<PAGE>
Sold through:
Banc of America
Investment Services, Inc.-TM-
and its subsidiaries and agencies
NATIONS VARIABLE ANNUITY
A TAX-DEFERRED VARIABLE ANNUITY
ANNUAL REPORT
DECEMBER 31, 1999
[LOGO]
HARTFORD LIFE
Issued by: Hartford Life Insurance Company
<PAGE>
HARTFORD SMALL COMPANY HLS FUND
- ------------------------
PORTFOLIO MANAGER
- ------------------------
[PHOTO] STEVEN C. ANGELI, CFA
Vice President
Wellington Management
Company, LLP
- ------------------------
PERFORMANCE OVERVIEW
- ------------------------
8/9/96 - 12/31/99
GROWTH OF A $10,000 INVESTMENT.
[GRAPH]
<TABLE>
<S> <C>
Small Company Fund IB $23,054
Russell 2000 $16,119
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
RETURNS AS OF 12/31/99
1 YEAR SINCE INCEPT.*
------ -------------
<S> <C> <C>
SMALL COMPANY IB 65.54% 27.90%
RUSSELL 2000 21.26% 15.10%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
</TABLE>
*Annualized Returns
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE SMALL COMPANY HLS FUND
CLASS IB SHARES. (THE RETURNS INCLUDE THE FUND LEVEL EXPENSES, BUT EXCLUDE THE
INSURANCE CHARGES).
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE VALUE OF THE CONTRACT
WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL INVESTMENT.
HOW DID THE FUND PERFORM?
The Hartford Small Company HLS Fund returned 65.54% for the one-year time period
ended December 31, 1999, outpacing the Lipper Small Cap VA-UF Average that
increased 38.3%.
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.
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.
<PAGE>
HARTFORD CAPITAL APPRECIATION HLS FUND
- ------------------------
PORTFOLIO MANAGER
- ------------------------
[PHOTO] SAUL J. PANNELL, CFA
Senior Vice President
and Partner
Wellington Management
Company, LLP
- ------------------------
PERFORMANCE OVERVIEW
- ------------------------
1/1/89 - 12/31/99
GROWTH OF A $10,000 INVESTMENT.
[GRAPH]
<TABLE>
<S> <C>
Capital Appreciation Fund IB $59,625
S&P 500 $53,268
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
RETURNS AS OF 12/31/99
1 YEAR 5 YEAR* 10 YEAR*
------ ------- --------
<S> <C> <C> <C>
CAPITAL APPRECIATION IB 37.21% 24.79% 19.55%
S&P 500 21.03% 28.54% 18.21%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
</TABLE>
*Annualized Returns
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE CAPITAL APPRECIATION HLS
FUND CLASS IB SHARES. (THE RETURNS INCLUDE THE FUND LEVEL EXPENSES, BUT EXCLUDE
THE INSURANCE CHARGES).
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE VALUE OF THE CONTRACT
WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL INVESTMENT.
HOW DID THE FUND PERFORM?
The Hartford Capital Appreciation HLS Fund gained 37.21% for the 1-year period
ended December 31, 1999 versus a return of 40.1% for the Lipper Capital
Appreciation VA-UF Average.
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.
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.
<PAGE>
HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND
- ------------------------
PORTFOLIO MANAGER
- ------------------------
[PHOTO] TROND SKRAMSTAD
Senior Vice President
and Partner
Wellington Management
Company, LLP
- ------------------------
PERFORMANCE OVERVIEW
- ------------------------
7/2/90 - 12/31/99
GROWTH OF A $10,000 INVESTMENT.
[GRAPH]
<TABLE>
<S> <C>
International Opportunities $25,633
EAFE GDP Fund IB $25,095
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
RETURNS AS OF 12/31/99
1 YEAR 5 YEAR* SINCE INCEPT.*
<S> <C> <C> <C>
INT'L OPPORT. IB 39.61% 15.16% 10.17%
EAFE GDP* 31.02% 16.01% 10.41%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
</TABLE>
*Annualized Returns
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE INTERNATIONAL
OPPORTUNITIES HLS FUND CLASS IB SHARES. (THE RETURNS INCLUDE THE FUND LEVEL
EXPENSES, BUT EXCLUDE THE INSURANCE CHARGES).
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE VALUE OF THE CONTRACT
WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL INVESTMENT.
*THE MORGAN STANLEY EUROPE AUSTRALIA FAR EAST GDP-NET INDEX
HOW DID THE FUND PERFORM?
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 39.6% versus a return of 42.9% for the Lipper International VA-UF
Average over the same time period.
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.
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.
