<PAGE>
STAG VARIABLE LIFE PRODUCT PORTFOLIO
1998
HARTFORD LIFE INSURANCE COMPANY
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
[LOGO]
SEPARATE ACCOUNTS AND
HARTFORD HLS MUTUAL FUNDS
ANNUAL REPORT
<PAGE>
Table of Contents
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Letter to Clients................................. 1
Performance Summary of Hartford Mutual Funds...... 2
Investment Review................................. 3
Hartford Life Insurance Companies Separate Account
FinancialStatements and Notes to Financial
Statements
Hartford Life Insurance Company Separate
Account Variable Life One.................... 16
Hartford Life Insurance Company Separate
Account Variable Life Two.................... 28
Hartford Life Insurance Company Separate
Account One.................................. 42
Hartford Life and Annuity Insurance Company
Separate Account Variable Life One........... 50
Hartford Life and Annuity Insurance Company
Separate Account Variable Life Two........... 64
Hartford Mutual Funds
Statements of Net Assets as of December 31,
1998:
Hartford Bond HLS Fund, Inc................... MF-1
Hartford Stock HLS Fund, Inc.................. MF-5
Hartford Money Market HLS Fund, Inc........... MF-7
Hartford Advisers HLS Fund, Inc............... MF-9
Hartford Capital Appreciation HLS Fund,
Inc.......................................... MF-13
Hartford Mortgage Securities HLS Fund, Inc.... MF-16
Hartford Index HLS Fund, Inc.................. MF-18
Hartford International Opportunities HLS Fund,
Inc.......................................... MF-24
Hartford Dividend and Growth HLS Fund, Inc.... MF-27
Hartford International Advisors HLS Fund,
Inc.......................................... MF-30
Hartford Small Company HLS Fund, Inc.......... MF-35
Hartford MidCap HLS Fund, Inc................. MF-37
Hartford Growth and Income HLS Fund........... MF-39
Hartford High Yield Bond HLS Fund............. MF-41
Hartford Global Leaders HLS Fund.............. MF-44
Statements of Operations for the Year Ended
December 31, 1998:
Hartford Mutual Funds......................... MF-46
Statements of Changes in Net Assets for the Year
Ended December 31, 1998 and the Year Ended
December 31, 1997:
Hartford Mutual Funds......................... MF-50
Notes to Financial Statements:
Hartford Mutual Funds......................... MF-56
Hartford Mutual Funds Financial Highlights...... MF-68
</TABLE>
Contract owners should refer to the prospectus provided to them at the time of
purchase of their contract for a description of investment alternatives
available in the Separate Accounts. This prospectus, along with the financial
information contained in this report, provides them with complete and up-to-date
financial information regarding the Separate Accounts.
This report is prepared for the general information of contract owners and is
not an offer of contracts. It should not be used in connection with any offer,
except in conjunction with the appropriate prospectus which contains all
pertinent information including the applicable sales, administrative and other
charges.
<PAGE>
A Message From The President
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Dear Policyowner,
Describing 1998 as a "volatile" year for the stock market could be considered an
understatement. While volatile market conditions can be unsettling, over time
the stock market has historically delivered the best results to investors. This
was still true in 1998. By year's end the market rewarded those investors who
took the long view. And the gains continued as the new year began. The lesson
learned in 1998 is important - don't get rattled by short-term disruptions.
Hartford Life's variable life insurance products are designed to provide strong
results for those who have long-term goals. We know our products' long-term
performance -- permanent life insurance protection -- is our ultimate value to
policy owners and that's why our money managers stay focused on the long-term.
So when we experience a year like 1998, our money managers look to identify new
opportunities for long-term gain.
The Stag Variable Life products offer an array of investment options positioned
to take advantage of the varying opportunities in the equity and fixed income
market. In fact, with 36 investment options to choose from, you have more choice
than ever before.
And while market conditions may fluctuate, one thing that won't waver is
Hartford Life's dedication to providing you with the best -- products, service
and investing discipline. Thank you for continuing to be a Hartford Life policy
owner.
[LOGO]
Lon A. Smith
PRESIDENT & CEO
Hartford Life, Inc.
NOTE: PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.
[LOGO]
1
<PAGE>
Performance Summary of Hartford HLS Mutual Funds
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FUNDS
<CAPTION>
TOTAL RETURNS FOR THE YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock HLS Fund... 33.47% 31.38% 24.37% 34.10% (1.89)% 14.34% 10.04% 24.58% (3.87)%
Bond HLS Fund.... 8.15 11.35 3.52 18.49 (3.95) 10.24 5.53 16.43 8.39
Money Market HLS
Fund............ 5.25 5.31 5.19 5.74 3.95 2.94 3.63 6.01 8.09
Advisers HLS
Fund............ 24.66 24.51 16.59 28.34 (2.74) 12.25 8.30 20.33 1.26
Capital
Appreciation HLS
Fund............ 15.48 22.34 20.70 30.25 2.50 20.80 16.98 53.99 (10.90)
Mortgage
Securities HLS
Fund............ 6.72 9.01 5.07 16.17 (1.61) 6.31 4.64 14.71 9.70
Index HLS Fund... 28.06 32.61 22.09 36.55 0.94 9.12 6.82 29.53 (3.99)
International
Opportunities
HLS Fund........ 13.16 0.34 12.93 13.93 (1.94) 33.73 (4.43) 13.00 (11.76)*
Dividend and
Growth HLS
Fund............ 16.42 31.89 22.91 36.37 1.96* -- -- -- --
International
Advisers HLS
Fund............ 13.35 5.52 11.79 15.84* -- -- -- -- --
Small Company HLS
Fund............ 11.62 18.38 7.15* -- -- -- -- -- --
MidCap HLS
Fund............ 26.57 13.81* -- -- -- -- -- -- --
Growth & Income
HLS Fund........ 19.05* -- -- -- -- -- -- -- --
Global Leaders
HLS Fund........ 31.88* -- -- -- -- -- -- -- --
High Yield HLS
Fund............ 3.58* -- -- -- -- -- -- -- --
MARKET INDICES
Standard & Poor's
500 Stock
Index........... 28.60 % 33.35 % 22.95 % 37.52 % 1.31 % 10.06 % 7.61 % 30.39 % (3.11)%
Standard & Poor's
400 Stock Index
(MidCap)........ 19.11 32.25 19.18 30.88 (3.59) 11.03 7.58 16.13 8.28
Shearson Lehman
Gov't/ Corp.
Bond Index...... 9.47 9.76 2.90 19.24 (3.51) 11.03 7.58 16.13 8.28
90-Day Treasury
Bills........... 4.98 5.33 5.29 5.80 4.14 3.12 3.70 5.90 7.95
EAFEGDP.......... 26.71 5.77 7.63 11.16 7.81 33.56 (9.65) 10.73 --
Frank Russell
2000 Index...... (2.55) 22.36 16.51 28.45 (1.82) 18.71 18.41 46.04 (19.48)
Frank Russell
2500 Index...... 0.38 24.43 19.04 31.70 (1.07) 16.54 16.18 46.69 (14.88)
Shearson Lehman
Brothers
Mortgage Backed
Bond Index...... 6.96 9.49 5.35 16.80 (1.61) 6.84 8.96 15.72 10.72
<CAPTION>
FUNDS
1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C>
Stock HLS Fund... 26.02% 19.00% 5.41% 12.33% 31.49%
Bond HLS Fund.... 12.10 7.60 (0.01) 12.19 20.62
Money Market HLS
Fund............ 9.10 7.40 6.49 6.77 8.53
Advisers HLS
Fund............ 21.72 14.24 6.08 12.70 26.85
Capital
Appreciation HLS
Fund............ 24.11 26.37 (4.31) 9.03 36.18
Mortgage
Securities HLS
Fund............ 13.13 8.38 2.64 11.13 20.61
Index HLS Fund... 30.47 16.35 (12.91)* -- --
International
Opportunities
HLS Fund........ -- -- -- -- --
Dividend and
Growth HLS
Fund............ -- -- -- -- --
International
Advisers HLS
Fund............ -- -- -- -- --
Small Company HLS
Fund............ -- -- -- -- --
MidCap HLS
Fund............ -- -- -- -- --
Growth & Income
HLS Fund........ -- -- -- -- --
Global Leaders
HLS Fund........ -- -- -- -- --
High Yield HLS
Fund............ -- -- -- -- --
MARKET INDICES
Standard & Poor's
500 Stock
Index........... 31.62 % 16.60 % 5.49 % 18.66 % 31.70 %
Standard & Poor's
400 Stock Index
(MidCap)........ 14.24 7.58 2.29 15.62 21.30
Shearson Lehman
Gov't/ Corp.
Bond Index...... 14.24 7.58 2.29 15.62 21.30
90-Day Treasury
Bills........... 8.67 6.56 5.97 6.41 7.97
EAFEGDP.......... -- -- -- -- --
Frank Russell
2000 Index...... 16.26 25.02 (8.80) 5.68 31.04
Frank Russell
2500 Index...... 19.43 21.39 1.75 12.62 --
Shearson Lehman
Brothers
Mortgage Backed
Bond Index...... 15.35 8.55 2.81 -- --
</TABLE>
* The inception dates of the Funds are as follows: Stock and Bond
Securities--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, Growth & Income--April
30, 1998, High Yield--September 21, 1998 and Global Leaders--September 30,
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 funds is intended.
---------------------------------------------------- 2
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<PAGE>
Hartford
Small Company HLS Fund
Portfolio Manager
Q. How Did The Fund Perform?
[PHOTOGRAPH]
MARK S. WATERHOUSE The Hartford Small Company HLS Fund outperformed
Vice President its Lipper peer group for the year ending
Wellington Management December 31, 1998. The Fund provided a total
Company, LLP return of 11.6% versus 1.5% for the Lipper Small
Company VA-UF Aver-age, placing the Fund in the
first quartile of performance for funds in the
group.
Q. Why Did The Fund Perform This Way?
The greatest single contributor to the great
performance in 1998 was maintaining our conviction
on our holdings during periods of market volatility,
while adhering to our discipline and taking advantage
of market gyrations to acquire attractively valued
smaller companies.
Q. What Is Your Outlook For 1999?
We are very optimistic about small cap stocks in 1999.
In light of larger cap companies' greater reliance
on markets outside of the U.S. for profit growth,
aggregate earnings estimates for small caps exceed
the expected growth for major companies. In
addition, due to their recent relative
underperformance, small caps are attractively valued
with multiples, in some instances, at 15-20 year
lows. Going forward, we will continue to focus on
identifying the most attractive opportunities in the
small cap universe. As a guide, we will concentrate
on those economic sectors where we see the greatest
potential and on those small companies with strong,
healthy balance sheets and 15-20% earnings growth.
Performance Overview
[GRAPH]
- ------------------------------------------------
Annualized Returns
Average Annual Returns
Period Ended December 31, 1998
1 YEAR SINCE INCEPTION
Small Co IA 11.62% 15.63%
Russell 2000 -2.55% 12.62%
- -------------------------------------------------
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN
THE SMALL COMPANY HLS FUND. (THE ANNUALIZED RETURNS
INCLUDE THE FUND LEVEL EXPENSES, BUT EXCLUDE THE
INSURANCE CHARGES). PAST PERFORMANCE DOES NOT
GUARANTEE FUTURE RESULTS. THE VALUE OF THE CONTRACT
WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE
WORTH MORE OR LESS THAN THE ORIGINAL INVESTMENT.
<PAGE>
Hartford
Capital Appreciation HLS Fund
Portfolio Manager
Q. How Did The Fund Perform?
[PHOTOGRAPH]
SAUL J. PANNELL, CFA The Hartford Capital Appreciation HLS Fund
Senior Vice President underperformed its Lipper peer group for the year
and Partner ending December 31, 1998. The Fund provided a total
Wellington Management return of 15.5% versus 22.2% for the Lipper Capital
Company, LLP Appreciation VA-UF Average. On a longer term basis,
the Fund has performed in line with its Lipper peer
group and ranks at the median point of its
competition.
Q. Why Did The Fund Perform This Way?
Due to their perceived safe haven characteristics,
large cap, blue chip growth stocks dominated the
market in 1998. There was a wide disparity between
the performance of "mega-caps" and everything else
in the market. The Capital Appreciation Fund is
invested in many mid and small cap companies that
we believe have great capital appreciation potential.
However, this exposure limited the Fund's returns
this year.
Q. What Is Your Outlook For 1999?
During 1999, we may well see a reversal of the large
cap dominance of the equity market. Therefore, we
are confident that our approach of focusing on
opportunities for capital appreciation, regardless of
market capitalization, will provide satisfactory
returns. The overall strategy for the Fund is dual
faceted: we will emphasize smaller companies with
dynamic earnings growth prospects, and use larger
stocks as opportunistic trades where we see a catalyst
for outperformance. We have tended to roam off
the beaten path, historically where the most upside
potential has been. This approach should provide
positive absolute and relative results over the
longer term. While the overall market outlook remains
controversial, macroeconomic and valuation factors
endorse our positioning.
Performance Overview
[GRAPH]
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Annualized Returns
Average Annual Returns
Period Ended December 31, 1998
1 YEAR 5 YEAR 10 YEAR
Cap App IA 15.48% 17.89% 18.55%
S&P 500 28.60% 24.05% 19.19%
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THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN
THE CAPITAL APPRECIATION HLS FUND. (THE ANNUALIZED
RETURNS INCLUDE THE FUND LEVEL EXPENSES, BUT EXCLUDE
THE INSURANCE CHARGES). PAST PERFORMANCE DOES NOT
GUARANTEE FUTURE RESULTS. THE VALUE OF THE CONTRACT
WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH
MORE OR LESS THAN THE ORIGINAL INVESTMENT.
<PAGE>
Hartford
MidCap HLS Fund
Portfolio Manager
Q. How Did The Fund Perform?
[PHOTOGRAPH]
PHILLIP H. PERELMUTER The Hartford MidCap HLS Fund outperformed its
Vice President Lipper peer group for the year ending December 31,
Wellington Management 1998. The Fund provided a total return of 26.6%
Company, LLP versus 19.3% for the Lipper MidCap VA-UF Average,
placing the Fund in the second quartile of
performance for funds in the group.
Q. Why Did The Fund Perform This Way?
Although the market's performance in 1998 was
driven by large cap stocks, mid caps fared
relatively well. A strong rebound in the 4th
quarter was especially helpful. Mid-caps, as
measured by the S&P Mid Cap 400 Index, returned
28.2% in the 4th quarter alone. This performance
was better than that of both large-cap and small-cap
stocks for the same period. In addition, our
steadfast focus on high-quality mid-cap companies
operating in the highest growth areas of the economy
provided a performance advantage versus the
competition.
Q. What Is Your Outlook For 1999?
Although large cap stocks outperformed mid caps in
1998, we may be near an inflection point in relative
performance. Mid-cap stocks generally perform well
relative to large-caps after Federal Reserve interest
rate cuts, of which we have recently had three. Also
supportive of the asset class, the current gap in
valuations between mid- and large-caps is very wide.
We will continue to focus on companies on the verge
of greatness within our five sectors of opportunity:
consumer products, finance, health care, services,
and technology. These are the sectors we believe will
show greater earnings growth than the overall market
over the next 12-18 months. 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 U.S.
and continued turbulence overseas.
Performance Overview
[GRAPH]
- ------------------------------------------------
Annualized Returns
Average Annual Returns
Period Ended December 31, 1998
1 YEAR SINCE INCEPTION
MidCap IA 26.57% 28.28%
S&P 400 19.11% 20.22%
- ------------------------------------------------
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN
THE MIDCAP HLS FUND. (THE ANNUALIZED RETURNS INCLUDE
THE FUND LEVEL EXPENSES, BUT EXCLUDE THE INSURANCE
CHARGES). PAST PERFORMANCE DOES NOT GUARANTEE FUTURE
RESULTS. THE VALUE OF THE CONTRACT WILL FLUCTUATE SO
THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN
THE ORIGINAL INVESTMENT.
<PAGE>
Hartford
International Opportunities HLS Fund
Lead Portfolio Manager
Q. How Did The Fund Perform?
[PHOTOGRAPH] The Hartford International Opportunities HLS Fund
TROND SKRAMSTAD performed in line with its Lipper peer group for the
Senior Vice President year ending December 31, 1998. The Fund provided a
and Partner total return of 13.2% versus 13.3% for the Lipper
Wellington Management International VA-UF Average.
Company, LLP
Q. Why Did The Fund Perform This Way?
Despite a volatile year for international equity
markets, the Hartford International Opportunities
Fund fared well as a result of its strategic country
allocation decisions. The Fund was positioned to
benefit from strong performing markets in Europe and
to limit losses in crisis areas such as Japan and
the Emerging Markets. The Fund was also repositioned
to have greater exposure to large cap stocks capable
of withstanding the challenges of less dynamic global
economic growth.
Q. What Is Your Outlook For 1999?
We expect lackluster corporate profits growth
globally in 1999. Although profit growth will slow,
equities should post good performance due to lower
global interest rates. We believe owning stable
growth companies during such a period of decelerating
corporate profits and global economic weakness is
the prudent investment strategy. We are bullish on
Europe, where the corporate restructuring and
increased focus on shareholder returns will be
accelerated by the Euro. We are concerned by the
slow pace of change in Japan and will limit exposure
to this market until we see substantial progress on
structural reforms. Despite Japan's problems, there
are select investment opportunities, such as in the
attractively valued technology sector. The
investment risks in the Emerging Markets currently
outweigh the prospective rewards, but we will
continue to monitor developments in these regions
to identify attractive opportunities.
Performance Overview
[GRAPH]
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Annualized Returns
Average Annual Returns
Period Ended December 31, 1998
1 YEAR 5 YEAR SINCE INCEP.
Int'l Opp IA 13.16% 7.45% 7.33%
EAFE GDP* 26.71% 11.57% 8.21%
- ------------------------------------------------
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN
THE INTERNATIONAL OPPORTUNITIES HLS FUND. (THE
ANNUALIZED RETURNS INCLUDE THE FUND LEVEL EXPENSES,
BUT EXCLUDE THE INSURANCE CHARGES). PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS. THE VALUE OF THE
CONTRACT WILL FLUCTUATE SO THAT WHEN REDEEMED, IT
MAY BE WORTH MORE OR LESS THAN THE ORIGINAL
INVESTMENT.
* THE MORGAN STANLEY EUROPE AUSTRALIA FAR EAST GDP-NET INDEX.
<PAGE>
Hartford
Global Leaders HLS Fund
Portfolio Managers
Q. How Did The Fund Perform?
[PHOTOGRAPH]
RAND L. ALEXANDER, CFA With a return of 31.9% during the fourth quarter,
Senior Vice President the Hartford Global Leaders Fund ranked #1 out
and Partner of 245 funds in the Lipper Global category for
Wellington Management the quarter ending December 31, 1998.
Company, LLP
Q. Why Did The Fund Perform This Way?
[PHOTOGRAPH]
ANDREW S. OFFIT The portfolio invests in the best companies around
Vice President the world. We focus on companies with superior
Wellington Management products, services and management. These global
Company, LLP leaders are capable of delivering admirable
earnings even during difficult economic times. The
factors which give them comparative advantages
translate into strong earnings growth and stock
price performance.
Q. What Is Your Outlook For 1999?
Overall, there is a clear focus toward growth sectors
and, while the valuations may be higher in these
areas, we believe our strategy is appropriate
for this stage of the world economy. Commodity price
deflation, industrial capacity oversupply, and
intense competition worldwide have made it difficult
for companies to grow revenues and profits. Companies
that can deliver growth in this environment will
command investor attention. The sectors on which we
are currently most focused are information technology,
health-care, and information and entertainment. We
are cautious on the materials and energy sectors
which require a more robust economic backdrop for
healthier earnings growth.
Performance Overview
[GRAPH]
- ---------------------------------------------------
Cumulative Returns
Cumulative Returns
Period Ended December 31, 1998
SINCE INCEPTION
Global Leaders IA 31.88%
MSCI World 21.15%
- ---------------------------------------------------
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE
GLOBAL LEADERS HLS FUND. (THE CUMULATIVE RETURNS
INCLUDE THE FUND LEVEL EXPENSES, BUT EXCLUDE THE
INSURANCE CHARGES). PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS. THE VALUE OF THE CONTRACT WILL
FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE
OR LESS THAN THE ORIGINAL INVESTMENT.
<PAGE>
Hartford
Stock HLS Fund
Portfolio Manager
Q. How Did The Fund Perform?
[PHOTOGRAPH]
RAND L. ALEXANDER, CFA The Hartford Stock HLS Fund outperformed its Lipper
Senior Vice President peer group for the year ending December 31, 1998.
and Partner The Fund provided a total return of 33.5% versus
Wellington Management 24.9% for the Lipper Growth VA-UF Average, placing
Company, LLP the Fund in the second quartile of performance for
funds in the group.
Q. Why Did The Fund Perform This Way?
In spite of the market turmoil in 1998, investors who
focused on large-cap, high quality companies with
consistent or accelerating earnings growth were well
rewarded. The market's performance was dominated by
a small number of very large companies who were
able to deliver in a difficult environment. These
are exactly the type of companies in which the Stock
Fund invests. The Fund also benefited from our
overweight positions in technology, healthcare,
retail and media -- sectors which performed well
in 1998.
Q. What Is Your Outlook For 1999?
With low inflation, less dynamic economic growth,
and the potential for lower interest rates, we expect
the market to continue focusing on companies with
consistent and predictable earnings growth. The
Federal Reserve's interest rate cuts have been
welcomed by Wall Street but have not had much
impact on global economic growth; therefore, we
expect further efforts on the part of the world's
central bankers to stimulate the worldwide economy.
These efforts could lead to a period of rapid growth
which would turn investors' attention to more
cyclical sectors of the market. At such time, we
would increase our exposure to commodities producers
and manufacturing.
Performance Overview
[GRAPH]
- ---------------------------------------------------
Annualized Returns
Average Annual Returns
Period Ended December 31, 1998
1 YEAR 5 YEAR 10 YEAR
Stock IA 33.47% 23.47% 18.48%
S&P 500 28.60% 24.05% 19.19%
- ---------------------------------------------------
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE
STOCK HLS FUND. (THE ANNUALIZED RETURNS INCLUDE THE
FUND LEVEL EXPENSES, BUT EXCLUDE THE INSURANCE CHARGES).
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
THE VALUE OF THE CONTRACT WILL FLUCTUATE SO THAT WHEN
REDEEMED, IT MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL INVESTMENT.
<PAGE>
Hartford
Growth and Income HLS Fund
Portfolio Manager
Q. How Did The Fund Perform?
[PHOTOGRAPH]
JAMES A. RULLO, CFA The Hartford Growth and Income HLS Fund outperformed
Vice President its Lipper peer group for the quarter ending
Wellington Management December 31, 1998. The Fund provided a total return
Company, LLP of 23.8% for the quarter, versus 17.8% for the Lipper
Growth & Income VA-UF Average.
Q. Why Did The Fund Perform This Way?
Large-cap stocks were the key beneficiaries of the
fourth quarter stock market rally. Within large
stocks, growth companies, the focus of the Growth
and Income Fund, outperformed value stocks. In
addition, our significant weighting in technology
stocks, which led the stock market recovery, also
boosted returns.
Q. What Is Your Outlook For 1999?
We anticipate slower U.S. economic activity and
corporate earnings growth in 1999. However, the
interest rate environment is very positive for
equities, particularly for those stocks which
produce stable earnings growth. We expect
additional interest rate cuts by the Federal
Reserve, which will also be supportive of stock
market returns. Finding superior stocks will be a
more difficult task in 1999 as valuations are
stretched by historical standards. However, we
still feel there are interesting opportunities in
technology and mid-to-small drug stocks.
Performance Overview
[GRAPH]
- ---------------------------------------------------
Cumulative Returns
Cumulative Returns
Period Ended December 31, 1998
SINCE INCEPTION
Growth and Income IA 19.05%
S&P 500 13.66%
- ---------------------------------------------------
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE
GROWTH AND INCOME HLS FUND. (THE CUMULATIVE RETURNS
INCLUDE THE FUND LEVEL EXPENSES, BUT EXCLUDE THE
INSURANCE CHARGES). PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS. THE VALUE OF THE CONTRACT
WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH
MORE OR LESS THAN THE ORIGINAL INVESTMENT.
<PAGE>
Hartford
Dividend and Growth HLS Fund
Portfolio Manager
Q. How Did The Fund Perform?
[PHOTOGRAPH]
LAURIE A. GABRIEL, CFA The Hartford Dividend and Growth HLS Fund performed
Senior Vice President in line with its Lipper peer group for the year
and Partner ending December 31, 1998. The Fund provided a total
Wellington Management return of 16.4% versus 16.8% for the Lipper Equity
Company, LLP Income VA-UF Average.
Q. Why Did The Fund Perform This Way?
During 1998, growth-oriented stocks outpaced value
stocks. In light of our dividend-oriented value
bias, some of the Fund's holdings were under
pressure. Our lack of holdings in the information
technology area which we find to be overvalued, was
also a drawback. Substantial holdings in the
industrial/commercial and information/entertainment
sectors were beneficial to the Fund.
Q. What Is Your Outlook For 1999?
We will continue to look for value plays across all
industries. This is a key feature of the Fund's
investment strategy. Since the focus of our investment
approach is stock selection, the sector representation
will be fairly stable over time. In light of
slower global growth and benign inflation trends, we
are well positioned going into 1999 as we have
limited our exposure to cyclical companies
(commodities, manufacturing) while maximizing holdings
in more promising areas such as health care and
consumer products. In our stock selection, we will
continue identifying stocks with above average yields
and below average price/earnings ratios.
Performance Overview
[GRAPH]
- ---------------------------------------------------
Annualized Returns
Average Annual Returns
Period Ended December 31, 1998
1 YEAR SINCE INCEPTION
Div and Grow IA 16.42% 22.18%
S&P 500 28.60% 24.92%
- ---------------------------------------------------
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE
DIVIDEND AND GROWTH HLS FUND. (THE ANNUALIZED RETURNS
INCLUDE THE FUND LEVEL EXPENSES, BUT EXCLUDE THE
INSURANCE CHARGES). PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS. THE VALUE OF THE CONTRACT WILL FLUCTUATE
SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN
THE ORIGINAL INVESTMENT.
<PAGE>
Hartford
International Advisers HLS Fund
Portfolio Managers
Q. How Did The Fund Perform?
[PHOTOGRAPH]
ROBERT EVANS The Hartford International Advisers HLS Fund
Vice President underperformed its benchmark for the year
Wellington Management ended December 31, 1998. The Fund provided a
Company, LLP total return of 13.4% versus 19.6% for the
Composite Index (55% EAFE GDP Net, 35% SB World
Govt non-U.S. Bond -- hedged, 10% T-Bill). Over
longer time periods, the Fund has outperformed
its market index.
Q. Why Did The Fund Perform This Way?
[PHOTOGRAPH]
TROND SKRAMSTAD It was a volatile year in the international equity
Senior Vice President and fixed income markets. Through our ability to
and Partner allocate assets between stocks, bonds and cash, we
Wellington Management were able to take advantage of attractive
Company, LLP opportunities. However, our allocation did not prove
to be the most optimal mix for surpassing the
returns of our Composite index benchmark.
Q. What Is Your Outlook For 1999?
The global economy will experience weak, but positive,
growth in 1999. World GDP should average only 1.3%
next year -- the slowest growth rate since the early
1980's. Weak economic activity and very low inflation
provide a backdrop for stable to lower global
interest rates. This provides a positive backdrop
for most global fixed income markets in 1999.
Weaker worldwide economic growth will result in
lackluster corporate profits growth. Despite the
slower profit growth, equities should post good
performance in light of the low level of global
interest rates. During a period of decelerating
corporate profits and global economic weakness,
we believe owning stable, well-established growth
companies is the most prudent investment strategy.
Performance Overview
[GRAPH]
- ---------------------------------------------------
Annualized Returns
Average Annual Returns
Period Ended December 31, 1998
1 YEAR SINCE INCEPTION
Int'l Advisers IA 13.35% 12.07%
EAFE GDP 26.71% 13.89%
Salomon 11.54% 12.32%
- ---------------------------------------------------
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE
INTER-NATIONAL ADVISERS HLS FUND. (THE ANNUALIZED
RETURNS INCLUDE THE FUND LEVEL EXPENSES, BUT EXCLUDE
THE INSURANCE CHARGES). PAST PERFORMANCE DOES NOT
GUARANTEE FUTURE RESULTS. THE VALUE OF THE
CONTRACT WILL FLUCTUATE SO THAT WHEN REDEEMED, IT
MAY BE WORTH MORE OR LESS THAN THE ORIGINAL INVESTMENT.
<PAGE>
Hartford
Advisers HLS Fund
Portfolio Managers
Q. How Did The Fund Perform?
[PHOTOGRAPH]
RAND L. ALEXANDER, CFA The Hartford Advisers HLS Fund outperformed its
Senior Vice President Lipper peer group for the year ending
and Partner December 31, 1998. The Fund had a total return
Wellington Management of 24.7% versus 13.5% for the Lipper Flexible
Company, LLP VA-UF Average, placing the fund in the first
quartile of performance for funds in the group.
Q. Why Did The Fund Perform This Way?
[PHOTOGRAPH]
PAUL D. KAPLAN During volatile times, allocating assets between
Senior Vice President stocks and bonds within a portfolio is an enormous
and Partner advantage. Merely having that flexibility, however,
Wellington Management is not enough. The asset allocation we used within
Company, LLP the portfolio allowed us to capture strong stock
market performance and utilize fixed income to
protect the Fund during difficult times, such as in
the third quarter '98. By gradually adjusting the
weighting between stocks, bonds and cash, we were
able to use our expectations of market developments
to produce attractive Fund returns.
Q. What Is Your Outlook For 1999?
Short- and intermediate-term yields are likely to
fall as the eventual weakening of the economy will
permit the Federal Reserve to lower short-term
interest rates. The current backdrop of slower
economic growth and historically low inflation
bodes well for the U.S. fixed income market.
While we are optimistic about U.S. equities, we
are also wary about market valuation levels.
Therefore, we will maintain our exposure to
equities around 55%. This is a neutral stance
versus our benchmark index. In addition, we will
continue to focus on well-established, larger
companies which will be capable of delivering
consistent earnings results despite a more
challenging economic environment.
Performance Overview
[GRAPH]
- ---------------------------------------------------
Annualized Returns
Average Annual Returns
Period Ended December 31, 1998
1 YEAR 5 YEAR 10 YEAR
Advisers IA 24.66% 17.70% 15.08%
S&P 500 28.60% 24.05% 19.19%
Lehman Govt/Corp 9.47% 7.30% 9.33%
- ---------------------------------------------------
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE
ADVISERS HLS FUND. (THE ANNUALIZED RETURNS INCLUDE THE
FUND LEVEL EXPENSES, BUT EXCLUDE THE INSURANCE CHARGES).
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
THE VALUE OF THE CONTRACT WILL FLUCTUATE SO THAT WHEN
REDEEMED, IT MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL INVESTMENT.
<PAGE>
The Hartford
High Yield HLS Fund
Portfolio Manager
Q. How Did The Fund Perform?
[PHOTOGRAPH]
ALISON D. GRANGER, CFA The Hartford High Yield HLS Fund commenced
Senior Vice President operations on October 1, 1998. The Fund's Class
The Hartford Investment IA shares placed in the 2nd quartile of its
Management Company Lipper peer group for the three-months ending
(HIMCO) December 31, 1998, producing a total return of
3.58% versus the 2.94% return of the Lipper High
Current Yield Variable Annuity Fund average. The
Fund's return also outpaced that of its benchmark
index, the Lehman Corporate High Yield Index,
which returned 2.13% for the quarter.
Q. Why Did The Fund Perform This Way?
The decline in the high yield fixed income market
during early October provided the Fund with the
opportunity to purchase many of its initial
investments at levels which contributed to the
Fund's overall outperfomance.
The Fund's allocation to issues which possess a
relatively high degree of market liquidity aided the
portfolio's performance, as these securities were
in demand during the fourth quarter. An underweighting
of the steel, finance, and energy industries
during the quarter also provided additional
performance at the margin.
Q. What Is Your Outlook For 1999?
As we enter 1999, we are emphasizing three themes in
the high yield fund. The first theme reflects our
belief that there are opportunities in selected
economically-sensitive issues which, in the opinion
of our analysts, have the wherewithal to survive
the current downturn. While the outlook for a number
of the cyclical industries remains challenging, the
pricing of these securities reflects a high level of
perceived risk. We therefore feel that the risk/reward
characteristics of these issues are very attractive.
The second portfolio theme we are emphasizing focuses
on the process of deregulation, convergence and
consolidation that can be witnessed in a variety of
industries, including the telecommunications and
independent power producing industries. When these
conditions are present, we seek to purchase bonds of
companies whose assets are attractive on their own
or to a higher-rated potential acquirer in the
changing competitive environment.
Our final theme aims to invest in relatively liquid
issues of large companies who are leaders in their
industries. We seek out investments in these
companies in part because of their expected continued
ability to access capital in these times of
declining credit availability. These companies are
also likely to have the staying power to weather a
period of declining earnings and may be able to find
opportunities left behind by smaller, weaker
competitors.
Performance Overview
[GRAPH]
- ---------------------------------------------------
Cumulative Returns
Cumulative Returns
Period Ended December 31, 1998
SINCE INCEPTION
High Yield IA 3.58%
Lehman High Yield 2.13%
- ---------------------------------------------------
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE
HIGH YIELD HLS FUND. (THE CUMULATIVE RETURNS INCLUDE
THE FUND LEVEL EXPENSES, BUT EXCLUDE THE INSURANCE CHARGES).
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE
VALUE OF THE CONTRACT WILL FLUCTUATE SO THAT WHEN REDEEMED,
IT MAY BE WORTH MORE OR LESS THAN THE ORIGINAL INVESTMENT.
<PAGE>
The Hartford
Bond HLS Fund
Portfolio Manager
Q. How Did The Fund Perform?
[PHOTOGRAPH]
Alison D. Granger, CFA The Hartford Bond HLS Fund Class IA shares
Senior Vice President placed in the 2nd quartile of its Lipper peer
The Hartford Investment group for the year ending December 31, 1998,
Management Company producing a total return of 8.15% versus the
(HIMCO) 7.44% return of the Lipper Corporate Debt "BBB"
rated Variable Annuity Underlying Fund Universe.
Q. Why Did The Fund Perform This Way?
The average maturity and interest rate duration
of the Fund remained longer than its benchmark index
for 1998, resulting in price gains as Treasury yields
declined by roughly a full percent during the year.
We began 1998 with a higher than average portfolio
credit quality, and continued to increase Treasury
holdings through September. This contributed to the
Fund's outperformance relative to its peer average
during the credit market declines of the summer and
early fall. Although they were relatively minimal,
the fund's holdings in non-investment grade debt
offset some of the outperformance produced by its
longer duration and high average credit quality. A
concentration in U.S. Treasury Inflation Protected
Securities failed to produce the expected returns
we anticipated, as their historically attractive real
yields did not decline to the extent expected given
1998's significant decline in nominal Treasury yields.
Q. What Is Your Outlook For 1999?
The domestic economy appears indecisive. Consumer-
related indicators, such as retail sales and housing
markets are booming, but inflation remains in check
for now. We believe any Federal Reserve easing bias
will be delayed, and could be tempered by foreign
influences, with the advent of the Euro and potential
repatriation of assets to Japan. Corporate,
asset-backed and mortgage-related fixed income
securities are still at historically attractive
levels, but pitfalls abound for the unwary. For that
reason, we expect to continue our high-average-
credit-quality approach to management of the Fund.
Select opportunities can be found in the commodity
sectors, which underperformed during 1998, and now
display an attractive risk/reward profile.
Performance Overview
[GRAPH]
- ---------------------------------------------------
Annualized Returns
Average Annual Returns
Period Ended December 31, 1998
1 YEAR 5 YEAR 10 YEAR
Bond IA 8.15% 7.25% 8.86%
Lehman Govt/Corp 9.47% 7.30% 9.33%
- ---------------------------------------------------
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN
THE BOND HLS FUND. (THE ANNUALIZED RETURNS INCLUDE
THE FUND LEVEL EXPENSES, BUT EXCLUDE THE INSURANCE
CHARGES). PAST PERFORMANCE DOES NOT GUARANTEE FUTURE
RESULTS. THE VALUE OF THE CONTRACT WILL FLUCTUATE
SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS
THAN THE ORIGINAL INVESTMENT.
<PAGE>
The Hartford
Mortgage Securities HLS Fund
Portfolio Manager
Q. How Did The Fund Perform?
[GRAPH]
TIMOTHY J. WILHIDE The Hartford Mortgage Securities HLS Fund
Senior Vice President provided a total return of 6.7% for the year
The Hartford Investment ending December 31, 1998, versus 6.9% for the
Management Company Lipper U.S. Mortgage Universe.
(HIMCO)
Q. Why Did The Fund Perform This Way?
Fixed Income yields declined by about one
percentage point during the year as the
Federal Reserve lowered interest rates to ease the
effects of the worldwide financial crises on the
United States economy. All domestic bond sectors
performed well as a result, although the best
returns were on U.S. Treasury securities which
benefited from their perceived -- "safe haven"
status during the turmoil. Mortgage securities
lagged the total returns of U.S. Treasuries as
investors feared the risks of early principal
repayments due to widespread homeowner refinancings.
For example, the 1998 total return of intermediate
maturity U.S. Treasury securities, as measured by
the Lehman Bros. Index, was 8.62% while the Lehman
Bros. Mortgage Securities Index earned 6.96%.
Q. What Is Your Outlook For 1999?
A silver lining to the underperformance of
mortgage securities is that they now offer a yield
advantage over U.S. Treasury and many corporate
investment grade securities which fully reflect the
risks of interest rate fluctuations. Said another way,
mortgage securities are now priced for further rate
declines and so should deliver a fair risk adjusted
return in that event and very attractive relative
returns should rates stay near current levels or move
modestly higher.
As we begin 1999, the Fund will continue to emphasize
high quality and highly liquid mortgage securities in
its holdings. Principally these are passthrough
mortgages of U.S. Government Agencies such as GNMA.,
FNMA and FHLMC, although from time to time other
attractive mortgage securities such as CMO's and AAA
Commercial Mortgage Backed Securities will be
purchased to add additional value to the Fund.
Performance Overview
[GRAPH]
- ---------------------------------------------------
Annualized Returns
Average Annual Returns
Period Ended December 31, 1998
1 YEAR 5 YEAR 10 YEAR
Mort. Sec. IA 6.72% 6.92% 8.27%
Lehman Mort. 6.96% 7.23% 9.13%
- ---------------------------------------------------
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE
MORTGAGE SECURITIES HLS FUND. (THE ANNUALIZED RETURNS
INCLUDE THE FUND LEVEL EXPENSES, BUT EXCLUDE THE
INSURANCE CHARGES). PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS. THE VALUE OF THE CONTRACT WILL
FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE
OR LESS THAN THE ORIGINAL INVESTMENT.
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS
Fund, Inc. - Class
IA
Shares 6,338,521
Cost $6,407,984
Market Value....... $ 6,849,818 --
Hartford Stock HLS
Fund, Inc. - Class
IA
Shares 8,654,685
Cost $39,050,787
Market Value....... -- $ 56,789,154
Hartford Money Market
HLS Fund, Inc. -
Class IA
Shares 22,626,947
Cost $22,626,947
Market Value....... -- --
Hartford Advisers HLS
Fund, Inc. - Class
IA
Shares 11,268,727
Cost $25,520,412
Market Value....... -- --
Hartford Capital
Appreciation HLS
Fund, Inc. - Class
IA
Shares 12,361,609
Cost $48,180,010
Market Value....... -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 1,534,123
Cost $1,615,108
Market Value....... -- --
Hartford Index HLS
Fund, Inc. - Class
IA
Shares 8,077,308
Cost $20,618,371
Market Value....... -- --
Hartford
International
Opportunities HLS
Fund, Inc. - Class
IA
Shares 13,651,826
Cost $17,625,868
Market Value....... -- --
Due from Hartford Life
Insurance Company..... 2,281 48,656
Receivable from fund
shares sold........... -- --
------------ ------------
Total Assets........... 6,852,099 56,837,810
------------ ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- --
Payable for fund shares
purchased............. 2,282 48,654
------------ ------------
Total Liabilities...... 2,282 48,654
------------ ------------
Net Assets (variable
life contract
liabilities).......... $ 6,849,817 $ 56,789,156
------------ ------------
------------ ------------
Units Owned by
Participants.......... 4,611,675 18,098,312
Unit Values............ $ 1.485321 $ 3.137815
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 16
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND 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. - Class
IA
Shares 6,338,521
Cost $6,407,984
Market Value....... -- -- -- -- -- --
Hartford Stock HLS
Fund, Inc. - Class
IA
Shares 8,654,685
Cost $39,050,787
Market Value....... -- -- -- -- -- --
Hartford Money Market
HLS Fund, Inc. -
Class IA
Shares 22,626,947
Cost $22,626,947
Market Value....... $22,626,947 -- -- -- -- --
Hartford Advisers HLS
Fund, Inc. - Class
IA
Shares 11,268,727
Cost $25,520,412
Market Value....... -- $ 33,640,001 -- -- -- --
Hartford Capital
Appreciation HLS
Fund, Inc. - Class
IA
Shares 12,361,609
Cost $48,180,010
Market Value....... -- -- $ 58,829,898 -- -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 1,534,123
Cost $1,615,108
Market Value....... -- -- -- $ 1,663,837 -- --
Hartford Index HLS
Fund, Inc. - Class
IA
Shares 8,077,308
Cost $20,618,371
Market Value....... -- -- -- -- $ 28,839,639 --
Hartford
International
Opportunities HLS
Fund, Inc. - Class
IA
Shares 13,651,826
Cost $17,625,868
Market Value....... -- -- -- -- -- $ 18,496,272
Due from Hartford Life
Insurance Company..... 196,010 33,609 112,081 4,590 28,000 33,450
Receivable from fund
shares sold........... -- -- -- -- -- --
------------- ------------ ------------- ------------ ------------ --------------
Total Assets........... 22,822,957 33,673,610 58,941,979 1,668,427 28,867,639 18,529,722
------------- ------------ ------------- ------------ ------------ --------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- -- -- -- -- --
Payable for fund shares
purchased............. 195,975 33,818 112,003 4,590 27,998 33,430
------------- ------------ ------------- ------------ ------------ --------------
Total Liabilities...... 195,975 33,818 112,003 4,590 27,998 33,430
------------- ------------ ------------- ------------ ------------ --------------
Net Assets (variable
life contract
liabilities).......... $22,626,982 $ 33,639,792 $ 58,829,976 $ 1,663,837 $ 28,839,641 $ 18,496,292
------------- ------------ ------------- ------------ ------------ --------------
------------- ------------ ------------- ------------ ------------ --------------
Units Owned by
Participants.......... 17,353,284 13,860,140 23,850,964 1,155,389 9,694,851 10,885,499
Unit Values............ $ 1.303902 $ 2.427089 $ 2.466566 $ 1.440067 $ 2.974738 $ 1.699168
</TABLE>
---------------------------------------------------- 17
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
DIVIDEND FIDELITY VIP
AND GROWTH EQUITY-INCOME
FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
----------- --------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 10,070,783
Cost $18,381,148
Market Value....... $21,757,786 --
Fidelity VIP
Equity-Income
Portfolio
Shares 629,161
Cost $13,604,703
Market Value....... -- $15,993,265
Fidelity VIP Overseas
Portfolio
Shares 377,944
Cost $7,114,515
Market Value....... -- --
Fidelity VIP II Asset
Manager Portfolio
Shares 131,689
Cost $2,172,892
Market Value....... -- --
Hartford Growth and
Income HLS Fund -
Class IA
Shares 9,908
Cost $11,036
Market Value....... -- --
Hartford
International
Advisers HLS Fund,
Inc. - Class IA
Shares 18,687
Cost $20,445
Market Value....... -- --
Hartford Small
Company HLS Fund,
Inc. - Class IA
Shares 121,607
Cost $129,704
Market Value....... -- --
Hartford MidCap HLS
Fund, Inc. - Class
IA
Shares 36,383
Cost $44,977
Market Value....... -- --
Due from Hartford Life
Insurance Company..... 16,869 29,134
Receivable from fund
shares sold........... -- --
----------- --------------
Total Assets........... 21,774,655 16,022,399
----------- --------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- --
Payable for fund shares
purchased............. 16,829 27,257
----------- --------------
Total Liabilities...... 16,829 27,257
----------- --------------
Net Assets (variable
life contract
liabilities).......... $21,757,826 $15,995,142
----------- --------------
----------- --------------
Units Owned by
Participants.......... 9,350,905 8,164,053
Unit Values............ $ 2.326815 $ 1.959216
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 18
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
FIDELITY VIP
FIDELITY VIP II GROWTH INTERNATIONAL SMALL
OVERSEAS ASSET MANAGER AND INCOME ADVISERS COMPANY MIDCAP
PORTFOLIO PORTFOLIO FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 10,070,783
Cost $18,381,148
Market Value....... -- -- -- -- -- --
Fidelity VIP
Equity-Income
Portfolio
Shares 629,161
Cost $13,604,703
Market Value....... -- -- -- -- -- --
Fidelity VIP Overseas
Portfolio
Shares 377,944
Cost $7,114,515
Market Value....... $ 7,577,777 -- -- -- -- --
Fidelity VIP II Asset
Manager Portfolio
Shares 131,689
Cost $2,172,892
Market Value....... -- $2,391,480 -- -- -- --
Hartford Growth and
Income HLS Fund -
Class IA
Shares 9,908
Cost $11,036
Market Value....... -- -- $ 11,750 -- -- --
Hartford
International
Advisers HLS Fund,
Inc. - Class IA
Shares 18,687
Cost $20,445
Market Value....... -- -- -- $ 21,578 -- --
Hartford Small
Company HLS Fund,
Inc. - Class IA
Shares 121,607
Cost $129,704
Market Value....... -- -- -- -- $ 160,656 --
Hartford MidCap HLS
Fund, Inc. - Class
IA
Shares 36,383
Cost $44,977
Market Value....... -- -- -- -- -- $ 52,364
Due from Hartford Life
Insurance Company..... 11,717 13,412 591 1,182 -- --
Receivable from fund
shares sold........... -- -- -- -- -- --
------------ -------------- ------------ -------------- ------------ ------------
Total Assets........... 7,589,494 2,404,892 12,341 22,760 160,656 52,364
------------ -------------- ------------ -------------- ------------ ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- -- -- -- -- --
Payable for fund shares
purchased............. 11,804 13,414 591 1,182 -- --
------------ -------------- ------------ -------------- ------------ ------------
Total Liabilities...... 11,804 13,414 591 1,182 -- --
------------ -------------- ------------ -------------- ------------ ------------
Net Assets (variable
life contract
liabilities).......... $ 7,577,690 $2,391,478 $ 11,750 $ 21,578 $ 160,656 $ 52,364
------------ -------------- ------------ -------------- ------------ ------------
------------ -------------- ------------ -------------- ------------ ------------
Units Owned by
Participants.......... 4,955,460 1,365,483 10,209 21,418 149,259 47,443
Unit Values............ $ 1.529160 $ 1.751379 $ 1.150984 $ 1.007480 $ 1.076363 $ 1.103726
</TABLE>
---------------------------------------------------- 19
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
CAPITAL MORTGAGE
BOND STOCK MONEY MARKET ADVISERS APPRECIATION SECURITIES
FUND FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $331,394 $ 426,569 $1,322,027 $ 662,962 $ 310,421 $102,546
------------ ------------- ------------- ------------ ------------- ------------
CAPITAL GAINS INCOME..... -- 1,117,421 440 796,015 2,575,286 --
------------ ------------- ------------- ------------ ------------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 71,193 (135,795) -- (51,519) (4,284) 9,356
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 185,585 10,569,607 -- 4,603,991 4,194,822 (17,750)
------------ ------------- ------------- ------------ ------------- ------------
Net gain (loss) on
investments......... 256,778 10,433,812 -- 4,552,472 4,190,538 (8,394)
------------ ------------- ------------- ------------ ------------- ------------
Net increase
(decrease) in net
assets resulting
from operations..... $588,172 $11,977,802 $1,322,467 $6,011,449 $7,076,245 $ 94,152
------------ ------------- ------------- ------------ ------------- ------------
------------ ------------- ------------- ------------ ------------- ------------
</TABLE>
* From inception, August 3, 1998, to December 31, 1998
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 20
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
FIDELITY VIP
INTERNATIONAL DIVIDEND FIDELITY VIP FIDELITY VIP II
INDEX OPPORTUNITIES AND GROWTH EQUITY-INCOME OVERSEAS ASSET MANAGER
FUND FUND FUND PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 234,014 $ 238,928 $ 339,438 $ 155,210 $ 47,702 $ 47,628
------------ -------------- ------------ -------------- ------------ --------------
CAPITAL GAINS INCOME..... 458,685 863,200 480,886 552,364 140,597 142,885
------------ -------------- ------------ -------------- ------------ --------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (28,044) 35,100 (251) (4,853) 9,814 779
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 4,990,372 808,400 1,697,176 701,127 379,546 80,467
------------ -------------- ------------ -------------- ------------ --------------
Net gain (loss) on
investments......... 4,962,328 843,500 1,696,925 696,274 389,360 81,246
------------ -------------- ------------ -------------- ------------ --------------
Net increase
(decrease) in net
assets resulting
from operations..... $5,655,027 $1,945,628 $2,517,249 $1,403,848 $577,659 $271,759
------------ -------------- ------------ -------------- ------------ --------------
------------ -------------- ------------ -------------- ------------ --------------
<CAPTION>
GROWTH INTERNATIONAL SMALL
AND INCOME ADVISERS COMPANY MIDCAP
FUND FUND FUND FUND
SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 42 $-- $-- $--
----- ------ ------------- ------
CAPITAL GAINS INCOME..... -- -- -- --
----- ------ ------------- ------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 3 17 165,038 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 714 1,133 30,952 7,387
----- ------ ------------- ------
Net gain (loss) on
investments......... 717 1,150 195,990 7,387
----- ------ ------------- ------
Net increase
(decrease) in net
assets resulting
from operations..... $759 $1,150 $195,990 $7,387
----- ------ ------------- ------
----- ------ ------------- ------
</TABLE>
* From inception, August 3, 1998, to December 31, 1998
---------------------------------------------------- 21
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 331,394 $ 426,569
Capital gains income... -- 1,117,421
Net realized gain
(loss) on security
transactions.......... 71,193 (135,795)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 185,585 10,569,607
----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 588,172 11,977,802
----------- -----------
UNIT TRANSACTIONS:
Purchases.............. 1,838,524 6,958,503
Net transfers.......... (1,406,522) 12,649,168
Surrenders for benefit
payments and fees..... (97,508) (1,360,527)
Net loan activity...... (146,115) (537,841)
Cost of insurance...... (358,266) (1,755,336)
----------- -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (169,887) 15,953,967
----------- -----------
Net increase (decrease)
in net assets......... 418,285 27,931,769
NET ASSETS:
Beginning of period.... 6,431,532 28,857,387
----------- -----------
End of period.......... $ 6,849,817 $56,789,156
----------- -----------
----------- -----------
</TABLE>
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 294,913 $ 246,080
Capital gains income... -- 827,575
Net realized gain
(loss) on security
transactions.......... 4,795 (3,225)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 202,163 4,386,067
------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 501,871 5,456,497
------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 865,251 3,217,829
Net transfers.......... 2,817,986 7,642,427
Surrenders for benefit
payments and fees..... (293,925) (880,386)
Net loan activity...... 61,034 (337,905)
Cost of insurance...... (205,795) (763,967)
------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 3,244,551 8,877,998
------------ ------------
Net increase (decrease)
in net assets......... 3,746,422 14,334,495
NET ASSETS:
Beginning of period.... 2,685,110 14,522,892
------------ ------------
End of period.......... $ 6,431,532 $ 28,857,387
------------ ------------
------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 22
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND 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)................ $ 1,322,027 $ 662,962 $ 310,421 $ 102,546 $ 234,014 $ 238,928
Capital gains income... 440 796,015 2,575,286 -- 458,685 863,200
Net realized gain
(loss) on security
transactions.......... -- (51,519) (4,284) 9,356 (28,044) 35,100
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 4,603,991 4,194,822 (17,750) 4,990,372 808,400
------------ ----------- ------------- ------------ ------------ --------------
Net increase (decrease)
in net assets
resulting from
operations............ 1,322,467 6,011,449 7,076,245 94,152 5,655,027 1,945,628
------------ ----------- ------------- ------------ ------------ --------------
UNIT TRANSACTIONS:
Purchases.............. 61,057,739 4,790,269 9,637,115 210,954 3,852,289 3,475,235
Net transfers.......... (62,188,027) 4,065,052 10,261,936 103,107 2,901,707 4,383,777
Surrenders for benefit
payments and fees..... (1,774,809) (1,153,292) (1,873,503) 10,697 (889,933) (862,986)
Net loan activity...... (2,292,059) (554,217) (801,337) (192,976) (135,969) (300,291)
Cost of insurance...... (1,910,006) (1,265,069) (1,991,294) (44,114) (857,070) (641,581)
------------ ----------- ------------- ------------ ------------ --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (7,107,162) 5,882,743 15,232,917 87,668 4,871,024 6,054,154
------------ ----------- ------------- ------------ ------------ --------------
Net increase (decrease)
in net assets......... (5,784,695) 11,894,192 22,309,162 181,820 10,526,051 7,999,782
NET ASSETS:
Beginning of period.... 28,411,677 21,745,600 36,520,814 1,482,017 18,313,590 10,496,510
------------ ----------- ------------- ------------ ------------ --------------
End of period.......... $ 22,626,982 $33,639,792 $ 58,829,976 $ 1,663,837 $ 28,839,641 $ 18,496,292
------------ ----------- ------------- ------------ ------------ --------------
------------ ----------- ------------- ------------ ------------ --------------
</TABLE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND 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)................ $ 1,060,601 $ 409,507 $ 167,160 $ 88,963 $ 179,138 $ 97,324
Capital gains income... -- 507,384 1,675,075 -- 620,188 745,516
Net realized gain
(loss) on security
transactions.......... -- 6,559 (30,085) 5,516 25,769 (13,764)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 2,125,547 3,560,780 35,955 2,403,244 (801,996)
------------- ------------ ------------- ------------ ------------ --------------
Net increase (decrease)
in net assets
resulting from
operations............ 1,060,601 3,048,997 5,372,930 130,434 3,228,339 27,080
------------- ------------ ------------- ------------ ------------ --------------
UNIT TRANSACTIONS:
Purchases.............. 77,604,898 3,078,132 6,237,688 230,306 2,753,450 2,796,551
Net transfers.......... (68,585,939) 7,033,474 7,660,280 (149,006) 7,278,662 124,941
Surrenders for benefit
payments and fees..... (2,421,703) (470,532) (1,305,489) (182,238) (1,605,500) (577,418)
Net loan activity...... 1,030,682 (227,083) (478,850) 130,625 1,102,289 (142,130)
Cost of insurance...... (1,739,916) (611,387) (1,155,528) (54,693) (509,686) (453,153)
------------- ------------ ------------- ------------ ------------ --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 5,888,022 8,802,604 10,958,101 (25,006) 9,019,215 1,748,791
------------- ------------ ------------- ------------ ------------ --------------
Net increase (decrease)
in net assets......... 6,948,623 11,851,601 16,331,031 105,428 12,247,554 1,775,871
NET ASSETS:
Beginning of period.... 21,463,054 9,893,999 20,189,783 1,376,589 6,066,036 8,720,639
------------- ------------ ------------- ------------ ------------ --------------
End of period.......... $28,411,677 $ 21,745,600 $ 36,520,814 $ 1,482,017 $ 18,313,590 $ 10,496,510
------------- ------------ ------------- ------------ ------------ --------------
------------- ------------ ------------- ------------ ------------ --------------
</TABLE>
---------------------------------------------------- 23
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
DIVIDEND FIDELITY VIP
AND GROWTH EQUITY-INCOME
FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
----------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 339,438 $ 155,210
Capital gains income... 480,886 552,364
Net realized gain
(loss) on security
transactions.......... (251) (4,853)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 1,697,176 701,127
----------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 2,517,249 1,403,848
----------- --------------
UNIT TRANSACTIONS:
Purchases.............. 3,822,100 2,918,513
Net transfers.......... 5,421,686 2,162,849
Surrenders for benefit
payments and fees..... (709,634) (307,937)
Net loan activity...... (324,543) (195,032)
Cost of insurance...... (752,950) (588,614)
----------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 7,456,659 3,989,779
----------- --------------
Net increase (decrease)
in net assets......... 9,973,908 5,393,627
NET ASSETS:
Beginning of
period.............. 11,783,918 10,601,515
----------- --------------
End of period........ $21,757,826 $15,995,142
----------- --------------
----------- --------------
</TABLE>
* From inception, August 3, 1998, to December 31, 1998
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
DIVIDEND FIDELITY VIP
AND GROWTH EQUITY-INCOME
FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
----------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)..................... $ 149,562 $ 88,466
Capital gains income........ 100,558 444,785
Net realized gain (loss) on
security transactions...... (9,177) (1,923)
Net unrealized appreciation
(depreciation) of
investments during the
period..................... 1,368,764 1,316,248
----------- --------------
Net increase (decrease) in
net assets resulting from
operations................. 1,609,707 1,847,576
----------- --------------
UNIT TRANSACTIONS:
Purchases................... 1,254,044 1,658,043
Net transfers............... 6,522,655 2,905,832
Surrenders for benefit
payments and fees.......... (387,945) (177,782)
Net loan activity........... (239,637) (108,547)
Cost of insurance........... (208,258) (334,701)
----------- --------------
Net increase (decrease) in
net assets resulting from
unit transactions.......... 6,940,859 3,942,845
----------- --------------
Net increase (decrease) in
net assets................. 8,550,566 5,790,421
NET ASSETS:
Beginning of period......... 3,233,352 4,811,094
----------- --------------
End of period............... $11,783,918 $10,601,515
----------- --------------
----------- --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 24
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
FIDELITY VIP
FIDELITY VIP II GROWTH INTERNATIONAL SMALL
OVERSEAS ASSET MANAGER AND INCOME ADVISERS COMPANY MIDCAP
PORTFOLIO PORTFOLIO FUND FUND FUND 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)................ $ 47,702 $ 47,628 $ 42 $-- $-- $--
Capital gains income... 140,597 142,885 -- -- -- --
Net realized gain
(loss) on security
transactions.......... 9,814 779 3 17 165,038 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 379,546 80,467 714 1,133 30,952 7,387
------------ -------------- ------------- ------------- ------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 577,659 271,759 759 1,150 195,990 7,387
------------ -------------- ------------- ------------- ------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 1,507,008 377,112 1,229 1,630 5,974 1,848
Net transfers.......... 3,697,147 438,799 9,925 19,068 (33,766) 43,693
Surrenders for benefit
payments and fees..... (128,400) (34,663) (85) (91) (1,127) (131)
Net loan activity...... (112,297) (13,265) -- -- (44) --
Cost of insurance...... (219,366) (84,019) (78) (179) (6,371) (433)
------------ -------------- ------------- ------------- ------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 4,744,092 683,964 10,991 20,428 (35,334) 44,977
------------ -------------- ------------- ------------- ------------- -------------
Net increase (decrease)
in net assets......... 5,321,751 955,723 11,750 21,578 160,656 52,364
NET ASSETS:
Beginning of
period.............. 2,255,939 1,435,755 -- -- -- --
------------ -------------- ------------- ------------- ------------- -------------
End of period........ $ 7,577,690 $2,391,478 $11,750 $21,578 $160,656 $52,364
------------ -------------- ------------- ------------- ------------- -------------
------------ -------------- ------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
FIDELITY VIP
FIDELITY VIP II
OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)..................... $ 18,168 $ 25,384
Capital gains income........ 72,122 63,674
Net realized gain (loss) on
security transactions...... (23,358) 984
Net unrealized appreciation
(depreciation) of
investments during the
period..................... 9,449 102,910
------------ --------------
Net increase (decrease) in
net assets resulting from
operations................. 76,381 192,952
------------ --------------
UNIT TRANSACTIONS:
Purchases................... 500,149 217,641
Net transfers............... 1,020,704 437,030
Surrenders for benefit
payments and fees.......... (148,574) (18,402)
Net loan activity........... (85,928) (4,843)
Cost of insurance........... (93,690) (43,442)
------------ --------------
Net increase (decrease) in
net assets resulting from
unit transactions.......... 1,192,661 587,984
------------ --------------
Net increase (decrease) in
net assets................. 1,269,042 780,936
NET ASSETS:
Beginning of period......... 986,897 654,819
------------ --------------
End of period............... $ 2,255,939 $1,435,755
------------ --------------
------------ --------------
<CAPTION>
<S> <C>
OPERATIONS:
Net investment income
(loss).....................
