<PAGE>
[LOGO]
1999
Annual Report
- - Manager Discussions
- - Financials
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Hartford
Small Company HLS Fund
Portfolio Manager
[Picture]
STEVE ANGELI
Vice President
Wellington Management Company, LLP
Q. How Did The Fund Perform?
The Hartford Small Company HLS Fund returned 65.83% for the
one-year time period ended December 31, 1999, outpacing the Lipper
Small Cap VA-UF Average that increased 38.3%.
Q. Why Did The Fund Perform This Way?
Led by the fastest growth companies, the Russell 2000 Index
outperformed the S&P 500 during the year. In fact, 1999, marks the
first time in five years that small cap stocks have outperformed
large cap stocks. For the one-year period ended December 31, 1999,
the Russell 2000 Index advanced 21.3% while the S&P 500 increased
21.0%. This type of relative outperformance was long overdue and
makes sense as the valuations for small cap stocks are very
attractive and the earnings prospects remain strong. During the
year, relative returns were positively impacted by strong stock
selection within the technology and healthcare sectors.
Q. What Is Your Outlook For 2000?
Supported by powerful consumer spending trends, the U.S. economy
should post relatively strong growth in 2000. Labor markets will be
tight, but inflation will remain benign due to above-average
productivity and moderating oil prices. In an environment of solid
economic growth and stable inflation, smaller companies should
outperform due to their strong earnings prospects and higher growth
potential. However, substantially higher rates could lead to
multiple compression, as valuations of small company stocks are
sensitive to changes in interest rates. While Technology is
unlikely to lead the market after last year's stellar performance,
we remain very bullish on the sector's long-term prospects.
[CHART]
Returns
Average Annual Returns
Period Ended December 31, 1999
1 YEAR SINCE INCEPTION
Small Co. IA 65.83% 28.59%
Russell 2000 21.26% 15.10%
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
[Picture]
SAUL J. PANNELL, CFA
Senior Vice President and Partner
Wellington Management Company, LLP
Q. How Did The Fund Perform?
The Hartford Capital Appreciation HLS Fund gained 37.5% for the
1-year period ended December 31, 1999 versus a return of 40.1% for
the Lipper Capital Appreciation VA-UF Average.
Q. Why Did The Fund Perform This Way?
The market continued to broaden, particularly relative to market
capitalization. Smaller companies' relative price-to-earnings
ratios remain below the overall market's, while relative growth
prospects are probably better. The historic disparity in both
relative performance and valuations should lead to a further
broadening of the market. World economic growth appears stronger
than it has been for some time. The leverage in the cyclical
sectors of the economy should be substantial, and we suspect that
existing earnings estimates for these stocks will have to be
revised upward as the year progresses. The technology sector was
the star performer for the year as Internet mania infected all
sectors of the market. The Fund's performance was again helped by a
diverse group of companies, most of these were in the information
technology sector.
Q. What Is Your Outlook For 2000?
Higher interest rates and obvious speculation have increased the
overall level of market risk. Flows into equity funds, however,
have remained strong, so the current uptrend may continue for a
while longer. Our overall strategy for the Fund remains dual
faceted: an emphasis on smaller companies with dynamic earnings
growth prospects, and an opportunistic trading approach to
larger-cap stocks where we typically see a catalyst for
outperformance. This approach, if executed well, should provide
positive absolute and relative results over a reasonable time frame.
[CHART]
Returns
Average Annual Returns
Period Ended December 31, 1999
1 YEAR 5 YEAR 10 YEAR
Cap App IA 37.46% 25.01% 19.76%
S&P 500 21.03% 28.54% 18.21%
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
[Picture]
PHILLIP H. PERELMUTER
Senior Vice President and Partner
Wellington Management Company, LLP
Q. How Did The Fund Perform?
The Hartford MidCap HLS Fund returned 51.81% for the 12-month
period ending December 31, 1999 relative to its Lipper Mid Cap
VA-UF Average of 46.3%. The Fund has outperformed it Lipper peer
group average by 7.4% since inception.
Q. Why Did The Fund Perform This Way?
In 1999, mid-cap stocks outperformed large cap stocks by just under
2%. Historically, mid-cap stocks have outperformed large cap stocks
during a time of accelerating economic growth. Within the mid-cap
universe, the best performing sectors were technology and
biotechnology. The Fund's performance benefited from good
participation in the better performing sectors such as technology
and from an underweight position in poorer performing sectors such
as finance.
Q. What Is Your Outlook For 2000?
We believe the outlook for the types of mid-cap companies we seek
is positive. These high quality, market-leading companies should
fare relatively well during a period of economic growth. The
relative valuations of these stocks are near 10-year lows. The Fund
should continue to fare well given our commitment and focus on
maintaining the investment strategies used thus far.
[CHART]
Returns
Average Annual Returns
Period Ended December 31, 1999
1 YEAR SINCE INCEPTION
MidCap IA 51.81% 37.35%
S&P 400 14.72% 13.17%
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
[Picture]
TROND SKRAMSTAD
Senior Vice President and Partner
Wellington Management Company, LLP
Q. How Did The Fund Perform?
In the fourth quarter, the Hartford International Opportunities HLS
Fund returned 22.2% bringing the return for the 1-year period
ending December 31, 1999 to 39.86% versus a return of 42.9% for the
Lipper International VA-UF Average over the same time period.
Q. Why Did The Fund Perform This Way?
Global equities delivered extraordinary performance during the
year, despite rising interest rates. The MSCI EAFE Index led the
way with strong European returns. Within Europe, Finland rose a
phenomenal 153.3%, while Germany was up a more modest though still
strong 20.5%. The UK rose 12.4% for the year. Elsewhere, Japan was
up 61.8% on strength in technology and telecom issues. Emerging
markets also advanced, led by the Pacific Rim. We continue to favor
countries within the euro area and increased our exposure to these
countries over the course of the year. Most of the euro area
countries stand to benefit from economic growth that we expect will
surprise on the upside. In Japan, we trimmed our position due to
the lack of any recent initiatives by the government to further
accelerate the process of change of the economy. We added
selectively to our emerging markets exposure, as these markets
should continue to perform well in an environment of improving
global growth.
Q. What Is Your Outlook For 2000?
We will continue to focus on areas that have demonstrated growth or
growth acceleration. Continental Europe remains the Fund's largest
regional exposure, within which we continue to favor France and
Germany. While we continue to like the longer-term outlook for
continental Europe, for both cyclical and secular reasons, we
believe that emerging markets will benefit the most from an
economic upturn and have increased our exposure to selected markets
in this area. In addition to favoring the faster growing economies
of the world, we also favor some of the faster growing sectors such
as information technology, telecommunications, and the internet,
which are experiencing strong secular growth trends around the
globe. In Japan, we have adopted a cautious stance as we await
further evidence of corporate restructuring and continued economic
recovery.
[CHART]
Returns
Average Annual Returns
Period Ended December 31, 1999
1 YEAR 5 YEAR SINCE INCEP.
Int'l. Opp. IA39.86% 15.36% 10.36%
EAFE GDP* 31.02% 16.01% 10.41%
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
[Picture]
RAND L. ALEXANDER, CFA
Senior Vice President
and Partner
Wellington Management
Company, LLP
[Picture]
ANDREW S. OFFIT
Vice President
Wellington Management
Company, LLP
Q. How Did The Fund Perform?
The Hartford Global Leaders HLS Fund returned 50.37% for the
12-month period ending December 31, 1999 versus 44.2% for its
Lipper Global VA-UF peer group average.
Q. Why Did The Fund Perform This Way?
December 31st marked one of the most dramatic stock markets we have
seen in some time. Around the globe, all forces were in sync to
help produce stellar returns in the equity market. There were two
important keys to the Fund's performance: sector allocation (most
of the Fund's assets were in the better performing sectors) and
stock selection (we added to the sector returns in all categories).
The Fund remained focus on its themes and sector strategies, and
continued to emphasize growth in both sectors and individual
companies.
Q. What Is Your Outlook For 2000?
The market environment continues to be challenging to global
investors. The only cautionary winds are interest rate increases
around the world, a trend that we will closely monitor in the
coming months. We have conviction in our company research and are
committed to our sector strategy and will continue to seek to
invest in the best companies in the world. We believe that as long
as we continue to maintain this strategy, the Fund can continue to
outperform its peers.
[CHART]
Returns
Cumulative Returns
Period Ended December 31, 1999
1 YEAR SINCE INCEPTION
Global Leaders IA 50.37% 72.77%
MSCI World 24.94% 39.25%
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
[Picture]
RAND L. ALEXANDER, CFA
Senior Vice President and Partner
Wellington Management Company, LLP
Q. How Did The Fund Perform?
The Hartford Stock HLS Fund returned 19.78% for the 12-month period
ending December 31, 1999. The Fund's return under performed both
the S&P 500 Index (21.0%) and the Lipper Growth VA-UF Average
(31.5%). The Fund has outperformed its Lipper peer group over the 3
and 5-year time periods.
Q. Why Did The Fund Perform This Way?
In 1999, large capitalization growth stocks performed well, as did
small and mid-cap growth stocks. Initial public offerings soared to
record levels and takeovers reached new heights. Additionally, the
Federal Reserve raised interest rates three times in an effort to
slow down the pace of the U.S. economy. Somewhat hidden within this
euphoria was the fact that once again, only about 30% of the stocks
in the S&P 500 outperformed the index. Strong sectors included:
electronics, communications equipment, metals and minerals,
computer software, oil service and media. The Fund's performance
benefited from overweight positions in semiconductors,
communications equipment, computer software, oil and service and
media and underweight positions in banks and food and beverages. In
general, we added value versus the index through both accurate
sector weightings and above average stock selection.
Q. What Is Your Outlook For 2000?
The U.S. economy continues to roll along. Unemployment is at record
lows, the Federal budget is in surplus and the political arena
seems benign. The major economic regions of the World seem to be
recovering from the stagnant period of the last few years. Rising
world interest rates could put a damper on further multiple
expansion in many of the market's favorite growth names. Given the
economic outlook and high valuation levels of growth companies, we
believe that a shift to more cyclically oriented stocks at the
margin makes sense. We continue to remain cautiously optimistic
about the equity market.
[CHART]
Returns
Average Annual Returns
Period Ended December 31, 1999
1 YEAR 5 YEAR 10 YEAR
Stock IA 19.78% 28.49% 17.88%
S&P 500 21.03% 28.53% 18.21%
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
[Picture]
JAMES A. RULLO, CFA
Senior Vice President and Partner
Wellington Management Company, LLP
Q. How Did The Fund Perform?
For the fourth quarter of 1999, the Hartford Growth and Income HLS
Fund returned 15.6% and outperformed the Lipper Growth and Income
VA-UF Average (+14.9%). Over the past year, the Fund has returned
21.82%, exceeding the 14.5% return of the Lipper VA-UF Growth and
Income Average.
Q. Why Did The Fund Perform This Way?
Equity markets were very strong around the globe. In the U.S., the
S&P 500 was up 21% and small cap stocks rallied over 21%. As
expected, the Federal Reserve raised rates for a third time during
the year, but the market was unfazed. Y2K concerns proved to be a
non-event, as corporations seemed to be extraordinarily well
prepared. The Fed was on hand with extra liquidity if needed, and
this may have played a role in the year-end rally. Once again,
technology issues carried the year. Some of the strongest
performing sectors during the year were communications equipment
and software. Our stocks in the technology sector - CISCO and
MOTOROLA contributed to the strong performance of the Fund. Large
cap drug stocks languished towards the end of the year, but the
smaller stocks that we owned in their place did very well. For
example, Immunex reported that sales of their arthritis drug was
gaining popularity and sales rose faster than expected, and
GENENTECH responded positively to the news that majority owner
ROCHE would be offering more of their shares through a secondary
offering.
Q. What Is Your Outlook For 2000?
We expect further Fed tightening and foresee interest rate
pressures. However, it appears that the market still likes
technology issues. We will continue to maintain our position in
this sector, but will try to buy some less expensive hardware
makers as we begin the next quarter. We continue to have faith in
the higher yielding sectors like utilities and energy and will
maintain our weighting in these sectors. The consumer stock sector
is beginning to look more attractive and we will look to increase
our weighting in this area as opportunities present themselves.
[CHART]
Returns
Cumulative Returns
Period Ended December 31, 1999
1 YEAR SINCE INCEPTION
Growth and Income IA 21.82% 26.31%
S&P 500 21.03% 22.17%
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
[Picture]
LAURIE A. GABRIEL, CFA
Senior Vice President and Managing Partner
Wellington Management Company, LLP
Q. How Did The Fund Perform?
The Hartford Dividend and Growth HLS Fund returned 5.31% for the
12-month period ending December 31, 1999 versus the Lipper Equity
Income Average return of 3.3% over the same time period. The Fund's
performance has exceeded that of its Lipper peer group average over
the 3 & 5-year periods.
Q. Why Did The Fund Perform This Way?
With the strength in the technology sector, it's not surprising
that growth again outperformed value (Russell 1000 Growth Index
total return 25% versus the Russell 1000 Value Index total return
5%). Our long-term positions within the Health Care, Finance and
Industrial/Commercial sectors were strong contributors to the
Fund's performance.
Q. What Is Your Outlook For 2000?
We will continue to maintain a long-term view on stock selection
and sector representation. In line with our dividend-oriented
style, we continue to be underweight in the information technology
sector. Our stock positions have an above-average yield and below
average P/E and beta. Relative to the market, the Fund should
continue to exhibit these value-oriented characteristics over time.
[CHART]
Returns
Average Annual Returns
Period Ended December 31, 1999
1 YEAR 5 YEAR SINCE INCEPTION
Div. and Grow.IA 5.31% 22.07% 19.10%
S&P 500 21.03% 28.53% 24.25%
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
[Picture]
ROBERT EVANS
Senior Vice President
and Partner
Wellington Management
Company, LLP
[Picture]
TROND SKRAMSTAD
Senior Vice President
and Partner
Wellington Management
Company, LLP
Q. How Did The Fund Perform?
The Hartford International Advisers HLS Fund returned 23.16% for
the 1-year period ended December 31, 1999 versus an 18.0% return
for the Fund's Composite Index (55% MSCI EAFE, 35% SB Non-U.S.
World Gov't Bond (hedged) and 10% T-Bill).
Q. Why Did The Fund Perform This Way?
In 1999, the global economy continued to accelerate with strong
activity in all regions. The U.S. economy continued to enjoy strong
economic growth and low inflation throughout the year. European
equities were particularly strong during the year. Elsewhere,
Japanese equities performed well due to the strength in technology
and telecom issues, and Asia ex-Japan also experienced strong
performance. Emerging markets continue to be robust, led by Latin
America. In this market environment, we continued to tilt the Fund
toward equities and cash instead of bonds, which boosted Fund
performance. By the end of the year, the Fund's equity exposure had
risen to 60%, with 30% in bonds and 10% in cash.
Q. What Is Your Outlook For 2000?
We expect that global economic activity will surprise on the upside
as the cycles of Europe, Japan, Asia ex-Japan and the emerging
markets continue to build up steam at the same time. While we
continue to like the longer term outlook for Continental Europe
equities, we believe that the emerging market companies are the
most leveraged to the global economic upturn and have increased our
exposure to selected markets in this group. In Japan, we have
adopted a cautious stance as we await further evidence of
additional steps toward economic and corporate restructuring. We
are likely to rebalance the Fund from stocks toward bonds early in
2000, moving closer to a neutral 35% weighting in bonds. While
international stock markets remain attractive, prices became a
little overvalued at the end of last year, and valuations are now
stretched. With rising bond yields and expensive valuations for
stocks, the prospects for fixed income have increased relative to
equity. In 2000, we expect further non-U.S. outperformance, driven
by the strength in the euro.
[CHART]
Returns
Average Annual Returns
Period Ended December 31, 1999
1 YEAR SINCE INCEPTION
Int'l Advisers IA 23.16% 14.28%
EAFE GDP 31.02% 17.24%
Salomon World Govt. Bond -5.07% 5.03%
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE INTERNATIONAL 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
[Picture]
RAND L. ALEXANDER, CFA
Senior Vice President
and Partner
Wellington Management
Company, LLP
[Picture]
PAUL D. KAPLAN
Senior Vice President
and Partner
Wellington Management
Company, LLP
Q. How Did The Fund Perform?
The Hartford Advisers HLS Fund returned 10.59% for the 12-month
period ending December 31, 1999 versus the Lipper Flexible VA-UF
Average return of 12.1%. The Fund's performance has significantly
exceeded its Lipper peer group over the 3 and 5-year periods.
Q. Why Did The Fund Perform This Way?
We have gradually increased our equity exposure in response to
favorable fundamentals; however, we remain cautious to the possible
negative effects resulting from more interest rate hikes. The
equity portion of the Fund's performance benefited from overweight
positions in semiconductors, communications equipment, computer
software, oil and service and media and underweight positions in
banks and food and beverages. In general, we added value versus the
index through both accurate sector weightings and above average
stock selection. The bond market provided mixed results in 1999
with the corporate and mortgage backed sectors leading the way. We
continue to maintain substantial positions in both corporate and
mortgage backed bonds, positions that clearly helped performance
during 1999.
Q. What Is Your Outlook For 2000?
For 2000, the critical issue for the direction of interest rates is
precisely the same as it was during 1999, the pace of the U.S.
economy. It is likely that the Fed will continue to pay primary
attention to real growth. We do not believe a radical upward move
in the Fed Funds rate is either necessary or desirable and that a
peak in long-term interest rates is not far off. We will likely
begin to slowly add longer bond positions to the portfolio in
anticipation to an end to the current round of Fed tightening. By
gradually adjusting the weighting between stocks, bonds, and cash
we will continue to use our expectations of market developments to
produce attractive returns.
[CHART]
Returns
Average Annual Returns
Period Ended December 31, 1999
1 YEAR 5 YEAR 10 YEAR
Advisers IA 10.59% 20.76% 13.98%
S&P 500 21.03% 28.53% 18.21%
Lehman Govt./Corp.-2.15% 7.61% 7.65%
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>
Hartford
High Yield HLS Fund
Portfolio Manager
[Picture]
ALISON D. GRANGER, CFA
Senior Vice President
Hartford Investment
Management Company (HIMCO)
Q. How Did The Fund Perform?
The Hartford High Yield HLS Fund commenced operations on September
30, 1998. The Fund's Class IA shares placed in the 44th percentile
of its Lipper peer group for the 12 months ended December 31, 1999,
producing a total return of 4.70% versus the 3.95% return of the
Lipper Corporate Debt "BBB" rated Variable Annuity Fund average.
Q. Why Did The Fund Perform This Way?
- - The Fund's high average credit quality contributed to Fund
outperformance as BB rated high yield securities significantly
outperformed the lower-rated B and CCC universe of high yield
issues.
- - The Fund's overweight of the commodity-related industries, such
as oil exploration and chemicals, provided additional performance
at the margin.
Q. What Is Your Outlook For 2000?
The current yield offered by the high yield market today averages
9.75%, offering income-seeking investors an attractive investment
complement to higher quality fixed income securities or equities.
As we enter the new year, we are emphasizing three themes in the
high yield funds. The first theme reflects our belief that there
are opportunities for outperformance in high yield securities that
will benefit from rising global economic growth. The
commodity-related issues we have been emphasizing in the portfolio
are reflective of this view. We have overweighted issues of select
health care providers to reflect our view that the worst is behind
this segment of the healthcare industry, and that their securities
are attractively valued. Finally, the Fund carries an underweighted
position in securities that could be adversely impacted by rising
interest rates and/or an enthusiastic U.S. consumer.
[CHART]
Returns
Average Annual Returns
Period Ended December 31, 1999
1 YEAR SINCE INCEPTION
High Yield IA 4.70% 6.69%
Lehman High Yield 1.87% 3.62%
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>
Hartford
Bond HLS Fund
Portfolio Manager
[Picture]
ALISON D. GRANGER, CFA
Senior Vice President
Hartford Investment
Management Company (HIMCO)
Q. How Did The Fund Perform?
The Hartford Bond HLS Fund Class IA shares placed in the 60th
percentile of its Lipper peer group for the 12 months ended
December 31, 1999, producing a total return of -2.02% versus the
- -1.57% return of the Lipper Corporate Debt "BBB" rated Variable
Annuity Underlying Fund Universe.
Q. Why Did The Fund Perform This Way?
- - The Fund's increased weightings in mortgage passthroughs
contributed positively to its performance relative to the market,
as these securities out performed the corporate market during the
third and fourth quarters.
- - The Fund's overweighted position in commodity-related fixed
income securities had a positive impact on Fund performance, as
many of these companies staged a comeback from their 1998 lows.
- - The Fund's holdings in short-dated corporate issues acquired
during the height of the market's Y2K concern aided portfolio
performance during the second half of the year when concerns about
the transition into the new year abated.
Q. What Is Your Outlook For 2000?
With the domestic economy firing on all cylinders and the isolated
events of 1998's Russian default and last year's Y2K apprehension
now behind us, we believe that the Federal Reserve will tighten
more aggressively this year. Our portfolio positioning as we enter
2000 includes a shorter average maturity than the market. We will
increase our emphasis on the mortgage sector for two reasons: The
large percentage of the market which is trading at a discount to
par value and the favorable supply/demand balance which our traders
currently forecast. Among investment grade and high yield corporate
issues, we will continue to emphasize those securities that will
benefit from rising global economic growth, including the
commodity-related issues mentioned above. We underweight most
consumer and financial-related issues, as these industries are
likely to experience greater fundamental challenges in a rising
rate environment.
[CHART]
Returns
Average Annual Returns
Period Ended December 31, 1999
1 YEAR 5 YEAR 10 YEAR
Bond IA -2.02% 7.68% 7.40%
Lehman Govt./Corp. -2.15% 7.61% 7.65%
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>
Hartford
Mortgage Securities HLS Fund
Portfolio Manager
[Picture]
PETER PERROTTI
Vice President
Hartford Investment
Management Company (HIMCO)
Q. How Did The Fund Perform?
The Hartford Mortgage HLS Fund Class IA shares placed in the 29th
percentile of its Lipper peer group for the 12 months ended
December 31, 1999, producing a total return of 1.52% versus the
0.45% return of the Lipper U.S. Mortgage Funds rated Variable
Annuity Underlying Fund Universe.
Q. Why Did The Fund Perform This Way?
Interest rates continued to rise in the face of strong economic
growth and the anticipation of a smooth transition into Y2K.
Although inflation has remained subdued, the Federal Reserve raised
the Fed Funds target rate twice during the second half of the year,
pointing to the tight Labor Market. The Treasury market followed
the Fed's lead, as the 30-year rate rose over 6.478%. The Hartford
Mortgage Fund performed well since we were shorter in duration than
the mortgage market. The Fund also benefited from its allocation to
higher yielding mortgage securities.
Q. What Is Your Outlook For 2000?
As we move into the New Year, the Fund is set up with slightly
lower duration than the mortgage index. We have a significant
overweight in the higher coupon, which are also higher yielding
mortgage securities, as we continue to believe they offer excellent
relative value. Although interest rates rose significantly in 1999,
the Federal Reserve will remain vigilant in the face of potential
inflation putting pressure on rates in the near term.
Mortgage Securities currently offer a very attractive risk/reward
profile. With the backup in rates, only a small percentage of the
outstanding mortgages are currently economic to refinance.
Mortgages offer diversification away from overall corporate risk,
with the primary mortgage issuers being U.S. Government (or
quasi-Government) agencies: GNMA, FNMA, and FHLMC.
[CHART]
Returns
Average Annual Returns
Period Ended December 31, 1999
1 YEAR 5 YEAR 10 YEAR
Mort. Sec. IA 1.52% 7.59% 7.10%
Lehman Mort. 1.86% 7.98% 7.78%
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>
BB&T
Growth & Income Fund
Portfolio Manager
RICK B. JONES, CFA
Vice President
Branch Banking & Trust Co.
Q. How Did The Fund Perform?
The BB&T Growth & Income Variable Annuity Fund provided a total
return of -3.85% for the 12-month period ended December 31, 1999.
In comparison, the Lipper Growth & Income Variable
Annuity-Underlying Fund average gained 11.61%.
Q. Why Did The Fund Perform This Way?
It was a very narrow market for most of the year, with investors
focusing on an increasingly smaller handful of growth stocks as the
year progressed. Only during a three-month stretch from April to
July did the type of value issues we favor show any strength. For
the rest of the year, we saw a market enamored of growth stocks, or
more specifically, technology stocks. If you didn't have a strong
technology presence in your portfolio, achieving top-notch
performance was challenging, and such was the case with our fund.
We take a diversified value approach. We look for high-quality,
large to mid-sized companies that produce significant earnings and
pay a dividend. In the long run, this strategy has served our
shareholders well, though over the last year, such an approach was
out of fashion. In fact, the average stock was down in 1999 and we
found this negative tide too strong to overcome.
As of December 31, 1999, the portfolio's five largest holdings
were: Hewlett Packard, AT&T, Kimberly Clark, Johnson & Johnson and
IBM.
We continued to provide an above-average yield. Also as of December
31, our dividend yield was 2.3%, versus 1.12% for the S&P 500.
Q. What Is Your Outlook For 2000?
We believe there are more opportunities for judicious stockpicking
than there has been in a long time. With investors generally
ignoring most sectors throughout 1999, despite the fact that
earnings have been growing in many areas of the market, we have
found some attractive values. Although we run a diversified
portfolio and don't make large sector bets, we believe there are
some compelling opportunities in financial services, health care
and even technology. The port-folio's price-to-book and
price-to-earnings ratios remain much lower than the overall
market's, which underscores our value emphasis.
[CHART]
Returns
Average Annual Returns
Period Ended December 31, 1999
1 YEAR SINCE INCEPTION
BB&T G&I -3.85% 10.96%
S&P 500 21.03% 25.71%
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE BB&T GROWTH AND INCOME
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>
AmSouth
Equity Income Fund
Portfolio Manager
CHRISTOPHER WILES, CFA
President
Rockhaven Asset Management
Q. How Did The Fund Perform?
The AmSouth Equity Income Variable Annuity Fund provided a total
return of 25.00% for the 12-month period ended December 31, 1999.
In comparison, the Lipper Equity Income Variable Annuity -
Underlying Fund average gained 6.33%.
Q. Why Did The Fund Perform This Way?
Our style of investing was beneficial. Our discipline is to be
fully invested and sector-neutral; we don't attempt to time the
market or gamble on which sector will be "hot" in the short run.
For example, if the S&P 500 has a 30% weighting in technology,
we're going to have an equal tech allocation. What we focus on is
picking the securities in each sector that offer the highest
yields, or those that are growing their dividends the fastest. In
technology, because a lot of stocks don't pay dividends, we used a
lot of convertible securities; our average convertible holding
yielded roughly 3.5%. Clearly, the tech sector was the place to be
last year; tech stocks accounted for approximately 90% of the S&P
500's performance. We were market-weighted in technology, while
most of our peers in the equity income universe tended to be
underweighted, because they shy away from convertibles. This
situation played to our advantage.
It always is our intent to provide a yield that is significantly
higher than the benchmark's, and we achieved this objective
throughout the period. As of December 31, 1999, our yield was
2.43%, versus 1.12% for the S&P 500.
Also as of December 31, the portfolio's five largest holdings were:
Nextel Convertible Preferred, General Electric, BCE, Inc., Veritas
Software Convertible Bond, Costco Convertible Bond.*
Q. What Is Your Outlook For 2000?
We don't try to forecast the future in the stock market, since we
believe it's impossible to do. Still, we believe the key factor to
watch this year is a tug-of-war between higher interest rates and
higher earnings growth rates. It's fairly obvious that the Federal
Reserve will continue to tighten credit in order to slow economic
growth and stem inflationary pressures. On the other hand, we
anticipate very strong revenue and earnings growth rates in the
technology sector. Whether this growth is enough to offset
interest-rate increases remains to be seen. Consequently, we
believe there will be a lot of volatility in the market throughout
the year.
* The Funds portfolio composition is subject to change.
[CHART]
Returns
Average Annual Returns
Period Ended December 31, 1999
1 YEAR SINCE INCEPTION
Equity Income 25.00% 18.14%
S&P 500 21.03% 23.74%
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE AMSOUTH EQUITY INCOME
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>
AmSouth
Select Equity Fund
Portfolio Managers
[Picture]
NEIL WRIGHT
OakBrook Investments
[Picture]
JANNA SAMPSON
OakBrook Investments
[Picture]
PETER JANKOVSKIS
OakBrook Investments
Q. How Did The Fund Perform?
Since its inception on May 3, 1999, which represents just less than
eight months of performance, the AmSouth Select Equity Variable
Annuity Fund provided a total return of -14.51%(1) for the period
ended December 31, 1999. In comparison, the S&P 500 Index returned
9.41% for the same period
Q. Why Did The Fund Perform This Way?
Our strategy leads us to buy the stocks of companies with stable
earnings growth and relatively low valuations. Unfortunately, these
types of stocks are not found in the one sector where investors
focused their interest: technology. In the months of November and
December alone, the tech-heavy Nasdaq rose 33%, and it ended the
year at a record level. In this type of environment, when
high-flying, richly valued tech stocks are roaring ever higher, the
stable stocks we favor tend to get left behind. Nonetheless, some
of our key holdings performed well, especially toward the end of
the period. In the fourth quarter of 1999, for example, Automatic
Data Processing (8.0% of the Fund's net assets) reported its 151st
consecutive quarter of double-digit earnings growth. This is the
type of stock we like to own. Another of our core holdings, Waste
Management (7.4%), started to resolve some of its earlier problems,
and looks to be ready to reward us for our patience.
As of December 31, 1999, the portfolio's five largest holdings
were: Automatic Data Processing, Waste Management, Sysco, Emerson
Electric and Bristol-Myers Squibb.*
Q. What Is Your Outlook For 2000?
The big story in 1999 was the meteoric rise in tech stocks. The big
story in 2000 also will center on technology, but the question will
be: Do tech stocks continue to soar, or are they poised for a
significant correction? We can't predict how the market will
perform in the short term, and we hesitate to hazard a guess about
what the next six to 12 months will hold. At the same time, we
expect to eventually see investors return to our type of stable
stocks. In the 36 years, relative valuations for stable stocks
rarely have been this low -leading us to believe that when the
mania surrounding technology finally abates, stable stocks could
outperform the market for a long time.
* The Fund's portfolio composition is subject to change.
(1) Without the 1.25% cost of insurance charge, the Fund's
performance would have been 14.51%.
[CHART]
Returns
Period Ended December 31, 1999
SINCE INCEPTION
Select Equity -14.51%
S&P 500 9.41%
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE AMSOUTH SELECT EQUITY
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>
Huntington
VA Income Equity Fund
Portfolio Manager
[Picture]
JAMES BUSKIRK, CFA
Chief Investment Officer and
Senior Vice President
Huntington Funds
Q. How Did The Fund Perform?
Since its inception on October 20, 1999, which represents just a
little over two months of performance, the Huntington VA Income
Equity Fund provided a total return of -0.72% for the period ended
December 31, 1999.
Q. Why Did The Fund Perform This Way?
The Fund's performance proved disappointing in the first two months
of introduction, largely due to its sensitivity to interest rates.
That is, rising rates throughout the year had a decidedly negative
impact on the Fund's significant holdings in high yielding stocks,
also known as value stocks. In addition, company and/or industry
specific problems drove stock prices of current held positions
sharply lower, as investors were unwilling to tolerate any earnings
shortfalls by these so-called "old economy" companies. Certainly,
no small measure for the weakness in such stocks is due to
investors fleeing what they perceive to be no-growth, old-line
companies in favor of those fast-growing, "new economy" companies
engaged in all facets of the technology revolution. Since the
Fund's focus is squarely on dividends, and many of the ever-popular
technology stocks have little in the way of reportable earnings,
much less dividends, we did not participate in the recent robust
growth of that sector.
Q. What Is Your Outlook For 2000?
We continue to believe attempting to divine the near-term direction
of the market is little more than guesswork. The Fund remains
committed to providing its shareholders with a high dividend yield,
steady dividend growth, low costs, and competitive risk-adjusted
returns. We are confident the market will positively reward this
focus over time.
[CHART]
Returns
Period Ended December 31, 1999
SINCE INCEPTION
Income Equity -0.72%
S&P 500 16.78%
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE HUNTINGTON VA INCOME
EQUITY 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>
Mentor
VIP Capital Growth Fund
Portfolio Managers
JOHN DAVENPORT, CFA
Chief Financial Officer (Managing Director)
Mentor Investment Group
RICHARD SKEPPSTROM
Senior Vice President &
Portfolio Manager
Mentor Investment Group
STEVE CERTO
Vice President &
Portfolio Manager
Mentor Investment Group
CRAIG DAUER
Vice President &
Portfolio Manager
Mentor Investment Group
JOHN JORDAN
Vice President &
Portfolio Manager
Mentor Investment Group
Q. How Did The Fund Perform?
The Mentor VIP Capital Growth Fund appreciated 6.34% in the fourth
quarter, compared to the 14.88% return of the benchmark S&P 500.
For 1999, the Mentor VIP Capital Growth appreciated 6.50%
underperforming the S&P 500, which ended the year up 21.03%. The
performance figures do not include the affects of any insurance
related charges.
Q. Why Did The Fund Perform This Way?
Limited exposure to high market cap, high P/E technology stocks,
and the more volatile cyclical and energy sectors largely explains
our underperformance. Our consistent-growth-at-a-reasonable-price
methodology simply does not justify our owing these sectors of the
market.
Despite our lack of high P/E tech exposure, over one-quarter of our
holdings benefit directly from technology spending (i.e. Automatic
Data Processing, Computer Associates, Computer Sciences, First
Data, Intel, MCI Worldcom, and Sungard Data Systems). These
technology companies, like other holdings in the Fund, have
substantial businesses, impressive operating records, and are
showing above-average earnings growth, but they trade at about half
the valuation of the technology sector. The Fund as a whole trades
at about a 25% discount to the S&P 500.
Recently, we acquired a position in American Home Products. This
company has an above average pipeline of new drugs, yet due to
recent negative publicity trades at an extremely cheap valuation
compared to other companies in its industry. Furthermore, we
believe the AHP merger with Warner-Lambert is not likely to occur
due to the more attractive offer for Warner by Pfizer. That would
likely put AHP in play. We also added Masco to our portfolio. It is
the leading building supply products company. The company is a
market leader in each of its core businesses: faucets, kitchen and
bathroom cabinetry, building hardware, and paint. In addition, the
stock trades at 13x year 2000 earnings estimates. We added Danaher,
an industrial company that designs, manufactures, and markets
industrial and consumer products. Its two major business lines are
tools (e.g., Craftsmen) and process/environmental controls. High
quality management, an under-leveraged balance sheet, and strong
free cash flow position it as a consolidator in a fragmented
industry.
Q. What Is Your Outlook For 2000?
We believe the market is in a state of extreme volatility and
speculation but realize our investment discipline will be rewarded
as the markets move towards their historical averages. The
portfolio is well positioned for attractive relative performance in
a declining earnings growth environment or a more normal valuation
environment.
[CHART]
Returns
Average Annual Returns
Period Ended December 31, 1999
1 YEAR SINCE INCEPTION
VIP Capital Growth 6.50% 19.64%
S&P 500 21.03% 20.25%
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE MENTOR VIP CAPITAL GROWTH
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>
Mentor
VIP Perpetual International Fund
Portfolio Managers
SCOTT McGLASHAN
Far East Team Leader
Perpetual, PLC
KATHRYN LANGRIDGE
Southeast Asia Team Leader
Perpetual, PLC
STEPHEN WHITTAKER
UK Team Leader
Perpetual, PLC
MARGARET RODDAN
Europe Team Leader
Perpetual, PLC
MARK TURNER
Latin America Team Leader
Perpetual, PLC
Q. How Did The Fund Perform?
The Fund returned 19.29% for the quarter, outpacing its MSCI EAFE
Index benchmark of 17.05%. For the year, the Mentor VIP Perpetual
International returned 39.97%, while its benchmark returned 26.98%.
The performance figures do not include the affects of any insurance
related charges.
Q. Why Did The Fund Perform This Way?
Geographically, the most significant theme for the year was the
strong performance from Japan. The MSCI Japan Index was up 61.7% in
U.S. dollars, which resulted in Japan's market cap value as a
percentage of the MSCI EAFE index rising from 21% to 28%.
Management is still very bullish on the outlook for the Japanese
market and, in fact, further raised Japanese exposure in November.
The other important theme of the year was the strong performance of
wireless/telecom related stocks. In the UK, Europe and Japan it was
stocks like Vodafone, Nokia (up 245% in the year to become Europe's
largest company by market cap) Ericsson, NTT DoCoMo and Softbank
which led indices higher as investors around the world realized the
importance of the convergence in internet and wireless telecom
technology.
1999 marked the first year in four that overseas markets
outperformed U.S. markets, a trend that we suspect will continue.
1999 was an important year for international investment from the
U.S. perspective. For the first time in four years the MSCI EAFE
(up 27.30%) outperformed the S&P 500 (up 21.04%).
Q. What Is Your Outlook For 2000?
We expect continued outperformance from Japan and Asia in the
coming year. 2000 should see European markets' strongest performers
in industrial, consumer cyclical, telecom, and telecom-related
technology names.
[CHART]
Returns
Average Annual Returns
Period Ended December 31, 1999
1 YEAR SINCE INCEPTION
VIP Perp. Intl. 39.97% 27.91%
EAFE 26.98% 16.34%
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE MENTOR VIP PERPETUAL
INTERNATIONAL 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>
Mentor
VIP Growth Fund
Portfolio Managers
TED PRICE, CFA
Managing Director
Mentor Investment Group
LINDA ZIGLAR, CFA
Managing Director
Mentor Investment Group
JEFF DRUMMOND, CFA
Senior Vice President
Mentor Investment Group
Q. How Did The Fund Perform?
After trailing its Russell 2000 benchmark dramatically early in the
year, the Mentor VIP Growth Fund consistently made up ground in the
second half to close the year up 21.21%, in line with the Russell
2000 benchmark return of 21.26%. During the fourth quarter the Fund
significantly outperformed its benchmark returning 30.97% versus
the Russell's 18.44%. The performance figures do not include the
affects of any insurance related charges.
Q. Why Did The Fund Perform This Way?
Entering 2000 approximately one-third of the Fund is in technology
names. We are overweight healthcare ex biotechnology. This is a
sector that was depressed in 1999 and hurt our performance. Despite
contracting P/E multiples, these stocks continue to produce strong
earnings and from a valuation standpoint appear increasingly
attractive. We additionally maintain overweightings in consumer
staples (particularly radio broadcasting), consumer cyclicals,
transportation, and energy. The portfolio continues to be driven by
very strong earnings growth (greater than 35% projected for last
year and for 2000) and an average P/E that is at a discount to this
growth. The Fund will be moving to a Russell 2000 Growth benchmark
beginning in the first quarter of 2000.
Q. What Is Your Outlook For 2000?
Our growth-at-a-reasonable-price methodology typically keeps us out
of the hottest Internet and IPO holdings, something that certainly
hurt our relative performance in the most recently ended period.
Despite that we had strongly positive returns for the quarter and
year. We continue to believe that small capitalization stocks are
attractively valued relative to their large cap counterparts. We
believe that when the market returns to valuations more in keeping
with historical norms that our portfolio is positioned for
attractive relative performance.
[CHART]
Returns
Average Annual Returns
Period Ended December 31, 1999
1 YEAR SINCE INCEPTION
VIP Growth 21.21% 5.94%
Russell 2000 21.26% 6.29%
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE MENTOR VIP GROWTH 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>
Mercury
V.I. U.S. Large Cap Fund
Portfolio Manager
[Picture]
MICHAEL MORONY
Director
Mercury Asset Management International
Ltd.
