<PAGE>
[LOGO]
1998
SEMI ANNUAL
REPORT
- - MANAGER
DISCUSSIONS
- - FINANCIALS
<PAGE>
HARTFORD
SMALL COMPANY HLS FUND
PORTFOLIO MANAGER
[PHOTO]
MARK S. WATERHOUSE
Vice President
Wellington Management Company, LLP
PERFORMANCE OVERVIEW
[GRAPH]
8/9/96 - 6/30/98
GROWTH OF A $10,000 INVESTMENT.
Small Company Fund Russell 2000
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
RETURNS (AS OF 6/30/98)
Cumulative Returns Annualized Returns
------------------ ------------------
YTD 1 YEAR SINCE INCEPTION
<S> <C> <C> <C>
Small Co 8.89% 16.68% 18.63%
Russell 2000 4.93% 16.51% 20.89%
- -------------------------------------------------------------------------------
</TABLE>
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE SMALL COMPANY HLS FUND
(THE 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.
HOW DID THE FUND PERFORM?
The Hartford Small Company HLS Fund outperformed its Lipper peer group
year-to-date for the period ended June 30, 1998. The Fund returned 8.9% versus
7.1% for the Lipper Small Company VA-UF Average, placing the Fund in the second
quartile of performance for funds in the group.
WHY DID THE FUND PERFORM THIS WAY?
A theme that has been present for the past year continued; investors want
exposure to the US market but they also want liquidity due to the fear of a
slowdown is the US economy. As a result, large capitalization stocks have
dramatically outperformed smaller names. Nonetheless, the stock selections made
in the Fund focused on companies with strong fundamentals, such as THE LEARNING
COMPANY, and ADC TELECOMMUNICATIONS, and have resulted in competitive relative
performance.
WHAT IS YOUR OUTLOOK FOR THE REST OF 1998?
The US economy remains healthy, led by strong consumer demand. However, a
widening trade gap, a strong US dollar, and continued weakness in the Asian
economies should result in a slowing of the economy in 1999. In this
environment, we believe that winners will be in the energy and technology
stocks. As such, we will try to opportunistically increase the Fund's exposure
to these areas. In terms of stock selection, we will try to find great small
companies and buy them below their intrinsic value.
<PAGE>
HARTFORD
CAPITAL APPRECIATION HLS FUND
PORTFOLIO MANAGER
[PHOTO]
SAUL J. PANNELL, CFA
Senior Vice President and Partner
Wellington Management Company, LLP
PERFORMANCE OVERVIEW
[GRAPH]
1/1/88 - 6/30/98
GROWTH OF A $10,000 INVESTMENT.
Capital Appreciation Fund S&P 500
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
RETURNS (AS OF 6/30/98)
Cumulative Returns Annualized Returns
------------------ ------------------
YTD 1 YEAR 5 YEAR 10 YEAR
<S> <C> <C> <C> <C>
Cap App 11.82% 19.41% 19.04% 17.96%
S&P 500 17.72% 30.17% 23.06% 18.54%
- -------------------------------------------------------------------------------
</TABLE>
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE CAPITAL APPRECIATION HLS
FUND. (THE 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.
HOW DID THE FUND PERFORM?
The Hartford Capital Appreciation HLS Fund underperformed its Lipper peer group
for the period year-to-date ended June 30, 1998. The Fund returned 11.8% versus
15.6% for the Lipper Capital Appreciation VA-UF Average. However, over longer
periods the Fund outperforms the Lipper Capital Appreciation VA-UF Average. The
five year annualized return ended 6/30/98 is 19.0% versus 18.6% for the Lipper
Capital Appreciation VA-UF Average.
WHY DID THE FUND PERFORM THIS WAY?
We began the year by finding gains in a handful of companies across sectors such
as finance, telecommunications and retail, and by reducing our overall foreign
stock exposure in light of the Asian crisis. As we moved into the second
quarter, large cap growth was clearly the place to be in the US equity market.
The S&P 500 Index exceeded the Russell 2000 Index by a whopping 8 percent and
within the large cap sector, growth stocks outperformed value by over 4 percent.
The Fund's performance was negatively impacted by a combination of factors
including 1) an emphasis on smaller companies, 2) a tilt toward value versus
growth, and 3) tactical security selection bets that went against us. Strong
performers over the six month period included AMERICA ONLINE and THE LEARNING
COMPANY.
WHAT IS YOUR OUTLOOK FOR THE REST OF 1998?
Our overall strategy for the Fund remains duel faceted. We maintain an emphasis
on smaller companies with dynamic earnings growth prospects, and couple that
with an opportunistic trading approach to larger cap stocks where we typically
see a catalyst for outperformance. Following a period of underperformance as we
now have experienced, the temptation is to alter the Fund's approach by moving
closer to the large cap growth paradigm which has dominated the US equity market
over the past year. In our view, however, the real risk now is to chase what
worked yesterday and be poorly positioned for a positioned rebound in small and
mid cap stocks.
<PAGE>
HARTFORD
MIDCAP HLS FUND
PORTFOLIO MANAGER
[PHOTO]
PHILLIP H. PERELMUTER
Vice President
Wellington Management Company, LLP
PERFORMANCE OVERVIEW
[GRAPH]
7/15/97 - 6/30/98
GROWTH OF A $10,000 INVESTMENT.
MidCap Fund S&P 400
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
RETURNS (AS OF 6/30/98)
Cumulative
-----------------------------
YTD SINCE INCEPTION
<S> <C> <C>
MidCap 17.64% 33.89%
S&P 400 8.63% 20.28%
- -------------------------------------------------------------------------------
</TABLE>
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE MID CAP HLS FUND. (THE
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.
HOW DID THE FUND PERFORM?
The Hartford MidCap HLS Fund outperformed its Lipper peer group year-to-date for
the period ended June 30, 1998. The Fund provided a total return of 17.6%
versus 13.4% for the Lipper Mid Cap VA-UF Average, placing the Fund in the
second quartile of performance for funds in the group.
WHY DID THE FUND PERFORM THIS WAY?
Despite the fact that mid cap stocks have grown their earnings faster than large
cap stocks over the past five years, investors' preference for stability,
liquidity, and safety in a slowing economic environment drove large cap
outperformance for the last year. There were several changes to the Fund's
industry weights during the six month period that contributed to positive
returns relative to competitors. Overall, the strong performance was led by our
stock selection in the technology sector. Many technology stocks did well as
the slowing pace of overall earnings growth made their year over year growth
numbers stand out. Additionally, computer service and software companies are
seeing demand accelerate due to the Year 2000 crunch, a continuation of the
outsourcing trend, and a shortage of information technology employees. Two of
our recent purchases, AMERICAN TOWER and SFX ENTERTAINMENT did well as they were
up over 20% and 40%, respectively in the second quarter.
WHAT IS YOUR OUTLOOK FOR THE REST OF 1998?
The Fund consists of high quality mid cap companies "on the verge of greatness"
within our five sectors of opportunity: consumer products, finance, health
care, services, and technology. The outlook for the type of mid cap companies
that we buy for the Fund is good. These high quality, market leading mid cap
growth companies which have minimal overseas exposure should fare relatively
well during a period of modest growth in the United States and turbulence
outside the United States.
<PAGE>
HARTFORD
INTERNATIONAL OPPORTUNITIES HLS FUND
LEAD PORTFOLIO MANAGER
[PHOTO]
TROND SKRAMSTAD
Senior Vice President and Partner
Wellington Management Company, LLP
PERFORMANCE OVERVIEW
[GRAPH]
7/2/90 - 6/30/98
GROWTH OF A $10,000 INVESTMENT.
International Opportunities Fund EAFE GDP
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
RETURNS (AS OF 6/30/98)
Cumulative Returns Annualized Returns
------------------ ---------------------
YTD 1 YEAR 5 YEAR SINCE INCEP.
<S> <C> <C> <C> <C>
Int'l Opp 16.73% 6.22% 12.45% 8.23%
EAFE GDP* 21.88% 15.14% 12.74% 8.22%
- -------------------------------------------------------------------------------
</TABLE>
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE INTERNATIONAL
OPPORTUNITIES HLS FUND. (THE 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
HOW DID THE FUND PERFORM?
The Hartford International Opportunities HLS Fund outperformed its Lipper peer
group year-to-date for the period ended June 30, 1998. The Fund returned 16.7%
versus 16.3% for the Lipper International VA-UF Average, placing the Fund in the
second quartile of performance for funds in the group.
WHY DID THE FUND PERFORM THIS WAY?
Overall, Europe showed strong performance and the Fund continued to benefit as a
result of its large, overweight position in that region. Also a benefit was our
underweight position in Asia where virtually every market in the region took a
turn for the worse after having seen a short but unsustainable bounce at the
beginning of the year.
WHAT IS YOUR OUTLOOK FOR THE REST OF 1998?
Europe remains the Fund's major area of exposure, and Japan remains the area
that is most significantly underweighted versus international benchmarks. In
all markets, we take a "fundamental research" approach, seeking stocks that are
attractively valued relative to their long-term prospects for growth. We
continue to feel that Europe shows the most promise for continued economic
growth and profit improvement. While there are many companies in Japan and the
rest of the Asia Pacific region that are attractively valued relative to
companies in other regions, we do not believe that the region has turned the
corner yet and feel that the investment risks outweigh the prospective rewards
at this time.
<PAGE>
HARTFORD
STOCK HLS FUND
PORTFOLIO MANAGER
[PHOTO]
RAND L. ALEXANDER, CFA
Senior Vice President and Partner
Wellington Management Company, LLP
PERFORMANCE OVERVIEW
[GRAPH]
1/1/88 - 6/30/98
GROWTH OF A $10,000 INVESTMENT.
Stock Fund S&P 500
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
RETURNS (AS OF 6/30/98)
Cumulative Returns Annualized Returns
------------------ ------------------
YTD 1 YEAR 5 YEAR 10 YEAR
<S> <C> <C> <C> <C>
Stock 21.36% 30.62% 23.34% 17.52%
S&P 500 17.72% 30.17% 23.06% 18.54%
- -------------------------------------------------------------------------------
</TABLE>
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE STOCK HLS FUND. (THE
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.
HOW DID THE FUND PERFORM?
The Hartford Stock HLS Fund outperformed its Lipper peer group during the
year-to-date period ended 6/30/98. The Fund provided a total return of 21.4%
versus 16.2% for the Lipper Growth VA-UF Average, placing the Fund in the first
quartile of performance for funds in the group.
WHY DID THE FUND PERFORM THIS WAY?
Overall, the Fund's performance over the last six month period was helped by
favorable sector weightings and strong stock selection. We continued to
emphasize predictable growth companies where results would not be seriously
damaged by the slowdown in the Pacific Rim. Our emphasis on less cyclical
companies in areas such as health care and household products, and our
overweights in financials and technology, continued to produce good results
through the first half of 1998.
WHAT IS YOUR OUTLOOK FOR THE REST OF 1998?
While concerns have surfaced about valuations as a result of the strong
performance of the US equity market during the first half of the year, we
continue to remain optimistic about the outlook. The economy seems to be
slowing at just the right time to prevent the Fed from raising interest rates.
Employment levels are extremely favorable. Inflation remains low and well under
control. US consumers are benefiting from lower priced Asian imports, low
interest rates and falling commodity prices. The Federal budget is in surplus.
US companies are gaining access to areas of the world that promise excellent
earnings growth over time. Mutual fund cash flows remain strong. The bond
market has started to provide support for higher multiples as yields move lower.
While this may all sound too good to be true, the fact is that it is true and we
see no reason why this should change anytime soon.
<PAGE>
HARTFORD
GROWTH AND INCOME HLS FUND
PORTFOLIO MANAGER
[PHOTO]
JAMES A. RULLO, CFA
Vice President
Wellington Management Company, LLP
PERFORMANCE OVERVIEW
[GRAPH]
6/1/98 - 6/30/98
GROWTH OF A $10,000 INVESTMENT.
Growth & Income Fund S&P 500
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
RETURNS (AS OF 6/30/98)
Cumulative Returns
------------------------------
1 YEAR SINCE INCEPTION
<S> <C> <C>
Growth & Income N/A 4.06%
S&P 500 N/A 4.06%
- -------------------------------------------------------------------------------
</TABLE>
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE GROWTH AND INCOME HLS
FUND. (THE 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.
HOW DID THE FUND PERFORM?
The Hartford Growth and Income HLS Fund outperformed its Lipper peer group for
the one month period ended June 30, 1998. The Fund returned 4.1% versus 1.5%
for the Lipper Growth & Income VA-UF Average.
WHY DID THE FUND PERFORM THIS WAY?
While it is early to comment on performance, in the inaugural months, the Fund
is competing well in its Lipper universe. The US equity market continued its
upward trend, but at a slower pace and with a very narrow focus. Large-cap
growth stocks provided almost all of the gains. Several of the Fund's top
performing names were in the technology sector, such as COMPUTER SCIENCES,
MICROSOFT and DELL COMPUTER. Another sector which helped performance was
retailing; strong US economic growth continues to bolster companies like GAP,
HOME DEPOT and WAL-MART. Weakness in oil prices continues to plague our energy
service companies such as FRIEDE GOLDMAN and HELMERICH & PAYNE. These are good
companies in a difficult environment, and we have added to them during the price
declines.
WHAT IS YOUR OUTLOOK FOR THE REST OF 1998?
With the economy showing more obvious signs of slowing, and consumer spending
likely to have more staying power than business investment, we expect to keep
the Fund's moderate sector and industry emphasis on finance, consumer
discretionary, and utilities. We'll reduce emphasis on most cyclical areas, as
well as the more richly valued drug and consumer staples stocks.
<PAGE>
HARTFORD
DIVIDEND AND GROWTH HLS FUND
PORTFOLIO MANAGER
[PHOTO]
LAURIE A. GABRIEL, CFA
Senior Vice President and Partner
Wellington Management Company, LLP
PERFORMANCE OVERVIEW
[GRAPH]
3/9/94 - 6-30/98
GROWTH OF A $10,000 INVESTMENT.
Dividend & Growth Fund S&P 500
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
RETURNS (AS OF 6/30/98)
Cumulative Returns Annualized Returns
------------------ ------------------
YTD 1 YEAR SINCE INCEPTION
<S> <C> <C> <C>
Div & Grow 10.93% 22.38% 23.68%
S&P 500 17.72% 30.17% 23.85%
- -------------------------------------------------------------------------------
</TABLE>
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE DIVIDEND AND GROWTH HLS
FUND. (THE 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.
HOW DID THE FUND PERFORM?
The Hartford Dividend and Growth HLS Fund outperformed its Lipper peer group
year-to-date for the period ended June 30, 1998. The Fund provided a total
return of 10.9% versus 10.6% for the Lipper Equity Income VA-UF Average, placing
the Fund in the second quartile of performance for funds in the group.
WHY DID THE FUND PERFORM THIS WAY?
The health care industry was an area of strength for the Fund due to positive
stock selection, with strong performance from names such as Warner-Lambert and
American Home Products. The finance sector was initially a drag on performance
at the beginning of the year, yet CITICORP ultimately helped performance, as did
MARSH & MCLELLAN. During the second quarter, large capitalization stocks
outperformed small cap stocks by almost 8% and growth outperformed value by more
than 4%. Therefore, the Fund's large capitalization focus was a positive, while
the strength in growth-oriented securities was a detriment given our value
orientation.
WHAT IS YOUR OUTLOOK FOR THE REST OF 1998?
Broad diversification across economic sectors is an ongoing part of the Fund's
approach. Since our focus is on stock selection, the sector representation will
be fairly stable over time. The competitive pricing environment brought on by
the deteriorating economic conditions in Asia and the rising US dollar exchange
rate should ensure a very low inflation rate for the year. As a result, we
believe the Fund is well-positioned going forward given its emphasis on less
cyclical companies in areas such as health care and household products with
above-average yields, below average price-to-earnings ratios and risk.
<PAGE>
HARTFORD
INTERNATIONAL ADVISERS HLS FUND
PORTFOLIO MANAGER
[PHOTO]
ROBERT EVANS
Vice President
Wellington Management Company, LLP
[PHOTO]
TROND SKRAMSTAD
Senior Vice President and Partner
Wellington Management Company, LLP
PERFORMANCE OVERVIEW
[GRAPH]
3/1/95 - 6/30/98
GROWTH OF A $10,000 INVESTMENT.
International Advisers Fund EAFE GDP
Salomon World Government Bond ex-US Index
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
RETURNS (AS OF 6/30/98)
Cumulative Returns Annualized Returns
------------------ ------------------
YTD 1 YEAR SINCE INCEP.
<S> <C> <C> <C>
Int'l Adv 12.67% 10.11% 13.82%
EAFE GDP 21.88% 15.14% 14.81%
Salomon 5.44% 11.89% 12.74%
- -------------------------------------------------------------------------------
</TABLE>
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE INTERNATIONAL ADVISERS HLS
FUND. (THE 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.
HOW DID THE FUND PERFORM?
The Hartford International Advisers HLS Fund underperformed its benchmark for
the six month period ended 6/30/98. The Fund provided a total return of 12.7%
versus 14.0% for the Composite Index (55% EAFE GDP Net, 35% SB World Govt non-US
Bond - hedged, 10% T-bill). However, over longer time periods the Fund
outperforms its market index.
WHY DID THE FUND PERFORM THIS WAY?
Overall, Europe showed strong performance and the Fund continued to benefit as a
result of its overweight position in the region. Also a benefit was our
underweight position in Asia where virtually every market in the region took a
turn for the worse after having seen a short but unsustainable bounce at the
beginning of the year.
WHAT IS YOUR OUTLOOK FOR THE REST OF 1998?
The historically low inflation environment across the industrialized countries
will continue to fuel positive performance in global fixed income securities.
In both the equity and bond portfolios, Europe remains the Fund's major area of
exposure, and Japan remains the area that is most significantly underweighted
versus international benchmarks. We continue to feel that Europe shows the most
promise for continued economic growth and profit improvement. In all equity
markets, we take a fundamental research approach, seeking stocks that are
attractively valued relative to their long-term prospects for growth. The bond
portfolio continues to be predominantly invested in intermediate and long
maturity fixed income securities with an average credit rating of AA+.
<PAGE>
HARTFORD
ADVISERS HLS FUND
PORTFOLIO MANAGERS
[PHOTO]
RAND L. ALEXANDER, CFA
Senior Vice President and Partner
Wellington Management Company, LLP
[PHOTO]
PAUL D. KAPLAN
Senior Vice President and Partner
Wellington Management Company, LLP
PERFORMANCE OVERVIEW
[GRAPH]
1/1/88 - 6/30/98
GROWTH OF A $10,000 INVESTMENT.
Advisers Fund S&P 500 Lehman Govt/Corp
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
RETURNS (AS OF 6/30/98)
Cumulative Returns Annualized Returns
------------------ ------------------
YTD 1 YEAR 5 YEAR 10 YEAR
<S> <C> <C> <C> <C>
Advisers 15.44% 23.90% 17.47% 14.38%
S&P 500 17.72% 30.17% 23.06% 18.54%
Lehman G/C 4.17% 11.28% 6.88% 9.10%
- -------------------------------------------------------------------------------
</TABLE>
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE ADVISERS HLS FUND. (THE
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.
HOW DID THE FUND PERFORM?
The Hartford Advisers HLS Fund outperformed its Lipper peer group during the
period year-to-date ended 6/30/98. The Fund provided a total return of 15.4%
versus 9.7% for the Lipper Flexible VA-UF Average, placing the Fund in the first
quartile of performance for funds in the group.
WHY DID THE FUND PERFORM THIS WAY?
The reasons for the strong performance of the Fund relative to competitors for
the six month period are twofold. First, the equity portion of the Fund has
achieved significantly greater total return than the competition and, second,
the Fund's equity ratio has been high during a period of strong equity markets.
Although the bond portion of the Fund has performed well, the keys to
performance have been in the equity portion and in the asset allocation (63%
stocks, 33% bonds and 4% cash as of 6/30/98).
WHAT IS YOUR OUTLOOK FOR THE REST OF 1998?
We have felt for some time that the direction of bond yields was downward, and
we have positioned the Fund's fixed income portfolio with longer-than-benchmark
duration in order to take advantage of any interest rate decline. In addition,
we have limited our holdings of mortgage-backed securities and corporate bonds
given their stretched valuations. While concerns have surfaced about valuations
as a result of the strong performance of the US equity market during the first
half of the year, we continue to remain optimistic about the outlook. Given the
economic environment with low inflation, low interest rates, and reasonable
economic growth, we see little reason to reduce the Funds' equity ratio. The
bull market has been a long one, but we remain comfortable with an equity ratio
in the area of 62%. We continue to prefer bonds to cash and are therefore
keeping the Funds' cash commitment quite low.
<PAGE>
HARTFORD
BOND HLS FUND
PORTFOLIO MANAGER
[PHOTO]
ALISON D. GRANGER, CFA
Senior Vice President
The Hartford Investment
Management Company (HIMCO)
PERFORMANCE OVERVIEW
[GRAPH]
1/1/88 - 6/30/98
GROWTH OF A $10,000 INVESTMENT.
Bond Income Strategy Fund Lehman Govt/Corp
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
RETURNS (AS OF 6/30/98)
Cumulative Returns Annualized Returns
------------------ ------------------
YTD 1 YEAR 5 YEAR 10 YEAR
<S> <C> <C> <C> <C>
Bond 4.28% 11.96% 7.09% 8.76%
Lehman G/C 4.17% 11.28% 6.88% 9.10%
- -------------------------------------------------------------------------------
</TABLE>
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE BOND HLS FUND. (THE
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.
HOW DID THE FUND PERFORM?
The Hartford Bond HLS Fund outperformed its Lipper peer group during the period
year-to-date ended 6/30/98. The Fund provided a total return of 4.28% versus
4.15% for the Lipper Corporate Debt "BBB" average, placing the fund in the
second quartile of performance for funds in the group.
WHY DID THE FUND PERFORM THIS WAY?
There were two major factors that contributed to the fund's performance this
quarter. The first was the Fund's duration of 6.1 years which was approximately
13% longer than its benchmark index. Yields declined between 20 and 30 basis
points during the quarter in ten-year and longer- maturity Treasuries, resulting
in price gains. High quality long-maturity corporate securities also benefited.
The Fund's overweighted position in these securities contributed positively to
returns. The second was the Fund's allocation to BB rated domestic high yield
and emerging market issues. The combination of huge new issue supply in the
domestic high yield market and Asian-induced weakness in the Emerging Markets
resulted in underperformance of these securities relative to higher quality
alternatives. We began the quarter with an underweighted position in these
assets and gradually increased the portfolio allocation to an overweighted
position at the end of the second quarter, as attractive values emerged. Second
quarter performance, however, was impacted by this allocation.
WHAT IS YOUR OUTLOOK FOR THE REST OF 1998?
High inflation-adjusted Treasury yields, the continued perceived safety of US
investments amidst recent global volatility, and the improving deficit
situation, all contribute to our expectation that Treasury securities will
continue to perform well over the course of 1998. We have added a position in
Treasury Inflation Protected Securities in to our belief that these securities
are fundamentally inexpensive, and could significantly outperform other fixed
income assets (of any quality) in the event that inflation emerges and/or real
Treasury yields decline. We continue to hold a portfolio of high average
quality in order to express our view that US Treasuries provide one of the most
attractive risk/reward profiles among the taxable fixed income asset classes.
The second quarter increase in allocation to high yield securities will provide
our shareholders with additional yield, but it is also our expectation that
these securities will perform well in the near term. Finally, we continue to
find value in fifteen-year discount mortgage passthroughs, such as FNMA Dwarf
6s, to provide additional yield, limit risk of a significant rise in
prepayments, and enhance portfolio diversification.
<PAGE>
HARTFORD
MORTGAGE SECURITIES HLS FUND
PORTFOLIO MANAGER
[PHOTO]
TIMOTHY J. WILHIDE
Senior Vice President
The Hartford Investment
Management Company (HIMCO)
PERFORMANCE OVERVIEW
[GRAPH]
1/1/88 - 6/30/98
GROWTH OF A $10,000 INVESTMENT.
Mortgage Securities Fund Lehman Mortgage Backed Securities
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
RETURNS (AS OF 6/30/98)
Cumulative Returns Annualized Returns
------------------ -------------------
YTD 1 YEAR 5 YEAR 10 YEAR
<S> <C> <C> <C> <C>
Mort. Sec. 3.35% 8.77% 6.63% 8.25%
Lehman Mort. 3.37% 8.92% 6.90% 9.03%
- -------------------------------------------------------------------------------
</TABLE>
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE MORTGAGE SECURITIES HLS
FUND. (THE 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.
HOW DID THE FUND PERFORM?
The Hartford Mortgage Securities HLS Fund outperformed its Lipper peer group
during the period year-to-date ended 6/30/98. The Fund provided a total return
of 3.35% versus 3.33% for the Lipper US Mortgage Average.
WHY DID THE FUND PERFORM THIS WAY?
In the second quarter, bond investors worried alternately over the risks of a
too hot U.S. economy and the risks of worsening financial problems in Asia.
Although this uncertainty kept yields on U.S. Treasuries within a narrow range,
it forced yield spreads to widen versus other classes of fixed income
securities.
Mortgage securities were affected by the uncertainties in the second quarter.
The sharp drop in rates caused by Asian turmoil in midwinter led to a surge of
homeowner mortgage refinancings in the spring. Mortgage security returns, as
measured by the Lehman Brothers Mortgage Securities Index, lagged those of the
Treasury and Corporate Indices on an outright basis. However, on a cash flow
adjusted or "Duration" basis, the Mortgage Index outperformed the Corporate
Index by 0.26 %.
For the second quarter, the Mortgage Securities HLS Fund earned a total return
of 1.80% compared to 1.72% for the Lehman Mortgage Index. The Fund's return was
boosted by owning, on average, slightly longer maturity securities than those in
the index and by diversifying into mortgage related paper such as high quality
Commercial Mortgage Backed Securities where business risk outweighs refinancing
risk.
WHAT IS YOUR OUTLOOK FOR THE REST OF 1998?
Looking ahead, it is our belief that the economy will slow from the rapid growth
of last winter and early spring. This suggests interest rates should stay near
current levels or perhaps fall a bit. Thus, refinancing risks are still in the
picture. We will continue to try to diversify the fund away from this risk where
reasonably possible. We will also be alert to further pressures on credit
quality arising from a slowing and will seek to adjust the Fund's credit related
holdings to minimize such risk.
<PAGE>
BB&T GROWTH & INCOME FUND
PORTFOLIO MANAGERS
RICK B. JONES, CFA
Vice President
Branch Banking & Trust, Co.
PERFORMANCE OVERVIEW
[GRAPH]
6/3/97 - 6/30/98
GROWTH OF A $10,000 INVESTMENT.
BB&T Growth & Income S&P 500
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
RETURNS (AS OF 6/30/98)
Cumulative Returns Annualized Returns
-------------------- --------------------
YTD 1 YEAR SINCE INCEP.
<S> <C> <C> <C>
BB&T G&I 5.25% 21.15% 24.25%
S&P 500 17.72% 30.17% 33.56%
- -------------------------------------------------------------------------------
</TABLE>
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE BB&T GROWTH & INCOME FUND.
(THE 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.
HOW DID THE FUND PERFORM?
The BB&T Growth & Income Fund provided a total return of 5.3% for the six-month
period ended June 30, 1998. In comparison, the Lipper Growth & Income Variable
Annuity-Underlying Fund average gained 12.2%.
WHY DID THE FUND PERFORM THIS WAY?
During the last six months, two factors drove the market. First, a very small
group of the largest growth stocks - we could count all of them on just two
hands - moved the market upward. Second, at the other end of the market, a
number of relatively small Internet stocks posted huge gains. To put a common
theme to what happened, as a group, stocks with price-to-sales ratios above 10 -
that is, very expensive stocks by traditional valuation methods - produced
average returns of 56% over the last six months. Quite simply, "value" was not
a productive theme during the period. And our style is diversified value. We
try to pay reasonable prices for the stocks of financially strong companies,
based on our assessment of future earnings or the value of a company's
underlying assets. Our goal is to achieve market returns over a full market
cycle, but with less risk. This approach has served us well in the past and we
expect it to produce satisfactory returns over the long term. Even during this
most recent period, which was difficult, we enjoyed success. As of June 30, the
portfolio's five largest holdings were: SUPERVALU, MERCK, ANHEUSER-BUSCH, ABBOTT
LABS and HARRIS CORP.
WHAT IS YOUR OUTLOOK FOR THE REST OF 1998?
We don't try to make broad economic or market calls and then use our forecasts
to buy and sell individual securities. Rather, we follow a bottom-up approach:
buying the best stocks while diversifying the portfolio across many sectors.
Being long-term investors, we stay as fully invested as possible all the time.
<PAGE>
AMSOUTH EQUITY INCOME
PORTFOLIO MANAGERS
CHRISTOPHER WILES, CFA
President
Rockhaven Asset Management
PERFORMANCE OVERVIEW
[GRAPH]
10/23/97 - 6/30/98
GROWTH OF A $10,000 INVESTMENT.
AmSouth Equity Income S&P 500
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
RETURNS (AS OF 6/30/98)
Cumulative Returns
--------------------------------
YTD SINCE INCEPTION
<S> <C> <C>
Equity Income 9.05% 11.53%
S&P 500 17.72% 20.58%
- -------------------------------------------------------------------------------
</TABLE>
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE AMSOUTH EQUITY INCOME
FUND. (THE 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.
HOW DID THE FUND PERFORM?
The AmSouth Equity Income Fund provided a total return of 9.05% for the
six-month period ended June 30, 1998. In comparison, the Lipper Equity Income
Variable Annuity-Underlying Fund average gained 10.6%.
WHY DID THE FUND PERFORM THIS WAY?
We saw a huge disparity between the different segments of the market. During
the period, large-cap growth stocks were up more than twice as much as the
large-cap value stocks we generally favor. There also was very narrow
leadership in the market, with the largest 10 stocks among the Standard & Poors
500 trading at historically excessive valuations. It's not our policy to chase
after stocks that have climbed to extreme valuation levels; consequently, we
lagged our benchmark. Our goal is to provide good market exposure at relatively
low levels of risk, and we feel we did that. Among our successes was FORD
MOTOR. FORD has taken market share from both CHRYSLER and GENERAL MOTORS and
has outearned GM; its stock has climbed roughly 80 percent during the first six
months of 1998. Another move that turned out well for us was our decision to
buy stock in MCDONALD'S late last year. MCDONALD'S was under a lot of pressure
earlier, due to the failure of their marketing efforts and an inability to
articulate a clear turnaround strategy. The company finally righted itself and
the stock was up 45 percent in the first six months of 1998.
WHAT IS YOUR OUTLOOK FOR THE REST OF 1998?
At some point - whether it's during the next six months or the six months after
that - the market will experience a serious sell-off. And when that happens, we
want to be invested in stocks that make us comfortable. So we're going to
continue doing what we've always done: buy good, solid companies run by capable
managers, companies whose stocks are inexpensive by our standards. That way, we
won't have to worry much about our downside risk.
<PAGE>
MENTOR
VIP CAPITAL GROWTH PORTFOLIO
PORTFOLIO MANAGERS
JOHN DAVENPORT, CFA
Managing Director
Mentor Investment Group
RICHARD SKEPPSTROM
Senior Vice President
Mentor Investment Group
CHRIS RUSBULDT, CFA
Vice President
Mentor Investment Group
STEVE CERTO
Vice President
Mentor Investment Group
PERFORMANCE OVERVIEW
[GRAPH]
3/3/98 - 6/30/98
GROWTH OF A $10,000 INVESTMENT.
VIP Growth Russell 2000
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CUMULATIVE RETURNS
Since Inception
---------------
<S> <C>
VIP Growth 2.00%
Russell 2000 8.59%
- -------------------------------------------------------------------------------
</TABLE>
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE MENTOR VIP GROWTH
PORTFOLIO. (THE 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.
HOW DID THE FUND PERFORM?
Since the fund inception through 6-30-98, the Mentor VIP Capital Growth
Portfolio returned 2.00%, trailing the S&P500 Index Benchmark which returned
8.59%.
WHY DID THE FUND PERFORM THIS WAY?
All of the second quarter gain for the S&P 500 came from a fairly select group
of stocks - its largest members. The index's 50 largest market value stocks
were up an average of 8.5%. These stocks make up only 10% of the companies in
the index, but more than half its weight and therefore performance. The other
450 stocks were down an average of 2.0%. Put another way, nearly 60% of the
stocks in this index declined during the quarter despite its overall 3.3% gain.
We own stocks for fundamental reasons, not according to size. We look for
reasonably valued companies with excellent management, strong financial
characteristics and sustainable above-average growth. Although we have only
about 17% of our holdings among the largest 50 names in the S&P 500, we continue
to purchase only those companies with superior operating results, strong
competitive positions, and attractive valuations on a relative basis. These
strong fundamental traits should continue to serve us well.
WHAT IS YOUR OUTLOOK FOR THE REST OF 1998?
We are fairly late into the current economic expansion. Corporate profit
margins, having expanded dramatically since 1991, are now facing typical
late-cycle pressures. Growing profit concerns are being compounded by Asian
economic troubles which are hurting demand and pricing in many industries
worldwide. According to First Call, S&P 500 earnings-per-share grew less than
4% in the first quarter and current estimates indicate similar growth will soon
be reported for the second quarter. This marks a significant slowdown from the
average 17% annual earnings growth this index registered over the prior six
years, and compares to the current 14% for our Portfolio. The key to continued
success is avoiding herd instincts and instead focusing ever more intently on
our core strategy.
<PAGE>
MENTOR
VIP INTERNATIONAL PORTFOLIO
PORTFOLIO MANAGERS
SCOTT MCGLASHAN
Far East Team Leader
Perpetual, PLC
KATHRYN LANGRIDGE
Southeast Asia Team Leader
Perpetual, PLC
STEPHEN WHITTAKER
UK Team Leader
Perpetual, PLC
MARGARET RODDAN
Europe Team Leader
Perpetual, PLC
MARK TURNER
Latin American Team Leader
Perpetual, PLC
PERFORMANCE OVERVIEW
[GRAPH]
3/3/98 - 6/30/98
GROWTH OF A $10,000 INVESTMENT.
VIP International EAFE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CUMULATIVE RETURNS
Since Inception
----------------
<S> <C>
VIP International 10.08%
EAFE 4.27%
- -------------------------------------------------------------------------------
</TABLE>
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE MENTOR PERPETUAL VIP
INTERNATIONAL PORTFOLIO. (THE 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.
HOW DID THE FUND PERFORM?
Since the fund inception through 6-30-98, the Mentor Perpetual VIP
International Portfolio returned 10.08%, outperforming the MSCI EAFE Index
benchmark which returned 4.27%
WHY DID THE FUND PERFORM THIS WAY?
International markets as a whole advanced modestly in the second quarter, as
marked by the MSCI EAFE Index, but this masks the tremendous disparity between
regional market returns. Japan started the quarter strong but ended up being
down, Asian markets fell by more than 20%, and Latin American markets also fell
by approximately 20% during the quarter. European markets, on the other hand,
were up approximately 8% for the quarter.
Our relative outperformance to our benchmark was primarily explained by our
stock selection during the quarter. At quarter-end our targeted regional
weightings were: 20% to the United Kingdom, 53% to Continental Europe, 15% to
Japan, 7% to Southeast Asia, 4% to Latin America, and 1% to Emerging Europe.
WHAT IS YOUR OUTLOOK FOR THE REST OF 1998?
We are approaching Asia with extreme caution, as it is very difficult to see any
short-term signs of recovery. The situation seems to have entered the
desperation phase of a deep bear market with years of capital gains and economic
development having been wiped out. The Japanese market appears cheap, but it
seems likely to stay that way until we see stabilization of the currency.
Europe appears less exposed than other regions to the dangers that we are seeing
in many international financial markets. Consumer growth in the peripheral
economies of Europe (Italy, Spain, Ireland, etc.) appears particularly well
established. We see the U.K. equity market as offering very modest risk, with
good support from a firm bond market, and with prospects of reasonable progress.
Latin America has been hurt by massive investment capital outflows, yet
fundamentals remain strong. With foreign investors having already reduced their
weightings to this region, the risk of a major sell-off from current levels
seems low. The recent turmoil in world markets has served to reinforce our
commitment to our regional team approach and focus on high-quality companies
with solid fundamentals.
<PAGE>
PORTFOLIO MANAGERS
TED PRICE, CFA
Managing Director
Mentor Investment Group
LINDA ZIGLAR, CFA
Managing Director
Mentor Investment Group
JEFF DRUMMOND
Senior Vice President
Mentor Investment Group
PERFORMANCE OVERVIEW
[GRAPH]
3/3/98 - 6/30/98
GROWTH OF A $10,000 INVESTMENT.
VIP Growth Russell 2000
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CUMULATIVE RETURNS
Since Inception
---------------
<S> <C>
VIP Growth -7.12%
Russell 2000 -0.73%
- -------------------------------------------------------------------------------
</TABLE>
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE MENTOR VIP GROWTH
PORTFOLIO. (THE 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.
HOW DID THE FUND PERFORM?
Since the fund inception through 6-30-98, the Mentor VIP Growth Portfolio
returned -7.12%, lagging the Russell 2000 Index benchmark which returned -0.73%.
WHY DID THE FUND PERFORM THIS WAY?
The portfolio's underperformance during the second quarter was due to several
factors. On average, large capitalization stocks outperformed small
capitalization stocks for the period. This hurt our performance relative to
some of our peers who have allowed the average market capitalization of their
holdings to increase significantly in recent years. The Mentor VIP Growth
Portfolio currently maintains a median market capitalization of under $500
million and a weighted average market capitalization of less than $1 billion,
making it a true small capitalization fund. As compared to the Russell 2000
Index, our relative sector overweightings in health care and technology and
underweighting in finance contributed to our underperformance for the period.
WHAT IS YOUR OUTLOOK FOR THE REST OF 1998?
The current level of relative small capitalization undervaluation when compared
to larger capitalization names (as represented by the S&P 500) has not been seen
since the market lows of 1991. This has occurred despite the fact that
according to I/B/E/S the one-year-forward earnings growth rates of small and mid
- - capitalization companies, as represented by those held in the Mentor VIP
Growth Portfolio, are projected at 35% versus 6.5% for the S&P 500.
Investors seem concerned about a market correction possibly brought on by the
spread of the malaise in the Far East and apparently prefer to be in highly
liquid stocks even if they are overvalued, rather than hold less liquid but
substantially cheaper small capitalization names. Acquisitions should continue
to be engines for growth for many small capitalization companies as they fill in
product lines or expand product offerings. We believe that the current relative
undervaluation of small capitalization equities is not merited, particularly
given their historically above average growth rates.
<PAGE>
Performance Summary of Hartford HLS Mutual Funds
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUNDS
TOTAL RETURNS FOR THE YEAR ENDED DECEMBER 31,
1998(A) 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Fund.......... 21.36% 31.38% 24.37% 34.10% (1.89)% 14.34% 10.04% 24.58% (3.87)% 26.02% 19.00% 5.41% 12.33%
Bond Fund........... 4.28 11.35 3.52 18.49 (3.95) 10.24 5.53 16.43 8.39 12.10 7.60 (0.01) 12.19
Money Market Fund... 2.63 5.31 5.19 5.74 3.95 2.94 3.63 6.01 8.09 9.10 7.40 6.49 6.77
Advisers Fund....... 15.44 24.51 16.59 28.34 (2.74) 12.25 8.30 20.33 1.26 21.72 14.24 6.08 12.70
Capital Appreciation
Fund............... 11.82 22.34 20.70 30.25 2.50 20.80 16.98 53.99 (10.90) 24.11 26.37 (4.31) 9.03
Mortgage Securities
Fund............... 3.35 9.01 5.07 16.17 (1.61) 6.31 4.64 14.71 9.70 13.13 8.38 2.64 11.13
Index Fund.......... 17.46 32.61 22.09 36.55 0.94 9.12 6.82 29.53 (3.99) 30.47 16.35 (12.91)* --
International
Opportunities
Fund............... 16.73 0.34 12.93 13.93 (1.94) 33.73 (4.43) 13.00 (11.76)* -- -- -- --
Dividend and Growth
Fund............... 10.93 31.89 22.91 36.37 1.96* -- -- -- -- -- -- -- --
International
Advisers Fund...... 12.67 5.52 11.79 15.84* -- -- -- -- -- -- -- -- --
Small Company
Fund............... 8.89 18.38 7.15* -- -- -- -- -- -- -- -- -- --
MidCap Fund......... 17.64 13.81* -- -- -- -- -- -- -- -- -- -- --
Growth & Income
Fund............... 4.06* -- -- -- -- -- -- -- -- -- -- -- --
MARKET INDICES
Standard & Poor's
500 Stock Index.... 17.70% 33.35% 22.95% 37.52% 1.31% 10.06% 7.61% 30.39% (3.11)% 31.62% 16.60% 5.49% 18.66%
Standard & Poor's
400 Stock Index
(MidCap)........... 8.63 32.25 19.18 30.88 (3,59) 11.03 7.58 16.13 8.28 14.24 7.58 2.29 15.62
Shearson Lehman
Government/Corporate
Bond Index......... 4.17 9.76 2.90 19.24 (3.51) 11.03 7.58 16.13 8.28 14.24 7.58 2.29 15.62
90-Day Treasury
Bills.............. 2.56 5.33 5.29 5.80 4.14 3.12 3.70 5.90 7.95 8.67 6.56 5.97 6.41
EAFEGDP............. 21.88 5.77 7.63 11.16 7.81 33.56 (9.65) 10.73 -- -- -- -- --
Frank Russell 2000
Index.............. 4.93 22.38 16.51 28.45 (1.82) 18.71 18.41 46.04 (19.48) 16.26 25.02 (8.80) 5.68
Frank Russell 2500
Index.............. 5.66 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.............. 3.38 9.49 5.35 16.80 (1.61) 6.84 8.96 15.72 10.72 15.35 8.55 2.81 --
<CAPTION>
FUNDS
1985
<S> <C>
Stock Fund.......... 31.49%
Bond Fund........... 20.62
Money Market Fund... 8.53
Advisers Fund....... 26.85
Capital Appreciation
Fund............... 36.18
Mortgage Securities
Fund............... 20.61
Index Fund.......... --
International
Opportunities
Fund............... --
Dividend and Growth
Fund............... --
International
Advisers Fund...... --
Small Company
Fund............... --
MidCap Fund......... --
Growth & Income
Fund............... --
MARKET INDICES
Standard & Poor's
500 Stock Index.... 31.70%
Standard & Poor's
400 Stock Index
(MidCap)........... 21.30
Shearson Lehman
Government/Corporate
Bond Index......... 21.30
90-Day Treasury
Bills.............. 7.97
EAFEGDP............. --
Frank Russell 2000
Index.............. 31.04
Frank Russell 2500
Index.............. --
Shearson Lehman
Brothers Mortgage
Backed Bond
Index.............. --
</TABLE>
(a) For the six months ended June 30, 1998.
* The inception dates of the Funds are as follows: Stock and Bond--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,
MidCap--July 15, 1997 and Growth & Income--May 29, 1998.
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 income. 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 where
applicable. Market indices are included as a broad measure of market
performance, and no direct comparison with the Funds is intended.
18
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- --------------- -------------
<S> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund,
Inc.
Shares 274,351,826
Cost $ 282,848,787
Market Value......... $ 299,574,636 -- --
Hartford Stock HLS
Fund, Inc.
Shares 369,110,058
Cost $1,248,163,004
Market Value......... -- $ 2,218,411,610 --
Hartford Money Market
HLS Fund, Inc.
Shares 273,245,455
Cost $ 273,245,455
Market Value......... -- -- $273,245,455
Hartford Advisers HLS
Fund, Inc.
Shares 1,564,731,303
Cost $2,813,334,981
Market Value......... -- -- --
Hartford Capital
Appreciation HLS
Fund, Inc.
Shares 424,829,645
Cost $1,335,408,438
Market Value......... -- -- --
Hartford Mortgage
Securities HLS Fund,
Inc.
Shares 165,765,244
Cost $ 178,806,792
Market Value......... -- -- --
Hartford Index HLS
Fund, Inc.
Shares 163,732,581
Cost $ 334,772,112
Market Value......... -- -- --
Hartford International
Opportunities HLS
Fund, Inc.
Shares 308,430,571
Cost $ 359,393,312
Market Value......... -- -- --
Hartford Dividend and
Growth HLS Fund, Inc.
Shares 425,087,826
Cost $ 670,635,581
Market Value......... -- -- --
Due from Hartford Life
Insurance Company.... 167,320 1,417,158 12,021,999
Receivable from fund
shares sold.......... 28 2,198,473 4
------------- --------------- -------------
Total Assets........... 299,741,984 2,222,027,241 285,267,458
------------- --------------- -------------
LIABILITIES:
Due to Hartford Life
Insurance Company.... 28 2,198,490 63
Payable for fund shares
purchased............ 167,389 1,416,518 12,016,849
------------- --------------- -------------
Total Liabilities...... 167,417 3,615,008 12,016,912
------------- --------------- -------------
Net Assets (variable
annuity contract
liabilities)......... $ 299,574,567 $ 2,218,412,233 $273,250,546
------------- --------------- -------------
------------- --------------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
20
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- -------------------- ------------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund,
Inc.
Shares 274,351,826
Cost $ 282,848,787
Market Value......... -- -- -- -- --
Hartford Stock HLS
Fund, Inc.
Shares 369,110,058
Cost $1,248,163,004
Market Value......... -- -- -- -- --
Hartford Money Market
HLS Fund, Inc.
Shares 273,245,455
Cost $ 273,245,455
Market Value......... -- -- -- -- --
Hartford Advisers HLS
Fund, Inc.
Shares 1,564,731,303
Cost $2,813,334,981
Market Value......... $4,411,057,345 -- -- -- --
Hartford Capital
Appreciation HLS
Fund, Inc.
Shares 424,829,645
Cost $1,335,408,438
Market Value......... -- $1,967,903,101 -- -- --
Hartford Mortgage
Securities HLS Fund,
Inc.
Shares 165,765,244
Cost $ 178,806,792
Market Value......... -- -- $184,433,393 -- --
Hartford Index HLS
Fund, Inc.
Shares 163,732,581
Cost $ 334,772,112
Market Value......... -- -- -- $ 540,322,921 --
Hartford International
Opportunities HLS
Fund, Inc.
Shares 308,430,571
Cost $ 359,393,312
Market Value......... -- -- -- -- $436,532,274
Hartford Dividend and
Growth HLS Fund, Inc.
Shares 425,087,826
Cost $ 670,635,581
Market Value......... -- -- -- -- --
Due from Hartford Life
Insurance Company.... 1,429,322 -- 5,080 -- 147,930
Receivable from fund
shares sold.......... 9,282 5,063,588 49,146 4,317,133 21
--------------- -------------------- ------------------- ---------------- -------------------
Total Assets........... 4,412,495,949 1,972,966,689 184,487,619 544,640,054 436,680,225
--------------- -------------------- ------------------- ---------------- -------------------
LIABILITIES:
Due to Hartford Life
Insurance Company.... 9,286 5,063,724 44,228 4,316,630 21
Payable for fund shares
purchased............ 1,429,973 -- 5,744 -- 147,768
--------------- -------------------- ------------------- ---------------- -------------------
Total Liabilities...... 1,439,259 5,063,724 49,972 4,316,630 147,789
--------------- -------------------- ------------------- ---------------- -------------------
Net Assets (variable
annuity contract
liabilities)......... $4,411,056,690 $1,967,902,965 $184,437,647 $ 540,323,424 $436,532,436
--------------- -------------------- ------------------- ---------------- -------------------
--------------- -------------------- ------------------- ---------------- -------------------
<CAPTION>
DIVIDEND AND
GROWTH FUND
SUB-ACCOUNT
---------------
<S> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund,
Inc.
Shares 274,351,826
Cost $ 282,848,787
Market Value......... --
Hartford Stock HLS
Fund, Inc.
Shares 369,110,058
Cost $1,248,163,004
Market Value......... --
Hartford Money Market
HLS Fund, Inc.
Shares 273,245,455
Cost $ 273,245,455
Market Value......... --
Hartford Advisers HLS
Fund, Inc.
Shares 1,564,731,303
Cost $2,813,334,981
Market Value......... --
Hartford Capital
Appreciation HLS
Fund, Inc.
Shares 424,829,645
Cost $1,335,408,438
Market Value......... --
Hartford Mortgage
Securities HLS Fund,
Inc.
Shares 165,765,244
Cost $ 178,806,792
Market Value......... --
Hartford Index HLS
Fund, Inc.
Shares 163,732,581
Cost $ 334,772,112
Market Value......... --
Hartford International
Opportunities HLS
Fund, Inc.
Shares 308,430,571
Cost $ 359,393,312
Market Value......... --
Hartford Dividend and
Growth HLS Fund, Inc.
Shares 425,087,826
Cost $ 670,635,581
Market Value......... $887,890,293
Due from Hartford Life
Insurance Company.... 1,237,179
Receivable from fund
shares sold.......... 219
---------------
Total Assets........... 889,127,691
---------------
LIABILITIES:
Due to Hartford Life
Insurance Company.... 179
Payable for fund shares
purchased............ 1,236,824
---------------
Total Liabilities...... 1,237,003
---------------
Net Assets (variable
annuity contract
liabilities)......... $887,890,688
---------------
---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
21
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL
ADVISERS SMALL SMITH BARNEY
FUND COMPANY FUND MIDCAP FUND CASH PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
International Advisers
HLS Fund, Inc.
Shares 61,881,580
Cost $70,787,595
Market Value......... $71,030,153 -- -- --
Small Company HLS Fund,
Inc.
Shares 73,770,170
Cost $88,417,890
Market Value......... -- $95,073,594 -- --
MidCap HLS Fund, Inc.
Shares 19,753,832
Cost $23,323,701
Market Value......... -- -- $26,424,760 --
Smith Barney Cash
Portfolio
Shares 507,488
Cost $ 507,488
Market Value......... -- -- -- $507,489
Smith Barney
Appreciation HLS Fund
Shares 12,197
Cost $ 86,545
Market Value......... -- -- -- --
Smith Barney Government
Portfolio
Shares 37,836
Cost $ 37,836
Market Value......... -- -- -- --
BB&T Growth & Income
HLS Fund
Shares 1,296,442
Cost $15,494,763
Market Value......... -- -- -- --
AmSouth Equity Income
HLS Fund
Shares 1,479,914
Cost $16,020,201
Market Value......... -- -- -- --
Mentor VIP Capital
Growth Fund
Shares 585,140
Cost $ 7,249,872
Market Value......... -- -- -- --
Mentor VIP Perpetual
International Fund
Shares 298,806
Cost $ 3,980,762
Market Value......... -- -- -- --
Mentor VIP Growth Fund
Shares 327,691
Cost $ 3,900,720
Market Value......... -- -- -- --
Dividends Receivable... -- -- -- 1,108
Due from Hartford Life
Insurance Company.... 172,530 182,932 91,778 27,028
Receivable from fund
shares sold.......... 9 4,837 17 --
------------ ------------ ------------ --------------
Total Assets........... 71,202,692 95,261,363 26,516,555 535,625
------------ ------------ ------------ --------------
LIABILITIES:
Due to Hartford Life
Insurance Company.... 8 4,841 17 54
Payable for fund shares
purchased............ 172,503 182,005 91,788 27,259
------------ ------------ ------------ --------------
Total Liabilities...... 172,511 186,846 91,805 27,313
------------ ------------ ------------ --------------
Net Assets (variable
annuity contract
liabilities)......... $71,030,181 $95,074,517 $26,424,750 $508,312
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
22
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMITH BARNEY BB&T AMSOUTH MENTOR VIP MENTOR VIP
SMITH BARNEY GOVERNMENT GROWTH & EQUITY CAPITAL PERPETUAL
APPRECIATION FUND PORTFOLIO INCOME FUND INCOME FUND GROWTH FUND INTERNATIONAL FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- ------------ -------------- ------------ ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
International Advisers
HLS Fund, Inc.
Shares 61,881,580
Cost $70,787,595
Market Value......... -- -- -- -- -- --
Small Company HLS Fund,
Inc.
Shares 73,770,170
Cost $88,417,890
Market Value......... -- -- -- -- -- --
MidCap HLS Fund, Inc.
Shares 19,753,832
Cost $23,323,701
Market Value......... -- -- -- -- -- --
Smith Barney Cash
Portfolio
Shares 507,488
Cost $ 507,488
Market Value......... -- -- -- -- -- --
Smith Barney
Appreciation HLS Fund
Shares 12,197
Cost $ 86,545
Market Value......... $188,391 -- -- -- -- --
Smith Barney Government
Portfolio
Shares 37,836
Cost $ 37,836
Market Value......... -- $37,837 -- -- -- --
BB&T Growth & Income
HLS Fund
Shares 1,296,442
Cost $15,494,763
Market Value......... -- -- $16,114,772 -- -- --
AmSouth Equity Income
HLS Fund
Shares 1,479,914
Cost $16,020,201
Market Value......... -- -- -- $16,338,256 -- --
Mentor VIP Capital
Growth Fund
Shares 585,140
Cost $ 7,249,872
Market Value......... -- -- -- -- $7,460,540 --
Mentor VIP Perpetual
International Fund
Shares 298,806
Cost $ 3,980,762
Market Value......... -- -- -- -- -- $4,111,574
Mentor VIP Growth Fund
Shares 327,691
Cost $ 3,900,720
Market Value......... -- -- -- -- -- --
Dividends Receivable... 65 90 -- -- -- --
Due from Hartford Life
Insurance Company.... 3,058 -- 30,265 155,087 98,798 83,849
Receivable from fund
shares sold.......... 14 7 -- -- -- --
-------- ------------ -------------- ------------ ------------ ------------------
Total Assets........... 191,528 37,934 16,145,037 16,493,343 7,559,338 4,195,423
-------- ------------ -------------- ------------ ------------ ------------------
LIABILITIES:
Due to Hartford Life
Insurance Company.... 71 29 -- -- -- --
Payable for fund shares
purchased............ -- -- 30,264 155,085 98,797 83,849
-------- ------------ -------------- ------------ ------------ ------------------
Total Liabilities...... 71 29 30,264 155,085 98,797 83,849
-------- ------------ -------------- ------------ ------------ ------------------
Net Assets (variable
annuity contract
liabilities)......... $191,457 $37,905 $16,114,773 $16,338,258 $7,460,541 $4,111,574
-------- ------------ -------------- ------------ ------------ ------------------
-------- ------------ -------------- ------------ ------------ ------------------
<CAPTION>
MENTOR VIP
GROWTH FUND
SUB-ACCOUNT
------------
<S> <C>
ASSETS:
Investments:
International Advisers
HLS Fund, Inc.
Shares 61,881,580
Cost $70,787,595
Market Value......... --
Small Company HLS Fund,
Inc.
Shares 73,770,170
Cost $88,417,890
Market Value......... --
MidCap HLS Fund, Inc.
Shares 19,753,832
Cost $23,323,701
Market Value......... --
Smith Barney Cash
Portfolio
Shares 507,488
Cost $ 507,488
Market Value......... --
Smith Barney
Appreciation HLS Fund
Shares 12,197
Cost $ 86,545
Market Value......... --
Smith Barney Government
Portfolio
Shares 37,836
Cost $ 37,836
Market Value......... --
BB&T Growth & Income
HLS Fund
Shares 1,296,442
Cost $15,494,763
Market Value......... --
AmSouth Equity Income
HLS Fund
Shares 1,479,914
Cost $16,020,201
Market Value......... --
Mentor VIP Capital
Growth Fund
Shares 585,140
Cost $ 7,249,872
Market Value......... --
Mentor VIP Perpetual
International Fund
Shares 298,806
Cost $ 3,980,762
Market Value......... --
Mentor VIP Growth Fund
Shares 327,691
Cost $ 3,900,720
Market Value......... $3,804,498
Dividends Receivable... --
Due from Hartford Life
Insurance Company.... 36,688
Receivable from fund
shares sold.......... --
------------
Total Assets........... 3,841,186
------------
LIABILITIES:
Due to Hartford Life
Insurance Company.... --
Payable for fund shares
purchased............ 36,688
------------
Total Liabilities...... 36,688
------------
Net Assets (variable
annuity contract
liabilities)......... $3,804,498
------------
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
23
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
-------------- --------- ---------------
DEFERRED ANNUITY CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Qualified 1.00%........ 232,283 $4.238446 $ 984,521
Bond Fund Non-Qualified 1.00%.... 1,960,810 4.174001 8,184,424
Bond Fund 1.25%.................. 132,183,621 2.190589 289,559,986
Bond Fund .25%................... 60,707 1.480537 89,878
Stock Fund Qualified 1.00%....... 825,538 10.726086 8,854,794
Stock Fund Non-Qualified 1.00%... 3,089,760 10.256524 31,690,196
Stock Fund 1.25%................. 391,317,218 5.549979 2,171,802,342
Stock Fund .25%.................. 1,095,987 2.96023 3,244,374
Money Market Fund Qualified
1.00%.......................... 781,249 2.625192 2,050,928
Money Market Fund Non-Qualified
1.00%.......................... 11,979,543 2.626439 31,463,539
Money Market Fund 1.25%.......... 141,636,490 1.683207 238,403,532
Money Market Fund .25%........... 450,247 1.268611 571,188
Advisers Fund Qualified 1.00%.... 3,286,176 6.146788 20,199,427
Advisers Fund Non-Qualified
1.00%.......................... 10,575,447 6.146788 65,005,028
Advisers Fund 1.25%.............. 1,053,422,288 4.098417 4,317,363,814
Advisers Fund .25%............... 1,083,570 2.320324 2,514,234
Capital Appreciation Fund
Qualified 1.00%................ 833,272 9.07319 7,560,434
Capital Appreciation Fund
Non-Qualified 1.00%............ 2,039,659 9.06897 18,497,603
Capital Appreciation Fund
1.25%.......................... 359,231,130 5.384554 1,934,299,419
Capital Appreciation Fund .25%... 2,315,112 2.630045 6,088,848
Mortgage Securities Fund
Qualified 1.00%................ 635,278 2.768932 1,759,042
Mortgage Securities Fund
Non-Qualified 1.00%............ 6,248,728 2.768932 17,302,304
Mortgage Securities Fund 1.25%... 76,577,515 2.154737 165,004,405
Mortgage Securities Fund .25%.... 15,250 1.414248 21,568
Index Fund 1.00%................. 146,647 1.720769 252,345
Index Fund Non-Qualified 1.00%... 746,115 1.720769 1,283,892
Index Fund 1.25%................. 123,605,433 4.34978 537,656,441
Index Fund .25%.................. 233,858 2.829546 661,713
International Opportunities Fund
Qualified 1.00%................ 238,840 1.738584 415,244
International Opportunities Fund
Non-Qualified 1.00%............ 1,472,399 1.738523 2,559,800
International Opportunities Fund
1.25%.......................... 253,241,547 1.704165 431,565,380
International Opportunities Fund
.25%........................... 747,213 1.935688 1,446,372
Dividend and Growth Fund
Qualified 1.00%................ 447,519 2.394948 1,071,785
Dividend and Growth Fund
Non-Qualified 1.00%............ 1,822,577 2.394948 4,364,977
Dividend and Growth Fund 1.25%... 371,734,086 2.369298 880,748,826
Dividend and Growth Fund .25%.... 239,569 2.473486 592,571
International Advisers Fund
Sub-Account 1.00%.............. 18,848 1.489191 28,069
International Advisers Fund
Non-Qualified 1.00%............ 186,923 1.489191 278,364
International Advisers Fund
1.25%.......................... 47,814,592 1.476841 70,614,550
International Advisers Fund
.25%........................... 39,807 1.526855 60,780
Hartford Small Company 1.00%..... 129,303 1.355409 175,259
Hartford Small Company
Non-Qualified 1.00%............ 426,318 1.355409 577,836
Hartford Small Company 1.25%..... 69,834,739 1.34904 94,209,856
Hartford Small Company .25%...... 48,750 1.374708 67,018
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
24
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
-------------- --------- ---------------
<S> <C> <C> <C>
INDIVIDUAL SUB-ACCOUNTS --
(CONTINUED)
Mid Cap Fund Sub-Account 1.00%
Qualified...................... 13,737 $1.285338 $ 17,656
Mid Cap Fund Sub-Account 1.00%
Non-Qualified.................. 126,211 1.285338 162,224
Mid Cap Fund Sub-Account 1.25%... 20,454,028 1.282381 26,229,857
Mid Cap Fund Sub-Account 1.00%
Qualified...................... 11,600 1.294218 15,013
Smith Barney Shearson Daily
Dividend, Inc. Qualified
1.00%.......................... 53,604 2.833281 151,876
Smith Barney Shearson Daily
Dividend, Inc. Non-Qualified
1.00%.......................... 121,572 2.931886 356,436
Smith Barney Shearson
Appreciation Fund, Inc.
