insurance Company (the Company)
and is registered with the Securities and Exchange Commission (SEC) as a
unit investment trust under the Investment Company Act of 1940, as amended.
The Account consists of twenty two sub-accounts. These financial statements
include twelve sub-accounts which invest solely in the Hartford and Fidelity
Mutual Funds (the Funds). The other ten sub-accounts, which invest in the
Putnam VT Funds, are presented in separate financial statements. Both the
Company and the Account are subject to supervision and regulation by the
Department of Insurance of the State of Connecticut and the SEC. The Account
invests deposits by variable life contractholders of the Company in the
Funds as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividend and capital
gains income are accrued as of the ex-dividend date. Capital gains
income represents dividends from the Funds which are characterized as
capital gains under tax regulations.
b) SECURITY VALUATION--The investment in shares of the funds are valued at
the closing net asset value per share as determined by the appropriate
Fund as of December 31, 1997.
c) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as
an insurance company under the Internal Revenue Code. Under current law,
no federal income taxes are payable with respect to the operations of
the Account.
d) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the financial statements and
the reported amounts of income and expenses during the period. Operating
results in the future could vary from the amounts derived from
management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
In accordance with the terms of the contracts, the Company makes deductions
for mortality and expense undertakings, cost of insurance, administrative
fees, and state premium taxes. These charges are deducted through
termination of units of interest from applicable contract owners' accounts.
48
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT VARIABLE LIFE TWO AND TO THE
OWNERS OF UNITS OF INTEREST THEREIN:
We have audited the accompanying statement of assets and liabilities of the
Bond Fund Sub-Account, Stock Fund Sub-Account, Money Market Fund Sub-Account,
Advisers Fund Sub-Account, Capital Appreciation Fund Sub-Account, Mortgage
Securities Fund Sub-Account, Index Fund Sub-Account, International
Opportunities Fund Sub-Account, Dividend and Growth Fund Sub-Account, Fidelity
VIP Equity Income Portfolio Sub-Account, Fidelity VIP Overseas Portfolio
Sub-Account and Fidelity VIP II Asset Manager Portfolio Sub-Account
(constituting ITT Hartford Life and Annuity Insurance Company Separate Account
Variable Life Two) (the Accounts) as of December 31, 1997, the related
statements of operations for the year then ended and statements of changes in
net assets for the year ended December 31, 1997 and the period from inception,
October 3, 1996, to December 31, 1996. These financial statements are the
responsibility of the Accounts' management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 referred to above present fairly, in
all material respects, the financial position of the Bond Fund Sub-Account,
Stock Fund Sub-Account, Money Market Fund Sub-Account, Advisers Fund Sub-
Account, Capital Appreciation Fund Sub-Account, Mortgage Securities Fund
Sub-Account, Index Fund Sub-Account, International Opportunities Fund
Sub-Account, Dividend and Growth Fund Sub-Account, Fidelity VIP Equity Income
Portfolio Sub-Account, Fidelity VIP Overseas Portfolio Sub-Account and Fidelity
VIP II Asset Manager Portfolio Sub-Account (constituting ITT Hartford Life and
Annuity Insurance Company Separate Account Variable Life Two) as of December
31, 1997, the results of its operations for the year then ended, and the
changes in its net assets for the year ended December 31, 1997 the period from
inception, October 3, 1996, to December 31, 1996, in conformity with generally
accepted accounting principles.
Hartford, Connecticut
February 16, 1998 ARTHUR ANDERSEN LLP
49
<PAGE>
HARTFORD BOND FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- -------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 3.6%
California Infrastructure Pacific Gas & Electric,
Series 1997-1 Class A6
$ 3,600,000 6.32% due 09/25/05.............................. $ 3,616,875
California Infrastructure Southern California
Edison, Series 1997-1 Class A3
3,250,000 6.17% due 03/25/03.............................. 3,262,123
Chemical Master Credit Card Trust, Series 96-1,
Class A
11,400,000 5.55% due 09/15/03.............................. 11,258,184
Oakwood Mortgage Investors, Inc. Series 94-A,
Class B1
1,853,755 8.40% due 02/15/15.............................. 1,891,738
-------------
Total asset-backed securities..................... $ 20,028,920
-------------
-------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 1.5%
NationsBank Corp., Series 1997-CTL1, Class A1
8,084,783 7.42% due 06/22/24.............................. $ 8,307,114
-------------
-------------
CORPORATE BONDS & NOTES -- 48.9%
CABLE -- 1.2%
Cablevision Systems Corp.
2,300,000 7.875% due 12/15/07............................. $ 2,346,000
Jones Intercable, Inc.
100,000 8.875% due 04/01/07............................. 104,500
Lenfest Communications Inc.
1,000,000 8.375% due 11/01/05............................. 1,031,250
Rogers Cablesystems, Inc.
2,945,000 9.625% due 08/01/02............................. 3,136,425
-------------
6,618,175
-------------
CHEMICALS -- 1.5%
du Pont (E.I.) Nemours & Co.
5,700,000 6.75% due 09/01/07.............................. 5,890,488
Terra Industries, Inc.
2,250,000 10.50% due 06/15/05............................. 2,418,750
-------------
8,309,238
-------------
COLLEGES -- 1.1%
Massachusetts Institutue of Technology
5,500,000 7.25% due 11/02/96.............................. 6,199,501
-------------
ENERGY & SERVICES -- 1.9%
Tenneco, Inc.
6,850,000 8.20% due 11/15/99.............................. 7,104,395
Union Oil Co. of California Medium-Term Note
2,500,000 9.375% due 02/15/11............................. 3,117,622
-------------
10,222,017
-------------
FINANCIAL SERVICES -- 15.5%
Abbey National First Capital (Yankee)
7,575,000 8.20% due 10/15/04.............................. 8,303,139
Ahmanson (H.F.) & Co. Medium-Term Note
5,500,000 6.35% due 09/01/98.............................. 5,516,175
American Reinsurance Co.
3,700,000 7.45% due 12/15/26.............................. 3,987,546
Bayerische Landesbank (NY)
7,000,000 6.20% due 02/09/06.............................. 6,957,608
BellSouth Capital Funding
7,500,000 7.12% due 07/15/97.............................. 7,865,993
Charles Schwab Corp. Medium-Term Note
3,000,000 6.63% due 08/04/98.............................. 3,010,785
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- -------------
<C> <S> <C>
CORPORATE BONDS & NOTES -- (CONTINUED)
FINANCIAL SERVICES -- (CONTINUED)
Chase Manhattan Corp.
$ 3,000,000 7.75% due 11/01/99.............................. $ 3,090,654
General Motors Acceptance Corp. Medium-Term Note
4,000,000 5.875% due 01/12/99............................. 3,991,536
KFW International Finance, Inc.
5,000,000 7.00% 03/01/13.................................. 5,322,805
Landeskreditbank Baden-Wuerttemberg
7,900,000 7.625% due 02/01/23............................. 8,959,587
Lehman Brothers Holdings, Inc.
3,000,000 10.00% due 05/15/99............................. 3,145,995
Lehman Brothers Holdings, Inc.
2,850,000 8.875% due 03/01/02............................. 3,090,170
Massachusetts Mutual Life Insurance Co.*
11,750,000 7.625% due 11/15/23............................. 12,829,743
Phoenix Home Life Mutual Insurance Co.*
2,750,000 6.95% due 12/01/06.............................. 2,801,783
Salomon Brothers, Inc.
2,500,000 7.00% due 01/20/98.............................. 2,500,913
Swiss Bank Corp. (NY)
1,000,000 7.375% due 06/15/17............................. 1,072,409
Westinghouse Credit Corp.
3,000,000 8.875% due 06/14/14............................. 3,280,974
-------------
85,727,815
-------------
FOOD, BEVERAGE & TOBACCO -- 1.5%
Ralcorp Holdings Inc.
7,400,000 8.75% due 09/15/04.............................. 8,393,672
-------------
FUNERAL/CEMETERY SERVICES -- 0.8%
Loewen Group International, Inc.
3,900,000 8.25% due 10/15/03.............................. 4,150,462
-------------
HOME BUILDING -- 0.8%
U.S. Home Corp.
4,190,000 7.95% due 03/01/01.............................. 4,251,949
-------------
MEDIA & SERVICES -- 1.1%
Turner Broadcasting System, Inc.
5,900,000 7.40% due 02/01/04.............................. 6,095,243
-------------
PACKAGING & CONTAINERS -- 0.8%
Borden Chemical and Plastics
500,000 9.50% due 05/01/05.............................. 527,500
Domtar, Inc.
2,350,000 9.50% due 08/01/16 2,604,902
Owens-Illinois, Inc.
1,000,000 8.10% due 05/15/07.............................. 1,063,892
-------------
4,196,294
-------------
REAL ESTATE -- 0.9%
Duke Realty LP
5,000,000 7.25% due 09/22/02.............................. 5,155,260
-------------
RETAIL -- 3.9%
KMart Corp.
4,000,000 12.50% due 03/01/05............................. 4,860,000
KMart Corp. Medium-Term Note
5,000,000 8.96% due 12/10/19.............................. 5,048,110
KMart Corp. Medium-Term Note
750,000 7.750% due 10/01/12............................. 720,000
Profitt's, Inc.
1,400,000 8.125% due 05/15/04............................. 1,456,000
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-1
<PAGE>
HARTFORD BOND FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- -------------
<C> <S> <C>
CORPORATE BONDS & NOTES -- (CONTINUED)
RETAIL -- (CONTINUED)
Stop & Shop Companies, Inc.
$ 8,585,000 9.75% due 02/01/02.............................. $ 9,587,780
-------------
21,671,890
-------------
SHIPBUILDING -- 0.4%
Newport News Shipbuilding, Inc.*
2,000,000 8.625% due 12/01/06............................. 2,102,500
-------------
TELECOMMUNICATIONS -- 5.1%
Bell Cablemedia PLC
9,750,000 0.00% due 09/15/05.............................. 8,659,229
Bell Telephone Co. of Pennsylvania
3,000,000 8.35% due 12/15/30.............................. 3,799,122
Chesapeake & Potomac Telephone Co. of MD
1,500,000 8.30% due 08/01/31.............................. 1,840,169
Continental Cablevision, Inc.
1,000,000 9.50% due 08/01/13.............................. 1,191,412
Rogers Cantel, Inc.
2,000,000 8.30% due 10/01/07.............................. 1,985,000
TCI Communications, Inc.
2,000,000 7.875% due 02/15/26............................. 2,146,290
Tele-Communications, Inc.
7,000,000 6.58% due 02/15/05.............................. 7,493,325
USW-1, Series A2 1997*
1,360,000 0.00% due 02/01/17.............................. 379,712
Viacom, Inc.
750,000 7.75% due 06/01/05.............................. 765,137
-------------
28,259,396
-------------
TRANSPORTATION -- 7.7%
Continental Airlines, Inc.
4,430,000 9.50% due 12/15/01.............................. 4,651,500
Continental Airlines, Inc. 1997-1*
12,000,000 7.461% due 04/01/13............................. 12,650,640
CSX Corp.*
4,000,000 7.25% due 05/01/04.............................. 4,149,552
Interpool, Inc.*
2,000,000 7.35% due 08/01/07.............................. 2,001,074
Norfolk Southern Corp.
2,650,000 7.80% due 05/15/27.............................. 2,989,452
U.S. Airways Group Inc., Class A
4,751,405 6.76% due 04/15/08.............................. 4,839,115
United Air Lines Inc.
8,900,000 9.75% due 08/15/21.............................. 11,512,630
-------------
42,793,963
-------------
UTILITIES -- 4.7%
CMS Energy Corp.
1,400,000 8.125% due 05/15/02............................. 1,441,207
Cleveland Electric Illuminating Co.
2,500,000 7.88% due 11/01/17.............................. 2,626,163
Cleveland Electric Illuminating Co.
1,750,000 7.13% due 07/01/07.............................. 1,848,063
El Paso Electric Co.
5,000,000 9.40% due 05/01/11.............................. 5,625,000
Long Island Lighting Co.
1,485,000 8.90% due 07/15/19.............................. 1,581,590
Long Island Lighting Co.
1,835,000 7.625% due 04/15/98............................. 1,840,813
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- -------------
<C> <S> <C>
UTILITIES -- (CONTINUED)
Public Service Electric & Gas Co. MBIA Insured
$ 4,000,000 7.00% due 09/01/24.............................. $ 4,097,380
Public Service Electric & Gas Co. MBIA Insured
7,000,000 6.75% due 01/01/16.............................. 7,095,830
-------------
26,156,046
-------------
Total corporate bonds & notes..................... $ 270,303,421
-------------
-------------
ENHANCED EQUIPMENT TRUST
CERTIFICATES -- 0.8%
Norwest Airlines Trust Series 2
2,408,000 11.30% due 06/21/14............................. $ 3,124,645
NWA Trust Series D
1,000,000 13.875% due 06/21/08............................ 1,212,507
-------------
Total enhanced equipment trust certificates....... $ 4,337,152
-------------
-------------
FOREIGN/YANKEE BONDS & NOTES -- 8.3%
FOREIGN CORPORATIONS -- 2.2%
Industrial Finance Corp. (Thailand)
12,800,000 7.75% due 08/04/07.............................. $ 12,160,000
-------------
FOREIGN GOVERNMENTS -- 6.1%
Banco Nacional de Comercio Exterior SNC
1,000,000 7.25% due 02/02/04.............................. 928,125
Province of Quebec
2,400,000 7.125% due 02/09/24............................. 2,480,400
Republica de Argentina Par Bonds
8,250,000 4.25% due 03/31/23.............................. 6,027,656
Republic of Colombia
1,650,000 7.625% due 02/15/07............................. 1,551,564
Republic of Panama
1,300,000 8.875% due 09/30/27............................. 1,222,000
Republic of Venezuela
6,250,000 9.25% due 09/15/27.............................. 5,601,563
Republic of Venezuela Discount Series A
2,000,000 6.75% due 03/31/20.............................. 1,790,000
The Russian Federation*
5,000,000 10.00% due 06/26/07............................. 4,621,875
United Mexican States Discount Bond
9,000,000 6.6925% due 12/31/19............................ 8,313,750
United Mexican States Discount Bond
1,000,000 6.6172% due 12/31/19............................ 923,750
-------------
33,460,683
-------------
Total foreign/yankee bonds & notes................ $ 45,620,683
-------------
-------------
U.S. TREASURIES & FEDERAL AGENCIES -- 31.5%
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 10.4%
44,990,090 6.00% due 01/01/12 - 05/01/26................... $ 44,221,291
6,490,000 6.50% due 01/01/12 - 12/01/27................... 6,466,693
4,000,000 7.00% due 01/01/28.............................. 4,027,500
FNMA Multifamily DUS
2,941,828 6.48% due 12/01/05.............................. 2,965,510
-------------
57,680,994
-------------
U.S. GOVERNMENT AGENCIES -- 1.3%
Israel Aid (State of)
7,200,000 4.875% due 09/15/98............................. 7,150,565
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-2
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- -------------
<C> <S> <C>
U.S. TREASURIES & FEDERAL AGENCIES -- (CONTINUED)
U.S. TREASURY BONDS -- 7.6%
$ 5,400,000 6.375% due 08/15/27............................. $ 5,693,625
4,380,000 6.50% due 11/15/26.............................. 4,675,650
8,950,000 6.625% due 02/15/27............................. 9,713,551
692,000 6.75% due 08/15/26.............................. 761,849
2,980,000 6.875% due 08/15/25............................. 3,321,770
5,550,000 7.50% due 11/15/16.............................. 6,474,425
3,900,000 8.125% due 08/15/19............................. 4,881,096
5,100,000 8.75% due 05/15/17.............................. 6,684,188
-------------
42,206,154
-------------
U.S. TREASURY INFLATION-INDEXED SECURITIES -- 1.0%
5,151,269 3.625% due 07/15/02............................. 5,173,269
-------------
U.S. TREASURY NOTES -- 11.2%
15,000,000 5.50% due 11/15/98.............................. 14,976,570
4,900,000 5.625% due 11/30/98 - 02/15/06.................. 4,889,063
5,850,000 5.75% due 10/31/02 - 08/15/03................... 5,856,423
7,120,000 5.875% due 08/15/98 - 09/30/02.................. 7,147,053
11,900,000 6.125% due 08/31/98............................. 11,940,912
6,300,000 6.25% due 07/31/98 - 02/15/03................... 6,377,597
3,160,000 6.50% due 05/31/02 - 05/15/05................... 3,278,550
100,000 6.875% due 08/31/99............................. 101,875
1,880,000 7.00% due 07/15/06.............................. 2,029,814
650,000 7.25% due 05/15/04.............................. 701,594
3,000,000 7.50% due 10/31/99 - 11/15/24................... 3,425,533
1,000,000 7.875% due 11/15/04............................. 1,117,813
-------------
61,842,797
-------------
Total U.S. treasuries & federal agencies.......... $ 174,053,779
-------------
-------------
SHORT-TERM SECURITIES -- 12.3%
COMMERCIAL PAPER -- 9.0%
Associates Corporation of North America
10,000,000 5.83% due 01/20/98.............................. $ 9,969,231
Bell Atlantic Corp.
5,000,000 5.78% due 01/22/98.............................. 4,983,142
Ford Motor Credit Corp.
10,000,000 5.80% due 01/14/98.............................. 9,979,056
General Electric Capital Corp.
5,000,000 5.87% due 01/16/98.............................. 4,987,770
Johnson Controls, Inc.
10,000,000 5.88% due 01/20/98.............................. 9,968,966
Lucent Technologies, Inc.
5,000,000 5.85% due 01/09/98.............................. 4,993,500
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- -------------
<C> <S> <C>
COMMERCIAL PAPER -- (CONTINUED)
Lucent Technologies, Inc.
$ 5,000,000 5.76% due 01/20/98.............................. $ 4,984,800
-------------
49,866,465
-------------
REPURCHASE AGREEMENT -- 3.3%
18,475,000 Interest in $86,953,000 joint repurchase agreement
with State Street Bank dated 12/31/97 at 6.50%,
to be repurchased at $18,481,672 on 01/02/98;
(Collateralized by $86,953,000 U.S. Treasury
Bonds 8.375% - 11.625% due 02/11/01 -
08/08/15)....................................... 18,475,000
-------------
Total short-term securities....................... $ 68,341,465
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
DIVERSIFICATION OF NET ASSETS:
<S> <C> <C>
Total asset-backed securities (cost $19,517,029)....... 3.6% $ 20,028,920
Total commercial mortgage-backed securities (cost
$8,244,546).......................................... 1.5 8,307,114
Total corporate bonds & notes (cost $258,420,440)...... 48.9 270,303,421
Total enhanced equipment trust certificates (cost
$4,153,907).......................................... 0.8 4,337,152
Total foreign/yankee bonds & notes (cost
$45,136,124)......................................... 8.3 45,620,683
Total U.S. treasuries & federal agencies (cost
$170,618,695)........................................ 31.5 174,053,779
Total short-term securities (cost $68,341,465)......... 12.3 68,341,465
------ -------------
Total investment in securities
(total cost $574,432,206)............................ 106.9 590,992,534
Cash, receivables and other assets..................... 1.9 10,462,778
Payable for securities purchased....................... (8.8) (48,576,194)
Other liabilities...................................... (0.0) (9,321)
------ -------------
Net assets (applicable to $1.049820 per share based on
526,632,753 shares outstanding)...................... 100.0% $ 552,869,797
------ -------------
------ -------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; authorized
800,000,000 shares; outstanding 526,632,753 shares........... $ 52,663,275
Capital surplus................................................ 483,398,206
Accumulated undistributed net investment income................ 1,354,301
Distribution in excess of net realized gain on investments..... (1,106,313)
Unrealized appreciation of investments......................... 16,560,328
-------------
Net assets, applicable to shares outstanding................... $ 552,869,797
-------------
-------------
</TABLE>
* Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At December 31, 1997, the market
value of these securities amounted to $41,536,879, or 7.5% of net assets.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-3
<PAGE>
HARTFORD STOCK FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------------ ---------------
<C> <S> <C>
COMMON STOCKS -- 91.2%
AEROSPACE & DEFENSE -- 1.5%
1,100,000 Boeing Co. (The).................................. $ 53,831,250
*334,628 Raytheon Co. Class A.............................. 16,501,343
---------------
70,332,593
---------------
COMMUNICATIONS EQUIPMENT -- 3.9%
*225,000 Ciena Corporation................................. 13,753,125
*1,275,000 Cisco Systems, Inc................................ 71,081,250
500,000 Ericsson (L.M.) Telephone-ADR..................... 18,656,250
550,000 Lucent Technologies, Inc.......................... 43,931,250
675,000 Motorola, Inc..................................... 38,517,187
---------------
185,939,062
---------------
COMPUTERS & OFFICE
EQUIPMENT -- 4.6%
*630,000 Adaptec, Inc...................................... 23,388,750
*1,518,600 EMC Corporation................................... 41,666,587
780,000 International Business Machines Corporation....... 81,558,750
950,000 Xerox Corporation................................. 70,121,875
---------------
216,735,962
---------------
CONSUMER DURABLES -- 0.4%
*595,000 General Motors Corp.-Class H...................... 21,977,812
---------------
CONSUMER NON-DURABLES -- 5.5%
295,000 Colgate Palmolive Company......................... 21,682,500
450,000 Estee Lauder Companies-Class A.................... 23,146,875
625,000 Gillette Company (The)............................ 62,773,437
1,295,000 Kimberly-Clark Corporation........................ 63,859,687
1,100,000 Proctor & Gamble Company (The).................... 87,793,750
---------------
259,256,249
---------------
CONSUMER SERVICES -- 1.9%
*374,548 Autotote Corp. (Unregistered Shares).............. 547,776
550,000 Eastman Kodak Company............................. 33,446,875
287,500 Hertz Corporation Class A (The)................... 11,571,875
*1,670,000 Mirage Resorts, Inc............................... 37,992,500
---------------
83,559,026
---------------
ELECTRONICS -- 6.5%
*550,000 Altera Corporation................................ 18,218,750
*935,000 Analog Devices, Inc............................... 25,887,812
2,700,000 General Electric Company.......................... 198,112,500
920,000 Intel Corporation................................. 64,630,000
---------------
306,849,062
---------------
ENERGY & SERVICES -- 6.5%
280,000 Amoco Corporation................................. 23,835,000
575,000 Chevron Corporation............................... 44,275,000
800,000 Exxon Corporation................................. 48,950,000
1,850,000 Royal Dutch Petroleum Co. ADR..................... 100,246,875
1,100,000 Schlumberger Ltd.................................. 88,550,000
---------------
305,856,875
---------------
FINANCIAL SERVICES -- 20.4%
290,000 Ace Ltd........................................... 27,985,000
<CAPTION>
MARKET
SHARES VALUE
------------ ---------------
<C> <S> <C>
FINANCIAL SERVICES -- (CONTINUED)
1,100,000 Allstate Corporation (The)........................ 99,962,500
950,000 American Express Co............................... $ 84,787,500
600,000 American International Group, Inc................. 65,250,000
530,000 Associates First Capital Corporation.............. 37,696,250
700,000 Bank America Corporation.......................... 51,100,000
800,000 Citicorp.......................................... 101,150,000
800,000 First Union Corporation........................... 41,000,000
1,075,000 Marsh & McLennan Companies, Inc................... 80,154,687
1,400,000 Merrill Lynch & Co., Inc.......................... 102,112,500
375,000 NationsBank Corporation........................... 22,804,687
1,150,000 State Street Corporation.......................... 66,915,625
2,280,000 Travelers Group, Inc.............................. 122,835,000
500,000 U.S. Bancorp...................................... 55,968,750
---------------
959,722,499
---------------
FOOD, BEVERAGE & TOBACCO -- 1.9%
450,000 Coca-Cola Company (The)........................... 29,981,250
50,000 Nabisco Holdings Corporation...................... 2,421,883
500,000 PepsiCo, Inc...................................... 18,218,750
600,000 Unilever N.V.-New York Shares..................... 37,462,500
---------------
88,084,383
---------------
HEALTH CARE -- 13.9%
1,020,000 Abbott Laboratories............................... 66,873,750
1,100,000 American Home Products Corporation and
Subsidiaries.................................... 84,150,000
1,300,000 Columbia/HCA Healthcare Corporation............... 38,512,500
1,100,000 Johnson & Johnson................................. 72,462,500
770,000 Merck & Co., Inc.................................. 81,812,500
1,250,000 Pfizer, Inc....................................... 93,203,125
1,800,000 Pharmacia & Upjohn, Inc........................... 65,925,000
*200,000 Phycor, Inc....................................... 5,400,000
360,000 Rhone-Poulenc SA.................................. 15,975,000
200,000 Service Corporation International................. 7,387,500
1,130,000 SmithKline Beecham PLC ADR........................ 58,124,375
*655,000 Tenet Healthcare Corporation...................... 21,696,875
300,000 Warner-Lambert Company............................ 37,200,000
*151,000 Wellpoint Health Networks, Inc.................... 6,379,750
---------------
655,102,875
---------------
INDUSTRIAL MATERIALS -- 0.3%
406,100 Santa Fe International Corporation................ 16,523,193
---------------
MANUFACTURING -- 1.6%
725,000 Caterpillar, Inc.................................. 35,207,812
600,000 Perkin-Elmer Corporation (The).................... 42,637,500
---------------
77,845,312
---------------
MEDIA & SERVICES -- 3.8%
*358,700 Clear Channel Communications, Inc................. 28,494,231
1,875,000 Gannett Co., Inc.................................. 115,898,437
350,000 Walt Disney Company (The)......................... 34,671,875
---------------
179,064,543
---------------
RETAIL -- 7.7%
973,000 CVS Corporation................................... 62,332,812
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-4
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------------ ---------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
RETAIL -- (CONTINUED)
450,000 Gap, Inc. (The)................................... 15,946,875
2,100,000 McDonald's Corporation............................ 100,275,000
1,102,500 Home Depot, Inc. (The)............................ $ 64,909,687
3,000,000 Wal-Mart Stores, Inc.............................. 118,312,500
---------------
361,776,874
---------------
SOFTWARE & SERVICES -- 4.7%
565,500 Automatic Data Processing, Inc.................... 34,707,562
*500,000 Computer Sciences Corporation..................... 41,750,000
1,400,000 First Data Corporation............................ 40,950,000
*625,000 Microsoft Corporation............................. 80,781,250
*650,000 PeopleSoft, Inc................................... 25,350,000
---------------
223,538,812
---------------
TRANSPORTATION -- 2.5%
2,100,000 Southwest Airlines Co............................. 51,712,500
1,050,000 Union Pacific Corp................................ 65,559,375
---------------
117,271,875
---------------
UTILITIES -- 3.6%
500,000 Duke Energy Corporation........................... 27,687,500
1,500,000 SBC Communications, Inc........................... 109,875,000
*1,000,000 WorldCom, Inc..................................... 30,250,000
---------------
167,812,500
---------------
Total common stocks............................... $ 4,297,249,507
---------------
---------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
------------ ---------------
<C> <S> <C>
SHORT-TERM SECURITIES -- 8.8%
REPURCHASE AGREEMENT
$415,099,000 Interest in $1,102,287,000 joint repurchase
agreement with State Street Bank dated 12/31/97
at 6.6119%, to be repurchased at $415,251,477 on
01/02/98; (Collateralized by $629,353,000 U.S.
Treasury Notes 5.625% - 7.5% due 03/31/98 -
02/15/05, $204,399,000 U.S. Treasury Bills 0.00%
due 05/21/98 - 06/04/98, $159,248,000 U.S.
Treasury Bonds 8.50% - 11.25% due 08/15/01 -
02/15/20, and $109,287,000 U.S. Treasury Strips
(principal) 0.00% due 02/15/09)................. $ 415,099,000
---------------
---------------
</TABLE>
<TABLE>
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $2,831,319,892).............. 91.2 % $ 4,297,249,507
Total short-term securities (cost $415,099,000)........ 8.8 415,099,000
------ ---------------
Total investment in securities
(total cost $3,246,418,892).......................... 100.0 4,712,348,507
Cash, receivables and other assets..................... 0.3 13,299,314
Payable for Fund shares redeemed....................... (0.3) (12,140,601)
Other liabilities...................................... (0.0) (185,659)
------ ---------------
Net assets (applicable to $5.123317 per share based on
919,974,649 shares outstanding)...................... 100.0% $ 4,713,321,561
------ ---------------
------ ---------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; authorized
2,000,000,000 shares; outstanding 919,974,648 shares......... $ 91,997,465
Capital surplus................................................ 2,980,214,648
Accumulated undistributed net investment income................ 1,514,768
Accumulated undistributed net realized gain of investments.....
173,671,132
Unrealized appreciation on investments......................... 1,465,929,615
Unrealized depreciation on translation of other assets and
liabilities in foreign currencies............................ (6,067)
---------------
Net assets, applicable to shares outstanding................... $ 4,713,321,561
---------------
---------------
</TABLE>
* Non-income producing during period.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-5
<PAGE>
HVA MONEY MARKET FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -------------
<C> <S> <C>
COMMERCIAL PAPER -- 50.6%
Abbey National, North America
$10,000,000 5.56% due 03/11/98................................... $ 9,893,433
Bankers Trust Corp.
10,000,000 5.72% due 06/17/98................................... 9,734,656
Cafco
10,000,000 5.58% due 01/28/98................................... 9,958,150
Cafco
10,000,000 5.65% due 02/17/98................................... 9,926,236
Ciesco L.P.
10,000,000 5.70% due 01/09/98................................... 9,987,333
Countrywide Home Loan
10,000,000 5.56% due 01/06/98................................... 9,992,278
Eaton Corp.
10,000,000 5.76% due 03/26/98................................... 9,865,600
Ford Motor Credit Corp.
5,000,000 5.58% due 02/02/98................................... 4,975,200
Goldman Sachs Group L.P. (The)
10,000,000 5.71% due 04/17/98................................... 9,831,872
IBM Credit Corp.
10,000,000 5.56% due 02/03/98................................... 9,949,033
J.P. Morgan & Co.
10,000,000 5.72% due 03/24/98................................... 9,869,711
Monsanto Co.
10,000,000 5.50% due 02/05/98................................... 9,946,528
National Rural Utilities
10,000,000 5.53% due 01/21/98................................... 9,969,278
National Rural Utilities
10,000,000 5.54% due 01/13/98................................... 9,981,533
Nationwide Building Society
10,000,000 5.67% due 02/13/98................................... 9,932,275
Nordbanken North America
10,000,000 5.56% due 01/12/98................................... 9,983,011
Oesterreichische Kontrollbank
5,000,000 5.53% due 01/14/98................................... 4,990,015
Oesterreichische Kontrollbank
10,000,000 5.52% due 01/14/98................................... 9,980,067
PHH Corp.
10,000,000 5.72% due 03/27/98................................... 9,864,944
PHH Corp.
10,000,000 5.55% due 01/22/98................................... 9,967,625
Pacific Dunlop Ltd.
10,000,000 5.71% due 03/02/98................................... 9,904,833
Province of Quebec
10,000,000 5.67% due 03/05/98................................... 9,900,775
Province of Quebec
10,000,000 5.66% due 02/25/98................................... 9,913,528
Sharp Electronics Corp.
10,000,000 5.87% due 02/20/98................................... 9,918,472
Smith Barney Holidings, Inc.
10,000,000 5.70% due 02/23/98................................... 9,916,083
Stanley Works
7,000,000 5.68% due 02/26/98................................... 6,938,151
Sumitomo Bank, Ltd., NY Branch
20,000,000 5.68% due 02/09/98................................... 19,876,933
Svenska Handelsbanken, Inc.