Q. How Did The Fund Perform?
The fund commenced operations on April 30th, 1999 and through to
the 31st of December, 1999, had a total return of 20.94%,
outperforming the S&P 500 index which returned 10.99% over the same
period. The fund consistently out performed the S&P 500 from month
to month, with the index's losses mediated during the third quarter
and its gains enhanced during the fourth quarter of the year.
Q. Why Did The Fund Perform This Way?
The portfolio's strong performance was largely driven by overweight
positions in selected telecommunications and technology stocks,
most notably Yahoo!, Cisco Systems and Texas Instruments, which saw
particularly strong appreciation in the last quarter of the year. A
degree of performance was held back by Tyco International, a
holding which performed poorly on concerns that its aggressive
accounting policies masked a deterioration in underlying
businesses. Pharmaceutical holdings also saw a somewhat weak
performance due to negative investor sentiment regarding possible
Medicare reforms.
Q. What Is Your Outlook For 2000?
Technology should see strength as subsectors continue to address
new markets -such as data infrastructure - and internet stocks move
into profit, but the outperformance of technology will be somewhat
dependent on the realization of strong growth rates, especially
from the flagship stocks such as Microsoft and Cisco. We expect
consumer spending to remain high, but price competition leads us to
aim to be underweight in consumer staples. Financials also remain
unattractive due to continuing interest rate fears, and indeed we
expect the market to be wary of the interest rate outlook for some
time to come. Overall we maintain that the companies which deliver
consistently high revenue growth rates will find themselves the
most highly valued by the market.
[CHART]
Returns
Period Ended December 31, 1999
SINCE INCEPTION
V.I. U.S. Large Cap 20.94%
S&P 500 10.99%
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE MERCURY V.I. U.S. LARGE
CAP 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>
Merrill Lynch
Global Growth Focus Fund
Portfolio Manager
[Picture]
LARRY FULLER
Senior Portfolio Manager
Merrill Lynch Asset Management L.P.
Q. How Did The Fund Perform?
The Merrill Lynch Variable Series: Global Growth Focus Fund had a
total return for the calendar year ending December 31, 1999 of
+38.69%. This compares favorably with the investment return for the
Morgan Stanley Capital International (MSCI) World Stock Index in
U.S. dollars with net dividends reinvested of +24.93% for the same
time period.
Q. Why Did The Fund Perform This Way?
The factors causing the Fund to perform the way it did in 1999 were
several. First of all, the performance in the first quarter of 1999
was enhanced by our reduction of the investment weightings in large
capitalization growth companies in technology and retailing
industries, primarily in the U.S. market. The performance was
handicapped during the March through June period by the relatively
modest investment exposure to companies in Japan and the other
Asian markets. During the early part of the third quarter of 1999,
we started to increase the investment exposure in large
capitalization Japanese companies and technology companies on a
global basis. The significant contributors to the absolute and
relatively positive investment returns, especially during the
fourth quarter 1999, were the investment holdings in technology and
wireline and wireless communications companies.
Q. What Is Your Outlook For 2000?
My outlook for 2000 is positive for the equity markets in the major
developed economies. I am anticipating low double-digit positive
rates of return in 2000 for equity markets. I think that the upturn
in consumer spending on a consecutive quarterly comparison basis in
Japan during 1999 will continue in 2000. Assuming an upturn in
consumer spending in Japan in combination with corporate
restructuring, I believe that there will be a sufficient upturn in
corporate profitability to provide a positive return on investments
in large capitalization companies in Japan. In my opinion, the
equity markets in Continental Europe will have positive returns in
2000 from the growth in profitability of technology and industrial
companies serving export markets, because the decline in the value
of the Euro in 1999 appears to have created an advantageous
competitive position for many companies. In the U.S., I anticipate
the continuation of relatively attractive rates of real growth for
consumer spending and for capital investment in communications
infrastructure, both wireline and wireless, and electric power
generation equipment. The relatively high level of energy prices
compared to a year ago may result in cost push inflation in many
industries during 2000. Also, the U.S. labor markets are relatively
tight and we may see an acceleration of real wage increases. As
long as the rate of real growth in consumer spending continues at
an above-average pace, the Federal Reserve Board is likely to
continue to gradually raise the federal funds target rate and
restrain the upside potential in equity markets from growth in
overall corporate profits.
[CHART]
Returns
Average Annual Returns
Period Ended December 31, 1999
1 YEAR SINCE INCEPTION
Global Growth Focus 38.69% 29.50%
MSCI World 24.93% 21.78%
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE MERRILL LYNCH GLOBAL
GROWTH FOCUS 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>
Mitchell Hutchins
Growth and Income Fund
Portfolio Manager
MARK A. TINCHER, CFA
Managing Director and Chief Investment
Officer of Equities
Mitchell Hutchins Asset Management, Inc.
Q. How Did The Fund Perform?
All of the major equity markets gained during the fiscal year, but
none more than the NASDAQ Composite, which, propelled by technology
stocks, rocketed up 85.59%. The Dow Jones Industrial Average (Dow)
and Standard and Poor's 500 Index (S&P 500) saw strong gains of
27.29% and 21.03%, respectively. Throughout the fiscal year, a
relatively small number of stocks led the charge, and market
breadth fell to a three-year low. In ever-greater numbers,
investors chased technology stocks, where earnings growth and
positive earnings surprises have been strong.
Q. Why Did The Fund Perform This Way?
In our last report to shareholders (August 20, 1999) we stated that
we were looking to increase our exposure to the technology and
financial services sectors, where we felt there had been a
softening in the price-to-earnings ratios (PEs) of several
growth-oriented market leaders. These moves worked out as planned
and helped performance during the latter half of the year.
Technology and financial services were two of the S&P 500's
strongest sectors during the period. Our exposure to the tech
sector rose from 18.2% of the portfolio at mid-year to 25.5% by
year-end. Microsoft (NASDAQ: MSFT) (2.3%), Apple Computer (NASDAQ:
AAPL) (2.1%) and Dell (NASDAQ: DELL) (1.9%) entered our top ten
holdings list by period end.* Our single largest holding, Cisco
Systems, Inc. (NASDAQ: CSCO) (3.4%) appreciated more than 50% from
mid-year to year-end. Our exposure to financial services rose from
12.9% to 16.0%. Our exposure to the consumer cyclicals, which at
19.2% was our largest sector weighting at mid-year, fell to 15.6%
at year-end.
Q. What Is Your Outlook For 2000?
Earnings momentum in the technology sector is likely to continue in
2000 as ongoing domestic demand extends overseas. High valuations,
however, leave little room for disappointment, and 1999's success
will make for difficult earnings comparisons in 2000. This could
make careful stock selection more important than ever. Equity
markets should fare reasonably well in 2000, with earnings expected
to grow approximately 10-12% or more in an expanding global
economy. This positive scenario assumes that the market can absorb
an interest-rate increase of limited magnitude.
Given our expectations for stable economic growth and continued
expansion in the technology sector, we plan to continue our
strategy of underweighting defensive sectors such as consumer
durables, foods and beverages. These sectors typically perform well
in weakening economic environments, not stable expansions such as
we are now experiencing.
We plan to maintain our exposure to the strong-performing
technology sector, but we are wary of technology's high PE ratios
and the probability of tough year-to-year earnings comparisons (vs.
strong 1999 reports) as we move through the current year. We expect
to lighten up on positions when target prices are reached, or if
earnings appear poised to disappoint. We probably will not initiate
new investments in these sectors unless we see pronounced price
weakness.
We see opportunity in the financial sector, which at year-end sold
below the low end of its 10-year range relative to the S&P 500.
Energy and basic industry stocks appear ready to benefit from
broadening global economic strength. In general, we remain
favorable toward stocks and sectors that will prosper in a growing
economy and which can tolerate a modest rise in inflation
expectations.
* Weightings represent percentages of the portfolio assets as of
December 31, 1999, unless indicated otherwise. The Portfolio is
actively managed and its composition will vary over time.
[CHART]
Returns
Average Annual Returns
Period Ended December 31, 1999
1 YEAR 5 YEAR SINCE INCEP.
Growth & Income 10.33% 22.00% 12.49%
S&P 500 21.03% 28.54% 19.68%
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE MITCHELL HUTCHINS GROWTH &
INCOME PORTFOLIO. (THE RETURNS INCLUDE THE FUND LEVEL EXPENSES, BUT EXCLUDE THE
INSURANCE CHARGES). PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE
VALUE OF THE CONTRACT WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE
OR LESS THAN THE ORIGINAL INVESTMENT.
<PAGE>
Mitchell Hutchins
Strategic Income Fund
Portfolio Manager
DENNIS L. McCAULEY
Managing Director and Chief
Investment Officer of Fixed
Income Investments
Mitchell Hutchins Asset Management, Inc.
Q. How Did The Fund Perform?
Interest rates rose in the United States as the economy continued
to expand more briskly than anticipated. The Federal Reserve (the
Fed) raised the Federal Funds rate three times during the fiscal
year, by 25 basis points each time (bps; a basis point equals one
one-hundredth of one percent). These increases reversed the 75 bps
reduction engineered in late 1998 to stave off the global financial
crisis. The 30-year Treasury bond's yield increased to 6.48%, just
below its two-year high of 6.49% and finishing the year with its
worst price performance ever.
Mortgage "spreads" to Treasuries narrowed for most of the year,
benefiting portfolios with mortgage exposure. (The spread is the
difference in yield or income that securities must pay to
compensate for their greater risk relative to U.S. Treasuries.)
High-yield bonds achieved modest gains for the year, gaining 1.57%
as measured by the Merrill Lynch High Yield Master Index.
Investment-grade corporate bonds suffered from oversupply and
buyers' Y2K worries, and lost 0.82% as measured by the Lehman
Brothers Aggregate Bond Index.
Interest rates also rose during the fiscal year in developed
countries around the world, in response to increasing economic
activity and higher commodity prices. Emerging market bonds were
the best performers last year, benefiting from a return of investor
confidence after the sharp sell-off in the wake of the Russian debt
crisis of 1998. A sooner-than-expected return to economic stability
and rising commodity prices contributed to their strength, although
spreads to U.S. Treasurys did not return to their pre-crisis levels.
Q. Why Did The Fund Perform This Way?
The Portfolio allocates assets among three main sectors of the
global bond market - U.S. government/investment grade bonds, U.S.
high-yield bonds and non-U.S. bonds - and shifts emphasis among
them as conditions warrant.
Through the first half of the year, the Portfolio maintained
relatively high allocations to the U.S. high-yield and
investment-grade bond sectors. In August 1999, spreads in the
high-yield sector widened as investors withdrew, fearful of
potential Y2K problems. In response, we began reducing the
Portfolio's high-yield allocation and increased its allocation to
the U.S. investment-grade sector. The high-yield allocation reached
a low of 38.3% in October.
By the end of the year we had increased the Portfolio's high-yield
allocation to 43.2%, in an effort to participate in the "January
effect," which has occurred during the first quarter of each of the
last four years and has resulted in an increase of high-yield bond
prices. We believe technical factors could make January and
February of 2000 very positive months for the high-yield market.
At fiscal year-end, the Portfolio's investment grade allocation
stood at 38.0%, of which 33.2% was allocated to mortgage-backed
securities and 4.8% to investment-grade corporate obligations. The
Portfolio remained underweighted in the global markets.
Q. What Is Your Outlook For 2000?
In the first half of 2000, we expect an active Federal Reserve and
rising rates across the yield curve. We look for moderating
economic growth in the second half of the year, and believe
interest rates will recede in response to slowing growth and the
absence of real inflationary pressure. In this environment, we
think the spread sectors - mortgages, agencies, investment-grade
corporate and high-yield bonds - will perform well. We think the
mortgage market could see further spread narrowing in certain
sub-sectors.
Looking to 2000 and beyond, we believe the next big opportunity for
the Portfolio will be in the global markets, where we expect rates
to rise and become more attractive relative to rates in the U.S. If
this occurs, we anticipate increasing our global allocation. The
Portfolio has increased its exposure to European markets by
investing in the euro currency. We believe that over time the euro
will strengthen against the dollar and enhance the Portfolio's
return.
[CHART]
Returns
Period Ending December 31, 1999
1 YEAR SINCE INCEPTION
Strategic Income 1.91% 3.79%
ML High Yld. Master 1.57% 3.57%
Lehman Govt. Bond -2.16% -1.62%
SB World Govt. Bond -4.27% -0.70%
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE MITCHELL HUTCHINS
STRATEGIC INCOME PORTFOLIO. (THE RETURNS INCLUDE THE FUND LEVEL EXPENSES, BUT
EXCLUDE THE INSURANCE CHARGES). PAST PERFORMANCE DOES NOT GUARANTEE FUTURE
RESULTS. THE VALUE OF THE CONTRACT WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY
BE WORTH MORE OR LESS THAN THE ORIGINAL INVESTMENT.
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Review. 1
<S> <C>
Performance Summary......................................... 27
Hartford Life Insurance Companies
Separate Account Financial Statements................... 28
Hartford HLS Mutual Funds Financial Statements for:......... MF-1
Hartford Bond Income Strategy HLS Fund
Hartford Stock HLS Fund
Hartford Money Market HLS Fund
Hartford Advisers HLS Fund
Hartford Capital Appreciation HLS Fund
Hartford Mortgage Securities HLS Fund
Hartford Index HLS Fund
Hartford International Opportunities HLS Fund
Hartford Dividend and Growth HLS Fund
Hartford International Advisers HLS Fund
Hartford Small Company HLS Fund
Hartford MidCap HLS Fund
Hartford Growth and Income HLS Fund
Hartford High Yield HLS Fund
Hartford Global Leaders HLS Fund
BB&T Mutual Fund Financial Statements for:................ MF-87
BB&T Growth & Income Fund
AmSouth Mutual Fund Financial Statements for:............. MF-97
AmSouth Select Equity Fund
AmSouth Equity Income Fund
Huntington Mutual Fund Financial Statements for:.......... MF-106
Huntington Income Equity Fund
Merrill Lynch Mutual Fund Financial Statements for:....... ML-1
Merrill Lynch Mercury VI U.S. Large Cap
Merrill Lynch Mercury Global Growth
Mitchell Hutchins Mutual Fund Financial Statements for:... MH-1
Strategic Income Fund
Tactical Allocation Fund
Growth and Income Fund
Mentor Mutual Fund Financial Statements for:.............. M-1
Mentor VIP Capital Growth Portfolio
Mentor VIP Growth Portfolio
Mentor VIP Perpetual International Portfolio
</TABLE>
<PAGE>
Performance Summary of Hartford HLS Mutual Funds
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FUNDS
<CAPTION>
CLASS IA SHARES TOTAL RETURNS FOR THE YEAR ENDED DECEMBER 31,
1999 1998 19911997 19901996 19891995
Stock. % 19.78 % 33.4% % 24.581.3)% % (3.874.3% % 26.024.1
<S> <C> <C> <C> <C> <C> <C> <C>
Bond.................................... (2.02) 8.15 11.35 3.52 18.49
Money Market............................ 4.89 5.25 5.31 5.19 5.74
Advisers................................ 10.59 24.66 24.51 16.59 28.34
Capital Appreciation.................... 37.46 15.48 22.34 20.70 30.25
Mortgage Securities..................... 1.52 6.72 9.01 5.07 16.17
Index................................... 20.49 28.06 32.61 22.09 36.55
International Opportunities............. 39.86 13.16 0.34 12.93 13.93
Dividend and Growth..................... 5.31 16.42 31.89 22.91 36.37
International Advisers.................. 23.16 13.35 5.52 11.79 15.84*
Small Company........................... 65.83 11.62 18.38 7.15* --
MidCap.................................. 51.81 26.57 13.81* -- --
Growth and Income....................... 21.82 19.05* -- -- --
Global Leaders.......................... 50.37 31.88* -- -- --
High Yield.............................. 4.7 3.58* -- -- --
MARKET INDICES
Standard & Poor's 500 Stock Index....... 21.03% 28.60% 33.35% 22.95% 37.52%
Standard & Poor's 400 Stock Index
(MidCap)............................... 14.7 19.11 32.25 19.18 30.88
Lehman Gov't./Corp. Bond Index.......... (2.15) 9.47 9.76 2.90 19.24
90-Day Treasury Bills................... 4.87 4.98 5.33 5.29 5.80
MSCI EAFEGDP............................ 31.02 26.71 5.77 7.63 11.16
Russell 2000 Index...................... 21.26 (2.55) 22.36 16.51 28.45
Russell 2500 Index...................... 24.15 0.38 24.43 19.04 31.70
Lehman Brothers Mortgage Backed Bond
Index.................................. 1.86 6.96 9.49 5.35 16.80
<CAPTION>
CLASS IA SHARES TOTAL RETURNS FOR THE YEAR ENDED DECEMBER 31,
Stock.
<S> <C> <C> <C>
FUNDS
Bond.................................... (3.95) 10.24 5.53
Money Market............................ 3.95 2.94 3.63
Advisers................................ (2.74) 12.25 8.30
Capital Appreciation.................... 2.50 20.80 16.98
Mortgage Securities..................... (1.61) 6.31 4.64
Index................................... 0.94 9.12 6.82
International Opportunities............. (1.94) 33.73 (4.43)
Dividend and Growth..................... 1.96* -- --
International Advisers.................. -- -- --
Small Company........................... -- -- --
MidCap.................................. -- -- --
Growth and Income....................... -- -- --
Global Leaders.......................... -- -- --
High Yield.............................. -- -- --
MARKET INDICES
Standard & Poor's 500 Stock Index....... 1.31% 10.06% 7.61%
Standard & Poor's 400 Stock Index
(MidCap)............................... (3.59) 11.03 7.58
Lehman Gov't./Corp. Bond Index.......... (3.51) 11.03 7.58
90-Day Treasury Bills................... 4.14 3.12 3.70
MSCI EAFEGDP............................ 7.81 33.56 (9.65)
Russell 2000 Index...................... (1.82) 18.71 18.41
Russell 2500 Index...................... (1.07) 16.54 16.18
Lehman Brothers Mortgage Backed Bond
Index.................................. (1.61) 6.84 8.96
<CAPTION>
<S>
Bond.................................... 16.43 8.39 12.10
Money Market............................ 6.01 8.09 9.10
Advisers................................ 20.33 1.26 21.72
Capital Appreciation.................... 53.99 (10.90) 24.11
Mortgage Securities..................... 14.71 9.70 13.13
Index................................... 29.53 (3.99) 30.47
International Opportunities............. 13.00 (11.76)* --
Dividend and Growth..................... -- -- --
International Advisers.................. -- -- --
Small Company........................... -- -- --
MidCap.................................. -- -- --
Growth and Income....................... -- -- --
Global Leaders.......................... -- -- --
High Yield.............................. -- -- --
MARKET INDICES
Standard & Poor's 500 Stock Index....... 30.39% (3.11)% 31.62%
Standard & Poor's 400 Stock Index
(MidCap)............................... 16.13 8.28 14.24
Lehman Gov't./Corp. Bond Index.......... 16.13 8.28 14.24
90-Day Treasury Bills................... 5.90 7.95 8.67
MSCI EAFEGDP............................ 10.73 -- --
Russell 2000 Index...................... 46.04 (19.48) 16.26
Russell 2500 Index...................... 46.69 (14.88) 19.43
Lehman Brothers Mortgage Backed Bond
Index.................................. 15.72 10.72 15.35
</TABLE>
* The inception dates of the Funds are as follows: Stock and Bond--August 31,
1977, 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 and Income--May 29,
1998, High Yield 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.
27
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<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 381,925,372
Cost $398,919,676
Market Value...................... $379,581,114 -- --
Hartford Stock HLS Fund, Inc. -
Class IA
Shares 446,551,430
Cost $1,739,620,114
Market Value...................... -- $3,191,676,331 --
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 416,009,296
Cost $416,009,296
Market Value...................... -- -- $416,009,296
Hartford Advisers HLS Fund, Inc. -
Class IA
Shares 1,924,549,471
Cost $3,837,456,863
Market Value...................... -- -- --
Hartford Capital Appreciation HLS
Fund, Inc. - Class IA
Shares 437,319,084
Cost $1,404,391,777
Market Value...................... -- -- --
Hartford Mortgage Securities HLS
Fund, Inc. - Class IA
Shares 163,664,753
Cost $176,379,736
Market Value...................... -- -- --
Hartford Index HLS Fund, Inc. -
Class IA
Shares 208,576,729
Cost $500,271,928
Market Value...................... -- -- --
Hartford International Opportunities
HLS Fund, Inc. - Class IA
Shares 270,848,565
Cost $312,238,682
Market Value...................... -- -- --
Hartford Dividend and Growth HLS
Fund, Inc. - Class IA
Shares 462,406,230
Cost $749,888,851
Market Value...................... -- -- --
Due from Hartford Life Insurance
Company.............................. -- -- --
Receivable from fund shares sold...... 160,437 77,855 38,653,596
------------ -------------- ------------
Total Assets.......................... 379,741,551 3,191,754,186 454,662,892
------------ -------------- ------------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. 160,617 79,461 38,625,437
Payable for fund shares purchased..... -- -- --
------------ -------------- ------------
Total Liabilities..................... 160,617 79,461 38,625,437
------------ -------------- ------------
Net Assets (variable annuity contract
liabilities)......................... $379,580,934 $3,191,674,725 $416,037,455
============ ============== ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 28 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ----------------- --------------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund, Inc. -
Class IA
Shares 381,925,372
Cost $398,919,676
Market Value...................... -- -- -- -- --
Hartford Stock HLS Fund, Inc. -
Class IA
Shares 446,551,430
Cost $1,739,620,114
Market Value...................... -- -- -- -- --
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 416,009,296
Cost $416,009,296
Market Value...................... -- -- -- -- --
Hartford Advisers HLS Fund, Inc. -
Class IA
Shares 1,924,549,471
Cost $3,837,456,863
Market Value...................... $5,705,854,235 -- -- -- --
Hartford Capital Appreciation HLS
Fund, Inc. - Class IA
Shares 437,319,084
Cost $1,404,391,777
Market Value...................... -- $2,665,629,499 -- -- --
Hartford Mortgage Securities HLS
Fund, Inc. - Class IA
Shares 163,664,753
Cost $176,379,736
Market Value...................... -- -- $170,128,202 -- --
Hartford Index HLS Fund, Inc. -
Class IA
Shares 208,576,729
Cost $500,271,928
Market Value...................... -- -- -- $ 873,682,031 --
Hartford International Opportunities
HLS Fund, Inc. - Class IA
Shares 270,848,565
Cost $312,238,682
Market Value...................... -- -- -- -- $508,094,303
Hartford Dividend and Growth HLS
Fund, Inc. - Class IA
Shares 462,406,230
Cost $749,888,851
Market Value...................... -- -- -- -- --
Due from Hartford Life Insurance
Company.............................. -- 14,808,231 85,563 205,321 1,011,121
Receivable from fund shares sold...... 2,195,184 -- -- -- --
-------------- -------------- ------------ ------------- ------------
Total Assets.......................... 5,708,049,419 2,680,437,730 170,213,765 873,887,352 509,105,424
-------------- -------------- ------------ ------------- ------------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. 2,196,979 -- -- -- --
Payable for fund shares purchased..... -- 14,808,295 81,591 206,074 1,012,471
-------------- -------------- ------------ ------------- ------------
Total Liabilities..................... 2,196,979 14,808,295 81,591 206,074 1,012,471
-------------- -------------- ------------ ------------- ------------
Net Assets (variable annuity contract
liabilities)......................... $5,705,852,440 $2,665,629,435 $170,132,174 $ 873,681,278 $508,092,953
============== ============== ============ ============= ============
<CAPTION>
DIVIDEND AND
GROWTH FUND
SUB-ACCOUNT
--------------
<S> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund, Inc. -
Class IA
Shares 381,925,372
Cost $398,919,676
Market Value...................... --
Hartford Stock HLS Fund, Inc. -
Class IA
Shares 446,551,430
Cost $1,739,620,114
Market Value...................... --
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 416,009,296
Cost $416,009,296
Market Value...................... --
Hartford Advisers HLS Fund, Inc. -
Class IA
Shares 1,924,549,471
Cost $3,837,456,863
Market Value...................... --
Hartford Capital Appreciation HLS
Fund, Inc. - Class IA
Shares 437,319,084
Cost $1,404,391,777
Market Value...................... --
Hartford Mortgage Securities HLS
Fund, Inc. - Class IA
Shares 163,664,753
Cost $176,379,736
Market Value...................... --
Hartford Index HLS Fund, Inc. -
Class IA
Shares 208,576,729
Cost $500,271,928
Market Value...................... --
Hartford International Opportunities
HLS Fund, Inc. - Class IA
Shares 270,848,565
Cost $312,238,682
Market Value...................... --
Hartford Dividend and Growth HLS
Fund, Inc. - Class IA
Shares 462,406,230
Cost $749,888,851
Market Value...................... $ 993,631,453
Due from Hartford Life Insurance
Company.............................. --
Receivable from fund shares sold...... 398,320
-------------
Total Assets.......................... 994,029,773
-------------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. 397,708
Payable for fund shares purchased..... --
-------------
Total Liabilities..................... 397,708
-------------
Net Assets (variable annuity contract
liabilities)......................... $ 993,632,065
=============
</TABLE>
______________________________________ 29 ______________________________________
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
ADVISERS COMPANY MIDCAP
FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------ ------------
<S> <C> <C> <C>
ASSETS:
Investments:
International Advisers HLS Fund, Inc
- Class IA
Shares 78,142,562
Cost $91,062,085
Market Value...................... $109,141,013 -- --
Small Company HLS Fund, Inc. -
Class IA
Shares 116,111,010
Cost $161,087,349
Market Value...................... -- $254,024,997 --
MidCap HLS Fund, Inc. - Class IA
Shares 126,461,413
Cost $205,816,508
Market Value...................... -- -- $259,688,385
Hartford Growth and Income HLS Fund
- Class IA
Shares 44,914,208
Cost $57,056,947
Market Value...................... -- -- --
Hartford High Yield HLS Fund -
Class IA
Shares 17,416,534
Cost $18,153,355
Market Value...................... -- -- --
Hartford Global Leaders HLS Fund -
Class IA
Shares 27,623,494
Cost $42,769,890
Market Value...................... -- -- --
Smith Barney Cash Portfolio
Shares 471,343
Cost $471,343
Market Value...................... -- -- --
Smith Barney Appreciation Fund
Shares 14,215
Cost $117,589
Market Value...................... -- -- --
Smith Barney Government Portfolio
Shares 31,310
Cost $31,310
Market Value...................... -- -- --
BB&T Growth & Income Fund
Shares 2,248,623
Cost $27,485,794
Market Value...................... -- -- --
AmSouth Equity Income Fund
Shares 2,572,237
Cost $28,494,557
Market Value...................... -- -- --
Due from Hartford Life Insurance
Company.............................. 119,851 5,463,600 16,063,484
Receivable from fund shares sold...... -- -- --
------------ ------------ ------------
Total Assets.......................... 109,260,864 259,488,597 275,751,869
------------ ------------ ------------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. -- -- --
Payable for fund shares purchased..... 120,096 5,463,705 16,063,809
------------ ------------ ------------
Total Liabilities..................... 120,096 5,463,705 16,063,809
------------ ------------ ------------
Net Assets (variable annuity contract
liabilities)......................... $109,140,768 $254,024,892 $259,688,060
============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 30 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH AND GLOBAL SMITH BARNEY SMITH BARNEY SMITH BARNEY
INCOME HIGH YIELD LEADERS CASH APPRECIATION GOVERNMENT
FUND FUND FUND PORTFOLIO FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
International Advisers HLS Fund, Inc
- Class IA
Shares 78,142,562
Cost $91,062,085
Market Value...................... -- -- -- -- -- --
Small Company HLS Fund, Inc. -
Class IA
Shares 116,111,010
Cost $161,087,349
Market Value...................... -- -- -- -- -- --
MidCap HLS Fund, Inc. - Class IA
Shares 126,461,413
Cost $205,816,508
Market Value...................... -- -- -- -- -- --
Hartford Growth and Income HLS Fund
- Class IA
Shares 44,914,208
Cost $57,056,947
Market Value...................... $64,301,022 -- -- -- -- --
Hartford High Yield HLS Fund -
Class IA
Shares 17,416,534
Cost $18,153,355
Market Value...................... -- $17,501,387 -- -- -- --
Hartford Global Leaders HLS Fund -
Class IA
Shares 27,623,494
Cost $42,769,890
Market Value...................... -- -- $52,840,981 -- -- --
Smith Barney Cash Portfolio
Shares 471,343
Cost $471,343
Market Value...................... -- -- -- $ 471,343 -- --
Smith Barney Appreciation Fund
Shares 14,215
Cost $117,589
Market Value...................... -- -- -- -- $223,601 --
Smith Barney Government Portfolio
Shares 31,310
Cost $31,310
Market Value...................... -- -- -- -- -- $31,310
BB&T Growth & Income Fund
Shares 2,248,623
Cost $27,485,794
Market Value...................... -- -- -- -- -- --
AmSouth Equity Income Fund
Shares 2,572,237
Cost $28,494,557
Market Value...................... -- -- -- -- -- --
Due from Hartford Life Insurance
Company.............................. 119,444 -- 279,383 26,631 -- --
Receivable from fund shares sold...... -- 16,018 -- -- 14 11
----------- ----------- ----------- --------- -------- -------
Total Assets.......................... 64,420,466 17,517,405 53,120,364 497,974 223,615 31,321
----------- ----------- ----------- --------- -------- -------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. -- 15,974 -- -- 77 19
Payable for fund shares purchased..... 119,350 -- 279,292 27,259 -- --
----------- ----------- ----------- --------- -------- -------
Total Liabilities..................... 119,350 15,974 279,292 27,259 77 19
----------- ----------- ----------- --------- -------- -------
Net Assets (variable annuity contract
liabilities)......................... $64,301,116 $17,501,431 $52,841,072 $ 470,715 $223,538 $31,302
=========== =========== =========== ========= ======== =======
<CAPTION>
BB&T AMSOUTH
GROWTH & EQUITY INCOME
INCOME FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -------------
<S> <C> <C>
ASSETS:
Investments:
International Advisers HLS Fund, Inc
- Class IA
Shares 78,142,562
Cost $91,062,085
Market Value...................... -- --
Small Company HLS Fund, Inc. -
Class IA
Shares 116,111,010
Cost $161,087,349
Market Value...................... -- --
MidCap HLS Fund, Inc. - Class IA
Shares 126,461,413
Cost $205,816,508
Market Value...................... -- --
Hartford Growth and Income HLS Fund
- Class IA
Shares 44,914,208
Cost $57,056,947
Market Value...................... -- --
Hartford High Yield HLS Fund -
Class IA
Shares 17,416,534
Cost $18,153,355
Market Value...................... -- --
Hartford Global Leaders HLS Fund -
Class IA
Shares 27,623,494
Cost $42,769,890
Market Value...................... -- --
Smith Barney Cash Portfolio
Shares 471,343
Cost $471,343
Market Value...................... -- --
Smith Barney Appreciation Fund
Shares 14,215
Cost $117,589
Market Value...................... -- --
Smith Barney Government Portfolio
Shares 31,310
Cost $31,310
Market Value...................... -- --
BB&T Growth & Income Fund
Shares 2,248,623
Cost $27,485,794
Market Value...................... $28,017,845 --
AmSouth Equity Income Fund
Shares 2,572,237
Cost $28,494,557
Market Value...................... -- $35,728,377
Due from Hartford Life Insurance
Company.............................. 2,564 170,059
Receivable from fund shares sold...... -- --
----------- -----------
Total Assets.......................... 28,020,409 35,898,436
----------- -----------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. -- --
Payable for fund shares purchased..... 2,585 170,055
----------- -----------
Total Liabilities..................... 2,585 170,055
----------- -----------
Net Assets (variable annuity contract
liabilities)......................... $28,017,824 $35,728,381
=========== ===========
</TABLE>
______________________________________ 31 ______________________________________
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MENTOR VIP MENTOR VIP
CAPITAL GROWTH PERPETUAL INTERNATIONAL
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
-------------- -----------------------
<S> <C> <C>
ASSETS:
Investments:
Mentor VIP Capital Growth Fund
Shares 1,714,877
Cost $21,738,831
Market Value..................................... $24,728,524 --
Mentor VIP Perpetual International Fund
Shares 1,160,994
Cost $16,298,880
Market Value..................................... -- $22,755,484
Mentor VIP Growth Fund
Shares 1,040,522
Cost $11,202,467
Market Value..................................... -- --
Mitchell Hutchins Growth & Income Portfolio -
Class I
Shares 245,997
Cost $3,654,815
Market Value..................................... -- --
Mitchell Hutchins Strategic Income Portfolio -
Class I
Shares 98,344
Cost $1,219,298
Market Value..................................... -- --
Mitchell Hutchins Tactical Allocation Portfolio -
Class I
Shares 1,320,950
Cost $21,338,736
Market Value..................................... -- --
Huntington VA Income Equity Fund
Shares 23,178
Cost $228,633
Market Value..................................... -- --
AmSouth Select Equity Fund
Shares 290,955
Cost $2,680,109
Market Value..................................... -- --
Due from Hartford Life Insurance Company............. -- 17,786
Receivable from fund shares sold..................... 7,221 --
----------- -----------
Total Assets......................................... 24,735,745 22,773,270
----------- -----------
LIABILITIES:
Due to Hartford Life Insurance Company............... 7,301 --
Payable for fund shares purchased.................... -- 17,847
----------- -----------
Total Liabilities.................................... 7,301 17,847
----------- -----------
Net Assets (variable annuity contract liabilities)... $24,728,444 $22,755,423
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 32 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MENTOR VIP MITCHELL HUTCHINS MITCHELL HUTCHINS MITCHELL HUTCHINS
GROWTH GROWTH AND INCOME STRATEGIC INCOME TACTICAL ALLOCATION
FUND PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------------- ----------------- -------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Mentor VIP Capital Growth Fund
Shares 1,714,877
Cost $21,738,831
Market Value..................................... -- -- -- --
Mentor VIP Perpetual International Fund
Shares 1,160,994
Cost $16,298,880
Market Value..................................... -- -- -- --
Mentor VIP Growth Fund
Shares 1,040,522
Cost $11,202,467
Market Value..................................... $14,432,037 -- -- --
Mitchell Hutchins Growth & Income Portfolio -
Class I
Shares 245,997
Cost $3,654,815
Market Value..................................... -- $4,022,057 -- --
Mitchell Hutchins Strategic Income Portfolio -
Class I
Shares 98,344
Cost $1,219,298
Market Value..................................... -- -- $1,153,572 --
Mitchell Hutchins Tactical Allocation Portfolio -
Class I
Shares 1,320,950
Cost $21,338,736
Market Value..................................... -- -- -- $21,769,264
Huntington VA Income Equity Fund
Shares 23,178
Cost $228,633
Market Value..................................... -- -- -- --
AmSouth Select Equity Fund
Shares 290,955
Cost $2,680,109
Market Value..................................... -- -- -- --
Due from Hartford Life Insurance Company............. 9,714 -- -- 1,537
Receivable from fund shares sold..................... -- 137 -- --
----------- ---------- ---------- -----------
Total Assets......................................... 14,441,751 4,022,194 1,153,572 21,770,801
----------- ---------- ---------- -----------
LIABILITIES:
Due to Hartford Life Insurance Company............... -- 134 38 --
Payable for fund shares purchased.................... 9,738 -- -- 1,531
----------- ---------- ---------- -----------
Total Liabilities.................................... 9,738 134 38 1,531
----------- ---------- ---------- -----------
Net Assets (variable annuity contract liabilities)... $14,432,013 $4,022,060 $1,153,534 $21,769,270
=========== ========== ========== ===========
<CAPTION>
HUNTINGTON VA AMSOUTH
INCOME EQUITY SELECT EQUITY
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- -------------
<S> <C> <C>
ASSETS:
Investments:
Mentor VIP Capital Growth Fund
Shares 1,714,877
Cost $21,738,831
Market Value..................................... -- --
Mentor VIP Perpetual International Fund
Shares 1,160,994
Cost $16,298,880
Market Value..................................... -- --
Mentor VIP Growth Fund
Shares 1,040,522
Cost $11,202,467
Market Value..................................... -- --
Mitchell Hutchins Growth & Income Portfolio -
Class I
Shares 245,997
Cost $3,654,815
Market Value..................................... -- --
Mitchell Hutchins Strategic Income Portfolio -
Class I
Shares 98,344
Cost $1,219,298
Market Value..................................... -- --
Mitchell Hutchins Tactical Allocation Portfolio -
Class I
Shares 1,320,950
Cost $21,338,736
Market Value..................................... -- --
Huntington VA Income Equity Fund
Shares 23,178
Cost $228,633
Market Value..................................... $228,763 --
AmSouth Select Equity Fund
Shares 290,955
Cost $2,680,109
Market Value..................................... -- $2,476,028
Due from Hartford Life Insurance Company............. -- 21,838
Receivable from fund shares sold..................... -- --
-------- ----------
Total Assets......................................... 228,763 2,497,866
-------- ----------
LIABILITIES:
Due to Hartford Life Insurance Company............... 8 --
Payable for fund shares purchased.................... -- 21,834
-------- ----------
Total Liabilities.................................... 8 21,834
-------- ----------
Net Assets (variable annuity contract liabilities)... $228,755 $2,476,032
======== ==========
</TABLE>
______________________________________ 33 ______________________________________
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- ---------- ---------------
<S> <C> <C> <C>
DEFERRED ANNUITY CONTRACTS IN THE
ACCUMULATION PERIOD:
Bond Fund Qualified 1.00%........ 213,341 $ 4.242785 $ 905,161
Bond Fund Non-Qualified 1.00%.... 1,528,336 4.178271 6,385,802
Bond Fund 1.25%.................. 167,706,691 2.184598 366,371,702
Bond Fund .25%................... 52,746 1.498860 79,060
Bond Fund 1.4%................... 755,787 2.182434 1,649,454
Bond Fund 1.5%................... 2,733,792 0.994947 2,719,978
Stock Fund Qualified 1.00%....... 2,764,533 13.310539 36,797,424
Stock Fund Qualified 1.00%....... 679,578 13.920026 9,459,745
Stock Fund 1.25%................. 432,423,789 7.175612 3,102,905,327
Stock Fund .25%.................. 1,068,046 3.885218 4,149,591
Stock Fund 1.4%.................. 2,104,901 7.168535 15,089,057
Stock Fund 1.5%.................. 11,808,607 1.223394 14,446,580
Stock Fund 1.65%................. 69,390 1.222948 84,860
Money Market Fund Qualified
1.00%........................... 459,952 2.782454 1,279,796
Money Market Fund Non-Qualified
1.00%........................... 6,995,552 2.783765 19,473,975
Money Market Fund 1.25%.......... 213,832,400 1.777341 380,053,091
Money Market Fund .25%........... 423,001 1.359855 575,220
Money Market Fund 1.65%.......... 95,824 1.049997 100,615
Money Market Fund 1.4%........... 1,061,435 1.775591 1,884,675
Money Market Fund 1.5%........... 11,251,805 1.050377 11,818,637
Advisers Fund Qualified 1.00%.... 2,884,286 7.230781 20,855,639
Advisers Fund Non-Qualified
1.00%........................... 8,513,289 7.230781 61,557,730
Advisers Fund 1.25%.............. 1,156,230,489 4.803097 5,553,487,191
Advisers Fund .25%............... 1,122,511 2.760456 3,098,643
Advisers Fund 1.65%.............. 90,120 1.127468 101,608
Advisers Fund 1.4%............... 4,952,412 4.798347 23,763,390
Advisers Fund 1.5%............... 24,758,627 1.127880 27,924,760
Capital Appreciation Fund
Qualified 1.00%................. 693,728 12.687752 8,801,850
Capital Appreciation Fund
Non-Qualified 1.00%............. 1,995,203 12.682513 25,304,182
Capital Appreciation Fund
1.25%........................... 347,433,441 7.501418 2,606,243,470
Capital Appreciation Fund .25%... 1,770,832 3.719454 6,586,527
Capital Appreciation Fund
1.65%........................... 56,270 1.334003 75,064
Capital Appreciation Fund 1.4%... 1,112,300 7.494011 8,335,584
Capital Appreciation Fund 1.5%... 5,291,692 1.334491 7,061,715
Mortgage Securities Fund
Qualified 1.00%................. 455,136 2.859263 1,301,354
Mortgage Securities Fund
Non-Qualified 1.00%............. 4,637,303 2.859263 13,259,270
Mortgage Securities Fund 1.25%... 69,554,953 2.216665 154,180,031
Mortgage Securities Fund .25%.... 14,431 1.476954 21,314
Mortgage Securities Fund 1.4%.... 120,468 2.214471 266,772
Mortgage Securities Fund 1.5%.... 435,786 1.022434 445,563
Index Fund Qualified 1.00%....... 180,991 2.226696 403,011
Index Fund Non-Qualified 1.00%... 705,606 2.226696 1,571,169
Index Fund 1.25%................. 152,272,495 5.607574 853,879,286
Index Fund .25%.................. 225,894 3.702905 836,463
Index Fund 1.65%................. 7,659 1.239923 9,497
Index Fund 1.4%.................. 1,106,937 5.602011 6,201,075
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 34 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- ---------- ---------------
<S> <C> <C> <C>
Index Fund 1.5%.................. 5,947,828 $ 1.240377 $ 7,377,549
International Opportunities Fund
Qualified 1.00%................. 164,957 2.321965 383,024
International Opportunities Fund
Non-Qualified 1.00%............. 1,040,352 2.320729 2,414,376
International Opportunities Fund
1.25%........................... 218,271,540 2.266827 494,783,822
International Opportunities Fund
.25%............................ 693,181 2.614527 1,812,341
International Opportunities Fund
1.4%............................ 449,187 2.264582 1,017,221
International Opportunities Fund
1.5%............................ 5,242,257 1.273461 6,675,810
Dividend and Growth Fund
Qualified 1.00%................. 302,679 2.607548 789,249
Dividend and Growth Fund
Non-Qualified 1.00%............. 1,206,465 2.607548 3,145,915
Dividend and Growth Fund 1.25%... 381,269,170 2.569946 979,841,178
Dividend and Growth Fund .25%.... 208,016 2.723583 566,550
Dividend and Growth Fund 1.65%... 17,587 1.045671 18,390
Dividend and Growth Fund 1.4%.... 1,030,411 2.567396 2,645,474
Dividend and Growth Fund 1.5%.... 4,376,833 1.046052 4,578,395
International Advisers Fund
Qualified 1.00%................. 12,397 1.817544 22,533
International Advisers Fund
Non-Qualified 1.00%............. 153,873 1.817544 279,670
International Advisers Fund
1.25%........................... 57,796,510 1.795704 103,785,423
International Advisers Fund