Qualified 1.00%................ 18,327 10.446564 191,457
Smith Barney Shearson Gov't and
Agencies, Inc. Qualified
1.00%.......................... 14,846 2.553223 37,905
BB&T Growth and Income Fund
Sub-Account.................... 12,947,014 1.244671 16,114,773
AM South Fund Sub-Account 1.00%
Qualified...................... 14,734,563 1.108839 16,338,258
Mentor Capital Growth
Sub-Account.................... 7,343,681 1.015913 7,460,541
Mentor Perpetual International
Sub-Account.................... 3,750,406 1.096301 4,111,574
Mentor Growth Sub-Account........ 4,113,073 0.924977 3,804,498
---------------
SUB-TOTAL INDIVIDUAL
SUB-ACCOUNTS..................... 11,446,138,974
---------------
ANNUITY CONTRACTS IN THE ANNUITY
PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Non-Qualified 1.00%.... 16,417 4.174001 68,524
Bond Fund 1.25%.................. 313,721 2.190589 687,234
Stock Fund Non-Qualified 1.00%... 19,300 10.256524 197,948
Stock Fund 1.25%................. 472,539 5.549979 2,622,579
Money Market Fund Qualified
1.00%.......................... 6,966 2.625192 18,287
Money Market Fund Non-Qualified
1.00%.......................... 85,504 2.626439 224,570
Money Market Fund 1.25%.......... 308,044 1.683207 518,502
Advisers Fund Qualified 1.00%.... 2,948 6.146788 18,119
Advisers Fund Non-Qualified
1.00%.......................... 52,527 6.146788 322,874
Advisers Fund 1.25%.............. 1,374,480 4.098417 5,633,194
Capital Appreciation Fund
Non-Qualified 1.00%............ 11,469 9.06897 104,013
Capital Appreciation Fund
1.25%.......................... 251,209 5.384554 1,352,648
Mortgage Securities Fund
Non-Qualified 1.00%............ 65,815 2.768932 182,237
Mortgage Securities Fund 1.25%... 78,010 2.154737 168,091
Index Fund 1.25%................. 107,829 4.34978 469,033
International Opportunities Fund
Non-Qualified 1.00%............ 6,241 1.738523 10,851
International Opportunities Fund
1.25%.......................... 313,813 1.704165 534,789
Dividend and Growth Fund 1.25%... 469,561 2.369298 1,112,530
International Advisers Fund
1.25%.......................... 32,785 1.476841 48,418
Hartford Small Company 1.25%..... 33,023 1.34904 44,549
---------------
SUB-TOTAL INDIVIDUAL
SUB-ACCOUNTS................... 14,338,990
---------------
GRAND TOTAL...................... $11,460,477,964
---------------
---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
25
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ -------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 645,656 $ 589,340
EXPENSES:
Mortality and expense
undertakings......... (1,649,162) (12,300,273)
------------ -------------
Net investment income
(loss).............. (1,003,506) (11,710,933)
------------ -------------
CAPITAL GAINS INCOME..... -- 63,980,079
------------ -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 13,648 912,013
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 10,557,241 316,267,943
------------ -------------
Net gain (loss) on
investments......... 10,570,889 317,179,956
------------ -------------
Net increase
(decrease) in net
assets resulting
from operations..... $ 9,567,383 $ 369,449,102
------------ -------------
------------ -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
26
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MORTGAGE
MONEY CAPITAL SECURITIES INTERNATIONAL
MARKET FUND ADVISERS FUND APPRECIATION FUND FUND INDEX FUND OPPORTUNITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------- ----------------- -------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 6,957,458 $ 2,115,083 $ 358,544 $1,277,609 $ 360,205 $ 228,147
EXPENSES:
Mortality and expense
undertakings......... (1,622,503) (25,072,649) (11,605,936) (1,142,835) (2,983,992) (2,558,675)
------------ ------------- ----------------- -------------- ------------ ------------------
Net investment income
(loss).............. 5,334,955 (22,957,566) (11,247,392) 134,774 (2,623,787) (2,330,528)
------------ ------------- ----------------- -------------- ------------ ------------------
CAPITAL GAINS INCOME..... 2,860 130,914,844 114,733,928 -- 10,662,058 25,347,181
------------ ------------- ----------------- -------------- ------------ ------------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... -- 706,749 1,248,455 200,665 (13,535) 29,082
Net unrealized
appreciation
(depreciation) of
investments during
the period........... -- 444,982,824 90,105,099 4,733,317 64,764,545 36,516,907
------------ ------------- ----------------- -------------- ------------ ------------------
Net gain (loss) on
investments......... -- 445,689,573 91,353,554 4,933,982 64,751,010 36,545,989
------------ ------------- ----------------- -------------- ------------ ------------------
Net increase
(decrease) in net
assets resulting
from operations..... $ 5,337,815 $ 553,646,851 $194,840,090 $5,068,756 $72,789,281 $59,562,642
------------ ------------- ----------------- -------------- ------------ ------------------
------------ ------------- ----------------- -------------- ------------ ------------------
<CAPTION>
DIVIDEND AND
GROWTH FUND
SUB-ACCOUNT
------------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $ 1,369,745
EXPENSES:
Mortality and expense
undertakings......... (4,915,736)
------------
Net investment income
(loss).............. (3,545,991)
------------
CAPITAL GAINS INCOME..... 25,624,259
------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 7,142
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 50,869,639
------------
Net gain (loss) on
investments......... 50,876,781
------------
Net increase
(decrease) in net
assets resulting
from operations..... $72,955,049
------------
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
27
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS -- (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
ADVISERS FUND COMPANY FUND MIDCAP FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $6,551,901 $ -- $ 330
EXPENSES:
Mortality and expense
undertakings......... (394,753) (517,245) (107,105)
-------------- ------------- ------------
Net investment income
(loss)............. 6,157,148 (517,245) (106,775)
-------------- ------------- ------------
CAPITAL GAINS INCOME..... 1,559,601 1,255,431 --
-------------- ------------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... (12,625) (8,770) 4,690
Net unrealized
appreciation
(depreciation) of
investments during
the period........... (762,318) 5,248,642 2,764,162
-------------- ------------- ------------
Net gain (loss) on
investments........ (774,943) 5,239,872 2,768,852
-------------- ------------- ------------
Net increase
(decrease) in net
assets resulting
from operations.... $6,941,806 $5,978,058 $2,662,077
-------------- ------------- ------------
-------------- ------------- ------------
</TABLE>
* From inception, March 2, 1998 to June 30, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
28
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMITH BARNEY BB&T MENTOR VIP
SMITH BARNEY SMITH BARNEY GOVERNMENT GROWTH & AM SOUTH EQUITY CAPITAL GROWTH
CASH PORTFOLIO APPRECIATION FUND PORTFOLIO INCOME FUND INCOME FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
--------------- ------------------ ------------- ------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $12,561 $ 65 $ 927 $ 82,504 $108,240 $--
EXPENSES:
Mortality and expense
undertakings......... (2,506) (909) (186) (68,124) (56,273) (12,150)
------- ------- ----- ------------ -------- ---------------
Net investment income
(loss)............. 10,055 (844) 741 14,380 51,967 (12,150)
------- ------- ----- ------------ -------- ---------------
CAPITAL GAINS INCOME..... -- 3,058 -- -- -- --
------- ------- ----- ------------ -------- ---------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... -- 91 -- 172 -- (766)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... -- 18,655 -- 210,524 285,859 210,668
------- ------- ----- ------------ -------- ---------------
Net gain (loss) on
investments........ -- 18,746 -- 210,696 285,859 209,902
------- ------- ----- ------------ -------- ---------------
Net increase
(decrease) in net
assets resulting
from operations.... $10,055 $20,960 $ 741 $225,076 $337,826 $197,752
------- ------- ----- ------------ -------- ---------------
------- ------- ----- ------------ -------- ---------------
<CAPTION>
MENTOR VIP
PERPETUAL
INTERNATIONAL MENTOR VIP
FUND GROWTH FUND
SUB-ACCOUNT* SUB-ACCOUNT*
------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $-- $ --
EXPENSES:
Mortality and expense
undertakings......... (6,560) (6,501)
------------- -------------
Net investment income
(loss)............. (6,560) (6,501)
------------- -------------
CAPITAL GAINS INCOME..... -- --
------------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 213 (206)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 130,811 (96,222)
------------- -------------
Net gain (loss) on
investments........ 131,024 (96,428)
------------- -------------
Net increase
(decrease) in net
assets resulting
from operations.... $124,464 $(102,929)
------------- -------------
------------- -------------
</TABLE>
* From inception, March 2, 1998 to June 30, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
29
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ (1,003,506) $ (11,710,933) $ 5,334,955
Capital gains income... -- 63,980,079 2,860
Net realized gain
(loss) on security
transactions......... 13,648 912,013 --
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 10,557,241 316,267,943 --
------------ -------------- ------------
Net increase (decrease)
in net assets
resulting from
operations........... 9,567,383 369,449,102 5,337,815
------------ -------------- ------------
UNIT TRANSACTIONS:
Purchases.............. 20,336,580 110,346,469 13,823,409
Net transfers.......... 35,059,991 45,065,130 28,125,267
Surrenders............. (10,755,244) (61,292,844) (41,057,413)
Net annuity
transactions......... (14,910) 149,059 (16,561)
------------ -------------- ------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 44,626,417 94,267,814 874,702
------------ -------------- ------------
Total increase
(decrease) in net
assets............... 54,193,800 463,716,916 6,212,517
NET ASSETS:
Beginning of period.... 245,380,767 1,754,695,317 267,038,029
------------ -------------- ------------
End of period.......... $299,574,567 $2,218,412,233 $273,250,546
------------ -------------- ------------
------------ -------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
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
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ 10,349,134 $ (2,890,041) $ 10,558,627
Capital gains income... -- 64,909,605 792
Net realized gain
(loss) on security
transactions......... 17,262 1,176,996 --
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 10,119,718 315,737,284 --
------------ -------------- ------------
Net increase (decrease)
in net assets
resulting from
operations........... 20,486,114 378,933,844 10,559,419
------------ -------------- ------------
UNIT TRANSACTIONS:
Purchases.............. 28,788,526 208,829,884 56,766,167
Net transfers.......... 19,102,654 45,780,800 (9,782,834)
Surrenders............. (18,300,042) (92,238,226) (68,418,264)
Net annuity
transactions......... 325,387 633,517 12,261
------------ -------------- ------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 29,916,525 163,005,975 (21,422,670)
------------ -------------- ------------
Total increase
(decrease) in net
assets............... 50,402,639 541,939,819 (10,863,251)
NET ASSETS:
Beginning of period.... 194,978,128 1,212,755,498 277,901,280
------------ -------------- ------------
End of period.......... $245,380,767 $1,754,695,317 $267,038,029
------------ -------------- ------------
------------ -------------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
30
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------------ ---------------- -------------- -------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ (22,957,566) $ (11,247,392) $ 134,774 $ (2,623,787) $ (2,330,528)
Capital gains income... 130,914,844 114,733,928 -- 10,662,058 25,347,181
Net realized gain
(loss) on security
transactions......... 706,749 1,248,455 200,665 (13,535) 29,082
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 444,982,824 90,105,099 4,733,317 64,764,545 36,516,907
-------------- ------------------ ---------------- -------------- -------------------
Net increase (decrease)
in net assets
resulting from
operations........... 553,646,851 194,840,090 5,068,756 72,789,281 59,562,642
-------------- ------------------ ---------------- -------------- -------------------
UNIT TRANSACTIONS:
Purchases.............. 199,984,169 94,864,435 4,658,654 39,199,605 9,551,331
Net transfers.......... 103,889,741 3,067,445 (492,048) 33,299,927 (12,149,839)
Surrenders............. (148,814,379) (58,952,406) (15,869,073) (16,123,873) (13,624,393)
Net annuity
transactions......... 1,078,714 175,233 (42,293) 2,668 147,237
-------------- ------------------ ---------------- -------------- -------------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 156,138,245 39,154,707 (11,744,760) 56,378,327 (16,075,664)
-------------- ------------------ ---------------- -------------- -------------------
Total increase
(decrease) in net
assets............... 709,785,096 233,994,797 (6,676,004) 129,167,608 43,486,978
NET ASSETS:
Beginning of period.... 3,701,271,594 1,733,908,168 191,113,651 411,155,816 393,045,458
-------------- ------------------ ---------------- -------------- -------------------
End of period.......... $4,411,056,690 $1,967,902,965 $184,437,647 $ 540,323,424 $436,532,436
-------------- ------------------ ---------------- -------------- -------------------
-------------- ------------------ ---------------- -------------- -------------------
<CAPTION>
DIVIDEND AND
GROWTH FUND
SUB-ACCOUNT
---------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ (3,545,991)
Capital gains income... 25,624,259
Net realized gain
(loss) on security
transactions......... 7,142
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 50,869,639
---------------
Net increase (decrease)
in net assets
resulting from
operations........... 72,955,049
---------------
UNIT TRANSACTIONS:
Purchases.............. 94,274,260
Net transfers.......... 72,770,280
Surrenders............. (21,716,252)
Net annuity
transactions......... 383,485
---------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 145,711,773
---------------
Total increase
(decrease) in net
assets............... 218,666,822
NET ASSETS:
Beginning of period.... 669,223,866
---------------
End of period.......... $ 887,890,688
---------------
---------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
US GOVERNMENT CAPITAL MORTGAGE
ADVISERS FUND MONEY MARKET 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)............... $ 36,403,121 $ 2,019 $ (10,930,508) $ 9,013,463 $ 492,907
Capital gains income... 129,600,221 -- 103,244,397 -- 21,612,566
Net realized gain
(loss) on security
transactions......... 2,159,454 -- 413,746 28,917 243,148
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 501,068,905 -- 190,913,008 5,074,541 65,120,869
-------------- ------------------ ------------------ ---------------- --------------
Net increase (decrease)
in net assets
resulting from
operations........... 669,231,701 2,019 283,640,643 14,116,921 87,469,490
-------------- ------------------ ------------------ ---------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 364,832,050 -- 194,562,087 7,925,304 65,766,703
Net transfers.......... 27,406,992 (88,379) (11,521,643) (9,594,437) 26,458,731
Surrenders............. (206,501,208) (9,133) (87,759,430) (17,575,723) (18,692,668)
Net annuity
transactions......... 725,608 (21,870) 361,130 (3,307) 190,331
-------------- ------------------ ------------------ ---------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 186,463,442 (119,382) 95,642,144 (19,248,163) 73,723,097
-------------- ------------------ ------------------ ---------------- --------------
Total increase
(decrease) in net
assets............... 855,695,143 (117,363) 379,282,787 (5,131,242) 161,192,587
NET ASSETS:
Beginning of period.... 2,845,576,451 117,363 1,354,625,381 196,244,893 249,963,229
-------------- ------------------ ------------------ ---------------- --------------
End of period.......... $3,701,271,594 $ -- $1,733,908,168 $191,113,651 $ 411,155,816
-------------- ------------------ ------------------ ---------------- --------------
-------------- ------------------ ------------------ ---------------- --------------
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ (1,529,162) $ 3,234,554
Capital gains income... 29,748,890 9,959,170
Net realized gain
(loss) on security
transactions......... 29,653 (4,003)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... (32,127,237) 111,067,791
------------------- ---------------
Net increase (decrease)
in net assets
resulting from
operations........... (3,877,856) 124,257,512
------------------- ---------------
UNIT TRANSACTIONS:
Purchases.............. 38,595,370 159,109,767
Net transfers.......... (16,075,692) 87,528,713
Surrenders............. (26,504,799) (20,331,098)
Net annuity
transactions......... 66,746 349,515
------------------- ---------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... (3,918,375) 226,656,897
------------------- ---------------
Total increase
(decrease) in net
assets............... (7,796,231) 350,914,409
NET ASSETS:
Beginning of period.... 400,841,689 318,309,457
------------------- ---------------
End of period.......... $393,045,458 $ 669,223,866
------------------- ---------------
------------------- ---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
31
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
ADVISERS FUND COMPANY FUND MIDCAP FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------- ------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ 6,157,148 $ (517,245) $ (106,775)
Capital gains income... 1,559,601 1,255,431 --
Net realized gain
(loss) on security
transactions......... (12,625) (8,770) 4,690
Net unrealized
appreciation
(depreciation) of
investments during
the period........... (762,318) 5,248,642 2,764,162
-------------- ------------- ------------
Net increase (decrease)
in net assets
resulting from
operations........... 6,941,806 5,978,058 2,662,077
-------------- ------------- ------------
UNIT TRANSACTIONS:
Purchases.............. 5,288,304 11,281,407 7,135,470
Net transfers.......... 3,214,333 8,751,066 7,827,967
Surrenders............. (1,857,322) (2,327,420) (374,654)
Net annuity
transactions......... 20,687 (2,229) --
-------------- ------------- ------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 6,666,002 17,702,824 14,588,783
-------------- ------------- ------------
Total increase
(decrease) in net
assets............... 13,607,808 23,680,882 17,250,860
NET ASSETS:
Beginning of period.... 57,422,373 71,393,635 9,173,890
-------------- ------------- ------------
End of period.......... $71,030,181 $95,074,517 $26,424,750
-------------- ------------- ------------
-------------- ------------- ------------
</TABLE>
* From inception, March 2, 1998 to June 30, 1998.
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
ADVISERS FUND COMPANY FUND
SUB-ACCOUNT SUB-ACCOUNT
-------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ 1,035,994 $ (457,120)
Capital gains income... 110,732 3,307,195
Net realized gain
(loss) on security
transactions......... 13,808 (36,223)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 118,913 1,332,603
-------------- -------------
Net increase (decrease)
in net assets
resulting from
operations........... 1,279,447 4,146,455
-------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 18,887,741 24,742,079
Net transfers.......... 9,531,179 30,544,670
Surrenders............. (2,110,213) (1,630,264)
Net annuity
transactions......... 25,045 44,603
-------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 26,333,752 53,701,088
-------------- -------------
Total increase
(decrease) in net
assets............... 27,613,199 57,847,543
NET ASSETS:
Beginning of period.... 29,809,174 13,546,092
-------------- -------------
End of period.......... $57,422,373 $71,393,635
-------------- -------------
-------------- -------------
</TABLE>
* From inception, July 15, 1997 to December 31, 1997.
** From inception, June 3, 1997 to December 31, 1997.
*** From inception, October 23, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
32
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMITH BARNEY BB&T
SMITH BARNEY SMITH BARNEY GOVERNMENT GROWTH & AM SOUTH EQUITY
CASH PORTFOLIO APPRECIATION FUND PORTFOLIO INCOME FUND INCOME FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------------ ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ 10,055 $ (844) $ 741 $ 14,380 $ 51,967
Capital gains income... -- 3,058 -- -- --
Net realized gain
(loss) on security
transactions......... -- 91 -- 172 --
Net unrealized
appreciation
(depreciation) of
investments during
the period........... -- 18,655 -- 210,524 285,859
--------------- ------------------ ------------- -------------- ----------------
Net increase (decrease)
in net assets
resulting from
operations........... 10,055 20,960 741 225,076 337,826
--------------- ------------------ ------------- -------------- ----------------
UNIT TRANSACTIONS:
Purchases.............. -- -- -- 7,220,583 10,132,350
Net transfers.......... -- -- -- 2,439,282 3,609,722
Surrenders............. (10,755) (76) -- (247,588) (133,556)
Net annuity
transactions......... -- -- -- -- --
--------------- ------------------ ------------- -------------- ----------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... (10,755) (76) -- 9,412,277 13,608,516
--------------- ------------------ ------------- -------------- ----------------
Total increase
(decrease) in net
assets............... (700) 20,884 741 9,637,353 13,946,342
NET ASSETS:
Beginning of period.... 509,012 170,573 37,164 6,477,420 2,391,916
--------------- ------------------ ------------- -------------- ----------------
End of period.......... $508,312 $ 191,457 $37,905 $16,114,773 $16,338,258
--------------- ------------------ ------------- -------------- ----------------
--------------- ------------------ ------------- -------------- ----------------
<CAPTION>
MENTOR VIP
MENTOR VIP PERPETUAL
CAPITAL GROWTH INTERNATIONAL MENTOR VIP
FUND FUND GROWTH FUND
SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
--------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ (12,150) $ (6,560) $ (6,501)
Capital gains income... -- -- --
Net realized gain
(loss) on security
transactions......... (766) 213 (206)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 210,668 130,811 (96,222)
--------------- ------------- -------------
Net increase (decrease)
in net assets
resulting from
operations........... 197,752 124,464 (102,929)
--------------- ------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 6,180,305 3,181,732 3,434,841
Net transfers.......... 1,087,330 807,860 475,646
Surrenders............. (4,846) (2,482) (3,060)
Net annuity
transactions......... -- -- --
--------------- ------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 7,262,789 3,987,110 3,907,427
--------------- ------------- -------------
Total increase
(decrease) in net
assets............... 7,460,541 4,111,574 3,804,498
NET ASSETS:
Beginning of period.... -- -- --
--------------- ------------- -------------
End of period.......... $7,460,541 $4,111,574 $3,804,498
--------------- ------------- -------------
--------------- ------------- -------------
</TABLE>
* From inception, March 2, 1998 to June 30, 1998.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMITH BARNEY BB&T
SMITH BARNEY SMITH BARNEY GOVERNMENT GROWTH & AMSOUTH EQUITY
MIDCAP FUND CASH PORTFOLIO APPRECIATION FUND PORTFOLIO INCOME FUND INCOME FUND
SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT** SUB-ACCOUNT***
------------ --------------- ------------------ ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ (12,661) $ 21,390 $ 687 $ 1,594 $ 22,704 $ 1,732
Capital gains income... -- -- 22,341 -- 662 --
Net realized gain
(loss) on security
transactions......... (2,185) -- 6,810 -- -- --
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 336,895 -- 8,816 -- 409,485 32,195
------------ --------------- -------- ------------- -------------- ---------------
Net increase (decrease)
in net assets
resulting from
operations........... 322,049 21,390 38,654 1,594 432,851 33,927
------------ --------------- -------- ------------- -------------- ---------------
UNIT TRANSACTIONS:
Purchases.............. 2,088,623 -- -- -- 5,104,417 2,100,608
Net transfers.......... 6,774,154 -- -- -- 1,006,220 259,438
Surrenders............. (10,936) (93,309) (40,942) (4,272) (66,068) (2,057)
Net annuity
transactions......... -- -- -- -- -- --
------------ --------------- -------- ------------- -------------- ---------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 8,851,841 (93,309) (40,942) (4,272) 6,044,569 2,357,989
------------ --------------- -------- ------------- -------------- ---------------
Total increase
(decrease) in net
assets............... 9,173,890 (71,919) (2,288) (2,678) 6,477,420 2,391,916
NET ASSETS:
Beginning of period.... -- 580,931 172,861 39,842 -- --
------------ --------------- -------- ------------- -------------- ---------------
End of period.......... $ 9,173,890 $509,012 $170,573 $37,164 $ 6,477,420 $ 2,391,916
------------ --------------- -------- ------------- -------------- ---------------
------------ --------------- -------- ------------- -------------- ---------------
</TABLE>
* From inception, July 15, 1997 to December 31, 1997.
** From inception, June 3, 1997 to December 31, 1997.
*** From inception, October 23, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
33
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (UNAUDITED)
1. ORGANIZATION:
Separate Account Two (the Account) is a separate investment account with
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 annuity 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 Hartford, Smith
Barney, TCI, Fidelity and Calvert Responsibly Invested Series mutual
funds are valued at the closing net asset value per share as determined
by the appropriate Fund as of June 30, 1998.
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
annuity contracts, provides the mortality and expense undertakings and,
with respect to the Account, receives a maximum annual fee of up to
1.25% of the Account's average daily net assets.
b) DEDUCTION OF ANNUAL MAINTENANCE FEE--Annual maintenance fees are
deducted through termination of units of interest from applicable
contract owners' accounts, in accordance with the terms of the
contracts.
4. HARTFORD U.S GOVERNMENT MONEY MARKET FUND:
On June 27, 1997, the Hartford U.S. Government Money Market Fund was merged
with the Hartford Money Market Fund. Accordingly, all contractholder account
values held in the Hartford U.S. Government Money Market Fund were exchanged
for equivalent account values of Hartford Money Market Fund on June 27,
1997.
34
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT ONE
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund,
Inc.
Shares 282,136,885
Cost $ 290,876,619
Market Value......... $308,075,423 --
Hartford Stock HLS
Fund, Inc.
Shares 462,463,221
Cost $1,859,444,465
Market Value......... -- $2,779,479,343
Hartford Money Market
HLS Fund, Inc.
Shares 219,361,377
Cost $ 219,361,377
Market Value......... -- --
Hartford Advisers HLS
Fund, Inc.
Shares 1,641,263,127
Cost $3,378,774,737
Market Value......... -- --
Hartford Capital
Appreciation HLS
Fund, Inc.
Shares 587,515,891
Cost $2,147,722,096
Market Value......... -- --
Hartford Mortgage
Securities HLS Fund,
Inc.
Shares 81,990,784
Cost $ 88,349,108
Market Value......... -- --
Hartford Growth and
Income HLS Fund
Shares 576,375
Cost $ 584,536
Market Value......... -- --
Hartford Index HLS
Fund, Inc.
Shares 186,572,993
Cost $ 446,598,379
Market Value......... -- --
Due from Hartford Life
and Annuity Insurance
Company.............. 965,042 2,196,717
Receivable from fund
shares sold.......... -- --
------------ --------------
Total Assets........... 309,040,465 2,781,676,060
------------ --------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company.............. -- --
Payable for fund shares
purchased............ 965,000 2,197,671
------------ --------------
Total Liabilities...... 965,000 2,197,671
------------ --------------
Net Assets (variable
annuity contract
liabilities)......... $308,075,465 $2,779,478,389
------------ --------------
------------ --------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by
Participants......... 140,316,174 499,812,539
Unit Price............. $ 2.190589 $ 5.549979
ANNUITY CONTRACTS IN THE
ANNUITY PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by
Participants......... 319,730 996,273
Unit Price............. $ 2.190589 $ 5.549979
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
36
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE GROWTH AND
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INCOME FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ------------------ ---------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund,
Inc.
Shares 282,136,885
Cost $ 290,876,619
Market Value......... -- -- -- -- -- --
Hartford Stock HLS
Fund, Inc.
Shares 462,463,221
Cost $1,859,444,465
Market Value......... -- -- -- -- -- --
Hartford Money Market
HLS Fund, Inc.
Shares 219,361,377
Cost $ 219,361,377
Market Value......... $219,361,378 -- -- -- -- --
Hartford Advisers HLS
Fund, Inc.
Shares 1,641,263,127
Cost $3,378,774,737
Market Value......... -- $4,626,804,461 -- -- -- --
Hartford Capital
Appreciation HLS
Fund, Inc.
Shares 587,515,891
Cost $2,147,722,096
Market Value......... -- -- $2,721,501,099 -- -- --
Hartford Mortgage
Securities HLS Fund,
Inc.
Shares 81,990,784
Cost $ 88,349,108
Market Value......... -- -- -- $91,224,422 -- --
Hartford Growth and
Income HLS Fund
Shares 576,375
Cost $ 584,536
Market Value......... -- -- -- -- $ 599,772 --
Hartford Index HLS
Fund, Inc.
Shares 186,572,993
Cost $ 446,598,379
Market Value......... -- -- -- -- -- $ 615,697,035
Due from Hartford Life
and Annuity Insurance
Company.............. -- 2,806,276 403,667 19,430 42,395 821,484
Receivable from fund
shares sold.......... 1,348,094 -- -- -- -- --
------------ -------------- ------------------ ---------------- ------------ -------------
Total Assets........... 220,709,472 4,629,610,737 2,721,904,766 91,243,852 642,167 616,518,519
------------ -------------- ------------------ ---------------- ------------ -------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company.............. 1,350,222 -- -- -- -- --
Payable for fund shares
purchased............ -- 2,805,971 241,427 20,193 42,396 816,708
------------ -------------- ------------------ ---------------- ------------ -------------
Total Liabilities...... 1,350,222 2,805,971 241,427 20,193 42,396 816,708
------------ -------------- ------------------ ---------------- ------------ -------------
Net Assets (variable
annuity contract
liabilities)......... $219,359,250 $4,626,804,766 $2,721,663,339 $91,223,659 $ 599,771 $ 615,701,811
------------ -------------- ------------------ ---------------- ------------ -------------
------------ -------------- ------------------ ---------------- ------------ -------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by
Participants......... 130,109,985 1,127,404,669 504,850,929 42,273,672 576,946 141,345,548
Unit Price............. $ 1.683207 $ 4.098417 $ 5.384554 $ 2.154737 $1.039561 $ 4.349780
ANNUITY CONTRACTS IN THE
ANNUITY PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by
Participants......... 212,222 1,520,173 606,596 62,659 -- 202,256
Unit Price............. $ 1.683207 $ 4.098417 $ 5.384554 $ 2.154737 $ -- $ 4.349780
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
37
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------- -----------------
<S> <C> <C>
ASSETS:
Investments:
Hartford International
Opportunities HLS
Fund, Inc.
Shares 482,073,074
Cost $ 612,442,105
Market Value......... $682,294,412 --
Hartford Dividend and
Growth HLS Fund, Inc.
Shares 755,319,504
Cost $1,234,805,942
Market Value......... -- $ 1,577,652,465
Hartford International
Advisers HLS Fund,
Inc.
Shares 160,614,072
Cost $ 184,179,820
Market Value......... -- --
Hartford Small Company
HLS Fund, Inc.
Shares 144,881,610
Cost $ 173,740,304
Market Value......... -- --
Hartford MidCap HLS
Fund, Inc.
Shares 38,632,505
Cost $ 46,046,774
Market Value......... -- --
Mentor VIP Capital
Growth HLS Fund, Inc.
Shares 13,019
Cost $ 161,856
Market Value......... -- --
Mentor VIP Perpetual
International HLS
Fund, Inc.
Shares 15,778
Cost $ 214,977
Market Value......... -- --
Mentor VIP Growth HLS
Fund, Inc.
Shares 14,974
Cost $ 169,355
Market Value......... -- --
Due from Hartford Life
and Annuity Insurance
Company.............. -- 2,299,326
Receivable from fund
shares sold.......... 86,975 --
------------------- -----------------
Total Assets........... 682,381,387 1,579,951,791
------------------- -----------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company.............. 87,524 --
Payable for fund shares
purchased............ -- 2,299,178
------------------- -----------------
Total Liabilities...... -- 2,299,178
------------------- -----------------
Net Assets (variable
annuity contract
liabilities)......... $682,293,863 $ 1,577,652,613
------------------- -----------------
------------------- -----------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by
Participants......... 399,979,260 665,091,087
Unit Price............. $ 1.704165 $ 2.369298
ANNUITY CONTRACTS IN THE
ANNUITY PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by
Participants......... 389,168 782,354
Unit Price............. $ 1.704165 $ 2.369298
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
38
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MENTOR VIP MENTOR VIP
INTERNATIONAL SMALL CAPITAL PERPETUAL MENTOR VIP
ADVISERS FUND COMPANY FUND MIDCAP FUND GROWTH FUND INTERNATIONAL FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------- ------------ ------------ ------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford International
Opportunities HLS
Fund, Inc.
Shares 482,073,074
Cost $ 612,442,105
Market Value......... -- -- -- -- -- --
Hartford Dividend and
Growth HLS Fund, Inc.
Shares 755,319,504
Cost $1,234,805,942
Market Value......... -- -- -- -- -- --
Hartford International
Advisers HLS Fund,
Inc.
Shares 160,614,072
Cost $ 184,179,820
Market Value......... $184,359,257 -- -- -- -- --
Hartford Small Company
HLS Fund, Inc.
Shares 144,881,610
Cost $ 173,740,304
Market Value......... -- $186,720,666 -- -- -- --
Hartford MidCap HLS
Fund, Inc.
Shares 38,632,505
Cost $ 46,046,774
Market Value......... -- -- $51,678,818 -- -- --
Mentor VIP Capital
Growth HLS Fund, Inc.
Shares 13,019
Cost $ 161,856
Market Value......... -- -- -- $ 165,990 -- --
Mentor VIP Perpetual
International HLS
Fund, Inc.
Shares 15,778
Cost $ 214,977
Market Value......... -- -- -- -- $ 217,103 --
Mentor VIP Growth HLS
Fund, Inc.
Shares 14,974
Cost $ 169,355
Market Value......... -- -- -- -- -- $ 173,845
Due from Hartford Life
and Annuity Insurance
Company.............. 220,849 206,630 301,199 -- -- --
Receivable from fund
shares sold.......... -- -- -- 6 7 6
-------------- ------------- ------------ ------------ ---------- ------------
Total Assets........... 184,580,106 186,927,296 51,980,017 165,996 217,110 173,851
-------------- ------------- ------------ ------------ ---------- ------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company.............. -- -- -- 6 7 6
Payable for fund shares
purchased............ 220,552 207,393 300,671 -- -- --
-------------- ------------- ------------ ------------ ---------- ------------
Total Liabilities...... 220,552 207,393 300,671 -- -- --
-------------- ------------- ------------ ------------ ---------- ------------
Net Assets (variable
annuity contract
liabilities)......... $184,359,554 $186,719,903 $51,679,346 $ 165,990 $ 217,103 $ 173,845
-------------- ------------- ------------ ------------ ---------- ------------
-------------- ------------- ------------ ------------ ---------- ------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by
Participants......... 124,772,315 138,290,377 40,299,525 163,390 198,033 187,945
Unit Price............. $ 1.476841 $ 1.349040 $ 1.282381 $1.015913 $1.096301 $0.924977
ANNUITY CONTRACTS IN THE
ANNUITY PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by
Participants......... 61,404 119,087 -- -- -- --
Unit Price............. $ 1.476841 $ 1.349040 $ -- $ -- $-- $ --
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
39
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 634,440 $ 700,625
EXPENSES:
Mortality and expense
undertakings......... (1,656,575) (14,925,606)
----------- ------------
Net investment income
(loss).............. (1,022,135) (14,224,981)
----------- ------------
CAPITAL GAINS INCOME..... -- 76,061,613
----------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... (13,876) (2,380)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 10,514,818 381,861,363
----------- ------------
Net gain (loss) on
investments......... 10,500,942 381,858,983
----------- ------------
Net increase
(decrease) in net
assets resulting
from operations..... $ 9,478,807 $443,695,615
----------- ------------
----------- ------------
</TABLE>
* From inception, June 1, 1998 to June 30, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
40
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE GROWTH AND
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INCOME FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT
----------- -------------- ------------------ ---------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 5,336,537 $ 2,107,645 $ 471,665 $ 566,344 $-- $ 390,766
EXPENSES:
Mortality and expense
undertakings......... (1,275,501) (25,445,020) (15,657,340) (533,708) (292) (3,279,506)
----------- -------------- ------------------ ---------------- ------------- --------------
Net investment income
(loss).............. 4,061,036 (23,337,375) (15,185,675) 32,636 (292) (2,888,740)
----------- -------------- ------------------ ---------------- ------------- --------------
CAPITAL GAINS INCOME..... -- 130,454,479 150,932,848 -- -- 11,566,682
----------- -------------- ------------------ ---------------- ------------- --------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... -- -- (137,143) 1,143 -- 6,638
Net unrealized
appreciation
(depreciation) of
investments during
the period........... -- 450,442,540 121,262,945 2,257,934 15,236 70,920,170
----------- -------------- ------------------ ---------------- ------------- --------------
Net gain (loss) on
investments......... -- 450,442,540 121,125,802 2,259,077 15,236 70,926,808
----------- -------------- ------------------ ---------------- ------------- --------------
Net increase
(decrease) in net
assets resulting
from operations..... $ 4,061,036 $ 557,559,644 $256,872,975 $2,291,713 $14,944 $ 79,604,750
----------- -------------- ------------------ ---------------- ------------- --------------
----------- -------------- ------------------ ---------------- ------------- --------------
</TABLE>
* From inception, June 1, 1998 to June 30, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
41
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS -- (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 351,493 $ 2,397,037
EXPENSES:
Mortality and expense
undertakings......... (3,956,858) (8,657,618)
------------------- ----------------
Net investment income
(loss)............. (3,605,365) (6,260,581)
------------------- ----------------
CAPITAL GAINS INCOME..... 39,050,857 44,842,140
------------------- ----------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... (285,889) --
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 56,921,334 89,535,088
------------------- ----------------
Net gain (loss) on
investments........ 56,635,445 89,535,088
------------------- ----------------
Net increase
(decrease) in net
assets resulting
from operations.... $92,080,937 $ 128,116,647
------------------- ----------------
------------------- ----------------
</TABLE>
* From inception, March 2, 1998 to June 30, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
42
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MENTOR MENTOR
INTERNATIONAL SMALL CAPITAL PERPETUAL MENTOR
ADVISERS FUND COMPANY FUND MIDCAP FUND GROWTH FUND INTERNATIONAL FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
-------------- ------------- ------------ ------------- ------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $16,822,117 $ -- $ 574 $-- --$ $--
EXPENSES:
Mortality and expense
undertakings......... (1,018,525) (1,006,200) (194,217) (68) (88) (69)
-------------- ------------- ------------ ------ ------ ------
Net investment income
(loss)............. 15,803,592 (1,006,200) (193,643) (68) (88) (69)
-------------- ------------- ------------ ------ ------ ------
CAPITAL GAINS INCOME..... 4,004,303 2,433,792 -- -- -- --
-------------- ------------- ------------ ------ ------ ------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... (13,860) (9,250) -- 1 -- 1
Net unrealized
appreciation
(depreciation) of
investments during
the period........... (1,895,944) 10,353,124 4,992,358 4,134 2,126 4,490
-------------- ------------- ------------ ------ ------ ------
Net gain (loss) on
investments........ (1,909,804) 10,343,874 4,992,358 4,135 2,126 4,491
-------------- ------------- ------------ ------ ------ ------
Net increase
(decrease) in net
assets resulting
from operations.... $17,898,091 $11,771,466 $4,798,715 $4,067 $2,038 $4,422
-------------- ------------- ------------ ------ ------ ------
-------------- ------------- ------------ ------ ------ ------
</TABLE>
* From inception, March 2, 1998 to June 30, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
43
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ (1,022,135) $ (14,224,981)
Capital gains income... -- 76,061,613
Net realized gain
(loss) on security
transactions......... (13,876) (2,380)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 10,514,818 381,861,363
------------ --------------
Net increase (decrease)
in net assets
resulting from
operations........... 9,478,807 443,695,615
------------ --------------
UNIT TRANSACTIONS:
Purchases.............. 30,539,681 214,211,643
Net transfers.......... 48,909,593 134,510,687
Surrenders............. (9,304,954) (45,190,046)
Net annuity
transactions......... 77,016 2,662,965
------------ --------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 70,221,336 306,195,249
------------ --------------
Total increase
(decrease) in net
assets............... 79,700,143 749,890,864
NET ASSETS:
Beginning of period.... 228,375,322 2,029,587,525
------------ --------------
End of period.......... $308,075,465 $2,779,478,389
------------ --------------
------------ --------------
</TABLE>
* From inception, June 1, 1998 to June 30, 1998.
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY 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)............... $ 9,223,325 $ (2,373,240)
Capital gains income... -- 62,602,913
Net realized gain
(loss) on security
transactions......... 9,814 84,100
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 8,361,624 325,437,100
------------ --------------
Net increase (decrease)
in net assets
resulting from
operations........... 17,594,763 385,750,873
------------ --------------
UNIT TRANSACTIONS:
Purchases.............. 48,533,601 430,730,097
Net transfers.......... 24,454,452 137,640,435
Surrenders............. (9,332,737) (52,393,369)
Net annuity
transactions......... 563,032 1,508,388
------------ --------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 64,218,348 517,485,551
------------ --------------
Total increase in net
assets............... 81,813,111 903,236,424
NET ASSETS:
Beginning of period.... 146,562,211 1,126,351,101
------------ --------------
End of period.......... $228,375,322 $2,029,587,525
------------ --------------
------------ --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
44
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE GROWTH AND
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INCOME FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT
------------ -------------- ------------------ ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ 4,061,036 $ (23,337,375) $ (15,185,675) $ 32,636 $ (292) $ (2,888,740)
Capital gains income... -- 130,454,479 150,932,848 -- -- 11,566,682
Net realized gain
(loss) on security
transactions......... -- -- (137,143) 1,143 -- 6,638
Net unrealized
appreciation
(depreciation) of
investments during
the period........... -- 450,442,540 121,262,945 2,257,934 15,236 70,920,170
------------ -------------- ------------------ ---------------- -------------- --------------
Net increase (decrease)
in net assets
resulting from
operations........... 4,061,036 557,559,644 256,872,975 2,291,713 14,944 79,604,750
------------ -------------- ------------------ ---------------- -------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 33,918,747 326,548,426 188,823,146 4,854,136 336,577 62,617,874
Net transfers.......... 2,728,662 268,088,116 90,403,621 6,621,491 248,343 46,266,485
Surrenders............. (21,300,521) (102,736,084) (54,047,142) (3,006,124) (93) (10,945,007)
Net annuity
transactions......... 117,752 1,618,122 1,686,956 127,524 -- 640,694
------------ -------------- ------------------ ---------------- -------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 15,464,640 493,518,580 226,866,581 8,597,027 584,827 98,580,046
------------ -------------- ------------------ ---------------- -------------- --------------
Total increase
(decrease) in net
assets............... 19,525,676 1,051,078,224 483,739,556 10,888,740 599,771 178,184,796
NET ASSETS:
Beginning of period.... 199,833,574 3,575,726,542 2,237,923,783 80,334,919 -- 437,517,015
------------ -------------- ------------------ ---------------- -------------- --------------
End of period.......... $219,359,250 $4,626,804,766 $2,721,663,339 $91,223,659 $ 599,771 $ 615,701,811
------------ -------------- ------------------ ---------------- -------------- --------------
------------ -------------- ------------------ ---------------- -------------- --------------
</TABLE>
* From inception, June 1, 1998 to June 30, 1998.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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)............... $ 7,922,137 $ 35,054,512 $ (12,623,739) $ 3,680,098 $ 645,552
Capital gains income... -- 107,409,178 112,339,947 -- 19,616,096
Net realized gain
(loss) on security
transactions......... -- 1,305 (119,550) 58,290 185,916
Net unrealized
appreciation
(depreciation) of
investments during
the period........... -- 440,215,879 223,915,112 1,886,382 62,356,292
------------ -------------- ------------------ ---------------- --------------
Net increase (decrease)
in net assets
resulting from
operations........... 7,922,137 582,680,874 323,511,770 5,624,770 82,803,856
------------ -------------- ------------------ ---------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 154,121,029 650,294,881 444,618,125 11,734,160 106,908,193
Net transfers.......... (105,053,239) 185,059,734 111,621,605 (5,624,261) 38,286,952
Surrenders............. (32,455,810) (124,493,708) (60,594,326) (6,044,100) (9,935,604)
Net annuity
transactions......... 110,035 1,689,593 689,458 5,419 151,370
------------ -------------- ------------------ ---------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 16,722,015 712,550,500 496,334,862 71,218 135,410,911
------------ -------------- ------------------ ---------------- --------------
Total increase in net
assets............... 24,644,152 1,295,231,374 819,846,632 5,695,988 218,214,767
NET ASSETS:
Beginning of period.... 175,189,422 2,280,495,168 1,418,077,151 74,638,931 219,302,248
------------ -------------- ------------------ ---------------- --------------
End of period.......... $199,833,574 $3,575,726,542 $2,237,923,783 $80,334,919 $ 437,517,015
------------ -------------- ------------------ ---------------- --------------
------------ -------------- ------------------ ---------------- --------------
<CAPTION>
INTERNATIONAL
OPPORTUNITIES FUND
SUB-ACCOUNT
-------------------
<S> <C>
OPERATIONS:
Net investment income
(loss)............... $ (1,712,982)
Capital gains income... 37,513,752
Net realized gain
(loss) on security
transactions......... (68,174)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... (45,233,169)
-------------------
Net increase (decrease)
in net assets
resulting from
operations........... (9,500,573)
-------------------
UNIT TRANSACTIONS:
Purchases.............. 103,316,180
Net transfers.......... 21,889,359
Surrenders............. (18,041,766)
Net annuity
transactions......... 39,532
-------------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 107,203,305
-------------------
Total increase in net
assets............... 97,702,732
NET ASSETS:
Beginning of period.... 484,965,318
-------------------
End of period.......... $582,668,050
-------------------
-------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
45
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ (3,605,365) $ (6,260,581)
Capital gains income... 39,050,857 44,842,140
Net realized gain
(loss) on security
transactions......... (285,889) --
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 56,921,334 89,535,088
------------------- ----------------
Net increase (decrease)
in net assets
resulting from
operations........... 92,080,937 128,116,647
------------------- ----------------
UNIT TRANSACTIONS:
Purchases.............. 24,263,477 171,594,976
Net transfers.......... (3,569,068) 140,814,308
Surrenders............. (13,418,141) (27,501,646)
Net annuity
transactions......... 268,608 1,173,058
------------------- ----------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 7,544,876 286,080,696
------------------- ----------------
Total increase
(decrease) in net
assets............... 99,625,813 414,197,343
NET ASSETS:
Beginning of period.... 582,668,050 1,163,455,270
------------------- ----------------
End of period.......... $ 682,293,863 $ 1,577,652,613
------------------- ----------------
------------------- ----------------
</TABLE>
** From inception, March 2, 1998 to June 30, 1998.
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVIDEND AND INTERNATIONAL
GROWTH FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss).................... $ 5,721,921 $ 2,472,525
Capital gains income........ 15,828,765 262,472
Net realized gain (loss) on
security transactions..... (12,819) 3,758
Net unrealized appreciation
(depreciation) of
investments during the
period.................... 182,031,024 383,378
-------------- --------------
Net increase (decrease) in
net assets resulting from
operations................ 203,568,891 3,122,133
-------------- --------------
UNIT TRANSACTIONS:
Purchases................... 344,818,126 53,015,752
Net transfers............... 142,586,883 20,439,056
Surrenders.................. (25,953,097) (3,671,030)
Net annuity transactions.... 343,961 63,436
-------------- --------------
Net increase (decrease) in
net assets resulting from
unit transactions......... 461,795,873 69,847,214
-------------- --------------
Total increase in net
assets.................... 665,364,764 72,969,347
NET ASSETS:
Beginning of period......... 498,090,506 71,817,059
-------------- --------------
End of period............... $1,163,455,270 $ 144,786,406
-------------- --------------
-------------- --------------
</TABLE>
* From inception, July 15, 1997 to December 31, 1997
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
46
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MENTOR MENTOR
INTERNATIONAL SMALL MIDCAP CAPITAL PERPETUAL MENTOR
ADVISERS FUND COMPANY FUND FUND GROWTH FUND INTERNATIONAL FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT** SUB-ACCOUNT** SUB-ACCOUNT**
-------------- ------------- ------------ -------------- ------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ 15,803,592 $ (1,006,200) $ (193,643) $ (68) $ (88) $ (69)
Capital gains income... 4,004,303 2,433,792 -- -- -- --
Net realized gain
(loss) on security
transactions......... (13,860) (9,250) -- 1 -- 1
Net unrealized
appreciation
(depreciation) of
investments during
the period........... (1,895,944) 10,353,124 4,992,358 4,134 2,126 4,490
-------------- ------------- ------------ -------------- -------- --------------
Net increase (decrease)
in net assets
resulting from
operations........... 17,898,091 11,771,466 4,798,715 4,067 2,038 4,422
-------------- ------------- ------------ -------------- -------- --------------
UNIT TRANSACTIONS:
Purchases.............. 13,717,952 25,023,818 16,591,444 10,075 12,600 17,575
Net transfers.......... 11,642,334 18,316,331 15,950,505 151,848 202,464 151,848
Surrenders............. (3,706,930) (3,316,385) (399,626) -- 1 --
Net annuity
transactions......... 21,701 142,491 -- -- -- --
-------------- ------------- ------------ -------------- -------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 21,675,057 40,166,255 32,142,323 161,923 215,065 169,423
-------------- ------------- ------------ -------------- -------- --------------
Total increase
(decrease) in net
assets............... 39,573,148 51,937,721 36,941,038 165,990 217,103 173,845
NET ASSETS:
Beginning of period.... 144,786,406 134,782,182 14,738,308 -- -- --
-------------- ------------- ------------ -------------- -------- --------------
End of period.......... $ 184,359,554 $ 186,719,903 $ 51,679,346 $165,990 $217,103 $173,845
-------------- ------------- ------------ -------------- -------- --------------
-------------- ------------- ------------ -------------- -------- --------------
</TABLE>
** From inception, March 2, 1998 to June 30, 1998.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL MIDCAP
COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT*
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss).................... $ (841,931) $ (16,949)
Capital gains income........ 6,247,370 --
Net realized gain (loss) on
security transactions..... (1,756) 414
Net unrealized appreciation
(depreciation) of
investments during the
period.................... 2,416,430 639,685
------------ ------------
Net increase (decrease) in
net assets resulting from
operations................ 7,820,113 623,150
------------ ------------
UNIT TRANSACTIONS:
Purchases................... 59,848,160 7,620,550
Net transfers............... 42,807,593 6,536,068
Surrenders.................. (1,723,390) (41,460)
Net annuity transactions.... 14,177 --
------------ ------------
Net increase (decrease) in
net assets resulting from
unit transactions......... 100,946,540 14,115,158
------------ ------------
Total increase in net
assets.................... 108,766,653 14,738,308
NET ASSETS:
Beginning of period......... 26,015,529 --
------------ ------------
End of period............... $134,782,182 $ 14,738,308
------------ ------------
------------ ------------
</TABLE>
* From inception, July 15, 1997 to December 31, 1997
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
47
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (UNAUDITED)
1. ORGANIZATION:
Separate Account One (the Account) is a separate investment account within
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. 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 annuity 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 June 30, 1998.
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
annuity contracts, provides the mortality and expense undertakings and,
with respect to the Account, receives a maximum annual fee of 1.25% of
the Account's average daily net assets.
b) DEDUCTION OF ANNUAL MAINTENANCE FEE--Annual maintenance fees are
deducted through termination of units of interest from applicable
contract owners' accounts, in accordance with the terms of the
contracts.
48
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FIVE
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<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 HLS Fund,
Inc.
Shares 7,280,184
Cost $ 7,438,186
Market Value......... $7,949,496 -- -- --
Hartford Stock HLS
Fund, Inc.
Shares 7,290,209
Cost $30,410,927
Market Value......... -- $43,815,344 -- --
Hartford Money Market
HLS Fund, Inc.
Shares 17,109,141
Cost $17,109,141
Market Value......... -- -- $17,109,141 --
Hartford Advisers HLS
Fund, Inc.
Shares 26,199,578
Cost $56,433,762
Market Value......... -- -- -- $73,857,945
Hartford Capital
Appreciation HLS
Fund, Inc.
Shares 12,092,263
Cost $45,601,978
Market Value......... -- -- -- --
Hartford Mortgage
Securities HLS Fund,
Inc.
Shares 2,076,530
Cost $ 2,207,742
Market Value......... -- -- -- --
Hartford Index HLS
Fund, Inc.
Shares 6,445,283
Cost $15,081,613
Market Value......... -- -- -- --
Hartford International
Opportunities HLS
Fund, Inc.
Shares 9,709,552
Cost $12,843,891
Market Value......... -- -- -- --
Hartford Dividend and
Growth HLS Fund, Inc.
Shares 14,525,092
Cost $23,172,285
Market Value......... -- -- -- --
Hartford International
Advisers HLS Fund,
Inc.
Shares 2,408,241
Cost $ 2,755,709
Market Value......... -- -- -- --
Hartford Small Company
HLS Fund, Inc.
Shares 1,764,207
Cost $ 2,184,404
Market Value......... -- -- -- --
Hartford MidCap HLS
Fund, Inc.
Shares 490,286
Cost $ 593,140
Market Value......... -- -- -- --
Due from Hartford Life
Insurance Company.... 2 11,792 47,886 38,589
Receivable from fund
shares sold.......... -- -- -- --
------------ ------------ ------------ --------------
Total Assets........... 7,949,498 43,827,136 17,157,027 73,896,534
------------ ------------ ------------ --------------
LIABILITIES:
Due to Hartford Life
Insurance Company.... -- -- -- --
Payable for fund shares
purchased............ -- 11,786 47,542 38,567
------------ ------------ ------------ --------------
Total Liabilities...... -- 11,786 47,542 38,567
------------ ------------ ------------ --------------
Net Assets (variable
life contract
liabilities)......... $7,949,498 $43,815,350 $17,109,485 $73,857,967
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
Units Owned by
Participants......... 5,585,576 16,651,592 14,250,921 34,562,441
Unit Values............ $ 1.423219 $ 2.631301 $ 1.200588 $ 2.136943
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
50
<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 HLS Fund,
Inc.
Shares 7,280,184
Cost $ 7,438,186
Market Value......... -- -- -- -- --
Hartford Stock HLS
Fund, Inc.
Shares 7,290,209
Cost $30,410,927
Market Value......... -- -- -- -- --
Hartford Money Market
HLS Fund, Inc.
Shares 17,109,141
Cost $17,109,141
Market Value......... -- -- -- -- --
Hartford Advisers HLS
Fund, Inc.
Shares 26,199,578
Cost $56,433,762
Market Value......... -- -- -- -- --
Hartford Capital
Appreciation HLS
Fund, Inc.
Shares 12,092,263
Cost $45,601,978
Market Value......... $56,013,984 -- -- -- --
Hartford Mortgage
Securities HLS Fund,
Inc.
Shares 2,076,530
Cost $ 2,207,742
Market Value......... -- $2,310,385 -- -- --
Hartford Index HLS
Fund, Inc.
Shares 6,445,283
Cost $15,081,613
Market Value......... -- -- $21,269,645 -- --
Hartford International
Opportunities HLS
Fund, Inc.
Shares 9,709,552
Cost $12,843,891
Market Value......... -- -- -- $13,742,259 --
Hartford Dividend and
Growth HLS Fund, Inc.
Shares 14,525,092
Cost $23,172,285
Market Value......... -- -- -- -- $30,338,879
Hartford International
Advisers HLS Fund,
Inc.
Shares 2,408,241
Cost $ 2,755,709
Market Value......... -- -- -- -- --
Hartford Small Company
HLS Fund, Inc.
Shares 1,764,207
Cost $ 2,184,404
Market Value......... -- -- -- -- --
Hartford MidCap HLS
Fund, Inc.
Shares 490,286
Cost $ 593,140
Market Value......... -- -- -- -- --
Due from Hartford Life
Insurance Company.... 38,139 -- -- 4 16,015
Receivable from fund
shares sold.......... -- -- 10,000 -- --
------------------ ---------------- -------------- ------------------- -------------
Total Assets........... 56,052,123 2,310,385 21,279,645 13,742,263 30,354,894
------------------ ---------------- -------------- ------------------- -------------
LIABILITIES:
Due to Hartford Life
Insurance Company.... -- -- 9,961 -- --
Payable for fund shares
purchased............ 38,019 -- -- -- 16,018
------------------ ---------------- -------------- ------------------- -------------
Total Liabilities...... 38,019 -- 9,961 -- 16,018
------------------ ---------------- -------------- ------------------- -------------
Net Assets (variable
life contract
liabilities)......... $56,014,104 $2,310,385 $21,269,684 $13,742,263 $30,338,876
------------------ ---------------- -------------- ------------------- -------------
------------------ ---------------- -------------- ------------------- -------------
Units Owned by
Participants......... 26,135,246 1,679,128 8,222,999 8,951,681 12,440,563
Unit Values............ $ 2.143240 $ 1.375943 $ 2.586609 $ 1.535160 $ 2.438706
<CAPTION>
INTERNATIONAL SMALL MIDCAP
ADVISERS FUND COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------- ------------
<S> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund,
Inc.
Shares 7,280,184
Cost $ 7,438,186
Market Value......... -- -- --
Hartford Stock HLS
Fund, Inc.
Shares 7,290,209
Cost $30,410,927
Market Value......... -- -- --
Hartford Money Market
HLS Fund, Inc.
Shares 17,109,141
Cost $17,109,141
Market Value......... -- -- --
Hartford Advisers HLS
Fund, Inc.
Shares 26,199,578
Cost $56,433,762
Market Value......... -- -- --
Hartford Capital
Appreciation HLS
Fund, Inc.