<PAGE>
HARTFORD STOCK HLS FUND
- ------------------------
PORTFOLIO MANAGER
- ------------------------
[PHOTO] RAND L. ALEXANDER, CFA
Senior Vice President
and Partner
Wellington Management
Company, LLP
- ------------------------
PERFORMANCE OVERVIEW
- ------------------------
1/1/89 - 12/31/99
GROWTH OF A $10,000 INVESTMENT.
[GRAPH]
<TABLE>
<S> <C>
Stock Fund IB $53,268
S&P 500 $50,881
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
RETURNS AS OF 12/31/99
1 YEAR 5 YEAR* 10 YEAR*
<S> <C> <C> <C>
STOCK IB 19.57% 28.26% 17.67%
S&P 500 21.03% 28.54% 18.21%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
</TABLE>
*Annualized Returns
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE STOCK HLS FUND CLASS IB
SHARES. (THE RETURNS INCLUDE THE FUND LEVELEXPENSES, BUT EXCLUDE THE INSURANCE
CHARGES).
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE VALUE OF THE CONTRACT
WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL INVESTMENT.
HOW DID THE FUND PERFORM?
The Hartford Stock HLS Fund returned 19.57% 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.
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.
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.
<PAGE>
HARTFORD DIVIDEND & GROWTH HLS FUND
- ------------------------
PORTFOLIO MANAGER
- ------------------------
[PHOTO] LAURIE A. GABRIEL, CFA
Senior Vice President
and Partner
Wellington Management
Company, LLP
- ------------------------
PERFORMANCE OVERVIEW
- ------------------------
3/9/94 - 12/31/99
GROWTH OF A $10,000 INVESTMENT.
[GRAPH]
<TABLE>
<S> <C>
Dividend & Growth Fund IB $35,352
S&P 500 $27,347
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
RETURNS AS OF 12/31/99
1 YEAR 5 YEAR* SINCE INCEPT.*
------ ------- --------------
<S> <C> <C> <C>
DIVIDEND & GROWTH IB 5.12% 21.85% 18.88%
S&P 500 21.03% 28.54% 24.25%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
</TABLE>
*Annualized Returns
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE DIVIDEND AND GROWTH HLS
FUND CLASS IB SHARES. (THE RETURNS INCLUDE THE FUND LEVEL EXPENSES, BUT EXCLUDE
THE INSURANCE CHARGES).
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE VALUE OF THE CONTRACT
WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL INVESTMENT.
HOW DID THE FUND PERFORM?
The Hartford Dividend and Growth HLS Fund returned 5.12% 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.
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.
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.
<PAGE>
HARTFORD ADVISERS HLS FUND
- --------------------------
PORTFOLIO MANAGER
- --------------------------
RAND L. ALEXANDER, CFA [PHOTO]
Senior Vice President
and Partner
Wellington Management
Company, LLP
[PHOTO] PAUL D. KAPLAN
Senior Vice President
and Partner
Wellington Management
Company, LLP
- ------------------------
PERFORMANCE OVERVIEW
- ------------------------
1/1/89 - 12/31/99
GROWTH OF A $10,000 INVESTMENT.
[GRAPH]
<TABLE>
<S> <C>
Advisers Fund IB $53,268
S&P 500 $36,355
Lehman Govt/Corp $20,909
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
RETURNS AS OF 12/31/99
1 YEAR 5 YEAR* 10 YEAR*
------ ------- --------
<S> <C> <C> <C>
ADVISERS IB 10.39% 20.54% 13.78%
S&P 500 21.03% 28.54% 18.21%
LEHMAN GOVT/CORP -2.15% 7.61% 7.65%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
</TABLE>
*Annualized Returns
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE ADVISERS HLS FUND CLASS IB
SHARES. (THE RETURNS INCLUDE THE FUND LEVEL EXPENSES, BUT EXCLUDE THE INSURANCE
CHARGES).
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE VALUE OF THE CONTRACT
WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL INVESTMENT.
HOW DID THE FUND PERFORM?
The Hartford Advisers HLS Fund returned 10.39% 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.
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.
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.
<PAGE>
HARTFORD BOND HLS FUND
- --------------------------
PORTFOLIO MANAGER
- --------------------------
[PHOTO] ALISON D. GRANGER, CFA
Senior Vice President
The Hartford Investment
Management Company (HIMCO)
- ------------------------
PERFORMANCE OVERVIEW
- ------------------------
1/1/89 - 12/31/99
GROWTH OF A $10,000 INVESTMENT.