.25%............................ 38,176 1.884645 71,947
International Advisers Fund
1.65%........................... 8,093 1.178048 9,534
International Advisers Fund
1.4%............................ 390,910 1.793926 701,264
International Advisers Fund
1.5%............................ 3,383,042 1.178481 3,986,850
Small Company Fund Qualified
1.00%........................... 227,604 2.269744 516,604
Small Company Fund Non-Qualified
1.00%........................... 2,533,564 2.269744 5,750,541
Small Company Fund 1.25%......... 107,808,156 2.250630 242,636,270
Small Company Fund .25%.......... 237,848 2.328130 553,741
Small Company Fund 1.65%......... 23,341 1.592576 37,173
Small Company Fund 1.4%.......... 725,945 2.248401 1,632,216
Small Company Fund 1.5%.......... 1,659,166 1.593152 2,643,303
MidCap Fund Sub-Account 1.00%
Qualified....................... 276,421 2.068062 571,655
MidCap Fund Sub-Account 1.00%
Non-Qualified................... 4,561,273 2.068062 9,432,996
MidCap Fund Sub-Account .25%..... 100,099 2.105927 210,800
MidCap Fund 1.65%................ 12,943 1.520083 19,674
MidCap Fund 1.4%................. 1,455,391 2.053534 2,988,695
MidCap Fund 1.5%................. 2,064,651 1.520630 3,139,571
MidCap Fund 1.25%................ 118,305,628 2.055574 243,185,973
Growth and Income Fund 1.65%..... 16,881 1.308008 22,081
Growth and Income Fund 1.4%...... 1,551,524 1.420460 2,203,878
Growth and Income Fund Non
Qualified 1.00%................. 94,246 1.427512 134,538
Growth and Income Fund Qualified
1.00%........................... 297,288 1.427512 424,382
Growth and Income Fund .25%...... 18,437 1.444538 26,633
Growth and Income Fund 1.25%..... 41,231,825 1.421882 58,626,791
Growth and Income Fund 1.5%...... 2,107,446 1.308485 2,757,561
High Yield Fund 1.4%............. 707,437 1.069043 756,281
High Yield Fund 1.5%............. 754,351 1.066776 804,723
High Yield Fund .25%............. 10,000 1.083588 10,836
High Yield Fund 1.25%............ 14,681,047 1.070110 15,710,335
High Yield Fund Qualified
1.00%........................... 9,996 1.073454 10,730
High Yield Fund Non Qualified
1.00%........................... 28,832 1.073454 30,950
</TABLE>
______________________________________ 35 ______________________________________
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- ---------- ---------------
<S> <C> <C> <C>
Global Leaders Fund 1.4%......... 601,937 $ 1.950512 $ 1,174,085
Global Leaders Fund .25%......... 34,138 1.976824 67,485
Global Leaders Fund 1.25%........ 25,342,886 1.952453 49,480,795
Global Leaders Fund Non Qualified
1.00%........................... 132,669 1.958438 259,824
Global Leaders Fund 1.00%........ 30,778 1.958438 60,278
Global Leaders Fund 1.5%......... 912,978 1.946293 1,776,922
Smith Barney Cash Portfolio
Qualified 1.00%................. 40,848 2.996122 122,387
Smith Barney Cash Portfolio
Non-Qualified 1.00%............. 112,352 3.100326 348,328
Smith Barney Appreciation Fund
1.00%........................... 17,669 12.651528 223,538
Smith Barney Government Portfolio
1.00%........................... 11,614 2.695221 31,302
BB&T Growth and Income Fund
1.4%............................ 164,327 1.263735 207,666
BB&T Growth and Income Fund
1.25%........................... 21,984,471 1.264991 27,810,158
AmSouth Equity Income Fund
1.4%............................ 868,023 1.400354 1,215,539
AmSouth Equity Income Fund
1.25%........................... 24,604,396 1.401746 34,489,115
Mentor VIP Capital Growth Fund
1.4%............................ 100,477 1.129778 113,517
Mentor VIP Capital Growth Fund
1.25%........................... 21,765,940 1.130892 24,614,927
Mentor VIP Perpetual
International Fund 1.4%......... 117,617 1.531949 180,183
Mentor VIP Perpetual
International Fund 1.25%........ 14,721,728 1.533464 22,575,240
Mentor VIP Growth Fund 1.4%...... 39,023 1.085030 42,341
Mentor VIP Growth Fund 1.25%..... 13,248,938 1.086100 14,389,672
Mitchell Hutchins Growth and
Income Portfolio 1.5%........... 28,159 1.082851 30,491
Mitchell Hutchins Growth and
Income Portfolio 1.4%........... 24,198 1.168150 28,267
Mitchell Hutchins Growth and
Income Portfolio 1.25%.......... 3,389,460 1.169302 3,963,302
Mitchell Hutchins Strategic
Income Portfolio 1.5%........... 39,574 0.975253 38,595
Mitchell Hutchins Strategic
Income Portfolio 1.4%........... 48,568 1.002380 48,683
Mitchell Hutchins Strategic
Income Portfolio 1.25%.......... 1,062,673 1.003372 1,066,256
Mitchell Hutchins Tactical
Allocation Portfolio 1.5%....... 1,771,459 1.065485 1,887,463
Mitchell Hutchins Tactical
Allocation Portfolio 1.4%....... 260,842 1.235332 322,226
Mitchell Hutchins Tactical
Allocation Portfolio 1.25%...... 15,817,865 1.236550 19,559,581
Huntington VA Income Equity Fund
1.4%............................ 6,274 0.992986 6,230
Huntington VA Income Equity Fund
1.25%........................... 224,042 0.993229 222,525
AmSouth Select Equity Fund
1.4%............................ 213,869 0.846981 181,143
AmSouth Select Equity Fund
1.25%........................... 2,706,783 0.847829 2,294,889
---------------
SUB-TOTAL:....................... 15,780,380,307
---------------
ANNUITY CONTRACTS IN THE ANNUITY
PERIOD:
Bond Fund Non-Qualified 1.00%.... 13,487 4.178271 56,352
Bond Fund 1.25%.................. 646,995 2.184598 1,413,425
Stock Fund Non-Qualified 1.00%... 21,934 13.310539 291,952
Stock Fund 1.25%................. 1,177,626 7.175612 8,450,189
Money Market Fund Qualified
1.00%........................... 317 2.782454 883
Money Market Fund Non-Qualified
1.00%........................... 70,673 2.783765 196,736
Money Market Fund 1.25%.......... 367,868 1.777341 653,827
Advisers Fund Qualified 1.00%.... 1,924 7.230781 13,909
Advisers Fund Non-Qualified
1.00%........................... 107,185 7.230781 775,030
Advisers Fund 1.25%.............. 2,971,945 4.803097 14,274,540
Capital Appreciation Fund
Non-Qualified 1.00%............. 15,299 12.682513 194,028
Capital Appreciation Fund
1.25%........................... 403,526 7.501418 3,027,015
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 36 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- ---------- ---------------
<S> <C> <C> <C>
Mortgage Securities Fund
Non-Qualified 1.00%............. 57,599 $ 2.859263 $ 164,690
Mortgage Securities Fund 1.25%... 222,487 2.216665 493,180
Index Fund 1.25%................. 603,079 5.607574 3,381,807
Index Fund Non Qualified 1.00%... 9,620 2.226696 21,421
International Opportunities Fund
Non-Qualified 1.00%............. 4,586 2.320729 10,643
International Opportunities Fund
1.25%........................... 439,255 2.266827 995,716
Dividend and Growth Fund 1.25%... 796,481 2.569946 2,046,914
International Advisers Fund
1.25%........................... 157,903 1.795704 283,547
Small Company Fund 1.25%......... 113,321 2.250630 255,044
MidCap Fund 1.25%................ 67,473 2.055574 138,696
Growth and Income Fund 1.25%..... 74,023 1.421882 105,252
High Yield Fund 1.25%............ 165,941 1.070110 177,576
Global Leaders Fund 1.25%........ 11,105 1.952453 21,683
AmSouth Equity Income Fund....... 16,927 1.401746 23,727
---------------
SUB-TOTAL........................ 37,467,782
---------------
GRAND TOTAL........................ $15,817,848,089
===============
</TABLE>
______________________________________ 37 ______________________________________
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 20,856,394 $ 21,835,245
EXPENSES:
Mortality and expense undertakings.... (4,786,965) (35,154,364)
------------ ------------
Net investment income (loss)........ 16,069,429 (13,319,119)
------------ ------------
CAPITAL GAINS INCOME.................... 2,623,245 216,819,144
------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized (loss) gain on security
transactions......................... (203,417) 318,938
Net unrealized (depreciation)
appreciation of investments during
the period........................... (31,230,646) 275,463,487
------------ ------------
Net (loss) gain on investments...... (31,434,063) 275,782,425
------------ ------------
Net (decrease) increase in net
assets resulting from operations... $(12,741,389) $479,282,450
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 38 ______________________________________
<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............................. $19,516,607 $119,254,083 $ 8,050,639 $ 9,514,435 $ 8,124,740 $ 4,967,210
EXPENSES:
Mortality and expense undertakings.... (5,024,718) (66,290,644) (27,044,767) (2,222,251) (9,248,662) (5,283,728)
----------- ------------ ------------ ----------- ------------ ------------
Net investment income (loss)........ 14,491,889 52,963,439 (18,994,128) 7,292,184 (1,123,922) (316,518)
----------- ------------ ------------ ----------- ------------ ------------
CAPITAL GAINS INCOME.................... 9,037 410,469,104 127,112,714 -- 10,953,439 --
----------- ------------ ------------ ----------- ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized (loss) gain on security
transactions......................... -- 2,721,491 8,239,831 106,051 3,676 12,898,810
Net unrealized (depreciation)
appreciation of investments during
the period........................... -- 6,294,211 578,461,865 (6,915,906) 121,670,024 137,769,735
----------- ------------ ------------ ----------- ------------ ------------
Net (loss) gain on investments...... -- 9,015,702 586,701,696 (6,809,855) 121,673,700 150,668,545
----------- ------------ ------------ ----------- ------------ ------------
Net (decrease) increase in net
assets resulting from operations... $14,500,926 $472,448,245 $694,820,282 $ 482,329 $131,503,217 $150,352,027
=========== ============ ============ =========== ============ ============
<CAPTION>
DIVIDEND
AND GROWTH
FUND
SUB-ACCOUNT
------------
<S> <C>
INVESTMENT INCOME:
Dividends............................. $ 16,011,869
EXPENSES:
Mortality and expense undertakings.... (12,526,370)
------------
Net investment income (loss)........ 3,485,499
------------
CAPITAL GAINS INCOME.................... 38,610,231
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized (loss) gain on security
transactions......................... 2,185,191
Net unrealized (depreciation)
appreciation of investments during
the period........................... (5,417,975)
------------
Net (loss) gain on investments...... (3,232,784)
------------
Net (decrease) increase in net
assets resulting from operations... $ 38,862,946
============
</TABLE>
______________________________________ 39 ______________________________________
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
ADVISERS COMPANY
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 1,927,226 $ --
EXPENSES:
Mortality and expense undertakings.... (1,089,997) (1,741,126)
----------- -----------
Net investment income (loss)........ 837,229 (1,741,126)
----------- -----------
CAPITAL GAINS INCOME.................... -- 315,082
----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... 295,153 4,251,712
Net unrealized appreciation
(depreciation) of investments during
the period........................... 17,296,426 81,907,566
----------- -----------
Net gain (loss) on investments...... 17,591,579 86,159,278
----------- -----------
Net increase (decrease) in net
assets resulting from operations... $18,428,808 $84,733,234
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 40 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH AND GLOBAL SMITH BARNEY SMITH BARNEY
MIDCAP INCOME HIGH YIELD LEADERS CASH APPRECIATION
FUND FUND FUND FUND PORTFOLIO FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ -- $ 172,552 $ 967,224 $ 67,709 $22,683 $ 1,997
EXPENSES:
Mortality and expense undertakings.... (1,335,119) (353,581) (122,260) (182,154) (4,908) (2,133)
----------- ---------- --------- ----------- ------- -------
Net investment income (loss)........ (1,335,119) (181,029) 844,964 (114,445) 17,775 (136)
----------- ---------- --------- ----------- ------- -------
CAPITAL GAINS INCOME.................... 10,415,254 397,311 1,135 238,680 -- 22,203
----------- ---------- --------- ----------- ------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... (224,429) 46,869 (15,929) (9,270) -- 123
Net unrealized appreciation
(depreciation) of investments during
the period........................... 46,937,316 6,503,899 (642,094) 10,060,655 -- 5,735
----------- ---------- --------- ----------- ------- -------
Net gain (loss) on investments...... 46,712,887 6,550,768 (658,023) 10,051,385 -- 5,858
----------- ---------- --------- ----------- ------- -------
Net increase (decrease) in net
assets resulting from operations... $55,793,022 $6,767,050 $ 188,076 $10,175,620 $17,775 $27,925
=========== ========== ========= =========== ======= =======
<CAPTION>
SMITH BARNEY BB&T GROWTH AMSOUTH
GOVERNMENT & INCOME EQUITY INCOME
PORTFOLIO FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................. $1,568 $ 300,770 $ 354,120
EXPENSES:
Mortality and expense undertakings.... (347) (320,977) (336,848)
------ ----------- ----------
Net investment income (loss)........ 1,221 (20,207) 17,272
------ ----------- ----------
CAPITAL GAINS INCOME.................... -- 393,152 --
------ ----------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... -- 3,527 (4,172)
Net unrealized appreciation
(depreciation) of investments during
the period........................... -- (1,805,236) 6,229,908
------ ----------- ----------
Net gain (loss) on investments...... -- (1,801,709) 6,225,736
------ ----------- ----------
Net increase (decrease) in net
assets resulting from operations... $1,221 $(1,428,764) $6,243,008
====== =========== ==========
</TABLE>
______________________________________ 41 ______________________________________
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MENTOR VIP MENTOR VIP
CAPITAL GROWTH PERPETUAL INTERNATIONAL
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
-------------- -----------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 32,268 $--
EXPENSES:
Mortality and expense undertakings.... (282,453) (195,980)
---------- ----------
Net investment (loss) income........ (250,185) (195,980)
---------- ----------
CAPITAL GAINS INCOME.................... 37,363 10,315
---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on security
transactions......................... 496 9,042
Net unrealized appreciation
(depreciation) of investments during
the period........................... 1,293,466 5,855,275
---------- ----------
Net gain (loss) on investments...... 1,293,962 5,864,317
---------- ----------
Net increase (decrease) in net
assets resulting from operations... $1,081,140 $5,678,652
========== ==========
</TABLE>
* From inception, November 1, 1999 to December 31, 1999
** From inception, May 3, 1999 to December 31, 1999
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 42 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MENTOR VIP MITCHELL HUTCHINS MITCHELL HUTCHINS MITCHELL HUTCHINS HUNTINGTON VA
GROWTH GROWTH AND INCOME STRATEGIC INCOME TACTICAL ALLOCATION INCOME
FUND PORTFOLIO PORTFOLIO PORTFOLIO EQUITY FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
----------- ----------------- ----------------- ------------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 16,104 $ 41 $ 63,920 $ 71,190 $1,302
EXPENSES:
Mortality and expense undertakings.... (131,586) (27,575) (7,295) (111,510) (175)
---------- -------- -------- ---------- ------
Net investment (loss) income........ (115,482) (27,534) 56,625 (40,320) 1,127
---------- -------- -------- ---------- ------
CAPITAL GAINS INCOME.................... -- -- -- 1,339,390 --
---------- -------- -------- ---------- ------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on security
transactions......................... 21,602 3,219 165 31,237 --
Net unrealized appreciation
(depreciation) of investments during
the period........................... 2,619,527 367,262 (65,581) 430,021 131
---------- -------- -------- ---------- ------
Net gain (loss) on investments...... 2,641,129 370,481 (65,416) 461,258 131
---------- -------- -------- ---------- ------
Net increase (decrease) in net
assets resulting from operations... $2,525,647 $342,947 $ (8,791) $1,760,328 $1,258
========== ======== ======== ========== ======
<CAPTION>
AMSOUTH
SELECT EQUITY
FUND
SUB-ACCOUNT**
-------------
<S> <C>
INVESTMENT INCOME:
Dividends............................. $ 6,148
EXPENSES:
Mortality and expense undertakings.... (11,570)
---------
Net investment (loss) income........ (5,422)
---------
CAPITAL GAINS INCOME.................... --
---------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on security
transactions......................... 73
Net unrealized appreciation
(depreciation) of investments during
the period........................... (204,081)
---------
Net gain (loss) on investments...... (204,008)
---------
Net increase (decrease) in net
assets resulting from operations... $(209,430)
=========
</TABLE>
* From inception, November 1, 1999 to December 31, 1999
** From inception, May 3, 1999 to December 31, 1999
______________________________________ 43 ______________________________________
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 16,069,429 $ (13,319,119)
Capital gains income.................. 2,623,245 216,819,144
Net realized (loss) gain on security
transactions......................... (203,417) 318,938
Net unrealized (depreciation)
appreciation of investments during
the period........................... (31,230,646) 275,463,487
------------ --------------
Net (decrease) increase in net assets
resulting from operations............ (12,741,389) 479,282,450
------------ --------------
UNIT TRANSACTIONS:
Purchases............................. 27,921,938 243,534,289
Net transfers......................... 28,910,921 204,580,762
Surrenders for benefit payments and
fees................................. (42,745,328) (238,079,087)
Net annuity transactions.............. 414,745 4,064,471
------------ --------------
Net increase (decrease) in net assets
resulting from unit transactions..... 14,502,276 214,100,435
------------ --------------
Net increase (decrease) in net
assets............................... 1,760,887 693,382,885
NET ASSETS:
Beginning of period................... 377,820,047 2,498,291,840
------------ --------------
End of period......................... $379,580,934 $3,191,674,725
============ ==============
</TABLE>
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).......... $ 14,116,691 $ (7,282,872)
Capital gains income.................. -- 63,980,079
Net realized (loss) gain on security
transactions......................... (17,730) (1,720,391)
Net unrealized appreciation
(depreciation) of investments during
the period........................... 5,723,478 522,612,064
------------ --------------
Net increase in net assets resulting
from operations...................... 19,822,439 577,588,880
------------ --------------
UNIT TRANSACTIONS:
Purchases............................. 41,906,997 201,628,213
Net transfers......................... 95,280,889 107,789,657
Surrenders for benefit payments and
fees................................. (24,892,187) (143,970,482)
Net annuity transactions.............. 321,142 560,255
------------ --------------
Net increase (decrease) in net assets
resulting from unit transactions..... 112,616,841 166,007,643
------------ --------------
Net increase (decrease) in net
assets............................... 132,439,280 743,596,523
NET ASSETS:
Beginning of period................... 245,380,767 1,754,695,317
------------ --------------
End of period......................... $377,820,047 $2,498,291,840
============ ==============
</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>
OPERATIONS:
Net investment income (loss).......... $ 14,491,889 $ 52,963,439 $ (18,994,128) $ 7,292,184 $ (1,123,922)
Capital gains income.................. 9,037 410,469,104 127,112,714 -- 10,953,439
Net realized (loss) gain on security
transactions......................... -- 2,721,491 8,239,831 106,051 3,676
Net unrealized (depreciation)
appreciation of investments during
the period........................... -- 6,294,211 578,461,865 (6,915,906) 121,670,024
------------- -------------- -------------- ------------ ------------
Net (decrease) increase in net assets
resulting from operations............ 14,500,926 472,448,245 694,820,282 482,329 131,503,217
------------- -------------- -------------- ------------ ------------
UNIT TRANSACTIONS:
Purchases............................. 52,032,809 400,762,799 114,346,316 5,634,859 86,228,724
Net transfers......................... 179,073,766 425,533,878 47,043,624 2,063,743 94,024,710
Surrenders for benefit payments and
fees................................. (172,457,509) (514,511,813) (177,116,018) (28,509,889) (63,335,518)
Net annuity transactions.............. 66,069 4,945,760 853,857 213,909 2,159,559
------------- -------------- -------------- ------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions..... 58,715,135 316,730,624 (14,872,221) (20,597,378) 119,077,475
------------- -------------- -------------- ------------ ------------
Net increase (decrease) in net
assets............................... 73,216,061 789,178,869 679,948,061 (20,115,049) 250,580,692
NET ASSETS:
Beginning of period................... 342,821,394 4,916,673,571 1,985,681,374 190,247,223 623,100,586
------------- -------------- -------------- ------------ ------------
End of period......................... $ 416,037,455 $5,705,852,440 $2,665,629,435 $170,132,174 $873,681,278
============= ============== ============== ============ ============
<CAPTION>
INTERNATIONAL DIVIDEND
OPPORTUNITIES AND GROWTH
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ (316,518) $ 3,485,499
Capital gains income.................. -- 38,610,231
Net realized (loss) gain on security
transactions......................... 12,898,810 2,185,191
Net unrealized (depreciation)
appreciation of investments during
the period........................... 137,769,735 (5,417,975)
------------ ------------
Net (decrease) increase in net assets
resulting from operations............ 150,352,027 38,862,946
------------ ------------
UNIT TRANSACTIONS:
Purchases............................. 13,080,473 65,414,965
Net transfers......................... (10,281,590) (15,678,141)
Surrenders for benefit payments and
fees................................. (43,785,344) (69,729,336)
Net annuity transactions.............. 123,273 320,965
------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions..... (40,863,188) (19,671,547)
------------ ------------
Net increase (decrease) in net
assets............................... 109,488,839 19,191,399
NET ASSETS:
Beginning of period................... 398,604,114 974,440,666
------------ ------------
End of period......................... $508,092,953 $993,632,065
============ ============
</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).......... $11,836,148 $ 44,020,326 $ (12,238,662) $ 9,644,833 $ (1,323,774)
Capital gains income.................. -- 130,914,844 114,733,928 -- 10,662,058
Net realized (loss) gain on security
transactions......................... -- 1,826,471 (4,786,085) 473,273 (704,518)
Net unrealized appreciation
(depreciation) of investments during
the period........................... -- 709,363,622 140,386,292 (228,914) 110,953,813
------------ -------------- -------------- ------------ ------------
Net increase in net assets resulting
from operations...................... 11,836,148 886,125,263 238,095,473 9,889,192 119,587,579
------------ -------------- -------------- ------------ ------------
UNIT TRANSACTIONS:
Purchases............................. 34,983,693 374,759,005 143,597,572 9,146,977 67,409,255
Net transfers......................... 123,126,442 280,406,929 (12,597,119) 8,722,639 58,996,655
Surrenders for benefit payments and
fees................................. (94,130,526) (329,416,389) (117,626,736) (28,665,195) (34,320,175)
Net annuity transactions.............. (32,392) 3,527,169 304,016 39,959 271,456
------------ -------------- -------------- ------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions..... 63,947,217 329,276,714 13,677,733 (10,755,620) 92,357,191
------------ -------------- -------------- ------------ ------------
Net increase (decrease) in net
assets............................... 75,783,365 1,215,401,977 251,773,206 (866,428) 211,944,770
NET ASSETS:
Beginning of period................... 267,038,029 3,701,271,594 1,733,908,168 191,113,651 411,155,816
------------ -------------- -------------- ------------ ------------
End of period......................... $342,821,394 $4,916,673,571 $1,985,681,374 $190,247,223 $623,100,586
============ ============== ============== ============ ============
<CAPTION>
INTERNATIONAL DIVIDEND
OPPORTUNITIES AND GROWTH
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 189,021 $ 4,915,811
Capital gains income.................. 25,347,181 25,624,259
Net realized (loss) gain on security
transactions......................... 1,455,876 (465,941)
Net unrealized appreciation
(depreciation) of investments during
the period........................... 17,463,831 82,775,505
------------ ------------
Net increase in net assets resulting
from operations...................... 44,455,909 112,849,634
------------ ------------
UNIT TRANSACTIONS:
Purchases............................. 16,804,591 141,279,121
Net transfers......................... (27,399,853) 99,305,048
Surrenders for benefit payments and
fees................................. (28,546,428) (49,052,200)
Net annuity transactions.............. 244,437 835,197
------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions..... (38,897,253) 192,367,166
------------ ------------
Net increase (decrease) in net
assets............................... 5,558,656 305,216,800
NET ASSETS:
Beginning of period................... 393,045,458 669,223,866
------------ ------------
End of period......................... $398,604,114 $974,440,666
============ ============
</TABLE>
______________________________________ 45 ______________________________________
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
ADVISERS COMPANY
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 837,229 $ (1,741,126)
Capital gains income.................. -- 315,082
Net realized gain (loss) on security
transactions......................... 295,153 4,251,712
Net unrealized appreciation
(depreciation) of investments during
the period........................... 17,296,426 81,907,566
------------ ------------
Net increase (decrease) in net assets
resulting from operations............ 18,428,808 84,733,234
------------ ------------
UNIT TRANSACTIONS:
Purchases............................. 10,659,922 13,837,871
Net transfers......................... 10,728,100 42,134,966
Surrenders for benefit payments and
fees................................. (6,643,729) (9,812,254)
Net annuity transactions.............. 129,729 (1,998)
------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions..... 14,874,022 46,158,585
------------ ------------
Net increase (decrease) in net
assets............................... 33,302,830 130,891,819
NET ASSETS:
Beginning of period................... 75,837,938 123,133,073
------------ ------------
End of period......................... $109,140,768 $254,024,892
============ ============
</TABLE>
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
ADVISERS COMPANY
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 5,711,299 $ (1,090,110)
Capital gains income.................. 1,559,601 1,255,431
Net realized (loss) gain on security
transactions......................... (62,176) 1,445,433
Net unrealized (depreciation)
appreciation of investments during
the period........................... (222,372) 9,623,019
----------- ------------
Net increase in net assets resulting
from operations...................... 6,986,352 11,233,773
----------- ------------
UNIT TRANSACTIONS:
Purchases............................. 9,244,144 17,606,410
Net transfers......................... 5,996,311 27,369,558
Surrenders for benefit payments and
fees................................. (3,894,672) (4,568,343)
Net annuity transactions.............. 83,430 98,040
----------- ------------
Net increase (decrease) in net assets
resulting from unit transactions..... 11,429,213 40,505,665
----------- ------------
Net increase (decrease) in net
assets............................... 18,415,565 51,739,438
NET ASSETS:
Beginning of period................... 57,422,373 71,393,635
----------- ------------
End of period......................... $75,837,938 $123,133,073
=========== ============
</TABLE>
** From inception, June 1, 1998 to December 31, 1998
*** From inception, September 30, 1998 to December 31, 1998
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 46 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH AND GLOBAL SMITH BARNEY SMITH BARNEY
MIDCAP INCOME HIGH YIELD LEADERS CASH APPRECIATION
FUND FUND FUND FUND PORTFOLIO 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).......... $ (1,335,119) $ (181,029) $ 844,964 $ (114,445) $ 17,775 $ (136)
Capital gains income.................. 10,415,254 397,311 1,135 238,680 -- 22,203
Net realized gain (loss) on security
transactions......................... (224,429) 46,869 (15,929) (9,270) -- 123
Net unrealized appreciation
(depreciation) of investments during
the period........................... 46,937,316 6,503,899 (642,094) 10,060,655 -- 5,735
------------ ----------- ----------- ----------- -------- --------
Net increase (decrease) in net assets
resulting from operations............ 55,793,022 6,767,050 188,076 10,175,620 17,775 27,925
------------ ----------- ----------- ----------- -------- --------
UNIT TRANSACTIONS:
Purchases............................. 28,146,551 15,704,459 4,494,431 8,251,247 -- --
Net transfers......................... 131,121,514 36,678,430 11,579,453 34,966,058 -- --
Surrenders for benefit payments and
fees................................. (1,798,300) (1,186,192) (881,151) (1,167,939) (33,763) (4,174)
Net annuity transactions.............. 122,890 88,032 177,075 16,976 -- --
------------ ----------- ----------- ----------- -------- --------
Net increase (decrease) in net assets
resulting from unit transactions..... 157,592,655 51,284,729 15,369,808 42,066,342 (33,763) (4,174)
------------ ----------- ----------- ----------- -------- --------
Net increase (decrease) in net
assets............................... 213,385,677 58,051,779 15,557,884 52,241,962 (15,988) 23,751
NET ASSETS:
Beginning of period................... 46,302,383 6,249,337 1,943,547 599,110 486,703 199,787
------------ ----------- ----------- ----------- -------- --------
End of period......................... $259,688,060 $64,301,116 $17,501,431 $52,841,072 $470,715 $223,538
============ =========== =========== =========== ======== ========
<CAPTION>
SMITH BARNEY BB&T GROWTH AMSOUTH
GOVERNMENT & INCOME EQUITY INCOME
PORTFOLIO FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 1,221 $ (20,207) $ 17,272
Capital gains income.................. -- 393,152 --
Net realized gain (loss) on security
transactions......................... -- 3,527 (4,172)
Net unrealized appreciation
(depreciation) of investments during
the period........................... -- (1,805,236) 6,229,908
------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations............ 1,221 (1,428,764) 6,243,008
------- ----------- -----------
UNIT TRANSACTIONS:
Purchases............................. -- 2,806,902 8,947,643
Net transfers......................... -- 4,398,250 60,144
Surrenders for benefit payments and
fees................................. (4,276) (1,469,630) (2,025,318)
Net annuity transactions.............. -- -- (8,117)
------- ----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions..... (4,276) 5,735,522 6,974,352
------- ----------- -----------
Net increase (decrease) in net
assets............................... (3,055) 4,306,758 13,217,360
NET ASSETS:
Beginning of period................... 34,357 23,711,066 22,511,021
------- ----------- -----------
End of period......................... $31,302 $28,017,824 $35,728,381
======= =========== ===========
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND GLOBAL SMITH BARNEY
MIDCAP INCOME HIGH YIELD LEADERS CASH
FUND FUND FUND FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT** SUB-ACCOUNT*** SUB-ACCOUNT*** SUB-ACCOUNT
----------- ------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ (320,020) $ 5,967 $ 32,022 $ 472 $ 19,946
Capital gains income.................. -- -- -- 16,340 --
Net realized (loss) gain on security
transactions......................... (3,698) (2,267) (287) 1,084 --
Net unrealized (depreciation)
appreciation of investments during
the period........................... 6,597,665 740,175 (9,874) 10,436 --
----------- ---------- ---------- -------- --------
Net increase in net assets resulting
from operations...................... 6,273,947 743,875 21,861 28,332 19,946
----------- ---------- ---------- -------- --------
UNIT TRANSACTIONS:
Purchases............................. 13,468,482 1,325,581 226,463 114,768 --
Net transfers......................... 18,368,378 4,236,085 1,697,571 456,296 --
Surrenders for benefit payments and
fees................................. (982,314) (56,204) (2,348) (286) (42,255)
Net annuity transactions.............. -- -- -- -- --
----------- ---------- ---------- -------- --------
Net increase (decrease) in net assets
resulting from unit transactions..... 30,854,546 5,505,462 1,921,686 570,778 (42,255)
----------- ---------- ---------- -------- --------
Net increase (decrease) in net
assets............................... 37,128,493 6,249,337 1,943,547 599,110 (22,309)
NET ASSETS:
Beginning of period................... 9,173,890 -- -- -- 509,012
----------- ---------- ---------- -------- --------
End of period......................... $46,302,383 $6,249,337 $1,943,547 $599,110 $486,703
=========== ========== ========== ======== ========
<CAPTION>
SMITH BARNEY SMITH BARNEY BB&T GROWTH AMSOUTH
APPRECIATION GOVERNMENT & INCOME EQUITY INCOME
FUND PORTFOLIO FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ----------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 526 $ 1,465 $ 28,796 $ 134,592
Capital gains income.................. 15,116 -- -- --
Net realized (loss) gain on security
transactions......................... 51 -- 1,013 4,124
Net unrealized (depreciation)
appreciation of investments during
the period........................... 17,076 -- 1,927,801 971,715
-------- ------- ----------- -----------
Net increase in net assets resulting
from operations...................... 32,769 1,465 1,957,610 1,110,431
-------- ------- ----------- -----------
UNIT TRANSACTIONS:
Purchases............................. -- -- 9,760,778 14,622,450
Net transfers......................... -- -- 6,090,057 5,094,816
Surrenders for benefit payments and
fees................................. (3,555) (4,272) (574,799) (733,985)
Net annuity transactions.............. -- -- -- 25,393
-------- ------- ----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions..... (3,555) (4,272) 15,276,036 19,008,674
-------- ------- ----------- -----------
Net increase (decrease) in net
assets............................... 29,214 (2,807) 17,233,646 20,119,105
NET ASSETS:
Beginning of period................... 170,573 37,164 6,477,420 2,391,916
-------- ------- ----------- -----------
End of period......................... $199,787 $34,357 $23,711,066 $22,511,021
======== ======= =========== ===========
</TABLE>
** From inception, June 1, 1998 to December 31, 1998
*** From inception, September 30, 1998 to December 31, 1998
______________________________________ 47 ______________________________________
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MENTOR VIP MENTOR VIP
CAPITAL GROWTH PERPETUAL INTERNATIONAL
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
-------------- -----------------------
<S> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $ (250,185) $ (195,980)
Capital gains income.................. 37,363 10,315
Net realized gain on security
transactions......................... 496 9,042
Net unrealized appreciation
(depreciation) of investments during
the period........................... 1,293,466 5,855,275
----------- -----------
Net increase (decrease) in net assets
resulting from operations............ 1,081,140 5,678,652
----------- -----------
UNIT TRANSACTIONS:
Purchases............................. 2,920,379 1,966,282
Net transfers......................... 2,776,202 4,932,157
Surrenders for benefit payments and
fees................................. (727,009) (634,023)
Net annuity transactions.............. -- --
----------- -----------
Net increase in net assets resulting
from unit transactions............... 4,969,572 6,264,416
----------- -----------
Net increase in net assets............ 6,050,712 11,943,068
NET ASSETS:
Beginning of period................... 18,677,732 10,812,355
----------- -----------
End of period......................... $24,728,444 $22,755,423
=========== ===========
</TABLE>
* From inception, November 1, 1999 to December 31, 1999
** From inception, May 3, 1999 to December 31, 1999
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MENTOR VIP MENTOR VIP
CAPITAL GROWTH PERPETUAL INTERNATIONAL
FUND FUND
SUB-ACCOUNT* SUB-ACCOUNT*
-------------- -----------------------
<S> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $ (85,499) $ (51,799)
Capital gains income.................. -- --
Net realized (loss) gain on security
transactions......................... (4,500) 1,684
Net unrealized appreciation
(depreciation) of investments during
the period........................... 1,696,228 601,328
----------- -----------
Net increase (decrease) in net assets
resulting from operations............ 1,606,229 551,213
----------- -----------
UNIT TRANSACTIONS:
Purchases............................. 11,672,774 6,236,230
Net transfers......................... 5,647,677 4,185,922
Surrenders for benefit payments and
fees................................. (248,948) (161,010)
Net annuity transactions.............. -- --
----------- -----------
Net increase in net assets resulting
from unit transactions............... 17,071,503 10,261,142
----------- -----------
Total increase in net assets.......... 18,677,732 10,812,355
NET ASSETS:
Beginning of period................... -- --
----------- -----------
End of period......................... $18,677,732 $10,812,355
=========== ===========
</TABLE>
* From inception, March 2, 1998 to December 31, 1998
**** From inception, December 16, 1998 to December 31, 1998
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 48 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MENTOR VIP MITCHELL HUTCHINS MITCHELL HUTCHINS MITCHELL HUTCHINS HUNTINGTON VA
GROWTH GROWTH AND STRATEGIC INCOME TACTICAL ALLOCATION INCOME
FUND INCOME PORTFOLIO PORTFOLIO PORTFOLIO EQUITY FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
----------- ----------------- ----------------- ------------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $ (115,482) $ (27,534) $ 56,625 $ (40,320) $ 1,127
Capital gains income.................. -- -- -- 1,339,390 --
Net realized gain on security
transactions......................... 21,602 3,219 165 31,237 --
Net unrealized appreciation
(depreciation) of investments during
the period........................... 2,619,527 367,262 (65,581) 430,021 131
----------- ---------- ---------- ----------- --------
Net increase (decrease) in net assets
resulting from operations............ 2,525,647 342,947 (8,791) 1,760,328 1,258
----------- ---------- ---------- ----------- --------
UNIT TRANSACTIONS:
Purchases............................. 1,591,255 3,251,474 741,317 12,031,575 171,554
Net transfers......................... 186,787 512,571 475,556 8,174,292 55,943
Surrenders for benefit payments and
fees................................. (341,906) (95,651) (64,519) (207,496) --
Net annuity transactions.............. -- -- -- -- --
----------- ---------- ---------- ----------- --------
Net increase in net assets resulting
from unit transactions............... 1,436,136 3,668,394 1,152,354 19,998,371 227,497
----------- ---------- ---------- ----------- --------
Net increase in net assets............ 3,961,783 4,011,341 1,143,563 21,758,699 228,755
NET ASSETS:
Beginning of period................... 10,470,230 10,719 9,971 10,571 --
----------- ---------- ---------- ----------- --------
End of period......................... $14,432,013 $4,022,060 $1,153,534 $21,769,270 $228,755
=========== ========== ========== =========== ========
<CAPTION>
AMSOUTH
SELECT EQUITY
FUND
SUB-ACCOUNT**
-------------
<S> <C>
OPERATIONS:
Net investment (loss) income.......... $ (5,422)
Capital gains income.................. --
Net realized gain on security
transactions......................... 73
Net unrealized appreciation
(depreciation) of investments during
the period........................... (204,081)
----------
Net increase (decrease) in net assets
resulting from operations............ (209,430)
----------
UNIT TRANSACTIONS:
Purchases............................. 1,791,654
Net transfers......................... 958,043
Surrenders for benefit payments and
fees................................. (64,235)
Net annuity transactions.............. --
----------
Net increase in net assets resulting
from unit transactions............... 2,685,462
----------
Net increase in net assets............ 2,476,032
NET ASSETS:
Beginning of period................... --
----------
End of period......................... $2,476,032
==========
</TABLE>
* From inception, November 1, 1999 to December 31, 1999
** From inception, May 3, 1999 to December 31, 1999
<TABLE>
<CAPTION>
MENTOR VIP MITCHELL HUTCHINS MITCHELL HUTCHINS MITCHELL HUTCHINS
GROWTH GROWTH AND INCOME STRATEGIC INCOME TACTICAL ALLOCATION
FUND PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT* SUB-ACCOUNT**** SUB-ACCOUNT**** SUB-ACCOUNT****
------------ ----------------- ----------------- -------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $ (44,785) $ 38 $ 111 $ 7
Capital gains income.................. -- 702 6 56
Net realized (loss) gain on security
transactions......................... (1,365) -- -- --
Net unrealized appreciation
(depreciation) of investments during
the period........................... 610,042 (20) (145) 507
----------- ------- ------ -------
Net increase (decrease) in net assets
resulting from operations............ 563,892 720 (28) 570
----------- ------- ------ -------
UNIT TRANSACTIONS:
Purchases............................. 6,771,031 10,000 10,000 10,000
Net transfers......................... 3,215,967 -- -- --
Surrenders for benefit payments and
fees................................. (80,660) (1) (1) 1
Net annuity transactions.............. -- -- -- --
----------- ------- ------ -------
Net increase in net assets resulting
from unit transactions............... 9,906,338 9,999 9,999 10,001
----------- ------- ------ -------
Total increase in net assets.......... 10,470,230 10,719 9,971 10,571
NET ASSETS:
Beginning of period................... -- -- -- --
----------- ------- ------ -------
End of period......................... $10,470,230 $10,719 $9,971 $10,571
=========== ======= ====== =======
</TABLE>
* From inception, March 2, 1998 to December 31, 1998
**** From inception, December 16, 1998 to December 31, 1998
______________________________________ 49 ______________________________________
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION:
Separate Account 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 annuity contractholders of the Company in various
mutual funds (the Funds) as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Realized gains and
losses on the sales of securities are computed on the basis of identified
cost of the fund shares sold. 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, 1999.
c) UNIT TRANSACTIONS--Unit transactions are executed based on the unit
values calculated at the close of the business day.
d) 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.
e) 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 expense 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:
Certain amounts are deducted from the contracts, as described below:
a) MORTALITY AND EXPENSE RISK CHARGE--The Company, will make deductions at a
maximum annual rate of 1.50% of the contract's value for the mortality
and expense risks which the Company undertakes.
b) TAX EXPENSE CHARGE--If applicable, the Company will make deductions at a
maximum rate of 4.0% of the contract's value to meet premium tax
requirements. An additional tax charge based on a percentage of the
contract's value may be assessed to partial withrawals or surrenders.