Shares 12,092,263
Cost $45,601,978
Market Value......... -- -- --
Hartford Mortgage
Securities HLS Fund,
Inc.
Shares 2,076,530
Cost $ 2,207,742
Market Value......... -- -- --
Hartford Index HLS
Fund, Inc.
Shares 6,445,283
Cost $15,081,613
Market Value......... -- -- --
Hartford International
Opportunities HLS
Fund, Inc.
Shares 9,709,552
Cost $12,843,891
Market Value......... -- -- --
Hartford Dividend and
Growth HLS Fund, Inc.
Shares 14,525,092
Cost $23,172,285
Market Value......... -- -- --
Hartford International
Advisers HLS Fund,
Inc.
Shares 2,408,241
Cost $ 2,755,709
Market Value......... $2,764,275 -- --
Hartford Small Company
HLS Fund, Inc.
Shares 1,764,207
Cost $ 2,184,404
Market Value......... -- $2,273,677 --
Hartford MidCap HLS
Fund, Inc.
Shares 490,286
Cost $ 593,140
Market Value......... -- -- $ 655,857
Due from Hartford Life
Insurance Company.... -- -- --
Receivable from fund
shares sold.......... -- -- --
-------------- ------------- ------------
Total Assets........... 2,764,275 2,273,677 655,857
-------------- ------------- ------------
LIABILITIES:
Due to Hartford Life
Insurance Company.... 1 1 --
Payable for fund shares
purchased............ -- -- --
-------------- ------------- ------------
Total Liabilities...... 1 1 --
-------------- ------------- ------------
Net Assets (variable
life contract
liabilities)......... $2,764,274 $2,273,676 $ 655,857
-------------- ------------- ------------
-------------- ------------- ------------
Units Owned by
Participants......... 1,795,455 1,794,024 536,355
Unit Values............ $ 1.539596 $ 1.267361 $1.222803
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
51
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<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.............. $ 19,688 $ 11,080 $422,143 $ 34,492
------------ ------------ ------------ --------------
CAPITAL GAINS INCOME..... -- 1,202,881 -- 2,134,889
------------ ------------ ------------ --------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 2,831 (3,719) -- 13,123
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 276,943 6,050,690 -- 7,275,621
------------ ------------ ------------ --------------
Net gain (loss) on
investments........ 279,774 6,046,971 -- 7,288,744
------------ ------------ ------------ --------------
Net increase
(decrease) in net
assets resulting
from operations.... $299,462 $ 7,260,932 $422,143 $9,458,125
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
52
<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.............. $ 9,866 $14,057 $ 14,199 $ 6,966 $ 48,298
------------------ ------- ------------ ------------------- -------------
CAPITAL GAINS INCOME..... 3,157,152 -- 420,305 773,886 903,529
------------------ ------- ------------ ------------------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 60,066 1,027 3,715 4,398 (2,076)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 2,499,382 59,035 2,528,691 1,130,653 1,792,348
------------------ ------- ------------ ------------------- -------------
Net gain (loss) on
investments........ 2,559,448 60,062 2,532,406 1,135,051 1,790,272
------------------ ------- ------------ ------------------- -------------
Net increase
(decrease) in net
assets resulting
from operations.... $5,726,466 $74,119 $ 2,966,910 $1,915,903 $2,742,099
------------------ ------- ------------ ------------------- -------------
------------------ ------- ------------ ------------------- -------------
<CAPTION>
INTERNATIONAL SMALL MIDCAP
ADVISERS FUND COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $265,660 $-- $ 7
-------------- ------------- ------------
CAPITAL GAINS INCOME..... 63,237 33,340 --
-------------- ------------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 4,256 (1,037) 33
Net unrealized
appreciation
(depreciation) of
investments during
the period........... (38,454) 147,167 59,424
-------------- ------------- ------------
Net gain (loss) on
investments........ (34,198) 146,130 59,457
-------------- ------------- ------------
Net increase
(decrease) in net
assets resulting
from operations.... $294,699 $179,470 $59,464
-------------- ------------- ------------
-------------- ------------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
53
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<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
(loss)............... $ 19,688 $ 11,080 $ 422,143 $ 34,492
Capital gains income... -- 1,202,881 -- 2,134,889
Net realized gain
(loss) on security
transactions......... 2,831 (3,719) -- 13,123
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 276,943 6,050,690 -- 7,275,621
------------ ------------ ------------- --------------
Net increase (decrease)
in net assets
resulting from
operations........... 299,462 7,260,932 422,143 9,458,125
------------ ------------ ------------- --------------
UNIT TRANSACTIONS:
Purchases.............. -- -- 29,679,284 337
Net transfers.......... 2,073,381 4,997,052 (27,926,874) 7,725,911
Surrenders............. (200,806) (566,104) (509,546) (1,210,000)
Net loan withdrawals... (44,772) (97,563) (1,445,042) (350,966)
Cost of insurance and
other fees........... (24,729) (123,912) (73,859) (223,483)
------------ ------------ ------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 1,803,074 4,209,473 (276,037) 5,941,799
------------ ------------ ------------- --------------
Total increase
(decrease) in net
assets............... 2,102,536 11,470,405 146,106 15,399,924
NET ASSETS:
Beginning of period.... 5,846,962 32,344,945 16,963,379 58,458,043
------------ ------------ ------------- --------------
End of period.......... $7,949,498 $ 43,815,350 $ 17,109,485 $73,857,967
------------ ------------ ------------- --------------
------------ ------------ ------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
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
(loss)............... $ 289,780 $ 277,126 $ 911,582 $ 1,156,876
Capital gains income... -- 933,599 -- 1,663,628
Net realized gain
(loss) on security
transactions......... 1,747 8,984 -- 2,740
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 234,683 5,037,260 -- 6,960,236
------------ ------------ ------------- --------------
Net increase (decrease)
in net assets
resulting from
operations........... 526,210 6,256,969 911,582 9,783,480
------------ ------------ ------------- --------------
UNIT TRANSACTIONS:
Purchases.............. -- -- 63,950,949 2,129
Net transfers.......... 2,261,134 10,438,019 (61,547,449) 16,160,071
Surrenders............. (72,004) (726,356) (1,485,440) (1,461,109)
Net loan withdrawals... (40,246) (220,955) (2,906,735) (120,116)
Cost of insurance and
other fees........... (29,688) (165,194) (154,854) (322,766)
------------ ------------ ------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 2,119,196 9,325,514 (2,143,529) 14,258,209
------------ ------------ ------------- --------------
Total increase
(decrease) in net
assets............... 2,645,406 15,582,483 (1,231,947) 24,041,689
NET ASSETS:
Beginning of period.... 3,201,556 16,762,462 18,195,326 34,416,354
------------ ------------ ------------- --------------
End of period.......... $5,846,962 $ 32,344,945 $ 16,963,379 $58,458,043
------------ ------------ ------------- --------------
------------ ------------ ------------- --------------
</TABLE>
* From inception, July 15, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
54
<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
(loss)............... $ 9,866 $ 14,057 $ 14,199 $ 6,966 $ 48,298
Capital gains income... 3,157,152 -- 420,305 773,886 903,529
Net realized gain
(loss) on security
transactions......... 60,066 1,027 3,715 4,398 (2,076)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 2,499,382 59,035 2,528,691 1,130,653 1,792,348
------------------ ---------------- -------------- ------------------- -------------
Net increase (decrease)
in net assets
resulting from
operations........... 5,726,466 74,119 2,966,910 1,915,903 2,742,099
------------------ ---------------- -------------- ------------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 21 -- 36 -- 72
Net transfers.......... 4,413,132 126,335 2,721,456 719,064 4,113,519
Surrenders............. (959,313) (81,973) (249,853) (173,075) (671,363)
Net loan withdrawals... (391,135) (28,109) (313,604) (87,080) (113,408)
Cost of insurance and
other fees........... (174,934) (8,693) (62,467) (42,032) (93,540)
------------------ ---------------- -------------- ------------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 2,887,771 7,560 2,095,568 416,877 3,235,280
------------------ ---------------- -------------- ------------------- -------------
Total increase
(decrease) in net
assets............... 8,614,237 81,679 5,062,478 2,332,780 5,977,379
NET ASSETS:
Beginning of period.... 47,399,867 2,228,706 16,207,206 11,409,483 24,361,497
------------------ ---------------- -------------- ------------------- -------------
End of period.......... $56,014,104 $2,310,385 $ 21,269,684 $13,742,263 $30,338,876
------------------ ---------------- -------------- ------------------- -------------
------------------ ---------------- -------------- ------------------- -------------
<CAPTION>
INTERNATIONAL SMALL MIDCAP
ADVISERS FUND COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------- ------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ 265,660 $ -- $ 7
Capital gains income... 63,237 33,340 --
Net realized gain
(loss) on security
transactions......... 4,256 (1,037) 33
Net unrealized
appreciation
(depreciation) of
investments during
the period........... (38,454) 147,167 59,424
-------------- ------------- ------------
Net increase (decrease)
in net assets
resulting from
operations........... 294,699 179,470 59,464
-------------- ------------- ------------
UNIT TRANSACTIONS:
Purchases.............. -- -- --
Net transfers.......... 259,268 347,240 430,485
Surrenders............. (50,687) (19,505) (3,130)
Net loan withdrawals... (10,443) (15,472) (4,156)
Cost of insurance and
other fees........... (8,874) (7,168) (1,309)
-------------- ------------- ------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 189,264 305,095 421,890
-------------- ------------- ------------
Total increase
(decrease) in net
assets............... 483,963 484,565 481,354
NET ASSETS:
Beginning of period.... 2,280,311 1,789,111 174,503
-------------- ------------- ------------
End of period.......... $2,764,274 $2,273,676 $655,857
-------------- ------------- ------------
-------------- ------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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
(loss)............... $ 221,135 $ 116,672 $ 180,981 $ 104,356 $ 341,582
Capital gains income... 2,382,496 -- 787,478 661,603 364,880
Net realized gain
(loss) on security
transactions......... 1,256 296 4,890 7,059 462
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 4,674,683 39,086 2,484,980 (783,223) 3,955,206
------------------ ---------------- -------------- ------------------- -------------
Net increase (decrease)
in net assets
resulting from
operations........... 7,279,570 156,054 3,458,329 (10,205) 4,662,130
------------------ ---------------- -------------- ------------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 684 -- -- 712 --
Net transfers.......... 12,167,630 699,756 4,486,710 3,635,238 8,771,193
Surrenders............. (1,165,216) (61,537) (569,846) (325,889) (474,419)
Net loan withdrawals... (179,295) (9,709) (170,615) (76,025) (141,694)
Cost of insurance and
other fees........... (268,542) (12,046) (85,758) (70,065) (120,449)
------------------ ---------------- -------------- ------------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 10,555,261 616,464 3,660,491 3,163,971 8,034,631
------------------ ---------------- -------------- ------------------- -------------
Total increase
(decrease) in net
assets............... 17,834,831 772,518 7,118,820 3,153,766 12,696,761
NET ASSETS:
Beginning of period.... 29,565,036 1,456,188 9,088,386 8,255,717 11,664,736
------------------ ---------------- -------------- ------------------- -------------
End of period.......... $47,399,867 $2,228,706 $ 16,207,206 $11,409,483 $24,361,497
------------------ ---------------- -------------- ------------------- -------------
------------------ ---------------- -------------- ------------------- -------------
<CAPTION>
INTERNATIONAL SMALL MIDCAP
ADVISERS FUND COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
-------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ 70,580 $ 811 $ 156
Capital gains income... 4,758 81,211 --
Net realized gain
(loss) on security
transactions......... 4,567 (11,838) (3)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 16,688 (57,877) 3,294
-------------- ------------- -------------
Net increase (decrease)
in net assets
resulting from
operations........... 96,593 12,307 3,447
-------------- ------------- -------------
UNIT TRANSACTIONS:
Purchases.............. -- -- 1,000
Net transfers.......... 841,304 1,790,398 170,709
Surrenders............. (46,000) (10,130) (525)
Net loan withdrawals... (23,722) (2) --
Cost of insurance and
other fees........... (12,736) (4,445) (128)
-------------- ------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 758,846 1,775,821 171,056
-------------- ------------- -------------
Total increase
(decrease) in net
assets............... 855,439 1,788,128 174,503
NET ASSETS:
Beginning of period.... 1,424,872 983 --
-------------- ------------- -------------
End of period.......... $2,280,311 $1,789,111 $174,503
-------------- ------------- -------------
-------------- ------------- -------------
</TABLE>
* From inception, July 15, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
55
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (UNAUDITED)
1. ORGANIZATION:
Separate Account Five (the Account) is a separate investment account with
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 June 30, 1998.
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.
56
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT FIVE
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<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 HLS Fund,
Inc.
Shares 4,153,371
Cost $ 4,248,294
Market Value......... $4,535,216 -- -- --
Hartford Stock HLS
Fund, Inc.
Shares 7,173,600
Cost $30,349,379
Market Value......... -- $43,114,508 -- --
Hartford Money Market
HLS Fund, Inc.
Shares 9,426,462
Cost $ 9,426,462
Market Value......... -- -- $9,426,462 --
Hartford Advisers HLS
Fund, Inc.
Shares 18,498,618
Cost $40,722,897
Market Value......... -- -- -- $52,148,548
Hartford Capital
Appreciation HLS
Fund, Inc.
Shares 10,869,028
Cost $41,748,285
Market Value......... -- -- -- --
Hartford Mortgage
Securities HLS Fund,
Inc.
Shares 1,489,139
Cost $ 1,592,256
Market Value......... -- -- -- --
Hartford Index HLS
Fund, Inc.
Shares 4,213,451
Cost $10,161,888
Market Value......... -- -- -- --
Hartford International
Opportunities HLS
Fund, Inc.
Shares 10,805,538
Cost $14,579,294
Market Value......... -- -- -- --
Hartford Dividend and
Growth HLS Fund, Inc.
Shares 14,275,486
Cost $23,152,432
Market Value......... -- -- -- --
Hartford International
Advisers HLS Fund,
Inc.
Shares 2,595,263
Cost $ 2,979,730
Market Value......... -- -- -- --
Hartford Small Company
HLS Fund, Inc.
Shares 1,114,531
Cost $ 1,359,892
Market Value......... -- -- -- --
Hartford MidCap HLS
Fund, Inc.
Shares 217,438
Cost $ 255,435
Market Value......... -- -- -- --
Due from Hartford Life
and Annuity Insurance
Company.............. 17 -- 356,382 --
Receivable from fund
shares sold.......... -- 25,843 -- 18,833
------------ ------------ ------------ --------------
Total Assets........... 4,535,233 43,140,351 9,782,844 52,167,381
------------ ------------ ------------ --------------
LIABILITIES:
Due to Hartford Life
Insurance Company.... -- 25,663 -- 18,601
Payable for fund shares
purchased............ -- -- 356,225 --
------------ ------------ ------------ --------------
Total Liabilities...... -- 25,663 356,225 18,601
------------ ------------ ------------ --------------
Net Assets (variable
life contract
liabilities)......... $4,535,233 $43,114,688 $9,426,619 $52,148,780
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
Units Owned by
Participants......... 3,186,602 16,385,312 7,851,668 24,403,449
Unit Values............ $ 1.423219 $ 2.631301 $ 1.200588 $ 2.136943
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
58
<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 HLS Fund,
Inc.
Shares 4,153,371
Cost $ 4,248,294
Market Value......... -- -- -- -- --
Hartford Stock HLS
Fund, Inc.
Shares 7,173,600
Cost $30,349,379
Market Value......... -- -- -- -- --
Hartford Money Market
HLS Fund, Inc.
Shares 9,426,462
Cost $ 9,426,462
Market Value......... -- -- -- -- --
Hartford Advisers HLS
Fund, Inc.
Shares 18,498,618
Cost $40,722,897
Market Value......... -- -- -- -- --
Hartford Capital
Appreciation HLS
Fund, Inc.
Shares 10,869,028
Cost $41,748,285
Market Value......... $50,347,697 -- -- -- --
Hartford Mortgage
Securities HLS Fund,
Inc.
Shares 1,489,139
Cost $ 1,592,256
Market Value......... -- $1,656,843 -- -- --
Hartford Index HLS
Fund, Inc.
Shares 4,213,451
Cost $10,161,888
Market Value......... -- -- $13,904,526 -- --
Hartford International
Opportunities HLS
Fund, Inc.
Shares 10,805,538
Cost $14,579,294
Market Value......... -- -- -- $15,293,446 --
Hartford Dividend and
Growth HLS Fund, Inc.
Shares 14,275,486
Cost $23,152,432
Market Value......... -- -- -- -- $29,817,521
Hartford International
Advisers HLS Fund,
Inc.
Shares 2,595,263
Cost $ 2,979,730
Market Value......... -- -- -- -- --
Hartford Small Company
HLS Fund, Inc.
Shares 1,114,531
Cost $ 1,359,892
Market Value......... -- -- -- -- --
Hartford MidCap HLS
Fund, Inc.
Shares 217,438
Cost $ 255,435
Market Value......... -- -- -- -- --
Due from Hartford Life
and Annuity Insurance
Company.............. -- 6 100 -- --
Receivable from fund
shares sold.......... 118,569 -- -- 620 103,182
------------------ ---------------- -------------- ------------------- -------------
Total Assets........... 50,466,266 1,656,849 13,904,626 15,294,066 29,920,703
------------------ ---------------- -------------- ------------------- -------------
LIABILITIES:
Due to Hartford Life
Insurance Company.... 119,282 -- -- 634 103,027
Payable for fund shares
purchased............ -- -- -- -- --
------------------ ---------------- -------------- ------------------- -------------
Total Liabilities...... 119,282 -- -- 634 103,027
------------------ ---------------- -------------- ------------------- -------------
Net Assets (variable
life contract
liabilities)......... $50,346,984 $1,656,849 $13,904,626 $15,293,432 $29,817,676
------------------ ---------------- -------------- ------------------- -------------
------------------ ---------------- -------------- ------------------- -------------
Units Owned by
Participants......... 23,491,062 1,204,155 5,375,619 9,962,110 12,226,844
Unit Values............ $ 2.143240 $ 1.375943 $ 2.586609 $ 1.535160 $ 2.438706
<CAPTION>
INTERNATIONAL SMALL MIDCAP
ADVISERS FUND COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------- ------------
<S> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund,
Inc.
Shares 4,153,371
Cost $ 4,248,294
Market Value......... -- -- --
Hartford Stock HLS
Fund, Inc.
Shares 7,173,600
Cost $30,349,379
Market Value......... -- -- --
Hartford Money Market
HLS Fund, Inc.
Shares 9,426,462
Cost $ 9,426,462
Market Value......... -- -- --
Hartford Advisers HLS
Fund, Inc.
Shares 18,498,618
Cost $40,722,897
Market Value......... -- -- --
Hartford Capital
Appreciation HLS
Fund, Inc.
Shares 10,869,028
Cost $41,748,285
Market Value......... -- -- --
Hartford Mortgage
Securities HLS Fund,
Inc.
Shares 1,489,139
Cost $ 1,592,256
Market Value......... -- -- --
Hartford Index HLS
Fund, Inc.
Shares 4,213,451
Cost $10,161,888
Market Value......... -- -- --
Hartford International
Opportunities HLS
Fund, Inc.
Shares 10,805,538
Cost $14,579,294
Market Value......... -- -- --
Hartford Dividend and
Growth HLS Fund, Inc.
Shares 14,275,486
Cost $23,152,432
Market Value......... -- -- --
Hartford International
Advisers HLS Fund,
Inc.
Shares 2,595,263
Cost $ 2,979,730
Market Value......... $2,978,946 -- --
Hartford Small Company
HLS Fund, Inc.
Shares 1,114,531
Cost $ 1,359,892
Market Value......... -- $1,436,386 --
Hartford MidCap HLS
Fund, Inc.
Shares 217,438
Cost $ 255,435
Market Value......... -- -- $ 290,867
Due from Hartford Life
and Annuity Insurance
Company.............. -- -- --
Receivable from fund
shares sold.......... 1,814 -- 19,113
-------------- ------------- ------------
Total Assets........... 2,980,760 1,436,386 309,980
-------------- ------------- ------------
LIABILITIES:
Due to Hartford Life
Insurance Company.... 1,841 22 19,114
Payable for fund shares
purchased............ -- -- --
-------------- ------------- ------------
Total Liabilities...... 1,841 22 19,114
-------------- ------------- ------------
Net Assets (variable
life contract
liabilities)......... $2,978,919 $1,436,364 $ 290,866
-------------- ------------- ------------
-------------- ------------- ------------
Units Owned by
Participants......... 1,934,871 1,133,350 237,869
Unit Values............ $ 1.539596 $ 1.267361 $1.222803
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
59
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<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.............. $ 9,181 $ 11,012 $271,270 $ 23,670
------------ ------------ ------------ --------------
CAPITAL GAINS INCOME..... -- 1,195,486 -- 1,465,098
------------ ------------ ------------ --------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... (22) (74) -- 2,264
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 158,454 5,983,530 -- 5,079,275
------------ ------------ ------------ --------------
Net gain (loss) on
investments........ 158,432 5,983,456 -- 5,081,539
------------ ------------ ------------ --------------
Net increase
(decrease) in net
assets resulting
from operations.... $167,613 $ 7,189,954 $271,270 $6,570,307
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
60
<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.............. $ 8,629 $11,386 $ 9,208 $ 7,410 $ 46,599
------------------ ------- ------------ ------------------- -------------
CAPITAL GAINS INCOME..... 2,761,262 -- 272,547 823,226 871,742
------------------ ------- ------------ ------------------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 13,868 1,259 (428) 2,006 779
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 2,196,660 42,751 1,658,489 1,206,844 1,746,489
------------------ ------- ------------ ------------------- -------------
Net gain (loss) on
investments........ 2,210,528 44,010 1,658,061 1,208,850 1,747,268
------------------ ------- ------------ ------------------- -------------
Net increase
(decrease) in net
assets resulting
from operations.... $4,980,419 $55,396 $ 1,939,816 $2,039,486 $2,665,609
------------------ ------- ------------ ------------------- -------------
------------------ ------- ------------ ------------------- -------------
<CAPTION>
INTERNATIONAL SMALL MIDCAP
ADVISERS FUND COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $285,452 $-- $ 4
-------------- ------------- ------------
CAPITAL GAINS INCOME..... 67,948 17,778 --
-------------- ------------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 561 (923) 449
Net unrealized
appreciation
(depreciation) of
investments during
the period........... (36,987) 83,515 32,452
-------------- ------------- ------------
Net gain (loss) on
investments........ (36,426) 82,592 32,901
-------------- ------------- ------------
Net increase
(decrease) in net
assets resulting
from operations.... $316,974 $100,370 $32,905
-------------- ------------- ------------
-------------- ------------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
61
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<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
(loss)............... $ 9,181 $ 11,012 $ 271,270 $ 23,670
Capital gains income... -- 1,195,486 -- 1,465,098
Net realized gain
(loss) on security
transactions......... (22) (74) -- 2,264
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 158,454 5,983,530 -- 5,079,275
------------ ------------ ------------ --------------
Net increase (decrease)
in net assets
resulting from
operations........... 167,613 7,189,954 271,270 6,570,307
------------ ------------ ------------ --------------
UNIT TRANSACTIONS:
Purchases.............. 606 -- 26,562,944 --
Net transfers.......... 1,164,470 4,565,965 (25,670,664) 5,910,800
Surrenders............. (30,821) (643,278) (1,660,074) (727,375)
Net loan activity...... (5,277) (69,727) (1,037,357) (230,561)
Cost of insurance...... (13,463) (113,181) (47,344) (148,021)
------------ ------------ ------------ --------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 1,115,515 3,739,779 (1,852,495) 4,804,843
------------ ------------ ------------ --------------
Total increase
(decrease) in net
assets............... 1,283,128 10,929,733 (1,581,225) 11,375,150
NET ASSETS:
Beginning of period.... 3,252,105 32,184,955 11,007,844 40,773,630
------------ ------------ ------------ --------------
End of period.......... $4,535,233 $ 43,114,688 $ 9,426,619 $52,148,780
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
</TABLE>
- --------------------------------------------------------------------------------
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
(loss)............... $ 156,755 $ 274,037 $ 632,382 $ 789,490
Capital gains income... -- 904,272 -- 1,045,984
Net realized gain
(loss) on security
transactions......... 894 12,939 -- 3,344
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 118,897 4,902,064 -- 4,613,047
------------ ------------ ------------ --------------
Net increase (decrease)
in net assets
resulting from
operations........... 276,546 6,093,312 632,382 6,451,865
------------ ------------ ------------ --------------
UNIT TRANSACTIONS:
Purchases.............. 16 50,244 63,908,110 243,545
Net transfers.......... 1,318,984 12,296,285 (62,169,665) 13,868,301
Surrenders............. (43,171) (1,275,425) (393,227) (1,057,654)
Net loan activity...... (15,758) (97,878) (2,491,658) (64,323)
Cost of insurance...... (16,113) (151,064) (109,762) (204,969)
------------ ------------ ------------ --------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 1,243,958 10,822,162 (1,256,202) 12,784,900
------------ ------------ ------------ --------------
Total increase
(decrease) in net
assets............... 1,520,504 16,915,474 (623,820) 19,236,765
NET ASSETS:
Beginning of period.... 1,731,601 15,269,481 11,631,664 21,536,865
------------ ------------ ------------ --------------
End of period.......... $3,252,105 $ 32,184,955 $11,007,844 $40,773,630
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
</TABLE>
* From inception, July 15, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
62
<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
(loss)............... $ 8,629 $ 11,386 $ 9,208 $ 7,410 $ 46,599
Capital gains income... 2,761,262 -- 272,547 823,226 871,742
Net realized gain
(loss) on security
transactions......... 13,868 1,259 (428) 2,006 779
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 2,196,660 42,751 1,658,489 1,206,844 1,746,489
------------------ ---------------- -------------- ------------------- -------------
Net increase (decrease)
in net assets
resulting from
operations........... 4,980,419 55,396 1,939,816 2,039,486 2,665,609
------------------ ---------------- -------------- ------------------- -------------
UNIT TRANSACTIONS:
Purchases.............. -- -- -- -- --
Net transfers.......... 5,306,193 (11,640) 1,707,050 1,619,052 4,490,229
Surrenders............. (686,733) (15,288) (357,311) (287,163) (380,599)
Net loan activity...... (276,591) (7,343) (22,141) (44,688) (248,930)
Cost of insurance...... (141,747) (5,538) (39,522) (43,149) (84,757)
------------------ ---------------- -------------- ------------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 4,201,122 (39,809) 1,288,076 1,244,052 3,775,943
------------------ ---------------- -------------- ------------------- -------------
Total increase
(decrease) in net
assets............... 9,181,541 15,587 3,227,892 3,283,538 6,441,552
NET ASSETS:
Beginning of period.... 41,165,443 1,641,262 10,676,734 12,009,894 23,376,124
------------------ ---------------- -------------- ------------------- -------------
End of period.......... $50,346,984 $1,656,849 $ 13,904,626 $15,293,432 $29,817,676
------------------ ---------------- -------------- ------------------- -------------
------------------ ---------------- -------------- ------------------- -------------
<CAPTION>
INTERNATIONAL SMALL MIDCAP
ADVISERS FUND COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------- ------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ 285,452 $ -- $ 4
Capital gains income... 67,948 17,778 --
Net realized gain
(loss) on security
transactions......... 561 (923) 449
Net unrealized
appreciation
(depreciation) of
investments during
the period........... (36,987) 83,515 32,452
-------------- ------------- ------------
Net increase (decrease)
in net assets
resulting from
operations........... 316,974 100,370 32,905
-------------- ------------- ------------
UNIT TRANSACTIONS:
Purchases.............. -- -- --
Net transfers.......... 273,579 476,445 168,495
Surrenders............. (40,275) (91,302) (1,395)
Net loan activity...... (25,655) (34,180) --
Cost of insurance...... (9,185) (4,262) (836)
-------------- ------------- ------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 198,464 346,701 166,264
-------------- ------------- ------------
Total increase
(decrease) in net
assets............... 515,438 447,071 199,169
NET ASSETS:
Beginning of period.... 2,463,481 989,293 91,697
-------------- ------------- ------------
End of period.......... $2,978,919 $1,436,364 $290,866
-------------- ------------- ------------
-------------- ------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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
(loss)............... $ 190,756 $ 79,693 $ 116,095 $ 108,028 $ 324,234
Capital gains income... 1,971,454 -- 474,812 587,257 328,863
Net realized gain
(loss) on security
transactions......... 4,174 141 (3,017) (1,502) (3,678)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 4,126,792 18,347 1,522,964 (918,735) 3,808,104
------------------ ---------------- -------------- ------------------- -------------
Net increase (decrease)
in net assets
resulting from
operations........... 6,293,176 98,181 2,110,854 (224,952) 4,457,523
------------------ ---------------- -------------- ------------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 103,255 -- 27 40,040 156
Net transfers.......... 12,570,924 882,849 3,834,337 6,039,925 9,250,118
Surrenders............. (1,417,215) (17,802) (430,212) (433,918) (388,933)
Net loan activity...... (35,024) 4,385 (42,196) (14,211) (126,702)
Cost of insurance...... (204,886) (7,440) (51,934) (63,263) (107,665)
------------------ ---------------- -------------- ------------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 11,017,054 861,992 3,310,022 5,568,573 8,626,974
------------------ ---------------- -------------- ------------------- -------------
Total increase
(decrease) in net
assets............... 17,310,230 960,173 5,420,876 5,343,621 13,084,497
NET ASSETS:
Beginning of period.... 23,855,213 681,089 5,255,858 6,666,273 10,291,627
------------------ ---------------- -------------- ------------------- -------------
End of period.......... $41,165,443 $1,641,262 $ 10,676,734 $12,009,894 $23,376,124
------------------ ---------------- -------------- ------------------- -------------
------------------ ---------------- -------------- ------------------- -------------
<CAPTION>
INTERNATIONAL SMALL MIDCAP
ADVISERS FUND COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
-------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)............... $ 72,657 $ 449 $ 82
Capital gains income... 4,846 44,954 --
Net realized gain
(loss) on security
transactions......... 691 (415) (2)
Net unrealized
appreciation
(depreciation) of
investments during
the period........... 9,052 (7,085) 2,981
-------------- ------------- -------------
Net increase (decrease)
in net assets
resulting from
operations........... 87,246 37,903 3,061
-------------- ------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 136 -- 1,000
Net transfers.......... 1,063,784 956,329 87,826
Surrenders............. (57,314) (12,652) (110)
Net loan activity...... (23,857) (1,427) --
Cost of insurance...... (13,409) (2,262) (80)
-------------- ------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions......... 969,340 939,988 88,636
-------------- ------------- -------------
Total increase
(decrease) in net
assets............... 1,056,586 977,891 91,697
NET ASSETS:
Beginning of period.... 1,406,895 11,402 --
-------------- ------------- -------------
End of period.......... $2,463,481 $ 989,293 $ 91,697
-------------- ------------- -------------
-------------- ------------- -------------
</TABLE>
* From inception, July 15, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
63
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (UNAUDITED)
1. ORGANIZATION:
Separate Account Five (the Account) is a separate investment account within
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. 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 June 30, 1998.
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.
64
<PAGE>
HARTFORD BOND HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- ------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 3.8%
Capital Lease Funding Securitization, Series
1997-CTL1, Class A1
$ 7,039,221 7.42% due 06/22/24............................. $ 7,254,797
Chemical Master Credit Card Trust, Series 96-1,
Class A
11,400,000 5.55% due 09/15/03............................. 11,348,358
Oakwood Mortgage Investors, Inc. Series 94-A,
Class B1
1,465,871 8.40% due 02/15/15............................. 1,493,371
PG & E 97-1 A6
3,600,000 6.32% due 09/25/05............................. 3,662,964
Sce Funding LLC Series 1997-1 A3
3,250,000 6.17% due 03/25/03............................. 3,279,575
------------
Total asset-backed securities..................... $ 27,039,065
------------
------------
CORPORATE BONDS & NOTES -- 51.6%
CHEMICALS -- 1.0%
du Pont (E.I.) Nemours & Co.
5,700,000 6.75% due 09/01/07............................. 5,957,816
Terra Industries, Inc.
1,225,000 10.50% due 06/15/05............................. 1,319,937
------------
7,277,753
------------
COLLEGES AND UNIVERSITIES -- 1.5%
Massachusetts Institute of Technology
5,500,000 7.25% due 11/02/96............................. 6,367,377
Yale University
3,500,000 7.37% due 04/15/96............................. 4,154,454
------------
10,521,831
------------
COMMUNICATIONS EQUIPMENT -- 0.7%
Comcast Cellular
4,575,000 9.50% due 05/01/07............................. 4,769,437
------------
CONSUMER DURABLES -- 0.9%
Fred Meyer, Inc.
6,000,000 7.37% due 03/01/05............................. 6,046,716
------------
ENERGY & SERVICES -- 1.5%
Tenneco, Inc.
6,850,000 8.20% due 01/15/99............................. 7,037,806
Union Oil Co. of California
2,500,000 9.38% due 02/15/11............................. 3,171,372
------------
10,209,178
------------
FINANCIAL SERVICES -- 14.3%
Abbey National First Capital (Yankee)
12,545,000 8.20% due 10/15/04............................. 13,843,959
Ahmanson (H.F.) & Co.
5,500,000 6.35% due 09/01/98............................. 5,508,497
Allstate Corp.
1,765,000 6.75% due 05/15/18............................. 1,809,808
Amvescap PLC
7,500,000 6.60% due 05/15/05............................. 7,579,402
BellSouth Capital Funding
7,500,000 7.12% due 07/15/97............................. 8,301,787
Buckeye Cellulos
300,000 8.50% due 02/15/05............................. 306,000
Chase Manhattan Corp.
3,000,000 7.75% due 11/01/99............................. 3,071,073
Dime Bancorp, Inc. Senior Notes
3,000,000 10.50% due 01/15/05............................. 3,180,000
Duke Realty LP
5,000,000 7.25% due 09/22/02............................. 5,174,330
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- ------------
<C> <S> <C>
CORPORATE BONDS & NOTES -- (CONTINUED)
FINANCIAL SERVICES -- (CONTINUED)
Equity Residential
$ 3,700,000 7.12% due 10/15/17............................. $ 3,743,704
General Motors Acceptance Corp.
4,000,000 5.87% due 01/12/99............................. 3,999,088
General Motors Acceptance Corp.
5,500,000 6.88% due 07/15/01............................. 5,634,634
General Motors Acceptance Corp.
1,000,000 6.66% due 01/17/03............................. 1,018,020
Landeskreditbank Baden-Wuerttemberg
7,900,000 7.62% due 02/01/23............................. 9,276,551
Lehman Brothers, Inc.
3,000,000 10.00% due 05/15/99............................. 3,096,729
Lehman Brothers, Inc.
2,850,000 8.87% due 03/01/02............................. 3,094,232
Massachusetts Mutual Life Insurance Co.*
11,750,000 7.62% due 11/15/23............................. 13,300,776
Phoenix Home Life Insurance Co.*
2,750,000 6.95% due 12/01/06............................. 2,843,599
Swiss Bank Corporation-NY
1,000,000 7.37% due 06/15/17............................. 1,110,368
Trenwick Group
4,300,000 6.70% due 04/01/03............................. 4,340,054
Westinghouse Credit Corp.
3,000,000 8.87% due 06/14/14............................. 3,382,653
------------
100,544,191
------------
FOOD, BEVERAGE & TOBACCO -- 1.4%
Ralcorp Holdings
7,400,000 8.75% due 09/15/04............................. 8,427,371
RJR Nabisco, Inc.
1,350,000 8.50% due 07/01/07............................. 1,354,591
------------
9,781,962
------------
HEALTH CARE -- 1.2%
Columbia Healthcare
1,675,000 7.50% due 02/15/23............................. 1,582,203
Columbia/HCA Healthcare
2,250,000 7.50% due 11/15/95............................. 2,086,931
Tenet Healthcare Corp.
4,600,000 8.13% due 12/01/08............................. 4,628,750
------------
8,297,884
------------
HOTELS & GAMING -- 0.2%
Boyd Gaming Corporation
1,600,000 9.50% due 07/15/07............................. 1,640,000
------------
INDUSTRIAL -- 4.5%
American Standard Companies
4,050,000 7.37% due 04/15/05............................. 4,035,792
American Standard Companies
4,600,000 7.37% due 02/01/08............................. 4,502,250
Borden Chemical
500,000 9.50% due 05/01/05............................. 500,000
Domtar, Inc.
2,550,000 9.50% due 08/01/16............................. 2,833,567
Jones Intercable, Inc.
2,000,000 7.62% due 04/15/08............................. 2,020,000
Loewen Group International, Inc.
3,900,000 8.25% due 10/15/03............................. 4,050,501
Newport News Shipbuilding, Inc.
2,000,000 8.62% due 12/01/06............................. 2,105,000
Owens-Illinois, Inc.
1,000,000 8.10% due 05/15/07............................. 1,067,844
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-1
<PAGE>
HARTFORD BOND HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- ------------
<C> <S> <C>
CORPORATE BONDS & NOTES -- (CONTINUED)
INDUSTRIAL -- (CONTINUED)
Placer Dome, Inc.
$ 6,200,000 7.12% due 06/15/07............................. $ 6,275,088
U.S. Home Group
1,390,000 7.95% due 03/01/01............................. 1,418,917
US Home Corp.
2,800,000 8.25% due 08/15/04............................. 2,828,000
------------
31,636,959
------------
INDUSTRIAL MATERIALS -- 0.1%
Tesoro Petroleum Corp.
1,000,000 9.00% due 07/01/08............................. 1,000,000
------------
MEDIA & SERVICES -- 3.2%
Continental Cablevision, Inc.
1,000,000 9.50% due 08/01/13............................. 1,190,831
Hollinger Intl Publishing
1,400,000 8.62% due 03/15/06............................. 1,463,000
News America Holdings, Inc.
6,500,000 7.70% due 10/30/25............................. 6,969,072
Lenfest Communications
1,000,000 8.38% due 11/01/05............................. 1,062,500
Rogers Cablesystems
2,995,000 9.63% due 08/01/02............................. 3,197,162
Time Warner Entertainment
3,019,000 8.87% due 10/01/12............................. 3,676,366
Turner Broadcasting
5,900,000 7.40% due 02/01/04............................. 6,165,151
------------
22,661,582
------------
RETAIL -- 3.9%
Kmart Corp.
750,000 7.75% due 10/01/12............................. 756,948
Kmart Corp.
5,000,000 8.96% due 02/10/19............................. 5,209,525
Kmart Corp.
4,000,000 12.50% due 03/01/05............................. 5,005,472
Kroger Co.
6,500,000 7.00% due 05/01/18............................. 6,665,041
Stop & Shop Companies, Inc.
8,585,000 9.75% due 02/01/02............................. 9,578,318
------------
27,215,304
------------
TRANSPORTATION -- 6.4%
Continental Airlines
4,430,000 9.50% due 02/15/01............................. 4,706,875
Continental Airlines*
13,874,192 7.46% due 04/01/13............................. 15,011,043
CSX Corp.
4,000,000 7.25% due 05/01/04............................. 4,191,124
Interpool, Inc.
1,100,000 7.35% due 08/01/07............................. 1,108,505
Northwest Airlines Trust, Series 2
2,376,001 11.30% due 06/21/14............................. 3,137,652
U.S. Air Inc., Series Class A
4,697,951 6.76% due 04/15/08............................. 4,867,547
United Air Lines
8,900,000 9.75% due 08/16/21............................. 11,886,136
------------
44,908,882
------------
TELECOMMUNICATIONS -- 2.5%
Lenfest Communications
1,000,000 8.38% due 11/01/05............................. 1,062,500
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- ------------
<C> <S> <C>
CORPORATE BONDS & NOTES -- (CONTINUED)
TELECOMMUNICATIONS -- (CONTINUED)
Rogers Cantel, Inc.
$ 1,350,000 8.30% due 10/01/07............................. $ 1,323,000
Rogers Cantel, Inc.
1,150,000 9.38% due 06/01/08............................. 1,193,125
Rogers Cantel, Inc.
1,650,000 9.75% due 06/01/16............................. 1,724,250
TCI Communications, Inc.
3,500,000 7.88% due 08/01/13............................. 4,040,281
Tele-Communications
836,000 9.25% due 01/15/23............................. 961,241
Tele-Communications, Inc.
7,000,000 6.58% due 02/15/05............................. 7,629,174
------------
17,933,571
------------
UTILITIES -- 7.9%
Bell Telephone Co. of Pennsylvania
3,000,000 8.35% due 02/15/30............................. 3,800,055
Calpine Corporation
1,400,000 7.88% due 04/01/08............................. 1,396,500
Chesapeake & Potomac Telephone Co.
1,500,000 8.30% due 08/01/31............................. 1,907,694
Cleveland Electric Illuminating Co.
1,750,000 7.13% due 07/01/07............................. 1,855,260
El Paso Electric Co. --
4,500,000 8.90% due 02/01/06............................. 5,017,500
El Paso Electric Co.
1,200,000 9.40% due 05/01/11............................. 1,368,000
Long Island Lighting Co.
1,735,000 8.90% due 07/15/19............................. 1,840,137
Niagara Mohawk Power
6,850,000 7.25% due 10/01/02............................. 6,841,437
Niagara Mohawk Power
1,100,000 7.76% due 10/01/08............................. 1,128,875
Pacificorp
3,100,000 6.12% due 01/15/08............................. 3,089,494
Pacificorp
13,150,000 6.38% due 05/15/08............................. 13,226,611
Public Service El-IBC
4,000,000 7.00% due 09/01/24............................. 4,132,384
Public Service El-MBIA
7,000,000 6.75% due 01/01/16............................. 7,275,674
Public Service El-MBIA
1,400,000 6.75% due 01/01/16............................. 1,455,134
WorldCom, Inc.
1,100,000 8.87% due 01/15/06............................. 1,190,750
------------
55,525,505
------------
Total corporate bonds & notes..................... $363,041,828
------------
------------
FOREIGN BONDS -- 5.2%
FOREIGN CORPORATIONS -- 1.2%
Bayerische Landesbank (NY)
7,000,000 6.20% due 02/09/06............................. $ 7,011,354
Gulf Canada Resources
1,000,000 8.25% due 03/15/17............................. 1,101,929
------------
8,113,283
------------
FOREIGN GOVERNMENTS -- 4.0%
Ministry Finance Russia
6,750,000 10.00% due 06/26/07............................. 5,113,125
Republic of Argentina
2,875,000 5.50% due 03/31/23............................. 2,140,078
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-2
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- ------------
<C> <S> <C>
FOREIGN BONDS -- (CONTINUED)
FOREIGN GOVERNMENTS -- (CONTINUED)
Republic of Colombia
$ 1,650,000 7.62% due 02/15/07............................. $ 1,480,378
Republic of Korea
1,625,000 8.87% due 04/15/08............................. 1,485,859
Republic of Panama
11,600,000 8.87% due 09/30/27............................. 10,940,250
Republic of Venezuela Discount Series A
2,000,000 6.75% due 03/31/20............................. 1,720,000
Republic of Venezuela Unsecured
7,150,000 9.25% due 09/15/27............................. 5,545,718
------------
28,425,408
------------
Total foreign bonds............................... $ 36,538,691
------------
------------
<CAPTION>
SHARES
-----------
<C> <S> <C>
PREFERRED STOCKS -- 0.5%
FINANCIAL SERVICES
156,000 Coastal Corporation (The)......................... $ 3,861,000
------------
------------
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<C> <S> <C>
U.S. TREASURIES & FEDERAL AGENCIES -- 32.2%
U.S. TREASURY BONDS -- 10.2%
$ 6,495,000 6.38% due 08/15/27............................. $ 7,134,354
4,380,000 6.50% due 11/15/26............................. 4,864,537
20,805,000 6.63% due 02/15/27............................. 23,503,158
5,433,074 6.88% due 08/15/26............................. 5,433,074
4,530,000 7.50% due 11/15/16............................. 5,438,831
10,600,000 7.63% due 02/15/25............................. 13,346,067
3,900,000 8.13% due 08/15/19............................. 5,033,437
5,100,000 8.75% due 05/15/17............................. 6,869,062
------------
71,622,520
------------
U.S. TREASURY INFLATION-INDEXED SECURITIES -- 3.9%
6,168,641 3.38% due 01/15/07............................. 6,129,151
21,699,909 3.63% due 7/15/02 - 04/15/28................... 21,550,952
------------
27,680,103
------------
U.S. TREASURY NOTES -- 7.4%
9,700,000 5.50% due 11/15/98............................. 9,703,036
3,400,000 5.63% due 12/31/99 - 05/15/08.................. 3,424,984
7,660,000 5.88% due 08/15/98 - 11/15/05.................. 7,747,756
12,900,000 6.13% due 08/31/98 - 11/15/27.................. 12,986,438
7,000,000 6.25% due 07/31/98 - 11/15/27.................. 7,094,441
4,190,000 6.50% due 08/15/05 - 10/15/06.................. 4,447,942
692,000 6.75% due 08/15/26............................. 792,340
3,280,000 6.88% due 08/31/99 - 05/15/06.................. 3,545,837
370,000 7.25% due 05/15/04............................. 401,450
1,500,000 7.50% due 10/31/99 - 11/15/24.................. 1,838,907
------------
51,983,131
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 9.7%
4,000,000 5.25% due 01/15/03............................. 3,939,680
55,444,615 6.00% due 07/01/12 - 06/01/28.................. 54,790,842
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- ------------
<C> <S> <C>
U.S. TREASURIES & FEDERAL AGENCIES -- (CONTINUED)
FEDERAL NATIONAL MORTGAGE ASSOCIATION --
(CONTINUED)
$ 2,925,887 6.48% due 12/01/05............................. $ 2,997,395
6,466,709 6.50% due 10/01/12 - 07/25/28.................. 6,482,175
------------
68,210,092
------------
U.S. GOVERNMENT AGENCIES -- 1.0%
Israel AID (State of)
7,200,000 4.88% due 09/15/98............................. 7,184,800
------------
Total U.S. treasuries & federal agencies.......... $226,680,646
------------
------------
SHORT-TERM SECURITIES -- 5.1%
REPURCHASE AGREEMENT
36,197,000 Interest in $131,291,000 joint repurchase
agreement with State Street Bank dated 06/30/98
at 5.90%, to be repurchased at $36,202,932 on
07/01/98; (collateralized by $131,291,000 U.S.
Treasury Bonds 6.5% due 11/15/26)............... $ 36,197,000
------------
------------
</TABLE>
<TABLE>
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total asset-backed securities (cost $26,307,494)....... 3.8% $ 27,039,065
Total corporate bonds & notes (cost $347,478,382)...... 51.6 363,041,828
Total foreign bonds (cost $38,902,803)................. 5.2 36,538,691
Total preferred stocks (cost $3,900,000)............... 0.5 3,861,000
Total U.S. treasuries & federal agencies (cost
$222,432,120)........................................ 32.2 226,680,646
Total short-term securities (cost $36,197,000)......... 5.1 36,197,000
----- ------------
Total investment in securities
(total cost $675,217,799)............................ 98.4 693,358,230
Excess of cash, receivables and other assets over
liabilities.......................................... 1.6 10,287,792
----- ------------
Net assets............................................. 100.0% $703,646,022
----- ------------
----- ------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; 1,500,000,000 shares
authorized; 644,475,161 shares outstanding.................. $ 64,447,516
Capital surplus............................................... 597,887,088
Accumulated undistributed net investment income............... 18,601,995
Accumulated undistributed net realized gain on investments....
4,568,992
Unrealized appreciation of investments........................ 18,140,431
------------
Net assets.................................................... $703,646,022
------------
------------
</TABLE>
<TABLE>
<S> <C>
Class IA
Net asset value per share ($702,486,673 DIVIDED BY
643,340,701 shares outstanding)...................... $1.09
-----
-----
Class IB
Net asset value per share ($1,159,349 DIVIDED BY
1,134,460 shares outstanding)........................ $1.02
-----
-----
</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 June 30, 1998, the market value
of these securities amounted to $31,155,418 or 4% of net assets.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-3
<PAGE>
HARTFORD STOCK HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------------ --------------
<C> <S> <C>
COMMON STOCKS -- 93.8%
COMMUNICATIONS EQUIPMENT -- 4.0%
*225,000 Ciena Corporation................................. $ 15,665,625
*1,275,000 Cisco Systems, Inc................................ 117,379,687
1,000,000 Ericsson (L.M.) Telephone ADR..................... 28,625,000
1,000,000 Lucent Technologies, Inc.......................... 83,187,500
--------------
244,857,812
--------------
COMPUTERS & OFFICE
EQUIPMENT -- 4.8%
1,150,000 Compaq Computer Corporation....................... 32,631,250
*1,518,600 EMC Corporation................................... 68,052,267
800,000 International Business Machines Corporation....... 91,850,000
1,050,000 Xerox Corporation................................. 106,706,250
--------------
299,239,767
--------------
CONSUMER NON-DURABLES -- 6.0%
795,000 Colgate Palmolive Company......................... 69,960,000
450,000 Estee Lauder Companies Class A.................... 31,359,375
1,450,000 Gillette Company (The)............................ 82,196,875
1,445,000 Kimberly-Clark Corporation........................ 66,289,375
1,300,000 Proctor & Gamble Company (The).................... 118,381,250
--------------
368,186,875
--------------
CONSUMER SERVICES -- 2.0%
*374,548 Autotote Corp. (Unregistered Shares).............. 646,095
700,000 Eastman Kodak Company............................. 51,143,750
*2,020,000 Mirage Resorts, Inc............................... 43,051,250
694,900 ServiceMaster Company (The)....................... 26,449,631
--------------
121,290,726
--------------
ELECTRONICS -- 6.3%
*550,000 Altera Corporation................................ 16,259,375
*935,000 Analog Devices, Inc............................... 22,965,937
*400,000 Applied Materials, Inc............................ 11,800,000
2,800,000 General Electric Company.......................... 254,800,000
1,120,000 Intel Corporation................................. 83,020,000
--------------
388,845,312
--------------
ENERGY & SERVICES -- 4.5%
575,000 Chevron Corporation............................... 47,760,937
800,000 Exxon Corporation................................. 57,050,000
1,600,000 Royal Dutch Petroleum Co. ADR..................... 87,700,000
1,250,000 Schlumberger Ltd. N.V............................. 85,390,625
--------------
277,901,562
--------------
FINANCIAL SERVICES -- 19.1%
720,000 Ace Ltd........................................... 28,080,000
1,000,000 American Express Co............................... 114,000,000
700,000 American International Group, Inc................. 102,200,000
1,050,000 Associates First Capital Corporation.............. 80,718,750
700,000 BankAmerica Corporation........................... 60,506,250
800,000 Citicorp.......................................... 119,400,000
300,000 Federal National Mortgage Association............. 18,225,000
1,000,000 First Union Corporation........................... 58,250,000
1,950,000 Marsh & McLennan Companies, Inc................... 117,853,125
138,200 Mellon Bank Corporation........................... 9,622,175
1,660,000 Merrill Lynch & Co., Inc.......................... 152,212,500
<CAPTION>
MARKET
SHARES VALUE
------------ --------------
<C> <S> <C>
FINANCIAL SERVICES -- (CONTINUED)
375,000 NationsBank Corporation........................... $ 28,687,500
1,250,000 State Street Corporation.......................... 86,875,000
2,280,000 Travelers Group, Inc.............................. 138,225,000
1,500,000 U.S. Bancorp...................................... 64,500,000
--------------
1,179,355,300
--------------
FOOD, BEVERAGE & TOBACCO -- 3.7%
1,100,000 Coca-Cola Company (The)........................... 94,050,000
750,000 Nabisco Holdings Corporation...................... 27,046,875
1,150,000 PepsiCo, Inc...................................... 47,365,625
750,000 Unilever N.V.-New York Shares..................... 59,203,125
--------------
227,665,625
--------------
HEALTH CARE -- 13.6%
2,240,000 Abbott Laboratories............................... 91,560,000
2,100,000 American Home Products Corporation and
Subsidiaries.................................... 108,675,000
2,600,000 Columbia/HCA Healthcare Corporation............... 75,725,000
1,200,000 Johnson & Johnson................................. 88,500,000
920,000 Merck & Co., Inc.................................. 123,050,000
900,000 Pfizer, Inc....................................... 97,818,750
1,800,000 Pharmacia & Upjohn, Inc........................... 83,025,000
1,050,000 Service Corporation International................. 45,018,750
700,000 SmithKline Beecham PLC ADR........................ 42,350,000
*655,000 Tenet Healthcare Corporation...................... 20,468,750
960,000 Warner-Lambert Company............................ 66,600,000
--------------
842,791,250
--------------
INDUSTRIAL MATERIALS -- 0.2%
406,100 Santa Fe International Corporation................ 12,284,525
--------------
MANUFACTURING -- 0.9%
850,000 Perkin-Elmer Corporation (The).................... 52,859,375
--------------
MEDIA & SERVICES -- 5.2%
*650,000 Airtouch Communications, Inc...................... 37,984,375
*850,000 CBS Corporation................................... 26,987,500
*358,700 Clear Channel Communications, Inc................. 39,143,137
2,038,900 Gannett Co., Inc.................................. 144,889,331
700,000 Walt Disney Company (The)......................... 73,543,750
--------------
322,548,093
--------------
REAL ESTATE -- 0.1%
*6,150 Security Capital Group, Incorporated.............. 8,179,500
--------------
RETAIL -- 9.2%
2,046,000 CVS Corporation................................... 79,666,125
850,000 Gap, Inc.......................................... 52,381,250
1,252,500 Home Depot, Inc. (The)............................ 104,035,781
1,675,000 McDonald's Corporation............................ 115,575,000
*640,000 Staples, Inc...................................... 18,520,000
3,000,000 Wal-Mart Stores, Inc.............................. 182,250,000
450,000 Walgreen Co....................................... 18,590,625
--------------
571,018,781
--------------
SOFTWARE & SERVICES -- 6.5%
*300,000 America Online, Inc............................... 31,800,000
*915,500 Automatic Data Processing, Inc.................... 66,717,062
</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)
SOFTWARE & SERVICES -- (CONTINUED)
800,000 Computer Sciences Corporation..................... $ 51,200,000
1,400,000 First Data Corporation............................ 46,637,500
*1,600,000 Microsoft Corporation............................. 173,400,000
*650,000 PeopleSoft, Inc................................... 30,550,000
--------------
400,304,562
--------------
TRANSPORTATION -- 1.8%
2,250,000 Southwest Airlines Co............................. 66,656,250
1,050,000 Union Pacific Corp................................ 46,331,250
--------------
112,987,500
--------------
UTILITIES -- 5.9%
300,000 Ameritech Corporation............................. 13,462,500
2,000,000 Bell Atlantic Corporation......................... 91,250,000
600,000 Duke Energy Corporation........................... 35,550,000
500,000 MCI Communications Corporation.................... 29,062,500
3,000,000 SBC Communications, Inc........................... 120,000,000
*1,500,000 WorldCom, Inc..................................... 72,656,250
--------------
361,981,250
--------------
Total common stocks............................... $5,792,297,815
--------------
--------------
<CAPTION>
PRINCIPAL
AMOUNT
------------
<C> <S> <C>
SHORT TERM SECURITIES -- 5.8%
REPURCHASE AGREEMENT
$358,629,000 Interest in $1,111,215,000 joint repurchase
agreement with State Street Bank dated 06/30/98
at 5.80%, to be repurchased at $358,686,779 on
07/01/98; (Collateralized by $421,318,000 U.S.
Treasury Notes 5.75%-7.825% due
05/15/99-11/15/04, $563,474,000 U.S. Treasury
Bonds 8.00%-11.125% due 02/15/15-08/15/25,
121,000,000 U.S. Treasury Strips (principal) 0%
due 08/15/04-08/15/07 and 5,423,000 U.S.
Treasury Bills 0% due 08/13/98)................. $ 358,629,000
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
---------------
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $3,565,285,159).............. 93.8% $ 5,792,297,815
Total short-term securities (cost $358,629,000)........ 5.8 358,629,000
------ ---------------
Total investment in securities
(total cost $3,923,914,159).......................... 99.6 6,150,926,815
Excess of cash, receivables and other assets over
liabilities.......................................... 0.4 24,049,188
------ ---------------
Net assets............................................. 100.0% $ 6,174,976,003
------ ---------------
------ ---------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; 2,000,000,000 shares
authorized; 1,029,069,147 shares outstanding................. $ 102,906,915
Capital surplus................................................ 3,564,367,242
Accumulated undistributed net investment income................ 24,792,296
Accumulated undistributed net realized gain on investments.....
255,896,894
Unrealized appreciation of investments......................... 2,227,012,656
---------------
Net assets..................................................... $ 6,174,976,003
---------------
---------------
</TABLE>
<TABLE>
<S> <C>
Class IA
Net asset value per share ($6,172,891,347 DIVIDED BY
1,027,075,607 shares outstanding).................... $6.01
-----
-----
Class IB
Net asset value per share ($2,084,656 DIVIDED BY
1,993,540 shares outstanding)........................ $1.05
-----
-----
</TABLE>
* Non-income producing during period.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-5
<PAGE>
HARTFORD MONEY MARKET HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- -------------
<C> <S> <C>
COMMERCIAL PAPER -- 63.5%
Allergan Inc.
$10,000,000 5.56% due 08/04/98................................... $ 9,947,488
Allergan Inc.
10,000,000 5.55% due 07/28/98................................... 9,958,375
American Home Products
10,000,000 5.48% due 07/14/98................................... 9,980,211
Aristar, Inc.
10,000,000 5.60% due 07/10/98................................... 9,986,000
Associates Corp. of North America
10,000,000 5.49% due 08/24/98................................... 9,917,650
Bankers Trust New York
10,000,000 5.55% due 10/26/98................................... 9,819,625
Bankers Trust New York
10,000,000 5.5% due 09/28/98.................................... 9,864,027
Countrywide Home Loans
10,000,000 5.54% due 09/01/98................................... 9,904,675
Countrywide Home Loans
10,000,000 5.54% due 07/21/98................................... 9,969,222
Daimler Benz N.A.
10,000,000 5.48% due 07/13/98................................... 9,981,733
Daimler Benz N.A.
10,000,000 5.52% due 08/24/98................................... 9,917,200
Eaton Corp.
10,000,000 5.49% due 01/12/98................................... 9,795,650
Eaton Corp.
10,000,000 5.49% due 11/03/98................................... 9,809,201
Finova Capital Corp.
10,000,000 5.53% due 09/08/98................................... 9,894,008
Finova Capital Corp.
10,000,000 5.55% due 07/09/98................................... 9,987,666
Ford Motor Credit
15,000,000 5.48% due 07/27/98................................... 14,940,633
General Electric Capital
10,000,000 5.46% due 09/09/98................................... 9,893,833
General Signal Corp.