[GRAPH]
<TABLE>
<S> <C>
Bond Fund IB $20,059
Lehman Govt/Corp $20,909
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
RETURNS AS OF 12/31/99
1 YEAR 5 YEAR* 10 YEAR*
------ ------- --------
<S> <C> <C> <C>
BOND IB -2.19% 7.48% 7.21%
LEHMAN GOVT/CORP -2.15% 7.61% 7.65%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
</TABLE>
*Annualized Returns
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN THE BOND HLS FUND CLASS IB
SHARES. (THE RETURNS INCLUDE THE FUND LEVEL EXPENSES, BUT EXCLUDE THE INSURANCE
CHARGES).
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE VALUE OF THE CONTRACT
WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL INVESTMENT.
HOW DID THE FUND PERFORM?
The Hartford Bond HLS Fund Class IB shares placed in the 72nd percentile of its
Lipper peer group for the twelve-months ended December 31, 1999, producing a
total return of -2.19% versus the -1.57% return of the Lipper Corporate Debt
"BBB" rated Variable Annuity Underlying Fund Universe.
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.
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.
<PAGE>
NATIONS BALANCED ASSETS PORTFOLIO
- --------------------------
PORTFOLIO MANAGER
- --------------------------
VALUE MANAGEMENT TEAM,
TRADESTREET INVESTMENT ASSOCIATES, INC.(1)
- ------------------------
PERFORMANCE OVERVIEW
- ------------------------
3/27/98 - 12/31/99
GROWTH OF A $10,000 INVESTMENT.
[GRAPH]
<TABLE>
<S> <C>
Nations Balanced $13,660
Assets Portfolio
S&P 500 $10,647
Lehman Aggregate $9,918
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
RETURNS AS OF 12/31/99
1 YEAR SINCE INCEPT.*
------ --------------
<S> <C> <C>
NATIONS BALANCED ASSETS 1.44% -0.47%
S&P 500 21.03% 19.34%
LEHMAN AGGREGATE BOND INDEX* -0.82% 3.62%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
</TABLE>
*Annualized Returns
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN NATIONS BALANCED ASSETS
PORTFOLIO. (THE RETURNS INCLUDE THE PORTFOLIO LEVEL EXPENSES, BUT EXCLUDE THE
INSURANCE CHARGES).
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE VALUE OF THE CONTRACT
WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL INVESTMENT.
HOW DID THE PORTFOLIO PERFORM?
Nations Balanced Assets Portfolio's total return for the year was 1.44%,
compared with the 21.03% return of the Standard & Poor's 500 Composite Stock
Price Index (S&P 500)(2) and the - 0.82% of the Lehman Aggregate Bond Index(3).
The equity market overwhelmingly favored growth stocks over value stocks in
1999. Illustrating this point is the performance of two style benchmarks - for
the year, the Russell 1000 Growth Index returned more than 4 times that of the
Russell 1000 Value Index(4).
The fixed income portion of the Portfolio did not add to overall performance as
fixed income securities struggled in a rising interest rate environment.
WHY DID THE PORTFOLIO PERFORM THIS WAY?
Since the first interest rate hike by the Federal Reserve Board (the Fed) on
June 30, the market's performance reminded us of a Force 5 tornado: unbelievably
powerful, leaving extraordinary damage in its wake. As illustrated, growth stock
performance shocked value investors with its incredible success in 1999. But, as
strategists noted and a few investors realized, instead of the 20% return for
the S&P 500, the average index stock, excluding technology, gained just 2%. The
huge disparity between the performance of the Russell 1000 Growth Index and the
Russell 1000 Value Index was essentially the result of the technology sector
with help from mega-capitalization companies WAL-MART STORES, HOME DEPOT and
GENERAL ELECTRIC. All together, one sector and three stocks represented 86% of
the performance difference between the styles.
Nations Balanced Asset Portfolio's equity investment philosophy is that a
portfolio of undervalued companies exhibiting low price/earnings ratios with a
catalyst for improvement should, over time, outperform the market while
incurring lower than market risk.
The discipline's valuation factors (low price to earnings, low price to book)
proved to be decidedly negative elements as the market exhibited the phenomena
known as GAAP investing ("growth at any price"). Additionally, the market
favored the largest companies. Because many mega-capitalization companies'
valuations are extended relative to historical norms, the Portfolio's holdings
during 1999 were typically companies with smaller market capitalizations than
the S&P 500 average. This posture proved to be out of favor during the year.
In terms of fixed income performance, 1999 was the worst year in 70 years for
the 30-year U.S. Treasury bond, which posted a return of -14.89%. The Lehman
Aggregate Bond Index returned -.82%, for only its second yearly loss in history.