These expenses are included in surrenders for benefit payments and fees
in the accompanying statements of changes in net assets.
c) ANNUAL MAINTENANCE FEE--An annual maintenance fee in the amount of $30
may be deducted from the contract's value each contract year. However,
this fee is not applicable to contracts with values of $50,000 or more,
as determined on the most recent contract anniversary. These expenses are
included in surrenders for benefit payments and fees in the accompanying
statements of changes in net assets.
______________________________________ 50 ______________________________________
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO AND TO THE OWNERS OF UNITS OF INTEREST THEREIN:
- --------------------------------------------------------------------------------
We have audited the accompanying statements of assets and liabilities of
Hartford Life Insurance Company Separate Account Two (Bond Fund, Stock Fund,
Money Market Fund, Advisers Fund, Capital Appreciation Fund, Mortgage Securities
Fund, Index Fund, International Opportunities Fund, Dividend and Growth Fund,
International Advisers Fund, Small Company Fund, MidCap Fund, Growth and Income
Fund, High Yield Fund, Global Leaders Fund, Smith Barney Cash Portfolio, Smith
Barney Appreciation Fund, Smith Barney Government Portfolio, BB&T Growth &
Income Fund, AmSouth Equity Income Fund, Mentor VIP Capital Growth Fund, Mentor
VIP Perpetual International Fund, Mentor VIP Growth Fund, Mitchell Hutchins
Growth and Income Portfolio, Mitchell Hutchins Strategic Income Portfolio,
Mitchell Hutchins Tactical Allocation Portfolio, Huntington VA Income Equity
Fund and AmSouth Select Equity Fund (collectively, the Account) as of December
31, 1999, and the related statements of operations and the statements of changes
in net assets for the periods presented. These financial statements are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1999, and the results of their operations and the changes in their net assets
for the periods presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 17, 2000 ARTHUR ANDERSEN LLP
______________________________________ 51 ______________________________________
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund, Inc. -
Class IA
Shares 449,867,813
Cost $471,536,987
Market Value...................... $447,106,524 --
Hartford Stock HLS Fund, Inc. -
Class IA
Shares 659,095,163
Cost $3,107,192,905
Market Value...................... -- $4,710,808,860
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 548,422,425
Cost $548,422,425
Market Value...................... -- --
Hartford Advisers HLS Fund, Inc. -
Class IA
Shares 2,366,315,491
Cost $5,444,912,732
Market Value...................... -- --
Hartford Capital Appreciation HLS
Fund, Inc. - Class IA
Shares 672,032,314
Cost $2,550,014,270
Market Value...................... -- --
Hartford Mortgage Securities HLS
Fund, Inc. - Class IA
Shares 117,880,676
Cost $127,698,156
Market Value...................... -- --
Hartford Index HLS Fund, Inc. -
Class IA
Shares 266,744,217
Cost $736,583,539
Market Value...................... -- --
Hartford International Opportunities
HLS Fund, Inc. - Class IA
Shares 480,127,442
Cost $614,510,013
Market Value...................... -- --
Hartford Dividend and Growth HLS
Fund, Inc. - Class IA
Shares 923,635,920
Cost $1,584,821,109
Market Value...................... -- --
Hartford International Advisers HLS
Fund, Inc. - Class IA
Shares 196,357,266
Cost $227,828,642
Market Value...................... -- --
Due from Hartford Life and Annuity
Insurance Company.................... -- 1,569,635
Receivable from fund shares sold...... 821,248 --
------------ --------------
Total Assets.......................... 447,927,772 4,712,378,495
------------ --------------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company.................... 821,442 --
Payable for fund shares purchased..... -- 1,564,212
------------ --------------
Total Liabilities..................... 821,442 1,564,212
------------ --------------
Net Assets (variable annuity contract
liabilities)......................... $447,106,330 $4,710,814,283
============ ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 52 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ----------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund, Inc. -
Class IA
Shares 449,867,813
Cost $471,536,987
Market Value...................... -- -- -- -- --
Hartford Stock HLS Fund, Inc. -
Class IA
Shares 659,095,163
Cost $3,107,192,905
Market Value...................... -- -- -- -- --
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 548,422,425
Cost $548,422,425
Market Value...................... $548,422,425 -- -- -- --
Hartford Advisers HLS Fund, Inc. -
Class IA
Shares 2,366,315,491
Cost $5,444,912,732
Market Value...................... -- $7,015,590,643 -- -- --
Hartford Capital Appreciation HLS
Fund, Inc. - Class IA
Shares 672,032,314
Cost $2,550,014,270
Market Value...................... -- -- $4,096,297,700 -- --
Hartford Mortgage Securities HLS
Fund, Inc. - Class IA
Shares 117,880,676
Cost $127,698,156
Market Value...................... -- -- -- $122,536,020 --
Hartford Index HLS Fund, Inc. -
Class IA
Shares 266,744,217
Cost $736,583,539
Market Value...................... -- -- -- -- $1,117,332,843
Hartford International Opportunities
HLS Fund, Inc. - Class IA
Shares 480,127,442
Cost $614,510,013
Market Value...................... -- -- -- -- --
Hartford Dividend and Growth HLS
Fund, Inc. - Class IA
Shares 923,635,920
Cost $1,584,821,109
Market Value...................... -- -- -- -- --
Hartford International Advisers HLS
Fund, Inc. - Class IA
Shares 196,357,266
Cost $227,828,642
Market Value...................... -- -- -- -- --
Due from Hartford Life and Annuity
Insurance Company.................... 4,024,594 -- -- -- --
Receivable from fund shares sold...... -- 954,565 2,647,605 70,893 110,670
------------ -------------- -------------- ------------ --------------
Total Assets.......................... 552,447,019 7,016,545,208 4,098,945,305 122,606,913 1,117,443,513
------------ -------------- -------------- ------------ --------------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company.................... -- 950,615 2,404,382 72,076 105,519
Payable for fund shares purchased..... 4,001,041 -- -- -- --
------------ -------------- -------------- ------------ --------------
Total Liabilities..................... 4,001,041 950,615 2,404,382 72,076 105,519
------------ -------------- -------------- ------------ --------------
Net Assets (variable annuity contract
liabilities)......................... $548,445,978 $7,015,594,593 $4,096,540,923 $122,534,837 $1,117,337,994
============ ============== ============== ============ ==============
<CAPTION>
INTERNATIONAL DIVIDEND AND INTERNATIONAL
OPPORTUNITIES FUND GROWTH FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ -------------- -------------
<S> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund, Inc. -
Class IA
Shares 449,867,813
Cost $471,536,987
Market Value...................... -- -- --
Hartford Stock HLS Fund, Inc. -
Class IA
Shares 659,095,163
Cost $3,107,192,905
Market Value...................... -- -- --
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 548,422,425
Cost $548,422,425
Market Value...................... -- -- --
Hartford Advisers HLS Fund, Inc. -
Class IA
Shares 2,366,315,491
Cost $5,444,912,732
Market Value...................... -- -- --
Hartford Capital Appreciation HLS
Fund, Inc. - Class IA
Shares 672,032,314
Cost $2,550,014,270
Market Value...................... -- -- --
Hartford Mortgage Securities HLS
Fund, Inc. - Class IA
Shares 117,880,676
Cost $127,698,156
Market Value...................... -- -- --
Hartford Index HLS Fund, Inc. -
Class IA
Shares 266,744,217
Cost $736,583,539
Market Value...................... -- -- --
Hartford International Opportunities
HLS Fund, Inc. - Class IA
Shares 480,127,442
Cost $614,510,013
Market Value...................... $900,687,872 -- --
Hartford Dividend and Growth HLS
Fund, Inc. - Class IA
Shares 923,635,920
Cost $1,584,821,109
Market Value...................... -- $1,984,734,728 --
Hartford International Advisers HLS
Fund, Inc. - Class IA
Shares 196,357,266
Cost $227,828,642
Market Value...................... -- -- $274,250,426
Due from Hartford Life and Annuity
Insurance Company.................... 1,056,559 -- 1,454
Receivable from fund shares sold...... -- 765,866 --
------------ -------------- ------------
Total Assets.......................... 901,744,431 1,985,500,594 274,251,880
------------ -------------- ------------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company.................... -- 763,409 --
Payable for fund shares purchased..... 1,313,277 -- 2,289
------------ -------------- ------------
Total Liabilities..................... 1,313,277 763,409 2,289
------------ -------------- ------------
Net Assets (variable annuity contract
liabilities)......................... $900,431,154 $1,984,737,185 $274,249,591
============ ============== ============
</TABLE>
______________________________________ 53 ______________________________________
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL MIDCAP
COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Small Company HLS
Fund, Inc. - Class IA
Shares 212,076,990
Cost $280,439,845
Market Value...................... $463,977,162 --
Hartford MidCap HLS Fund, Inc. -
Class IA
Shares 191,961,289
Cost $297,691,376
Market Value...................... -- $394,192,314
Hartford Global Leaders HLS Fund -
Class IA
Shares 61,681,952
Cost $94,610,676
Market Value...................... -- --
Hartford High Yield HLS Fund -
Class IA
Shares 24,345,792
Cost $25,309,628
Market Value...................... -- --
Hartford Growth and Income HLS Fund
- Class IA
Shares 90,572,348
Cost $114,627,320
Market Value...................... -- --
Mentor VIP Capital Growth
Fund, Inc.
Shares 109,628
Cost $1,371,449
Market Value...................... -- --
Mentor VIP Perpetual International
Fund, Inc.
Shares 106,262
Cost $1,460,933
Market Value...................... -- --
Mentor VIP Growth Fund, Inc.
Shares 64,247
Cost $676,124
Market Value...................... -- --
Mercury VI US Large Cap Fund -
Class A
Shares 1,173
Cost $13,731
Market Value...................... -- --
Merrill Lynch Global Growth Focus
Fund - Class A
Shares 6,455
Cost $91,458
Market Value...................... -- --
Due from Hartford Life and Annuity
Insurance Company.................... 797,344 1,361,926
------------ ------------
Total Assets.......................... 464,774,506 395,554,240
------------ ------------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company.................... -- --
Payable for fund shares purchased..... 797,460 1,361,681
------------ ------------
Total Liabilities..................... 797,460 1,361,681
------------ ------------
Net Assets (variable annuity contract
liabilities)......................... $463,977,046 $394,192,559
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 54 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL HIGH GROWTH AND MENTOR VIP CAPITAL MENTOR VIP PERPETUAL
LEADERS FUND YIELD FUND INCOME FUND GROWTH FUND INTERNATIONAL FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ------------ ------------------ --------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Small Company HLS
Fund, Inc. - Class IA
Shares 212,076,990
Cost $280,439,845
Market Value...................... -- -- -- -- --
Hartford MidCap HLS Fund, Inc. -
Class IA
Shares 191,961,289
Cost $297,691,376
Market Value...................... -- -- -- -- --
Hartford Global Leaders HLS Fund -
Class IA
Shares 61,681,952
Cost $94,610,676
Market Value...................... $117,991,405 -- -- -- --
Hartford High Yield HLS Fund -
Class IA
Shares 24,345,792
Cost $25,309,628
Market Value...................... -- $24,464,405 -- -- --
Hartford Growth and Income HLS Fund
- Class IA
Shares 90,572,348
Cost $114,627,320
Market Value...................... -- -- $129,667,086 -- --
Mentor VIP Capital Growth
Fund, Inc.
Shares 109,628
Cost $1,371,449
Market Value...................... -- -- -- $1,580,833 --
Mentor VIP Perpetual International
Fund, Inc.
Shares 106,262
Cost $1,460,933
Market Value...................... -- -- -- -- $2,082,740
Mentor VIP Growth Fund, Inc.
Shares 64,247
Cost $676,124
Market Value...................... -- -- -- -- --
Mercury VI US Large Cap Fund -
Class A
Shares 1,173
Cost $13,731
Market Value...................... -- -- -- -- --
Merrill Lynch Global Growth Focus
Fund - Class A
Shares 6,455
Cost $91,458
Market Value...................... -- -- -- -- --
Due from Hartford Life and Annuity
Insurance Company.................... 429,704 74,858 432,287 -- --
------------ ----------- ------------ ---------- ----------
Total Assets.......................... 118,421,109 24,539,263 130,099,373 1,580,833 2,082,740
------------ ----------- ------------ ---------- ----------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company.................... -- -- -- 68 104
Payable for fund shares purchased..... 429,387 74,789 431,728 -- --
------------ ----------- ------------ ---------- ----------
Total Liabilities..................... 429,387 74,789 431,728 68 104
------------ ----------- ------------ ---------- ----------
Net Assets (variable annuity contract
liabilities)......................... $117,991,722 $24,464,474 $129,667,645 $1,580,765 $2,082,636
============ =========== ============ ========== ==========
<CAPTION>
MERRILL LYNCH
MENTOR VIP MERCURY VI US GLOBAL GROWTH
GROWTH FUND LARGE CAP FUND FOCUS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- -------------- -------------
<S> <C> <C> <C>
ASSETS:
Investments:
Hartford Small Company HLS
Fund, Inc. - Class IA
Shares 212,076,990
Cost $280,439,845
Market Value...................... -- -- --
Hartford MidCap HLS Fund, Inc. -
Class IA
Shares 191,961,289
Cost $297,691,376
Market Value...................... -- -- --
Hartford Global Leaders HLS Fund -
Class IA
Shares 61,681,952
Cost $94,610,676
Market Value...................... -- -- --
Hartford High Yield HLS Fund -
Class IA
Shares 24,345,792
Cost $25,309,628
Market Value...................... -- -- --
Hartford Growth and Income HLS Fund
- Class IA
Shares 90,572,348
Cost $114,627,320
Market Value...................... -- -- --
Mentor VIP Capital Growth
Fund, Inc.
Shares 109,628
Cost $1,371,449
Market Value...................... -- -- --
Mentor VIP Perpetual International
Fund, Inc.
Shares 106,262
Cost $1,460,933
Market Value...................... -- -- --
Mentor VIP Growth Fund, Inc.
Shares 64,247
Cost $676,124
Market Value...................... $891,105
Mercury VI US Large Cap Fund -
Class A
Shares 1,173
Cost $13,731
Market Value...................... -- $14,105
Merrill Lynch Global Growth Focus
Fund - Class A
Shares 6,455
Cost $91,458
Market Value...................... -- -- $95,403
Due from Hartford Life and Annuity
Insurance Company.................... -- -- --
-------- ------- -------
Total Assets.......................... 891,105 14,105 95,403
-------- ------- -------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company.................... 35 -- --
Payable for fund shares purchased..... -- -- --
-------- ------- -------
Total Liabilities..................... 35 -- --
-------- ------- -------
Net Assets (variable annuity contract
liabilities)......................... $891,070 $14,105 $95,403
======== ======= =======
</TABLE>
______________________________________ 55 ______________________________________
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- --------- ---------------
<S> <C> <C> <C>
DEFERRED ANNUITY CONTRACTS IN THE ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Bond Fund Sub-Account..................................... 26,834 $0.994578 $ 26,688
Bond Fund Sub-Account..................................... 1,184,617 2.182434 2,585,349
Bond Fund Sub-Account..................................... 465 1.007093 469
Bond Fund Sub-Account..................................... 2,499 1.007410 2,518
Bond Fund Sub-Account..................................... 11,256,103 0.994947 11,199,226
Bond Fund Sub-Account..................................... 197,574,642 2.184598 431,621,166
Stock Fund Sub-Account.................................... 210,327 1.222948 257,219
Stock Fund Sub-Account.................................... 5,858,621 7.168535 41,997,729
Stock Fund Sub-Account.................................... 74,387 1.136485 84,539
Stock Fund Sub-Account.................................... 1,647,138 1.136847 1,872,544
Stock Fund Sub-Account.................................... 53,638,914 1.223394 65,621,525
Stock Fund Sub-Account.................................... 638,407,205 7.175612 4,580,962,400
Money Market Fund Sub-Account............................. 35,300 1.049997 37,065
Money Market Fund Sub-Account............................. 917,155 1.775591 1,628,493
Money Market Fund Sub-Account............................. 0 1.009271 0
Money Market Fund Sub-Account............................. 522 1.009591 527
Money Market Fund Sub-Account............................. 60,490,202 1.050377 63,537,517
Money Market Fund Sub-Account............................. 270,072,357 1.777341 480,010,674
Advisers Fund Sub-Account................................. 342,934 1.127468 386,647
Advisers Fund Sub-Account................................. 7,318,141 4.798347 35,114,981
Advisers Fund Sub-Account................................. 57,191 1.083555 61,970
Advisers Fund Sub-Account................................. 1,601,663 1.083900 1,736,043
Advisers Fund Sub-Account................................. 99,547,381 1.127880 112,277,500
Advisers Fund Sub-Account................................. 1,425,393,462 4.803097 6,846,303,062
Capital Appreciation Fund Sub-Account..................... 297,634 1.334003 397,044
Capital Appreciation Fund Sub-Account..................... 2,064,035 7.494011 15,467,902
Capital Appreciation Fund Sub-Account..................... 62,274 1.235938 76,966
Capital Appreciation Fund Sub-Account..................... 775,935 1.236331 959,313
Capital Appreciation Fund Sub-Account..................... 27,329,043 1.334491 36,470,362
Capital Appreciation Fund Sub-Account..................... 537,835,362 7.501418 4,034,527,863
Mortgage Securities Fund Sub-Account...................... 0 1.022060 0
Mortgage Securities Fund Sub-Account...................... 269,500 2.214471 596,801
Mortgage Securities Fund Sub-Account...................... 0 1.006743 0
Mortgage Securities Fund Sub-Account...................... 2,763 1.007064 2,783
Mortgage Securities Fund Sub-Account...................... 5,585,485 1.022434 5,710,790
Mortgage Securities Fund Sub-Account...................... 52,197,499 2.216665 115,704,370
Index Fund Sub-Account.................................... 83,406 1.239923 103,417
Index Fund Sub-Account.................................... 1,310,125 5.602011 7,339,336
Index Fund Sub-Account.................................... 1,381 1.144312 1,580
Index Fund Sub-Account.................................... 334,670 1.144675 383,089
Index Fund Sub-Account.................................... 27,071,357 1.240377 33,578,689
Index Fund Sub-Account.................................... 191,224,666 5.607574 1,072,306,463
International Opportunities Fund Sub-Account.............. 58,213 1.273000 74,106
International Opportunities Fund Sub-Account.............. 970,042 2.264582 2,196,739
International Opportunities Fund Sub-Account.............. 500 1.199943 600
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 56 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- --------- ---------------
<S> <C> <C> <C>
GROUP SUB-ACCOUNTS -- (CONTINUED)
International Opportunities Fund Sub-Account.............. 88,714 $1.200325 $ 106,485
International Opportunities Fund Sub-Account.............. 5,998,131 1.273461 7,638,386
International Opportunities Fund Sub-Account.............. 391,870,958 2.266827 888,303,667
Dividend and Growth Fund Sub-Account...................... 102,974 1.045671 107,677
Dividend and Growth Fund Sub-Account...................... 2,452,827 2.567396 6,297,378
Dividend and Growth Fund Sub-Account...................... 3,271 1.064013 3,480
Dividend and Growth Fund Sub-Account...................... 227,845 1.064354 242,507
Dividend and Growth Fund Sub-Account...................... 19,290,169 1.046052 20,178,520
Dividend and Growth Fund Sub-Account...................... 760,046,046 2.569946 1,953,277,297
International Advisers Fund Sub-Account................... 15,134 1.178048 17,829
International Advisers Fund Sub-Account................... 953,594 1.793926 1,710,677
International Advisers Fund Sub-Account................... 1,202 1.121881 1,348
International Advisers Fund Sub-Account................... 22,473 1.122237 25,220
International Advisers Fund Sub-Account................... 3,025,244 1.178481 3,565,193
International Advisers Fund Sub-Account................... 149,494,531 1.795704 268,447,928
Small Company Fund Sub-Account............................ 42,607 1.592576 67,856
Small Company Fund Sub-Account............................ 1,735,342 2.248401 3,901,745
Small Company Fund Sub-Account............................ 258 1.364431 352
Small Company Fund Sub-Account............................ 150,069 1.364863 204,823
Small Company Fund Sub-Account............................ 198,856,386 2.250630 447,552,149
Small Company Fund Sub-Account............................ 6,084,767 1.593152 9,693,959
MidCap Fund Sub-Account................................... 69,564 1.520083 105,743
MidCap Fund Sub-Account................................... 3,184,542 2.053534 6,539,565
MidCap Fund Sub-Account................................... 3,815 1.292197 4,930
MidCap Fund Sub-Account................................... 249,883 1.292607 323,000
MidCap Fund Sub-Account................................... 8,978,236 1.520630 13,652,575
MidCap Fund Sub-Account................................... 181,141,994 2.055574 372,350,771
Global Leaders Fund Sub-Account........................... 3,764,460 1.946293 7,326,743
Global Leaders Fund Sub-Account........................... 60,499 1.945587 117,706
Global Leaders Fund Sub-Account........................... 1,465,474 1.950512 2,858,424
Global Leaders Fund Sub-Account........................... 3,636 1.293486 4,703
Global Leaders Fund Sub-Account........................... 300,137 1.293896 388,346
Global Leaders Fund Sub-Account........................... 54,890,185 1.952453 107,170,506
High Yield Fund Sub-Account............................... 2,071,284 1.066776 2,209,596
High Yield Fund Sub-Account............................... 1,731 1.066388 1,845
High Yield Fund Sub-Account............................... 481,332 1.069043 514,565
High Yield Fund Sub-Account............................... 0 1.019709 0
High Yield Fund Sub-Account............................... 6,836 1.020038 6,973
High Yield Fund Sub-Account............................... 20,234,594 1.070110 21,653,242
Growth and Income Fund Sub-Account........................ 129,575 1.308008 169,485
Growth and Income Fund Sub-Account........................ 3,576,088 1.420460 5,079,689
Growth and Income Fund Sub-Account........................ 37,993 1.158303 44,008
Growth and Income Fund Sub-Account........................ 246,069 1.158668 285,112
Growth and Income Fund Sub-Account........................ 8,930,138 1.308485 11,684,951
Growth and Income Fund Sub-Account........................ 78,909,139 1.421882 112,199,485
Mentor VIP Capital Growth Fund Sub-Account................ 8,587 1.129778 9,701
Mentor VIP Capital Growth Fund Sub-Account................ 1,389,225 1.130892 1,571,064
</TABLE>
______________________________________ 57 ______________________________________
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- --------- ---------------
<S> <C> <C> <C>
Mentor VIP Perpetual International Fund Sub-Account......... 8,183 $1.531949 $ 12,536
Mentor VIP Perpetual International Fund Sub-Account......... 1,349,950 1.533464 2,070,100
Mentor VIP Growth Fund Sub-Account.......................... 12,522 1.085030 13,586
Mentor VIP Growth Fund Sub-Account.......................... 805,875 1.086100 875,260
Mercury VI US Large Cap Fund Sub-Account.................... 2,255 1.104998 2,491
Mercury VI US Large Cap Fund Sub-Account.................... 10,508 1.105269 11,614
Merrill Lynch Global Growth Focus Fund Sub-Account.......... 46,526 1.248875 58,105
Merrill Lynch Global Growth Focus Fund Sub-Account.......... 29,858 1.249180 37,298
---------------
SUB-TOTAL................................................. 22,283,922,258
---------------
ANNUITY CONTRACTS IN THE ANNUITY PERIOD:
GROUP SUB-ACCOUNTS:
Bond Fund Sub-Account..................................... 764,861 2.184598 1,670,914
Stock Fund Sub-Account.................................... 2,789,773 7.175612 20,018,327
Money Market Fund Sub-Account............................. 1,818,279 1.777341 3,231,702
Advisers Fund Sub-Account................................. 4,104,516 4.803097 19,714,390
Capital Appreciation Fund Sub-Account..................... 1,151,979 7.501418 8,641,473
Mortgage Securities Fund Sub-Account...................... 234,629 2.216665 520,093
Index Fund Sub-Account.................................... 646,522 5.607574 3,625,420
International Opportunities Fund Sub-Account.............. 931,333 2.266827 2,111,171
Dividend and Growth Fund Sub-Account...................... 1,801,721 2.569946 4,630,326
International Advisers Fund Sub-Account................... 268,082 1.795704 481,396
Small Company Fund Sub-Account............................ 1,135,754 2.250630 2,556,162
MidCap Fund Sub-Account................................... 591,550 2.055574 1,215,975
Global Leaders Fund Sub-Account........................... 64,172 1.952453 125,294
High Yield Fund Sub-Account............................... 73,126 1.070110 78,253
Growth & Income Fund Sub-Account.......................... 144,116 1.421882 204,915
Mentor VIP Growth Fund Sub-Account........................ 2,048 1.086100 2,224
---------------
SUB-TOTAL................................................. 68,828,035
---------------
GRAND TOTAL................................................. $22,352,750,293
===============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 58 ______________________________________
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 24,593,727 $ 32,121,491
EXPENSES:
Mortality and expense undertakings.... (5,518,904) (50,004,645)
------------ ------------
Net investment income (loss)........ 19,074,823 (17,883,154)
------------ ------------
CAPITAL GAINS INCOME.................... 2,910,226 297,745,384
------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... 58,228 170,224
Net unrealized (depreciation)
appreciation of investments during
the period........................... (36,187,007) 402,196,558
------------ ------------
Net (loss) gain on investments...... (36,128,779) 402,366,782
------------ ------------
Net (decrease) increase in net
assets resulting from operations... $(14,143,730) $682,229,012
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 60 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- ----------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................. $21,324,529 $146,368,182 $ 12,342,082 $ 6,851,063 $ 10,341,697
EXPENSES:
Mortality and expense undertakings.... (5,620,086) (79,151,221) (40,991,208) (1,515,206) (11,624,230)
----------- ------------ -------------- ----------- ------------
Net investment income (loss)........ 15,704,443 67,216,961 (28,649,126) 5,335,857 (1,282,533)
----------- ------------ -------------- ----------- ------------
CAPITAL GAINS INCOME.................... 8,648 473,055,258 188,426,299 -- 13,517,068
----------- ------------ -------------- ----------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... -- 78,597 (457,576) (16,786) 53,550
Net unrealized (depreciation)
appreciation of investments during
the period........................... -- 22,727,549 892,664,508 (5,088,216) 153,057,340
----------- ------------ -------------- ----------- ------------
Net (loss) gain on investments...... -- 22,806,146 892,206,932 (5,105,002) 153,110,890
----------- ------------ -------------- ----------- ------------
Net (decrease) increase in net
assets resulting from operations... $15,713,091 $563,078,365 $1,051,984,105 $ 230,855 $165,345,425
=========== ============ ============== =========== ============
<CAPTION>
INTERNATIONAL DIVIDEND AND INTERNATIONAL
OPPORTUNITIES FUND GROWTH FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------ -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 8,691,519 $31,884,385 $ 4,847,238
EXPENSES:
Mortality and expense undertakings.... (9,068,100) (24,246,739) (2,826,348)
------------ ----------- -----------
Net investment income (loss)........ (376,581) 7,637,646 2,020,890
------------ ----------- -----------
CAPITAL GAINS INCOME.................... -- 73,317,212 --
------------ ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... 6,651,839 (442,117) 39,305
Net unrealized (depreciation)
appreciation of investments during
the period........................... 245,333,665 (4,845,420) 44,681,650
------------ ----------- -----------
Net (loss) gain on investments...... 251,985,504 (5,287,537) 44,720,955
------------ ----------- -----------
Net (decrease) increase in net
assets resulting from operations... $251,608,923 $75,667,321 $46,741,845
============ =========== ===========
</TABLE>
______________________________________ 61 ______________________________________
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL MIDCAP
COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ -- $ --
EXPENSES:
Mortality and expense undertakings.... (3,422,328) (2,370,115)
------------ -----------
Net investment (loss) income........ (3,422,328) (2,370,115)
------------ -----------
CAPITAL GAINS INCOME.................... 617,854 16,614,969
------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... 674,034 (76)
Net unrealized appreciation
(depreciation) of investments during
the period........................... 163,127,296 82,609,085
------------ -----------
Net gain (loss) on investments...... 163,801,330 82,609,009
------------ -----------
Net increase in net assets resulting
from operations.................... $160,996,856 $96,853,863
============ ===========
</TABLE>
* From inception, May 11, 1999 to December 31, 1999
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 62 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MENTOR VIP MENTOR VIP
GLOBAL HIGH GROWTH AND CAPITAL GROWTH PERPETUAL
LEADERS FUND YIELD FUND INCOME FUND FUND INTERNATIONAL FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ----------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 150,490 $1,359,521 $ 347,049 $ 2,097 $--
EXPENSES:
Mortality and expense undertakings.... (440,649) (195,616) (683,916) (19,998) (20,341)
----------- ---------- ----------- -------- --------
Net investment (loss) income........ (290,159) 1,163,905 (336,867) (17,901) (20,341)
----------- ---------- ----------- -------- --------
CAPITAL GAINS INCOME.................... 539,412 2,165 799,084 2,428 1,053
----------- ---------- ----------- -------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... 12,511 (9,962) (7,190) 9,551 7,458
Net unrealized appreciation
(depreciation) of investments during
the period........................... 23,328,310 (859,225) 13,132,965 91,216 574,300
----------- ---------- ----------- -------- --------
Net gain (loss) on investments...... 23,340,821 (869,187) 13,125,775 100,767 581,758
----------- ---------- ----------- -------- --------
Net increase in net assets resulting
from operations.................... $23,590,074 $ 296,883 $13,587,992 $ 85,294 $562,470
=========== ========== =========== ======== ========
<CAPTION>
MENTOR VIP MERRILL LYNCH
GROWTH MERCURY VI US GLOBAL GROWTH
FUND LARGE CAP FUND FOCUS FUND
SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT*
----------- -------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 1,072 $ 27 $ 576
EXPENSES:
Mortality and expense undertakings.... (9,090) (8) (45)
-------- ---- ------
Net investment (loss) income........ (8,018) 19 531
-------- ---- ------
CAPITAL GAINS INCOME.................... -- 21 563
-------- ---- ------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... (7,232) -- --
Net unrealized appreciation
(depreciation) of investments during
the period........................... 158,548 376 3,949
-------- ---- ------
Net gain (loss) on investments...... 151,316 376 3,949
-------- ---- ------
Net increase in net assets resulting
from operations.................... $143,298 $416 $5,043
======== ==== ======
</TABLE>
* From inception, May 11, 1999 to December 31, 1999
______________________________________ 63 ______________________________________
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 19,074,823 $ (17,883,154)
Capital gains income.................. 2,910,226 297,745,384
Net realized gain (loss) on security
transactions......................... 58,228 170,224
Net unrealized (depreciation)
appreciation of investments during
the period........................... (36,187,007) 402,196,558
------------ --------------
Net (decrease) increase in net assets
resulting from operations............ (14,143,730) 682,229,012
------------ --------------
UNIT TRANSACTIONS:
Purchases............................. 40,898,140 423,849,947
Net transfers......................... 40,556,582 426,490,471
Surrenders for benefit payments and
fees................................. (31,895,263) (201,860,525)
Net annuity transactions.............. 434,093 7,775,030
------------ --------------
Net increase (decrease) in net assets
resulting from unit transactions..... 49,993,552 656,254,923
------------ --------------
Net increase in net assets............ 35,849,822 1,338,483,935
NET ASSETS:
Beginning of period................... 411,256,508 3,372,330,348
------------ --------------
End of period......................... $447,106,330 $4,710,814,283
============ ==============
</TABLE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 15,464,795 $ (7,691,830)
Capital gains income.................. -- 76,061,613
Net realized (loss) gain on security
transactions......................... (5,587) (1,418,674)
Net unrealized appreciation
(depreciation) of investments during
the period........................... 5,072,560 663,245,884
------------ --------------
Net increase in net assets resulting
from operations...................... 20,531,768 730,196,993
------------ --------------
UNIT TRANSACTIONS:
Purchases............................. 58,804,116 385,880,357
Net transfers......................... 123,611,549 325,699,308
Surrenders for benefit payments and
fees................................. (20,698,247) (105,089,407)
Net annuity transactions.............. 632,000 6,055,572
------------ --------------
Net increase in net assets resulting
from unit transactions............... 162,349,418 612,545,830
------------ --------------
Net increase in net assets............ 182,881,186 1,342,742,823
NET ASSETS:
Beginning of period................... 228,375,322 2,029,587,525
------------ --------------
End of period......................... $411,256,508 $3,372,330,348
============ ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 64 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ----------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 15,704,443 $ 67,216,961 $ (28,649,126) $ 5,335,857 $ (1,282,533)
Capital gains income.................. 8,648 473,055,258 188,426,299 -- 13,517,068
Net realized gain (loss) on security
transactions......................... -- 78,597 (457,576) (16,786) 53,550
Net unrealized (depreciation)
appreciation of investments during
the period........................... -- 22,727,549 892,664,508 (5,088,216) 153,057,340
------------ -------------- -------------- ------------ --------------
Net (decrease) increase in net assets
resulting from operations............ 15,713,091 563,078,365 1,051,984,105 230,855 165,345,425
------------ -------------- -------------- ------------ --------------
UNIT TRANSACTIONS:
Purchases............................. 121,514,425 553,278,445 204,353,783 10,455,451 117,361,306
Net transfers......................... 199,660,729 726,127,643 142,107,778 13,740,703 116,603,220
Surrenders for benefit payments and
fees................................. (136,368,048) (395,371,857) (170,334,783) (11,130,292) (45,795,636)
Net annuity transactions.............. 2,186,026 8,508,756 1,937,989 283,866 1,387,602
------------ -------------- -------------- ------------ --------------
Net increase (decrease) in net assets
resulting from unit transactions..... 186,993,132 892,542,987 178,064,767 13,349,728 189,556,492
------------ -------------- -------------- ------------ --------------
Net increase in net assets............ 202,706,223 1,455,621,352 1,230,048,872 13,580,583 354,901,917
NET ASSETS:
Beginning of period................... 345,739,755 5,559,973,241 2,866,492,051 108,954,254 762,436,077
------------ -------------- -------------- ------------ --------------
End of period......................... $548,445,978 $7,015,594,593 $4,096,540,923 $122,534,837 $1,117,337,994
============ ============== ============== ============ ==============
<CAPTION>
INTERNATIONAL DIVIDEND AND INTERNATIONAL
OPPORTUNITIES FUND GROWTH FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ -------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ (376,581) $ 7,637,646 $ 2,020,890
Capital gains income.................. -- 73,317,212 --
Net realized gain (loss) on security
transactions......................... 6,651,839 (442,117) 39,305
Net unrealized (depreciation)
appreciation of investments during
the period........................... 245,333,665 (4,845,420) 44,681,650
------------ -------------- ------------
Net (decrease) increase in net assets
resulting from operations............ 251,608,923 75,667,321 46,741,845
------------ -------------- ------------
UNIT TRANSACTIONS:
Purchases............................. 28,399,437 122,792,647 18,919,242
Net transfers......................... (2,401,768) 54,502,249 17,826,840
Surrenders for benefit payments and
fees................................. (36,408,990) (94,489,028) (10,676,542)
Net annuity transactions.............. 782,800 1,856,944 281,999
------------ -------------- ------------
Net increase (decrease) in net assets
resulting from unit transactions..... (9,628,521) 84,662,812 26,351,539
------------ -------------- ------------
Net increase in net assets............ 241,980,402 160,330,133 73,093,384
NET ASSETS:
Beginning of period................... 658,450,752 1,824,407,052 201,156,207
------------ -------------- ------------
End of period......................... $900,431,154 $1,984,737,185 $274,249,591
============ ============== ============
</TABLE>
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ----------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 9,775,262 $ 53,393,050 $ (16,365,803) $ 5,495,664 $ (1,160,481)
Capital gains income.................. -- 130,454,479 150,932,848 -- 11,566,682
Net realized (loss) gain on security
transactions......................... -- (287,760) (3,541,507) 1,531 (301,028)
Net unrealized appreciation
(depreciation) of investments during
the period........................... -- 750,363,179 201,102,863 (691,300) 129,513,479
------------ -------------- -------------- ------------ --------------
Net increase in net assets resulting
from operations...................... 9,775,262 933,922,948 332,128,401 4,805,895 139,618,652
------------ -------------- -------------- ------------ --------------
UNIT TRANSACTIONS:
Purchases............................. 75,815,780 600,914,213 285,756,586 9,674,424 107,850,968
Net transfers......................... 120,297,377 671,280,081 116,427,127 20,420,247 98,345,205
Surrenders for benefit payments and
fees................................. (60,700,173) (226,423,137) (108,713,408) (6,506,845) (22,295,418)
Net annuity transactions.............. 717,935 4,552,594 2,969,562 225,614 1,399,655
------------ -------------- -------------- ------------ --------------
Net increase in net assets resulting
from unit transactions............... 136,130,919 1,050,323,751 296,439,867 23,813,440 185,300,410
------------ -------------- -------------- ------------ --------------
Net increase in net assets............ 145,906,181 1,984,246,699 628,568,268 28,619,335 324,919,062
NET ASSETS:
Beginning of period................... 199,833,574 3,575,726,542 2,237,923,783 80,334,919 437,517,015
------------ -------------- -------------- ------------ --------------
End of period......................... $345,739,755 $5,559,973,241 $2,866,492,051 $108,954,254 $ 762,436,077
============ ============== ============== ============ ==============
<CAPTION>
INTERNATIONAL DIVIDEND AND INTERNATIONAL
OPPORTUNITIES FUND GROWTH FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ -------------- --------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 668,487 $ 9,816,261 $ 14,628,419
Capital gains income.................. 39,050,857 44,842,140 4,004,303
Net realized (loss) gain on security
transactions......................... (1,485,356) (541,832) 13,013
Net unrealized appreciation
(depreciation) of investments during
the period........................... 27,913,220 151,447,604 (335,247)
------------ -------------- -------------
Net increase in net assets resulting
from operations...................... 66,147,208 205,564,173 18,310,488
------------ -------------- -------------
UNIT TRANSACTIONS:
Purchases............................. 39,589,829 264,852,722 23,124,347
Net transfers......................... (4,225,169) 249,782,849 22,048,417
Surrenders for benefit payments and
fees................................. (26,163,417) (61,426,410) (7,181,403)
Net annuity transactions.............. 434,251 2,178,448 67,952
------------ -------------- -------------
Net increase in net assets resulting
from unit transactions............... 9,635,494 455,387,609 38,059,313
------------ -------------- -------------
Net increase in net assets............ 75,782,702 660,951,782 56,369,801
NET ASSETS:
Beginning of period................... 582,668,050 1,163,455,270 144,786,406
------------ -------------- -------------
End of period......................... $658,450,752 $1,824,407,052 $ 201,156,207
============ ============== =============
</TABLE>
______________________________________ 65 ______________________________________
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL MIDCAP
COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $(3,422,328) $ (2,370,115)
Capital gains income.................. 617,854 16,614,969
Net realized gain (loss) on security
transactions......................... 674,034 (76)
Net unrealized appreciation
(depreciation) of investments during
the period........................... 163,127,296 82,609,085
------------ ------------
Net increase in net assets resulting
from operations...................... 160,996,856 96,853,863
------------ ------------
UNIT TRANSACTIONS:
Purchases............................... 31,132,986 54,146,905
Net transfers........................... 67,507,616 159,587,148
Surrenders for benefit payments and
fees................................... (12,711,095) (8,059,665)
Net annuity transactions................ 1,448,874 819,581
------------ ------------
Net increase in net assets resulting
from unit transactions................. 87,378,381 206,493,969
------------ ------------
Net increase in net assets.............. 248,375,237 $303,347,832
NET ASSETS:
Beginning of period................... 215,601,809 90,844,727
------------ ------------
End of period......................... $463,977,046 $394,192,559
============ ============
</TABLE>
*** From inception, May 11, 1999 to December 31, 1999
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
SMALL MIDCAP
COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $(2,126,815) $ (602,824)
Capital gains income.................. 2,433,792 --
Net realized (loss) gain on security
transactions......................... (74,920) (2,834)
Net unrealized appreciation of
investments during the period........ 17,782,782 13,252,169
------------ ------------
Net increase in net assets resulting
from operations...................... 18,014,839 12,646,511
------------ ------------
UNIT TRANSACTIONS:
Purchases............................... 37,657,549 28,291,639
Net transfers........................... 31,192,792 36,483,561
Surrenders for benefit payments and
fees................................... (6,343,764) (1,424,845)
Net annuity transactions................ 298,211 109,553
------------ ------------
Net increase in net assets resulting
from unit transactions................. 62,804,788 63,459,908
------------ ------------
Net increase in net assets.............. 80,819,627 76,106,419
NET ASSETS:
Beginning of period................... 134,782,182 14,738,308
------------ ------------
End of period......................... $215,601,809 $ 90,844,727
============ ============
</TABLE>
* From inception, June 1, 1998 to December 31, 1998
** From inception, September 30, 1998 to December 31, 1998
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 66 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MENTOR VIP MENTOR VIP PERPETUAL
GLOBAL HIGH GROWTH AND CAPITAL GROWTH INTERNATIONAL
LEADERS FUND YIELD FUND INCOME FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ------------ -------------- --------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $ (290,159) $ 1,163,905 $ (336,867) $ (17,901) $ (20,341)
Capital gains income.................. 539,412 2,165 799,084 2,428 1,053
Net realized gain (loss) on security
transactions......................... 12,511 (9,962) (7,190) 9,551 7,458
Net unrealized appreciation
(depreciation) of investments during
the period........................... 23,328,310 (859,225) 13,132,965 91,216 574,300
------------ ----------- ------------ ---------- ----------
Net increase in net assets resulting
from operations...................... 23,590,074 296,883 13,587,992 85,294 562,470
------------ ----------- ------------ ---------- ----------
UNIT TRANSACTIONS:
Purchases............................... 21,579,201 7,629,629 32,753,873 46,506 94,565
Net transfers........................... 72,852,417 15,016,945 70,693,683 177,612 568,196
Surrenders for benefit payments and
fees................................... (1,320,605) (979,313) (2,805,059) (199,015) (155,582)
Net annuity transactions................ 90,872 76,676 192,208 -- --
------------ ----------- ------------ ---------- ----------
Net increase in net assets resulting
from unit transactions................. 93,201,885 21,743,937 100,834,705 25,103 507,179
------------ ----------- ------------ ---------- ----------
Net increase in net assets.............. 116,791,959 22,040,820 114,422,697 110,397 1,069,649
NET ASSETS:
Beginning of period................... 1,199,763 2,423,654 15,244,948 1,470,368 1,012,987
------------ ----------- ------------ ---------- ----------
End of period......................... $117,991,722 $24,464,474 $129,667,645 $1,580,765 $2,082,636
============ =========== ============ ========== ==========
<CAPTION>
MERRILL LYNCH
MENTOR VIP MERCURY VI US GLOBAL GROWTH
GROWTH FUND LARGE CAP FUND FOCUS FUND
SUB-ACCOUNT SUB-ACCOUNT*** SUB-ACCOUNT***
----------- -------------- --------------
<S> <C> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $ (8,018) $ 19 $ 531
Capital gains income.................. -- 21 563
Net realized gain (loss) on security
transactions......................... (7,232) -- --
Net unrealized appreciation
(depreciation) of investments during
the period........................... 158,548 376 3,949
-------- ------- -------
Net increase in net assets resulting
from operations...................... 143,298 416 5,043
-------- ------- -------
UNIT TRANSACTIONS:
Purchases............................... 19,924 2,499 82,968
Net transfers........................... 179,242 11,190 7,393
Surrenders for benefit payments and
fees................................... (44,998) -- (1)
Net annuity transactions................ 1,932 -- --
-------- ------- -------
Net increase in net assets resulting
from unit transactions................. 156,100 13,689 90,360
-------- ------- -------
Net increase in net assets.............. 299,398 14,105 95,403
NET ASSETS:
Beginning of period................... 591,672 -- --
-------- ------- -------
End of period......................... $891,070 $14,105 $95,403
======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
GLOBAL HIGH GROWTH AND MENTOR VIP MENTOR VIP PERPETUAL
LEADERS FUND YIELD FUND INCOME FUND CAPITAL GROWTH INTERNATIONAL
SUB-ACCOUNT** SUB-ACCOUNT** SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT
------------- ------------- ------------ -------------- --------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $ 128 $ 39,679 $ 13,479 $ (3,951) $ (3,170)
Capital gains income.................. 29,044 -- -- -- --
Net realized (loss) gain on security
transactions......................... (3,023) (1,553) 140 55 38
Net unrealized appreciation of
investments during the period........ 52,419 14,002 1,906,801 118,168 47,507
------------ ----------- ------------ ---------- ----------
Net increase in net assets resulting
from operations...................... 78,568 52,128 1,920,420 114,272 44,375
------------ ----------- ------------ ---------- ----------
UNIT TRANSACTIONS:
Purchases............................... 463,522 815,158 5,482,553 92,146 38,705
Net transfers........................... 657,728 1,561,354 7,951,308 1,266,689 937,906
Surrenders for benefit payments and
fees................................... (55) (4,986) (109,333) (2,739) (7,999)
Net annuity transactions................ -- -- -- -- --
------------ ----------- ------------ ---------- ----------
Net increase in net assets resulting
from unit transactions................. 1,121,195 2,371,526 13,324,528 1,356,096 968,612
------------ ----------- ------------ ---------- ----------
Net increase in net assets.............. 1,199,763 2,423,654 15,244,948 1,470,368 1,012,987
NET ASSETS:
Beginning of period................... -- -- -- -- --
------------ ----------- ------------ ---------- ----------
End of period......................... $ 1,199,763 $ 2,423,654 $ 15,244,948 $1,470,368 $1,012,987
============ =========== ============ ========== ==========
<CAPTION>
MENTOR VIP
GROWTH
SUB-ACCOUNT
-----------
<S> <C>
OPERATIONS:
Net investment (loss) income.......... $ (2,316)
Capital gains income.................. --
Net realized (loss) gain on security
transactions......................... 2
Net unrealized appreciation of
investments during the period........ 56,433
--------
Net increase in net assets resulting
from operations...................... 54,119
--------
UNIT TRANSACTIONS:
Purchases............................... 39,810
Net transfers........................... 497,486
Surrenders for benefit payments and
fees................................... 257
Net annuity transactions................ --
--------
Net increase in net assets resulting
from unit transactions................. 537,553
--------
Net increase in net assets.............. 591,672
NET ASSETS:
Beginning of period................... --
--------
End of period......................... $591,672
========
</TABLE>
* From inception, June 1, 1998 to December 31, 1998
** From inception, September 30, 1998 to December 31, 1998
______________________________________ 67 ______________________________________
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION:
Separate Account One (the Account) is a separate investment account within
Hartford Life & Annuity Insurance Company (the Company) and is registered
with the Securities and Exchange Commission (SEC) as a unit investment trust
under the Investment Company Act of 1940, as amended. Both the Company and
the Account are subject to supervision and regulation by the Department of
Insurance of the State of Connecticut and the SEC. The Account invests
deposits by variable annuity contractholders of the Company in various
mutual funds (the Funds) as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Realized gains and
losses on the sales of securities are computed on the basis of identified
cost of the fund shares sold. 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, 1999
c) UNIT TRANSACTIONS--Unit transactions are executed based on the unit
values calculated at the close of the business day.