9,750,000 5.60% due 07/21/98................................... 9,719,666
GTE Corporation
10,000,000 5.55% due 07/07/98................................... 9,990,750
J.P. Morgan & Co.
5,000,000 5.50% due 09/14/98................................... 4,942,708
J.P. Morgan & Co.
15,000,000 5.50% due 10/19/98................................... 14,747,916
Monsanto Co.
10,000,000 5.50% due 10/26/98................................... 9,821,250
Morgan Stanley
10,000,000 5.50% due 08/31/98................................... 9,906,805
National Rural Utilities
10,000,000 5.50% due 09/14/98................................... 9,885,416
National Rural Utilities
10,000,000 5.51% due 08/05/98................................... 9,946,430
Nationwide Building Society
10,000,000 5.51% due 08/17/98................................... 9,928,063
Nationwide Building Society
10,000,000 5.50% due 10/13/98................................... 9,841,111
Nordbanken North America
10,000,000 5.50% due 10/05/98................................... 9,853,333
Procter & Gamble Co.
10,000,000 5.50% due 09/14/98................................... 9,885,416
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- -------------
<C> <S> <C>
Salomon Smith Barney, Inc.
$10,000,000 5.51% due 08/31/98................................... $ 9,906,658
Salomon Smith Barney, Inc.
10,000,000 5.51% due 08/03/98................................... 9,949,491
Sherwin-Williams Co.
5,000,000 5.51% due 08/10/98................................... 4,969,388
Sherwin-Williams Co.
4,200,000 5.55% due 09/22/98................................... 4,146,257
Southland Corp.
4,000,000 5.53% due 08/11/98................................... 3,974,807
Southland Corp.
1,298,000 5.49% due 09/09/98................................... 1,284,143
Southland Corp.
9,727,000 5.49% due 09/08/98................................... 9,624,647
Southland Corp.
5,000,000 5.54% due 08/11/98................................... 4,968,452
Spintab
10,000,000 5.56% due 01/18/98................................... 9,783,777
Svenska Handelsbanken, Inc.
10,000,000 5.44% due 09/22/98................................... 9,874,577
Svenska Handelsbanken, Inc.
10,000,000 5.43% due 09/21/98................................... 9,876,316
Westpac Capital Corp.
10,000,000 5.51% due 08/24/98................................... 9,917,425
Westpac Capital Corp.
10,000,000 5.50% due 08/17/98................................... 9,928,194
Wood Street Funding Corp.
10,000,000 5.50% due 07/09/98................................... 9,987,777
Zeneca Inc.
10,000,000 5.48% due 07/15/98................................... 9,978,688
-------------
Total commercial paper................................. $ 410,206,658
-------------
-------------
CORPORATE NOTES -- 30.5%
Bear Stearns Companies, Inc.
15,000,000 5.67% due 10/15/98................................... $ 15,000,000
Caterpillar Financial Services
10,000,000 6.58% due 10/19/98................................... 10,007,908
First USA Bank
4,250,000 5.89% due 10/22/98................................... 4,255,257
First USA Bank
15,000,000 5.83% due 10/09/98................................... 15,014,486
General Motors Acceptance Corp.
5,000,000 6.06% due 08/03/98................................... 5,000,985
Goldman Sachs Group
20,000,000 5.63% due 03/26/99................................... 20,000,000
Honda Motor Corp Mtn
20,000,000 5.62% due 04/08/99................................... 19,996,448
John Deere
20,000,000 5.49% due 02/09/99................................... 19,992,668
Lehman Brothers Holdings, Inc.
4,000,000 8.87% due 11/01/99................................... 4,035,948
Lehman Brothers Holdings, Inc.
15,250,000 5.92% due 01/13/99................................... 15,250,000
Merrill Lynch & Co., Inc.
20,000,000 5.68% due 07/20/99................................... 20,000,000
Morgan Stanley Group, Inc.
5,000,000 5.62% due 02/10/99................................... 5,002,800
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-6
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- -------------
<C> <S> <C>
CORPORATE NOTES -- (CONTINUED)
Morgan Stanley Group, Inc.
$ 5,000,000 5.66% due 02/28/98................................... $ 5,002,766
Triangle Funding Ltd.
19,250,000 5.75% due 01/15/98................................... 19,250,000
USL Capital Corporation
9,250,000 5.67% due 04/19/99................................... 9,265,882
Wells Fargo
10,000,000 5.82% due 07/01/98................................... 10,000,000
-------------
Total corporate notes.................................. $ 197,075,148
-------------
-------------
REPURCHASE AGREEMENT -- 4.1%
$26,155,000 Interest in $131,291,000 joint repurchase agreement
with State Street Bank dated 06/30/98 at 5.90%, to be
repurchased at $26,159,287 on 07/01/98;
(collateralized by $131,291,000 U.S. Treasury Bonds
6.5% due 11/15/26)................................... $ 26,155,000
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
---------------
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total commercial paper (cost $410,206,658)............. 63.5% $ 410,206,658
Total corporate notes (cost $197,075,148).............. 30.5 197,075,148
Total repurchase agreement (cost $26,155,000).......... 4.1 26,155,000
------ ---------------
Total investment in securities (total cost
$633,436,806)*....................................... 98.1 633,436,806
Excess of cash, receivables and other assets over
liabilities.......................................... 1.9 12,114,521
------ ---------------
Net assets applicable to $1.00 per share based on
645,551,327 shares outstanding....................... 100.0% $ 645,551,327
------ ---------------
------ ---------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; 1,300,000,000 shares
authorized; 645,551,327 shares outstanding................... $ 64,555,133
Paid in surplus................................................ 580,996,194
---------------
Net assets..................................................... $ 645,551,327
---------------
---------------
</TABLE>
<TABLE>
<S> <C>
Class IA
Shares of beneficial interest outstanding, $0.10 par
value (net assets $645,163,373)...................... 645,163,373
Net asset value........................................ $1.00
----
----
Class IB
Shares of beneficial interest outstanding, $0.10 par
value (net assets $387,954).......................... 387,954
Net asset value........................................ $1.00
----
----
</TABLE>
* Aggregate cost for federal income tax purposes.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-7
<PAGE>
HARTFORD ADVISERS HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
-------------- ---------------
<C> <S> <C>
COMMON STOCKS -- 62.2%
COMMUNICATIONS EQUIPMENT -- 2.7%
*240,000 Ciena Corporation................................. $ 16,710,000
*1,432,500 Cisco Systems, Inc................................ 131,879,531
1,000,000 Ericsson (L.M.) Telephone ADR..................... 28,625,000
1,070,000 Lucent Technologies, Inc.......................... 89,010,625
---------------
266,225,156
---------------
COMPUTERS & OFFICE
EQUIPMENT -- 3.5%
1,050,000 Compaq Computer Corporation....................... 29,793,750
*1,898,000 EMC Corp.......................................... 85,054,125
920,000 International Business Machines Corp.............. 105,627,500
1,360,000 Xerox Corporation................................. 138,210,000
---------------
358,685,375
---------------
CONSUMER NON-DURABLES -- 3.5%
625,000 Colgate-Palmolive Company......................... 55,000,000
550,000 Estee Lauder Companies Class A.................... 38,328,125
1,400,000 Gillette Company (The)............................ 79,362,500
1,450,000 Kimberly-Clark Corporation........................ 66,518,750
1,360,000 Proctor & Gamble Company (The).................... 123,845,000
---------------
363,054,375
---------------
CONSUMER SERVICES -- 1.2%
*561,821 Autotote Corp. (Unregistered Shares).............. 969,141
650,000 Eastman Kodak Company............................. 47,490,625
*2,350,000 Mirage Resorts, Inc............................... 50,084,375
730,700 ServiceMaster Company (The)....................... 27,812,268
---------------
126,356,409
---------------
ELECTRONICS -- 4.4%
*575,000 Altera Corporation................................ 16,998,437
*1,165,000 Analog Devices, Inc............................... 28,615,312
*400,000 Applied Materials, Inc............................ 11,800,000
3,250,000 General Electric Company.......................... 295,750,000
1,350,000 Intel Corporation................................. 100,068,750
---------------
453,232,499
---------------
ENERGY & SERVICES -- 2.9%
650,000 Chevron Corporation............................... 53,990,625
800,000 Exxon Corporation................................. 57,050,000
1,800,000 Royal Dutch Petroleum Co.......................... 98,662,500
1,270,000 Schlumberger Ltd. N.V............................. 86,756,875
---------------
296,460,000
---------------
FINANCIAL SERVICES -- 12.9%
1,110,000 Ace Ltd........................................... 43,290,000
1,100,000 American Express Co............................... 125,400,000
772,500 American International Group, Inc................. 112,785,000
1,130,000 Associates First Capital Corporation.............. 86,868,750
800,000 BankAmerica Corporation........................... 69,150,000
875,000 Citicorp.......................................... 130,593,750
300,000 Federal National Mortgage Association............. 18,225,000
1,100,000 First Union Corporation........................... 64,075,000
2,145,000 Marsh & McLennan Companies, Inc................... 129,638,437
42,800 Mellon Bank Corporation........................... 2,979,950
1,850,000 Merrill Lynch & Co., Inc.......................... 170,662,500
450,000 NationsBank Corporation........................... 34,425,000
1,350,000 State Street Corp................................. 93,825,000
2,850,000 Travelers Group, Inc.............................. 172,781,250
1,545,000 U.S. Bancorp...................................... 66,435,000
---------------
1,321,134,637
---------------
<CAPTION>
MARKET
SHARES VALUE
-------------- ---------------
<C> <S> <C>
FOOD, BEVERAGE & TOBACCO -- 2.1%
1,150,000 Coca-Cola Company (The) $ 98,325,000
700,000 Nabisco Holdings Corporation...................... 25,243,750
1,100,000 PepsiCo, Inc...................................... 45,306,250
550,000 Unilever NV-New York Shares....................... 43,415,625
---------------
212,290,625
---------------
HEALTH CARE -- 9.2%
2,600,000 Abbott Laboratories............................... 106,275,000
2,550,000 American Home Products Corporation and
Subsidiaries.................................... 131,962,500
2,800,000 Columbia/HCA Healthcare Corporation............... 81,550,000
1,370,000 Johnson & Johnson................................. 101,037,500
1,000,000 Merck & Co., Inc.................................. 133,750,000
1,000,000 Pfizer, Inc....................................... 108,687,500
2,100,000 Pharmacia & Upjohn, Inc........................... 96,862,500
1,125,000 Service Corporation International................. 48,234,375
700,000 SmithKline Beecham PLC ADR........................ 42,350,000
895,000 Tenet Healthcare Corporation...................... 27,968,750
975,000 Warner-Lambert Company............................ 67,640,625
---------------
946,318,750
---------------
INDUSTRIAL MATERIALS -- 0.1%
400,000 Santa Fe International Corporation................ 12,100,000
---------------
MANUFACTURING -- 0.5%
850,000 Perkin-Elmer Corporation (The).................... 52,859,375
---------------
MEDIA & SERVICES -- 3.4%
*500,000 Airtouch Communications, Inc...................... 29,218,750
*820,000 CBS Corporation................................... 26,035,000
*466,300 Clear Channel Communications, Inc................. 50,884,987
2,479,000 Gannett Co., Inc.................................. 176,163,937
625,000 Walt Disney Company (The)......................... 65,664,062
---------------
347,966,736
---------------
REAL ESTATE -- 0.1%
*6,150 Security Capital Group, Incorporated.............. 8,179,500
---------------
RETAIL -- 6.4%
2,519,600 CVS Corporation................................... 98,106,925
625,000 Gap, Inc.......................................... 38,515,625
1,447,500 Home Depot, Inc. (The)............................ 120,232,968
2,035,000 McDonald's Corporation............................ 140,415,000
*690,000 Staples, Inc...................................... 19,966,875
3,600,000 Wal-Mart Stores, Inc.............................. 218,700,000
500,000 Walgreen Co....................................... 20,656,250
---------------
656,593,643
---------------
SOFTWARE & SERVICES -- 4.5%
*300,000 America Online, Inc............................... 31,800,000
898,200 Automatic Data Processing, Inc.................... 65,456,325
*1,000,000 Computer Sciences Corporation..................... 64,000,000
1,650,000 First Data Corporation............................ 54,965,625
*1,900,000 Microsoft Corporation............................. 205,912,500
*750,000 PeopleSoft, Inc................................... 35,250,000
---------------
457,384,450
---------------
TRANSPORTATION -- 1.3%
2,775,000 Southwest Airlines Co............................. 82,209,375
1,230,000 Union Pacific Corp................................ 54,273,750
---------------
136,483,125
---------------
</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)
UTILITIES -- 3.5%
300,000 Ameritech Corporation............................. $ 13,462,500
1,500,000 Bell Atlantic Corporation......................... 68,437,500
600,000 Duke Energy Corporation........................... 35,550,000
500,000 MCI Communications Corporation.................... 29,062,500
3,700,000 SBC Communications, Inc........................... 148,000,000
1,300,000 WorldCom, Inc..................................... 62,968,750
---------------
357,481,250
---------------
Total common stocks............................... $ 6,372,805,905
---------------
---------------
ASSET-BACKED SECURITIES -- 0.3%
Aesop AU 98-1
30,000,000 6.14% due 05/20/06.............................. $ 30,018,750
---------------
---------------
<CAPTION>
PRINCIPAL
AMOUNT
--------------
<C> <S> <C>
CORPORATE BONDS & NOTES -- 5.9%
FINANCIAL SERVICES -- 3.4%
Amerus Life Holdings
$ 17,905,000 6.95% due 06/15/05.............................. $ 17,878,411
Amvescap Plc
21,670,000 6.60% due 06/15/05.............................. 21,899,420
Associate Corp. N.A.
15,000,000 6.50% due 10/15/02.............................. 15,240,075
Bank of Boston Corporation
10,000,000 6.63% due 02/01/04.............................. 10,177,600
Banponce Corp.
14,825,000 6.75% due 12/15/05.............................. 15,205,424
Bayerische Landesbank NY
15,000,000 5.63% due 02/26/01.............................. 14,886,150
CIT Group Holdings
20,000,000 6.75% due 05/14/01.............................. 20,412,700
Chase Manhattan Corp.
10,000,000 8.50% due 02/15/02.............................. 10,785,640
Citicorp
20,000,000 5.63% due 02/15/01.............................. 19,785,460
Credit National Euro
24,000,000 7.00% due 11/14/05.............................. 24,480,000
Fairfax Financial Holdings
10,000,000 7.75% due 12/15/03.............................. 10,513,950
Finova Capital Corporation
18,000,000 6.39% due 10/08/02.............................. 18,190,602
First Interstate Bank
12,000,000 9.00% due 11/15/04.............................. 12,473,028
First Union Corp.
25,000,000 6.40% due 04/01/08.............................. 25,158,550
Fleet Financial Group
20,000,000 6.88% due 01/15/28.............................. 20,525,400
Heller Financial
20,000,000 6.38% due 11/10/00.............................. 20,097,420
Home Savings America
15,000,000 6.00% due 11/01/00.............................. 15,006,330
Lumbermens Mutual Casualty, Inc.
10,000,000 9.15% due 07/01/26.............................. 12,014,210
NationsBank Corp.
20,000,000 7.80% due 09/15/16.............................. 22,645,100
Travelers Group, Inc.
10,000,000 6.25% due 12/01/05.............................. 10,099,200
Travelers/Aetna P&C, Inc.
10,000,000 6.75% due 04/15/01.............................. 10,202,570
---------------
347,677,240
---------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
-------------- ---------------
<C> <S> <C>
CORPORATE BONDS & NOTES -- (CONTINUED)
INDUSTRIAL MATERIALS -- 1.8%
Boise Cascade Office
$ 25,000,000 7.05% due 05/15/05.............................. $ 25,203,825
Computer Associates International
25,000,000 6.50% due 04/15/08.............................. 25,109,800
E.W. Scripps Company
19,420,000 6.38% due 10/15/02.............................. 19,600,062
Honeywell Inc.
13,135,000 6.60% due 04/15/01.............................. 13,329,200
Husky Oil Ltd.
15,000,000 6.88% due 11/15/03.............................. 15,052,800
ICI Wilmington
20,000,000 6.95% due 09/15/04.............................. 20,813,360
Postal Square LP
7,300,764 8.95% due 06/15/22.............................. 9,450,619
Praxair Inc.
25,000,000 6.15% due 04/15/03.............................. 24,974,000
Williams Companies, Inc.
20,000,000 6.50% due 11/15/02.............................. 20,237,860
Zeneca Wilmington
10,000,000 6.30% due 06/15/03.............................. 10,090,090
---------------
183,861,616
---------------
REAL ESTATE -- 0.2%
Liberty Property Trust (REIT)
20,000,000 7.25% due 08/15/07.............................. 20,346,980
---------------
UTILITIES -- 0.5%
Hydro Quebec
15,000,000 7.37% due 02/01/03.............................. 15,737,250
Pacific Gas & Electric
11,000,000 7.88% due 03/01/02.............................. 11,658,581
Southern California Gas Co.
10,000,000 5.75% due 11/15/03.............................. 9,901,760
US West Capital Funding Inc.
15,710,000 6.88% due 07/15/28.............................. 15,758,701
---------------
53,056,292
---------------
Total corporate bonds & notes..................... $ 604,942,128
---------------
---------------
FOREIGN GOVERNMENT BONDS -- 0.2%
City Of Naples, Italy
$ 17,000,000 7.52% due 07/15/06.............................. $ 18,025,000
---------------
---------------
MORTGAGE-BACKED SECURITIES -- 0.7%
ASC 97-D4 A-1D
$ 18,000,000 7.49% due 04/14/29.............................. $ 19,582,560
Chase Commercial Mortgage 1997-A2
25,000,000 7.37% due 02/19/07.............................. 26,619,750
Newcourt EQ 97-1 A4
28,500,000 6.19% due 06/20/05.............................. 28,732,560
---------------
Total mortgage-backed securities.................. $ 74,934,870
---------------
---------------
MUNICIPAL BONDS -- 0.3%
Miami Beach, Florida
$ 7,000,000 8.80% due 12/01/15.............................. $ 7,883,519
Mount Sinai School of Medicine NY
20,000,000 6.00% due 07/01/03.............................. 20,119,860
---------------
Total municipal bonds............................. $ 28,003,379
---------------
---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-9
<PAGE>
HARTFORD ADVISERS HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
-------------- ---------------
<C> <S> <C>
U.S. TREASURIES & FEDERAL AGENCIES -- 27.4%
U.S. TREASURY BONDS -- 6.3%
$3,683,000,000 6.25% due 08/15/23.............................. $ 393,875,184
214,000,000 7.25% due 05/15/16.............................. 250,781,250
---------------
644,656,434
---------------
U.S. TREASURY NOTES -- 18.2%
584,000,000 5.75% due 10/31/00 - 08/15/03................... 589,190,075
200,000,000 6.25% due 05/31/00.............................. 202,625,000
550,000,000 6.50% due 08/15/05 - 10/15/06................... 582,562,650
207,000,000 7.25% due 05/15/04 - 08/15/04................... 224,962,866
213,000,000 7.50% due 11/15/07 - 02/15/05................... 228,227,294
34,000,000 7.75% due 12/31/99.............................. 35,062,500
---------------
1,862,630,385
---------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 2.9%
49,640,684 6.00% due 06/15/24 - 05/15/28................... 48,477,120
148,389,652 6.50% due 03/15/26 - 06/15/28................... 148,018,677
99,112,410 7.00% due 11/15/23 - 11/15/24................... 100,938,336
2,849,002 9.00% due 06/20/16 - 07/20/16................... 3,069,201
---------------
300,503,334
---------------
Total U.S. treasuries & federal agencies.......... $ 2,807,790,153
---------------
---------------
SHORT-TERM SECURITIES -- 2.3%
REPURCHASE AGREEMENT
$ 235,723,000 Interest in $1,111,215,000 joint repurchase
agreement with State Street Bank dated 06/30/98
at 5.80%, to be repurchased at $235,760,978 on
07/01/98; (collateralized by $421,318,000 U.S.
Treasury Notes 5.75%-7.825% due
05/15/99-11/15/04, 563,474,000 U.S. Treasury
Bonds 8.00%-11.125% due 02/15/15-08/15/25,
121,000,000 U.S. Treasury Strips (principal) 0%
due 08/15/04-8/15/07 and 5,423,000 U.S. Treasury
Bills 0% due 08/13/98).......................... $ 235,723,000
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
---------------
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $3,654,306,296)............. 62.2% $ 6,372,805,905
Total asset-backed securities (cost $29,978,508)...... 0.3 30,018,750
Total corporate bonds & notes (cost $592,149,221)..... 5.9 604,942,128
Total foreign government bonds (cost $17,000,000)..... 0.2 18,025,100
Total mortgage-backed securities (cost $72,776,702)... 0.7 74,934,870
Total municipal bonds (cost $27,012,672).............. 0.3 28,003,379
Total U.S. treasuries & federal agencies (cost
$2,686,465,626)..................................... 27.4 2,807,790,153
Total short-term securities (cost $235,723,000)....... 2.3 235,723,000
------ ---------------
Total investment in securities
(total cost $7,315,414,025)......................... 99.3 10,172,243,285
Excess of cash, receivables and other assets over
liabilities ........................................ 0.7 71,612,363
------ ---------------
Net assets............................................ 100.0% $10,243,855,648
------ ---------------
------ ---------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; 6,000,000,000 shares
authorized; 3,637,653,871 shares outstanding................ $ 363,765,387
Capital surplus............................................... 6,551,416,345
Accumulated undistributed net investment income............... 108,394,386
Accumulated undistributed net realized gain on investments....
363,450,270
Unrealized appreciation of investments........................ 2,856,829,260
---------------
Net assets.................................................... $10,243,855,648
---------------
---------------
Class IA
Net asset value per share ($10,237,519,510 DIVIDED BY
3,631,548,444 shares outstanding).................... $2.82
-----
-----
Class IB
Net asset value per share ($6,336,138 DIVIDED BY
6,105,427 shares outstanding)........................ $1.04
-----
-----
</TABLE>
* Non-income producing during period.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-10
<PAGE>
HARTFORD CAPITAL APPRECIATION HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- --------------
<C> <S> <C>
COMMON STOCKS -- 92.8%
AEROSPACE & DEFENSE -- 3.8%
1,550,000 Boeing Company (The).............................. $ 69,071,875
*1,652,900 Loral Space & Communications Ltd.................. 46,694,425
369,500 Northrop Grumman Corporation...................... 38,104,687
1,050,000 Precision Castparts Corporation................... 56,043,750
--------------
209,914,737
--------------
BUSINESS SERVICES -- 1.3%
298,915 Aztec Technology Partners......................... 2,279,228
*934,900 Ionics, Inc....................................... 34,474,437
970,000 Manpower, Inc..................................... 27,826,875
149,458 Navigant International, Inc....................... 1,270,389
*373,644 U.S. Office Products Company...................... 7,286,058
199,276 Workflow Management, Inc.......................... 1,606,665
--------------
74,743,652
--------------
COMMUNICATIONS EQUIPMENT -- 5.1%
*1,075,000 3Com Corporation.................................. 32,989,062
*694,200 Cisco Systems, Inc................................ 63,909,787
1,318,000 ECI Telecommunications............................ 49,919,250
*373,300 Elsag Bailey Process Auto NV...................... 8,982,531
1,384,050 General Cable Corporation......................... 39,964,443
712,200 Lucent Technologies, Inc.......................... 59,246,137
*1,000,000 Oak Industries, Inc............................... 35,375,000
--------------
290,386,210
--------------
COMPUTERS & OFFICE
EQUIPMENT -- 4.0%
*3,400,000 EMC Corporation................................... 152,362,500
*1,000,000 Komag Inc......................................... 5,343,750
*687,200 Seagate Technology, Inc........................... 16,363,950
*1,331,250 Symbol Technologies, Inc.......................... 50,254,687
--------------
224,324,887
--------------
CONSUMER NON-DURABLES -- 1.3%
1,000,000 Kimberly-Clark Corporation........................ 45,875,000
*1,335,200 Quiksilver Inc.................................... 27,019,300
--------------
72,894,300
--------------
CONSUMER SERVICES -- 2.3%
*749,800 American Skiing Corporation....................... 9,747,400
950,000 Berg Electronics Corp............................. 18,584,375
*986,250 Cheesecake Factory, Inc. (The).................... 22,313,906
89,800 Harman International Industries, Inc.............. 3,457,300
1,600,000 International Game Technology..................... 38,800,000
*1,817,000 Mirage Resorts, Inc............................... 38,724,812
--------------
131,627,793
--------------
ELECTRONICS -- 6.5%
*660,000 Altera Corporation................................ 19,511,250
*883,333 Analog Devices, Inc............................... 21,696,866
*800,000 Credence Systems Corporation...................... 15,200,000
*426,900 Lattice Semiconductor Corporation................. 12,126,628
1,250,001 Molex, Inc........................................ 29,218,779
1,400,000 Philips Electronics N.V. NY Shares................ 119,000,000
120,000 SCI Systems, Inc.................................. 4,515,000
1,100,000 Silicon Valley Group, Inc......................... 17,668,750
*1,739,400 Solectron Corporation............................. 73,163,512
<CAPTION>
MARKET
SHARES VALUE
----------- --------------
<C> <S> <C>
ELECTRONICS -- (CONTINUED)
800,001 Thomas & Betts Corporation........................ $ 39,400,049
*1,003,206 Vishay Intertechnology, Inc....................... 17,995,007
--------------
369,495,841
--------------
ENERGY & SERVICES -- 5.1%
360,600 Ashland, Inc...................................... 18,615,975
1,000,000 Eni ADS........................................... 65,000,000
*940,700 Input Output, Inc................................. 16,756,218
*755,100 J Ray McDermott SA................................ 31,336,650
920,200 Nordic American Tanker Shipping Ltd............... 13,860,512
700,000 Repsol SA......................................... 38,500,000
1,631,570 Transocean Offshore, Inc.......................... 72,604,865
1,110,000 YPF SA ADR........................................ 33,369,375
--------------
290,043,595
--------------
FINANCIAL SERVICES -- 18.4%
2,065,000 Ace Ltd........................................... 80,535,000
1,150,000 Aetna Life Insurance and Annuity Company.......... 87,543,750
1,349,300 Ambac Financial Group, Inc........................ 78,934,050
1,200,000 Banc One Corporation.............................. 66,975,000
1,200,000 BankBoston Corporation............................ 66,750,000
1,000,000 Bear Stearns Cos, Inc............................. 56,875,000
300,000 Citicorp.......................................... 44,775,000
850,000 Federal National Mortgage Association............. 51,637,500
*1,280,000 FIRSTPLUS Financial Group, Inc.................... 46,080,000
1,800,000 GreenPoint Financial Corp......................... 67,725,000
*377,500 Heller Financial, Inc............................. 11,325,000
*1,300,000 Imperial Credit Industries, Inc................... 30,550,000
761,200 Legg Mason, Inc................................... 43,816,575
1,050,000 Marsh & McLennan Companies, Inc................... 63,459,375
473,000 Merrill Lynch & Co., Inc.......................... 43,634,250
739,100 MMI Companies, Inc................................ 18,340,437
1,168,600 Morgan Stanley Dean Witter & Co................... 106,780,825
468,400 Providian Financial Corporation................... 36,798,675
1,050,000 Unibanco GDR...................................... 30,975,000
--------------
1,033,510,437
--------------
FOOD, BEVERAGE & TOBACCO -- 0.5%
1,378,000 Archer-Daniels-Midland Company.................... 26,698,759
--------------
FOREIGN SECURITIES -- 3.5%
154,000 Alcatel Alsthom................................... 31,355,125
*7,000,000 Billiton PLC...................................... 14,190,609
*1,445,000 Corporation Geo SA de CV-Class B.................. 7,749,135
1,900,000 Eisai Co., Ltd.................................... 25,874,551
1,000,000 Siemans AG........................................ 60,829,879
160,000 UBS AG............................................ 59,493,239
--------------
199,492,538
--------------
HEALTH CARE -- 13.1%
1,600,000 Abbott Laboratories............................... 65,400,000
*943,400 Biogen, Inc....................................... 46,226,600
*2,200,000 Columbia/HCA Healthcare Corporation............... 64,075,000
1,169,800 Depuy, Inc........................................ 33,046,850
*1,700,000 Genzyme Corporation............................... 43,456,250
*500,000 Humana Inc........................................ 15,593,750
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-11
<PAGE>
HARTFORD CAPITAL APPRECIATION HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- --------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
HEALTH CARE -- (CONTINUED)
1,725,000 ICN Pharmaceuticals, Inc.......................... $ 78,810,937
*731,400 IDX Systems Corporation........................... 33,690,112
*1,135,000 Magellan Health Services, Inc..................... 28,800,625
*2,370,000 Medpartners....................................... 18,960,000
2,600,000 Pharmacia & Upjohn, Inc........................... 119,925,000
1,650,000 Rhone-Poulenc SA.................................. 92,709,375
225,600 Vencor, Inc....................................... 1,635,600
*750,000 Ventas, Inc....................................... 10,359,375
*1,159,600 Wellpoint Health Networks, Inc.................... 85,810,400
--------------
738,499,874
--------------
INDUSTRIAL MATERIALS -- 1.9%
1,221,300 IMC Global, Inc................................... 36,791,662
286,600 Owens Corning..................................... 11,696,862
1,150,000 Titanium Metals Corporation....................... 25,371,875
*1,200,000 UCAR International, Inc........................... 35,025,000
--------------
108,885,399
--------------
MANUFACTURING -- 0.8%
1,170,000 Chicago Bridge & Iron Company NV.................. 18,135,000
705,000 Cognex Corporation................................ 13,042,500
262,713 Perkin-Elmer Corporation (The).................... 16,337,464
--------------
47,514,964
--------------
MEDIA & SERVICES -- 2.0%
*1,400,000 ADC Telecommunications, Inc....................... 51,143,750
*559,600 APT Satellite Holdings ADR........................ 4,931,475
*743,100 Capstar Broadcasting Corp. Class A................ 18,670,387
857,000 News Corporation Ltd. Sponsored ADR............... 24,210,250
*600,000 Omnipoint Corporation............................. 13,762,500
--------------
112,718,362
--------------
REAL ESTATE -- 1.8%
2,000,000 Beacon Capital Corp. (Reit)**..................... 40,000,000
*350,400 Boston Properties, Inc............................ 12,088,800
*261,500 Security Capital Group Incorporated - Class B..... 6,962,437
*900,000 Starwood Hotels & Resorts......................... 43,481,250
--------------
102,532,487
--------------
RETAIL -- 3.9%
1,600,000 Cendant Corporation............................... 33,400,000
*2,120,000 CompUSA, Inc...................................... 38,292,500
*1,150,000 Consolidated Stores Corporation, Inc.............. 41,687,500
1,200,000 Gap, Inc.......................................... 73,950,000
375,000 Home Depot, Inc. (The)............................ 31,148,437
--------------
218,478,437
--------------
SOFTWARE & SERVICES -- 8.1%
*800,000 America Online, Inc............................... 84,800,000
*825,000 Ceridian Corporation.............................. 48,468,750
*517,800 Cognos Corporation................................ 13,794,515
*1,350,000 Compuware Corporation............................. 69,018,750
<CAPTION>
MARKET
SHARES VALUE
----------- --------------
<C> <S> <C>
SOFTWARE & SERVICES -- (CONTINUED)
1,000,000 Electronic Data Systems Corporation............... $ 40,000,000
1,240,218 First Data Corporation............................ 41,314,762
111,800 Intuit, Inc....................................... 6,847,750
*1,500,000 Learning Company, Inc. (The)...................... 44,437,500
*300,000 Microsoft Corporation............................. 32,512,500
*550,000 PeopleSoft, Inc................................... 25,850,000
*562,200 Policy Management Systems Corporation............. 22,066,350
*2,000,000 Rational Software Corporation..................... 30,500,000
--------------
459,610,877
--------------
TRANSPORTATION -- 2.2%
*852,600 AMR Corporation................................... 70,978,950
1,000,000 Canadian Pacific Ltd.............................. 28,375,000
1,423,750 Werner Enterprises, Inc........................... 27,140,234
--------------
126,494,184
--------------
UTILITIES -- 5.1%
*1,886,500 Calpine Corporation............................... 38,083,718
*500,000 Companie Generale de Geophysique SA............... 14,687,500
1,400,000 Empresa Nacional de Electricidad SA............... 19,950,000
1,882,000 Endesa S.A........................................ 40,698,250
1,011,600 MCI Communications Corporation.................... 58,799,250
*2,400,000 WorldCom, Inc..................................... 116,250,000
--------------
288,468,718
--------------
WASTE MANAGEMENT -- 2.1%
*1,781,000 Republic Industries, Inc.......................... 44,525,000
2,100,000 Waste Management, Inc............................. 73,500,000
--------------
118,025,000
--------------
Total common stocks............................... $5,204,361,042
--------------
--------------
PREFERRED STOCKS -- 1.5%
CONSUMER SERVICES -- 0.1%
*1,094,544 SGW Holdings Corporation***....................... $ 6,911,717
--------------
FINANCIAL SERVICES -- 1.0%
1,280,000 Union Pacific Cap Trust........................... 58,720,000
--------------
MANUFACTURING -- 0.4%
1,228,000 Cooper Industries, Inc............................ 21,643,500
--------------
Total preferred stocks............................ $ 87,275,217
--------------
--------------
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<C> <S> <C>
CORPORATE NOTES -- 0.3%
FOOD, BEVERAGE & TOBACCO
Unisys Corp.**
$15,000,000 12.00% due 04/15/03............................. $ 16,912,500
--------------
--------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-12
<PAGE>
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
AMOUNT --------------
-----------
<C> <S> <C>
SHORT-TERM SECURITIES -- 4.7%
REPURCHASE AGREEMENT
$262,420,000 Interest in $1,111,215,000 joint repurchase
agreement with State Street Bank dated 06/30/98
at 5.80%, to be repurchased at $262,462,279 on
07/01/98; (collateralized by $421,318,000 U.S.
Treasury Notes 5.75%-7.825% due
05/15/99-11/15/04, 563,474,000 U.S. Treasury
Bonds 8.00%-11.125% due 02/15/15-08/15/25,
121,000,000 U.S. Treasury Strips (principal) 0%
due 08/15/04-08/15/07 and 5,423,000 U.S.
Treasury Bills 0% due 08/13/98)................. $ 262,420,000
--------------
--------------
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $3,908,907,022)............. 92.8 % $ 5,244,361,042
Total preferred stocks (cost $92,022,168)............. 1.5 87,275,217
Total corporate notes (cost $15,293,984).............. 0.3 16,912,500
Total short-term securities (cost $262,420,000)....... 4.7 262,420,000
------ ---------------
Total investment in securities
(total cost $4,278,643,174)......................... 99.3 5,610,968,759
Excess of cash, receivables and other assets over
liabilities......................................... 0.7 37,329,106
------ ---------------
Net assets............................................ 100.0 % $ 5,648,297,865
------ ---------------
------ ---------------
MARKET
VALUE
---------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; 2,000,000,000 shares
authorized; 1,220,826,223 shares outstanding................ $ 122,082,622
Capital surplus............................................... 4,001,959,789
Accumulated undistributed net investment income............... 17,629,655
Accumulated undistributed net realized gain on investments....
174,938,982
Unrealized appreciation of investments........................ 1,332,325,585
Unrealized depreciation on forward currency contracts......... (567,810)
Unrealized depreciation on translation on other assets and
liabilities in foreign currencies........................... (70,958)
---------------
Net assets.................................................... $5,648,297,865
---------------
---------------
</TABLE>
<TABLE>
<S> <C>
Class IA
Net asset value per share ($5,646,451,781 DIVIDED BY
1.218,952,381 shares outstanding).................... $4.63
-----
-----
Class IB
Net asset value per share ($1,846,076 DIVIDED BY
1,873,842 shares outstanding)........................ $0.99
-----
-----
</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 June 30, 1998,
the market value of these securities amounted to $56,912,500 or 1% of net
assets.
*** Restricted security (See Note 2)
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING AT JUNE 30, 1998
<TABLE>
<CAPTION>
AGGREGATE DELIVERY UNREALIZED
DESCRIPTION TOTAL VALUE FACE VALUE DATE DEPRECIATION
--------------------- ----------- ----------- -------- -------------
<S> <C> <C> <C> <C>
Brazilian Real (Sell) $26,307,810 $25,740,000 08/19/98 $(567,810)
-------------
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-13
<PAGE>
HARTFORD MORTGAGE SECURITIES HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- --------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 0.8%
Corestates Home Equity Trust,
Series 94-1, Class A
$ 2,625,126 6.65% due 05/15/09.............................. $ 2,657,677
--------------
--------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 21.9%
Asset Securitization Corporation
Series 1997-MD7, Class A1B
5,000,000 7.41% due 01/13/30.............................. $ 5,383,285
BankAmerica Manufactured Housing
5,000,000 6.31% due 10/10/10.............................. 5,046,450
Bear Stearns Mortgage Securities, Inc. Series
95-1, Class 1A
3,424,371 6.48% due 05/25/10.............................. 3,438,445
Chase Manhattan RV Owner Trust
3,000,000 6.32% due 02/15/08.............................. 3,023,160
Chase Mortgage Finance Corp. Series 93-C2, Class
2A-3
1,361,367 8.25% due 01/25/24.............................. 1,365,586
Countrywide Home Loans
4,143,160 7.50% due 04/25/27.............................. 4,196,014
Countrywide Home Loans
4,937,055 6.50% due 06/25/13.............................. 4,916,997
Countrywide Mortgage Backed Securities, Inc.,
Series 93-C, Class A1
1,500,000 6.28% due 01/15/03.............................. 1,503,046
DLJ Mortgage Acceptance Corporation Series 96-I,
Class B1
477,439 7.25% due 09/25/11.............................. 491,016
DLJ Mortgage Acceptance Corporation Series 96-I,
B2
159,146 7.25% due 09/25/11.............................. 162,080
GE Capital Mortgage Services, Inc. Series 94-21,
Class A
6,251,451 6.50% due 08/25/09.............................. 6,283,083
GE Capital Mortgage Services, Inc. Series 94-26,
Class A
6,040,006 6.98% due 07/25/09.............................. 6,120,639
GE Capital Mortgage Services, Inc. Series 96-1,
Class B2
563,741 6.75% due 02/25/11.............................. 562,731
GE Capital Mortgage Services, Inc. Series 96-1,
Class M
1,689,426 6.75% due 02/25/11.............................. 1,706,371
GE Capital Mortgage Services, Inc. Series 96-10,
Class B1
570,848 6.75% due 06/25/11.............................. 574,152
GE Capital Mortgage Services, Inc. Series 96-10,
Class B2
570,848 6.75% due 06/25/11.............................. 569,848
GE Capital Mortgage 98-7a
4,807,448 6.50% due 04/25/13.............................. 4,808,740
GGP 1997 C1 A1
1,000,000 6.54% due 01/15/04.............................. 1,019,062
GSMGT 97gl A2b
2,000,000 6.86% due 07/13/30.............................. 2,080,140
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- --------------
<C> <S> <C>
COLLATERALIZED MORTGAGE
OBLIGATIONS -- (CONTINUED)
Housing Securities, Inc.
Series 93-E, Class E15
$ 3,470,165 10.00% due 09/25/08............................. $ 3,672,683
Midland Realty Corp. 1996-c2 A1
779,434 7.02% due 01/25/29.............................. 802,520
Morgan Stanley Capital Ser 1997-c1
930,000 7.63% due 02/15/20 1,000,112
Nascor Series 1998-16 Cl Pt
4,250,000 8.50% due 05/31/13.............................. 4,244,687
PNC Mortgage Securities Corp. Series 96-2, Class
B1
576,525 6.60% due 02/25/11.............................. 576,588
PNC Mortgage Securities Corp. Series 96-2, Class
B2
192,175 6.60% due 02/25/11.............................. 194,030
PNC Mortgage Securities Corp. Series 96-2, Class
B3
307,480 6.60% due 02/25/11.............................. 305,278
Prudential Home Mortgage Securities Co. Series
93-H, Class 2B
4,438,181 6.76% due 09/28/08.............................. 4,466,985
Prudential Home Mortgage Securities Co. Series
96-3, Class B1
1,124,244 6.75% due 03/25/11.............................. 1,140,554
Prudential Home Mortgage Securities Co. Series
96-3, Class B2
561,672 6.75% due 03/25/11.............................. 565,019
Residential Funding Mortgage Sec I Series 95-S18,
Class M3
689,224 7.00% due 01/25/10.............................. 706,502
Residential Funding Mortgage Sec I Series 96-S11,
Class M3
262,046 7.00% due 04/25/11.............................. 268,551
Residential Funding Mortgage Sec I Series 96-S19,
Class M3
488,742 7.50% due 09/25/11.............................. 505,857
Residential Funding Mortgage Sec I Series 96-S5,
Class M3
538,309 6.75% due 02/25/11.............................. 546,769
--------------
Total collateralized mortgage obligations......... $ 72,246,980
--------------
--------------
CORPORATE NOTES -- 1.5%
ERP Operating LP
5,000,000 6.63% due 04/13/05.............................. $ 5,023,635
--------------
--------------
FEDERAL AGENCIES -- 67.9%
FEDERAL HOME LOAN
MORTGAGE ASSOCIATION -- 13.3%
2,257,390 10.00% due 09/01/05 - 11/01/20.................... $ 2,452,433
15,073,792 6.50% due 02/01/09 - 06/01/26..................... 15,098,171
8,526,940 7.00% due 12/01/10 - 03/01/26..................... 8,662,859
2,404,246 7.50% due 01/01/24 - 06/01/25..................... 2,466,222
4,277,018 8.00% due 02/01/13 - 11/01/24..................... 4,423,844
3,400,089 8.50% due 07/01/01 - 05/01/25..................... 3,531,544
3,191,026 9.00% due 10/15/01 - 10/01/06..................... 3,294,867
3,641,961 9.50% due 11/01/08................................ 3,810,219
--------------
43,740,159
--------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-14
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- --------------
<C> <S> <C>
FEDERAL AGENCIES -- (CONTINUED)
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 25.3%
$ 716,191 11.00% due 04/01/09............................... $ 801,382
1,000,113 6.00% due 05/01/13................................ 988,857
19,687,739 6.50% due 02/01/13 - 07/25/28..................... 19,716,785
29,340,700 7.00% due 05/01/09 - 07/25/28..................... 29,808,289
24,551,166 7.50% due 02/01/10 - 07/25/28..................... 25,220,280
1,960,895 8.00% due 04/01/22................................ 2,034,879
1,829,753 8.50% due 06/25/19 - 07/01/25..................... 1,908,698
2,629,427 9.00% due 05/01/21 - 09/01/21..................... 2,784,299
--------------
83,263,469
--------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 29.3%
114,144 12.00% due 05/15/15............................... 130,424
39,228,950 7.50% due 11/15/09 - 07/15/28..................... 40,336,512
1,709,362 10.00% due 11/15/09 - 05/15/13.................... 1,880,169
453,455 11.00% due 02/15/10 - 09/15/10.................... 506,563
35,430 11.25% due 01/15/01............................... 37,331
59,431 12.50% due 06/15/14 - 08/15/15.................... 69,309
25,668 13.00% due 11/15/14............................... 30,283
10,000,000 6.50% due 07/15/98................................ 9,974,930
17,804,595 7.00% due 01/15/24 - 07/15/28..................... 18,094,479
17,989,459 8.00% due 02/15/01 - 11/29/27..................... 18,660,932
2,269,344 8.50% due 06/15/17 - 02/15/25..................... 2,397,263
1,341,115 9.00% due 01/15/25 - 12/15/25..................... 1,437,997
2,852,959 9.50% due 10/15/09 - 11/15/09..................... 3,107,442
--------------
96,663,634
--------------
Total federal agencies............................ $ 223,667,262
--------------
--------------
SHORT-TERM SECURITIES -- 27.7%
COMMERCIAL PAPER -- 12.1%
American Express Credit
5,000,000 5.53% due 07/21/98.............................. $ 4,984,638
Associates Corporation of North America
5,000,000 5.53% due 07/14/98.............................. 4,990,015
Bell Atlantic Financial Services
5,000,000 5.53% due 07/21/98.............................. 4,984,638
Ford Motor Credit Corp.
5,000,000 5.51% due 07/14/98.............................. 4,990,051
General Motors Acceptance Corp.
5,000,000 5.51% due 07/21/98.............................. 4,984,694
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- --------------
<C> <S> <C>
SHORT-TERM SECURITIES -- (CONTINUED):
COMMERCIAL PAPER -- (CONTINUED)
Goldman Sachs Group, L.P. (The)
$ 5,000,000 5.52% due 07/20/98.............................. $ 4,985,433
Merrill Lynch & Co., Inc.
5,000,000 5.58% due 07/14/98.............................. 4,989,925
Salomon Smith Barney, Inc.