10,000,000 5.57% due 01/30/98................................... 9,955,131
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -------------
<C> <S> <C>
Triple A One Funding Corp.
$ 5,112,000 5.55% due 01/16/98................................... $ 5,100,179
Westpac Capital Corp.
10,000,000 5.65% due 03/17/98................................... 9,882,292
Wood Street Funding Corp.
5,000,000 5.70% due 02/12/98................................... 4,966,750
Wood Street Funding Corp.
10,000,000 5.70% due 02/13/98................................... 9,931,917
Wood Street Funding Corp.
5,000,000 5.92% due 01/06/98................................... 4,995,889
-------------
Total commercial paper................................. $ 309,799,711
-------------
-------------
CORPORATE NOTES -- 39.2%
American Honda Finance Corp.
10,000,000 5.91% due 06/16/98................................... $ 10,000,000
American Honda Finance Corp.
10,000,000 5.81% due 07/27/98................................... 10,000,000
Bear Stearns Companies, Inc.
5,000,000 5.46% due 02/13/98................................... 4,999,542
Bear Stearns Companies, Inc.
15,000,000 5.76% due 10/15/98................................... 15,000,000
Caterpillar Financial Services
10,000,000 5.95% due 10/19/98................................... 10,020,921
Caterpillar Financial Services
10,000,000 5.70% due 04/13/98................................... 10,000,000
Chrysler Financial Corp.
10,000,000 5.94% due 02/02/98................................... 10,002,172
Finova Capital Corp.
20,000,000 6.19% due 03/06/98................................... 20,009,565
First USA Bank
15,000,000 6.02% due 10/09/98................................... 15,040,707
First USA Bank
4,250,000 6.16% due 10/22/98................................... 4,263,678
Ford Motor Credit Corp.
5,000,000 6.30% due 06/02/98................................... 5,008,802
General Motors Acceptance Corp.
5,000,000 5.94% due 08/03/98................................... 5,006,390
General Motors Acceptance Corp.
5,000,000 5.75% due 04/17/98................................... 5,000,333
General Motors Acceptance Corp.
9,000,000 5.75% due 04/17/98................................... 9,000,728
IBM Credit Corp.
10,250,000 5.81% due 06/05/98................................... 10,247,249
Lehman Brothers Holdings, Inc.
15,250,000 5.92% due 01/13/99................................... 15,250,000
Lehman Brothers Holdings, Inc.
4,000,000 8.88% due 11/01/98................................... 4,088,848
Merrill Lynch & Co., Inc.
20,000,000 5.70% due 07/20/98................................... 20,000,000
Morgan Stanley Group, Inc.
5,000,000 5.98% due 12/28/98................................... 5,005,548
Morgan Stanley Group, Inc.
10,000,000 5.83% due 05/18/98................................... 10,000,000
Morgan Stanley Group, Inc.
5,000,000 6.01% due 12/10/98................................... 5,005,929
NationsBank Corp.
5,000,000 6.06% due 03/27/98................................... 5,002,379
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-6
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -------------
<C> <S> <C>
CORPORATE NOTES -- (CONTINUED)
NationsBank Corp.
$ 3,000,000 6.01% due 06/02/98................................... $ 3,002,497
Triangle Funding Ltd.
19,250,000 5.75% due 11/15/98................................... 19,250,000
Wells Fargo
10,000,000 5.95% due 07/01/98................................... 10,005,301
-------------
Total corporate notes.................................. $ 240,210,589
-------------
-------------
REPURCHASE AGREEMENT -- 3.4%
20,832,000 Interest in $86,953,000 joint repurchase agreement with
State Street Bank dated 12/31/97 at 6.50%, to be
repurchased at $20,839,522 on 01/02/98;
(Collateralized by $86,953,000 U.S. Treasury Bonds
8.375% - 11.625% due 02/11/01 - 08/08/15)............ $ 20,832,000
-------------
-------------
<CAPTION>
VALUE
-------------
<C> <S> <C>
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; authorized 1,300,000,000
shares; outstanding 612,480,218 shares........................... $ 61,248,022
Capital surplus.................................................... 551,232,196
-------------
Net assets, applicable to shares outstanding....................... $ 612,480,218
-------------
-------------
STATEMENT OF ASSETS AND LIABILITIES:
ASSETS
Investment in securities, at value (total cost
$570,842,300)* - see accompanying portfolio.............. $ 570,842,300
Receivable for fund shares sold............................ 39,730,234
Interest receivable........................................ 1,952,596
Cash and other assets...................................... 11,821
-------------
Total assets............................................... $ 612,536,951
-------------
-------------
LIABILITIES
Custodian fees payable..................................... 25,494
Administrative service fees HLIC - see Note 3.............. 921
Dividends Payable.......................................... 1,072
Other accrued expenses..................................... 29,246
-------------
Total Liabilities.......................................... 56,733
-------------
Net assets, applicable to $1.00 per share based on
612,480,218 shares outstanding (1,300,000,000
authorized).............................................. $ 612,480,218
-------------
-------------
</TABLE>
* Aggregate cost for federal income tax purposes.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-7
<PAGE>
HARTFORD ADVISERS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- ---------------
<C> <S> <C>
COMMON STOCKS -- 61.8%
AEROSPACE & DEFENSE -- 1.0%
1,300,000 Boeing Company (The).............................. $ 63,618,750
*438,672 Raytheon Co. Class A.............................. 21,632,013
---------------
85,250,763
---------------
COMMUNICATIONS EQUIPMENT -- 2.6%
*240,000 Ciena Corporation................................. 14,670,000
*1,432,500 Cisco Systems, Inc................................ 79,861,875
500,000 Ericsson (L.M.) Telephone ADR..................... 18,656,250
710,000 Lucent Technologies, Inc.......................... 56,711,250
725,000 Motorola, Inc..................................... 41,370,313
---------------
211,269,688
---------------
COMPUTERS & OFFICE
EQUIPMENT -- 3.3%
*860,000 Adaptec, Inc...................................... 31,927,500
*1,898,000 EMC Corp.......................................... 52,076,375
900,000 International Business Machines Corp.............. 94,106,250
1,310,000 Xerox Corp........................................ 96,694,375
---------------
274,804,500
---------------
CONSUMER DURABLES -- 0.3%
780,000 General Motors Corporation Class H................ 28,811,250
---------------
CONSUMER NON-DURABLES -- 3.5%
325,000 Colgate Palmolive Company......................... 23,887,500
550,000 Estee Lauder Companies Class A.................... 28,290,625
675,000 Gillette Company (The)............................ 67,795,313
1,400,000 Kimberly-Clark Corporation........................ 69,037,500
1,260,000 Proctor & Gamble Company (The).................... 100,563,750
---------------
289,574,688
---------------
CONSUMER SERVICES -- 1.2%
*561,821 Autotote Corp. (Unregistered Shares).............. 821,663
550,000 Eastman Kodak Company............................. 33,446,875
327,500 Hertz Corp. Class A (The)......................... 13,181,875
*2,100,000 Mirage Resorts, Inc............................... 47,775,000
---------------
95,225,413
---------------
ELECTRONICS -- 4.4%
*575,000 Altera Corporation................................ 19,046,875
*1,165,000 Analog Devices, Inc............................... 32,255,938
3,250,000 General Electric Company.......................... 238,468,750
1,100,000 Intel Corporation................................. 77,275,000
---------------
367,046,563
---------------
ENERGY & SERVICES -- 4.6%
400,000 Amoco Corporation................................. 34,050,000
750,000 Chevron Corporation............................... 57,750,000
900,000 Exxon Corporation................................. 55,068,750
2,270,000 Royal Dutch Petroleum Co. ADR..................... 123,005,625
1,370,000 Schlumberger Ltd.................................. 110,285,000
---------------
380,159,375
---------------
FINANCIAL SERVICES -- 14.0%
420,000 Ace Ltd........................................... 40,530,000
1,355,000 Allstate Corporation (The)........................ 123,135,625
1,300,000 American Express Co............................... 116,025,000
<CAPTION>
MARKET
SHARES VALUE
----------- ---------------
<C> <S> <C>
FINANCIAL SERVICES -- (CONTINUED)
772,500 American International Group, Inc................. $ 84,009,375
640,000 Associates First Capital Corporation.............. 45,520,000
800,000 BankAmerica Corporation........................... 58,400,000
875,000 Citicorp.......................................... 110,632,813
900,000 First Union Corporation........................... 46,125,000
1,255,000 Marsh & McLennan Companies, Inc................... 93,575,938
1,700,000 Merrill Lynch & Co., Inc.......................... 123,993,750
450,000 NationsBank Corporation........................... 27,365,625
1,350,000 State Street Corp................................. 78,553,125
2,850,000 Travelers Group, Inc.............................. 153,543,750
515,000 U.S. Bancorp...................................... 57,647,812
---------------
1,159,057,813
---------------
FOOD, BEVERAGE & TOBACCO -- 1.0%
450,000 Coca-Cola Company (The)........................... 29,981,250
50,000 Nabisco Holdings Corporation...................... 2,421,875
500,000 PepsiCo, Inc...................................... 18,218,750
450,000 Unilever N.V.-New York Shares..................... 28,096,875
---------------
78,718,750
---------------
HEALTH CARE -- 9.5%
1,200,000 Abbott Laboratories............................... 78,675,000
1,325,000 American Home Products Corporation and
Subsidiaries.................................... 101,362,500
1,500,000 Columbia/HCA Healthcare Corporation............... 44,437,500
1,270,000 Johnson & Johnson................................. 83,661,250
850,000 Merck & Co., Inc.................................. 90,312,500
1,550,000 Pfizer, Inc....................................... 115,571,875
2,100,000 Pharmacia & Upjohn, Inc........................... 76,912,500
*200,000 Phycor, Inc....................................... 5,400,000
550,000 Rhone-Poulenc SA.................................. 24,406,250
275,000 Service Corporation International................. 10,157,813
1,400,000 SmithKline Beecham PLC ADR........................ 72,012,500
*895,000 Tenet Healthcare Corporation...................... 29,646,875
375,000 Warner-Lambert Company............................ 46,500,000
*191,500 Wellpoint Health Networks, Inc.................... 8,090,875
---------------
787,147,438
---------------
INDUSTRIAL MATERIALS -- 0.2%
496,600 Santa Fe International Corporation................ 20,205,413
---------------
MANUFACTURING -- 1.0%
875,000 Caterpillar, Inc.................................. 42,492,188
600,000 Perkin Elmer Corporation (The).................... 42,637,500
---------------
85,129,688
---------------
MEDIA & SERVICES -- 2.6%
*466,300 Clear Channel Communications, Inc................. 37,041,706
2,315,000 Gannett Co., Inc.................................. 143,095,938
375,000 Walt Disney Company (The)......................... 37,148,437
---------------
217,286,081
---------------
RETAIL -- 5.2%
1,209,800 CVS Corporation................................... 77,502,812
375,000 Gap, Inc. (The)................................... 13,289,062
1,397,500 Home Depot, Inc. (The)............................ 82,277,813
2,460,000 McDonald's Corporation............................ 117,465,000
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-8
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- ---------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
RETAIL -- (CONTINUED)
3,600,000 Wal-Mart Stores, Inc.............................. $ 141,975,000
---------------
432,509,687
---------------
SOFTWARE & SERVICES -- 3.3%
648,200 Automatic Data Processing, Inc.................... 39,783,275
*675,000 Computer Sciences Corporation..................... 56,362,500
1,650,000 First Data Corporation............................ 48,262,500
*750,000 Microsoft Corporation............................. 96,937,500
*750,000 PeopleSoft, Inc................................... 29,250,000
---------------
270,595,775
---------------
TRANSPORTATION -- 1.7%
2,625,000 Southwest Airlines Co............................. 64,640,625
1,230,000 Union Pacific Corp................................ 76,798,125
---------------
141,438,750
---------------
UTILITIES -- 2.4%
500,000 Duke Energy Corporation........................... 27,687,500
1,850,000 SBC Communications, Inc........................... 135,512,500
*1,000,000 WorldCom, Inc..................................... 30,250,000
---------------
193,450,000
---------------
Total common stocks............................... $ 5,117,681,635
---------------
---------------
ASSET-BACKED SECURITIES -- 0.4%
Newcourt EQ 97-1 A4
28,500,000 6.19% due 11/15/00.............................. $ 28,629,141
---------------
---------------
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<C> <S> <C>
CORPORATE BONDS & NOTES -- 5.5%
FINANCIAL SERVICES -- 3.3%
Associates Corp. N.A.
$15,000,000 6.50% due 10/15/02.............................. $ 15,112,350
Bank of Boston Corporation
10,000,000 6.63% due 02/01/04.............................. 10,047,960
Banponce Corp.
14,825,000 6.75% due 12/15/05.............................. 14,985,080
Bayerische Landesbank NY
15,000,000 5.63% due 02/26/01.............................. 14,818,365
CIT Group Holdings
20,000,000 6.75% due 05/14/01.............................. 20,324,840
Chase Manhattan Corp.
10,000,000 8.50% due 02/15/02.............................. 10,795,180
Citicorp
20,000,000 5.63% due 02/15/01.............................. 19,610,940
Credit National Euro
20,000,000 7.00% due 11/14/05.............................. 20,100,000
Fairfax Financial Holdings
10,000,000 7.75% due 12/15/03.............................. 10,523,840
Finova Capital Corporation
18,000,000 6.39% due 10/08/02.............................. 18,067,662
First Interstate Bank
12,000,000 9.00% due 11/15/04.............................. 12,606,828
General Motors Acceptance Corp.
15,000,000 5.63% due 02/01/99.............................. 14,941,770
Heller Financial
20,000,000 6.38% due 11/10/00.............................. 20,001,480
Home Savings America
15,000,000 6.00% due 11/01/00.............................. 14,958,750
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- ---------------
<C> <S> <C>
CORPORATE BONDS & NOTES -- (CONTINUED)
FINANCIAL SERVICES -- (CONTINUED)
Korean Development Bank
$36,780,000 7.25% due 05/15/06.............................. $ 28,929,419
Lumbermens Mutual Casualty, Inc.
10,000,000 9.15% due 07/01/26.............................. 11,651,000
Travelers Group, Inc.
10,000,000 6.25% due 12/01/05.............................. 9,864,120
Travelers/Aetna P&C, Inc.
10,000,000 6.75% due 04/15/01.............................. 10,167,640
---------------
277,507,224
---------------
INDUSTRIAL MATERIALS -- 1.5%
Browning-Ferris Industries, Inc.
15,000,000 6.10% due 01/15/03.............................. 14,917,230
E.W. Scripps Company
19,420,000 6.38% due 10/15/02.............................. 19,513,468
Honeywell Inc.
13,135,000 6.60% due 04/15/01.............................. 13,313,701
Husky Oil Ltd.
15,000,000 6.88% due 11/15/03.............................. 15,319,950
ICI Wilmington
20,000,000 6.95% due 09/15/04.............................. 20,562,100
Postal Square LP
7,344,269 8.95% due 06/15/22.............................. 9,206,188
Williams Companies, Inc.
20,000,000 6.50% due 11/15/02.............................. 20,093,620
Zeneca Wilmington
10,000,000 6.30% due 06/15/03.............................. 10,015,040
---------------
122,941,297
---------------
REAL ESTATE -- 0.3%
Liberty Property Trust (REIT)
20,000,000 7.25% due 08/15/07.............................. 20,404,020
---------------
UTILITIES -- 0.4%
Hydro Quebec
15,000,000 7.38% due 02/01/03.............................. 15,678,300
Pacific Gas & Electric
11,000,000 7.88% due 03/01/02.............................. 11,666,017
Southern California Gas Co.
10,000,000 5.75% due 11/15/03.............................. 9,721,560
---------------
37,065,877
---------------
Total corporate bonds & notes..................... $ 457,918,418
---------------
---------------
FOREIGN GOVERNMENT BONDS -- 0.2%
City Of Naples, Italy
18,000,000 7.52% due 07/15/06.............................. $ 18,912,780
---------------
---------------
MORTGAGE-BACKED SECURITIES -- 0.5%
ASC 97-D4 A-1D
18,000,000 7.49% due 04/14/29.............................. $ 19,283,040
Chase Commercial Mortgage 1997-A2
25,000,000 7.37% due 02/19/07.............................. 25,951,000
---------------
Total mortgage-backed securities.................. $ 45,234,040
---------------
---------------
MUNICIPAL BONDS -- 0.3%
Miami Beach, Florida
7,000,000 8.80% due 12/01/15.............................. $ 7,772,030
Mount Sinai School of Medicine NY
20,000,000 6.00% due 07/01/03.............................. 19,870,960
---------------
Total municipal bonds............................. $ 27,642,990
---------------
---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-9
<PAGE>
HARTFORD ADVISERS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- ---------------
<C> <S> <C>
U.S. TREASURIES & FEDERAL AGENCIES -- 29.6%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 1.3%
$105,198,232 7.00% due 11/15/23 - 11/15/24................... $ 106,298,832
3,453,872 9.00% due 06/20/16 - 07/20/16................... 3,718,818
---------------
110,017,650
---------------
U.S. TREASURY BONDS -- 6.9%
318,000,000 6.25% due 08/15/23.............................. 327,738,750
214,000,000 7.25% due 05/15/16.............................. 243,625,732
---------------
571,364,482
---------------
U.S. TREASURY NOTES -- 21.4%
434,000,000 5.75% due 10/31/00 - 08/15/03................... 434,472,924
200,000,000 6.25% due 05/31/00.............................. 202,500,000
407,000,000 6.50% due 08/15/05 - 10/15/06................... 425,335,516
207,000,000 7.25% due 05/15/04 - 08/15/04................... 223,597,866
313,000,000 7.50% due 11/15/01 - 02/15/05................... 337,885,000
139,000,000 7.75% due 12/31/99.............................. 144,429,757
---------------
1,768,221,063
---------------
Total U.S. treasuries & federal agencies.......... $ 2,449,603,195
---------------
---------------
SHORT-TERM SECURITIES -- 2.2%
COMMERCIAL PAPER -- 0.3%
Ford Motor Credit Corp.
10,000,000 5.63% due 12/15/98.............................. 9,967,140
Great Western Financial
10,000,000 8.63% due 12/01/98.............................. 10,180,610
---------------
20,147,750
---------------
REPURCHASE AGREEMENT -- 1.9%
160,709,000 Interest in $1,102,287,000 joint repurchase
agreement with State Street Bank dated 12/31/97
at 6.6119%, to be repurchased at $160,768,033;
(Collateralized by $629,353,000 U.S. Treasury
Notes 5.625% - 7.50% due 03/31/98 - 02/15/05,
$204,399,000 U.S. Treasury Bills 0.00% due
05/21/98 - 06/04/98, $159,248,000 U.S. Treasury
Bonds 8.50% - 11.25% due 08/15/01 - 02/15/20 and
$109,287,000 U.S. Treasury Strips (principal)
0.00% due 02/15/09)............................. 160,709,000
---------------
Total short-term securities....................... $ 180,856,750
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
---------------
DIVERSIFICATION OF NET ASSETS:
<S> <C> <C>
Total common stocks (cost $3,204,532,290)............. 61.8 % $ 5,117,681,635
Total asset-backed securities (cost $28,500,000)...... 0.4 28,629,141
Total corporate bonds & notes (cost $456,781,097)..... 5.5 457,918,418
Total foreign government bonds (cost $18,000,000)..... 0.2 18,912,780
Total mortgage-backed securities (cost $44,323,442)... 0.5 45,234,040
Total municipal bonds (cost $26,988,667).............. 0.3 27,642,990
Total U.S. treasuries & federal agencies (cost
$2,353,343,191)..................................... 29.6 2,449,603,195
Total short-term securities (cost $181,896,500)....... 2.2 180,856,750
------ ---------------
Total investment in securities
(total cost $6,314,365,187)......................... 100.5 8,326,478,949
Cash, receivables and other assets.................... 0.8 65,201,322
Payable for securities purchased...................... (1.3) (106,863,451)
Payable for Fund shares redeemed...................... 0.0 0
Other liabilities..................................... (0.0) (904,919)
------ ---------------
Net assets (applicable to $2.526746 per share based on
3,278,489,627 shares outstanding)................... 100.0% $ 8,283,911,901
------ ---------------
------ ---------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; authorized
5,000,000,000 shares; outstanding 3,278,489,627 shares...... $ 327,848,963
Capital surplus............................................... 5,645,004,475
Accumulated undistributed net investment income............... 4,725,219
Accumulated undistributed net realized gain on investments....
294,253,099
Unrealized appreciation of investments........................ 2,012,113,762
Unrealized depreciation on translation of other assets and
liabilities in foreign currencies........................... (33,617)
---------------
Net assets, applicable to shares outstanding.................. $ 8,283,911,901
---------------
---------------
</TABLE>
* Non-income producing during period.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-10
<PAGE>
HARTFORD CAPITAL APPRECIATION FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- --------------
<C> <S> <C>
COMMON STOCKS -- 92.6%
AEROSPACE & DEFENSE -- 4.3%
1,550,000 Boeing Company (The).............................. $ 75,853,125
*1,462,900 Loral Space & Communications Ltd.................. 31,360,919
288,500 Northrop Grumman Corporation...................... 33,177,500
801,500 Precision Castparts Corporation................... 48,340,469
*297,556 SPS Technologies, Inc............................. 12,980,880
*130,000 Wyman-Gordon Company.............................. 2,551,250
--------------
204,264,143
--------------
BUSINESS SERVICES -- 2.8%
*1,273,500 Cendant Corporation............................... 43,776,563
*226,500 Howmet International, Inc......................... 3,383,344
*752,300 Ionics, Inc....................................... 29,433,738
601,400 Manpower, Inc..................................... 21,199,350
*1,947,000 U.S. Office Products Company...................... 38,209,875
--------------
136,002,870
--------------
COMMUNICATIONS EQUIPMENT -- 5.5%
*1,075,000 3Com Corporation.................................. 37,557,812
*694,200 Cisco Systems, Inc................................ 38,701,650
1,395,000 ECI Telecommunications............................ 35,572,500
*320,000 Elsag Bailey Process Auto NV...................... 5,280,000
922,700 General Cable Corporation......................... 33,390,206
506,100 Lucent Technologies, Inc.......................... 40,424,737
*971,200 Oak Industries, Inc............................... 28,832,500
*627,200 Plantronics, Inc.................................. 25,088,000
*515,000 Proxim, Inc....................................... 5,825,937
*992,900 Scitex Corp., Ltd................................. 11,976,856
--------------
262,650,198
--------------
COMPUTERS & OFFICE
EQUIPMENT -- 4.9%
*1,117,000 Adaptec, Inc...................................... 41,468,625
*3,773,600 EMC Corporation................................... 103,538,150
*1,000,000 Komag Inc......................................... 14,875,000
815,000 Micron Technology, Inc............................ 21,190,000
*145,000 Stratus Computer, Inc............................. 5,482,813
887,500 Symbol Technologies, Inc.......................... 33,503,125
*1,000,000 Western Digital Corporation....................... 16,062,500
--------------
236,120,213
--------------
CONSUMER NON-DURABLES -- 0.4%
*677,600 Quiksilver Inc.................................... 19,396,300
--------------
CONSUMER SERVICES -- 3.7%
*800,000 American Skiing Corporation....................... 11,900,000
*800,000 Berg Electronics Corp............................. 18,200,000
*657,500 Cheescake Factory, Inc. (The)..................... 20,053,750
*731,300 Dollar Thrifty Automotive......................... 14,991,650
741,300 Harman International Industries, Inc.............. 31,458,919
1,600,000 International Game Technology..................... 40,400,000
*1,600,000 Mirage Resorts, Inc............................... 36,400,000
*415,300 Ugly Duckling Corporation......................... 3,530,050
--------------
176,934,369
--------------
ELECTRONICS -- 7.4%
*883,333 Analog Devices, Inc............................... 24,457,282
<CAPTION>
MARKET
SHARES VALUE
----------- --------------
<C> <S> <C>
ELECTRONICS -- (CONTINUED)
*265,200 Clare C.P. Corporation............................ 3,447,600
*534,700 Credence Systems Corporation...................... 15,840,488
*125,000 Electronics for Imaging, Inc...................... $ 2,078,125
*450,000 Lattice Semiconductor Corporation................. 21,318,750
*5,487 Lernout & Hauspie Speech Products................. 255,166
750,001 Molex, Inc........................................ 21,562,536
1,346,500 Philips Electronics N.V. NY Shares................ 81,463,250
*1,100,000 Silicon Valley Group, Inc......................... 24,887,500
*1,639,400 Solectron Corporation............................. 68,137,563
*870,000 Taiwan Semiconductor ADR.......................... 15,823,125
800,001 Thomas & Betts Corporation........................ 37,800,047
*882,435 Vishay Intertechnology, Inc....................... 20,847,527
*645,000 VLSI Technology Inc............................... 15,238,125
--------------
353,157,084
--------------
ENERGY & SERVICES -- 6.1%
360,600 Ashland, Inc...................................... 19,359,713
*508,200 Calenergy Company, Inc............................ 14,610,750
10,731 Dataware Technologies, Inc........................ 28,168
900,000 Eni ADS........................................... 51,356,250
400,000 ENSCO International, Inc.......................... 13,400,000
*940,700 Input Output, Inc................................. 27,927,031
*628,700 J Ray McDermott SA................................ 27,034,100
920,200 Nordic American Tanker Shipping Ltd............... 15,183,300
520,300 Repsol SA......................................... 22,145,269
*700,000 Rowan Companies, Inc.............................. 21,350,000
1,197,870 Transocean Offshore, Inc.......................... 57,722,361
670,000 YPF SA ADR........................................ 22,905,625
--------------
293,022,567
--------------
FINANCIAL SERVICES -- 17.2%
730,000 Ace Ltd........................................... 70,445,000
900,000 Aetna Life Insurance and Annuity Company.......... 63,506,250
500,000 Allstate Corporation (The)........................ 45,437,500
1,349,300 Ambac Financial Group, Inc........................ 62,067,800
877,689 Banc One Corporation.............................. 47,669,484
450,000 BankBoston Corporation............................ 42,271,875
90,000 Citicorp.......................................... 11,379,375
324,600 Cullen/Frost Bankers, Inc......................... 19,699,163
1,040,400 Dime BanCorp, Inc................................. 31,472,100
550,000 Federal National Mortgage Association............. 31,384,375
*1,270,000 FIRSTPLUS Financial Group, Inc.................... 48,736,250
900,000 GreenPoint Financial Corp......................... 65,306,250
*1,087,800 Imperial Credit Industries, Inc................... 22,299,900
761,200 Legg Mason, Inc................................... 42,579,625
400,070 Long Island BanCorp, Inc.......................... 19,853,474
793,100 MMI Companies, Inc................................ 19,926,638
1,320,000 Morgan Stanley Dean Witter, Discover & Co......... 78,045,000
1,802,400 Money Store, Inc. (The)........................... 37,850,400
27,600 NAC Re Corp....................................... 1,347,225
468,400 Providian Financial Corporation................... 21,165,825
*900,000 Unibanco GDR...................................... 28,968,750
260,000 Washington Mutual, Inc............................ 16,591,250
--------------
828,003,509
--------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-11
<PAGE>
HARTFORD CAPITAL APPRECIATION FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- --------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
FOOD, BEVERAGE & TOBACCO -- 1.0%
1,500,000 Archer-Daniels-Midland Company.................... 32,531,250
*700,000 General Cigar Holdings, Inc....................... $ 14,918,750
--------------
47,450,000
--------------
FOREIGN SECURITIES -- 3.2%
*7,000,000 Billiton PLC...................................... 17,881,412
*1,445,000 Corporation Geo SA de CV-Class B.................. 8,886,794
2,178,000 Daiwa Securities, Inc............................. 7,538,007
1,900,000 Eisai Co., Ltd.................................... 29,079,897
3,100 Roche Holdings AG Genusss......................... 30,828,884
621,000 Sankyo............................................ 14,089,637
32,000 Union Bank of Switzerland......................... 46,336,398
--------------
154,641,029
--------------
HEALTH CARE -- 14.3%
800,000 Abbott Laboratories............................... 52,450,000
*910,000 Atria Communities, Inc............................ 15,583,750
*943,400 Biogen, Inc....................................... 34,316,175
*700,000 Boston Scientific Corporation..................... 32,112,500
2,200,000 Columbia/HCA Healthcare Corporation............... 65,175,000
*64,692 Coram Healthcare.................................. 218,336
*460,000 Covance, Inc...................................... 9,142,500
1,169,800 Depuy, Inc........................................ 33,631,750
*1,206,000 Genzyme Corporation............................... 33,466,500
1,050,000 ICN Pharmaceuticals, Inc.......................... 51,253,125
*685,500 IDX Systems Corporation........................... 25,363,500
*1,100,000 Magellan Health Services, Inc..................... 23,650,000
*700,000 Medpartners....................................... 15,662,500
*1,110,000 Perrigo Company................................... 14,846,250
*640,700 PerSeptive Biosystems, Inc........................ 8,088,838
2,503,000 Pharmacia & Upjohn, Inc........................... 91,672,375
*1,075,000 Phycor, Inc....................................... 29,025,000
1,650,000 Rhone-Poulenc SA.................................. 73,218,750
*1,000,000 Vencor, Inc....................................... 24,437,500
*1,000,000 Wellpoint Health Networks, Inc.................... 42,250,000
*417,500 Xomed Surgical Products, Inc...................... 10,020,000
--------------
685,584,349
--------------
INDUSTRIAL MATERIALS -- 2.9%
623,000 Abitibi-Consolidated, Inc......................... 8,722,000
*500,000 American Pad & Paper Company of Delaware, Inc..... 4,812,500
1,221,300 IMC Global, Inc................................... 39,997,575
490,000 Owens Corning..................................... 16,721,250
*1,050,000 Titanium Metals Corporation....................... 30,318,750
*973,200 UCAR International, Inc........................... 38,867,175
--------------
139,439,250
--------------
MANUFACTURING -- 0.7%
1,100,000 Chicago Bridge & Iron Company NV.................. 17,875,000
*655,000 Cognex Corporation................................ 17,848,750
--------------
35,723,750
--------------
MEDIA & SERVICES -- 2.0%
*1,000,000 ADC Telecommunications, Inc....................... 41,750,000
*559,600 APT Satellite Holdings ADR........................ 6,575,300
<CAPTION>
MARKET
SHARES VALUE
----------- --------------
<C> <S> <C>
MEDIA & SERVICES -- (CONTINUED)
175,000 Comcast Corporation Class A....................... $ 5,523,438
857,000 News Corporation Ltd. Spons. ADR.................. 17,032,875
*764,700 Omnipoint Corporation............................. 17,779,275
*469,700 Western Wireless Corporation...................... 8,161,038
--------------
96,821,926
--------------
RETAIL -- 3.1%
*285,300 Circuit City Stores-Carmax........................ 2,567,700
*1,100,000 CompUSA, Inc...................................... 34,100,000
*318,000 Gadzooks, Inc..................................... 6,678,000
1,050,000 Gap, Inc. (The)................................... 37,209,375
375,000 Home Depot, Inc. (The)............................ 22,078,125
560,000 Mercantile Stores Company, Inc.................... 34,090,000
*531,000 Saks Holdings, Inc................................ 10,985,063
--------------
147,708,263
--------------
SOFTWARE & SERVICES -- 5.5%
*450,000 America Online, Inc............................... 40,134,375
*288,800 Cadence Design Systems, Inc....................... 7,075,600
*1,000,000 Ceridian Corporation.............................. 45,812,500
*517,800 Cognos Corporation................................ 11,909,400
*1,600,000 Compuware Corporation............................. 51,200,000
*200,700 Discreet Logic, Inc............................... 4,402,857
590,218 First Data Corporation............................ 17,263,877
*880,000 Integrated Systems Inc............................ 12,100,000
*309,900 Learning Company, Inc. (The)...................... 4,977,769
*150,000 Microsoft Corporation............................. 19,387,500
*370,000 Pegasystems, Inc.................................. 7,570,312
*281,100 Policy Management Systems Corporation............. 19,554,018
*2,000,000 Rational Software Corporation..................... 22,750,000
*130,000 System Software Associates, Inc................... 1,137,500
--------------
265,275,708
--------------
TRANSPORTATION -- 2.2%
*426,300 AMR Corporation................................... 54,779,550
1,000,000 Canadian Pacific Ltd.............................. 27,250,000
1,139,000 Werner Enterprises, Inc........................... 23,349,500
--------------
105,379,050
--------------
UTILITIES -- 4.0%
*1,625,000 Calpine Corporation............................... 24,171,875
*500,000 Companie Generale de Geophysique SA............... 12,812,500
1,400,000 Empresa Nacional de Electricidad SA............... 24,762,500
1,011,600 MCI Communications Corporation.................... 43,309,125
*2,868,400 WorldCom, Inc..................................... 86,769,100
--------------
191,825,100
--------------
WASTE MANAGEMENT -- 1.4%
*1,514,500 Republic Industries, Inc.......................... 35,306,781
1,200,000 Waste Management, Inc............................. 33,000,000
--------------
68,306,781
--------------
Total common stocks............................... $4,447,706,459
--------------
--------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-12
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- --------------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS -- 0.5%
CONSUMER SERVICES -- 0.2%
*1,094,544 SGW Holdings Corporation***....................... $ 9,614,365
--------------
--------------
NON-CONVERTIBLE PREFERRED STOCKS -- 0.2%
MANUFACTURING -- 0.5%
*1,228,000 Cooper Industries, Inc............................ 22,411,000
--------------
Total convertible preferred stocks................ $ 32,025,365
--------------
--------------
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<C> <S> <C>
CORPORATE NOTES -- 0.3%
TELECOMMUNICATIONS -- 0.3%
Unisys Corp.**
$15,000,000 12.00% due 04/15/03............................. $ 16,987,500
--------------
--------------
SHORT-TERM SECURITIES -- 6.6%
REPURCHASE AGREEMENT -- 6.6%
316,331,000 Interest in $1,102,287,000 joint repurchase
agreement with State Street Bank dated 12/31/97
at 6.6119%, to be repurchased $316,447,197 on
01/02/98; (Collateralized by $629,353,000 U.S.