d) 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.
e) 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 expense 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:
Certain amounts are deducted from the contracts on a monthly basis, as
decribed below:
a) MORTALITY AND EXPENSE RISK CHARGE--The Company, will make deductions at a
maximum annual rate of 1.25% of the contract's value for the mortality
and expense risks which the Company undertakes.
b) TAX EXPENSE CHARGE--If applicable, the Company will make deductions at a
maximum rate of 3.5% of the contract's value to meet premium tax
requirements. An additional tax charge based on a percentage of the
contract's value may be assessed to partial withrawals or surrenders.
These expenses are included in surrenders for benefit payments and fees
in the accompanying statements of changes in net assets.
c) ANNUAL MAINTENANCE FEE--An annual maintenance fee in the amount of $30
may be deducted from the contract's value each contract year. However,
this fee is not applicable to contracts with values of $50,000 or more,
as determined on the most recent contract anniversary. These expenses are
included in surrenders for benefit payments and fees in the accompanying
statements of changes in net assets.
______________________________________ 68 ______________________________________
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT ONE AND TO THE OWNERS OF UNITS OF INTEREST THEREIN:
We have audited the accompanying statements of assets and liabilities of
Hartford Life and Annuity Insurance Company Separate Account One (Bond Fund,
Stock Fund, Money Market Fund, Advisers Fund, Capital Appreciation Fund,
Mortgage Securities Fund, Index Fund, International Opportunities Fund, Dividend
and Growth Fund, International Advisers Fund, Small Company Fund, MidCap Fund,
Global Leaders Fund, High Yield Fund, Growth and Income Fund, Mentor VIP Capital
Growth Fund, Mentor VIP Perpetual International Fund, Mentor VIP Growth Fund,
Mercury VI US Large Cap Fund and Merrill Lynch Global Growth Focus Fund)
(collectively, the Account) as of December 31, 1999, and the related statements
of operations and the statements of changes in net assets for the periods
presented. These financial statements are the responsibility of the Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1999, and the results of their operations and the changes in their net assets
for the periods presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 17, 2000 ARTHUR ANDERSEN LLP
______________________________________ 69 ______________________________________
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
ASSETS:
Investments
Hartford Bond HLS Fund, Inc. -
Class IA
Shares 9,055,662
Cost $9,286,229
Market Value...................... $8,950,385 --
Hartford Stock HLS Fund, Inc. -
Class IA
Shares 9,654,675
Cost $45,387,590
Market Value...................... -- $69,005,708
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 24,438,267
Cost $24,438,267
Market Value...................... -- --
Hartford Advisers HLS Fund, Inc. -
Class IA
Shares 33,791,951
Cost $77,902,324
Market Value...................... -- --
Hartford Capital Appreciation HLS
Fund, Inc. - Class IA
Shares 12,678,358
Cost $48,394,524
Market Value...................... -- --
Hartford Mortgage Securities HLS
Fund, Inc. - Class IA
Shares 2,980,863
Cost $3,191,620
Market Value...................... -- --
Hartford Index HLS Fund, Inc. -
Class IA
Shares 7,895,819
Cost $20,455,761
Market Value...................... -- --
Due from Hartford Life Insurance
Company.............................. -- 98,436
Receivable from fund shares sold...... 1,450 --
---------- -----------
Total Assets.......................... 8,951,835 69,104,144
---------- -----------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. 1,465 --
Payable for fund shares purchased..... -- 98,365
---------- -----------
Total Liabilities..................... 1,465 98,365
---------- -----------
Net Assets (variable life contract
liabilities)......................... $8,950,370 $69,005,779
========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 70 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET CAPITAL MORTGAGE
FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------- ----------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments
Hartford Bond HLS Fund, Inc. -
Class IA
Shares 9,055,662
Cost $9,286,229
Market Value...................... -- -- -- -- --
Hartford Stock HLS Fund, Inc. -
Class IA
Shares 9,654,675
Cost $45,387,590
Market Value...................... -- -- -- --
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 24,438,267
Cost $24,438,267
Market Value...................... $24,438,267 -- -- -- --
Hartford Advisers HLS Fund, Inc. -
Class IA
Shares 33,791,951
Cost $77,902,324
Market Value...................... -- $100,185,497 -- -- --
Hartford Capital Appreciation HLS
Fund, Inc. - Class IA
Shares 12,678,358
Cost $48,394,524
Market Value...................... -- -- $77,279,509 -- --
Hartford Mortgage Securities HLS
Fund, Inc. - Class IA
Shares 2,980,863
Cost $3,191,620
Market Value...................... -- -- -- $3,098,583 --
Hartford Index HLS Fund, Inc. -
Class IA
Shares 7,895,819
Cost $20,455,761
Market Value...................... -- -- -- -- $33,073,850
Due from Hartford Life Insurance
Company.............................. -- 57,108 -- -- --
Receivable from fund shares sold...... 110,108 -- 107,531 16,450 23,657
----------- ------------ ----------- ---------- -----------
Total Assets.......................... 24,548,375 100,242,605 77,387,040 3,115,033 33,097,507
----------- ------------ ----------- ---------- -----------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. 108,955 57,100 107,412 16,456 23,701
Payable for fund shares purchased..... -- -- -- -- --
----------- ------------ ----------- ---------- -----------
Total Liabilities..................... 108,955 57,100 107,412 16,456 23,701
----------- ------------ ----------- ---------- -----------
Net Assets (variable life contract
liabilities)......................... $24,439,420 $100,185,505 $77,279,628 $3,098,577 $33,073,806
=========== ============ =========== ========== ===========
</TABLE>
______________________________________ 71 ______________________________________
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------
<S> <C> <C>
ASSETS:
Investments
Hartford International Opportunities
HLS Fund, Inc. - Class IA
Shares 9,308,039
Cost $12,322,737
Market Value...................... $17,461,276 --
Hartford Dividend and Growth HLS
Fund, Inc. - Class IA
Shares 16,287,975
Cost $26,836,004
Market Value...................... -- $35,000,057
Hartford International Advisers HLS
Fund, Inc. - Class IA
Shares 2,598,233
Cost $3,005,795
Market Value...................... -- --
Hartford Small Company HLS Fund, Inc
- Class IA
Shares 3,015,736
Cost $4,185,241
Market Value...................... -- --
Hartford MidCap HLS Fund, Inc. -
Class IA
Shares 2,656,338
Cost $4,286,562
Market Value...................... -- --
Hartford Growth and Income HLS Fund
- Class IA
Shares 774,971
Cost $1,009,119
Market Value...................... -- --
Hartford Global Leaders HLS Fund -
Class IA
Shares 789,773
Cost $1,226,325
Market Value...................... -- --
Hartford High Yield HLS Fund -
Class IA
Shares 365,696
Cost $384,891
Market Value...................... -- --
Due from Hartford Life Insurance
Company.............................. -- 96,083
Receivable from fund shares sold...... 103,082 --
----------- -----------
Total Assets.......................... 17,564,358 35,096,140
----------- -----------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. 103,070 --
Payable for fund shares purchased..... -- 96,084
----------- -----------
Total Liabilities..................... 103,070 96,084
----------- -----------
Net Assets (variable life contract
liabilities)......................... $17,461,288 $35,000,056
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 72 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SMALL MIDCAP GROWTH AND GLOBAL LEADERS HIGH YIELD
ADVISERS FUND COMPANY FUND FUND INCOME 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 International Opportunities
HLS Fund, Inc. - Class IA
Shares 9,308,039
Cost $12,322,737
Market Value...................... -- -- -- -- -- --
Hartford Dividend and Growth HLS
Fund, Inc. - Class IA
Shares 16,287,975
Cost $26,836,004
Market Value...................... -- -- -- -- -- --
Hartford International Advisers HLS
Fund, Inc. - Class IA
Shares 2,598,233
Cost $3,005,795
Market Value...................... $3,628,929 -- -- -- -- --
Hartford Small Company HLS Fund, Inc
- Class IA
Shares 3,015,736
Cost $4,185,241
Market Value...................... -- $6,597,758 -- -- -- --
Hartford MidCap HLS Fund, Inc. -
Class IA
Shares 2,656,338
Cost $4,286,562
Market Value...................... -- -- $5,454,788 -- -- --
Hartford Growth and Income HLS Fund
- Class IA
Shares 774,971
Cost $1,009,119
Market Value...................... -- -- -- $1,109,481 -- --
Hartford Global Leaders HLS Fund -
Class IA
Shares 789,773
Cost $1,226,325
Market Value...................... -- -- -- -- $1,510,756 --
Hartford High Yield HLS Fund -
Class IA
Shares 365,696
Cost $384,891
Market Value...................... -- -- -- -- -- $367,477
Due from Hartford Life Insurance
Company.............................. -- -- -- -- 2,998 --
Receivable from fund shares sold...... -- 10,103 9,999 -- -- --
---------- ---------- ---------- ---------- ---------- --------
Total Assets.......................... 3,628,929 6,607,861 5,464,787 1,109,481 1,513,754 367,477
---------- ---------- ---------- ---------- ---------- --------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. -- 10,115 9,998 -- -- --
Payable for fund shares purchased..... 8 -- -- -- 3,000 --
---------- ---------- ---------- ---------- ---------- --------
Total Liabilities..................... 8 10,115 9,998 -- 3,000 --
---------- ---------- ---------- ---------- ---------- --------
Net Assets (variable life contract
liabilities)......................... $3,628,921 $6,597,746 $5,454,789 $1,109,481 $1,510,754 $367,477
========== ========== ========== ========== ========== ========
</TABLE>
______________________________________ 73 ______________________________________
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ --------- ------------
<S> <C> <C> <C>
DEFERRED ANNUITY CONTRACTS IN THE
ACCUMULATION PERIOD
GROUP SUB-ACCOUNTS:
Bond Fund Sub-Account............ 6,188,623 $1.446262 $ 8,950,370
Stock Fund Sub-Account........... 19,906,488 3.466497 69,005,779
Money Market Fund Sub-Account.... 18,919,152 1.291782 24,439,420
Advisers Fund Sub-Account........ 39,259,935 2.551851 100,185,505
Capital Appreciation Fund
Sub-Account..................... 25,401,102 3.042373 77,279,628
Mortgage Securities Fund
Sub-Account..................... 2,148,284 1.442350 3,098,577
Index Fund Sub-Account........... 9,734,011 3.397757 33,073,806
International Opportunities Fund
Sub-Account..................... 8,389,502 2.081326 17,461,288
Dividend and Growth Fund
Sub-Account..................... 12,985,116 2.695398 35,000,056
International Advisers Fund
Sub-Account..................... 1,902,444 1.907505 3,628,921
Small Company Fund Sub-Account... 3,062,463 2.154392 6,597,746
MidCap Fund Sub-Account.......... 2,731,234 1.997189 5,454,789
Growth and Income Fund
Sub-Account..................... 791,257 1.402176 1,109,481
Global Leaders Fund
Sub-Account..................... 761,860 1.982981 1,510,754
High Yield Fund Sub-Account...... 338,091 1.086917 367,477
------------
GRAND TOTAL........................ $387,163,597
============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 74 ______________________________________
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 491,287 $ 470,668
--------- -----------
CAPITAL GAINS INCOME.................... 60,691 4,571,787
--------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized (loss) gain on security
transactions......................... (3,504) (12,486)
Net unrealized (depreciation)
appreciation of investments during
the period........................... (731,747) 5,898,516
--------- -----------
Net (loss) gain on investments...... (735,251) 5,886,030
--------- -----------
Net (decrease) increase in net
assets resulting from operations... $(183,273) $10,928,485
========= ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 76 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET CAPITAL MORTGAGE
FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------- ----------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................. $1,040,195 $2,093,527 $ 233,748 $ 174,068 $ 308,000
---------- ---------- ----------- --------- ----------
CAPITAL GAINS INCOME.................... 499 7,198,080 3,825,954 -- 413,011
---------- ---------- ----------- --------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized (loss) gain on security
transactions......................... -- (32,927) 260,636 567 (33,817)
Net unrealized (depreciation)
appreciation of investments during
the period........................... -- 170,130 16,904,315 (128,516) 4,615,982
---------- ---------- ----------- --------- ----------
Net (loss) gain on investments...... -- 137,203 17,164,951 (127,949) 4,582,165
---------- ---------- ----------- --------- ----------
Net (decrease) increase in net
assets resulting from operations... $1,040,694 $9,428,810 $21,224,653 $ 46,119 $5,303,176
========== ========== =========== ========= ==========
</TABLE>
______________________________________ 77 ______________________________________
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 168,186 $ 560,410
---------- ----------
CAPITAL GAINS INCOME.................... -- 1,326,728
---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... 68,488 21,013
Net unrealized appreciation
(depreciation) of investments during
the period........................... 4,821,724 (141,489)
---------- ----------
Net gain (loss) on investments...... 4,890,212 (120,476)
---------- ----------
Net increase in net assets resulting
from operations.................... $5,058,398 $1,766,662
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 78 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SMALL MIDCAP GROWTH AND GLOBAL LEADERS HIGH YIELD
ADVISERS FUND COMPANY FUND FUND INCOME 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............................. $ 64,215 $ -- $ -- $ 3,019 $ 1,992 $ 20,834
-------- ---------- ---------- -------- -------- --------
CAPITAL GAINS INCOME.................... -- 9,477 219,591 6,954 7,346 13
-------- ---------- ---------- -------- -------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... 5,194 41,425 (9,619) (907) 10,778 25
Net unrealized appreciation
(depreciation) of investments during
the period........................... 598,509 2,244,959 1,041,779 100,214 285,208 (17,258)
-------- ---------- ---------- -------- -------- --------
Net gain (loss) on investments...... 603,703 2,286,384 1,032,160 99,307 295,986 (17,233)
-------- ---------- ---------- -------- -------- --------
Net increase in net assets resulting
from operations.................... $667,918 $2,295,861 $1,251,751 $109,280 $305,324 $ 3,614
======== ========== ========== ======== ======== ========
</TABLE>
______________________________________ 79 ______________________________________
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income................. $ 491,287 $ 470,668
Capital gains income.................. 60,691 4,571,787
Net realized (loss) gain on security
transactions......................... (3,504) (12,486)
Net unrealized (depreciation)
appreciation of investments during
the period........................... (731,747) 5,898,516
---------- -----------
Net (decrease) increase in net assets
resulting from operations............ (183,273) 10,928,485
---------- -----------
UNIT TRANSACTIONS:
Purchases............................. -- 2,631
Net transfers......................... 410,367 9,258,933
Surrenders for benefit payments and
fees................................. (222,283) (1,981,044)
Net loan activity..................... (102,289) (535,091)
Cost of insurance..................... (143,672) (941,486)
---------- -----------
Net (decrease) increase in net assets
resulting from unit transactions..... (57,877) 5,803,943
---------- -----------
Net (decrease) increase in net
assets............................... (241,150) 16,732,428
NET ASSETS:
Beginning of period................... 9,191,520 52,273,351
---------- -----------
End of period......................... $8,950,370 $69,005,779
========== ===========
</TABLE>
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income................. $ 439,974 $ 394,942
Capital gains income.................. -- 1,202,881
Net realized gain (loss) on security
transactions......................... 4,953 (70,871)
Net unrealized appreciation
(depreciation) of investments during
the period........................... 161,536 10,365,875
---------- -----------
Net increase in net assets resulting
from operations...................... 606,463 11,892,827
---------- -----------
UNIT TRANSACTIONS:
Purchases............................. -- 10,617
Net transfers......................... 3,122,789 9,694,176
Surrenders for benefit payments and
fees................................. (282,701) (1,193,061)
Net loan activity..................... (48,849) (201,305)
Cost of insurance..................... (53,144) (274,848)
---------- -----------
Net increase in net assets resulting
from unit transactions............... 2,738,095 8,035,579
---------- -----------
Net increase in net assets............ 3,344,558 19,928,406
NET ASSETS:
Beginning of period................... 5,846,962 32,344,945
---------- -----------
End of period......................... $9,191,520 $52,273,351
========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 80 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET CAPITAL MORTGAGE
FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------- ----------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................. $ 1,040,195 $ 2,093,527 $ 233,748 $ 174,068 $ 308,000
Capital gains income.................. 499 7,198,080 3,825,954 -- 413,011
Net realized (loss) gain on security
transactions......................... -- (32,927) 260,636 567 (33,817)
Net unrealized (depreciation)
appreciation of investments during
the period........................... -- 170,130 16,904,315 (128,516) 4,615,982
----------- ------------ ----------- ---------- -----------
Net (decrease) increase in net assets
resulting from operations............ 1,040,694 9,428,810 21,224,653 46,119 5,303,176
----------- ------------ ----------- ---------- -----------
UNIT TRANSACTIONS:
Purchases............................. 42,715,718 1,765 1,689 -- 81
Net transfers......................... (35,871,812) 9,478,186 2,117,816 598,286 5,258,810
Surrenders for benefit payments and
fees................................. (1,801,195) (3,253,026) (2,897,430) (62,333) (896,900)
Net loan activity..................... (2,516,908) (861,439) (499,677) (73,895) (277,475)
Cost of insurance..................... (428,501) (1,459,911) (1,002,626) (47,091) (434,192)
----------- ------------ ----------- ---------- -----------
Net (decrease) increase in net assets
resulting from unit transactions..... 2,097,302 3,905,575 (2,280,228) 414,967 3,650,324
----------- ------------ ----------- ---------- -----------
Net (decrease) increase in net
assets............................... 3,137,996 13,334,385 18,944,425 461,086 8,953,500
NET ASSETS:
Beginning of period................... 21,301,424 86,851,120 58,335,203 2,637,491 24,120,306
----------- ------------ ----------- ---------- -----------
End of period......................... $24,439,420 $100,185,505 $77,279,628 $3,098,577 $33,073,806
=========== ============ =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET CAPITAL MORTGAGE
FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------- ----------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................. $ 907,215 $ 1,713,763 $ 309,876 $ 161,695 $ 197,134
Capital gains income.................. -- 2,134,889 3,157,152 -- 420,305
Net realized gain (loss) on security
transactions......................... -- (2,350) (195,604) 1,356 (76,809)
Net unrealized appreciation
(depreciation) of investments during
the period........................... -- 11,964,481 4,068,045 (8,129) 4,342,765
------------ ----------- ----------- ---------- -----------
Net increase in net assets resulting
from operations...................... 907,215 15,810,783 7,339,469 154,922 4,883,395
------------ ----------- ----------- ---------- -----------
UNIT TRANSACTIONS:
Purchases............................. 57,281,893 1,450 10,490 -- 10,734
Net transfers......................... (49,482,802) 16,449,477 6,484,579 404,847 4,207,201
Surrenders for benefit payments and
fees................................. (1,218,848) (2,772,483) (1,949,888) (102,327) (659,660)
Net loan activity..................... (2,979,256) (610,361) (596,858) (30,755) (394,242)
Cost of insurance..................... (170,157) (485,789) (352,456) (17,902) (134,328)
------------ ----------- ----------- ---------- -----------
Net increase in net assets resulting
from unit transactions............... 3,430,830 12,582,294 3,595,867 253,863 3,029,705
------------ ----------- ----------- ---------- -----------
Net increase in net assets............ 4,338,045 28,393,077 10,935,336 408,785 7,913,100
NET ASSETS:
Beginning of period................... 16,963,379 58,458,043 47,399,867 2,228,706 16,207,206
------------ ----------- ----------- ---------- -----------
End of period......................... $21,301,424 $86,851,120 $58,335,203 $2,637,491 $24,120,306
============ =========== =========== ========== ===========
</TABLE>
______________________________________ 81 ______________________________________
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income................. $ 168,186 $ 560,410
Capital gains income.................. -- 1,326,728
Net realized gain (loss) on security
transactions......................... 68,488 21,013
Net unrealized appreciation
(depreciation) of investments during
the period........................... 4,821,724 (141,489)
----------- -----------
Net increase in net assets resulting
from operations...................... 5,058,398 1,766,662
----------- -----------
UNIT TRANSACTIONS:
Purchases............................. 135 92
Net transfers......................... (249,293) 1,225,292
Surrenders for benefit payments and
fees................................. (338,940) (1,133,720)
Net loan activity..................... 51,629 (92,650)
Cost of Insurance..................... (222,438) (550,772)
----------- -----------
Net (decrease) increase in net assets
resulting from unit transactions..... (758,907) (551,758)
----------- -----------
Net increase in net assets............ 4,299,491 1,214,904
NET ASSETS:
Beginning of period................... 13,161,797 33,785,152
----------- -----------
End of period......................... $17,461,288 $35,000,056
=========== ===========
</TABLE>
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income................. $ 171,752 $ 535,570
Capital gains income.................. 773,886 903,529
Net realized (loss) gain on security
transactions......................... (32,807) 3,909
Net unrealized appreciation
(depreciation) of investments during
the period........................... 549,100 2,931,296
----------- -----------
Net increase in net assets resulting
from operations...................... 1,461,931 4,374,304
----------- -----------
UNIT TRANSACTIONS:
Purchases............................. 5,004 886
Net transfers......................... 842,567 6,508,074
Surrenders for benefit payments and
fees................................. (297,843) (1,015,921)
Net loan activity..................... (174,741) (242,467)
Cost of Insurance..................... (84,604) (201,221)
----------- -----------
Net increase in net assets resulting
from unit transactions............... 290,383 5,049,351
----------- -----------
Net increase in net assets............ 1,752,314 9,423,655
NET ASSETS:
Beginning of period................... 11,409,483 24,361,497
----------- -----------
End of period......................... $13,161,797 $33,785,152
=========== ===========
</TABLE>
* From inception, September 30, 1998 to December 31, 1998
** From inception, June 1, 1998 to December 31, 1998
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 82 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SMALL MIDCAP GROWTH AND GLOBAL HIGH YIELD
ADVISERS FUND COMPANY FUND FUND INCOME FUND LEADERS 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................. $ 64,215 $ -- $ -- $ 3,019 $ 1,992 $ 20,834
Capital gains income.................. -- 9,477 219,591 6,954 7,346 13
Net realized gain (loss) on security
transactions......................... 5,194 41,425 (9,619) (907) 10,778 25
Net unrealized appreciation
(depreciation) of investments during
the period........................... 598,509 2,244,959 1,041,779 100,214 285,208 (17,258)
----------- ------------ ----------- ---------- ----------- -----------
Net increase in net assets resulting
from operations...................... 667,918 2,295,861 1,251,751 109,280 305,324 3,614
----------- ------------ ----------- ---------- ----------- -----------
UNIT TRANSACTIONS:
Purchases............................. 74 55 -- -- -- --
Net transfers......................... 269,953 1,669,332 3,279,457 1,010,485 1,177,107 347,424
Surrenders for benefit payments and
fees................................. (38,568) (79,864) (13,678) (4,212) (3,047) (3,831)
Net loan activity..................... (5,510) 76,890 74,909 (874) (20,599) (851)
Cost of Insurance..................... (48,519) (59,948) (39,373) (6,349) (7,085) (3,764)
----------- ------------ ----------- ---------- ----------- -----------
Net (decrease) increase in net assets
resulting from unit transactions..... 177,430 1,606,465 3,301,315 999,050 1,146,376 338,978
----------- ------------ ----------- ---------- ----------- -----------
Net increase in net assets............ 845,348 3,902,326 4,553,066 1,108,330 1,451,700 342,592
NET ASSETS:
Beginning of period................... 2,783,573 2,695,420 901,723 1,151 59,054 24,885
----------- ------------ ----------- ---------- ----------- -----------
End of period......................... $ 3,628,921 $ 6,597,746 $ 5,454,789 $1,109,481 $ 1,510,754 $ 367,477
=========== ============ =========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL SMALL MIDCAP GROWTH AND GLOBAL HIGH YIELD
ADVISORS FUND COMPANY FUND FUND INCOME FUND LEADERS 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................. $ 265,660 $ -- $ 7 $ 4 $ 69 $ 457
Capital gains income.................. 63,237 33,340 -- -- 1,434 --
Net realized (loss) gain on security
transactions......................... 1,598 14,371 (28,672) -- -- --
Net unrealized appreciation
(depreciation) of investments during
the period........................... (22,396) 225,453 123,154 147 (777) (156)
----------- ------------ ----------- ---------- ----------- -----------
Net increase in net assets resulting
from operations...................... 308,099 273,164 94,489 151 726 301
----------- ------------ ----------- ---------- ----------- -----------
UNIT TRANSACTIONS:
Purchases............................. -- 7,511 8,500 1,000 2,000 2,000
Net transfers......................... 353,622 695,351 641,260 -- 56,338 22,441
Surrenders for benefit payments and
fees................................. (73,340) (37,178) (8,125) -- (7) 115
Net loan activity..................... (66,673) (17,491) (4,163) -- -- (1)
Cost of Insurance..................... (18,446) (15,048) (3,741) -- (3) 29
----------- ------------ ----------- ---------- ----------- -----------
Net increase in net assets resulting
from unit transactions............... 195,163 633,145 633,731 1,000 58,328 24,584
----------- ------------ ----------- ---------- ----------- -----------
Net increase in net assets............ 503,262 906,309 728,220 1,151 59,054 24,885
NET ASSETS:
Beginning of period................... 2,280,311 1,789,111 173,503 -- -- --
----------- ------------ ----------- ---------- ----------- -----------
End of period......................... $ 2,783,573 $ 2,695,420 $ 901,723 $ 1,151 $ 59,054 $ 24,885
=========== ============ =========== ========== =========== ===========
</TABLE>
* From inception, September 30, 1998 to December 31, 1998
** From inception, June 1, 1998 to December 31, 1998
______________________________________ 83 ______________________________________
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION:
Separate Account Five (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). Realized gains and
losses on the sales of securities are computed on the basis of identified
cost of the fund shares sold. 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, 1999.
c) UNIT TRANSACTIONS--Unit transactions are executed based on the unit
values calculated at the close of the business day.
d) 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.
e) 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 expense 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:
Certain amounts are deducted from the contracts, as described below:
a) COST OF INSURANCE CHARGE--In accordance with terms of the contracts, the
Company makes deductions for costs of insurance to cover the Company's
anticipated mortality costs. Because a policy's account value and death
benefit may vary from month to month, the cost of insurance charge may
also vary.
b) MORTALITY AND EXPENSE RISK CHARGES--The Company will make deductions at a
maximum annual rate of 0.90% of the contract's value for the mortality
and expense risks which the company undertakes. These expenses are
included in surrenders for benefit payments and fees on the accompanying
statements of changes in net assets.
c) TAX EXPENSE CHARGE--If applicable, the Company will make deductions at a
maximum rate of 4.0% of the contract's value to meet premium tax
requirements. An additional tax charge based on a percentage of the
contract's value may be assessed to partial withdrawals or surrenders.
These expenses are included in surrenders for benefit payments and fees
on the accompanying statements of changes in net assets.
d) ADMINISTRATIVE CHARGE--The Company will make deductions to cover
administrative expenses at a maximum annual rate of 0.25% of the
contract's value. These expenses are included in surrenders for benefit
payments and fees on the accompanying statements of changes in net
assets.
e) ANNUAL MAINTENANCE FEE--An annual maintenance fee in the amount of $30
may be deducted from the contract's value each contract year. However,
this fee is not applicable to contracts with values of $50,000 or more,
as determined on the most recent contract anniversary. These expenses are
included in surrenders for benefit payments and fees on the accompanying
statements of changes in net assets.