The fourth quarter provided an ugly close to an already disappointing year.
Interest rates
(1) As of January 18, 2000, the Value Management Team changed its name to the
Value Strategies Team and TradeStreet Investment Associates, Inc. became
Banc of America Capital Management, Inc.
(2) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
market-capitalization weighted index that measures the market value of 400
industrial stocks, 60 transportation and utility company stocks, and 40
financial issues. It is unmanaged and unavailable for investment.
(3) The Lehman Aggregate Bond Index is an unmanaged index composed of the
Government Corporate Bond Index, the Asset-Backed Securities Index and the
Mortgage-Backed Securities Index and includes U.S. Treasury issues, agency
issues, corporate bond issues and mortgage-backed issues. It includes
reinvestment of dividends and is unavailable for investment.
(4) The Russell 1000(R) Growth Index measures the performance of those Russell
1000 companies with higher price-to-book ratios and higher forecasted growth
values relative to the Russell 1000 Index as a whole. The Russell
1000-Registered Trademark- Value Index measures the performance of those
Russell 1000 companies with lower price-to-book ratios and lower forecasted
growth values relative to the Russell 1000 Index as a whole.
<PAGE>
NATIONS BALANCED ASSETS PORTFOLIO
rose sharply as the market began to accept that the Fed had more tightening work
to do before the U.S. economy would fall back within a sustainable growth path.
The Portfolio's fixed income holdings slightly underperformed the Lehman
Aggregate Bond Index for the year. This underperformance was due primarily to an
underweighting of corporate bonds and mortgage-backed securities during the year
versus the Index.
WHAT IS YOUR OUTLOOK FOR 2000?(5)
Looking forward, the fixed income markets are clearly focused on the Fed. With
the expected passing of Y2K concerns, the Fed should be looking at the continued
above-trend growth of the U.S. economy as well as the current lofty levels of
the equity markets in setting interest rates in 2000. The market is expecting at
least one-half of a percentage point of further tightening, and is nervous about
the possibility of even more. With this uncertainty regarding the level of
interest rates, the year 2000 looks to be another challenging one for fixed
income managers.
In the equity markets, it is important to recognize the extraordinary and likely
short-term nature of the market's current returns as well as the circumstances
driving that performance. Strategically, the equity portion of the Portfolio has
maintained a cyclical tilt, owning stocks that are sensitive to economic
strength, since the late spring of 1999. This strategy is supported by both
strong economic data and solid traditional valuation measures.
The domestic economy continues to remain strong as witnessed by the strongest
holiday sales in seven years and improved consumer confidence. Globally, leading
indicators in Canada, Japan, France and the Netherlands, and the United Kingdom
are strong. Asia, ex-Japan, seems to have bottomed and the region may once again
roar as the U.S. and China made significant progress on World Trade Organization
issues. Also, support for firmer commodity prices is building as evidenced by
price increases in pulp, paper, aluminum, nickel, zinc, steel, petrochemical
feed stocks, oil, freight, labor, selective engineering and construction
services, cans and fructose. These factors and increased overall global economic
strength should create a favorable economic backdrop for domestic value oriented
stocks such as INTERNATIONAL PAPER, NUCOR CORPORATION and EXXON MOBIL
CORPORATION, among others.
Entering the year 2000, the Portfolio is most overweighted in the basic
materials, energy and finance sectors because we think the valuations in these
sectors are compelling from a "bottom up" perspective. The Portfolio is most
underweighted in technology, health care and consumer staples as the majority of
stocks in these areas are overvalued within the framework of the value
discipline.
Some of the companies considered most attractive within the overweighted sectors
include, as noted, INTERNATIONAL PAPER and NUCOR in the basic materials sector;
ROYAL DUTCH PETROLEUM and EXXON in the energy sector; and CITIGROUP, INC., CHASE
MANHATTAN, THE BANK OF NEW YORK and FLEETBOSTON FINANCIAL in the finance sector.
All of the above companies offer attractive valuations with solid improving
earnings potential. They are undervalued relative to their peers in the same
industry as well as to the market.(6)
(5) The outlook for this Portfolio may differ from that presented for other
Nations Funds Portfolios.
(6) Portfolio holdings are subject to change and may not be representative of
current holdings.
<PAGE>
NATIONS DISCIPLINED EQUITY PORTFOLIO
- --------------------------
PORTFOLIO MANAGER
- --------------------------
STRUCTURED PRODUCTS MANAGEMENT TEAM,
TRADESTREET INVESTMENT ASSOCIATES, INC.(1)
- ------------------------
PERFORMANCE OVERVIEW
- ------------------------
3/27/98 - 12/31/99
GROWTH OF A $10,000 INVESTMENT.