Treasury Notes 5.625% - 7.50% due 03/31/98 -
02/15/05, $204,399,000 U.S. Treasury Bills 0.00%
due 05/21/98 - 06/04/98, $159,248,000 U.S.
Treasury Bonds 8.50% - 11.25% due 08/15/01 -
02/15/20, and $109,287,000 U.S. Treasury Strips
(principal) 0.00% due 02/15/09)................. $ 316,331,000
--------------
--------------
MARKET
VALUE
--------------
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $3,503,343,683)............. 92.6 % $ 4,447,706,459
Total convertible preferred stocks (cost
$11,311,018)........................................ 0.7 32,025,365
Total non-convertible preferred stocks (cost
$16,861,150)........................................ 0.2 22,411,000
Total corporate notes (cost $15,293,984).............. 0.3 16,987,500
Total short-term securities (cost $316,331,000)....... 6.6 316,331,000
------ ---------------
Total investment in securities
(total cost $3,863,140,835)......................... 100.2 4,813,050,324
Cash, receivables and other assets.................... 0.6 30,168,384
Payable for securities purchased...................... (0.5 ) (24,478,282)
Payable for Fund shares redeemed...................... (0.3 ) (15,736,410)
Other liabilities..................................... (0.0 ) (12,014)
------ ---------------
Net assets (applicable to $4.409717 per share based on
1,089,183,639 shares outstanding)................... 100.0 % $ 4,802,992,002
------ ---------------
------ ---------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; authorized
2,000,000,000 shares; outstanding 1,089,183,639 shares...... $ 108,918,364
Capital surplus............................................... 3,425,579,684
Accumulated undistributed net investment income............... 990,092
Accumulated undistributed net realized gain of investments....
317,683,182
Unrealized appreciation of investments........................ 949,909,489
Unrealized depreciation of forward foreign currency contracts
(Note 2).................................................... (35,449)
Unrealized depreciation on translation of other assets and
liabilities in foreign currencies........................... (53,310)
---------------
Net assets, applicable to shares outstanding.................. $ 4,802,992,002
---------------
---------------
</TABLE>
* Non-income producing during the period.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1997, the market value of these securities amounted to $16,987,500, or 0.4%
of net assets.
*** Restricted Security (see Note 2).
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
TOTAL AGGREGATE DELIVERY UNREALIZED
DESCRIPTION VALUE FACE VALUE DATE (DEPRECIATION)
- ------------------------------ ---------- ---------- --------- -------------
<S> <C> <C> <C> <C>
Brazilian Real (Sell) $27,035,449 $27,000,000 3/20/98 $ (35,449)
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-13
<PAGE>
HARTFORD MORTGAGE SECURITIES FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- --------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 0.9%
Corestates Home Equity Trust
Series 94-1, Class A
$ 3,000,347 6.65% due 05/15/09.............................. $ 3,026,060
--------------
--------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 12.2%
Bear Stearns Mortgage Securities, Inc. Series
95-1, Class 1A
3,727,039 6.48% due 05/25/10.............................. $ 3,705,869
Chase Mortgage Finance Corp. Series 93-C2, Class
2A-3
2,453,241 8.25% due 01/25/24.............................. 2,475,598
Countrywide Mortgage Backed Securities, Inc.,
Series 93-C, Class A1
1,500,000 6.28% due 01/15/03.............................. 1,496,484
Countrywide Mortgage Backed Securities, Inc.
Series 93-C, Class A1
322,545 6.50% due 01/25/24.............................. 321,287
DLJ Mortgage Acceptance Corporation Series 96-I,
Class B1
488,577 7.25% due 09/25/11.............................. 495,142
DLJ Mortgage Acceptance Corporation Series 96-I,
B2
162,859 7.25% due 09/25/11.............................. 163,419
GE Capital Mortgage Services, Inc. Series 94-21,
Class A
6,968,638 6.50% due 08/25/09.............................. 6,937,976
GE Capital Mortgage Services, Inc. Series 94-26,
Class A
6,846,972 7.00% due 07/25/09.............................. 6,912,634
GE Capital Mortgage Services, Inc. Series 96-1,
Class B2
578,417 6.75% due 02/25/11.............................. 569,608
GE Capital Mortgage Services, Inc. Series 96-1,
Class M
1,733,410 6.75% due 02/25/11.............................. 1,728,937
GE Capital Mortgage Services, Inc. Series 96-10,
Class B1
584,635 6.75% due 06/25/11.............................. 582,086
GE Capital Mortgage Services, Inc. Series 96-10,
Class B2
584,635 6.75% due 06/25/11.............................. 578,549
Housing Securities, Inc. Series 93-E, Class E15
4,034,334 10.00% due 09/25/08............................. 4,264,936
PNC Mortgage Securities Corp. Series 96-2, Class
B1
593,127 6.60% due 02/25/11.............................. 588,506
PNC Mortgage Securities Corp. Series 96-2, Class
B2
197,710 6.60% due 02/25/11.............................. 197,512
PNC Mortgage Securities Corp. Series 96-2, Class
B3
316,336 6.60% due 02/25/11.............................. 311,739
Prudential Home Mortgage Securities Co. Series
93-H, Class 2B
4,574,940 6.76% due 09/28/08.............................. 4,586,332
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- --------------
<C> <S> <C>
COLLATERALIZED MORTGAGE
OBLIGATIONS -- (CONTINUED)
Prudential Home Mortgage Securities Co. Series
96-3, Class B1
$ 1,152,601 6.75% due 03/25/11.............................. $ 1,157,119
Prudential Home Mortgage Securities Co. Series
96-3, Class B2
575,839 6.75% due 03/25/11.............................. 573,680
Residential Funding Mortgage Sec I Series 95-S18,
Class M3
707,247 7.00% due 11/25/10.............................. 717,126
Residential Funding Mortgage Sec I Series 96-S11,
Class M3
268,455 7.00% due 04/25/11.............................. 272,130
Residential Funding Mortgage Sec I Series 96-S19,
Class M3
499,466 7.50% due 09/25/11.............................. 515,718
Residential Funding Mortgage Sec I Series 96-S5,
Class M3
552,052 6.75% due 02/25/11.............................. 553,758
--------------
Total collateralized mortgage obligations......... $ 39,706,145
--------------
--------------
COMMERCIAL MORTGAGE BACKED SECURITIES -- 1.7%
Asset Securitization Corporation Series 97-MD7,
Class A1B
5,000,000 7.41% due 01/13/30.............................. $ 5,327,350
--------------
--------------
CORPORATE NOTES -- 1.0%
REAL ESTATE -- 1.0%
Kimco Realty Corp. Medium-Term Note
3,000,000 7.46% due 05/29/07.............................. $ 3,196,485
--------------
--------------
U.S. TREASURIES & FEDERAL AGENCIES -- 75.2%
FEDERAL HOME LOAN
MORTGAGE ASSOCIATION -- 23.2%
2,644,547 10.00% due 09/01/05 - 11/01/20.................... $ 2,880,646
15,865,350 6.50% due 02/01/09 - 06/01/26..................... 15,772,106
21,262,743 7.00% due 12/01/10 - 03/01/26..................... 21,517,361
15,623,261 7.50% due 01/01/24 - 01/01/28..................... 16,019,853
5,583,078 8.00% due 02/01/13 - 11/01/24..................... 5,783,755
4,468,510 8.50% due 07/01/01 - 05/01/25..................... 4,628,398
3,969,194 9.00% due 10/15/01 - 10/01/06..................... 4,105,152
4,561,059 9.50% due 11/01/08................................ 4,787,516
--------------
75,494,787
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 26.9%
801,585 11.00% due 04/01/09............................... 899,097
1,000,000 6.00% due 01/01/12................................ 983,750
1,960,931 6.20% due 01/01/06................................ 1,944,890
19,231,365 6.50% due 01/01/12 - 07/01/26..................... 19,056,048
22,327,757 7.00% due 05/01/09 - 01/01/28..................... 22,544,082
25,746,492 7.50% due 02/01/10 - 01/01/28..................... 26,387,650
152,698 7.95% due 03/25/20................................ 152,622
5,698,330 8.00% due 04/01/22 - 01/01/28..................... 5,913,575
2,751,126 8.50% due 06/25/19 - 07/01/25..................... 2,868,054
6,444,926 9.00% due 05/01/21 - 06/01/25..................... 6,866,327
--------------
87,616,095
--------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-14
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- --------------
<C> <S> <C>
U.S. TREASURIES & FEDERAL AGENCIES -- (CONTINUED)
U.S. TREASURY NOTE -- 0.9%
$ 3,100,000 5.75% due 08/15/03 - 11/15/00..................... $ 3,104,781
--------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 24.2%
1,939,899 10.00% due 11/15/09 - 05/15/13.................... 2,131,487
536,989 11.00% due 02/15/10 - 09/15/10.................... 601,857
42,821 11.25% due 01/15/01............................... 45,724
115,116 12.00% due 05/15/15............................... 131,704
60,636 12.50% due 06/15/14 - 08/15/15.................... 70,885
25,880 13.00% due 11/15/14............................... 30,542
18,219,900 7.00% due 01/15/24 - 01/01/28..................... 18,366,439
29,515,021 7.50% due 11/15/09 - 12/15/27..................... 30,283,790
18,037,876 8.00% due 02/15/01 - 12/29/26..................... 18,730,860
2,872,959 8.50% due 06/15/17 - 02/15/25..................... 3,039,665
1,629,481 9.00% due 11/15/25 - 12/15/25..................... 1,748,776
3,301,761 9.50% due 10/15/09 - 11/15/09..................... 3,612,985
78,794,714
--------------
Total U.S. treasuries & Federal agencies.......... $ 245,010,377
--------------
--------------
SHORT-TERM SECURITIES -- 27.6%
COMMERCIAL PAPER -- 18.3%
5,000,000 Associates Corporation of North America
5.83% due 01/20/98.............................. $ 4,984,615
5,000,000 Bell Atlantic Corp.
5.80% due 01/14/98.............................. 4,989,528
5,000,000 Caterpillar Financial Services
5.90% due 01/23/98.............................. 4,981,972
5,000,000 Ford Motor Credit Corp.
5.80% due 01/14/98.............................. 4,989,528
5,000,000 GE Capital Corp.
5.87% due 01/16/98.............................. 4,987,771
5,000,000 Goldman Sachs Group
5.85% due 01/22/98.............................. 4,982,938
5,000,000 Johnson Controls, Inc.
5.88% due 01/20/98.............................. 4,984,483
5,000,000 Lucent Technologies, Inc.
5.76% due 01/20/98.............................. 4,984,800
5,000,000 Merrill Lynch & Co.
5.80% due 01/22/98.............................. 4,983,083
5,000,000 Morgan Stanley Corp.
5.83% due 01/14/98.............................. 4,989,474
5,000,000 Pearson Inc.
5.92% due 01/20/98.............................. 4,984,378
5,000,000 Salomon Smith Barney
5.84% due 01/14/98.............................. 4,989,456
--------------
59,832,026
--------------
REPURCHASE AGREEMENT -- 9.3%
30,169,000 Interest in $86,953,000 joint repurchase agreement
with State Street Bank at 6.50%, to be
repurchased at $30,179,894 on 01/02/98;
(Collateralized by $86,953,000 U.S. Treasury
Bonds 8.375% - 11.625% due 02/11/01 -
08/08/15)....................................... 30,169,000
--------------
Total short-term securities....................... $ 90,001,026
--------------
--------------
<CAPTION>
MARKET
VALUE
--------------
<C> <S> <C>
DIVERSIFICATION OF NET ASSETS:
Total asset-backed securities (cost $2,962,410).... 0.9% $ 3,026,060
Total collateralized mortgage obligations
(cost $39,140,476)............................... 12.2 39,706,145
Total commercial mortgage backed securities (cost
$5,047,384)...................................... 1.7 5,327,350
Total corporate notes (cost $3,000,000)............ 1.0 3,196,485
Total U.S. treasuries & Federal agencies (cost
$240,190,777).................................... 75.2 245,010,377
Total short-term securities (cost $90,001,025)..... 27.6 90,001,026
------ ---------------
Total investment in securities
(total cost $380,342,072)........................ 118.6 386,267,443
Cash, receivable and other assets.................. 2.0 6,390,295
Payable for securities purchased................... (20.6) (66,906,942)
Payable for Fund shares redeemed................... 0.0 0
Other liabilities.................................. (0.0) (49,116)
------ ---------------
Net assets (applicable to $1.083781 per share based
on 300,523,424 shares outstanding)............... 100.0% $ 325,701,680
------ ---------------
------ ---------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; authorized
800,000,000 shares; outstanding 300,523,424 shares....... $ 30,052,342
Capital surplus............................................ 298,278,139
Accumulated undistributed net investment income............ 1,762,527
Distribution in excess of net realized gain on
investments.............................................. (10,342,647)
Unrealized appreciation of investments..................... 5,925,372
Unrealized appreciation of option*......................... 25,947
---------------
Net assets, applicable to shares outstanding............... $ 325,701,680
---------------
---------------
</TABLE>
* At December 31, 1997 the Fund had an open Interest Rate Swap Option with
Morgan Guarantee Trust Company. The Option had a notional value of $10,116,831
at December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-15
<PAGE>
HARTFORD INDEX FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES MARKET
----------- VALUE
--------------
<C> <S> <C>
COMMON STOCKS -- 99.2%
AEROSPACE & DEFENSE -- 2.1%
83,300 Allied Signal, Inc................................ $ 3,243,493
147,498 Boeing Company (The).............................. 7,218,183
9,200 General Dynamics Corp............................. 795,225
28,600 Lockheed Martin Corp.............................. 2,817,100
9,800 Northrop Grumman Corp............................. 1,127,000
6,224 Raytheon Co. Class A.............................. 306,918
42,500 Raytheon Co. Class B.............................. 2,146,250
30,800 Rockwell International Corp....................... 1,609,300
24,300 Textron, Inc...................................... 1,518,750
34,700 United Technologies Corp.......................... 2,526,593
--------------
23,308,812
--------------
BUSINESS SERVICES -- 0.5%
12,100 DeLuxe Corp....................................... 417,450
12,400 Fluor Corp........................................ 463,450
6,000 Foster Wheeler Corp............................... 162,375
19,600 Ikon Office Solutions............................. 551,250
4,600 John H. Harland Co................................ 96,600
13,100 Moore Corp. Ltd................................... 198,137
6,600 National Service Industries, Inc.................. 327,112
21,600 R.R. Donnelly & Sons Company...................... 804,600
8,600 Safety Kleen Corp................................. 235,962
8,900 SuperValu, Inc.................................... 372,687
25,300 Sysco Corp........................................ 1,152,731
7,300 W.W. Grainger, Inc................................ 709,468
--------------
5,491,822
--------------
COMMUNICATIONS EQUIPMENT -- 2.8%
50,800 3 Com Corp........................................ 1,774,825
*13,350 Andrew Corp....................................... 320,400
31,000 Bay Networks, Inc................................. 792,437
23,300 Cabletron Systems, Inc............................ 349,500
148,450 Cisco Systems, Inc................................ 8,276,087
17,300 DSC Communications Corporation.................... 415,200
11,700 Harris Corp....................................... 536,737
94,600 Lucent Technologies, Inc.......................... 7,556,175
88,100 Motorola, Inc..................................... 5,027,206
21,700 Nextlevel Systems, Inc............................ 387,887
38,700 Northern Telecom Ltd.............................. 3,444,300
12,900 Raychem Corp...................................... 555,506
11,400 Scientific Atlanta, Inc........................... 190,950
26,700 Tellabs, Inc...................................... 1,411,762
--------------
31,038,972
--------------
COMPUTERS & OFFICE
EQUIPMENT -- 4.4%
10,700 Adobe System Inc.................................. 441,375
18,700 Apple Computer, Inc............................... 245,437
111,342 Compaq Computer Corp.............................. 6,283,864
7,100 Data General Corp................................. 123,806
48,200 Dell Computer Corp................................ 4,048,800
21,800 Digital Equipment Corp............................ 806,600
73,200 EMC Corp. - Mass.................................. 2,008,425
29,200 HBO & Company..................................... 1,401,600
153,700 Hewlett-Packard Co................................ 9,606,250
143,600 International Business Machines Corp.............. 15,015,175
31,100 Micron Technology Inc............................. 808,600
21,300 Pitney Bowes, Inc................................. 1,915,668
36,100 Seagate Technology, Inc........................... 694,925
55,200 Sun Microsystems, Inc............................. 2,201,100
25,700 Unisys Corp....................................... 356,587
48,000 Xerox Corp........................................ 3,543,000
--------------
49,501,212
--------------
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CONSUMER DURABLES -- 2.0%
97,800 Chrysler Corp..................................... $ 3,441,337
11,600 Cooper Tire & Rubber Co........................... 282,750
9,300 Echlin, Inc....................................... 336,543
177,200 Ford Motor Co..................................... 8,627,425
104,300 General Motors Corp............................... 6,323,187
26,550 Genuine Parts Co.................................. 901,040
23,000 Goodyear Tire & Rubber Co. (The).................. 1,463,375
17,400 ITT Industries.................................... 545,925
18,200 TRW, Inc.......................................... 971,425
--------------
22,893,007
--------------
CONSUMER NON-DURABLES -- 4.0%
8,300 Alberto Culver Co. Class B........................ 266,118
19,500 Avon Products, Inc................................ 1,196,812
13,900 Black & Decker Corporation (The).................. 542,968
3,700 Briggs & Stratton Corporation..................... 179,681
4,300 Centex Corp....................................... 270,631
15,200 Clorox Company (The).............................. 1,201,750
43,600 Colgate Palmolive Co.............................. 3,204,600
5,300 Fleetwood Enterprises, Inc........................ 224,918
10,800 Fruit of the Loom, Inc............................ 276,750
82,600 Gillette Company (The)............................ 8,296,137
16,100 International Flavors & Fragrances, Inc........... 829,150
5,700 Kaufman & Broad Home Corp......................... 127,893
80,700 Kimberly-Clark Corp............................... 3,979,518
9,900 Liz Claiborne, Inc................................ 413,943
24,300 Masco Corp........................................ 1,236,262
14,000 Maytag Corp....................................... 522,375
23,400 Newell Co......................................... 994,500
42,900 NIKE, Inc. Class B................................ 1,683,825
198,500 Proctor & Gamble Company (The).................... 15,842,781
8,300 Reebok International Ltd.......................... 239,143
22,100 Rubbermaid, Inc................................... 552,500
5,400 Russell Corp...................................... 143,437
9,000 Snap-On, Inc...................................... 392,625
3,000 Springs Industries, Inc........................... 156,000
13,100 Stanley Works (The)............................... 618,156
9,000 Tupperware Corp................................... 250,875
18,000 V F Corp.......................................... 826,875
11,000 Whirlpool Corp.................................... 605,000
--------------
45,075,223
--------------
CONSUMER SERVICES -- 1.1%
14,600 Brunswick Corporation............................. 442,562
22,600 Darden Restaurants, Inc........................... 282,500
48,100 Eastman Kodak Company............................. 2,925,081
15,400 H & R Block, Inc.................................. 690,112
14,900 Harrah's Entertainment, Inc....................... 281,237
18,750 Hasbro, Inc....................................... 590,625
36,900 Hilton Hotels Corp................................ 1,097,775
17,200 ITT Corp.......................................... 1,425,450
18,700 Marriott International, Inc....................... 1,294,975
42,800 Mattel, Inc....................................... 1,594,300
26,300 Mirage Resorts, Incorporated...................... 598,325
6,700 Polaroid Corp..................................... 326,206
19,400 Wendy's International, Inc........................ 466,812
--------------
12,015,960
--------------
ELECTRONICS -- 5.8%
20,700 Advanced Micro Devices, Inc....................... 371,306
32,300 AMP, Inc.......................................... 1,356,600
53,800 Applied Materials, Inc............................ 1,620,725
6,700 EG & G, Inc....................................... 139,443
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
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COMMON STOCKS -- (CONTINUED)
ELECTRONICS -- (CONTINUED)
65,400 Emerson Electric Co............................... $ 3,691,012
483,400 General Electric Co............................... 35,469,475
7,400 General Signal Corp............................... 312,187
241,600 Intel Corp........................................ 16,972,400
12,300 Johnson Controls, Inc............................. 587,325
12,300 KLA-Tencor Corporation............................ 475,087
20,900 LSI Logic Corp.................................... 412,775
23,800 National Semiconductor Corp....................... 617,312
27,700 Silicon Graphics, Inc............................. 344,518
7,400 Tektronix, Inc.................................... 293,687
57,600 Texas Instruments, Inc............................ 2,592,000
8,100 Thomas & Betts Corp............................... 382,725
--------------
65,638,577
--------------
ENERGY & SERVICES -- 8.5%
13,500 Amerada Hess Corp................................. 740,812
71,900 Amoco Corp........................................ 6,120,487
8,800 Anadarko Petroleum Corporation.................... 534,050
13,300 Apache Corporation................................ 466,331
11,000 Ashland, Inc...................................... 590,562
47,300 Atlantic Richfield Co............................. 3,789,912
24,900 Baker Hughes, Inc................................. 1,086,262
25,920 Burlington Resources, Inc......................... 1,161,540
97,000 Chevron Corp...................................... 7,469,000
15,600 Coastal Corporation (The)......................... 966,225
14,100 Consolidated Natural Gas Company.................. 853,050
25,800 Dresser Industries, Inc........................... 1,081,987
363,800 Exxon Corp........................................ 22,260,012
38,700 Halliburton Co.................................... 2,009,981
3,700 Helmerich & Payne, Inc............................ 251,137
7,000 Kerr-McGee Corp................................... 443,187
8,200 McDermott International, Inc...................... 300,325
115,900 Mobil Corp........................................ 8,366,531
50,100 Occidental Petroleum Corp......................... 1,468,556
15,500 Oryx Energy Co.................................... 395,250
7,000 Pennzoil Co....................................... 467,687
38,900 Phillips Petroleum Co............................. 1,891,512
12,800 Rowan Cos., Inc................................... 390,400
316,700 Royal Dutch Petroleum Co. ADR..................... 17,161,181
73,000 Schlumberger Ltd.................................. 5,876,500
10,700 Sun Company, Inc.................................. 450,068
80,900 Texaco, Inc....................................... 4,398,937
42,500 USX-Marathon Group................................ 1,434,375
37,300 Union Pacific Resources Group, Inc................ 904,525
36,400 Unocal Corp....................................... 1,412,775
8,000 Western Atlas, Inc................................ 592,000
--------------
95,335,157
--------------
FINANCIAL SERVICES -- 16.9%
23,900 Aetna Life & Casualty Co.......................... 1,686,443
64,800 Allstate Corporation (The)........................ 5,888,700
68,700 American Express Co............................... 6,131,475
39,002 American General Corp............................. 2,108,545
105,750 American International Group, Inc................. 11,500,312
25,250 Aon Corp.......................................... 1,480,281
86,600 Banc One Corp..................................... 4,703,462
55,900 Bank of New York Company, Inc. (The).............. 3,231,718
102,300 BankAmerica Corp.................................. 7,467,900
21,500 BankBoston Corporation............................ 2,019,656
14,700 Bankers Trust NY Corp............................. 1,652,831
28,500 Barnett Banks, Inc................................ 2,048,437
20,200 BB&T Corporation.................................. 1,294,062
7,800 Beneficial Corp................................... 648,375
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FINANCIAL SERVICES -- (CONTINUED)
38,950 Charles Schwab Corporation (The).................. $ 1,633,465
62,500 Chase Manhattan Corporation (The)................. 6,843,750
26,000 Chubb Corporation (The)........................... 1,966,250
11,200 CIGNA Corporation................................. 1,938,300
8,300 Cincinnati Financial.............................. 1,168,225
67,600 Citicorp.......................................... 8,547,175
15,600 Comerica, Inc..................................... 1,407,900
30,000 Conseco Inc....................................... 1,363,125
29,200 Corestates Financial Corp......................... 2,337,825
15,800 Countrywide Credit Industries Inc................. 677,425
22,300 Equifax Inc....................................... 790,256
102,500 Federal Home Loan Mortgage Corp................... 4,298,593
156,500 Federal National Mortgage Association............. 8,930,281
22,750 Fifth Third Bancorp............................... 1,859,812
42,900 First Chicago Corp................................ 3,582,150
92,600 First Union Corp.................................. 4,745,750
36,800 Fleet Financial Group, Inc........................ 2,757,700
12,000 General Re Corp................................... 2,544,000
8,400 Golden West Financial Corp........................ 821,625
20,000 Greentree Financial Corp.......................... 523,750
13,900 H.F. Ahmanson & Co................................ 930,431
15,700 Household International Corp...................... 2,002,731
28,200 Huntington Bancshares, Inc........................ 1,015,200
26,400 J.P. Morgan & Co., Inc............................ 2,979,900
11,300 Jefferson Pilot Corp.............................. 879,987
32,400 Keycorp........................................... 2,294,325
16,300 Lincoln National Corp............................. 1,273,437
13,500 MBIA, Inc......................................... 901,968
73,950 MBNA Corp......................................... 2,019,759
17,200 MGIC Investment................................... 1,143,800
24,800 Marsh & McLennan Cos., Inc........................ 1,849,150
37,600 Mellon Bank Corp.................................. 2,279,500
48,900 Merrill Lynch & Co., Inc.......................... 3,566,643
87,475 Morgan Stanley Dean Witter Discover & Co.......... 5,171,959
31,700 National City Corp................................ 2,084,275
105,024 NationsBank Corp.................................. 6,386,772
111,400 Norwest Corp...................................... 4,302,825
45,300 PNC Bank Corp..................................... 2,584,931
10,900 Progressive Corporation (The)..................... 1,306,637
13,800 Providian Corp.................................... 623,587
8,100 Republic New York Corp............................ 924,918
21,000 SAFECO Corp....................................... 1,023,750
12,600 St. Paul Companies, Inc. (The).................... 1,033,987
23,700 State Street Corporation.......................... 1,379,043
31,100 SunTrust Banks, Inc............................... 2,219,762
25,700 Synovus Financial Corp............................ 841,675
20,800 Torchmark Corporation............................. 874,900
10,100 Transamerica Corporation.......................... 1,075,650
169,305 Travelers Group, Inc.............................. 9,121,306
21,000 UNUM Corporation.................................. 1,141,875
36,073 U.S. Bancorp...................................... 4,037,921
16,700 USF&G Corporation................................. 368,443
30,100 Wachovia Corporation.............................. 2,441,862
38,000 Washington Mutual, Inc............................ 2,424,875
13,000 Wells Fargo & Company............................. 4,412,687
--------------
189,520,025
--------------
FOOD, BEVERAGE & TOBACCO -- 8.0%
5,500 Adolph Coors Company Class B...................... 182,875
72,400 Anheuser-Busch Cos., Inc.......................... 3,185,600
82,055 Archer-Daniels-Midland Company.................... 1,779,567
10,200 Brown-Forman Corporation Class B.................. 563,550
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-17
<PAGE>
HARTFORD INDEX FUND, INC.