______________________________________ 84 ______________________________________
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FIVE AND TO THE OWNERS OF UNITS OF INTEREST THEREIN:
- --------------------------------------------------------------------------------
We have audited the accompanying statements of assets and liabilities of
Hartford Life Insurance Company Separate Account Five (Bond Fund, Stock Fund,
Money Market Fund, Advisers Fund, Capital Appreciation Fund, Mortgage Securities
Fund, Index Fund, International Opportunities Fund, Dividend and Growth Fund,
International Advisers Fund, Small Company Fund, MidCap Fund, Growth and Income
Fund, Global Leaders Fund and High Yield Fund) (collectively, the Account) as of
December 31, 1999, and the related statements of operations and the statements
of changes in net assets for the periods presented. These financial statements
are the responsibility of the Account's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1999, and the results of their operations and the changes in their net assets
for the periods presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 17, 2000 ARTHUR ANDERSEN LLP
______________________________________ 85 ______________________________________
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
ASSETS:
Investments
Hartford Bond HLS Fund, Inc. -
Class IA
Shares 7,719,146
Cost $8,086,111
Market Value...................... $7,671,769 --
Hartford Stock HLS Fund, Inc. -
Class IA
Shares 10,582,563
Cost $51,760,070
Market Value...................... -- $75,637,682
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 21,162,511
Cost $21,162,511
Market Value...................... -- --
Hartford Advisers HLS Fund, Inc. -
Class IA
Shares 27,392,045
Cost $65,975,867
Market Value...................... -- --
Hartford Capital Appreciation HLS
Fund, Inc. - Class IA
Shares 11,637,066
Cost $45,242,186
Market Value...................... -- --
Hartford Mortgage Securities HLS
Fund, Inc. - Class IA
Shares 1,868,313
Cost $2,011,720
Market Value...................... -- --
Hartford Index HLS Fund, Inc. -
Class IA
Shares 5,084,840
Cost $13,243,433
Market Value...................... -- --
Due from Hartford Life and Annuity
Insurance Company.................... -- --
Receivable from fund shares sold...... -- 4,373
---------- -----------
Total Assets.......................... 7,671,769 75,642,055
---------- -----------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company.................... -- 4,093
Payable for fund shares purchased..... -- --
---------- -----------
Total Liabilities..................... -- 4,093
---------- -----------
Net Assets (variable life contract
liabilities)......................... $7,671,769 $75,637,962
========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 86 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET CAPITAL MORTGAGE
FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------- ----------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments
Hartford Bond HLS Fund, Inc. -
Class IA
Shares 7,719,146
Cost $8,086,111
Market Value...................... -- -- -- -- --
Hartford Stock HLS Fund, Inc. -
Class IA
Shares 10,582,563
Cost $51,760,070
Market Value...................... -- -- -- -- --
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 21,162,511
Cost $21,162,511
Market Value...................... $21,162,511 -- -- -- --
Hartford Advisers HLS Fund, Inc. -
Class IA
Shares 27,392,045
Cost $65,975,867
Market Value...................... -- $81,211,223 -- -- --
Hartford Capital Appreciation HLS
Fund, Inc. - Class IA
Shares 11,637,066
Cost $45,242,186
Market Value...................... -- -- $70,932,432 -- --
Hartford Mortgage Securities HLS
Fund, Inc. - Class IA
Shares 1,868,313
Cost $2,011,720
Market Value...................... -- -- -- $1,942,099 --
Hartford Index HLS Fund, Inc. -
Class IA
Shares 5,084,840
Cost $13,243,433
Market Value...................... -- -- -- -- $21,299,277
Due from Hartford Life and Annuity
Insurance Company.................... 79,850 3,257 -- -- --
Receivable from fund shares sold...... -- -- 2,296 -- --
----------- ----------- ----------- ---------- -----------
Total Assets.......................... 21,242,361 81,214,480 70,934,728 1,942,099 21,299,277
----------- ----------- ----------- ---------- -----------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company.................... -- -- 3,806 -- 197
Payable for fund shares purchased..... 78,989 3,116 -- -- --
----------- ----------- ----------- ---------- -----------
Total Liabilities..................... 78,989 3,116 3,806 -- 197
----------- ----------- ----------- ---------- -----------
Net Assets (variable life contract
liabilities)......................... $21,163,372 $81,211,364 $70,930,922 $1,942,099 $21,299,080
=========== =========== =========== ========== ===========
</TABLE>
______________________________________ 87 ______________________________________
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------
<S> <C> <C>
ASSETS:
Investments
Hartford International Opportunities
HLS Fund, Inc. - Class IA
Shares 10,810,593
Cost $14,642,754
Market Value...................... $20,279,970 --
Hartford Dividend and Growth HLS
Fund, Inc. - Class IA
Shares 16,919,650
Cost $28,590,115
Market Value...................... -- $36,357,418
Hartford International Advisers HLS
Fund, Inc. - Class IA
Shares 3,493,615
Cost $4,009,746
Market Value...................... -- --
Hartford Small Company HLS
Fund, Inc. - Class IA
Shares 2,695,999
Cost $3,442,968
Market Value...................... -- --
Hartford MidCap HLS Fund, Inc. -
Class IA
Shares 1,974,262
Cost $3,065,877
Market Value...................... -- --
Hartford Growth and Income HLS Fund
- Class IA
Shares 758,263
Cost $973,025
Market Value...................... -- --
Hartford Global Leaders HLS Fund -
Class IA
Shares 775,652
Cost $1,177,654
Market Value...................... -- --
Hartford High Yield HLS Fund -
Class IA
Shares 392,104
Cost $410,645
Market Value...................... -- --
Due from Hartford Life and Annuity
Insurance Company.................... -- 267
Receivable from fund shares sold...... 2,049 --
----------- -----------
Total Assets.......................... 20,282,019 36,357,685
----------- -----------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company.................... 2,138 --
----------- -----------
Total Liabilities..................... 2,138 --
----------- -----------
Net Assets (variable life contract
liabilities)......................... $20,279,881 $36,357,685
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 88 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SMALL MIDCAP GROWTH AND GLOBAL LEADERS HIGH YIELD
ADVISERS FUND COMPANY FUND FUND INCOME 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 International Opportunities
HLS Fund, Inc. - Class IA
Shares 10,810,593
Cost $14,642,754
Market Value...................... -- -- -- -- -- --
Hartford Dividend and Growth HLS
Fund, Inc. - Class IA
Shares 16,919,650
Cost $28,590,115
Market Value...................... -- -- -- -- -- --
Hartford International Advisers HLS
Fund, Inc. - Class IA
Shares 3,493,615
Cost $4,009,746
Market Value...................... $4,879,501 -- -- -- -- --
Hartford Small Company HLS
Fund, Inc. - Class IA
Shares 2,695,999
Cost $3,442,968
Market Value...................... -- $5,898,244 -- -- -- --
Hartford MidCap HLS Fund, Inc. -
Class IA
Shares 1,974,262
Cost $3,065,877
Market Value...................... -- -- $4,054,145 -- -- --
Hartford Growth and Income HLS Fund
- Class IA
Shares 758,263
Cost $973,025
Market Value...................... -- -- -- $1,085,563 -- --
Hartford Global Leaders HLS Fund -
Class IA
Shares 775,652
Cost $1,177,654
Market Value...................... -- -- -- -- $1,483,743 --
Hartford High Yield HLS Fund -
Class IA
Shares 392,104
Cost $410,645
Market Value...................... -- -- -- -- -- $394,013
Due from Hartford Life and Annuity
Insurance Company.................... -- -- -- -- -- --
Receivable from fund shares sold...... -- 6,922 9,396 -- -- --
---------- ---------- ---------- ---------- ---------- --------
Total Assets.......................... 4,879,501 5,905,166 4,063,541 1,085,563 1,483,743 394,013
---------- ---------- ---------- ---------- ---------- --------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company.................... 94 6,993 9,397 -- -- --
---------- ---------- ---------- ---------- ---------- --------
Total Liabilities..................... 94 6,993 9,397 -- -- --
---------- ---------- ---------- ---------- ---------- --------
Net Assets (variable life contract
liabilities)......................... $4,879,407 $5,898,173 $4,054,144 $1,085,563 $1,483,743 $394,013
========== ========== ========== ========== ========== ========
</TABLE>
______________________________________ 89 ______________________________________
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ --------- ------------
<S> <C> <C> <C>
DEFERRED ANNUITY CONTRACTS IN THE
ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Bond Fund Sub-Account............ 5,304,549 $1.446262 $ 7,671,769
Stock Fund Sub-Account........... 21,819,711 3.466497 75,637,962
Money Market Fund Sub-Account.... 16,383,083 1.291782 21,163,372
Advisers Fund Sub-Account........ 31,824,493 2.551851 81,211,364
Capital Appreciation Fund
Sub-Account..................... 23,314,341 3.042373 70,930,922
Mortgage Securities Fund
Sub-Account..................... 1,346,482 1.442350 1,942,099
Index Fund Sub-Account........... 6,268,571 3.397757 21,299,080
International Opportunities Fund
Sub-Account..................... 9,743,731 2.081326 20,279,881
Dividend and Growth Fund
Sub-Account..................... 13,488,800 2.695398 36,357,685
International Advisers Fund
Sub-Account..................... 2,558,005 1.907505 4,879,407
Small Company Fund Sub-Account... 2,737,744 2.154392 5,898,173
MidCap Fund Sub-Account.......... 2,029,925 1.997189 4,054,144
Growth and Income Fund
Sub-Account..................... 774,198 1.402176 1,085,563
Global Leaders Fund
Sub-Account..................... 748,239 1.982981 1,483,743
High Yield Fund Sub-Account...... 362,505 1.086917 394,013
------------
GRAND TOTAL........................ $354,289,177
============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 90 ______________________________________
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 419,600 $ 516,388
--------- -----------
CAPITAL GAINS INCOME.................... 45,235 4,959,958
--------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized (loss) gain on security
transactions......................... (6,510) (5,932)
Net unrealized (depreciation)
appreciation of investments during
the period........................... (605,391) 6,441,388
--------- -----------
Net (loss) gain on investments...... (611,901) 6,435,456
--------- -----------
Net (decrease) increase in net
assets resulting from operations... $(147,066) $11,911,802
========= ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 92 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET CAPITAL MORTGAGE
FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------- ----------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................. $767,397 $1,692,849 $ 215,458 $ 108,544 $ 201,102
-------- ---------- ----------- --------- ----------
CAPITAL GAINS INCOME.................... 353 5,512,773 3,330,568 -- 289,134
-------- ---------- ----------- --------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized (loss) gain on security
transactions......................... -- (30,425) 32,011 (10,251) 4,046
Net unrealized (depreciation)
appreciation of investments during
the period........................... -- 239,692 15,536,343 (65,765) 3,066,971
-------- ---------- ----------- --------- ----------
Net (loss) gain on investments...... -- 209,267 15,568,354 (76,016) 3,071,017
-------- ---------- ----------- --------- ----------
Net (decrease) increase in net
assets resulting from operations... $767,750 $7,414,889 $19,114,380 $ 32,528 $3,561,253
======== ========== =========== ========= ==========
</TABLE>
______________________________________ 93 ______________________________________
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 193,868 $ 582,664
---------- ----------
CAPITAL GAINS INCOME.................... -- 1,358,573
---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... 76,436 (21,433)
Net unrealized appreciation
(depreciation) of investments during
the period........................... 5,566,961 (111,720)
---------- ----------
Net gain (loss) on investments...... 5,643,397 (133,153)
---------- ----------
Net increase in net assets resulting
from operations.................... $5,837,265 $1,808,084
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 94 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SMALL MIDCAP GROWTH AND GLOBAL LEADERS HIGH YIELD
ADVISERS FUND COMPANY FUND FUND INCOME 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............................. $ 86,268 $ -- $ -- $ 2,731 $ 1,956 $ 22,004
-------- ---------- ---------- -------- -------- --------
CAPITAL GAINS INCOME.................... -- 8,748 170,046 6,287 7,635 7
-------- ---------- ---------- -------- -------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... 5,981 58,301 (659) (648) (838) 197
Net unrealized appreciation
(depreciation) of investments during
the period........................... 820,238 2,189,838 851,495 106,011 303,116 (16,392)
-------- ---------- ---------- -------- -------- --------
Net gain (loss) on investments...... 826,219 2,248,139 850,836 105,363 302,278 (16,195)
-------- ---------- ---------- -------- -------- --------
Net increase in net assets resulting
from operations.................... $912,487 $2,256,887 $1,020,882 $114,381 $311,869 $ 5,816
======== ========== ========== ======== ======== ========
</TABLE>
______________________________________ 95 ______________________________________
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income................. $ 419,600 $ 516,388
Capital gains income.................. 45,235 4,959,958
Net realized (loss) gain on security
transactions......................... (6,510) (5,932)
Net unrealized (depreciation)
appreciation of investments during
the period........................... (605,391) 6,441,388
---------- -----------
Net (decrease) increase in net assets
resulting from operations............ (147,066) 11,911,802
---------- -----------
UNIT TRANSACTIONS:
Purchases............................. 20,022 20,079
Net transfers......................... 1,893,700 10,958,293
Surrenders............................ (533,322) (2,535,149)
Net loan activity..................... (41,245) (241,644)
Cost of insurance..................... (108,110) (977,799)
---------- -----------
Net increase (decrease) in net assets
resulting from unit transactions..... 1,231,045 7,223,780
---------- -----------
Net increase (decrease) in net
assets............................... 1,083,979 19,135,582
NET ASSETS:
Beginning of period................... 6,587,790 56,502,380
---------- -----------
End of period......................... $7,671,769 $75,637,962
========== ===========
</TABLE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income................. $ 310,867 $ 425,157
Capital gains income.................. -- 1,195,486
Net realized gain (loss) on security
transactions......................... 337 (29,330)
Net unrealized appreciation
(depreciation) of investments during
the period........................... 62,577 10,654,625
---------- -----------
Net increase in net assets resulting
from operations...................... 373,781 12,245,938
---------- -----------
UNIT TRANSACTIONS:
Purchases............................. 46,311 16,926
Net transfers......................... 3,067,527 13,961,989
Surrenders............................ (107,425) (1,506,358)
Net loan activity..................... (11,064) (140,475)
Cost of insurance..................... (33,445) (260,595)
---------- -----------
Net increase in net assets resulting
from unit transactions............... 2,961,904 12,071,487
---------- -----------
Net increase in net assets............ 3,335,685 24,317,425
NET ASSETS:
Beginning of period................... 3,252,105 32,184,955
---------- -----------
End of period......................... $6,587,790 $56,502,380
========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 96 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET CAPITAL MORTGAGE
FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------- ----------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................. $ 767,397 $ 1,692,849 $ 215,458 $ 108,544 $ 201,102
Capital gains income.................. 353 5,512,773 3,330,568 -- 289,134
Net realized (loss) gain on security
transactions......................... -- (30,425) 32,011 (10,251) 4,046
Net unrealized (depreciation)
appreciation of investments during
the period........................... -- 239,692 15,536,343 (65,765) 3,066,971
----------- ----------- ----------- ---------- -----------
Net (decrease) increase in net assets
resulting from operations............ 767,750 7,414,889 19,114,380 32,528 3,561,253
----------- ----------- ----------- ---------- -----------
UNIT TRANSACTIONS:
Purchases............................. 48,649,661 70 20,492 -- --
Net transfers......................... (39,998,316) 12,656,798 4,057,125 114,902 2,416,134
Surrenders............................ (860,950) (2,572,156) (1,687,173) (366,384) (717,510)
Net loan activity..................... (2,124,911) (271,016) (156,498) (100,182) (86,764)
Cost of insurance..................... (322,782) (1,125,122) (872,690) (33,794) (293,219)
----------- ----------- ----------- ---------- -----------
Net increase (decrease) in net assets
resulting from unit transactions..... 5,342,702 8,688,574 1,361,256 (385,458) 1,318,641
----------- ----------- ----------- ---------- -----------
Net increase (decrease) in net
assets............................... 6,110,452 16,103,463 20,475,636 (352,930) 4,879,894
NET ASSETS:
Beginning of period................... 15,052,920 65,107,901 50,455,286 2,295,029 16,419,186
----------- ----------- ----------- ---------- -----------
End of period......................... $21,163,372 $81,211,364 $70,930,922 $1,942,099 $21,299,080
=========== =========== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET CAPITAL MORTGAGE
FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------- ----------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................. $ 563,092 $ 1,280,919 $ 268,384 $ 139,853 $ 132,802
Capital gains income.................. 190 1,465,098 2,761,262 -- 272,547
Net realized gain (loss) on security
transactions......................... -- (9,456) 28,295 1,924 (21,988)
Net unrealized appreciation
(depreciation) of investments during
the period........................... -- 8,649,288 3,751,151 (25,693) 2,904,724
------------ ----------- ----------- ---------- -----------
Net increase in net assets resulting
from operations...................... 563,282 11,385,849 6,809,092 116,084 3,288,085
------------ ----------- ----------- ---------- -----------
UNIT TRANSACTIONS:
Purchases............................. 62,062,192 32,794 16,742 -- 10,249
Net transfers......................... (54,690,953) 15,334,793 4,545,203 589,382 3,377,452
Surrenders............................ (1,724,767) (1,683,040) (1,471,654) (31,118) (708,786)
Net loan activity..................... (2,052,054) (407,150) (324,672) (8,665) (138,230)
Cost of insurance..................... (112,624) (328,975) (284,868) (11,916) (86,318)
------------ ----------- ----------- ---------- -----------
Net increase in net assets resulting
from unit transactions............... 3,481,794 12,948,422 2,480,751 537,683 2,454,367
------------ ----------- ----------- ---------- -----------
Net increase in net assets............ 4,045,076 24,334,271 9,289,843 653,767 5,742,452
NET ASSETS:
Beginning of period................... 11,007,844 40,773,630 41,165,443 1,641,262 10,676,734
------------ ----------- ----------- ---------- -----------
End of period......................... $15,052,920 $65,107,901 $50,455,286 $2,295,029 $16,419,186
============ =========== =========== ========== ===========
</TABLE>
______________________________________ 97 ______________________________________
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income................. $ 193,868 $ 582,664
Capital gains income.................. -- 1,358,573
Net realized gain (loss) on security
transactions......................... 76,436 (21,433)
Net unrealized appreciation
(depreciation) of investments during
the period........................... 5,566,961 (111,720)
----------- -----------
Net increase in net assets resulting
from operations...................... 5,837,265 1,808,084
----------- -----------
UNIT TRANSACTIONS:
Purchases............................. 30,000 30,000
Net transfers......................... (115,619) 1,862,826
Surrenders............................ (415,482) (1,252,128)
Net loan activity..................... (67,371) (88,629)
Cost of insurance..................... (253,665) (551,075)
----------- -----------
Net (decrease) increase in net assets
resulting from unit transactions..... (822,137) 994
----------- -----------
Net increase in net assets............ 5,015,128 1,809,078
NET ASSETS:
Beginning of period................... 15,264,753 34,548,607
----------- -----------
End of period......................... $20,279,881 $36,357,685
=========== ===========
</TABLE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income............. $ 198,529 $ 544,970
Capital gains income.............. 823,226 871,742
Net realized (loss) gain on
security transactions............ (4,950) 1,267
Net unrealized appreciation
(depreciation) of investments
during the period................ 562,948 2,960,422
----------- -----------
Net increase in net assets
resulting from operations........ 1,579,753 4,378,401
----------- -----------
UNIT TRANSACTIONS:
Purchases......................... 11 10,000
Net transfers..................... 2,336,307 8,163,378
Surrenders........................ (500,386) (866,498)
Net loan activity................. (71,420) (327,128)
Cost of insurance................. (89,406) (185,670)
----------- -----------
Net increase in net assets
resulting from unit
transactions..................... 1,675,106 6,794,082
----------- -----------
Net increase in net assets........ 3,254,859 11,172,483
NET ASSETS:
Beginning of period............... 12,009,894 23,376,124
----------- -----------
End of period..................... $15,264,753 $34,548,607
=========== ===========
</TABLE>
** From inception, June 1, 1998 to December 31, 1998
*** From inception, September 30, 1998 to December 31, 1998
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 98 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SMALL MIDCAP GROWTH AND GLOBAL LEADERS HIGH YIELD
ADVISERS FUND COMPANY FUND FUND INCOME 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................. $ 86,268 $ -- $ -- $ 2,731 $ 1,956 $ 22,004
Capital gains income.................. -- 8,748 170,046 6,287 7,635 7
Net realized gain (loss) on security
transactions......................... 5,981 58,301 (659) (648) (838) 197
Net unrealized appreciation
(depreciation) of investments during
the period........................... 820,238 2,189,838 851,495 106,011 303,116 (16,392)
---------- ------------ ---------- ---------- ---------- --------
Net increase in net assets resulting
from operations...................... 912,487 2,256,887 1,020,882 114,381 311,869 5,816
---------- ------------ ---------- ---------- ---------- --------
UNIT TRANSACTIONS:
Purchases............................. 55 20,000 20,000 20,000 -- 20,000
Net transfers......................... 395,265 1,247,576 2,225,928 845,861 1,093,472 346,031
Surrenders............................ (63,881) (42,122) (26,590) (5,249) (7,549) (3,575)
Net loan activity..................... (22,926) (20,135) (2,563) (25,056) 7,303 4,381
Cost of insurance..................... (66,079) (60,079) (31,836) (8,077) (7,337) (3,224)
---------- ------------ ---------- ---------- ---------- --------
Net (decrease) increase in net assets
resulting from unit transactions..... 242,434 1,145,240 2,184,939 827,479 1,085,889 363,613
---------- ------------ ---------- ---------- ---------- --------
Net increase in net assets............ 1,154,921 3,402,127 3,205,821 941,860 1,397,758 369,429
NET ASSETS:
Beginning of period................... 3,724,486 2,496,046 848,323 143,703 85,985 24,584
---------- ------------ ---------- ---------- ---------- --------
End of period......................... $4,879,407 $ 5,898,173 $4,054,144 $1,085,563 $1,483,743 $394,013
========== ============ ========== ========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL SMALL MIDCAP GROWTH AND GLOBAL LEADERS HIGH YIELD
ADVISERS FUND COMPANY FUND FUND INCOME 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............. $ 285,452 $ -- $ 4 $ 542 $ 101 $ 451
Capital gains income.............. 67,948 17,778 -- -- 2,088 --
Net realized (loss) gain on
security transactions............ 567 (1,718) (3,505) 16 4 --
Net unrealized appreciation
(depreciation) of investments
during the period................ 13,314 272,458 133,792 6,525 2,975 (240)
---------- ---------- -------- -------- ------- -------
Net increase in net assets
resulting from operations........ 367,281 288,518 130,291 7,083 5,168 211
---------- ---------- -------- -------- ------- -------
UNIT TRANSACTIONS:
Purchases......................... -- -- -- 1,000 2,000 2,000
Net transfers..................... 1,048,999 1,383,287 645,414 135,859 78,949 22,414
Surrenders........................ (98,488) (109,974) (4,632) (172) (105) (29)
Net loan activity................. (36,658) (44,570) (11,492) -- -- --
Cost of insurance................. (20,129) (10,508) (2,955) (67) (27) (12)
---------- ---------- -------- -------- ------- -------
Net increase in net assets
resulting from unit
transactions..................... 893,724 1,218,235 626,335 136,620 80,817 24,373
---------- ---------- -------- -------- ------- -------
Net increase in net assets........ 1,261,005 1,506,753 756,626 143,703 85,985 24,584
NET ASSETS:
Beginning of period............... 2,463,481 989,293 91,697 -- -- --
---------- ---------- -------- -------- ------- -------
End of period..................... $3,724,486 $2,496,046 $848,323 $143,703 $85,985 $24,584
========== ========== ======== ======== ======= =======
</TABLE>
** From inception, June 1, 1998 to December 31, 1998
*** From inception, September 30, 1998 to December 31, 1998
______________________________________ 99 ______________________________________
<PAGE>
SEPARATE ACCOUNT FIVE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION:
Separate Account Five (the Account) is a separate investment account within
Hartford Life & 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). Realized gains and
losses on the sales of securities are computed on the basis of identified
cost of the fund shares sold. 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, 1999.
c) UNIT TRANSACTIONS--Unit transactions are executed based on the unit
values calculated at the close of the business day.
d) 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.
e) 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 expense 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:
Certain amounts are deducted from the contracts, as described below:
a) COST OF INSURANCE CHARGE--In accordance with the terms of the contracts,
the Company makes deductions for costs of insurance to cover the
Company's anticipated mortality costs. Because a policy's account value
and death benefit may vary from month to month, the cost of insurance
charge may also vary.
b) MORTALITY AND EXPENSE RISK CHARGE--The Company will make deductions at a
maximum annual rate of 0.90% of the contract's value for the mortality
and expense risks which the company undertakes. These expenses are
included in surrenders for benefit payments and fees on the accompanying
statements of changes in net assets.
c) TAX EXPENSE CHARGE--If applicable, the Company will make deductions at a
maximum rate of 4.0% of the contract's value to meet premium tax
requirements. An additional tax charge based on a percentage of the
contract's value may be assessed to partial withdrawals or surrenders.
These expenses are included in surrenders for benefit payments and fees
on the accompanying statements of changes in net assets.
d) ADMINISTRATIVE CHARGE--The Company will make deductions to cover
administrative expenses at a maximum annual rate of 0.25% of the
contract's value. These expenses are included in surrenders for benefit
payments and fees on the accompanying statements of changes in net
assets.
2) ANNUAL MAINTENANCE FEE--An annual maintenance fee in the amount of $30
may be deducted from the contract's value each contract year. However,
this fee is not applicable to contracts with values of $50,000 or more,
as determined on the most recent contract anniversary. These expenses are
included in surrenders for benefit payments and fees on the accompanying
statements of changes in net assets.
______________________________________ 100 _____________________________________
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT FIVE AND TO THE OWNERS OF UNITS OF INTEREST THEREIN:
- --------------------------------------------------------------------------------
We have audited the accompanying statements of assets and liabilities of
Hartford Life and Annuity Insurance Company Separate Account Five (Bond Fund,
Stock Fund, Money Market Fund, Advisers Fund, Capital Appreciation Fund,
Mortgage Securities Fund, Index Fund, International Opportunities Fund, Dividend
and Growth Fund, International Advisers Fund, Small Company Fund, MidCap Fund,
Growth and Income Fund, Global Leaders Fund and High Yield Fund) (collectively,
the Account) as of December 31, 1999, and the related statements of operations
and the statements of changes in net assets for the periods presented. These
financial statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1999, and the results of their operations and the changes in their net assets
for the periods presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 17, 2000 ARTHUR ANDERSEN LLP
______________________________________ 101 _____________________________________
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
BB&T GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
- ---------- ---------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS -- 96.9%
AEROSPACE/DEFENSE -- 2.0%
17,400 Lockheed Martin Corp.................... $ 380,625
27,000 Raytheon Co.-Class A.................... 669,938
-----------
1,050,563
-----------
APPAREL -- 0.7%
11,600 VF Corp................................. 348,000
-----------
AUTOMOTIVE -- 0.9%
9,000 Ford Motor Co........................... 480,938
-----------
BANKING -- 8.0%
14,000 Banc One Corp........................... 448,875
14,000 Bank Of America Corp.................... 702,625
23,600 Central Carolina Bank Financial Corp.... 1,028,074
5,700 J.P. Morgan & Co........................ 721,762
11,907 Old Kent Financial Corp................. 421,210
19,000 Pacific Century Financial Corp.......... 355,063
7,200 Wachovia Corp........................... 489,600
-----------
4,167,209
-----------
BEVERAGES -- 0.7%
5,400 Anheuser-Busch Cos., Inc................ 382,725
-----------
BUSINESS EQUIPMENT & SERVICES -- 0.6%
7,000 Pitney Bowes, Inc....................... 338,188
-----------
CAPITAL EQUIPMENT -- 1.9%
19,900 Parker-Hannifin Corp.................... 1,021,119
-----------
CHEMICALS -- 1.7%
26,000 Air Products & Chemicals, Inc........... 872,625
-----------
COMMUNICATIONS EQUIPMENT -- 2.9%
8,000 BCE Inc................................. 721,500
30,200 Harris Corp............................. 805,963
-----------
1,527,463
-----------
COMPUTER - PERIPHERALS -- 2.2%
17,000 Adobe Systems, Inc...................... 1,143,250
-----------
COMPUTER SOFTWARE -- 1.5%
11,000 Computer Associates International, 769,313
Inc.....................................
-----------
COMPUTERS - MAIN & MINI -- 5.9%
15,600 Hewlett-Packard Co...................... 1,777,424
10,800 International Business Machines Corp.... 1,166,400
7,000 Xerox Corp.............................. 158,813
-----------
3,102,637
-----------
CONTAINERS -- 0.8%
18,800 Sonoco Products Co...................... 427,700
-----------
COSMETICS/PERSONAL CARE -- 2.6%
21,000 Kimberly-Clark Corp..................... 1,370,250
-----------
ELECTRICAL EQUIPMENT -- 1.9%
17,500 Emerson Electric Co..................... 1,004,063
-----------
ELECTRONIC COMPONENTS -- 3.5%
18,100 Avnet, Inc.............................. 1,095,050
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
- ---------- ---------------------------------------- -----------
<C> <S> <C>
</TABLE>
ELECTRONIC COMPONENTS -- (CONTINUED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
- ---------- ---------------------------------------- -----------
<C> <S> <C>
9,000 Intel Corp.............................. $ 740,813
-----------
1,835,863
-----------
ELECTRONIC INSTRUMENTS -- 1.6%
22,150 Tektronix, Inc.......................... 861,081
-----------
ENGINEERING -- 1.1%
12,400 Fluor Corp.............................. 568,850
-----------
FINANCIAL SERVICES -- 0.8%
7,000 Fannie Mae.............................. 437,063
-----------
FOOD & RELATED -- 4.5%
26,000 Bob Evans Farms......................... 401,375
21,000 Dole Food Co., Inc...................... 341,250
53,800 SUPERVALU, Inc.......................... 1,075,999
26,000 Universal Foods Corp.................... 529,750
-----------
2,348,374
-----------
FOREST & PAPER PRODUCTS -- 1.4%
10,000 Weyerhaeuser Co......................... 718,125
-----------
HEALTH CARE - DRUGS -- 1.5%
22,200 Abbott Laboratories..................... 806,138
-----------
HEALTH CARE - GENERAL -- 1.6%
26,600 Mallinckrodt, Inc....................... 846,213
-----------
HOUSEHOLD - GENERAL PRODUCTS -- 3.7%
28,000 American Greetings Corp................. 661,499
5,000 Corning, Inc............................ 644,688
11,785 Unilever................................ 641,546
-----------
1,947,733
-----------
HOUSEHOLD - MAJOR APPLIANCES -- 1.4%
11,100 Whirlpool Corp.......................... 722,194
-----------
INSURANCE - LIFE & HEALTH -- 1.7%
16,000 Aetna, Inc.............................. 893,000
-----------
INSURANCE - PROPERTY & CASUAL -- 4.0%
23,200 Lincoln National Corp................... 927,999
23,800 SAFECO Corp............................. 592,025
17,600 Saint Paul Companies, Inc............... 592,900
-----------
2,112,924
-----------
LEISURE TIME INDUSTRY -- 1.2%
34,300 Hasbro, Inc............................. 653,844
-----------
MEDIA -- 2.3%
17,000 Banta Corp.............................. 383,563
16,100 Media General, Inc. Class A............. 837,200
-----------
1,220,763
-----------
MEDICAL EQUIPMENT & SUPPLIES -- 4.3%
14,500 Bausch & Lomb, Inc...................... 992,343
13,700 Johnson & Johnson....................... 1,275,812
-----------
2,268,155
-----------
METAL FABRICATION -- 0.8%
14,100 Trinity Industries, Inc................. 400,969
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-87
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
BB&T GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
- ---------- ---------------------------------------- -----------
<C> <S> <C>
</TABLE>
COMMON STOCKS -- (CONTINUED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
- ---------- ---------------------------------------- -----------
<C> <S> <C>
METAL FABRICATION -- (CONTINUED)
OFFICE EQUIPMENT & SERVICES -- 0.2%
30,200 Lanier Inc.*............................ $ 117,025
-----------
OIL & GAS -- 1.2%
13,100 National Fuel Gas....................... 609,150
-----------
PETROLEUM - DOMESTIC -- 4.8%
20,100 Ashland, Inc............................ 662,044
11,316 Exxon Mobil Corp........................ 911,645
19,700 Phillips Petroleum Co................... 925,899
-----------
2,499,588
-----------
PETROLEUM - INTERNATIONAL -- 1.5%
6,900 Chevron Corp............................ 597,713
3,500 Royal Dutch Petroleum Co................ 211,531
-----------
809,244
-----------
PHARMACEUTICALS -- 2.7%
7,600 Bristol-Myers Squibb Co................. 487,825
14,000 Merck & Co., Inc........................ 938,875
-----------
1,426,700
-----------
PHOTOGRAPHIC EQUIPMENT -- 1.0%
8,000 Eastman Kodak Co........................ 530,000
-----------
PUBLISHING -- 0.2%
3,000 Houghton Mifflan Co..................... 126,563
-----------
RAILROAD -- 0.7%
18,200 Norfolk Southern Corp................... 373,100
-----------
RETAIL - FOOD STORES -- 0.9%
15,400 Albertson's, Inc........................ 496,650
-----------
RETAIL - GENERAL MERCHANDISE -- 1.2%
19,400 May Department Stores Co................ 625,650
-----------
SECURITY & COMMISSION BROKERS -- 1.7%
27,150 A.G. Edwards, Inc....................... 870,497
-----------
TOBACCO -- 1.2%
20,000 Philip Morris Co., Inc.................. 463,750
7,200 UST, Inc................................ 181,350
-----------
645,100
-----------
TRANSPORTATION - MARINE -- 0.3%
8,000 Alexander & Baldwin, Inc................ 182,500
-----------
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
- ---------- ---------------------------------------- -----------
<C> <S> <C>
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
- ---------- ---------------------------------------- -----------
<C> <S> <C>
UTILITIES - ELECTRIC -- 2.3%
27,200 New Century Energies, Inc............... $ 826,200
10,000 Texas Utilities Co...................... 355,625
-----------
1,181,825
-----------
UTILITIES - GAS & PIPELINE -- 0.5%
7,900 Nicor, Inc.............................. 256,750
-----------
UTILITIES - TELEPHONE -- 6.8%
27,150 AT&T Corp............................... 1,377,862
21,800 BellSouth Corp.......................... 1,020,513
23,400 SBC Communications, Inc................. 1,140,749
-----------
3,539,124
-----------
Total Common Stocks 50,936,798
(Cost $48,302,653)......................
===========
U.S. GOVERNMENT AGENCY -- 1.9%
$1,000,000 Federal Home Loan Banks, Discount Note, 999,140
1/10/00.................................
-----------
Total U.S. Government Agency Mortgages 999,140
(Cost $998,650).........................
===========
INVESTMENT COMPANIES -- 2.3%
1,190,557 Federated Government Obligation Fund.... 1,190,557
-----------
Total Investment Companies 1,190,557
(Cost $1,190,557).......................
===========
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Total Investments (Cost $50,491,860) (a) --
101.1%........................................... 53,126,495
Liabilities in excess of other assets -- (1.1)%... (601,625)
----------
TOTAL NET ASSETS -- 100.0%........................ $52,524,870
==========
- --------------------------------------------------------------
</TABLE>
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation (depreciation) of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.............. $ 8,584,385
Unrealized depreciation.............. (5,949,750)
-----------
Net unrealized appreciation.......... $ 2,634,635
===========
</TABLE>
* Represents non-income producing securities.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-88
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
BB&T GROWTH & INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $50,491,860)........ $53,126,495
Receivable for investment securities sold....... 315,307
Interest and dividends receivable............... 93,728
Prepaid expenses and other assets............... 2,966
----------
Total Assets................................ 53,538,496
----------
LIABILITIES:
Dividends payable............................... 40,038
Payable for investment securities purchased..... 930,615
Accrued expenses and other payables:
Investment advisory fees...................... 26,112
Administration fees........................... 285
Other......................................... 16,576
----------
Total Liabilities........................... 1,013,626
----------
NET ASSETS:
Capital......................................... 49,332,795
Undistributed net investment income............. 131,797
Net unrealized appreciation (depreciation) from
investments.................................... 2,634,635
Accumulated undistributed net realized gains
(losses) from investment transactions.......... 425,643
----------
Net Assets.................................. $52,524,870
==========
Outstanding units of beneficial interest
(shares)......................................... 4,214,206
==========
Net asset value -- offering and redemption price
per share........................................ $ 12.46
==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-89
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
BB&T GROWTH & INCOME FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income................................. $ 49,503
Dividend income................................. 1,120,594
----------
Total Income................................ 1,170,097
----------
EXPENSES:
Investment advisory fees........................ 376,143
Administration fees............................. 101,661
Custodian fees.................................. 11,269
Accounting fees................................. 33,990
Legal fees...................................... 28,498
Audit fees...................................... 8,900
Organization costs.............................. 2,734
Trustees' fees and expenses..................... 5,743
Transfer agent fees............................. 10,600
Printing costs.................................. 3,558
Insurance....................................... 5,534
Other........................................... 568
----------
Total expenses before voluntary reductions...... 589,198
Expenses voluntarily reduced.................... (146,842)
----------
Net expenses.................................. 442,356
----------
Net Investment Income........................... 727,741
----------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS:
Net realized gains (losses) from investment
transactions................................... 1,227,474
Net change in unrealized appreciation
(depreciation) from investments................ (4,036,397)
----------
Net realized/unrealized gains (losses) from
investments.................................. (2,808,923)
----------
Change in net assets resulting from
operations................................... $(2,081,182)
==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-90
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
BB&T GROWTH & INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income................. $ 727,741 $ 530,644
Net realized gains (losses) from
investment transactions.............. 1,227,474 (36,048)
Net change in unrealized appreciation
(depreciation) from investments...... (4,036,397) 4,670,681
----------- -----------
Change in net assets resulting from
operations........................... (2,081,182) 5,165,277
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............ (594,896) (514,713)
Net realized gains from investment
transactions......................... (741,928) --
----------- -----------
Change in net assets from shareholder
distributions........................ (1,336,824) (514,713)
----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued........... 6,717,001 15,172,449
Dividends reinvested.................. 1,440,251 513,105
Cost of shares redeemed............... (1,275,983) (103,445)
----------- -----------
Change in net assets from capital
transactions......................... 6,881,269 15,582,109
----------- -----------
Change in net assets.................. 3,463,263 20,232,673
NET ASSETS:
Beginning of period................... 49,061,607 28,828,934
----------- -----------
End of period......................... $52,524,870 $49,061,607
=========== ===========
SHARE TRANSACTIONS:
Issued................................ 513,205 1,227,333
Reinvested............................ 112,776 42,578
Redeemed.............................. (100,033) (8,596)
----------- -----------
Change in shares...................... 525,948 1,261,315
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-91
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
BB&T GROWTH & INCOME FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION:
The Variable Insurance Funds (the "Trust") was organized on July 20, 1994,
and is registered under the Investment Company Act of 1940, as amended (the
"Act"), as an open-end investment company established as a Massachusetts
business trust. Between the date of organization and the dates of
commencement of operations (June 3, 1997), the Trust had no operations other
than incurring organizational expenses and the sale of initial units of
beneficial interest ("shares").
The Trust is authorized to issue an unlimited number of shares of beneficial
interest without par value. The Trust presently offers shares of the BB&T
Growth & Income Fund (the "Fund"). Shares of the Fund are offered to a
separate account of Hartford Life Insurance Company, as well as other
eligible purchasers.
The investment objective of the Fund is to seek to provide capital growth,
current income or both. Under normal market conditions, it seeks this
objective by investing at least 65% of its total assets in stocks, which for
this purpose may include common stock, preferred stock, warrants, or debt
instruments that are, convertible into common stock.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Trust in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The preparation
of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses for the period. Actual results could differ from those estimates.
SECURITIES VALUATION--Exchange listed securities are valued at the closing
sales price on the exchange on the day of computation, or, if there have
been no sales during such day, at the latest bid quotation. Unlisted
securities are valued at their latest bid quotation in their principal
market. If no such bid price is available, then such securities are valued
in good faith at their respective fair market values using methods
determined by or under the supervision of the Board of Trustees. Portfolio
securities with a remaining maturity of 60 days or less are valued either at
amortized cost or original cost plus accrued interest, which approximates
current value.
All other assets and securities, including securities for which market
quotations are not readily available, are valued at their fair market value
as determined in good faith under the general supervision of the Board of
Trustees.
SECURITIES TRANSACTIONS AND RELATED INCOME--Securities transactions are
accounted for on the date the security is purchased or sold (trade date).