[GRAPH]
<TABLE>
<S> <C>
Nations Disciplined Equity $13,660
S&P 500 $11,682
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
RETURNS AS OF 12/31/99
1 YEAR SINCE INCEPT.*
------ --------------
<S> <C> <C>
NATIONS DISCIPLINED EQUITY 9.75% 9.20%
S&P 500 21.03% 19.34%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
</TABLE>
*Annualized Returns
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN NATIONS DISCIPLINED EQUITY
PORTFOLIO. (THE RETURNS INCLUDE THE PORTFOLIO LEVEL EXPENSES, BUT EXCLUDE THE
INSURANCE CHARGES).
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE VALUE OF THE CONTRACT
WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL INVESTMENT.
HOW DID THE PORTFOLIO PERFORM?
For the year, Nations Disciplined Equity Portfolio's performance was
disappointing; returning 9.75% compared with its benchmark, the Standard &
Poor's 500 Composite Stock Price Index (S&P 500)(2), which returned 21.03%. We
have recently announced changes to the Portfolio's investment objective and
principal strategies to better serve our shareholders.
WHY DID THE PORTFOLIO PERFORM THIS WAY?(3)
The primary sources of underperformance were market capitalization and style,
i.e., the Disciplined Equity investment process model's valuation component.
Since the first interest rate hike by the Federal Reserve Board on June 30, the
market's performance reminded us of a Force 5 tornado: unbelievably powerful,
leaving extraordinary damage in its wake. As illustrated, growth stock
performance shocked value investors with its incredible success in 1999. But, as
strategists noted and a few investors realized, instead of the 20% return for
the S&P 500, the average index stock, excluding technology, gained just 2%. The
huge disparity between the performance of the Russell 1000 Growth Index and the
Russell 1000 Value Index(4) was essentially confined to the technology sector
with help from mega-capitalization companies WAL-MART STORES, HOME DEPOT and
GENERAL ELECTRIC. All together, one sector and three stocks represented 86%
of the performance difference between the styles.
In addition to style, the Portfolio's capitalization proved to be a
significantly negative factor during the year. The largest 100 stocks within the
S&P 500 comprise over 70% of the Index's market capitalization. The Portfolio
was postured away from the largest stocks and this positioning was detrimental
to results.
The financial sector was the largest positive contributor to performance in
1999. The portfolio's sector return posted a 25% gain while the Index sector
advanced less than 5%. Most of the Portfolio's financial holdings responded
favorably but positions in MORGAN STANLEY DEAN WITTER, CAPITAL ONE, MGIC
INVESTMENT CORP and AMERICAN INTERNATIONAL GROUP did particularly well,
advancing 100%, 45%, 50% and 35%, respectively.
Though the broad health care sector was under pressure in 1999 due to rising
interest rates and a less than favorable business environment, the Portfolio's
holdings in Biogen and Allergan followed strong earnings momentum and advanced
40% and 55% respectively. As a result, the Portfolio's health care holdings
outperformed the Index sector +8.5% vs. -9.5% over the year.
The Portfolio's worst performing sector during 1999 was technology. Positions in
ADAPTEC, LEXMARK, ALTERA, and COMPUTER SCIENCES responded well to positive
earn-
(1) As of January 18, 2000, the Structured Products Management Team changed its
name to the Quantitative Strategies Team and TradeStreet Investment
Associates, Inc. became Banc of America Capital Management, Inc.
(2) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
market-capitalization weighted index that measures the market value of 400
industrial stocks, 60 transportation and utility company stocks, and 40
financial issues. It is unmanaged and unavailable for investment.
(3) Portfolio characteristics are subject to change and may not be
representative of current characteristics.
(4) The Russell 1000-Registered Trademark- Growth Index measures the
performance of those Russell 1000 companies with higher price-to-book ratios
and higher forecasted growth values relative to the Russell 1000 Index as a
whole. The Russell 1000-Registered Trademark- Value Index measures the
performance of those Russell 1000 companies with lower price-to-booK ratios
and lower forecasted growth values relative to the Russell 1000 Index as a
whole.
<PAGE>
ings surprises generated by strong product sales (up 75%, 80%, 60% and 40%
respectively), but failed to make a dent in relative performance. In the S&P
500 technology sector, GAAP investing ("growth at any price") was quite
evident as several of the companies referenced above were technology stocks
that advanced between 100 and 300% for the full year. Not owning them was
detrimental to performance. These companies average $160 billion in market
cap, are trading at 125 times next year's projected earnings and are expected
to grow longer term revenue and earnings about 30%. The discipline's balance
between growth and value factors acted as a performance penalty in 1999.