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STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1997
<TABLE>
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COMMON STOCKS -- (CONTINUED)
FOOD, BEVERAGE & TOBACCO -- (CONTINUED)
21,200 CPC International, Inc............................ $ 2,284,300
67,800 Campbell Soup Company............................. 3,940,875
365,300 Coca-Cola Company (The)........................... 24,338,112
69,600 ConAgra, Inc...................................... 2,283,750
25,200 Fortune Brands Inc................................ 933,975
23,600 General Mills, Inc................................ 1,690,350
54,500 H.J. Heinz Company................................ 2,769,281
21,000 Hershey Foods Corporation......................... 1,300,687
60,800 Kellogg Company................................... 3,017,200
224,100 PepsiCo, Inc...................................... 8,165,643
358,000 Philip Morris Companies, Inc...................... 16,221,875
20,300 Quaker Oats Company (The)......................... 1,070,825
15,700 Ralston Purina Company............................ 1,459,118
70,800 Sara Lee Corporation.............................. 3,986,925
52,600 Seagram Company Ltd. (The)........................ 1,699,637
22,530 Tricon Global Restaurants, Inc.................... 654,778
27,100 UST, Inc.......................................... 1,001,006
94,400 Unilever NV-New York Shares....................... 5,894,100
15,000 Whitman Corporation............................... 390,937
17,100 Wrigley (W.M.) Jr. Company........................ 1,360,518
--------------
90,175,484
--------------
HEALTH CARE -- 11.6%
113,000 Abbott Laboratories............................... 7,408,562
9,500 Allergan, Inc..................................... 318,843
12,500 Alza Corporation.................................. 397,656
95,700 American Home Products Corporation and
Subsidiaries.................................... 7,321,050
39,100 Amgen, Inc........................................ 2,116,287
8,500 Bard (C.R.), Inc.................................. 266,156
8,200 Bausch & Lomb, Inc................................ 324,925
41,200 Baxter International, Inc......................... 2,078,025
18,000 Becton, Dickinson and Company..................... 900,000
16,400 Biomet, Inc....................................... 420,250
28,600 Boston Scientific Corporation..................... 1,312,025
146,900 Bristol-Myers Squibb Company...................... 13,900,412
16,000 Cardinal Health, Inc.............................. 1,202,000
95,600 Columbia/HCA Healthcare Corporation............... 2,832,150
164,100 Eli Lilly and Company............................. 11,425,462
21,900 Guidant Corporation............................... 1,363,275
58,100 Healthsouth Corporation........................... 1,612,275
24,100 Humana, Inc....................................... 500,075
198,500 Johnson & Johnson................................. 13,076,187
17,300 Loews Corporation................................. 1,835,962
10,800 Mallinckrodt, Inc................................. 410,400
9,400 Manor Care, Inc................................... 329,000
69,300 Medtronic, Inc.................................... 3,625,256
176,900 Merck & Co., Inc.................................. 18,795,625
6,400 Millipore Corporation............................. 217,200
18,800 Pall Corporation.................................. 388,925
191,000 Pfizer, Inc....................................... 14,241,437
74,700 Pharmacia & Upjohn, Inc........................... 2,735,887
9,700 Pioneer Hi-Bred International, Inc................ 1,040,325
108,100 Schering-Plough Corporation....................... 6,715,712
37,000 Service Corporation International................. 1,366,687
3,700 Shared Medical Systems Corporation................ 244,200
13,500 St. Jude Medical, Inc............................. 411,750
31,150 SunAmerica, Inc................................... 1,331,662
45,100 Tenet Healthcare Corporation...................... 1,493,937
27,700 United HealthCare Corporation..................... 1,376,343
11,200 United States Surgical Corporation................ 328,300
40,000 Warner-Lambert Company............................ 4,960,000
--------------
130,624,223
--------------
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INDUSTRIAL MATERIALS -- 4.6%
16,000 ARMCO, Inc........................................ $ 79,000
6,200 ASARCO, Inc....................................... 139,112
16,200 Air Products & Chemicals, Inc..................... 1,332,450
33,500 Alcan Aluminum Ltd................................ 925,437
25,900 Allegheny Teledyne, Inc........................... 670,162
25,700 Aluminum Company of America....................... 1,808,637
6,000 Armstrong World Industries, Inc................... 448,500
10,600 B.F. Goodrich Company (The)....................... 439,237
54,800 Barrick Gold Corp................................. 1,020,650
33,500 Battle Mountain Gold Company...................... 196,812
7,800 Bemis Company, Inc................................ 343,687
16,600 Bethlehem Steel Corporation....................... 143,175
8,200 Boise Cascade Corporation......................... 248,050
14,100 Champion International Corporation................ 638,906
18,900 Crown Cork & Seal Company, Inc.................... 947,362
13,700 Cyprus Amax Minerals Company...................... 210,637
33,600 Dow Chemical Company (The)........................ 3,410,400
167,200 du Pont (E.I.) de Nemours & Co.................... 10,042,450
11,600 Eastman Chemical Company.......................... 690,925
20,600 Echo Bay Mines Ltd................................ 50,212
9,500 Ecolab, Inc....................................... 526,656
21,300 Englehard Corporation............................. 370,087
5,500 FMC Corporation................................... 370,218
28,600 Freeport-McMoran Copper & Gold, Inc............... 450,450
13,500 Georgia-Pacific Corporation....................... 820,125
10,700 Grace (W.R.) & Co................................. 860,681
8,800 Great Lakes Chemical Corporation.................. 394,900
14,600 Hercules, Inc..................................... 730,912
21,600 Homestake Mining Company.......................... 191,700
24,500 Inco Ltd.......................................... 416,500
7,200 Inland Steel Industries, Inc...................... 123,300
44,600 International Paper Company....................... 1,923,375
30,800 James River Corporation of Virginia............... 1,178,100
16,100 Louisiana-Pacific Corporation..................... 305,900
15,400 Mead Corporation (The)............................ 431,200
87,500 Monsanto Company.................................. 3,675,000
19,600 Morton International, Inc......................... 673,750
9,800 Nalco Chemical Company............................ 387,712
22,993 Newmont Mining Corporation........................ 675,419
12,900 Nucor Corporation................................. 623,231
7,900 Owens-Corning..................................... 269,587
20,700 Owens-Illinois Group, Inc......................... 785,306
26,400 PPG Industries, Inc............................... 1,508,100
8,900 Phelps Dodge Corporation.......................... 554,025
35,300 Placer Dome, Inc.................................. 447,868
4,300 Potlatch Corporation.............................. 184,900
23,300 Praxair, Inc...................................... 1,048,500
10,900 Reynolds Metal Company............................ 654,000
9,100 Rohm & Haas Company............................... 871,325
25,500 Sherman-Williams Company (The).................... 707,625
14,800 Sigma-Aldrich Corporation......................... 588,300
14,600 Stone Container Corporation....................... 152,387
8,400 Temple-Inland, Inc................................ 439,425
12,600 USX Corporation................................... 393,750
10,200 Union Camp Corporation............................ 547,612
18,300 Union Carbide Corporation......................... 785,756
15,000 Westvaco Corporation.............................. 471,562
29,400 Weyerhaeuser Company.............................. 1,442,437
16,400 Willamette Industries, Inc........................ 527,875
14,300 Worthington Industries, Inc....................... 235,950
--------------
51,531,307
--------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-18
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COMMON STOCKS -- (CONTINUED)
MANUFACTURING -- 2.7%
4,100 Aeroquip-Vickers, Inc............................. $ 201,156
15,200 Avery Dennison Corporation........................ 680,200
4,400 Ball Corporation.................................. 155,375
11,000 Case Corporation.................................. 664,812
54,900 Caterpillar, Inc.................................. 2,666,081
5,900 Cincinnati Milacron, Inc.......................... 153,031
18,000 Cooper Industries, Inc............................ 882,000
34,000 Corning Incorporated.............................. 1,262,250
6,800 Crane Co.......................................... 294,950
5,600 Cummins Engine Company, Inc....................... 330,750
15,400 Dana Corporation.................................. 731,500
37,200 Deere & Company................................... 2,169,225
32,800 Dover Corporation................................. 1,184,900
11,400 Eaton Corporation................................. 1,017,450
7,300 Harnischfeger Industries, Inc..................... 257,781
18,800 Honeywell, Inc.................................... 1,287,800
36,700 Illinois Tool Works, Inc.......................... 2,206,587
24,450 Ingersoll-Rand Company............................ 990,225
60,300 Minnesota Mining & Manufacturing Company.......... 4,948,368
1,200 NACCO Industries, Inc............................. 128,625
10,700 Navistar International Corporation................ 265,493
11,500 PACCAR, Inc....................................... 603,750
16,450 Parker-Hannifin Corporation....................... 754,643
6,500 Perkin Elmer Corporation (The).................... 461,906
25,100 Tenneco, Inc...................................... 991,450
22,200 Thermo Electron Corporation....................... 987,900
9,300 Timken Company (The).............................. 319,687
78,500 Tyco International, Ltd........................... 3,537,406
--------------
30,135,301
--------------
MEDIA & SERVICES -- 3.9%
74,200 Airtouch Communications, Inc...................... 3,083,937
103,100 CBS Corporation................................... 3,035,006
14,500 Clear Channel Communications, Inc................. 1,151,843
24,200 Cognizant Corporation............................. 1,078,412
51,300 Comcast Corporation Class A....................... 1,619,156
14,200 Dow Jones & Company, Inc.......................... 762,362
25,100 Dun & Bradstreet Corporation (The)................ 776,531
41,800 Gannett Co., Inc.................................. 2,583,879
10,400 Harcourt General, Inc............................. 569,400
18,350 Interpublic Group of Companies, Inc............... 914,059
5,400 King World Productions, Inc....................... 311,850
12,500 Knight-Ridder, Inc................................ 650,000
14,600 McGraw-Hill Companies, Inc. (The)................. 1,080,400
7,900 Meredith Corporation.............................. 281,931
14,100 New York Times Co. (The).......................... 932,362
23,600 Omnicom Group, Inc................................ 1,000,050
74,500 TCI Communications, Inc........................... 2,081,343
82,600 Time Warner, Inc.................................. 5,121,200
14,100 Times Mirror Co.-Class A.......................... 867,150
18,100 Tribune Co........................................ 1,126,725
89,600 U.S. West, Inc.................................... 2,587,200
52,000 Viacom, Inc.-Class B.............................. 2,154,750
99,500 Walt Disney Company (The)......................... 9,856,718
--------------
43,626,264
--------------
REAL ESTATE -- 0.0%
3,100 Pulte Corporation................................. 129,618
--------------
RETAIL -- 5.5%
36,200 Albertson's, Inc.................................. 1,714,975
11,100 American Greetings Corporation.................... 434,287
40,000 American Stores Company........................... 822,500
22,300 AutoZone, Inc..................................... 646,700
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RETAIL -- (CONTINUED)
25,400 CVS Corporation................................... $ 1,627,187
116,646 Cendant Corporation............................... 4,009,696
15,600 Charming Shoppes, Inc............................. 73,125
14,500 Circuit City Stores............................... 515,656
31,300 Costco Companies, Inc............................. 1,396,762
32,100 Dayton Hudson Corporation......................... 2,166,750
16,400 Dillard's, Inc.................................... 578,100
30,800 Federated Department Stores, Inc.................. 1,326,325
59,250 Gap Inc. (The).................................... 2,099,671
8,800 Giant Food, Inc................................... 296,450
5,600 Great Atlantic & Pacific Tea Company, Inc.
(The)........................................... 166,250
107,950 Home Depot, Inc. (The)............................ 6,355,556
5,800 Jostens, Inc...................................... 133,762
72,000 KMart Corporation................................. 832,500
37,400 Kroger Company (The).............................. 1,381,462
39,900 Limited Inc. (The)................................ 1,017,450
5,800 Longs Drug Store Corporation...................... 186,325
25,600 Lowe's Companies, Inc............................. 1,220,800
34,300 May Department Stores Company (The)............... 1,807,181
101,500 McDonald's Corporation............................ 4,846,625
5,400 Mercantile Stores Company, Inc.................... 328,725
11,400 Nordstrom, Inc.................................... 688,275
36,700 J.C. Penney Company, Inc.......................... 2,213,468
9,300 Pep Boys - Manny, Moe & Jack (The)................ 222,037
18,100 Rite Aid Corporation.............................. 1,062,243
57,700 Sears Roebuck & Co................................ 2,610,925
24,100 TJX Companies, Inc. (The)......................... 828,437
15,200 Tandy Corporation................................. 586,150
42,100 Toys "R" Us, Inc.................................. 1,323,518
72,600 Walgreen Co....................................... 2,277,825
332,300 Wal-Mart Stores, Inc.............................. 13,105,081
21,900 Winn-Dixie Stores, Inc............................ 956,756
19,900 Woolworth Corporation............................. 405,462
--------------
62,264,997
--------------
SOFTWARE & SERVICES -- 3.4%
7,100 Autodesk, Inc..................................... 262,700
43,200 Automatic Data Processing, Inc.................... 2,651,400
11,300 Ceridian Corporation.............................. 517,681
80,550 Computer Associates International, Inc............ 4,259,081
11,400 Computer Sciences Corporation..................... 951,900
63,200 First Data Corporation............................ 1,848,600
178,200 Microsoft Corporation............................. 23,032,350
51,700 Novell, Inc....................................... 387,750
144,550 Oracle Corporation................................ 3,225,271
18,800 Parametric Technology Corporation................. 890,650
--------------
38,027,383
--------------
TRANSPORTATION -- 1.3%
13,600 AMR Corporation................................... 1,747,600
22,900 Burlington Northern Santa Fe Corporation.......... 2,128,268
32,100 CSX Corporation................................... 1,733,400
5,700 Caliber System, Inc............................... 277,518
10,800 Delta Air Lines, Inc.............................. 1,285,200
17,000 Federal Express Corporation....................... 1,038,062
48,500 Laidlaw, Inc...................................... 660,812
55,600 Norfolk Southern Corporation...................... 1,713,175
11,400 Ryder Systems, Inc................................ 373,350
32,300 Southwest Airlines Co............................. 795,387
36,400 Union Pacific Corporation......................... 2,272,725
13,400 US Airways Group, Inc............................. 837,500
--------------
14,862,997
--------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-19
<PAGE>
HARTFORD INDEX FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- --------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
UTILITIES -- 9.8%
239,600 AT&T Corp......................................... $ 14,675,500
27,500 Alltel Corporation................................ 1,129,218
27,900 American Electric Power........................... 1,440,337
81,100 Ameritech Corporation............................. 6,528,550
21,800 Baltimore Gas & Electric Company.................. 742,562
114,381 Bell Atlantic Corporation......................... 10,408,671
146,200 BellSouth Corporation............................. 8,232,887
22,300 Carolina Power and Light Company.................. 946,356
31,300 Central and Southwest Corporation................. 847,056
23,200 CINergy Corp...................................... 888,850
8,200 Columbia Gas System, Inc. (The)................... 644,212
34,600 Consolidated Edison Company of New York, Inc...... 1,418,600
21,400 DTE Energy Co..................................... 742,312
27,400 Dominion Resources, Inc........................... 1,166,212
53,052 Duke Energy Corporation........................... 2,937,754
3,000 Eastern Enterprises............................... 135,000
56,300 Edison International.............................. 1,530,656
47,000 Enron Corp........................................ 1,953,437
36,000 Entergy Corporation............................... 1,077,750
26,900 FPL Group, Inc.................................... 1,592,143
33,900 Firstenergy Corp.................................. 983,100
24,100 Frontier Corporation.............................. 579,906
17,800 GPU, Inc.......................................... 749,825
141,400 GTE Corporation................................... 7,388,150
42,092 Houston Industries, Inc........................... 1,123,330
102,700 MCI Communications Corporation.................... 4,396,843
7,200 NICOR, Inc........................................ 303,750
21,300 Niagara Mohawk Power Corporation.................. 223,650
10,900 Northern States Power Company..................... 634,925
4,600 Oneok, Inc........................................ 185,725
64,500 PG & E Corporation................................ 1,963,218
24,400 PP & L Resources, Inc............................. 584,075
12,300 Pacific Enterprises............................... 462,787
43,600 Pacificorp........................................ 1,190,825
32,800 Peco Energy Company............................... 795,400
5,200 Peoples Energy Corporation........................ 204,750
34,100 Public Service Enterprise Group, Inc.............. 1,080,543
135,260 SBC Communications, Inc........................... 9,907,795
12,600 Sonat, Inc........................................ 576,450
101,900 Southern Company (The)............................ 2,636,662
63,500 Sprint Corporation................................ 3,722,687
36,315 Texas Utilities Company........................... 1,509,342
71,300 U.S. West, Inc.................................... 3,217,412
31,800 Unicom Corporation................................ 977,850
20,300 Union Electric Co................................. 877,975
46,800 Williams Companies, Inc. (The).................... 1,327,950
133,400 WorldCom, Inc..................................... 4,035,350
--------------
110,678,338
--------------
<CAPTION>
MARKET
SHARES VALUE
----------- --------------
<C> <S> <C>
WASTE MANAGEMENT -- 0.3%
29,200 Browning-Ferris Industries, Inc................... $ 1,080,400
67,204 Waste Management, Inc............................. 1,848,110
--------------
2,928,510
--------------
Total common stocks............................... $1,114,803,189
--------------
--------------
PRINCIPAL
AMOUNT
-----------
SHORT-TERM SECURITIES -- 1.1%
U.S. TREASURY BILLS -- 0.1%
$ 500,000 5.08% due 01/08/98.............................. $ 499,506
275,000 5.08% due 01/08/98.............................. 274,728
--------------
774,234
--------------
REPURCHASE AGREEMENT -- 1.0%
11,722,000 Interest in $86,953,000 joint repurchase agreement
with State Street Bank at 6.50%, to be
repurchased at $11,726,233 on 01/02/98;
(Collateralized by $86,953,000 U.S. Treasury
Bonds 8.375% - 11.625% due 02/11/01 -
08/08/15)....................................... 11,722,000
--------------
Total short-term securities....................... $ 12,496,234
--------------
--------------
</TABLE>
<TABLE>
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $816,021,371)................ 99.2% $1,114,803,189
Total short-term securities (cost $12,496,234)......... 1.1 12,496,234
------ --------------
Total investment in securities (total cost
$828,517,605)........................................ 100.3 1,127,299,423
Cash, receivables and other assets..................... 0.2 1,953,306
Payable for securities purchased....................... (0.0) (225,160)
Payable for Fund shares redeemed....................... (0.5) (5,401,568)
Other liabilities...................................... (0.0) (170,999)
------ --------------
Net assets (applicable to $2.877709 per share based on
390,399,110 shares outstanding)...................... 100.0% $1,123,455,002
------ --------------
------ --------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; authorized
1,000,000,000 shares; outstanding 390,399,109 shares......... $ 39,039,911
Capital surplus................................................ 756,821,801
Accumulated undistributed net investment income................ 977,108
Accumulated undistributed net realized gain on investments.....
27,782,478
Unrealized appreciation of futures contracts**................. 51,886
Unrealized appreciation on investments......................... 298,781,818
--------------
Net assets, applicable to shares outstanding................... $1,123,455,002
--------------
--------------
</TABLE>
* Non-income producing during period.
** The Fund had 26 Standard & Poor's 500 March 1998 futures contracts open as of
December 31, 1997. These contracts had a value of $6,364,150 as of December
31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-20
<PAGE>
HARTFORD INTERNATIONAL OPPORTUNITIES FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- --------------
<C> <S> <C>
COMMON STOCKS -- 87.6%
ARGENTINA -- 0.6%
536,787 Banco Galicia y Buenos
Aires....................... $ 3,436,065
97,800 Telefonica de Argentina SA
ADR......................... 3,643,050
--------------
7,079,115
--------------
AUSTRALIA -- 2.5%
814,035 Amcor Ltd..................... 3,580,185
818,000 Australia & New Zealand
Banking Group Ltd........... 5,404,430
961,152 Boral Ltd..................... 2,429,866
599,849 Broken Hill Proprietary Co.
Ltd......................... 5,569,488
3,594,839 Goodman Fielder Ltd........... 5,715,154
*421,498 ICI Australia Ltd. ***........ 2,952,314
412,000 News Corporation Ltd.......... 2,273,732
--------------
27,925,169
--------------
AUSTRIA -- 0.8%
61,870 OMV AG........................ 8,558,519
--------------
BRAZIL -- 2.2%
135,300 Aracruz Cellulose SA ADR...... 1,944,937
64,025,100 Cia Energetica de Brazilia.... 2,781,829
120,500 Electrobras On ADR............ 2,996,244
19,211,000 Petroleo Brasileiro........... 4,492,814
*1,789,300 Riograndense Mineracao........ 2,204,519
8,531,000 Tele de Sao Paulo SA.......... 2,270,229
68,147,000 Telecommunicacoes Brasileiras
SA.......................... 6,930,596
--------------
23,621,168
--------------
CANADA -- 2.8%
162,300 Alcan Aluminum Ltd............ 4,468,577
182,800 Canadian Imperial Bank of
Commerce.................... 5,697,254
86,500 Canadian National Railway
Co.......................... 4,087,125
416,400 Canadian Pacific Ltd.......... 11,346,900
289,000 Canwest Global Communications
Corp. Class A
(non-voting)................ 5,202,000
--------------
30,801,856
--------------
CHILE -- 0.3%
165,600 Embotelladora Andina ADR Class
B........................... 3,218,850
--------------
CHINA -- 0.2%
*129,700 China Southern Airlines ADR... 1,710,418
--------------
DENMARK -- 1.7%
256,800 Unidanmark AS-A Shares
(Reg.)...................... 18,864,676
--------------
FINLAND -- 1.7%
469,900 Kesko......................... 7,438,343
765,000 Metsa-Serla-B Shares.......... 5,970,543
14,500 Nokia OYJ Class A Shares...... 1,030,486
244,300 Rauma OYJ..................... 3,813,343
--------------
18,252,715
--------------
FRANCE -- 8.7%
99,600 Assurance Generale ***........ 5,279,782
111,990 Assurance Generale de
France...................... 5,936,574
170,661 Banque Nationale de Paris
***......................... 9,075,084
35,965 Compagnie de Saint Gobain..... 5,111,499
68,710 Credit Commerciale de
France...................... 4,711,357
<CAPTION>
SHARES MARKET
----------- VALUE
--------------
<C> <S> <C>
FRANCE -- (CONTINUED)
174,112 Havas SA...................... $ 12,531,952
69,430 Peugeot Citroen SA............ 8,759,737
362,228 Rhone-Poulenc SA.............. 16,233,196
64,524 Societe Generale Class A...... 8,795,028
86,000 Societe Nationale Elf
Acquitaine.................. 10,006,878
76,303 Total SA B Shares............. 8,307,781
--------------
94,748,868
--------------
GERMANY -- 6.3%
506,300 Bayer AG...................... 18,795,726
108,500 Degussa AG.................... 5,370,561
181,520 Deutsche Lufthansa AG
(Reg.)...................... 3,412,252
27,610 Karstadt AG................... 9,551,173
36,080 M.A.N. AG..................... 10,424,422
23,709 Mannesmann AG................. 11,906,960
*492,200 Metallgesellschaft AG......... 9,006,113
--------------
68,467,207
--------------
HONG KONG -- 1.5%
1,090,000 Hutchison Whampoa Ltd......... 6,836,883
794,000 Hysan Development Co. Ltd..... 1,583,231
854,000 New World Development Co.
Ltd......................... 2,953,847
552,000 Sun Hung Kai Properties
Ltd......................... 3,847,053
11,350,000 Tingyi (Cayman Islands)
Holding Corp................ 1,479,492
--------------
16,700,506
--------------
INDIA -- 0.3%
58,100 Ranbaxy Laboratories Ltd.
GDR***...................... 1,745,062
75,800 State Bank of India GDR***.... 1,317,025
--------------
3,062,087
--------------
INDONESIA -- 0.1%
4,462,000 Pt. Kalbe Farma Foreign
registered.................. 791,733
--------------
ITALY -- 2.6%
345,400 Arnoldo Mondadori Editore
S.p.A....................... 2,715,537
271,800 Instituto Banco San Paolo
Tori........................ 2,598,093
325,800 Instituto Banco San Paolo
Tori***..................... 3,114,271
3,040,00 Telecom Italia S.p.A.......... 19,429,904
--------------
27,857,805
--------------
JAPAN -- 15.4%
837,000 Aisin Seiki Co., Ltd.......... 8,690,513
600,000 Bank of Tokyo-Mitsubishi
Ltd......................... 8,306,344
591,000 Daiwa Securities Co. Ltd...... 2,045,437
580,000 Eisai Co. Ltd................. 8,877,021
371,000 Exedy Corporation............. 2,821,996
270,000 Fuji Machine Manufacturing
Co.......................... 6,541,246
283,000 Fujisawa Pharmaceutical Co.
Ltd......................... 2,481,289
142,000 Fukuda Denshi................. 1,452,533
518,000 Hitachi Ltd................... 3,705,091
1,525,000 JGC Corp...................... 3,225,438
193,000 Mabuchi Motor Co. Ltd......... 9,841,403
380,000 Maruichi Steel Tube Ltd....... 4,646,938
187,800 Matsumotokiyoshi.............. 7,221,905
749,000 Matsushita Electric Industrial
Co.......................... 11,002,753
*3,595,000 Mazda Motor Corporation....... 8,571,301
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-21
<PAGE>
HARTFORD INTERNATIONAL OPPORTUNITIES FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES MARKET
----------- VALUE
--------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
JAPAN -- (CONTINUED)
94,400 Meiwa Estate Co. Ltd.......... $ 710,789
200,000 Murata Manufacturing Co.,
Ltd......................... 5,045,335
610,000 NGK Spark Plug Co. Ltd........ 3,471,744
306,000 Namco Ltd..................... 8,919,629
168,000 Nomura Securities Co. Ltd..... 2,248,250
1,069,000 Okumura Corp.................. 2,548,740
65,000 Otsuka Kago, Ltd.............. 2,349,618
20,000 Rohm Company, Ltd............. 2,045,821
1,666,000 Sakura Bank Ltd............... 4,779,363
305,000 Sanwa Bank Ltd................ 3,096,420
6,000 Sawako Corporation............ 39,685
212,000 Shimachu Co., Ltd............. 3,342,534
86,000 Sony Corporation.............. 7,672,601
376,800 Sony Music Entertainment,
(Japan) Inc................. 13,910,358
116,500 Square Co. Ltd................ 3,243,550
1,891,000 Sumitomo Rubber Industries
Ltd......................... 8,013,630
671,000 Toyo Ink Manufacturing Co.
Ltd......................... 1,186,961
984,000 Yamato Kogyo Co. Ltd.......... 5,940,882
--------------
167,997,118
--------------
MALAYSIA -- 0.1%
1,210,000 Renong Berhad................. 559,556
361,550 Sime Darby Berhad............. 347,397
--------------
906,953
--------------
MEXICO -- 1.4%
237,200 Grupo Televisa SA Series
CPO......................... 4,614,591
1,085,000 Kimberly-Clark de Mexico SA de
CV Class A.................. 8,549,411
74,100 Panamerican Beverages Inc.
Class A..................... 2,417,512
--------------
15,581,514
--------------
NETHERLANDS -- 3.5%
65,090 AKZO Nobel N.V................ 11,224,921
328,857 ING Groep N.V................. 13,853,597
195,733 Polygram N.V.................. 9,365,552
54,500 Unilever NV-CVA............... 3,360,501
--------------
37,804,571
--------------
NEW ZEALAND -- 0.9%
957,680 Air New Zealand Ltd. Class
B........................... 1,918,479
1,913,344 Brierley Investments Ltd...... 1,366,519
1,352,000 Carter Holt Harvey Ltd........ 2,088,218
107,150 Telecom Corp. New Zealand
ADR......................... 4,152,062
--------------
9,525,278
--------------
NORWAY -- 1.2%
757,500 Saga Petroleum AS-A Shares.... 13,049,380
--------------
PHILLIPINES -- 0.4%
950,000 Manila Electric Co. Class B... 3,190,571
253,200 Metropolitan Bank & Trust..... 1,729,299
--------------
4,919,870
--------------
SINGAPORE -- 1.1%
1,010,000 Keppel Corp. Ltd.............. 2,901,232
970,000 Keppel Fels Ltd............... 2,705,735
<CAPTION>
SHARES MARKET
----------- VALUE
--------------
<C> <S> <C>
SINGAPORE -- (CONTINUED)
838,000 Keppel Land Ltd............... $ 1,153,845
1,218,000 Overseas Union Bank (Foreign
Registered)................. 4,662,542
--------------
11,423,354
--------------
SPAIN -- 2.1%
146,700 Banco Popular Espanol......... 10,250,637
517,100 Endesa SA..................... 9,177,258
45,600 Telefonica de Espana SA....... 4,152,450
--------------
23,580,345
--------------
SWEDEN -- 3.9%
*3,835,300 Nordbanken Holding AB......... 21,703,694
449,700 Pharmacia & Upjohn............ 16,549,837
185,080 Sparbanken Sverige AB-A
Shares...................... 4,210,412
--------------
42,463,943
--------------
SWITZERLAND -- 5.1%
*40,010 CIBA Specialty Chemicals...... 4,773,052
18,750 Holderbank Financial Glarus
B........................... 15,323,427
11,359 Nestle SA (Reg.).............. 17,047,639
1,851 Roche Holdings AG Genusss..... 18,407,827
--------------
55,551,945
--------------
THAILAND -- 0.1%
1,597,219 Land & House Co. Ltd. (Foreign
Registered)................. 318,457
87,324 Siam City Cement Co. Ltd.
Foreign Registered.......... 90,681
22,067 Siam Commercial Bank (Foreign
Registered)................. 25,207
508,000 Thai Farmers Bank (Foreign
Registered)................. 923,183
--------------
1,357,528
--------------
UNITED KINGDOM -- 20.1%
320,815 Allied Irish Banks PLC........ 3,101,235
1,408,163 Associated British Foods
PLC......................... 12,071,544
729,200 Bank of Scotland.............. 6,611,049
790,400 Bass PLC...................... 12,172,925
*738,300 Billiton PLC.................. 1,862,794
*1,876,100 Billiton PLC***............... 4,815,658
756,604 BOC Group PLC................. 12,530,101
969,500 British Petroleum Co. PLC..... 12,769,718
2,546,000 BTR PLC....................... 7,812,848
764,700 Burmah Castrol PLC............ 13,299,589
1,274,000 Carlton Communications PLC.... 9,810,416
2,783,315 Cookson Group PLC............. 8,953,335
1,430,000 Diageo PLC.................... 13,141,089
424,300 HSBC Holdings PLC............. 10,967,847
963,000 Johnson Matthey PLC........... 8,580,190
983,859 PowerGen PLC.................. 12,869,810
1,600,000 Rank Group PLC................ 9,181,346
701,942 Reckitt & Colman PLC.......... 11,035,806
769,381 Royal & Sun Alliance Insurance
Group....................... 7,722,243
875,100 Royal Bank of Scotland
Group....................... 11,202,358
4,540,777 Smurfit (Jefferson) Group..... 12,626,676
528,100 Zeneca Group PLC.............. 18,595,254
--------------
221,773,831
--------------
Total common stocks........... $ 957,556,322
--------------
--------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-22
<PAGE>
<TABLE>
<CAPTION>
SHARES MARKET
----------- VALUE
--------------
<C> <S> <C>
PREFERRED STOCKS -- 2.3%
FINLAND -- 0.8%
120,000 Nokia Corp. SA ADR............ $ 8,400,000
--------------
GERMANY -- 1.5%
77,110 Hornbach Holding AG
(Non-Vtg)................... 5,317,803
*236,450 Prosieben Media AG............ 10,849,087
--------------
16,166,890
--------------
Total preferred stocks........ $ 24,566,890
--------------
--------------
NOMINAL
AMOUNT
-----------
OPTIONS -- 0.0%
$12,020,000 Brazilian Real Foreign
Currency (Put)
strike price $1.17
expiration date 01/16/98.... $ 24,040
--------------
--------------
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<C> <S> <C>
SHORT-TERM SECURITIES -- 9.3%
U.S. TREASURY BILLS -- 1.1%
$10,000,000 5.02% due 03/12/98.......... $ 9,902,388
2,000,000 5.15% due 02/12/98.......... 1,987,995
--------------
11,890,383
--------------
REPURCHASE AGREEMENT -- 8.2%
90,311,000 Interest in $1,102,287,000
joint repurchase agreement
with State Street Bank dated
12/31/97 at 6.6119%, to be
repurchased at $90,344,174
on 01/02/98; (Collateralized
by $629,353,000 U.S.
Treasury Notes 5.625% -
7.50% due 03/31/98 -
02/15/05, $204,399,000 U.S.