Capital gains income........
Net realized gain (loss) on
security transactions......
Net unrealized appreciation
(depreciation) of
investments during the
period.....................
Net increase (decrease) in
net assets resulting from
operations.................
UNIT TRANSACTIONS:
Purchases...................
Net transfers...............
Surrenders for benefit
payments and fees..........
Net loan activity...........
Cost of insurance...........
Net increase (decrease) in
net assets resulting from
unit transactions..........
Net increase (decrease) in
net assets.................
NET ASSETS:
Beginning of period.........
End of period...............
</TABLE>
---------------------------------------------------- 25
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. ORGANIZATION:
Separate Account Variable Life One (the Account) is a separate investment
account within Hartford Life Insurance Company (the Company) and is
registered with the Securities and Exchange Commission (SEC) as a unit
investment trust under the Investment Company Act of 1940, as amended. 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 is accrued as of the ex-dividend date. Capital gains income
represents those dividends from the Funds which are characterized as
capital gains under tax regulations.
b) SECURITY VALUATION--The investments in shares of the Funds are valued at
the closing net asset value per share as determined by the appropriate
Fund as of December 31, 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) DEDUCTIONS AND CHARGES FROM THE ACCOUNT VALUE-- On the policy date and on
each subsequent monthly activity date, the Company will deduct from the
Account an amount to cover mortality and expense risk charges, cost of
insurance, administrative charges and any other benefits provided by the
rider. These charges, which may vary from month to month in accordance
with the terms of the contracts, are deducted through termination of
units of interest from applicable contract owners' accounts.
______________________________________ 26 ______________________________________
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS
Fund, Inc. - Class
IA
Shares 3,283,908
Cost $3,475,321
Market Value....... $ 3,548,804 --
Hartford Stock HLS
Fund, Inc. - Class
IA
Shares 2,372,983
Cost $11,800,445
Market Value....... -- $ 15,570,723
Hartford Money Market
HLS Fund, Inc. -
Class IA
Shares 5,819,959
Cost $5,819,959
Market Value....... -- --
Hartford Advisers HLS
Fund, Inc. - Class
IA
Shares 2,708,124
Cost $6,682,965
Market Value....... -- --
Hartford Capital
Appreciation HLS
Fund, Inc. - Class
IA
Shares 3,092,534
Cost $12,782,349
Market Value....... -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 214,290
Cost $229,086
Market Value....... -- --
Hartford Index HLS
Fund, Inc. - Class
IA
Shares 3,757,796
Cost $10,402,891
Market Value....... -- --
Hartford
International
Opportunities HLS
Fund, Inc. - Class
IA
Shares 3,968,001
Cost $5,260,082
Market Value....... -- --
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 3,926,588
Cost $7,345,244
Market Value....... -- --
Due from Hartford Life
Insurance Company..... 4,028 6,960
Receivable from fund
shares sold........... -- --
------------ ------------
Total Assets........... 3,552,832 15,577,683
------------ ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- --
Payable for fund shares
purchased............. 4,058 7,984
------------ ------------
Total Liabilities...... 4,058 7,984
------------ ------------
Net Assets (variable
life contract
liabilities).......... $ 3,548,774 $ 15,569,699
------------ ------------
------------ ------------
Units Owned by
Participants.......... 2,389,231 4,961,955
Unit Values............ $ 1.485321 $ 3.137815
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 28
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND 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. - Class
IA
Shares 3,283,908
Cost $3,475,321
Market Value....... -- -- -- -- -- --
Hartford Stock HLS
Fund, Inc. - Class
IA
Shares 2,372,983
Cost $11,800,445
Market Value....... -- -- -- -- -- --
Hartford Money Market
HLS Fund, Inc. -
Class IA
Shares 5,819,959
Cost $5,819,959
Market Value....... $5,819,959 -- -- -- -- --
Hartford Advisers HLS
Fund, Inc. - Class
IA
Shares 2,708,124
Cost $6,682,965
Market Value....... -- $ 8,084,434 -- -- -- --
Hartford Capital
Appreciation HLS
Fund, Inc. - Class
IA
Shares 3,092,534
Cost $12,782,349
Market Value....... -- -- $ 14,717,621 -- -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 214,290
Cost $229,086
Market Value....... -- -- -- $ 232,408 -- --
Hartford Index HLS
Fund, Inc. - Class
IA
Shares 3,757,796
Cost $10,402,891
Market Value....... -- -- -- -- $ 13,417,031 --
Hartford
International
Opportunities HLS
Fund, Inc. - Class
IA
Shares 3,968,001
Cost $5,260,082
Market Value....... -- -- -- -- -- $5,376,073
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 3,926,588
Cost $7,345,244
Market Value....... -- -- -- -- -- --
Due from Hartford Life
Insurance Company..... 130,362 2,690 11,574 202 13,834 4,351
Receivable from fund
shares sold........... -- -- -- -- -- --
------------- ------------ ------------- ------------ ------------ --------------
Total Assets........... 5,950,321 8,087,124 14,729,195 232,610 13,430,865 5,380,424
------------- ------------ ------------- ------------ ------------ --------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- -- -- -- -- --
Payable for fund shares
purchased............. 130,254 2,726 11,272 201 17,956 4,416
------------- ------------ ------------- ------------ ------------ --------------
Total Liabilities...... 130,254 2,726 11,272 201 17,956 4,416
------------- ------------ ------------- ------------ ------------ --------------
Net Assets (variable
life contract
liabilities).......... $5,820,067 $ 8,084,398 $ 14,717,923 $ 232,409 $ 13,412,909 $5,376,008
------------- ------------ ------------- ------------ ------------ --------------
------------- ------------ ------------- ------------ ------------ --------------
Units Owned by
Participants.......... 4,463,577 3,330,903 5,966,969 161,388 4,508,938 3,163,907
Unit Values............ $ 1.303902 $ 2.427089 $ 2.466566 $1.440067 $ 2.974738 $ 1.699168
<CAPTION>
DIVIDEND
AND GROWTH
FUND
SUB-ACCOUNT
------------
<S> <C>
ASSETS:
Investments:
Hartford Bond HLS
Fund, Inc. - Class
IA
Shares 3,283,908
Cost $3,475,321
Market Value....... --
Hartford Stock HLS
Fund, Inc. - Class
IA
Shares 2,372,983
Cost $11,800,445
Market Value....... --
Hartford Money Market
HLS Fund, Inc. -
Class IA
Shares 5,819,959
Cost $5,819,959
Market Value....... --
Hartford Advisers HLS
Fund, Inc. - Class
IA
Shares 2,708,124
Cost $6,682,965
Market Value....... --
Hartford Capital
Appreciation HLS
Fund, Inc. - Class
IA
Shares 3,092,534
Cost $12,782,349
Market Value....... --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 214,290
Cost $229,086
Market Value....... --
Hartford Index HLS
Fund, Inc. - Class
IA
Shares 3,757,796
Cost $10,402,891
Market Value....... --
Hartford
International
Opportunities HLS
Fund, Inc. - Class
IA
Shares 3,968,001
Cost $5,260,082
Market Value....... --
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 3,926,588
Cost $7,345,244
Market Value....... $ 8,483,339
Due from Hartford Life
Insurance Company..... 10,166
Receivable from fund
shares sold........... --
------------
Total Assets........... 8,493,505
------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... --
Payable for fund shares
purchased............. 10,325
------------
Total Liabilities...... 10,325
------------
Net Assets (variable
life contract
liabilities).......... $ 8,483,180
------------
------------
Units Owned by
Participants.......... 3,645,833
Unit Values............ $ 2.326815
</TABLE>
---------------------------------------------------- 29
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP
EQUITY-INCOME OVERSEAS
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------
<S> <C> <C>
ASSETS:
Investments:
Fidelity VIP
Equity-Income
Portfolio
Shares 350,918
Cost $7,982,323
Market Value....... $8,920,347 --
Fidelity VIP Overseas
Portfolio
Shares 187,541
Cost $3,672,034
Market Value....... -- $ 3,760,204
Fidelity VIP II Asset
Manager Portfolio
Shares 81,462
Cost $1,364,740
Market Value....... -- --
Hartford Growth and
Income HLS Fund -
Class IA
Shares 1,355
Cost $1,456
Market Value....... -- --
Hartford
International
Advisers HLS Fund,
Inc. - Class IA
Shares 873
Cost $1,000
Market Value....... -- --
Hartford Small
Company HLS Fund,
Inc. - Class IA
Shares 43,112
Cost $42,608
Market Value....... -- --
Hartford MidCap HLS
Fund, Inc. - Class
IA
Shares 767
Cost $1,000
Market Value....... -- --
Due from Hartford Life
Insurance Company..... -- --
Receivable from fund
shares sold........... 9,664 2,981
-------------- ------------
Total Assets........... 8,930,011 3,763,185
-------------- ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- --
Payable for fund shares
purchased............. 11,458 1,777
-------------- ------------
Total Liabilities...... 11,458 1,777
-------------- ------------
Net Assets (variable
life contract
liabilities).......... $8,918,553 $ 3,761,408
-------------- ------------
-------------- ------------
Units Owned by
Participants.......... 4,552,103 2,459,787
Unit Values............ $ 1.959216 $ 1.529160
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 30
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
FIDELITY VIP
II
ASSET MANAGER GROWTH AND INTERNATIONAL SMALL COMPANY MIDCAP
PORTFOLIO INCOME FUND ADVISERS FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------ -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Fidelity VIP
Equity-Income
Portfolio
Shares 350,918
Cost $7,982,323
Market Value....... -- -- -- -- --
Fidelity VIP Overseas
Portfolio
Shares 187,541
Cost $3,672,034
Market Value....... -- -- -- -- --
Fidelity VIP II Asset
Manager Portfolio
Shares 81,462
Cost $1,364,740
Market Value....... $1,479,344 -- -- -- --
Hartford Growth and
Income HLS Fund -
Class IA
Shares 1,355
Cost $1,456
Market Value....... -- $ 1,606 -- -- --
Hartford
International
Advisers HLS Fund,
Inc. - Class IA
Shares 873
Cost $1,000
Market Value....... -- -- $ 1,007 -- --
Hartford Small
Company HLS Fund,
Inc. - Class IA
Shares 43,112
Cost $42,608
Market Value....... -- -- -- $ 56,956 --
Hartford MidCap HLS
Fund, Inc. - Class
IA
Shares 767
Cost $1,000
Market Value....... -- -- -- -- $ 1,104
Due from Hartford Life
Insurance Company..... -- -- -- -- --
Receivable from fund
shares sold........... -- -- -- -- --
-------------- ------------ -------------- -------------- ------------
Total Assets........... 1,479,344 1,606 1,007 56,956 1,104
-------------- ------------ -------------- -------------- ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 6,312 -- -- -- --
Payable for fund shares
purchased............. -- -- -- -- --
-------------- ------------ -------------- -------------- ------------
Total Liabilities...... 6,312 -- -- -- --
-------------- ------------ -------------- -------------- ------------
Net Assets (variable
life contract
liabilities).......... $1,473,032 $ 1,606 $ 1,007 $ 56,956 $ 1,104
-------------- ------------ -------------- -------------- ------------
-------------- ------------ -------------- -------------- ------------
Units Owned by
Participants.......... 841,070 1,396 1,000 52,916 1,000
Unit Values............ $ 1.751379 $ 1.150984 $1.007480 $1.076363 $1.103726
</TABLE>
---------------------------------------------------- 31
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $166,560 $ 116,844
------------ ------------
Net investment income
(loss).............. 166,560 116,844
------------ ------------
CAPITAL GAINS INCOME..... -- 289,691
------------ ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 20,736 (19,525)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 48,115 2,840,198
------------ ------------
Net gain (loss) on
investments......... 68,851 2,820,673
------------ ------------
Net increase
(decrease) in net
assets resulting
from operations..... $235,411 $ 3,227,208
------------ ------------
------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 32
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------ ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $524,273 $ 158,735 $ 77,525 $14,559 $ 107,603 $ 69,373
------------- ------------ ------------- ------------ ------------ --------------
Net investment income
(loss).............. 524,273 158,735 77,525 14,559 107,603 69,373
------------- ------------ ------------- ------------ ------------ --------------
CAPITAL GAINS INCOME..... -- 148,349 573,895 -- 176,994 235,374
------------- ------------ ------------- ------------ ------------ --------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- 3,423 (40,897) (1) 41,466 (12,897)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 925,117 1,053,772 632 2,102,732 226,926
------------- ------------ ------------- ------------ ------------ --------------
Net gain (loss) on
investments......... -- 928,540 1,012,875 631 2,144,198 214,029
------------- ------------ ------------- ------------ ------------ --------------
Net increase
(decrease) in net
assets resulting
from operations..... $524,273 $ 1,235,624 $ 1,664,295 $15,190 $ 2,428,795 518,776
------------- ------------ ------------- ------------ ------------ --------------
------------- ------------ ------------- ------------ ------------ --------------
<CAPTION>
DIVIDEND
AND GROWTH
FUND
SUB-ACCOUNT
------------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $132,007
------------
Net investment income
(loss).............. 132,007
------------
CAPITAL GAINS INCOME..... 182,157
------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (22,437)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 652,784
------------
Net gain (loss) on
investments......... 630,347
------------
Net increase
(decrease) in net
assets resulting
from operations..... $944,511
------------
------------
</TABLE>
---------------------------------------------------- 33
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP
EQUITY-INCOME OVERSEAS
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 64,760 $ 22,698
-------------- ------------
Net investment income
(loss).............. 64,760 22,698
-------------- ------------
CAPITAL GAINS INCOME..... 230,469 66,900
-------------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 16 (12,367)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 303,166 80,752
-------------- ------------
Net gain (loss) on
investments......... 303,182 68,385
-------------- ------------
Net increase
(decrease) in net
assets resulting
from operations..... $598,411 $157,983
-------------- ------------
-------------- ------------
</TABLE>
* From inception, August 3, 1998, to December 31, 1998
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 34
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
FIDELITY VIP
II
ASSET MANAGER GROWTH AND INTERNATIONAL SMALL COMPANY MIDCAP
PORTFOLIO INCOME FUND ADVISERS FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
-------------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 29,183 $ 6 --$ $-- --$
-------------- ----- ----- ------- -----
Net investment income
(loss).............. 29,183 6 -- -- --
-------------- ----- ----- ------- -----
CAPITAL GAINS INCOME..... 87,549 -- -- -- --
-------------- ----- ----- ------- -----
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (943) -- -- 41 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 48,191 150 7 14,348 104
-------------- ----- ----- ------- -----
Net gain (loss) on
investments......... 47,248 150 7 14,389 104
-------------- ----- ----- ------- -----
Net increase
(decrease) in net
assets resulting
from operations..... $163,980 $156 $ 7 $14,389 $104
-------------- ----- ----- ------- -----
-------------- ----- ----- ------- -----
</TABLE>
* From inception, August 3, 1998, to December 31, 1998
---------------------------------------------------- 35
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 166,560 $ 116,844
Capital gains income... -- 289,691
Net realized gain
(loss) on security
transactions.......... 20,736 (19,525)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 48,115 2,840,198
------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 235,411 3,227,208
------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 408,130 2,041,519
Net transfers.......... 1,509,453 4,810,627
Surrenders for benefit
payments and fees..... (69,652) (576,595)
Net loan activity...... (519) (125,205)
Cost of insurance...... (87,306) (456,787)
------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,760,106 5,693,559
------------ ------------
Net increase (decrease)
in net assets......... 1,995,517 8,920,767
NET ASSETS:
Beginning of period.... 1,553,257 6,648,932
------------ ------------
End of period.......... $3,548,774 $ 15,569,699
------------ ------------
------------ ------------
</TABLE>
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 60,722 $ 50,976
Capital gains income... -- 103,392
Net realized gain
(loss) on security
transactions.......... 344 4,792
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 23,137 785,883
------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 84,203 945,043
------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 224,575 691,357
Net transfers.......... 1,114,603 3,645,966
Surrenders for benefit
payments and fees..... (20,975) (141,324)
Net loan activity...... (25,999) (85,662)
Cost of insurance...... (33,000) (141,765)
------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,259,204 3,968,572
------------ ------------
Net increase (decrease)
in net assets......... 1,343,407 4,913,615
NET ASSETS:
Beginning of period.... 209,850 1,735,317
------------ ------------
End of period.......... $1,553,257 $ 6,648,932
------------ ------------
------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 36
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND 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)................ $ 524,273 $ 158,735 $ 77,525 $ 14,559 $ 107,603 $ 69,373
Capital gains income... -- 148,349 573,895 -- 176,994 235,374
Net realized gain
(loss) on security
transactions.......... -- 3,423 (40,897) (1) 41,466 (12,897)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 925,117 1,053,772 632 2,102,732 226,926
------------- ------------ ------------- ------------ ------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 524,273 1,235,624 1,664,295 15,190 2,428,795 518,776
------------- ------------ ------------- ------------ ------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 27,722,133 1,892,134 2,473,509 56,332 1,752,558 707,600
Net transfers.......... (33,879,254) 1,620,594 3,402,616 (58,529) 3,270,849 1,517,699
Surrenders for benefit
payments and fees..... (1,840,672) (400,056) (595,743) (8,870) (264,762) (221,694)
Net loan activity...... (66,865) 20,293 35,831 -- (56,810) (97,052)
Cost of insurance...... (501,588) (299,823) (540,583) (20,595) (313,799) (144,802)
------------- ------------ ------------- ------------ ------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (8,566,246) 2,833,142 4,775,630 (31,662) 4,388,036 1,761,751
------------- ------------ ------------- ------------ ------------- --------------
Net increase (decrease)
in net assets......... (8,041,973) 4,068,766 6,439,925 (16,472) 6,816,831 2,280,527
NET ASSETS:
Beginning of period.... 13,862,040 4,015,632 8,277,998 248,881 6,596,078 3,095,481
------------- ------------ ------------- ------------ ------------- --------------
End of period.......... $ 5,820,067 $8,084,398 $ 14,717,923 $232,409 $ 13,412,909 $5,376,008
------------- ------------ ------------- ------------ ------------- --------------
------------- ------------ ------------- ------------ ------------- --------------
<CAPTION>
DIVIDEND
AND GROWTH
FUND
SUB-ACCOUNT
------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ 132,007
Capital gains income... 182,157
Net realized gain
(loss) on security
transactions.......... (22,437)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 652,784
------------
Net increase (decrease)
in net assets
resulting from
operations............ 944,511
------------
UNIT TRANSACTIONS:
Purchases.............. 1,129,533
Net transfers.......... 2,842,341
Surrenders for benefit
payments and fees..... (358,785)
Net loan activity...... (33,764)
Cost of insurance...... (302,161)
------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 3,277,164
------------
Net increase (decrease)
in net assets......... 4,221,675
NET ASSETS:
Beginning of period.... 4,261,505
------------
End of period.......... $8,483,180
------------
------------
</TABLE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND 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)................ $ 380,235 $ 72,777 $ 34,129 $ 10,759 $ 61,758 $ 27,817
Capital gains income... -- 75,982 219,489 -- 128,080 128,065
Net realized gain
(loss) on security
transactions.......... -- 2,197 2,152 288 (284) 2,089
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 382,569 705,479 2,161 799,655 (168,332)
------------- ------------ ------------- ------------ ------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 380,235 533,525 961,249 13,208 989,209 (10,361)
------------- ------------ ------------- ------------ ------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 43,540,050 899,022 1,340,476 41,748 1,525,193 948,086
Net transfers.......... (32,385,194) 1,480,789 4,197,271 159,978 3,225,273 1,088,413
Surrenders for benefit
payments and fees..... (504,402) (123,087) (203,529) (4,181) (120,518) (78,919)
Net loan activity...... (685,736) (78,047) (112,292) -- (84,328) (61,840)
Cost of insurance...... (494,906) (108,782) (225,833) (5,854) (138,997) (77,690)
------------- ------------ ------------- ------------ ------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 9,469,812 2,069,895 4,996,093 191,691 4,406,623 1,818,050
------------- ------------ ------------- ------------ ------------- --------------
Net increase (decrease)
in net assets......... 9,850,047 2,603,420 5,957,342 204,899 5,395,832 1,807,689
NET ASSETS:
Beginning of period.... 4,011,993 1,412,212 2,320,656 43,982 1,200,246 1,287,792
------------- ------------ ------------- ------------ ------------- --------------
End of period.......... $13,862,040 $4,015,632 $ 8,277,998 $248,881 $ 6,596,078 $3,095,481
------------- ------------ ------------- ------------ ------------- --------------
------------- ------------ ------------- ------------ ------------- --------------
<CAPTION>
DIVIDEND
AND GROWTH
FUND
SUB-ACCOUNT
------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ 50,755
Capital gains income... 33,614
Net realized gain
(loss) on security
transactions.......... (751)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 446,847
------------
Net increase (decrease)
in net assets
resulting from
operations............ 530,465
------------
UNIT TRANSACTIONS:
Purchases.............. 360,484
Net transfers.......... 3,059,353
Surrenders for benefit
payments and fees..... (71,909)
Net loan activity...... (74,405)
Cost of insurance...... (91,491)
------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 3,182,032
------------
Net increase (decrease)
in net assets......... 3,712,497
NET ASSETS:
Beginning of period.... 549,008
------------
End of period.......... $4,261,505
------------
------------
</TABLE>
---------------------------------------------------- 37
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
FIDELITY VIP
EQUITY-INCOME
PORTFOLIO
SUB-ACCOUNT
--------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ 64,760
Capital gains income... 230,469
Net realized gain
(loss) on security
transactions.......... 16
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 303,166
--------------
Net increase (decrease)
in net assets
resulting from
operations............ 598,411
--------------
UNIT TRANSACTIONS:
Purchases.............. 1,148,707
Net transfers.......... 3,213,980
Surrenders for benefit
payments and fees..... (198,212)
Net loan activity...... (929)
Cost of insurance...... (201,357)
--------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 3,962,189
--------------
Net increase (decrease)
in net assets......... 4,560,600
NET ASSETS:
Beginning of period.... 4,357,953
--------------
End of period.......... $8,918,553
--------------
--------------
</TABLE>
* From inception, August 3, 1998, to December 31, 1998
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
FIDELITY VIP
EQUITY-INCOME
PORTFOLIO
SUB-ACCOUNT
--------------
<S> <C>
OPERATIONS:
Net investment income (loss)..... $ 28,391
Capital gains income............. 142,745
Net realized gain (loss) on
security transactions........... 2,925
Net unrealized appreciation
(depreciation) of investments
during the period............... 514,150
--------------
Net increase (decrease) in net
assets resulting from
operations...................... 688,211
--------------
UNIT TRANSACTIONS:
Purchases........................ 626,240
Net transfers.................... 1,691,959
Surrenders for benefit payments
and fees........................ (115,305)
Net loan activity................ (620)
Cost of insurance................ (98,277)
--------------
Net increase (decrease) in net
assets resulting from unit
transactions.................... 2,103,997
--------------
Net increase (decrease) in net
assets.......................... 2,792,208
NET ASSETS:
Beginning of period.............. 1,565,745
--------------
End of period.................... $4,357,953
--------------
--------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 38
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
FIDELITY VIP
FIDELITY VIP II
OVERSEAS ASSET MANAGER GROWTH AND INTERNATIONAL SMALL COMPANY MIDCAP
PORTFOLIO PORTFOLIO INCOME FUND ADVISERS FUND FUND 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)................ $ 22,698 $ 29,183 $ 6 $-- $-- $--
Capital gains income... 66,900 87,549 -- -- -- --
Net realized gain
(loss) on security
transactions.......... (12,367) (943) -- -- 41 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 80,752 48,191 150 7 14,348 104
------------ -------------- ------ ------ ------- ------
Net increase (decrease)
in net assets
resulting from
operations............ 157,983 163,980 156 7 14,389 104
------------ -------------- ------ ------ ------- ------
UNIT TRANSACTIONS:
Purchases.............. 296,446 276,627 1,000 1,000 1,344 1,000
Net transfers.......... 2,455,676 218,464 450 -- 41,605 --
Surrenders for benefit
payments and fees..... (66,416) (46,101) -- -- (271) --
Net loan activity...... (1,217) -- -- -- -- --
Cost of insurance...... (50,423) (44,434) -- -- (111) --
------------ -------------- ------ ------ ------- ------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 2,634,066 404,556 1,450 1,000 42,567 1,000
------------ -------------- ------ ------ ------- ------
Net increase (decrease)
in net assets......... 2,792,049 568,536 1,606 1,007 56,956 1,104
NET ASSETS:
Beginning of period.... 969,359 904,496 -- -- -- --
------------ -------------- ------ ------ ------- ------
End of period.......... $3,761,408 $1,473,032 $1,606 $1,007 $56,956 $1,104
------------ -------------- ------ ------ ------- ------
------------ -------------- ------ ------ ------- ------
</TABLE>
<TABLE>
<CAPTION>
FIDELITY VIP
FIDELITY VIP II
OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 3,585 $ 12,026
Capital gains income............. 14,231 30,166
Net realized gain (loss) on
security transactions........... (2,477) 4,849
Net unrealized appreciation
(depreciation) of investments
during the period............... (1,284) 45,529
------------- --------------
Net increase (decrease) in net
assets resulting from
operations...................... 14,055 92,570
------------- --------------
UNIT TRANSACTIONS:
Purchases........................ 80,330 187,210
Net transfers.................... 754,893 350,249
Surrenders for benefit payments
and fees........................ (17,526) (19,442)
Net loan activity................ (18,863) --
Cost of insurance................ (10,590) (18,932)
------------- --------------
Net increase (decrease) in net
assets resulting from unit
transactions.................... 788,244 499,085
------------- --------------
Net increase (decrease) in net
assets.......................... 802,299 591,655
NET ASSETS:
Beginning of period.............. 167,060 312,841
------------- --------------
End of period.................... $ 969,359 $ 904,496
------------- --------------
------------- --------------
</TABLE>
---------------------------------------------------- 39
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. ORGANIZATION:
Separate Account Variable Life Two (the Account) is a separate investment
account within Hartford Life Insurance Company (the Company) and is
registered with the Securities and Exchange Commission (SEC) as a unit
investment trust under the Investment Company Act of 1940, as amended. 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 is accrued as of the ex-dividend date. Capital gains income
represents those dividends from the Funds which are characterized as
capital gains under tax regulations.
b) SECURITY VALUATION--The investments in shares of the Funds are valued at
the closing net asset value per share as determined by the appropriate
Fund as of December 31, 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) DEDUCTIONS AND CHARGES FROM THE ACCOUNT VALUE-- On the policy date and on
each subsequent monthly activity date, the Company will deduct from the
Account an amount to cover mortality and expense risk charges, cost of
insurance, administrative charges and any other benefits provided by the
rider. These charges, which may vary from month to month in accordance
with the terms of the Contracts, are deducted through termination of
units of interest from applicable contract owners' accounts.
______________________________________ 40 ______________________________________
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS
Fund, Inc. - Class
IA
Shares 1,875,338
Cost $1,912,152
Market Value....... $ 2,026,612 --
Hartford Stock HLS
Fund, Inc. - Class
IA
Shares 1,326,067
Cost $3,488,088
Market Value....... -- $ 8,701,207
Hartford Money Market
HLS Fund, Inc. -
Class IA
Shares 2,027,556
Cost $2,027,556
Market Value....... -- --
Hartford Advisers HLS
Fund, Inc. - Class
IA
Shares 7,043,196
Cost $9,343,101
Market Value....... -- --
Hartford Capital
Appreciation HLS
Fund, Inc. - Class
IA
Shares 1,914,588
Cost $3,741,293
Market Value....... -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 3,160,963
Cost $3,424,244
Market Value....... -- --
Hartford Index HLS
Fund, Inc. - Class
IA
Shares 105,454
Cost $157,726
Market Value....... -- --
Due from Hartford Life
Insurance Company..... 86,341 681
Receivable from fund
shares sold........... -- --
------------ ------------
Total Assets........... 2,112,953 8,701,888
------------ ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- --
Payable for fund shares
purchased............. 86,341 681
------------ ------------
Total Liabilities...... 86,341 681
------------ ------------
Net Assets (variable
life contract
liabilities).......... $ 2,026,612 $ 8,701,207
------------ ------------
------------ ------------
Units Owned by
Participants.......... 807,578 1,265,738
Unit Price............. $ 2.509495 $ 6.874413
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 42
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX
FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS
Fund, Inc. - Class
IA
Shares 1,875,338
Cost $1,912,152
Market Value....... -- -- -- -- --
Hartford Stock HLS
Fund, Inc. - Class
IA
Shares 1,326,067
Cost $3,488,088
Market Value....... -- -- -- -- --
Hartford Money Market
HLS Fund, Inc. -
Class IA
Shares 2,027,556
Cost $2,027,556
Market Value....... $2,027,556 -- -- -- --
Hartford Advisers HLS
Fund, Inc. - Class
IA
Shares 7,043,196
Cost $9,343,101
Market Value....... -- $ 21,025,723 -- -- --
Hartford Capital
Appreciation HLS
Fund, Inc. - Class
IA
Shares 1,914,588
Cost $3,741,293
Market Value....... -- -- $ 9,111,679 -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 3,160,963
Cost $3,424,244
Market Value....... -- -- -- $ 3,428,232 --
Hartford Index HLS
Fund, Inc. - Class
IA
Shares 105,454
Cost $157,726
Market Value....... -- -- -- -- $ 376,520
Due from Hartford Life
Insurance Company..... -- 2,630 138,261 218 --
Receivable from fund
shares sold........... 124,056 -- -- -- 24,595
------------- ------------ ------------- ------------ ------------
Total Assets........... 2,151,612 21,028,353 9,249,940 3,428,450 401,115
------------- ------------ ------------- ------------ ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 126,747 -- -- -- 24,595
Payable for fund shares
purchased............. -- 2,629 138,352 3,246 --
------------- ------------ ------------- ------------ ------------
Total Liabilities...... 126,747 2,629 138,352 3,246 24,595
------------- ------------ ------------- ------------ ------------
Net Assets (variable
life contract
liabilities).......... $2,024,865 $ 21,025,724 $ 9,111,588 $ 3,425,204 $ 376,520
------------- ------------ ------------- ------------ ------------
------------- ------------ ------------- ------------ ------------
Units Owned by
Participants.......... 1,089,285 4,243,408 1,422,209 1,404,419 76,631
Unit Price............. $ 1.858893 $ 4.954914 $ 6.406645 $ 2.438877 $4.913416
</TABLE>
---------------------------------------------------- 43
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 97,110 $ 66,114
EXPENSES:
Mortality and expense
undertakings.......... (16,264) (67,726)
------------ ------------
Net investment income
(loss).............. 80,846 (1,612)
------------ ------------
CAPITAL GAINS INCOME..... -- 246,858
------------ ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 3,142 234,844
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 42,024 1,660,727
------------ ------------
Net gain (loss) on
investments......... 45,166 1,895,571
------------ ------------
Net increase
(decrease) in net
assets resulting
from operations..... $126,012 $ 2,140,817
------------ ------------
------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 44
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX
FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $118,633 $ 417,110 $ 48,015 $215,074 $ 3,208
EXPENSES:
Mortality and expense
undertakings.......... (20,759) (175,730) (77,480) (30,784) (4,531)
------------- ------------ ------------- ------------ ------------
Net investment income
(loss).............. 97,874 241,380 (29,465) 184,290 (1,323)
------------- ------------ ------------- ------------ ------------
CAPITAL GAINS INCOME..... -- 635,067 575,189 -- 10,423
------------- ------------ ------------- ------------ ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- 533,821 115,209 5,202 56,730
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 2,722,020 569,309 1,929 58,103
------------- ------------ ------------- ------------ ------------
Net gain (loss) on
investments......... -- 3,255,841 684,518 7,131 114,833
------------- ------------ ------------- ------------ ------------
Net increase
(decrease) in net
assets resulting
from operations..... $ 97,874 $ 4,132,288 $ 1,230,242 $191,421 $123,933
------------- ------------ ------------- ------------ ------------
------------- ------------ ------------- ------------ ------------
</TABLE>
---------------------------------------------------- 45
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 80,846 $ (1,612)
Capital gains income... -- 246,858
Net realized gain
(loss) on security
transactions.......... 3,142 234,844
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 42,024 1,660,727
------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 126,012 2,140,817
------------ ------------
UNIT TRANSACTIONS:
Net transfers.......... 492,699 162,134
Surrenders for benefit
payments and fees..... (91,551) (101,584)
Net loan activity...... 1,626 (349,986)
Cost of insurance and
other fees............ (13,618) (36,443)
------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 389,156 (325,879)
------------ ------------
Net increase (decrease)
in net assets......... 515,168 1,814,938
NET ASSETS:
Beginning of period.... 1,511,444 6,886,269
------------ ------------
End of period.......... $ 2,026,612 $ 8,701,207
------------ ------------
------------ ------------
</TABLE>
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 71,795 $ 8,215
Capital gains income... -- 288,640
Net realized gain
(loss) on security
transactions.......... 7,245 51,904
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 66,093 1,292,997
------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 145,133 1,641,756
------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 784,609 1,421,887
Net transfers.......... (66,546) 286,315
Surrenders for benefit
payments and fees..... (288,440) (688,071)
Net loan activity...... (679,536) (1,039,721)
Cost of insurance and
other fees............ (15,437) (36,874)
------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (265,350) (56,464)
------------ ------------
Net increase (decrease)
in net assets......... (120,217) 1,585,292
NET ASSETS:
Beginning of period.... 1,631,661 5,300,977
------------ ------------
End of period.......... $ 1,511,444 $ 6,886,269
------------ ------------
------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 46
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX
FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 97,874 $ 241,380 $ (29,465) $ 184,290 $ (1,323)
Capital gains income... -- 635,067 575,189 -- 10,423
Net realized gain
(loss) on security
transactions.......... -- 533,821 115,209 5,202 56,730
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 2,722,020 569,309 1,929 58,103
------------- ------------ ------------- ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 97,874 4,132,288 1,230,242 191,421 123,933
------------- ------------ ------------- ------------ ------------
UNIT TRANSACTIONS:
Net transfers.......... (74,776) (228,502) (189,359) -- (162,196)
Surrenders for benefit
payments and fees..... (168,673) (981,260) (196,186) (131,470) (3,051)
Net loan activity...... (81,767) (217,376) (263,471) (39,378) (79)
Cost of insurance and
other fees............ (33,960) (97,971) (39,901) (26,561) (2,129)
------------- ------------ ------------- ------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (359,176) (1,525,109) (688,917) (197,409) (167,455)
------------- ------------ ------------- ------------ ------------
Net increase (decrease)
in net assets......... (261,302) 2,607,179 541,325 (5,988) (43,522)
NET ASSETS:
Beginning of period.... 2,286,167 18,418,545 8,570,263 3,431,192 420,042
------------- ------------ ------------- ------------ ------------
End of period.......... $2,024,865 $ 21,025,724 $ 9,111,588 $ 3,425,204 $ 376,520
------------- ------------ ------------- ------------ ------------
------------- ------------ ------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX
FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 87,754 $ 240,748 $ (31,565) $ 170,772 $ 2,574
Capital gains income... -- 731,667 587,118 -- 35,941
Net realized gain
(loss) on security
transactions.......... -- 508,849 202,014 1,486 22,222
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 2,262,927 891,144 87,119 65,629
------------- ------------ ------------- ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 87,754 3,744,191 1,648,711 259,377 126,366
------------- ------------ ------------- ------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 837,735 5,805,878 1,313,089 1,040,366 335,550
Net transfers.......... (158,936) (268,159) 54,530 (52,290) 201,194
Surrenders for benefit
payments and fees..... (39,806) (2,029,515) (982,045) (52,364) (220,245)
Net loan activity...... (860,395) (5,120,268) (1,247,165) (1,104,813) (41,858)
Cost of insurance and
other fees............ (33,231) (125,426) (42,477) (32,362) (213,232)
------------- ------------ ------------- ------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (254,633) (1,737,490) (904,068) (201,463) 61,409
------------- ------------ ------------- ------------ ------------
Net increase (decrease)
in net assets......... (166,879) 2,006,701 744,643 57,914 187,775
NET ASSETS:
Beginning of period.... 2,453,046 16,411,844 7,825,620 3,373,278 232,267
------------- ------------ ------------- ------------ ------------
End of period.......... $2,286,167 $ 18,418,545 $ 8,570,263 $ 3,431,192 $ 420,042
------------- ------------ ------------- ------------ ------------
------------- ------------ ------------- ------------ ------------
</TABLE>
---------------------------------------------------- 47
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. ORGANIZATION:
Separate Account One (the Account) is a separate investment account within
Hartford Life Insurance Company (the Company) and is registered with the
Securities and Exchange Commission (SEC) as a unit investment trust under
the Investment Company Act of 1940, as amended. Both the Company and the
Account are subject to supervision and regulation by the Department of
Insurance of the State of Connecticut and the SEC. The Account invests
deposits by variable life contractholders of the Company in various mutual
funds (the Funds), as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividend and capital
gains income is accrued as of the ex-dividend date. Capital gains income
represents those dividends from the Funds which are characterized as
capital gains under tax regulations.
b) SECURITY VALUATION--The investments in shares of the Funds are valued at
the closing net asset value per share as determined by the appropriate
Fund as of December 31, 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) DEDUCTIONS AND CHARGES FROM THE ACCOUNT VALUE-- On the policy date and on
each subsequent monthly activity date, the Company will deduct from the
Account an amount to cover mortality and expense risk charges, cost of
insurance, administrative charges and any other benefits provided by the
rider. These charges, which may vary from month to month in accordance
with the terms of the contracts, are deducted through termination of
units of interest from applicable contract owners' accounts.