Interest income is recognized on the accrual basis and includes, where
applicable, the pro rata amortization of premium or discount. Dividend
income is recorded on the ex-dividend date. Gains or losses realized on
sales of securities are determined by comparing the identified cost of the
security lot sold with the net sales proceeds.
REPURCHASE AGREEMENTS--The Fund may acquire repurchase agreements from
member banks of the Federal Deposit Insurance Corporation and from
registered broker/dealers that Branch Banking and Trust Company ("BB&T")
deems creditworthy under guidelines approved by the Board of Trustees,
subject to the seller's agreement to repurchase such securities at a
mutually agreed-upon date and price. The repurchase price generally equals
the price paid by the Funds plus interest negotiated on the basis of current
short-term rates, which may be more or less than the rate on the underlying
collateral. The seller under a repurchase agreement is required to maintain
the value of collateral held pursuant to the agreement at not less than the
repurchase price, including accrued interest. Securities subject to
repurchase agreements are held by the Fund's custodian or another qualified
custodian or in the Federal Reserve/Treasury book-entry system.
DIVIDENDS AND DISTRIBUTIONS--Dividends from net investment income are
declared and paid quarterly for the Fund. Distributable net realized gains,
if any are declared and distributed at least annually.
The amounts of dividends from net investment income and of distributions
from net realized gains are determined in accordance with federal income tax
regulations, which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such
amounts are reclassified within the composition of net assets based on their
federal tax-basis treatment; temporary differences do not require
reclassification.
Dividends and distributions to shareholders which exceed net investment
income and net realized capital
MF-92
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
BB&T GROWTH & INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess
of net realized gains. To the extent they exceed net investment income and
net realized gains for tax purposes, they are reported as distributions of
capital.
FEDERAL INCOME TAXES--It is the Fund's policy to continue to comply with the
requirement of the Internal Revenue Code applicable to regulated investment
companies and to distribute timely, all of its net investment company
taxable and net capital gains to shareholders. Therefore, no federal income
tax provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends and capital gains
earned on foreign investments at various rates. Where available, the Fund
will file for claims on foreign taxes withheld.
ORGANIZATION COSTS--Costs incurred by the fund in connection with its
organization and registration of shares have been deferred and are amortized
using the straight-line method over a period of two years from June 3, 1997,
the commencement of the public offering of shares of the Fund. In the event
that any of the initial shares of the Fund are redeemed during the
amortization period by any holder thereof, the redemption proceeds may be
reduced by any unamortized organizational expenses of the Fund in the same
proportion as the number of said shares the Fund being redeemed bears to the
number of initial shares of the Fund of that fund that are outstanding at
the time of redemption.
OTHER--Expenses that are directly related to the Fund are charged directly
to the Fund.
3. PURCHASES AND SALES OF SECURITIES:
Cost of purchases and proceeds from sales of portfolio securities, excluding
short-term securities, were $12,040,023 and $5,856,241, respectively, for
the year ended December 31, 1999.
4. RELATED PARTY TRANSACTIONS:
Investment advisory services are provided to the Fund by BB&T. Under the
terms of the investment advisory agreement, BB&T is entitled to receive fees
based on a percentage of the average daily net assets of the Fund.
BISYS Fund Services Ohio, Inc. d/b/a BISYS Fund Services ("BISYS Ohio"),
with whom certain officers and trustees of the Trust are affiliated, serves
the Trust as Administrator. Such officers and trustees are paid no fees
directly by the Trust for serving as officers and trustees of the Trust.
Under the terms of the Management and Administration Agreement between BISYS
Ohio and the Trust, BISYS Ohio's fees are computed daily as a percentage of
the average net assets of the Fund. BISYS Fund Services LP "BISYS LP" also
serves, without compensation, as Distributor of the Fund. BISYS Ohio serves
the Fund as Transfer agent and Mutual fund accountant. BISYS LP, an Ohio
limited partnership, and BISYS Ohio are subsidiaries of The BISYS
Group, Inc.
Shares of the Trust are subject to a Variable Contract Owner Servicing Plan
(the "Servicing Plan") permitting payment of the compensation to financial
institutions that agree to provide certain administrative support services
for their customers or account holders. The Fund has entered into a specific
arrangement with BISYS for the provision of such services and reimburses
BISYS for its cost of providing these services, subject to a maximum annual
rate equal to 0.25% of the average daily net assets of the Fund.
Fees may be voluntarily reduced or reimbursed to assist the Fund in
maintaining competitive expense ratios. Information regarding these
transactions is as follows for the year ended December 31, 1999:
<TABLE>
<S> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee
reductions (percentage of average
daily net assets)................. 0.74%
Voluntary fee reductions............ $70,597
ADMINISTRATION FEES:
Annual fee before voluntary fee
reductions (percentage of average
daily net assets)................. 0.20%
Voluntary fee reductions............ $76,245
</TABLE>
5. FEDERAL INCOME TAX INFORMATION (UNAUDITED):
CAPITAL LOSS CARRYFORWARD--At December 31, 1999 the Fund had no net capital
loss carryforwards.
DIVIDEND RECEIVED DEDUCTION--For corporate shareholders 100.00% of the total
ordinary income distributions paid during the fiscal year ended
December 31, 1999 qualify for the corporate dividends received deduction.
MF-93
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
BB&T GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR JUNE 3, 1997
ENDED ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997(A)
------------ ------------ ------------
<S> <C> <C> <C>
NET ASSETS VALUE, BEGINNING OF
PERIOD............................ $ 13.30 $ 11.88 $ 10.00
------- ------- -------
INVESTMENT ACTIVITIES:
Net investment income............ 0.18 0.16 0.10
Net realized and unrealized
gain............................ (0.69) 1.42 1.89
------- ------- -------
Total investment activities...... (0.51) 1.58 1.99
------- ------- -------
DISTRIBUTIONS:
Net investment income............ (0.15) (0.16) (0.10)
In excess of net investment
income.......................... -- -- (0.01)
Net realized gains............... (0.18) -- --
------- ------- -------
Total distributions.............. (0.33) (0.16) (0.11)
------- ------- -------
NET ASSET VALUE, END OF PERIOD... $ 12.46 $ 13.30 $ 11.88
======= ======= =======
Total Return..................... (3.85)% 13.36% 19.96%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, at end of period
(000)........................... $52,525 $49,062 $28,829
Ratio of expenses to average net
assets.......................... 0.87% 0.91% 0.91%(c)
Ratio of net investment income to
average net assets.............. 1.43% 1.37% 1.68%(c)
Ratio of expenses to average net
assets*......................... 1.16% 1.24% 2.31%(c)
Ratio of net investment income to
average net assets*............. 1.14% 1.04% 0.28%(c)
Portfolio turnover rate.......... 11.98% 2.77% 7.75%
- ------------------------
</TABLE>
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
* During the period certain fees were reimbursed and voluntarily reduced. If
such reimbursements and voluntary fee reductions had not occurred, the ratios
would have been as indicated.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-94
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To Trustees of
Variable Insurance Funds:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the BB&T Growth and Income Fund
(one portfolio constituting Variable Insurance Funds) at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at
December 31, 1999, by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Columbus, Ohio
February 16, 2000
MF-95
<PAGE>
AMSOUTH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
AMOUNT VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCKS & SECURITIES
CONVERTIBLE TO COMMON STOCKS -- 99.5%
BASIC MATERIALS -- 2.6%
5,900 E.I. du Pont de Nemours................. $ 388,663
10,800 Sealed Air Corp., 4.00%, CVT. PFD.,
4/1/18.................................. 545,400
-----------
934,063
-----------
CAPITAL GOODS/DIVERSIFIED -- 7.5%
8,350 General Electric Co..................... 1,292,162
25,800 Ingersoll-Rand Co., 6.75%, CVT. PFD.,
12/31/49................................ 657,900
14,850 Pitney Bowes, Inc....................... 717,441
-----------
2,667,503
-----------
CONSUMER CYCLICAL -- 1.9%
12,750 Ford Motor Co........................... 681,328
-----------
CONSUMER STAPLES -- 6.1%
6,200 Coca-Cola Co............................ 361,150
6,300 Estee Lauder, 6.25%, CVT. PFD.,
2/23/02................................. 596,925
4,700 Procter & Gamble Co..................... 514,944
10,700 Quaker Oats Co.......................... 702,187
-----------
2,175,206
-----------
ENERGY -- 5.6%
25,500 EOG Resources., 7.00%, CVT. PFD.,
7/31/02................................. 478,125
10,305 Exxon Mobil Corp........................ 830,196
13,750 Shell Transport & Trading PLC (ADR)..... 677,188
-----------
1,985,509
-----------
FINANCE -- 12.7%
6,400 American International Group, Inc....... 692,000
6,800 Chase Manhattan Corp.................... 528,275
15,600 Citigroup, Inc.......................... 866,775
5,050 J.P. Morgan & Co........................ 639,456
4,550 Jefferson Pilot/ NationsBank (ACES)..... 381,063
40,240 Lincoln National Corp., 7.75%, CVT.
PFD.,
8/16/01................................. 885,280
6,300 Merrill Lynch & Co., Inc................ 526,050
-----------
4,518,899
-----------
HEALTH CARE -- 9.3%
12,400 Abbott Laboratories..................... 450,275
5,300 Bausch & Lomb, Inc...................... 362,719
9,800 Bristol-Myers Squibb Co................. 629,038
$ 500,000 Centocor, Inc., 4.75%, CVT. BD.,
2/15/05................................. 665,625
2,850 Johnson & Johnson....................... 265,406
6,700 Merck & Co., Inc........................ 449,319
14,850 Monsanto (ACES), 6.50%, CVT. PFD.,
11/30/01................................ 491,906
-----------
3,314,288
-----------
RETAILING -- 6.4%
$1,015,000 Costco Co., Inc., 0.00%, CVT. BD.,
8/19/02................................. 1,075,900
19,300 Dollar General STRYPES Trust............ 697,213
7,200 Home Depot, Inc......................... 493,650
-----------
2,266,763
-----------
SERVICES -- 5.1%
$ 460,000 Clear Channel Communication, 2.63%, CVT.
BD., 4/1/03............................. 680,225
7,300 McDonald's Corp......................... 294,281
$ 260,000 Omnicom Group, 4.25%, CVT. BD., 1/3/07.. 826,800
-----------
1,801,306
-----------
TECHNOLOGY -- 32.2%
26,000 Amdocs Ltd., 6.75%, CVT. PFD.,
9/11/02................................. 835,250
9,900 Computer Associates
International, Inc...................... 692,381
$ 200,000 Conexant Systems, 4.25%, CVT. BD.,
5/1/06.................................. 585,750
5,000 Corning Glass Works, Inc................ $ 644,688
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
AMOUNT VALUE
- ---------- -----------
<C> <S> <C>
</TABLE>
TECHNOLOGY -- (CONTINUED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
AMOUNT VALUE
- ---------- -----------
<C> <S> <C>
90,000 EMC Corp., 3.25%, CVT. BD., 3/15/02..... 868,725
$ 700,000 Internet Capital Group, 5.50%, CVT. BD.,
12/21/04................................ 1,032,500
$ 200,000 Level One Communications, 4.00%, CVT.
BD., 9/1/04............................. 540,750
6,000 Motorola, Inc........................... 883,500
14,800 Nextel STRYPES Trust, 7.25%, CVT. PFD.,
5/15/00................................. 1,331,999
$ 250,000 Oak Industries, 4.88%, CVT. BD.,
3/1/08.................................. 690,625
$ 300,000 Sanmina Corp., 4.25%, CVT. BD.,
5/1/04.................................. 396,750
$1,270,000 Solectron, 0.00%, CVT. BD., 1/27/19..... 954,088
8,000 Texas Instruments, Inc.................. 775,000
$ 450,000 Veritas Software, 1.86%, CVT. BD.,
8/13/06................................. 1,211,062
-----------
11,443,068
-----------
UTILITIES -- 10.1%
14,300 BCE, Inc................................ 1,289,681
14,000 Enron Corp.............................. 621,250
8,443 SBC Communications, Inc................. 411,596
1 Sempra Energy........................... 17
14,200 Vodafone/Mediaone Group, 7.00%, CVT.
PFD., 11/5/02........................... 681,600
19,000 Williams Companies, Inc................. 580,688
-----------
3,584,832
-----------
Total Common Stocks & Securities 35,372,765
Convertible to Common Stocks............
-----------
INVESTMENT COMPANIES -- 1.2%
424,488 Firstar Stellar Treasury Fund........... 424,488
-----------
Total Investment Companies.............. 424,488
-----------
TOTAL (Cost $29,320,189) -- 100.7%
(a)..................................... $35,797,253
===========
- ------------------------------
</TABLE>
Percentages indicated are based on net assets of $35,554,367.
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting in excess of federal income tax reporting of
$42,246. Cost for federal income tax purposes differs from value by net
unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.............. $7,394,470
Unrealized depreciation.............. (959,652)
----------
Net unrealized appreciation.......... $6,434,818
==========
</TABLE>
ACES -- Adjustable Conversion-Rate Equity Securities
ADR -- American Depository Receipt
CVT. -- Convertible Preferred
PFD
CVT. -- Convertible Bond
BD.
PLC -- Public Limited Co.
STRYPES -- Structured Yield Product Exchangeable for Stock
<TABLE>
<CAPTION>
BREAKDOWN OF SECTORS
- --------------------
<S> <C>
Common Stocks 53.7%
Convertible Bonds 26.8%
Convertible Preferred Stocks 18.3%
Investment Companies 1.2%
------
TOTAL 100.00%
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
MF-96
<PAGE>
AMSOUTH SELECT EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCKS -- 98.6%
CONSUMER GOODS -- 4.5%
5,500 American Greetings Corp., Class A....... $ 129,938
-----------
DATA PROCESSING &
REPRODUCTION -- 8.0%
4,300 Automatic Data Processing, Inc.......... 231,663
-----------
ELECTRICAL EQUIPMENT -- 5.9%
6,300 Hubbell Harvey, Inc., Class B........... 171,675
-----------
ELECTRONIC COMPONENTS/
INSTRUMENTS -- 7.2%
3,600 Emerson Electric Co..................... 206,550
-----------
FINANCIAL SERVICES -- 9.1%
4,600 Dun & Bradstreet Corp................... 135,700
2,900 H & R Block, Inc........................ 126,875
-----------
262,575
-----------
FOOD DISTRIBUTORS &
WHOLESALERS -- 14.4%
3,900 Smuckers Co., Class A................... 76,050
5,300 SYSCO Corp.............................. 209,680
4,600 Ralston Purina Co....................... 128,225
-----------
413,955
-----------
FOOD PRODUCTS, PROCESSING &
PACKAGING -- 9.5%
3,800 General Mills, Inc...................... 135,850
2,900 Hershey Foods Corp...................... 137,750
-----------
273,600
-----------
HEALTH CARE SERVICES -- 4.6%
4,900 IMS Health, Inc......................... 133,219
-----------
MACHINERY & EQUIPMENT -- 7.8%
2,400 Briggs & Stratton Corp.................. 128,700
3,600 Snap-On, Inc............................ 95,625
-----------
224,325
-----------
<CAPTION>
MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
NEWSPAPERS -- 8.8%
1,700 Gannett Co., Inc........................ $ 138,656
1,900 Lee Enterprises......................... 60,681
100 Washington Post, Class B................ 55,588
-----------
254,925
-----------
OFFICE EQUIPMENT & SERVICES -- 4.9%
2,900 Pitney Bowes, Inc....................... 140,106
-----------
PHARMACEUTICALS -- 6.5%
2,900 Bristol-Myers Squibb Co................. 186,144
-----------
POLLUTION CONTROL SERVICES & EQUIPMENT
-- 7.4%
12,400 Waste Management, Inc................... 213,125
-----------
Total Common Stocks..................... 2,841,800
-----------
INVESTMENT COMPANIES -- 3.3%
94,351 Bony Hamilton Prime Money Market........ 94,351
142 Bony Hamilton Treasury Money Market 142
Fund....................................
-----------
Total Investment Companies.............. 94,493
-----------
TOTAL (Cost $3,219,811) -- 101.9% (a)... $ 2,936,293
===========
- ------------------------------
</TABLE>
Percentages indicated are based on net assets of $2,881,114.
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............... $ 114,611
Unrealized depreciation............... (398,129)
---------
Net unrealized depreciation........... $(283,518)
=========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
MF-97
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY INCOME SELECT EQUITY
FUND FUND
------------- -------------
<S> <C> <C>
ASSETS:
Investments, at value (Cost
$29,320,189 and $3,219,811).......... $35,797,253 $2,936,293
Interest and dividends receivable..... 56,637 4,783
Receivable for investments sold....... 1,225,783 --
Reimbursement receivable.............. 3,564 --
Prepaid expenses and other............ 2,551 --
----------- ----------
Total assets........................ 37,085,788 2,941,076
----------- ----------
LIABILITIES:
Payable for investments purchased..... 1,515,648 54,636
Accrued expenses and other payables:
Investment advisory fees............ 262 35
Administration fees................. 769 --
Distribution fees................... 7,098 573
Accounting fees..................... 101 56
Transfer Agent fees................. 58 5
Custody fees........................ 170 14
Other............................... 7,315 4,643
----------- ----------
Total liabilities................. 1,531,421 59,962
----------- ----------
NET ASSETS:
Capital............................. 28,324,617 3,160,275
Undistributed (distributions in
excess of) net investment income... (7,214) 186
Net unrealized appreciation
(depreciation) on investments...... 6,477,064 (283,518)
Undistributed net realized gains
(losses) on investment
transactions....................... 759,900 4,171
----------- ----------
Net Assets........................ $35,554,367 $2,881,114
=========== ==========
Outstanding units of beneficial
interest (shares).................... 2,559,994 338,615
=========== ==========
Net asset value -- offering and
redemption price per share........... $ 13.89 $ 8.51
=========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
MF-98
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY INCOME SELECT EQUITY
FUND FUND(A)
------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Interest income....................... $ 272,315 $ --
Dividend income....................... 408,455 23,478
---------- ---------
Total income........................ 680,770 23,478
---------- ---------
EXPENSES:
Investment advisory fees............ 161,583 9,703
Administration fees................. 53,861 2,426
Distribution fees................... 67,326 3,032
Custodian fees...................... 1,583 73
Accounting fees..................... 12,162 1,640
Legal fees.......................... 32,343 10,154
Audit fees.......................... 9,497 8,127
Organization costs.................. 4,933 --
Trustees' fees and expenses......... 7,808 244
Transfer agent fees................. 10,000 5,833
Printing costs...................... 2,470 1,208
Insurance........................... 5,680 159
Other............................... 51 120
---------- ---------
Total expenses.................... 369,297 42,719
Expenses waived..................... (30,236) (9,411)
Expenses voluntarily reimbursed..... (10,608) (18,237)
---------- ---------
Net expenses........................ 328,453 15,071
---------- ---------
Net investment income................. 352,317 8,407
---------- ---------
REALIZED/UNREALIZED GAINS (LOSSES) ON
INVESTMENTS:
Net realized gains (losses) from
investment transactions.............. 2,044,397 4,171
Net change in unrealized appreciation
(depreciation) from investments...... 4,178,324 (283,518)
---------- ---------
Net realized/unrealized gains
(losses) on investments............ 6,222,721 (279,347)
---------- ---------
Change in net assets resulting from
operations......................... $6,575,038 $(270,940)
========== =========
</TABLE>
(a) For the period from May 3, 1999 (commencement of operations) through
December 31, 1999.
SEE NOTES TO FINANCIAL STATEMENTS.
MF-99
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY INCOME SELECT EQUITY
FUND FUND
-------------------------------- -------------
FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999(A)
--------------- --------------- -------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income............ $ 352,317 $ 303,721 $ 8,407
Net realized gains (losses) from
investment transactions......... 2,044,397 (1,278,675) 4,171
Net change in unrealized
appreciation/depreciation from
investments..................... 4,178,324 2,263,855 (283,518)
----------- ----------- ----------
Change in net assets resulting
from operations................. 6,575,038 1,288,901 (270,940)
----------- ----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income....... (352,317) (304,238) (8,221)
In excess of net investment
income.......................... (1,802) (9,161) --
----------- ----------- ----------
Change in net assets resulting
from shareholder
distributions................... (354,119) (313,399) (8,221)
----------- ----------- ----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued...... 10,079,377 20,248,784 3,284,776
Dividends reinvested............. 354,119 313,399 8,221
Cost of shares redeemed.......... (3,642,784) (1,381,615) (132,722)
----------- ----------- ----------
Change in net assets from capital
transactions.................... 6,790,712 19,180,568 3,160,275
----------- ----------- ----------
Change in net assets............. 13,011,631 20,156,070 2,881,114
NET ASSETS:
Beginning of period.............. 22,542,736 2,386,666 --
----------- ----------- ----------
End of period.................... $35,554,367 $22,542,736 $2,881,114
=========== =========== ==========
SHARE TRANSACTIONS:
Issued........................... 833,355 1,874,103 353,116
Reinvested....................... 29,478 29,521 937
Redeemed......................... (304,781) (134,871) (15,438)
----------- ----------- ----------
Change in shares................. 558,052 1,768,753 338,615
=========== =========== ==========
</TABLE>
(a) For the period from May 3, 1999 (commencement of operations) through
December 31, 1999.
SEE NOTES TO FINANCIAL STATEMENTS.
MF-100
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION:
The Variable Insurance Funds (the "Trust") was organized on July 20, 1994,
and is registered under the Investment Company Act of 1940, as amended (the
"Act"), as a diversified, open-end management investment company established
as a Massachusetts business trust.
The Trust is authorized to issue an unlimited number of shares without par
value. The Trust currently offers shares of the AmSouth Equity Income Fund
("Equity Income") and the AmSouth Select Equity Fund ("Select Equity")
(collectively, "the Funds" and individually "a Fund"). Shares of the Funds
are offered to a separate account of Hartford Life Insurance Company, as
well as other eligible purchasers.
The Equity Income Fund seeks to provide above average income and capital
appreciation. It seeks this objective by investing, under normal market
conditions, at least 65% of its total assets in income-producing equity
securities, including common stock, preferred stock, and securities that are
convertible into common stocks, such as convertible bonds and convertible
preferred stocks. The Select Equity Fund seeks to provide long-term growth
of capital by investing primarily in common stocks and securities
convertible into common stocks, such as convertible bonds and convertible
preferred stocks, of companies with market capitalization that are greater
than $2 billion at the time of purchase.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Trust in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles ("GAAP"). The
preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of income
and expenses for the period. Actual results could differ from those
estimates.
SECURITIES VALUATION--Exchange-listed securities are valued at the closing
price on the exchange on the day of computation, or, if there have been no
sales during such day, at the latest bid quotation. Unlisted securities are
valued at their latest bid quotation in their principal market. If no such
bid is available, then such securities are valued in good faith at their
respective fair market values using methods determined by or under the
supervision of the Trust's Board of Trustees. Portfolio securities with a
remaining maturity of 60 days or less are valued either at amortized cost or
original cost plus accrued interest, which approximates current value.
SECURITIES TRANSACTIONS AND RELATED INCOME--Securities transactions are
accounted for on the date the security is purchased or sold (trade date).
Interest income is recognized on the accrual basis and includes, where
applicable, the pro rata amortization of premium or discount. Dividend
income is recorded on the ex-dividend date. Gains or losses realized on
sales of securities are determined by comparing the identified cost of the
security lot sold with the net sales proceeds.
REPURCHASE AGREEMENTS--The Funds may enter into repurchase agreements with
member banks of the Federal Deposit Insurance Corporation and from
registered broker/dealers that AmSouth Bank ("AmSouth") deems creditworthy
under guidelines approved by the Trust's Board of Trustees, subject to the
seller's agreement to repurchase such securities at a mutually agreed-upon
date and price. The repurchase price generally equals the price paid by the
Funds plus interest negotiated on the basis of current short-term rates,
which may be more or less than the rate on the underlying collateral. The
seller, under a repurchase agreement, is required to maintain the value of
collateral held pursuant to the agreement at not less than the repurchase
price (including accrued interest).
DIVIDENDS TO SHAREHOLDERS--Dividends from net investment income, if any, are
declared and paid monthly for the Funds. Distributable net realized gains,
if any, are declared and distributed at least annually.
Dividends from net investment income and net realized capital gains are
determined in accordance with income tax regulations, which may differ from
GAAP. These differences are primarily due to differing treatments of
deferrals of certain losses.
These "book/tax" differences are considered to be either temporary or
permanent in nature. To the extent these differences are permanent in
nature, such amounts are reclassified within the composition of net assets
based on their federal tax-basis treatment; temporary differences do not
require reclassifications. Dividends and distributions to shareholders which
exceed net investment income and net realized gains
SEE NOTES TO FINANCIAL STATEMENTS.
MF-101
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of
net realized gains. To the extent they exceed net investment income and net
realized gains for tax purposes, they are reported as distribution of
capital.
As of December 31, 1999, the following reclassification have been made to
increase (decrease) such accounts with offsetting adjustments made to
additional paid-in-capital:
<TABLE>
<CAPTION>
UNDISTRIBUTED
(DISTRIBUTIONS UNDISTRIBUTED
IN EXCESS OF) NET REALIZED
NET INVESTMENT GAIN (LOSS)
FUND INCOME ON INVESTMENTS
---- -------------- --------------
<S> <C> <C>
Equity Income VIF $ 3,295 $(3,295)
Select Equity VIF -- --
</TABLE>
FEDERAL INCOME TAXES--It is the intention of the Funds to continue to
qualify as regulated investment companies by complying with the provisions
available to certain investment companies, as defined in applicable sections
of the Internal Revenue Code, and to make distributions of net investment
income and net realized capital gains sufficient to relieve it from all, or
substantially all, federal income taxes.
ORGANIZATION COSTS--Costs incurred by the Equity Income Fund, in connection
with its organization and registration of shares have been deferred and are
amortized using the straight-line method over a period of two years from the
commencement of the public offering of shares of the Fund. In the event that
any of the initial shares of the Equity Income Fund are redeemed during the
amortization period by any holder thereof, the redemption proceeds may be
reduced by any unamortized organizational expenses of the Equity Income Fund
in the same proportion as the number of said shares of the Equity Income
Fund being redeemed bears to the number of initial shares of the Equity
Income Fund that are outstanding at the time of redemption.
On June 30, 1998 the Funds adopted Statement of Position ("SOP") 98-5,
"Reporting on the costs of start-up activities." Under the provisions of SOP
98-5, costs associated with organizing a fund which commences operating
subsequent to June 30, 1998, must be expensed as incurred and may not be
amortized over future periods.
OTHER--Expenses that are directly related to a Fund are charged directly to
that Fund, while general Trust expenses are allocated between the Funds
based on their relative net assets or another appropriate method.
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of portfolio securities (excluding short-term
securities) for the period from January 1, 1999 through December 31, 1999
were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
AmSouth Equity Income Fund.............. $36,683,324 $29,461,014
AmSouth Select Equity Fund (a).......... $ 3,448,885 $ 327,737
</TABLE>
(a) For the period from May 3, 1999 (commencement of operations) through
December 31, 1999.
4. RELATED PARTY TRANSACTIONS:
Investment advisory services are provided to the Funds by AmSouth. Under the
terms of the investment advisory agreement, AmSouth is entitled to receive
fees based on a percentage of the average daily net assets of the Funds.
Sub-advisory services are provided to the Equity Income Fund by Rockhaven
Asset Management, LLC ("Rockhaven"). Under the terms of the sub-advisory
agreement, Rockhaven is entitled to receive fees, payable by AmSouth, based
on a percentage of the average daily net assets of the Fund, provided that
if AmSouth waives a portion of its investment advisory fee, Rockhaven has
agreed that its sub-advisory fee shall not exceed 60% of AmSouth's net
investment advisory fee.
Sub-advisory services are provided to the Select Equity Fund by Oakbrook
Investments, LLC ("Oakbrook"). Under the terms of the sub-advisory
agreement, Oakbrook is entitled to receive fees, payable by AmSouth, based
on a percentage of the average daily net assets of the Fund, provided that
if AmSouth waives a portion of its investment advisory fee, Oakbrook has
agreed that its sub-advisory fee shall not exceed 70% of AmSouth's net
investment advisory fee.
AmSouth also serves as custodian for the Funds. Pursuant to the Custodian
Agreement with the Trust, AmSouth receives compensation from the Funds for
such services in an amount equal to an asset-based fee plus fixed fees
charged for certain portfolio transactions and out-of-pocket expenses.
BISYS Fund Services Ohio, Inc. (BISYS Ohio) with which certain officers and
trustees of the Trust are affiliated, serves the Trust as Administrator.
Such officers and trustees are paid no fees directly by the Trust for
serving as officers and trustees of the Trust. Under the terms of the
Management and
SEE NOTES TO FINANCIAL STATEMENTS.
MF-102
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Administration Agreement between BISYS Ohio and the Trust, BISYS Ohio's fees
are computed daily as a percentage of the average net assets of the Funds.
BISYS Fund Services Limited Partnership ("BISYS") serves, without
compensation, as Distributor of the Fund's. BISYS Ohio also serves the Funds
as Transfer Agent and Fund Accountant. BISYS, an Ohio limited partnership,
and BISYS Ohio are subsidiaries of The BISYS Group, Inc.
Shares of the Trust are subject to a Variable Contract Owner Servicing Plan
(the "Servicing Plan") permitting payment of compensation to financial
institutions that agree to provide certain administrative support services
for their customers or account holders. The Funds have entered into a
specific arrangement with BISYS for the provision of such services and
reimburses BISYS for its cost of providing these services, subject to a
maximum annual rate equal to 0.25% of the average daily net assets of the
Funds.
Fees may be voluntarily reduced or reimbursed to assist the Funds in
maintaining competitive expense ratios. Information regarding these
transactions is as follows for the year ended December 31, 1999:
<TABLE>
<CAPTION>
EQUITY SELECT
INCOME EQUITY (A)
------- ----------
<S> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee
reductions (percentage of average daily
net assets)............................ 0.60% 0.80%
Voluntary fee reductions................ $24,238 $ 970
ADMINISTRATION FEES:
Annual fee before voluntary fee
reductions and reimbursements
(percentage of average daily net
assets)................................ 0.20% 0.20%
Voluntary fee reductions................ $ -- $ 2,426
Voluntary fee reimbursements............ $10,608 $18,237
VARIABLE CONTRACT OWNER SERVICING FEES:
Annual fee (percentage of average daily
net assets)............................ 0.25% 0.25%
CUSTODIAN FEES:
Annual fee (percentage of average daily
net assets)............................ 0.006% 0.006%
FUND ACCOUNTING FEES:
Annual fee before voluntary fee
reductions (percentage of average daily
net assets)............................ 0.03% 0.03%
Voluntary fee reductions................ $ -- $ 364
TRANSFER AGENT FEES:
Annual fee of $14 per account, subject
to a minimum of $10,000 per year.
Voluntary fee reductions................ $ 5,998 $ 5,651
(a) For the period from May 3, 1999 (commencement of
operations) through December 31, 1999.
</TABLE>
5. FEDERAL INCOME TAX INFORMATION (UNAUDITED):
The AmSouth Variable Insurance Funds designate the following eligible
distributions for the dividends received deductions for corporations for the
year ended December 31, 1999:
<TABLE>
<CAPTION>
PERCENTAGE
----------
<S> <C>
Equity Income Fund................................ 99.97%
Select Equity Fund................................ 100.00%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
MF-103
<PAGE>
VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY INCOME SELECT EQUITY
------------------------------------------------- -------------
FOR THE FOR THE OCTOBER 23, MAY 3,
YEAR ENDED YEAR ENDED 1997 TO 1999 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997(A) 1999(A)
--------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD....................... $ 11.26 $ 10.23 $10.00 $10.00
------- ------- ------ ------
INVESTMENT ACTIVITIES:
Net investment income....... 0.15 0.22 0.03 0.04
Net realized and unrealized
gains...................... 2.64 1.03 0.23 (1.49)
------- ------- ------ ------
Total investment
activities................. 2.79 1.25 0.26 (1.45)
------- ------- ------ ------
DISTRIBUTIONS:
From net investment
income..................... (0.16) (0.22) (0.03) (0.04)
------- ------- ------ ------
Total distributions......... (0.16) (0.22) (0.03) (0.04)
------- ------- ------ ------
NET ASSET VALUE, END OF
PERIOD....................... $ 13.89 $ 11.26 $10.23 $ 8.51
======= ======= ====== ======
Total return................ 25.00% 12.36% 2.27%(b) (14.51%)(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, at end of period
(000)...................... $35,554 $22,543 $2,387 $2,881
Ratio of expenses to average
net assets................. 1.22% 1.14% 1.22%(c) 1.23%(c)
Ratio of net investment
income to average net
assets..................... 1.31% 2.13% 2.39%(c) 0.69%(c)
Ratio of expenses to average
net assets*................ 1.37% 1.53% 7.26%(c) 3.50%(c)
Portfolio turnover rate..... 110.31% 120.83% 4.00% 18.21%
- ------------------------
</TABLE>
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
* During the period certain fees were reimbursed and voluntarily reduced. If
such reimbursements and voluntary fee reductions had not occurred, the ratios
would have been as indicated.
SEE NOTES TO FINANCIAL STATEMENTS.
MF-104
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO SHAREHOLDERS AND TRUSTEES OF
VARIABLE INSURANCE FUNDS:
- --------------------------------------------------------------------------------
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Equity Income Fund and Select
Equity Fund (two portfolios constituting Variable Insurance Funds) at
December 31, 1999, the results of each of their operations for the period then
ended, the changes in each of their net assets for the periods presented, and
their financial highlights for each of the periods presented in conformity with
accounting principles generally accepted in the United States. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation and verification by
examination of securities at December 31, 1999, by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Columbus, Ohio
February 14, 2000 PRICEWATERHOUSECOOPERS LLP
SEE NOTES TO FINANCIAL STATEMENTS.
MF-105
<PAGE>
HUNTINGTON VA INCOME EQUITY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES (000)
- ------ ------
<C> <S> <C>
COMMON STOCK -- 34.3%
AUTO -- 2.1%
300 Ford.................................... $ 16
1,200 Genuine Parts........................... 30
------
46
------
BANKS -- 6.9%
1,200 Bank One................................ 39
250 Chase Manhattan......................... 19
1,200 First Union............................. 39
1,100 Fleet Boston Financial.................. 38
800 National City........................... 19
------
154
------
CHEMICALS -- 1.7%
200 E.I. duPont de Nemours.................. 13
650 International Flavors & Fragrances...... 25
------
38
------
DRUGS & HEALTH CARE -- 4.2%
400 Abbott Laboratories..................... 15
1,200 American Home Products.................. 47
500 Bristol-Myers Squibb.................... 32
------
94
------
ELECTRICAL UTILITIES -- 1.9%
650 Ipalco Enterprises...................... 11
900 LG&E Energy............................. 16
900 Nisource................................ 16
------
43
------
FOOD & BEVERAGE -- 1.8%
1,800 Conagra................................. 41
------
GAS & NATURAL GAS -- 1.4%
900 Peoples Energy.......................... 30
------
HOUSEHOLD PRODUCTS -- 1.6%
700 Clorox.................................. 35
------
INSURANCE -- 1.4%
2,000 Ohio Casualty........................... 32
------
MISCELLANEOUS BUSINESS SERVICES -- 0.5%
400 Deluxe.................................. 11
------
PETROLEUM REFINING -- 2.3%
400 Conoco.................................. 10
200 Royal Dutch Petroleum, NY............... 12
550 Texaco.................................. 30
------
52
------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES --
1.2%
1,200 Xerox................................... 27
------
REAL ESTATE INVESTMENT TRUST -- 1.0%
1,600 Nationwide Health Properties............ 22
------
<CAPTION>
MARKET
VALUE
SHARES (000)
- ------ ------
<C> <S> <C>
COMMON STOCK -- (CONTINUED)
RUBBER & PLASTIC -- 2.3%
4,700 Hanna................................... $ 52
------
STEEL & STEEL WORKS -- 1.6%
2,200 Worthington Industries.................. 36
------
TELEPHONE & TELECOMMUNICATION -- 2.2%
550 Bell Atlantic........................... 34
200 GTE..................................... 14
------
48
------
Total common stock (cost $770).......... $ 761
======
<CAPTION>
PAR VALUE
(000) (000)
- ------ ------
<C> <S> <C>
CORPORATE BONDS -- 6.7%
Bank One
$ 50 8.000% due 04/29/2027................. $ 49
New Jersey Bell
50 7.850% due 11/15/2029................. 50
Quebec Province
50 7.500% due 09/15/2029................. 49
------
Total corporate bonds (cost $150)....... $ 148
======
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 29.1%
FFCB
150 5.790% due 02/23/2000................. $ 149
FHLB
150 5.790% due 02/03/2000................. 149
FHLMC
200 5.600% due 03/21/2000................. 198
FNMA
150 5.770% due 01/26/2000................. 150
------
Total U.S. government agency obligations $ 646
(cost $645).............................
======
U.S. TREASURY OBLIGATIONS -- 26.3%
Treasury Bill
472 5.399% due 01/20/2000................. $ 471
Treasury Bond
120 6.125% due 08/15/2029................. 114
------
Total U.S. Treasury Obligations (cost $ 585
$591)...................................