Treasury Bills 0% due
05/21/98 - 06/04/98,
$159,248,000 U.S. Treasury
Bonds 8.50% - 11.25% due
08/15/01 - 02/15/20, and
$109,287,000 U.S. Treasury
Strips (principal) 0% due
02/15/09)................... 90,311,000
--------------
Total short-term securities... $ 102,201,383
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
----------------
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $926,247,457)...... 87.6% $ 957,556,322
Total preferred stocks (cost $20,758,782).... 2.3 24,566,890
Total options (cost $70,918)................. 0.0 24,040
Total short-term securities (cost
$102,201,383).............................. 9.3 102,201,383
------ ----------------
Total investment in securities (total cost
$1,049,278,540)............................ 99.2 1,084,348,635
Cash, receivables and other assets........... 1.8 19,837,779
Payable for securities purchased............. (0.9) (10,452,941)
Payable for Fund shares redeemed............. (0.0) (181,393)
Other liabilities............................ (0.1) (606,480)
------ ----------------
Net assets (applicable to $1.294457 per share
based on 844,327,314 shares outstanding)... 100.0% $ 1,092,945,600
------ ----------------
------ ----------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; authorized
1,500,000,000 shares; outstanding 844,327,314
shares............................................. $ 84,432,731
Capital surplus...................................... 944,370,133
Distribution in excess of net investment income...... (527,438)
Accumulated undistributed net realized gain on
investments........................................ 29,745,743
Unrealized appreciation on investments............... 35,070,095
Unrealized appreciation of futures contracts**....... 420,229
Unrealized depreciation of forward foreign currency
contracts (see Note 2)............................. (339,041)
Unrealized depreciation on translation of other
assets and liabilities in foreign currencies....... (226,852)
----------------
Net assets, applicable to shares outstanding......... $ 1,092,945,600
----------------
----------------
</TABLE>
* Non-income producing during period.
** The Fund had 54 March TSE 35 Index futures contracts, 72 March ALL ORDS
Index futures, 93 January IBEX futures contracts, 210 January OMX Stock
Index futures contracts, 50 March MIB 30 Index futures contracts, and 25
March DTB DAX Index futures contracts open December 31, 1997. These
contracts had a market value of $363,443 as of December 31, 1997.
*** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1997, the market value of these securities amounted to $26,982,171, or 2.5%
of net assets.
FORWARD FOREIGN CURRENCY CONTRACTS -- NOTE 2 -- OUTSTANDING AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
TOTAL AGGREGATE DELIVERY APPRECIATION
DESCRIPTION MARKET VALUE FACE VALUE DATE (DEPRECIATION)
- ------------------------------ ------------ ---------- --------- -------------
<S> <C> <C> <C> <C>
Australian Dollar (Buy) $2,973,188 $2,984,089 03/31/98 $ (10,901)
Canadian Dollar (Buy) 6,826,608 6,885,944 03/19/98 (59,336)
German Deutschemark (Buy) 5,859,768 5,963,342 03/19/98 (103,574)
German Deutschemark (Sell) 173,824 176,018 03/19/98 2,194
Italian Lira (Buy) 2,562,178 2,604,274 03/20/98 (42,096)
Italian Lira (Buy) 4,563,706 4,589,464 03/20/98 (25,758)
Swedish Krona (Buy) 6,407,329 6,536,007 01/23/98 (128,678)
Swiss Franc (Sell) 4,472,645 4,501,754 09/11/98 29,109
-------------
$(339,041)
-------------
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-23
<PAGE>
HARTFORD DIVIDEND AND GROWTH FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES MARKET
- ----------- VALUE
--------------
<C> <S> <C>
COMMON STOCKS -- 94.0%
AEROSPACE & DEFENSE -- 2.1%
208,100 Northrop Grumman Corp......... $ 23,931,500
*12,595 Raytheon Co. Class A.......... 621,070
232,500 United Technologies Corp...... 16,928,906
--------------
41,481,476
--------------
COMPUTERS & OFFICE EQUIPMENT -- 1.8%
485,500 Xerox Corp.................... 35,835,969
--------------
CONSUMER DURABLES -- 2.7%
1,199,300 Dial Corp..................... 24,960,431
213,800 General Motors Corporation.... 12,961,625
236,600 Genuine Parts Company......... 8,029,613
142,800 TRW, Inc...................... 7,621,950
--------------
53,573,619
--------------
CONSUMER NON-DURABLES -- 2.4%
312,900 Clorox Company (The).......... 24,738,656
482,300 Kimberly-Clark Corp........... 23,783,419
--------------
48,522,075
--------------
CONSUMER SERVICES -- 1.3%
442,700 Eastman Kodak Company......... 26,921,694
--------------
ELECTRONICS -- 5.3%
431,100 Amp Inc....................... 18,106,200
1,004,560 General Electric Company...... 73,709,590
271,200 Johnson Controls, Inc......... 12,949,800
--------------
104,765,590
--------------
ENERGY & SERVICES -- 8.9%
395,200 Ashland, Inc.................. 21,217,300
517,300 Chevron Corp.................. 39,832,100
254,000 Exxon Corp.................... 15,541,625
299,600 Pennzoil Co................... 20,017,025
432,000 Phillips Petroleum Co......... 21,006,000
554,000 Royal Dutch Petroleum Co.
ADR......................... 30,019,875
860,600 USX Corporation............... 29,045,250
--------------
176,679,175
--------------
FINANCIAL SERVICES -- 17.9%
432,200 Allstate Corporation (The).... 39,276,175
634,300 Citicorp...................... 80,199,306
778,900 Federal National Mortgage
Association................. 44,445,981
308,700 Marsh & McLennan Cos., Inc.... 23,017,444
1,008,500 Pacific Century Financial
Corp........................ 24,960,375
561,100 Peoples Heritage Financial
Group....................... 25,810,600
291,400 Pinnacle West Capital Corp.... 12,348,075
694,300 U.S. Bancorp.................. 77,718,206
363,900 Wachovia Corporation.......... 29,521,388
--------------
357,297,550
--------------
FOOD, BEVERAGE & TOBACCO --
8.0%
1,312,575 Flowers Industries, Inc....... 26,989,824
483,200 General Mills Co.............. 34,609,200
709,200 Interstate Bakeries........... 26,506,350
672,500 McCormick & Company, Inc...... 18,830,000
<CAPTION>
SHARES MARKET
- ----------- VALUE
--------------
<C> <S> <C>
FOOD, BEVERAGE & TOBACCO --
(CONTINUED)
1,175,300 Philip Morris Companies
Inc......................... $ 53,255,781
--------------
160,191,155
--------------
HEALTH CARE -- 11.2%
305,500 Abbott Laboratories........... 20,029,344
383,500 American Home Products
Corporation and
Subsidiaries................ 29,337,750
368,600 Bard (C.R.), Inc.............. 11,541,787
321,200 Bristol-Myers Squibb Co....... 30,393,550
309,000 Merck & Co., Inc.............. 32,831,250
1,238,200 Pharmacia & Upjohn, Inc....... 45,349,075
442,600 Warner-Lambert Co............. 54,882,400
--------------
224,365,156
--------------
INDUSTRIAL MATERIALS -- 4.7%
150,600 Aluminum Company of America... 10,598,475
45,700 BetzDearborn, Inc............. 2,790,556
114,900 BOC Group PLC SA ADR.......... 3,784,519
194,000 Calgon Carbon Corp............ 2,085,500
370,100 du Pont (E.I.) de Nemours &
Co.......................... 22,229,131
105,000 Eastman Chemical Co........... 6,254,063
*125,800 Georgia-Pacific (Timber
Group)...................... 2,854,088
125,800 Georgia-Pacific Corporation... 7,642,350
232,900 International Paper Co........ 10,043,813
181,400 Nalco Chemical Co............. 7,176,637
268,750 RPM, Inc...................... 4,098,437
253,100 Temple-Inland, Inc............ 13,240,294
--------------
92,797,863
--------------
MANUFACTURING -- 1.8%
147,400 Cooper Industries............. 7,222,600
163,100 Deere & Company............... 9,510,769
243,800 Minnesota Mining &
Manufacturing Corp.......... 20,006,837
--------------
36,740,206
--------------
MEDIA & SERVICES -- 1.6%
93,200 Cognizant Corp................ 4,153,225
438,500 Gannett Co., Inc.............. 27,104,781
--------------
31,258,006
--------------
REAL ESTATE -- 3.3%
131,900 AMB Property Corporation...... 3,313,988
27,500 Charles E. Smith Residential
Realty, Inc................. 976,250
277,200 Kimco Realty Corporation
(REIT)...................... 9,771,300
390,400 Liberty Property Trust
(SBI)....................... 11,150,800
316,000 Nationwide Health Properties
Inc. (REIT)................. 8,058,000
396,900 Security Capital Pacific Inc.
(REIT)...................... 9,624,825
473,700 Spieker Properties Inc.
(REIT)...................... 20,309,887
123,500 Sunstone Hotel Investors, Inc.
(REIT)...................... 2,130,375
--------------
65,335,425
--------------
RETAIL -- 2.9%
364,900 May Department Stores Company
(The)....................... 19,225,669
630,500 J.C. Penney Company, Inc...... 38,027,031
--------------
57,252,700
--------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-24
<PAGE>
<TABLE>
<CAPTION>
SHARES MARKET
- ----------- VALUE
--------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
TRANSPORTATION -- 0.8%
243,500 Union Pacific Corp............ $ 15,203,531
--------------
UTILITIES -- 16.8%
104,700 AT&T Corp..................... 6,412,875
265,100 Ameritech Corp................ 21,340,550
342,373 Bell Atlantic Corporation..... 31,155,943
562,200 BellSouth Corp................ 31,658,888
245,600 CINergy Corp.................. 9,409,550
329,200 DPL, Inc...................... 9,464,500
408,800 Duke Energy Corp.............. 22,637,300
486,100 Endesa SA..................... 8,840,944
252,000 GPU Inc....................... 10,615,500
403,900 MCN Energy Group Inc.......... 16,307,463
195,000 New England Electric System... 8,336,250
370,500 National Power PLC SA ADR..... 14,681,063
156,400 New Century Energies, Inc..... 7,497,425
213,000 NIPSCO Industries Inc......... 10,530,187
198,400 Northern States Power
Company..................... 11,556,800
282,500 Pacific Enterprises........... 10,629,062
177,800 PowerGen PLC SP ADR........... 9,445,625
418,100 SBC Communications Inc........ 30,625,825
205,600 SCANA Corp.................... 6,155,150
633,700 Southern Company (The)........ 16,396,987
365,700 Sprint Corp................... 21,439,162
505,800 Texas Utilities Co............ 21,022,312
--------------
336,159,361
--------------
WASTE MANAGEMENT -- 0.5%
132,500 Browning-Ferris Industries,
Inc......................... 4,902,500
215,900 Waste Management, Inc......... 5,937,250
--------------
10,839,750
--------------
Total common stocks........... $1,875,220,301
--------------
--------------
CONVERTIBLE PREFERRED STOCKS -- 4.6%
AEROSPACE & DEFENSE -- 0.9%
292,600 Loral Space & Communications,
Ltd......................... $ 17,885,175
--------------
COMMUNICATIONS EQUIPMENT --
0.5%
95,500 Worldcom, Inc. - Depository
Shares...................... 10,027,500
--------------
ENERGY & SERVICES -- 1.1%
601,900 Sun Company, Inc.............. 21,593,163
--------------
INDUSTRIAL MATERIALS -- 0.8%
290,700 Unocal Capital Trust.......... 16,170,188
--------------
MEDIA & SERVICES -- 1.1%
336,600 American Radio Systems
Corporation **.............. 21,584,475
--------------
SOFTWARE & SERVICES -- 0.2%
49,500 Miscrosoft Corporation........ 4,448,812
--------------
Total convertible preferred
stocks...................... $ 91,709,313
--------------
--------------
WARRANTS -- 0.0%
*18,794 Security Capital Group........ $ 98,668
--------------
--------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- --------------
<C> <S> <C>
SHORT-TERM SECURITIES -- 1.5%
REPURCHASE AGREEMENT -- 1.5%
$29,836,000 Interest in $1,102,287,000
joint repurchase agreement
with State Street Bank dated
12/31/97 at 6.6119%, to be
repurchased at $29,846,810
on 01/02/98; (Collateralized
by $629,353,000 U.S.
Treasury Notes 5.625% -
7.50% due 03/31/98 -
02/15/05, $204,399,000 U.S.
Treasury Bills 0.00% due
05/21/98 - 06/04/98,
$159,248,000 U.S. Treasury
Bonds 8.50% - 11.25% due
08/15/01 - 02/15/20, and
$109,287,000 U.S. Treasury
Strips (principal) 0.00% due
02/15/09)................... $ 29,836,000
--------------
--------------
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $1,514,080,865).... 94.0 % $1,875,220,301
Total convertible preferred stocks
(cost $80,569,899)......................... 4.6 91,709,313
Total warrants (cost $0)..................... 0.0 98,668
Total short-term securities (cost
$29,836,000)............................... 1.5 29,836,000
------ --------------
Total investment in securities (total cost
$1,624,486,764)............................ 100.1 1,996,864,282
Cash, receivables and other assets........... 0.4 8,136,837
Payable for investment purchased............. (0.5) (10,329,853)
Payable for Fund shares redeemed............. (0.0) (15,260)
Other liabilities............................ (0.0) (2,784)
------ --------------
Net assets (applicable to $1.952328 per share
based on 1,021,679,226 shares
outstanding)............................... 100.0 % $1,994,653,222
------ --------------
------ --------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; authorized
2,000,000,000 shares; outstanding 1,021,679,226
shares............................................. $ 102,167,923
Capital surplus...................................... 1,439,484,026
Accumulated undistributed net investment income...... 3,949,537
Accumulated undistributed net realized gain on
investments........................................ 76,674,218
Unrealized appreciation of investments............... 372,377,518
--------------
Net assets, applicable to shares outstanding......... $1,994,653,222
--------------
--------------
</TABLE>
* Non-income producing during period.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1997, the market value of these securities amounted to $21,584,475 or 1.1% of
net assets.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-25
<PAGE>
HARTFORD INTERNATIONAL ADVISERS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------------ -------------
<C> <S> <C>
COMMON STOCKS -- 49.9%
ARGENTINA -- 0.5%
15,600 Telefonica de Argentina SA ADR.......... $ 581,100
69,000 Banco Galicia y Buenos Aires............ 441,681
-------------
1,022,781
-------------
AUSTRALIA -- 1.3%
63,750 Amcor Ltd............................... 280,377
94,000 Australia & New Zealand Banking Group
Ltd................................... 621,047
72,433 Boral Ltd............................... 183,116
56,933 Broken Hill Proprietary Co. Ltd......... 528,614
329,367 Goodman Fielder Ltd..................... 523,635
*38,407 ICI Australia Ltd. ***.................. 269,016
48,000 News Corporation Ltd.................... 264,901
-------------
2,670,706
-------------
AUSTRIA -- 0.4%
5,790 OMV AG.................................. 800,935
-------------
BRAZIL -- 1.3%
13,600 Aracruz Cellulose S.A. ADR.............. 195,500
6,111,500 Cia Energetica de Brazilia.............. 265,539
*179,700 Cia Riograndese Mineracao............... 221,401
6,875 Electrobas On ADR....................... 170,948
2,251,000 Petroleo Brasileiro..................... 526,434
1,730 Telebras SA............................. 201,437
993,000 Tele de Sao Paulo SA ADR................ 264,253
7,406,000 Telecomunicacoes Brasileiras SA......... 753,195
-------------
2,598,707
-------------
CANADA -- 1.7%
19,500 Alcan Aluminum Ltd...................... 536,890
22,500 Canadian Imperial Bank of Commerce...... 701,249
9,600 Canadian National Railway Co............ 453,600
46,900 Canadian Pacific Ltd.................... 1,278,025
25,300 Canwest Global Communications Corp.
Class A (non-voting).................. 455,400
-------------
3,425,164
-------------
CHILE -- 0.1%
12,200 Embotelladora Andina ADR Class B........ 237,138
-------------
CHINA -- 0.1%
*12,200 China Southern Airlines ADR............. 160,888
-------------
DENMARK -- 1.1%
30,600 UniDanmark AS A Shares (Reg.)........... 2,247,894
-------------
FINLAND -- 0.9%
40,000 Kesko................................... 633,185
59,000 Metsa-Serla OYJ Class B Shares.......... 460,473
6,700 Nokia OYJ Class A Shares................ 476,156
18,000 Rauma OYJ............................... 280,967
-------------
1,850,781
-------------
FRANCE -- 5.2%
4,800 Assurance Generale ***.................. 254,447
17,490 Assurance Generale de France............ 927,142
23,650 Banque Nationale de Paris ***........... 1,257,614
5,420 Compagnie de Saint Gobain............... 770,314
8,960 Credit Commerciale de France............ 614,376
21,660 Havas SA................................ 1,559,009
5,620 Peugeot Citroen SA...................... 709,056
42,831 Rhone-Poulenc SA Class A................ 1,919,465
<CAPTION>
SHARES MARKET
- ------------ VALUE
-------------
<C> <S> <C>
FRANCE -- (CONTINUED)
6,777 Societe Generale........................ $ 923,748
10,470 Societe Nationale Elf Aquitaine......... 1,218,279
5,989 Total SA Class B Shares................. 652,075
-------------
10,805,525
-------------
GERMANY -- 3.5%
57,200 Bayer AG................................ 2,123,475
16,500 Degussa AG.............................. 816,721
15,100 Deutsche Lufthansa AG (Reg)............. 283,853
3,015 Karstadt AG............................. 1,042,984
3,400 M.A.N. AG............................... 982,346
2,690 Mannesmann AG........................... 1,350,952
*34,100 Metallgesellschaft AG................... 623,951
-------------
7,224,282
-------------
HONG KONG -- 0.8%
127,000 Hutchison Whampoa Ltd................... 796,591
79,000 Hysan Development Co. Ltd............... 157,525
94,000 New World Development Co., Ltd.......... 325,131
39,000 Sun Hung Kai Properties Ltd............. 271,803
1,268,000 Tingyi (Cayman Islands) Holding Corp.... 165,286
-------------
1,716,336
-------------
INDIA -- 0.1%
4,300 Ranbaxy Laboratories Ltd. GDR........... 110,187
8,600 State Bank of India GDR***.............. 149,425
-------------
259,612
-------------
INDONESIA -- 0.1%
478,000 PT Kalbe Farma (Foreign Registered)..... 84,816
8,600 State Bank of India GDR***.............. 149,425
-------------
234,241
-------------
IRELAND -- 0.6%
440,084 Smurfit (Jefferson) Group............... 1,223,754
-------------
ITALY -- 1.6%
41,900 Arnoldo Mondadori Editore S.p.A......... 329,418
109,900 Instituto Banco San Paolo Tori.......... 1,050,517
313,944 Telecom Italia S.p.A.................... 2,006,550
-------------
3,386,485
-------------
JAPAN -- 9.0%
1,000,000 Aisin Seiki Co. Ltd..................... 1,038,293
65,000 Bank of Tokyo-Mitsubishi Ltd............ 899,855
69,000 Daiwa Securities Co. Ltd................ 238,807
78,000 Eisai Co. Ltd........................... 1,193,806
36,000 Exedy Corporation....................... 273,833
37,000 Fuji Machine Manufacturing Co........... 896,393
33,000 Fujisawa Pharmaceutical Co. Ltd......... 289,338
12,000 Fukuda Denshi........................... 122,749
58,000 Hitachi Ltd............................. 414,856
139,000 JGC Corp................................ 293,991
24,000 Mabuchi Motor Co. Ltd................... 1,223,801
43,000 Maruichi Steel Tube Ltd................. 525,838
20,600 Matsumotokiyoshi........................ 792,179
88,000 Matsushita Electric Industrial Co....... 1,292,713
*363,000 Mazda Motor Corporation................. 865,475
5,800 Meiwa Estate Co. Ltd.................... 43,671
22,000 Murata Manufacturing Co., Ltd........... 554,987
60,500 NGK Spark Plug Co., Ltd................. 344,329
32,000 Namco Ltd............................... 932,771
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-26
<PAGE>
<TABLE>
<CAPTION>
SHARES MARKET
- ------------ VALUE
-------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
JAPAN -- (CONTINUED)
20,000 Nomura Securities....................... $ 267,648
125,000 Okumura................................. 298,029
5,900 Otsuka Kago, Ltd........................ 213,273
2,000 Rohm Company Ltd........................ 204,582
191,000 Sakura Bank Ltd......................... 547,934
33,000 Sanwa Bank Ltd.......................... 335,023
500 Sawako Corporation...................... 3,307
18,700 Shimachu................................ 294,837
10,000 Sony Corporation........................ 892,162
42,300 Sony Music Entertainment (Japan),
Inc................................... 1,561,593
19,000 Square Co. Ltd.......................... 528,991
173,000 Sumitomo Rubber Industries Ltd.......... 733,135
48,000 Toyo Ink Manufacturing Co. Ltd.......... 84,909
82,000 Yamato Kogyo Co. Ltd.................... 495,074
-------------
18,698,182
-------------
MALAYSIA -- 0.0%
106,000 Renong Berhad........................... 49,019
32,750 Sime Darby Berhad....................... 31,468
-------------
80,487
-------------
MEXICO -- 0.9%
23,400 Grupo Televisa SA....................... 455,234
222,000 Kimberly-Clark de Mexico SA de CV Class
A..................................... 1,051,507
7,600 Panamerican Beverages Inc. Class A...... 247,950
-------------
1,754,691
-------------
NETHERLANDS -- 1.9%
4,960 AKZO Nobel NV........................... 855,364
39,691 ING Groep NV............................ 1,672,043
20,233 Polygram NV............................. 968,121
6,400 Unilever NV CVA......................... 394,628
-------------
3,890,156
-------------
NEW ZEALAND -- 0.4%
93,600 Air New Zealand Ltd. Class B............ 187,505
159,016 Brierley Investments Ltd................ 113,570
132,000 Carter Holt Harvey Ltd.................. 203,879
9,600 Telecom Corp. New Zealand ADR........... 372,001
-------------
876,955
-------------
NORWAY -- 0.7%
89,200 Saga Petroleum AS Class A Shares........ 1,536,639
-------------
PHILIPPINES -- 0.2%
99,000 Manila Electric Co. Class B............. 332,492
25,200 Metropolitan Bank & Trust............... 172,110
-------------
504,602
-------------
SINGAPORE -- 0.6%
70,250 Keppel Corp. Ltd........................ 201,794
60,000 Keppel Fels Ltd......................... 167,365
55,000 Keppel Land Ltd......................... 75,730
180,000 Overseas Union Bank (Foreign Reg)....... 689,046
-------------
1,133,935
-------------
SPAIN -- 1.3%
16,425 Banco Popular Espanol................... 1,147,694
63,400 Endesa S.A.............................. 1,125,195
5,500 Telefonica de Espana SA................. 500,844
-------------
2,773,733
-------------
<CAPTION>
SHARES MARKET
- ------------ VALUE
-------------
<C> <S> <C>
SWEDEN -- 2.2%
420,000 Nordbanken Holding AB................... $ 2,376,751
51,400 Pharmacia & Upjohn DR................... 1,891,620
17,420 Sparbanken Sverige AB-A Shares.......... 396,290
-------------
4,664,661
-------------
SWITZERLAND -- 2.8%
4,080 Ciba Specialty Chemicals................ 486,730
2,050 Holderbank Financial Glarus B........... 1,675,361
1,015 Nestle SA (Reg)......................... 1,523,316
215 Roche Holdings AG Genusss............... 2,138,132
-------------
5,823,539
-------------
THAILAND -- 0.1%
152,217 Land & House Co. Ltd. (Foreign Reg)..... 30,349
7,324 Siam City Cement Co. (Foreign Reg)...... 7,606
1,567 Siam Commercial Bank (Foreign Reg)...... 1,790
55,900 Thai Farmers Bank (Foreign Reg)......... 101,587
-------------
141,332
-------------
UNITED KINGDOM -- 10.5%
42,467 Allied Irish Banks PLC.................. 410,517
146,900 Associated British Foods PLC............ 1,259,307
76,600 Bank of Scotland........................ 694,468
82,700 Bass PLC................................ 1,273,660
*222,100 Billiton PLC............................ 567,352
88,550 BOC Group PLC........................... 1,466,475
107,900 British Petroleum Co. PLC............... 1,421,199
214,000 BTR PLC................................. 656,697
71,700 Burmah Castrol PLC...................... 1,247,000
146,000 Carlton Communications PLC.............. 1,124,271
263,069 Cookson Group PLC....................... 846,230
134,000 Diageo PLC.............................. 1,231,403
51,300 HSBC Holdings PLC....................... 1,326,068
94,000 Johnson Matthey PLC..................... 837,526
84,697 PowerGen PLC............................ 1,107,917
144,000 Rank Group PLC.......................... 826,321
83,620 Reckitt & Colman PLC.................... 1,314,659
84,469 Royal & Sun Alliance Insurance Group.... 847,807
98,200 Royal Bank of Scotland Group............ 1,257,081
60,900 Zeneca Group PLC........................ 2,144,387
-------------
21,860,345
-------------
Total common stocks..................... $ 103,455,061
-------------
-------------
PREFERRED STOCKS -- 1.1%
FINLAND -- 0.3%
9,700 Nokia Corp.-Sponsored ADS............... $ 679,000
-------------
GERMANY -- 0.8%
8,860 Hornbach Holding AG..................... 611,020
*21,320 Prosieben Media AG...................... 978,230
-------------
1,589,250
-------------
Total preferred stocks.................. $ 2,268,250
-------------
-------------
<CAPTION>
NOMINAL
AMOUNT
- ------------
<C> <S> <C>
OPTIONS -- 0.0%
$ 1,110,000 Brazilian Real Foreign Currency......... $ 2,220
-------------
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-27
<PAGE>
HARTFORD INTERNATIONAL ADVISERS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ------------ -------------
<C> <S> <C>
CORPORATE BONDS -- 0.7%
FOOD, BEVERAGE & TOBACCO -- 0.7%
Sara Lee Corp.
$ 1,400,000 4.75% due 10/22/98.................... $ 1,388,666
-------------
-------------
FOREIGN CORPORATE BONDS -- 0.5%
FRANCE -- 0.1%
Electricite de France
32,000,000 4.75% due 12/05/01.................... 279,339
-------------
GERMANY -- 0.4%
Deutsche Hypobank Frankfurt
1,500,000 4.50% due 08/23/02.................... 819,308
-------------
Total foreign corporate bonds........... $ 1,098,647
-------------
-------------
FOREIGN GOVERNMENT BONDS -- 27.2%
AUSTRALIA -- 2.3%
Australia Commonwealth
6,250,000 9.00% due 09/15/04.................... 4,767,348
-------------
AUSTRIA -- 0.2%
Austria Republic
50,000,000 6.25% due 10/16/03.................... 485,979
-------------
CANADA -- 1.5%
Canada Government
250,000 8.00% due 09/01/27.................... 223,896
3,530,000 7.00% due 12/01/06.................... 2,704,349
Provence de Quebec
1,660,000 6.88% due 04/22/04.................... 298,702
-------------
3,226,947
-------------
DENMARK -- 1.2%
Denmark Kingdom
12,000,000 9.00% due 11/15/00.................... 1,944,091
3,000,000 7.00% due 12/15/04.................... 477,567
-------------
2,421,658
-------------
FRANCE -- 1.0%
France O.A.T.
1,600,000 8.50% due 04/25/03.................... 310,273
10,000,000 6.00% due 10/25/25.................... 1,683,882
-------------
1,994,155
-------------
GERMANY -- 7.6%
Deutschland Republic
2,750,000 6.88% due 05/12/05.................... 1,687,126
3,430,000 6.25% due 01/04/24.................... 2,004,346
German Federal Unity
5,200,000 7.25% due 10/21/02.................... 3,189,623
Treuhandanstalt
14,300,000 7.38% due 12/02/02.................... 8,823,159
-------------
15,704,254
-------------
ICELAND -- 0.3%
Iceland Republic
381,000 8.75% due 05/12/03.................... 673,132
-------------
ITALY -- 4.2%
Italy BTPS
10,900,000,000 6.25% due 03/01/02.................... 6,436,439
Italy Republic
240,000,000 5.00% due 12/15/04.................... 2,235,791
-------------
8,672,230
-------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ------------ -------------
<C> <S> <C>
JAPAN -- 0.6%
Japan Government #17
110,000,000 6.60% due 09/20/11.................... $ 1,279,600
-------------
NETHERLANDS -- 0.2%
Netherlands Government
705,000 7.00% due 06/15/05.................... 385,151
-------------
PORTUGAL -- 0.4%
Portugal Republic
90,000,000 4.50% due 03/15/02.................... 782,433
-------------
SPAIN -- 1.2%
Spanish Government
395,000,000 5.25% due 01/31/03.................... 2,595,611
-------------
SWEDEN -- 3.1%
Sweden Kingdom
35,000,000 10.25% due 05/05/00................... 4,872,692
10,000,000 9.00% due 04/20/09.................... 1,560,087
-------------
6,432,779
-------------
UNITED KINGDOM -- 3.4%
FFRESH MB 1-A2 ***
590,272 11.13% due 10/05/58................... 1,319,590
United Kingdom Treasury Gilt
1,370,000 8.75% due 08/25/17.................... 2,871,994
900,000 7.75% due 09/08/06.................... 1,613,214
750,000 6.75% due 11/26/04.................... 1,256,805
-------------
7,061,603
-------------
Total foreign government bonds.......... $ 56,482,880
-------------
-------------
U.S. TREASURIES & FEDERAL AGENCIES -- 0.9%
U.S. TREASURY NOTE -- 0.6%
$ 1,300,000 5.875% due 07/31/99................... $ 1,303,657
AGENCIES -- 0.3%
FNMA-Global Medium-Term Note
820,000 6.50% due 07/10/02.................... 547,028
-------------
Total U.S. treasuries & federal
agencies.............................. $ 1,850,685
-------------
-------------
SHORT-TERM SECURITIES -- 18.2%
U.S. TREASURY BILL -- 0.1%
200,000 5.15% due 02/12/98.................... $ 198,799
-------------
CERTIFICATE OF DEPOSIT -- 0.3%
Bank of Nova Scotia (NY)
700,000 5.89% due 09/16/98.................... 699,709
-------------
COMMERCIAL PAPER -- 4.3%
Associates Corporation of North America
1,500,000 5.58% due 02/24/28.................... 1,487,445
Beneficial Corp.
1,500,000 5.58% due 02/24/98.................... 1,487,445
General Electric Capital Corp.
1,500,000 5.67% due 03/16/98.................... 1,482,517
General Motors Acceptance Corp.
1,500,000 5.74% due 03/20/98.................... 1,481,345
New Center Asset Trust
1,500,000 5.78% due 03/16/98.................... 1,482,178
Nationsbank N.A.
1,500,000 5.67% due 03/20/98.................... 1,481,572
-------------
8,902,502
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-28
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ------------ -------------
<C> <S> <C>
SHORT-TERM SECURITIES -- (CONTINUED)
NON-CONVERTIBLE CORPORATE NOTE -- 0.4%
Westpac Capital Corp.