______________________________________ 48 ______________________________________
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<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. - Class
IA
Shares 1,859,522
Cost $1,961,050
Market Value....... $ 2,009,520 -- --
Hartford Stock HLS
Fund, Inc. - Class
IA
Shares 2,751,972
Cost $15,443,622
Market Value....... -- $ 18,057,519 --
Hartford Money Market
HLS Fund, Inc. -
Class IA
Shares 25,796,373
Cost $25,796,373
Market Value....... -- -- $ 25,796,373
Hartford Advisers HLS
Fund, Inc. - Class
IA
Shares 2,938,878
Cost $8,019,628
Market Value....... -- -- --
Hartford Capital
Appreciation HLS
Fund, Inc. - Class
IA
Shares 3,585,142
Cost $15,550,948
Market Value....... -- -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 608,233
Cost $669,509
Market Value....... -- -- --
Hartford Index HLS
Fund, Inc. - Class
IA
Shares 3,042,284
Cost $9,431,173
Market Value....... -- -- --
Hartford
International
Opportunities HLS
Fund, Inc. - Class
IA
Shares 4,336,343
Cost $5,697,915
Market Value....... -- -- --
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 4,333,353
Cost $8,735,254
Market Value....... -- -- --
Due from Hartford Life
& Annuity Insurance
Company............... -- 36,742 2,586,454
Receivable from fund
shares sold........... 25 -- --
------------ ------------ ------------
Total Assets........... 2,009,545 18,094,261 28,382,827
------------ ------------ ------------
LIABILITIES:
Due to Hartford Life &
Annuity Insurance
Company............... 41 -- --
Payable for fund shares
purchased............. -- 37,028 2,585,351
------------ ------------ ------------
Total Liabilities...... 41 37,028 2,585,351
------------ ------------ ------------
Net Assets (variable
life contract
liabilities).......... $ 2,009,504 $ 18,057,233 $ 25,797,476
------------ ------------ ------------
------------ ------------ ------------
Units Owned by
Participants.......... 1,352,909 5,754,715 19,784,827
Unit Values............ $ 1.485321 $ 3.137815 $ 1.303902
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 50
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND
APPRECIATION SECURITIES INDEX OPPORTUNITIES AND GROWTH
ADVISERS FUND FUND FUND FUND FUND 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. - Class
IA
Shares 1,859,522
Cost $1,961,050
Market Value....... -- -- -- -- -- --
Hartford Stock HLS
Fund, Inc. - Class
IA
Shares 2,751,972
Cost $15,443,622
Market Value....... -- -- -- -- -- --
Hartford Money Market
HLS Fund, Inc. -
Class IA
Shares 25,796,373
Cost $25,796,373
Market Value....... -- -- -- -- -- --
Hartford Advisers HLS
Fund, Inc. - Class
IA
Shares 2,938,878
Cost $8,019,628
Market Value....... $8,773,294 -- -- -- -- --
Hartford Capital
Appreciation HLS
Fund, Inc. - Class
IA
Shares 3,585,142
Cost $15,550,948
Market Value....... -- $ 17,061,980 -- -- -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 608,233
Cost $669,509
Market Value....... -- -- $ 659,660 -- -- --
Hartford Index HLS
Fund, Inc. - Class
IA
Shares 3,042,284
Cost $9,431,173
Market Value....... -- -- -- $ 10,862,331 -- --
Hartford
International
Opportunities HLS
Fund, Inc. - Class
IA
Shares 4,336,343
Cost $5,697,915
Market Value....... -- -- -- -- $5,875,125 --
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 4,333,353
Cost $8,735,254
Market Value....... -- -- -- -- -- $ 9,362,148
Due from Hartford Life
& Annuity Insurance
Company............... 56,120 71,090 1 -- 8,547 61,290
Receivable from fund
shares sold........... -- -- -- 59,331 -- --
-------------- ------------- ------------ ------------ -------------- ------------
Total Assets........... 8,829,414 17,133,070 659,661 10,921,662 5,883,672 9,423,438
-------------- ------------- ------------ ------------ -------------- ------------
LIABILITIES:
Due to Hartford Life &
Annuity Insurance
Company............... -- -- -- 59,974 -- --
Payable for fund shares
purchased............. 56,258 71,362 -- -- 8,652 61,707
-------------- ------------- ------------ ------------ -------------- ------------
Total Liabilities...... 56,258 71,362 -- 59,974 8,652 61,707
-------------- ------------- ------------ ------------ -------------- ------------
Net Assets (variable
life contract
liabilities).......... $8,773,156 $ 17,061,708 $ 659,661 $ 10,861,688 $5,875,020 $ 9,361,731
-------------- ------------- ------------ ------------ -------------- ------------
-------------- ------------- ------------ ------------ -------------- ------------
Units Owned by
Participants.......... 3,614,682 6,917,191 458,077 3,651,309 3,457,586 4,023,410
Unit Values............ $ 2.427089 $ 2.466566 $1.440067 $ 2.974738 $ 1.699168 $ 2.326815
</TABLE>
---------------------------------------------------- 51
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP
EQUITY-INCOME OVERSEAS
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------
<S> <C> <C>
ASSETS:
Investments:
Fidelity VIP
Equity-Income
Portfolio
Shares 252,738
Cost $6,042,615
Market Value....... $6,424,588 --
Fidelity VIP Overseas
Portfolio
Shares 174,735
Cost $3,340,244
Market Value....... -- $ 3,503,442
Fidelity VIP II Asset
Manager Portfolio
Shares 54,516
Cost $923,808
Market Value....... -- --
Hartford Growth and
Income HLS Fund -
Class IA
Shares 59,644
Cost $64,739
Market Value....... -- --
Hartford
International
Advisers HLS Fund,
Inc. - Class IA
Shares 5,199
Cost $5,764
Market Value....... -- --
Hartford Small
Company HLS Fund,
Inc. - Class IA
Shares 103,221
Cost $113,208
Market Value....... -- --
Hartford MidCap HLS
Fund, Inc. - Class
IA
Shares 50,672
Cost $63,516
Market Value....... -- --
Due from Hartford Life
& Annuity Insurance
Company............... 103,278 2,774
Receivable from fund
shares sold........... -- --
-------------- ------------
Total Assets........... 6,527,866 3,506,216
-------------- ------------
LIABILITIES:
Due to Hartford Life &
Annuity Insurance
Company............... -- --
Payable for fund shares
purchased............. 103,371 2,809
-------------- ------------
Total Liabilities...... 103,371 2,809
-------------- ------------
Net Assets (variable
life contract
liabilities).......... $6,424,495 $ 3,503,407
-------------- ------------
-------------- ------------
Units Owned by
Participants.......... 3,279,115 2,291,066
Unit Values............ $ 1.959216 $ 1.529160
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 52
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
FIDELITY VIP
II
ASSET MANAGER GROWTH AND INTERNATIONAL SMALL COMPANY MIDCAP
PORTFOLIO INCOME FUND ADVISERS FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------ -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Fidelity VIP
Equity-Income
Portfolio
Shares 252,738
Cost $6,042,615
Market Value....... -- -- -- -- --
Fidelity VIP Overseas
Portfolio
Shares 174,735
Cost $3,340,244
Market Value....... -- -- -- -- --
Fidelity VIP II Asset
Manager Portfolio
Shares 54,516
Cost $923,808
Market Value....... $ 990,008 -- -- -- --
Hartford Growth and
Income HLS Fund -
Class IA
Shares 59,644
Cost $64,739
Market Value....... -- $ 70,735 -- -- --
Hartford
International
Advisers HLS Fund,
Inc. - Class IA
Shares 5,199
Cost $5,764
Market Value....... -- -- $ 6,003 -- --
Hartford Small
Company HLS Fund,
Inc. - Class IA
Shares 103,221
Cost $113,208
Market Value....... -- -- -- $ 136,367 --
Hartford MidCap HLS
Fund, Inc. - Class
IA
Shares 50,672
Cost $63,516
Market Value....... -- -- -- -- $ 72,930
Due from Hartford Life
& Annuity Insurance
Company............... 57 -- -- -- --
Receivable from fund
shares sold........... -- -- -- 3,353 3,343
-------------- ------------ -------------- -------------- ------------
Total Assets........... 990,065 70,735 6,003 139,720 76,273
-------------- ------------ -------------- -------------- ------------
LIABILITIES:
Due to Hartford Life &
Annuity Insurance
Company............... -- -- -- 3,354 3,344
Payable for fund shares
purchased............. 64 -- -- -- --
-------------- ------------ -------------- -------------- ------------
Total Liabilities...... 64 -- -- 3,354 3,344
-------------- ------------ -------------- -------------- ------------
Net Assets (variable
life contract
liabilities).......... $ 990,001 $ 70,735 $ 6,003 $ 136,366 $ 72,929
-------------- ------------ -------------- -------------- ------------
-------------- ------------ -------------- -------------- ------------
Units Owned by
Participants.......... 565,270 61,456 5,958 126,692 66,076
Unit Values............ $1.751379 $1.150984 $1.007480 $1.076363 $1.103726
</TABLE>
---------------------------------------------------- 53
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 94,731 $ 133,161
------------ ------------
CAPITAL GAINS INCOME..... -- 103,525
------------ ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 9,305 (98)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 38,190 2,521,917
------------ ------------
Net gain (loss) on
investments......... 47,495 2,521,819
------------ ------------
Net increase
(decrease) in net
assets resulting
from operations..... $142,226 $ 2,758,505
------------ ------------
------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 54
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------ ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $445,803 $169,656 $ 88,276 $37,142 $ 84,654 $ 74,346
------------- ------------ ------------- ------------ ------------ --------------
CAPITAL GAINS INCOME..... -- 63,605 250,090 -- 53,874 99,646
------------- ------------ ------------- ------------ ------------ --------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- 4,573 39,470 (871) (922) (741)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 731,402 1,421,650 (8,524) 1,330,595 214,444
------------- ------------ ------------- ------------ ------------ --------------
Net gain (loss) on
investments......... -- 735,975 1,461,120 (9,395) 1,329,673 213,703
------------- ------------ ------------- ------------ ------------ --------------
Net increase
(decrease) in net
assets resulting
from operations..... $445,803 $969,236 $ 1,799,486 $27,747 $ 1,468,201 $387,695
------------- ------------ ------------- ------------ ------------ --------------
------------- ------------ ------------- ------------ ------------ --------------
<CAPTION>
DIVIDEND
AND GROWTH
FUND
SUB-ACCOUNT
------------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $137,525
------------
CAPITAL GAINS INCOME..... 62,013
------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 1,074
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 561,829
------------
Net gain (loss) on
investments......... 562,903
------------
Net increase
(decrease) in net
assets resulting
from operations..... $762,441
------------
------------
</TABLE>
---------------------------------------------------- 55
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP
EQUITY-INCOME OVERSEAS
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 14,647 $ 7,173
-------------- ------------
CAPITAL GAINS INCOME..... 52,127 21,143
-------------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 690 (6,944)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 333,233 162,234
-------------- ------------
Net gain (loss) on
investments......... 333,923 155,290
-------------- ------------
Net increase
(decrease) in net
assets resulting
from operations..... $400,697 $183,606
-------------- ------------
-------------- ------------
</TABLE>
* From inception, August 3, 1998, to December 31, 1998
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 56
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
FIDELITY VIP
II
ASSET MANAGER GROWTH AND INTERNATIONAL SMALL COMPANY MIDCAP
PORTFOLIO INCOME FUND ADVISERS FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
-------------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 6,411 $ 267 -$- $-- $--
------- ------ ----- ------- ------
CAPITAL GAINS INCOME..... 19,232 -- -- -- --
------- ------ ----- ------- ------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 68 14 5 235 191
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 58,568 5,996 239 23,159 9,414
------- ------ ----- ------- ------
Net gain (loss) on
investments......... 58,636 6,010 244 23,394 9,605
------- ------ ----- ------- ------
Net increase
(decrease) in net
assets resulting
from operations..... $84,279 $6,277 $244 $23,394 $9,605
------- ------ ----- ------- ------
------- ------ ----- ------- ------
</TABLE>
* From inception, August 3, 1998, to December 31, 1998
---------------------------------------------------- 57
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 94,731 $ 133,161
Capital gains income... -- 103,525
Net realized gain
(loss) on security
transactions.......... 9,305 (98)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 38,190 2,521,917
------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 142,226 2,758,505
------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 683,210 3,513,223
Net transfers.......... 571,074 10,950,874
Surrenders for benefit
payments and fees..... (31,817) (207,585)
Net loan activity...... (7,510) (178,910)
Cost of insurance...... (110,589) (599,935)
------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,104,368 13,477,667
------------ ------------
Net increase (decrease)
in net assets......... 1,246,594 16,236,172
NET ASSETS:
Beginning of period.... 762,910 1,821,061
------------ ------------
End of period.......... $ 2,009,504 $ 18,057,233
------------ ------------
------------ ------------
</TABLE>
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 26,909 $ 11,815
Capital gains income... -- 558
Net realized gain
(loss) on security
transactions.......... 148 (109)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 10,267 91,919
------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 37,324 104,183
------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 58,303 110,273
Net transfers.......... 674,390 1,673,468
Surrenders for benefit
payments and fees..... (6,137) (12,105)
Net loan activity...... 11,825 (221)
Cost of insurance...... (13,939) (55,771)
------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 724,442 1,715,644
------------ ------------
Net increase (decrease)
in net assets......... 761,766 1,819,827
NET ASSETS:
Beginning of period.... 1,144 1,234
------------ ------------
End of period.......... $762,910 $ 1,821,061
------------ ------------
------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 58
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND 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)................ $ 445,803 $ 169,656 $ 88,276 $ 37,142 $ 84,654 $ 74,346
Capital gains income... -- 63,605 250,090 -- 53,874 99,646
Net realized gain
(loss) on security
transactions.......... -- 4,573 39,470 (871) (922) (741)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 731,402 1,421,650 (8,524) 1,330,595 214,444
------------- ------------ ------------- ------------ ------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 445,803 969,236 1,799,486 27,747 1,468,201 387,695
------------- ------------ ------------- ------------ ------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 95,425,381 1,751,574 3,507,330 37,276 2,118,676 1,309,658
Net transfers.......... (72,076,036) 5,691,550 9,794,312 550,267 6,100,193 3,666,828
Surrenders for benefit
payments and fees..... (411,072) (489,261) (187,213) (5,125) (112,773) (64,967)
Net loan activity...... (3,001,765) (71,056) (101,857) (7,079) (209,775) (30,352)
Cost of insurance...... (1,609,252) (229,420) (489,408) (31,183) (280,128) (165,473)
------------- ------------ ------------- ------------ ------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 18,327,256 6,653,387 12,523,164 544,156 7,616,193 4,715,694
------------- ------------ ------------- ------------ ------------- --------------
Net increase (decrease)
in net assets......... 18,773,059 7,622,623 14,322,650 571,903 9,084,394 5,103,389
NET ASSETS:
Beginning of period.... 7,024,417 1,150,533 2,739,058 87,758 1,777,294 771,631
------------- ------------ ------------- ------------ ------------- --------------
End of period.......... $ 25,797,476 $ 8,773,156 $ 17,061,708 $659,661 $ 10,861,688 $5,875,020
------------- ------------ ------------- ------------ ------------- --------------
------------- ------------ ------------- ------------ ------------- --------------
</TABLE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND 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)................ $ 105,975 $ 16,534 $ 9,163 $ 3,444 $ 14,934 $ 6,510
Capital gains income... -- 584 10,410 -- 4,291 14,471
Net realized gain
(loss) on security
transactions.......... -- (232) 716 28 463 (828)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 22,216 89,337 (1,336) 100,497 (37,302)
------------- ------------ ------------- ------------ ------------ --------------
Net increase (decrease)
in net assets
resulting from
operations............ 105,975 39,102 109,626 2,136 120,185 (17,149)
------------- ------------ ------------- ------------ ------------ --------------
UNIT TRANSACTIONS:
Purchases.............. 26,348,230 17,300 308,974 1,853 68,957 176,177
Net transfers.......... (17,219,898) 1,125,736 2,397,785 76,873 1,641,927 650,101
Surrenders for benefit
payments and fees..... (76,531) (8,960) (23,361) (640) (13,070) (15,973)
Net loan activity...... (2,085,251) (2,510) 6,968 7,850 (7,681) 88
Cost of insurance...... (460,124) (21,190) (63,644) (1,339) (34,163) (25,871)
------------- ------------ ------------- ------------ ------------ --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 6,506,426 1,110,376 2,626,722 84,597 1,655,970 784,522
------------- ------------ ------------- ------------ ------------ --------------
Net increase (decrease)
in net assets......... 6,612,401 1,149,478 2,736,348 86,733 1,776,155 767,373
NET ASSETS:
Beginning of period.... 412,016 1,055 2,710 1,025 1,139 4,258
------------- ------------ ------------- ------------ ------------ --------------
End of period.......... $ 7,024,417 $ 1,150,533 $ 2,739,058 $87,758 $ 1,777,294 $ 771,631
------------- ------------ ------------- ------------ ------------ --------------
------------- ------------ ------------- ------------ ------------ --------------
</TABLE>
---------------------------------------------------- 59
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
DIVIDEND FIDELITY VIP
AND GROWTH EQUITY-INCOME
FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 137,525 $ 14,647
Capital gains income... 62,013 52,127
Net realized gain
(loss) on security
transactions.......... 1,074 690
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 561,829 333,233
------------ --------------
Net increase (decrease)
in net assets
resulting from
operations............ 762,441 400,697
------------ --------------
UNIT TRANSACTIONS:
Purchases.............. 2,087,615 1,026,458
Net transfers.......... 5,745,039 4,607,992
Surrenders for benefit
payments and fees..... (95,097) (66,082)
Net loan activity...... (128,288) (40,966)
Cost of insurance...... (288,431) (150,445)
------------ --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 7,320,838 5,376,957
------------ --------------
Net increase (decrease)
in net assets......... 8,083,279 5,777,654
NET ASSETS:
Beginning of period.... 1,278,452 646,841
------------ --------------
End of period.......... $ 9,361,731 $6,424,495
------------ --------------
------------ --------------
</TABLE>
* From inception, August 3, 1998, to December 31, 1998
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
DIVIDEND FIDELITY VIP
AND GROWTH EQUITY-INCOME
FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)..................... $ 12,804 $ 374
Capital gains income........ 815 1,882
Net realized gain (loss) on
security transactions...... 360 1,671
Net unrealized appreciation
(depreciation) of
investments during the
period..................... 65,053 48,686
------------ --------------
Net increase (decrease) in
net assets resulting from
operations................. 79,032 52,613
------------ --------------
UNIT TRANSACTIONS:
Purchases................... 62,971 43,181
Net transfers............... 1,157,823 579,483
Surrenders for benefit
payments and fees.......... (7,195) (11,517)
Net loan activity........... 3,918 (3,459)
Cost of insurance........... (22,528) (15,244)
------------ --------------
Net increase (decrease) in
net assets resulting from
unit transactions.......... 1,194,989 592,444
------------ --------------
Net increase (decrease) in
net assets................. 1,274,021 645,057
NET ASSETS:
Beginning of period......... 4,431 1,784
------------ --------------
End of period............... $ 1,278,452 $646,841
------------ --------------
------------ --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 60
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
FIDELITY VIP
FIDELITY VIP II
OVERSEAS ASSET MANAGER GROWTH AND INTERNATIONAL SMALL COMPANY MIDCAP
PORTFOLIO PORTFOLIO INCOME FUND ADVISERS FUND FUND 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)................ $ 7,173 $ 6,411 $ 267 $-- $-- $--
Capital gains income... 21,143 19,232 -- -- -- --
Net realized gain
(loss) on security
transactions.......... (6,944) 68 14 5 235 191
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 162,234 58,568 5,996 239 23,159 9,414
------------ -------------- ------------- ------ -------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 183,606 84,279 6,277 244 23,394 9,605
------------ -------------- ------------- ------ -------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 686,112 229,316 3,992 1,111 4,285 5,632
Net transfers.......... 2,484,394 567,140 62,775 4,904 114,315 62,276
Surrenders for benefit
payments and fees..... (24,102) (8,417) (315) (126) (1,068) (433)
Net loan activity...... (25,210) 5,364 -- -- (3,356) (3,343)
Cost of insurance...... (74,993) (21,314) (1,994) (130) (1,204) (808)
------------ -------------- ------------- ------ -------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 3,046,201 772,089 64,458 5,759 112,972 63,324
------------ -------------- ------------- ------ -------------- -------------
Net increase (decrease)
in net assets......... 3,229,807 856,368 70,735 6,003 136,366 72,929
NET ASSETS:
Beginning of period.... 273,600 133,633 -- -- -- --
------------ -------------- ------------- ------ -------------- -------------
End of period.......... $ 3,503,407 $990,001 $70,735 $6,003 $136,366 $72,929
------------ -------------- ------------- ------ -------------- -------------
------------ -------------- ------------- ------ -------------- -------------
</TABLE>
<TABLE>
<CAPTION>
FIDELITY VIP
FIDELITY VIP II
OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)..................... $ 373 $ 66
Capital gains income........ 1,481 165
Net realized gain (loss) on
security transactions...... (138) 28
Net unrealized appreciation
(depreciation) of
investments during the
period..................... 919 7,582
------------ --------------
Net increase (decrease) in
net assets resulting from
operations................. 2,635 7,841
------------ --------------
UNIT TRANSACTIONS:
Purchases................... 22,743 8,385
Net transfers............... 257,320 121,381
Surrenders for benefit
payments and fees.......... (3,860) (1,502)
Net loan activity........... (12) --
Cost of insurance........... (6,270) (3,522)
------------ --------------
Net increase (decrease) in
net assets resulting from
unit transactions.......... 269,921 124,742
------------ --------------
Net increase (decrease) in
net assets................. 272,556 132,583
NET ASSETS:
Beginning of period......... 1,044 1,050
------------ --------------
End of period............... $273,600 $133,633
------------ --------------
------------ --------------
</TABLE>
---------------------------------------------------- 61
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. ORGANIZATION:
Separate Account Variable Life 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 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 is accrued as of the ex-dividend date. Capital gains income
represents those dividends from the Funds which are characterized as
capital gains under tax regulations.
b) SECURITY VALUATION--The investments in shares of the Funds are valued at
the closing net asset value per share as determined by the appropriate
Fund as of December 31, 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) DEDUCTIONS AND CHARGES FROM THE ACCOUNT VALUE-- On the policy date and on
each subsequent monthly activity date, the Company will deduct from the
Account an amount to cover mortality and expense risk charges, cost of
insurance, administrative charges and any other benefits provided by the
rider. These charges, which may vary from month to month in accordance
with the terms of the contracts, are deducted through termination of
units of interest from applicable contract owners' accounts.
______________________________________ 62 ______________________________________
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS
Fund, Inc. - Class
IA
Shares 2,132,205
Cost $2,318,402
Market Value....... $ 2,304,199 --
Hartford Stock HLS
Fund, Inc. - Class
IA
Shares 791,346
Cost $4,632,387
Market Value....... -- $ 5,192,546
Hartford Money Market
HLS Fund, Inc. -
Class IA
Shares 12,981,615
Cost $12,981,615
Market Value....... -- --
Hartford Advisers HLS
Fund, Inc. - Class
IA
Shares 1,091,175
Cost $3,029,766
Market Value....... -- --
Hartford Capital
Appreciation HLS
Fund, Inc. - Class
IA
Shares 729,577
Cost $3,165,354
Market Value....... -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 40,097
Cost $44,447
Market Value....... -- --
Hartford Index HLS
Fund, Inc. - Class
IA
Shares 2,920,622
Cost $8,806,337
Market Value....... -- --
Hartford
International
Opportunities HLS
Fund, Inc. - Class
IA
Shares 1,085,187
Cost $1,406,135
Market Value....... -- --
Due from Hartford Life
and Annuity Insurance
Company............... 37 26,077
Receivable from fund
shares sold........... -- --
------------ ------------
Total Assets........... 2,304,236 5,218,623
------------ ------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... -- --
Payable for fund shares
purchased............. 44 26,052
------------ ------------
Total Liabilities...... 44 26,052
------------ ------------
Net Assets (variable
life contract
liabilities).......... $ 2,304,192 $ 5,192,571
------------ ------------
------------ ------------
Units Owned by
Participants.......... 1,551,309 1,654,836
Unit Values............ $ 1.485321 $ 3.137815
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 64
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND 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. - Class
IA
Shares 2,132,205
Cost $2,318,402
Market Value....... -- -- -- -- -- --
Hartford Stock HLS
Fund, Inc. - Class
IA
Shares 791,346
Cost $4,632,387
Market Value....... -- -- -- -- -- --
Hartford Money Market
HLS Fund, Inc. -
Class IA
Shares 12,981,615
Cost $12,981,615
Market Value....... $12,981,615 -- -- -- -- --
Hartford Advisers HLS
Fund, Inc. - Class
IA
Shares 1,091,175
Cost $3,029,766
Market Value....... -- $ 3,257,433 -- -- -- --
Hartford Capital
Appreciation HLS
Fund, Inc. - Class
IA
Shares 729,577
Cost $3,165,354
Market Value....... -- -- $ 3,472,117 -- -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 40,097
Cost $44,447
Market Value....... -- -- -- $ 43,487 -- --
Hartford Index HLS
Fund, Inc. - Class
IA
Shares 2,920,622
Cost $8,806,337
Market Value....... -- -- -- -- $ 10,427,941 --
Hartford
International
Opportunities HLS
Fund, Inc. - Class
IA
Shares 1,085,187
Cost $1,406,135
Market Value....... -- -- -- -- -- $1,470,274
Due from Hartford Life
and Annuity Insurance
Company............... 118,848 20 17,159 -- 14,175 12,605
Receivable from fund
shares sold........... -- -- -- -- -- --
------------- ------------ ------------- ------------ ------------ --------------
Total Assets........... 13,100,463 3,257,453 3,489,276 43,487 10,442,116 1,482,879
------------- ------------ ------------- ------------ ------------ --------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... -- -- -- -- -- --
Payable for fund shares
purchased............. 118,713 45 17,190 -- 14,242 12,641
------------- ------------ ------------- ------------ ------------ --------------
Total Liabilities...... 118,713 45 17,190 -- 14,242 12,641
------------- ------------ ------------- ------------ ------------ --------------
Net Assets (variable
life contract
liabilities).......... $12,981,750 $ 3,257,408 $ 3,472,086 $ 43,487 $ 10,427,874 $1,470,238
------------- ------------ ------------- ------------ ------------ --------------
------------- ------------ ------------- ------------ ------------ --------------
Units Owned by
Participants.......... 9,956,078 1,342,105 1,407,660 30,198 3,505,476 865,269
Unit Values............ $ 1.303902 $ 2.427089 $ 2.466566 $1.440067 $ 2.974738 $ 1.699168
</TABLE>
---------------------------------------------------- 65
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
DIVIDEND FIDELITY VIP
AND GROWTH EQUITY-INCOME
FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 1,055,565
Cost $2,159,136
Market Value....... $ 2,280,532 --
Fidelity VIP
Equity-Income
Portfolio
Shares 53,993
Cost $1,298,173
Market Value....... -- $1,372,514
Fidelity VIP Overseas
Portfolio
Shares 47,654
Cost $911,449
Market Value....... -- --
Fidelity VIP II Asset
Manager Portfolio
Shares 21,404
Cost $371,018
Market Value....... -- --
Hartford Growth and
Income HLS Fund -
Class IA
Shares 36,103
Cost $38,125
Market Value....... -- --
Hartford
International
Advisers HLS Fund,
Inc. - Class IA
Shares 69,593
Cost $75,997
Market Value....... -- --
Hartford Small
Company HLS Fund,
Inc. - Class IA
Shares 64,192
Cost $72,344
Market Value....... -- --
Hartford MidCap HLS
Fund, Inc. - Class
IA
Shares 61,941
Cost $80,971
Market Value....... -- --
Due from Hartford Life
and Annuity Insurance
Company............... 12,768 --
Receivable from fund
shares sold........... -- --
------------ --------------
Total Assets........... 2,293,300 1,372,514
------------ --------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... -- 18
Payable for fund shares
purchased............. 12,795 --
------------ --------------
Total Liabilities...... 12,795 18
------------ --------------
Net Assets (variable
life contract
liabilities).......... $ 2,280,505 $1,372,496
------------ --------------
------------ --------------
Units Owned by
Participants.......... 980,098 700,553
Unit Values............ $ 2.326815 $ 1.959216
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 66
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
FIDELITY VIP
FIDELITY VIP II INTERNATIONAL
OVERSEAS ASSET MANAGER GROWTH AND INCOME ADVISERS SMALL COMPANY MIDCAP
PORTFOLIO PORTFOLIO FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ------------------ -------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 1,055,565
Cost $2,159,136
Market Value....... -- -- -- -- -- --
Fidelity VIP
Equity-Income
Portfolio
Shares 53,993
Cost $1,298,173
Market Value....... -- -- -- -- -- --
Fidelity VIP Overseas
Portfolio
Shares 47,654
Cost $911,449
Market Value....... $ 955,461 -- -- -- -- --
Fidelity VIP II Asset
Manager Portfolio
Shares 21,404
Cost $371,018
Market Value....... -- $ 388,704 -- -- -- --
Hartford Growth and
Income HLS Fund -
Class IA
Shares 36,103
Cost $38,125
Market Value....... -- -- $ 42,817 -- -- --
Hartford
International
Advisers HLS Fund,
Inc. - Class IA
Shares 69,593
Cost $75,997
Market Value....... -- -- -- $ 80,358 -- --
Hartford Small
Company HLS Fund,
Inc. - Class IA
Shares 64,192
Cost $72,344
Market Value....... -- -- -- -- $ 84,806 --
Hartford MidCap HLS
Fund, Inc. - Class
IA
Shares 61,941
Cost $80,971
Market Value....... -- -- -- -- -- $ 89,149
Due from Hartford Life
and Annuity Insurance
Company............... 2,473 2 6,368 -- 1 --
Receivable from fund
shares sold........... -- -- -- -- -- --
------------ -------------- ---------- -------------- -------------- ------------
Total Assets........... 957,934 388,706 49,185 80,358 84,807 89,149
------------ -------------- ---------- -------------- -------------- ------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... -- -- -- -- -- --
Payable for fund shares
purchased............. 2,474 -- 6,367 -- -- --
------------ -------------- ---------- -------------- -------------- ------------
Total Liabilities...... 2,474 -- 6,367 -- -- --
------------ -------------- ---------- -------------- -------------- ------------
Net Assets (variable
life contract
liabilities).......... $ 955,460 $ 388,706 $ 42,818 $ 80,358 $ 84,807 $ 89,149
------------ -------------- ---------- -------------- -------------- ------------
------------ -------------- ---------- -------------- -------------- ------------
Units Owned by
Participants.......... 624,827 221,943 37,201 79,762 78,789 80,771
Unit Values............ $1.529160 $1.751379 $1.150984 $1.007480 $1.076363 $1.103726
</TABLE>
---------------------------------------------------- 67
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
CAPITAL MORTGAGE
BOND STOCK MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX
FUND FUND FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $106,052 $ 38,074 $178,529 $ 63,199 $ 17,887 $2,575 $ 79,420
------------ ------------ ------------- ------------ ------------- ------ ------------
CAPITAL GAINS INCOME..... -- 18,418 -- 11,531 30,576 -- 12,992
------------ ------------ ------------- ------------ ------------- ------ ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 746 (2,645) -- 1,768 (3,241) (114) 14,698
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (16,930) 557,352 -- 224,740 308,545 147 1,617,496
------------ ------------ ------------- ------------ ------------- ------ ------------
Net gain (loss) on
investments......... (16,184) 554,707 -- 226,508 305,304 33 1,632,194
------------ ------------ ------------- ------------ ------------- ------ ------------
Net increase
(decrease) in net
assets resulting
from operations..... $ 89,868 $611,199 $178,529 $301,238 $353,767 $2,608 $1,724,606
------------ ------------ ------------- ------------ ------------- ------ ------------
------------ ------------ ------------- ------------ ------------- ------ ------------
</TABLE>
*From inception, August 3, 1998, to December 31, 1998
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 68
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
FIDELITY VIP
INTERNATIONAL DIVIDEND FIDELITY VIP FIDELITY VIP II GROWTH
OPPORTUNITIES AND GROWTH EQUITY-INCOME OVERSEAS ASSET MANAGER AND INCOME
FUND FUND PORTFOLIO PORTFOLIO PORTFOLIO FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
-------------- ------------ -------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 18,410 $ 33,160 $ 1,864 $ 540 $ 5,839 $ 138
-------------- ------------ ------- ------------ ------- ------
CAPITAL GAINS INCOME..... 17,744 8,141 6,635 1,592 17,517 --
-------------- ------------ ------- ------------ ------- ------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 77 63 (1,856) 89 (16) 21
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 73,152 117,405 70,207 44,647 15,814 4,692
-------------- ------------ ------- ------------ ------- ------
Net gain (loss) on
investments......... 73,229 117,468 68,351 44,736 15,798 4,713
-------------- ------------ ------- ------------ ------- ------
Net increase
(decrease) in net
assets resulting
from operations..... $109,383 $158,769 $76,850 $46,868 $39,154 $4,851
-------------- ------------ ------- ------------ ------- ------
-------------- ------------ ------- ------------ ------- ------
<CAPTION>
SMALL
INTERNATIONAL COMPANY MIDCAP
ADVISERS FUND FUND FUND
SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
-------------- ------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. -- -- --
------ ------------- ------
CAPITAL GAINS INCOME..... -- -- --
------ ------------- ------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 308 (148) 19
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 4,361 12,462 8,178
------ ------------- ------
Net gain (loss) on
investments......... 4,669 12,314 8,197
------ ------------- ------
Net increase
(decrease) in net
assets resulting
from operations..... $4,669 $12,314 $8,197
------ ------------- ------
------ ------------- ------
</TABLE>
*From inception, August 3, 1998, to December 31, 1998
---------------------------------------------------- 69
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment
income................ $ 106,052 $ 38,074
Capital gains income... -- 18,418
Net realized gain
(loss) on security
transactions.......... 746 (2,645)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (16,930) 557,352
------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 89,868 611,199
------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 219,212 486,207
Net transfers.......... 1,873,633 4,031,316
Surrenders for benefit
payments and fees..... (22,489) (93,425)
Net loan activity...... (63,707) (57)
Cost of insurance...... (39,274) (74,817)
------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,967,375 4,349,224
------------ ------------
Net increase (decrease)
in net assets......... 2,057,243 4,960,423
NET ASSETS:
Beginning of period.... $ 246,949 $ 232,148
------------ ------------
End of period.......... $ 2,304,192 $ 5,192,571
------------ ------------
------------ ------------
</TABLE>
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment
income................ $ 10,020 $ 1,517
Capital gains income... -- 113
Net realized gain
(loss) on security
transactions.......... 281 287
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 3,212 2,743
------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 13,513 4,660
------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 16,326 9,295
Net transfers.......... 161,664 224,575
Surrenders for benefit
payments and fees..... (4,558) (6,421)
Cost of insurance...... (4,584) (1,028)
------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 168,848 226,421
------------ ------------
Net increase (decrease)
in net assets......... 182,361 231,081
NET ASSETS:
Beginning of period.... $ 64,588 $ 1,067
------------ ------------
End of period.......... $ 246,949 $ 232,148
------------ ------------
------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 70
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------ ------------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income................ $ 178,529 $ 63,199 $ 17,887 $ 2,575 $ 79,420 $ 18,410
Capital gains income... -- 11,531 30,576 -- 12,992 17,744
Net realized gain
(loss) on security
transactions.......... -- 1,768 (3,241) (114) 14,698 77
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 224,740 308,545 147 1,617,496 73,152
------------- ------------ ------------- ------------ ------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 178,529 301,238 353,767 2,608 1,724,606 109,383
------------- ------------ ------------- ------------ ------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 44,552,053 332,157 483,397 7,687 443,474 286,640
Net transfers.......... (32,394,672) 2,418,661 2,506,371 (37,994) 8,055,206 1,011,184
Surrenders for benefit
payments and fees..... (423,409) (40,763) (79,406) (1,565) (110,057) (27,008)
Net loan activity...... (6,910) (23,103) -- -- -- (17,916)
Cost of insurance...... (362,173) (28,973) (51,821) (4,367) (60,585) (39,292)
------------- ------------ ------------- ------------ ------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 11,364,889 2,657,979 2,858,541 (36,239) 8,328,038 1,213,608
------------- ------------ ------------- ------------ ------------- --------------
Net increase (decrease)
in net assets......... 11,543,418 2,959,217 3,212,308 (33,631) 10,052,644 1,322,991
NET ASSETS:
Beginning of period.... $ 1,438,332 $ 298,191 $ 259,778 $ 77,118 $ 375,230 $ 147,247
------------- ------------ ------------- ------------ ------------- --------------
End of period.......... $ 12,981,750 $ 3,257,408 $ 3,472,086 $ 43,487 $ 10,427,874 $1,470,238
------------- ------------ ------------- ------------ ------------- --------------
------------- ------------ ------------- ------------ ------------- --------------
</TABLE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------ ------------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income................ $ 22,397 $ 4,523 $ 817 $ 2,894 $ 3,998 $ 1,213
Capital gains income... -- 1,075 385 -- 574 2,408
Net realized gain
(loss) on security
transactions.......... -- (3) 2,118 25 911 1,535
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 3,056 (1,824) (1,118) 4,041 (9,304)
------------- ------------ ------------- ------------ ------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 22,397 8,651 1,496 1,801 9,524 (4,148)
------------- ------------ ------------- ------------ ------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 4,374,149 16,165 16,079 1,604 28,684 16,294
Net transfers.......... (2,888,312) 256,828 253,669 76,343 352,567 125,494
Surrenders for benefit
payments and fees..... (61,718) (2,671) (7,630) (883) (9,226) (6,183)
Cost of insurance...... (55,698) (811) (4,880) (2,772) (7,390) (4,631)
------------- ------------ ------------- ------------ ------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,368,421 269,511 257,238 74,292 364,635 130,974
------------- ------------ ------------- ------------ ------------- --------------
Net increase (decrease)
in net assets......... 1,390,818 278,162 258,734 76,093 374,159 126,826
NET ASSETS:
Beginning of period.... $ 47,514 $ 20,029 $ 1,044 $ 1,025 $ 1,071 $ 20,421
------------- ------------ ------------- ------------ ------------- --------------
End of period.......... $ 1,438,332 $ 298,191 $ 259,778 $ 77,118 $ 375,230 $ 147,247
------------- ------------ ------------- ------------ ------------- --------------
------------- ------------ ------------- ------------ ------------- --------------
</TABLE>
---------------------------------------------------- 71
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
DIVIDEND FIDELITY VIP
AND GROWTH EQUITY-INCOME
FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment
income................ $ 33,160 $ 1,864
Capital gains income... 8,141 6,635
Net realized gain
(loss) on security
transactions.......... 63 (1,856)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 117,405 70,207
------------ --------------
Net increase (decrease)
in net assets
resulting from
operations............ 158,769 76,850
------------ --------------
UNIT TRANSACTIONS:
Purchases.............. 250,584 213,483
Net transfers.......... 1,838,934 1,066,683
Surrenders for benefit
payments and fees..... (49,049) (28,144)
Net loan activity...... -- --
Cost of insurance...... (41,259) (15,372)
------------ --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,999,210 1,236,650
------------ --------------
Net increase (decrease)
in net assets......... 2,157,979 1,313,500
NET ASSETS:
Beginning of period.... $ 122,526 $ 58,996
------------ --------------
End of period.......... $ 2,280,505 $1,372,496
------------ --------------
------------ --------------
</TABLE>
* From inception, August 3, 1998, to December 31, 1998
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
DIVIDEND FIDELITY VIP
AND GROWTH EQUITY-INCOME
FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income....... $ 1,121 $ 18
Capital gains income........ 30 91
Net realized gain (loss) on
security transactions...... 12 782
Net unrealized appreciation
(depreciation) of
investments during the
period..................... 3,930 4,077
------------ --------------
Net increase (decrease) in
net assets resulting from
operations................. 5,093 4,968
------------ --------------
UNIT TRANSACTIONS:
Purchases................... 11,377 2,252
Net transfers............... 109,235 54,175
Surrenders for benefit
payments and fees.......... (2,933) (2,747)
Cost of insurance........... (1,314) (708)
------------ --------------
Net increase (decrease) in
net assets resulting from
unit transactions.......... 116,365 52,972
------------ --------------
Net increase (decrease) in
net assets................. 121,458 57,940
NET ASSETS:
Beginning of period......... $ 1,068 $ 1,056
------------ --------------
End of period............... $ 122,526 $ 58,996
------------ --------------
------------ --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 72
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
FIDELITY VIP
FIDELITY VIP II GROWTH INTERNATIONAL SMALL
OVERSEAS ASSET MANAGER AND INCOME ADVISERS COMPANY MIDCAP
PORTFOLIO PORTFOLIO FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
------------ -------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income................ $ 540 $ 5,839 $ 138 $-- $-- $--
Capital gains income... 1,592 17,517 -- -- -- --
Net realized gain
(loss) on security
transactions.......... 89 (16) 21 308 (148) 19
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 44,647 15,814 4,692 4,361 12,462 8,178
------------ -------------- ------------- ------------- ------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 46,868 39,154 4,851 4,669 12,314 8,197
------------ -------------- ------------- ------------- ------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 152,670 54,314 1,000 1,000 10,618 1,000
Net transfers.......... 770,437 134,602 37,221 75,134 62,509 80,559
Surrenders for benefit
payments and fees..... (16,660) (10,808) (181) (356) (439) (361)
Net loan activity...... -- -- -- -- -- --
Cost of insurance...... (19,327) (5,833) (73) (89) (195) (246)
------------ -------------- ------------- ------------- ------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 887,120 172,275 37,967 75,689 72,493 80,952
------------ -------------- ------------- ------------- ------------- -------------
Net increase (decrease)
in net assets......... 933,988 211,429 42,818 80,358 84,807 89,149
NET ASSETS:
Beginning of period.... $ 21,472 $177,277 -- -- -- --
------------ -------------- ------------- ------------- ------------- -------------
End of period.......... $955,460 $388,706 $42,818 $80,358 $84,807 $89,149
------------ -------------- ------------- ------------- ------------- -------------
------------ -------------- ------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
FIDELITY VIP
FIDELITY VIP II
OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income....... $ 38 $ 37
Capital gains income........ 150 92
Net realized gain (loss) on
security transactions...... (6) --
Net unrealized appreciation
(depreciation) of
investments during the
period..................... (679) 1,822
------------ --------------
Net increase (decrease) in
net assets resulting from
operations................. (497) 1,951
------------ --------------
UNIT TRANSACTIONS:
Purchases................... 1,594 10,283
Net transfers............... 22,728 165,107
Surrenders for benefit
payments and fees.......... (1,120) (735)
Cost of insurance........... (2,277) (379)
------------ --------------
Net increase (decrease) in
net assets resulting from
unit transactions.......... 20,925 174,276
------------ --------------
Net increase (decrease) in
net assets................. 20,428 176,227
NET ASSETS:
Beginning of period......... $ 1,044 $ 1,050
------------ --------------
End of period............... $ 21,472 $177,277
------------ --------------
------------ --------------
<CAPTION>
<S> <C>
OPERATIONS:
Net investment income.......
Capital gains income........
Net realized gain (loss) on
security transactions......
Net unrealized appreciation
(depreciation) of
investments during the
period.....................
Net increase (decrease) in
net assets resulting from
operations.................
UNIT TRANSACTIONS:
Purchases...................
Net transfers...............
Surrenders for benefit
payments and fees..........
Cost of insurance...........
Net increase (decrease) in
net assets resulting from
unit transactions..........
Net increase (decrease) in
net assets.................
NET ASSETS:
Beginning of period.........
End of period...............
</TABLE>
---------------------------------------------------- 73
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT VARIABLE LIFE TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. ORGANIZATION:
Separate Account Variable Life Two (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 is accrued as of the ex-dividend date. Capital gains income
represents those dividends from the Funds which are characterized as
capital gains under tax regulations.
b) SECURITY VALUATION--The investments in shares of the Funds are valued at
the closing net asset value per share as determined by the appropriate
Fund as of December 31, 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) DEDUCTIONS AND CHARGES FROM THE ACCOUNT VALUE-- On the policy date and on
each subsequent monthly activity date, the Company will deduct from the
Account an amount to cover mortality and expense risk charges, cost of
insurance, administrative charges and any other benefits provided by the
rider. These charges, which may vary from month to month in accordance
with the terms of the contracts, are deducted through termination of
units of interest from applicable contract owners' accounts.
______________________________________ 74 ______________________________________
<PAGE>
HARTFORD BOND HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 4.8%
$ 3,600,000 California Infrastructure Pacific Gas &
Electric, Series 1997-1 Class A6
6.32% due 09/25/05.................... $ 3,701,988
3,250,000 California Infrastructure Southern
California Edison, Series 1997-1 Class
A3
6.17% due 03/25/03.................... 3,295,597
11,400,000 Chemical Master Credit Card Trust,
Series 1996-1, Class A
5.55% due 09/15/03.................... 11,464,524
15,000,000 Comed Transitional Funding Trust, Series
1998-1 Class A5
5.44% due 03/25/07.................... 15,041,400
5,175,000 DLJ Commercial Mortgage Corp., Series
1998-CF1 Class B2
7.33% due 01/15/10.................... 4,885,924
5,000,000 Premier Auto Trust, Series 1998-5 Class
A2
5.07% due 04/09/01.................... 4,991,550
------------
Total asset-backed securities........... $ 43,380,983
------------
------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.1%
1,112,442 Oakwood Mortgage Investors, Inc., Series
94-A, Class B1
8.40% due 02/15/15.................... $ 1,128,227
------------
------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 0.7%
6,341,441 Capital Lease Funding Securitization,
Series 1997-CTL1, Class A1
7.42% due 06/22/24.................... $ 6,541,592
------------
------------
CORPORATE NOTES -- 52.7%
COLLEGES -- 1.2%
5,500,000 Massachusetts Institute of Technology
7.25% due 04/02/2096.................. $ 6,449,432
3,500,000 Yale University
7.375% due 04/15/2096................. 4,101,779
------------
10,551,211
------------
COMMUNICATIONS EQUIPMENT -- 0.1%
400,000 Jones Intercable, Inc.
9.625% due 03/15/02................... 430,000
900,000 Jones Intercable, Inc.
7.625% due 04/15/08................... 927,000
------------
1,357,000
------------
ENERGY & SERVICES -- 4.5%
8,250,000 Amoco Company
6.00% due 06/09/08.................... 8,561,850
2,400,000 Enterprise Oil PLC
6.70% due 09/15/07.................... 2,384,124
6,500,000 Enterprise Oil PLC
6.50% due 05/01/05.................... 6,529,360
1,200,000 Gulf Canada Resources Ltd.
8.375% due 11/15/05................... 1,182,000
1,000,000 Gulf Canada Resources Ltd.
8.25% due 03/15/17.................... 993,810
4,300,000 Occidental Petroleum Corp.
7.375% due 11/15/08................... 4,412,926
2,000,000 R & B Falcon Corp.
7.375% due 04/15/18................... 1,622,644
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
</TABLE>
CORPORATE NOTES -- (CONTINUED)
ENERGY & SERVICES -- (CONTINUED)
<TABLE>
<C> <S> <C>
$ 1,750,000 R & B Falcon Corp.
9.50% due 12/15/08.................... $ 1,747,812
6,850,000 Tenneco, Inc.
8.20% due 11/15/99.................... 6,982,622
1,000,000 Tesoro Petroleum Corp.
9.00% due 07/01/08.................... 970,000
2,850,000 Tuboscope, Inc.
7.50% due 02/15/08.................... 2,593,500
2,500,000 Union Oil Co. of California
9.375% due 02/15/11................... 3,082,450
------------
41,063,098
------------
FINANCIAL SERVICES -- 16.2%
1,765,000 Allstate Corp.
6.75% due 05/15/18.................... 1,838,342
7,500,000 Amvescap PLC
6.60% due 05/15/05.................... 7,513,597
5,100,000 Associates Corporation of North America
5.75% due 11/01/03.................... 5,136,429
6,500,000 Bank of New York Co., Inc. (The)
7.625% due 07/15/02................... 6,946,550
3,750,000 BankBoston Corp.
7.00% due 09/15/07.................... 3,911,058
7,000,000 Bayerische Landesbank (NY)
6.20% due 02/09/06.................... 7,134,344
3,000,000 Chase Manhattan Corp.
7.75% due 11/01/99.................... 3,059,421
4,450,000 CIT Group, Inc.
5.57% due 12/08/03.................... 4,416,344
4,500,000 Conseco, Inc.
7.875% due 12/15/00................... 4,462,668
3,000,000 Dime Bancorp, Inc.
10.5% due 11/15/05.................... 3,150,000
5,000,000 Duke Realty LP
7.25% due 09/22/02.................... 5,038,125
3,700,000 Equity Residential Properties Trust
7.125% due 10/15/17................... 3,429,504
3,800,000 General Motors Acceptance Corp.
5.507% due 08/18/03................... 3,764,071
4,000,000 General Motors Acceptance Corp.
5.875% due 01/12/99................... 4,000,068
1,000,000 General Motors Acceptance Corp. Medium
Term Note
6.55% due 11/17/03.................... 1,039,806
600,000 HMH Properties
7.875% due 08/01/05................... 585,000
7,900,000 Interamer Development Bank
8.875% due 06/01/09................... 10,089,287
6,000,000 KFW International Finance, Inc.
9.50% due 12/15/00.................... 6,494,589
10,900,000 Landeskreditbank Baden-Wurttemberg
7.625% due 02/01/23................... 12,661,549
3,000,000 Lehman Brothers, Inc.
10.00% due 05/15/99................... 3,042,123
11,750,000 Massachusetts Mutual Life Insurance Co.
7.625% due 11/15/23................... 12,994,395
14,560,000 NationsBank Corp
7.00% due 09/15/01.................... 15,123,122
</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)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
</TABLE>
CORPORATE NOTES -- (CONTINUED)
FINANCIAL SERVICES -- (CONTINUED)
<TABLE>
<C> <S> <C>
$ 2,750,000 Phoenix Home Life Insurance Co.
6.95% due 12/01/06.................... $ 2,827,374
1,000,000 Swiss Bank Corporation (NY)
7.375% due 06/15/17................... 1,060,717
4,300,000 Trenwick Group, Inc.
6.70% due 04/01/03.................... 4,405,943
1,750,000 Wachovia Corp.
5.625% due 12/15/08................... 1,739,528
7,150,000 Wachovia Corp.
6.25% due 08/01/08.................... 7,429,350
3,000,000 Westinghouse Credit Corp.
8.875% due 06/14/14................... 3,306,315
------------
146,599,619
------------
FOOD, BEVERAGE & TOBACCO -- 2.0%
100,000 Keebler Corp.
10.75% due 07/01/06................... 111,500
1,350,000 Nabisco (RJR) Holdings Corp.
8.50% due 07/01/07.................... 1,332,641
7,400,000 Ralcorp Holdings, Inc.
8.75% due 09/15/04.................... 8,592,724
8,325,000 Seagram (J) & Sons, Inc.
6.25% due 12/15/01.................... 8,312,287
------------
18,349,152
------------
FUNERAL/CEMETERY SERVICES -- 0.5%
5,500,000 Loewen Group International, Inc.
7.60% due 06/01/08.................... 4,427,500
------------
HEALTH CARE -- 1.0%
1,675,000 Columbia Healthcare
7.50% due 12/15/23.................... 1,501,325
2,250,000 Columbia/HCA Healthcare Corp.
7.50% due 11/15/95.................... 1,958,514
4,600,000 Tenet Healthcare Corp.
7.625% due 06/01/08................... 4,779,133
------------
8,238,972
------------
HOME BUILDING -- 0.5%
2,800,000 U.S. Home Corp.
8.250% due 08/15/04................... 2,807,000
1,390,000 U.S. Home Corp.
7.95% due 03/01/01.................... 1,431,666
------------
4,238,666
------------
HOTELS & GAMING -- 1.6%
990,000 Circus Circus Enterprises, Inc.