WHAT IS YOUR OUTLOOK FOR 2000?(5)
Many of the positive factors supporting the market remain in place as we enter
2000. But valuation measures indicating that the market is expensive, along with
rising interest rates, are of some concern. We note as well that our
disappointment with last year's results has led us to change the Portfolio's
investment objective, effective May 1, 2000, to one seeking capital
appreciation. The Portfolio's principal investment strategies and name will also
be changed at the same time. We intend Nations Aggressive Growth Portfolio - the
Portfolio's new name - to better serve your interests.
(5) The outlook for this Portfolio may differ from that presented for other
Nations Funds Portfolios.
<PAGE>
NATIONS INTERNATIONAL GROWTH PORTFOLIO
- --------------------------
PORTFOLIO MANAGER
- --------------------------
BRIAN O'NEILL,
GARTMORE GLOBAL PARTNERS
- ------------------------
PERFORMANCE OVERVIEW
- ------------------------
3/27/98 - 12/31/99
GROWTH OF A $10,000 INVESTMENT.
[GRAPH]
<TABLE>
<S> <C>
Nations International $14,750
Growth EAFE $13,282
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
RETURNS AS OF 12/31/99
1 YEAR SINCE INCEPT.*
------ --------------
<S> <C> <C>
NATIONS INTERNATIONAL GROWTH 43.05% 24.60%
EAFE 26.98% 17.45%
</TABLE>
*Cumulative Returns
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN NATIONS INTERNATIONAL GROWTH
PORTFOLIO. (THE RETURNS INCLUDE THE PORTFOLIO LEVEL EXPENSES, BUT EXCLUDE THE
INSURANCE CHARGES).
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE VALUE OF THE CONTRACT
WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL INVESTMENT.
HOW DID THE PORTFOLIO PERFORM?
The Portfolio rose 43.05% in the 12 months ended December 31, 1999, compared to
a 26.98% rise in the MSCI EAFE Index(1) in U.S. dollar terms, thereby strongly
outperforming the Index return.
WHY DID THE PORTFOLIO PERFORM THIS WAY?(2)
The substantial outperformance was almost entirely attributable to stock
selection, with the Portfolio's telecommunications and technology stocks in all
the major regions registering strong rises in comparison to the Index. These
stocks were identified using the Portfolio's "bottom up" selection process. For
example, the U.K. computer games manufacturer EIDOS Ord. rose by 347.1% in U.S.
dollar terms relative to the Index, due to the extraordinary popularity of its
games characters which has led to very strong demand. Finland's NOKIA was in
second place with a 135.3% outperformance in U.S. dollar terms, reflecting both
the sharp increase in mobile telecomm usage throughout 1999 and the company's
position as the global leader in the design and supply of mobile handsets.
Japan's SHARP CORPORATION registered an outperformance over the 12-month period
of 125.8% in U.S. dollar terms. Sweden's ERICSSON (+119.1% in U.S. dollar terms
versus the Index) was also a top performer, reflecting its dominant position in
the supply of leading-edge wireless data transmission equipment. The benefits
from the strong upsurge in telecommunications stocks spread to other regions,
such as Latin America, where Brazil's TELE NORTE LESTE (+63.7% in U.S. dollar
terms versus the Index) contributed positively to the Portfolio's performance.
The strong showing of these and other select growth stocks more than offset a
weak showing from financials such as BANK OF IRELAND ORD. and pharmaceuticals
such as NOVARTIS AG.
WHAT IS YOUR OUTLOOK FOR 2000?(3)
Looking forward, we expect international equity markets to be supported by
accelerating economic activity in 2000. In Europe, the economic outlook remains
positive although the prospect of rising interest rates in the near term remains
a concern. Across the regions, we are upbeat on the outlook for
telecommunications equipment and services companies over the next few years as
next generation mobile telecomm handsets, broadband Internet access and digital
television are rolled out. However, we will continue to emphasize companies with
excellent prospects for positive unexpected earnings, which we believe is the
key to share price outperformance. The Portfolio remains focused in Europe,
although we continue to seek growth opportunities in Japan, the Pacific ex-Japan
region and Emerging Markets.
INVESTING IN INTERNATIONAL INVESTMENTS MAY INVOLVE SPECIAL RISKS, INCLUDING
FOREIGN TAXATION, CURRENCY RISKS, RISKS ASSOCIATED WITH POSSIBLE DIFFERENCES IN
FINANCIAL STANDARDS, AND OTHER MONETARY AND POLITICAL RISKS ASSOCIATED WITH
FUTURE POLITICAL AND ECONOMIC DEVELOPMENTS.