$ 750,000 6.00% due 12/11/98.................... $ 750,000
-------------
REPURCHASE AGREEMENT -- 13.1%
27,281,000 Interest in $1,102,287,000 joint
repurchase agreement with State Street
Bank dated 12/31/97 at 6.6119%, to be
repurchased at $27,291,021 on
01/02/98; (Collateralized by
$629,353,000 U.S. Treasury Notes
5.625% - 7.50% due 03/31/98 -
02/15/05, $204,399,000 U.S. Treasury
Bills 0.00% due 05/21/98 - 06/04/98,
$159,248,000 U.S. Treasury Bonds 8.50%
- 11.25% due 08/15/01 - 02/15/20 and
$109,287,000 U.S. Treasury Strips
(principal) 0.00% due 02/15/09)....... 27,281,000
-------------
Total short-term securities............. $ 37,832,010
-------------
-------------
</TABLE>
<TABLE>
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $103,557,606)...... 49.9 % $ 103,455,061
Total preferred stocks (cost $2,040,322)..... 1.1 2,268,250
Total options (cost $6,549).................. 0.0 2,220
Total corporate bonds (cost $1,387,144)...... 0.7 1,388,666
Total foreign corporate bonds (cost
$1,144,883)................................ 0.5 1,098,647
Total foreign government bonds (cost
$57,146,596)............................... 27.2 56,482,880
Total U.S. treasuries & federal agencies
(cost $1,914,605).......................... 0.9 1,850,685
Total short-term securities (cost
$37,832,010)............................... 18.2 37,832,010
------ --------------
Total investment in securities (total cost
$205,029,715).............................. 98.5 204,378,419
Cash, receivables and other assets........... 4.5 9,298,180
Payable for securities purchased............. (2.7) (5,575,235)
Payable for Fund shares redeemed............. (0.0) (2,481)
Other liabilities............................ (0.30) (517,359)
------ --------------
Net assets (applicable to $1.174791 per share
based on 176,696,582 shares outstanding)... 100.0% $ 207,581,524
------ --------------
------ --------------
<CAPTION>
MARKET
VALUE
--------------
<S> <C> <C>
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; authorized
750,000,000 shares; outstanding 176,696,582
shares............................................. $ 17,669,658
Capital surplus...................................... 185,262,135
Accumulated undistributed net investment income...... 547,755
Accumulated undistributed net realized gain on
investments........................................ 2,496,765
Unrealized depreciation of investments............... (651,296)
Unrealized appreciation of futures contracts**....... 243,955
Unrealized appreciation of forward foreign currency
contracts (Note 2)................................. 1,940,087
Unrealized appreciation of other assets and
liabilities in foreign currencies.................. 72,465
--------------
Net assets, applicable to shares outstanding......... $ 207,581,524
--------------
--------------
</TABLE>
* Non-income producing during period.
** The Fund had 4 March TSE 35 Index futures contracts, 9 March MATIF CAC Index
futures contracts, 17 March ALL ORDS Index futures, 16 March LIF FTSE 100
Index futures contracts, 25 January IBEX futures contracts, 37 January OMX
Stock Index futures contracts, 7 March MIB 30 Index futures contracts, 6
March DTB DAX Index futures contracts, 5 March TSE 10 year JGB Index futures
contracts, 28 March LIF DM BUND Index futures contracts, 34 March DTB MED
BUND Index futures contracts, and 14 March TSE TOPIX Index futures contracts
open as of December 31, 1997. These contracts had a market value of $239,225
as of December 31, 1997.
*** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1997, the market value of these securities amounted to $1,930,502 or 0.9% of
net assets.
FORWARD FOREIGN CURRENCY CONTRACTS -- NOTE 2 -- OUTSTANDING AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
TOTAL AGGREGATE DELIVERY APPRECIATION
DESCRIPTION MARKET VALUE FACE VALUE DATE (DEPRECIATION)
- ------------------------------ ------------ ----------- --------- -------------
<S> <C> <C> <C> <C>
Australian Dollars (Buy) $ 702,003 $ 704,576 03/31/98 $ (2,573)
Australian Dollars (Sell) 2,069,572 2,120,775 01/30/98 51,203
Australian Dollars (Sell) 1,898,899 1,969,986 01/30/98 71,087
Australian Dollars (Sell) 1,317,829 1,403,031 01/30/98 85,202
British Pounds (Buy) 693,315 703,474 01/30/98 (10,159)
British Pounds (Buy) 163,307 166,068 01/30/98 (2,761)
British Pounds (Buy) 3,828,018 3,930,710 01/30/98 (102,692)
British Pounds (Buy) 177,436 176,040 01/30/98 1,396
British Pounds (Buy) 253,011 254,100 01/30/98 (1,089)
British Pounds (Buy) 3,438,442 3,458,763 03/20/98 (20,321)
British Pounds (Sell) 2,527,693 2,587,916 01/23/98 60,223
British Pounds (Sell) 10,802,241 10,967,758 01/30/98 165,517
British Pounds (Sell) 1,021,900 1,032,862 01/30/98 10,962
British Pounds (Sell) 436,197 447,368 01/30/98 11,171
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-29
<PAGE>
HARTFORD INTERNATIONAL ADVISERS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
TOTAL AGGREGATE DELIVERY APPRECIATION
DESCRIPTION MARKET VALUE FACE VALUE DATE (DEPRECIATION)
- ------------------------------ ------------ ----------- --------- -------------
British Pounds (Sell) $ 184,665 $ 188,776 01/30/98 $ 4,111
<S> <C> <C> <C> <C>
Canadian Dollars (Buy) 2,022,393 2,038,297 02/02/98 (15,904)
Canadian Dollars (Buy) 505,675 510,070 03/19/98 (4,395)
Canadian Dollars (Sell) 210,622 212,496 01/30/98 1,874
Canadian Dollars (Sell) 2,690,505 2,709,655 01/30/98 19,150
Danish Kroner (Sell) 1,941,342 2,020,113 01/30/98 78,771
Danish Kroner (Sell) 469,618 488,146 01/30/98 18,528
French Francs (Buy) 889,597 894,746 03/31/98 (5,149)
French Francs (Sell) 2,248,972 2,323,316 01/30/98 74,344
French Francs (Sell) 12,037 12,392 01/30/98 355
German Deutschemarks (Buy) 1,875,126 1,908,269 03/19/98 (33,143)
German Deutschemarks (Buy) 6,611,430 6,639,648 09/11/98 (28,218)
German Deutschemarks (Buy) 898,357 909,339 01/30/98 (10,982)
German Deutschemarks (Buy) 277,872 279,004 09/11/98 (1,132)
German Deutschemarks (Sell) 695,759 725,007 01/20/98 29,248
German Deutschemarks (Sell) 1,397,083 1,455,224 01/20/98 58,141
German Deutschemarks (Sell) 723,586 738,322 01/20/98 14,736
German Deutschemarks (Sell) 723,589 734,837 01/20/98 11,248
German Deutschemarks (Sell) 246,728 257,120 01/30/98 10,392
German Deutschemarks (Sell) 10,447,786 10,848,808 01/30/98 401,022
German Deutschemarks (Sell) 835,422 869,061 01/30/98 33,639
German Deutschemarks (Sell) 980,228 1,015,873 01/30/98 35,645
German Deutschemarks (Sell) 3,341,688 3,462,204 01/30/98 120,516
German Deutschemarks (Sell) 1,615,149 1,653,694 01/30/98 38,545
German Deutschemarks (Sell) 1,615,149 1,659,371 01/30/98 44,222
German Deutschemarks (Sell) 813,144 828,604 01/30/98 15,460
German Deutschemarks (Sell) 47,341 48,137 01/30/98 796
German Deutschemarks (Sell) 1,113,896 1,127,078 01/30/98 13,182
German Deutschemarks (Sell) 580,897 582,682 01/30/98 1,785
German Deutschemarks (Sell) 510,499 516,937 03/19/98 6,438
Italian Lira (Buy) 943,960 959,469 03/20/98 (15,509)
Italian Lira (Sell) 523,430 544,224 01/30/98 20,794
Italian Lira (Sell) 5,823,809 6,028,429 01/30/98 204,620
Japanese Yen (Buy) 16,893 17,146 01/30/98 (253)
Japanese Yen (Sell) 1,553,559 1,702,171 01/30/98 148,612
Japanese Yen (Sell) 2,242,187 2,272,374 01/30/98 30,187
Netherlands Guilders (Sell) 380,166 396,392 01/30/98 16,226
Spanish Pesetas (Buy) 1,168,844 1,187,950 01/16/98 (19,106)
Spanish Pesetas (Sell) 2,559,262 2,658,051 01/30/98 98,789
Swedish Krona (Buy) 1,128,910 1,151,582 01/23/98 (22,672)
Swedish Krona (Buy) 1,612,273 1,651,484 01/30/98 (39,211)
Swedish Krona (Buy) 1,110,394 1,125,742 01/30/98 (15,348)
Swedish Krona (Buy) 1,606,404 1,657,160 01/30/98 (50,756)
Swedish Krona (Sell) 6,417,903 6,712,566 01/30/98 294,663
Swiss Francs (Sell) 6,702,045 6,739,468 09/11/98 37,423
Swiss Francs (Sell) 281,759 282,996 09/11/98 1,237
-------------
$ 1,940,087
-------------
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-30
<PAGE>
HARTFORD SMALL COMPANY FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ----------- -------------
<C> <S> <C>
COMMON STOCKS -- 96.7%
AEROSPACE & DEFENSE -- 5.5%
*210,700 Howmet International, Inc............... $ 3,147,331
*150,000 Oregon Mattallurgical Corporation....... 5,006,250
56,500 Precision Castparts Corporation......... 3,407,656
-------------
11,561,237
-------------
BUSINESS SERVICES -- 2.2%
*238,750 U.S. Office Products Company............ 4,685,469
-------------
COMMUNICATION EQUIPMENT -- 9.0%
*198,200 Corsair Communications, Inc............. 3,220,750
237,000 ECI Telecommunications.................. 6,043,500
*322,100 EIS International, Inc.................. 1,771,550
*53,000 Excel Switching Corporation............. 947,375
*50,600 Gilat Satellite Network................. 1,448,425
*12,900 MMC Networks, Inc....................... 219,300
*25,000 Natural MicroSystems Corporation........ 1,162,500
*95,000 RCN Corporation......................... 3,253,750
*131,300 Transwitch Corp......................... 984,750
-------------
19,051,900
-------------
COMPUTER & OFFICE
EQUIPMENT -- 1.6%
*23,700 Qlogic Corporation...................... 699,150
50,000 Symbol Technologies, Inc................ 1,887,500
*50,000 Western Digital Corporation............. 803,125
-------------
3,389,775
-------------
CONSUMER SERVICES -- 0.9%
*61,200 Cheesecake Factory, Inc. (The).......... 1,866,600
-------------
ELECTRONIC -- 8.0%
*200,000 Cypress Semiconductor Corporation....... 1,700,000
*78,700 Electronic Imaging, Inc................. 1,308,388
*67,800 International Manufacturing Services,
Inc................................... 491,550
*81,500 Lattice Semiconductor Corporation....... 3,861,063
*75,000 PMC-Sierra, Inc......................... 2,325,000
38,000 Phillips N.V. ADR....................... 2,299,000
*34,000 SCI Systems, Inc........................ 1,481,125
*155,000 Unitrode Corporation.................... 3,332,500
-------------
16,798,626
-------------
ENERGY & SERVICES -- 2.9%
68,100 Coflexip ADR............................ 3,779,550
60,000 Pogo Producing Company.................. 1,770,000
23,700 Teekay Shipping Corporation............. 795,431
-------------
6,344,981
-------------
FINANCIAL SERVICES -- 20.3%
120,000 Ambac Financial Group, Inc.............. 5,520,000
52,400 Finova Group, Inc. (The)................ 2,603,625
*240,500 FIRSTPLUS Financial Group, Inc.......... 9,229,188
*64,900 ITLA Capital Corporation................ 1,249,325
*218,100 Imperial Credit Industries, Inc......... 4,471,050
*34,400 Investment Technology Group, Inc........ 963,200
81,800 Jefferies Group Inc..................... 3,348,688
100,000 Legg Mason, Inc......................... 5,593,750
*241,300 Long Beach Financial Corporation........ 2,805,113
53,000 Long Island Bancorp, Inc................ 2,630,125
<CAPTION>
SHARES MARKET
- ----------- VALUE
-------------
<C> <S> <C>
FINANCIAL SERVICES -- (CONTINUED)
3,100 Pioneer Group, Inc. (The)............... $ 87,187
53,350 Reinsurance Group of America, Inc....... 2,270,709
117,390 Resource Bancshares Mortgage Group,
Inc................................... 1,914,924
-------------
42,686,884
-------------
FOOD, BEVERAGE & TOBACCO -- 2.7%
*126,200 General Cigar Holdings Inc.............. 2,689,638
*24,400 II Fornaio (America) Corporation........ 362,950
*49,700 International Home Foods, Inc........... 1,391,600
*27,100 Robert Mondavi Corporation (The)........ 1,321,125
-------------
5,765,313
-------------
HEALTH CARE -- 10.7%
119,000 Allergan, Inc........................... 3,993,937
*117,500 Heska Corporation....................... 1,454,063
48,500 ICN Pharmaceuticals, Inc................ 2,367,406
*97,500 IDX Systems Corporation................. 3,607,500
*45,000 LAM Research Corporation................ 1,316,250
89,100 Pharmacia & Upjohn, Inc................. 3,263,288
*154,000 Phycor, Inc............................. 4,158,000
*254,900 Roberts Pharmaceutical Corporation...... 2,437,481
-------------
22,597,925
-------------
INDUSTRIAL MATERIALS -- 2.8%
*250,000 American Pad & Paper Company of
Delaware, Inc......................... 2,406,250
*117,000 Noble Drilling Corporation.............. 3,583,125
-------------
5,989,375
-------------
MANUFACTURING -- 3.8%
*94,000 Chicago Miniature Lamp, Inc............. 3,172,500
*90,000 Covance, Inc............................ 1,788,750
*280,000 Miller Industries, Inc.................. 3,010,000
-------------
7,971,250
-------------
MEDIA & SERVICES -- 1.7%
*83,100 ADC Telecommucations, Inc............... 3,469,425
-------------
RETAIL -- 5.5%
*55,000 CompUSA, Inc............................ 1,705,000
*125,000 Eagle Hardware & Garden, Inc............ 2,421,875
*193,400 Finish Line, Inc. (The) Class A......... 2,538,375
*100,600 Gadzooks Inc............................ 2,112,600
*363,300 PETsMART, Inc........................... 2,633,925
-------------
11,411,775
-------------
SOFTWARE & SERVICES -- 15.3%
*51,300 Ceridian Corporation.................... 2,350,181
*81,000 Cognos Corporation...................... 1,863,000
*89,000 Electronic Arts, Inc.................... 3,365,312
*222,200 Endosonics Corporation.................. 2,388,650
*100,000 Geotel Communications Corporation....... 1,562,500
*282,500 Learning Company, Inc. (The)............ 4,537,656
*120,000 Peerless Systems Corporation............ 1,545,000
*60,000 Safeguard Scientifics, Inc.............. 1,882,500
*142,800 Security Dynamics Technologies, Inc..... 5,105,100
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-31
<PAGE>
HARTFORD SMALL COMPANY FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES MARKET
- ----------- VALUE
-------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
SOFTWARE & SERVICES -- (CONTINUED)
*141,900 Simulation Sciences Inc................. $ 2,270,400
*68,200 Splash Technology Holdings, Inc......... 1,534,500
247,800 System Software Associates, Inc......... 2,168,250
*116,400 Xylan Corporation....................... 1,760,550
-------------
32,333,599
-------------
TRANSPORTATION -- 2.6%
*5,400 Robinson (C.H.) Worldwide, Inc.......... 120,825
*50,100 Jevic Transporation, Inc................ 807,863
*129,000 M.S. Carriers, Inc...................... 3,208,875
60,200 Werner Enterprises Inc.................. 1,234,100
-------------
5,371,663
-------------
UTILITIES -- 1.2%
*110,000 Calpine Corporation..................... 1,636,250
*45,000 Tel-Save Holdings, Inc.................. 894,375
-------------
2,530,625
-------------
Total common stocks..................... $203,826,422
-------------
-------------
CONVERTIBLE PREFERRED STOCKS -- 0.2%
CONSUMER SERVICES
*58,060 SGW Holdings Corporation**.............. $ 509,993
-------------
-------------
<CAPTION>
PRINCIPAL
AMOUNT
- -----------
<C> <S> <C>
SHORT-TERM SECURITIES -- 1.5%
REPURCHASE AGREEMENT -- 1.3%
$ 2,639,000 Interest in $1,102,287,000 joint
repurchase agreement with State Street
Bank dated 12/31/97 at 6.6119%, to be
repurchased at $2,639,969 on 01/02/98;
(Collateralized by $629,353,000 U.S.
Treasury Notes 5.625% - 7.50% due
03/31/98 - 02/15/05, $204,399,000 U.S.
Treasury Bills 0.00% due 05/21/98 -
06/04/98, $159,248,000 U.S. Treasury
Bonds 8.50% - 11.25% due 08/15/01 -
02/15/20 and $109,287,000 U.S.
Treasury Strips (principal) 0.00% due
02/15/09)............................. $ 2,639,000
-------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- -------------
<C> <S> <C>
SHORT-TERM SECURITIES -- (CONTINUED)
U.S. TREASURY BILLS -- 0.2%
$ 150,000 5.15% due 02/12/98.................... $ 149,100
165,000 5.84% due 05/28/98.................... 161,284
35,000 5.02% due 03/12/98.................... 34,658
85,000 4.97% due 01/08/98.................... 84,918
20,000 5.18% due 03/12/98.................... 19,799
-------------
449,759
-------------
Total short-term securities............. $ 3,088,759
-------------
-------------
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $202,243,931)...... 96.7 % $ 203,826,422
Total convertible preferred stocks (cost
$599,992).................................. 0.2 509,993
Total short-term securities (cost
$3,088,759)................................ 1.5 3,088,759
------ --------------
Total investment in securities
(total cost $205,932,682).................. 98.4 207,425,174
Cash, receivables and other assets........... 3.6 7,491,786
Payable for securities purchased............. (2.0) (4,139,243)
Payable for Fund shares redeemed............. 0.0 0
Other liabilities............................ (0.0) (8,283)
------ --------------
Net assets (applicable to $1.202211 per share
based on 175,318,154 shares outstanding)... 100.0 % $ 210,769,434
------ --------------
------ --------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; authorized
750,000,000 shares; outstanding 175,318,154
shares............................................. $ 17,531,815
Capital surplus...................................... 188,890,755
Accumulated undistributed net investment income...... 46
Accumulated undistributed net realized gain on
investments........................................ 2,854,326
Unrealized appreciation of investments............... 1,492,492
--------------
Net assets, applicable to shares outstanding......... $ 210,769,434
--------------
--------------
</TABLE>
* Non-income producing during period.
** Restricted security (See Note 2).
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-32
<PAGE>
HARTFORD MIDCAP FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
COMMON STOCKS -- 98.4%
AEROSPACE & DEFENSE -- 1.9%
*24,355 Loral Space & Communications Ltd........ $ 522,110
------------
COMMUNICATION EQUIPMENT -- 2.4%
*6,210 Ciena Corporation....................... 379,586
7,435 General Cable Corporation............... 269,054
------------
648,640
------------
COMPUTERS & OFFICE EQUIPMENT -- 2.9%
*8,670 Adaptec, Inc............................ 321,874
*16,950 EMC Corporation......................... 465,065
------------
786,939
------------
CONSUMER NON-DURABLES -- 3.4%
*15,695 Polo Ralph Lauren Corporation........... 381,585
8,230 Sunbeam Corporation..................... 346,689
5,265 UNIFI, Inc.............................. 214,220
------------
942,494
------------
CONSUMER SERVICES -- 7.0%
*6,615 Avis Rent a Car, Inc.................... 211,267
12,830 Hertz Corporation (The)................. 516,408
*15,625 Host Marriott Corporation............... 306,641
*25,685 Mirage Resorts, Incorporated............ 584,334
*8,205 Starbucks Corporation................... 314,867
------------
1,933,517
------------
ELECTRONICS -- 6.4%
*26,010 Analog Devices, Inc..................... 720,152
4,165 Linear Technology Corporation........... 240,008
*5,225 SCI Systems, Inc........................ 227,614
*7,530 Solectron Corporation................... 312,966
*7,425 Xilinx, Inc............................. 260,339
------------
1,761,079
------------
ENERGY & SERVICES -- 5.1%
7,790 Baker Hughes, Inc....................... 339,839
5,935 Coflexip ADR............................ 329,393
6,805 Transocean Offshore, Inc................ 327,916
*5,640 Western Atlas, Inc...................... 417,360
------------
1,414,508
------------
FINANCIAL SERVICES -- 20.5%
3,700 Ace Ltd................................. 357,050
4,365 BB&T Corporation........................ 279,633
8,600 City National Corporation............... 317,663
5,765 Crestar Financial Corporation........... 328,605
10,805 Equifax, Inc............................ 382,902
9,830 Finova Group, Inc. (The)................ 488,428
8,896 Legg Mason, Inc......................... 497,620
5,100 MBIA, Inc............................... 340,744
4,715 Mercantile Bancorporation, Inc.......... 289,973
6,475 Mercantile Bankshares Corporation....... 253,334
7,360 Nationwide Financial Services, Inc...... 265,880
5,465 Northern Trust Corporation.............. 381,184
7,710 Old Kent Financial Corporation.......... 305,509
6,575 Peoples Heritage Financial Group,
Inc................................... 302,450
<CAPTION>
SHARES MARKET
- ---------- VALUE
------------
<C> <S> <C>
FINANCIAL SERVICES -- (CONTINUED)
6,605 State Street Corporation................ $ 384,328
4,382 Summit Bancorp.......................... 233,342
4,065 T. Rowe Price Associates, Inc........... 255,586
------------
5,664,231
------------
FOOD, BEVERAGE & TOBACCO -- 1.4%
11,070 Coca-Cola Enterprises, Inc.............. 393,676
------------
HEALTH CARE -- 13.5%
*7,780 Bergen Brunswig Corporation Class A..... 327,733
11,535 Biomet, Inc............................. 295,584
2,200 Cardinal Health, Inc.................... 165,275
*19,210 Covance, Inc............................ 381,799
*7,055 Genzyme Corporation..................... 195,776
*12,480 Health Management Associates, Inc....... 315,120
*6,300 Human Genome Sciences, Inc.............. 250,425
9,140 Manor Care, Inc......................... 319,900
17,565 Service Corporation International....... 648,807
*8,600 Sunrise Assisted Living, Inc............ 370,875
*13,630 Tenet Healthcare Corporation............ 451,494
------------
3,722,788
------------
INDUSTRIAL MATERIALS -- 1.9%
7,520 Morton International, Inc............... 258,500
6,695 Santa Fe International Corporation...... 272,403
------------
530,903
------------
MANUFACTURING -- 6.4%
6,245 Avery Dennison Corporation.............. 279,464
4,060 Danaher Corporation..................... 256,288
7,310 Dover Corporation....................... 264,073
8,475 Perkin-Elmer Corporation (The).......... 602,254
*21,800 Unova, Inc.............................. 358,337
------------
1,760,416
------------
MEDIA & SERVICES -- 5.7%
*4,440 Clear Channel Communications, Inc....... 352,702
7,570 Omnicom Group, Inc...................... 320,779
*15,850 Outdoor Systems, Inc.................... 608,244
6,415 Stewart Enterprises, Inc................ 299,099
------------
1,580,824
------------
RETAIL -- 8.0%
*8,585 Bed Bath & Beyond, Inc.................. 330,522
*11,620 Borders Group, Inc...................... 363,851
7,955 CVS Corporation......................... 509,617
*8,600 Consolidated Stores Corp................ 377,863
6,038 Dollar General Corporation.............. 218,878
*14,800 Staples, Inc,........................... 410,700
------------
2,211,431
------------
SOFTWARE & SERVICES -- 7.0%
*2,510 America Online, Inc..................... 223,860
*4,600 BMC Software, Inc....................... 301,875
*6,655 Ceridian Corporation.................... 304,882
*4,835 Computer Sciences Corporation........... 403,722
*6,800 DST Systems, Inc........................ 290,275
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-33
<PAGE>
HARTFORD MIDCAP FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES MARKET
- ---------- VALUE
------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
SOFTWARE & SERVICES -- (CONTINUED)
*10,080 PeopleSoft, Inc......................... $ 393,120
------------
1,917,734
------------
TRANSPORTATION -- 2.6%
14,213 Southwest Airlines Co................... 349,983
17,500 Virgin Express Holdings ADR............. 363,125
------------
713,108
------------
UTILITIES -- 2.3%
*6,800 Teleport Communications................. 373,150
*10,700 Winstar Communications.................. 266,831
------------
639,981
------------
Total common stocks..................... $27,144,379
------------
------------
<CAPTION>
PRINCIPAL
AMOUNT
- ----------
<C> <S> <C>
SHORT-TERM SECURITIES -- 4.2%
REPURCHASE AGREEMENT
$1,157,000 Interest in $1,102,287,000 joint
repurchase agreement with State Street
Bank dated 12/31/97 at 6.6119%, to be
repurchased at $1,157,425 on 01/02/98;
(Collateralized by $629,353,000 U.S.
Treasury Notes 5.625% - 7.50% due
03/31/98 - 02/15/05, $204,399,000 U.S.
Treasury Bills 0.00% due 05/21/98 -
06/04/98, $159,248,000 U.S. Treasury
Bonds 8.50% - 11.25% due 08/15/01 -
02/15/20 and $109,287,000 U.S.
Treasury Strips (principal) 0.00% due
02/15/09)............................. $ 1,157,000
------------
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
----------------
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $25,630,668)....... 98.4% $ 27,144,379
Total short-term securities (cost
$1,157,000)................................ 4.2 1,157,000
------ ----------------
Total investment in securities (total cost
$26,787,668)............................... 102.6 28,301,379
Cash, receivables and other assets........... 0.5 155,579
Payable for securities purchased............. (3.1) (860,911)
Other liabilities............................ (0.0) (7,140)
------ ----------------
Net assets (applicable to $1.137082 per share
based on 24,262,893 shares outstanding).... 100.0% $ 27,588,907
------ ----------------
------ ----------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; authorized
750,000,000 shares; outstanding 24,262,893
shares............................................. $ 2,426,289
Capital surplus......................................
23,770,860
Accumulated undistributed net investment income......
460
Accumulated net realized loss........................
(122,413)
Unrealized appreciation on investments...............
1,513,711
----------------
Net assets, applicable to shares outstanding.........
$ 27,588,907
----------------
----------------
</TABLE>
* Non-income producing during period.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-34
<PAGE>
[This page intentionally left blank]
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
HARTFORD HARTFORD HVA HARTFORD
BOND STOCK MONEY MARKET ADVISERS
FUND, INC. FUND, INC. FUND, INC. FUND, INC.
-------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 503,616 $ 51,726,467 $ -- $ 66,071,395
Interest............... 31,692,547 10,169,153 32,491,172 153,978,415
Less: foreign tax
withheld............. -- (594,046) -- (803,117)
-------------- ------------- ------------ ---------------
Total investment
income............. 32,196,163 61,301,574 32,491,172 219,246,693
-------------- ------------- ------------ ---------------
EXPENSES:
Investment advisory
fees................. 1,422,689 10,265,666 1,436,068 31,252,771
Administrative service
fees................. 794,107 6,879,714 1,005,248 12,508,493
Accounting services.... 35,308 219,269 35,521 448,629
Custodian fees......... 3,001 15,000 8,602 27,000
Board of directors
fees................. 2,240 19,404 3,167 35,277
Other expenses......... 43,489 367,225 59,111 667,574
-------------- ------------- ------------ ---------------
Total expenses
(before waivers)... 2,300,834 17,766,278 2,547,717 44,939,744
-------------- ------------- ------------ ---------------
Expense waivers........ -- -- -- --
-------------- ------------- ------------ ---------------
Total expenses, net.... -- -- -- --
-------------- ------------- ------------ ---------------
Net investment
income............... 29,895,329 43,535,296 29,943,455 174,306,949
-------------- ------------- ------------ ---------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 7,057,575 173,881,786 6,689 297,338,380
Net realized gain
(loss) on futures
contracts............ -- -- -- --
Net realized gain
(loss) on forward
foreign currency
contracts............ -- -- -- --
Net realized gain
(loss) on foreign
currency
transactions......... 4,339 (20,512) -- (5,044)
Net unrealized
appreciation
(depreciation) of
investments.......... 13,239,598 796,622,993 -- 1,046,804,680
Net unrealized
appreciation
(depreciation) of
futures contracts.... -- -- -- --
Net unrealized
(depreciation)
appreciation of
forward foreign
currency contracts... -- -- -- --
Net unrealized
(depreciation)
appreciation on
translation of other
assets and
liabilities in
foreign currencies... -- (6,067) -- (33,617)
Net unrealized
appreciation of
option contracts..... -- -- -- --
-------------- ------------- ------------ ---------------
Net realized and
unrealized gain
(loss) on
investments.......... 20,301,512 970,478,200 6,689 1,344,104,399
-------------- ------------- ------------ ---------------
Net increase (decrease)
in net assets
resulting from
operations........... $ 50,196,841 $1,014,013,496 $29,950,144 $1,518,411,348
-------------- ------------- ------------ ---------------
-------------- ------------- ------------ ---------------
</TABLE>
* From inception, July 15, 1997, to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-36
<PAGE>
<TABLE>
<CAPTION>
HARTFORD HARTFORD HARTFORD HARTFORD HARTFORD
CAPITAL MORTGAGE HARTFORD INTERNATIONAL DIVIDEND AND INTERNATIONAL
APPRECIATION SECURITIES INDEX OPPORTUNITIES GROWTH ADVISERS
FUND, INC. FUND, INC. FUND, INC. FUND, INC. FUND, INC. FUND, INC.
------------ ------------- ------------ ------------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $25,896,133 $ 903,065 $ 15,046,574 $ 23,729,831 $ 39,042,988 $ 1,922,184
Interest............... 19,829,802 21,735,565 2,000,340 4,113,742 2,140,833 4,733,992
Less: foreign tax
withheld............. (935,663) -- (81,856) (3,060,107) (87,934) (264,774)
------------ ------------- ------------ ------------------- --------------- -------------
Total investment
income............. 44,790,272 22,638,630 16,965,058 24,783,466 41,095,887 6,391,402
------------ ------------- ------------ ------------------- --------------- -------------
EXPENSES:
Investment advisory
fees................. 18,471,888 802,900 1,771,465 5,565,620 6,910,062 926,609
Administrative service
fees................. 7,245,777 562,030 1,550,032 1,931,542 2,486,421 282,011
Accounting services.... 230,888 45,910 49,393 91,541 79,274 10,994
Custodian fees......... 31,000 16,000 23,000 800,000 8,000 175,000
Board of directors
fees................. 20,433 1,585 4,371 5,446 7,015 796
Other expenses......... 389,111 31,141 89,688 104,352 133,558 16,277
------------ ------------- ------------ ------------------- --------------- -------------
Total expenses
(before waivers)... 26,389,097 1,459,566 3,487,949 8,498,501 9,624,330 1,411,687
------------ ------------- ------------ ------------------- --------------- -------------
Expense waivers........ -- -- -- -- -- --
------------ ------------- ------------ ------------------- --------------- -------------
Total expenses, net.... -- -- -- -- -- --
------------ ------------- ------------ ------------------- --------------- -------------
Net investment
income............... 18,401,175 21,179,064 13,477,109 16,284,965 31,471,557 4,979,715
------------ ------------- ------------ ------------------- --------------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 284,764,663 1,812,474 22,712,225 19,027,094 76,546,072 (2,114,022)
Net realized gain
(loss) on futures
contracts............ 33,283,209 74,830 5,179,181 10,721,826 -- 1,747,862
Net realized gain
(loss) on forward
foreign currency
contracts............ 7,579,815 -- -- (7,321,022) -- 3,863,728
Net realized gain
(loss) on foreign
currency
transactions......... (614,954) -- -- 559,729 -- 315,335
Net unrealized
appreciation
(depreciation) of
investments.......... 447,082,711 4,637,056 194,615,758 (38,735,645) 265,339,837 (4,357,240)
Net unrealized
appreciation
(depreciation) of
futures contracts.... 323,587 -- 162,520 (284,135) -- 121,395
Net unrealized
(depreciation)
appreciation of
forward foreign
currency contracts... (1,088,978) -- -- (438,841) -- 1,916,305
Net unrealized
(depreciation)
appreciation on
translation of other
assets and
liabilities in
foreign currencies... (60,142) -- -- (307,104) -- 83,251
Net unrealized
appreciation of
option contracts..... -- 25,947 -- -- -- --
------------ ------------- ------------ ------------------- --------------- -------------
Net realized and
unrealized gain
(loss) on
investments.......... 771,269,911 6,550,307 222,669,684 (16,778,098) 341,885,909 1,576,614
------------ ------------- ------------ ------------------- --------------- -------------
Net increase (decrease)
in net assets
resulting from
operations........... $789,671,086 $ 27,729,371 $236,146,793 $ (493,133) $373,357,466 $ 6,556,329
------------ ------------- ------------ ------------------- --------------- -------------
------------ ------------- ------------ ------------------- --------------- -------------
<CAPTION>
HARTFORD HARTFORD
SMALL COMPANY MIDCAP
FUND, INC. FUND, INC.*
-------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 348,896 $ 28,969
Interest............... 627,959 21,620
Less: foreign tax
withheld............. (1,567) (26)
-------------- -------------
Total investment
income............. 975,288 50,563
-------------- -------------
EXPENSES:
Investment advisory
fees................. 657,507 28,186
Administrative service
fees................. 200,110 9,636
Accounting services.... 6,383 305
Custodian fees......... 10,060 8,000
Board of directors
fees................. 565 27
Other expenses......... 11,880 1,624
-------------- -------------
Total expenses
(before waivers)... 886,505 47,778
-------------- -------------
Expense waivers........ -- (22,175)
-------------- -------------
Total expenses, net.... -- 25,603
-------------- -------------
Net investment
income............... 88,783 24,960
-------------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 13,543,047 (122,413)
Net realized gain
(loss) on futures
contracts............ (1,099,984) --
Net realized gain
(loss) on forward
foreign currency
contracts............ -- --
Net realized gain
(loss) on foreign
currency
transactions......... 7,063 --
Net unrealized
appreciation
(depreciation) of
investments.......... 1,186,607 1,513,711
Net unrealized
appreciation
(depreciation) of
futures contracts.... -- --
Net unrealized
(depreciation)
appreciation of
forward foreign
currency contracts... -- --
Net unrealized
(depreciation)
appreciation on
translation of other
assets and
liabilities in
foreign currencies... -- --
Net unrealized
appreciation of
option contracts..... -- --
-------------- -------------
Net realized and
unrealized gain
(loss) on
investments.......... 13,636,733 1,391,298
-------------- -------------
Net increase (decrease)
in net assets
resulting from
operations........... $13,725,516 $ 1,416,258
-------------- -------------
-------------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-37
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
HARTFORD HARTFORD HVA HARTFORD
BOND STOCK MONEY MARKET ADVISERS
FUND, INC. FUND, INC. FUND, INC. FUND, INC.