7.625% due 07/15/13................... 888,161
1,000,000 Harrah's Operating Co., Inc.
7.875% due 12/15/05................... 1,011,080
3,100,000 La Quinta Motor Inns
7.25% due 03/15/04.................... 2,857,626
400,000 MGM Grand, Inc.
6.875% due 02/06/08................... 373,637
1,800,000 Park Place Entertainment Corp.
7.875% due 12/15/05................... 1,802,250
8,158,000 Starwood Hotels & Resorts
7.375% due 11/15/15................... 7,225,197
------------
14,157,951
------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
INDUSTRIAL -- 3.2%
$ 800,000 Agriculture Minerals and Chemicals Co.
10.75% due 09/30/03................... $ 812,000
2,250,000 Allied Waste Industries, Inc.
7.625% due 01/01/06................... 2,261,250
1,560,000 Arco Chemical Co.
9.80% due 02/01/20.................... 1,570,202
2,500,000 Bausch & Lomb, Inc.
7.125% due 08/01/28................... 2,484,702
500,000 Borden Chemical, Inc.
9.50% due 05/01/05.................... 415,000
2,550,000 Domtar, Inc.
9.50% due 08/01/16.................... 2,626,500
5,700,000 du Pont (E.I.) de Nemours & Co.
6.75% due 09/01/07.................... 6,237,145
6,200,000 Placer Dome, Inc.
7.125% due 06/15/07................... 5,903,919
1,750,000 Protection One Alarm
8.125% due 01/15/09................... 1,750,000
3,750,000 Raytheon Co.
6.15% due 11/01/08.................... 3,823,511
1,225,000 Terra Industries, Inc.
10.50% due 06/15/05................... 1,261,750
------------
29,145,979
------------
MANFACTURING -- 0.1%
1,250,000 AGCO Corp.
8.50% due 03/15/06.................... 1,212,500
------------
MEDIA & SERVICES -- 3.2%
1,000,000 Continental Cablevision, Inc.
9.50% due 08/01/13.................... 1,190,666
2,000,000 Hollinger International Publishing
8.625% due 03/15/05................... 2,110,000
1,000,000 Lenfest Communications, Inc.
8.375% due 11/01/05................... 1,080,000
6,500,000 News America Holdings
7.70% due 10/30/25.................... 6,983,132
865,000 News America, Inc.
7.30% due 04/30/28.................... 889,385
900,000 Qwest Communications International, Inc.
7.25% due 11/01/08.................... 918,000
3,019,000 Time Warner Enterprises, Inc.
8.875% due 10/01/12................... 3,725,125
6,000,000 Time Warner, Inc.
6.625% due 05/15/29................... 6,098,484
5,900,000 Turner Broadcasting System, Inc.
7.40% due 02/01/04.................... 6,310,398
------------
29,305,190
------------
PACKAGING & CONTAINERS -- 0.1%
1,000,000 Owens-Illinois, Inc.
8.10% due 05/15/07.................... 1,068,886
------------
RETAIL -- 4.1%
6,000,000 Fred Meyer, Inc.
7.375% due 03/01/05................... 6,353,394
750,000 KMart Corp.
7.75% due 10/01/12.................... 769,011
4,000,000 KMart Corp.
12.50% due 03/01/05................... 5,006,380
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-2
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
</TABLE>
CORPORATE NOTES -- (CONTINUED)
RETAIL -- (CONTINUED)
<TABLE>
<C> <S> <C>
$ 5,000,000 KMart Corp.
8.96% due 12/10/19.................... $ 5,222,300
6,500,000 Kroger Co. (The)
7.00% due 05/01/18.................... 6,650,059
1,300,000 Safeway, Inc.
6.50% due 11/15/08.................... 1,347,400
2,250,000 Saks, Inc.
7.25% due 12/01/04.................... 2,267,433
8,585,000 Stop & Shop Companies, Inc.
9.75% due 02/01/02.................... 9,528,869
------------
37,144,846
------------
SHIPBUILDING -- 0.2%
2,000,000 Newport News Shipbuilding
8.625% due 12/01/06................... 2,112,500
------------
TELECOMMUNICATIONS -- 1.3%
400,000 Rogers Cablesystems, Inc.
10.125% due 09/01/12.................. 440,000
115,000 Rogers Cablesystems, Inc.
9.625% due 08/01/02................... 124,200
1,350,000 Rogers Cantel Mobile, Inc.
8.30% due 10/01/07.................... 1,356,750
1,650,000 Rogers Cantel Mobile, Inc.
9.75% due 06/01/16.................... 1,765,500
7,000,000 Tele-Communications, Inc.
6.58% due 02/15/05.................... 7,942,949
------------
11,629,399
------------
TEXTILE -- 0.2%
1,920,000 Westpoint Stevens, Inc.
7.875% due 06/15/08................... 1,951,200
------------
TRANSPORTATION -- 4.9%
400,000 AMR Corp.
10.00% due 03/07/01................... 432,078
4,430,000 Continental Airlines, Inc.
9.50% due 12/15/01.................... 4,629,350
13,820,428 Continental Airlines, Inc.
7.461% due 04/01/13................... 14,442,899
1,800,000 CSC Holdings, Inc.
7.625% due 07/15/18................... 1,765,080
1,750,000 CSC Holdings, Inc.
7.25% due 07/15/08.................... 1,748,775
500,000 CSC Holdings, Inc.
9.875% due 02/15/13................... 560,000
4,000,000 CSX Corp.
7.25% due 05/01/04.................... 4,262,884
1,100,000 Interpool, Inc.
7.35% due 08/01/07.................... 1,047,429
4,644,498 U.S. Air Inc., Series -- Class A
6.76% due 04/15/08.................... 4,770,503
8,900,000 United Air Lines, Inc. -- Class A
9.75% due 08/15/21.................... 10,863,945
------------
44,522,943
------------
UTILITIES -- 7.8%
3,000,000 Bell Telephone Co. of Pennsylvania
8.35% due 12/15/30.................... 3,840,540
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
</TABLE>
UTILITIES -- (CONTINUED)
<TABLE>
<C> <S> <C>
$ 1,400,000 Calpine Corp.
7.875% due 04/01/08................... $ 1,407,000
1,500,000 Chesapeake & Potomac Telephone Co.
8.30% due 08/01/31.................... 1,920,715
1,750,000 Cleveland Electric Illuminating Co.
7.13% due 07/01/07.................... 1,874,239
1,341,000 El Paso Electric Co.
9.40% due 05/01/11.................... 1,552,207
4,500,000 El Paso Electric Co.
8.90% due 02/01/06.................... 5,118,750
3,787,000 GTE Northwest, Inc.
5.55% due 10/15/08.................... 3,794,642
7,250,000 Illinois Power Co.
6.25% due 07/15/02.................... 7,379,434
6,850,000 Niagara Mohawk Power Corp.
7.25% due 10/01/02.................... 7,017,023
1,100,000 Niagara Mohawk Power Corp.
7.375% due 07/01/03................... 1,130,483
13,150,000 PacifiCorp
6.375% due 05/15/08................... 13,693,292
3,100,000 PacifiCorp
6.12% due 01/15/06.................... 3,178,085
4,000,000 Public Service EI-IBC
7.00% due 09/01/24.................... 4,230,880
7,000,000 Public Service EI-MBIA
6.75% due 01/01/16.................... 7,460,131
1,400,000 Public Service Electric & Gas Co.,
MBIA-Insured
6.75% due 01/01/16.................... 1,492,026
4,500,000 Worldcom, Inc.
6.125% due 08/15/01................... 4,575,415
1,100,000 Worldcom, Inc.
8.875% due 01/15/06................... 1,198,314
------------
70,863,176
------------
Total corporate notes................... $477,939,788
------------
------------
ENHANCED EQUIPMENT TRUST CERTIFICATES -- 0.3%
2,344,001 Norwest Airlines Trust, Series 2
11.30% due 06/21/14................... $ 2,913,968
------------
------------
FOREIGN/YANKEE BONDS & NOTES -- 3.7%
FOREIGN GOVERNMENTS -- 3.7%
12,545,000 Abbey National First Capital (Yankee)
8.20% due 10/15/04.................... $ 14,035,835
3,200,000 Province of Alberta
4.875% due 10/29/03................... 3,161,056
3,563,000 Province of Manitoba
5.50% due 10/01/08.................... 3,566,467
5,600,000 Republic of Argentina
11.00% due 12/04/05................... 5,568,472
1,650,000 Republic of Colombia
7.625% due 02/15/07................... 1,363,626
2,000,000 Republic of Venezuela, discount Series A
6.750% due 03/31/20................... 1,220,000
2,000,000 Russian Federation (The)
10.00% due 06/26/07................... 541,240
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-3
<PAGE>
HARTFORD BOND HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
</TABLE>
FOREIGN/YANKEE BONDS & NOTES -- (CONTINUED)
FOREIGN GOVERNMENTS -- (CONTINUED)
<TABLE>
<C> <S> <C>
$ 5,000,000 United Mexican States Discount Bond
6.6171% due 12/31/19.................. $ 4,050,000
------------
Total foreign/yankee bonds & notes...... $ 33,506,696
------------
------------
U.S. TREASURIES & FEDERAL AGENCIES -- 31.7%
FEDERAL NATIONAL MORTGAGE ASSOCIATION --
7.6%
55,824,867 6.00% due 07/01/12 - 10/01/28........... $ 55,820,825
6,128,510 6.50% due 10/01/12 - 09/01/28........... 6,195,915
4,000,000 5.25% due 01/15/03.................... 4,031,912
2,909,344 FNMA Multifamily DUS
6.480% due 12/01/05................... 3,035,587
------------
69,084,239
------------
U.S. TREASURY BONDS -- 16.9%
2,750,000 5.25% due 11/15/28...................... 2,818,750
4,300,000 5.50% due 08/15/28...................... 4,506,937
1,000,000 6.00% due 02/15/26...................... 1,091,250
6,525,000 6.125% due 11/15/27..................... 7,308,000
9,390,000 6.375% due 08/15/27..................... 10,798,500
8,060,000 6.50% due 11/15/26...................... 9,379,825
13,155,000 6.625% due 02/15/27..................... 15,559,905
692,000 6.75% due 08/15/26...................... 829,319
25,690,000 6.875% due 08/15/25..................... 31,165,181
9,970,000 7.50% due 11/15/16 - 11/15/24........... 12,686,076
10,600,000 7.625% due 02/15/25..................... 13,955,567
26,975,000 8.125% due 08/15/19..................... 36,070,646
5,100,000 8.75% due 05/15/17...................... 7,101,750
------------
153,271,706
------------
U.S. TREASURY INFLATION-INDEXED
SECURITIES -- 4.4%
6,168,641 3.375% due 01/15/07..................... 6,153,816
33,973,223 3.625% due 07/15/02 - 04/15/28.......... 33,750,351
------------
39,904,167
------------
U.S. TREASURY NOTES -- 2.8%
2,600,000 4.75% due 11/15/08...................... 2,620,313
1,470,000 6.50% due 08/15/05 - 10/15/06........... 1,626,412
3,460,000 6.875% due 05/15/06..................... 3,910,882
15,445,000 7.00% due 07/15/06...................... 17,587,993
------------
25,745,600
------------
Total U.S. treasuries & federal
agencies................................ $288,005,712
------------
------------
SHORT-TERM SECURITIES -- 4.5%
COMMERCIAL PAPER -- 4.3%
8,000,000 Airtouch Communications, Inc.
6.05% due 01/04/99.................... $ 7,995,966
7,000,000 CSX Corp.
6.18% due 01/20/99.................... 6,977,168
8,000,000 ICI Wilimington, Inc.
6.15% due 01/04/99.................... 7,995,900
8,000,000 Litton Industries
6.10% due 01/11/99.................... 7,986,444
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
</TABLE>
SHORT-TERM SECURITIES -- (CONTINUED)
COMMERCIAL PAPER -- (CONTINUED)
<TABLE>
<C> <S> <C>
$ 8,000,000 Norfolk Southern Corp.
6.20% due 01/12/99.................... $ 7,984,844
------------
38,940,322
------------
REPURCHASE AGREEMENT -- 0.2%
1,682,000 Interest in $121,902,000 joint
repurchase agreement dated 12/31/98 with
State Street Bank 4.750% due 01/04/99;
maturity amount $1,682,888
(Collateralized by $121,902,000 U.S.
Treasury Bonds 8.125% due 05/15/21)..... 1,682,000
------------
Total short-term securities............. $ 40,622,322
------------
------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total asset-backed securities (cost
$42,491,722)........................... 4.8% $ 43,380,983
Total collateralized mortgage
obligations (cost $1,109,834).......... 0.1 1,128,227
Total commercial mortgage-backed
securities (cost $6,465,129)........... 0.7 6,541,592
Total corporate notes (cost
$463,121,576).......................... 52.7 477,939,788
Total enhanced equipment trust
certificates (cost $2,892,045)......... 0.3 2,913,968
Total foreign/yankee bonds & notes (cost
$34,837,531)........................... 3.7 33,506,696
Total U.S. treasuries & federal agencies
(cost $279,401,277).................... 31.7 288,005,712
Total short-term securities (cost
$40,622,322)........................... 4.5 40,622,322
----- ------------
Total investment in securities (total
cost $870,941,436)..................... 98.5 894,039,288
Cash, receivables and other assets...... 1.5 13,740,215
Payable for Fund shares redeemed........ (0.0) (9,710)
Payable for dividends................... (0.0) (16)
Other liabilities....................... (0.0) (4,358)
----- ------------
Net assets.............................. 100.0% $907,765,419
----- ------------
----- ------------
</TABLE>
<TABLE>
<S> <C>
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share;
authorized 1,500,000,000 shares; outstanding
840,360,327 shares............................... $ 84,036,033
Capital surplus................................... 794,273,665
Accumulated undistributed net investment income... 601,032
Accumulated undistributed net realized gain on
investments...................................... 5,756,837
Unrealized appreciation of investments............ 23,097,852
------------
Net assets........................................ $907,765,419
------------
------------
</TABLE>
<TABLE>
<S> <C>
Class IA
Net asset value per share ($902,480,438
DIVIDED BY 835,116,005 shares outstanding)...... $1.08
-----
-----
Class IB
Net asset value per share ($5,284,981 DIVIDED BY
5,244,322 shares outstanding).................... $1.01
-----
-----
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-4
<PAGE>
HARTFORD STOCK HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------------ --------------
<C> <S> <C>
COMMON STOCKS -- 95.6%
AEROSPACE & DEFENSE -- 1.2%
2,000,000 AlliedSignal, Inc....................... $ 88,625,000
--------------
COMMUNICATIONS EQUIPMENT -- 3.2%
*1,612,500 Cisco Systems, Inc...................... 149,660,156
700,000 Lucent Technologies, Inc................ 77,000,000
--------------
226,660,156
--------------
COMPUTERS & OFFICE
EQUIPMENT -- 5.9%
1,600,000 Compaq Computer Corporation............. 67,100,000
*1,018,600 EMC Corporation......................... 86,581,000
800,000 International Business Machines Corp.... 147,800,000
1,050,000 Xerox Corporation....................... 123,900,000
--------------
425,381,000
--------------
CONSUMER NON-DURABLES -- 5.0%
495,000 Colgate-Palmolive Company............... 45,973,125
450,000 Estee Lauder Companies - Class A........ 38,475,000
1,450,000 Gillette Company (The).................. 70,053,125
1,445,000 Kimberly-Clark Corporation.............. 78,752,500
1,400,000 Proctor & Gamble Co..................... 127,837,500
--------------
361,091,250
--------------
CONSUMER SERVICES -- 1.3%
*374,548 Autotote Corporation.................... 702,278
900,000 Eastman Kodak Company................... 64,800,000
*2,020,000 Mirage Resorts, Inc..................... 30,173,750
--------------
95,676,028
--------------
ELECTRONICS -- 5.9%
*550,000 Altera Corporation...................... 33,481,250
*935,000 Analog Devices, Inc..................... 29,335,625
2,200,000 General Electric Company................ 224,537,500
1,120,000 Intel Corporation....................... 132,790,000
--------------
420,144,375
--------------
ENERGY & SERVICES -- 6.1%
800,000 Amoco Corporation....................... 48,300,000
100,000 Anadarko Petroleum Corporation.......... 3,087,500
700,000 Chevron Corporation..................... 58,056,250
1,550,000 Exxon Corporation....................... 113,343,750
2,050,000 Royal Dutch Petroleum................... 98,143,750
556,100 Santa Fe International Corporation...... 8,132,962
1,550,000 Schlumberger Ltd........................ 71,493,750
1,375,000 Unocal Corporation...................... 40,132,812
--------------
440,690,774
--------------
FINANCIAL SERVICES -- 15.4%
720,000 Ace Ltd................................. 24,795,000
1,075,000 American International Group, Inc....... 103,871,875
3,777,000 Associates First Capital Corporation.... 160,050,375
1,393,440 BankAmerica Corp........................ 83,780,580
3,930,000 Citigroup, Inc.......................... 194,535,000
1,000,000 First Union Corporation................. 60,812,500
1,600,000 Franklin Resources, Corp................ 51,200,000
2,150,000 Marsh & McLennon Companies, Inc......... 125,640,625
338,200 Mellon Bank Corporation................. 23,251,250
1,950,000 Merrill Lynch & Co., Inc................ 130,162,500
1,350,000 State Street Corporation................ 93,909,375
<CAPTION>
MARKET
SHARES VALUE
- ------------ --------------
<C> <S> <C>
</TABLE>
FINANCIAL SERVICES -- (CONTINUED)
<TABLE>
<C> <S> <C>
1,500,000 U.S. Bancorp............................ $ 53,250,000
--------------
1,105,259,080
--------------
FOOD, BEVERAGE & TOBACCO -- 2.7%
2,300,000 Philip Morris Co., Inc.................. 123,050,000
850,000 Unilever United States Inc.............. 70,496,875
--------------
193,546,875
--------------
HEALTH CARE -- 15.8%
2,240,000 Abbott Laboratories..................... 109,760,000
2,300,000 American Home Products Corporation...... 129,518,750
1,450,000 Baxter International, Inc............... 93,253,125
*1,232,100 Boston Scientific Corporation........... 33,035,681
3,300,000 Columbia/HCA Healthcare Corporation..... 81,675,000
1,200,000 Johnson & Johnson....................... 100,650,000
870,000 Merck & Co., Inc........................ 128,488,125
750,000 Perkin-Elmer Corporation................ 73,171,875
500,000 Pfizer, Inc............................. 62,718,750
1,800,000 Pharmacia & Upjohn, Inc................. 101,925,000
1,827,600 Service Corporation International....... 69,563,025
1,302,350 ServiceMaster Company (The)............. 28,733,096
750,000 SmithKline Beecham PLC ADR.............. 52,125,000
960,000 Warner-Lambert Company.................. 72,180,000
--------------
1,136,797,427
--------------
INDUSTRIAL MATERIALS -- 2.9%
850,000 Aluminum Company of America............. 63,378,125
550,000 Dow Chemical Company.................... 50,015,625
1,250,000 du Pont (E.I.) de Nemours & Company..... 66,328,125
100,000 Praxair, Inc............................ 3,525,000
*200,000 Sealed Air Corporation.................. 10,212,500
250,000 Weyerhaeuser Company.................... 12,703,125
--------------
206,162,500
--------------
MANUFACTURING -- 0.9%
900,000 Tyco International, Ltd................. 67,893,750
--------------
MEDIA & SERVICES -- 4.8%
*1,100,000 AirTouch Communications, Inc............ 79,337,500
*1,100,000 CBS Corporation......................... 36,025,000
2,388,900 Gannett Co., Inc........................ 158,115,319
2,300,000 Walt Disney Company (The)............... 69,000,000
--------------
342,477,819
--------------
REAL ESTATE -- 0.1%
*6,150 Security Capital Group, Inc............. 4,059,000
--------------
RETAIL -- 10.5%
2,046,000 CVS Corporation......................... 112,530,000
1,575,000 Gap, Inc. (The)......................... 88,593,750
2,505,000 Home Depot, Inc. (The).................. 153,274,688
1,675,000 McDonald's Corporation.................. 128,346,875
790,000 Staples, Inc............................ 34,513,125
2,600,000 Wal-Mart Stores, Inc.................... 211,737,500
450,000 Walgreen Co............................. 26,353,125
--------------
755,349,063
--------------
SOFTWARE & SERVICES -- 5.0%
915,500 Automatic Data Processing, Inc.......... 73,411,656
*900,000 Computer Sciences Corp.................. 57,993,750
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-5
<PAGE>
HARTFORD STOCK HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------------ --------------
<C> <S> <C>
</TABLE>
COMMON STOCKS -- (CONTINUED)
SOFTWARE & SERVICES -- (CONTINUED)
<TABLE>
<C> <S> <C>
1,600,000 First Data Corporation.................. $ 50,700,000
*1,300,000 Microsoft Corporation................... 180,293,750
--------------
362,399,156
--------------
TRANSPORTATION -- 2.5%
*1,150,000 AMR Corporation......................... 68,281,250
3,375,000 Southwest Airlines Co................... 75,726,563
750,000 Union Pacific Corporation............... 33,796,875
--------------
177,804,688
--------------
UTILITIES -- 6.4%
2,200,000 Bell Atlantic Corporation............... 124,987,500
2,471,950 MCI WorldCom, Inc....................... 177,362,413
3,000,000 SBC Communications, Inc................. 160,875,000
--------------
463,224,913
--------------
Total common stocks..................... $6,873,242,854
--------------
--------------
PREFERRED STOCKS -- 0.1%
MANUFACTURING -- 0.1%
203,500 Monsanto Company........................ $ 9,971,500
--------------
--------------
<CAPTION>
PRINCIPAL
AMOUNT
- ------------
<C> <S> <C>
SHORT-TERM SECURITIES -- 4.2%
REPURCHASE AGREEMENT
$300,887,000 Interest in $1,162,198,000 joint $ 300,887,000
repurchase agreement dated 12/31/98 with
State Street Bank 4.773% due 01/04/99;
maturity amount $301,046,570
(Collateralized by $469,031,000 U.S.
Treasury Notes 4.00% - 7.775% due
10/31/99 - 02/15/07, $278,664,000 U.S.
Treasury Bonds 7.875% - 12.75% due
11/15/10 - 02/15/21, $414,503,000 U.S.
Treasury Strips (principal) 0.00% due
02/15/19 - 08/15/21)....................
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
--------------
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost
$4,384,136,128)........................ 95.6% $6,873,242,854
Total preferred stocks (cost
$8,140,000)............................ 0.1 9,971,500
Total short-term securities (cost
$300,887,000).......................... 4.2 300,887,000
----- --------------
Total investment in securities
(total cost $4,693,163,128)............ 99.9 7,184,101,354
Cash, receivables and other assets...... 0.1 9,251,591
Payable for Fund shares redeemed........ (0.0) (108,028)
Other liabilities....................... (0.0) (31,747)
----- --------------
Net assets.............................. 100.0% $7,193,213,170
----- --------------
----- --------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share;
authorized 2,000,000,000 shares; outstanding
1,103,931,497 shares............................. $ 110,393,150
Capital surplus................................... 3,982,565,368
Accumulated undistributed net investment income... 2,530,584
Accumulated undistributed net realized gain on
investments...................................... 606,785,842
Unrealized appreciation of investments............ 2,490,938,226
--------------
Net assets........................................ $7,193,213,170
--------------
--------------
</TABLE>
<TABLE>
<S> <C>
Class IA
Net asset value per share ($7,183,046,178
DIVIDED BY 1,094,698,597 shares outstanding).... $6.56
-----
-----
Class IB
Net asset value per share ($10,166,992
DIVIDED BY 9,232,900 shares outstanding)........ $1.10
-----
-----
</TABLE>
* Non-income producing during period
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-6
<PAGE>
HARTFORD MONEY MARKET HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
COMMERCIAL PAPER -- 64.2%
$20,000,000 Abbey National, North America
4.83% due 03/15/99.................... $ 19,804,137
10,000,000 Abbott Laboratories
5.47% due 01/07/99.................... 9,990,883
10,000,000 Air Products & Chemicals
5.19% due 03/22/99.................... 9,884,666
19,000,000 Bass Finance Ltd.
5.20% due 01/19/99.................... 18,950,600
5,000,000 Bradford & Bingley
5.10% due 01/04/99.................... 4,997,875
20,000,000 Bradford & Bingley
5.21% due 01/04/99.................... 19,991,316
10,000,000 Cafco
5.21% due 01/11/99.................... 9,985,527
10,000,000 Cafco
5.13% due 03/02/99.................... 9,914,500
10,000,000 Caterpillar Financial Services
5.28% due 01/05/99.................... 9,994,133
10,000,000 Caterpillar Financial Services
5.42% due 02/22/99.................... 9,921,711
10,000,000 Ciesco L.P.
5.15% due 01/19/99.................... 9,974,250
10,000,000 Ciesco L.P.
5.28% due 01/25/99.................... 9,964,800
20,000,000 Coca-Cola Co.
4.98% due 03/01/99.................... 19,836,766
9,600,000 Colgate-Palmolive Co.
5.05% due 03/12/99.................... 9,505,733
10,000,000 Colgate-Palmolive Co.
5.00% due 04/06/99.................... 9,868,055
10,000,000 Daimler Benz N.A.
4.98% due 03/17/99.................... 9,896,250
9,250,000 Daimler Benz N.A.
5.42% due 02/25/99.................... 9,173,404
10,000,000 du Pont (E.I.) de Nemours & Company
4.97% due 03/08/99.................... 9,908,883
10,000,000 du Pont (E.I.) de Nemours & Company
4.99% due 03/09/99.................... 9,907,130
10,000,000 Eaton Corp.
5.25% due 05/25/99.................... 9,790,000
10,000,000 Finova Capital Corp.
5.27% due 02/04/99.................... 9,950,227
5,000,000 Finova Capital Corp.
5.27% due 02/17/99.................... 4,965,598
5,750,000 Finova Capital Corp.
5.17% due 02/19/99.................... 5,707,894
10,000,000 Ford Motor Credit Corp.
5.02% due 01/25/99.................... 9,966,533
5,000,000 General Electric Capital Corp.
4.96% due 03/29/99.................... 4,940,066
10,000,000 General Electric Capital Corp.
5.33% due 02/22/99.................... 9,923,011
10,000,000 General Electric Capital Corp.
5.36% due 02/17/99.................... 9,930,022
5,000,000 General Motors Acceptance Corp.
5.18% due 01/27/99.................... 4,981,294
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
$ 5,000,000 GTE Corporation
5.25% due 02/03/99.................... $ 4,975,937
9,750,000 GTE Corporation
5.43% due 02/11/99.................... 9,689,704
5,000,000 GTE Corporation
5.55% due 01/22/99.................... 4,983,812
20,000,000 Halifax PLC
5.20% due 03/09/99.................... 19,806,444
10,000,000 IBM Credit Corporation
5.24% due 01/05/99.................... 9,994,177
10,000,000 Market Street Funding, Inc.
5.42% due 02/04/99.................... 9,948,811
10,000,000 Merita Bank Ltd.
5.11% due 01/25/99.................... 9,965,933
10,000,000 Morgan (J.P.) & Co.
5.09% due 02/26/99.................... 9,920,822
15,000,000 Morgan (J.P.) & Co.
4.82% due 03/30/99.................... 14,823,266
10,000,000 Morgan Stanley Group, Inc.
5.35% due 02/02/99.................... 9,952,444
5,000,000 Morgan Stanley Group, Inc.
5.20% due 03/24/99.................... 4,940,777
5,000,000 Motorola, Inc.
5.00% due 03/09/99.................... 4,953,472
10,000,000 Motorola, Inc.
5.04% due 02/25/99.................... 9,923,000
5,000,000 Motorola, Inc.
5.14% due 01/28/99.................... 4,980,725
20,000,000 National Fuel Gas Co.
5.35% due 02/17/99.................... 19,860,305
10,000,000 National Rural Utilities
5.12% due 01/14/99.................... 9,981,511
10,000,000 National Rural Utilities
4.85% due 02/23/99.................... 9,928,597
5,000,000 Penney (J.C.) Co.
5.00% due 04/22/99.................... 4,922,916
10,000,000 Rubbermaid, Inc.
5.10% due 02/08/99.................... 9,946,166
15,000,000 Rubbermaid, Inc.
5.12% due 02/01/99.................... 14,933,866
10,000,000 Salomon Smith Barney Holdings, Inc.
5.39% due 02/22/99.................... 9,922,144
10,000,000 Salomon Smith Barney Holdings, Inc.
5.01% due 04/05/99.................... 9,869,183
10,000,000 Sharp Electronics Corp.
5.55% due 01/12/99.................... 9,983,041
20,000,000 Toyota Motor Credit Corp.
5.15% due 02/05/99.................... 19,899,861
12,000,000 Westpac Capital Corp.
5.20% due 01/11/99.................... 11,982,666
10,000,000 Zeneca, Inc.
5.07% due 01/19/99.................... 9,974,650
------------
Total commercial paper.................. $561,689,494
------------
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-7
<PAGE>
HARTFORD MONEY MARKET HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
CORPORATE NOTES -- 24.7%
$10,000,000 Ab Spintab
5.19% due 05/26/99.................... $ 9,997,658
8,000,000 Association Corporation of North America
6.68% due 09/17/99.................... 8,062,652
20,000,000 CITGroup Holdings
6.25% due 03/22/99.................... 20,039,460
10,000,000 Countrywide Home Loans
5.472% due 10/29/99................... 10,000,000
10,000,000 Countrywide Home Loans
5.25% due 08/30/99.................... 10,000,000
4,250,000 Finova Capital Corp.
6.05% due 10/08/99.................... 4,274,216
20,000,000 General Motors Corp.
5.34% due 02/12/99.................... 19,999,734
20,000,000 Goldman Sachs Group L.P. (The)
5.25% due 03/26/99.................... 20,000,000
20,000,000 Honda Motor Corp.
5.27% due 04/08/99.................... 19,998,773
20,000,000 John Deere Capital Corp.
5.25% due 02/09/99.................... 19,998,717
10,000,000 Key Bank N.A.
5.18% due 08/20/99.................... 9,999,880
15,250,000 Lehman Brothers Holdings, Inc.
5.25% due 01/13/99.................... 15,250,000
20,000,000 Merrill Lynch & Co., Inc.
5.32% due 08/13/99.................... 20,000,000
19,250,000 PepsiCo, Inc.
5.21% due 08/19/99.................... 19,236,312
9,250,000 USL Capital Corporation
5.51% due 04/19/99.................... 9,255,874
------------
Total corporate notes................... $216,113,276
------------
------------
REPURCHASE AGREEMENT -- 12.5%
109,187,000 Interest in $121,902,000 joint $109,187,000
repurchase agreement dated 12/31/98
with State Street Bank 4.750% due
01/04/99; maturity amount $109,244,626
(Collateralized by $121,902,000 U.S.
Treasury Bonds 8.125% due 05/15/21)...
------------
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
------------
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total commercial paper (cost
$561,689,494).......................... 64.2% $561,689,494
Total corporate notes (cost
$216,113,276).......................... 24.7 216,113,276
Total repurchase agreement (cost
$109,187,000).......................... 12.5 109,187,000
----- ------------
Total investment in securities
(total cost $886,989,770).............. 101.4 886,989,770
Cash, receivables and other assets...... 0.2 2,048,517
Payable for Fund shares redeemed........ (1.6) (14,368,303)
Payable for dividends................... (0.0) (1,091)
Other liabilities....................... (0.0) (3,843)
----- ------------
Net assets.............................. 100.0% $874,665,050
----- ------------
----- ------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share;
authorized 1,300,000,000 shares; outstanding
874,665,050 shares............................... $ 87,466,505
Capital surplus................................... 787,198,545
------------
Net assets........................................ $874,665,050
------------
------------
Class IA
Shares of beneficial interest outstanding, $0.10
par value (net assets $872,486,007).............. 872,486,007
------------
------------
</TABLE>
<TABLE>
<S> <C>
Net asset value................................... $1.00
-----
-----
</TABLE>
<TABLE>
<S> <C>
Class IB
Shares of beneficial interest outstanding, $0.10
par value (net assets $2,179,043)................ 2,179,043
------------
------------
</TABLE>
<TABLE>
<S> <C>
Net asset value................................... $1.00
-----
-----
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-8
<PAGE>
HARTFORD ADVISERS HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- -------------- ---------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 0.3%
$ 30,000,000 Aesop Funding II LLC Series 98-1** Class $ 29,996,100
A
6.14% due 05/20/06....................
---------------
---------------
<CAPTION>
SHARES
- --------------
<C> <S> <C>
COMMON STOCKS -- 60.8%
AEROSPACE & DEFENSE -- 0.7%
1,850,000 AlliedSignal, Inc....................... $ 81,978,139
---------------
COMMUNICATIONS
EQUIPMENT -- 1.8%
*1,500,000 Cisco Systems, Inc...................... 139,218,750
700,000 Lucent Technologies, Inc................ 77,000,000
---------------
216,218,750
---------------
COMPUTERS & OFFICE EQUIPMENT -- 4.0%
1,500,000 Compaq Computer Corporation............. 62,906,250
*1,100,000 EMC Corporation......................... 93,500,000
920,000 International Business Machines 169,970,000
Corporation............................
1,200,000 Xerox Corporation....................... 141,600,000
---------------
467,976,250
---------------
CONSUMER NON-DURABLES -- 2.8%
325,000 Colgate-Palmolive Company............... 30,184,375
450,000 Estee Lauder Companies-Class A.......... 38,475,000
1,300,000 Gillette Company (The).................. 62,806,250
1,450,000 Kimberly-Clark Corporation.............. 79,025,000
1,360,000 Proctor & Gamble Co..................... 124,185,000
---------------
334,675,625
---------------
CONSUMER SERVICES -- 0.9%
*561,821 Autotote Corporation.................... 1,053,414
950,000 Eastman Kodak Company................... 68,400,000
*2,150,000 Mirage Resorts, Inc..................... 32,115,625
---------------
101,569,039
---------------
ELECTRONICS -- 3.9%
475,000 Altera Corporation...................... 28,915,625
*1,100,000 Analog Devices, Inc..................... 34,512,500
2,350,000 General Electric Company................ 239,846,875
1,350,000 Intel Corporation....................... 160,059,375
---------------
463,334,375
---------------
ENERGY & SERVICES -- 3.8%
800,000 Amoco Corporation....................... 48,300,000
100,000 Anadarko Petroleum Corporation.......... 3,087,500
800,000 Chevron Corporation..................... 66,350,000
1,550,000 Exxon Corporation....................... 113,343,750
2,050,000 Royal Dutch Petroleum................... 98,143,750
550,000 Santa Fe International Corporation...... 8,043,750
1,470,000 Schlumberger Ltd........................ 67,803,750
1,375,000 Unocal Corporation...................... 40,132,812
---------------
445,205,312
---------------
FINANCIAL SERVICES -- 10.1%
1,110,000 Ace Ltd................................. 38,225,625
1,158,750 American International Group, Inc....... 111,964,218
3,840,400 Associates First Capital Corporation.... 162,736,950
<CAPTION>
MARKET
SHARES VALUE
- -------------- ---------------
<C> <S> <C>
</TABLE>
COMMON STOCKS -- (CONTINUED)
FINANCIAL SERVICES -- (CONTINUED)
<TABLE>
<C> <S> <C>
1,568,440 BankAmerica Corp........................ $ 94,302,455
4,650,000 Citigroup, Inc.......................... 230,175,000
1,200,000 First Union Corporation................. 72,975,000
1,600,000 Franklin Resources, Corp................ 51,200,000
2,295,000 Marsh & Mclennan Companies, Inc......... 134,114,062
142,800 Mellon Bank Corporation................. 9,817,500
2,000,000 Merrill Lynch & Co., Inc................ 133,500,000
1,450,000 State Street Corporation................ 100,865,625
1,645,000 U.S. Bancorp............................ 58,397,500
---------------
1,198,273,935
---------------
FOOD, BEVERAGE & TOBACCO -- 1.5%
2,300,000 Philip Morris Co., Inc.................. 123,050,000
700,000 Unilever United States, Inc............. 58,056,250
---------------
181,106,250
---------------
HEALTH CARE -- 10.4%
2,600,000 Abbott Laboratories..................... 127,400,000
2,700,000 American Home Products Corporation...... 152,043,750
1,500,000 Baxter International, Inc............... 96,468,750
*1,432,000 Boston Scientific Corporation........... 38,395,500
3,300,000 Columbia/HCA Healthcare Corporation..... 81,675,000
1,370,000 Johnson & Johnson....................... 114,908,750
900,000 Merck & Co., Inc........................ 132,918,750
750,000 Perkin-Elmer Corporation................ 73,171,875
550,000 Pfizer, Inc............................. 68,990,625
2,100,000 Pharmacia & Upjohn, Inc................. 118,912,500
1,780,300 Service Corporation International....... 67,762,668
1,456,050 ServiceMaster Company (The)............. 32,124,103
850,000 SmithKline Beecham PLC ADR.............. 59,075,000
975,000 Warner-Lambert Company.................. 73,307,812
---------------
1,237,155,083
---------------
INDUSTRIAL MATERIALS -- 1.7%
750,000 Aluminum Company of America............. 55,921,875
500,000 Dow Chemical Company.................... 45,468,750
1,350,000 du Pont (E.I.) de Nemours & Company..... 71,634,375
100,000 Praxair, Inc............................ 3,525,000
*200,000 Sealed Air Corporation.................. 10,212,500
250,000 Weyerhaeuser Company.................... 12,703,125
---------------
199,465,625
---------------
MANUFACTURING -- 0.6%
900,000 Tyco International Ltd.................. 67,893,750
---------------
MEDIA & SERVICES -- 3.0%
1,100,000 AirTouch Communications, Inc............ 79,337,500
1,020,000 CBS Corporation......................... 33,405,000
2,729,000 Gannett Co., Inc........................ 180,625,687
2,125,000 Walt Disney Company (The)............... 63,750,000
---------------
357,118,187
---------------
REAL ESTATE -- 0.0%
*6,150 Security Capital Group, Inc............. 4,059,000
---------------
RETAIL -- 6.6%
2,519,600 CVS Corporation......................... 138,578,000
</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)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- -------------- ---------------
<C> <S> <C>
</TABLE>
COMMON STOCKS -- (CONTINUED)
RETAIL -- (CONTINUED)
<TABLE>
<C> <S> <C>
1,387,500 Gap, Inc. (The)......................... $ 78,046,875
2,700,000 Home Depot, Inc. (The).................. 165,206,250
1,835,000 McDonald's Corporation.................. 140,606,875
*890,000 Staples, Inc............................ 38,881,875
2,380,700 Wal-Mart Stores, Inc.................... 193,878,256
500,000 Walgreen Co............................. 29,281,250
---------------
784,479,381
---------------
SOFTWARE & SERVICES -- 3.2%
898,200 Automatic Data Processing, Inc.......... 72,024,412
*1,000,000 Computer Sciences Corp.................. 64,437,500
1,650,000 First Data Corporation.................. 52,284,375
*1,350,000 Microsoft Corporation................... 187,228,125
---------------
375,974,412
---------------
TRANSPORTATION -- 1.8%
*1,250,000 AMR Corporation......................... 74,218,750
4,162,500 Southwest Airlines Co................... 93,396,093
1,030,000 Union Pacific Corporation............... 46,414,375
---------------
214,029,218
---------------
UTILITIES -- 4.0%
1,700,000 Bell Atlantic Corporation............... 96,581,250
*2,471,950 MCI WorldCom, Inc....................... 177,362,412
3,700,000 SBC Communications, Inc................. 198,412,500
---------------
472,356,162
---------------
Total common stocks..................... $ 7,202,868,493
---------------
---------------
CONVERTIBLE PREFERRED STOCKS -- 0.1%
INDUSTRIAL MATERIALS -- 0.1%
204,900 Monsanto Company........................ $ 10,040,100
---------------
---------------
<CAPTION>
PRINCIPAL
AMOUNT
- --------------
<C> <S> <C>
CORPORATE NOTES -- 12.0%
COMPUTERS & OFFICE EQUIPMENT -- 0.2%
$ 13,135,000 Honeywell, Inc. $ 13,536,510
6.60% due 04/15/01....................
11,645,000 International Business Machines Corp. 12,299,099
6.50% due 01/15/28....................
---------------
25,835,609
---------------
CONSUMER DURABLES -- 0.6%
35,000,000 Ford Motor Co. 36,010,835
6.625% due 10/01/28...................
35,000,000 General Motors Corp. 36,528,450
6.75% due 05/01/28....................
---------------
72,539,285
---------------
FINANCIAL SERVICES -- 5.6%
30,000,000 Allmerica Financial Corp. 32,093,610
7.625% due 10/15/25...................
26,485,000 Amerus Life Holdings 26,653,947
6.95% due 06/15/05....................
21,670,000 Amvescap PLC 21,709,287
6.60% due 05/15/05....................
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- -------------- ---------------
<C> <S> <C>
</TABLE>
CORPORATE NOTES -- (CONTINUED)
FINANCIAL SERVICES -- (CONTINUED)
<TABLE>
<C> <S> <C>
$ 25,000,000 Associates Corp. N.A. $ 25,402,200
6.00% due 07/15/05....................
15,000,000 Associates Corp. N.A. 15,505,905
6.50% due 10/15/02....................
10,000,000 BankBoston Corp. 10,148,360
6.625% due 02/01/04...................
14,825,000 Banponce Corp. 15,044,424
6.75% due 12/15/05....................
15,000,000 Bayerische Landesbank NY 15,074,250
5.625% due 02/26/01...................
10,000,000 Chase Manhattan Corp. 10,795,780
8.50% due 02/15/02....................
15,740,000 CIGNA Corp. 16,747,454
7.40% due 05/15/07....................
30,000,000 Cincinnati Financial Group 29,818,110
6.90% due 05/15/28....................
20,000,000 CIT Group Holdings 20,533,680
6.75% due 05/14/01....................
20,000,000 Citicorp 20,049,720
5.625% due 02/15/01...................
10,000,000 Citigroup, Inc. 10,327,460
6.25% due 12/01/05....................
24,000,000 Credit National Euro 24,480,000
7.00% due 11/14/05....................
10,000,000 Fairfax Financial Holdings 10,548,300
7.75% due 12/15/03....................
18,000,000 Finova Capital Corporation 18,132,030
6.39% due 10/08/02....................
12,000,000 First Interstate Bank 12,364,152
9.00% due 11/15/04....................
25,000,000 First Union National Bank 24,946,800
5.80% due 12/01/08....................
20,000,000 Fleet Financial Group 20,891,380
6.875% due 01/15/28...................
20,000,000 Heller Financial 20,155,040
6.382% due 11/10/00...................
15,000,000 Home Savings America 15,097,125
6.00% due 11/01/00....................
27,000,000 Jackson National Life Insurance Co.** 31,052,376
8.15% due 03/15/27....................
11,400,000 Liberty Mutual Life Insurance Co.** 11,729,551
6.75% due 11/15/08....................
30,000,000 Liberty Mutual Life Insurance Co. 34,062,060
8.20% due 05/04/07....................
10,000,000 Lumbermens Mutual Casualty** 12,070,940
9.15% due 07/01/26....................
20,000,000 NationsBank Corp. 22,932,140
7.80% due 09/15/16....................
30,000,000 New England Mutual Life Insurance Co.** 32,222,940
7.875% due 02/15/24...................
27,600,000 Torchmark Corp. 30,706,883
8.25% due 08/15/09....................
30,000,000 Toyota Motor Credit Corp. 29,775,000
5.50% due 12/15/08....................
25,000,000 Transamerica Financial 25,105,350
6.125% due 11/01/01...................
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-10
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- -------------- ---------------
<C> <S> <C>
</TABLE>
CORPORATE NOTES -- (CONTINUED)
FINANCIAL SERVICES -- (CONTINUED)
<TABLE>
<C> <S> <C>
$ 10,000,000 Travelers/Aetna P&C, Inc. $ 10,235,300
6.75% due 04/15/01....................
---------------
656,411,554
---------------
FOOD, BEVERAGE & TOBACCO -- 0.3%
30,000,000 Coca-Cola Enterprises 31,133,370
6.75% due 09/15/28....................
---------------
HEALTH CARE -- 0.2%
29,000,000 United Healthcare Corp.** 29,198,795
6.60% due 12/01/03....................
---------------
HOME BUILDING -- 0.2%
26,000,000 American Home Products 29,091,140
7.25% due 03/01/23....................
---------------
INDUSTRIAL MATERIALS -- 3.4%
30,000,000 Alcan Aluminum Ltd. 30,031,830
7.25% due 11/01/28....................
22,000,000 Becton Dickinson 23,174,976
6.70% due 08/01/28....................
25,000,000 Boise Cascade Office 24,079,950
7.05% due 05/15/05....................
18,000,000 Colgate-Palmolive 18,117,414
5.58% due 11/06/08....................
25,000,000 Computer Associates International 24,664,250
6.50% due 04/15/08....................
30,000,000 Danaher Corp. 29,898,000
6.00% due 10/15/08....................
30,000,000 Equitable Cos., Inc. 30,844,620
7.00% due 04/01/28....................
15,000,000 Husky Oil Ltd. 15,234,450
6.875% due 11/15/03...................
20,000,000 ICI Wilmington 20,237,860
6.95% due 09/15/04....................
25,000,000 Parker Hannifin Corp. 24,958,750
5.65% due 09/15/03....................
7,255,334 Postal Square LP 9,290,382
8.95% due 06/15/22....................
25,000,000 Praxair Inc 24,833,800
6.15% due 04/15/03....................
30,000,000 Rockwell International Corp. 31,243,740
6.70% due 01/15/28....................
19,420,000 Scripps (E.W.) Company 19,998,211
6.375% due 10/15/02...................
15,710,000 U.S. West Cap Funding, Inc. 16,779,945
6.875% due 07/15/28...................
20,000,000 Williams Cos., Inc. 20,288,300
6.50% due 11/15/02....................
30,000,000 Worldcom, Inc. 31,093,440
6.40% due 08/15/05....................
10,000,000 Zeneca Group PLC 10,339,800
6.30% due 06/15/03....................
---------------
405,109,718
---------------
MEDIA & SERVICES -- 0.1%
10,400,000 Times Mirror Co. 11,705,907
7.50% due 07/01/23....................
---------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- -------------- ---------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
REAL ESTATE -- 0.2%
$ 20,000,000 Liberty Propert Trust (REIT) $ 19,087,260
7.25% due 08/15/07....................
---------------
RETAIL -- 0.4%
20,200,000 Dayton Hudson Co 20,490,981
5.875% due 11/01/08...................
26,500,000 Penney (J.C.) & Company 29,366,531
7.95% due 04/01/17....................
---------------
49,857,512
---------------
TRANSPORTATION -- 0.4%
23,700,000 Continental Airlines 24,089,154
6.90% due 01/02/18....................
20,000,000 Santiago Air 144A** 19,850,000
6.95% due 07/01/12....................
---------------
43,939,154
---------------
UTILITIES -- 0.4%
10,000,000 Bellsouth Telecommunications 10,474,900
6.375% due 06/01/28...................
15,000,000 Hydro Quebec 15,957,750
7.375% due 02/01/03...................
11,000,000 Pacific Gas & Electric Co. 11,820,963
7.875% due 03/01/02...................
10,000,000 Southern California Gas Co. 10,197,830
5.75% due 11/15/03....................
---------------
48,451,443
---------------
Total corporate notes................... $ 1,422,360,747
---------------
---------------
FOREIGN GOVERNMENT BONDS -- 0.2%
16,000,000 City of Naples, Italy $ 16,954,400
7.52% due 07/15/06....................
---------------
---------------
MORTGAGE-BACKED SECURITIES -- 0.6%
18,000,000 Asset Securitization Corp. Series 97-D4 $ 19,574,100
Class A1D
7.49% due 04/14/29....................
25,000,000 Chase Commercial Mortgage 97-A2 26,961,250
7.370% due 02/19/07...................
28,500,000 Newcourt Receivable Asset Trust Series 28,971,390
97-1 Class A4
6.193% due 05/20/05...................
---------------
Total mortgage-backed securities........ $ 75,506,740
---------------
---------------
MUNICIPAL BONDS -- 0.2%
7,000,000 Miami Beach, Florida $ 8,049,034
8.80% due 12/01/15....................
16,635,000 Mount Sinai School of Medicine NY 17,304,758
6.00% due 07/01/03....................
---------------
Total municipal bonds................... $ 25,353,792
---------------
---------------
U.S. TREASURIES & FEDERAL AGENCIES -- 24.1%
U.S. TREASURY BONDS -- 0.7%
76,750,000 6.25% due 08/15/23.................... $ 85,864,062
---------------
U.S. TREASURY NOTES -- 18.8%
1,023,000,000 5.75% due 10/31/02 - 08/15/03......... 1,066,115,800
280,000,000 5.785% due 11/15/05................... 298,725,000
417,500,000 6.50% due 08/15/05 - 10/15/06......... 461,411,250
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-11
<PAGE>
HARTFORD ADVISERS HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- -------------- ---------------
<C> <S> <C>
</TABLE>
U.S. TREASURIES & FEDERAL AGENCIES -- (CONTINUED)
U.S. TREASURY NOTES -- (CONTINUED)
<TABLE>
<C> <S> <C>
$ 207,000,000 7.25% due 05/15/04 - 08/15/04......... $ 232,404,116
158,000,000 7.50% due 11/15/01.................... 169,800,704
---------------
2,228,456,870
---------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
-- 4.1%
250,391,534 6.00% due 06/15/24 - 11/15/28......... 248,100,011
146,116,685 6.50% due 03/15/26 - 06/15/28......... 147,532,556
90,402,350 7.00% due 11/15/23 - 11/15/24......... 92,535,129
1,980,257 9.00% due 06/20/16 - 07/20/16......... 2,117,740
---------------
490,285,436
---------------
U.S. GOVERNMENT
AGENCIES -- 0.5%
Tennesse Valley Authority
50,000,000 6.00% due 03/15/13.................... 52,654,800
---------------
Total U.S. treasuries & federal $ 2,857,261,168
agencies...............................