5,000,000 5.55% due 07/15/98.............................. 4,989,208
--------------
39,898,602
--------------
REPURCHASE AGREEMENT -- 15.6%
$51,220,000 Interest in $131,291,000 joint repurchase
agreement with State Street Bank dated 06/30/98
at 5.90% to be repurchased at $51,228,394 on
July 1, 1998; (Collateralized by $131,291,000
U.S. Treasury Bonds 6.5% due 11/15/26).......... $ 51,220,000
--------------
Total short-term securities....................... $ 91,118,602
--------------
--------------
</TABLE>
<TABLE>
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total asset-backed securities (cost $2,591,938).... 0.8 % $ 2,657,677
Total collateralized mortgage obligations
(cost $71,027,101)............................... 21.9 72,246,980
Total corporate notes (cost $5,000,000)............ 1.5 5,023,635
Total U.S. treasuries & Federal agencies (cost
$220,448,316).................................... 67.9 223,667,262
Total short-term securities (cost $91,118,602)..... 27.7 91,118,602
------ ---------------
Total investment in securities
(total cost $390,185,957)........................ 119.9 394,714,156
Excess of liabilities over cash, receivables and
other assets..................................... (19.9) (65,403,846)
------ ---------------
Net assets (applicable to $1.11 per share based on
295,977,969 shares outstanding).................. 100.0% $ 329,310,310
------ ---------------
------ ---------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; 800,000,000
shares authorized; 295,977,969 shares outstanding........ $ 29,597,797
Capital surplus............................................ 293,734,134
Accumulated undistributed net investment income............ 9,741,147
Accumulated net realized loss on investments............... (8,329,063)
Unrealized appreciation of investments..................... 4,528,199
Unrealized appreciation on option contracts*............... 38,096
---------------
Net assets, applicable to shares outstanding............... $ 329,310,310
---------------
---------------
</TABLE>
* At June 30, 1998, the Fund had an open Interest Rate Swap Option with Morgan
Guarantee Trust Company. The Option had a notional value of $10,523,805 at June
30, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-15
<PAGE>
HARTFORD INDEX HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET
--------- VALUE
--------------
<C> <S> <C>
COMMON STOCKS -- 98.5%
AEROSPACE & DEFENSE -- 1.8%
96,000 Allied Signal, Inc................................ $ 4,260,000
171,498 Boeing Company (The).............................. 7,642,379
21,400 General Dynamics Corp............................. 995,100
33,100 Lockheed Martin Corp.............................. 3,504,462
11,400 Northrop Grumman Corp............................. 1,175,625
57,423 Raytheon Co. Class B.............................. 3,395,134
34,200 Rockwell International Corp....................... 1,643,737
28,000 Textron, Inc...................................... 2,007,250
39,700 United Technologies Corp.......................... 3,672,250
--------------
28,295,937
--------------
BUSINESS SERVICES -- 0.4%
13,800 DeLuxe Corp....................................... 494,212
14,300 Fluor Corp........................................ 729,300
6,900 Foster Wheeler Corp............................... 147,918
22,900 Ikon Office Solutions............................. 333,481
15,000 Moore Corp. Ltd................................... 198,750
7,300 National Service Industries, Inc.................. 371,387
24,800 R.R. Donnelly & Sons Company...................... 1,134,600
10,200 SuperValu, Inc.................................... 452,625
67,800 Sysco Corp........................................ 1,481,125
16,900 W.W. Grainger, Inc................................ 841,831
--------------
6,185,229
--------------
COMMUNICATIONS EQUIPMENT -- 3.6%
*60,400 3Com Corp......................................... 1,853,525
15,050 Andrew Corp....................................... 271,840
32,800 Ascend Communications, Inc........................ 1,625,650
37,400 Bay Networks, Inc................................. 1,206,150
26,900 Cabletron Systems, Inc............................ 361,468
173,150 Cisco Systems, Inc................................ 15,940,621
20,100 DSC Communications Corporation.................... 603,000
25,100 General Instrument Corporation.................... 682,406
13,600 Harris Corp....................................... 607,750
222,800 Lucent Technologies, Inc.......................... 18,534,175
101,600 Motorola, Inc..................................... 5,340,350
88,600 Northern Telecom Ltd.............................. 5,028,050
14,400 Raychem Corp...................................... 425,700
13,500 Scientific Atlanta, Inc........................... 342,562
30,900 Tellabs, Inc...................................... 2,213,212
--------------
55,036,459
--------------
COMPUTERS & OFFICE
EQUIPMENT -- 4.3%
11,700 Adobe System Inc.................................. 496,518
22,600 Apple Computer, Inc............................... 648,337
280,297 Compaq Computer Corp.............................. 7,953,427
8,300 Data General Corp................................. 123,981
109,500 Dell Computer Corp................................ 10,162,968
*84,400 EMC Corp.......................................... 3,782,175
26,400 Gateway 2000 Inc.................................. 1,336,500
175,900 Hewlett-Packard Co................................ 10,532,012
160,200 International Business Machines Corp.............. 18,392,962
36,000 Micron Technology Inc............................. 893,250
46,500 Pitney Bowes, Inc................................. 2,237,933
*41,200 Seagate Technology, Inc........................... 981,075
64,300 Sun Microsystems, Inc............................. 2,793,031
42,500 Unisys Corp....................................... 1,200,625
55,400 Xerox Corp........................................ 5,630,025
--------------
67,164,819
--------------
<CAPTION>
MARKET
SHARES VALUE
--------- --------------
<C> <S> <C>
CONSUMER DURABLES -- 2.0%
110,300 Chrysler Corp..................................... $ 6,218,162
13,400 Cooper Tire & Rubber Co........................... 276,375
10,800 Echlin, Inc....................................... 529,875
206,200 Ford Motor Co..................................... 12,165,800
113,600 General Motors Corp............................... 7,583,218
30,450 Genuine Parts Co.................................. 1,052,428
26,600 Goodyear Tire & Rubber Co. (The).................. 1,714,037
20,100 ITT Industries, Inc............................... 751,237
21,000 TRW, Inc.......................................... 1,147,125
--------------
31,438,257
--------------
CONSUMER NON-DURABLES -- 3.8%
9,700 Alberto Culver Co. Class B........................ 281,300
22,500 Avon Products, Inc................................ 1,743,750
16,200 Black & Decker Corporation (The).................. 988,200
4,200 Briggs & Stratton Corporation..................... 157,237
10,100 Centex Corp....................................... 381,275
17,600 Clorox Company (The).............................. 1,678,600
50,300 Colgate Palmolive Co.............................. 4,426,400
6,200 Fleetwood Enterprises, Inc........................ 248,000
12,400 Fruit of the Loom, Inc............................ 411,525
190,500 Gillette Company (The)............................ 10,798,968
18,600 International Flavors & Fragrances, Inc........... 807,937
6,600 Kaufman & Broad Home Corp......................... 209,550
94,600 Kimberly-Clark Corp............................... 4,339,775
11,400 Liz Claiborne, Inc................................ 595,650
28,100 Masco Corp........................................ 1,700,050
16,200 Maytag Corp....................................... 799,875
27,100 Newell Co......................................... 1,349,918
49,400 NIKE, Inc. Class B................................ 2,405,162
228,400 Proctor & Gamble Company (The).................... 20,798,675
9,600 Reebok International Ltd.......................... 265,800
25,500 Rubbermaid, Inc................................... 846,281
6,200 Russell Corp...................................... 187,162
10,400 Snap-On, Inc...................................... 377,000
3,400 Springs Industries, Inc........................... 156,825
15,200 Stanley Works (The)............................... 631,750
10,400 Tupperware Corp................................... 292,500
20,800 V F Corp.......................................... 1,071,200
12,800 Whirlpool Corp.................................... 880,000
--------------
58,830,365
--------------
CONSUMER SERVICES -- 0.8%
17,000 Brunswick Corporation............................. 420,750
25,200 Darden Restaurants, Inc........................... 400,050
55,300 Eastman Kodak Company............................. 4,040,356
17,800 H & R Block, Inc.................................. 749,825
17,200 Harrah's Entertainment, Inc....................... 399,900
22,660 Hasbro, Inc....................................... 890,428
42,500 Hilton Hotels Corp................................ 1,211,250
43,400 Marriott International, Inc....................... 1,405,075
49,400 Mattel, Inc....................................... 2,090,237
*30,500 Mirage Resorts, Incorporated...................... 650,031
7,600 Polaroid Corp..................................... 270,275
22,400 Wendy's International, Inc........................ 526,400
--------------
13,054,577
--------------
ELECTRONICS -- 5.7%
24,100 Advanced Micro Devices, Inc....................... 411,206
37,600 AMP, Inc.......................................... 1,289,062
62,300 Applied Materials, Inc............................ 1,837,850
7,700 EG & G, Inc....................................... 231,000
75,400 Emerson Electric Co............................... 4,552,275
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-16
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
--------- --------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
ELECTRONICS -- (CONTINUED)
553,400 General Electric Co............................... $ 50,359,400
7,400 General Signal Corp............................... 266,400
288,000 Intel Corp........................................ 21,348,000
14,300 Johnson Controls, Inc............................. 817,781
14,300 KLA-Tencor Corporation............................ 395,931
24,000 LSI Logic Corp.................................... 553,500
28,000 National Semiconductor Corp....................... 369,250
32,000 Silicon Graphics, Inc............................. 388,000
8,600 Tektronix, Inc.................................... 304,225
66,400 Texas Instruments, Inc............................ 3,871,950
9,400 Thomas & Betts Corp............................... 462,950
--------------
87,458,780
--------------
ENERGY & SERVICES -- 7.4%
15,600 Amerada Hess Corp................................. 847,275
162,900 Amoco Corp........................................ 6,780,712
10,200 Anadarko Petroleum Corporation.................... 685,312
16,200 Apache Corporation................................ 510,300
12,800 Ashland, Inc...................................... 660,800
54,600 Atlantic Richfield Co............................. 4,265,625
28,900 Baker Hughes, Inc................................. 998,856
30,020 Burlington Resources, Inc......................... 1,292,736
111,700 Chevron Corp...................................... 9,278,081
16,200 Consolidated Natural Gas Company.................. 953,775
29,900 Dresser Industries, Inc........................... 1,317,468
415,900 Exxon Corp........................................ 29,658,868
44,600 Halliburton Co.................................... 1,987,487
8,500 Helmerich & Payne, Inc............................ 189,125
8,100 Kerr-McGee Corp................................... 468,787
10,300 McDermott International, Inc...................... 354,706
133,400 Mobil Corp........................................ 10,221,775
62,300 Occidental Petroleum Corp......................... 1,682,100
18,000 Oryx Energy Co.................................... 398,250
8,100 Pennzoil Co....................................... 410,062
44,700 Phillips Petroleum Co............................. 2,153,981
14,700 Rowan Cos., Inc................................... 285,731
364,700 Royal Dutch Petroleum Co. ADR..................... 19,990,118
84,700 Schlumberger Ltd.................................. 5,786,068
40,654 Sempra Energy..................................... 1,128,147
16,100 Sun Company, Inc.................................. 624,881
92,000 Texaco, Inc....................................... 5,491,250
18,100 Coastal Corporation (The)......................... 1,263,606
49,100 USX-Marathon Group................................ 1,684,743
43,200 Union Pacific Resources Group Inc................. 758,700
41,900 Unocal Corp....................................... 1,497,925
9,300 Western Atlas, Inc................................ 789,337
--------------
114,416,587
--------------
FINANCIAL SERVICES -- 17.4%
27,100 Aetna Life Insurance & Annuity Co................. 2,062,987
73,200 Allstate Corporation (The)........................ 6,702,375
79,100 American Express Co............................... 9,017,400
46,302 American General Corp............................. 3,296,123
122,450 American International Group, Inc................. 17,877,700
29,250 Aon Corp.......................................... 2,054,812
58,963 Associates First Capital Corporation.............. 4,532,780
119,460 Banc One Corp..................................... 6,667,361
116,000 BankAmercia Corp.................................. 10,026,750
49,400 BankBoston Corporation............................ 2,747,875
64,100 Bank of New York Company, Inc. (The).............. 3,890,068
16,700 Bankers Trust NY Corp............................. 1,938,243
24,300 BB&T Corporation.................................. 1,643,287
9,000 Beneficial Corp................................... 1,378,687
<CAPTION>
MARKET
SHARES VALUE
--------- --------------
<C> <S> <C>
FINANCIAL SERVICES -- (CONTINUED)
45,150 Charles Schwab Corporation (The).................. $ 1,467,375
144,900 Chase Manhattan Corporation (The)................. 10,939,950
29,700 Chubb Corporation (The)........................... 2,387,137
37,500 CIGNA Corporation................................. 2,587,500
28,700 Cincinnati Financial.............................. 1,101,362
76,800 Citicorp.......................................... 11,462,400
26,850 Comerica, Inc..................................... 1,778,812
34,300 Conseco Inc....................................... 1,603,525
18,500 Countrywide Credit Industries Inc................. 938,875
25,500 Equifax Inc....................................... 925,968
115,200 Federal Home Loan Mortgage Corp................... 5,421,600
176,100 Federal National Mortgage Association............. 10,698,075
44,775 Fifth Third Bancorp............................... 2,820,825
49,500 First Chicago Corp................................ 4,386,937
164,630 First Union Corp.................................. 9,589,697
48,300 Fleet Financial Group, Inc........................ 4,033,050
43,000 Franklin Resources, Inc........................... 2,322,000
13,700 General Re Corp................................... 3,472,950
9,700 Golden West Financial Corp........................ 1,031,231
23,200 Greentree Financial Corp.......................... 993,250
18,600 H.F. Ahmanson & Co................................ 1,320,600
54,700 Household International Corp...................... 2,721,325
32,600 Huntington Bancshares, Inc........................ 1,092,100
30,200 J.P. Morgan & Co., Inc............................ 3,537,175
19,400 Jefferson Pilot Corp.............................. 1,123,987
74,800 Keycorp........................................... 2,664,750
20,100 Lehman Brothers Holdings, Inc..................... 1,559,006
18,600 Lincoln National Corp............................. 1,699,575
17,100 MBIA, Inc......................................... 1,280,362
85,350 MBNA Corp......................................... 2,816,550
19,900 MGIC Investment................................... 1,135,543
43,350 Marsh & McLennan Companies, Inc................... 2,619,965
43,300 Mellon Bank Corp.................................. 3,014,762
22,300 Mercantile Bancorporation Inc..................... 1,123,362
58,800 Merrill Lynch & Co., Inc.......................... 5,424,300
101,975 Morgan Stanley Dean Witter Discover & Co.......... 9,317,965
55,900 National City Corp................................ 3,968,900
162,667 NationsBank Corp.................................. 12,444,025
19,000 Northern Trust Corporation........................ 1,448,750
128,400 Norwest Corp...................................... 4,798,950
51,900 PNC Bank Corp..................................... 2,792,868
12,600 Progressive Corporation (The)..................... 1,776,600
17,300 Providian Corp.................................... 1,359,131
18,600 Republic New York Corp............................ 1,170,637
24,700 SAFECO Corp....................................... 1,122,306
40,280 St. Paul Companies, Inc. (The).................... 1,694,277
27,400 State Street Corporation.......................... 1,904,300
30,000 Summit Bancorp.................................... 1,425,000
35,900 SunTrust Banks, Inc............................... 2,919,118
44,750 Synovus Financial Corp............................ 1,062,812
25,500 Torchmark Corporation............................. 1,166,625
11,500 Transamerica Corporation.......................... 1,323,937
195,205 Travelers Group, Inc.............................. 11,834,303
24,200 UNUM Corporation.................................. 1,343,100
125,219 U.S. Bancorp...................................... 5,384,417
35,000 Wachovia Corporation.............................. 2,957,500
65,600 Washington Mutual, Inc............................ 2,849,500
14,800 Wells Fargo & Company............................. 5,461,200
--------------
268,458,550
--------------
FOOD, BEVERAGE & TOBACCO -- 7.2%
6,300 Adolph Coors Company Class B...................... 214,200
83,400 Anheuser-Busch Cos., Inc.......................... 3,935,437
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-17
<PAGE>
HARTFORD INDEX HLS, FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
--------- --------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
FOOD, BEVERAGE & TOBACCO -- (CONTINUED)
96,955 Archer-Daniels-Midland Company.................... $ 1,878,503
48,900 Bestfoods......................................... 2,839,256
11,800 Brown-Forman Corporation Class B.................. 758,150
77,600 Campbell Soup Company............................. 4,122,500
419,800 Coca-Cola Company (The)........................... 35,892,900
80,800 ConAgra, Inc...................................... 2,560,350
29,200 Fortune Brands Inc................................ 1,122,375
28,900 General Mills, Inc................................ 1,839,287
62,200 H.J. Heinz Company................................ 3,490,975
24,300 Hershey Foods Corporation......................... 1,676,700
70,000 Kellogg Company................................... 2,629,375
253,500 PepsiCo, Inc...................................... 10,441,031
412,100 Philip Morris Companies, Inc...................... 16,226,437
23,600 Quaker Oats Company (The)......................... 1,296,525
18,200 Ralston Purina Company............................ 2,125,987
79,400 Sara Lee Corporation.............................. 4,441,437
58,900 Seagram Company Ltd. (The)........................ 2,411,218
25,830 Tricon Global Restaurants, Inc.................... 818,488
31,400 UST, Inc.......................................... 847,800
108,900 Unilever NV-New York Shares....................... 8,596,293
19,700 Wrigley (W.M.) Jr. Company........................ 1,930,600
--------------
112,095,824
--------------
HEALTH CARE -- 12.2%
262,400 Abbott Laboratories............................... 10,725,600
11,100 Allergan, Inc..................................... 514,782
14,500 Alza Corporation.................................. 627,125
222,900 American Home Products Corporation and
Subsidiaries.................................... 11,535,075
43,200 Amgen, Inc........................................ 2,824,200
9,400 Bausch & Lomb, Inc................................ 471,175
47,600 Baxter International, Inc......................... 2,561,475
20,800 Becton, Dickinson and Company..................... 1,614,600
19,000 Biomet, Inc....................................... 628,187
33,100 Boston Scientific Corporation..................... 2,370,787
169,300 Bristol-Myers Squibb Company...................... 19,458,918
9,700 C.R. Bard, Inc.................................... 369,206
18,700 Cardinal Health, Inc.............................. 1,753,125
*109,200 Columbia/HCA Healthcare Corporation............... 3,180,450
188,900 Eli Lilly and Company............................. 12,479,206
25,700 Guidant Corporation............................... 1,832,731
68,000 Healthsouth Corporation........................... 1,814,750
27,800 Humana, Inc....................................... 867,012
229,000 Johnson & Johnson................................. 16,888,750
20,100 Loews Corporation................................. 1,751,212
12,400 Mallinckrodt, Inc................................. 368,125
10,800 Manor Care, Inc................................... 415,125
79,700 Medtronic, Inc.................................... 5,080,875
204,000 Merck & Co., Inc.................................. 27,285,000
7,400 Millipore Corporation............................. 201,650
21,200 Pall Corporation.................................. 434,600
221,900 Pfizer, Inc....................................... 24,117,756
86,400 Pharmacia & Upjohn, Inc........................... 3,985,200
41,500 Pioneer Hi-Bred International, Inc................ 1,717,062
124,700 Schering-Plough Corporation....................... 11,425,637
42,900 Service Corporation International................. 1,839,337
4,500 Shared Medical Systems Corporation................ 330,468
14,300 St. Jude Medical, Inc............................. 526,418
35,650 SunAmerica, Inc................................... 2,047,646
*52,100 Tenet Healthcare Corporation...................... 1,628,125
32,000 United HealthCare Corporation..................... 2,032,000
<CAPTION>
MARKET
SHARES VALUE
--------- --------------
<C> <S> <C>
HEALTH CARE -- (CONTINUED)
12,900 United States Surgical Corporation................ $ 588,562
139,100 Warner-Lambert Company............................ 9,650,062
--------------
187,941,994
--------------
INDUSTRIAL MATERIALS -- 4.1%
18,400 ARMCO, Inc........................................ 117,300
6,900 ASARCO, Inc....................................... 153,525
40,100 Air Products & Chemicals, Inc..................... 1,604,000
38,700 Alcan Aluminum Ltd................................ 1,069,087
33,200 Allegheny Teledyne, Inc........................... 759,450
29,300 Aluminum Company of America....................... 1,931,968
6,900 Armstrong World Industries, Inc................... 464,887
12,200 B.F. Goodrich Company (The)....................... 605,425
63,200 Barrick Gold Corp................................. 1,212,650
39,100 Battle Mountain Gold Company...................... 232,156
9,000 Bemis Company, Inc................................ 367,875
21,800 Bethlehem Steel Corporation....................... 271,137
9,600 Boise Cascade Corporation......................... 314,400
16,400 Champion International Corporation................ 806,675
21,900 Crown Cork & Seal Company, Inc.................... 1,040,250
15,800 Cyprus Amax Minerals Company...................... 209,350
38,600 Dow Chemical Company (The)........................ 3,732,137
192,500 du Pont (E.I.) de Nemours & Co.................... 14,365,312
13,300 Eastman Chemical Company.......................... 827,925
21,900 Ecolab, Inc....................................... 678,900
24,600 Englehard Corporation............................. 498,150
5,900 FMC Corporation................................... 402,306
30,600 Freeport-McMoran Copper & Gold, Inc............... 464,737
15,800 Georgia-Pacific Corporation....................... 931,212
10,200 Great Lakes Chemical Corporation.................. 402,262
16,400 Hercules, Inc..................................... 674,450
35,900 Homestake Mining Company.......................... 372,462
28,300 Inco Ltd.......................................... 385,587
8,300 Inland Steel Industries, Inc...................... 233,956
51,400 International Paper Company....................... 2,210,200
37,500 James River Corporation of Virginia............... 1,668,750
18,700 Louisiana-Pacific Corporation..................... 341,275
17,800 Mead Corporation (The)............................ 565,150
101,000 Monsanto Company.................................. 5,643,375
22,200 Morton International, Inc......................... 555,000
11,300 Nalco Chemical Company............................ 396,912
26,593 Newmont Mining Corporation........................ 628,259
15,000 Nucor Corporation................................. 690,000
9,100 Owens-Corning..................................... 371,393
26,300 Owens-Illinois Group, Inc......................... 1,176,925
30,300 PPG Industries, Inc............................... 2,107,743
10,000 Phelps Dodge Corporation.......................... 571,875
41,800 Placer Dome, Inc.................................. 491,150
4,900 Potlatch Corporation.............................. 205,800
26,800 Praxair, Inc...................................... 1,254,575
12,600 Reynolds Metal Company............................ 704,812
10,400 Rohm & Haas Company............................... 1,080,950
14,025 Sealed Air........................................ 515,411
29,400 Sherman-Williams Company (The).................... 973,875
17,100 Sigma-Aldrich Corporation......................... 600,637
16,900 Stone Container Corporation....................... 264,062
9,600 Temple-Inland, Inc................................ 517,200
14,600 USX Corporation................................... 481,800
11,900 Union Camp Corporation............................ 590,537
23,100 Union Carbide Corporation......................... 1,232,962
12,600 W.R. Grace Co..................................... 214,987
17,400 Westvaco Corporation.............................. 491,550
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-18
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
--------- --------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
INDUSTRIAL MATERIALS -- (CONTINUED)
34,000 Weyerhaeuser Company.............................. $ 1,570,375
18,900 Willamette Industries, Inc........................ 604,800
16,400 Worthington Industries, Inc....................... 247,025
--------------
64,098,896
--------------
MANUFACTURING -- 2.4%
4,800 Aeroquip-Vickers, Inc............................. 280,200
19,900 Avery Dennison Corporation........................ 1,069,625
5,100 Ball Corporation.................................. 204,956
12,800 Case Corporation.................................. 617,600
62,300 Caterpillar, Inc.................................. 3,294,112
6,800 Cincinnati Milacron, Inc.......................... 165,325
20,600 Cooper Industries, Inc............................ 1,131,712
39,400 Corning Incorporated.............................. 1,369,150
7,800 Crane Co.......................................... 378,787
6,500 Cummins Engine Company, Inc....................... 333,125
17,900 Dana Corporation.................................. 957,650
42,500 Deere & Company................................... 2,247,187
37,800 Dover Corporation................................. 1,294,650
12,200 Eaton Corporation................................. 948,550
8,100 Harnischfeger Industries, Inc..................... 229,331
21,700 Honeywell, Inc.................................... 1,813,306
42,500 Illinois Tool Works, Inc.......................... 2,834,218
28,150 Ingersoll-Rand Company............................ 1,240,359
69,500 Minnesota Mining & Manufacturing Company.......... 5,712,031
1,400 NACCO Industries, Inc............................. 180,950
12,300 Navistar International Corporation................ 355,162
13,300 PACCAR, Inc....................................... 694,925
18,850 Parker-Hannifin Corporation....................... 718,656
8,300 Perkin-Elmer Corporation (The).................... 516,156
29,000 Tenneco, Inc...................................... 1,103,812
27,100 Thermo Electron Corporation....................... 926,481
10,700 Timken Company (The).............................. 329,693
99,100 Tyco International, Ltd........................... 6,243,300
--------------
37,191,009
--------------
MEDIA & SERVICES -- 4.4%
97,300 Airtouch Communications, Inc...................... 5,685,968
*122,100 CBS Corporation................................... 3,876,675
*21,000 Clear Channel Communications, Inc................. 2,291,625
27,600 Cognizant Corporation............................. 1,738,800
62,600 Comcast Corporation Class A....................... 2,541,168
29,000 Dun & Bradstreet Corporation (The)................ 1,047,625
16,400 Dow Jones & Company, Inc.......................... 914,300
48,300 Gannett Co., Inc.................................. 3,432,318
12,000 Harcourt General, Inc............................. 714,000
72,900 HBO & Company..................................... 2,569,725
23,150 Interpublic Group of Companies, Inc. (The)........ 1,404,915
12,500 King World Productions, Inc....................... 318,750
13,500 Knight-Ridder, Inc................................ 743,343
16,900 McGraw-Hill Companies, Inc. (The)................. 1,378,406
103,200 Mediaone Group Inc................................ 4,534,350
9,000 Meredith Corporation.............................. 422,437
16,300 New York Times Company (The)...................... 1,291,775
46,500 Nextel Communications Inc......................... 1,156,687
28,900 Omnicom Group, Inc................................ 1,441,387
86,200 TCI Communications, Inc........................... 3,313,312
100,400 Time Warner, Inc.................................. 8,577,925
15,100 Times Mirror Co.-Class A.......................... 949,412
20,900 Tribune Co........................................ 1,438,181
<CAPTION>
MARKET
SHARES VALUE
--------- --------------
<C> <S> <C>
MEDIA & SERVICES -- (CONTINUED)
60,100 Viacom, Inc.-Class B.............................. $ 3,500,825
115,900 Walt Disney Company (The)......................... 12,176,743
--------------
67,460,652
--------------
REAL ESTATE -- 0.0%
7,200 Pulte Corporation................................. 215,100
--------------
RETAIL -- 6.2%
493 Abercrombie & Fitch............................... 21,691
41,800 Albertson's, Inc.................................. 2,165,762
12,400 American Greetings Corporation.................... 631,625
46,500 American Stores Company........................... 1,124,718
25,800 AutoZone, Inc..................................... 823,987
65,000 CVS Corporation................................... 2,530,937
144,745 Cendant Corporation............................... 3,021,551
16,800 Circuit City Stores............................... 787,500
18,300 Consolidated Stores Corporation................... 663,375
36,500 Costco Companies, Inc............................. 2,301,781
74,300 Dayton Hudson Corporation......................... 3,603,550
18,900 Dillard's, Inc.................................... 783,168
35,700 Federated Department Stores, Inc.................. 1,921,106
67,350 Gap Inc........................................... 4,150,443
10,200 Giant Food, Inc................................... 439,237
8,500 Great Atlantic & Pacific Tea Company, Inc.
(The)........................................... 214,906
124,450 Home Depot, Inc. (The)............................ 10,337,128
42,600 J.C. Penney Company, Inc.......................... 3,080,512
6,600 Jostens, Inc...................................... 159,225
83,100 Kmart Corporation................................. 1,599,675
43,400 Kroger Company (The).............................. 1,860,775
38,400 Limited Inc. (The)................................ 1,272,000
6,600 Longs Drug Store Corporation...................... 190,575
59,600 Lowe's Companies, Inc............................. 2,417,525
39,300 May Department Stores Company (The)............... 2,574,150
117,200 McDonald's Corporation............................ 8,086,800
6,300 Mercantile Stores Company, Inc.................... 497,306
13,200 Nordstrom, Inc.................................... 1,019,700
10,800 Pep Boys - Manny, Moe & Jack (The)................ 204,525
43,800 Rite Aid Corporation.............................. 1,645,237
66,700 Sears Roebuck & Co................................ 4,072,868
55,000 TJX Companies, Inc. (The)......................... 1,326,875
17,600 Tandy Corporation................................. 933,900
47,400 Toys "R" Us, Inc.................................. 1,116,862
22,900 Venator Group Inc................................. 437,962
84,200 Walgreen Co....................................... 3,478,512
382,000 Wal-Mart Stores, Inc.............................. 23,206,500
25,300 Winn-Dixie Stores, Inc............................ 1,295,043
--------------
95,998,992
--------------
SOFTWARE & SERVICES -- 4.2%
7,900 Autodesk, Inc..................................... 305,137
50,900 Automatic Data Processing, Inc.................... 3,709,337
*12,300 Ceridian Corporation.............................. 722,625
92,950 Computer Associates International, Inc............ 5,164,534
*26,500 Computer Sciences Corporation..................... 1,696,000
75,700 First Data Corporation............................ 2,521,756
*418,600 Microsoft Corporation............................. 45,365,775
59,700 Novell, Inc....................................... 761,175
165,450 Oracle Corporation................................ 4,063,865
45,900 Parametric Technology Corporation................. 1,245,037
--------------
65,555,241
--------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-19
<PAGE>
HARTFORD INDEX HLS, FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
--------- --------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
TRANSPORTATION -- 1.1%
31,000 AMR Corporation................................... $ 2,580,750
26,600 Burlington Northern Santa Fe Corporation.......... 2,611,787
37,100 CSX Corporation................................... 1,688,050
12,700 Delta Air Lines, Inc.............................. 1,641,475
24,960 FDX Corporation................................... 1,566,240
55,700 Laidlaw, Inc...................................... 678,843
64,200 Norfolk Southern Corporation...................... 1,913,962
13,000 Ryder Systems, Inc................................ 410,312
37,600 Southwest Airlines Co............................. 1,113,900
42,100 Union Pacific Corporation......................... 1,857,662
17,100 US Airways Group, Inc............................. 1,355,175
--------------
17,418,156
--------------
UTILITIES -- 9.2%
276,500 AT&T Corp......................................... 15,795,062
31,300 Alltel Corporation................................ 1,455,450
23,300 Ameren Corporation................................ 926,175
32,300 American Electric Power........................... 1,465,612
186,100 Ameritech Corporation............................. 8,351,237
25,100 Baltimore Gas & Electric Company.................. 779,668
264,362 Bell Atlantic Corporation......................... 12,061,516
168,800 BellSouth Corporation............................. 11,330,700
25,600 Carolina Power and Light Company.................. 1,110,400
36,100 Central and Southwest Corporation................. 970,187
26,800 CINergy Corp...................................... 938,000
14,200 Columbia Gas System, Inc. (The)................... 789,875
40,000 Consolidated Edison Company of New York, Inc...... 1,842,500
24,700 DTE Energy Co..................................... 997,262
32,900 Dominion Resources, Inc........................... 1,340,675
61,252 Duke Energy Corporation........................... 3,629,181
3,500 Eastern Enterprises............................... 150,062
61,600 Edison International.............................. 1,821,050
55,900 Enron Corp........................................ 3,022,093
41,500 Entergy Corporation............................... 1,193,125
31,000 FPL Group, Inc.................................... 1,953,000
39,200 Firstenergy Corp.................................. 1,205,400
29,100 Frontier Corporation.............................. 916,650
21,600 GPU, Inc.......................................... 816,750
163,000 GTE Corporation................................... 9,066,875
50,292 Houston Industries, Inc........................... 1,552,765
123,000 MCI Communications Corporation.................... 7,149,375
8,200 NICOR, Inc........................................ 329,025
28,300 Niagara Mohawk Power Corporation.................. 422,731
25,300 Northern States Power Company..................... 724,212
5,300 Oneok, Inc........................................ 211,337
64,900 PG & E Corporation................................ 2,048,406
28,200 PP & L Resources, Inc............................. 639,787
50,500 Pacificorp........................................ 1,142,562
37,800 Peco Energy Company............................... 1,103,287
6,000 Peoples Energy Corporation........................ 231,750
39,400 Public Service Enterprise Group, Inc.............. 1,356,837
312,120 SBC Communications, Inc........................... 12,484,800
18,700 Sonat, Inc........................................ 722,287
118,300 Southern Company (The)............................ 3,275,431
73,200 Sprint Corporation................................ 5,160,600
47,715 Texas Utilities Company........................... 1,986,136
87,944 U.S. West, Inc.................................... 4,133,349
36,900 Unicom Corporation................................ 1,293,806
72,100 Williams Companies, Inc. (The).................... 2,433,375
175,400 WorldCom, Inc..................................... 8,495,937
--------------
140,826,300
--------------
<CAPTION>
MARKET
SHARES VALUE
--------- --------------
<C> <S> <C>
WASTE MANAGEMENT -- 0.3%
31,400 Browning-Ferris Industries, Inc................... $ 1,091,150
80,804 Waste Management, Inc............................. 2,828,140
--------------
3,919,290
--------------
Total common stocks............................... $1,523,061,013
--------------
--------------
PRINCIPAL
AMOUNT
---------
SHORT-TERM SECURITIES -- 1.2%
COMMERCIAL PAPER -- 0.0%
$ 200,000 5.01% due 09/24/98.............................. $ 197,829
150,000 5.07% due 09/17/98.............................. 148,352
--------------
346,181
--------------
U.S. TREASURY BILLS -- 0.3%
500,000 4.98% due 08/20/98.............................. 496,541
700,000 5.00% due 08/20/98.............................. 695,216
500,000 5.01% due 09/17/98.............................. 494,085
1,500,000 5.03% due 08/20/98.............................. 1,489,520
500,000 5.05% due 08/20/98.............................. 496,493
50,000 5.055% due 08/20/98............................. 49,648
250,000 5.065% due 08/20/98............................. 248,241
--------------
3,969,744
--------------
REPURCHASE AGREEMENT -- 0.9%
13,616,000 Interest in $131,291,000 joint repurchase
agreement with State Street Bank dated 06/30/98
at 5.9%, to be repurchased at $13,618,232 on
07/01/98; (collateralized by $131,291,000 U.S.
Treasury Bonds 6.5% due 11/15/26)............... 13,616,000
--------------
Total short-term securities....................... $ 17,931,925
--------------
--------------
</TABLE>
<TABLE>
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $1,030,184,572).............. 98.5% $1,523,061,013
Total short-term securities (cost $17,931,929)......... 1.2 17,931,925
------ --------------
Total investment in securities (total cost
$1,048,116,501)...................................... 99.7 1,540,992,938
Excess of cash, receivables and other assets over
liabilities.......................................... 0.3 5,567,111
------ --------------
Net assets (applicable to $3.30 per share based on
468,649,820 shares outstanding)...................... 100.0% $1,546,560,049
------ --------------
------ --------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; 1,000,000,000 shares
authorized; 468,649,820 shares outstanding................... $ 46,864,982
Capital surplus................................................ 991,480,960
Accumulated undistributed net investment income................ 8,315,909
Accumulated undistributed net realized gain on investments.....
6,882,368
Unrealized appreciation of futures contracts**................. 139,393
Unrealized appreciation of investments......................... 492,876,437
--------------
Net assets, applicable to shares outstanding................... $1,546,560,049
--------------
--------------
</TABLE>
* Non-income producing during period.
** The Fund had 66 Standard & Poor's 500 September 1998 futures contracts open
June 30, 1998. The contracts had a value of $18,859,500.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-20
<PAGE>
HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- --------------
<C> <S> <C>
COMMON STOCKS -- 88.1%
ARGENTINA -- 0.3%
116,600 Telefonica De Argentina-ADR... $ 3,782,212
--------------
AUSTRALIA -- 3.7%
*852,495 Amp Limited................... 9,977,413
1,128,000 Australia & New Zealand
Banking..................... 7,781,415
1,289,000 CSR Ltd....................... 3,719,659
2,200,016 News Corporation Ltd.......... 17,955,833
3,944,028 Pasminco Limited.............. 3,004,065
1,327,819 WMC Limited................... 3,996,128
--------------
46,434,513
--------------
BRAZIL -- 0.6%
109,723,896 Cia Energetica Minas.......... 3,396,240
37,023,800 Telecommunicacoes Brasileiras
SA.......................... 4,081,364
--------------
7,477,604
--------------
CANADA -- 0.4%
86,500 Canadian Natl Railway Co...... 4,595,312
--------------
CHILE -- 0.2%
106,700 Cia Telecom Chile ADR......... 2,167,343
--------------
DENMARK -- 2.2%
89,950 Novov -- nordisk.............. 12,399,653
166,680 Unidanmark AS-A Shares
(Reg.)...................... 14,978,626
--------------
27,378,279
--------------
FINLAND -- 2.0%
765,000 Metsa-Serla-B Shares.......... 7,389,978
85,720 Nokia OYJ Class A Shares...... 6,304,223
150,100 Nokia Corp.- Sponsored ADR.... 10,891,631
--------------
24,585,832
--------------
FRANCE -- 15.5%
40,308 AGF-Assurance Generale de
France...................... 2,280,731
111,930 Alcatel Alsthom............... 22,789,475
4,577 Allianz BCVG.................. 26,609
35,849 Assurance Generale**.......... 2,028,429
134,840 Axa UAP....................... 15,165,524
263,521 Banque National de Paris**.... 21,531,384
4,290 Carrefour Supermarche......... 2,714,054
66,369 Compagnie de Saint Gobain..... 12,305,539
123,310 Elf Aquitaine................. 17,335,924
295,110 Michelin...................... 17,034,881
239,558 Rhone-Poulenc SA.............. 13,511,228
108,514 Societe Generale Class A...... 22,560,609
113,343 Total SA B Shares............. 14,734,894
145,280 Vivendi....................... 31,021,432
--------------
195,040,713
--------------
GERMANY -- 12.0%
28,220 Adidas AG..................... 4,877,825
742,650 Bayer AG...................... 38,304,383
337,850 Dresdner Bank AG.............. 18,211,737
302,560 Hoechst AG.................... 15,102,572
27,610 Karstadt AG................... 13,338,208
36,470 M.A.N. AG..................... 14,183,633
172,290 Mannesmann AG................. 17,476,844
<CAPTION>
SHARES MARKET
----------- VALUE
--------------
<C> <S> <C>
GERMANY -- (CONTINUED)
*162,240 Metallgesellschaft AG......... $ 3,325,632
193,290 Siemans AG.................... 11,757,807
201,920 Veba AG....................... 13,759,386
--------------
150,338,027
--------------
HONG KONG -- 0.4%
*1,058,000 Cheung Kong Holdings Ltd...... 5,202,220
--------------
IRELAND -- 0.4%
1,835,877 Smurfit (Jefferson) Group..... 5,529,011
--------------
ITALY -- 1.5%
126,300 Gucci Group Registerd
Shares...................... 6,693,900
1,617,400 Telecom Italia Spa............ 11,906,093
--------------
18,599,093
--------------
JAPAN -- 9.2%
70,700 Advantest Corp................ 3,800,280
201,000 Dai Nippon Printing........... 3,207,947
1,265,000 Daiwa Securities, Inc......... 5,441,545
283,000 Fuji Machine Manufacturing
Co.......................... 7,503,980
331,000 Fuji Photo Film Co............ 11,519,471
510,000 Jusco Co. Ltd................. 9,352,234
171,000 Kao Corp...................... 2,636,739
101,000 Mabuchi Motor Co. Ltd......... 6,404,149
170,000 Matsumotokiyoshi.............. 5,977,590
406,000 Matsushita Electric Industrial
Co.......................... 6,523,614
10,480 Nippon Telegraph &
Telephone................... 8,683,934
556,000 Olympus Optical............... 4,831,472
*62,000 Rohm Company, Ltd............. 6,365,961
466,000 Sanwa Bank Ltd................ 4,166,919
10,400 Shohkoh Fund.................. 2,555,319
174,700 Sony Corporation.............. 15,042,438
4,600 Square Co. Ltd................ 122,635
2,023,000 Toshiba Corporation........... 8,264,876
99,000 Uni-Charm Corporation......... 3,666,534
--------------
116,067,637
--------------
MEXICO -- 1.9%
1,680,000 Coca Cola Femsa SA............ 2,947,500
1,539,500 Grupo Financiero Banamex...... 2,924,362
193,500 Grupo Televisa SA............. 3,654,059
1,635,700 Kimberly-Clark................ 5,695,741
169,100 Telefonos de Mexico SA ADR.... 8,127,368
--------------
23,349,030
--------------
NETHERLANDS -- 7.2%
323,957 ING Groep N.V................. 21,212,567
214,000 Kon Knp N.V................... 13,600,246
326,400 Philips Electronics N.V....... 27,437,713
109,000 Royal Dutch Petroleum......... 5,974,562
293,900 Unilever NV-CVA............... 23,318,723
--------------
91,543,811
--------------
NEW ZEALAND -- 0.3%
107,150 Telecom Corp. New Zealand
ADR......................... 3,509,162
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-21
<PAGE>
HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET
----------- VALUE
--------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
NEW ZEALAND -- (CONTINUED)
272,000 Telecom Corp. New Zealand
Ltd......................... $ 581,709
--------------
4,090,871
--------------
NORWAY -- 0.4%
356,500 Saga Petroleum................ 5,482,085
--------------
PHILLIPINES -- 0.2%
2,565,600 Ayala Land Inc................ 738,300
579,000 Manila Electric Co............ 1,527,334
--------------
2,265,634
--------------
SINGAPORE -- 0.3%
1,732,000 Overseas Union Bank........... 3,793,117
--------------
SOUTH AFRICA -- 0.0%
27,600 De Beers-Centenary............ 488,369
--------------
SPAIN -- 3.3%
52,600 Banco Popular Espanol......... 4,494,140
237,000 Banco Santander SA............ 6,076,326
510,900 Endesa SA..................... 11,196,481
137,872 Telefonica De Espana SA ADR... 19,172,825
--------------
40,939,772
--------------
SWEDEN -- 3.1%
1,752,470 Nordbanken Holding AB......... 12,855,194
142,350 Pharmacia & Upjohn............ 6,550,820
94,300 Sparbanken Sverige AB-A
Shares...................... 2,837,887
552,660 Volvo......................... 16,458,636
--------------
38,702,537
--------------
SWITZERLAND -- 4.6%
2,840 Cie Financial Richemont....... 3,716,613
64,840 Credit Suisse Group........... 14,427,308
17,550 Holderbank Financial Glarus
B........................... 22,330,732
8,119 Nestle SA (Reg.).............. 17,374,790
--------------
57,849,443
--------------
THAILAND -- 0.0%
450,500 Bangkok Bank.................. 553,805
--------------
UNITED KINGDOM -- 18.4%
952,110 Allied Irish Banks PLC........ 13,765,196
1,074,300 B.A.T. Industries PLC......... 10,727,943
630,114 Bass PLC...................... 11,775,080
317,004 BOC Group PLC................. 4,326,580
1,164,711 British Petroleum Co. PLC..... 16,955,490
560,100 British Telecom Co. PLC....... 6,892,143
682,263 BTR PLC....................... 1,938,051
1,174,900 Compass Group PLC............. 13,526,228
157,015 Cookson Group PLC............. 539,678
1,104,092 Diageo PLC.................... 13,143,952
198,000 Granada Group PLC............. 3,647,211
853,300 Great Universal Stores........ 11,254,607
512,100 HSBC Holdings PLC............. 12,996,030
491,500 Lloyds TSB Group PLC.......... 6,863,975
336,700 Marks & Spencer PLC........... 3,072,961
420,100 Next PLC...................... 3,616,838
755,488 PowerGen PLC.................. 10,462,426
794,142 Reckitt & Colman PLC.......... 15,158,314
<CAPTION>
SHARES MARKET
----------- VALUE
--------------
<C> <S> <C>
UNITED KINGDOM -- (CONTINUED)
630,881 Royal & Sun Alliance Insurance
Group....................... $ 6,436,809
370,400 Royal Bank of Scotland
Group....................... 6,421,156
289,700 Siebe PLC..................... 5,795,546
1,897,085 SmithKline Beecham PLC........ 23,090,791
570,800 Standard Chartered PLC........ 6,480,952
1,832,900 WPP Group PLC................. 12,064,588
235,600 Zeneca Group PLC.............. 10,122,301
--------------
231,074,846
--------------
Total common stocks........... $1,107,331,916
--------------
--------------
PREFERRED STOCKS -- 3.4%
BRAZIL -- 0.8%
8,644,900 Banco Itau SA................. $ 4,895,707
50,459,900 Cia Brasileiro Distribution... 1,103,776
19,211,000 Petroleo Brasileiro........... 3,571,104
--------------
9,570,587
--------------
GERMANY -- 2.4%
104,810 Henkel........................ 10,422,737
51,100 Hornbach Holding AG........... 4,686,174
15,470 Sap AG - Vorzug............... 10,515,973
7,020 Sap AG........................ 4,258,590
--------------
29,883,474
--------------
INDIA -- 0.2%
4,135,100 Cervejaria Brahma............. 2,558,054
--------------
Total preferred stocks........ $ 42,012,115
--------------
--------------
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<C> <S> <C>
SHORT-TERM SECURITIES -- 8.0%
REPURCHASE AGREEMENT
$101,184,000 Interest in $1,111,215,000
joint repurchase agreement
with State Street Bank dated
06/30/98 at 5.8%, to be
repurchased at $101,200,302
on 07/01/98; (Collateralized
by $421,318,000 U.S.
Treasury Notes 5.75%-7.825%
due 05/15/99-11/15/04,
563,474,000 U.S. Treasury
Bonds 8.00%-11.125% due
02/15/15-08/15/25,
121,000,000 U.S. Treasury
Strips (principal) 0% due
08/15/04-08/15/07 and
5,423,000 U.S. Treasury
Bills 0% due 08/13/98)...... $ 101,184,000
--------------
--------------
</TABLE>
<TABLE>
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $951,970,783)...... 88.1% $ 1,107,331,916
Total preferred stocks (cost $36,530,426).... 3.4 42,012,115
Total short-term securities (cost
$101,184,000).............................. 8.0 101,184,000
------ ----------------
Total investment in securities (total cost
$1,089,685,209)............................ 99.5 1,250,528,031
Excess of cash, receivables and other assets
over liabilities........................... 0.5 5,830,050
------ ----------------
Net assets................................... 100.0% $ 1,256,358,081
------ ----------------
------ ----------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-22
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; 1,500,000,000
shares authorized; 887,753,488 shares outstanding....
$ 88,775,349
Capital surplus........................................
998,738,972
Accumulated undistributed net investment income........
12,439,328
Accumulated net realized loss on investments...........
(4,223,955)
Unrealized appreciation of investments.................
160,842,822
Unrealized depreciation on translation on other assets
and liabilities in foreign currencies................
(214,435)
--------------
Net assets.............................................
$1,256,358,081
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
-------
<S> <C>
Class IA
Net asset value per share ($1,256,074,022 DIVIDED BY
887,475,218 shares outstanding)......................
$1.42
-----
-----
Class IB
Net asset value per share ($284,059 DIVIDED BY 278,270
shares outstanding)..................................
$1.02
-----
-----
</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 June 30, 1998,
the market value of these securities amounted to $23,559,813, or 2% of net
assets.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-23
<PAGE>
HARTFORD DIVIDEND AND GROWTH HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET
- ----------- VALUE
--------------
<C> <S> <C>
COMMON STOCKS -- 96.4%
AEROSPACE & DEFENSE -- 1.9%
229,300 Northrop Grumman
Corporation................. $ 23,646,562
297,700 United Technologies
Corporation................. 27,537,250
--------------
51,183,812
--------------
COMPUTERS & OFFICE EQUIPMENT -- 1.2%
304,200 Xerox Corporation............. 30,914,325
--------------
CONSUMER DURABLES -- 1.3%
533,100 Cooper Tire & Rubber
Company..................... 10,995,187
271,100 Ford Motor Company............ 15,994,900
163,300 TRW, Inc...................... 8,920,262
--------------
35,910,349
--------------
CONSUMER NON-DURABLES -- 3.1%
199,200 Clorox Company (The).......... 18,998,700
392,200 Colgate-Palmolive Company..... 34,513,600
635,300 Kimberly-Clark Corporation.... 29,144,387
--------------
82,656,687
--------------
CONSUMER SERVICES -- 1.4%
528,500 Eastman Kodak Company......... 38,613,531
--------------
ELECTRONICS -- 6.2%
264,900 AMP Incorporated.............. 9,105,937
1,237,860 General Electric Company...... 112,645,260
349,600 Johnson Controls, Inc......... 19,992,750
476,500 Thomas & Betts Corporation.... 23,467,625
--------------
165,211,572
--------------
ENERGY & SERVICES -- 10.7%
302,800 Ashland, Inc.................. 15,632,050
405,600 Chevron Corporation........... 33,690,150
909,800 Eni Ads....................... 59,137,000
254,000 Exxon Corporation............. 18,113,375
159,100 Pennzoil Company.............. 8,054,437
181,700 Phillips Petroleum Company.... 8,755,668
519,600 Repsol S.A. ADR............... 28,578,000
423,800 Royal Dutch Petroleum......... 23,229,537
424,824 Sempra Energy................. 11,788,852
731,705 Sun Company, Inc.............. 28,399,312
1,199,300 USX Corporation............... 41,150,981
448,400 Wisconsin Energy
Corporation................. 13,620,150
--------------
290,149,512
--------------
FINANCIAL SERVICES -- 17.7%
350,700 CIGNA Corporation............. 24,198,300
764,600 Citicorp...................... 114,116,550
1,028,700 Federal National Mortgage
Association................. 62,493,525
704,000 First Union Corporation....... 41,008,000
744,750 Marsh & McLennan Companies,
Inc......................... 45,010,828
1,306,900 Pacific Century Financial
Corporation................. 31,365,600
465,700 Peoples Heritage Financial
Group, Inc.................. 11,002,162
311,300 Pinnacle West Capital
Corporation................. 14,008,500
2,612,200 U.S. Bancorp.................. 112,324,600
227,700 Wachovia Corporation.......... 19,240,650
--------------
474,768,715
--------------
<CAPTION>
SHARES MARKET
- ----------- VALUE
--------------
<C> <S> <C>
FOOD, BEVERAGE & TOBACCO --
5.8%
1,317,575 Flowers Industries, Inc....... $ 26,927,939
547,200 H.J. Heinz Company............ 30,711,600
237,400 Interstate Bakeries........... 7,878,712
866,500 McCormick & Company,
Incorporated................ 30,950,296
666,600 Nabisco Holdings
Corporation................. 24,039,262
689,100 Philip Morris Companies,
Inc......................... 27,133,312
311,100 Schweitzer Mauduit
International............... 9,021,900
--------------
156,663,021
--------------
FOREIGN SECURITIES -- 0.3%
2,985,522 Southcorp Limited............. 8,670,765
--------------
HEALTH CARE -- 13.0%
899,300 Abbott Laboratories........... 36,758,887
783,000 American Home Products
Corporation and
Subsidiaries................ 40,520,250
338,400 Baxter International Inc...... 18,210,150
342,700 Bristol-Myers Squibb
Company..................... 39,389,081
318,400 Merck & Co., Inc.............. 42,586,000
1,674,800 Pharmacia & Upjohn, Inc....... 77,250,150
1,350,900 Warner-Lambert Company........ 93,718,687
--------------
348,433,205
--------------
INDUSTRIAL MATERIALS -- 4.4%
181,100 Aluminum Company of America... 11,941,281
112,500 BetzDearborn, Inc............. 4,746,093
154,700 BOC Group PLC-Sponsored ADR... 4,196,237
394,200 Calgon Carbon Corporation..... 3,917,362
*422,400 du Pont (E.I.) de Nemours &
Co.......................... 31,521,600
105,000 Eastman Chemical Co........... 6,536,250
*125,800 Georgia-Pacific (Timber
Group)...................... 2,901,262
159,700 Georgia-Pacific Corporation... 9,412,318
75,700 Imperial Chemical ADR......... 4,882,650
321,000 International Paper Company... 13,803,000
268,750 RPM, Inc...................... 4,568,750
315,300 Temple-Inland, Inc............ 16,986,787
127,100 Witco Chemical Corp........... 3,717,675
--------------
119,131,265
--------------
INSURANCE--PROPERTY & CASUALTY -- 0.9%
323,800 Exel Limited.................. 25,195,687
--------------
MANUFACTURING -- 1.8%
203,500 Deere & Company............... 10,760,062
169,100 Eaton Corporation............. 13,147,525
306,800 Minnesota Mining &
Manufacturing Company....... 25,215,125
--------------
49,122,712
--------------
MEDIA & SERVICES -- 1.7%
93,200 Cognizant Corp................ 5,871,600
562,700 Gannett Co., Inc.............. 39,986,868
--------------
45,858,468
--------------
REAL ESTATE -- 3.0%
277,200 Kimco Realty Corporation
(REIT)...................... 11,365,200
390,400 Liberty Property Trust
(REIT)...................... 9,979,600
</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)
REAL ESTATE -- (CONTINUED)
235,100 Nationwide Health Properties,
Inc. (REIT)................. $ 5,613,012
488,800 Security Capital Pacific
Trust....................... 10,998,000
527,400 Spieker Properties, Inc....... 20,436,750
427,100 Starwood Hotels & Resorts
(REIT)...................... 20,634,268
122,800 Sunstone Hotel Investors, Inc.
(REIT)...................... 1,634,775
--------------
80,661,605
--------------
RETAIL -- 4.1%
438,100 American Greetings
Corporation................. 22,315,718
408,900 J.C. Penney Company, Inc...... 29,568,581
877,300 May Department Stores Company
(The)....................... 57,463,150
--------------
109,347,449
--------------
SOFTWARE & SERVICES -- 0.2%
49,500 Microsoft Corporation......... 4,702,500
--------------
UTILITIES -- 17.3%
204,900 AT&T Corp..................... 11,704,912
656,100 Ameritech Corporation......... 29,442,487
889,346 Bell Atlantic Corporation..... 40,576,411
711,500 BellSouth Corporation......... 47,759,437
245,600 CINergy Corp.................. 8,596,000
222,600 Columbia Gas System, Inc.
(The)....................... 12,382,125
534,000 Duke Energy Corporation....... 31,639,500
546,600 El Paso Natural Gas Company... 20,907,450
492,200 Endesa SA..................... 10,643,825
692,500 GPU, Inc...................... 26,185,156
*541,400 MCN Energy Group Inc.......... 13,467,325
330,700 Montana Power Company......... 11,491,825
480,300 National Power PLC-Sponsored
ADR......................... 17,711,062
291,800 New England Electric System... 12,620,350
664,800 NIPSCO Industries Inc......... 18,614,400
525,200 Northern States Power
Company..................... 15,033,850
255,900 PowerGen PLC Sponsored ADR.... 14,426,362
1,015,400 SBC Communications Inc........ 40,616,000
726,400 Southern Company (The)........ 20,112,200
420,200 Sprint Corporation............ 29,624,100
324,000 Texas Utilities Company....... 13,486,500
*328,781 WorldCom, Inc................. 15,925,329
--------------
462,966,606
--------------
WASTE MANAGEMENT -- 0.4%
*215,900 Waste Management, Inc......... 7,556,500
--------------
Total common stocks........... $2,587,718,286
--------------
--------------
CONVERTIBLE PREFERRED STOCKS -- 2.0%
AEROSPACE & DEFENSE -- 1.0%
58,900 Loral Space & Communications,
Ltd.
Cv Pfd...................... $ 4,454,312
283,600 Loral Space & Communications,
Ltd......................... 21,447,250
--------------
25,901,562
--------------
MEDIA & SERVICES -- 1.0%
336,600 American Radio Systems
Corporation**............... 26,591,400
--------------
Total convertible preferred
stocks...................... $ 52,492,962
--------------
--------------
WARRANTS -- 0.0%
*18,794 Security Capital Group........ $ 6,460
--------------
--------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- --------------
<C> <S> <C>
SHORT-TERM SECURITIES -- 2.3%
REPURCHASE AGREEMENT
$61,082,000 Interest in $1,111,215,000
joint repurchase agreement
with State Street Bank dated
06/30/98 at 5.8%, to be
repurchased at $61,091,841
on 07/01/98; (collateralized
by $421,318,000 U.S.
Treasury Notes 5.75%-7.825%
due 05/15/99-11/15/04,
563,474,000 U.S. Treasury
Bonds 8.00%-11.125% due
02/15/15-08/15/25,
121,000,000 U.S. Treasury
Strips (principal) 0% due
08/15/04-08/15/07 and
5,423,000 U.S. Treasury
Bills 0% due 08/13/98)...... $ 61,082,000
--------------
--------------
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $2,113,358,302).... 96.4 % $2,587,718,286
Total convertible preferred stocks
(cost $36,015,463)......................... 2.0 52,492,962
Total warrants (cost $0)..................... 0.0 6,460
Total short-term securities (cost
$61,082,000)............................... 2.3 61,082,000
------ --------------
Total investment in securities (total cost
$2,210,455,765)............................ 100.7 2,701,299,708
Excess of liabilities over cash, receivables
and other assets........................... (0.7) (18,602,980)
------ --------------
Net assets................................... 100.0 % $2,682,696,728
------ --------------
------ --------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share;
3,000,000,000 shares authorized; 1,285,871,318
shares outstanding................................. $ 128,587,132
Capital surplus...................................... 1,948,277,085
Accumulated undistributed net investment income...... 21,897,287
Accumulated undistributed net realized gain on
investments........................................ 93,249,066
Unrealized appreciation of investments............... 490,843,943
Unrealized depreciation of option contracts.......... (147,198)
Unrealized depreciation on translation on other
assets and liabilities in foreign currencies....... (10,587)
--------------
Net assets........................................... $2,682,696,728
--------------
--------------
</TABLE>
<TABLE>
<S> <C>
Class IA
Net asset value per share ($2,679,882,266 DIVIDED BY
1,283,024,906 shares outstanding).................... $2.09
-----
-----
Class IB
Net asset value per share ($2,814,462 DIVIDED BY
2,846,412 shares outstanding)........................ $0.99
-----
-----
</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 June 30, 1998,
the market value of these securities amounted to $26,591,400 or 1% of net
assets.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-25
<PAGE>
HARTFORD DIVIDEND AND GROWTH HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
WRITTEN OPTIONS AT JUNE 30, 1998
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF PREMIUM MARKET APPRECIATION
DESCRIPTION CONTRACTS RECEIVED VALUE (DEPRECIATION)
- ------------------------------------------------ ------------- ----------- --------- -------------
<S> <C> <C> <C> <C>
American Home Products July 1998 Strike Price 55 783 $ 49,007 $ 19,575 $ 29,432
Ford Motor Company July 1998 Strike Price 60 271 16,157 32,181 (16,024)
Merck & Co. July 1998 Strike Price 135 318 25,609 79,500 (53,891)
Nabisco Holdings Co. July 1998 Strike Price 40 1,350 77,460 67,500 9,960
Phillip Morris Companies July 1998 Strike Price
42.5 336 18,902 6,300 12,602
Warner-Lambert Company July 1998 Strike Price 70 1,125 93,682 246,094 (152,412)
Warner-Lambert Company July 1998 Strike Price 75 225 16,424 16,875 (451)
Xerox July 1998 Strike Price 115 115 27,386 3,800 23,586
-------------
$(147,198)
-------------
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-26
<PAGE>
HARTFORD INTERNATIONAL ADVISERS HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ----------------- -------------
<C> <S> <C>
COMMON STOCKS -- 59.4%
ARGENTINA -- 0.2%
15,800 Telefonica de Argentina - ADR........... $ 512,512
-------------
AUSTRALIA -- 2.4%
*114,212 Amp Limited**........................... 1,336,712
164,866 Australia & New Zealand Banking Group
Ltd................................... 1,137,314
155,000 CSR Ltd................................. 447,282
294,669 News Corporation Ltd.................... 2,404,994
512,844 Pasminco Limited........................ 390,620
164,056 WMC Limited............................. 493,733
-------------
6,210,655
-------------
BRAZIL -- 0.5%
1,145,900 Banco Itau SA........................... 648,936
6,449,400 Cia Brasileiro Distribution............. 141,076
2,276,000 Petroleo Brasileiro..................... 423,082
-------------
1,213,094
-------------
CANADA -- 0.1%
9,600 Canadian National Railway Company....... 510,000
-------------
CHILE -- 0.1%
13,200 Cia Telecom Chile ADR................... 268,125
-------------
DENMARK -- 1.4%
11,530 Novov-Nordisk A/S - B Shares............ 1,589,416
21,880 UniDanmark A/S - A Shares (Reg.)........ 1,966,236
-------------
3,555,652
-------------
FINLAND -- 1.3%
95,700 Metsa-Serla - B Shares.................. 924,471
22,870 Nokia OYJ Class A Shares................ 1,681,959
9,600 Nokia Corp. - Sponsored ADR............. 696,600
-------------
3,303,030
-------------
FRANCE -- 10.1%
6,296 AGF-Assurance Generale de France........ 356,244
15,790 Alcatel Alsthom......................... 3,214,918
483 Allianz Bcvg Warrant.................... 2,808
1,727 Assurance Generale**.................... 97,718
19,180 Axa-UAP................................. 2,157,184
35,490 Banque Nationale de Paris**............. 2,899,764
560 Carrefour Supermarche................... 354,282
8,767 Compagnie de Saint Gobain............... 1,625,497
16,890 Elf Aquitaine........................... 2,374,533
39,690 Michelin................................ 2,291,059
32,351 Rhone-Poulenc - A Shares................ 1,824,617
14,657 Societe Generale - A.................... 3,047,264
15,679 Total S.A. - B Shares................... 2,038,312
20,240 Vivendi................................. 4,321,818
-------------
26,606,018
-------------
GERMANY -- 9.1%
3,770 Adidas AG............................... 651,644
99,790 Bayer AG................................ 5,146,966
45,330 Dresdner Bank AG........................ 2,443,504
14,150 Henkel AG............................... 1,407,134
40,860 Hoechst AG.............................. 2,039,566
6,760 Hornbach Holding AG..................... 619,811
3,415 Karstadt AG............................. 1,649,763
4,900 M.A.N. AG............................... 1,905,670
23,100 Mannesmann AG........................... 2,343,230
*21,070 Metallgesellschaft AG................... 431,897
<CAPTION>
SHARES MARKET
- ----------------- VALUE
-------------
<C> <S> <C>
GERMANY -- (CONTINUED)
900 Sap AG.................................. $ 545,973
2,150 Sap AG-Vorzug........................... 1,461,496
26,100 Siemans AG.............................. 1,587,659
27,190 Veba AG................................. 1,852,801
-------------
24,087,114
-------------
HONG KONG -- 0.3%
*138,000 Cheung Kong Holdings Ltd................ 678,550
-------------
INDIA -- 0.6%
548,100 Cervejaria Brahma....................... 339,065
14,543,712 Cia Energetica Minas.................... 450,165
5,949,900 Telecomun Brasileiras SA................ 655,894
-------------
1,445,124
-------------
IRELAND -- 0.3%
237,184 Smurfit (Jefferson) Group............... 714,314
-------------
ITALY -- 1.0%
16,800 Gucci Group NV.......................... 890,400
223,344 Telecom Italia S.p.A.................... 1,644,095
-------------
2,534,495
-------------
JAPAN -- 5.9%
10,900 Advantest Corp.......................... 585,898
28,000 Dai Nippon Printing..................... 446,878
167,000 Daiwa Securities, Inc................... 718,370
37,000 Fuji Machine Manufacturing Company...... 981,085
45,000 Fuji Photo Film Co...................... 1,566,091
68,000 Jusco Co. Ltd........................... 1,246,964
23,000 Kao Corp................................ 354,649
13,000 Mabuchi Motor Co., Ltd.................. 824,296
22,600 Matsumotokiyoshi........................ 794,667
55,000 Matsushita Electric Industrial Co....... 883,740
1,390 Nippon Telegraph & Tel.................. 1,151,781
73,000 Olympus Optical......................... 634,348
*8,000 Rohm Company Limited.................... 821,414
57,000 Sanwa Bank Ltd.......................... 509,687
1,400 Shohkoh Fund............................ 343,985
23,800 Sony Corporation........................ 2,049,284
500 Square Co. Ltd.......................... 13,329
282,000 Toshiba Corporation..................... 1,152,098
12,400 Uni-Charm Corporation................... 459,242
-------------
15,537,806
-------------
MEXICO -- 1.2%
227,600 Coca Cola Femsa SA Series L............. 399,316
201,800 Grupo Financiero Banamex................ 383,329
27,200 Grupo Televisa SA....................... 513,536
204,200 Kimberly-Clark de Mexico SA de CV Class
A..................................... 711,053
22,400 Telefonos de Mexico S.A. - ADR.......... 1,076,600
-------------
3,083,916
-------------
NETHERLANDS -- 4.7%
43,591 ING Groep NV............................ 2,854,320
28,370 Kon KNP NV.............................. 1,802,985
44,100 Philips Electronics NV.................. 3,707,117
14,800 Royal Dutch Petroleum Co................ 811,225
39,600 Unilever NV-CVA......................... 3,141,957
-------------
12,317,604
-------------
NEW ZEALAND -- 0.1%
9,600 Telecom Corp. New Zealand Ltd. ADR...... 314,400
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-27
<PAGE>
HARTFORD INTERNATIONAL ADVISERS HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET
- ----------------- VALUE
-------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
NEW ZEALAND -- (CONTINUED)
35,200 Telecom Corp. New Zealand Ltd........... $ 75,280
-------------
389,680
-------------
NORWAY -- 0.3%
46,000 Saga Petroleum AS Class A Shares........ 707,365
-------------
PHILIPPINES -- 0.1%
309,600 Ayala Land, Inc......................... 89,093
71,500 Manila Electric Company, Class B........ 188,608
-------------
277,701
-------------
SINGAPORE -- 0.2%
230,000 Overseas Union Bank (Foreign Reg)....... 503,704
-------------
SOUTH AFRICA -- 0.0%
3,500 De Beers - Centenary.................... 61,918
-------------
SPAIN -- 2.2%
6,925 Banco Popular Espanol................... 591,671
31,200 Banco Santander S.A..................... 799,921
73,400 Endesa S.A.............................. 1,608,576
20,027 Telefonica de Espana S.A. - ADR......... 2,785,004
-------------
5,785,172
-------------
SWEDEN -- 2.1%
231,160 Nordbanken Holding AB................... 1,695,667
19,160 Pharmacia & Upjohn ADR.................. 881,726
16,200 Sparbanken Sverige AB-A Shares.......... 487,526
80,160 Volvo AB................................ 2,387,225
-------------
5,452,144
-------------
SWITZERLAND -- 3.0%
380 Cie Financ Richemont.................... 497,293
9,400 Credit Suisse Group..................... 2,091,559
2,350 Holderbank Financial Glarus B........... 2,990,155
1,105 Nestle S.A. (Reg)....................... 2,364,717
-------------
7,943,724
-------------
THAILAND -- 0.0%
58,600 Bangkok Bank............................ 72,037
-------------
UNITED KINGDOM -- 12.2%
138,072 Allied Irish Banks PLC.................. 1,996,185
144,700 B.A.T. Industries PLC................... 1,444,971
88,932 Bass PLC................................ 1,661,810
42,850 BOC Group PLC........................... 584,831
168,939 British Petroleum Co. PLC............... 2,459,359
114,400 British Telecom Co. PLC................. 1,407,715
92,175 BTR..................................... 261,834
157,900 Compass Group PLC....................... 1,817,849
20,369 Cookson Group PLC....................... 70,010
149,394 Diageo PLC.............................. 1,778,500
26,300 Granada Group PLC....................... 484,452
114,700 Great Universal Stores.................. 1,512,836
69,400 HSBC Holdings PLC....................... 1,761,227
63,800 Lloyds TSB Group PLC.................... 890,990
66,600 Marks & Spencer PLC..................... 607,838
55,400 Next PLC................................ 476,964
85,672 PowerGen PLC............................ 1,186,434
104,720 Reckitt & Colman PLC.................... 1,998,860
83,169 Royal & Sun Alliance Insurance Group.... 848,559
48,400 Royal Bank of Scotland Group............ 839,049
<CAPTION>
SHARES MARKET
- ----------------- VALUE
-------------
<C> <S> <C>
UNITED KINGDOM -- (CONTINUED)
38,500 Siebe PLC............................... $ 770,205
262,062 SmithKline Beecham...................... 3,189,745
79,100 Standard Chartered PLC.................. 898,113
243,400 WPP Group PLC........................... 1,602,117
32,200 Zeneca Group PLC........................ 1,383,438
-------------
31,933,891
-------------
Total common stocks..................... $ 155,705,345
-------------
-------------
<CAPTION>
PRINCIPAL
AMOUNT
- -----------------
<C> <S> <C>
CORPORATE NOTES -- 0.5%
INDUSTRIAL
Sara Lee Corporation
$ 1,400,000 4.75% due 10/22/98.................... $ 1,397,425
-------------
-------------
FOREIGN CORPORATE BONDS -- 0.8%
GERMANY -- 0.4%
Cades
1,950,000 5.12% due 10/25/08.................... $ 1,092,465
-------------
LUXEMBOURG -- 0.1%
Electricite de France
32,000,000 4.75% due 12/05/01.................... 259,340
-------------
UNITED KINGDOM -- 0.3%
Hyder PLC
450,000 8.75% due 07/17/06.................... 832,297
-------------
Total foreign corporate bonds........... $ 2,184,102
-------------
-------------
FOREIGN GOVERNMENT BONDS -- 26.2%
AUSTRALIA -- 2.4%
Australia Commonwealth
4,210,000 9.75% due 08/15/02.................... $ 2,990,787
Australia Commonwealth
3,950,000 10.00% due 10/15/07................... 3,223,400
-------------
6,214,187
-------------
CANADA -- 1.7%
Canada Government
2,870,000 7.00% due 12/01/06.................... 2,166,734
Canada Government
250,000 8.00% due 09/01/27.................... 230,772
Canada Government
2,800,000 7.50% due 03/01/01.................... 2,005,432
-------------
4,402,938
-------------
DENMARK -- 3.4%
Denmark Bullet
46,000,000 9.00% due 11/15/00.................... 7,367,208
Denmark Bullet
3,000,000 7.00% due 12/15/04.................... 488,584
Denmark Kingdom
6,000,000 7.00% due 11/10/24.................... 1,058,569
-------------
8,914,361
-------------
FRANCE -- 0.9%
France O.A.T.
1,600,000 8.50% due 04/25/03.................... 310,815
France O.A.T.