======
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
DIVERSIFICATION OF NET ASSETS:
Total common stocks (cost $770)................ 34.3% $ 761
Total corporate bonds (cost $150).............. 6.7 148
Total U.S. government agency obligations (cost
$645)......................................... 29.1 646
Total U.S. treasury obligations (cost $591).... 26.3 585
----- -----
Total investment in securities (total cost
$2,156)....................................... 96.4 2,140
Cash, receivables and other assets net of
liabilities................................... 3.6 81
----- -----
Net assets..................................... 100.0% $2,221
===== =====
</TABLE>
FFCB -- Federal Farm Credit Bank
FHLB -- Federal Home Loan Bank
FHLMC -- Federal Home Loan Credit Corporation
FNMA -- Federal National Mortgage Association
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-106
<PAGE>
HUNTINGTON VA INCOME EQUITY FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
FOR THE PERIOD ENDED DECEMBER 31, 1999*
(ALL NUMBERS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (total cost
$2,156) -- see accompanying portfolio.......... $2,140
Receivable for Fund shares sold................. 10
Receivable for dividends and interest........... 6
Receivable from advisor (see note 3)............ 21
Cash and other assets........................... 66
-----
Total assets................................ $2,243
-----
LIABILITIES:
Accrued expenses payable........................ (22)
-----
Total liabilities........................... (22)
-----
SUMMARY OF SHAREHOLDERS' EQUITY:
Capital stock, par value $0.001 per share;
225,700 shares authorized; 225,700 shares
outstanding................................. $2,243
Return of Capital........................... (6)
Unrealized appreciation (depreciation) of
investments................................. (16)
-----
Net assets.................................. $2,221
=====
</TABLE>
<TABLE>
<S> <C>
Net assets value, offering and redemption prices per share --
Trust Class................................................... $9.84
====
</TABLE>
* Fund commenced operations on October 20, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-107
<PAGE>
HUNTINGTON VA INCOME EQUITY FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999*
(ALL NUMBERS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends....................................... $ 3
Interest........................................ 8
----
Total investment income....................... 11
----
EXPENSES:
Investment advisory fees........................ 1
Administrative services fees.................... 1
Transfer agent fees............................. 1
Professional fees............................... 11
Directors fees.................................. 3
Printing fees................................... 6
Other expenses.................................. 1
----
Total expenses.................................. 24
Less: investment advisory fees waived........... (1)
Reimbursement from Advisor...................... (21)
----
Net expenses.................................. 2
----
Net investment income (loss).................... 9
----
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized and unrealized gain (loss) on
investments.................................... (16)
----
Net decrease in net assets resulting from
operations..................................... $ (7)
====
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999*
(ALL NUMBERS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
OPERATIONS:
Net investment income........................... $ 9
Net unrealized appreciation (depreciation) of
investments.................................... (16)
-----
Net increase (decrease) in net assets resulting
from operations................................ (7)
-----
DISTRIBUTIONS TO SHAREHOLDERS TRUST CLASS:
From net investment income...................... (9)
Return of Capital............................... (6)
-----
Total Distributions............................. (15)
-----
CAPITAL SHARE TRANSACTIONS:
Trust Class
Proceeds from shares issued................. 2,228
Dividends reinvested........................ 15
-----
Net increase (decrease) from capital share
transactions................................ 2,243
-----
Net increase in net assets.................. 2,243
NET ASSETS:
Beginning of period............................. --
-----
End of period................................... $2,221
=====
SHARES ISSUED AND REDEEMED:
Trust Class:
Shares issued............................... 225
Reinvestments of distributions.............. 1
Total Trust Share Transactions................ 226
-----
Net change in fund share transactions......... 226
=====
</TABLE>
* Fund commenced operations on October 20, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
MF-108
<PAGE>
HUNTINGTON VA INCOME EQUITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR THE PERIOD ENDED DECEMBER 31, 1999*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HUNTINGTON
VARIABLE ANNUITY
INCOME EQUITY FUND
------------------
<S> <C>
SELECTED PER-SHARE DATA
Net Asset Value at Beginning of Period.......... $10.000
Net Investment Income........................... 0.061
Net Realized and Unrealized Gain (Loss) on
Investments.................................... (0.130)
Total from Investment Operations................ (0.069)
Dividends from Net Investment Income............ (0.053)
Return of Capital............................... (0.035)
Total Distributions............................. (0.088)
Net Increase (Decrease) in Net Assets Value..... (0.157)
Net Asset Value at End of Period................ 9.843
Total Return(1)................................. (0.72)%
RATIOS AND SUPPLEMENTAL DATA
Net Assets at End of Period (in thousands)...... $ 2,221
Ratio of Expenses to Average Net Assets After
Waivers(2)..................................... 0.77%
Ratio of Expenses to Average Net Assets Before
Waivers(2)..................................... 10.85%
Ratio of Net Investment Income to Average Net
Assets(2)...................................... 4.30%
Portfolio Turnover Rate......................... 0%
</TABLE>
* Fund commenced operations on October 20, 1999
1. Not Annualized
2. Annualized
MF-109
<PAGE>
HUNTINGTON VA FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Huntington VA Funds (the "Trust") are registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company. Huntington VA Funds are a series of mutual funds
established exclusively for the purpose of providing an investment vehicle
for variable annuity contracts and variable life insurance policies offered
by the separate accounts of participating Insurance Companies. Currently,
Hartford Life Insurance Company is the only participant. As of
December 31, 1999, the Trust consisted of two diversified portfolios
(individually referred to as a "Fund", or collectively as the "Funds") as
follows:
Huntington VA Income Equity Fund
Huntington VA Growth Fund*
*Fund has yet to commence operations as of December 31, 1999
The assets of each Fund are segregated, and a shareholder's interest is
limited to the Fund and to the class in which shares are held. Currently,
there is only one class of Shares - the Trust Class.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by each Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles
("GAAP"). The preparation of financial statements in accordance with GAAP
requires management to make estimates and assumptions that affect the
reported amounts and disclosures in the Statements. The actual results
could differ from those estimates.
A. INVESTMENT VALUATIONS-- Each Fund values its securities in calculating
net asset values as follows. Securities traded on a national
securities exchange or quoted on the NASDAQ National Market System are
valued at their last-reported sale price on the principal exchange or
reported by NASDAQ or, if there is no reported sale, and in the case
of over-the-counter securities not included in the NASDAQ National
Market System, at a bid price estimated by a pricing service using
methodology approved and authorized by the Board of Trustees (an
"Authorized Pricing Service"). Debt securities traded on a national
securities exchange or in the over-the-counter market are valued at
their last-reported sale price, or, if there is no reported sale, at a
bid price estimated by an Authorized Pricing Service. For the other
debt securities, including zero-coupon securities, and foreign
securities, an Authorized Pricing Service will be used.
Short-term investments with remaining maturities of 60 days or less at
the time of purchase may be valued at amortized cost. Investments in
other open-end investment companies are valued at net asset value.
For securities, which cannot be priced by an Authorized Pricing
Service, the Board of Trustees has authorized the Trust's recordkeeper
to seek a good faith fair value determination from a broker-dealer or
other financial intermediary. In certain circumstances, in accordance
with the Trust's Security Valuation Policy, the recordkeeper may seek
a good faith value determination where an Authorized Pricing Service
has provided a price. The Trust's Security Valuation Policy has also
established a Pricing Committee, which will price a security in the
event that no price can be obtained from an Authorized Pricing
Service, a broker-dealer or other financial intermediary.
REPURCHASE AGREEMENTS--It is the policy of the Funds to require the
custodian to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian banks' vault, all securities held as collateral under
repurchase agreement transactions. Additionally, it's the policy of
the Trust to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of
collateral at least equals the repurchase price to be paid under the
repurchase agreement transaction.
The Funds will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers, which
are deemed by the Funds' adviser to be creditworthy pursuant to the
guidelines established by the Trustees. Risks may arise from the
potential inability of counterparties to honor the terms of these
agreements. Accordingly, the Funds could receive less than the
repurchase price on the sale of collateral securities.
MF-110
<PAGE>
HUNTINGTON VA FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME, EXPENSE AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued daily. Bond premium and
discount, if applicable, are amortized, as required by the Internal
Revenue Code, as amended (the "Code") which does not differ materially
from GAAP.
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses for the Funds are allocated daily to each
class of shares based upon the relative proportion of net assets
represented by such class.
FEDERAL TAXES--It is the Trust's policy to comply with the provisions
of the Code applicable to regulated investment companies and to
distribute to shareholders each year substantially all of their
income. Accordingly, no provisions for federal tax are necessary.
B. OTHER-- Investment transactions are accounted for on the trade date.
Gains or losses realized from the sale of securities are determined by
comparing the identified cost of the security sold with the net sales
proceeds.
(3) INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--The Huntington National Bank, the Trust's
investment adviser ("Huntington" or the "Adviser"), receives for its
service an annual investment advisory fee for each of the Funds at the
following annual rates: Income Equity Variable Annuity 0.60% of the Fund's
average daily net assets. The Adviser has voluntarily agreed to waive all
or a portion of its fees and to reimburse expenses in order to limit their
total operating expenses (as a percentage of daily net assets on an
annualized basis) to not more than 0.77%.
ADMINISTRATION FEE--Huntington also serves as administrator to the Trust
and was entitled to receive an annual fee of 0.11% of each Fund's average
net assets, paid monthly, for services performed under the Trust's
Administration Agreement through December 20, 1999. Huntington paid monthly
to SEI Investments Mutual Funds Services ("SIMFS"), under a
Sub-Administration Agreement through December 20, 1999, an annual fee of
0.045% of each Fund's average net assets for services performed. On
December 20, 1999, Huntington entered into a new Administration Agreement
whereby Huntington receives an annual fee of 0.14% of each Fund's average
net assets, paid monthly, for services performed under the Trust's
Administration Agreement. In addition, Huntington entered into a new
Sub-Administration Agreement whereby Huntington pays SIMFS an annual fee of
0.05% for Sub-Administration and 0.03% for record keeping of each Fund's
average net assets for services performed. The new Administration and
Sub-Administration Agreement reflects the expansion of SIMFS' services to
provide certain accounting and recordkeeping services.
DISTRIBUTION AGREEMENT--SEI Investments Distribution Co. ("SIDCO") acts as
the Trust's distributor pursuant to a Distribution Agreement. SEI
Investments Management Corporation, a wholly owned subsidiary of SEI
Investment Company, is the owner of all beneficial interests in SIMFS.
SIDCO is a wholly owned subsidiary of SEI Investments Company.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSE, PORTFOLIO
ACCOUNTING AND CUSTODIAN FEES--State Street Bank and Trust Company ("State
Street") serves as the Trust's transfer agent and dividend disbursing
agent. The fees payable to State Street for transfer agent and dividend
disbursing services are based on the size, type and number of accounts and
transactions made by shareholders.
Currently SIMFS provides certain accounting and recordkeeping services with
respect to each of the Funds' portfolios of investments as part of its Sub-
Administration Agreement. Prior to December 20, 1999, Huntington provided
certain accounting and recordkeeping services under a trust custodian
agreement. Beginning December 20, 1999, these services are provided for
under the Administration Agreement. Huntington receives an annual fee based
on the level of each Fund's average daily net assets. For the year ended
December 31, 1999, Huntington received fees of $61 for record keeping
services.
Huntington also receives a fee for its services as the custodian of the
Funds' investment and other assets. For the year ended December 31, 1999,
Huntington received fees of $71.
MF-111
<PAGE>
HUNTINGTON VA FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
For the year ended December 31, 1999, certain Officers of the Trust were
Officers of SIMFS and SIDCO. Such Officers receive no compensation from the
Trust.
(4) INVESTMENT TRANSACTIONS
Purchase and sales of investments, excluding short-term securities for the
year ended December 31, 1999 were as follows (all numbers in thousands):
INVESTMENT SECURITIES
<TABLE>
<CAPTION>
PURCHASES SALES
--------- -------
<S> <C> <C>
VA Income Equity 311 --
</TABLE>
(5) NOTICE TO SHAREHOLDERS OF THE HUNTINGTON FUNDS
(UNAUDITED)
For the fiscal year ended December 31, 1999, each fund is designating
long-term capital gains, qualifying dividends, and exempt income with
regard to distributions paid during the year as follows:
<TABLE>
<CAPTION>
(A)
LONG TERM (B)
CAPITAL ORDINARY (C) (E)
GAINS INCOME TOTAL (D) TAX
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING EXEMPT
FUND TAX BASIS TAX BASIS TAX BASIS DIVIDENDS(1) INTEREST
---- ------------- ------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
VA Income Equity 0% 100% 100% 2% 0%
</TABLE>
Please consult your tax advisor for proper treatment of the information.
(1) Qualifying dividends represent dividends which qualify for the
corporate dividends received deductions.
* Items (A) and (B) are based on a percentage of the Funds' total
distributions.
** Items (D) and (E) are based on a percentage of the Funds' ordinary
income distributions.
MF-112
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
THE HUNTINGTON VA FUNDS:
- --------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities of the
Huntington VA Income Equity Fund, including the schedule of portfolio
investments, ("the Fund"), as of December 31, 1999, and the related statement of
operations, statement of changes in net assets and the financial highlights for
the period from October 20, 1999 (commencement of operations) through
December 31, 1999. These financial statements and the financial highlights are
the responsibility of the management of the Fund. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included verification of securities owned as of December 31, 1999, by
examination. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Huntington VA Income Equity Fund as of December 31, 1999, the results of its
operations, the changes in its net assets and the financial highlights for the
period from October 20, 1999 through December 31, 1999.
KPMG LLP
Columbus, Ohio
February 11, 2000
SEE NOTES TO FINANCIAL STATEMENTS.
MF-113
<PAGE>
- --------------------------------------------------------------------------------
- -----------------------------------------
MERCURY V.I. U.S. LARGE CAP FUND OF
MERCURY ASSET MANAGEMENT V.I. FUNDS, INC.
ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
- --------------------------------------------------------------------------------
MERCURY V.I. U.S. LARGE CAP FUND
Annual Report
December 31, 1999
- --------------------------------------------------------------------------------
DEAR SHAREHOLDER:
We are pleased to provide you with this first annual report to shareholders for
Mercury V.I. U.S. Large Cap Fund.
FISCAL YEAR IN REVIEW
Since inception (April 30, 1999) through December 31, 1999, the Fund's Class A
Shares had a total return of +20.94%, outperforming the total return of the
unmanaged Standard & Poor's (S&P) 500 Index of +11.0% during the same period.
Since the Fund commenced operations on April 30, 1999, we have seen a steady
inflow of cash, and the Fund had net assets of just over $24 million at year-
end. At December 31, 1999, the Fund was fully invested with common stocks
comprising 96.2% of the Fund's net assets.
During this fiscal period, the Fund benefited from its heavy weighting in
selected technology and telecommunication issues, particularly in Yahoo! Inc.,
Cisco Systems, Inc. and Texas Instruments Incorporated. Technology and
telecommunications were the star sectors for the year and were very strong
during the fourth quarter of 1999, as investors became confident that the Year
2000 changeover would not cause material setbacks for these companies. Even
rising bond yields later in the period were not enough to dampen investor
enthusiasm for technology issues, although financial stocks, particularly banks,
were weak on interest rate and execution concerns.
During the period, we took aggressive positions in selected technology and
telecommunications issues. The Fund's general exposure to the technology sector
as a whole was about neutral relative to the S&P 500 Index as we believe that
the route to outperformance is through stock selection and not sectors.
Performance was held back by our holding in Tyco International Ltd., which
performed poorly on concerns that its aggressive accounting policies masked a
deterioration in underlying businesses. Our pharmaceutical holdings were also a
drag on performance, as the sector was dogged by poor investor sentiment,
relating to possible Medicare reforms.
INVESTMENT ENVIRONMENT
On June 30, 1999, the Federal Reserve Board increased interest rates by 0.25%,
which set the tone for an expectation of further interest rate rises during the
third quarter. The US current account deficit continued to be a source of
negative surprise and as a result the Federal Reserve Board raised interest
rates for a second time on August 24, 1999 to 5.25%. Market breadth worsened in
the second half of the year, with nearly 60% of all S&P 500 Index stocks down
over the year with only the technology sector able to outperform the market
during the fourth quarter of the year. Bond yields rose over 25% from their
trough in the fourth quarter of 1998 to the year-end level of 6.48%.
Despite the Federal Reserve Board's efforts to slow the economy by increasing
the Federal Funds rate, gross domestic product growth showed no signs of a
slowdown and finished up a strong 4% in 1999. This was primarily the result of
strong consumer spending (up 3.6%), and a recovery in exports in the second half
of the year. Nevertheless, inflationary pressures remained benign, as indicated
by a consumer price index rise of only 2.3% during the year, while the
unemployment rate continued its downward trend from 4.4% in April to 4.1% at the
end of the year.
Following poor third quarter performance, equity markets improved during the
fourth quarter, particularly the NASDAQ, which appreciated 48% during the
quarter. The S&P 500 Index rose 14.5%, although excluding technology stocks, the
Index would have been down 1%. Corporate activity reached record levels, with
high-profile merger and acquisition activity, such as Dow Chemical Company and
Union Carbide Corporation; Viacom Inc. and CBS Corporation; and the American
Home Products Corporation/Pfizer Inc. battle over Warner-Lambert Company.
ML-1
<PAGE>
- --------------------------------------------------------------------------------
MERCURY V.I. U.S. LARGE CAP FUND
Annual Report
December 31, 1999 (Concluded)
- --------------------------------------------------------------------------------
Three increases in interest rates by the Federal Reserve Board failed to dampen
enthusiasm for technology and telecommunications stocks. Communications
equipment and cellular/wireless telecommunications were star performers over the
period, as these industry sectors as measured by S&P were up 49.9% and 77.9%,
respectively, driven by strong growth in sales of software and mobile phones. In
data transmission, Qualcomm Incorporated (not a Fund holding) led the rise
ending the period up 358.7%, with fiber optic components manufacturer JDS
Uniphase Corporation up 263%.
Financial groups such as life insurance and investment bank/brokerage stocks
performed poorly in an environment of rising interest rates. Despite a run up in
mid October from excitement about changes in financial legislation, the S&P
Financials Index closed the period down 14.6%. Property casualty insurers ended
the year down 29.4% because of overcapitalization and a weak pricing
environment. The healthcare sector struggled in the face of concerns about
Medicare reform, a worsening legislative environment, and a dwindling pipeline
of new drugs caused the drug sector to end the period down 14.5%. The
worst-performing industry sector was waste management, which ended the period
down 68.9%.
PORTFOLIO ACTIVITIES
Since the Fund's inception, we have maintained overweighted positions in
selected technology and communications stocks. These two sectors were the key
drivers of the Fund's performance during the second half of 1999. In the last
two months of the year in particular, momentum behind these highly rated and
fast-growing companies was strong and led to outperformance. The Fund also
benefited from our initial purchase of these issues at the end of April, when a
sector rotation out of growth stocks into value stocks temporarily depressed
prices.
In October we initiated a position in Citigroup Inc. This company has leadership
positions in consolidating industries such as credit cards, consumer finance,
and insurance and stands to be a prime beneficiary as financial services
converge. It is also one of the few financial companies within the sector where
earnings estimates have been rising. We also purchased Citrix Systems, Inc. in
November, which saw substantial outperformance in the last two months of the
year as expectations for wireless applications rose.
During the period, we made several notable sales. We sold Tyco International
Ltd. because of deteriorating fundamentals and reduced our exposure to the
financial sector by selling U.S. Bancorp and Washington Mutual, Inc. on the
basis that we believe financial stocks will not perform well in an environment
of rising interest rates. We also reduced our holding in Microsoft Corporation
in November over concerns that the Department of Justice action would limit any
upside appreciation in the stock in the near term.
IN CONCLUSION
We thank you for your investment in Mercury V.I U.S. Large Cap Fund, and we look
forward to servicing your investment needs in the months and years ahead.
Sincerely,
[SIGNATURE]
Jeffrey Peek
President
[SIGNATURE]
Michael Morony
Portfolio Manager
February 10, 2000
ML-2
<PAGE>
- --------------------------------------------------------------------------------
MERCURY INTERNATIONAL V.I. U.S. LARGE CAP FUND
Performance Information
December 31, 1999
- --------------------------------------------------------------------------------
TOTAL RETURN BASED ON A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MERCURY VI US LARGE S&P 500
CAP FUND + - CLASS A SHARES* INDEX ++
<S> <C> <C>
4/30/99** $10,000 $10,000
12/99 $12,094 $11,100
</TABLE>
* Assuming transaction costs and other operating expenses, including advisory
fees.
** Commencement of operations.
+ The Fund invests primarily in a diversified portfolio of equity securities of
large cap companies located in the United States that Fund management
believes are undervalued or have good prospects for earnings growth.
++ This unmanaged broad-based Index is comprised of common stocks.
Past results shown should not be considered a representation of future
performance.
- --------------------------------------------------------------------------------
AGGREGATE TOTAL RETURN
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A SHARES % RETURN
<S> <C>
- --------------------------------------------------------------------------
Inception (4/30/99) to 12/31/99 +20.94%
- --------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
RECENT PERFORMANCE RESULTS*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE INCEPTION
AS OF DECEMBER 31, 1999 TOTAL RETURN
<S> <C>
- -----------------------------------------------------------------------------
Class A Shares +20.94%
- -----------------------------------------------------------------------------
</TABLE>
* Total investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date. Insurance-related
fees and expenses are not reflected in these returns. The Fund commenced
operations on April 30, 1999.
ML-3
<PAGE>
- --------------------------------------------------------------------------------
MERCURY V.I. U.S. LARGE CAP FUND
Schedule of Investments as of December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES PERCENT OF
INDUSTRY HELD COMMON STOCKS VALUE NET ASSETS
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
AEROSPACE 9,200 United Technologies Corporation $ 598,000 2.5%
- ------------------------------------------------------------------------------------------------------------------------
AUTOS & AUTO RELATED 4,250 Ford Motor Company 227,109 0.9
- ------------------------------------------------------------------------------------------------------------------------
BEVERAGES 9,300 PepsiCo, Inc. 327,825 1.4
- ------------------------------------------------------------------------------------------------------------------------
COSMETICS & TOILETRIES 4,300 The Estee Lauder Companies Inc. (Class A) 216,881 0.9
- ------------------------------------------------------------------------------------------------------------------------
DOMESTIC OIL 5,600 Texaco Inc. 304,150 1.2
- ------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 9,450 General Electric Company 1,462,388 6.1
5,475 Honeywell International Inc. 315,839 1.3
----------- -----
1,778,227 7.4
- ------------------------------------------------------------------------------------------------------------------------
FINANCE COMPANIES-- 2,950 American Express Company 490,438 2.0
CONSUMER & DIVERSIFIED 3,100 Bank of America Corporation 155,581 0.7
10,500 Citigroup Inc. 583,406 2.4
2,550 Providian Financial Corporation 232,209 1.0
----------- -----
1,461,634 6.1
- ------------------------------------------------------------------------------------------------------------------------
FOOD RETAILERS 9,500 +The Kroger Co. 179,313 0.7
4,150 +Safeway Inc. 147,584 0.6
----------- -----
326,897 1.3
- ------------------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS 3,500 Weyerhaeuser Company 251,344 1.0
- ------------------------------------------------------------------------------------------------------------------------
GENERAL & DRUG 7,575 The Home Depot, Inc. 519,361 2.2
RETAILING 3,950 +Kohl's Corporation 285,141 1.2
10,900 Wal-Mart Stores, Inc. 753,462 3.1
10,500 Walgreen Co. 307,125 1.3
----------- -----
1,865,089 7.8
- ------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS 9,200 The Dial Corporation 223,675 0.9
5,800 The Procter & Gamble Company 635,463 2.6
----------- -----
859,138 3.5
- ------------------------------------------------------------------------------------------------------------------------
INSURANCE 4,800 American International Group, Inc. 519,000 2.2
- ------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL OIL 8,500 Conoco Inc. (Class B) 211,438 0.9
12,786 Exxon Mobil Corporation 1,030,072 4.3
----------- -----
1,241,510 5.2
- ------------------------------------------------------------------------------------------------------------------------
MEDIA 8,950 +Infinity Broadcasting Corporation (Class A) 323,878 1.4
4,400 The Walt Disney Company 128,700 0.5
----------- -----
452,578 1.9
- ------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 6,650 Bristol-Myers Squibb Company 426,847 1.8
6,700 Merck & Co., Inc. 449,319 1.9
7,050 Pfizer Inc. 228,684 0.9
3,900 Schering-Plough Corporation 164,531 0.7
4,450 Warner-Lambert Company 364,622 1.5
----------- -----
1,634,003 6.8
- ------------------------------------------------------------------------------------------------------------------------
REGIONAL BANKS 6,700 FleetBoston Financial Corporation 233,244 1.0
11,300 Mellon Financial Corporation 384,906 1.6
----------- -----
618,150 2.6
- ------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY-- 10,000 +Cisco Systems, Inc. 1,070,625 4.5
SEMICONDUCTORS, 8,000 +Dell Computer Corporation 407,500 1.7
NETWORK & OTHER 3,900 +EMC Corporation 426,075 1.8
HARDWARE 4,650 Intel Corporation 382,463 1.6
4,800 +JDS Uniphase Corporation 774,000 3.2
2,800 +Sun Microsystems, Inc. 216,650 0.9
3,100 +Tellabs, Inc. 198,787 0.8
5,700 Texas Instruments Incorporated 552,187 2.3
----------- -----
4,028,287 16.8
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
ML-4
<PAGE>
- --------------------------------------------------------------------------------
MERCURY V.I. U.S. LARGE CAP FUND
Schedule of Investments as of December 31, 1999 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES PERCENT OF
INDUSTRY HELD COMMON STOCKS VALUE NET ASSETS
<S> <C> <C> <C> <C>
TECHNOLOGY-- 8,900 +America Online, Inc. $ 671,394 2.8%
SOFTWARE & SERVICES 2,750 +BMC Software, Inc. 219,656 0.9
EQUIPMENT 3,100 +Citrix Systems, Inc. 381,106 1.6
9,600 +Microsoft Corporation 1,120,200 4.7
1,700 +VeriSign, Inc. 324,912 1.3
700 +Yahoo! Inc. 302,881 1.3
----------- -----
3,020,149 12.6
- ------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 5,800 AT&T Corp. 294,350 1.2
9,100 Bell Atlantic Corporation 560,219 2.3
6,882 +Global Crossing Ltd. 343,670 1.4
6,150 +MCI WorldCom Inc. 325,950 1.4
3,100 +Nextel Communications, Inc. (Class A) 319,494 1.3
5,400 +Qwest Communications International Inc. 231,863 1.0
3,750 SBC Communications Inc. 182,813 0.8
7,400 Sprint Corp. (FON Group) 498,112 2.1
6,050 +Sprint Corp. (PCS Group) 620,125 2.6
----------- -----
3,376,596 14.1
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST -- $19,970,835) 23,106,567 96.2
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT SHORT-TERM SECURITIES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER* $798,000 General Motors Acceptance Corp.,
5% due 1/03/2000 797,778 3.3
- ------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES (COST -- $797,778) 797,778 3.3
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST -- $20,768,613)................ 23,904,345 99.5
OTHER ASSETS LESS LIABILITIES.......................... 109,502 0.5
----------- -----
NET ASSETS............................................. $24,013,847 100.0%
=========== =====
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commercial Paper is traded on a discount basis; the interest rate shown
reflects the discount rate paid at the time of purchase by the Fund.
+ Non-income producing security.
See Notes to Financial Statements.
ML-5
<PAGE>
- --------------------------------------------------------------------------------
MERCURY V.I. U.S. LARGE CAP FUND
Statement of Assets and Liabilities as of December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (identified cost -- $20,768,613)...... $23,904,345
Cash........................................................ 554
Receivables:
Investment adviser........................................ $42,837
Capital shares sold....................................... 33,943
Dividends................................................. 11,194
Securities sold........................................... 4,500 92,474
-------
Prepaid expense............................................. 63,587
-----------
Total assets.............................................. 24,060,960
-----------
LIABILITIES:
Capital shares redeemed payable............................. 140
Accrued expenses and other liabilities...................... 46,973
-----------
Total liabilities......................................... 47,113
-----------
NET ASSETS:
Net assets.................................................. $24,013,847
===========
NET ASSETS CONSIST OF:
Class A Shares of Common Stock, $.0001 par value,
200,000,000 shares authorized+............................ $ 200
Paid-in capital in excess of par............................ 20,978,412
Accumulated realized capital loss on investments -- net..... (47,005)
Accumulated distributions in excess of realized capital
gains on investments -- net............................... (53,492)
Unrealized appreciation on investments -- net............... 3,135,732
-----------
NET ASSETS.................................................. $24,013,847
===========
NET ASSET VALUE:
Class A -- Based on net assets of $24,013,847 and 1,996,009
shares outstanding........................................ $ 12.03
===========
</TABLE>
+ The Fund is also authorized to issue 200,000,000 Class B Shares.
See Notes to Financial Statements.
ML-6
<PAGE>
- --------------------------------------------------------------------------------
MERCURY V.I. U.S. LARGE CAP FUND
Statement of Operations for the Period April 30, 1999+ to December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends................................................... $ 63,831
Interest and discount earned................................ 28,081
----------
Total income................................................ 91,912
----------
EXPENSES:
Offering costs.............................................. $ 74,163
Investment advisory fees.................................... 50,626
Custodian fees.............................................. 22,105
Director's fees and expenses................................ 22,000
Professional fees........................................... 19,953
Printing and shareholder reports............................ 19,229
Transfer agent fees......................................... 6,747
Registration fees........................................... 5,751
Pricing fees................................................ 12
---------
Total expenses before reimbursement......................... 220,586
Reimbursement of expenses................................... (123,228)
---------
Total expenses after reimbursement.......................... 97,358
----------
Investment loss -- net...................................... (5,446)
----------
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET:
Realized loss from investments -- net....................... (47,005)
Unrealized appreciation on investments -- net............... 3,135,732
----------
Net realized and unrealized gain on investments............. 3,088,727
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $3,083,281
==========
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
ML-7
<PAGE>
- --------------------------------------------------------------------------------
MERCURY V.I. U.S. LARGE CAP FUND
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1999+ TO
INCREASE (DECREASE) IN NET ASSETS: DECEMBER 31, 1999
<S> <C>
- ---------------------------------------------------------------------------------
OPERATIONS:
Investment loss -- net...................................... $ (5,446)
Realized loss on investments -- net......................... (47,005)
Unrealized appreciation on investments -- net............... 3,135,732
-----------
Net increase in net assets resulting from operations........ 3,083,281
-----------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS:
In excess of investment income -- net:
Class A................................................... (69,125)
In excess of realized gain on investments -- net:
Class A................................................... (53,492)
-----------
Net decrease in net assets resulting from dividends and
distributions to shareholders............................. (122,617)
-----------
CAPITAL SHARE TRANSACTIONS:
Increase in net assets derived from net capital share
transactions.............................................. 21,053,083
-----------
NET ASSETS:
Total increase in net assets................................ 24,013,747
Beginning of period......................................... 100
-----------
End of period............................................... $24,013,847
===========
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
ML-8
<PAGE>
- --------------------------------------------------------------------------------
MERCURY V.I. U.S. LARGE CAP FUND
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE FOLLOWING RATIOS HAVE BEEN DERIVED FROM INFORMATION CLASS A
PROVIDED IN THE FINANCIAL STATEMENTS. --------------------
FOR THE PERIOD
APRIL 30, 1999+ TO
INCREASE/DECREASE IN NET ASSET VALUE: DECEMBER 31, 1999
<S> <C>
- ----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 10.00
-------
Investment loss -- net...................................... --++
Realized and unrealized gain on investments -- net.......... 2.10
-------
Total from investment operations............................ 2.10
-------
Less dividends and distributions:
In excess of investment income -- net..................... (.04)
In excess of realized gain on investments -- net.......... (.03)
-------
Total dividends and distributions........................... (.07)
-------
Net asset value, end of period.............................. $ 12.03
=======
TOTAL INVESTMENT RETURN:**
Based on net asset value per share.......................... 20.94%+++
=======
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement.............................. 1.25%*
=======
Expenses.................................................... 2.83%*
=======
Investment loss -- net...................................... (.07%)*
=======
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).................... $24,014
=======
Portfolio turnover.......................................... 37.25%
=======
</TABLE>
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Commencement of operations.
++ Amount is less than $.01 per share.
+++ Aggregate total investment return.
See Notes to Financial Statements.
ML-9
<PAGE>
- --------------------------------------------------------------------------------
MERCURY V.I. U.S. LARGE CAP FUND
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES:
Mercury V.I. U.S Large Cap Fund (the "Fund") is a series of Mercury Asset
Management V.I. Funds, Inc. (the "Corporation"). The Fund is registered under
the Investment Company act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's financial statements are prepared in
accordance with generally accepted accounting principles, which may require the
use of management accruals and estimates. Prior to commencement of operations on
April 30, 1999, the Fund had no operations other than those relating to
organizational matters and the issuance of 10 capital shares of the Fund on
April 19, 1999 to Mercury Asset Management International Ltd. ("Mercury
International") for $100. The Fund offers two classes of shares. Class A and
Class B Shares have equal voting, dividend, liquidation and other rights, except
that only shares of the respective classes are entitled to vote on matters
concerning only that class and Class B Shares bear certain expenses related to
the distribution of such shares. The following is a summary of significant
accounting policies followed by the Fund.
(a) VALUATION OF INVESTMENTS -- Portfolio securities that are traded on stock
exchanges are valued at the last sale price as of the close of business on the
day the securities are being valued or, lacking any sales, at the last available
bid price for long positions and the last available ask price for short
positions. Securities traded in the over-the-counter market are valued at the
last available bid price in the over-the-counter market prior to the time of
valuation. Securities traded both in the over-the-counter market and on a stock
exchange are valued according to the broadest and most representative market.
Short positions in securities traded in the over-the-counter market are valued
at the last available ask price prior to the time of valuation. Options written
or purchased are valued at the last sale price in the case of exchange-traded
options. In the case of options traded in the over-the-counter market, valuation
is the last asked price (options written) or the last bid price (options
purchased). Short-term securities are valued at amortized cost, which
approximates market value. Other investments, including futures contracts and
related options, are stated at market value. Securities and assets for which
market quotations are not readily available are valued at fair market value, as
determined in good faith by or under the direction of the Fund's Board of
Directors.
(b) DERIVATIVE FINANCIAL INSTRUMENTS -- The Fund may engage in various portfolio
investment strategies to seek to increase its return by hedging its holdings
against adverse movements in the equity, debt and currency markets. Losses may
arise due to changes in the value of the contract or if the counterparty does
not perform under the contract.
- - FINANCIAL FUTURES CONTRACTS -- The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities. Upon
entering into a contract, the Fund deposits and maintains as collateral such
initial margin as required by the exchange on which the transaction is effected.
Pursuant to the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as variation margin and are recorded by the Fund
as unrealized gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
- - OPTIONS -- The Fund is authorized to purchase and write call and put options.
When the Fund writes an option, an amount equal to the premium received by the
Fund is reflected as an asset and an equivalent liability. The amount of the
liability is subsequently marked to market to reflect the current market value
of the option written. When a security is purchased or sold through an exercise
of an option, the related premium paid (or received) is added to (or deducted
from) the basis of the security acquired or deducted from (or added to) the
proceeds of the security sold. When an option
ML-10
<PAGE>
- --------------------------------------------------------------------------------
MERCURY V.I. U.S. LARGE CAP FUND
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
expires (or the Fund enters into a closing transaction), the Fund realizes a
gain or loss on the option to the extent of the premiums received or paid (or a
gain or loss to the extent that the cost of the closing transaction exceeds the
premium paid or received).
Written and purchased options are non-income producing investments.
- - FORWARD FOREIGN EXCHANGE CONTRACTS -- The Fund is authorized to enter into
forward foreign exchange contracts as a hedge against either specific
transactions or Fund positions. Such contracts are not entered on the Fund's
records. However, the effect on operations is recorded from the date the Fund
enters into such contracts.
(c) FOREIGN CURRENCY TRANSACTIONS -- Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into US dollars. Realized and unrealized gains or losses from
investments include the effects of foreign exchange rates on investments.
(d) INCOME TAXES -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends, and
capital gains at various rates.
(e) SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). Dividend income is recorded on the ex-dividend dates. Dividends from
foreign securities where the ex-dividend date may have passed are subsequently
recorded when the Fund has determined the ex-dividend date. Interest income
(including amortization of discount) is recognized on the accrual basis.
Realized gains and losses on security transactions are determined on the
identified cost basis.
(f) DIVIDENDS AND DISTRIBUTIONS -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates. Distributions in excess of net investment
income and net realized capital gains are due primarily to post-October losses.
(g) RECLASSIFICATION -- Generally accepted accounting principles require that
certain components of net assets be adjusted to reflect permanent differences
between financial and tax reporting. Accordingly, current year's permanent
book/tax differences of $74,571 have been reclassified between paid-in capital
in excess of par and accumulated net investment loss. These reclassifications
have no effect on net assets or net asset values per share.
2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATES:
The Fund has entered into an Investment Advisory Agreement with Mercury
International, an affiliate of Fund Asset Management, L.P. ("FAM"). The general
partner of FAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited
partner.
Mercury International is responsible for the management of the Fund's
investments and provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of .65% of the average
daily value of the Fund's net assets. Mercury International has entered into a
Sub-Advisory Agreement with FAM with respect to the Fund, pursuant to which FAM
provides investment advisory services with
ML-11
<PAGE>
- --------------------------------------------------------------------------------
MERCURY V.I. U.S. LARGE CAP FUND
Notes to Financial Statements (Concluded)
- --------------------------------------------------------------------------------
respect to the Fund's daily cash assets. Mercury International has agreed to pay
FAM a fee in an amount to be determined from time to time by both parties but in
no event in excess of the amount that Mercury International actually receives
for providing services to the Corporation pursuant to the Investment Advisory
Agreement.
Mercury International has agreed to limit the annual operating expenses of the
Fund to 1.25% and 1.40% of the Fund's average net assets with respect to the
Class A Shares and Class B Shares, respectively. These expense limits will be in
place through April 2000.
For the period April 30, 1999 to December 31, 1999, Mercury International earned
fees of $50,626, all of which were waived. FAM also reimbursed the Fund for
additional expenses of $72,602.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Corporation are officers and/or
directors of Mercury International, FAM, PSI, and/or ML & Co.
3. INVESTMENTS:
Purchases and sales of investments, excluding short-term securities, for the
period April 30, 1999 to December 31, 1999 were $24,220,384 and $4,202,544,
respectively.
Net realized losses for the period April 30, 1999 to December 31, 1999 and net
unrealized gains as of December 31, 1999 were as follows:
<TABLE>
<CAPTION>
REALIZED UNREALIZED
LOSSES GAINS
<S> <C> <C>
- -------------------------------------------------------------------------------------
Long-term investments....................................... $(47,005) $3,135,732
-------- ----------
Total investments........................................... $(47,005) $3,135,732
======== ==========
</TABLE>
As of December 31, 1999, net unrealized appreciation for Federal income tax
purposes aggregated $3,062,898, of which $3,588,870 related to appreciated
securities and $525,972 related to depreciated securities. At December 31, 1999,
the aggregate cost of investments for Federal income tax purposes was
$20,841,447.
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares for each class were as follows:
<TABLE>
<CAPTION>
DOLLAR
CLASS A SHARES FOR THE PERIOD APRIL 30, 1999+ TO DECEMBER 30, 1999 SHARES AMOUNT
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
Shares sold................................................... 2,113,257 $22,372,710
Shares issued to shareholders in reinvestment of dividends
and distributions........................................... 10,561 122,618
---------- -----------
Total issued.................................................. 2,123,818 22,495,328
Shares redeemed............................................... (127,819) (1,442,245)
---------- -----------
Net increase.................................................. 1,995,999 $21,053,083
========== ===========
</TABLE>
+ Prior to April 30, 1999 (commencement of operations), the Fund issued 10
shares to Mercury International for $100.
ML-12
<PAGE>
- --------------------------------------------------------------------------------
MERCURY V.I. U.S. LARGE CAP FUND
Independent Auditors' Report
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS,
MERCURY V.I. U.S. LARGE CAP FUND OF
MERCURY ASSET MANAGEMENT V.I. FUNDS, INC.
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Mercury V.I. U.S. Large Cap Fund of Mercury
Asset Management V.I. Funds, Inc. as of December 31, 1999, the related
statements of operations, changes in net assets and the financial highlights for
the period April 30, 1999 (commencement of operations) to December 31, 1999.
These financial statements and the financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the financial highlights
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at December 31, 1999 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Mercury V.I. U.S.
Large Cap Fund of Mercury Asset Management V.I. Funds, Inc. as of December 31,
1999, the results of its operations, the changes in its net assets, and the
financial highlights for the period April 30, 1999 (commencement of operations)
to December 31, 1999 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Princeton, New Jersey
February 14, 2000
ML-13
<PAGE>
- --------------------------------------------------------------------------------
MERCURY V.I. U.S. LARGE CAP FUND
Officers and Directors
- --------------------------------------------------------------------------------
JEFFREY M. PEEK-Director and President
DAVID O. BEIM-Director
JAMES T. FLYNN-Director
W. CARL KESTER-Director
KAREN P. ROBARDS-Director
TERRY K. GLENN-Director and Executive Vice President
DONALD C. BURKE-Vice President and Treasurer
ALLAN J. OSTER-Secretary
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
TRANSFER AGENT
Financial Data Services, Inc.
P.O. Box 44062
Jacksonville, Florida 32232-4062
(888) 763-2260
ML-14
<PAGE>
This report is authorized for distribution only to current shareholders of the
Fund. Past performance results shown in this report should not be considered a
representation of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost. Statements and other information herein are as dated
and are subject to change.
Mercury V.I. U.S. Large Cap Fund of
Mercury Asset Management V.I. Funds, Inc.
Box 9011
Princeton, NJ
08543-9011
<TABLE>
<CAPTION>
<S> <C> <C>
[LOGO] Printed on post-consumer recycled paper MERCVI1--12/99
</TABLE>