---------------
---------------
SHORT-TERM SECURITIES -- 1.1%
REPURCHASE AGREEMENT
129,040,000 Interest in $1,162,198,000 joint $ 129,040,000
repurchase agreement dated 12/31/98 with
State Street Bank 4.773% due 01/04/99;
maturity amount $129,108,434
(Collateralized by $469,031,000 U.S.
Treasury Notes 4.00% - 7.775% due
10/31/99 - 02/15/07, $278,664,000 U.S.
Treasury Bonds 7.875% -12.75% due
11/15/10 - 02/15/21, $414,503,000 U.S.
Treasury Strips (principal) 0.00% due
02/15/19 - 08/15/21)....................
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
---------------
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total asset-backed securities (cost
$29,978,508)........................... 0.3% $ 29,996,100
Total common stocks (cost
$4,371,259,187)........................ 60.8 7,202,868,493
Total convertible preferred stocks (cost
$8,196,000)............................ 0.1 10,040,100
Total corporate notes (cost
$1,398,499,775)........................ 12.0 1,422,360,747
Total foreign government bonds (cost
$16,000,000)........................... 0.2 16,954,400
Total mortgage-backed securities (cost
$72,728,353)........................... 0.6 75,506,740
Total municipal bonds (cost
$23,724,759)........................... 0.2 25,353,792
Total U.S. treasuries & federal agencies
(cost $2,755,667,250).................. 24.1 2,857,261,168
Total short-term securities (cost
$129,040,000).......................... 1.1 129,040,000
----- ---------------
Total investment in securities
(total cost $8,805,093,832)............ 99.4 11,769,381,540
Cash, receivables and other assets...... 0.6 70,873,762
Other liabilities....................... (0.0) (130,168)
----- ---------------
Net assets.............................. 100.0% $11,840,125,134
----- ---------------
----- ---------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share;
authorized 6,000,000,000 shares; outstanding
3,987,285,128 shares............................. $ 398,728,513
Capital surplus................................... 7,474,906,331
Accumulated undistributed net investment income... 8,440,413
Accumulated undistributed net realized gain on
investments...................................... 993,762,169
Unrealized appreciation of investments............ 2,964,287,708
---------------
Net assets........................................ $11,840,125,134
---------------
---------------
</TABLE>
<TABLE>
<S> <C>
Class IA
Net asset value per share ($11,805,411,184
DIVIDED BY 3,954,575,864 shares outstanding).... $2.99
-----
-----
Class IB
Net asset value per share ($34,713,950
DIVIDED BY 32,709,264 shares outstanding)....... $1.06
-----
-----
</TABLE>
* Non-income producing during period.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1998, the market value of these securities amounted to $166,120,702 or 1.4%
of net assets.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-12
<PAGE>
HARTFORD CAPITAL APPRECIATION HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------------ --------------
<C> <S> <C>
COMMON STOCKS -- 94.7%
AEROSPACE & DEFENSE -- 4.2%
1,619,800 AlliedSignal, Inc....................... $ 71,777,387
*1,890,000 Loral Space & Communications............ 33,665,625
600,000 Northrop Grumman Corporation............ 43,875,000
1,080,000 Precision Castparts Corporation......... 47,790,000
890,000 Raytheon Co. Class A.................... 46,001,875
*220,200 Wyman-Gordon Company.................... 2,257,050
--------------
245,366,937
--------------
BUSINESS SERVICES -- 2.7%
*1,700,000 Cendant Corporation..................... 32,406,250
1,170,000 Chicago Bridge & Iron Company N.V....... 14,405,625
*467,500 Computer Learning Centers, Inc.......... 3,126,406
*648,650 Ingram Micro, Inc....................... 22,621,668
*934,900 Ionics, Inc............................. 27,988,568
1,339,300 Manpower, Inc........................... 33,733,618
1,000,000 Ogden Corp.............................. 25,062,500
--------------
159,344,635
--------------
COMMUNICATIONS EQUIPMENT -- 5.6%
*897,600 3Com Corporation........................ 40,223,700
*1,700,000 ADC Telecommunications, Inc............. 59,075,000
90,000 Alcatel................................. 11,020,392
*975,000 Cisco Systems, Inc...................... 90,492,187
1,260,000 ECI Telecommunications.................. 44,887,500
750,000 Harris Corporation...................... 27,468,750
250,000 Motorola, Inc........................... 15,265,625
*1,053,200 Oak Industries, Inc..................... 36,862,000
--------------
325,295,154
--------------
COMPUTERS & OFFICE
EQUIPMENT -- 4.5%
*2,000,000 EMC Corporation......................... 170,000,000
*38,700 NCR Corporation......................... 1,615,725
*687,200 Seagate Technology, Inc................. 20,787,800
1,100,000 Symbol Technologies, Inc................ 70,331,250
--------------
262,734,775
--------------
CONSUMER NON-DURABLES -- 1.4%
1,350,000 Kimberly-Clark Corporation.............. 73,575,000
*306,600 Quiksilver, Inc......................... 9,198,000
--------------
82,773,000
--------------
CONSUMER SERVICES -- 2.2%
*749,800 American Skiing Co...................... 5,764,110
*444,000 Anchor Gaming........................... 25,030,500
*1,000,000 Cheesecake Factory Incorporated (The)... 29,656,250
*1,600,000 International Game Technology........... 38,900,000
*1,817,000 Mirage Resorts, Inc..................... 27,141,437
--------------
126,492,297
--------------
ELECTRONICS -- 9.2%
*660,000 Altera Corporation...................... 40,177,500
*1,083,333 Analog Devices, Inc..................... 33,989,572
*850,000 Cognex Corporation...................... 17,000,000
*820,900 Credence Systems Corporation............ 15,186,650
1,449,050 General Cable Corporation............... 29,705,525
*505,000 Micron Technology, Inc.................. 25,534,062
666,500 Molex, Inc.............................. 21,244,687
1,505,800 Phillips N.V. ADR....................... 101,923,837
<CAPTION>
MARKET
SHARES VALUE
- ------------ --------------
<C> <S> <C>
</TABLE>
ELECTRONICS -- (CONTINUED)
<TABLE>
<C> <S> <C>
1,450,000 Siemens AG.............................. $ 95,330,301
1,200,000 Solectron Corporation................... 111,525,000
800,001 Thomas & Betts Corporation.............. 34,650,043
700,000 Vishay Intertechnology, Inc............. 10,150,000
--------------
536,417,177
--------------
ENERGY & SERVICES -- 4.9%
360,600 Ashland, Inc............................ 17,444,025
568,400 British Petroleum PLC ADR............... 50,942,850
*466,900 Cie Gen Geophysique - Sponsored ADR..... 5,077,537
*1,445,000 Corporation Geo Sa de C.V. - Class B.... 4,011,862
1,000,000 Eni Ads................................. 67,750,000
*940,700 Input/Output, Inc....................... 6,878,868
*775,100 McDermott (J. Ray) S.A.................. 18,941,506
700,000 Repsol S.A. ADR......................... 38,237,500
1,631,570 Transocean Offshore, Inc................ 43,746,470
1,110,000 YPF Sociedad Anonima - Sponsored ADR.... 31,010,625
--------------
284,041,243
--------------
FINANCIAL SERVICES -- 13.4%
2,220,000 Ace Ltd................................. 76,451,250
1,349,300 AMBAC Financial Group, Inc.............. 81,210,993
202,700 American Bankers Insurance Group, 9,805,612
Inc....................................
1,200,000 Banc One Corporation.................... 61,275,000
1,100,000 BankBoston Corporation.................. 42,831,250
1,300,000 Citigroup, Inc.......................... 64,350,000
1,000,000 Federal National Mortgage Association... 74,000,000
*633,700 FIRSTPLUS Financial Group, Inc.......... 1,742,675
1,000,000 Fleet Financial Group, Inc.............. 44,687,500
1,000,000 Green Point Financial Corp.............. 35,125,000
1,200,000 Heller Financial, Inc................... 35,250,000
*1,300,000 Imperial Credit......................... 10,887,500
1,522,400 Legg Mason, Inc......................... 48,050,750
1,050,000 Marsh & Mclennan Companies, Inc......... 61,359,375
907,000 Merrill Lynch & Co., Inc................ 60,542,250
793,100 MMI Companies, Inc...................... 13,284,425
800,000 Morgan Stanley, Dean Witter, Discover 56,800,000
and Co.................................
--------------
777,653,580
--------------
FOOD, BEVERAGE & TOBACCO -- 1.0%
1,050,000 Archer-Daniels-Midland Company.......... 18,046,875
700,000 Philip Morris Co., Inc.................. 37,450,000
--------------
55,496,875
--------------
HEALTH CARE -- 13.7%
1,600,000 Abbott Laboratories..................... 78,400,000
*540,200 Boston Scientific Corporation........... 14,484,112
2,200,000 Columbia/HCA Healthcare Corporation..... 54,450,000
1,900,000 Eisai Co., Ltd.......................... 37,057,851
1,743,500 Genzyme Corporation..................... 86,739,125
800,000 HBO & Company........................... 22,950,000
1,900,000 ICN Pharmaceuticals, Inc................ 42,987,500
*1,135,000 Magellan Health Services, Inc........... 9,505,625
870,000 Medpartners, Inc........................ 4,567,500
*30 Perkin-Elmer Corporation................ 217
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-13
<PAGE>
HARTFORD CAPITAL APPRECIATION HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------------ --------------
<C> <S> <C>
</TABLE>
COMMON STOCKS -- (CONTINUED)
HEALTH CARE -- (CONTINUED)
<TABLE>
<C> <S> <C>
2,600,000 Pharmacia & Upjohn, Inc................. $ 147,225,000
1,650,000 Rhone-Poulenc S.A....................... 82,912,500
1,575,900 United Healthcare Corporation........... 67,862,193
*1,000,000 Wellpoint Health Networks, Inc.......... 87,000,000
1,475,000 Zeneca Group PLC........................ 64,420,232
--------------
800,561,855
--------------
INDUSTRIAL MATERIALS -- 0.9%
7,000,000 Billiton PLC**.......................... 13,917,681
1,221,300 IMC Global, Inc......................... 26,105,287
1,150,000 Titanium Metals Corporation............. 9,775,000
--------------
49,797,968
--------------
MANUFACTURING -- 0.4%
*1,289,800 Ucar International, Inc................. 22,974,562
--------------
MEDIA & SERVICES -- 7.3%
*1,210,000 America Online, Inc..................... 175,147,500
*1,386,400 American Tower Corporation.............. 40,985,450
*743,100 Capstar Broadcasting Corporation........ 16,998,412
*703,100 Infinity Broadcasting Class A........... 19,247,362
857,000 News Corp. - Preferred Shares ADR 21,157,187
Ltd....................................
*5,407,400 Rogers Communications, Inc.............. 47,990,675
*1,647,200 Univision Communications, Inc........... 59,608,050
*865,500 Valassis Communications, Inc............ 44,681,437
--------------
425,816,073
--------------
REAL ESTATE -- 1.5%
*2,000,000 Beacon Properties Corporation**......... 32,000,000
418,400 Boston Properties, Inc.................. 12,761,200
*1,000,000 Security Capital Group, Inc............. 13,562,500
1,200,000 Starwood Hotels & Resorts............... 27,225,000
--------------
85,548,700
--------------
RETAIL -- 4.5%
*2,355,200 CompUSA, Inc............................ 30,764,800
*918,700 Consolidated Stores, Inc................ 18,546,256
1,800,000 Gap, Inc. (The)......................... 101,250,000
500,000 Home Depot, Inc. (The).................. 30,593,750
1,025,000 Wal-Mart Stores, Inc.................... 83,473,437
--------------
264,628,243
--------------
SOFTWARE & SERVICES -- 7.0%
*1,255,000 Avant! Corporation...................... 20,080,000
*700,000 Ceridan Corporation..................... 48,868,750
*717,800 Cognos, Inc............................. 17,945,000
*900,000 Compuware Corporation................... 70,312,500
1,600,218 First Data Corporation.................. 50,706,907
*1,629,000 Learning Company, Inc. (The)............ 42,252,187
*500,000 Microsoft Corporation................... 69,343,750
*600,000 Policy Management Systems Corporation... 30,300,000
*2,100,000 Rational Software Corporation........... 55,650,000
--------------
405,459,094
--------------
TRANSPORTATION -- 1.6%
*854,200 AMR Corporation......................... 50,718,125
1,000,000 Canadian Pacific Ltd.................... 18,875,000
<CAPTION>
MARKET
SHARES VALUE
- ------------ --------------
<C> <S> <C>
</TABLE>
TRANSPORTATION -- (CONTINUED)
<TABLE>
<C> <S> <C>
1,346,300 Werner Enterprises, Inc................. $ 23,812,681
--------------
93,405,806
--------------
UTILITIES -- 7.0%
*438,500 APT Satellite Holdings ADR.............. 1,781,406
*1,886,500 Calpine Corporation..................... 47,634,125
1,019,200 COMSAT Corporation...................... 36,691,200
500,000 DQE, Inc................................ 21,968,750
817,000 Empresa Nac Elec........................ 9,293,375
822,900 Enron Corp.............................. 46,956,731
*14,040 Intermedia Communications 144A***....... 217,971
*900,000 Intermedia Communications, Inc.......... 15,525,000
*2,400,000 MCI WorldCom, Inc....................... 172,200,000
1,260,430 Swisscom AG - Sponsored ADR............. 53,647,051
--------------
405,915,609
--------------
WASTE MANAGEMENT -- 1.7%
1,200,000 Republic Industries, Inc................ 17,700,000
1,700,000 Waste Management, Inc................... 79,262,500
--------------
96,962,500
--------------
Total common stocks..................... $5,506,686,083
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- ------------
<C> <S> <C>
CORPORATE NOTES -- 0.3%
INDUSTRIAL MATERIALS -- 0.3%
UNISYS Corp.
$ 15,000,000 12.00% due 04/15/03................... $ 16,800,000
--------------
--------------
PREFERRED STOCKS -- 1.5%
CONSUMER SERVICES -- 0.0%
1,094,544 SGW Holdings Corporation***............. $ 2,736,360
--------------
HEALTH CARE -- 0.2%
*1,173,300 MedPartners, Inc........................ 9,019,743
--------------
TRANSPORTATION -- 1.0%
1,280,000 Union Pacific Capital Trust**........... 59,200,000
--------------
UTILITIES -- 0.3%
1,200,000 Intermedia Communications Inc.**........ 16,800,000
--------------
Total preferred stocks.................. $ 87,756,103
--------------
--------------
SHORT-TERM SECURITIES -- 3.4%
REPURCHASE AGREEMENT
196,379,000 Interest in $1,162,198,000 joint $ 196,379,000
repurchase agreement dated 12/31/98 with
State Street Bank 4.773% due 01/04/99;
maturity amount $196,483,146
(Collateralized by $469,031,000 U.S.
Treasury Notes 4.00% - 7.775% due
10/31/99 - 02/15/07, $278,664,000 U.S.
Treasury Bonds 7.875% - 12.75% due
11/15/10 - 02/15/21, $414,503,000 U.S.
Treasury Strips (principal) 0.00% due
02/15/19 - 08/15/21)....................
--------------
--------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-14
<PAGE>
<TABLE>
<CAPTION>
MARKET
VALUE
--------------
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost
$4,176,931,447)........................ 94.7% $5,506,686,083
Total corporate notes (cost
$15,293,984)........................... 0.3 16,800,000
Total preferred stocks (cost
$111,349,158).......................... 1.5 87,756,103
Total short-term securities (cost
$196,379,000).......................... 3.4 196,379,000
----- --------------
Total investment in securities
(total cost $4,499,953,589)............ 99.9 5,807,621,186
Cash, receivables and other assets...... 1.1 66,114,577
Payable for securities purchased........ (1.0) (60,288,064)
Other liabilities....................... (0.0) (26,087)
----- --------------
Net assets.............................. 100.0% $5,813,421,612
----- --------------
----- --------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share;
authorized 2,000,000,000 shares; outstanding
1,226,281,575 shares............................. $ 122,628,158
Capital surplus................................... 4,020,767,755
Accumulated undistributed net investment income... 61,286
Accumulated undistributed net realized gain on
investments...................................... 362,259,435
Unrealized appreciation of investments............ 1,307,667,597
Unrealized appreciation of other assets and
liabilities in foreign currencies................ 27,381
--------------
Net assets........................................ $5,813,421,612
--------------
--------------
</TABLE>
<TABLE>
<S> <C>
Class IA
Net asset value per share ($5,807,479,718
DIVIDED BY 1,220,294,461 shares outstanding).... $4.76
-----
-----
Class IB
Net asset value per share ($5,941,894 DIVIDED BY
5,987,114 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 December 31,
1998, the market value of these securities amounted to $121,917,681 or
2.10% of net assets.
*** Restricted Security (see Note 2).
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-15
<PAGE>
HARTFORD MORTGAGE SECURITIES HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 0.9%
$ 3,000,000 Chase Manhattan RV Owner Trust, Series
97-A Class A9
6.32% due 12/15/08.................... $ 3,040,710
------------
------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 14.9%
3,069,102 Bear Stearns Mortgage Securities, Inc.,
Series 95-1, Class 1A
6.4713% due 05/25/10.................. 3,088,744
50,752 Chase Mortgage Finance Corp., Series
93-C2, Class 2A-3
8.25% due 01/25/24.................... 50,564
2,251,138 Corestates Home Equity Trust, Series
94-1, Class A
6.65% due 05/15/09.................... 2,282,788
2,635,300 Countrywide Mortgage Backed Securities,
Series 97-2 Class A13
7.50% due 04/25/27.................... 2,654,933
4,391,325 Countrywide Mortgage Backed Securities,
Series 98-6 Class A
6.50% due 06/25/13.................... 4,427,773
465,860 DLJ Mortgage Acceptance Corporation,
Series 96-1, B1
7.25% due 09/25/11.................... 465,277
155,287 DLJ Mortgage Acceptance Corporation,
Series 96-1, B2
7.25% due 09/25/11.................... 152,035
3,000,000 Fannie Mae Series 97-28 Class PD
7.50% due 07/18/23.................... 3,061,687
622,241 Fannie Mae Strip Series D Class 2
11.00% due 04/01/09................... 679,020
5,411,405 GE Capital Mortgage Services, Inc.,
Series 94-21, Class A
6.50% due 08/25/09.................... 5,453,181
5,129,566 GE Capital Mortgage Services, Inc.,
Series 94-26, Class A
6.9439% due 07/25/09.................. 5,195,460
548,409 GE Capital Mortgage Services, Inc.,
Series 96-1, Class B2
6.75% due 02/25/11.................... 541,038
1,643,481 GE Capital Mortgage Services, Inc.,
Series 96-1, Class M
6.75% due 02/25/11.................... 1,665,766
556,227 GE Capital Mortgage Services, Inc.,
Series 96-10, Class B1
6.75% due 06/25/11.................... 547,544
556,227 GE Capital Mortgage Services, Inc.,
Series 96-10, Class B2
6.75% due 06/25/11.................... 547,544
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
</TABLE>
COLLATERALIZED MORTGAGE OBLIGATIONS -- (CONTINUED)
<TABLE>
<C> <S> <C>
$ 4,193,099 GE Capital Mortgage Services, Inc.,
Series 98-7, Class A
6.50% due 04/25/13.................... $ 4,202,198
2,812,989 Housing Securities, Inc., Series 93-E,
Class E15
10.00% due 09/25/08................... 2,944,018
3,894,327 Norwest Asset Securities Corporation,
Series 98-16 Class A1
6.50% due 06/25/13.................... 3,909,632
552,057 PNC Mortgage Securities Corp., Series
96-2, Class B1
6.60% due 02/25/11.................... 542,136
184,039 PNC Mortgage Securities Corp., Series
96-2, Class B2
6.60% due 02/25/11.................... 180,732
294,430 PNC Mortgage Securities Corp., Series
96-2, Class B3
6.60% due 02/25/11.................... 289,139
4,179,028 Prudential Home Mortgage Securities Co.,
Series 93-H, Class 2B
6.7587% due 09/28/08.................. 4,176,813
1,094,538 Prudential Home Mortgage Securities Co.,
Series 96-3, Class B1
6.75% due 03/25/11.................... 1,078,700
546,830 Prudential Home Mortgage Securities Co.,
Series 96-3, Class B2
6.75% due 03/25/11.................... 538,917
670,168 Residential Funding Mortgage Sec I,
Series 95-S18, Class M3
7.00% due 11/25/10.................... 666,810
255,193 Residential Funding Mortgage Sec I,
Series 96-S11, Class M3
7.00% due 04/25/11.................... 260,053
477,298 Residential Funding Mortgage Sec I,
Series 96-S19, Class M3
7.50% due 09/25/11.................... 483,204
524,077 Residential Funding Mortgage Sec I,
Series 96-S5, Class M3
6.75% due 02/25/11.................... 514,958
2,510,713 Residential Funding Mortgage Sec I,
Series 98-S22 Class A1
6.50% due 09/25/13.................... 2,520,566
------------
Total collateralized mortgage
obligations............................. $ 53,121,230
------------
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-16
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 2.6%
$ 5,000,000 Asset Securitization Corporation, Series
1997-MDVII, Class A1B
7.41% due 01/13/30.................... $ 5,478,250
1,000,000 General Growth Properties Series 1,
Class A1
6.537% due 11/15/04................... 1,040,860
1,000,000 Merrill Lynch Mortgage Investors, Inc.,
Series 96-C2 Class B
6.96% due 11/21/28.................... 1,052,040
745,507 Midland Realty Acceptance Corporation,
Series 96-C2, Class A1
7.02% due 01/25/29.................... 767,850
930,000 Morgan Stanley Capital, Series 97-C1
Class A1C
7.63% due 02/15/20.................... 997,778
------------
Total commercial mortgage-backed
securities.............................. $ 9,336,778
------------
------------
CORPORATE NOTES -- 1.8%
FINANCIAL SERVICES -- 1.8%
1,500,000 Countrywide Funding Corp.
6.28% due 01/15/03.................... $ 1,504,026
5,000,000 ERP Operating Ltd. Partnership
6.63% due 04/13/05.................... 4,929,035
------------
Total corporate notes................... $ 6,433,061
------------
------------
U.S. TREASURIES & FEDERAL AGENCIES -- 70.7%
U.S. TREASURY INFLATION-INDEXED
SECURITIES -- 1.4%
5,048,250 3.625% due 01/15/08................... $ 5,023,790
------------
U.S. TREASURY NOTES -- 0.9%
3,000,000 5.625% due 02/15/06................... 3,164,064
------------
FEDERAL HOME LOAN MORTGAGE
ASSOCIATION -- 11.4%
1,739,930 10.00% due 11/01/20................... 1,879,736
13,826,938 6.50% due 02/01/09 - 06/01/26........ 13,947,623
7,260,038 7.00% due 12/01/10 - 03/01/26........ 7,404,289
5,521,360 7.50% due 02/01/10 - 06/01/25........ 5,677,596
3,228,646 8.00% due 02/01/13 - 11/01/24........ 3,346,218
2,713,404 8.50% due 07/01/01 - 05/01/25........ 2,818,962
2,557,209 9.00% due 10/15/01 - 10/01/06........ 2,649,607
2,906,209 9.50% due 11/01/08................... 3,056,192
------------
40,780,223
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- 28.2%
10,815,007 6.00% due 05/01/13 - 09/01/28......... 10,711,514
32,028,778 6.50% due 02/01/13 - 12/01/28......... 32,281,760
31,704,181 7.00% due 05/01/09 - 11/01/28......... 32,376,549
19,076,674 7.50% due 08/01/10 - 08/01/28......... 19,594,279
1,540,091 8.00% due 04/01/22.................... 1,599,195
1,430,289 8.50% due 06/01/24 - 07/01/25......... 1,500,047
2,484,506 9.00% due 05/01/21 - 09/01/21......... 2,621,461
------------
100,684,805
------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
</TABLE>
U.S. TREASURIES & FEDERAL AGENCIES -- (CONTINUED)
<TABLE>
<C> <S> <C>
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 28.8%
$ 1,387,638 10.00% due 11/15/09 - 05/15/13........ $ 1,526,972
406,964 11.00% due 02/15/10 - 09/15/10........ 455,774
21,257 11.25% due 01/15/01................... 22,197
52,317 12.00% due 05/15/15................... 59,104
58,133 12.50% due 06/15/14 - 08/15/15........ 66,594
13,005,230 6.00% due 07/15/28 - 11/15/28........ 12,887,402
9,962,148 6.50% due 03/15/28 - 11/15/28........ 10,060,237
21,686,575 7.00% due 01/15/24 - 09/15/28........ 22,185,584
33,990,481 7.50% due 11/15/09 - 06/15/28........ 35,042,648
14,159,643 8.00% due 02/15/01 - 11/29/27........ 14,721,870
1,767,344 8.50% due 06/15/17 - 02/15/25........ 1,881,005
1,056,654 9.00% due 01/15/25 - 12/15/25........ 1,130,330
2,394,394 9.50% due 10/15/09 - 11/15/09........ 2,590,915
------------
102,630,632
------------
Total U.S. treasuries & federal
agencies................................ $252,283,514
------------
------------
SHORT-TERM SECURITIES -- 8.6%
REPURCHASE AGREEMENT
30,817,000 Interest in $121,902,000 joint $ 30,817,000
repurchase agreement dated 12/31/98 with
State Street Bank 4.750% due 01/04/99;
maturity amount $30,833,264
(Collateralized by $121,902,000 U.S.
Treasury Bonds 8.125% due 05/15/21).....
------------
------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total asset-backed securities........... 0.9% $ 3,040,710
Total collateralized mortgage
obligations (cost $59,753,451)......... 14.9 53,121,230
Total commercial mortgage-backed
securities (cost $6,070,395)........... 2.6 9,336,778
Total corporate notes (cost
$5,000,000)............................ 1.8 6,433,061
Total U.S. treasuries & Federal agencies
(cost $248,701,956).................... 70.7 252,283,514
Total short-term securities (cost
$30,817,000)........................... 8.6 30,817,000
----- ------------
Total investment in securities
(total cost $350,342,802).............. 99.5 355,032,293
Cash, receivables and other assets...... 0.6 2,274,047
Payable for Fund shares redeemed........ (0.1) (472,007)
----- ------------
Net assets (applicable to $1.084553 per
share based on 329,014,976 shares
outstanding)........................... 100.0% $356,834,333
----- ------------
----- ------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share;
authorized 800,000,000 shares; outstanding
329,014,976 shares............................... $ 32,901,498
Capital surplus................................... 326,589,275
Distribution in excess of net realized gain on
investments...................................... (7,345,931)
Unrealized appreciation of investments............ 4,689,491
------------
Net assets, applicable to shares outstanding...... $356,834,333
------------
------------
</TABLE>
* Non-income producing during period
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-17
<PAGE>
HARTFORD INDEX HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------------ --------------
<C> <S> <C>
COMMON STOCKS -- 99.7%
AEROSPACE AND DEFENSE -- 1.5%
103,100 AlliedSignal, Inc....................... $ 4,568,618
183,498 Boeing Company (The).................... 5,986,622
23,300 General Dynamics Corporation............ 1,365,962
36,100 Lockheed Martin Corporation............. 3,059,475
12,600 Northrop Grumman Corporation............ 921,375
62,223 Raytheon Company Class B................ 3,313,374
35,100 Rockwell International Corporation...... 1,704,543
29,100 Textron, Inc............................ 2,209,781
41,500 United Technologies Corporation......... 4,513,125
--------------
27,642,875
--------------
BUSINESS SERVICES -- 0.5%
*156,445 Cendant Corporation..................... 2,982,232
14,900 Deluxe Corporation...................... 544,781
25,000 Donnelly (R.R.) & Sons Company.......... 1,095,312
13,900 Fluor Corporation....................... 591,618
7,500 Foster Wheeler Corporation.............. 98,906
17,400 Grainger (W.W.), Inc.................... 724,275
25,000 IKON Office Solutions................... 214,062
16,300 Moore Corporation Ltd................... 179,300
7,800 National Service Industries, Inc........ 296,400
22,100 SuperValu, Inc.......................... 618,800
61,300 Sysco Corporation....................... 1,681,918
--------------
9,027,604
--------------
COMMUNICATIONS EQUIPMENT -- 4.3%
*66,000 3Com Corporation........................ 2,957,625
*15,850 Andrew Corporation...................... 261,525
*39,775 Ascend Communications, Inc.............. 2,615,206
*30,400 Cabletron Systems, Inc.................. 254,600
*290,525 Cisco Systems, Inc...................... 26,964,351
*30,500 General Instrument Corporation.......... 1,035,093
14,800 Harris Corporation...................... 542,050
242,100 Lucent Technologies, Inc................ 26,631,000
110,000 Motorola, Inc........................... 6,716,875
120,140 Northern Telecom Ltd.................... 6,022,017
14,500 Raychem Corporation..................... 468,531
13,800 Scientific-Atlanta, Inc................. 314,812
*76,400 Sprint Corporation (PCS Group).......... 1,766,750
*35,600 Tellabs, Inc............................ 2,440,825
--------------
78,991,260
--------------
COMPUTERS & OFFICE
EQUIPMENT -- 5.7%
*24,900 Apple Computer, Inc..................... 1,019,343
312,297 Compaq Computer Corporation............. 13,096,955
*9,100 Data General Corporation................ 149,581
*234,100 Dell Computer Corporation............... 17,133,193
*91,900 EMC Corporation......................... 7,811,500
*28,700 Gateway 2000, Inc....................... 1,469,081
190,600 Hewlett-Packard Company................. 13,020,362
171,700 International Business Machines Corp.... 31,721,575
*50,300 Pitney Bowes, Inc....................... 3,322,943
*44,800 Seagate Technology, Inc................. 1,355,200
*69,600 Sun Microsystems, Inc................... 5,959,500
*46,800 Unisys Corporation...................... 1,611,675
60,500 Xerox Corporation....................... 7,139,000
--------------
104,809,908
--------------
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CONSUMER DURABLES -- 1.5%
13,900 Cooper Tire & Rubber Company............ $ 284,081
222,600 Ford Motor Company...................... 13,063,837
120,400 General Motors Corporation.............. 8,616,125
33,050 Genuine Parts Company................... 1,105,109
28,900 Goodyear Tire & Rubber Company (The).... 1,457,643
19,100 ITT Industries, Inc..................... 759,225
29,900 Newell Co............................... 1,233,375
22,000 TRW, Inc................................ 1,236,125
--------------
27,755,520
--------------
CONSUMER NON-DURABLES -- 3.1%
10,500 Alberto-Culver Company Class B.......... 280,218
48,400 Avon Products, Inc...................... 2,141,700
16,500 Black & Decker Corporation.............. 925,031
4,500 Briggs & Stratton Corporation........... 224,437
11,000 Centex Corporation...................... 495,687
19,200 Clorox Company (The).................... 2,242,800
53,800 Colgate-Palmolive Company............... 4,996,675
6,400 Fleetwood Enterprises, Inc.............. 222,400
*13,300 Fruit of the Loom, Inc.................. 183,706
203,800 Gillette Company (The).................. 9,846,087
19,900 International Flavors & Fragrances, 879,331
Inc.....................................
7,300 Kaufman & Broad Home Corporation........ 209,875
99,600 Kimberly-Clark Corporation.............. 5,428,200
62,500 Masco Corporation....................... 1,796,875
16,900 Maytag Corporation...................... 1,052,025
244,100 Proctor & Gamble Co..................... 22,289,381
27,500 Rubbermaid, Inc......................... 864,531
6,700 Russell Corporation..................... 136,093
11,000 Snap-On, Inc............................ 382,937
3,600 Springs Industries, Inc................. 149,175
10,600 Tupperware Corporation.................. 174,237
22,400 VF Corp................................. 1,050,000
13,900 Whirlpool Corporation................... 769,712
--------------
56,741,113
--------------
CONSUMER SERVICES -- 0.8%
18,700 Block (H & R), Inc...................... 841,500
17,700 Brunswick Corporation................... 438,075
110,700 Carnival Corp. Class A.................. 5,313,600
25,600 Darden Restaurants, Inc................. 460,800
59,500 Eastman Kodak Company................... 4,284,000
*23,200 Harrah's Entertainment, Inc............. 363,950
48,000 Hilton Hotels Corporation............... 918,000
46,200 Marriott International.................. 1,339,800
*33,100 Mirage Resorts, Inc..................... 494,431
8,100 Polaroid Corporation.................... 151,368
--------------
14,605,524
--------------
ELECTRONICS -- 6.6%
*26,500 Advanced Micro Devices, Inc............. 766,843
40,400 AMP, Inc................................ 2,103,325
*68,000 Applied Materials, Inc.................. 2,902,750
8,300 EG&G, Inc............................... 230,843
81,000 Emerson Electric Company................ 5,067,562
602,500 General Electric Company................ 61,492,656
306,700 Intel Corporation....................... 36,363,118
15,600 Johnson Controls, Inc................... 920,400
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
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COMMON STOCKS -- (CONTINUED)
ELECTRONICS -- (CONTINUED)
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*16,000 KLA-Tencor Corporation.................. $ 694,000
*25,900 LSI Logic Corporation................... 417,637
*39,200 Micron Technology, Inc.................. 1,982,050
*30,300 National Semiconductor Corporation...... 409,050
*34,600 Silicon Graphics, Inc................... 445,475
21,600 Solectron Corporation................... 2,007,450
8,700 Tektronix, Inc.......................... 261,543
*71,800 Texas Instruments, Inc.................. 6,143,387
10,200 Thomas & Betts Corporation.............. 441,787
--------------
122,649,876
--------------
ENERGY & SERVICES -- 5.8%
16,900 Amerada Hess Corporation................ 840,775
22,100 Anadarko Petroleum Corporation.......... 682,337
18,200 Apache Corporation...................... 460,687
13,900 Ashland, Inc............................ 672,412
59,100 Atlantic Richfield Company.............. 3,856,275
59,910 Baker Hughes, Inc....................... 1,059,658
32,720 Burlington Resources, Inc............... 1,171,785
120,400 Chevron Corporation..................... 9,985,675
39,100 Coastal Corporation (The)............... 1,366,056
17,700 Consolidated Natural Gas Company........ 955,800
447,300 Exxon Corporation....................... 32,708,812
80,600 Halliburton Company..................... 2,387,775
*9,300 Helmerich & Payne, Inc.................. 180,187
8,900 Kerr-McGee Corporation.................. 340,425
*11,200 McDermott International, Inc............ 276,500
143,700 Mobil Corporation....................... 12,519,862
63,600 Occidental Petroleum Corporation........ 1,073,250
*19,600 Oryx Energy Company..................... 263,375
46,800 Phillips Petroleum Company.............. 1,994,850
*15,300 Rowan Companies, Inc.................... 153,000
394,000 Royal Dutch Petroleum................... 18,862,750
99,999 Schlumberger Ltd........................ 4,612,453
43,953 Sempra Energy........................... 1,115,307
17,300 Sunoco, Inc............................. 623,881
31,300 Tenneco, Inc............................ 1,066,156
98,600 Texaco, Inc............................. 5,213,475
46,300 Union Pacific Resources Group, Inc...... 419,593
44,500 Unocal Corporation...................... 1,298,843
56,300 USX Corporation......................... 1,696,037
--------------
107,857,991
--------------
FINANCIAL SERVICES -- 15.4%
28,200 Aetna Inc............................... 2,217,225
155,700 Allstate Corporation.................... 6,013,912
83,200 American Express Company................ 8,507,200
49,002 American General Corporation............ 3,822,156
199,375 American International Group, Inc....... 19,264,609
32,050 Aon Corporation......................... 1,774,768
132,926 Associates First Capital Corporation.... 5,632,739
215,156 Banc One Corporation.................... 10,986,403
139,700 Bank of New York Company, Inc. (The).... 5,622,925
318,443 BankAmerica Corp........................ 19,146,385
54,000 BankBoston Corporation.................. 2,102,625
17,700 Bankers Trust New York Corp............. 1,512,243
54,100 BB&T Corporation........................ 2,180,906
20,900 Bear Stearns Company, Inc............... 781,137
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12,100 Capital One Financial Corporation....... $ 1,391,500
73,625 Charles Schwab Corporation.............. 4,136,804
155,600 Chase Manhattan Corporation............. 10,590,525
30,900 Chubb Corporation (The)................. 2,004,637
40,200 CIGNA Corporation....................... 3,107,962
31,700 Cincinnati Financial Corporation........ 1,161,012
420,605 Citigroup, Inc.......................... 20,819,947
28,850 Comerica, Inc........................... 1,967,209
61,262 Conseco, Inc............................ 1,872,319
20,400 Countrywide Credit Industries, Inc...... 1,023,825
27,200 Equifax, Inc............................ 929,900
124,900 Federal Home Loan Mortgage 8,048,243
Corporation............................
190,600 Federal National Mortgage Association... 14,104,400
49,275 Fifth Third Bancorp..................... 3,513,923
182,130 First Union Corporation................. 11,075,780
43,300 Firstar Corporation..................... 4,026,900
104,500 Fleet Financial Group, Inc.............. 4,669,843
46,600 Franklin Resources, Corp................ 1,491,200
10,500 Golden West Financial Corp.............. 962,718
88,799 Household International, Inc............ 3,518,660
38,860 Huntington Bancshares, Inc.............. 1,168,228
20,600 Jefferson-Pilot Corporation............. 1,545,000
83,800 KeyCorp................................. 2,681,600
21,300 Lehman Brothers Holdings, Inc........... 938,531
19,500 Lincoln National Corporation............ 1,595,343
47,250 Marsh & McLennan Companies, Inc......... 2,761,171
18,600 MBIA, Inc............................... 1,219,462
138,375 MBNA Corporation........................ 3,450,726
47,900 Mellon Bank Corporation................. 3,293,125
29,000 Mercantile Bancorp, Inc................. 1,337,625
65,200 Merrill Lynch & Co., Inc................ 4,352,100
20,800 MGIC Investment Corp.................... 828,100
32,100 Morgan (J.P.) & Co., Inc................ 3,372,506
106,175 Morgan Stanley, Dean Witter, Discover 7,538,425
and Co.................................
60,500 National City Corporation............... 4,386,250
20,600 Northern Trust Corporation.............. 1,798,637
55,400 PNC Bank Corp........................... 2,998,525
13,900 Progressive Corp. of Ohio............... 2,354,312
25,700 Provident Companies, Inc................ 1,066,550
26,050 Providian Financial Corporation......... 1,953,750
40,700 Regions Financial Corporation........... 1,640,718
19,900 Republic New York Corporation........... 906,693
25,900 SAFECO Corp............................. 1,112,081
30,900 SLM Holding Corporation................. 1,483,200
44,480 St. Paul Companies, Inc................. 1,545,680
29,700 State Street Corporation................ 2,066,006
32,000 Summit Bancorp.......................... 1,398,000
44,800 SunTrust Banks, Inc..................... 3,427,200
49,050 Synovus Financial Corp.................. 1,195,593
27,100 Torchmark Corporation................... 956,968
12,200 Transamerica Corporation................ 1,409,100
133,319 U.S. Bancorp............................ 4,732,824
25,000 Union Planters Corporation.............. 1,132,812
26,300 Unum Corporation........................ 1,535,262
37,300 Wachovia Corporation.................... 3,261,418
108,956 Washington Mutual, Inc.................. 4,160,757
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-19
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HARTFORD INDEX HLS FUND, INC.
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STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1998
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FINANCIAL SERVICES -- (CONTINUED)
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297,800 Wells Fargo & Co........................ $ 11,893,387
--------------
284,480,205
--------------
FOOD, BEVERAGE & TOBACCO -- 7.1%
87,900 Anheuser-Busch Companies, Inc........... 5,768,437
108,702 Archer-Daniels-Midland Company.......... 1,868,315
52,600 Bestfoods............................... 2,800,950
12,700 Brown-Forman Corporation Class B........ 961,231
82,500 Campbell Soup Company................... 4,537,500
453,300 Coca-Cola Company, (The)................ 30,314,437
72,100 Coca-Cola Enterprises, Inc.............. 2,577,575
89,600 Conagra, Inc............................ 2,822,400
6,700 Coors (Adolph) Company Class B.......... 378,131
31,900 Fortune Brands, Inc..................... 1,008,837
28,500 General Mills, Inc...................... 2,215,875
66,600 Heinz (H.J.) Company.................... 3,771,225
26,500 Hershey Foods Corporation............... 1,647,968
74,400 Kellogg Company......................... 2,538,900
59,900 Nabisco (RJR) Holdings Corp............. 1,778,281
270,000 PepsiCo, Inc............................ 11,053,125
448,000 Philip Morris Co., Inc.................. 23,968,000
25,100 Quaker Oats Company (The)............... 1,493,450
57,400 Ralston Purina Group.................... 1,858,325
89,500 Safeway, Inc............................ 5,453,906
167,800 Sara Lee Corporation.................... 4,729,862
72,500 Seagram Company Ltd. (The).............. 2,755,000
*27,930 Tricon Global Restaurants, Inc.......... 1,399,991
117,800 Unilever United States Inc.............. 9,770,037
34,100 UST, Inc................................ 1,189,237
21,400 Wrigley, (Wm.) Jr. Co................... 1,916,637
--------------
130,577,632
--------------
HEALTH CARE -- 12.7%
278,900 Abbott Laboratories..................... 13,666,100
12,100 Allergan, Inc........................... 783,475
*15,900 ALZA Corporation........................ 830,775
242,200 American Home Products Corporation...... 13,638,887
*46,800 Amgen, Inc.............................. 4,893,525
9,900 Bard (C.R.), Inc........................ 490,050
10,200 Bausch & Lomb, Inc...................... 612,000
52,600 Baxter International, Inc............... 3,382,837
45,300 Becton, Dickinson & Company............. 1,933,743
20,600 Biomet, Inc............................. 829,150
*72,100 Boston Scientific Corporation........... 1,933,181
183,000 Bristol-Myers Squibb Company............ 24,487,687
36,851 Cardinal Health, Inc.................... 2,796,069
118,800 Columbia/HCA Healthcare Corporation..... 2,940,300
202,300 Eli Lilly and Company................... 17,979,412
27,700 Guidant Corporation..................... 3,053,925
85,700 HBO & Company........................... 2,458,518
*20,200 HCR Manor Care, Inc..................... 593,375
*77,500 HealthSouth Corp........................ 1,196,406
*30,700 Humana, Inc............................. 546,843
247,400 Johnson & Johnson....................... 20,750,675
21,800 Loews Corporation....................... 2,141,850
13,500 Mallinckrodt, Inc....................... 415,968
90,200 Medtronic, Inc.......................... 6,697,350
219,200 Merck & Co., Inc........................ 32,373,100
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HEALTH CARE -- (CONTINUED)
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8,000 Millipore Corporation................... $ 227,500
22,900 Pall Corporation........................ 579,656
9,100 Perkin-Elmer Corporation................ 887,818
238,800 Pfizer, Inc............................. 29,954,475
93,400 Pharmacia & Upjohn, Inc................. 5,288,775
44,500 Pioneer Hi-Bred International, Inc...... 1,201,500
270,100 Schering-Plough Corporation............. 14,923,025
47,100 Service Corporation International....... 1,792,743
5,000 Shared Medical Systems Corporation...... 249,375
*15,500 St. Jude Medical, Inc................... 429,156
42,250 SunAmerica, Inc......................... 3,427,531
*56,700 Tenet Healthcare Corporation............ 1,488,375
34,200 United Healthcare Corporation........... 1,472,737
150,800 Warner-Lambert Company.................. 11,338,275
--------------
234,686,142
--------------
INDUSTRIAL MATERIALS -- 3.2%
42,600 Air Products & Chemicals, Inc........... 1,704,000
41,900 Alcan Aluminum Ltd...................... 1,133,918
36,200 Allegheny Teledyne Incorporated......... 739,837
33,700 Aluminum Company of America............. 2,512,756
7,400 Armstrong World Industries, Inc......... 446,312
7,300 ASARCO, Inc............................. 109,956
68,400 Barrick Gold Corp....................... 1,333,800
42,300 Battle Mountain Gold Company............ 174,487
9,900 Bemis Company, Inc...................... 375,581
*23,900 Bethlehem Steel Corporation............. 200,162
10,400 Boise Cascade Corporation............... 322,400
17,700 Champion International Corporation...... 716,850
22,900 Crown Cork & Seal Company, Inc.......... 705,606
16,600 Cyprus Amax Minerals Company............ 166,000
40,700 Dow Chemical Company.................... 3,701,156
207,200 du Pont (E.I.) de Nemours & Company..... 10,994,550
14,500 Eastman Chemical Company................ 648,875
23,700 Ecolab, Inc............................. 857,643
26,700 Engelhard Corporation................... 520,650
*6,400 FMC Corporation......................... 358,400
30,500 Freeport-McMoRan Copper & Gold, Inc..... 318,343
16,200 Georgia-Pacific Corporation............. 948,712
13,400 Goodrich (B.F.) Co...................... 480,725
*13,900 Grace (W.R.) & Co....................... 218,056
11,000 Great Lakes Chemical Corporation........ 440,000
18,500 Hercules, Inc........................... 506,437
44,000 Homestake Mining Company................ 404,250
30,600 Inco Ltd................................ 323,212
56,600 International Paper Company............. 2,536,387
40,700 James River Corporation of Virginia..... 1,628,000
20,300 Louisiana-Pacific Corporation........... 371,743
19,200 Mead Corporation (The).................. 562,800
115,100 Monsanto Company........................ 5,467,250
22,300 Morton International, Inc............... 546,350
12,200 Nalco Chemical Company.................. 378,200
30,793 Newmont Mining Corporation.............. 556,198
16,200 Nucor Corporation....................... 700,650
*9,900 Owens Corning........................... 350,831
*28,400 Owens-Illinois, Inc..................... 869,750
10,900 Phelps Dodge Corporation................ 554,537
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-20
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COMMON STOCKS -- (CONTINUED)
INDUSTRIAL MATERIALS -- (CONTINUED)
<TABLE>
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46,100 Placer Dome, Inc........................ $ 530,150
5,400 Potlatch Corporation.................... 199,125
32,700 PPG Industries, Inc..................... 1,904,775
29,100 Praxair, Inc............................ 1,025,775
11,900 Reynolds Metals Company................. 626,981
30,600 Rohm & Haas Company..................... 921,825
*15,424 Sealed Air Corporation.................. 787,588
31,900 Sherman-Williams Company................ 937,062
*18,600 Sigma-Aldrich Corporation............... 546,375
10,300 Temple-Inland, Inc...................... 610,918
12,900 Union Camp Corporation.................. 870,750
24,400 Union Carbide Corporation............... 1,037,000
16,000 USX US Steel Group...................... 368,000
18,800 Westvaco Corporation.................... 504,075
36,700 Weyerhaeuser Company.................... 1,864,818
20,500 Willamette Industries, Inc.............. 686,750
17,000 Worthington Industries, Inc............. 212,500
--------------
59,519,837
--------------
MANUFACTURING -- 2.1%
5,300 Aeroquip-Vickers, Inc................... 158,668
21,600 Avery Dennison Corporation.............. 973,350
5,700 Ball Corporation........................ 260,775
13,700 Case Corporation........................ 298,831
66,000 Caterpillar, Inc........................ 3,036,000
19,100 Cooper Industries, Inc.................. 910,831
42,600 Corning, Inc............................ 1,917,000
12,800 Crane Co................................ 386,400
7,700 Cummins Engine Company, Inc............. 273,350
30,436 Dana Corporation........................ 1,244,071
24,800 Danaher Corporation..................... 1,346,950
43,900 Deere & Company......................... 1,454,187
41,000 Dover Corporation....................... 1,501,625
13,300 Eaton Corporation....................... 940,143
8,900 Harnischfeger Industries, Inc........... 90,668
23,300 Honeywell, Inc.......................... 1,754,781
46,100 Illinois Tool Works, Inc................ 2,673,800
30,550 Ingersoll-Rand Company.................. 1,433,940
7,300 Milacron, Inc........................... 140,525
73,800 Minnesota Mining and Manufacturing 5,249,025
Company................................
1,500 NACCO Industries, Inc................... 138,000
*12,400 Navistar International Corporation...... 353,400
14,300 PACCAR, Inc............................. 588,087
20,250 Parker Hannifin Corporation............. 663,187
16,300 Stanley Works (The)..................... 452,325
29,200 Thermo Electron Corporation............. 494,575
11,500 Timken Company (The).................... 217,062
118,544 Tyco International, Ltd................. 8,942,663
--------------
37,894,219
--------------
MEDIA & SERVICES -- 4.9%
*105,200 AirTouch Communications, Inc............ 7,587,550
84,700 America Online, Inc..................... 12,260,325
*129,900 CBS Corporation......................... 4,254,225
*48,400 Clear Channel Communications............ 2,637,800
67,800 Comcast Corporation Class A............. 3,979,012
17,200 Dow Jones & Company, Inc................ 827,750
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MEDIA & SERVICES -- (CONTINUED)
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30,700 Dun & Bradstreet Corporation (The)...... $ 968,968
51,800 Gannett Co., Inc........................ 3,428,512
13,100 Harcourt General, Inc................... 696,756
29,500 IMS Health, Inc......................... 2,225,406
25,150 Interpublic Group of Companies, Inc..... 2,005,712
*13,500 King World Productions, Inc............. 397,406
14,400 Knight-Ridder, Inc...................... 736,200
*18,300 McGraw-Hill Companies, Inc. (The)....... 1,864,312
*112,000 MediaOne Group, Inc..................... 5,264,000
9,700 Meredith Corporation.................... 367,387
*33,600 New York Times Company (The) - Class 1,165,500
A......................................
*31,300 Omnicom Group, Inc...................... 1,815,400
98,900 TCI Communications, Inc................. 5,470,406
225,500 Time Warner, Inc........................ 13,995,093
14,600 Times Mirror Co. - Class A.............. 817,600
*21,800 Tribune Company......................... 1,438,800
*65,700 Viacom, Inc. - Class B.................. 4,861,800
377,000 Walt Disney Company (The)............... 11,310,000
--------------
90,375,920
--------------
REAL ESTATE -- 0.0%
7,900 Pulte Corporation....................... 219,718
--------------
RETAIL -- 7.1%
45,300 Albertson's, Inc........................ 2,885,043
13,100 American Greetings Corporation.......... 537,918
50,200 American Stores Company................. 1,854,262
*28,000 AutoZone, Inc........................... 922,250
18,200 Circuit City Stores, Inc................ 908,862
*20,200 Consolidated Stores, Inc................ 407,787
*39,700 Costco Companies, Inc................... 2,865,843
71,600 CVS Corporation......................... 3,938,000
80,600 Dayton-Hudson Corp...................... 4,372,550
19,700 Dillard's, Inc. - Class A............... 558,987
33,948 Dollar General Corporation.............. 802,021
*37,600 Federated Department Stores, Inc........ 1,637,950
106,475 Gap, Inc. (The)......................... 5,989,218
7,100 Great Atlantic & Pacific Tea Company, 210,337
Inc....................................