10,000,000 6.00% due 10/25/25.................... 1,797,874
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-28
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------------- -------------
<C> <S> <C>
FOREIGN GOVERNMENT BONDS -- (CONTINUED)
FRANCE -- (CONTINUED)
Quebec Province
$ 1,660,000 6.88% due 04/22/04.................... $ 302,702
-------------
2,411,391
-------------
GERMANY -- 5.0%
Deutsche Hypbk Frankfurt
1,500,000 4.50% due 03/23/02.................... 832,089
Deutschland Republic
7,800,000 6.25% due 01/04/24.................... 4,870,046
Deutschland Republic
10,450,000 6.88% due 05/12/05.................... 6,536,771
Republic of Slovenia
1,500,000 5.75% due 06/16/04.................... 856,458
-------------
13,095,364
-------------
ITALY -- 3.5%
Italy BTPS
4,600,000,000 6.00% due 01/01/07.................... 2,775,190
Italy BTPS
10,900,000,000 6.25% due 03/01/02.................... 6,470,523
-------------
9,245,713
-------------
JAPAN -- 1.7%
Italy Republic
240,000,000 5.00% due 02/15/04.................... 2,118,384
Japan Government
110,000,000 6.60% due 09/20/11.................... 1,228,915
Nippon Tel & Tel
108,000,000 2.50% due 07/25/07.................... 821,954
Republic of Austria
50,000,000 6.25% due 10/16/03.................... 454,389
-------------
4,623,642
-------------
NEW ZEALAND -- 1.3%
New Zealand Government
5,910,000 10.00% due 08/15/02................... 3,370,251
-------------
PORTUGAL -- 0.3%
Portugal Republic
90,000,000 4.50% due 08/15/02.................... 730,761
-------------
SPAIN -- 1.0%
Spanish Government
395,000,000 0.00% due 01/31/03.................... 2,651,394
-------------
SWEDEN -- 0.5%
1034 Sweden
7,500,000 9.00% due 04/20/09.................... 1,251,346
-------------
UNITED KINGDOM -- 4.5%
FFRESH MB 1-A2
580,467 11.13% due 10/05/58................... 1,389,131
Iceland Republic
381,000 8.75% due 05/12/03.................... 681,787
Japan Finance Municipal
590,000 8.38% due 12/07/06.................... 1,093,932
U.K. Treasury Gilt
950,000 8.75% due 08/25/17.................... 2,144,311
U.K. Treasury Gilt
1,200,000 6.75% due 01/26/04.................... 2,070,402
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------------- -------------
<C> <S> <C>
UNITED KINGDOM -- (CONTINUED)
U.K. Treasury Gilt
$ 2,350,000 7.75% due 09/08/06.................... $ 4,354,738
-------------
11,734,301
-------------
Total foreign government bonds.......... $ 68,645,649
-------------
-------------
U.S. TREASURY AND FEDERAL AGENCIES -- 0.8%
U.S. TREASURY NOTES -- 0.5%
1,300,000 5.875 due 07/31/99...................... 1,304,469
-------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- 0.3%
FNMA Series 1993-1998
216,943 5.25% due 11/25/14.................... $ 216,146
FNMA Global Medium Term Note
820,000 6.50% due 07/10/02.................... 523,011
-------------
739,157
-------------
Total U.S. treasuries and federal
agencies.............................. $ 2,043,626
-------------
-------------
SHORT-TERM SECURITIES -- 12.5%
CERTIFICATE OF DEPOSIT -- 3.3%
Bank of Nova Scotia-NY
700,000 5.89% due 09/16/98.................... $ 699,916
Bankers Trust Corporation
1,700,000 5.97% due 10/27/98.................... 1,700,378
Canadian Imperial Bank-NY
1,700,000 5.74% due 08/31/99.................... 1,699,269
Canadian Imperial Bank of Commerce
1,500,000 5.55% due 12/10/99.................... 1,498,911
Credit Agricole USA
1,500,000 5.70% due 03/02/99.................... 1,499,615
Deutsche Bank NY
1,500,000 5.70% due 04/06/99.................... 1,499,450
-------------
8,597,539
-------------
NON CONVERTIBLE-CORPORATE NOTES -- 0.3%
Westpac Capital Corporation
750,000 6.00% due 12/11/98.................... 750,000
REPURCHASE AGREEMENT -- 8.9%
23,335,000 Interest in $1,111,215,000 joint
repurchase agreement with State Street
Bank dated 06/30/98 at 5.80%, to be
repurchased at $23,338,760 on July 1,
1998; (collateralized by $421,318,000
U.S. Treasury Notes 5.75%-7.825% due
05/15/99-11/15/04, 563,474,000 U.S.
Treasury Bonds 8.00%-11.25% due
02/15/15-8/15/25, 121,000,000 U.S.
Treasury Strips (principal) 0% due
08/15/04-08/15/07 and 5,423,000 U.S.
Treasury Bills 0% due 08/13/98)....... 23,335,000
-------------
Total short-term securities............. $ 32,682,539
-------------
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-29
<PAGE>
HARTFORD INTERNATIONAL ADVISERS HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
VALUE
--------------
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $138,965,741)...... 59.4% $ 155,705,345
Total corporate bonds and notes (cost
$1,394,964)................................ 0.5 1,397,425
Total foreign corporate bonds (cost
$2,232,419)................................ 0.8 2,184,102
Total foreign government bonds (cost
$68,047,610)............................... 26.2 68,645,649
Total U.S. treasuries & federal agencies
(cost $2,130,147).......................... 0.8 2,043,626
Total short-term securities (cost
$32,682,539)............................... 12.5 32,682,539
------ --------------
Total investment in securities (total cost
$245,453,420).............................. 100.2 262,658,686
Excess of liabilities over cash, receivables
and other assets........................... (0.2) (537,658)
------ --------------
Net assets (applicable to $1.15 per share
based on 228,360,278 shares outstanding)... 100.0% $ 262,121,028
------ --------------
------ --------------
<CAPTION>
MARKET
VALUE
--------------
<S> <C> <C>
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; 750,000,000
shares authorized; 228,360,278 shares
outstanding........................................ $ 22,836,028
Capital surplus...................................... 237,378,401
Distribution in excess of net investment income...... (19,561,099)
Accumulated undistributed net realized gain on
investments........................................ 3,907,458
Unrealized appreciation of investments............... 17,205,266
Unrealized depreciation of futures contracts***...... (95,111)
Unrealized appreciation on forward foreign currency
contracts (note 2)................................. 563,794
Unrealized depreciation on translation of other
assets and liabilities in forward foreign
currencies......................................... (113,709)
--------------
Net assets, applicable to shares outstanding......... $ 262,121,028
--------------
--------------
</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 June 30, 1998,
the market value of these securities amounted to $4,334,194 or 1.6% of net
assets.
*** The Fund had 8 September TSE 10 year JGB Index futures contracts open at
June 30, 1998. These contracts had a market value of $95,111 at June 30,
1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-30
<PAGE>
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING AT JUNE 30, 1998
<TABLE>
<CAPTION>
UNREALIZED
TOTAL AGGREGATE DELIVERY APPRECIATION
DESCRIPTION MARKET VALUE FACE VALUE DATE (DEPRECIATION)
- ------------------------------ ------------ ---------- --------- -------------
<S> <C> <C> <C> <C>
Australian Dollar (Sell) $3,759,138 $3,784,005 08/31/98 $ 24,867
Australian Dollar (Sell) 2,975,468 2,825,365 08/31/98 (150,103)
British Pounds (Buy) 189,429 189,764 09/01/98 336
British Pounds (Sell) 1,513,312 1,499,521 08/18/98 (13,791)
British Pounds (Sell) 1,496,682 1,503,000 08/18/98 6,318
British Pounds (Sell) 12,179,924 11,947,900 08/18/98 (232,024)
British Pounds (Sell) 199,398 197,664 09/01/98 (1,734)
British Pounds (Sell) 372,211 363,328 09/01/98 (8,883)
Canadian Dollar (Buy) 1,691,217 1,707,107 08/04/98 (15,891)
Canadian Dollar (Buy) 1,760,933 1,776,325 08/31/98 (15,392)
Canadian Dollar (Buy) 947,670 958,592 08/31/98 (10,922)
Canadian Dollar (Buy) 251,075 253,269 08/31/98 (2,195)
Canadian Dollar (Sell) 5,352,391 5,410,345 08/31/98 57,953
Canadian Dollar (Sell) 2,013,372 2,010,218 08/31/98 (3,154)
Danish Krone (Sell) 2,389,896 2,442,708 08/31/98 52,812
French Franc (Sell) 2,387,167 2,442,881 09/01/98 55,714
French Franc (Sell) 7,939,896 7,901,049 01/04/99 (38,847)
German Deutschemark (Buy) 753,212 760,201 07/20/98 (6,989)
German Deutschemark (Buy) 6,516,305 6,639,648 09/11/98 (123,343)
German Deutschemark (Buy) 2,166,334 2,211,517 08/31/98 (45,183)
German Deutschemark (Buy) 273,874 279,004 09/11/98 (5,130)
German Deutschemark (Buy) 2,705,419 2,728,230 08/31/98 (22,811)
German Deutschemark (Buy) 7,943,873 7,903,665 01/04/99 40,208
German Deutschemark (Sell) 470,758 476,377 07/20/98 5,620
German Deutschemark (Sell) 282,455 287,324 07/20/98 4,869
German Deutschemark (Sell) 1,240,585 1,262,875 07/20/98 22,291
German Deutschemark (Sell) 825,210 838,723 07/20/98 13,513
German Deutschemark (Sell) 1,604,370 1,634,463 08/12/98 30,093
German Deutschemark (Sell) 3,850,377 3,929,481 08/12/98 79,104
German Deutschemark (Sell) 1,078,638 1,089,026 08/12/98 10,388
German Deutschemark (Sell) 2,771,305 2,790,253 08/20/98 18,948
German Deutschemark (Sell) 18,394,404 18,828,102 08/31/98 433,699
German Deutschemark (Sell) 494,115 502,116 08/31/98 8,001
German Deutschemark (Sell) 227,626 226,952 08/31/98 (674)
German Deutschemark (Sell) 1,388,812 1,397,280 09/11/98 8,469
Italian Lira (Sell) 6,442,441 6,578,471 08/31/98 136,030
Japanese Yen (Sell) 4,464,013 4,515,660 08/31/98 51,647
New Zealand Dollar (Buy) 1,764,160 1,860,480 09/18/98 (96,320)
New Zealand Dollar (Buy) 799,546 793,135 09/18/98 6,411
New Zealand Dollar (Buy) 1,989,896 2,140,602 09/28/98 (150,706)
Spanish Pesetas (Sell) 2,639,787 2,697,764 08/31/98 57,977
Swedish Krona (Buy) 1,217,439 1,260,635 07/20/98 (43,196)
Swedish Krona (Buy) 811,125 837,367 07/20/98 (26,242)
Swedish Krona (Sell) 1,233,638 1,276,963 08/31/98 43,325
Swiss Franc (Buy) 1,379,859 1,402,203 09/11/98 (22,344)
Swiss Franc (Sell) 6,325,461 6,739,468 09/11/98 414,007
Swiss Franc (Sell) 265,927 282,996 09/11/98 17,069
-------------
$ 563,794
-------------
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-31
<PAGE>
HARTFORD SMALL COMPANY HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ----------- -------------
<C> <S> <C>
COMMON STOCKS -- 92.3%
BUSINESS SERVICES -- 5.0%
*55,845 Aztec Technology Partners............... $ 425,819
*103,400 Getty Images, Inc....................... 2,300,650
*25,800 Iron Mountain, Inc...................... 1,154,550
*199,223 Navigant International Inc.............. 1,693,392
1 School Specialty Inc.................... 17
95,000 Select Appointments Holdings-ADR........ 2,802,500
*69,807 U.S. Office Products Company............ 1,361,226
*37,230 Workflow Management Inc................. 300,167
*135,700 Young & Rubicam Inc..................... 4,342,400
-------------
14,380,721
-------------
COMMUNICATIONS EQUIPMENT -- 4.5%
*48,400 Cellstar Corporation.................... 626,175
137,000 ECI Telecommunications.................. 5,188,875
*215,500 Innova Corp. Wash....................... 1,104,437
*130,000 RCN Corporation......................... 2,518,750
*131,300 Transwitch Corp......................... 1,805,375
*47,600 Verisign Inc............................ 1,779,050
-------------
13,022,662
-------------
COMPUTER & OFFICE EQUIPMENT -- 3.0%
*106,600 Seagate Technology, Inc................. 2,524,125
100,950 Symbol Technologies, Inc................ 3,810,862
*50,000 Synopsis, Inc........................... 2,287,500
-------------
8,622,487
-------------
CONSUMER NON-DURABLES -- 1.5%
279,000 Stride Rite Corp. (The)................. 4,202,437
-------------
CONSUMER SERVICES -- 2.5%
*100,000 SFX Entertainment Inc. Class A.......... 4,587,500
*114,300 Cheesecake Factory, Inc. (The).......... 2,586,037
-------------
7,173,537
-------------
ELECTRONICS -- 6.0%
*358,600 Cypress Semiconductor Corporation....... 2,980,862
*142,300 Jabil Circuit, Inc...................... 4,704,793
*675,000 Rogers Communications, Inc.............. 6,075,000
*94,700 SCI Systems, Inc........................ 3,563,087
-------------
17,323,742
-------------
ENERGY & SERVICES -- 3.8%
50,100 Coflexip ADR............................ 3,062,362
*78,000 J Ray McDermott SA...................... 3,237,000
*160,000 Marine Drilling Companies, Inc.......... 2,560,000
80,000 Pogo Producing Company.................. 2,010,000
-------------
10,869,362
-------------
FINANCIAL SERVICES -- 13.1%
62,400 Finova Group Inc. (The)................. 3,533,400
*133,200 FIRSTPLUS Financial Group, Inc.......... 4,795,200
*132,500 Golden State Bancorp, Inc............... 3,941,875
*100,000 Heller Financial, Inc................... 3,000,000
*248,100 Imperial Credit Industries, Inc......... 5,830,350
81,800 Jefferies Group Inc..................... 3,353,800
75,000 Legg Mason, Inc......................... 4,317,187
53,000 Long Island Bancorp, Inc................ 3,219,750
66,250 Reinsurance Group of America, Inc....... 3,917,031
<CAPTION>
SHARES MARKET
- ----------- VALUE
-------------
<C> <S> <C>
FINANCIAL SERVICES -- (CONTINUED)
204,200 Rock Financial Corporation.............. $ 2,093,050
-------------
38,001,643
-------------
HEALTH CARE -- 10.8%
*62,000 Agouron Pharmaceuticals, Inc............ 1,879,375
119,000 Allergan, Inc........................... 5,518,625
*142,000 Genzyme Corporation..................... 3,629,875
*36,600 Gilead Sciences, Inc.................... 1,173,487
109,800 Herbalife International, Inc. Class B... 2,264,625
66,750 ICN Pharmaceuticals, Inc................ 3,049,640
*97,500 IDX Systems Corporation................. 4,491,093
*51,000 LAM Research Corporation................ 975,375
*179,400 Magellan Health Services, Inc........... 4,552,275
89,100 Pharmacia & Upjohn, Inc................. 4,109,737
-------------
31,644,107
-------------
INDUSTRIAL MATERIALS -- 0.8%
100,000 Titanium Metals Corporation............. 2,206,250
-------------
MANUFACTURING -- 2.5%
*157,000 Cognex Corporation...................... 2,904,500
*196,000 Covance, Inc............................ 4,410,000
-------------
7,314,500
-------------
MEDIA & SERVICES -- 10.2%
*257,500 ADC Telecommunications, Inc............. 9,406,796
*218,000 American Tower Corp. A.................. 5,436,375
*170,000 Broderbund Software..................... 4,861,687
*148,000 Hearst-Argyle Television Inc............ 5,920,000
*107,000 Lamar Advertising Company............... 3,838,625
-------------
29,463,483
-------------
RETAIL -- 3.8%
*215,000 CompUSA, Inc............................ 3,883,437
29,200 Ethan Allen, Inc........................ 1,458,175
*100,600 Gadzooks Inc............................ 2,772,787
*50,000 Whole Food Market....................... 3,025,000
-------------
11,139,399
-------------
SOFTWARE & SERVICES -- 19.2%
*347,100 Activision Inc.......................... 3,579,468
*4,200 Acxiom Corp............................. 104,737
*14,300 Answerthink Consulting Group............ 307,450
170,000 Broderbund Software..................... 3,878,125
*175,000 Check Point Software Tech............... 5,731,250
52,000 Comverse Technology, Inc................ 2,697,500
*60,000 Inktomi Corp............................ 2,385,000
*60,000 J.D. Edwards & Co....................... 2,576,250
*332,500 Learning Company, Inc. (The)............ 9,850,312
*67,700 Mobius Management Systems, Inc.......... 1,015,500
*208,000 Peerless Systems Corporation............ 4,316,000
*180,000 Pegasystems, Inc........................ 4,882,500
*42,000 PeopleSoft, Inc......................... 1,974,000
*152,400 Policy Management Systems Corp.......... 5,981,700
*146,000 Safeguard Scientifics, Inc.............. 6,086,375
*42,900 Transition Systems, Inc................. 455,812
-------------
55,821,979
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-32
<PAGE>
<TABLE>
<CAPTION>
SHARES MARKET
- ----------- VALUE
-------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
TRANSPORTATION -- 4.1%
*209,000 Atlas Air Inc........................... $ 7,066,812
73,600 Robinson (C.H.) Worldwide, Inc.......... 1,830,800
147,300 Swift Transportation.................... 2,918,381
-------------
11,815,993
-------------
UTILITIES -- 1.5%
*298,500 CulturalAccessWorldwide, Inc............ 2,910,375
*35,000 Snyder Communications................... 1,540,000
-------------
4,450,375
-------------
Total common stocks..................... $267,452,677
-------------
-------------
CONVERTIBLE PREFERRED STOCKS -- 0.1%
CONSUMER SERVICES
*58,060 SGW Holdings Corporation**.............. $ 366,631
-------------
-------------
<CAPTION>
PRINCIPAL
AMOUNT
- -----------
<C> <S> <C>
SHORT-TERM SECURITIES -- 6.8%
REPURCHASE AGREEMENT
$19,647,000 Interest in $1,111,215,000 joint
repurchase agreement with State Street
Bank dated 06/30/98 at 5.8%, to be
repurchased at $19,650,165 on
07/01/98; (collateralized by
$421,318,000 U.S. Treasury Notes
5.75%-7.825% due 05/15/99-11/15/04,
563,474,000 U.S. Treasury Bonds
8.00%-11.125% due 02/15/15-08/15/25,
121,000,000 U.S. Treasury Strips
(principal) 0% due 08/15/04-8/15/07
and 5,423,000 U.S. Treasury Bills 0%
due 08/13/98)......................... $ 19,647,000
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
--------------
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $244,623,153)...... 92.3% $ 267,452,677
Total convertible preferred stocks (cost
$599,992).................................. 0.1 366,631
Total short-term securities (cost
$19,647,000)............................... 6.8 19,647,000
------ --------------
Total investment in securities
(Total cost $264,870,145).................. 99.2 287,466,308
Excess of cash, receivables and other assets
over liabilities........................... 0.8 2,327,836
------ --------------
Net assets................................... 100.0% $ 289,794,144
------ --------------
------ --------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; 750,000,000
shares authorized; 224,924,207 shares
outstanding........................................ $ 22,492,421
Capital surplus...................................... 247,034,320
Distribution in excess of net investment income...... (255,945)
Accumulated net realized loss on investments......... (2,072,815)
Unrealized appreciation of investments............... 22,596,163
--------------
Net assets........................................... $289,794,144
--------------
--------------
Class IA
Net asset value per share ($289,545,195 DIVIDED BY
224,665,861 shares outstanding).................... $1.29
----
----
Class IB
Net asset value per share ($248,949 DIVIDED BY
258,346 shares outstanding)........................ $0.96
----
----
</TABLE>
* Non-income producing during period.
** Restricted security (see Note 2)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-33
<PAGE>
HARTFORD MIDCAP HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
COMMON STOCKS -- 97.3%
AEROSPACE & DEFENSE -- 1.6%
*46,055 Loral Space & Communications Ltd........ $ 1,301,053
------------
BUSINESS SERVICES -- 2.8%
*17,000 Iron Mountain, Inc...................... 760,750
14,500 Select Appointments Hldg-ADR............ 427,750
*36,700 Young & Rubicam Inc..................... 1,174,400
------------
2,362,900
------------
COMMUNICATION EQUIPMENT -- 2.7%
*8,310 Ciena Corporation....................... 578,583
28,002 General Cable Corporation............... 808,557
*12,300 Tellabs, Inc............................ 880,987
------------
2,268,127
------------
COMPUTERS & OFFICE EQUIPMENT -- 2.5%
*29,850 EMC Corporation......................... 1,337,653
*20,725 Xilinx, Inc............................. 704,650
------------
2,042,303
------------
CONSUMER DURABLES -- 4.4%
*44,100 Avis Rent a Car Inc..................... 1,091,475
37,330 Hertz Corporation (The)................. 1,654,185
*40,900 Unova, Inc.............................. 879,350
------------
3,625,010
------------
CONSUMER NON-DURABLES -- 2.9%
5,000 Black & Decker Corporation (The)........ 305,000
38,800 Leggett & Platt......................... 970,000
*39,995 Polo Ralph Lauren Corporation........... 1,119,860
------------
2,394,860
------------
CONSUMER SERVICES -- 6.6%
37,000 Galileo International, Inc.............. 1,667,312
*45,285 Mirage Resorts, Inc..................... 965,136
*18,300 SFX Entertainment Inc.-Class A.......... 839,512
29,700 ServiceMaster Company (The)............. 1,130,456
*16,705 Starbucks Corporation................... 892,673
------------
5,495,089
------------
ELECTRONICS -- 4.4%
*75,760 Analog Devices, Inc..................... 1,860,855
*22,330 Solectron Corporation................... 939,255
20,300 York International Corp................. 884,318
------------
3,684,428
------------
ENERGY & SERVICES -- 2.5%
17,345 Coflexip ADR............................ 1,060,213
*12,040 Western Atlas, Inc...................... 1,021,895
------------
2,082,108
------------
FINANCIAL SERVICES -- 17.7%
30,000 Ace Ltd................................. 1,170,000
20,500 City National Corporation............... 757,218
24,005 Equifax, Inc............................ 871,681
15,430 Finova Group, Inc. (The)................ 873,723
20,400 Franklin Resources, Inc................. 1,101,600
*38,500 Heller Financial, Inc................... 1,155,000
<CAPTION>
SHARES MARKET
- ---------- VALUE
------------
<C> <S> <C>
FINANCIAL SERVICES -- (CONTINUED)
27,896 Legg Mason, Inc......................... $ 1,605,763
12,015 Mercantile Bancorporation, Inc.......... 605,255
28,760 Nationwide Financial Services, Inc...... 1,466,760
10,465 Northern Trust Corporation.............. 797,956
17,231 Old Kent Financial Corporation.......... 619,759
22,705 State Street Corporation................ 1,577,997
30,330 T. Rowe Price Associates, Inc........... 1,139,270
18,000 Unum Corporation........................ 999,000
------------
14,740,982
------------
FOOD, BEVERAGE & TOBACCO -- 1.2%
24,970 Coca-Cola Enterprises, Inc.............. 980,072
------------
HEALTH CARE -- 6.7%
31,435 Biomet, Inc............................. 1,039,319
*23,200 Human Genome Sciences, Inc.............. 827,950
28,865 Service Corporation International....... 1,237,586
*35,300 Sunrise Assisted Living, Inc............ 1,213,437
*39,130 Tenet Healthcare Corporation............ 1,222,812
------------
5,541,104
------------
INDUSTRIAL MATERIALS -- 0.3%
*7,000 Sealed Air.............................. 257,250
------------
MANUFACTURING -- 6.5%
16,445 Avery Dennison Corporation.............. 883,918
*52,610 Covance Inc............................. 1,183,725
22,520 Danaher Corporation..................... 826,202
22,310 Dover Corporation....................... 764,117
28,275 Perkin-Elmer Corporation (The).......... 1,758,351
------------
5,416,313
------------
MEDIA & SERVICES -- 12.5%
*44,000 ADC Telecommunications, Inc............. 1,607,375
*47,900 Amer. Tower Corp.-Cl A.................. 1,194,506
*6,940 Clear Channel Communications, Inc....... 757,327
14,800 Cognizant Corporation................... 932,400
*32,400 Intermedia Communications, Inc.......... 1,358,775
*30,800 Lamar Advertising Company............... 1,104,950
*63,412 Outdoor Systems, Inc.................... 1,775,536
11,00 Scripps EW Co........................... 602,937
38,230 Stewart Enterprises, Inc................ 1,017,873
------------
10,351,679
------------
RETAIL -- 8.9%
21,000 American Greetings Corporation.......... 1,069,687
*47,020 Borders Group, Inc...................... 1,739,740
33,110 CVS Corporation......................... 1,289,220
*23,300 Consolidated Stores Corp................ 844,625
*23,800 Papa John's International, Inc.......... 938,612
*51,750 Staples, Inc,........................... 1,497,515
------------
7,379,399
------------
SOFTWARE & SERVICES -- 11.7%
*11,320 America Online, Inc..................... 1,199,920
*16,900 BMC Software, Inc....................... 877,743
*31,800 Bisys Group, Inc. (The)................. 1,303,800
*18,355 Ceridian Corporation.................... 1,078,356
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-34
<PAGE>
<TABLE>
<CAPTION>
SHARES MARKET
- ---------- VALUE
------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
SOFTWARE & SERVICES -- (CONTINUED)
*20,470 Computer Sciences Corporation........... $ 1,310,080
*14,400 DST Systems, Inc........................ 806,400
*7,000 Intuit, Inc............................. 428,750
*23,180 PeopleSoft, Inc......................... 1,089,460
*30,200 Policy Management Systems Corporation... 1,185,350
*3,000 Yahoo................................... 472,500
------------
9,752,359
------------
TRANSPORTATION -- 1.4%
27,613 Southwest Airlines Co................... 818,020
*24,100 Virgin Express Holdings ADR............. 311,793
------------
1,129,813
------------
Total common stocks..................... $ 80,804,849
------------
------------
<CAPTION>
PRINCIPAL
AMOUNT
- ----------
<C> <S> <C>
SHORT-TERM SECURITIES -- 3.7%
REPURCHASE AGREEMENT
$3,112,000 Interest in $1,111,215,000 joint
repurchase agreement with State Street
Bank dated 06/30/98 at 5.8%, to be
repurchased at $3,112,501 on 07/01/98;
(collateralized by $421,318,000 U.S.
Treasury Notes 5.75%-7.825% due
05/15/99-11/15/04, 563,474,000 U.S.
Treasury Bonds 8.00%-11.125% due
02/15/15-08/15/25, 121,000,000 U.S.
Treasury Strips (principal) 0% due
08/15/04-8/15/07 and 5,423,000 U.S.
Treasury Bills 0% due 08/13/98)....... $ 3,112,000
------------
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
-----------
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $72,294,615)....... 97.3% $80,804,849
Total short-term securities (cost
$3,112,000)................................ 3.7 3,112,000
------ -----------
Total investment in securities (total cost
$75,406,615)............................... 101.0 83,916,849
Excess of liabilities over cash, receivables
and other assets........................... (1.0) (844,810)
------ -----------
Net assets (applicable to $1.34 per share
based on 62,094,060 shares outstanding).... 100.0% $83,072,039
------ -----------
------ -----------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share; 750,000,000
shares authorized; 62,094,060 shares outstanding... $6,209,406
Capital surplus...................................... 67,006,252
Distribution in excess of net investment income...... (54,455)
Accumulated undistributed net realized gain on
investments........................................ 1,400,602
Unrealized appreciation of investments............... 8,510,234
-----------
Net assets, applicable to shares outstanding......... $83,072,039
-----------
-----------
</TABLE>
* Non-income producing during period.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-35
<PAGE>
HARTFORD GROWTH AND INCOME HLS FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET
- -------- VALUE
----------
<C> <S> <C>
COMMON STOCKS -- 93.6%
AEROSPACE & DEFENSE -- 5.2%
500 Lockheed Martin Corporation... $ 52,937
100 Northrop Grumman
Corporation................. 10,312
700 Textron, Inc.................. 50,181
800 United Technologies
Corporation................. 74,000
600 York International
Corporation................. 26,137
----------
213,567
----------
BUSINESS SERVICES -- 0.9%
700 Fluor Corporation............. 35,700
----------
COMMUNICATIONS EQUIPMENT --
3.1%
*700 Cisco Systems, Inc............ 64,443
500 Lucent Technologies, Inc...... 41,593
*300 Tellabs, Inc.................. 21,487
----------
127,523
----------
COMPUTERS & OFFICE EQUIPMENT -- 3.1%
*300 Dell Computer Corporation..... 27,843
*700 EMC Corporation............... 31,368
*200 Gateway 2000, Inc............. 10,125
500 International Business
Machines Corporation........ 57,406
----------
126,742
----------
CONSUMER DURABLES -- 1.8%
1,000 Ford Motor Company............ 59,000
400 ITT Industries, Inc........... 14,950
----------
73,950
----------
CONSUMER NON-DURABLES -- 2.8%
600 Leggett & Platt............... 15,000
1,100 Procter & Gamble Company
(The)....................... 100,168
----------
115,168
----------
ELECTRONICS -- 3.3%
*1,100 Analog Devices, Inc........... 27,018
800 General Electric Company...... 72,800
500 Intel Corporation............. 37,062
----------
136,880
----------
ENERGY & SERVICES -- 5.6%
700 Ashland, Inc.................. 36,137
400 Exxon Corporation............. 28,525
*800 Friede Goldman International,
Inc......................... 23,100
800 Helmerich & Payne, Inc........ 17,800
700 Royal Dutch Petroleum Co...... 38,368
1,600 Sun Company, Inc.............. 62,100
600 Transocean Offshore, Inc...... 26,700
----------
232,730
----------
FINANCIAL SERVICES -- 16.1%
700 Chase Manhattan Corporation
(The)....................... 52,850
500 Citicorp...................... 74,625
900 Federal Home Loan Mortgage
Corporation................. 42,356
1,200 Federal National Mortgage
Association................. 72,900
800 First Chicago NBD
Corporation................. 70,900
1,300 First Union Corporation....... 75,725
<CAPTION>
SHARES MARKET
- -------- VALUE
----------
<C> <S> <C>
FINANCIAL SERVICES --
(CONTINUED)
500 Franklin Resources, Inc....... $ 27,000
1,050 Marsh & McLennan Companies,
Inc......................... 63,459
300 Merrill Lynch & Co., Inc...... 27,675
300 NAC Re Corp................... 16,012
200 Reinsurance Group of America,
Inc......................... 11,825
1,400 Travelers Group, Inc.......... 84,875
900 U.S. Bancorp.................. 38,700
----------
658,902
----------
FOOD, BEVERAGE & TOBACCO --
6.1%
800 Coca-Cola Company (The)....... 68,400
900 H.J. Heinz Company............ 50,512
700 Interstate Bakeries........... 23,231
1,200 Philip Morris Companies,
Inc......................... 47,250
800 Unilever N.V.-New York
Shares...................... 63,150
----------
252,543
----------
HEALTH CARE -- 14.5%
2,300 Abbott Laboratories........... 94,012
*800 Amgen, Inc.................... 52,300
500 Baxter International, Inc..... 26,906
500 Bergen Brunswig Corporation... 23,187
1,900 Columbia/HCA Healthcare
Corporation................. 55,337
*1,300 Genzyme Corporation........... 33,231
1,100 Johnson & Johnson............. 81,125
300 Life Technologies, Inc........ 9,412
500 Loews Corporation............. 43,562
600 Mallinckrodt, Inc............. 17,812
600 Pfizer, Inc................... 65,212
500 Pharmacia & Upjohn, Inc....... 23,062
*700 Tenet Healthcare
Corporation................. 21,875
700 Warner-Lambert Company........ 48,562
----------
595,595
----------
INDUSTRIAL MATERIALS -- 3.0%
1,100 Air Products and Chemicals,
Inc......................... 44,000
1,200 Engelhard Corporation......... 24,300
500 Georgia-Pacific Corporation... 29,468
500 Temple-Inland, Inc............ 26,937
----------
124,705
----------
MANUFACTURING -- 2.6%
1,100 Deere & Company............... 58,162
400 Dover Corporation............. 13,700
300 Honeywell, Inc................ 25,068
200 Ingersoll-Rand Company........ 8,812
----------
105,742
----------
MEDIA & SERVICES -- 1.5%
*400 360 Communications Company.... 12,800
700 Gannett Co., Inc.............. 49,743
----------
62,543
----------
REAL ESTATE -- 0.7%
600 Starwood Hotels & Resorts..... 28,987
----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-36
<PAGE>
<TABLE>
<CAPTION>
SHARES MARKET
- -------- VALUE
----------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
RETAIL -- 7.5%
700 American Greetings
Corporation................. $ 35,680
600 Dayton Hudson Corporation..... 29,100
400 Gap, Inc...................... 24,650
700 Home Depot, Inc. (The)........ 58,143
700 May Department Stores Company
(The)....................... 45,850
700 Rite Aid Corporation.......... 26,293
1,500 Wal-Mart Stores, Inc.......... 91,125
----------
310,841
----------
SOFTWARE & SERVICES -- 6.2%
200 BMC Software, Inc............. 10,387
*500 Bisys Group, Inc. (The)....... 20,500
*600 Computer Sciences
Corporation................. 38,400
*1,600 Microsoft Corporation......... 173,400
*500 Sterling Software, Inc........ 14,781
----------
257,468
----------
TRANSPORTATION -- 0.9%
300 Delta Air Lines, Inc.......... 38,775
----------
UTILITIES -- 8.7%
500 Ameritech Corporation......... 22,437
800 AT&T Corp..................... 45,700
1,400 Bell Atlantic Corporation..... 63,875
900 BellSouth Corporation......... 60,412
500 Duke Energy Corporation....... 29,625
600 GPU, Inc...................... 22,687
600 NIPSCO Industries Inc......... 28,000
1,700 SBC Communications Inc........ 68,000
*400 WorldCom, Inc................. 19,375
----------
360,111
----------
Total common stocks........... $3,858,472
----------
----------
<CAPTION>
PRINCIPAL MARKET
AMOUNTS VALUE
- -------- ----------
<C> <S> <C>
SHORT-TERM SECURITIES -- 6.9%
REPURCHASE AGREEMENT
$286,000 Interest in $1,111,215,000
joint repurchase agreement
with State Street Bank dated
06/30/98 at 5.8%, to be
repurchased at $286,046 on
July 1 1998; (collateralized
by $421,318,000 U.S.
Treasury Notes 5.75%-7.825%
due 05/15/99-11/15/04,
563,474,000 U.S. Treasury
Bonds 8.00%-11.125% due
02/15/15-08/15/25,
121,000,000 U.S. Treasury
Strips (principal) 0% due
08/15/04-08/15/07 and
5,423,000 U.S. Treasury
Bills 0% due 08/13/98)...... $ 286,000
----------
----------
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $3,716,682)........ 93.6% $ 3,858,472
Total short-term securities (cost
$286,000).................................. 6.9 286,000
------ --------------
Total investment in securities (identified
cost $4,002,682)........................... 100.5 4,144,472
Excess of liabilities over cash, receivables
and other assets........................... (0.5) (20,037)
------ --------------
Net assets................................... 100.0% $ 4,124,435
------ --------------
------ --------------
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share;
3,000,000,000 shares authorized; 3,963,344 shares
outstanding........................................ $ 3,963
Capital surplus...................................... 3,973,812
Accumulated undistributed net investment income...... 4,686
Accumulated undistributed net realized gain on
investments........................................ 184
Unrealized appreciation of investments............... 141,790
--------------
Net assets........................................... $ 4,124,435
--------------
--------------
</TABLE>
<TABLE>
<S> <C>
Class IA
Net asset value per share ($4,114,031 DIVIDED BY
3,963,344 shares outstanding)........................ $1.04
-----
-----
Class IB
Net asset value per share ($10,404 DIVIDED BY 10,000
shares outstanding).................................. $1.04
-----
-----
</TABLE>
* Non-income producing during period.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-37
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
HARTFORD HARTFORD HARTFORD HARTFORD
BOND STOCK MONEY MARKET ADVISERS
HLS FUND, INC. HLS FUND, INC. HLS FUND, INC. HLS FUND, INC.
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 42,643 $ 28,738,177 $ -- $ 32,586,326
Interest............... 20,240,938 8,542,816 17,380,996 104,841,974
Less: foreign tax
withheld............. -- (342,374) -- (290,313)
-------------- --------------- -------------- ---------------
Total investment
income............. 20,283,580 36,938,619 17,380,996 137,137,987
-------------- --------------- -------------- ---------------
EXPENSES:
Investment advisory
fees................. 942,060 6,977,733 761,926 19,967,276
Administrative services
fees................. 540,325 4,732,546 533,348 8,043,152
Accounting services.... 13,460 125,826 18,294 223,738
Custodian fees......... 3,966 13,477 2,682 23,217
Board of directors
fees................. 2,259 21,047 3,032 37,241
Distribution fees --
Class IB............. 208 338 55 1,194
Other expenses......... 33,428 190,123 27,773 373,003
-------------- --------------- -------------- ---------------
Total expenses....... 1,535,886 12,061,091 1,347,111 28,668,821
-------------- --------------- -------------- ---------------
Net investment income
(loss)............... 18,747,694 24,877,528 16,033,885 108,469,166
-------------- --------------- -------------- ---------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 5,675,305 255,925,712 6,682 366,321,780
Net realized gain on
futures contracts.... -- -- -- --
Net realized gain
(loss) on forward
foreign currency
contracts............ -- -- -- --
Net realized gain
(loss) on option
contracts............ -- -- -- --
Net realized gain
(loss) on foreign
currency
transactions......... -- 50 -- (24,608)
Net unrealized
appreciation
(depreciation) of
investments.......... 1,580,103 761,083,041 -- 844,715,498
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 on
investments.......... 7,255,408 1,017,014,871 6,682 1,211,046,287
-------------- --------------- -------------- ---------------
Net increase in net
assets resulting from
operations........... $26,003,102 $1,041,892,399 $16,040,567 $1,319,515,453
-------------- --------------- -------------- ---------------
-------------- --------------- -------------- ---------------
* For the period from
inception May 30, 1998
to June 30, 1998.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-38
<PAGE>
<TABLE>
<CAPTION>
HARTFORD HARTFORD HARTFORD HARTFORD HARTFORD
CAPITAL MORTGAGE HARTFORD INTERNATIONAL DIVIDEND AND INTERNATIONAL
APPRECIATION SECURITIES INDEX OPPORTUNITIES GROWTH ADVISERS
HLS FUND, INC. HLS FUND, INC. HLS FUND, INC. HLS FUND, INC. HLS FUND, INC. HLS FUND, INC.
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 25,523,142 $ -- $ 9,766,306 $ 17,050,872 $ 27,985,192 $ 2,352,264
Interest............... 9,795,861 10,918,633 1,242,581 2,825,554 1,829,317 2,805,123
Less: foreign tax
withheld............. (1,041,459) -- (66,129) (1,836,006) (118,240) (288,257)
-------------- -------------- -------------- -------------- -------------- --------------
Total investment
income............. 34,277,543 10,918,633 10,942,758 18,040,420 29,696,270 4,869,130
-------------- -------------- -------------- -------------- -------------- --------------
EXPENSES:
Investment advisory
fees................. 11,630,782 406,513 1,336,745 2,924,303 5,451,464 666,244
Administrative services
fees................. 4,610,479 284,559 1,169,651 1,025,458 2,066,054 202,855
Accounting services.... 137,486 8,455 28,790 34,804 44,551 5,162
Custodian fees......... 26,839 8,207 11,620 352,237 5,730 90,200
Board of directors
fees................. 23,020 1,377 4,838 5,776 7,743 863
Distribution fees --
Class IB............. 330 -- -- 45 526 --
Other expenses......... 209,045 30,903 52,313 81,032 72,450 12,660
-------------- -------------- -------------- -------------- -------------- --------------
Total expenses....... 16,637,980 740,013 2,603,957 4,423,654 7,648,519 977,984
-------------- -------------- -------------- -------------- -------------- --------------
Net investment income
(loss)............... 17,639,563 10,178,620 8,338,801 13,616,766 22,047,750 3,891,146
-------------- -------------- -------------- -------------- -------------- --------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... 178,046,031 1,941,142 4,488,217 29,466,829 93,164,616 3,076,852
Net realized gain on
futures contracts.... -- -- 4,211,673 10,892,980 -- 2,796,052
Net realized gain
(loss) on forward
foreign currency
contracts............ (24,282) -- -- (1,829,203) -- 2,296,687
Net realized gain
(loss) on option
contracts............ -- 72,442 -- (459,970) -- (53,142)
Net realized gain
(loss) on foreign
currency
transactions......... (765,949) -- -- 174,723 110,232 (1,045,986)
Net unrealized
appreciation
(depreciation) of
investments.......... 382,416,096 (1,397,173) 194,094,619 125,772,727 118,466,425 17,856,562
Net unrealized
appreciation
(depreciation) of
futures contracts.... -- -- 87,507 (420,229) -- (339,066)
Net unrealized
(depreciation)
appreciation of
forward foreign
currency contracts... (532,361) -- -- 339,041 -- (1,376,293)
Net unrealized
(depreciation)
appreciation on
translation of other
assets and
liabilities in
foreign currencies... (17,648) -- -- 12,417 (10,587) (186,174)
Net unrealized
appreciation of
option contracts..... -- 12,149 -- -- (147,198) --
-------------- -------------- -------------- -------------- -------------- --------------
Net realized and
unrealized gain on
investments.......... 559,121,887 628,560 202,882,016 163,949,315 211,583,488 23,025,492
-------------- -------------- -------------- -------------- -------------- --------------
Net increase in net
assets resulting from
operations........... $576,761,450 $10,807,180 $211,220,817 $177,566,081 $233,631,238 $26,916,638
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
* For the period from
inception May 30, 1998
to June 30, 1998.
<CAPTION>
HARTFORD
HARTFORD HARTFORD GROWTH AND
SMALL COMPANY MIDCAP INCOME
HLS FUND, INC. HLS FUND, INC. HLS FUND*
-------------- -------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 440,731 $ 107,754 $ 2,399
Interest............... 265,961 53,234 2,777
Less: foreign tax
withheld............. (9,524) (872) --
-------------- -------------- --------------
Total investment
income............. 706,692 160,116 5,176
-------------- -------------- --------------
EXPENSES:
Investment advisory
fees................. 713,624 149,869 --
Administrative services
fees................. 218,146 45,612 489
Accounting services.... 1,786 7,000 --
Custodian fees......... 10,909 4,000 --
Board of directors
fees................. 310 2,000 --
Distribution fees --
Class IB............. 38 -- 1
Other expenses......... 17,870 5,551 --
-------------- -------------- --------------
Total expenses....... 962,682 214,032 490
-------------- -------------- --------------
Net investment income
(loss)............... (255,991) (53,915) 4,686
-------------- -------------- --------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions......... (1,151,141) 1,523,015 184
Net realized gain on
futures contracts.... -- -- --
Net realized gain
(loss) on forward
foreign currency
contracts............ -- -- --
Net realized gain
(loss) on option
contracts............ -- -- --
Net realized gain
(loss) on foreign
currency
transactions......... -- -- --
Net unrealized
appreciation
(depreciation) of
investments.......... 21,103,671 6,996,523 141,790
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 on
investments.......... 19,952,531 8,519,538 141,974
-------------- -------------- --------------
Net increase in net
assets resulting from
operations........... $19,696,540 $8,465,623 $146,660
-------------- -------------- --------------
-------------- -------------- --------------
* For the period from
inception May 30, 1998
to June 30, 1998.
</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 SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
HARTFORD HARTFORD HARTFORD HARTFORD
BOND STOCK MONEY MARKET ADVISERS
HLS FUND, INC. HLS FUND, INC. HLS FUND, INC. HLS FUND, INC.
-------------- --------------- -------------- ----------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment
income............... $ 18,747,694 $ 24,877,528 $ 16,033,885 $ 108,469,166
Net realized gain
(loss)............... 5,675,305 255,925,762 6,682 366,297,172
Net unrealized
appreciation
(depreciation) of
investments.......... 1,580,103 761,089,108 -- 844,749,115
-------------- --------------- -------------- ----------------
Net increase (decrease)
in net assets
resulting from
operations........... 26,003,102 1,041,892,399 16,040,567 1,319,515,453
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income
Class IA............. (1,500,000) (1,600,000) (16,033,885) (4,799,999)
Class IB............. -- -- -- --
From net realized gain
on investments
Class IA............. -- (173,700,000) (6,682) (297,100,001)
Class IB............. -- -- -- --
-------------- --------------- -------------- ----------------
Total
distributions...... (1,500,000) (175,300,000) (16,040,567) (301,900,000)
-------------- --------------- -------------- ----------------
CAPITAL SHARE
TRANSACTIONS:
Class IA............. 125,127,802 593,039,877 32,683,154 936,166,883
Class IB............. 1,145,321 2,022,166 387,955 6,161,411
-------------- --------------- -------------- ----------------
Net increase
(decrease) in net
assets resulting
from capital share
transactions....... 126,273,123 595,062,043 33,071,109 942,328,294
-------------- --------------- -------------- ----------------
Total increase in net
assets............. 150,776,225 1,461,654,442 33,071,109 1,959,943,747
NET ASSETS:
Beginning of period.... 552,869,797 4,713,321,561 612,480,218 8,283,911,901
-------------- --------------- -------------- ----------------
End of period.......... $703,646,022 $6,174,976,003 $645,551,327 $10,243,855,648
-------------- --------------- -------------- ----------------
-------------- --------------- -------------- ----------------
* For the period from
inception May 30, 1998
to June 30, 1998.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-40
<PAGE>
<TABLE>
<CAPTION>
HARTFORD HARTFORD HARTFORD HARTFORD HARTFORD
CAPITAL MORTGAGE HARTFORD INTERNATIONAL DIVIDEND AND INTERNATIONAL
APPRECIATION SECURITIES INDEX OPPORTUNITIES GROWTH ADVISERS
HLS FUND, INC. HLS FUND, INC. HLS FUND, INC. HLS FUND, INC. HLS FUND, INC. HLS FUND, INC.
--------------- -------------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income............... $ 17,639,563 $ 10,178,620 $ 8,338,801 $ 13,616,766 $ 22,047,750 $ 3,891,146
Net realized gain
(loss)............... 177,255,800 2,013,584 8,699,890 38,245,359 93,274,848 7,070,463
Net unrealized
appreciation
(depreciation) of
investments.......... 381,866,087 (1,385,024) 194,182,126 125,703,956 118,308,640 15,955,029
--------------- -------------- --------------- --------------- --------------- --------------
Net increase (decrease)
in net assets
resulting from
operations........... 576,761,450 10,807,180 211,220,817 177,566,081 233,631,238 26,916,638
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income
Class IA............. (1,000,000) (2,200,000) (1,000,000) (650,000) (4,100,000) (24,000,000)
Class IB............. -- -- -- -- -- --
From net realized gain
on investments
Class IA............. (320,000,000) -- (29,600,000) (72,215,057) (76,700,000) (5,712,912)
Class IB............. -- -- -- -- -- --
--------------- -------------- --------------- --------------- --------------- --------------
Total
distributions...... (321,000,000) (2,200,000) (30,600,000) (72,865,057) (80,800,000) (29,712,912)
--------------- -------------- --------------- --------------- --------------- --------------
CAPITAL SHARE
TRANSACTIONS:
Class IA............. 587,700,411 (4,998,550) 242,484,230 58,428,399 532,403,454 57,335,778
Class IB............. 1,844,002 -- -- 283,058 2,808,814 --
--------------- -------------- --------------- --------------- --------------- --------------
Net increase
(decrease) in net
assets resulting
from capital share
transactions....... 589,544,413 (4,998,550) 242,484,230 58,711,457 535,212,268 57,335,778
--------------- -------------- --------------- --------------- --------------- --------------
Total increase in net
assets............. 845,305,863 3,608,630 423,105,047 163,412,481 688,043,506 54,539,504
NET ASSETS:
Beginning of period.... 4,802,992,002 325,701,680 1,123,455,002 1,092,945,600 1,994,653,222 207,581,524
--------------- -------------- --------------- --------------- --------------- --------------
End of period.......... $5,648,297,865 $329,310,310 $1,546,560,049 $1,256,358,081 $2,682,696,728 $262,121,028
--------------- -------------- --------------- --------------- --------------- --------------
--------------- -------------- --------------- --------------- --------------- --------------
* For the period from
inception May 30, 1998
to June 30, 1998.
<CAPTION>
HARTFORD
HARTFORD HARTFORD GROWTH AND
SMALL COMPANY MIDCAP INCOME
HLS FUND, INC. HLS FUND, INC. HLS FUND*
-------------- -------------- --------------
<S> <C> <C> <C>
OPERATIONS:
Net investment
income............... $ (255,991) $ (53,915) $ 4,686
Net realized gain
(loss)............... (1,151,141) 1,523,015 184
Net unrealized
appreciation
(depreciation) of
investments.......... 21,103,671 6,996,523 141,790
-------------- -------------- --------------
Net increase (decrease)
in net assets
resulting from
operations........... 19,696,540 8,465,623 146,660
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income
Class IA............. -- (1,000) --
Class IB............. -- -- --
From net realized gain
on investments
Class IA............. (3,776,000) -- --
Class IB............. -- -- --
-------------- -------------- --------------
Total
distributions...... (3,776,000) (1,000) --
-------------- -------------- --------------
CAPITAL SHARE
TRANSACTIONS:
Class IA............. 62,854,907 47,018,509 3,967,775
Class IB............. 249,263 -- 10,000
-------------- -------------- --------------
Net increase
(decrease) in net
assets resulting
from capital share
transactions....... 63,104,170 47,018,509 3,977,775
-------------- -------------- --------------
Total increase in net
assets............. 79,024,710 55,483,132 4,124,435
NET ASSETS:
Beginning of period.... 210,769,434 27,588,907 --
-------------- -------------- --------------
End of period.......... $280,794,144 $83,072,039 $4,124,435
-------------- -------------- --------------
-------------- -------------- --------------
* For the period from
inception May 30, 1998
to June 30, 1998.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-41
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
HARTFORD HARTFORD HARTFORD HARTFORD
BOND STOCK MONEY MARKET ADVISERS
HLS FUND, INC. HLS FUND, INC. HLS FUND, INC. HLS 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>
* For the period from inception, July 15, 1997, to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-42
<PAGE>
<TABLE>
<CAPTION>
HARTFORD HARTFORD
HARTFORD MORTGAGE HARTFORD INTERNATIONAL HARTFORD
CAPITAL SECURITIES INDEX OPPORTUNITIES HARTFORD INTERNATIONAL
APPRECIATION HLS FUND, HLS FUND, HLS FUND, DIVIDEND AND GROWTH ADVISERS HLS
HLS FUND, INC. INC. INC. INC. HLS 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
HLS FUND, HLS FUND,
INC. 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-43
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (UNAUDITED)
1. ORGANIZATION:
Hartford Bond HLS Fund, Inc., Hartford Stock HLS Fund, Inc., Hartford Money
Market HLS Fund, Inc., Hartford Advisers HLS Fund, Inc., Hartford Capital
Appreciation HLS Fund, Inc., Hartford Mortgage Securities HLS Fund, Inc.,
Hartford Index HLS Fund, Inc., Hartford International Opportunities HLS
Fund, Inc., Hartford Dividend and Growth HLS Fund, Inc., Hartford
International Advisers HLS Fund, Inc., Hartford Small Company HLS Fund,
Inc., Hartford MidCap HLS Fund, Inc., and Hartford Series Fund, Inc.
(comprised of Hartford Growth and Income HLS Fund) (each a "Fund" or
together 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 Hartford Life and Annuity
Insurance Company (collectively, 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 HLS Fund, Inc. Seeks maximum current income consistent with preservation of capital
through investing primarily in high-grade government and corporate bonds
and other debt securities.
Hartford Stock HLS Fund, Inc. Seeks long-term capital growth through investment in a diversified
portfolio of equity securities.
Hartford Money Market HLS Seeks a high level of current income consistent with liquidity and the
Fund, Inc. need for preservation of capital through investment in high-quality
money-market securities.
Hartford Advisers HLS Fund, Seeks maximum long-term total rate of return (capital growth and current
Inc. income) through investment in a varying mix of stocks, bonds and money
market instruments.
Hartford Capital Appreciation Seeks growth of capital through investment in equity securities of
HLS Fund, Inc. companies with high growth potential, including small, medium and large
companies.
Hartford Mortgage Securities Seeks a high level of current income by investing primarily Fund, Inc.in
HLS Fund, Inc. mortgage- backed securities, including securities issued by Government
National Mortgage Association.
Hartford Index HLS 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 growth of capital through investing primarily in foreign equity
Opportunities HLS Fund, Inc. securities issues.
Hartford Dividend and Growth Seeks a high level of current income consistent with growth of capital
HLS Fund, Inc. and moderate investment risk. Primary investments are equity securities
and securities convertible into equity securities that typically have
above average yield.
Hartford International Seeks a long-term total rate of return consistent with moderate risk.
Advisers HLS Fund, Inc. Investments include a mix of debt, equity and money market instruments
primarily with foreign issuers.
Hartford Small Company HLS Seeks growth of capital by investing primarily in equity securities
Fund, Inc. selected on the basis of potential for capital appreciation.
Hartford MidCap HLS Fund, Seeks long term capital growth through capital appreciation by investing
Inc. primarily in equity securities.
Hartford Growth and Income Seeks growth of capital and current income by investing primarily in
HLS Fund equity securities with earnings growth potential and steady or rising
dividends.
</TABLE>
M-44
<PAGE>
Each Fund, with the exception of Hartford Mortgage Securities HLS, Hartford
Index HLS, Hartford International Advisers HLS and Hartford MidCap HLS Funds
are divided into Class IA and IB shares. Each class is offered at net asset
value without a sales charge and is subject to the same expenses except that
the Class IB shares are subject to distribution fees charged pusuant to a
Rule 12-b1 plan. Distribution and Service Plans adopted in accordance with
rule 12b-1 of the Investment Company Act of 1940, as amended.
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.
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 Hartford Money Market HLS 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 are
valued based on market quotations until the remaining days to maturity
become less than 61 days. From such time until maturity, the investments
are valued at amortized cost.
Equity securities are valued at the last sales price reported on 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 and
in the case of certain equity securities traded over-the-counter, 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 TRANSACTIONS--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 portfolio securities and other assets and liabilities at the end
of the reporting period, resulting from changes in the 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
M-45
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
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.
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 at 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. In the absence of a last sale price, the last offering price is
used. 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 excess of cash,
receivables and other assets over liabilities, or excess of liabilities
over cash, receivables and other assets, 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,
receivables and other assets over liabilities or excess of liabilities
over cash, receivables and other assets 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 buy 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 of 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
Funds' 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 each 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 a Fund's shares received prior to the close of the
Exchange on any day on which the Fund is open for business are priced at
the per-share 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 HLS Fund, Inc., Hartford Stock HLS Fund, Inc., Hartford
M-46
<PAGE>
Advisers HLS Fund, Inc., Hartford Capital Appreciation HLS Fund, Inc.,
Hartford Mortgage Securities HLS Fund, Inc., Hartford Index HLS Fund,
Inc., Hartford International Opportunities HLS Fund, Inc., Hartford
Dividend and Growth HLS Fund, Inc., Hartford International Advisers HLS
Fund, Inc., Hartford Small Company HLS Fund, Inc., Hartford MidCap HLS
Fund, Inc. and Hartford Growth and Income HLS Fund is to pay dividends
from net investment income and distribute realized capital gains, if any,
annually.
Hartford Money Market HLS 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 federal 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, losses
deferred due to wash sales and excise tax regulations. Permanent book and
tax basis differences relating to shareholder distributions result in
reclassifications to capital accounts (see Note 7).
i) FORWARD FOREIGN CURRENCY CONTRACTS--As of June 30, 1998, Hartford
Capital Appreciation HLS Fund, Inc. and Hartford International Advisers
HLS Fund, Inc., had entered into forward foreign currency exchange
contracts that obligate the Funds to repurchase/replace or sell
currencies at specified future dates. The Funds enter into forward
foreign currency contracts to hedge against adverse fluctuations in
exchange rates between currencies. The forward foreign currency
contracts' costs are included in excess of cash, receivables and other
assets over liabilities or excess of liabilities over cash, receivables
and other assets, 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 upto 15% of its
net assets in illiquid securities, except for Money Market HLS Fund,
Inc., 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 per share. Each Fund may also purchase certain restricted
securities, commonly known as Rule 144A securities, that can be resold to
institutions and which may be determined to be liquid pursuant to
policies and guidelines established by the Funds' Board of Directors.
At June 30, 1998, 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 HLS Fund,
Inc. SGW Holdings Corporation 8/14/97 $ 11,311,018 $ 6,911,717 .12%
Small Company HLS Fund, Inc. SGW Holdings Corporation 8/14/97 $ 599,992 $ 366,631 .13%
</TABLE>
3. EXPENSES:
a) INVESTMENT MANAGEMENT AND ADVISORY AGREEMENTS--HL Investment Advisors,
Inc. (HL Advisors) an indirect majority-owned subsidiary of The Hartford
Financial Services Group, Inc. (The Hartford), serves as investment
manager to the Funds pursuant to Investment Management Agreements
approved by each Funds' Board of Directors and shareholders.
M-47
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
The schedule below reflects the rates of compensation paid to HL Advisors
for services rendered:
<TABLE>
<CAPTION>
HARTFORD INDEX HLS FUND, INC.
AVERAGE DAILY NET ASSETS ANNUAL RATE
- ------------------------------------ -----------
<S> <C>
All Assets 0.200%
<CAPTION>
HARTFORD MORTGAGE SECURITIES HLS FUND, INC.
AND HARTFORD MONEY MARKET HLS FUND, INC.
AVERAGE DAILY NET ASSETS ANNUAL RATE
- ------------------------------------ -----------
<S> <C>
All Assets 0.250%
<CAPTION>
HARTFORD BOND HLS FUND, INC.
AND HARTFORD STOCK HLS 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 HLS FUND, INC.,
HARTFORD CAPITAL APPRECIATION HLS FUND, INC.,
HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND,
INC.,
HARTFORD DIVIDEND AND GROWTH HLS FUND, INC.,
HARTFORD INTERNATIONAL ADVISERS HLS FUND, INC.,
HARTFORD SMALL COMPANY HLS FUND, INC.,
HARTFORD MIDCAP HLS FUND, INC.,
AND HARTFORD GROWTH AND INCOME HLS FUND
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 investment services agreements between HL Advisors and The
Hartford Investment Management Company (HIMCO), HIMCO provides the
day-to-day investment management services to the Hartford Bond HLS Fund
Inc., Hartford Money Market HLS Fund, Inc., Hartford Mortgage Securities
HLS Fund, Inc. and Hartford Index HLS Fund, Inc. HIMCO is a wholly-owned
subsidiary of The Hartford.
Pursuant to sub-advisory agreements between HL Advisors and Wellington,
Wellington provides the day-to-day investment management services to the
Hartford Stock HLS Fund, Inc., Hartford Advisers HLS Fund, Inc., Hartford
Capital Appreciation HLS Fund, Inc., Hartford International Opportunities
HLS Fund, Inc., Hartford Dividend and Growth HLS Fund, Inc., Hartford
International Advisers HLS Fund, Inc., Hartford Small Company HLS Fund,
Inc., Hartford MidCap HLS Fund, Inc. and Hartford Growth and Income HLS
Fund.
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.
M-48
<PAGE>
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 the Funds. Nonallocable expenses are charged to each fund
based on specific identification.