(1) The Morgan Stanley Capital International EAFE Index is an unmanaged index
consisting of securities listed on exchanges in European, Australasian and
Far Eastern markets and includes dividends and distributions, but does not
reflect fees, brokerage commissions or other expenses of investing.
(2) Portfolio holdings are subject to change and may not be representative of
current holdings.
(3) The outlook for this Portfolio may differ from that presented for other
Nations Funds Portfolios.
<PAGE>
NATIONS MANAGED INDEX PORTFOLIO
- --------------------------
PORTFOLIO MANAGER
- --------------------------
STRUCTURED PRODUCTS MANAGEMENT TEAM,
TRADESTREET INVESTMENT ASSOCIATES, INC.(1)
- ------------------------
PERFORMANCE OVERVIEW
- ------------------------
3/27/98 - 12/31/99
GROWTH OF A $10,000 INVESTMENT.
[GRAPH]
<TABLE>
<S> <C>
Nations Managed Index $13,660
S&P 500 $13,174
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
RETURNS AS OF 12/31/99
1 YEAR SINCE INCEPT.*
------ --------------
<S> <C> <C>
NATIONS MANAGED INDEX 18.27% 16.88%
S&P 500 21.03% 19.34%
</TABLE>
*Annualized Returns
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN NATIONS MANAGED INDEX
PORTFOLIO. (THE RETURNS INCLUDE THE PORTFOLIO LEVEL EXPENSES, BUT EXCLUDE THE
INSURANCE CHARGES).
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE VALUE OF THE CONTRACT
WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL INVESTMENT.
HOW DID THE PORTFOLIO PERFORM?
Nations Managed Index Portfolio underperformed the Standard & Poor's 500
Composite Stock Price Index (S&P 500)(2) in a very difficult equity market. The
Index returned 21.03% compared with the Portfolio's return of 18.27%. The trend
from 1998 continued into 1999 as growth stocks outperformed value stocks, as
defined by the S&P/BARRA style indexes, by a wide margin. And, market leadership
continued to be very narrow as the technology sector moved much higher in 1999,
a year in which investors ignored valuations and chased momentum.
WHY DID THE PORTFOLIO PERFORM THIS WAY?(3)
It was a difficult year for any
manager who was not overweight in technology stocks. The S&P 500 was up over 21%
for the year, but if the technology sector is excluded, the remainder of the S&P
was only up about 2%. Close to half of the stocks in the Index had negative
returns during 1999. In this environment, the fundamental factors that the
Managed Index process uses to measure a company's prospects for the future were
overcome by the "buy at any price" approach of many investors. The Portfolio was
underweight in the technology sector which caused much of its underperformance.
Our stock selection process involves studying a variety of factors that have
historically proven to be powerful indicators of the future performance of
stocks. These factors are each useful in isolation, as well as when combined
with each other. One of the objectives of this process is to take into
consideration the price the Portfolio is paying for the stocks that it acquires.
While the Portfolio will have some representation in a wide range of stocks for
risk control, it will tend to be underweight in stocks that are considered
expensive. In the long run we believe this is a good strategy, but during 1999
overvalued companies outperformed the markets, becoming even more overvalued in
the process. This phenomenon was present in many sectors, but was most prominent
among technology stocks. It is the valuation influence of the process that
resulted in the Portfolio's below market representation in the technology
sector.
The flip side of valuation considerations is that the Portfolio was overweight
in the utilities sector. This exposure was also detrimental to performance, and
was driven by the same aspects of our process that determined the Portfolio's
technology exposure. These weighting differences relative to the Index, while
small, were still significant contributors to the Portfolio's results.
WHAT IS YOUR OUTLOOK FOR 2000?(4)
Many of the positive factors supporting the market remain in place as we enter
2000. But valuation measures indicating that the market is expensive, along with
rising interest rates, are of some concern. At the same time, rising rates could
help temper the single-minded enthusiasm for anything that is a technology play,
resulting in a welcome broadening of the market which should give our stock
selection process better opportunities to deliver the kind of relative
performance that we expect.
(1) As of January 18, 2000, the Structured Products Management Team changed its
name to Quantitative Strategies Team and TradeStreet Investment Associates,
Inc. became Banc of America Capital Management, Inc.
(2) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
market-capitalization weighted index that measures the market value of 400
industrial stocks, 60 transportation and utility company stocks, and 40
financial issues. It is unmanaged and unavailable for investment.