24,450 Hasbro, Inc............................. 883,256
287,300 Home Depot, Inc. (The).................. 17,579,168
6,800 Jostens, Inc............................ 178,075
*90,700 KMart Corp.............................. 1,388,843
*29,100 Kohl's Corp............................. 1,787,831
*47,100 Kroger Company (The).................... 2,849,550
41,800 Limited, Inc. (The)..................... 1,217,425
12,200 Liz Claiborne, Inc...................... 385,062
7,100 Longs Drug Store, Inc................... 266,250
64,700 Lowe's Companies, Inc................... 3,311,831
52,900 Mattel, Inc............................. 1,206,781
43,000 May Department Stores Company........... 2,596,125
124,400 McDonald's Corporation.................. 9,532,150
*28,200 Meyer, Fred Inc......................... 1,699,050
52,900 NIKE, Inc. Class B...................... 2,145,756
27,400 Nordstrom, Inc.......................... 950,437
46,600 Penney (J.C.) Company, Inc.............. 2,184,375
11,700 Pep Boys - Manny, Moe & Jack............ 183,543
*10,400 Reebok International Ltd................ 154,700
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-21
<PAGE>
HARTFORD INDEX HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
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COMMON STOCKS -- (CONTINUED)
RETAIL -- (CONTINUED)
<TABLE>
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47,400 Rite Aid Corporation.................... $ 2,349,262
70,400 Sears, Roebuck & Co..................... 2,992,000
*57,600 Staples, Inc............................ 2,516,400
18,600 Tandy Corporation....................... 766,087
59,100 TJX Companies, Inc. (The)............... 1,713,900
*48,200 Toys R Us, Inc.......................... 813,375
414,500 Wal-Mart Stores, Inc.................... 33,755,843
91,400 Walgreen Co............................. 5,352,612
22,900 Wendy's International, Inc.............. 499,506
27,300 Winn-Dixie Stores, Inc.................. 1,225,087
--------------
130,375,308
--------------
SOFTWARE & SERVICES -- 5.4%
12,300 Adobe Systems Incorporated, Inc......... 575,025
8,600 Autodesk, Inc........................... 367,112
55,300 Automatic Data Processing, Inc.......... 4,434,368
*39,700 BMC Software, Inc....................... 1,769,131
*13,500 Ceridan Corporation..................... 942,468
98,850 Computer Associates International, 4,213,481
Inc....................................
*29,100 Computer Sciences Corp.................. 1,875,131
35,400 Compuware Corporation................... 2,765,625
90,500 Electronic Data Systems Corporation..... 4,547,625
81,400 First Data Corporation.................. 2,579,362
*458,800 Microsoft Corporation................... 63,629,825
*64,700 Novell, Inc............................. 1,172,687
*178,550 Oracle Corporation...................... 7,699,968
*49,600 Parametric Technology Corporation....... 812,200
*30,000 Paychex, Inc............................ 1,543,125
*42,700 PeopleSoft, Inc......................... 808,631
--------------
99,735,764
--------------
TRANSPORTATION -- 1.0%
*33,600 AMR Corporation......................... 1,995,000
86,200 Burlington Northern Santa Fe 2,909,250
Corporation............................
40,400 CSX Corporation......................... 1,676,600
26,200 Delta Air Lines, Inc.................... 1,362,400
*27,060 FDX Corporation......................... 2,408,340
60,300 Laidlaw, Inc............................ 606,768
69,700 Norfolk Southern Corporation............ 2,208,618
13,200 Ryder System, Inc....................... 343,200
*61,600 Southwest Airlines Co................... 1,382,150
45,500 Union Pacific Corporation............... 2,050,343
*16,100 US Airways Group, Inc................... 837,200
--------------
17,779,869
--------------
UTILITIES -- 10.7%
*33,100 Aes Corporation (The)................... 1,568,112
50,400 Alltel Corp............................. 3,014,550
25,300 Ameren Corporation...................... 1,079,993
35,000 American Electric Power Co., Inc........ 1,647,187
202,700 Ameritech Corporation................... 12,846,112
332,100 AT&T Corp............................... 24,990,525
27,200 Baltimore Gas & Electric Company........ 839,800
285,262 Bell Atlantic Corporation............... 16,206,447
359,800 BellSouth Corp.......................... 17,945,025
27,800 Carolina Power & Light Company.......... 1,308,337
39,000 Central & South West Corp............... 1,070,062
29,100 CINergy Corp............................ 1,000,312
<CAPTION>
MARKET
SHARES VALUE
- ------------ --------------
<C> <S> <C>
</TABLE>
UTILITIES -- (CONTINUED)
<TABLE>
<C> <S> <C>
*15,400 Columbia Gas System, Inc................ $ 889,350
43,300 Consolidated Edison Company of New York, 2,289,487
Inc....................................
36,100 Dominion Resources, Inc................. 1,687,675
26,800 DTE Energy Company...................... 1,149,050
66,352 Duke Energy Corporation................. 4,250,675
3,800 Eastern Enterprises..................... 166,250
65,000 Edison International.................... 1,811,875
60,900 Enron Corp.............................. 3,475,106
45,400 Entergy Corporation..................... 1,413,075
43,500 FirstEnergy Corp........................ 1,416,468
33,500 FPL Group, Inc.......................... 2,064,437
31,500 Frontier Corporation.................... 1,071,000
23,600 GPU, Inc................................ 1,042,825
*177,400 GTE Corporation......................... 11,963,412
52,392 Houston Industries, Inc................. 1,683,093
*337,399 MCI WorldCom, Inc....................... 24,208,378
21,100 New Century Energies, Inc............... 1,028,625
52,700 Nextel Communications, Inc.............. 1,245,037
*34,500 Niagara Mohawk Power Corporation........ 556,312
8,900 NICOR, Inc.............................. 376,025
27,700 Northern States Power Company........... 768,675
5,900 ONEOK, Inc.............................. 213,137
54,500 PacifiCorp.............................. 1,147,906
40,900 Peco Energy Company..................... 1,702,462
6,600 Peoples Energy Corporation.............. 263,175
70,200 PG&E Corp............................... 2,211,300
27,600 PP&L Resources Inc...................... 769,350
41,900 Public Service Enterprise Group, Inc.... 1,676,000
359,720 SBC Communications, Inc................. 19,289,985
20,300 Sonat, Inc.............................. 549,368
128,100 Southern Company........................ 3,722,906
79,300 Sprint Corporation (FON Group).......... 6,671,112
51,915 Texas Utilities Company................. 2,423,781
92,143 U.S. West, Inc.......................... 5,954,741
40,000 Unicom Corporation...................... 1,542,500
78,700 Williams Companies, Inc................. 2,454,456
--------------
198,665,471
--------------
WASTE MANAGEMENT -- 0.3%
32,000 Browning-Ferris Industries, Inc......... 910,000
105,682 Waste Management, Inc................... 4,927,555
--------------
5,837,555
--------------
Total common stocks..................... $1,840,229,311
--------------
--------------
<CAPTION>
PRINCIPAL
AMOUNT
- ------------
<C> <S> <C>
SHORT-TERM SECURITIES -- 0.8%
U.S. TREASURY BILL -- 0.2%
$ 200,000 3.78% due 01/07/99................... $ 199,874
450,000 3.90% due 01/07/99................... 449,718
300,000 3.99% due 01/21/99................... 299,335
400,000 4.32% due 01/21/99................... 399,040
200,000 4.355% due 01/21/99................... 199,516
500,000 4.41% due 01/21/99................... 498,775
150,000 4.415% due 01/21/99................... 149,632
200,000 4.43% due 01/21/99................... 199,507
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-22
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ------------ --------------
<C> <S> <C>
</TABLE>
SHORT-TERM SECURITIES -- (CONTINUED)
U.S. TREASURY BILL -- (CONTINUED)
<TABLE>
<C> <S> <C>
$ 1,250,000 4.455% due 01/21/99................... $ 1,246,906
500,000 4.52% due 01/21/99................... 498,744
--------------
4,141,047
--------------
REPURCHASE AGREEMENT -- 0.6%
11,733,000 Interest in $121,902,000 joint $ 11,733,000
repurchase agreement dated 12/31/98 with
State Street Bank 4.750% due 01/04/99;
maturity amount $11,739,192
(Collateralized by $121,902,000 U.S.
Treasury Bonds 8.125% due 05/15/21).....
--------------
Total short-term securities............. $ 15,874,047
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
<CAPTION>
MARKET
VALUE
---------------
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost
$1,224,734,388)........................ 99.7% $1,840,229,311
Total short-term securities (cost
$15,874,047)........................... 0.8 15,874,047
----- ---------------
Total investment in securities
(total cost $1,240,608,435)............ 100.5 1,856,103,358
Cash, receivables and other assets...... 0.7 12,955,820
Payable for securities purchased........ (1.2) (22,930,827 )
Other liabilities....................... (0.0) (11,131 )
----- ---------------
Net assets (applicable to $3.570452 per
share based on 517,054,136 shares
outstanding)........................... 100.0% $1,846,117,220
----- ---------------
----- ---------------
</TABLE>
<TABLE>
<S> <C>
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share;
authorized 1,000,000,000 shares; outstanding
517,054,136 shares............................... $ 51,705,414
Capital surplus................................... 1,146,503,103
Accumulated undistributed net investment income... 3,697,905
Accumulated undistributed net realized gain on
investments...................................... 28,710,790
Unrealized appreciation of futures contracts**.... 5,085
Unrealized appreciation of investments............ 615,494,923
--------------
Net assets, applicable to share outstanding....... $1,846,117,220
--------------
--------------
</TABLE>
* Non-income producing during period
** The Fund had 29 Standard & Poor's 500 March 1999 Futures contracts open as
of December 31, 1998. These contracts had a value of $9,029,879 as of
December 31, 1998 and were collateralized by various U.S. Treasury
obligations with a market value of $4,150,000.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-23
<PAGE>
HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------------ --------------
<C> <S> <C>
COMMON STOCKS -- 94.3%
AUSTRALIA -- 4.6%
852,495 AMP Ltd.**.............................. $ 10,810,674
1,814,653 Australia & New Zealand Banking......... 11,887,219
503,808 News Corp. Ltd.......................... 3,331,188
5,664,196 Pasminco Ltd............................ 4,307,996
318,762 Rio Tinto PLC........................... 3,784,209
230,000 Schlumberger Ltd........................ 10,608,750
*833,178 Telstra Corporation Ltd................. 3,899,220
2,103,846 WMC Ltd................................. 6,348,841
--------------
54,978,097
--------------
BRAZIL -- 0.4%
*128,700 Embratel Participacoes S.A.............. 1,793,756
*76,200 Telesp Celular Participacoes S.A........ 1,333,500
72,500,000 Telesp Participacoes S.A................ 1,650,184
--------------
4,777,440
--------------
CANADA -- 0.5%
112,900 Canadian National Railway Company....... 5,856,687
--------------
CHINA -- 1.4%
863,000 Cheung Kong Holdings Ltd................ 6,210,416
*49,700 China Telecom (Hong Kong) Ltd........... 1,727,075
*1,510,100 China Telecom (Hong Kong) Ltd........... 2,612,014
786,000 Sun Hung Kai Properties................. 5,732,394
--------------
16,281,899
--------------
DENMARK -- 1.4%
191,380 Unidanmark AS- A Shares (Reg.).......... 17,290,619
--------------
FINLAND -- 2.1%
451,250 Metsa-Serla Class B Shares.............. 3,698,559
172,340 Nokia AB OYJ Class A Shares............. 21,103,041
--------------
24,801,600
--------------
FRANCE -- 15.0%
55,317 AGF-Assurance Generale de France........ 3,305,547
156,610 Alcatel................................. 19,176,707
118,300 AXA..................................... 17,154,110
291,371 Banque National de Paris................ 24,004,429
73,230 Casino Guichard-Perrachon S.A........... 7,629,752
62,909 Compagnie de Saint-Gobain S.A........... 8,885,630
163,490 Compagnie Financiere de Paribas......... 14,215,356
75,340 Elf Aquitaine........................... 8,712,776
95,470 France Telecom S.A...................... 7,588,367
11,780 Groupe Danone........................... 3,374,144
78,220 Renault S.A............................. 3,514,713
77,868 Rhone-Poulenc - Class A Shares.......... 4,009,095
49,330 Suez Lyonnaise des Eaux................. 10,137,980
164,903 Total S.A. - Class B Shares............. 16,708,729
120,890 Vivendi................................. 31,380,280
--------------
179,797,615
--------------
GERMANY -- 7.2%
14,080 Allianz AG.............................. 5,241,350
242,950 Bayer AG................................ 10,203,600
*89,810 DaimlerChrysler AG...................... 8,924,246
443,360 Hoechst AG.............................. 18,341,066
21,410 Karstadt AG............................. 11,209,390
172,650 Mannesmann AG........................... 19,980,659
<CAPTION>
MARKET
SHARES VALUE
- ------------ --------------
<C> <S> <C>
</TABLE>
GERMANY -- (CONTINUED)
<TABLE>
<C> <S> <C>
193,500 Siemens AG.............................. $ 12,721,664
--------------
86,621,975
--------------
GREECE -- 0.2%
101,500 Panafon S.A.**.......................... 2,718,345
--------------
IRELAND -- 0.0%
2 Smurfit (Jefferson) Group............... 3
--------------
ITALY -- 3.9%
2,068,500 Banca Commerciale Italiana S.p.A........ 14,301,053
2,081,900 ENI S.p.A............................... 13,636,134
2,190,300 Telecom Italia S.p.A.................... 18,729,680
--------------
46,666,867
--------------
JAPAN -- 10.8%
70,700 Advantest Corporation................... 4,487,829
1,619,000 Asahi Bank Ltd.......................... 5,942,253
139,000 Bridgestone Corp........................ 3,160,866
1,103,000 Fuji Bank, Ltd.......................... 4,067,923
142,000 Fuji Machine Manufacturing Co........... 4,494,284
192,000 Fuji Photo Film Co., Ltd................ 7,149,151
159,000 Kao Corporation......................... 3,594,522
54,500 Mabuchi Motor Co., Ltd.................. 4,179,425
182,700 Matsumotokiyoshi........................ 7,078,218
60,000 Matsushita Communication Industrial Co., 2,835,191
Ltd....................................
488,000 NEC Corporation......................... 4,499,426
75,300 Nichiei Co., Ltd........................ 6,008,159
2,120 NTT Mobile Communication Network, 8,739,624
Inc.**.................................
813,000 Olympus Optical Co., Ltd................ 9,362,754
88,000 Rohm Company Ltd........................ 8,027,900
1,968,000 Sakura Bank Ltd......................... 4,518,859
169,100 Sony Corporation........................ 12,338,074
81,000 Takeda Chemical Industries Ltd.......... 3,123,764
46,400 Takefuji Corp........................... 3,393,719
279,000 Tokyo Style Co.......................... 2,829,659
2,145,000 Toshiba Corporation..................... 12,798,123
99,000 Uni-Charm Corp.......................... 4,651,735
76,000 Yamanouchi Pharmaceuticals Co., Ltd..... 2,452,555
--------------
129,734,013
--------------
MEXICO -- 0.3%
64,600 Telefonos de Mexico S.A. ADR............ 3,145,212
--------------
NETHERLANDS -- 7.6%
67,800 Aegon N.V............................... 8,331,084
229,300 Gucci Group N.V......................... 11,149,712
167,857 ING Groep N.V........................... 10,241,356
133,800 Koninklijke Ahold N.V................... 4,947,982
278,300 Philips Electronics N.V................. 18,685,137
114,200 Royal Dutch Petroleum Company........... 5,689,711
*69,000 STMicroelectronics N.V.................. 5,386,312
350,337 TNT Post Group N.V...................... 11,294,159
182,900 Unilever N.V. - CVA..................... 15,642,324
--------------
91,367,777
--------------
SOUTH AFRICA -- 0.0%
27,600 De Beers-Centenary Linked-UT............ 351,943
--------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-24
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------------ --------------
<C> <S> <C>
</TABLE>
COMMON STOCKS -- (CONTINUED)
<TABLE>
<C> <S> <C>
SPAIN -- 3.3%
121,500 Banco Santander S.A..................... $ 2,418,144
808,700 ENDESA - Empresa Nacional de 21,460,116
Electricidad S.A.......................
69,700 Repsol S.A.............................. 3,723,792
87,589 Telefonica S.A.......................... 11,857,420
--------------
39,459,472
--------------
SWEDEN -- 4.4%
71,120 Hennes & Mauritz AB..................... 5,808,549
1,612,460 Nordbanken Holding AB................... 10,344,517
566,310 Pharmacia & Upjohn...................... 31,719,623
201,160 Telefonaktiebolaget LM Ericsson Class B 4,789,794
Shares.................................
--------------
52,662,483
--------------
SWITZERLAND -- 4.9%
8,170 Holderbank Financiere Glarus AG 9,672,074
(Bearer)...............................
3,129 Nestle S.A.............................. 6,811,672
4,480 Novartis................................ 8,806,813
930 Roche Holdings AG Genusss............... 11,348,383
30,060 Swisscom AG............................. 12,584,438
32,610 UBS AG.................................. 10,019,366
--------------
59,242,746
--------------
TAIWAN -- 0.6%
*428,040 Taiwan Semiconductor ADR................ 6,072,817
--------------
UNITED KINGDOM -- 25.7%
620,200 Allied Domecq PLC....................... 5,639,269
1,198,311 Allied Irish Banks PLC.................. 21,333,115
774,300 Bank of Scotland........................ 9,249,849
2,175,800 Billiton PLC............................ 4,326,013
768,500 BOC Group PLC........................... 11,251,942
1,731,300 British American Tobacco PLC............ 15,367,658
1,266,218 British Petroleum Co., PLC.............. 18,897,392
736,500 British Telecommunications PLC.......... 11,083,636
*474,700 Cable & Wireless PLC.................... 4,339,981
525,300 Cadbury Schweppes PLC................... 8,949,696
1,652,300 Compass Group PLC....................... 18,913,778
812,392 Diageo PLC.............................. 9,130,445
437,200 Glaxo Wellcome PLC...................... 14,991,983
95,079 Granada Group PLC....................... 1,687,121
209,500 Great Universal Stores PLC.............. 2,194,222
210,200 HSBC Holdings PLC....................... 5,725,090
164,700 Imperial Chemical Industries PLC........ 1,422,204
662,400 National Westminster Bank PLC........... 12,762,326
1,527,700 Next PLC................................ 12,403,917
665,600 Orange PLC.............................. 7,724,288
184,800 Powergen PLC............................ 2,435,163
2,132,000 Rentokil Initial PLC.................... 15,944,755
1,102,800 Scottish Power PLC...................... 11,293,427
3,154,400 Siebe PLC............................... 12,385,961
1,982,616 SmithKline Beecham PLC.................. 27,824,326
935,800 Standard Chartered PLC.................. 10,805,465
1,398,400 Vodafone Group PLC...................... 22,661,639
156,900 Zeneca Group PLC........................ 6,852,565
--------------
307,597,226
--------------
Total common stocks..................... $1,129,424,836
--------------
--------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ------------ --------------
<C> <S> <C>
SHORT-TERM SECURITIES -- 5.6%
U.S. TREASURY BILLS -- 0.3%
$ 2,200,000 3.59% due 01/14/99...................... $ 2,197,147
U.S. TREASURY BILLS
1,000,000 3.800% due 01/14/99..................... 998,627
--------------
3,195,774
--------------
REPURCHASE AGREEMENT -- 5.3%
63,893,000 Interest in $1,162,198,000 joint 63,893,000
repurchase agreement dated 12/31/98 with
State Street Bank 4.773% due 01/04/99;
maturity amount $63,926,885
(Collateralized by $469,031,000 U.S.
Treasury Notes 4.00% - 7.775% due
10/31/99 - 02/15/07, $278,664,000 U.S.
Treasury Bonds 7.875% - 12.75% due
11/15/10 - 02/15/21, $414,503,000 U.S.
Treasury Strips (principal) 0.00% due
02/15/19 - 08/15/21)....................
--------------
Total short-term securities............. $ 67,088,774
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
--------------
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost
$984,281,196).......................... 94.3% $1,129,424,836
Total short-term securities (cost
$67,088,774)........................... 5.6 67,088,774
----- --------------
Total investment in securities (total
cost $1,051,369,970)................... 99.9 1,196,513,610
Cash, receivables and other assets...... 0.3 3,603,264
Payable for securities purchased........ (0.1) (1,092,350)
Payable for Fund shares redeemed........ (0.0) (493,224)
Other liabilities....................... (0.1) (1,174,718)
----- --------------
Net assets.............................. 100.0% $1,197,356,582
----- --------------
----- --------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share;
authorized 1,500,000,000 shares; outstanding
883,944,044 shares............................... $ 88,394,404
Capital surplus................................... 993,280,846
Accumulated undistributed net investment income... 958,685
Distribution in excess of net realized gain on
investments...................................... (29,362,842)
Unrealized appreciation of investments............ 145,143,640
Unrealized depreciation of forward foreign
currencies contracts (Note 2)***................. (1,092,350)
Unrealized appreciation of other assets and
liabilities in foreign currencies................ 34,199
--------------
Net assets........................................ $1,197,356,582
--------------
--------------
</TABLE>
<TABLE>
<S> <C>
Class IA
Net asset value per share ($1,196,693,803
DIVIDED BY 883,262,316 shares outstanding)...... $1.35
-----
-----
Class IB
Net asset value per share ($662,779 DIVIDED BY
681,728 shares outstanding)...................... $0.97
-----
-----
</TABLE>
* Non-income producing during period
**Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At December 31, 1998, the market
value of these securities amounted to $22,268,643 or 1.86% of net assets.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-25
<PAGE>
HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1998
***FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
TOTAL AGGREGATE DELIVERY UNREALIZED
DESCRIPTION MARKET VALUE FACE VALUE DATE (DEPRECIATION)
- ------------------------------ ------------- ------------ --------- ---------------
<S> <C> <C> <C> <C>
Japanese Yen (Sell) $ 5,641,332 $ 5,567,240 01/13/99 $ (74,092)
Japanese Yen (Sell) 16,278,927 15,318,960 01/13/99 (959,967)
Japanese Yen (Sell) 10,312,031 10,253,740 01/13/99 (58,291)
---------------
$(1,092,350)
---------------
---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-26
<PAGE>
HARTFORD DIVIDEND AND GROWTH HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------------ --------------
<C> <S> <C>
COMMON STOCKS -- 96.5%
AEROSPACE & DEFENSE -- 2.7%
264,600 Northrop Grumman Corporation............ $ 19,348,875
582,600 United Technologies Corporation......... 63,357,750
--------------
82,706,625
--------------
COMPUTERS & OFFICE
EQUIPMENT -- 1.2%
*304,200 Xerox Corporation....................... 35,895,600
--------------
CONSUMER DURABLES -- 3.6%
533,100 Cooper Tire & Rubber Company............ 10,895,231
622,200 Ford Motor Company...................... 36,515,362
395,600 General Motors Corporation.............. 28,310,125
156,900 Genuine Parts Company................... 5,246,343
*229,400 Newell Co............................... 9,462,750
318,400 TRW, Inc................................ 17,890,120
--------------
108,319,931
--------------
CONSUMER NON-DURABLES -- 3.2%
199,200 Clorox Company (The).................... 23,269,050
400,000 Colgate-Palmolive Company............... 37,150,000
693,600 Kimberly-Clark Corporation.............. 37,801,200
--------------
98,220,250
--------------
CONSUMER SERVICES -- 1.9%
814,400 Eastman Kodak Company................... 58,636,800
--------------
ELECTRONICS -- 5.2%
*1,270,360 General Electric Company................ 129,656,117
134,800 Johnson Controls, Inc................... 7,953,200
476,500 Thomas & Betts Corporation.............. 20,638,406
--------------
158,247,723
--------------
ENERGY & SERVICES -- 9.1%
544,400 Amoco Corporation....................... 32,868,150
*521,800 Chevron Corporation..................... 43,276,787
285,900 Eni Ads................................. 19,369,725
563,700 Mobil Corporation....................... 49,112,362
1,124,900 Royal Dutch Petroleum................... 53,854,587
772,306 Sunoco, Inc............................. 27,851,285
1,156,200 USX Corporation......................... 34,830,525
448,400 Wisconsin Energy Corporation............ 14,096,575
--------------
275,259,996
--------------
FINANCIAL SERVICES -- 18.1%
369,300 CIGNA Corporation....................... 28,551,506
2,308,000 Citigroup, Inc.......................... 114,246,000
501,700 Edwards (A.G.) & Sons, Inc.............. 18,688,325
364,700 EXEL Limited............................ 27,352,500
1,176,200 Federal National Mortgage Association... 87,038,800
768,850 Marsh & McLennan Companies, Inc......... 44,929,671
565,700 National City Corporation............... 41,013,250
1,375,700 Pacific Century Financial Corporation... 33,532,687
766,300 Pinnacle West Capital Corporation....... 32,471,962
327,800 Republic New York Corporation........... 14,935,387
*2,602,000 U.S. Bancorp............................ 92,371,000
188,200 Wachovia Corporation.................... 16,455,737
--------------
551,586,825
--------------
FOOD, BEVERAGE & TOBACCO -- 8.5%
477,900 Anheuser-Busch Companies, Inc........... 31,362,187
<CAPTION>
MARKET
SHARES VALUE
- ------------ --------------
<C> <S> <C>
</TABLE>
FOOD, BEVERAGE & TOBACCO -- (CONTINUED)
<TABLE>
<C> <S> <C>
1,258,975 Flowers Industries, Inc................. $ 30,136,714
547,200 Heinz (H.J.) Company.................... 30,985,200
1,140,800 McCormick & Co., Inc.................... 38,573,300
*979,400 Nabisco Holdings Corporation............ 40,645,100
1,625,700 Philip Morris Co., Inc.................. 86,974,950
--------------
258,677,451
--------------
HEALTH CARE -- 12.5%
1,017,800 Abbott Laboratories..................... 49,872,200
830,700 American Home Products Corporation...... 46,778,793
382,200 Baxter International, Inc............... 24,580,237
342,700 Bristol-Myers Squibb Company............ 45,857,543
*246,900 Merck & Co., Inc........................ 36,464,043
1,674,800 Pharmacia & Upjohn, Inc................. 94,835,550
1,081,800 Warner-Lambert Company.................. 81,337,837
--------------
379,726,203
--------------
INDUSTRIAL MATERIALS -- 3.8%
622,700 Abitibi-Consolidated, Inc............... 5,798,893
215,500 Aluminum Company of America............. 16,068,218
304,500 BOC Group PLC-Sponsored ADR............. 8,297,625
167,900 Bowater, Inc............................ 6,957,356
*508,300 du Pont E.I. de Nemours & Company....... 26,971,668
123,000 Imperial Chemical ADR................... 4,297,312
171,900 Morton International, Inc............... 4,211,550
315,300 Temple-Inland, Inc...................... 18,701,231
291,700 Weyerhaeuser Company.................... 14,822,006
96,200 Willamette Industries, Inc.............. 3,222,700
202,100 Witco Corporation....................... 3,220,968
--------------
112,569,527
--------------
MANUFACTURING -- 0.9%
159,300 Dana Corporation........................ 6,511,387
*306,800 Minnesota Mining and Manufacturng 21,821,150
Company.................................
--------------
28,332,537
--------------
MEDIA & SERVICES -- 1.3%
608,800 Gannett Co., Inc........................ 40,294,950
31,066 Nielson Media Research Inc.............. 559,188
--------------
40,854,138
--------------
REAL ESTATE -- 2.3%
496,800 Archstone Communities Trust............. 10,060,200
89,300 Boston Properties, Inc.................. 2,723,650
331,200 Kimco Realty Corp. (REIT)............... 13,144,500
414,000 Liberty Property Trust (SBI)............ 10,194,750
545,600 Spieker Properties, Inc. (REIT)......... 18,891,400
605,548 Starwood Hotels & Resorts............... 13,738,370
--------------
68,752,870
--------------
RETAIL -- 2.4%
1,219,000 May Department Stores Company........... 73,597,125
--------------
UTILITIES -- 19.8%
577,700 Ameritech Corporation................... 36,611,737
*204,900 AT&T Corp............................... 15,418,725
1,181,246 Bell Atlantic Corporation............... 67,109,538
1,599,400 BellSouth Corp.......................... 79,770,075
*222,600 Columbia Gas System, Inc................ 12,855,150
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-27
<PAGE>
HARTFORD DIVIDEND AND GROWTH HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------------ --------------
<C> <S> <C>
</TABLE>
COMMON STOCKS -- (CONTINUED)
UTILITIES -- (CONTINUED)
<TABLE>
<C> <S> <C>
696,700 DQE, Inc................................ $ 30,611,256
*263,800 Duke Energy Corporation................. 16,899,687
694,100 El Paso Energy Corporation.............. 24,163,356
1,107,500 Endesa S.A.............................. 29,902,500
445,300 Enron Corp.............................. 25,409,931
728,600 GPU, Inc................................ 32,195,012
*328,781 MCI WorldCom, Inc....................... 23,590,036
205,200 Montana Power Company................... 11,606,625
664,800 Nipsco Industries, Inc.................. 20,234,850
864,200 Peco Energy Company..................... 35,972,325
333,200 Powergen PLC Sponsored ADR.............. 17,826,200
1,091,600 SBC Communications, Inc................. 58,537,050
420,200 Sprint Corporation (FON Group).......... 35,349,325
324,000 Texas Utilities Company................. 15,126,750
317,900 UtiliCorp United, Inc................... 11,662,956
--------------
600,853,084
--------------
Total common stocks..................... $2,932,236,685
--------------
--------------
<CAPTION>
PRINCIPAL
AMOUNT
- ------------
<C> <S> <C>
CONVERTIBLE CORPORATE BONDS -- 0.9%
MEDIA & SERVICES -- 0.9%
CBS Radio, Inc.**
$ 16,830,000 7.00% due 06/30/11.................... $ 26,912,836
--------------
--------------
<CAPTION>
SHARES
- ------------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS -- 0.8%
SOFTWARE & SERVICES -- 0.1%
49,500 Microsoft Corporation................... $ 4,838,625
--------------
UTILITIES -- 0.7%
350,000 Qwest Trends Trust**.................... 16,275,000
65,400 Texas Utilities Co...................... 3,686,925
--------------
19,961,925
--------------
Total convertible preferred stocks...... $ 24,800,550
--------------
--------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ------------ --------------
<C> <S> <C>
SHORT-TERM SECURITIES -- 2.9%
REPURCHASE AGREEMENT
$ 88,513,000 Interest in $1,162,198,000 joint $ 88,513,000
repurchase agreement dated 12/31/98 with
State Street Bank 4.773% due 01/04/99;
maturity amount $88,559,941
(Collateralized by $469,031,000 U.S.
Treasury Notes 4.00% - 7.775% due
10/31/99 - 02/15/07, $278,664,000 U.S.
Treasury Bonds 7.876% - 12.75% due
11/15/10 - 02/15/21, $414,603,000 U.S.
Treasury Strips (principal) 0.00% due
02/15/19 - 08/15/21)....................
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost
$2,352,803,505)........................ 96.5% $2,932,236,685
Total convertible corporate bonds (cost
$17,066,825)........................... 0.9 26,912,836
Total convertible preferred stocks (cost
$22,058,536)........................... 0.8 24,800,550
Total short-term securities (cost
$88,513,000)........................... 2.9 88,513,000
----- ---------------
Total investment in securities
(total cost $2,480,441,866)............ 101.1 3,072,463,071
Cash, receivables and other assets...... 0.4 13,306,760
Payable for securities purchased........ (1.5) (44,767,218 )
Payable for Fund shares redeemed........ (0.0) (172,927 )
Other liabilities....................... (0.0) (935,889 )
----- ---------------
Net assets.............................. 100.0% $3,039,893,797
----- ---------------
----- ---------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.001 per share;
authorized 3,000,000,000 shares; outstanding
1,411,611,945 shares............................. $ 141,161,195
Capital surplus................................... 2,192,005,280
Accumulated undistributed net investment income... 2,405,420
Accumulated undistributed net realized gain on
investments...................................... 112,538,201
Unrealized appreciation of investments............ 592,021,205
Unrealized depreciation of option contracts
written (See Note 2)***.......................... (237,504)
--------------
Net assets........................................ $3,039,893,797
--------------
--------------
</TABLE>
<TABLE>
<S> <C>
Class IA
Net asset value per share ($3,031,293,305
DIVIDED BY 1,403,061,074 shares outstanding).... $2.16
-----
-----
Class IB
Net asset value per share ($8,600,492 DIVIDED BY
8,550,871 shares outstanding).................... $1.01
-----
-----
</TABLE>
* Non-income producing during period
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1998, the market value of these securities amounted to $43,187,836 or 1.4%
of net assets.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-28
<PAGE>
***OPTION CONTRACTS WRITTEN -- NOTE 2 -- OUTSTANDING AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF EXERCISE EXPIRATION MARKET
DESCRIPTION CONTRACTS PRICE DATE VALUE
- ------------------------------ -------------- --------- -------------- -----------
<S> <C> <C> <C> <C>
AT&T Corp. 205 $ 69 January 1999 $ (14,137)
Chevron Corp. 521 94 January 1999 (10,211)
Columbia Gas System Co. (The) 223 61 January 1999 (6,467)
du Pont (E.I.) de Nemours 508 60 January 1999 (22,225)
Duke Energy Corp. 534 67 January 1999 (19,224)
General Electric Corp. 635 110 January 1999 (63,500)
Merck & Co., Inc. 246 162 January 1999 (16,964)
Minnesota Mining &
Manufacturing 306 85 January 1999 (7,650)
Nabisco Holdings Corp. 574 43 January 1999 (84,952)
Newell Co. 2,294 40 January 1999 (516,150)
U.S. Bancorp 1,300 41 January 1999 (24,375)
Xerox 304 120 January 1999 (136,253)
-----------
Total option contracts written
(cost ($684,604)) $ (922,108)
-----------
-----------
</TABLE>
The securities underlying these option contracts are included in the Fund's
Statement of Net Assets.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-29
<PAGE>
HARTFORD INTERNATIONAL ADVISERS HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- -------------- ------------
<C> <S> <C>
COMMON STOCKS -- 52.9%
AUSTRALIA -- 2.6%
*114,212 AMP Ltd.***............................. $ 1,448,423
242,737 Australia & New Zealand Banking......... 1,590,093
67,392 News Corp. Ltd.......................... 445,597
747,683 Pasminco Ltd............................ 568,662
42,202 Rio Tinto PLC........................... 501,004
30,800 Schlumberger Ltd........................ 1,420,650
*109,981 Telstra Corporation Ltd................. 514,704
277,711 WMC Ltd................................. 838,057
------------
7,327,190
------------
BRAZIL -- 0.2%
*17,200 Embratel Participacoes S.A.............. 239,725
*10,200 Telesp Celular Participacoes S.A........ 178,500
9,400,000 Telesp Participacoes S.A................ 213,955
------------
632,180
------------
CANADA -- 0.3%
14,700 Canadian National Railway Company....... 762,562
------------
CHINA -- 1.1%
128,000 Cheung Kong Holdings Ltd................ 921,127
*6,900 China Telecom (Hong Kong) Ltd........... 239,775
*200,100 China Telecom (Hong Kong) Ltd........... 346,112
32,800 HSBC Holdings PLC....................... 817,139
103,500 Sun Hung Kai Properties................. 754,838
------------
3,078,991
------------
DENMARK -- 0.8%
25,510 Unidanmark AS A Shares (Reg.)........... 2,304,753
------------
FINLAND -- 1.1%
54,280 Metsa-Serla Class B Shares.............. 444,892
22,770 Nokia AB OYJ Class A Shares............. 2,788,187
------------
3,233,079
------------
FRANCE -- 8.3%
5,823 AGF-Assurance Generale de France........ 347,961
20,700 Alcatel................................. 2,534,690
15,540 AXA..................................... 2,253,380
39,040 Banque National de Paris................ 3,216,287
9,530 Casino Guichard-Perrachon S.A........... 992,920
8,287 Compagnie de Saint-Gobain S.A........... 1,170,503
21,900 Compagnie Financiere de Paribas......... 1,904,191
10,090 Elf Aquitaine........................... 1,166,869
12,790 France Telecom S.A...................... 1,016,604
1,550 Groupe Danone........................... 443,966
10,430 Renault S.A............................. 468,658
10,261 Rhone-Poulenc Class A Shares............ 528,295
6,610 Suez Lyonnaise des Eaux................. 1,358,444
21,689 Total S.A. Class B Shares............... 2,197,629
16,200 Vivendi................................. 4,205,149
------------
23,805,546
------------
GERMANY -- 4.0%
1,860 Allianz AG.............................. 692,394
31,800 Bayer AG................................ 1,335,560
*12,030 DaimlerChrysler AG...................... 1,195,397
58,030 Hoechst AG.............................. 2,400,604
2,835 Karstadt AG............................. 1,484,288
23,530 Mannesmann AG........................... 2,723,109
<CAPTION>
MARKET
SHARES VALUE
- -------------- ------------
<C> <S> <C>
</TABLE>
GERMANY -- (CONTINUED)
<TABLE>
<C> <S> <C>
*25,810 Siemens AG.............................. $ 1,696,879
------------
11,528,231
------------
GREECE -- 0.1%
*13,500 Panafon S.A.***......................... 361,553
------------
IRELAND -- 0.0%
3 Smurfit (Jefferson) Group............... 5
------------
ITALY -- 2.2%
274,200 Banca Commerciale Italiana S.p.A........ 1,895,745
270,900 ENI S.p.A............................... 1,774,354
290,244 Telecom Italia S.p.A.................... 2,481,936
------------
6,152,035
------------
JAPAN -- 6.3%
10,900 Advantest Corporation................... 691,900
216,000 Asahi Bank Ltd.......................... 792,789
18,000 Bridgestone Corp........................ 409,320
147,000 Fuji Bank, Ltd.......................... 542,143
19,000 Fuji Machine Manufacturing Co........... 601,347
26,000 Fuji Photo Film Co., Ltd................ 968,114
21,000 Kao Corporation......................... 474,748
7,400 Mabuchi Motor Co., Ltd.................. 567,481
37,600 Matsumotokiyoshi........................ 1,456,710
8,000 Matsushita Communication Industrial Co., 378,025
Ltd....................................
65,000 NEC Corporation......................... 599,308
8,800 Nichiei Co., Ltd........................ 702,148
290 NTT Mobile Communication Network, 1,195,514
Inc.***.................................
107,000 Olympus Optical Co., Ltd................ 1,232,244
12,000 Rohm Company Ltd........................ 1,094,713
262,000 Sakura Bank Ltd......................... 601,596
23,400 Sony Corporation........................ 1,707,338
11,000 Takeda Chemical Industries Ltd.......... 424,214
6,200 Takefuji Corp........................... 453,471
37,000 Tokyo Style Co.......................... 375,259
287,000 Toshiba Corporation..................... 1,712,383
12,400 Uni-Charm Corp.......................... 582,641
10,000 Yamanouchi Pharmaceuticals Co., Ltd..... 322,704
------------
17,886,110
------------
MEXICO -- 0.1%
8,600 Telefonos de Mexico S.A. ADR............ 418,712
------------
NETHERLANDS -- 4.2%
8,900 Aegon N.V............................... 1,093,608
30,300 Gucci Group N.V......................... 1,473,337
22,491 ING Groep N.V........................... 1,372,229
17,700 Koninklijke Ahold N.V................... 654,553
36,900 Philips Electronics N.V................. 2,477,476
14,900 Royal Dutch Petroleum Company ADR....... 742,352
*9,200 STMicroelectronics N.V.................. 718,175
43,747 TNT Post Group N.V...................... 1,410,315
24,000 Unilever N.V.-CVA....................... 2,052,574
------------
11,994,619
------------
SOUTH AFRICA -- 0.0%
3,500 De Beers-Centenary Linked-UT............ 44,622
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-30
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- -------------- ------------
<C> <S> <C>
</TABLE>
COMMON STOCKS -- (CONTINUED)
<TABLE>
<C> <S> <C>
SPAIN -- 2.0%
16,300 Banco Santander S.A..................... $ 324,409
107,100 ENDESA - Empresa Nacional de 2,842,065
Electricidad S.A.......................
9,200 Repsol S.A.............................. 491,519
10,000 Telef De Espana......................... 8,892
10,000 Telefonica S.A.......................... 445,334
*11,452 Telefonica S.A.......................... 1,550,252
------------
5,662,471
------------
SWEDEN -- 2.4%
9,420 Hennes & Mauritz AB..................... 769,355
212,620 Nordbanken Holding AB................... 1,364,034
75,480 Pharmacia & Upjohn...................... 4,227,714
26,930 Telefonakietebolaget LM Ericsson Class B 641,226
Shares.................................
------------
7,002,329
------------
SWITZERLAND -- 2.7%
1,090 Holderbank Financiere Glarus AG 1,290,399
(Bearer)...............................
415 Nestle S.A.............................. 903,433
600 Novartis................................ 1,179,483
120 Roche Holdings AG Genusss............... 1,464,307
3,650 Swisscom AG............................. 1,528,050
4,310 UBS AG.................................. 1,324,240
------------
7,689,912
------------
TAIWAN -- 0.3%
*58,145 Taiwan Semiconductor ADR................ 824,932
------------
UNITED KINGDOM -- 14.2%
83,100 Allied Domecq PLC....................... 755,600
155,972 Allied Irish Banks PLC.................. 2,776,715
103,355 Bank of Scotland........................ 1,234,687
286,600 Billiton PLC............................ 569,829
102,500 BOC Group PLC........................... 1,500,747
212,300 British American Tobacco PLC............ 1,884,453
169,625 British Petroleum Co., PLC.............. 2,531,531
90,900 British Telecommunications PLC.......... 1,367,960
*63,300 Cable & Wireless PLC.................... 578,725
70,400 Cadbury Schweppes PLC................... 1,199,426
217,300 Compass Group PLC....................... 2,487,420
107,194 Diageo PLC.............................. 1,204,749
54,600 Glaxo Wellcome PLC...................... 1,872,283
12,700 Granada Group PLC....................... 225,354
27,833 Great Universal Stores PLC.............. 291,512
27,800 HSBC Holdings PLC....................... 757,171
22,100 Imperial Chemical Industries PLC........ 190,836
88,700 National Westminster Bank PLC........... 1,708,964
201,200 Next PLC................................ 1,633,611
89,200 Orange PLC.............................. 1,035,166
24,000 Powergen PLC............................ 316,254
285,600 Rentokil Initial PLC.................... 2,135,939
147,700 Scottish Power PLC...................... 1,512,549
422,600 Siebe PLC............................... 1,659,367
265,606 SmithKline Beecham PLC.................. 3,727,553
123,100 Standard Chartered PLC.................. 1,421,407
187,300 Vodafone Group PLC...................... 3,035,272
<CAPTION>
MARKET
SHARES VALUE
- -------------- ------------
<C> <S> <C>
</TABLE>
UNITED KINGDOM -- (CONTINUED)
<TABLE>
<C> <S> <C>
21,600 Zeneca Group PLC........................ $ 943,374
------------
40,558,454
------------
Total common stocks..................... $151,268,286
------------
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- --------------
<C> <S> <C>
CORPORATE BONDS -- 0.9%
COMPUTERS & EQUIPMENT -- 0.6%
$ 1,500,000 Xerox $ 1,577,469
9.75% due 03/15/00....................
--------------
FINANCIAL SERVICES -- 0.3%
925,000 Ford Motor Credit 948,345
7.5% due 04/03/00....................
--------------
Total corporate bonds................... $ 2,525,814
--------------
--------------
ENHANCED EQUIPMENT TRUST CERTIFICATES -- 0.2%
620,000 Daimler-Benz Vehicle Trust Series 1998-A $ 618,934
Class A4
5.23% due 12/20/01....................
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(IN LOCAL CURRENCY)
- --------------------
<C> <S> <C>
FOREIGN CORPORATE BONDS -- 1.8%
GERMANY -- 0.8%
1,500,000 Deutsche Hypobank Frankfurt $ 929,616
4.5% due 08/23/02....................
2,000,000 Kredit Fuer Wiederaufbau 1,281,878
5.00% due 01/04/09....................
-----------------
2,211,494
-----------------
JAPAN -- 0.3%
108,000,000 Nippon Telephone and Telegraph 976,026
2.50% due 07/25/07....................
-----------------
UNITED KINGDOM -- 0.7%
700,000 Caisse D'amort Dette 1,259,288
7.625% due 09/08/06...................
450,000 Hyder PLC 867,562
8.75% due 07/17/06...................
-----------------
2,126,850
-----------------
Total foreign corporate bonds........... $ 5,314,370
-----------------
-----------------
FOREIGN GOVERNMENT BONDS -- 24.6%
CANADA -- 4.6%
4,400,000 Canada Government $ 3,178,174
8.50% due 04/01/02...................
1,600,000 Canada Government 1,141,824
7.25% due 06/01/03...................
12,480,000 Canada Government 8,564,073
7.50% due 03/01/01...................
1,660,000 Province de Quebec 336,174
6.875% due 04/22/04...................
-----------------
13,220,245
-----------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-31
<PAGE>
HARTFORD INTERNATIONAL ADVISERS HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET
(IN LOCAL CURRENCY) VALUE
- -------------------- -----------------
<C> <S> <C>
</TABLE>
FOREIGN GOVERNMENT BONDS -- (CONTINUED)
<TABLE>
<C> <S> <C>
DENMARK -- 4.5%
3,000,000 Denmark Kingdom $ 543,449
7.00% due 12/15/04....................
9,000,000 Denmark Kingdom 1,810,083
7.00% due 11/10/24....................
62,000,000 Denmark Kingdom 10,608,786
9.00% due 11/15/00....................
-----------------
12,962,318
-----------------
FRANCE -- 0.8%
10,000,000 France O.A.T. 2,129,427
6.00% due 10/25/25....................
-----------------
GERMANY -- 6.2%
700,000 Deutschland Republic 527,251
6.50% due 07/04/27...................
9,350,000 Deutschland Republic 6,818,015
6.25% due 01/04/24...................
2,200,000 Deutschland Republic 1,509,530
6.00% due 01/04/07...................
1,200,000 Deutschland Republic 820,570
6.875% due 06/11/03...................
11,300,000 Deutschland Republic 7,996,385
6.875% due 05/12/05...................
-----------------
17,671,751
-----------------
ITALY -- 3.5%
4,600,000,000 Italy BTPS 3,184,501
6.00% due 11/01/07....................
1,100,000,000 Italy BTPS 833,559
6.50% due 11/01/27....................
8,500,000,000 Italy BTPS 5,580,260
6.25% due 03/01/02....................
-----------------
9,598,320
-----------------
JAPAN -- 1.7%
290,000,000 Japan Government #164 2,907,800
4.10% due 12/22/03....................
230,000,000 Japan Government #39 1,985,236
2.60% due 03/20/18....................
-----------------
4,893,036
-----------------
SLOVENIA -- 0.3%
1,500,000 Republic of Slovenia 979,420
5.75% due 06/16/04...................
-----------------
SWEDEN -- 0.4%
7,000,000 Sweden Kingdom 1,206,866
9.00% due 04/20/09....................
-----------------
UNITED KINGDOM -- 2.6%
1,100,000 European Investment Bank 2,154,798
7.625% due 12/07/06..................
575,692 FFRESH MB 1-A2*** 1,424,331
11.126% due 10/05/58..................
381,000 Iceland Republic 709,184
8.75% due 05/12/03..................
590,000 Japan Fin Muni 1,150,974
8.375% due 12/07/06..................
<CAPTION>
PRINCIPAL
AMOUNT MARKET
(IN LOCAL CURRENCY) VALUE
- -------------------- -----------------
<C> <S> <C>
</TABLE>
UNITED KINGDOM -- (CONTINUED)
<TABLE>
<C> <S> <C>
850,000 United Kingdom Treasury Gilt $ 1,710,369
7.75% due 09/08/06..................
200,000 United Kingdom Treasury Gilt 373,190
6.75% due 11/26/04..................
-----------------
7,522,846
-----------------
Total foreign government bonds.......... $ 70,184,229
-----------------
-----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- --------------
<C> <S> <C>
U.S. TREASURIES & FEDERAL AGENCIES -- 1.2%
U.S. TREASURY NOTE -- 0.5%
$ 1,300,000 5.875% due 07/31/99..................... $ 1,308,937
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION --
0.2%
1,020,000 FNMA-Global Medium Term Note 659,645
6.375% due 08/15/07...................
--------------
FEDERAL HOME LOAN MORTGAGE ASSOCIATION
-- 0.5%
1,420,000 5.125% due 10/15/08..................... 1,392,559
--------------
Total U.S. treasuries & federal $ 3,361,141
agencies................................
--------------
--------------
SHORT-TERM SECURITIES -- 19.8%
CERTIFICATES OF DEPOSIT -- 2.2%
1,500,000 Canadian Imperial Bank of Commerce $ 1,499,805
5.55% due 02/10/99....................
1,700,000 Canadian Imperial Bank (NY) 1,699,761
5.74% due 03/31/99....................
1,500,000 Credit Agricole (USA) 1,499,905
5.70% due 03/02/99....................
1,500,000 Deutsche Bank (NY) 1,499,812
5.70% due 04/06/99....................
--------------
6,199,283
--------------
COMMERCIAL PAPER -- 3.8%
2,000,000 Corporate Asset Funding Co. 1,985,408
5.36% due 02/19/99....................
1,000,000 Ford Motor Credit Europe 984,630
5.03% due 04/21/99....................
2,000,000 National Rural Utilities 1,976,386
5.02% due 03/26/99....................