4. TAX COST AND UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS:
As of June 30, 1998, the aggregate gross unrealized appreciation and
depreciation of all investments, based on cost for federal income tax
purposes, was 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 HLS Fund, Inc......................... $ 640,082,876 $ 20,700,181 $ (3,234,022) $ 17,466,159
Hartford Stock HLS Fund, Inc........................ 3,565,285,158 2,309,946,068 (82,933,412) 2,227,012,656
Hartford Advisers HLS Fund, Inc..................... 7,084,010,541 2,938,731,191 (84,620,547) 2,854,110,644
Hartford Capital Appreciation HLS Fund, Inc......... 4,018,513,601 1,618,350,288 (287,904,760) 1,330,445,528
Hartford Mortgage Securities HLS Fund, Inc.......... 299,109,588 4,900,727 (429,863) 4,470,864
Hartford Index HLS Fund, Inc........................ 1,030,944,139 516,460,414 (24,343,643) 492,116,771
Hartford International Opportunities HLS Fund,
Inc................................................ 21,392,463 22,970,406 (6,810,860) 16,159,546
Hartford Dividend & Growth HLS Fund, Inc............ 2,149,535,648 546,271,712 (55,589,628) 490,682,084
Hartford International Advisers HLS Fund, Inc....... 989,738,016 199,670,006 (39,676,835) 159,993,171
Hartford Small Company HLS Fund, Inc................ 247,799,667 35,584,048 (15,564,392) 20,019,656
Hartford MidCap Fund HLS Fund, Inc.................. 72,620,755 10,573,879 (2,086,304) 8,487,575
Hartford Growth and Income HLS Fund................. 3,716,682 185,534 (43,745) 141,789
</TABLE>
5. AFFILIATE HOLDINGS:
a) HARTFORD MIDCAP HLS FUND, INC.--HL Investment Advisers, Inc. has
ownership of 3,000,000 shares of Hartford MidCap HLS Fund, Inc. and
Hartford Growth and Income HLS Fund representing 4.8% and 75.6%,
respectively of the total outstanding shares of each Fund as of June 30,
1998.
b) As of June 30, 1998, certain HL group pension contracts held direct
interests in shares as follows:
<TABLE>
<CAPTION>
PERCENT OF
FUND SHARES TOTAL SHARES
------------------------------------------------------ ---------- ------------
<S> <C> <C>
Hartford Bond HLS Fund, Inc........................... 4,834,749 .75%
Hartford Money Market HLS Fund Inc.................... 26,217,960 4.06
Hartford Stock HLS Fund, Inc.......................... 4,119,684 .40
Hartford Advisers HLS Fund, Inc....................... 32,874,765 .91
Hartford Capital Appreciation HLS Fund, Inc........... 24,465,579 2.00
Hartford Mortgage Securities HLS Fund, Inc............ 14,757,318 5.00
Hartford Index HLS Fund, Inc.......................... 31,054,910 6.63
Hartford International Opportunities HLS Fund, Inc.... 10,970,561 1.24
Hartford Dividend and Growth HLS Fund, Inc............ 6,985,353 .54
Hartford International Advisers HLS Fund, Inc......... 861,122 .38
</TABLE>
M-49
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
6. INVESTMENT TRANSACTIONS:
For the six months ended June 30, 1998, aggregate purchases and sales of
investment securities (excludes short-term investments) were as follows:
<TABLE>
<CAPTION>
FUND PURCHASE AT COST SALES AT PROCEEDS
------------------------------------------ ----------------- -----------------
<S> <C> <C>
Hartford Bond HLS Fund, Inc............... $ 604,811,366 $ 480,483,193
Hartford Stock HLS Fund, Inc.............. 1,061,924,129 584,944,576
Hartford Advisers HLS Fund, Inc........... 1,689,884,052 1,129,321,894
Hartford Capital Appreciation HLS Fund,
Inc...................................... 1,467,226,627 1,175,448,951
Hartford Mortgage Securities HLS Fund,
Inc...................................... 522,066,013 491,538,609
Hartford Index HLS Fund, Inc.............. 221,385,374 11,710,390
Hartford International Opportunities HLS
Fund, Inc................................ 806,689,764 794,275,013
Hartford Dividend and Growth HLS Fund,
Inc...................................... 963,638,560 502,080,152
Hartford International Advisers HLS Fund,
Inc...................................... 191,512,683 147,785,921
Hartford Small Company HLS Fund, Inc...... 377,046,575 333,516,188
Hartford MidCap HLS Fund, Inc............. 64,904,928 19,485,674
Hartford Growth and Income HLS Fund....... 3,748,209 31,710
</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 per shares of the
Funds and are designed generally to present undistributed income and
realized gains 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
ACCUMULATED UNDISTRIBUTED
UNDISTRIBUTED (DISTRIBUTION
(DISTRIBUTION IN EXCESS OF)
IN EXCESS OF) NET REALIZED
NET INVESTMENT GAIN ON PAID-IN
FUND INCOME INVESTMENTS SURPLUS
- ---------------------------------------------------------------------------- -------------- --------------- --------------
<S> <C> <C> <C>
Hartford Bond HLS Fund, Inc................................................. $ (41,029) $ 41,0290 $ 0
Hartford Stock HLS Fund, Inc................................................ (20,5130) 20,513 0
Hartford Advisers HLS Fund, Inc............................................. 418,269) (418,269) 0
Hartford Capital Appreciation HLS Fund, Inc................................. 6,642,158 (6,642,158) 0
Hartford Mortgage Securities HLS Fund, Inc.................................. (416,537) 416,537 0
Hartford International Opportunities HLS Fund, Inc.......................... (6,758,168) 6,788,167 (29,999)
Hartford Dividend and Growth HLS Fund, Inc.................................. (231,694) 244,530 (12,836)
Hartford International Advisers HLS Fund, Inc............................... 1,257,390 (1,257,390 0
Hartford Small Company HLS Fund, Inc........................................ 7,062 (7,062)
</TABLE>
M-50
<PAGE>
8. CAPITAL SHARE TRANSACTIONS:
The following information is for the period ending June 30, 1998:
<TABLE>
<CAPTION>
HARTFORD BOND HARTFORD STOCK HARTFORD MONEY MARKET HARTFORD ADVISERS
HLS FUND, INC. HLS FUND, INC. HLS FUND, INC. HLS FUND, INC.
---------------------------- ------------------------- -------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS IA
Shares sold...... 140,139,917 $150,096,170 123,604,723 $691,570,261 944,202,743 $944,203,735 267,349,848 $715,446,353
Shares issued on
reinvestment of
distributions... 1,414,284 1,499,999 32,495,236 175,300,001 16,037,426 16,037,426 116,152,059 301,899,991
Shares redeemed.. (24,778,741) (26,468,367) (48,999,001) (273,830,385) (927,558,007) (927,558,007) (30,443,090) (81,179,461)
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
Net Increase..... 116,775,460 $125,127,802 107,100,958 $593,039,877 32,682,162 $ 32,683,154 353,058,817 $936,166,883
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
<CAPTION>
HARTFORD CAPITAL HARTFORD MORTGAGE HARTFORD INTERNATIONAL
APPRECIATION SECURITIES HARTFORD INDEX OPPORTUNITIES
HLS FUND, INC. HLS FUND, INC. HLS FUND, INC. HLS FUND, INC.
---------------------------- ------------------------- -------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS IA
Shares sold...... 176,967,773 $804,422,818 20,770,514 $ 22,806,104 120,404,516 $374,169,681 44,287,452 $ 61,140,228
Shares issued on
reinvestment of
distributions... 71,437,060 320,999,999 2,020,729 2,200,000 10,055,222 30,600,000 55,643,802 72,865,058
Shares redeemed.. (118,636,205) (537,722,406) (27,336,697) (30,004,654) (52,209,028) (162,285,451) (56,783,350) (75,576,887)
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
Net Increase..... 129,768,628 $587,700,411 (4,545,454) (4,998,550) 78,250,710 $242,484,230 43,147,904 $ 58,428,399
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
<CAPTION>
HARTFORD DIVIDEND AND GROWTH HARTFORD INTERNATIONAL HARTFORD SMALL COMPANY HLS HARTFORD MIDCAP
HLS FUND, INC. ADVISERS HLS FUND, INC. FUND, INC. HLS FUND, INC.
---------------------------- ------------------------- -------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS IA
Shares sold...... 227,722,909 $465,719,661 29,357,390 $ 33,656,891 49,403,077 $ 62,836,009 39,285,617 $ 51,925,062
Shares issued on
reinvestment of
distributions... 40,497,356 80,800,000 27,522,863 29,712,912 2,958,223 3,776,000 747 916
Shares redeemed.. (6,874,585) (14,116,207) (5,216,557) (6,034,025) (3,013,593) (3,757,102) (1,455,196) (1,907,469)
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
Net Increase..... 261,345,680 $532,403,454 51,663,696 $ 57,353,778 49,347,707 $ 62,854,907 37,831,168 $ 50,018,509
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
<CAPTION>
HARTFORD GROWTH AND INCOME
HLS FUND
----------------------------
SHARES AMOUNT
------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS IA
Shares sold...... 3,981,156 $ 3,995,482
Shares issued on
reinvestment of
distributions... -- --
Shares redeemed.. (17,612) (17,707)
------------- ------------
Net Increase..... 3,963,544 $ 3,977,775
------------- ------------
------------- ------------
</TABLE>
M-51
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
HARTFORD BOND HARTFORD STOCK HARTFORD MONEY MARKET HARTFORD ADVISERS
HLS FUND, INC. HLS FUND, INC. HLS FUND, INC. HLS FUND, INC.
---------------------------- ------------------------- -------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
CLASS IB
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold...... 1,139,236 $ 1,150,176 1,993,605 $ 2,022,233 512,019 $ 512,019 6,266,067 $ 6,324,501
Shares issued on
reinvestment of
distributions... -- -- -- -- 3,075 3,075 -- --
Shares redeemed.. (4,775) (4,855) (64) (67) (127,139) (127,139) (160,640) (163,090)
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
Net Increase..... 1,134,461 $ 1,145,321 1,993,541 $ 2,022,166 387,955 $ 387,955 6,105,427 $ 6,161,411
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
<CAPTION>
HARTFORD CAPITAL HARTFORD INTERNATIONAL
APPRECIATION OPPORTUNITIES HARTFORD DIVIDEND AND HARTFORD SMALL COMPANY
HLS FUND, INC. HLS FUND, INC. GROWTH HLS FUND, INC. HLS FUND, INC.
---------------------------- ------------------------- -------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS IB
Shares sold...... 1,873,884 $ 1,844,044 279,319 $ 284,133 2,846,506 $ 2,808,906 258,716 $ 249,612
Shares issued on
reinvestment of
distributions... -- -- -- -- -- -- -- --
Shares redeemed.. (42) (42) (1,049) (1,075) (94) (92) (370) (349)
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
Net Increase..... 1,873,842 $ 1,844,002 278,270 $ 283,058 2,846,412 $ 2,808,814 258,346 $ 249,263
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
------------- ------------ ----------- ------------ ------------ ------------ ----------- ------------
<CAPTION>
HARTFORD GROWTH AND INCOME
HLS FUND, INC.
----------------------------
SHARES AMOUNT
------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS IB
Shares sold...... 10,000 $ 10,000
Shares issued on
reinvestment of
distributions... -- --
Shares redeemed.. -- --
------------- ------------
Net Increase..... 10,000 $ 10,000
------------- ------------
------------- ------------
</TABLE>
M-52
<PAGE>
Hartford Mutual Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
-- SELECTED PER-SHARE DATA(3) --
-------------------------------------------------------------------------
<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 HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... $1.050 $0.029 $ 0.016 $ 0.045
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
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... 1.000 0.006 0.016 0.022
HARTFORD STOCK HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... 5.123 0.024 1.049 1.073
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
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... 1.000 -- 0.046 --
HVA MONEY MARKET HLS
FUND, INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... 1.000 0.025 -- 0.025
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
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... 1.000 0.010 -- 0.010
HARTFORD ADVISERS HLS
FUND, INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... 2.527 0.030 0.352 0.382
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
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... 1.000 0.002 0.036 0.038
HARTFORD CAPITAL
APPRECIATION HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... 4.410 0.014 0.498 0.512
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
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... 1.000 0.001 (0.016) (0.015)
HARTFORD MORTGAGE
SECURITIES HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited).......... 1.084 0.034 0.002 0.036
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
</TABLE>
(1) Annualized
(2) 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 would have been lowwer if management fees were not waived.
(3) Information presented relates to a share of capital stock outstanding
throughout the indicated period.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-54
<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 GAIN 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 HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... $(0.003) $ -- $(0.003) $ 0.042 $1.092 4.28% $ 702,487
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) 247458
1993................... (0.062) (0.019) (0.081) 0.020 1.044 10.24 239,602
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... -- -- -- 0.022 1.022 2.20 1,159
HARTFORD STOCK HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... (0.002) (0.184) (0.186) 0.887 6.010 21.36 6,172,891
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
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... -- -- -- 0.046 1.046 4.60 1,994
HVA MONEY MARKET HLS
FUND, INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... (0.025) -- (0.025) -- 1.000 2.63 645,163
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
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... (0.010) -- (0.010) -- 1.000 -- 388
HARTFORD ADVISERS HLS
FUND, INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... (0.001) (0.089) (0.090) 0.292 2.819 15.44 10,237,520
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
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... -- -- -- 0.038 1.038 3.80 6,336
HARTFORD CAPITAL
APPRECIATION HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... (0.001) (0.289) (0.290) 0.222 4.632 11.82 5,646,452
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
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... -- -- -- (0.015) 0.985 (1.50) 1,846
HARTFORD MORTGAGE
SECURITIES HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited).......... (0.007) -- (0.007) 0.029 1.113 3.35 329,310
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) -- -- (0.004) 1.075 6.31 365,198
<CAPTION>
RATIO OF
RATIO OF NET
OPERATING INVESTMENT
EXPENSES INCOME PORTFOLIO
TO AVERAGE TO AVERAGE TURNOVER
NET ASSETS(1) NET ASSETS(1) RATE
------------- --------------- ---------
<S> <C> <C> <C>
HARTFORD BOND HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... 0.50% 6.01% 83.3%
For the Year Ended
December 31,
1997................... 0.51 6.58 112.9
1996................... 0.52 6.37 212.0
1995................... 0.53 6.51 215.0
1994................... 0.55 6.23 328.8
1993................... 0.57 5.93 494.3
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... 0.33 2.94 --
HARTFORD STOCK HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... 0.46 1.00 11.4
For the Year Ended
December 31,
1997................... 0.45 1.11 31.6
1996................... 0.46 1.59 42.3
1995................... 0.48 2.23 52.9
1994................... 0.50 2.17 63.8
1993................... 0.53 1.86 69.0
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... 0.64 0.46
HVA MONEY MARKET HLS
FUND, INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... 0.44 5.24 --
For the Year Ended
December 31,
1997................... 0.44 5.21 --
1996................... 0.44 5.04 --
1995................... 0.45 5.57 --
1994................... 0.47 3.99 --
1993................... 0.48 2.91 --
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... -- 0.30 --
HARTFORD ADVISERS HLS
FUND, INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... 0.63 2.36 12.4
For the Year Ended
December 31,
1997................... 0.63 2.44 36.1
1996................... 0.63 2.92 53.8
1995................... 0.65 3.57 63.5
1994................... 0.65 3.34 60.0
1993................... 0.69 3.07 55.3
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... 0.40 1.00 --
HARTFORD CAPITAL
APPRECIATION HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... 0.67 0.67 23.5
For the Year Ended
December 31,
1997................... 0.64 0.44 57.6
1996................... 0.65 0.60 85.4
1995................... 0.68 0.95 78.6
1994................... 0.72 0.40 73.3
1993................... 0.76 0.12 91.4
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... 0.85 0.61 --
HARTFORD MORTGAGE
SECURITIES HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited).......... 0.45 6.26 163.4
For the Year Ended
December 31,
1997................... 0.45 6.60 46.5
1996................... 0.45 6.67 201.0
1995................... 0.47 6.50 489.4
1994................... 0.48 6.65 365.7
1993................... 0.49 6.49 183.4
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-55
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CONTINUED
-- SELECTED PER-SHARE DATA(3) --
-------------------------------------------------------------------------
<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 INDEX HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited).......... $2.878 $0.018 $ 0.478 $ 0.496
For the Year Ended
December 31,
1997................... 2.832 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
HARTFORD INTERNATIONAL
OPPORTUNITIES HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... 1.294 0.015 0.195 0.210
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
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... 1.000 0.003 0.018 0.021
HARTFORD DIVIDEND AND
GROWTH HLS FUND, INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... 1.952 0.017 0.194 0.211
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
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... 1.000 0.002 (0.013) (0.011)
HARTFORD INTERNATIONAL
ADVISERS HLS FUND, INC.
For the Six Months
Ended June 30, 1998
(unaudited).......... 1.175 0.017 0.122 0.139
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
HLS FUND, INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... 1.202 (0.001 ) 0.108 0.107
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
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... 1.000 -- (0.037) (0.037)
HARTFORD MIDCAP HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited).......... 1.137 (0.001 ) 0.202 0.201
From inception, July
15, 1997, through
December 31, 1997.... 1.000 0.001 0.137 0.138
HARTFORD GROWTH AND
INCOME HLS FUND
From inception, May 31,
1998, through June
30, 1998 (unaudited)
Class IA............... 1.000 0.001 0.040 0.041
From inception, May 31,
1998, through June
30, 1998 (unaudited)
Class IB............... 1.000 -- 0.040 0.040
</TABLE>
(1) Annualized
(2) 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 would have been lowwer if management fees were not waived.
(3) Information presented relates to a share of capital stock outstanding
throughout the indicated period.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-56
<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 GAIN 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 INDEX HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited).......... $(0.002) $(0.072) $(0.074) $ 0.422 $3.300 17.46% $1,546,560
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
HARTFORD INTERNATIONAL
OPPORTUNITIES HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... (0.001) (0.088) (0.089) 0.121 1.415 16.73 1,256,074
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
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... -- -- -- 0.021 1.021 2.10 284
HARTFORD DIVIDEND AND
GROWTH HLS FUND, INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... (0.004) (0.070) (0.074) 0.137 2.089 10.93 2,679,882
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 1.96 55,066
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... -- -- -- (0.011) 0.989 (1.100) 2,814
HARTFORD INTERNATIONAL
ADVISERS HLS FUND, INC.
For the Six Months
Ended June 30, 1998
(unaudited).......... (0.134) (0.032) (0.166) (0.027) 1.148 12.67 262,121
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 15.84 31,264
HARTFORD SMALL COMPANY
HLS FUND, INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... -- (0.020) (0.020) 0.087 1.289 8.89 289,545
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 18.12 42,812
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... -- -- -- (0.037) 0.963 (3.70) 249
HARTFORD MIDCAP HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited).......... -- -- -- 0.201 1.338 17.64 83,072
From inception, July
15, 1997, through
December 31, 1997.... (0.001) -- (0.001) 0.137 1.137 13.81 27,589
HARTFORD GROWTH AND
INCOME HLS FUND
From inception, May 31,
1998, through June
30, 1998 (unaudited)
Class IA............... -- -- -- 0.041 1.041 4.1 4,114
From inception, May 31,
1998, through June
30, 1998 (unaudited)
Class IB............... -- -- -- 0.040 1.040 4 10
<CAPTION>
RATIO OF
RATIO OF NET
OPERATING INVESTMENT
EXPENSES INCOME PORTFOLIO
TO AVERAGE TO AVERAGE TURNOVER
NET ASSETS(1) NET ASSETS(1) RATE
------------- --------------- ---------
<S> <C> <C> <C>
HARTFORD INDEX HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited).......... 0.40% 1.24% 0.9%
For the Year Ended
December 31,
1997................... 0.39 1.52 5.7
1996................... 0.39 2.07 19.3
1995................... 0.39 2.46 1.5
1994................... 0.45 2.50 1.8
1993................... 0.49 2.36 0.8
HARTFORD INTERNATIONAL
OPPORTUNITIES HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... 1.07 2.3 73.2
For the Year Ended
December 31,
1997................... 0.77 1.48 72.7
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
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... 1.30 2.75 --
HARTFORD DIVIDEND AND
GROWTH HLS FUND, INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... 0.66 1.86 21.6
For the Year Ended
December 31,
1997................... 0.68 2.21 34.2
1996................... 0.73 2.52 56.9
1995................... 0.77 2.91 41.4
From inception, March
8, 1994, through
December 31, 1994.... 0.83 3.52 27.8
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... 0.82 1.64 --
HARTFORD INTERNATIONAL
ADVISERS HLS FUND, INC.
For the Six Months
Ended June 30, 1998
(unaudited).......... 0.84 3.38 74.5
For the Year Ended
December 31,
1997................... 0.87 3.08 162.5
1996................... 0.96 3.24 95.2
From inception March 1,
1995, through
December 31, 1995.... 0.65(2) 3.36(2) 47.2
HARTFORD SMALL COMPANY
HLS FUND, INC.
For the Six Months
Ended June 30, 1998
(unaudited)
Class IA............... 0.77 0.20 136.4
For the Year Ended
December 31,
1997................... 0.77 0.08 222.2
From inception, August
9, 1996, through
December 31, 1996.... 0.72(2) 0.31(2) 31.8
From inception April 1,
1998 to June 30, 1998
(unaudited)
Class IB............... 0.47 (0.38) --
HARTFORD MIDCAP HLS FUND,
INC.
For the Six Months
Ended June 30, 1998
(unaudited).......... 0.81 (0.21) 37.18
From inception, July
15, 1997, through
December 31, 1997.... 0.46(2) 0.45(2) 46.1
HARTFORD GROWTH AND
INCOME HLS FUND
From inception, May 31,
1998, through June
30, 1998 (unaudited)
Class IA............... 0.15(2) 1.45(2) 0.8
From inception, May 31,
1998, through June
30, 1998 (unaudited)
Class IB............... 0.21(2) 1.37(2) 0.0
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-57
<PAGE>
[This page is intentionally left blank]
<PAGE>
Variable Insurance Funds
- --------------------------------------------------------------------------------
BB&T GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT SECURITY DESCRIPTION MARKET VALUE
- --------- --------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS -- (96.8%):
AEROSPACE/DEFENSE -- (4.1%):
7,700 Lockheed Martin Corp................... $ 815,237
14,000 Raytheon Co.-Class A................... 806,750
------------
1,621,987
------------
APPAREL -- (0.7%):
5,600 VF Corp................................ 288,050
------------
BANKING -- (7.9%):
7,000 Banc One Corp.......................... 390,688
6,800 Central Carolina Bank Financial Corp... 722,499
5,700 J.P. Morgan & Co....................... 667,612
11,340 Old Kent Financial Corp................ 407,886
15,000 Pacific Century Financial Corp......... 360,000
7,200 Wachovia Corp.......................... 608,400
------------
3,157,085
------------
BEVERAGES -- (2.3%):
19,400 Anheuser-Busch Cos., Inc............... 915,438
------------
BUSINESS EQUIPMENT &
SERVICES -- (1.5%):
12,000 Pitney Bowes, Inc...................... 577,500
------------
CAPITAL EQUIPMENT -- (1.4%):
14,900 Parker-Hannifin Corp................... 568,063
------------
CHEMICALS -- (2.2%):
7,900 Great Lakes Chemical Corp.............. 311,556
1,975 Octel Corp. (b)........................ 39,253
4,800 Vulcan Materials Co.................... 512,100
------------
862,909
------------
COMMUNICATIONS EQUIPMENT -- (2.2%):
19,200 Harris Corp............................ 858,000
------------
COMPUTER - PERIPHERALS -- (1.1%):
10,000 Adobe Systems, Inc..................... 424,375
------------
COMPUTERS - MAIN & MINI -- (2.9%):
9,600 Hewlett-Packard Co..................... 574,800
4,900 International Business Machines Corp... 562,581
------------
1,137,381
------------
CONTAINERS -- (1.0%):
12,800 Sonoco Products Co..................... 387,200
------------
COSMETICS/PERSONAL CARE -- (1.6%):
14,000 Kimberly-Clark Corp.................... 642,250
------------
DIVERSIFIED OPERATIONS -- (1.0%):
10,000 Varian Associates, Inc................. 390,000
------------
ELECTRICAL EQUIPMENT -- (1.9%):
12,500 Emerson Electric Co.................... 753,906
------------
ELECTRONIC COMPONENTS -- (1.5%):
11,100 Avnet, Inc............................. 607,031
------------
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT SECURITY DESCRIPTION MARKET VALUE
- --------- --------------------------------------- ------------
<C> <S> <C>
ELECTRONIC INSTRUMENTS -- (0.9%):
10,150 Tektronix, Inc......................... $ 359,056
------------
ENGINEERING -- (0.8%):
6,400 Fluor Corp............................. 326,400
------------
FINANCIAL SERVICES -- (1.4%):
15,800 Deluxe Corp............................ 565,838
------------
FOOD & RELATED -- (4.5%):
5,000 Bob Evans Farms........................ 105,938
6,200 Dean Foods Co.......................... 340,613
21,400 SUPERVALU, Inc......................... 949,624
17,000 Universal Foods Corp................... 377,187
------------
1,773,362
------------
FOREST & PAPER PRODUCTS -- (1.0%):
9,000 Weyerhaeuser Co........................ 415,688
------------
HEALTH CARE - DRUGS -- (2.2%):
21,200 Abbott Laboratories.................... 866,550
------------
HEALTH CARE - GENERAL -- (1.8%):
24,600 Mallinckrodt, Inc...................... 730,313
------------
HOUSEHOLD - GENERAL
PRODUCTS -- (3.9%):
15,000 American Greetings Corp................ 764,063
5,000 Corning, Inc........................... 173,750
7,600 Unilever............................... 599,925
------------
1,537,738
------------
HOUSEHOLD - MAJOR
APPLIANCES -- (1.2%):
7,100 Whirlpool Corp......................... 488,125
------------
INSURANCE - PROPERTY &
CASUAL -- (6.6%):
8,100 Lincoln National Corp.................. 740,137
13,800 SAFECO Corp............................ 627,038
17,600 Saint Paul Companies, Inc.............. 740,299
6,500 Transatlantic Holdings, Inc............ 502,531
------------
2,610,005
------------
LEISURE TIME INDUSTRY -- (1.5%):
15,200 Hasbro, Inc............................ 597,550
------------
MEDIA -- (3.0%):
18,000 Banta Corp............................. 555,750
13,100 Media General, Inc. Class A............ 638,625
------------
1,194,375
------------
MEDICAL EQUIPMENT &
SUPPLIES -- (3.7%):
13,500 Bausch & Lomb, Inc..................... 676,688
10,700 Johnson & Johnson...................... 789,125
------------
1,465,813
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-58
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
BB&T GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) -- (CONTINUED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT SECURITY DESCRIPTION MARKET VALUE
- --------- --------------------------------------- ------------
COMMON STOCKS - (CONTINUED)
<C> <S> <C>
METAL FABRICATION -- (1.2%):
11,100 Trinity Industries, Inc................ $ 460,650
------------
MINING -- (0.5%):
3,200 Phelps Dodge Corp...................... 183,000
------------
OIL & GAS -- (1.1%):
10,100 National Fuel Gas...................... 439,981
------------
PETROLEUM - DOMESTIC -- (4.0%):
15,100 Ashland, Inc........................... 779,538
16,700 Phillips Petroleum Co.................. 804,730
------------
1,584,268
------------
PETROLEUM - INTERNATIONAL -- (3.3%):
6,900 Chevron Corp........................... 573,131
7,300 Mobil Corp............................. 559,363
3,500 Royal Dutch Petroleum Co............... 191,844
------------
1,324,338
------------
PHARMACEUTICALS -- (3.8%):
4,800 Bristol-Myers Squibb Co................ 551,700
7,000 Merck & Co., Inc....................... 936,250
------------
1,487,950
------------
RAILROAD -- (0.8%):
10,200 Norfolk Southern Corp.................. 304,088
------------
RETAIL - FOOD STORES -- (2.0%):
15,400 Albertson's, Inc....................... 797,913
------------
RETAIL - GENERAL MERCHANDISE -- (1.9%):
11,600 May Department Stores Co............... 759,800
------------
SECURITY & COMMISSION BROKERS --
(0.9%):
8,650 A.G. Edwards, Inc...................... 369,247
------------
TOBACCO -- (2.2%):
10,000 Philip Morris Co., Inc................. 393,750
17,200 UST, Inc............................... 464,400
------------
858,150
------------
TRANSPORTATION - MARINE -- (0.6%):
8,000 Alexander & Baldwin, Inc............... 233,000
------------
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT SECURITY DESCRIPTION MARKET VALUE
- --------- --------------------------------------- ------------
<C> <S> <C>
UTILITIES - ELECTRIC -- (2.1%):
7,200 New Century Energies, Inc.............. $ 327,150
13,100 Western Resources, Inc................. 508,444
------------
835,594
------------
UTILITIES - GAS & PIPELINE -- (0.8%):
7,900 Nicor, Inc............................. 316,988
------------
UTILITIES - TELEPHONE -- (5.8%):
14,100 AT&T Corp.............................. 805,463
9,400 BellSouth Corp......................... 630,975
21,400 SBC Communications, Inc................ 855,999
------------
2,292,437
------------
Total Common Stocks.................... 38,369,392
------------
U.S. GOVERNMENT AGENCY
MORTGAGES -- (1.3%):
500,000 Federal Farm Credit Banks,
5.48%, 7/2/98........................ 499,920
------------
Total U.S. Government Agency Mortgages 499,920
------------
INVESTMENT COMPANIES -- (3.6%):
1,437,017 Provident Federal Fund................. 1,437,017
------------
Total Investment Companies............. 1,437,017
------------
Total Investments (Cost $37,076,898)
(a) - 101.7%......................... 40,306,329
------------
Liabilities in excess of other assets -
(1.7)%............................... (676,421)
------------
TOTAL NET ASSETS -- 100.0%........................ $39,629,908
------------
------------
</TABLE>
- --------------------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation (depreciation) of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................... $4,410,399
Unrealized depreciation.................... (1,180,968)
----------
Net unrealized appreciation................ $3,229,431
----------
----------
</TABLE>
(b) Non-income producing securities.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-59
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
BB&T GROWTH AND INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $37,076,898)...................................................... $40,306,329
Interest and dividends receivable............................................................. 61,932
Receivable from advisor....................................................................... 99,759
Unamortized organizational costs.............................................................. 3,933
Prepaid expenses and other assets............................................................. 783
----------
Total assets.............................................................................. 40,472,736
----------
LIABILITIES:
Dividends payable............................................................................. 132,317
Payable for investment securities purchased................................................... 603,005
Accrued expenses and other payables:
Administration fees......................................................................... 270
Accounting fees............................................................................. 411
Audit fees.................................................................................. 4,884
Custodian fees.............................................................................. 2,751
Insurance fees.............................................................................. 90
Investment advisory fees.................................................................... 30,251
Legal fees.................................................................................. 22,384
Printing fees............................................................................... 10,298
Registration and filing fees................................................................ 21,042
Transfer agent fees......................................................................... 144
Trustee fees and expenses................................................................... 4,835
Other....................................................................................... 10,146
----------
Total liabilities......................................................................... 842,828
----------
NET ASSETS:
Capital....................................................................................... 36,429,699
Undistributed (distributions in excess of) net investment income.............................. (5,367)
Net unrealized appreciation (depreciation) from investments................................... 3,229,431
Accumulated undistributed net realized gains (losses) from investment transactions............ (23,855)
----------
Net assets................................................................................ $39,629,908
----------
----------
Outstanding units of beneficial interest (shares)............................................... 3,189,246
----------
----------
Net asset value -- offering and redemption price per share...................................... $ 12.43
----------
----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-60
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
BB&T GROWTH AND INCOME FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 1998 THROUGH JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income................................. $ 4,839
Dividend income................................. 386,773
-----------
Total income.................................. 391,612
-----------
EXPENSES:
Investment advisory fees........................ 127,115
Accounting fees................................. 14,876
Administration fees............................. 34,356
Audit fees...................................... 6,984
Custodian fees.................................. 9,875
Insurance fees.................................. 2,714
Legal fees...................................... 30,518
Organizational fees............................. 5,363
Other........................................... 341
-----------
Total expenses before reimbursements and
voluntary reductions.......................... 232,142
-----------
Expenses reimbursed and voluntarily reduced..... (77,589)
-----------
Net expenses.................................. 154,553
-----------
Net investment income........................... 237,059
-----------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS:
Net realized gains (losses) from investment
transactions.................................. --
Net change in unrealized appreciation
(depreciation) from investments............... 1,229,080
-----------
Net realized/unrealized gains (losses) from
investments.................................. 1,229,080
-----------
Change in net assets resulting from
operations................................... $ 1,466,139
-----------
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-61
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
BB&T GROWTH AND INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
SIX MONTHS JUNE 3, 1997
ENDED THROUGH
JUNE 30, DECEMBER 31,
1998 1997(A)
------------ ------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income........................... $ 237,059 $ 148,011
Net realized gains (losses) from investment
transactions.................................. -- (20,598)
Net change in unrealized appreciation
(depreciation) from investments............... 1,229,080 2,000,351
------------ ------------
Change in net assets resulting from
operations.................................... 1,466,139 2,127,764
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income...................... (220,080) (148,011)
In excess of net investment income.............. (5,367) (32,999)
In excess of net realized gains from investment
transactions.................................. -- (3,257)
------------ ------------
Change in net assets from shareholder
distributions................................. (225,447) (184,267)
------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued..................... 9,352,108 26,843,035
Dividends reinvested............................ 234,994 42,402
Cost of shares redeemed......................... (26,820) --
------------ ------------
Change in net assets from capital
transactions.................................. 9,560,282 26,885,437
------------ ------------
Change in net assets............................ 10,800,974 28,828,934
NET ASSETS:
Beginning of period............................. 28,828,934 --
------------ ------------
End of period................................... $ 39,629,908 $ 28,828,934
------------ ------------
------------ ------------
SHARE TRANSACTIONS:
Issued.......................................... 745,343 2,423,169
Reinvested...................................... 19,111 3,774
Redeemed........................................ (2,151) --
------------ ------------
Change in shares................................ 762,303 2,426,943
------------ ------------
------------ ------------
</TABLE>
- ------------------------
(a) Period from commencement of operations.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-62
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
BB&T GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (UNAUDITED)
1. ORGANIZATION:
The Variable Insurance Funds (the "Trust") was organized on July 20, 1994,
and is registered under the Investment Company Act of 1940, as amended (the
"Act"), as an open-end investment company established as a Massachusetts
business trust. Between the date of organization and the date of
commencement of operations (June 3, 1997), the Trust had no operations other
than incurring organizational expenses and the sale of initial units of
beneficial interest ("shares").
The Trust is authorized to issue an unlimited number of shares of beneficial
interest without par value. The Trust presently offers shares of the BB&T
Growth and Income Fund (the "Fund"). Shares of the Fund are offered to a
separate account of Hartford Life Insurance Company, as well as other
eligible purchasers.
The investment objective of the Fund is to seek capital growth, current
income or both. Under normal market conditions, it seeks this objective by
investing at least 65% of its total assets in stocks which for this purpose
may include common stock, preferred stock, warrants, or debt instruments
that are convertible into common stock.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Trust in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles (GAAP). The
preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of income
and expenses for the period. Actual results could differ from those
estimates.
SECURITIES VALUATION--Exchange listed securities are valued at the closing
price on the exchange on the day of computation, or, if there have been no
sales during such day, at the latest bid quotation. Unlisted securities are
valued at their latest bid quotation in their principal market. If no such
bid is available, then such securities are valued in good faith at their
respective fair market values using methods determined by or under the
supervision of the Trust's Board of Trustees. Portfolio securities with a
remaining maturity of 60 days or less are valued either at amortized cost or
original cost plus accrued interest, which approximates current value.
All other assets and securities, including securities for which market
quotations are not readily available, are valued at their fair market value
as determined in good faith under the general supervision of the Board of
Trustees.
SECURITIES TRANSACTIONS AND RELATED INCOME--Securities transactions are
accounted for on the date the security is purchased or sold (trade date).
Interest income is recognized on the accrual basis and includes, where
applicable, the pro rata amortization of premium or discount. Dividend
income is recorded on the ex-dividend date. Gains or losses realized on
sales of securities are determined by comparing the identified cost of the
security lot sold with the net sales proceeds.
REPURCHASE AGREEMENTS--The Fund may acquire securities from member banks of
the Federal Deposit Insurance Corporation and from registered broker/dealers
that Branch Banking and Trust Company ("BB&T") deems creditworthy under
guidelines approved by the Board of Trustees, subject to the seller's
agreement to repurchase such securities at a mutually agreed-upon date and
price. The repurchase price generally equals the price paid by the Fund plus
interest negotiated on the basis of current short-term rates, which may be
more or less than the rate on the underlying collateral. The seller under a
repurchase agreement is required to maintain the value of collateral held
pursuant to the agreement at not less than the repurchase price (including
accrued interest). Securities subject to repurchase agreements are held by
the Fund's custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to
be loans by the Fund under the Act.
DIVIDENDS TO SHAREHOLDERS--Dividends from net investment income are declared
and paid quarterly for the Fund. Distributable net realized gains, if any,
are declared and distributed at least annually.
Dividends from net investment income and net realized capital gains are
determined in accordance with income tax regulations, which may differ from
GAAP. These differences are primarily due to differing treatments of
deferrals of certain losses.
FEDERAL INCOME TAXES--It is the intention of the Fund to qualify and elect
to be treated as a regulated investment company by complying with the
provisions available to certain investment companies, as defined in
applicable sections of the Internal Revenue Code, and
--------------------------------------------------- MF-63
---------------------------------------------------
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
BB&T GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
to make distributions of net investment income and net realized capital
gains sufficient to relieve it from all, or substantially all, federal
income taxes.
ORGANIZATION COSTS--Costs incurred by the Fund in connection with its
organization and registration of shares have been deferred and are amortized
using the straight-line method over a period of two years from June 3, 1997,
the commencement of the public offering of shares of the Fund. In the event
that any of the initial shares of the Fund are redeemed during the
amortization period by any holder thereof, the redemption proceeds may be
reduced by any unamortized organizational expenses of the Fund in the same
proportion as the number of said shares the Fund being redeemed bears to the
number of initial shares of the Fund of that fund that are outstanding at
time of redemption.
OTHER--Expenses that are directly related to the Fund are charged directly
to the Fund.
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of portfolio securities (excluding short-term
securities) for the period from January 1, 1998 through June 30, 1998 were
as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------- ------------
<S> <C> <C>
BB&T Growth and Income Fund... $ 9,103,541 $ 0
</TABLE>
4. RELATED PARTY TRANSACTIONS:
Investment advisory services are provided to the Fund by BB&T. Under the
terms of the investment advisory agreement, BB&T is entitled to receive fees
based on a percentage of the average daily net assets of the Fund.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"),
with whom certain officers and trustees of the Trust are affiliated, serves
the Trust as Administrator. Such officers and trustees are paid no fees
directly by the Trust for serving as officers and trustees of the Trust.
Under the terms of the Management and Administration Agreement between BISYS
and the Trust, BISYS's fees are computed daily as a percentage of the
average net assets of the Fund. BISYS also serves, without compensation, as
Distributor of the Fund. BISYS Fund Services Ohio, Inc. ("BISYS Ohio")
serves the Fund as Transfer agent and Mutual fund accountant. BISYS, an Ohio
limited partnership, and BISYS Ohio are subsidiaries of The BISYS Group,
Inc.
Shares of the Trust are subject to a Variable Contract Owner Servicing Plan
(the "Servicing Plan") permitting payment of compensation to financial
institutions that agree to provide certain administrative support services
for their customers or account holders. The Fund has entered into a specific
arrangement with BISYS for the provision of such services and reimburses
BISYS for its cost of providing these services, subject to a maximum annual
rate equal to 0.25% of the average daily net assets of the Fund.
Fees may be voluntarily reduced or reimbursed to assist the Fund in
maintaining competitive expense ratios. Information regarding these
transactions is as follows for the six-month period ended June 30, 1998:
<TABLE>
<S> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee reductions (percentage of average
net assets)....................................................... 0.74%
Voluntary fee reductions............................................ $ 29,444
Voluntary fee reimbursements........................................ $ 22,378
ADMINISTRATION FEES:
Annual fee before voluntary fee reductions (percentage of average
net assets)....................................................... 0.20%
Voluntary fee reductions............................................ $ 25,767
TRANSFER AGENT AND MUTUAL FUND ACCOUNTANT FEES: $ 20,362
</TABLE>
--------------------------------------------------- MF-64
---------------------------------------------------
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
BB&T GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
1998
-----------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................................................................ $ 11.88
-----------
INVESTMENT ACTIVITIES:
Net investment income..................................................................................... 0.07
Net realized and unrealized gains......................................................................... 0.56
-----------
Total investment activities............................................................................... 0.63
-----------
DISTRIBUTIONS:
Net investment income..................................................................................... (0.08)
In excess of net investment income........................................................................ --
-----------
Total distributions....................................................................................... (0.08)
-----------
NET ASSET VALUE, END OF PERIOD.............................................................................. $ 12.43
-----------
-----------
Total return.............................................................................................. 5.25%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, at end of period (000)........................................................................ $ 39,630
Ratio of expenses to average net assets................................................................... 0.90%(c)
Ratio of net investment income to average net assets...................................................... 1.38%(c)
Ratio of expenses to average net assets*.................................................................. 1.35%(c)
Ratio of net investment income to average net assets*..................................................... 0.93%(c)
Portfolio turnover rate................................................................................... 0.00%
<CAPTION>
FOR THE
PERIOD FROM
JUNE 3, 1997
THROUGH
DECEMBER 31,
1997(A)
------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................................................................ $ 10.00
------------
INVESTMENT ACTIVITIES:
Net investment income..................................................................................... 0.10
Net realized and unrealized gains......................................................................... 1.89
------------
Total investment activities............................................................................... 1.99
------------
DISTRIBUTIONS:
Net investment income..................................................................................... (0.10)
In excess of net investment income........................................................................ (0.01)
------------
Total distributions....................................................................................... (0.11)
------------
NET ASSET VALUE, END OF PERIOD.............................................................................. $ 11.88
------------
------------
Total return.............................................................................................. 19.96 %(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, at end of period (000)........................................................................ $ 28,829
Ratio of expenses to average net assets................................................................... 0.91 %(c)
Ratio of net investment income to average net assets...................................................... 1.68 %(c)
Ratio of expenses to average net assets*.................................................................. 2.31 %(c)
Ratio of net investment income to average net assets*..................................................... 0.28 %(c)
Portfolio turnover rate................................................................................... 7.75 %
</TABLE>
- ------------------------
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
* During the period certain fees were reimbursed and voluntarily reduced. If
such reimbursements and voluntary fee reductions had not occurred, the
ratios would have been as indicated.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-65
<PAGE>
Variable Insurance Funds
- --------------------------------------------------------------------------------
AMSOUTH EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- --------- ------------
<C> <S> <C>
COMMON STOCKS -- 72.6%
AEROSPACE -- 1.2%
3,850 B.F. Goodrich, Inc....................... $ 191,056
------------
AUTOMOTIVE -- 2.2%
6,050 Ford Motor Co............................ 356,950
------------
BANKS -- 12.1%
6,710 Banc One Corp............................ 374,502
3,050 Bankers Trust Corp....................... 353,991
3,250 J.P. Morgan & Co......................... 380,656
19,400 Pacific Century Financial Corp........... 465,599
5,850 Wilmington Trust Corp.................... 356,119
------------
1,930,867
------------
CHEMICALS -- 1.4%
2,300 Dow Chemical Co.......................... 222,381
------------
CHEMICALS - SPECIALITY -- 2.1%
4,950 PPG Industries, Inc...................... 344,334
------------
COMPUTERS -- 1.8%
7,200 Electronic Data Services................. 288,000
------------
COMPUTERS & PERIPHERALS -- 1.6%
4,350 Hewlett-Packard Co....................... 260,456
------------
DIVERSIFIED MANUFACTURING -- 2.0%
1,850 General Electric Co...................... 168,350
1,900 Minnesota Mining & Manufacturing Co...... 156,156
------------
324,506
------------
ELECTRICAL & ELECTRONIC -- 4.1%
7,600 Motorola, Inc............................ 399,475
3,150 Philips N.V.............................. 267,750
------------
667,225
------------
ELECTRICAL EQUIPMENT -- 1.6%
4,350 Emerson Electric Co...................... 262,359
------------
ENGINEERING & CONSTRUCTION -- 2.4%
7,750 Fluor Corp............................... 395,250
------------
FOOD DISTRIBUTORS & WHOLESALERS -- 1.5%
9,200 Sysco Corp............................... 235,750
------------
FOOD PROCESSING & PACKAGING -- 2.0%
5,700 H.J. Heinz Co............................ 319,913
------------
FOOD PRODUCTS & SERVICES -- 2.7%
12,000 Mc Cormick & Co., Inc.................... 428,625
------------
HEALTH CARE - GENERAL -- 3.8%
6,800 Bausch & Lomb, Inc....................... 340,850
3,750 Johnson & Johnson........................ 276,563
------------
617,413
------------
HOUSEHOLD PRODUCTS/WARES -- 1.9%
11,050 Tupperware Corp.......................... 310,781
------------
MEDICAL SUPPLIES -- 2.4%
7,300 Baxter International, Inc................ 392,831
------------
<CAPTION>
MARKET
SHARES VALUE
- --------- ------------
<C> <S> <C>
OFFICE/BUSINESS EQUIPMENT -- 1.7%
5,550 Pitney Bowes, Inc........................ $ 267,094
------------
OIL & GAS EXPLORATION, PRODUCTION &
SERVICES -- 4.6%
2,400 British Petroleum Co..................... 211,800
3,800 Exxon Corp............................... 270,987
6,250 Shell Transport & Trading PLC (ADR)...... 264,844
------------
747,631
------------
PHARMACEUTICALS -- 5.7%
7,200 American Home Products Corp.............. 372,600
700 Merck & Co., Inc......................... 93,625
9,700 Pharmacia & Upjohn, Inc.................. 447,413
------------
913,638
------------
RESTAURANTS -- 1.7%
4,050 McDonald's Corp.......................... 279,450
------------
RETAIL - GENERAL MERCHANDISE -- 5.0%
4,100 J.C. Penney Co., Inc..................... 296,481
8,450 Sears, Roebuck & Co...................... 515,978
------------
812,459
------------
STEEL -- 1.0%
7,300 Allegheny Teledyne, Inc.................. 166,988
------------
TOBACCO -- 1.2%
4,900 Philip Morris Cos., Inc.................. 192,938
------------
UTILITIES - ELECTRIC -- 1.5%
6,100 Hawaiian Electric Industries, Inc........ 242,094
------------
UTILITIES - NATURAL GAS -- 1.8%
10,602 Sempra Energy (b)........................ 294,200
------------
UTILITIES - TELECOMMUNICATIONS -- 1.6%
5,650 US West Inc.............................. 265,550
------------
Total common stocks...................... 11,730,739
------------
CONVERTIBLE PREFERRED STOCKS -- 21.0%
BANKS -- 4.9%
3,150 Jefferson Pilot/NationsBank (ACES)....... 417,768
12,900 National Australia Bank.................. 370,069
------------
787,837
------------
COMPUTER SOFTWARE -- 3.9%
6,650 Microsoft Corp., Series A................ 631,750
------------
FOOD PROCESSING & PACKAGING -- 2.5%
9,000 Dole Food (TRACES)....................... 402,750
------------
INDUSTRIALS -- 2.1%
11,950 DECS Trust II/Royal Group Technology..... 337,588
------------
OIL-REFINERS -- 1.5%
4,450 Tosco Financing Trust.................... 246,975
------------
PRINTING & PUBLISHING -- 2.7%
16,900 Readers Digest (TRACES).................. 435,175
------------
RAILROADS -- 1.0%
3,500 Union Pacific (c)........................ 162,313
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-66
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
AMSOUTH EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- --------- ------------
CONVERTIBLE PREFERRED STOCKS, CONTINUED
<C> <S> <C>
TELECOMMUNICATIONS -- 1.4%
4,000 Salomon Smith Barney Holdings, Inc.
(Cincinnati Bell)(DECS)................ $ 223,750
------------
TOBACCO -- 1.0%
11,500 Dimon, Inc............................... 158,125
------------
Total convertible preferred stocks....... 3,386,263
------------
CONVERTIBLE BONDS -- 4.9%
COMPUTERS -- 2.0%
160,000 EMC Corp, 3.25%, 3/15/02................. 328,200
------------
INDUSTRIALS -- 1.3%
105,000 Xilinx, Inc., 5.25%, 11/1/02............. 99,225
120,000 Xilinx, Inc., 5.25%, 11/1/02 (c)......... 113,400
------------
212,625
------------
OIL & GAS EXPLORATION, PRODUCTION &
SERVICES -- 1.6%
220,000 Diamond Offshore Drill, 3.75%, 2/15/07,
Callable 2/22/01 @ 102.08.............. 254,100
------------
Total convertible bonds.................. 794,925
------------
<CAPTION>
MARKET
SHARES VALUE
- --------- ------------
<C> <S> <C>
INVESTMENT COMPANIES -- 1.9%
310,578 AmSouth Prime Obligations Fund........... $ 310,578
------------
Total investment companies............... 310,578
------------
Total (Cost $15,791,880) (a)............. $ 16,222,505
------------
------------
</TABLE>
- --------------------------
Percentages indicated are based on net assets of $16,148,858.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................... $ 827,697
Unrealized depreciation..................... (397,072)
---------
Net unrealized appreciation................. $ 430,625
---------
---------
</TABLE>
(b) Non-income producing security.
(c) 144A security. Resale is restricted to institutional investors.
ACES -- Advanced Computerized Execution System
ADR -- American Depository Receipt
DECS -- Dividend Enhanced Convertible Security
PLC -- Public Limited Co.
TRACES -- Trust Automatic Common Exchange Securities
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-67
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
AMSOUTH EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $15,791,880)...................................................... $16,222,505
Interest and dividends receivable............................................................. 39,598
Receivable for investment securities sold..................................................... 181,974
Unamortized organizational costs.............................................................. 7,977
Prepaid expenses and other assets............................................................. 7,067
Reimbursement receivable...................................................................... 15,340
----------
Total assets.............................................................................. 16,474,461
----------
LIABILITIES:
Dividends payable............................................................................. 33,353
Payable for investment securities purchased................................................... 271,838
Accrued expenses and other payables:
Investment advisory fees.................................................................... 5,091
Administration fees......................................................................... 153
Variable contract owner servicing fees...................................................... 3,053
Accounting fees............................................................................. 66
Audit fees.................................................................................. 6,451
Printing fees............................................................................... 4,590
Trustee fees and expenses................................................................... 527
Other....................................................................................... 481
----------
Total liabilities......................................................................... 325,603
----------
NET ASSETS:
Capital....................................................................................... 15,831,934
Undistributed net investment income........................................................... 952
Net unrealized appreciation (depreciation) from investments................................... 430,625
Accumulated undistributed net realized gains (losses) from investment transactions............ (114,653)
----------
Net assets................................................................................ $16,148,858
----------
----------
Outstanding units of beneficial interest (shares)............................................... 1,462,856
----------
----------
Net asset value -- offering and redemption price per share...................................... $ 11.04
----------
----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-68
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
AMSOUTH EQUITY INCOME FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 1998 THROUGH JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income................................................................................. $ 17,589
Dividend income................................................................................. 138,379
---------
Total income.................................................................................. 155,968
---------
EXPENSES:
Investment advisory fees........................................................................ 26,780
Administration fees............................................................................. 8,927
Variable contract owner servicing fees.......................................................... 11,158
Accounting fees................................................................................. 2,169
Audit fees...................................................................................... 10,171
Insurance fees.................................................................................. 3,432
Legal fees...................................................................................... 5,694
Printing fees................................................................................... 4,746
Transfer agent fees............................................................................. 258
Trustee fees and expenses....................................................................... 2,812
Organizational fees............................................................................. 3,689
Other........................................................................................... 231
---------
Total expenses.................................................................................. 80,067
Expenses reimbursed and voluntarily reduced..................................................... (32,775)
---------
Net expenses.................................................................................. 47,292
---------
Net investment income........................................................................... 108,676
---------
REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS:
Net realized gains (losses) from investment transactions........................................ (112,580)
Net change in unrealized appreciation (depreciation) from investments........................... 395,740
---------
Net realized/unrealized gains (losses) from investments....................................... 283,160
---------
Change in net assets resulting from operations................................................ $ 391,836
---------
---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-69
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
AMSOUTH EQUITY INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
1998
-------------
<S> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.................................................................................. $ 108,676
Net realized gains (losses) from investment transactions............................................... (112,580)
Net change in unrealized appreciation (depreciation) from investments.................................. 395,740
-------------
Change in net assets resulting from operations......................................................... 391,836
-------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............................................................................. (108,241)
-------------
Change in net assets from shareholder distributions.................................................... (108,241)
-------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued............................................................................ 13,403,710
Dividends reinvested................................................................................... 74,887
Cost of shares redeemed................................................................................ --
-------------
Change in net assets from capital transactions......................................................... 13,478,597
-------------
Change in net assets................................................................................... 13,762,192
NET ASSETS:
Beginning of period.................................................................................... 2,386,666
-------------
End of period.......................................................................................... $ 16,148,858
-------------
-------------
SHARE TRANSACTIONS:
Issued................................................................................................. 1,222,948
Reinvested............................................................................................. 6,718
Redeemed............................................................................................... --
-------------
Change in shares....................................................................................... 1,229,666
-------------
-------------
<CAPTION>
OCTOBER 23,
1997 TO
DECEMBER 31,
1997 (A)
------------
<S> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.................................................................................. $ 4,906
Net realized gains (losses) from investment transactions............................................... (2,073)
Net change in unrealized appreciation (depreciation) from investments.................................. 34,885
------------
Change in net assets resulting from operations......................................................... 37,718
------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............................................................................. (4,389)
------------
Change in net assets from shareholder distributions.................................................... (4,389)
------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued............................................................................ 2,348,968
Dividends reinvested................................................................................... 4,389
Cost of shares redeemed................................................................................ (20)
------------
Change in net assets from capital transactions......................................................... 2,353,337
------------
Change in net assets................................................................................... 2,386,666
NET ASSETS:
Beginning of period.................................................................................... --
------------
End of period.......................................................................................... $2,386,666
------------
------------
SHARE TRANSACTIONS:
Issued................................................................................................. 232,760
Reinvested............................................................................................. 432
Redeemed............................................................................................... (2)
------------
Change in shares....................................................................................... 233,190
------------
------------
</TABLE>
(a) Period from commencement of operations.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-70
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
AMSOUTH EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
1. ORGANIZATION:
The Variable Insurance Funds (the "Trust") was organized on July 20, 1994,
and is registered under the Investment Company Act of 1940, as amended (the
"Act"), as a diversified, open-end management investment company established
as a Massachusetts business trust. Between the date of organization and the
date of commencement of Trust operations (October 23, 1997), the Trust had
no operations other than incurring organizational expenses and the sale of
initial units of beneficial interest ("shares").
The Trust is authorized to issue an unlimited number of shares without par
value. The Trust currently offers shares of the AmSouth Equity Income Fund
(the "Fund"). Shares of the Fund are offered to a separate account of
Hartford Life Insurance Company, as well as other eligible purchasers.
The investment objective of the Fund is to seek to provide above average
income and capital appreciation. It seeks this objective by investing, under
normal market conditions, at least 65% of its total assets in
income-producing equity securities, including common stock, preferred stock,
and securities that are convertible into common stocks, such as convertible
bonds and convertible preferred stocks.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Trust in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles ("GAAP"). The
preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of income
and expenses for the period. Actual results could differ from those
estimates.
SECURITIES VALUATION--Exchange-listed securities are valued at the closing
price on the exchange on the day of computation, or, if there have been no
sales during such day, at the latest bid quotation. Unlisted securities are
valued at their latest bid quotation in their principal market. If no such
bid is available, then such securities are valued in good faith at their
respective fair market values using methods determined by or under the
supervision of the Trust's Board of Trustees. Portfolio securities with a
remaining maturity of 60 days or less are valued either at amortized cost or
original cost plus accrued interest, which approximates current value.
All other assets and securities, including securities for which market
quotations are not readily available, are valued at their fair market value
as determined in good faith under the general supervision of the Trust's
Board of Trustees.
SECURITIES TRANSACTIONS AND RELATED INCOME--Securities transactions are
accounted for on the date the security is purchased or sold (trade date).
Interest income is recognized on the accrual basis and includes, where
applicable, the pro rata amortization of premium or discount. Dividend
income is recorded on the ex-dividend date. Gains or losses realized on
sales of securities are determined by comparing the identified cost of the
security lot sold with the net sales proceeds.
REPURCHASE AGREEMENTS--The Fund may enter into repurchase agreements with
member banks of the Federal Deposit Insurance Corporation and from
registered broker/dealers that AmSouth Bank ("AmSouth") deems creditworthy
under guidelines approved by the Trust's Board of Trustees, subject to the
seller's agreement to repurchase such securities at a mutually agreed-upon
date and price. The repurchase price generally equals the price paid by the
Fund plus interest negotiated on the basis of current short-term rates,
which may be more or less than the rate on the underlying collateral. The
seller under a repurchase agreement is required to maintain the value of
collateral held pursuant to the agreement at not less than the repurchase
price (including accrued interest).
DIVIDENDS TO SHAREHOLDERS--Dividends from net investment income are declared
and paid quarterly for the Fund. Distributable net realized gains, if any,
are declared and distributed at least annually.
Dividends from net investment income and net realized capital gains are
determined in accordance with income tax regulations, which may differ from
GAAP. These differences are primarily due to differing treatments of
deferrals of certain losses.
These "book/tax" differences are considered to be either temporary or
permanent in nature. To the extent these differences are permanent in
nature, such amounts are reclassified within the composition of net assets
based on their federal tax-basis treatment; temporary differences do not
require reclassifications. Dividends and distributions to shareholders which
exceed
--------------------------------------------------- MF-71
---------------------------------------------------
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
AMSOUTH EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1998
net investment income and net realized gains for financial reporting
purposes but not for tax purposes are reported as dividends in excess of net
investment income or distributions in excess of net realized gains. To the
extent they exceed net investment income and net realized gains for tax
purposes, they are reported as distribution of capital.
FEDERAL INCOME TAXES--It is the intention of the Fund to qualify and elect
to be treated as a regulated investment company by complying with the
provisions available to certain investment companies, as defined in
applicable sections of the Internal Revenue Code, and to make distributions
of net investment income and net realized capital gains sufficient to
relieve it from all, or substantially all, federal income taxes.