---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment
income............... $ 29,895,329 $ 43,535,296 $ 29,943,455 $ 174,306,949
Net realized gain
(loss) on
investments.......... 7,061,914 173,861,274 6,689 297,333,336
Net unrealized
appreciation
(depreciation) of
investments.......... 13,239,598 796,616,926 -- 1,046,771,063
---------------- --------------- --------------- ---------------
Net increase (decrease)
in net assets
resulting from
operations........... 50,196,841 1,014,013,496 29,950,144 1,518,411,348
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income............... (28,506,187) (42,197,246) (29,943,455) (170,527,116)
From net realized gain
on investments....... -- (161,851,967) (6,689) (270,771,078)
CAPITAL SHARE
TRANSACTIONS:
Proceeds from sale of
shares............... 150,801,506 1,228,638,401 2,014,842,442 1,017,109,674
Reinvested
distributions........ 28,506,187 204,049,153 29,947,294 441,298,194
Cost of shares
repurchased.......... (50,676,350) (523,538,867) (1,974,895,094) (131,138,289)
---------------- --------------- --------------- ---------------
Net increase
(decrease) in net
assets resulting
from capital share
transactions....... 128,631,343 909,148,687 69,894,642 1,327,269,579
---------------- --------------- --------------- ---------------
Total increase in net
assets............. 150,321,997 1,719,112,970 69,894,642 2,404,382,733
NET ASSETS:
Beginning of year...... 402,547,800 2,994,208,591 542,585,576 5,879,529,168
---------------- --------------- --------------- ---------------
End of year............ $ 552,869,797 $ 4,713,321,561 $ 612,480,218 $8,283,911,901
---------------- --------------- --------------- ---------------
---------------- --------------- --------------- ---------------
CHANGE IN CAPITAL SHARES
OUTSTANDING:
Shares sold............ 145,350,512 261,136,064 2,014,842,442 427,999,289
Reinvested
distributions........ 27,684,476 47,265,691 29,947,294 195,721,711
Shares repurchased..... (49,276,444) (111,192,689) (1,974,895,094) (55,281,602)
---------------- --------------- --------------- ---------------
Net increase (decrease)
in capital shares
outstanding.......... 123,758,544 197,209,066 69,894,642 568,439,398
---------------- --------------- --------------- ---------------
---------------- --------------- --------------- ---------------
</TABLE>
* From inception, July 15, 1997, to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-38
<PAGE>
<TABLE>
<CAPTION>
HARTFORD HARTFORD HARTFORD HARTFORD
CAPITAL MORTGAGE HARTFORD INTERNATIONAL HARTFORD INTERNATIONAL
APPRECIATION SECURITIES INDEX OPPORTUNITIES DIVIDEND AND GROWTH ADVISERS
FUND, INC. FUND, INC. FUND, INC. FUND, INC. FUND, INC. FUND, INC.
--------------- ------------- ------------- ------------- --------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income............... $ 18,401,175 $ 21,179,064 $ 13,477,109 $ 16,284,965 $ 31,471,557 $ 4,979,715
Net realized gain
(loss) on
investments.......... 325,012,733 1,887,304 27,891,406 22,987,627 76,546,072 3,812,903
Net unrealized
appreciation
(depreciation) of
investments.......... 446,257,178 4,663,003 194,778,278 (39,765,725) 265,339,837 (2,236,289)
--------------- ------------- ------------- ------------- --------------------- -------------
Net increase (decrease)
in net assets
resulting from
operations........... 789,671,086 27,729,371 236,146,793 (493,133) 373,357,466 6,556,329
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income............... (23,026,942) (19,179,286) (12,572,622) (10,088,484) (27,536,907) (5,624,995)
From net realized gain
on investments....... (262,285,067) -- (54,414,034) (75,709,860) (27,905,705) (383,508)
CAPITAL SHARE
TRANSACTIONS:
Proceeds from sale of
shares............... 1,567,700,149 40,002,581 832,154,018 175,623,844 759,068,188 101,220,653
Reinvested
distributions........ 285,312,010 19,179,286 66,986,656 85,798,344 55,442,612 6,008,503
Cost of shares
repurchased.......... (941,049,022) (67,525,455) (565,910,370) (78,728,142) (17,752,873) (4,681,200)
--------------- ------------- ------------- ------------- --------------------- -------------
Net increase
(decrease) in net
assets resulting
from capital share
transactions....... 911,963,137 (8,343,588) 333,230,304 182,694,046 796,757,927 102,547,956
--------------- ------------- ------------- ------------- --------------------- -------------
Total increase in net
assets............. 1,416,322,214 206,497 502,390,441 96,402,569 1,114,672,781 103,095,782
NET ASSETS:
Beginning of year...... 3,386,669,788 325,495,183 621,064,561 996,543,031 879,980,441 104,485,742
--------------- ------------- ------------- ------------- --------------------- -------------
End of year............ $ 4,802,992,002 $ 325,701,680 $1,123,455,002 $1,092,945,600 $1,994,653,222 $207,581,524
--------------- ------------- ------------- ------------- --------------------- -------------
--------------- ------------- ------------- ------------- --------------------- -------------
CHANGE IN CAPITAL SHARES
OUTSTANDING:
Shares sold............ 373,368,266 36,817,301 319,711,524 127,140,923 430,488,870 85,766,460
Reinvested
distributions........ 76,688,687 17,908,502 27,848,903 66,285,199 32,437,147 5,312,136
Shares repurchased..... (226,071,746) (62,504,975) (217,918,590) (57,436,791) (9,921,919) (3,947,987)
--------------- ------------- ------------- ------------- --------------------- -------------
Net increase (decrease)
in capital shares
outstanding.......... 223,985,207 (7,779,172) 129,641,837 135,989,331 453,004,098 87,130,609
--------------- ------------- ------------- ------------- --------------------- -------------
--------------- ------------- ------------- ------------- --------------------- -------------
<CAPTION>
HARTFORD HARTFORD
SMALL COMPANY MIDCAP
FUND, INC. FUND, INC.*
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment
income............... $ 88,783 $ 24,960
Net realized gain
(loss) on
investments.......... 12,450,126 (122,413)
Net unrealized
appreciation
(depreciation) of
investments.......... 1,186,607 1,513,711
------------- -------------
Net increase (decrease)
in net assets
resulting from
operations........... 13,725,516 1,416,258
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income............... (95,955) (24,500)
From net realized gain
on investments....... (9,778,063) --
CAPITAL SHARE
TRANSACTIONS:
Proceeds from sale of
shares............... 161,029,937 26,374,232
Reinvested
distributions........ 9,859,112 21,452
Cost of shares
repurchased.......... (6,783,034) (198,535)
------------- -------------
Net increase
(decrease) in net
assets resulting
from capital share
transactions....... 164,106,015 26,197,149
------------- -------------
Total increase in net
assets............. 167,957,513 27,588,907
NET ASSETS:
Beginning of year...... 42,811,921 --
------------- -------------
End of year............ $210,769,434 $ 27,588,907
------------- -------------
------------- -------------
CHANGE IN CAPITAL SHARES
OUTSTANDING:
Shares sold............ 132,781,679 24,427,494
Reinvested
distributions........ 8,233,190 18,866
Shares repurchased..... (5,739,202) (183,467)
------------- -------------
Net increase (decrease)
in capital shares
outstanding.......... 135,275,667 24,262,893
------------- -------------
------------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-39
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
HARTFORD HARTFORD HVA HARTFORD
BOND STOCK MONEY MARKET ADVISERS
FUND, INC. FUND, INC. FUND, INC. FUND, INC.
---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment
income............... $ 23,250,402 $ 38,483,030 $ 22,738,638 $ 147,050,773
Net realized gain
(loss) on
investments.......... 2,775,436 161,403,731 2,197 267,921,758
Net unrealized
appreciation
(depreciation) of
investments during
the period........... (12,099,332) 329,790,776 -- 373,870,758
---------------- --------------- --------------- ---------------
Net increase in net
assets resulting
from operations.... 13,926,506 529,677,537 22,740,835 788,843,289
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income............... (23,252,299) (38,048,174) (22,738,638) (146,336,279)
From net realized gain
on investments....... -- (80,821,138) (2,197) (97,284,143)
CAPITAL SHARE
TRANSACTIONS:
Proceeds from sale of
shares............... 254,369,346 1,358,328,493 2,549,507,437 1,211,458,165
Reinvested dividends
and distributions.... 23,252,298 118,869,307 22,740,798 243,620,416
Cost of shares
repurchased.......... (208,242,998) (770,681,048) (2,369,371,242) (383,541,029)
---------------- --------------- --------------- ---------------
Net increase in net
assets resulting
from capital share
transactions....... 69,378,646 706,516,752 202,876,993 1,071,537,552
---------------- --------------- --------------- ---------------
Total increase
(decrease) in net
assets............. 60,052,853 1,117,324,977 202,876,993 1,616,760,419
NET ASSETS:
Beginning of year...... 342,494,947 1,876,883,614 339,708,583 4,262,768,749
---------------- --------------- --------------- ---------------
End of year............ $ 402,547,800 $ 2,994,208,591 $ 542,585,576 $5,879,529,168
---------------- --------------- --------------- ---------------
---------------- --------------- --------------- ---------------
CHANGE IN CAPITAL SHARES
OUTSTANDING:
Shares sold............ 254,649,109 360,788,240 2,549,507,437 597,537,609
Reinvested
distributions........ 23,512,053 33,332,051 22,740,798 122,083,331
Shares repurchased..... (208,369,007) (203,498,988) (2,369,371,242) (186,184,804)
---------------- --------------- --------------- ---------------
Net increase (decrease)
in capital shares
outstanding.......... 69,792,155 190,621,303 202,876,993 533,436,136
---------------- --------------- --------------- ---------------
---------------- --------------- --------------- ---------------
</TABLE>
* From inception, August 9, 1996, to December 31, 1996.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-40
<PAGE>
<TABLE>
<CAPTION>
HARTFORD
U.S. HARTFORD HARTFORD HARTFORD
GOVERNMENT CAPITAL MORTGAGE HARTFORD INTERNATIONAL HARTFORD
MONEY MARKET APPRECIATION SECURITIES INDEX OPPORTUNITIES DIVIDEND AND GROWTH
FUND, INC. FUND, INC. FUND, INC. FUND, INC. FUND, INC. FUND, INC.
------------ --------------- ------------- ------------- ------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income............... $ 508,120 $ 16,536,321 $ 21,509,830 $ 9,798,518 $ 14,944,153 $ 13,982,229
Net realized gain
(loss) on
investments.......... 99 261,451,959 (548,712) 54,296,870 77,347,624 27,789,320
Net unrealized
appreciation
(depreciation) of
investments during
the period........... -- 239,093,295 (5,189,787) 32,113,387 10,899,075 76,776,242
------------ --------------- ------------- ------------- ------------- -------------------
Net increase in net
assets resulting
from operations.... 508,219 517,081,575 15,771,331 96,208,775 103,190,852 118,547,791
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income............... (508,120) (18,981,972) (20,576,313) (9,725,897) (16,566,894) (13,722,811)
From net realized gain
on investments....... (99) (144,074,825) -- (6,503,101) (20,342,973) (6,559,586)
CAPITAL SHARE
TRANSACTIONS:
Proceeds from sale of
shares............... 11,370,111 1,992,482,669 60,478,861 909,101,858 271,959,848 514,924,406
Reinvested dividends
and distributions.... 508,218 163,056,776 20,576,314 16,228,997 36,909,865 20,282,403
Cost of shares
repurchased.......... (10,218,454) (1,280,786,138) (78,320,323) (702,498,963) (65,082,872) (18,562,229)
------------ --------------- ------------- ------------- ------------- -------------------
Net increase in net
assets resulting
from capital share
transactions....... 1,659,875 874,753,307 2,734,852 222,831,892 243,786,841 516,644,580
------------ --------------- ------------- ------------- ------------- -------------------
Total increase
(decrease) in net
assets............. 1,659,875 1,228,778,085 (2,070,130) 302,811,669 310,067,826 614,909,974
NET ASSETS:
Beginning of year...... 10,070,267 2,157,891,703 327,565,313 318,252,892 686,475,205 265,070,467
------------ --------------- ------------- ------------- ------------- -------------------
End of year............ $11,730,142 $ 3,386,669,788 $ 325,495,183 $ 621,064,561 $996,543,031 $879,980,441
------------ --------------- ------------- ------------- ------------- -------------------
------------ --------------- ------------- ------------- ------------- -------------------
CHANGE IN CAPITAL SHARES
OUTSTANDING:
Shares sold............ 11,370,111 550,329,695 57,507,862 418,317,811 202,942,268 365,817,586
Reinvested
distributions........ 508,218 48,709,013 19,671,794 7,617,074 27,910,095 14,561,833
Shares repurchased..... (10,218,454) (352,206,856) (74,651,995) (322,113,339) (48,271,571) (12,969,461)
------------ --------------- ------------- ------------- ------------- -------------------
Net increase (decrease)
in capital shares
outstanding.......... 1,659,875 246,831,852 2,527,661 103,821,546 182,580,792 367,409,958
------------ --------------- ------------- ------------- ------------- -------------------
------------ --------------- ------------- ------------- ------------- -------------------
<CAPTION>
HARTFORD
INTERNATIONAL HARTFORD
ADVISERS SMALL COMPANY
FUND, INC. FUND, INC.*
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment
income............... $ 2,226,486 $ 36,756
Net realized gain
(loss) on
investments.......... 3,299,171 189,315
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 2,337,601 305,895
------------- -------------
Net increase in net
assets resulting
from operations.... 7,863,258 531,966
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income............... (3,160,906) (36,601)
From net realized gain
on investments....... (2,100,363) --
CAPITAL SHARE
TRANSACTIONS:
Proceeds from sale of
shares............... 80,121,321 42,814,882
Reinvested dividends
and distributions.... 5,081,390 29,636
Cost of shares
repurchased.......... (14,583,123) (527,962)
------------- -------------
Net increase in net
assets resulting
from capital share
transactions....... 70,619,588 42,316,556
------------- -------------
Total increase
(decrease) in net
assets............. 73,221,577 42,811,921
NET ASSETS:
Beginning of year...... 31,264,165 --
------------- -------------
End of year............ $104,485,742 $42,811,921
------------- -------------
------------- -------------
CHANGE IN CAPITAL SHARES
OUTSTANDING:
Shares sold............ 69,719,902 40,509,778
Reinvested
distributions........ 4,382,000 27,965
Shares repurchased..... (12,726,579) (495,256)
------------- -------------
Net increase (decrease)
in capital shares
outstanding.......... 61,375,323 40,042,487
------------- -------------
------------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-41
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION:
Hartford Bond Fund, Inc., Hartford Stock Fund, Inc., HVA Money Market Fund,
Inc., Hartford Advisers Fund, Inc., Hartford Capital Appreciation Fund,
Inc., Hartford Mortgage Securities Fund, Inc., Hartford Index Fund, Inc.,
Hartford International Opportunities Fund, Inc., Hartford Dividend and
Growth Fund, Inc., Hartford International Advisers Fund, Inc., Hartford
Small Company Fund, Inc. and Hartford MidCap Fund, Inc. (the Funds) are
organized under the laws of the State of Maryland and are registered with
the Securities and Exchange Commission (SEC) under the Investment Company
Act of 1940, as amended, as diversified open-end management investment
companies.
The Funds serve as the underlying investment vehicles for certain variable
annuity and variable life insurance separate accounts, and group pension
contracts of Hartford Life Insurance Company and ITT Hartford Life and
Annuity Insurance Company (collectively, the "The Hartford Life Insurance
Companies"). The Hartford Life Insurance Companies are affiliates of the
Funds. The Funds, which have different investment objectives and policies,
are described below:
<TABLE>
<S> <C>
Hartford Bond Fund, Inc. Seeks a high level of current income while preserving capital through
investing primarily in investment-grade government and corporate bonds
and other debt securities.
Hartford Stock Fund, Inc. Seeks long-term growth of capital with income as a secondary
consideration, through a diversified portfolio of equity securities.
HVA Money Market Fund, Inc. Seeks a high level of current income consistent with liquidity and the
need for preservation of capital through high-quality money market
instruments.
Hartford Advisers Fund, Inc. Seeks a high, long-term total return (capital growth and current income)
through a varying mix of stocks, bonds and money market instruments.
Hartford Capital Appreciation Seeks growth of capital through investment in equity securities of
Fund, Inc. companies with high growth potential, including small and emerging
market companies.
Hartford Mortgage Securities Seeks a high level of current income, consistent with preservation of
Fund, Inc. capital, by investing primarily in mortgage-backed securities, including
securities issued by the Government National Mortgage Association.
Hartford Index Fund, Inc. Seeks to approximate the price and yield performance represented by the
Standard & Poor's 500 Composite Stock Price Index through investments in
common stocks.
Hartford International Seeks a long-term total return consistent with that of international
Opportunities Fund, Inc. equity markets by investing primarily in foreign equity security issues.
Hartford Dividend and Growth Seeks a high level of current income consistent with growth of capital
Fund, Inc. and moderate investment risk. Primary investments are equity securities
and securities convertible into equity securities that typically have
above average yields.
Hartford International Seeks a long-term total return consistent with moderate risk.
Advisers Fund, Inc. Investments include a mix of debt, equity and money market instruments
primarily, with foreign issuers.
Hartford Small Company Fund, Seeks long-term growth of capital by investing primarily in equity
Inc. securities selected on the basis of potential for capital appreciation.
Hartford MidCap Fund, Inc. Seeks long-term capital growth by investing primarily in equity
securities selected on the basis of potential for capital appreciation.
</TABLE>
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the Funds,
which are in accordance with generally accepted accounting principles in the
investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Security gains and
losses are determined on the basis of identified cost.
M-42
<PAGE>
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 securities held in the HVA Money Market Fund, Inc.
are valued at amortized cost or original cost plus accrued interest
receivable, both of which approximate market value. In the remaining
funds, short-term investments purchased with a maturity of 60 days or
less 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 become less than 61 days. From that time until maturity,
the investments are valued at amortized cost.
Equity securities are valued at the last sales price reported on the
principal securities exchanges 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 occurred on a particular day,
then such securities are valued at the mean between the bid and asked
prices. Securities quoted in foreign currencies are translated into U.S.
dollars at the prevailing exchange rates at the end of each business day.
Options are valued at the last sales price; if no sale took place on such
day, then options are valued at the mean between the bid and asked prices.
Securities for which market quotations are not readily available and all
other assets are valued in good faith at their fair values as determined
by, or under the direction of, the Funds' Board of Directors.
c) FOREIGN CURRENCY TRANSLATION--The accounting records of the Funds are
maintained in U.S. dollars. All assets and liabilities initially
expressed in foreign currencies are converted into U.S. dollars at the
prevailing exchange rates. Purchases and sales of investment securities,
dividend and interest income and certain expenses are translated at the
rates of exchange prevailing on the respective dates of such
transactions.
The Funds do not isolate that portion of the results of operations
resulting from changes in the foreign exchange rates on investments from
the fluctuations arising from changes in the market prices of securities
held. Such fluctuations are included with the net realized and unrealized
gain or loss on investments in the accompanying financial statements.
Net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales of foreign currencies and the difference
between asset and liability amounts initially stated in foreign currencies
and the U.S. dollar value of the amounts actually received or paid. Net
unrealized foreign exchange gains or losses arise from changes in the
value of other assets and liabilities at the end of the reporting period,
resulting from changes in exchange rates.
d) 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 Funds enter 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 and, in the case of repurchase
agreements exceeding one day, the value of the underlying security(ies),
including accrued interest, is required during the term of the agreement
to be equal to or exceed the value of the repurchase agreement.
Securities which serve to collateralize the repurchase agreement are held
by each Fund's custodian in book entry or physical form in the custodial
account of the Fund. Repurchase agreements are valued at cost plus
accrued interest receivable.
In June 1996, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 125, ACCOUNTING FOR
TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF
LIABILITIES. This Statement provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers
that are secured borrowings. Under the provisions of SFAS No. 125,
transfers of certain financial assets, such as repurchases agreements, are
required to be accounted for as sales if control, as defined, over those
assets has been surrendered by the transferor. The Statement also requires
collateral under repurchase agreements and securities lending transactions
to be separately classified by the debtor and recognized as an asset by
the creditor in the respective financial statements if certain conditions
are met. SFAS No. 125 is effective for transfers of financial assets
occurring after December 31, 1996, except for certain transfers for which
the effective date has been delayed to January 1, 1998 by SFAS No. 127,
DEFERRAL OF THE EFFECTIVE DATE OF CERTAIN PROVISIONS OF FASB STATEMENT NO.
125, issued by the FASB in December 1996. Management does not believe the
adoption of this new accounting standard will have a material impact on
the financial position or future results of operations of the Funds.
M-43
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
e) JOINT TRADING ACCOUNT--Pursuant to an exemptive order issued by the SEC,
the Funds may transfer uninvested cash balances into a joint trading
account managed by The Hartford Investment Management Company or
Wellington Management Company, LLP (Wellington). These balances may be
invested in one or more repurchase agreements and/or short-term money
market instruments.
f) FUTURES, OPTIONS ON FUTURES AND OPTIONS TRANSACTIONS--The Funds enter
into futures contracts to retain their cash balance and yet be exposed to
the market, thereby providing the liquidity necessary to accommodate
redemptions while at the same time providing shareholders with the
investment return of a fully invested portfolio. A futures contract is an
agreement between two parties to buy and sell a security for a set price
on a future date. When the Funds enter into such contracts, they are
required to deposit with their custodian an amount of "initial margin" of
cash or U.S. Treasury Bills. Subsequent payments, called maintenance
margin, to and from the broker-dealer, are made on a daily basis as the
price of the underlying debt security fluctuates, making the long and
short positions in the futures contract more or less valuable (i.e.,
mark-to-market), which results in an unrealized gain or loss to the
Funds. The market value of a traded futures contract is the last sale
price or, in the absence of a last sale price, the last offering price.
In the absence of either of these prices, fair value is determined
according to procedures established by the Funds' Board of Directors. The
variation margin on futures contracts is included in cash, receivables
and other assets or other liabilities, as applicable, in each Funds'
Statement of Net Assets.
At any time prior to the expiration of the futures contract, the Funds may
close the position by taking an opposite position which would operate to
terminate the position in the futures contract. A final determination of
maintenance margin is then made, additional cash is required to be paid by
or released to the Funds and the Funds realize a gain or loss.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's Statement of Net Assets as excess of cash and
receivables over liabilities or excess of liabilities over cash and
receivables and subsequently "marked to market" to reflect the current
market value of the option purchased as of the end of the reporting
period. If an option which the Fund has purchased expires on its
stipulated expiration date, the Fund realizes a loss in the amount of the
cost of the option. If the Fund enters into a closing transaction, it
realizes a gain or loss, depending on whether the proceeds from the sale
are greater or less than the cost of the option. If the Fund exercises a
put option, it realizes a gain or loss from the sale of the underlying
security and the proceeds from such sale will be decreased by the premium
originally paid. If the Fund exercises a call option, the cost of the
security which the Fund purchases upon exercise will be increased by the
premium originally paid to by the call.
g) FEDERAL INCOME TAXES--For federal income tax purposes, the Funds intend
to continue to qualify as regulated investment companies under Subchapter
M of the Internal Revenue Code by distributing substantially all of their
taxable net investment income and net realized capital gains to their
shareholders or otherwise complying with the requirements for regulated
investment companies. Accordingly, no provision for federal income taxes
has been made in the accompanying financial statements.
h) FUND SHARE VALUATION AND DISTRIBUTIONS TO SHAREHOLDERS--Orders for the
Fund's shares are executed in accordance with the investment instructions
of the contract holders. Dividend income is accrued as of the ex-dividend
date. Interest income and expenses are accrued on a daily basis. The net
asset value of the Fund's shares is determined as of the close of each
business day of the New York Stock Exchange (the Exchange). Orders for
the purchase of the Funds' shares received prior to the close of the
Exchange on any day on which the Fund is open for business are priced at
the net asset value determined as of the close of the Exchange. Orders
received after the close of the Exchange, or on a day on which the
Exchange and/or the Fund is not open for business, are priced at the next
determined per-share net asset value.
Dividends are declared by the Funds' Board of Directors based upon the
investment performance of the respective Funds. The policy with respect to
the Hartford Bond Fund, Inc., Hartford Stock Fund, Inc., Hartford Advisers
Fund, Inc., Hartford Capital Appreciation Fund, Inc., Hartford Mortgage
Securities Fund, Inc., Hartford Index Fund, Inc., Hartford International
Opportunities Fund, Inc., Hartford Dividend and Growth Fund, Inc.,
Hartford International Advisers Fund, Inc., Hartford Small Company Fund,
Inc., and Hartford MidCap Fund, Inc. is to pay dividends from net
investment income and distribute realized capital gains, if any, annually.
M-44
<PAGE>
The HVA Money Market Fund, Inc. seeks to maintain a stable net asset value
per share of $1.00 by declaring a daily dividend from net investment
income, including net short-term capital gains and losses, and by valuing
its investments using the amortized cost method. Dividends are distributed
monthly.
Distributions from net investment income and realized capital gains are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences include the
treatment of non-taxable dividends, expiring capital loss carryforwards,
foreign currency gains and losses, partnerships, and losses deferred due
to wash sales and excise tax regulations. Permanent book and tax basis
differences relating to shareholder distributions will result in
reclassifications to capital accounts (see Note 7).
i) FORWARD FOREIGN CURRENCY CONTRACTS--As of December 31, 1997, Hartford
International Opportunities Fund, Inc., Hartford Capital Appreciation
Fund, Inc. and Hartford International Advisers Fund, Inc. had entered
into forward foreign currency contracts that obligate the Funds to
repurchase or sell currencies at specified future dates. The Funds enter
into forward foreign currency contracts to manage currency exchange rate
risk. The forward foreign currency contracts' costs are are included in
cash, receivables and other assets or other liabilities, as applicable,
in the Funds' Statement of Net Assets.
Forward foreign currency contracts involve elements of market risk in
excess of the amount reflected in the Statement of Net Assets. In
addition, risks may arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of the
contracts and from unanticipated movements in the value of the foreign
currencies relative to the U.S. dollar.
j) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported
amounts of income and expenses during the period. Operating results in
the future could vary from the amounts derived from management's
estimates.
k) RESTRICTED SECURITIES--Each Fund is permitted to invest up to 15% of its
net assets in illiquid securities, except for the Money Market Fund,
which may invest up to 10% in such securities. "Illiquid Securities" are
those that may not be sold or disposed of in the ordinary course of
business, at approximately the price used to determine a Fund's net asset
value. Each Fund may purchase certain restricted securities, commonly
known as Rule 144A Securities, that can be resold to qualified
institutions and which may be determined to be liquid pursuant to
policies and guidelines established by the Board of Directors.
At December 31, 1997, the Funds held the following restricted securities
(excluding 144A issues):
<TABLE>
<CAPTION>
ACQUISITION MARKET % OF
FUND SECURITY DATE COST VALUE NET ASSETS
- ------------------------------ ------------------------------- ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Capital Appreciation Fund SGW Holdings Corporation 8/14/97 $ 11,311,018 $ 9,614,365 0.2%
Small Company Fund SGW Holdings Corporation 8/14/97 $ 599,992 $ 509,993 0.2%
</TABLE>
3. EXPENSES:
a) INVESTMENT MANAGEMENT AND ADVISORY AGREEMENTS--HL Investment Advisors,
Inc. (HL Advisors) an indirect majority-owned indirect subsidiary of The
Hartford Financial Services Group, Inc. (The Hartford) provides
investment services and supervision to the Funds, pursuant to Investment
Management Agreements approved by the Funds' Board of Directors and
shareholders.
The schedule below reflects the rates of compensation paid to HL Advisors
for services rendered:
<TABLE>
<CAPTION>
HARTFORD INDEX FUND, INC.
AVERAGE DAILY NET ASSETS ANNUAL RATE
- ------------------------------------ -----------
<S> <C>
All Assets 0.200%
</TABLE>
M-45
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
HARTFORD MORTGAGE SECURITIES FUND, INC.
AND HVA MONEY MARKET FUND, INC.
AVERAGE DAILY NET ASSETS ANNUAL RATE
- ------------------------------------ -----------
<S> <C>
All Assets 0.250%
<CAPTION>
HARTFORD BOND FUND, INC.
AND HARTFORD STOCK FUND, INC.
AVERAGE DAILY NET ASSETS ANNUAL RATE
- ------------------------------------ -----------
<S> <C>
On first $250 million .325%
On next $250 million .300
On next $500 million .275
Over $1 billion .250
<CAPTION>
HARTFORD ADVISERS FUND, INC.,
HARTFORD CAPITAL APPRECIATION FUND, INC.,
HARTFORD INTERNATIONAL OPPORTUNITIES FUND, INC.,
HARTFORD DIVIDEND AND GROWTH FUND, INC.
HARTFORD INTERNATIONAL ADVISERS FUND, INC.