2,000,000 Peacock Funding Group 1,990,177
5.20% due 02/04/99....................
2,000,000 Rose Funding 1,982,920
5.49% due 02/26/99....................
2,000,000 Variable Funding Capital 1,984,423
5.29% due 02/23/99....................
--------------
10,903,944
--------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-32
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- -------------- --------------
<C> <S> <C>
</TABLE>
SHORT-TERM SECURITIES -- (CONTINUED)
<TABLE>
<C> <S> <C>
REPURCHASE AGREEMENT -- 13.8%
$ 39,347,000 Interest in $1,162,198,000 joint $ 39,347,000
repurchase agreement dated 12/31/98 with
State Street Bank 4.773% due 01/04/99;
maturity amount $39,367,867
(Collateralized by $468,031,000 U.S.
Treasury Notes 4.00% - 7.775% due
10/31/99 - 02/16/07, $278,664,000 U.S.
Treasury Bonds 7.875% - 12.75% due
11/16/10 - 02/16/21, $414,603,000 U.S.
Treasury Strips (principal) 0.00% due
02/15/19 - 08/15/21)....................
--------------
Total short-term securities............. $ 56,450,227
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost
$134,347,542).......................... 52.9% $151,268,286
Total corporate bonds (cost
$2,520,114)............................ 0.9 2,525,814
Total enhanced equipment trust
certificates (cost $619,943)........... 0.2 618,934
Total foreign corporate bonds (cost
$4,998,485)............................ 1.8 5,314,370
Total foreign government bonds (cost
$66,016,648)........................... 24.6 70,184,229
Total U.S. treasuries & federal agencies
(cost $3,307,214)...................... 1.2 3,361,141
Total short-term securities (cost
$56,450,227)........................... 19.8 56,450,227
----- ------------
Total investment in securities
(total cost $268,260,173).............. 101.4 289,723,001
Cash, receivables and other assets...... 1.3 3,809,109
Payable for securities purchased........ (2.4) (6,810,385)
Payable for Fund Shares redeemed........ (0.0) (4,291)
Other liabilities....................... (0.3) (864,905)
----- ------------
Net assets (applicable to $1.154689 per
share based on 247,558,004 shares
outstanding)........................... 100.0% $285,852,529
----- ------------
----- ------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
------------
<S> <C>
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value 0.10 per share;
authorized 750,000,000 shares; outstanding
247,558,004 shares............................... $ 24,755,800
Capital surplus................................... 241,092,418
Accumulated undistributed net investment income... 763,703
Distribution in excess of net realized gain on
investments...................................... (1,405,044)
Unrealized appreciation of futures contracts**.... 218,919
Unrealized appreciation of investments............ 21,462,828
Unrealized depreciation of forward foreign
currenies contracts (Note 2)****................. (807,877)
Unrealized depreciation of other assets and
liabilities in foreign currencies................ (228,218)
------------
Net assets, applicable to shares outstanding...... $285,852,529
------------
------------
</TABLE>
* Non-income producing during period
** The fund had 36 March NEW FTSE 100 Index future contracts, 2 March TSE 35
Index futures contracts, 93 March MATIF CAC 40 Index futures contracts, 19
March ASX ALL ORDS Index futures contracts, 3 January IBEX 35 PLUS Index
futures contracts, 6 March TSE 10 year JGB Index futures contracts, 19
March TSE TOPIX Index futures contracts, 108 January OMX Index futures
contracts, 7 March MIB 30 Index futures contracts, 5 DTB DAX Index futures
contracts open as of December 31, 1998. These contracts had a market value
of $20,651,362 as of December 31, 1998 and are collateralized by various
U.S. Treasury obligations having a market value of $1,308,937.
*** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1998, the market value of these securities amounted to $4,429,821 or 1.55%
of net assets.
****FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
UNREALIZED
TOTAL AGGREGATE DELIVERY APPRECIATION
DESCRIPTION MARKET VALUE FACE VALUE DATE (DEPRECIATION)
- ------------------------------ ------------- ------------ --------- ---------------
<S> <C> <C> <C> <C>
Australian Dollars (Buy) $ 805,406 $ 820,860 01/29/99 $ (15,454)
Australian Dollars (Buy) 333,762 340,564 03/31/99 (6,802)
Australian Dollars (Buy) 459,825 462,506 03/31/99 (2,681)
Australian Dollars (Sell) 1,445,695 1,525,537 01/29/99 79,842
Canadian Dollars (Buy) 111,406 111,182 03/18/99 224
Canadian Dollars (Buy) 1,782,996 1,779,870 01/29/99 3,126
Canadian Dollars (Buy) 111,588 111,393 03/18/99 195
Canadian Dollars (Sell) 11,555,975 11,494,216 01/29/99 (61,759)
Canadian Dollars (Sell) 3,167,892 3,152,104 01/29/99 (15,788)
Danish Kroner (Buy) 1,915,460 1,917,135 02/08/99 (1,675)
Danish Kroner (Buy) 965,050 970,910 02/08/99 (5,860)
Danish Kroner (Sell) 4,020,853 4,061,765 01/29/99 40,912
Danish Kroner (Sell) 4,991,250 4,998,330 01/29/99 7,080
Danish Kroner (Sell) 178,313 178,552 01/29/99 239
Danish Kroner (Sell) 2,444,130 2,437,991 01/29/99 (6,139)
Danish Kroner (Sell) 1,375,039 1,384,189 01/29/99 9,150
French Francs (Buy) 1,290,217 1,300,458 03/31/99 (10,241)
French Francs (Buy) 1,859,347 1,855,984 03/31/99 3,363
French Francs (Sell) 2,326,746 2,359,021 01/29/99 32,275
German Deutschemarks (Buy) 923,317 960,699 01/13/99 (37,382)
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-33
<PAGE>
HARTFORD INTERNATIONAL ADVISERS HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
UNREALIZED
TOTAL AGGREGATE DELIVERY APPRECIATION
DESCRIPTION MARKET VALUE FACE VALUE DATE (DEPRECIATION)
- ------------------------------ ------------- ------------ --------- ---------------
<S> <C> <C> <C> <C>
German Deutschemarks (Buy) $ 989,268 $ 1,001,274 01/13/99 $ (12,006)
German Deutschemarks (Buy) 960,489 952,268 01/13/99 8,221
German Deutschemarks (Buy) 784,184 775,207 01/29/99 8,977
German Deutschemarks (Buy) 993,875 973,243 02/18/99 20,632
German Deutschemarks (Buy) 2,339,813 2,294,118 01/28/99 45,695
German Deutschemarks (Buy) 820,184 819,938 01/29/99 246
German Deutschemarks (Buy) 3,068,796 3,067,194 02/10/99 1,602
German Deutschemarks (Buy) 720,374 730,371 02/10/99 (9,997)
German Deutschemarks (Buy) 831,058 842,150 03/18/99 (11,092)
German Deutschemarks (Buy) 555,542 559,818 03/18/99 (4,276)
German Deutschemarks (Buy) 1,982,360 1,980,530 01/29/99 1,830
German Deutschemarks (Buy) 239,995 239,363 01/29/99 632
German Deutschemarks (Sell) 2,237,284 2,302,611 01/22/99 65,327
German Deutschemarks (Sell) 16,820,664 16,946,028 01/29/99 125,364
German Deutschemarks (Sell) 1,522,770 1,535,985 01/29/99 13,215
German Deutschemarks (Sell) 2,061,559 2,048,897 01/29/99 (12,662)
German Deutschemarks (Sell) 1,419,572 1,402,881 01/29/99 (16,691)
German Deutschemarks (Sell) 758,985 743,069 01/29/99 (15,916)
German Deutschemarks (Sell) 1,892,362 1,856,386 01/29/99 (35,976)
German Deutschemarks (Sell) 1,920,768 1,918,925 02/08/99 (1,843)
German Deutschemarks (Sell) 966,387 972,164 02/08/99 5,777
German Deutschemarks (Sell) 900,468 897,129 02/10/99 (3,339)
Italian Lira (Sell) 625,605 584,511 01/19/99 (41,094)
Italian Lira (Sell) 2,083,333 1,937,679 01/07/99 (145,654)
Italian Lira (Sell) 6,606,797 6,136,778 01/07/99 (470,019)
Italian Lira (Buy) 777,744 784,359 03/19/99 (6,615)
Italian Lira (Buy) 584,764 589,835 03/19/99 (5,071)
Italian Lira (Sell) 191,703 191,616 01/07/99 (87)
Italian Lira (Sell) 133,769 135,682 01/29/99 1,913
Japanese Yen (Buy) 18,871 17,860 01/29/99 1,011
Japanese Yen (Buy) 1,116,211 1,058,120 03/11/99 58,091
Japanese Yen (Buy) 719,860 708,847 03/11/99 11,013
Japanese Yen (Sell) 1,004,407 969,048 01/13/99 (35,359)
Japanese Yen (Sell) 743,912 734,142 01/13/99 (9,770)
Japanese Yen (Sell) 2,124,934 1,999,627 01/13/99 (125,307)
Japanese Yen (Sell) 1,358,470 1,350,791 01/13/99 (7,679)
Japanese Yen (Sell) 1,052,738 1,018,036 01/29/99 (34,702)
Japanese Yen (Sell) 1,009,166 1,009,433 01/13/99 267
Japanese Yen (Sell) 1,032,224 963,637 02/18/99 (68,587)
Japanese Yen (Sell) 1,004,883 957,176 01/13/99 (47,707)
Spanish Pesetas (Buy) 194,839 196,513 01/15/99 (1,674)
Swedish Krona (Buy) 2,207,274 2,299,308 01/22/99 (92,034)
Swedish Krona (Buy) 1,548,756 1,604,450 01/29/99 (55,694)
Swedish Krona (Buy) 1,923,186 1,999,383 01/29/99 (76,197)
Swedish Krona (Buy) 269,068 271,934 01/22/99 (2,866)
Swedish Krona (Buy) 611,287 619,600 01/22/99 (8,313)
Swedish Krona (Sell) 4,666,050 4,866,267 10/29/99 200,217
Swiss Francs (Buy) 900,058 899,186 02/10/99 872
Swiss Francs (Sell) 3,050,117 3,077,036 02/10/99 26,919
Swiss Francs (Sell) 705,728 732,373 02/10/99 26,645
British Pounds (Buy) 2,003,117 2,002,864 01/29/99 253
British Pounds (Buy) 923,623 921,278 01/29/99 2,345
British Pounds (Buy) 371,439 372,512 01/29/99 (1,073)
British Pounds (Buy) 1,926,478 1,964,983 03/19/99 (38,505)
British Pounds (Buy) 1,386,985 1,408,341 03/19/99 (21,356)
British Pounds (Sell) 12,660,432 12,630,581 01/29/99 (29,851)
British Pounds (Sell) 2,285,088 2,282,988 01/28/99 (2,100)
British Pounds (Sell) 182,403 185,949 01/29/99 3,546
---------------
$ (807,877)
---------------
---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-34
<PAGE>
HARTFORD MIDCAP HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
COMMON STOCKS -- 98.0%
AEROSPACE & DEFENSE -- 0.8%
*64,455 Loral Space & Communications Ltd........ $ 1,148,123
------------
BUSINESS SERVICES -- 8.0%
*57,100 Ingram Micro, Inc....................... 1,991,362
*97,850 Iron Mountain, Inc...................... 3,528,715
*77,200 Pierce Leahy Corp....................... 1,968,600
*20,000 Robert Half International Inc........... 890,000
64,800 Viad Corp............................... 1,968,300
*33,900 Young & Rubicam, Inc.................... 1,097,512
------------
11,444,489
------------
COMMUNICATIONS EQUIPMENT -- 1.3%
*37,300 ADC Telecommunications, Inc............. 1,296,175
*13,300 Network Appliance, Inc.................. 598,500
------------
1,894,675
------------
COMPUTERS & OFFICE EQUIPMENT -- 3.5%
43,200 Affiliated Computer Services, Inc....... 1,944,000
*46,700 NCR Corporation......................... 1,949,725
*33,300 Unisys Corporation...................... 1,146,768
------------
5,040,493
------------
CONSUMER DURABLES -- 1.3%
40,230 Hertz Corporation (The)................. 1,835,493
------------
CONSUMER NON-DURABLES -- 2.1%
18,100 Black & Decker Corporation (The)........ 1,014,731
74,500 Miller (Herman) Inc..................... 2,002,187
------------
3,016,918
------------
CONSUMER SERVICES -- 3.6%
*30,400 DeVry, Inc.............................. 931,000
35,600 Galileo International, Inc.............. 1,548,600
64,400 Sodexho Marriott Services, Inc.......... 1,783,075
17,200 Starbucks Corporation................... 965,350
------------
5,228,025
------------
ELECTRONICS -- 6.8%
*63,160 Analog Devices, Inc..................... 1,981,645
38,600 Linear Technology Corporation........... 3,457,112
*58,700 Maxim Integrated Products, Inc.......... 2,564,456
*29,100 Sanmina Corporation..................... 1,818,750
------------
9,821,963
------------
FINANCIAL SERVICES -- 15.5%
61,300 Ace Ltd................................. 2,111,018
42,800 City National Corporation............... 1,781,550
59,905 Equifax, Inc............................ 2,048,002
57,100 Franklin Resources, Inc................. 1,827,200
64,500 Heller Financial, Inc................... 1,894,687
40,096 Legg Mason, Inc......................... 1,265,530
33,530 Old Kent Financial Corporation.......... 1,559,145
*64,000 Sabre Group Holdings.................... 2,848,000
41,705 State Street Corporation................ 2,901,104
62,530 T. Rowe Price Associates, Inc........... 2,141,652
31,400 Unum Corporation........................ 1,832,975
------------
22,210,863
------------
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
FOOD, BEVERAGE & TOBACCO -- 1.6%
*61,400 Keebler Foods Company................... $ 2,310,175
------------
HEALTH CARE -- 12.2%
44,135 Biomet, Inc............................. 1,776,433
*19,700 Forest Laboratories, Inc................ 1,047,793
*9,700 Genentech, Inc.......................... 772,968
*68,800 Health Management Associates, Inc....... 1,487,800
*32,500 Human Genome Sciences, Inc.............. 1,155,781
*25,100 Immunex Corporation..................... 3,157,893
14,975 Perkin-Elmer Corporation (The).......... 1,460,998
106,750 ServiceMaster Company (The)............. 2,355,171
43,000 Stryker Corporation..................... 2,367,687
*38,200 Sunrise Assisted Living, Inc............ 1,981,625
------------
17,564,149
------------
INDUSTRIAL MATERIALS -- 3.7%
138,400 Abitibi-Consolidated, Inc............... 1,288,850
19,000 Phelps Dodge Corporation................ 966,625
60,400 Sealed Air Corporation.................. 3,084,175
------------
5,339,650
------------
MANUFACTURING -- 3.0%
*85,310 Covance, Inc............................ 2,484,653
32,620 Danaher Corporation..................... 1,771,673
------------
4,256,326
------------
MEDIA & SERVICES -- 11.9%
*124,600 American Tower Corporation.............. 3,683,487
*38,900 Lamar Advertising Company............... 1,449,025
*53,712 Outdoor Systems, Inc.................... 1,611,360
20,500 Scripps E.W. Co......................... 1,019,875
82,730 Stewart Enterprises, Inc................ 1,840,742
*70,300 Tele-Communications, Inc................ 3,238,193
*115,900 Univision Communications, Inc........... 4,194,131
------------
17,036,813
------------
RETAIL -- 9.7%
*5,000 Amazon.com, Inc......................... 1,606,250
25,110 CVS Corporation......................... 1,381,050
150,800 Dollar General Corporation.............. 3,562,650
38,100 Gucci Group............................. 1,852,612
*44,600 Papa John's International, Inc.......... 1,967,975
*36,550 Staples, Inc............................ 1,596,778
*40,300 Whole Foods Market, Inc................. 1,949,512
------------
13,916,827
------------
SOFTWARE & SERVICES -- 9.8%
*46,700 Bisys Group, Inc. (The)................. 2,410,887
*96,900 CBT Group Public Ltd. Company........... 1,441,387
*30,755 Ceridan Corporation..................... 2,147,083
*3,100 eBay, Inc............................... 747,875
75,900 First Data Corporation.................. 2,405,081
*45,800 Policy Management Systems Corporation... 2,312,900
*97,300 Rational Software Corporation........... 2,578,450
------------
14,043,663
------------
TRANSPORTATION -- 1.4%
88,218 Southwest Airlines Co................... 1,979,391
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-37
<PAGE>
HARTFORD MIDCAP HLS FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
</TABLE>
COMMON STOCKS -- (CONTINUED)
<TABLE>
<C> <S> <C>
UTILITIES -- 1.8%
*53,700 Intermedia Communications, Inc.......... $ 926,325
*53,300 McLeodUSA Incorporated.................. 1,665,625
------------
2,591,950
------------
Total common stocks..................... $140,679,986
------------
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- -----------
<C> <S> <C>
SHORT-TERM SECURITIES -- 1.2%
REPURCHASE AGREEMENT
Interest in $1,162,198,000 joint
repurchase agreement dated 12/31/98 with
State Street Bank 4.773% due 01/04/99;
maturity amount $1,667,884
(Collateralized by $469,031,000 U.S.
Treasury Notes 4.00% - 7.775% due
10/31/99 - 02/15/07, $278,664,000 U.S.
Treasury Bonds 7.875% - 12.75% due
11/15/10 - 02/15/21, $414,603,000 U.S.
Treasury Strips (principal) 0.00% due
02/15/19 - 08/15/21).................... $ 1,667,000
$ 1,667,000
------------
------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share;
authorized 750,000,000 shares; outstanding
99,699,854 shares................................ $ 9,969,985
Capital surplus................................... 111,118,741
Accumulated undistributed net realized gain on
investments...................................... 3,329,966
Unrealized appreciation of investments............ 19,074,951
------------
Net assets, applicable to shares outstanding...... $143,493,643
------------
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
------------
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
ASSETS
Investment in securities, at value (total cost
$123,272,035) - see accompanying portfolio....... $142,346,986
Receivable for investment securities sold......... 16,319,887
Receivable for Fund shares sold................... 362,861
Receivable dividend and interest.................. 52,873
Cash and other assets............................. 436
------------
Total assets...................................... $159,083,043
------------
------------
LIABILITIES
Investment securities purchased................... $ 15,588,467
Dividend payable.................................. 84
Other accrued expenses............................ 849
------------
Total liabilities................................. 15,589,400
------------
Net assets (applicable to $1.439256 per share
based on 99,699,854 shares outstanding).......... $143,493,643
------------
------------
</TABLE>
* Non-income producing during period
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-38
<PAGE>
HARTFORD GROWTH AND INCOME HLS FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCKS -- 97.3%
AEROSPACE & DEFENSE -- 3.3%
4,200 AlliedSignal, Inc....................... $ 186,112
2,800 Lockheed Martin Corporation............. 237,300
3,800 United Technologies Corporation......... 413,250
-----------
836,662
-----------
BUSINESS SERVICES -- 1.1%
2,100 Fluor Corporation....................... 89,381
5,700 Snyder Communications, Inc.............. 192,375
-----------
281,756
-----------
COMMUNICATIONS EQUIPMENT -- 3.0%
*4,600 Cisco Systems, Inc...................... 426,937
2,700 Lucent Technologies, Inc................ 297,000
*1,050 Sprint Corporation (PCS Group).......... 24,281
-----------
748,218
-----------
COMPUTERS & OFFICE EQUIPMENT -- 6.7%
8,100 Compaq Computer Corporation............. 339,693
*1,700 Dell Computer Corporation............... 124,418
*2,300 EMC Corporation......................... 195,500
*1,400 Gateway 2000, Inc....................... 71,662
2,700 Hewlett-Packard Company................. 184,443
3,200 International Business Machines Corp.... 591,231
2,200 Sun Microsystems, Inc................... 188,375
-----------
1,695,322
-----------
CONSUMER DURABLES -- 2.0%
5,300 Ford Motor Company...................... 311,043
2,900 General Motors Corporation.............. 207,531
-----------
518,574
-----------
CONSUMER NON-DURABLES -- 2.1%
1,800 Leggett & Platt, Inc.................... 39,600
5,300 Proctor & Gamble Co..................... 483,956
-----------
523,556
-----------
CONSUMER SERVICES -- 1.7%
7,900 Darden Restaurants, Inc................. 142,200
3,900 Eastman Kodak Company................... 280,800
-----------
423,000
-----------
ELECTRONICS -- 6.3%
*4,100 Analog Devices, Inc..................... 128,637
4,300 General Electric Company................ 438,868
5,400 Intel Corporation....................... 640,237
1,800 Texas Instruments, Inc.................. 154,012
5,500 York International Corp................. 224,468
-----------
1,586,222
-----------
ENERGY & SERVICES -- 4.4%
*1,800 Conoco, Inc............................. 37,575
900 Exxon Corporation....................... 65,812
*3,100 Friede Goldman International, Inc....... 35,262
7,500 Noble Affiliates, Inc................... 184,687
5,300 Royal Dutch Petroleum................... 253,737
2,600 Sunoco, Inc............................. 93,762
21,200 Union Pacific Resources Group, Inc...... 192,125
<CAPTION>
MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
</TABLE>
ENERGY & SERVICES -- (CONTINUED)
<TABLE>
<C> <S> <C>
8,200 USX Corporation......................... $ 247,025
-----------
1,109,985
-----------
FINANCIAL SERVICES -- 15.8%
600 American Express Company................ 61,350
2,700 American International Group, Inc....... 260,887
5,000 Associates First Capital Corporation.... 211,875
3,900 CIGNA Corporation....................... 301,518
11,500 Citigroup, Inc.......................... 569,250
2,700 City National Corporation............... 112,387
4,600 Cullen/Frost Bankers, Inc............... 252,425
3,300 Edwards (A.G.) & Sons, Inc.............. 122,925
4,200 Federal Home Loan Mortgage Corporation.. 270,637
7,600 Federal National Mortgage Association... 562,400
3,400 FINOVA Group, Inc....................... 183,387
3,200 Marsh & McLennan Cos., Inc.............. 187,000
3,700 Mercantile Bankshares Corporation....... 142,450
2,600 NAC Re Corp............................. 122,037
4,600 National City Corporation............... 333,500
9,100 Pacific Century Financial Corporation... 221,812
1,100 Reinsurance Group of America, Inc....... 77,000
-----------
3,992,840
-----------
FOOD, BEVERAGE & TOBACCO -- 6.4%
7,800 Anheuser-Busch Companies, Inc........... 511,875
1,100 Coca-Cola Company, (The)................ 73,562
1,900 Heinz (H.J.) Company.................... 107,587
6,300 Interstate Bakeries Corp................ 166,556
9,300 Philip Morris Co.,Inc................... 497,550
3,100 Unilever United States, Inc............. 257,106
-----------
1,614,236
-----------
HEALTH CARE -- 12.3%
12,000 Abbott Laboratories..................... 588,000
8,700 American Home Products Corporation...... 489,918
*2,200 Amgen, Inc.............................. 230,037
1,100 Baxter International, Inc............... 70,743
5,000 Bergen Brunswig Corporation............. 174,375
*5,900 Boston Scientific Corporation........... 158,193
1,000 Bristol-Myers Squibb Company............ 133,812
7,500 Columbia/HCA Healthcare Corporation..... 185,625
*6,300 Genzyme Corporation..................... 313,425
*399 Genzyme Molecular Oncology.............. 1,296
4,800 HBO & Company........................... 137,700
600 Merck & Co., Inc........................ 88,612
1,900 Pharmacia & Upjohn, Inc................. 107,587
5,900 Warner-Lambert Company.................. 443,606
-----------
3,122,929
-----------
INDUSTRIAL MATERIALS -- 3.2%
5,100 Air Products & Chemicals, Inc........... 204,000
2,300 Aluminum Company of America............. 171,493
7,800 Engelhard Corporation................... 152,100
1,700 Georgia-Pacific Corporation............. 99,556
2,500 Minerals Technologies, Inc.............. 102,343
*1,700 Sealed Air Corporation.................. 86,806
-----------
816,298
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-39
<PAGE>
HARTFORD GROWTH AND INCOME HLS FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
</TABLE>
COMMON STOCKS -- (CONTINUED)
<TABLE>
<C> <S> <C>
MEDIA & SERVICES -- 2.4%
*3,500 AirTouch Communications, Inc............ $ 252,437
*800 America Online, Inc..................... 115,800
3,800 Gannett Co., Inc........................ 251,512
-----------
619,749
-----------
REAL ESTATE -- 0.5%
5,400 Starwood Hotels & Resorts............... 122,512
-----------
RETAIL -- 7.1%
4,300 Dayton-Hudson Corp...................... 233,275
5,500 Dollar General Corporation.............. 129,937
5,750 Gap, Inc. (The)......................... 323,437
1,600 Home Depot, Inc. (The).................. 97,900
2,800 May Department Stores Company........... 169,050
2,500 McDonald's Corporation.................. 191,562
8,100 Wal-Mart Stores, Inc.................... 659,643
-----------
1,804,804
-----------
SOFTWARE & SERVICES -- 6.0%
*2,700 Bisys Group, Inc. (The)................. 139,387
*1,700 BMC Software, Inc....................... 75,756
6,000 First Data Corporation.................. 190,125
*7,300 Microsoft Corporation................... 1,012,418
*4,100 Sterling Software, Inc.................. 110,956
-----------
1,528,642
-----------
UTILITIES -- 13.0%
2,700 ALLTEL Corp............................. 161,493
4,600 Ameritech Corporation................... 291,525
4,900 AT&T Corp............................... 368,725
6,000 Bell Atlantic Corporation............... 340,875
12,000 BellSouth Corp.......................... 598,500
8,000 Central & South West Corp............... 219,500
5,600 DQE, Inc................................ 246,050
3,500 El Paso Energy Corporation.............. 121,843
6,000 GPU, Inc................................ 265,125
9,400 SBC Communications, Inc................. 504,075
2,200 Sprint Corporation (FON Group).......... 185,075
-----------
3,302,786
-----------
Total common stocks..................... $24,648,091
-----------
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- -----------
<C> <S> <C>
SHORT-TERM SECURITIES -- 3.8%
REPURCHASE AGREEMENT
Interest in $1,162,198,000 joint
repurchase agreement dated 12/31/98 with
State Street Bank 4.773% due 01/04/99;
maturity amount $954,506 (Collateralized
by $469,031,000 U.S. Treasury Notes
4.00% - 7.775% due 10/31/99 - 02/15/07,
$278,664,000 U.S. Treasury Bonds 7.875%
-12.75% due 11/15/10 - 02/15/21,
$414,603,000 U.S. Treasury Strips
(principal) 0.00% due 02/15/19 -
08/15/21)............................... $ 954,000
$ 954,000
-----------
-----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
<CAPTION>
MARKET
VALUE
-----------
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost
$21,360,397)........................... 97.3% $24,648,091
Total short-term securities (cost
$954,000).............................. 3.8 954,000
------ -----------
Total investment in securities (total
cost $22,314,397)...................... 101.1 25,602,091
Cash, receivables and other assets...... 1.0 243,302
Payable for securities purchased........ (2.0) (507,047)
Payable for dividends................... (0.1) (13,463)
Other liabilities....................... (0.0) (1,758)
------ -----------
Net assets.............................. 100.0% $25,323,125
------ -----------
------ -----------
</TABLE>
<TABLE>
<S> <C>
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.001 per share;
authorized 1,000,000,000 shares; outstanding
21,353,159 shares................................ $ 21,353
Capital surplus................................... 22,081,669
Accumulated undistributed net investment income... 278
Distribution in excess of net realized gain on
investments...................................... (81,434)
Unrealized appreciation of futures contracts...... 13,565
Unrealized appreciation of investments............ 3,287,694
-----------
Net assets........................................ $25,323,125
-----------
-----------
</TABLE>
<TABLE>
<S> <C>
Class IA
Net asset value per share ($25,312,182
DIVIDED BY 21,343,159
shares outstanding).............................. $1.19
-----
-----
Class IB
Net asset value per share ($10,943 DIVIDED BY
10,000
shares outstanding).............................. $1.09
-----
-----
</TABLE>
* Non-income producing during period
** The Fund had 1 Standard & Poor's 500 March 1999 futures contract open as of
December 31, 1998. This contract had a value of $311,375 as of December 31,
1998 and was collateralized by $13,500 of cash.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-40
<PAGE>
HARTFORD HIGH YIELD HLS FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ---------- ------------
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.0%
DLJ Commercial Mortgage Corp., Series
1998-CF1 Class B2
$150,000 7.33% due 01/15/10.................... $ 141,621
------------
------------
<CAPTION>
SHARES
- ----------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCK -- 1.4%
UTILITIES -- 1.4%
8,000 Coastal Finance Corp.................... $ 197,000
------------
------------
<CAPTION>
PRINCIPAL
AMOUNT
- ----------
<C> <S> <C>
CORPORATE NOTES -- 89.2%
COMMUNICATION EQUIPMENT -- 1.1%
Metromedia Fiber Network
$160,000 10.00% due 11/15/08................... $ 164,400
------------
CONSUMER NON-DURABLES -- 0.3%
Revlon Consumer Products Corp.
50,000 8.625% due 02/01/08................... 45,500
------------
CONSUMER SERVICES -- 2.1%
Regal Cinemas, Inc.
100,000 9.50% due 06/01/08.................... 104,000
Six Flags Entertainment Corp.
200,000 8.875% due 04/01/06................... 205,250
------------
309,250
------------
ELECTRONICS -- 2.6%
Advanced Micro Devices
100,000 11.00% due 08/01/03................... 106,500
UNISYS Corp.
150,000 12.00% due 04/15/03................... 168,000
UNISYS Corp.
100,000 7.87% due 04/01/08.................... 108,500
------------
383,000
------------
ENERGY & SERVICES -- 8.6%
AES Corp. Senior Subordinated Note
100,000 10.25% due 07/15/06................... 108,000
AES Corp. Senior Subordinated Note
150,000 8.00% due 12/31/08.................... 148,520
Clark Refining & Marketing, Inc.
125,000 8.375% due 11/15/07................... 117,500
Cogentrix Energy, Inc.
125,000 8.75% due 10/15/08.................... 133,750
Gulf Canada Resources Ltd.
50,000 8.375% due 11/15/05................... 49,250
Gulf Canada Resources Ltd.
100,000 9.625% due 07/01/05................... 99,750
Nuevo Energy Co.
103,000 9.50% due 04/15/06.................... 99,910
Ocean Energy, Inc.
100,000 10.375% due 10/15/05.................. 104,000
R & B Falcon Corp.
150,000 10.25% due 05/15/03................... 158,250
Tesoro Petroleum Corp.
100,000 9.00% due 07/01/08.................... 97,000
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ---------- ------------
<C> <S> <C>
</TABLE>
CORPORATE NOTES -- (CONTINUED)
ENERGY & SERVICES -- (CONTINUED)
<TABLE>
<C> <S> <C>
Tuboscope, Inc.
$150,000 7.50% due 02/15/08.................... $ 136,500
------------
1,252,430
------------
FINANCIAL SERVICES -- 1.1%
Conseco, Inc.
50,000 7.875% due 12/15/00................... 49,585
Trizec Finance Ltd.
100,000 10.875% due 10/15/05.................. 106,250
------------
155,835
------------
FOOD, BEVERAGE & TOBACCO -- 5.3%
Agrilink Foods, Inc.
250,000 11.875% due 11/01/08.................. 254,375
Carr-Gottstein Foods Co.
125,000 12.00% due 11/15/05................... 143,437
Chiquita Brands International, Inc.
200,000 10.25% due 11/01/06................... 207,500
Keebler Corp.
100,000 10.75% due 07/01/06................... 111,500
Nabisco (RJR) Holdings Corp.
50,000 8.75% due 07/15/07.................... 50,488
------------
767,300
------------
FUNERAL/CEMETERY SERVICES -- 0.8%
Loewen Group International, Inc.
150,000 7.60% due 06/01/08.................... 120,750
------------
HEALTH CARE -- 3.6%
Columbia/HCA Healthcare Corp.
150,000 9.00% due 12/15/14.................... 156,062
Owens & Minor, Inc.
250,000 10.875% due 06/01/06.................. 268,750
Tenet Healthcare Corp.
100,000 8.625% due 12/01/03................... 105,515
------------
530,327
------------
HOME BUILDING -- 2.6%
DEL Webb Corp.
50,000 9.375% due 05/01/09................... 49,000
MDC Holdings, Inc.
100,000 8.375% due 02/01/08................... 98,000
Toll Brothers, Inc.
125,000 7.75% due 09/15/07.................... 124,687
Toll Corp.
100,000 8.75% due 11/15/06.................... 102,500
------------
374,187
------------
HOTELS & GAMING -- 7.9%
Circus Circus Enterprises, Inc.
150,000 7.625% due 07/15/13................... 134,569
Circus Circus Enterprises, Inc.
200,000 9.25% due 12/01/05.................... 202,000
Harrah's Operating Co., Inc.
50,000 7.87% due 12/15/05.................... 50,554
Host Marriott Travel Plaza
50,000 9.50% due 05/15/05.................... 51,125
La Quinta Motor Inns
200,000 7.25% due 03/15/04.................... 184,363
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-41
<PAGE>
HARTFORD HIGH YIELD HLS FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ---------- ------------
<C> <S> <C>
</TABLE>
CORPORATE NOTES -- (CONTINUED)
HOTELS & GAMING -- (CONTINUED)
<TABLE>
<C> <S> <C>
MGM Grand, Inc.
$200,000 6.875% due 02/06/08................... $ 186,818
Park Place Entertainment Corp.
100,000 7.875% due 12/15/05................... 100,125
Starwood Hotels & Resorts
272,000 7.375% due 11/15/15................... 240,898
------------
1,150,452
------------
INDUSTRIAL -- 14.0%
Agriculture Minerals and Chemicals Co.
150,000 10.75% due 09/30/03................... 152,250
Allied Waste Industries, Inc.
75,000 7.625% due 01/01/06................... 75,375
American Standard, Inc.
12,000 10.875% due 05/15/99.................. 12,030
Arco Chemical Co.
300,000 9.80% due 02/01/20.................... 301,962
Big Flower Press Holdings, Inc.
125,000 8.625% due 12/01/08................... 126,250
Borden Chemical, Inc.
100,000 9.50% due 05/01/05.................... 83,000
Fisher Scientific International, Inc.
300,000 9.00% due 02/01/08.................... 300,000
Huntsman Corp.
300,000 9.50% due 07/01/07.................... 298,500
ISP Holdings, Inc.
125,000 9.00% due 10/15/03.................... 131,562
R & B Falcon Corp.
50,000 9.50% due 12/15/08.................... 49,937
R & B Falcon Corp.
100,000 7.375% due 04/15/18................... 81,132
RCN Corp.
113,000 10.00% due 10/15/07................... 107,915
Stone Container Corp.
125,000 12.58% due 08/01/16................... 133,750
Terra Industries, Inc.
105,000 10.50% due 06/15/05................... 108,150
WMX Corp.
80,000 10.50% due 04/15/05................... 74,400
------------
2,036,213
------------
MANUFACTURING -- 2.0%
AGCO Corp.
225,000 8.50% due 03/15/06.................... 218,250
Hayes Lemmerz International, Inc.
75,000 8.25% due 12/15/08.................... 74,261
------------
292,511
------------
MEDIA & SERVICES -- 8.7%
Adelphia Communications Corp.
148,000 9.25% due 10/01/02.................... 156,140
Chancellor Media Corp. of Los Angeles
200,000 8.75% due 06/15/07.................... 205,000
Fox Family Worldwide, Inc.
200,000 9.25% due 11/01/07.................... 198,000
Fox/Liberty Networks LLC
150,000 8.875% due 08/15/07................... 153,000
Hollinger International Publishing, Inc.
100,000 9.25% due 02/01/06.................... 105,500
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ---------- ------------
<C> <S> <C>
</TABLE>
MEDIA & SERVICES -- (CONTINUED)
<TABLE>
<C> <S> <C>
Primedia, Inc.
$250,000 10.25% due 06/01/04................... $ 262,500
TCI Satellite Entertainment, Inc.
270,000 10.87% due 02/15/07................... 89,100
Time Warner Telecom LLC
100,000 9.75% due 07/15/08.................... 105,000
------------
1,274,240
------------
PACKAGING & CONTAINERS -- 2.8%
Ball Corp.
115,000 8.25% due 08/01/08.................... 119,600
Container Corp. of America
175,000 11.25% due 05/01/04................... 182,000
Domtar, Inc.
100,000 8.75% due 08/01/06.................... 103,000
------------
404,600
------------
RETAIL -- 0.7%
Jitney-Jungle Stores of America, Inc.
42,000 12.00% due 03/01/06................... 46,830
KMart Corp.
47,000 12.50% due 03/01/05................... 58,824
------------
105,654
------------
SHIPBUILDING -- 0.7%
Newport News Shipbuilding
100,000 9.25% due 12/01/06.................... 105,750
------------
TELECOMMUNICATIONS -- 13.4%
Call-Net Enterprises, Inc.
100,000 8.00% due 08/15/08.................... 96,500
Centennial Cellular Corp.
100,000 10.75% due 12/15/08................... 100,015
Charter Communication International
225,000 11.25% due 03/15/06................... 253,125
Comcast Cellular Holdings Corp. 144A
100,000 9.50% due 05/01/07.................... 106,000
Flag Limited
100,000 8.25% due 01/30/08.................... 98,250
Lenfest Communications
125,000 10.50% due 06/15/06................... 146,250
Level 3 Communications
200,000 9.125% due 05/01/08................... 197,500
McLeodUSA, Inc.
100,000 9.25% due 07/15/07.................... 104,500
McLeodUSA, Inc. 144A
100,000 9.50% due 11/08/08.................... 106,000
Nextlink Communications
150,000 12.50% due 04/15/06................... 162,000
Rogers Cablesystems, Inc.
193,000 10.125% due 09/01/12.................. 212,300
Rogers Cantel Mobile, Inc.
150,000 9.375% due 06/01/08................... 158,250
Rogers Cantel Mobile, Inc.
50,000 9.75% due 06/01/16.................... 53,500
Telewest Communications PLC
100,000 11.25% due 11/01/08................... 112,000
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-42
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ---------- ------------
<C> <S> <C>
</TABLE>
CORPORATE NOTES -- (CONTINUED)
TELECOMMUNICATIONS -- (CONTINUED)
<TABLE>
<C> <S> <C>
Telewest Communications PLC
$ 50,000 9.625% due 10/01/06................... $ 51,500
------------
1,957,690
------------
TEXTILE -- 0.7%
Westpoint Stevens, Inc.
100,000 7.875% due 06/15/05................... 101,625
------------
TRANSPORTATION -- 5.8%
AMR Corp.
150,000 10.00% due 03/07/01................... 162,029
CSC Holdings, Inc.
200,000 9.875% due 02/15/13................... 224,000
Enterprises Shipholding, Inc.
125,000 8.875% due 05/01/08................... 102,500
Teekay Shipping Corp.
250,000 8.32% due 02/01/08.................... 242,812
United Air Lines, Inc.
100,000 9.125% due 01/15/12................... 115,373
------------
846,714
------------
UTILITIES -- 4.4%
Calpine Corp.
50,000 10.50% due 05/15/06................... 55,125
Calpine Corp.
200,000 9.25% due 02/01/04.................... 210,000
Connecticut Light & Power Co.
125,000 7.875% due 10/01/24................... 130,815
El Paso Electric Co.
125,000 9.40% due 05/01/11.................... 144,687
Public Service Company of New Mexico
100,000 7.10% due 08/01/05.................... 100,716
------------
641,343
------------
Total corporate notes................... $ 13,019,771
------------
------------
FOREIGN/YANKEE BONDS & NOTES -- 5.4%
FOREIGN GOVERNMENTS -- 5.4%
Republic of Argentina
250,000 11.00% due 12/04/05................... $ 248,592
Republic of Colombia
100,000 8.375% due 02/15/27................... 74,042
Republic of Panama
100,000 8.875% due 09/30/27................... 93,500
Republic of Venezuela
250,000 6.75% due 03/31/20.................... 173,906
United Mexican States Discount Bond
250,000 6.097% due 12/31/19................... 202,500
------------
Total foreign/yankee bonds & notes...... $ 792,540
------------
------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ---------- ------------
<C> <S> <C>
SHORT-TERM SECURITIES -- 1.8%
REPURCHASE AGREEMENT
$260,000 Interest in $121,902,000 joint $ 260,000
repurchase agreement dated 12/31/98 with
State Street Bank 4.750% due 01/04/99;
maturity amount $260,137 (Collateralized
by $121,902,000 U.S. Treasury Bonds
8.126% due 05/15/21)....................
------------
------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total collaterilzed mortgage obligations
(cost $140,126)........................ 1.0% $ 141,621
Total convertible preferred stock (cost
$196,000).............................. 1.4 197,000
Total corporate notes (cost
$12,886,200)........................... 89.2 13,019,771
Total foreign/yankee bonds & notes (cost
$764,610).............................. 5.4 792,540
Total short-term securities (cost
$260,000).............................. 1.8 260,000
----- -----------
Total investment in securities (total
cost $14,246,936)...................... 98.8 14,410,932
Cash, receivables and other assets...... 2.5 364,138
Payable for dividends................... (1.3) (190,103)
Other liabilities....................... (0.0) (834)
----- -----------
Net assets.............................. 100.0% $14,584,133
----- -----------
----- -----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.10 per share;
authorized 1,000,000,000 shares; outstanding
14,343,923 shares................................ $ 1,434,392
Capital surplus................................... 12,980,385
Accumulated undistributed net realized gain on
investments...................................... 5,360
Unrealized appreciation of investments............ 163,996
-----------
Net assets........................................ $14,584,133
-----------
-----------
</TABLE>
<TABLE>
<S> <C>
Class IA
Net asset value per share ($14,482,460
DIVIDED BY 14,243,923
shares outstanding).............................. $1.02
-----
-----
Class IB
Net asset value per share ($101,673 DIVIDED BY
100,000
shares outstanding).............................. $1.02
-----
-----
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-43
<PAGE>
HARTFORD GLOBAL LEADERS HLS FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ----------
<C> <S> <C>
COMMON STOCKS -- 88.3%
DOMESTIC COMMON STOCKS -- 55.7%
COMMUNICATIONS EQUIPMENT -- 3.8%
*1,370 Cisco Systems, Inc...................... $ 127,153
860 Lucent Technologies, Inc................ 94,600
----------
221,753
----------
COMPUTERS & OFFICE EQUIPMENT -- 5.4%
1,170 EMC Corporation......................... 99,450
750 International Business Machines Corp.... 138,562
640 Xerox Corporation....................... 75,548
----------
313,560
----------
CONSUMER NON-DURABLES -- 0.8%
530 Proctor & Gamble Co..................... 48,395
----------
ELECTRONICS -- 4.6%
1,500 General Electric Company................ 153,093
790 Intel Corporation....................... 93,664
210 Texas Instruments, Inc.................. 17,968
----------
264,725
----------
ENERGY & SERVICES -- 2.3%
870 Exxon Corporation....................... 63,618
1,530 Schlumberger Ltd........................ 70,571
----------
134,189
----------
FINANCIAL SERVICES -- 9.1%
710 American Express Company................ 72,597
880 American International Group, Inc....... 85,030
1,640 Associates First Capital Corporation.... 69,495
1,990 Citigroup, Inc.......................... 98,505
990 Marsh & McLennan Companies, Inc......... 57,853
960 Merrill Lynch & Co., Inc................ 64,080
1,110 State Street Corporation................ 77,214
----------
524,774
----------
FOOD, BEVERAGE & TOBACCO -- 1.3%
1,380 Philip Morris Co., Inc.................. 73,830
----------
HEALTH CARE -- 8.2%
1,110 American Home Products Corporation...... 62,506
*550 Amgen, Inc.............................. 57,509
550 Johnson & Johnson....................... 46,131
840 Medtronic, Inc.......................... 62,370
770 Pfizer, Inc............................. 96,586
1,750 Service Corporation International....... 66,609
1,110 Warner-Lambert Company.................. 83,458
----------
475,169
----------
MANUFACTURING -- 1.1%
860 Tyco International, Ltd................. 64,876
----------
MEDIA & SERVICES -- 2.9%
220 America Online, Inc..................... 31,845
1,300 Gannett Co., Inc........................ 86,043
1,590 Walt Disney Company (The)............... 47,700
----------
165,588
----------
RETAIL -- 9.9%
1,300 CVS Corporation......................... 71,500
1,685 Gap, Inc. (The)......................... 94,781
1,180 Gucci Group NV.......................... 57,377
<CAPTION>
MARKET
SHARES VALUE
- ---------- ----------
<C> <S> <C>
</TABLE>
RETAIL -- (CONTINUED)
<TABLE>
<C> <S> <C>
1,860 Home Depot, Inc. (The).................. $ 113,808
830 McDonald's Corporation.................. 63,598
*1,920 Staples, Inc............................ 83,880
1,110 Wal-Mart Stores, Inc.................... 90,395
----------
575,339
----------
SOFTWARE & SERVICES -- 1.8%
*770 Microsoft Corporation................... 106,789
----------
TRANSPORTATION -- 0.8%
*740 AMR Corporation......................... 43,937
----------
UTILITIES -- 3.7%
350 AT&T Corp............................... 26,337
*1,590 MCI WorldCom, Inc....................... 114,082
1,400 SBC Communications, Inc................. 75,075
----------
215,494
----------
Total domestic common stocks............ $3,228,418
----------
FOREIGN COMMON STOCKS -- 32.6%
FINLAND -- 2.0%
930 Nokia AB Oy............................. $ 113,878
----------
FRANCE -- 4.2%
420 Alcatel................................. 51,428
270 AXA..................................... 39,151
60 L'Oreal................................. 43,394
430 Vivendi................................. 111,618
----------
245,591
----------
GERMANY -- 3.3%
*770 DaimlerChrysler AG...................... 76,513
1,580 Hoechst AG.............................. 65,361
740 Siemens AG.............................. 48,651
----------
190,525
----------
ITALY -- 1.6%
10,600 Telecom Italia S.p.A.................... 90,642
----------
JAPAN -- 3.6%
1,090 Fuji Photo Film Co., Ltd................ 40,586
290 Mabuchi Motor Co., Ltd.................. 22,239
4,380 Olympus Optical Co., Ltd................ 50,441
620 Sony Corporation........................ 45,237
8,630 Toshiba Corporation..................... 51,490
----------
209,993
----------
NETHERLANDS -- 4.3%
480 Aegon Nv................................ 58,981
800 Heineken NV............................. 48,170
670 ING Groep N.V........................... 40,878
540 Philips Electronics NV.................. 36,255
760 Unilever NV CVA......................... 64,998
----------
249,282
----------
SPAIN -- 0.5%
670 Telef De Espana......................... 595
*670 Telefonica S.A.......................... 29,837
----------
30,432
----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-44
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ----------
<C> <S> <C>
</TABLE>
FOREIGN COMMON STOCKS -- (CONTINUED)
<TABLE>
<C> <S> <C>
SWEDEN -- 2.9%
1,030 Hennes & Mauritz AB..................... $ 84,122
1,520 Pharmacia & Upjohn...................... 85,136
----------
169,258
----------
UNITED KINGDOM -- 10.2%
6,390 British Petroleum Co., PLC.............. 95,366
*3,460 COLT Telecom Group PLC.................. 50,659
5,020 Compass Group PLC....................... 57,463
2,540 Glaxo Wellcome PLC...................... 87,098
3,670 National Westminster Bank PLC........... 70,709
10,750 Rentokil Initial PLC.................... 80,396
3,930 SmithKline Beecham PLC.................. 55,154
5,850 Vodafone Group PLC...................... 94,801
----------
591,646
----------
Total foreign common stocks............. $1,891,247
----------
Total common stocks..................... $5,119,665
----------
----------
<CAPTION>
PRINCIPAL
AMOUNT
- ----------
<C> <S> <C>
SHORT-TERM SECURITIES -- 17.6%
Repurchase Agreement
$1,020,000 Interest in $1,162,198,000 joint $1,020,000
repurchase agreement dated 12/31/98
with State Street Bank 4.773% due
01/04/99; maturity amount $1,020,541
(Collateralized by $469,031,000 U.S.
Treasury Notes 4.00% - 7.775% due
10/31/99 - 02/15/07, $278,664,000 U.S.
Treasury Bonds 7.875% - 12.75% due
11/15/10 - 02/15/21, $414,603,000 U.S.
Treasury Strips (principal) 0.00% due
02/15/19 - 08/15/21)..................
----------
----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
<CAPTION>
MARKET
VALUE
----------
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $4,249,568)... 88.3% $5,119,665
Total short-term securities (cost
$1,020,000)............................ 17.6 1,020,000
----- ----------
Total investment in securities (total
cost $5,269,568)....................... 105.9 6,139,665
Cash, receivables and other assets...... 0.5 29,995
Payable for securities purchased........ (3.4) (194,817)
Payable for Fund shares redeemed........ (1.2) (69,651)
Payable for dividends................... (1.7) (100,727)
Other liabilities....................... (0.1) (5,020)
----- ----------
Net assets.............................. 100.0% $5,799,445
----- ----------
----- ----------
</TABLE>
<TABLE>
<S> <C>
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value 0.10 per share;
authorized 1,000,000,000 shares; outstanding
4,512,549 shares................................. $ 451,255
Capital surplus................................... 4,429,528
Accumulated undistributed net investment income... 585
Accumulated undistributed net realized gain on
investments...................................... 47,973
Unrealized appreciation of investments............ 870,097
Unrealized appreciation of other assets and
liabilities in foriegn currencies................ 7
----------
Net assets........................................ $5,799,445
----------
----------
</TABLE>
<TABLE>
<S> <C>
Class IA
Net asset value per share ($5,760,892 DIVIDED BY
4,482,549
shares outstanding).............................. $1.29
-----
-----
Class IB
Net asset value per share ($38,553 DIVIDED BY
30,000
shares outstanding).............................. $1.29
-----
-----
</TABLE>
* Non-income producing during period
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-45
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
HARTFORD HARTFORD
BOND STOCK
HLS FUND, INC. HLS FUND, INC.