ORGANIZATION COSTS--Costs incurred by the Fund in connection with its
organization and registration of shares have been deferred and are amortized
using the straight-line method over a period of two years from October 23,
1997, the commencement of the public offering of shares of the Fund. In the
event that any of the initial shares of the Fund are redeemed during the
amortization period by any holder thereof, the redemption proceeds may be
reduced by any unamortized organizational expenses of the Fund in the same
proportion as the number of said shares of the Fund being redeemed bears to
the number of initial shares of the Fund that are outstanding at the time of
redemption.
OTHER--Expenses that are directly related to the Fund are charged directly
to the Fund.
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of portfolio securities (excluding short-term
securities) for the period from January 1, 1998 through June 30, 1998 were
as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------- ------------
<S> <C> <C>
AmSouth Equity Income Fund.... $ 18,408,919 $ 2,934,787
</TABLE>
4. RELATED PARTY TRANSACTIONS:
Investment advisory services are provided to the Fund by AmSouth. Under the
terms of the investment advisory agreement, AmSouth is entitled to receive
fees based on a percentage of the average daily net assets of the Fund.
Sub-advisory services are provided to the Fund by Rockhaven Asset
Management, LLC ("Rockhaven"). Under the terms of the sub-advisory
agreement, Rockhaven is entitled to receive fees, payable by AmSouth, based
on a percentage of the average daily net assets of the Fund, provided that
if AmSouth waives a portion of its investment advisory fee, Rockhaven has
agreed that its sub-advisory fee shall not exceed 60% of AmSouth's net
investment advisory fee. AmSouth also serves as Custodian for the Fund.
Pursuant to the Custodian Agreement with the Trust, the Custodian receives
compensation from the Fund for such services in an amount equal to an
asset-based fee plus fixed fees charged for certain portfolio transactions
and out-of-pocket expenses.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"),
with which certain officers and trustees of the Trust are affiliated, serves
the Trust as Administrator. Such officers and trustees are paid no fees
directly by the Trust for serving as officers and trustees of the Trust.
Under the terms of the Management and Administration Agreement between BISYS
and the Trust, BISYS' fees are computed daily as a percentage of the average
net assets of the Fund. BISYS also serves, without compensation, as
Distributor of the Fund's. BISYS Fund Services Ohio, Inc. ("BISYS Ohio")
serves the Fund as Transfer agent and Mutual fund accountant. BISYS, an Ohio
limited partnership, and BISYS Ohio are subsidiaries of The BISYS Group,
Inc.
Shares of the Trust are subject to a Variable contract owner servicing Plan
(the "Servicing Plan") permitting payment of compensation to financial
institutions that agree to provide certain administrative support services
for their customers or account holders. The Fund has entered into a specific
arrangement with BISYS for the provision of such services and reimburses
BISYS for its cost of providing these services, subject to a maximum annual
rate equal to 0.25% of the average daily net assets of the Fund.
Fees may be voluntarily reduced or reimbursed to assist the Fund in
maintaining competitive expense ratios.
--------------------------------------------------- MF-72
---------------------------------------------------
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
AMSOUTH EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1998
Information regarding these transactions is as follows for the six-month
period ended June 30, 1998:
<TABLE>
<S> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee
reductions and reimbursements
(percentage of average daily net
assets)............................ 0.60%
Voluntary fee reductions............. $ 19,651
Voluntary fee reimbursements......... $ 4,566
ADMINISTRATION FEES:
Annual fee before voluntary fee
reductions (percentage of average
daily net assets).................. 0.20%
Voluntary fee reductions............. $ 7,918
VARIABLE CONTRACT OWNER SERVICING FEES:
Annual fee (percentage of average
daily net assets).................. 0.25%
CUSTODIAN FEES:
Annual fee (percentage of average
daily net assets).................. 0.006%
TRANSFER AGENT AND MUTUAL FUND
ACCOUNTING FEES:..................... $ 1,657
</TABLE>
--------------------------------------------------- MF-73
---------------------------------------------------
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
AMSOUTH EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
1998
-----------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................................................................ $ 10.23
-----------
INVESTMENT ACTIVITIES:
Net investment income..................................................................................... 0.11
Net realized and unrealized gains......................................................................... 0.81
-----------
Total investment activities............................................................................... 0.92
-----------
DISTRIBUTIONS:
Net investment income..................................................................................... (0.11)
-----------
Total distributions....................................................................................... (0.11)
-----------
NET ASSET VALUE, END OF PERIOD.............................................................................. $ 11.04
-----------
-----------
Total return.............................................................................................. 9.36%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, at end of period (000)........................................................................ $ 16,149
Ratio of expenses to average net assets................................................................... 1.06%(c)
Ratio of net investment income to average net assets...................................................... 2.43%(c)
Ratio of expenses to average net assets*.................................................................. 1.80%(c)
Ratio of net investment income to average net assets*..................................................... 1.70%(c)
Portfolio turnover rate................................................................................... 28.13%
<CAPTION>
OCTOBER 23,
1997 TO
DECEMBER 31,
1997 (A)
-------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................................................................ $ 10.00
------
INVESTMENT ACTIVITIES:
Net investment income..................................................................................... 0.03
Net realized and unrealized gains......................................................................... 0.23
------
Total investment activities............................................................................... 0.26
------
DISTRIBUTIONS:
Net investment income..................................................................................... (0.03)
------
Total distributions....................................................................................... (0.03)
------
NET ASSET VALUE, END OF PERIOD.............................................................................. $ 10.23
------
------
Total return.............................................................................................. 2.27 %(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, at end of period (000)........................................................................ $ 2,387
Ratio of expenses to average net assets................................................................... 1.22 %(c)
Ratio of net investment income to average net assets...................................................... 2.39 %(c)
Ratio of expenses to average net assets*.................................................................. 7.26 %(c)
Ratio of net investment income to average net assets*..................................................... (3.65 %)(c)
Portfolio turnover rate................................................................................... 4.00 %
</TABLE>
- ------------------------
(a) Period from commencement of operations.
(b) Not annualized
(c) Annualized
* During the period certain fees were reimbursed and voluntarily reduced. If
such reimbursements and voluntary fee reductions had not occurred, the
ratios would have been as indicated.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-74
<PAGE>
Variable Insurance Funds
- --------------------------------------------------------------------------------
MENTOR VIP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCKS -- 73.68%
CAPITAL GOODS -- 1.85%
1,100 Brookdale Living Communities.......... $ 28,188
950 Conrad Industries, Inc.*.............. 10,806
850 PRI Automation, Inc.*................. 14,503
800 SCP Pool Corporation*................. 19,600
------------
73,097
------------
CONSUMER CYCLICAL -- 12.65%
1,050 A C Moore Arts & Crafts, Inc.......... 17,063
800 Butler International, Inc.*........... 20,900
1,050 Cadmus Communication Corporation...... 25,475
300 Clear Channel Communications.......... 32,744
1,200 Dollar General Corporation............ 47,489
1,050 Dollar Tree Stores, Inc.*............. 42,657
400 Express Scripts *..................... 32,250
1,850 Family Dollar Stores.................. 34,246
700 Gadzooks Inc.*........................ 19,293
750 Galey & Lord, Inc.*................... 11,177
1,450 Keystone Automotive Industries,
Inc.*............................... 33,531
1,200 Media Arts Group, Inc................. 23,100
1,150 NBTY, Inc.*........................... 21,131
350 Pillowtex Corporation................. 14,043
1,100 Rental Service Corporation*........... 36,998
450 Stage Stores, Inc.*................... 20,363
1,050 Suburban Lodges of America*........... 15,882
600 Travel Services International, Inc.... 19,725
700 Twinlab Corporation*.................. 30,582
------------
498,649
------------
CONSUMER STAPLES -- 2.85%
1,000 Rexall Sundown, Inc.*................. 35,250
1,450 Richfood Holdings, Inc................ 30,014
650 U.S. Foodservice...................... 22,797
400 Whole Foods Market, Inc.*............. 24,200
------------
112,261
------------
ENERGY -- 3.68%
500 BJ Services Company*.................. 14,538
700 Ceanic Corporation*................... 13,563
650 Coach U.S.A., Inc.*................... 29,663
1,450 Core Laboratories, Inc.*.............. 31,357
1,200 Global Industries, Ltd.*.............. 20,250
1,400 Pride International, Inc.*............ 23,726
750 Unifab International, Inc.*........... 12,188
------------
145,285
------------
FINANCIAL -- 6.50%
1,200 Amresco............................... 34,950
1,775 Concord EFS, Inc.*.................... 46,372
300 Cost Plus, Inc.*...................... 8,925
1,050 Hibernia Corporation.................. 21,207
250 Markel Corporation*................... 44,609
1,450 National Commerce Bancorporation...... 60,719
1,550 PMT Services, Inc.*................... 39,428
------------
256,210
------------
<CAPTION>
MARKET
SHARES VALUE
- ----------- ------------
<C> <S> <C>
HEALTH -- 12.16%
300 American Dental Partnership*.......... $ 4,200
700 Assisted Living Concepts*............. 12,082
550 Centennial Healthcare Company*........ 9,968
1,000 Curative Health Services, Inc.*....... 28,500
300 ESC Medical Systems*.................. 10,125
1,200 Health Management Association*........ 40,139
1,000 Healthcare Recoveries*................ 19,750
550 Henry Schein, Inc.*................... 25,368
1,000 Mecon, Inc............................ 10,375
1,300 Medquist, Inc.*....................... 37,537
1,200 Molecular Devices Company............. 19,350
600 Monarch Dental Corporation*........... 9,374
700 NCS Healthcare, Inc. - Class A*....... 19,950
900 Omnicare, Inc......................... 34,319
1,000 Paragon Health Network*............... 16,135
900 Pediatric Services of America*........ 13,950
1,350 Pharmerica............................ 16,284
650 Priority Healthcare Corporation -
Class B............................. 11,781
1,100 Province Healthcare Company........... 30,456
1,050 QuadraMed Corporation*................ 28,678
300 Quorum Health Group*.................. 7,949
1,350 Serologicals Corporation*............. 43,538
900 United Payors & United Providers,
Inc................................. 20,363
400 Wesley Jessen Visioncare, Inc......... 9,250
------------
479,421
------------
TECHNOLOGY -- 14.43%
650 ADE Corporation*...................... 9,506
550 ATMI, Inc.*........................... 8,250
650 Advanced Fibre Communications*........ 26,040
950 Ansoft Corporation.................... 11,044
200 Aspect Development, Inc.*............. 15,125
1,300 Benchmark Electronics*................ 26,014
1,150 Billing Information Concepts*......... 17,825
650 Black Box Corporation*................ 21,572
1,250 Cerprobe Corporation.................. 16,406
650 CSG Systems International, Inc.*...... 30,468
1,050 E.Spire Communications*............... 23,690
1,050 FORE Systems, Inc.*................... 27,825
550 ICG Communications*................... 20,109
950 MediaLink Worldwide*.................. 19,950
1,000 MediaRisk, Inc........................ 20,250
700 Meta Group, Inc.*..................... 15,487
450 Networking Appliance*................. 17,522
800 Optek Technology, Inc................. 15,301
1,000 Osteotech, Inc........................ 17,751
1,200 Parlex Corporation*................... 16,200
900 PCD, Inc.*............................ 15,413
550 PMC Sierra, Inc.*..................... 25,781
1,100 Powerwave Technologies, Inc.*......... 18,425
2,150 SCB Computer Technology, Inc.*........ 23,650
1,250 Segue Software, Inc................... 19,219
800 Select Appointments Holding........... 23,600
1,050 Speedfam International, Inc.*......... 19,360
780 Technology Solutions*................. 24,716
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-75
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
MENTOR VIP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ----------- ------------
TECHNOLOGY -- (CONTINUED)
<C> <S> <C>
750 World Access, Inc..................... $ 22,500
------------
568,999
------------
TRANSPORTATION -- 6.30%
800 Atlantic Coast Airlines, Inc.......... 24,000
600 Carey International, Inc.............. 16,800
1,100 Comair Holdings, Inc.................. 33,963
1,300 Covenant Transportation, Inc.*........ 25,350
1,000 Hunt (JB) Transportation Services,
Inc.*............................... 35,625
1,875 Mesaba Holdings, Inc.*................ 43,125
1,300 MotivePower Industry, Inc............. 31,867
500 MS Carriers, Inc.*.................... 13,562
1,000 Tristar Aerospace Company*............ 15,507
500 US Xpress Enterprise - Class A*....... 8,375
------------
248,174
------------
UTILITIES -- 0.38%
350 ITC DeltaCom*......................... 14,957
------------
MISCELLANEOUS -- 12.88%
700 ABR Information Services*............. 16,625
600 AccuStaff, Inc.*...................... 18,757
1,400 AHL Services, Inc.*................... 55,125
450 C & D Technologies.................... 26,107
1,050 Central Garden & Pet Company*......... 32,682
700 Chancellor Media Corporation*......... 34,759
950 Denali, Inc........................... 14,844
2,100 Fairfield Communities, Inc.*.......... 40,294
750 Gulf Island Fabrication, Inc.......... 14,063
1,000 Kulicke & Soffa Industries............ 17,000
1,150 NFO Worldwide, Inc.*.................. 20,570
1,000 Omega Protein Corporation*............ 16,011
2,550 Outdoor Systems, Inc.*................ 71,428
850 Pentacon, Inc......................... 10,105
700 Rock of Ages Corporation.............. 10,850
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
MISCELLANEOUS -- (CONTINUED)
977 Romac International*.................. $ 29,676
650 Staffmark, Inc.*...................... 23,807
800 Sunrise Assisted Living, Inc.*........ 27,500
600 Superior Services, Inc.*.............. 18,038
450 Waste Industries, Inc.*............... 9,366
------------
507,607
------------
Total Common Stocks (cost $2,948,931) 2,904,660
------------
SHORT-TERM INVESTMENT -- 37.48%
REPURCHASE AGREEMENT
$ 1,477,351 Goldman Sachs & Company
Dated 6/30/98, 6.00%, due 7/1/98
collateralized by $1,756,000 Federal
National Mortgage Association 8.50%,
2/01/28, market value $1,508,577
(cost $1,477,351)................... 1,477,351
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments (cost
$4,426,282)....................... 111.16% 4,382,011
Other Assets less Liabilities...... (11.16%) (439,888)
--------- ----------
Net Assets......................... 100.00% $3,942,123
--------- ----------
--------- ----------
</TABLE>
- ------------------------
* Non-income producing.
INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales of securities, other than short-term
securities, aggregated $3,248,364 and $247,595, respectively.
INCOME TAX INFORMATION
At June 30, 1998, the aggregated cost of investment securities for federal
income tax purposes was $4,426,282. Net unrealized depreciation aggregated
$44,271, of which $121,452, related to appreciated investment securities and
$165,723, related to depreciated investment securities.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-76
<PAGE>
Variable Insurance Funds
- --------------------------------------------------------------------------------
MENTOR VIP GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value
Investment securities......................... $2,904,660
Repurchase agreements......................... 1,477,351
----------
Total investments (cost $4,426,282)......... 4,382,011
Receivables
Investments sold.............................. 27,375
Dividends and interest........................ 468
----------
Total assets................................ 4,409,854
----------
LIABILITIES:
Payable for investment securities purchased..... 460,135
Accrued expenses and other liabilities
Management fee................................ 3,450
Other......................................... 4,146
----------
Total liabilities........................... 467,731
----------
NET ASSETS:
Capital......................................... 4,033,598
Undistributed net investment income............. 4,643
Accumulated undistributed net realized loss on
investment transactions....................... (51,847)
Net unrealized depreciation of investments...... (44,271)
----------
Net assets.................................. $3,942,123
----------
----------
Shares outstanding................................ 339,506
----------
----------
Net asset value -- offering and redemption price
per share....................................... $ 11.61
----------
----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-77
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
MENTOR VIP GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION, MARCH 3, 1998 TO JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income.................................................................................. $ 9,793
Dividends income................................................................................. 458
---------
Total income................................................................................. 10,251
---------
EXPENSES:
Management fee................................................................................... 3,449
Custodian and accounting fees.................................................................... 2,051
Distribution fee................................................................................. 1,331
Shareholder reports and postage expenses......................................................... 94
Miscellaneous.................................................................................... 14
---------
Total expenses............................................................................... 6,939
---------
Deduct
Waiver of distribution fee....................................................................... 1,331
---------
Net expenses..................................................................................... 5,608
---------
Net investment income............................................................................ 4,643
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized loss on investments................................................................. (51,847)
Change in unrealized depreciation on investments................................................. (44,271)
---------
Net loss on investments...................................................................... (96,118)
---------
Net decrease in net assets resulting from operations......................................... $ (91,475)
---------
---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-78
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
MENTOR VIP GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION, MARCH 3, 1998 TO JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
NET INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income.......................................................................... $ 4,643
Net realized loss on investments............................................................... (51,847)
Change in unrealized depreciation on investments............................................... (44,271)
---------
Decrease in net assets resulting from operations............................................... (91,475)
---------
CAPITAL TRANSACTIONS:
Proceeds from sale of shares................................................................... 4,149,798
Cost of shares redeemed........................................................................ (116,199)
---------
Net change in net assets resulting from capital share transactions............................. 4,033,598
---------
Total increase in net assets................................................................. 3,942,123
NET ASSETS:
Beginning of period............................................................................ --
---------
End of period (including undistributed net investment income of $4,643)........................ $3,942,123
---------
---------
SHARE TRANSACTIONS:
Issued......................................................................................... 349,807
Redeemed....................................................................................... (10,301)
---------
Change in shares............................................................................... 339,506
---------
---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-79
<PAGE>
Variable Insurance Funds
- --------------------------------------------------------------------------------
MENTOR VIP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (UNAUDITED)
NOTE 1: ORGANIZATION
Mentor Variable Investment Portfolios (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Trust consists of five separate Portfolios
(hereinafter each individually referred to as a "Portfolio" or collectively
as the "Portfolios") at June 30, 1998, as follows:
Mentor VIP Growth Portfolio
("Growth Portfolio")
Mentor VIP Perpetual International Portfolio
("International Portfolio")
Mentor VIP Capital Growth Portfolio
("Capital Growth Portfolio")
Mentor VIP Strategy Portfolio
("Strategy Portfolio")
Mentor VIP Balanced Portfolio
("Balanced Portfolio")
These financial statements include the Growth Portfolio.
The Growth Portfolio shares are sold subject to a contingent deferred sales
charge payable upon redemption which decreases depending on when shares were
purchased and how long they have been held.
The Growth Portfolio's investment objective is to seek long-term
appreciation of capital through investments in a diversified portfolio of
securities.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Portfolio in the preparation of its financial statements.
The policies are in conformity with generally accepted accounting principles
which require management to make estimates and assumptions that affect
amounts reported therein. Although actual results could differ from these
estimates, any such differences are expected to be immaterial to the net
assets of the Portfolio.
(a) VALUATION OF SECURITIES--Listed securities held by the Growth Portfolio
traded on national stock exchanges and over-the-counter securities quoted on
the NASDAQ National Market System are valued at the last reported sales
price or, lacking any sales, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are valued
on the exchange designated by the Board of Trustees of the Portfolios as the
primary market. Secu-
rities traded in the over-the-counter market, other than those quoted on the
NASDAQ National Market System, are valued at the last available bid price.
Short-term investments with remaining maturities of 60 days or less are
carried at amortized cost, which approximates market value. Securities for
which market quotations are not readily available are valued at fair value
as determined in good faith under procedures established by and under the
general supervision and responsibility of the Board of Trustees.
(b) REPURCHASE AGREEMENTS--It is the policy of the Trust to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book entry system, or to have segregated within the custodian bank's
vault all securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Trust to
monitor, on a daily basis, the market value of each repurchase agreement's
underlying securities to ensure the existence of a proper level of
collateral.
The Trust will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed by
the Trust's adviser to be creditworthy pursuant to guidelines established by
the Trustees. Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Trust could
receive less than the repurchase price on the sale of collateral securities.
(c) SECURITY TRANSACTIONS AND INVESTMENT INCOME-- Security transactions for
the Portfolio are accounted for on trade date. Dividend income is recorded
on the ex-dividend date. Interest income is recorded on the accrual basis.
Interest income includes interest and discount earned (net of premium) on
short-term obligations. Dividends to shareholders and capital gain
distributions, if any, are recorded on the ex-dividend date.
(d) FEDERAL INCOME TAXES--No provision for federal income taxes has been
made since it is the Portfolio's policy to comply with the provisions
applicable to regulated investment companies under the Internal Revenue Code
and to distribute to its shareholders within the allowable time limit
substantially all taxable income and realized capital gains.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-80
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
MENTOR VIP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
(e) DISTRIBUTIONS--Income distributions and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily
due to differing treatments for net operating losses and deferral of wash
sales.
NOTE 3: DIVIDENDS
Dividends are declared and paid annually to all shareholders invested in the
Growth Portfolio. Dividends will be reinvested in additional shares of the
Portfolio on payment dates at the ex-dividend date net asset value without a
sales charge unless an election is made on behalf of a separate account to
receive some or all distributions in cash. Capital gains realized by the
Portfolio, if any, are paid annually.
NOTE 4: INVESTMENT ADVISORY AND MANAGEMENT AND ADMINISTRATION AGREEMENTS
Mentor Investment Advisors, LLC ("Mentor Advisors"), is the Portfolio's
investment adviser. Mentor Advisors is a wholly owned subsidiary of Mentor
Investment Group, LLC ("Mentor") which is in turn a partially owned
subsidiary of Wheat First Union. EVEREN Capital Corporation owns 20% of the
outstanding interest in Mentor.
Mentor Advisors receives for its services an annual fee of 0.70% as a
percentage of the average daily net assets of the Portfolio. For the period
ended June 30, 1998, Mentor Advisors earned $3,449 in advisory fees.
Administrative personnel and services are provided by Mentor, under an
Administration Agreement, at an annual rate of 0.10% of the average daily
net assets of the Portfolio.
NOTE 5: DISTRIBUTION AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The Growth Portfolio has adopted a Distribution Plan (the Plan) pursuant to
Rule 12b-1 under the Investment Company Act of 1940. Under a Distribution
Agreement between the Portfolio and Mentor Distributors, LLC ("Mentor
Distributors") a wholly-owned subsidiary of BISYS Fund Services, Inc.,
Mentor Distributors was appointed distributor of the Portfolio. To
compensate Mentor Distributors for the services it provides and for the
expenses it incurs under the Distribution Agreement, the Portfolios pay a
distribution fee, which is accrued daily and paid monthly at the annual rate
of 0.25% of the Portfolio's average daily net assets for the Growth
Portfolio. For the period ended June 30, 1998, Mentor Distributors waived
such fees in the amount of $1,331.
YEAR 2000
The Portfolio receives services from a number of providers which depend on
the reliable functioning of their respective systems and the systems of
others to perform those services. It is generally recognized that certain
systems in use today may not perform their intended functions adequately
after the Year 1999 because of the inability of computer software to
distinguish the Year 2000 from the Year 1900. Mentor Advisors is taking
steps that it believes are reasonably designed to address this potential
"Year 2000" problem and to obtain satisfactory assurances that comparable
steps are being taken by the Portfolio's other major service providers.
There can be no assurance, however, that these steps will be sufficient to
avoid any adverse impact on the Portfolio from this problem.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-81
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
MENTOR VIP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR THE PERIOD FROM INCEPTION, MARCH 3, 1998 TO JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD............................................................. $ 12.50
-----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.......................................................................... 0.01
Net realized and unrealized gain on investments................................................ (0.90)
-----------
Total from investment operations............................................................... (0.89)
-----------
NET ASSET VALUE, END OF PERIOD................................................................... $ 11.61
-----------
-----------
Total Return*.................................................................................. (7.12)%
RATIOS / SUPPLEMENTAL DATA
Net assets, end of period (in thousands)....................................................... $ 3,942
Ratio of expenses to average net assets........................................................ 0.95%(a)
Ratio of expenses to average net assets excluding waiver....................................... 1.13%
Ratio of net investment income to average net assets........................................... 0.87%(a)
Portfolio turnover rate........................................................................ 30.97%
Average commission rate on portfolio transactions.............................................. $ 0.0655
</TABLE>
- ------------------------
(a) Annualized.
* Total return does not include sales commissions and is not annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-82
<PAGE>
Variable Insurance Funds
- --------------------------------------------------------------------------------
MENTOR VIP PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
LONG-TERM INVESTMENTS -- 98.74%
PREFERRED STOCKS -- 3.71%
GERMANY
260 Koenig & Bauer........................... $ 69,746
16 Porsche AG............................... 46,283
800 Prosieben Media AG....................... 41,504
-----------
Total Preferred Stocks (cost $141,294)... 157,533
-----------
COMMON STOCKS -- 95.00%
ARGENTINA -- 0.30%
390 Telefonica de Argentina SA~.............. 12,651
-----------
AUSTRALIA -- 0.55%
2,000 AMP Limited.............................. 23,398
-----------
AUSTRIA -- 1.42%
740 Bank Austria AG.......................... 60,097
-----------
BELGIUM -- 17.13%
11,200 GIB Holdins.............................. 630,766
900 Confinimmo............................... 96,546
-----------
727,312
-----------
BRAZIL -- 1.27%
410 Cemig Energetic~ (a)..................... 12,690
670 Petroleo Brasileiro SA~.................. 12,454
145 Telecomunicacoes Brasileiras SA~......... 15,832
630 Vale do Rio Doche~....................... 12,800
-----------
53,776
-----------
CHINA -- 0.32%
1,000 Huaneng Power International, Inc.~*...... 13,438
-----------
DENMARK -- 0.79%
850 Vestas Wind Systems...................... 33,511
-----------
FINLAND -- 1.33%
770 Nokia Oy -- Class A...................... 56,537
-----------
FRANCE -- 13.94%
235 Accor SA................................. 65,602
505 Axa...................................... 56,658
112 Comptoirs Modernes....................... 57,949
380 Genset SA~*.............................. 33,982
295 Groupe SEB SA............................ 40,788
300 Imetal................................... 41,133
300 Schneider SA............................. 23,863
800 Serp Recyclage*.......................... 105,595
255 Societe Generale......................... 52,888
490 Total -- Class B......................... 63,545
235 Vivendi.................................. 50,056
-----------
592,059
-----------
GERMANY -- 5.80%
110 AVA Allg Handels der Verbrau............. 39,607
700 Bayerische Vereinsbank................... 59,430
1,000 Hawesko Holding AG....................... 48,673
1,000 Metro AG................................. 60,564
2,700 Sauer Inc................................ 37,969
-----------
246,243
-----------
<CAPTION>
MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
GREAT BRITAIN -- 14.29%
1,350 Abbey National PLC....................... $ 24,041
850 Arcadia Group PLC........................ 5,698
2,400 ASDA Group PLC........................... 8,274
850 BAA PLC.................................. 9,191
950 Barclays PLC............................. 27,420
900 Bass PLC................................. 16,807
2,350 BAT Industries PLC....................... 23,452
1,000 Billiton PLC............................. 2,026
750 Brit-Borneo Petrolord.................... 3,733
1,900 British Aerospace PLC.................... 14,573
1,700 British Airways.......................... 18,297
1,000 British Gas PLC.......................... 5,805
500 Brittanic Assurance...................... 9,513
800 Burmah Castrol........................... 14,313
500 Celltech PLC*............................ 2,605
5,000 Centrica*................................ 8,462
369 CGU PLC.................................. 6,885
800 Emap PLC................................. 16,194
1,460 Enterprise Oil........................... 13,268
2,400 Express Dairies PLC...................... 6,663
1,500 Gallaher Group PLC....................... 8,310
1,050 Glaxo Wellcome........................... 31,584
1,000 Granada Group............................ 18,408
1,200 Greenalls Group PLC...................... 10,425
850 HSBC Holdings PLC........................ 20,636
1,000 Iceland Group PLC........................ 3,485
1,000 III Group PLC............................ 10,213
900 Imperial Chemical Industries PLC......... 14,496
1,000 Inchcape PLC............................. 3,185
1,600 J. Sainsbury PLC......................... 14,193
1,800 Lloyds TSB Group......................... 25,121
800 Meggitt PLC.............................. 2,594
800 National Westminster..................... 14,313
1,600 Northern Foods PLC....................... 5,816
600 PIC International Group PLC.............. 2,251
1,000 PowerGen PLC............................. 13,839
900 Prudential Corporation PLC............... 11,855
1,950 Rank Organization PLC.................... 10,608
500 Reckitt & Colman PLC..................... 9,538
900 Reuters Group PLC........................ 10,295
3,520 Rolls-Royce.............................. 14,541
400 Scot & Newcastle......................... 5,626
500 Scotia Holdings*......................... 2,739
7,800 Signet Group............................. 5,625
1,160 Smith (H.W.) Group PLC................... 7,111
1,470 SmithKline Beecham PLC................... 17,881
250 Spirax-Sarco Engineering PLC............. 2,199
7,500 Stakis PLC............................... 15,194
1,500 Standard Chartered....................... 17,020
600 Tate & Lyle PLC.......................... 4,756
900 Tesco PLC................................ 8,771
750 Trinity PLC.............................. 6,071
750 United News & Media PLC.................. 10,492
500 United Utilities......................... 7,295
900 Vickers.................................. 3,226
-----------
606,932
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-83
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
MENTOR VIP PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- -----------
HONG KONG -- 1.82%
<C> <S> <C>
8,000 Bank of East Asia........................ $ 8,674
8,000 China Foods Holdings*.................... 2,117
6,000 China Telecom*........................... 10,417
20,000 HKR International, Limited............... 7,100
12,000 Hong Kong & China Gas.................... 13,631
4,000 Hutchison Whampoa, Limited............... 21,118
47,000 Legend Holdings, Limited*................ 14,112
-----------
77,169
-----------
INDIA -- 0.75%
3,000 BSES Limited#*........................... 31,875
-----------
IRELAND -- 1.31%
2,700 Bank of Ireland.......................... 55,509
-----------
ITALY -- 4.61%
5,700 Gruppo Editoriale L'Espresso............. 47,213
4,000 Instituto Mobiliare Italiano............. 62,895
7,320 Telecom Italia Mobile.................... 44,683
5,600 Telecom Italia SPA....................... 41,149
-----------
195,940
-----------
JAPAN -- 13.71%
7,000 Asahi Glass Company...................... 37,728
4,000 Daiwa House Industry Company, Limited.... 35,213
10,000 Daiwa Securities*........................ 42,902
12 DDI Corporation.......................... 41,651
3,000 Kirin Brewery Company, Limited........... 28,242
23,000 Kurabo Industries........................ 29,916
6,000 Minebea.................................. 59,584
22,000 Nippon Steel Corporation*................ 38,576
4,000 Sumimoto Bank............................ 38,806
5,000 Sumitomo Marine & Fire................... 27,883
6,000 Sumimoto Real Estate..................... 51,310
10,000 Sumitomo Warehouse Company, Limited...... 37,297
2,000 Tokyo Electric Power..................... 39,093
2,000 Toyoda Automatic Loom Works, Limited..... 35,213
30,000 UBE Industries........................... 38,806
-----------
582,220
-----------
MALAYSIA -- 0.12%
10,000 IOI Corporation Berhad................... 5,005
-----------
MEXICO -- 1.29%
730 Coca-Cola FEMSA SP~...................... 12,684
1,400 Grupo Carso SA~.......................... 11,513
490 Panamerican Beverages -- Class A*........ 15,404
320 Telefono de Mexico -- Class L~........... 15,380
-----------
64,981
-----------
SINGAPORE -- 0.90%
5,000 GP Batteries International, Limited...... 9,131
12,000 Marco Polo Developments, Limited......... 9,036
3,000 Singapore Press.......................... 20,101
-----------
38,268
-----------
SPAIN -- 6.71%
1,350 Baron de Ley*............................ 44,771
1,810 Centros Comerciales Continente, SA....... 41,276
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- ---------- -----------
<C> <S> <C>
SPAIN -- (CONTINUED)
4,220 Corporate Finance Reunida................ $ 63,652
1,370 Telefonica de Espana SA.................. 63,287
6,800 Telepizza................................ 71,991
-----------
284,977
-----------
SWEDEN -- 2.33%
2,450 Astra AB -- Class A...................... 49,937
2,100 Celsius AB -- Class B.................... 48,843
-----------
98,780
-----------
SWITZERLAND -- 3.58%
54 Jelmoli Holding AG....................... 68,411
225 UBS AG................................... 83,514
-----------
151,925
-----------
THAILAND -- 0.73%
20,000 Electricity General Public............... 31,116
-----------
Total Common Stocks (cost $3,960,007).... 4,033,719
-----------
CONVERTIBLE SECURITY -- 0.03%
600 PIC International Group (cost $1,602).... 1,381
-----------
Total Long-Term Investments (cost
$4,102,903)............................ 4,192,633
-----------
SHORT-TERM INVESTMENT -- 20.53%
REPURCHASE AGREEMENT
$ 871,979 Goldman Sachs & Company
Dated 6/30/98, 6.00%, due 7/01/98,
collateralized by Federal National
Mortgage Association, $853,032,
8.50%, 2/01/28, market value $890,885,
(cost $871,979)........................ 871,979
-----------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments (cost $4,974,882)............... 119.27 % 5,064,612
Other Assets less Liabilities..................... (19.27 %) (818,289)
------- -----------
Net Assets........................................ 100.00% $ 4,246,323
------- -----------
------- -----------
</TABLE>
* Non-income producing.
~ American Depository Receipts.
# Global Depository Receipts.
@ International Depository Receipts.
(a) These are securities that may be resold to qualified institutional buyers
under Rule 144A or securities offered pursuant to Section 4(2) of the
Securities Act of 1933, as amended. These securities have been determined to
be liquid under guidelines established by the Board of Trustees.
INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales of securities, other than short-term
securities, aggregated $4,180,698 and $93,354, respectively.
INCOME TAX INFORMATION
At June 30, 1998, the aggregated cost of investment securities for federal
income tax purposes was $4,974,882. Net unrealized appreciation aggregated
$89,730, of which $210,718, related to appreciated investment securities and
$120,988, related to depreciated investment securities.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-84
<PAGE>
Variable Insurance Funds
- --------------------------------------------------------------------------------
MENTOR VIP PERPETUAL INTERNATIONAL PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value
Investment securities........................................................................ $4,192,633
Repurchase agreements........................................................................ 871,979
----------
Total investments (cost $4,974,882)........................................................ 5,064,612
Cash........................................................................................... 12,403
Dividends and interest receivable.............................................................. 12,501
Other.......................................................................................... 5,929
----------
Total assets............................................................................... 5,095,445
----------
LIABILITIES
Investments purchased.......................................................................... 841,202
Unrealized depreciation on forward foreign currency exchange contracts......................... 40
Accrued expenses and other liabilities
Management fee............................................................................... 5,100
Other........................................................................................ 2,780
----------
Total liabilities.......................................................................... 849,122
----------
NET ASSETS
Capital........................................................................................ $4,120,966
Undistributed net investment income............................................................ 21,507
Accumulated undistributed net realized gain on investment transactions......................... 9,937
Net unrealized appreciation of investments and foreign currency related transactions........... 93,913
----------
Net assets................................................................................. $4,246,323
----------
----------
Shares outstanding............................................................................... 308,491
----------
----------
Net asset value -- offering and redemption price per share....................................... $ 13.76
----------
----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-85
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
MENTOR VIP PERPETUAL INTERNATIONAL PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION, MARCH 3, 1998 TO JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income.................................................................................. $ 10,367
Dividends income................................................................................. 19,247
--------
Total income................................................................................... 29,614
--------
EXPENSES
Management fee................................................................................... 5,100
Custodian and accounting fees.................................................................... 2,893
Distribution fee................................................................................. 1,489
Shareholder reports and postage expenses......................................................... 100
Miscellaneous.................................................................................... 14
--------
Total expenses............................................................................... 9,596
--------
Deduct
Waiver of distribution fee..................................................................... 1,489
--------
Net expenses................................................................................... 8,107
--------
Net investment income.......................................................................... 21,507
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments................................................................. 9,937
Change in unrealized appreciation of investments and foreign currency related transactions....... 93,913
--------
Net gain on investments........................................................................ 103,850
--------
Net increase in net assets resulting from operations........................................... $125,357
--------
--------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-86
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
MENTOR VIP PERPETUAL INTERNATIONAL PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION, MARCH 3, 1998 TO JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
NET INCREASE IN NET ASSETS
OPERATIONS
Net investment income.......................................................................... $ 21,507
Net realized gain on investments............................................................... 9,937
Change in unrealized appreciation of investments and foreign currency related transactions..... 93,913
-----------
Increase in net assets resulting from operations............................................... 125,357
-----------
CAPITAL TRANSACTIONS
Proceeds from sale of shares................................................................... 4,266,747
Cost of shares redeemed........................................................................ (145,781)
-----------
Net change in net assets resulting from capital share transactions............................. 4,120,966
-----------
Total increase in net assets................................................................... 4,246,323
NET ASSETS
Beginning of period............................................................................ --
-----------
End of period (including undistributed net investment income of $21,507)....................... $ 4,246,323
-----------
-----------
SHARE TRANSACTIONS
Issued......................................................................................... 319,171
Redeemed....................................................................................... (10,680)
-----------
Change in shares............................................................................... 308,491
-----------
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-87
<PAGE>
Variable Insurance Funds
- --------------------------------------------------------------------------------
MENTOR VIP INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (UNAUDITED)
NOTE 1: ORGANIZATION
Mentor Variable Investment Portfolios (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Trust consists of five separate Portfolios
(hereinafter each individually referred to as a "Portfolio" or collectively
as the "Portfolios") at June 30, 1998, as follows:
Mentor VIP Growth Portfolio
("Growth Portfolio")
Mentor VIP Perpetual International Portfolio
("International Portfolio")
Mentor VIP Capital Growth Portfolio
("Capital Growth Portfolio")
Mentor VIP Strategy Portfolio
("Strategy Portfolio")
Mentor VIP Balanced Portfolio
("Balanced Portfolio")
These financial statements include the International Portfolio.
The International Portfolio shares are sold subject to a contingent deferred
sales charge payable upon redemption which decreases depending on when
shares were purchased and how long they have been held.
The International Portfolio's investment objective is to seek long-term
appreciation of capital through investments in a diversified portfolio of
securities of issuers located outside the United States.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the International Portfolio ("Portfolio") in the preparation of
their financial statements. The policies are in conformity with generally
accepted accounting principles which require management to make estimates
and assumptions that affect amounts reported therein. Although actual
results could differ from these estimates, any such differences are expected
to be immaterial to the net assets of the Portfolio.
(a) VALUATION OF SECURITIES--Listed securities held by the International
Portfolio for which quotations are readily available are valued at the last
sale price, or if no sale price, at the closing bid price in the principal
market in which such securities are normally traded. Short-term investments
with remaining maturities of 60 days or less are carried at amortized cost,
which approximates market value. Securities for which market quotations are
not readily available are valued at fair value as determined in good faith
under procedures established by and under the general supervision and
responsibility of the Board of Trustees.
Investment valuations, other assets, and liabilities initially expressed in
foreign currencies are converted each business day into U.S. dollars based
upon current exchange rates. Purchases and sales of foreign investments,
income, and expenses are converted into U.S. dollars based upon currency
exchange rates prevailing on the respective dates of such transactions. Net
realized gains and losses on foreign currency transactions represent net
gains and losses from sales and maturities of forward currency contracts,
disposition of foreign currencies, and currency gains and losses realized
between the trade and the settlement dates on securities transactions. The
effects of changes in foreign currency exchange rates on investments in
securities are included with the net unrealized appreciation/ depreciation
of investment securities.
(b) REPURCHASE AGREEMENTS--It is the policy of the Trust to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book entry system, or to have segregated within the custodian bank's
vault all securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Trust to
monitor, on a daily basis, the market value of each repurchase agreement's
underlying securities to ensure the existence of a proper level of
collateral.
The Trust will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed by
the Trust's adviser to be creditworthy pursuant to guidelines established by
the Trustees. Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Trust could
receive less than the repurchase price on the sale of collateral securities.
(c) SECURITY TRANSACTIONS AND INVESTMENT INCOME-- Security transactions for
the Portfolio are accounted for on trade date. Dividend income is recorded
on the ex-dividend date. Interest income is recorded on the accrual basis.
Interest income includes interest and discount earned (net of premium) on
short-term obligations. Dividends to shareholders and capital gain
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-88
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
MENTOR VIP INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
distributions, if any, are recorded on the ex-dividend date.
(d) FEDERAL INCOME TAXES--No provision for federal income taxes has been
made since it is the Portfolio's policy to comply with the provisions
applicable to regulated investment companies under the Internal Revenue Code
and to distribute to its shareholders within the allowable time limit
substantially all taxable income and realized capital gains.
(e) DISTRIBUTIONS--Income distributions and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily
due to differing treatments for net operating losses and deferral of wash
sales.
NOTE 3: DIVIDENDS
Dividends are declared and paid annually to all shareholders invested in the
International Portfolio. Dividends will be reinvested in additional shares
of the Portfolio on payment dates at the ex-dividend date net asset value
without a sales charge unless an election is made on behalf of a separate
account to receive some or all distributions in cash. Capital gains realized
by the Portfolio, if any, are paid annually.
NOTE 4: INVESTMENT MANAGEMENT AND ADMINISTRATION AGREEMENTS
The Portfolio has entered into an Investment Advisory Agreement with Mentor
Perpetual Advisors, LLC ("Mentor Perpetual"). Mentor Perpetual is owned
equally by Mentor Investment Advisors, LLC and Perpetual plc., a diversified
financial services holding company. Under this agreement, Mentor Perpetual's
management fee is accrued daily and paid monthly at an annual rate of 1.00%
applied to the average daily net assets of the Portfolio. For the six months
ended June 30, 1998, Mentor Perpetual earned advisory fees of $5,100.
Administrative personnel and services are provided by Mentor Investment
Group LLC ("Mentor"), under an Administration Agreement, at an annual rate
of 0.10% of the average daily net assets of the Portfolio.
NOTE 5: DISTRIBUTION AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The International Portfolio has adopted a Distribution Plan (the Plan)
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under a
Distribution Agreement between the Portfolio and Mentor Distributors, LLC
("Mentor Distributors") a wholly-owned subsidiary of BISYS Fund Services,
Inc., Mentor Distributors was appointed distributor of the Portfolio. To
compensate Mentor Distributors for the services it provides and for the
expenses it incurs under the Distribution Agreement, the Portfolios pay a
distribution fee, which is accrued daily and paid monthly at the annual rate
of 0.25% of the Portfolio's average daily net assets for the International
Portfolio. For the period ended June 30, 1998, Mentor Distributors waived
such fees in the amount of $1,489.
NOTE 6: FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
In connection with portfolio purchases and sales of securities denominated
in a foreign currency, the International Portfolio may enter into forward
foreign currency exchange contracts ("contracts"). Additionally, from time
to time the International Portfolio may enter into contracts to hedge
certain foreign currency assets. Contracts are recorded at market value.
Realized gains and losses arising from such transactions are included in net
gain (loss) on investments and forward foreign currency exchange contracts.
The Portfolio is subject to the credit risk that the other party will not
complete the obligations of the contract. At June 30, 1998, International
Portfolio had outstanding forward contracts as set forth below.
<TABLE>
<CAPTION>
IN NET
CONTRACTS TO EXCHANGE UNREALIZED
SETTLEMENT DATE DELIVER/RECEIVE VALUE FOR DEPRECIATION
- ------------------- --------------- --------- ----------- ---------------
<S> <C> <C> <C> <C>
PURCHASES
7/01/98 British
Pound............. 55,739 $ 92,975 $ 92,941 $ (34)
7/02/98 British
Pound............. 5,538 9,238 9,235 (3)
7/03/98 British
Pound............. 5,780 9,641 9,638 (3)
---
$ (40)
---
---
</TABLE>
YEAR 2000
The Portfolio receives services from a number of providers which depend on
the reliable functioning of their respective systems and the systems of
others to perform those services. It is generally recognized that certain
systems in use today may not perform their intended functions adequately
after the Year 1999 because of the inability of computer software to
distinguish the Year 2000 from the Year 1900. Mentor Advisors is taking
steps that it believes are reasonably designed to address
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-89
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
MENTOR VIP INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
this potential "Year 2000" problem and to obtain satisfactory assurances
that comparable steps are being taken by each of the Portfolio's other major
service providers. There can be no assurance, however, that these steps will
be sufficient to avoid any adverse impact on the Portfolio from this
problem.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-90
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
MENTOR VIP PERPETUAL INTERNATIONAL PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR THE PERIOD FROM INCEPTION, MARCH 3, 1998 TO JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD........................................................... $ 12.50
-------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................................................................ 0.07
Net realized and unrealized gain on investments.............................................. 1.19
-------------
Total from investment operations............................................................. 1.26
-------------
NET ASSET VALUE, END OF PERIOD................................................................. $ 13.76
-------------
-------------
Total Return*................................................................................ 10.08%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)..................................................... $ 4,246
Ratio of expenses to average net assets...................................................... 1.55%(a)
Ratio of expenses to average net assets excluding waiver..................................... 1.79 %
Ratio of net investment loss to average net assets........................................... 3.61 %(a)
Portfolio turnover rate...................................................................... 7.93 %
Average commission rate on portfolio transactions............................................ $ 0.0021
</TABLE>
- ------------------------
(a) Annualized.
* Total return does not include sales commissions and is not annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-91
<PAGE>
Variable Insurance Funds
- --------------------------------------------------------------------------------
MENTOR VIP CAPITAL GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ----------- -----------
<C> <S> <C>
COMMON STOCKS -- 90.05%
BASIC MATERIALS -- 2.94%
5,410 Bemis Company, Inc..................... $ 221,134
-----------
CAPITAL GOODS &
CONSTRUCTION -- 13.36%
5,790 AlliedSignal, Inc...................... 256,931
4,030 Illinois Tool Works.................... 268,751
3,630 Tyco International..................... 228,690
5,050 W.W. Grainger, Inc..................... 251,553
-----------
1,005,925
-----------
CONSUMER CYCLICAL -- 13.89%
3,020 Chancellor Media Corporation*.......... 149,962
1,470 Clear Channel Communications........... 160,414
4,750 Federated Department Store *........... 255,609
3,740 Interpublic Group Company.............. 226,971
5,070 Newell Company......................... 252,549
-----------
1,045,505
-----------
CONSUMER STAPLES -- 10.02%
2,190 Bristol-Myers Squibb................... 251,713
7,240 Sherwin Williams Company............... 239,825
10,280 Sysco Corporation...................... 263,425
-----------
754,963
-----------
FINANCIAL -- 19.28%
2,360 American Express Company............... 269,040
3,860 Banc One Corporation................... 215,436
4,010 Federal National Mortgage Association.. 243,608
3,290 NationsBank Corporation................ 251,685
5,890 Norwest Corporation.................... 220,139
4,540 UNUM Corporation....................... 251,970
-----------
1,451,878
-----------
HEALTH -- 9.12%
7,980 HealthSouth Corporation *.............. 212,966
2,840 Johnson & Johnson...................... 209,450
8,450 Tenet Healthcare....................... 264,063
-----------
686,479
-----------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- -----------
<C> <S> <C>
TECHNOLOGY -- 15.87%
3,570 Automatic Data Processing.............. $ 260,164
3,450 Computer Sciences Company.............. 220,800
4,100 Emerson Electric Company............... 247,538
5,630 Sun Microsystems, Inc. *............... 244,553
4,590 WorldCom, Inc.......................... 222,328
-----------
1,195,383
-----------
TRANSPORTATION & SERVICES -- 2.86%
11,300 Werner Enterprises, Inc................ 215,406
-----------
MISCELLANEOUS -- 2.71%
1,800 S&P 500 Depository Receipt Trust....... 203,962
-----------
Total Common Stocks (cost $6,631,746).. 6,780,635
-----------
SHORT-TERM INVESTMENT -- 18.19%
REPURCHASE AGREEMENT
$ 1,369,309 Goldman Sachs & Company
Dated 6/30/98, 6.00%, due 7/01/98,
collateralized by $1,339,187 Federal
National Mortgage Association, 8.50%,
2/01/28, market value $1,398,612
(cost $1,369,309).................... 1,369,309
-----------
Total Investments (cost $8,001,055)............... 108.24% 8,149,944
Other Assets less Liabilities..................... (8.24%) (620,326)
------- -----------
Net Assets........................................ 100.00% $ 7,529,618
------- -----------
------- -----------
</TABLE>
* Non-income producing.
INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales of securities, other than short-term
securities, aggregated $7,094,984 and $520,789, respectively.
INCOME TAX INFORMATION
At June 30, 1998, the aggregated cost of investment securities for federal
income tax purposes was $8,001,055. Net unrealized appreciation aggregated
$148,889, of which $237,329, related to appreciated investment securities and
$88,440, related to depreciated investment securities.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-92
<PAGE>
Variable Insurance Funds
- --------------------------------------------------------------------------------
MENTOR VIP CAPITAL GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value
Investment securities................................... $6,780,635
Repurchase agreements................................... 1,369,309
----------
Total investments (cost $8,001,055)................... 8,149,944
Dividends and interest receivable......................... 3,311
----------
Total assets.......................................... 8,153,255
----------
LIABILITIES:
Investments purchased..................................... 612,829
Accrued expenses and other liabilities
Management fee.......................................... 7,401
Other................................................... 3,407
----------
Total liabilities..................................... 623,637
----------
NET ASSETS:
Capital................................................... 7,313,701
Undistributed net investment income....................... 9,477
Accumulated undistributed net realized gain on investment
transactions............................................ 57,551
Net unrealized appreciation of investments................ 148,889
----------
Net assets............................................ $7,529,618
----------
----------
Shares outstanding.......................................... 590,411
----------
----------
Net asset value -- offering and redemption price per
share..................................................... $ 12.75
----------
----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-93
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
MENTOR VIP CAPITAL GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION, MARCH 3, 1998 TO JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income........................................... $ 10,559
Dividends................................................. 9,932
--------
Total income............................................ 20,491
--------
EXPENSES:
Management fee............................................ 7,401
Custodian and accounting fees............................. 3,051
Distribution fee.......................................... 2,479
Shareholder reports and postage expenses.................. 472
Miscellaneous............................................. 90
--------
Total expenses........................................ 13,493
--------
Deduct
Waiver of distribution fee.............................. 2,479
--------
Net expenses............................................ 11,014
--------
Net investment income................................... 9,477
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments.......................... 57,551
Net unrealized appreciation on investments................ 148,889
--------
Net gain on investments................................. 206,440
--------
Net increase in net assets resulting from operations.... $215,917
--------
--------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-94
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
MENTOR VIP CAPITAL GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION, MARCH 3, 1998 TO JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
NET INCREASE IN NET ASSETS
OPERATIONS
Net investment income..................................... $ 9,477
Net realized gain on investments.......................... 57,551
Net unrealized appreciation on investments................ 148,889
----------
Net increase in net assets resulting from operations...... 215,917
----------
CAPITAL TRANSACTIONS
Proceeds from sales of shares............................. 7,409,417
Cost of Shares redeemed................................... (95,716)
----------
Net change in net assets resulting from capital share
transactions............................................ 7,313,701
----------
Total increase in net assets.............................. 7,529,618
----------
NET ASSETS
Beginning of period....................................... --
----------
End of period (including undistributed net investment
income of $9,477)....................................... $7,529,618
----------
----------
SHARE TRANSACTIONS
Issued.................................................... 598,139
Redeemed.................................................. (7,728)
----------
Change in shares.......................................... 590,411
----------
----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-95
<PAGE>
Variable Insurance Funds
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MENTOR VIP CAPITAL GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
NOTE 1: ORGANIZATION
Mentor Variable Investment Portfolios (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Trust consists of five separate Portfolios
(hereinafter each individually referred to as a "Portfolio" or collectively
as the "Portfolios") at June 30, 1998, as follows:
Mentor VIP Growth Portfolio
("Growth Portfolio")
Mentor VIP Perpetual International Portfolio
("International Portfolio")
Mentor VIP Capital Growth Portfolio
("Capital Growth Portfolio")
Mentor VIP Strategy Portfolio
("Strategy Portfolio")
Mentor VIP Balanced Portfolio
("Balanced Portfolio")
These financial statements include the Capital Growth Portfolio.
The Capital Growth Portfolio shares are sold subject to a contingent
deferred sales charge payable upon redemption which decreases depending on
when shares were purchased and how long they have been held.
The investment objective of the Capital Growth Portfolio is to provide
long-term appreciation of capital by investing in a wide variety of
securities which the investment adviser believes offers the potential for
capital appreciation over both the intermediate and long-term.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Portfolio in the preparation of its financial statements.
The policies are in conformity with generally accepted accounting principles
which require management to make estimates and assumptions that affect
amounts reported therein. Although actual results could differ from these
estimates, any such differences are expected to be immaterial to the net
assets of the Portfolio.
(a) VALUATION OF SECURITIES--Listed securities held by the Capital Growth
Portfolio traded on national stock exchanges and over-the-counter securities
quoted on the NASDAQ National Market System are valued at the last reported
sales price or, lacking any sales, at the last available bid price. In cases
where securities are traded on more than one exchange, the securities are
valued on the exchange designated by the Board of Trustees of the Portfolios
as the primary market. Securities traded in the over-the-counter market,
other than those quoted on the NASDAQ National Market System, are valued at
the last available bid price. Short-term investments with remaining
maturities of 60 days or less are carried at amortized cost, which
approximates market value. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith under
procedures established by and under the general supervision and
responsibility of the Board of Trustees.
(b) REPURCHASE AGREEMENTS--It is the policy of the Trust to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book entry system, or to have segregated within the custodian bank's
vault all securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Trust to
monitor, on a daily basis, the market value of each repurchase agreement's
underlying securities to ensure the existence of a proper level of
collateral. The Trust will only enter into repurchase agreements with banks
and other recognized financial institutions such as broker/dealers which are
deemed by the Trust's adviser to be creditworthy pursuant to guidelines
established by the Trustees. Risks may arise from the potential inability of
counterparties to honor the terms of the repurchase agreement. Accordingly,
the Trust could receive less than the repurchase price on the sale of
collateral securities.
(c) SECURITY TRANSACTIONS AND INVESTMENT INCOME-- Security transactions for
the Portfolio are accounted for on trade date. Dividend income is recorded
on the ex-dividend date. Interest income is recorded on the accrual basis.
Interest income includes interest and discount earned (net of premium) on
short-term obligations. Dividends to shareholders and capital gain
distributions, if any, are recorded on the ex-dividend date.
(d) FEDERAL INCOME TAXES--No provision for federal income taxes has been
made since it is the Portfolio's policy to comply with the provisions
applicable to regulated investment companies under the Internal Revenue Code
and to distribute to its shareholders within the allowable time limit
substantially all taxable income and realized capital gains.
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VARIABLE INSURANCE FUNDS
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MENTOR VIP CAPITAL GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1998
(e) Distributions -- Income distributions and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily
due to differing treatments for net operating losses and deferral of wash
sales.
NOTE 3: DIVIDENDS
Dividends are declared and paid annually to all shareholders invested in the
Capital Growth Portfolio. Dividends will be reinvested in additional shares
of the Portfolio on payment dates at the ex-dividend date net asset value
without a sales charge unless an election is made on behalf of a separate
account to receive some or all distributions in cash. Capital gains realized
by the Portfolio, if any, are paid annually.
NOTE 4: INVESTMENT ADVISORY AND MANAGEMENT AND ADMINISTRATION AGREEMENTS
Mentor Investment Advisors, LLC ("Mentor Advisors"), is the Portfolio's
investment adviser. Mentor Advisors is a wholly owned subsidiary of Mentor
Investment Group, LLC ("Mentor") which is in turn a partially owned
subsidiary of Wheat First Union. EVEREN Capital Corporation owns 20% of the
outstanding interest in Mentor.
Mentor Advisors receives for its services an annual fee of 0.80% as a
percentage of the average daily net assets of the Portfolio. For the period
ended June 30, 1998, Mentor Advisors earned $7,401 in advisory fees.
Administrative personnel and services are provided by Mentor, under an
Administration Agreement, at an annual rate of 0.10% of the average daily
net assets of the Portfolio.
NOTE 5: DISTRIBUTION AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The Capital Growth Portfolio has adopted a Distribution Plan (the Plan)
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under a
Distribution Agreement between the Portfolio and Mentor Distributors, LLC
("Mentor Distributors") a wholly-owned subsidiary of BISYS Fund Services,
Inc., Mentor Distributors was appointed distributor of the Portfolio. To
compensate Mentor Distributors for the services it provides and for the
expenses it incurs under the Distribution Agreement, the Portfolios pay a
distribution fee, which is accrued daily and paid monthly at the annual rate
of 0.25% of the Portfolio's average daily net assets for the Capital Growth
Portfolio. For the period ended June 30, 1998, Mentor Distributors waived
such fees in the amount of $2,479.
YEAR 2000
The Portfolio receives services from a number of providers which depend on
the reliable functioning of their respective systems and the systems of
others to perform those services. It is generally recognized that certain
systems in use today may not perform their intended functions adequately
after the Year 1999 because of the inability of computer software to
distinguish the Year 2000 from the Year 1900. Mentor Advisors is taking
steps that it believes are reasonably designed to address this potential
"Year 2000" problem and to obtain satisfactory assurances that comparable
steps are being taken by the Portfolio's other major service providers.
There can be no assurance, however, that these steps will be sufficient to
avoid any adverse impact on the Portfolio from this problem.
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VARIABLE INSURANCE FUNDS
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MENTOR VIP CAPITAL GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR THE PERIOD FROM INCEPTION, MARCH 3, 1998 TO JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD........................................................... $ 12.50
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INCOME FROM INVESTMENT OPERATIONS
Net investment income........................................................................ 0.02
Net realized and unrealized gain on investments.............................................. 0.23
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Total from investment operations............................................................. 0.25
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NET ASSET VALUE, END OF PERIOD................................................................. $ 12.75
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Total Return*................................................................................ 2.00%
RATIOS / SUPPLEMENTAL DATA
Net assets, end of period (in thousands)..................................................... $ 7,530
Ratio of expenses to average net assets...................................................... 1.05%(a)
Ratio of expenses to average net assets excluding waiver..................................... 1.24%
Ratio of net investment loss to average net assets........................................... 0.96%(a)
Portfolio turnover rate...................................................................... 27.86%
Average commission rate on portfolio transactions............................................ $ 0.0684
</TABLE>
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(a) Annualized.
* Total return does not include sales commissions and is not annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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