HARTFORD SMALL COMPANY FUND, INC.
AND HARTFORD MIDCAP FUND, INC.
AVERAGE DAILY NET ASSETS ANNUAL RATE
- ------------------------------------ -----------
<S> <C>
On first $250 million .575%
On next $250 million .525
On next $500 million .475
Over $1 billion .425
</TABLE>
Pursuant to an agreement between HL Advisors and The Hartford Investment
Management Company (HIMCO), HIMCO provides the day-to-day investment
management services to the Hartford Bond Fund, Inc., HVA Money Market
Fund, Inc., Hartford Mortgage Securities Fund, Inc. and Hartford Index
Fund, Inc. HIMCO is a wholly owned subsidiary of The Hartford.
Pursuant to investment sub-advisory agreements between HL Advisors and
Wellington, Wellington provides the day-to-day investment management
services for the Hartford Stock Fund, Inc., Hartford Advisers Fund, Inc.,
Hartford Capital Appreciation Fund, Inc., Hartford International
Opportunities Fund, Inc., Hartford Dividend and Growth Fund, Inc.,
Hartford International Advisers Fund, Inc., Hartford Small Company Fund,
Inc. and Hartford MidCap Fund, Inc.
Wellington and HIMCO determine the purchase and sale of portfolio
securities and place such orders for execution in the name of the
respective Fund. In conjunction with their investment activity, Wellington
and HIMCO regularly furnish reports to the Funds' Board of Directors
concerning economic forecasts, investment strategy, portfolio activity and
performance of the Funds.
b) ADMINISTRATIVE SERVICES AGREEMENT--Under the Administrative Services
Agreement between Hartford Life Insurance Company (HL) and each of the
Funds, HL provides administrative services to the Funds and receives
monthly compensation at the annual rate of .175% of each Fund's average
daily net assets. The Funds assume and pay certain other expenses
(including, but not limited to, shareholder accounting, state taxes and
directors' fees). Directors' fees represent remuneration paid or accrued
to directors not affiliated with HL or any other related company.
c) OPERATING EXPENSES--Allocable expenses of the Funds are charged to each
Fund based on the ratio of the net assets of each fund to the combined
net assets of all of the Funds. Nonallocable expenses are charged to each
Fund based on specific identification.
M-46
<PAGE>
4. TAX COST AND UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS:
As of December 31, 1997, the aggregate gross unrealized appreciation on all
investments where there was an excess of value over tax cost, the aggregate
gross unrealized depreciation of investments where there was an excess of
tax cost over value and the net unrealized appreciation (depreciation) of
investments based on cost for federal income tax cost, were as follows:
<TABLE>
<CAPTION>
AGGREGATE GROSS AGGREGATE GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
FUND TAX COST APPRECIATION DEPRECIATION DEPRECIATION
- ---------------------------------------------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Hartford Bond Fund, Inc............................. $ 574,612,909 $ 17,780,926 $ (1,401,300) $ 16,379,626
Hartford Stock Fund, Inc............................ 3,246,418,892 1,319,455,421 (53,525,806) 1,465,929,615
Hartford Advisers Fund, Inc......................... 6,317,083,804 2,074,071,385 (64,676,240) 2,009,395,145
Hartford Capital Appreciation Fund, Inc............. 3,864,632,301 1,155,359,598 (206,941,576) 948,418,022
Hartford Mortgage Securities Fund, Inc.............. 380,400,346 6,310,379 (443,282) 5,867,097
Hartford Index Fund, Inc............................ 829,353,859 317,343,709 (19,398,145) 297,945,564
Hartford International Opportunities Fund, Inc...... 1,049,780,584 148,824,039 (114,255,988) 34,568,051
Hartford Dividend and Growth Fund, Inc.............. 1,624,460,222 393,353,381 (20,949,321) 372,404,060
Hartford International Advisers Fund, Inc........... 205,073,228 12,198,029 (12,892,838) (694,809)
Hartford Small Company Fund, Inc.................... 206,853,361 15,796,892 (15,225,079) 571,813
Hartford MidCap Fund, Inc........................... 26,789,204 2,155,116 (642,941) 1,512,175
</TABLE>
5. AFFILIATE HOLDINGS:
a) HARTFORD SMALL COMPANY FUND, INC.--HL Investment Advisors, Inc. redeemed
ownership of 3,000,000 shares during 1997 realizing a gain of $520,374.
b) HARTFORD MIDCAP FUND, INC.--HL Investment Advisors, Inc. has ownership
of 3,000,000 shares of Hartford MidCap Fund, Inc., representing 12.36% of
the total outstanding shares of the Fund as of December 31, 1997.
c) As of December 31, 1997, certain HL group pension contracts held direct
interest in shares as follows:
<TABLE>
<CAPTION>
PERCENT OF
FUND SHARES TOTAL SHARES
------------------------------------------------------ ---------- ------------
<S> <C> <C>
Hartford Bond Fund, Inc............................... 3,649,073 .69%
HVA Money Market Fund Inc............................. 25,433,642 4.15
Hartford Stock Fund, Inc.............................. 2,343,837 .25
Hartford Advisers Fund, Inc........................... 30,369,579 .93
Hartford Capital Appreciation Fund, Inc............... 20,321,589 1.87
Hartford Mortgage Securities Fund, Inc................ 16,076,327 5.35
Hartford Index Fund, Inc.............................. 23,020,319 5.90
Hartford International Opportunities Fund, Inc........ 9,832,576 1.16
Hartford Dividend and Growth Fund, Inc................ 4,708,801 .46
Hartford International Advisers Fund, Inc............. 534,692 .30
Hartford Small Company Fund, Inc...................... 1,508,936 .86
</TABLE>
M-47
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
6. INVESTMENT TRANSACTIONS:
Investment transactions (excluding short-term investments) for the year
ended December 31, 1997, were as follows:
<TABLE>
<CAPTION>
PROCEEDS FROM
FUND COST OF PURCHASES SALES
------------------------------------------ ----------------- -----------------
<S> <C> <C>
Hartford Bond Fund, Inc................... $ 551,947,718 $ 482,741,333
Hartford Stock Fund, Inc.................. 1,654,851,670 1,170,633,576
Hartford Advisers Fund, Inc............... 3,641,292,564 2,505,486,572
Hartford Capital Appreciation Fund,
Inc...................................... 2,878,783,106 2,211,998,959
Hartford Mortgage Securities Fund, Inc.... 143,193,797 213,148,732
Hartford Index Fund, Inc.................. 330,294,502 48,517,775
Hartford International Opportunities Fund,
Inc...................................... 821,622,321 738,916,866
Hartford Dividend and Growth Fund, Inc.... 1,240,665,246 472,153,671
Hartford International Advisers, Fund,
Inc...................................... 291,657,600 213,980,368
Hartford Small Company Fund, Inc.......... 388,867,071 236,924,330
Hartford MidCap Fund, Inc................. 30,958,247 5,171,389
</TABLE>
7. RECLASSIFICATION OF CAPITAL ACCOUNTS:
In accordance with AICPA Statement of Position 93-2, DETERMINATION,
DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES, the Funds have
recorded several reclassifications in their capital accounts. These
reclassifications had no impact on the net asset value of the Funds and are
designed generally to present accumulated undistributed (distribution in
excess of) net investment income and net realized gain on investments on a
tax basis which is considered to be more informative to the shareholder. As
of December 31, 1997, the Funds recorded the following reclassifications to
increase (decrease) the accounts listed below.
<TABLE>
<CAPTION>
ACCUMULATED UNDISTRIBUTED
UNDISTRIBUTED (DISTRIBUTION IN EXCESS
(DISTRIBUTION IN EXCESS OF)
OF) NET REALIZED GAIN CAPITAL
FUND NET INVESTMENT INCOME ON INVESTMENTS SURPLUS
- ------------------------------------------------------------ ------------------------ ------------------------ -----------
<S> <C> <C> <C>
Hartford Bond Fund, Inc..................................... $ (41,029) $ 41,029 $ --
Hartford Stock Fund, Inc.................................... (20,513) 20,513 --
Hartford Advisers, Fund, Inc................................ 418,269 (418,269) --
Hartford Capital Appreciation Fund, Inc..................... 6,642,158 (6,642,158) --
Hartford Mortgage Securities Fund, Inc...................... (416,537) 416,537 --
Hartford International Opportunities Fund, Inc.............. (6,758,168) 6,788,167 (29,999)
Hartford Dividend and Growth Fund, Inc...................... (231,694) 244,530 (12,836)
Hartford International Advisers Fund, Inc................... 1,257,390 (1,257,390) --
Hartford Small Company Fund, Inc............................ 7,062 (7,062) --
</TABLE>
8. DISTRIBUTION FROM NET REALIZED CAPITAL GAINS:
The Board of Directors declared a distribution from net realized capital
gains in the respective Funds is as follows:
<TABLE>
<CAPTION>
FUND RECORD DATE PAYABLE DATE PER SHARE AMOUNT
-------------------------------------------------------------------------- ----------------- ----------------- ----------------
<S> <C> <C> <C>
Hartford Stock Fund, Inc.................................................. February 27, 1997 February 28, 1997 $0.145092
Hartford Advisers, Fund, Inc.............................................. February 27, 1997 February 28, 1997 0.068200
Hartford Capital Appreciation Fund, Inc................................... February 27, 1997 February 28, 1997 0.183585
Hartford Index Fund, Inc.................................................. February 27, 1997 February 28, 1997 0.178996
Hartford International Opportunities Fund, Inc............................ February 27, 1997 February 28, 1997 0.067382
Hartford Dividend and Growth Fund, Inc.................................... February 27, 1997 February 28, 1997 0.020531
</TABLE>
M-48
<PAGE>
9. MERGER OF HARTFORD U.S. GOVERNMENT SECURITIES MONEY MARKET FUND, INC. WITH
HVA MONEY MARKET FUND, INC.:
On June 27, 1997, HVA Money Market Fund, Inc. (HVAMMF) acquired the net
assets of the Hartford U.S. Government Securities Money Market Fund, Inc.
(HUSGSMMF) pursuant to a plan of reorganization adopted by the Board of
Directors on April 22, 1997 and approved by HUSGSMMF's shareholders on June
19, 1997. The reorganization was effected through a tax free exchange of
10,575,168 (NAV $1.00) shares of HUSGSMMF for 10,575,168 (NAV $1.00) shares
of HVAMMF outstanding. The net assets acquired by HVAMMF are included in
proceeds from sale of shares and the HVAMMF shares exchanged are included in
shares sold in the accompanying Statement of Changes in Net Assets for the
year ending December 31, 1997.
M-49
<PAGE>
Hartford Mutual Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
-- SELECTED PER-SHARE DATA(4) --
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET REALIZED
AND
NET ASSET UNREALIZED
VALUE AT NET GAIN TOTAL FROM
BEGINNING INVESTMENT (LOSS) ON INVESTMENT
OF PERIOD INCOME INVESTMENTS OPERATIONS
--------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
HARTFORD BOND FUND, INC.
For the Year Ended
December 31, 1997.... $1.000 $0.063 $ 0.047 $ 0.110
1996................... 1.028 0.064 (0.029) 0.035
1995................... 0.926 0.064 0.102 0.166
1994................... 1.044 0.060 (0.100) (0.040)
1993................... 1.024 0.062 0.039 0.101
1992................... 1.061 0.074 (0.019) 0.055
HARTFORD STOCK FUND, INC.
For the Year Ended
December 31, 1997.... 4.143 0.050 1.196 1.246
1996................... 3.527 0.060 0.763 0.823
1995................... 2.801 0.070 0.840 0.910
1994................... 3.099 0.061 (0.111) (0.050)
1993................... 2.965 0.053 0.339 0.392
1992................... 2.927 0.051 0.219 0.270
HVA MONEY MARKET FUND,
INC.
For the Year Ended
December 31, 1997.... 1.000 0.049 -- 0.049
1996................... 1.000 0.500 -- 0.050
1995................... 1.000 0.056 -- 0.056
1994................... 1.000 0.039 -- 0.039
1993................... 1.000 0.029 -- 0.029
1992................... 1.000 0.036 -- 0.036
HARTFORD ADVISERS FUND,
INC.
For the Year Ended
December 31, 1997.... 2.169 0.056 0.455 0.511
1996................... 1.958 0.059 0.255 0.314
1995................... 1.600 0.064 0.377 0.441
1994................... 1.752 0.054 (0.100) (0.046)
1993................... 1.676 0.050 0.145 0.195
1992................... 1.649 0.059 0.070 0.129
HARTFORD CAPITAL
APPRECIATION FUND, INC.
For the Year Ended
December 31, 1997.... 3.914 0.020 0.794 0.814
1996................... 3.490 0.022 0.655 0.677
1995................... 2.860 0.030 0.785 0.815
1994................... 3.052 0.011 0.070 0.081
1993................... 2.634 0.003 0.526 0.529
1992................... 2.607 0.008 0.388 0.396
HARTFORD MORTGAGE
SECURITIES FUND, INC.
For the Year Ended
December 31, 1997.... 1.056 0.071 0.022 0.093
1996................... 1.071 0.069 (0.018) 0.051
1995................... 0.984 0.068 0.087 0.155
1994................... 1.075 0.068 (0.086) (0.018)
1993................... 1.079 0.071 (0.004) 0.067
1992................... 1.115 0.086 (0.036) 0.050
HARTFORD INDEX FUND, INC.
For the Year Ended
December 31, 1997.... 2.382 0.035 0.692 0.727
1996................... 2.028 0.044 0.393 0.437
1995................... 1.522 0.044 0.507 0.551
1994................... 1.546 0.038 (0.024) 0.014
1993................... 1.450 0.035 0.096 0.131
1992................... 1.390 0.033 0.060 0.093
HARTFORD INTERNATIONAL
OPPORTUNITIES FUND,
INC.
For the Year Ended
December 31, 1997.... 1.407 0.022 (0.019) 0.003
1996................... 1.306 0.023 0.140 0.163
1995................... 1.176 0.020 0.141 0.161
1994................... 1.215 0.016 (0.039) (0.023)
1993................... 0.917 0.009 0.298 0.307
1992................... 0.973 0.013 (0.056) (0.043)
HARTFORD DIVIDEND AND
GROWTH FUND, INC.
For the Year Ended
December 31, 1997.... 1.547 0.035 0.445 0.480
1996................... 1.317 0.034 0.258 0.292
1995................... 0.994 0.033 0.323 0.356
From inception, March
8, 1994, through
December 31, 1994.... 1.000 0.024 (0.005) 0.019
HARTFORD INTERNATIONAL
ADVISERS FUND, INC.
For the Year Ended
December 31, 1997.... 1.167 0.056 0.006 0.062
1996................... 1.109 0.040 0.093 0.133
From inception, March
1, 1995, through
December 31, 1995.... 1.000 0.030 0.126 0.156
HARTFORD SMALL COMPANY
FUND, INC.
For the Year Ended
December 31, 1997.... 1.069 0.001 0.195 0.196
From inception, August
9, 1996, through
December 31, 1996.... 1.000 0.002 0.069 0.071
HARTFORD MIDCAP FUND,
INC.
From inception, July
15, 1997, through
December 31, 1997.... 1.000 0.001 0.137 0.138
</TABLE>
(1) Annualized.
(2) Disclosure required for reporting periods beginning after September 1, 1995.
(3) Management fees were waived until assets (excluding assets contributed by
companies affiliated with The Hartford Investment Management Company)
reached $20 million. The ratio of expenses to average net assets would have
been higher if management fees were not waived. The ratio of net investment
income to average net assest would have been lower if management fees were
not waived.
(4) Information presented relates to a share of capital stock outstanding for
the indicated period.
(5) Excluding mortgage dollar rolls.
(6) Not annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-50
<PAGE>
- --------------------------------------------------------------------------------
-- RATIOS AND
SUPPLEMENTAL DATA --
-------------------------------------------------
---------------------------------------------------------
<TABLE>
<CAPTION>
DISTRIBUTIONS
DISTRIBUTIONS FROM NET NET INCREASE NET ASSET NET ASSETS
FROM NET REALIZED (DECREASE) IN VALUE AT AT END OF
INVESTMENT GAINS ON TOTAL NET ASSET END TOTAL PERIOD
INCOME INVESTMENTS DISTRIBUTIONS VALUE OF PERIOD RETURN (IN THOUSANDS)
---------- ------------- ------------- ------------- --------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
HARTFORD BOND FUND, INC.
For the Year Ended
December 31, 1997.... $(0.060) -- $(0.060) $ 0.050 $1.050 11.35% $ 552,870
1996................... (0.063) -- (0.063) (0.028) 1.000 3.54 402,548
1995................... (0.064) -- (0.064) 0.102 1.028 18.49 342,495
1994................... (0.060) $(0.018) (0.078) (0.118) 0.926 (3.95) 247,458
1993................... (0.062) (0.019) (0.081) 0.020 1.044 10.24 239,602
1992................... (0.074) (0.018) (0.092) (0.037) 1.024 5.53 128,538
HARTFORD STOCK FUND, INC.
For the Year Ended
December 31, 1997.... (0.049) (0.217) (0.266) 0.980 5.123 31.38 4,713,322
1996................... (0.059) (0.148) (0.207) 0.616 4.143 24.33 2,994,209
1995................... (0.070) (0.114) (0.184) 0.726 3.527 34.10 1,876,884
1994................... (0.061) (0.187) (0.248) (0.298) 2.801 (1.89) 1,163,158
1993................... (0.053) (0.205) (0.258) 0.134 3.099 14.34 968,425
1992................... (0.051) (0.181) (0.232) 0.038 2.965 10.04 569,903
HVA MONEY MARKET FUND,
INC.
For the Year Ended
December 31, 1997.... (0.049) -- (0.049) -- 1.000 5.31 612,480
1996................... (0.050) -- (0.050) -- 1.000 5.09 542,586
1995................... (0.056) -- (0.056) -- 1.000 5.74 339,709
1994................... (0.039) -- (0.039) -- 1.000 3.95 321,465
1993................... (0.029) -- (0.029) -- 1.000 2.94 234,088
1992................... (0.036) -- (0.036) -- 1.000 3.63 190,246
HARTFORD ADVISERS FUND,
INC.
For the Year Ended
December 31, 1997.... (0.055) (0.098) (0.153) 0.358 2.527 24.51 8,283,912
1996................... (0.059) (0.044) (0.103) 0.211 2.169 16.62 5,879,529
1995................... (0.064) (0.019) (0.083) 0.358 1.958 28.34 4,262,769
1994................... (0.054) (0.052) (0.106) (0.152) 1.600 (2.74) 3,034,034
1993................... (0.050) (0.069) (0.119) 0.076 1.752 12.25 2,426,550
1992................... (0.059) (0.043) (0.102) 0.027 1.676 8.30 985,747
HARTFORD CAPITAL
APPRECIATION FUND, INC.
For the Year Ended
December 31, 1997.... (0.022) (0.296) (0.318) 0.496 4.410 22.34 4,802,992
1996................... (0.025) (0.228) (0.253) 0.424 3.914 20.70 3,386,670
1995................... (0.030) (0.155) (0.185) 0.630 3.490 30.25 2,157,892
1994................... (0.011) (0.262) (0.273) (0.192) 2.860 2.50 1,158,644
1993................... (0.003) (0.108) (0.111) 0.418 3.052 20.80 778,904
1992................... (0.008) (0.361) (0.369) 0.027 2.634 16.98 300,373
HARTFORD MORTGAGE
SECURITIES FUND, INC.
For the Year Ended
December 31, 1997.... (0.065) -- (0.065) 0.028 1.084 9.01 325,702
1996................... (0.066) -- (0.066) (0.015) 1.056 4.99 325,495
1995................... (0.068) -- (0.068) 0.087 1.071 16.17 327,565
1994................... (0.068) (0.005) (0.073) (0.091) 0.984 (1.61) 304,147
1993................... (0.071) -- (0.071) (0.004) 1.075 6.31 365,198
1992................... (0.086) -- (0.086) (0.036) 1.079 4.64 258,711
HARTFORD INDEX FUND, INC.
For the Year Ended
December 31, 1997.... (0.035) (0.196) (0.231) 0.496 2.878 32.61 1,123,455
1996................... (0.044) (0.039) (0.083) 0.354 2.382 22.09 621,065
1995................... (0.044) (0.001) (0.045) 0.506 2.028 36.55 318,253
1994................... (0.038) -- (0.038) (0.024) 1.522 0.94 157,660
1993................... (0.035) -- (0.035) 0.096 1.546 9.12 140,396
1992................... (0.033) -- (0.033) 0.060 1.450 6.82 82,335
HARTFORD INTERNATIONAL
OPPORTUNITIES FUND,
INC.
For the Year Ended
December 31, 1997.... (0.012) (0.104) (0.116) (0.113) 1.294 0.34 1,092,946
1996................... (0.025) (0.037) (0.062) 0.101 1.407 12.91 996,543
1995................... (0.020) (0.011) (0.031) 0.130 1.306 13.93 686,475
1994................... (0.016) -- (0.016) (0.039) 1.176 (1.94) 563,765
1993................... (0.009) -- (0.009) 0.298 1.215 33.73 281,608
1992................... (0.013) -- (0.013) (0.056) 0.917 (4.43) 47,560
HARTFORD DIVIDEND AND
GROWTH FUND, INC.
For the Year Ended
December 31, 1997.... (0.031) (0.044) (0.075) 0.405 1.952 31.89 1,994,653
1996................... (0.034) (0.028) (0.062) 0.230 1.547 22.91 879,980
1995................... (0.033) -- (0.033) 0.323 1.317 36.37 265,070
From inception, March
8, 1994, through
December 31, 1994.... (0.024) (0.001) (0.025) (0.006) 0.994 1.60(6) 55,066
HARTFORD INTERNATIONAL
ADVISERS FUND, INC.
For the Year Ended
December 31, 1997.... (0.050) (0.004) (0.054) 0.008 1.175 5.52 207,582
1996................... (0.051) (0.024) (0.075) 0.058 1.167 12.25 104,486
From inception, March
1, 1995, through
December 31, 1995.... (0.030) (0.017) (0.047) 0.109 1.109 13.24(6) 31,264
HARTFORD SMALL COMPANY
FUND, INC.
For the Year Ended
December 31, 1997.... (0.001) (0.062) (0.063) 0.133 1.202 18.38 210,769
From inception, August
9, 1996, through
December 31, 1996.... (0.002) -- (0.002) 0.069 1.069 7.15(6) 42,812
HARTFORD MIDCAP FUND,
INC.
From inception, July
15, 1997, through
December 31, 1997.... (0.001) -- (0.001) 0.137 1.137 13.81(6) 27,589
<CAPTION>
RATIO OF
RATIO OF NET
OPERATING INVESTMENT AVERAGE
EXPENSES INCOME PORTFOLIO COMMISSION
TO AVERAGE TO AVERAGE TURNOVER RATE
NET ASSETS NET ASSETS RATE PAID(2)
------------- ------------- --------- ----------
<S> <C> <C> <C> <C>
HARTFORD BOND FUND, INC.
For the Year Ended
December 31, 1997.... 0.51% 6.58% 112.9%(5) N/A
1996................... 0.52 6.37 212.0 N/A
1995................... 0.53 6.51 215.0 --
1994................... 0.55 6.23 328.8 --
1993................... 0.57 5.93 494.3 --
1992................... 0.64 7.21 434.1 --
HARTFORD STOCK FUND, INC.
For the Year Ended
December 31, 1997.... 0.45 1.11 31.6 $0.0531
1996................... 0.46 1.59 42.3 0.0490
1995................... 0.48 2.23 52.9 --
1994................... 0.50 2.17 63.8 --
1993................... 0.53 1.86 69.0 --
1992................... 0.57 1.90 69.8 --
HVA MONEY MARKET FUND,
INC.
For the Year Ended
December 31, 1997.... 0.44 5.21 -- N/A
1996................... 0.44 5.04 -- N/A
1995................... 0.45 5.57 -- --
1994................... 0.47 3.99 -- --
1993................... 0.48 2.91 -- --
1992................... 0.53 3.60 -- --
HARTFORD ADVISERS FUND,
INC.
For the Year Ended
December 31, 1997.... 0.63 2.44 36.1 0.0529
1996................... 0.63 2.92 53.8 0.0487
1995................... 0.65 3.57 63.5 --
1994................... 0.65 3.34 60.0 --
1993................... 0.69 3.07 55.3 --
1992................... 0.78 3.55 72.8 --
HARTFORD CAPITAL
APPRECIATION FUND, INC.
For the Year Ended
December 31, 1997.... 0.64 0.44 57.6 0.0588
1996................... 0.65 0.60 85.4 0.0665
1995................... 0.68 0.95 78.6 --
1994................... 0.72 0.40 73.3 --
1993................... 0.76 0.12 91.4 --
1992................... 0.87 0.36 100.3 --
HARTFORD MORTGAGE
SECURITIES FUND, INC.
For the Year Ended
December 31, 1997.... 0.45 6.60 46.5(5) N/A
1996................... 0.45 6.67 201.0 N/A
1995................... 0.47 6.50 489.4 --
1994................... 0.48 6.65 365.7 --
1993................... 0.49 6.49 183.4 --
1992................... 0.56 7.96 277.2 --
HARTFORD INDEX FUND, INC.
For the Year Ended
December 31, 1997.... 0.39 1.52 5.7 0.0230
1996................... 0.39 2.07 19.3 0.0500
1995................... 0.39 2.46 1.5 --
1994................... 0.45 2.50 1.8 --
1993................... 0.49 2.36 0.8 --
1992................... 0.60 2.48 1.2 --
HARTFORD INTERNATIONAL
OPPORTUNITIES FUND,
INC.
For the Year Ended
December 31, 1997.... 0.77 1.48 72.7 0.0037
1996................... 0.79 1.74 70.0 --
1995................... 0.86 1.60 55.6 --
1994................... 0.85 1.42 46.4 --
1993................... 1.00 0.84 31.8 --
1992................... 1.23 1.40 25.1 --
HARTFORD DIVIDEND AND
GROWTH FUND, INC.
For the Year Ended
December 31, 1997.... 0.68 2.21 34.2 0.0543
1996................... 0.73 2.52 56.9 0.0715
1995................... 0.77 2.91 41.4 --
From inception, March
8, 1994, through
December 31, 1994.... 0.83(1) 3.52(1) 27.8 --
HARTFORD INTERNATIONAL
ADVISERS FUND, INC.
For the Year Ended
December 31, 1997.... 0.87 3.08 162.5 0.0045
1996................... 0.96 3.24 95.2 0.0064
From inception, March
1, 1995, through
December 31, 1995.... 0.65(1)(3) 3.36(1)(3) 47.2 --
HARTFORD SMALL COMPANY
FUND, INC.
For the Year Ended
December 31, 1997.... 0.77 0.08 222.2 0.412
From inception, August
9, 1996, through
December 31, 1996.... 0.72(1)(3) 0.31(1)(3) 31.8 0.0290
HARTFORD MIDCAP FUND,
INC.
From inception, July
15, 1997, through
December 31, 1997.... 0.46(1)(3) 0.45(1)(3) 46.1 0.0247
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-51
<PAGE>
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF HARTFORD BOND FUND, INC.,
HARTFORD STOCK FUND, INC.,
HVA MONEY MARKET FUND, INC., HARTFORD ADVISERS FUND, INC., HARTFORD CAPITAL
APPRECIATION FUND, INC.,
HARTFORD MORTGAGE SECURITIES FUND, INC., HARTFORD INDEX FUND, INC., HARTFORD
INTERNATIONAL OPPORTUNITIES FUND, INC.,
HARTFORD DIVIDEND AND GROWTH FUND, INC., HARTFORD INTERNATIONAL ADVISERS FUND,
INC.,
HARTFORD SMALL COMPANY FUND, INC. AND HARTFORD MIDCAP FUND, INC.:
We have audited the accompanying statements of net assets of Hartford Bond
Fund, Inc., Hartford Stock Fund, Inc., HVA Money Market Fund, Inc., Hartford
Advisers Fund, Inc., Hartford Capital Appreciation Fund, Inc., Hartford
Mortgage Securities Fund, Inc., Hartford Index Fund, Inc., Hartford
International Opportunities Fund, Inc., Hartford Dividend and Growth Fund,
Inc., Hartford International Advisers Fund, Inc., Hartford Small Company Fund,
Inc. and Hartford MidCap Fund, Inc. (all Maryland corporations) (the Funds) as
of December 31, 1997, and the related statement of operations for the year then
ended (except for Hartford MidCap Fund, Inc., which reflects the period from
inception, July 15, 1997, to December 31, 1997), the statements of changes in
net assets for each of the two years in the period then ended (except for
Hartford Small Company Fund, Inc., which reflects the year ended December 31,
1997 and the period from inception, August 9, 1996, to December 31, 1996, and
Hartford MidCap Fund, Inc., which reflects the period from inception, July 15,
1997, to December 31, 1997) and the financial highlights for each of the six
years in the period then ended (except for Hartford Dividend and Growth Fund,
Inc., which reflects the three years ended December 31, 1997 and the period
from inception, March 8, 1994, to December 31, 1994, Hartford International
Advisers Fund, Inc., which reflects the two years ended December 31, 1997 and
the period from inception, March 1, 1995, to December 31, 1995, the Hartford
Small Company Fund, Inc., which reflects the year ended December 31, 1997 and
the period from inception, August 9, 1996, to December 31, 1996, and the
Hartford MidCap Fund, Inc., which reflects the period from inception, July 15,
1997, to December 31, 1997). These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian bank. 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 audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Hartford Bond Fund, Inc., Hartford Stock Fund, Inc., HVA Money Market Fund,
Inc., Hartford Advisers Fund, Inc., Hartford Capital Appreciation Fund, Inc.,
Hartford Mortgage Securities Fund, Inc., Hartford Index Fund, Inc., Hartford
International Opportunities Fund, Inc., Hartford Dividend and Growth Fund,
Inc., Hartford International Advisers Fund, Inc., Hartford Small Company Fund,
Inc., and Hartford MidCap Fund, Inc. as of December 31, 1997, the results of
their operations for the year then ended (except for Hartford MidCap Fund,
Inc., which reflects the period from inception, July 15, 1997, to December 31,
1997), the changes in their net assets for each of the two years in the period
then ended (except for Hartford Small Company Fund, Inc., which reflects the
period from inception, August 9, 1996, to December 31, 1996 and the year ended
December 31, 1997 and Hartford MidCap Fund, Inc., which reflects the period
from inception, July 15, 1997, to December 31, 1997) and the financial
highlights for each of the six years in the period then ended (except for
Hartford Dividend and Growth Fund, Inc., which reflects the three years ended
December 31, 1997 and the period from inception, March 8, 1994, to December 31,
1994, Hartford International Advisers Fund, Inc., which reflects the two years
ended December 31, 1997 and the period from inception, March 1, 1995, to
December 31, 1995, Hartford Small Company Fund, Inc., which reflects the year
ended December 31, 1997 and the period from inception, August 9, 1996, to
December 31, 1996 and Hartford MidCap Fund, Inc., which reflects the period
from inception, July 15, 1997 to December 31, 1997), in conformity with
generally accepted accounting principles.
Hartford, Connecticut
February 16, 1998 ARTHUR ANDERSEN LLP
MF-52
<PAGE>
- ------------------------------------------------------------------------------
Hartford Life Insurance Companies BULK RATE
P.O. Box 2999 U.S. POSTAGE
Hartford, CT 06104-2999 PAID
PERMIT #20
HOLLISTON, MA
01746
HV-2232-0
-Registered
Printed in U.S.A. Trademark- 1997 The Hartford, Hartford, CT 06115