--------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 63,796 $ 66,038,085
Interest............... 45,802,968 17,131,997
Less foreign tax
withheld.............. -- (620,113)
--------------- ----------------
Total investment
income, net......... 45,866,764 82,549,969
--------------- ----------------
EXPENSES:
Investment advisory
fees.................. 2,165,188 15,103,808
Administrative services
fees.................. 1,314,094 10,675,568
Accounting services.... 49,193 338,710
Custodian fees gross... 16,903 25,129
Custodian fee expense
offset................ (13,232) (6,446)
Board of Directors
fees.................. 2,266 18,649
Distribution fees --
Class IB.............. 3,149 5,242
Other expenses......... 77,289 673,470
--------------- ----------------
Total expenses,
net................. 3,614,850 26,834,130
Less advisory fees
waived by HL
Advisors.............. -- --
--------------- ----------------
Net expenses......... 3,614,850 26,834,130
--------------- ----------------
Net investment income
(loss)................ 42,251,914 55,715,839
--------------- ----------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 6,858,115 606,814,711
Net realized gain
(loss) on futures
contracts............. -- --
Net realized gain
(loss) on forward
foreign currency
contracts............. -- (73)
Net realized loss on
option contracts...... -- --
Net realized gain
(loss) on foreign
currency
transactions.......... (147) 50
Net unrealized
appreciation
(depreciation) of
investments........... 6,537,524 1,025,008,611
Net unrealized
appreciation
(depreciation) of
futures contracts..... -- --
Net unrealized
appreciation
(depreciation) of
forward foreign
currency contracts.... -- --
Net unrealized
(depreciation)
appreciation on
translation of other
assets and liabilities
in foreign
currencies............ -- 6,067
Net unrealized
appreciation of option
contracts............. -- --
--------------- ----------------
Net realized and
unrealized gain (loss)
on investments........ 13,395,492 1,631,829,366
--------------- ----------------
Net increase in net
assets resulting from
operations............ $55,647,406 $1,687,545,205
--------------- ----------------
--------------- ----------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-46
<PAGE>
<TABLE>
<CAPTION>
HARTFORD HARTFORD
HARTFORD HARTFORD CAPITAL MORTGAGE HARTFORD
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX
HLS FUND, INC. HLS FUND, INC. HLS FUND, INC. HLS FUND, INC. HLS FUND, INC.
--------------- ---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ -- $ 72,075,207 $ 49,463,854 $ -- $ 21,216,435
Interest............... 39,247,531 230,292,716 16,250,813 22,304,944 2,512,046
Less foreign tax
withheld.............. -- (601,648) (1,432,247) -- (122,001)
--------------- ---------------- --------------- --------------- ---------------
Total investment
income, net......... 39,247,531 301,766,275 64,282,420 22,304,944 23,606,480
--------------- ---------------- --------------- --------------- ---------------
EXPENSES:
Investment advisory
fees.................. 1,756,465 43,114,112 23,148,831 838,841 2,931,531
Administrative services
fees.................. 1,284,777 18,087,300 9,497,866 609,614 2,669,517
Accounting services.... 37,291 593,833 309,882 43,753 84,477
Custodian fees gross... 7,404 49,003 130,384 14,508 24,416
Custodian fee expense
offset................ (3,289) (15,270) (112,989) (950) (1,563)
Board of Directors
fees.................. 2,247 31,961 17,367 1,118 4,622
Distribution fees --
Class IB.............. 1,113 18,206 3,564 -- --
Other expenses......... 63,438 1,137,354 639,763 43,766 172,673
--------------- ---------------- --------------- --------------- ---------------
Total expenses,
net................. 3,149,446 63,016,499 33,634,668 1,550,650 5,885,673
Less advisory fees
waived by HL
Advisors.............. -- -- -- -- --
--------------- ---------------- --------------- --------------- ---------------
Net expenses......... 3,149,446 63,016,499 33,634,668 1,550,650 5,885,673
--------------- ---------------- --------------- --------------- ---------------
Net investment income
(loss)................ 36,098,085 238,749,776 30,647,752 20,754,294 17,720,807
--------------- ---------------- --------------- --------------- ---------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 11,475 996,514,466 358,809,472 1,956,549 25,573,037
Net realized gain
(loss) on futures
contracts............. -- -- 4,069,525 241,511 4,352,316
Net realized gain
(loss) on forward
foreign currency
contracts............. -- (53) 2,844,827 -- (10)
Net realized loss on
option contracts...... -- -- -- -- --
Net realized gain
(loss) on foreign
currency
transactions.......... -- 74 (1,712,932) -- --
Net unrealized
appreciation
(depreciation) of
investments........... -- 952,173,946 357,758,158 (1,235,881) 316,713,105
Net unrealized
appreciation
(depreciation) of
futures contracts..... -- -- -- -- (46,801)
Net unrealized
appreciation
(depreciation) of
forward foreign
currency contracts.... -- -- 35,449 -- --
Net unrealized
(depreciation)
appreciation on
translation of other
assets and liabilities
in foreign
currencies............ -- 33,617 80,691 -- --
Net unrealized
appreciation of option
contracts............. -- -- -- (25,947) --
--------------- ---------------- --------------- --------------- ---------------
Net realized and
unrealized gain (loss)
on investments........ 11,475 1,948,722,050 721,885,190 936,232 346,591,647
--------------- ---------------- --------------- --------------- ---------------
Net increase in net
assets resulting from
operations............ $36,109,560 $2,187,471,826 $752,532,942 $21,690,526 $364,312,454
--------------- ---------------- --------------- --------------- ---------------
--------------- ---------------- --------------- --------------- ---------------
<CAPTION>
HARTFORD
INTERNATIONAL
OPPORTUNITIES
HLS FUND, INC.
---------------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $ 23,432,286
Interest............... 5,508,136
Less foreign tax
withheld.............. (2,356,446)
---------------
Total investment
income, net......... 26,583,976
---------------
EXPENSES:
Investment advisory
fees.................. 5,838,942
Administrative services
fees.................. 2,115,423
Accounting services.... 82,214
Custodian fees gross... 782,236
Custodian fee expense
offset................ (8,863)
Board of Directors
fees.................. 3,868
Distribution fees --
Class IB.............. 454
Other expenses......... 193,914
---------------
Total expenses,
net................. 9,008,188
Less advisory fees
waived by HL
Advisors.............. --
---------------
Net expenses......... 9,008,188
---------------
Net investment income
(loss)................ 17,575,788
---------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 4,385,904
Net realized gain
(loss) on futures
contracts............. 10,045,308
Net realized gain
(loss) on forward
foreign currency
contracts............. (4,349,030)
Net realized loss on
option contracts...... (459,970)
Net realized gain
(loss) on foreign
currency
transactions.......... 3,044,637
Net unrealized
appreciation
(depreciation) of
investments........... 110,073,545
Net unrealized
appreciation
(depreciation) of
futures contracts..... (420,229)
Net unrealized
appreciation
(depreciation) of
forward foreign
currency contracts.... (753,309)
Net unrealized
(depreciation)
appreciation on
translation of other
assets and liabilities
in foreign
currencies............ 261,051
Net unrealized
appreciation of option
contracts............. --
---------------
Net realized and
unrealized gain (loss)
on investments........ 121,827,907
---------------
Net increase in net
assets resulting from
operations............ $139,403,695
---------------
---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-47
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS -- (CONTINUED)
FOR THE PERIOD ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
HARTFORD HARTFORD
DIVIDEND AND INTERNATIONAL
GROWTH ADVISERS
HLS FUND, INC. HLS FUND, INC.
--------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 59,811,128 $ 3,075,922
Interest............... 4,107,427 6,333,858
Less foreign tax
withheld.............. (609,590) (341,731)
--------------- ----------------
Total investment
income, net......... 63,308,965 9,068,049
--------------- ----------------
EXPENSES:
Investment advisory
fees.................. 11,746,871 1,429,470
Administrative services
fees.................. 4,656,224 453,310
Accounting services.... 147,474 17,980
Custodian fees gross... 20,952 240,573
Custodian fee expense
offset................ (10,205) (3,106)
Board of Directors
fees.................. 8,158 801
Distribution fees --
Class IB.............. 5,749 --
Other expenses......... 288,887 12,909
--------------- ----------------
Total expenses,
net................. 16,864,110 2,151,937
Less advisory fees
waived by HL
Advisors.............. -- --
--------------- ----------------
Net expenses......... 16,864,110 2,151,937
--------------- ----------------
Net investment income
(loss)................ 46,444,855 6,916,112
--------------- ----------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 112,250,668 (827,584)
Net realized gain
(loss) on futures
contracts............. -- 4,192,582
Net realized gain
(loss) on forward
foreign currency
contracts............. 5,694 (234,783)
Net realized loss on
option contracts...... 313,315 (53,142)
Net realized gain
(loss) on foreign
currency
transactions.......... 105,334 79,061
Net unrealized
appreciation
(depreciation) of
investments........... 219,643,687 22,114,123
Net unrealized
appreciation
(depreciation) of
futures contracts..... -- (25,037)
Net unrealized
appreciation
(depreciation) of
forward foreign
currency contracts.... -- (2,747,964)
Net unrealized
(depreciation)
appreciation on
translation of other
assets and liabilities
in foreign
currencies............ -- (300,681)
Net unrealized
appreciation of option
contracts............. (237,504) --
--------------- ----------------
Net realized and
unrealized gain (loss)
on investments........ 332,081,194 22,196,575
--------------- ----------------
Net increase in net
assets resulting from
operations............ $378,526,049 $29,112,687
--------------- ----------------
--------------- ----------------
</TABLE>
* From inception, April 30, 1998, to December 31, 1998.
** From inception, September 21, 1998, to December 31, 1998.
*** From inception, September 30, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-48
<PAGE>
<TABLE>
<CAPTION>
HARTFORD HARTFORD
SMALL HARTFORD GROWTH AND HARTFORD HARTFORD
COMPANY MIDCAP INCOME HIGH YIELD GLOBAL LEADERS
HLS FUND, INC. HLS FUND, INC. HLS FUND* HLS FUND** HLS FUND***
--------------- --------------- ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 781,032 $ 321,869 $ 86,018 $ 4,188 $ 6,113
Interest............... 641,062 181,823 29,226 279,022 9,553
Less foreign tax
withheld.............. (15,197) (3,338) (915) -- (219)
--------------- --------------- ------------ ----------- ---------------
Total investment
income, net......... 1,406,897 500,354 114,329 283,210 15,447
--------------- --------------- ------------ ----------- ---------------
EXPENSES:
Investment advisory
fees.................. 1,511,160 449,736 38,069 19,214 5,826
Administrative services
fees.................. 481,386 144,116 12,712 6,684 2,027
Accounting services.... 14,870 5,195 347 976 309
Custodian fees gross... 12,921 13,055 4,183 3,011 6,251
Custodian fee expense
offset................ (7,901) (7,308) (81) (99) (10)
Board of Directors
fees.................. 848 213 12 -- --
Distribution fees --
Class IB.............. 427 -- 10 50 16
Other expenses......... 28,411 15,619 1,868 1,124 460
--------------- --------------- ------------ ----------- ---------------
Total expenses,
net................. 2,042,122 620,626 57,120 30,960 14,879
Less advisory fees
waived by HL
Advisors.............. -- -- (38,069) (19,214) (5,826)
--------------- --------------- ------------ ----------- ---------------
Net expenses......... 2,042,122 620,626 19,051 11,746 9,053
--------------- --------------- ------------ ----------- ---------------
Net investment income
(loss)................ (635,225) (120,272) 95,278 271,464 6,394
--------------- --------------- ------------ ----------- ---------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (23,736,198) 3,572,474 (84,884) 3,917 193,107
Net realized gain
(loss) on futures
contracts............. -- -- 3,450 -- --
Net realized gain
(loss) on forward
foreign currency
contracts............. (397) 2,884 -- -- (1,475)
Net realized loss on
option contracts...... -- -- -- -- --
Net realized gain
(loss) on foreign
currency
transactions.......... 272 (2,167) -- (21) 2,532
Net unrealized
appreciation
(depreciation) of
investments........... 58,188,093 17,561,240 3,287,694 163,996 870,097
Net unrealized
appreciation
(depreciation) of
futures contracts..... -- -- 13,565 -- --
Net unrealized
appreciation
(depreciation) of
forward foreign
currency contracts.... -- -- -- -- --
Net unrealized
(depreciation)
appreciation on
translation of other
assets and liabilities
in foreign
currencies............ 157 -- -- -- 7
Net unrealized
appreciation of option
contracts............. -- -- -- -- --
--------------- --------------- ------------ ----------- ---------------
Net realized and
unrealized gain (loss)
on investments........ 34,451,927 21,134,431 3,219,825 167,892 1,064,268
--------------- --------------- ------------ ----------- ---------------
Net increase in net
assets resulting from
operations............ $33,816,702 $21,014,159 $3,315,103 $439,356 $1,070,662
--------------- --------------- ------------ ----------- ---------------
--------------- --------------- ------------ ----------- ---------------
</TABLE>
* From inception, April 30, 1998, to December 31, 1998.
** From inception, September 21, 1998, to December 31, 1998.
*** From inception, September 30, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-49
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
HARTFORD HARTFORD
BOND STOCK
HLS FUND, INC. HLS FUND, INC.
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment
income................ $ 42,251,914 $ 55,715,839
Net realized gain
(loss)................ 6,857,968 606,814,688
Net unrealized
appreciation
(depreciation) of
investments........... 6,537,524 1,025,014,678
--------------- ---------------
Net increase (decrease)
in net assets
resulting from
operations............ 55,647,406 1,687,545,205
--------------- ---------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income
Class IA............. (42,744,233) (54,276,510)
Class IB............. (255,767) (423,490)
In excess of net
investment income
Class IA............. -- --
Class IB............. -- --
From realized gain on
investments
Class IA............. -- (173,700,001)
Class IB............. -- --
From Capital
Class IA............. -- --
Class IB............. -- --
--------------- ---------------
Total
distributions....... (43,000,000) (228,400,001)
--------------- ---------------
CAPITAL SHARE
TRANSACTIONS:
Class IA............. 336,835,852 1,011,129,116
Class IB............. 5,412,364 9,617,289
--------------- ---------------
Net increase
(decrease) from
capital share
transactions...... 342,248,216 1,020,746,405
--------------- ---------------
Net increase in
net assets........ 354,895,622 2,479,891,609
NET ASSETS:
Beginning of period.... 552,869,797 4,713,321,561
--------------- ---------------
End of period.......... $907,765,419 $7,193,213,170
--------------- ---------------
--------------- ---------------
Accumulated
undistributed
(distribution in
excess of) net
investment income..... $ 601,032 $ 2,530,584
--------------- ---------------
--------------- ---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-50
<PAGE>
<TABLE>
<CAPTION>
HARTFORD HARTFORD
HARTFORD HARTFORD CAPITAL MORTGAGE HARTFORD
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX
HLS FUND, INC. HLS FUND, INC. HLS FUND, INC. HLS FUND, INC. HLS FUND, INC.
--------------- ---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income................ $ 36,098,085 $ 238,749,776 $ 30,647,752 $ 20,754,294 $ 17,720,807
Net realized gain
(loss)................ 11,475 996,514,487 364,010,892 2,198,060 29,925,343
Net unrealized
appreciation
(depreciation) of
investments........... -- 952,207,563 357,874,298 (1,261,828) 316,666,304
--------------- ---------------- --------------- --------------- ---------------
Net increase (decrease)
in net assets
resulting from
operations............ 36,109,560 2,187,471,826 752,532,942 21,690,526 364,312,454
--------------- ---------------- --------------- --------------- ---------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income
Class IA............. (36,067,869) (233,135,052) (30,859,661) (20,754,294) (15,000,000)
Class IB............. (30,216) (1,804,946) (140,339) -- --
In excess of net
investment income
Class IA............. -- -- -- (963,871) --
Class IB............. -- -- -- -- --
From realized gain on
investments
Class IA............. (11,470) (297,100,001) (320,000,000) -- (29,600,000)
Class IB............. (5) -- -- -- --
From Capital
Class IA............. -- -- -- (481,835) --
Class IB............. -- -- -- -- --
--------------- ---------------- --------------- --------------- ---------------
Total
distributions....... (36,109,560) (532,039,999) (351,000,000) (22,200,000) (44,600,000)
--------------- ---------------- --------------- --------------- ---------------
CAPITAL SHARE
TRANSACTIONS:
Class IA............. 260,005,789 1,866,824,047 603,278,396 31,642,127 402,949,764
Class IB............. 2,179,043 33,957,359 5,618,272 -- --
--------------- ---------------- --------------- --------------- ---------------
Net increase
(decrease) from
capital share
transactions...... 262,184,832 1,900,781,406 608,896,668 31,642,127 402,949,764
--------------- ---------------- --------------- --------------- ---------------
Net increase in
net assets........ 262,184,832 3,556,213,233 1,010,429,610 31,132,653 722,662,218
NET ASSETS:
Beginning of period.... 612,480,218 8,283,911,901 4,802,992,002 325,701,680 1,123,455,002
--------------- ---------------- --------------- --------------- ---------------
End of period.......... $874,665,050 $11,840,125,134 $5,813,421,612 $356,834,333 $1,846,117,220
--------------- ---------------- --------------- --------------- ---------------
--------------- ---------------- --------------- --------------- ---------------
Accumulated
undistributed
(distribution in
excess of) net
investment income..... $ -- $ 8,440,413 $ 61,286 $ -- $ 3,697,905
--------------- ---------------- --------------- --------------- ---------------
--------------- ---------------- --------------- --------------- ---------------
<CAPTION>
HARTFORD
INTERNATIONAL
OPPORTUNITIES
HLS FUND, INC.
---------------
<S> <C>
OPERATIONS:
Net investment
income................ $ 17,575,788
Net realized gain
(loss)................ 12,666,849
Net unrealized
appreciation
(depreciation) of
investments........... 109,161,058
---------------
Net increase (decrease)
in net assets
resulting from
operations............ 139,403,695
---------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income
Class IA............. (15,638,936)
Class IB............. (11,063)
In excess of net
investment income
Class IA............. --
Class IB............. --
From realized gain on
investments
Class IA............. (72,215,058)
Class IB............. --
From Capital
Class IA............. --
Class IB............. --
---------------
Total
distributions....... (87,865,057)
---------------
CAPITAL SHARE
TRANSACTIONS:
Class IA............. 52,208,761
Class IB............. 663,583
---------------
Net increase
(decrease) from
capital share
transactions...... 52,872,344
---------------
Net increase in
net assets........ 104,410,982
NET ASSETS:
Beginning of period.... 1,092,945,600
---------------
End of period.......... $1,197,356,582
---------------
---------------
Accumulated
undistributed
(distribution in
excess of) net
investment income..... $ 958,685
---------------
---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-51
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE PERIOD ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
HARTFORD HARTFORD
DIVIDEND AND INTERNATIONAL
GROWTH ADVISERS
HLS FUND, INC. HLS FUND, INC.
-------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment
income................ $ 46,444,855 $ 6,916,112
Net realized gain
(loss)................ 112,675,011 3,156,134
Net unrealized
appreciation
(depreciation) of
investments........... 219,406,183 19,040,441
-------------- ----------------
Net increase (decrease)
in net assets
resulting from
operations............ 378,526,049 29,112,687
-------------- ----------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income
Class IA............. (47,843,520 ) (6,916,112)
Class IB............. (256,480 ) --
In excess of net
investment income
Class IA............. -- (1,129,081)
Class IB............. -- --
From realized gain on
investments
Class IA............. (76,700,000 ) (5,712,912)
Class IB............. -- --
From Capital
Class IA............. -- (15,954,807)
Class IB............. -- --
-------------- ----------------
Total
distributions....... (124,800,000 ) (29,712,912)
-------------- ----------------
CAPITAL SHARE
TRANSACTIONS:
Class IA............. 783,146,614 78,871,230
Class IB............. 8,367,912 --
-------------- ----------------
Net increase
(decrease) from
capital share
transactions........ 791,514,526 78,871,230
-------------- ----------------
Net increase in net
assets.............. 1,045,240,575 78,271,005
NET ASSETS:
Beginning of period.... 1,994,653,222 207,581,524
-------------- ----------------
End of period.......... $3,039,893,797 $285,852,529
-------------- ----------------
-------------- ----------------
Accumulated
undistributed
(distribution in
excess of) net
investment income..... $ 2,405,420 $ 763,703
-------------- ----------------
-------------- ----------------
</TABLE>
* From inception, April 30, 1998, to December 31, 1998.
** From inception, September 21, 1998, to December 31, 1998.
*** From inception, September 30, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-52
<PAGE>
<TABLE>
<CAPTION>
HARTFORD HARTFORD
SMALL HARTFORD GROWTH AND HARTFORD HARTFORD
COMPANY MIDCAP INCOME HIGH YIELD GLOBAL LEADERS
HLS FUND, INC. HLS FUND, INC. HLS FUND* HLS FUND** HLS FUND***
--------------- --------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income................ $ (635,225) $ (120,272) $ 95,278 $ 271,464 $ 6,394
Net realized gain
(loss)................ (23,736,323) 3,573,191 (81,434) 3,896 194,164
Net unrealized
appreciation
(depreciation) of
investments........... 58,188,250 17,561,240 3,301,259 163,996 870,104
--------------- --------------- ------------ ------------ ---------------
Net increase (decrease)
in net assets
resulting from
operations............ 33,816,702 21,014,159 3,315,103 439,356 1,070,662
--------------- --------------- ------------ ------------ ---------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income
Class IA............. -- (1,000) (94,966) (268,149) (6,969)
Class IB............. -- -- (34) (1,851) (31)
In excess of net
investment income
Class IA............. -- -- -- -- --
Class IB............. -- -- -- -- --
From realized gain on
investments
Class IA............. (3,776,000) -- -- -- (144,039)
Class IB............. -- -- -- -- (961)
From Capital
Class IA............. -- -- -- -- --
Class IB............. -- -- -- -- --
--------------- --------------- ------------ ------------ ---------------
Total
distributions....... (3,776,000) (1,000) (95,000) (270,000) (152,000)
--------------- --------------- ------------ ------------ ---------------
CAPITAL SHARE
TRANSACTIONS:
Class IA............. 109,974,909 94,891,577 22,093,022 14,314,777 4,850,783
Class IB............. 644,867 -- 10,000 100,000 30,000
--------------- --------------- ------------ ------------ ---------------
Net increase
(decrease) from
capital share
transactions........ 110,619,776 94,891,577 22,103,022 14,414,777 4,880,783
--------------- --------------- ------------ ------------ ---------------
Net increase in net
assets.............. 140,660,478 115,904,736 25,323,125 14,584,133 5,799,445
NET ASSETS:
Beginning of period.... 210,769,434 27,588,907 -- -- --
--------------- --------------- ------------ ------------ ---------------
End of period.......... $351,429,912 $143,493,643 $25,323,125 $14,584,133 $5,799,445
--------------- --------------- ------------ ------------ ---------------
--------------- --------------- ------------ ------------ ---------------
Accumulated
undistributed
(distribution in
excess of) net
investment income..... $ -- $ -- $ 278 $ -- $ 585
--------------- --------------- ------------ ------------ ---------------
--------------- --------------- ------------ ------------ ---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
MF-53
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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, Hartford High Yield HLS
Fund and Hartford Global Leaders 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
(formerly Hartford Bond Fund, Inc.) 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
(formerly Hartford Stock Fund, Inc.) in a diversified portfolio of equity securities.
Hartford Money Market HLS Fund, Inc. Seeks a high level of current income consistent
(formerly HVA Money Market Fund, Inc.) with liquidity and the need for preservation of
capital through investment in high-quality
money-market securities.
Hartford Advisers HLS Fund, Inc. Seeks maximum long-term total rate of return
(formerly Hartford Advisers Fund, Inc.) (capital growth and current income) through
investment in a varying mix of stocks, bonds and
money market instruments.
Hartford Capital Appreciation HLS Fund, Inc. Seeks growth of capital through investment in
(formerly Hartford Capital Appreciation Fund, equity securities of companies with high growth
Inc.) potential, including small, medium and large
companies.
Hartford Mortgage Securities HLS Fund, Inc. Seeks a high level of current income by investing
(formerly Hartford Mortgage Securities Fund, primarily in mortgage-backed securities, including
Inc.) securities issued by Government National Mortgage
Association.
Hartford Index HLS Fund, Inc. Seeks to approximate the price and yield
(formerly Hartford Index Fund, Inc.) performance represented by the Standard & Poor's
500 Composite Stock Price Index through
investments in common stocks.
Hartford International Opportunities HLS Fund, Seeks growth of capital through investing
Inc. primarily in foreign equity securities issues.
(formerly Hartford International Opportunity
Fund, Inc.)
Hartford Dividend and Growth HLS Fund, Inc. Seeks a high level of current income consistent
(formerly Hartford Dividend and Growth Fund, with growth of capital and moderate investment
Inc.) risk. Primary investments are equity securities
and securities convertible into equity securities
that typically have above average yield.
</TABLE>
MF-56
<PAGE>
<TABLE>
<S> <C>
Hartford International Advisers HLS Fund, Inc. Seeks a long-term total rate of return consistent
(formerly Hartford International Advisors Fund, with moderate risk. Investments include a mix of
Inc.) debt, equity and money market instruments
primarily with foreign issuers.
Hartford Small Company HLS Fund, Inc. Seeks growth of capital by investing primarily in
(formerly Hartford Small Company Fund, Inc.) equity securities selected on the basis of
potential for capital appreciation.
Hartford MidCap HLS Fund, Inc. Seeks long term capital growth through capital
(formerly Hartford MidCap Fund, Inc.) appreciation by investing primarily in equity
securities.
Hartford Growth and Income HLS Fund Seeks growth of capital and current income by
investing primarily in equity securities with
earnings growth potential and steady or rising
dividends.
Hartford High Yield Bond HLS Fund Seeks high current income, growth of capital is a
secondary objective.
Hartford Global Leaders HLS Fund Seeks growth of capital by investing primarily in
equity securities selected on the basis of
potential for capital appreciation.
</TABLE>
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 12b-1 plan. Distribution and Service Plans have been 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 (the day 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 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.
MF-57
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
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 foreign
currencies and the difference between asset and liability amounts
initially stated in foreign currencies and the U.S. dollar value of the
amounts actually received or paid. Net unrealized foreign exchange gains
or losses arise from changes in the value of other assets and liabilities
at the end of the reporting period, resulting from changes in 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 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 (HIMCO) 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.
MF-58
<PAGE>
The funds may write covered options. "Covered" means that so long as the
Fund is obligated as the writer of an option, it will own either the
underlying securities or currency or an option to purchase or sell the
same underlying securities or currency having an expiration date of the
covered option at an exercise price equal to or less than the exercise
price of the covered option, or will establish or maintain with its
custodian for the term of the option a "segregated account" consisting of
cash or other liquid securities having a value equal to the fluctuating
market value of the option securities or currencies. The Fund receives a
premium from writing a call or put option, which increases the Fund's
return if the option expires unexercised or is closed out at a net profit.
The Funds' option activity was as follows during 1998:
HLS DIVIDEND AND GROWTH FUND
<TABLE>
<CAPTION>
OPTIONS CONTRACTS
WRITTEN DURING THE
PERIOD
------------------------
NUMBER OF DOLLAR
CALL WRITES CONTRACTS AMOUNTS
- ---------------------------------------- --------- ------------
<S> <C> <C>
Beginning of Period..................... 0 $ 0
During the Period....................... 44,254 3,733,685
Expired during the period............... (1,146) (90,855)
Closed during the period................ (33,790) (2,752,267)
Exercised during the period............. (1,668) (205,958)
--------- ------------
Balance at the end of period............ 7,650 $ 684,605
--------- ------------
--------- ------------
</TABLE>
<TABLE>
<CAPTION>
OPTIONS CONTRACTS
WRITTEN DURING THE
PERIOD
------------------------
NUMBER OF DOLLAR
PUT PURCHASES CONTRACTS AMOUNTS
- ---------------------------------------- --------- ------------
<S> <C> <C>
Beginning of Period..................... 0 $ 0
During the Period....................... 11,249 1,109,195
Expired during the period............... 0 0
Closed during the period................ (11,249) (1,109,195)
Exercised during the period............. 0 0
--------- ------------
Balance at the end of period............ 0 $ 0
--------- ------------
--------- ------------
</TABLE>
g) FORWARD FOREIGN CURRENCY CONTRACTS--As of December 31, 1998, Hartford
International Opportunities 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.
h) 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.
i) 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,
except that certain dividends for foreign securities where the ex-dividend
date may have passed, are recorded as soon as the fund is informed of the
ex-dividend data in the exercise of due diligence. 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
MF-59
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
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 of all funds
except the Hartford Money Market HLS Fund, Inc. 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, realized capital gains and
capital 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).
j) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported
amounts of income and expenses during the period. Operating results in the
future could vary from the amounts derived from management's estimates.
k) RESTRICTED SECURITIES--Each Fund is permitted to invest up to 15% of its
net assets in illiquid securities, except for 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 December 31, 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............... Intermedia Communications 10/15/98 $ 342,225 $ 217,971 0.004%
Capital Appreciation HLS
Fund, Inc............... SGW Holding Corporation 8/15/97 $ 11,311,018 $ 2,736,360 0.047%
Small Company HLS Fund,
Inc..................... SGW Holding Corporation 8/15/97 $ 599,992 $ 145,150 0.041%
</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.
MF-60
<PAGE>
The schedule below reflects the rates of compensation paid to HL Advisors
for services rendered:
HARTFORD INDEX HLS FUND, INC.
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS ANNUAL RATE
- -------------------------------------------------- -----------
<S> <C>
All Assets 0.200%
</TABLE>
HARTFORD MORTGAGE SECURITIES HLS FUND, INC.
AND HARTFORD MONEY MARKET HLS FUND, INC.
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS ANNUAL RATE
- -------------------------------------------------- -----------
<S> <C>
All Assets 0.250%
</TABLE>
HARTFORD BOND HLS FUND, INC.
AND HARTFORD STOCK HLS FUND, INC.
<TABLE>
<CAPTION>
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
</TABLE>
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.,
HARTFORD GROWTH AND INCOME HLS FUND,
HARTFORD HIGH YIELD HLS FUND AND
HARTFORD GLOBAL LEADERS HLS FUND
<TABLE>
<CAPTION>
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>
HL Advisors has agreed to waive its fees for the Hartford Growth and
Income HLS Fund, Inc., Hartford High Yield HLS Fund, Inc. and Hartford
Global Leaders HLS Fund, Inc. and until the net assets of these Funds,
excluding assets contributed by companies affiliated with HL Advisors,
reaches $20 million. Total fees waived during 1998 amounted to $38,069,
$19,214 and $5,826 on Hartford Growth and Income HLS Fund, Hartford High
Yield HLS Fund and Hartford Global Leaders HLS Fund, respectively.
Pursuant to investment services agreements between HL Advisors and 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., Hartford Index HLS Fund, Inc.
and Hartford High Yield HLS Fund. 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., Hartford Growth and Income HLS Fund
and Hartford Global Leaders 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
MF-61
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
furnish reports to the Funds' Board of Directors concerning economic
forecasts, investment strategy, portfolio activity and performance of the
Funds.
b) ADMINISTRATIVE SERVICES AGREEMENT--Under the Administrative Services
Agreement between Hartford Life Insurance Company (HL and each of the Funds, HL
provides administrative services to the Funds and receives monthly
compensation at the annual rate of .175% of each Fund's average daily net
assets. The Funds assume and pay certain other expenses (including, but
not limited to, shareholder accounting, state taxes and directors' fees).
Directors' fees represent remuneration paid or accrued to directors not
affiliated with HL or any other related company.
c) OPERATING EXPENSES--Allocable expenses of the Funds are charged to each
Fund based on the ratio of the net assets of each fund to the combined net
assets of the Funds. Nonallocable expenses are charged to each fund based
on specific identification.
d) EXPENSE OFFSET--The Funds have entered into certain expense offset
arrangements with the Custodian Bank. The amount of the Funds' expense
reductions is shown on the accompanying statements of operations as
Custodian expense offset.
e) DISTRIBUTION PLAN FOR CLASS IB SHARES--Each Fund has adopted a
Distribution Plan pursuant to Rule 12b-1 under the 1940 Act for the Class IB
shares. Pursuant to the Distribution Plan, each Fund compensates the
Distributor from assets attributable to the Class IB shares for services
rendered and expenses borne in connection with activities primarily
intended to result in the sale of the Class IB shares.
Although the Distribution Plan provides that each Fund may pay annually up
to 0.25% of the average daily net assets of a Fund attributable to its
Class IB shares for activities primarily intended to result in the sale of
Class IB shares, the Distributor has voluntarily agreed to waive .07% of
the fee. This waiver may be withdrawn at any time after notice to
shareholders. Under the terms of the Distribution Plan and the principal
underwriting agreement, each Fund is authorized to make payments monthly
to the Distributor which may be used to pay or reimburse entities
providing distribution and shareholder servicing with respect to the Class
IB shares for such entities' fees or expenses incurred or paid in that
regard.
4. TAX COST AND UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS:
As of December 31, 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.......................... $ 871,497,170 $ 27,479,821 $ (4,937,702) $ 22,542,119
Hartford Stock HLS Fund,
Inc.......................... 4,693,215,246 2,635,787,778 (144,901,670) 2,490,886,108
Hartford Advisers HLS Fund,
Inc.......................... 8,805,451,830 3,107,491,802 (143,562,091) 2,963,929,711
Hartford Capital Appreciation
HLS Fund, Inc................ 4,501,200,224 1,791,961,279 (485,540,317) 1,306,420,962
Hartford Mortgage Securities
HLS Fund, Inc................ 350,385,543 5,191,077 (544,327) 4,646,750
Hartford Index HLS Fund,
Inc.......................... 1,242,025,166 663,685,253 (49,607,059) 614,078,194
Hartford International
Opportunities HLS Fund,
Inc.......................... 1,061,010,574 169,270,545 (33,767,509) 135,503,036
Hartford Dividend & Growth HLS
Fund, Inc.................... 4,960,802,783 1,330,813,019 (146,689,660) 1,184,123,359
Hartford International
Advisers HLS Fund, Inc....... 269,337,618.59 25,313,809 (4,928,644) 20,385,165
Hartford Small Company HLS
Fund, Inc.................... 289,476,601 72,775,395 (15,192,480) 57,582,915
Hartford MidCap Fund HLS Fund,
Inc.......................... 123,705,221 22,481,115 (3,839,351) 18,641,764
Hartford Growth and Income HLS
Fund......................... 44,652,602 7,190,515 (638,937) 6,551,578
Hartford High Yield HLS
Fund......................... 14,249,054 313,256 (151,378) 161,878
Hartford Global Leaders HLS
Fund......................... 5,276,887 877,516 (14,740) 862,776
</TABLE>
MF-62
<PAGE>
5. AFFILIATE HOLDINGS:
a) As of December 31, 1998, HL Investment Advisers, Inc. held direct
interests in shares as follows:
<TABLE>
<CAPTION>
PERCENT OF
FUND SHARES TOTAL SHARES
- ---------------------------------------- --------- ------------
<S> <C> <C>
Hartford MidCap HLS Fund, Inc........... 3,000,000 3.01%
Hartford Growth and Income HLS Fund..... 2,990,000 14.01
Hartford High Yield HLS Fund............ 9,900,000 69.50
Hartford Global Leaders HLS Fund........ 2,970,000 66.25
</TABLE>
b) As of December 31, 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............. 8,824,895 1.06%
Hartford Stock HLS Fund, Inc............ 5,383,104 0.46
Hartford Money Market HLS Fund Inc...... 30,104,713 3.45
Hartford Advisers HLS Fund, Inc......... 35,408,305 0.89
Hartford Capital Appreciation HLS Fund,
Inc.................................... 24,653,150 2.02
Hartford Mortgage Securities HLS Fund,
Inc.................................... 16,876,477 5.13
Hartford Index HLS Fund, Inc............ 33,164,714 6.41
Hartford International Opportunities HLS
Fund, Inc.............................. 11,572,560 1.31
Hartford Dividend and Growth HLS Fund,
Inc.................................... 8,684,808 0.62
Hartford International Advisers HLS
Fund, Inc.............................. 1,940,981 0.78
Hartford Small Company HLS Fund, Inc.... 4,821,686 1.82
Hartford MidCap HLS Fund, Inc........... 43,464 0.04
</TABLE>
6. INVESTMENT TRANSACTIONS:
For the year ended December 31, 1998, aggregate purchases and sales of
investment securities (excludes short-term investments) were as follows:
<TABLE>
<CAPTION>
PROCEEDS FROM
FUND COST OF PURCHASES SALES
- ---------------------------------------- ------------------ ------------------
<S> <C> <C>
Hartford Bond HLS Fund, Inc............. $1,133,799,470 $ 820,763,031
Hartford Stock HLS Fund, Inc............ 2,452,300,800 1,499,218,395
Hartford Advisers HLS Fund, Inc......... 5,094,408,319 3,567,912,122
Hartford Capital Appreciation HLS Fund,
Inc.................................... 2,945,768,461 2,547,813,230
Hartford Mortgage Securities HLS Fund,
Inc.................................... 732,595,334 646,628,954
Hartford Index HLS Fund, Inc............ 446,989,710 63,849,733
Hartford International Opportunities HLS
Fund, Inc.............................. 1,722,340,014 1,689,451,513
Hartford Dividend and Growth HLS Fund,
Inc.................................... 1,882,004,424 1,196,771,032
Hartford International Advisers HLS
Fund, Inc.............................. 380,030,754 335,952,711
Hartford Small Company HLS Fund, Inc.... 687,530,998 598,406,783
Hartford MidCap HLS Fund, Inc........... 194,415,148 102,047,032
Hartford Growth and Income HLS Fund..... 25,116,565 3,671,285
Hartford High Yield HLS Fund............ 15,651,886 1,693,300
Hartford Global Leaders HLS Fund........ 6,061,213 2,004,751
</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. The reclassifications are a result of temporary and
permanent differences between GAAP and tax accounting as a result of losses
on wash sale transactions, paydown gains and losses on mortgage-backed
securities, foreign currency gains and losses, post October loss deferrals
and realized and unrealized gains and losses on passive foreign investment
companies. Therefore, the source of the Funds' distributions may be shown in
the accompanying statement of changes in net assets as from, or in excess of
net investment income, from, or in excess of net
MF-63
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
realized gain on investments or from capital depending on the type of book
and tax debt that may exist. As of December 31, 1998 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........ $ (5,182) $ 5,182 $ 0
Hartford Stock HLS Fund, Inc....... (23) 23 0
Hartford Advisers HLS Fund, Inc.... (94,584) 94,584 0
Hartford Capital Appreciation HLS
Fund, Inc......................... (576,558) 575,361 1,197
Hartford Mortgage Securities HLS
Fund, Inc......................... (316,821) 798,656 (481,835)
Hartford Index HLS Fund, Inc....... (10) 602,969 (602,959)
Hartford International
Opportunities HLS Fund, Inc....... (439,666) 439,624 42
Hartford Dividend and Growth HLS
Fund, Inc......................... 111,028 (111,028) 0
Hartford International Advisers HLS
Fund, Inc......................... 17,299,836 (1,345,031) (15,954,805)
Hartford Small Company HLS Fund,
Inc............................... 635,179 1,111 (636,290)
Hartford Midcap HLS Fund, Inc...... 120,812 (120,812) 0
Hartford Growth & Income HLS
Fund.............................. 0 0 0
Hartford High Yield HLS Fund....... (1,464) 1,464 0
Hartford Global Leaders HLS Fund... 1,191 (1,191) 0
</TABLE>
8. CAPITAL LOSS CARRY FORWARD:
At December 31, 1998, (tax year-end) the following Funds had capital loss
carry forwards for U.S. Federal Tax purposes of approximately:
<TABLE>
<CAPTION>
FUND AMOUNT YEAR OF EXPIRATION
- ---------------------------------------- ----------- ------------------
<S> <C> <C>
Hartford International Opportunities HLS
Fund, Inc.............................. $17,680,925 2006
Hartford Small Company HLS Fund, Inc.... 15,134,644 2006
Hartford Mortgage Securities HLS Fund,
Inc.................................... 7,251,161 2002
Hartford Growth & Income HLS Fund....... 44,062 2006
</TABLE>
9. TAX INFORMATION NOTICE (UNAUDITED):
For the year ended December 31, 1998, the following Funds distributed
long-term capital gains dividends as follows:
<TABLE>
<S> <C>
Hartford International Advisers HLS Fund, Inc..... $ 466,833
Hartford Index HLS Fund, Inc...................... 28,098,262
Hartford Capital Appreciation HLS Fund, Inc....... 364,341,473
Hartford Advisers HLS Fund, Inc................... 968,417,253
Hartford Stock HLS Fund, Inc...................... 587,225,084
Hartford Bond HLS Fund, Inc....................... 1,415,804
Hartford MidCap HLS Fund, Inc..................... 200,476
</TABLE>
MF-64
<PAGE>
10. CAPITAL SHARE TRANSACTIONS:
The following information is for the period ending December 31, 1998:
<TABLE>
<CAPTION>
HARTFORD STOCK HLS FUND, HARTFORD MONEY MARKET
HARTFORD BOND HLS FUND, INC. INC. HLS FUND, INC.
---------------------------- --------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ -------------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
CLASS IA
Shares sold.............. 334,981,284 $ 366,472,552 226,124,652 $1,307,750,395 2,279,384,552 $2,279,385,544
Shares issued on
reinvestment of
distributions........... 39,579,874 42,744,216 40,523,153 227,976,510 36,079,243 36,079,243
Shares Redeemed.......... (66,010,394) (72,380,915) (91,923,857) (524,597,789) (2,055,458,998) (2,055,458,998)
------------ -------------- ----------- -------------- -------------- --------------
Net Increase............. 308,550,764 $ 336,835,853 174,723,948 $1,011,129,116 260,004,797 $ 260,005,789
------------ -------------- ----------- -------------- -------------- --------------
------------ -------------- ----------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
HARTFORD CAPITAL
HARTFORD ADVISERS HLS FUND, APPRECIATION HARTFORD MORTGAGE SECURITIES
INC. HLS FUND, INC. HLS FUND, INC.
---------------------------- ---------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ -------------- ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
CLASS IA
Shares sold.............. 567,555,489 $1,567,924,884 281,342,857 $1,257,555,081 57,937,610 $ 64,363,026
Shares issued on
reinvestment of
distributions........... 192,639,731 530,235,045 77,711,309 350,859,661 20,461,506 22,200,000
Shares Redeemed.......... (84,108,984) (231,335,882) (227,943,459) (1,005,136,346) (49,367,564) (54,920,899)
------------ -------------- ------------ -------------- -------------- --------------
Net Increase............. 676,086,236 $1,866,824,047 131,110,707 $ 603,278,396 29,031,552 $ 31,642,127
------------ -------------- ------------ -------------- -------------- --------------
------------ -------------- ------------ -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
HARTFORD INDEX HLS FUND, HARTFORD INTERNATIONAL HARTFORD DIVIDEND AND GROWTH
INC. OPPORTUNITIES HLS FUND, INC. HLS FUND, INC.
---------------------------- ---------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ -------------- ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
CLASS IA
Shares sold.............. 216,433,464 $ 689,009,410 313,574,429 $ 398,422,898 372,555,830 $ 763,971,073
Shares issued on
reinvestment of
distributions........... 13,976,294 44,600,001 66,706,915 87,853,994 60,744,430 124,543,520
Shares Redeemed.......... (103,754,732) (330,659,647) (341,346,342) (434,068,131) (51,918,413) (105,367,979)
------------ -------------- ------------ -------------- -------------- --------------
Net Increase............. 126,655,026 $ 402,949,764 38,935,002 $ 52,208,761 381,381,847 $ 783,146,614
------------ -------------- ------------ -------------- -------------- --------------
------------ -------------- ------------ -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
HARTFORD INTERNATIONAL HARTFORD SMALL COMPANY
ADVISERS HLS FUND, INC. HLS FUND, INC. HARTFORD MIDCAP HLS FUND, INC.
---------------------------- ---------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ -------------- ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
CLASS IA
Shares sold.............. 56,027,943 $ 63,375,108 221,875,243 $ 257,442,860 79,802,187 $ 100,347,290
Shares issued on
reinvestment of
distributions........... 27,522,863 29,712,912 2,958,223 3,776,000 747 916
Shares Redeemed.......... (12,689,383) (14,216,790) (134,668,328) (151,243,951) (4,365,974) (5,456,629)
------------ -------------- ------------ -------------- -------------- --------------
Net Increase............. 70,861,423 $ 78,871,230 90,165,138 $ 109,974,909 75,436,960 $ 94,891,577
------------ -------------- ------------ -------------- -------------- --------------
------------ -------------- ------------ -------------- -------------- --------------
</TABLE>
MF-65
<PAGE>
HARTFORD MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
HARTFORD GROWTH AND INCOME HARTFORD HIGH YIELD HLS HARTFORD GLOBAL LEADERS HLS
HLS FUND FUND FUND
---------------------------- --------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ -------------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
CLASS IA
Shares sold.............. 22,409,375 $ 23,210,363 15,548,498 $ 15,659,286 5,396,366 $ 5,971,006
Shares issued on
reinvestment of
distributions........... 68,752 81,537 78,581 79,897 39,896 51,273
Shares Redeemed.......... (1,134,968) (1,198,878) (1,383,155) (1,424,406) (953,712) (1,171,496)
------------ -------------- ----------- -------------- -------------- --------------
Net Increase............. 21,343,159 $ 22,093,022 14,243,924 $ 14,314,777 4,482,550 $ 4,850,783
------------ -------------- ----------- -------------- -------------- --------------
------------ -------------- ----------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
HARTFORD STOCK HLS FUND, HARTFORD MONEY MARKET
HARTFORD BOND HLS FUND, INC. INC. HLS FUND, INC.
---------------------------- --------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ -------------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
CLASS IB
Shares sold.............. 5,125,307 $ 5,297,213 8,894,358 $ 9,242,551 2,658,059 $ 2,658,060
Shares issued on
reinvestment of
distributions........... 253,800 255,767 384,582 423,490 30,221 30,221
Shares Redeemed.......... (134,784) (140,616) (46,040) (48,752) (509,238) (509,238)
------------ -------------- ----------- -------------- -------------- --------------
Net Increase............. 5,244,323 $ 5,412,364 9,232,900 $ 9,617,289 2,179,042 $ 2,179,043
------------ -------------- ----------- -------------- -------------- --------------
------------ -------------- ----------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
HARTFORD INTERNATIONAL
HARTFORD ADVISERS HLS FUND, HARTFORD CAPITAL OPPORTUNITIES
INC. APPRECIATION HLS FUND, INC. HLS FUND, INC.
---------------------------- --------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ -------------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
CLASS IB
Shares sold.............. 31,357,674 $ 32,503,646 5,950,525 $ 5,572,551 680,037 $ 661,681
Shares issued on
reinvestment of
distributions........... 1,700,713 1,804,946 141,407 140,339 11,380 11,063
Shares Redeemed.......... (349,123) (351,233) (104,818) (94,618) (9,688) (9,161)
------------ -------------- ----------- -------------- -------------- --------------
Net Increase............. 32,709,264 $ 33,957,359 5,987,114 $ 5,618,272 681,729 $ 663,583
------------ -------------- ----------- -------------- -------------- --------------
------------ -------------- ----------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
HARTFORD DIVIDEND AND GROWTH HARTFORD SMALL COMPANY HARTFORD GROWTH AND INCOME
HLS FUND, INC. HLS FUND, INC. HLS FUND
---------------------------- --------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ -------------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
CLASS IB
Shares sold.............. 8,473,373 $ 8,276,226 708,407 $ 647,615 10,000 $ 10,000
Shares issued on
reinvestment of
distributions........... 255,001 256,481 -- -- -- --
Shares Redeemed.......... (177,503) (164,795) (3,241) (2,748) -- --
------------ -------------- ----------- -------------- -------------- --------------
Net Increase............. 8,550,871 $ 8,367,912 705,166 $ 644,867 10,000 $ 10,000
------------ -------------- ----------- -------------- -------------- --------------
------------ -------------- ----------- -------------- -------------- --------------
</TABLE>
MF-66
<PAGE>
<TABLE>
<CAPTION>
HARTFORD GLOBAL LEADERS
HARTFORD HIGH YIELD HLS FUND HLS FUND
---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
------------ -------------- ----------- --------------
<S> <C> <C> <C> <C>
CLASS IB
Shares sold................... 100,000 $ 100,000 30,000 $ 30,000
Shares issued on reinvestment
of distributions............. -- -- -- --
Shares Redeemed............... -- -- -- --
------------ -------------- ----------- --------------
Net Increase.................. 100,000 $ 100,000 30,000 $ 30,000
------------ -------------- ----------- --------------
------------ -------------- ----------- --------------
</TABLE>
11. EUROPEAN MONETARY UNION:
On January 1, 1999, the European Monetary Union "EMU" introduced a new
single currency, the euro, which will replace the national currencies of the
participating members countries. Until 2002, the national currencies will
continue to exist, but exchange rates will be tied to the euro. The
introduction of the euro is likely to affect all stages of the investment
process, including trading, foreign exchange and accounting. Because this
change to a single currency is new, the introduction of the euro may result
in market volatility and may affect the business or financial conditions of
European issuers or of a Portfolio investing in European issuers. In
addition, while the conversion will eliminate currency risk among the
participating nations, currency risk between the euro and the U.S. dollar
remains a factor.
12. LINE OF CREDIT:
The Funds participate in a $500,000,000 committed revolving line of credit
facility. The facility is to be used for temporary or emergency purposes.
Under the arrangement, the Funds are required to own securities having a
market value in excess of 300% of the total bank borrowings. The interest
rate on borrowings varies depending on the nature of the loan. The facility
also requires a fee to be paid based on the amount of the commitment which
has not been utilized. During the year ended December 31, 1998, the Funds
did not have any borrowings under these facilities.
MF-67
<PAGE>
- ------------------------------------------------------------------------------
Hartford Life Insurance Companies
P.O. Box 2999 BULK RATE
Hartford, CT 06104-2999 U.S. POSTAGE
PAID
PERMIT #20
HOLLISTON, MA
01746
HV-2232-2
Printed in U.S.A. -Registered 1999 The Hartford, Hartford, CT 06115
Trademark-