(3) Portfolio characteristics are subject to change and may not be
representative of current characteristics.
(4) The outlook for this Portfolio may differ from that presented for other
Nations Funds Portfolios.
<PAGE>
NATIONS MANAGED SMALLCAP INDEX PORTFOLIO
- --------------------------
PORTFOLIO MANAGER
- --------------------------
STRUCTURED PRODUCTS MANAGEMENT TEAM,
TRADESTREET INVESTMENT ASSOCIATES, INC.(1)
- ------------------------
PERFORMANCE OVERVIEW
- ------------------------
3/27/98 - 12/31/99
GROWTH OF A $10,000 INVESTMENT.
[GRAPH]
<TABLE>
<S> <C>
Nations Managed SmallCap $9,991
S&P 600 $9,602
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
RETURNS AS OF 12/31/99
1 YEAR SINCE INCEPT.*
------ --------------
<S> <C> <C>
NATIONS MANAGED SMALLCAP 5.92% -2.27%
S&P 600 12.43% -0.05%
</TABLE>
*Annualized Returns
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN NATIONS MANAGED SMALLCAP INDEX
PORTFOLIO. (THE RETURNS INCLUDE THE PORTFOLIO LEVEL EXPENSES, BUT EXCLUDE THE
INSURANCE CHARGES).
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE VALUE OF THE CONTRACT
WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL INVESTMENT.
HOW DID THE PORTFOLIO PERFORM?
Nations Managed SmallCap Index Portfolio underperformed the Standard & Poor's
SmallCap 600 Index (the S&P 600 Index)(2) in a very difficult equity market. The
Index returned 12.43% compared with the Portfolio's return of 5.92%. The trend
from 1998 continued into 1999 as small-capitalization growth stocks outperformed
small-capitalization value stocks by 16.5% as defined by the S&P/BARRA style
indexes. Most of this differential was caused by the technology sector, which
moved much higher in 1999, a year in which many investors ignored valuation and
chased momentum. We have recently announced changes to the Portfolio's
investment objective and principal strategies to better serve our
shareholders.
WHY DID THE PORTFOLIO PERFORM THIS WAY?(3)
It was a difficult year for any manager who was not overweight in technology
stocks. In 1999, the S&P 600 Index returned 12.43%. If technology stocks are
excluded, the Index was essentially flat. If we also exclude E Trade Group, an
internet brokerage company typically included in the financial sector, the
remaining securities in the S&P 600 Index would have a negative return for the
year. In this environment, the fundamental factors that the Managed Index
process uses to measure a company's prospects for the future were overcome by
the "buy at any price" approach of many investors. The Portfolio was underweight
in the technology sector and E Trade Group, which caused the majority of the
underperformance.
Our stock selection process involves studying a variety of factors that have
historically proven to be powerful indicators of the future performance of
stocks. These factors are each useful in isolation, as well as when combined
with each other. One of the objectives of this process is to take into
consideration what price the Portfolio is paying for the stocks that it
acquires. While the Portfolio will have some representation in a wide range of
stocks for risk control, it will tend to be underweight in stocks that are
considered expensive. In the long run we believe this is a good strategy, but
during 1999 overvalued companies outperformed the market, becoming even more
overvalued in the process. This phenomenon was present in many sectors, but was
most prominent among technology stocks. It is the valuation influence of the
process that resulted in the Portfolio's below market representation in the
technology sector.
WHAT IS YOUR OUTLOOK FOR 2000?(4)
It was good to see small capitalization stocks participate more fully in the
bull market during 1999. While rising interest rates are a concern, relative to
the large-capitalization market, we believe smaller stocks should deliver good
performance. In addition, rising rates could help temper the single-minded
enthusiasm for anything that is a technology play, resulting in a welcome
broadening of the market. We note as well that our disappointment with last
year's results has led us to change the Portfolio's investment objective,
effective May 1, 2000, to one seeking investment results that (before fees and
expenses) correspond to the total return of the S&P 600 Index. The Portfolio's
principal investment strategies and name will also be changed at the same time.
We intend Nations SmallCap Index Portfolio - the Portfolio's new name - to
better serve your interests.
(1) As of January 18, 2000, the Structured Products Management Team changed its
name to Quantitative Strategies Team and TradeStreet Investment Associates,
Inc. became Banc of America Capital Management, Inc.
(2) The Standard & Poor's SmallCap 600 Index is a market-capitalization weighted
index consisting of 600 common stocks that capture the economic and industry
characteristics of small-company stock performance. It is unmanaged and
unavailable for investment.
(3) Portfolio characteristics are subject to change and may not be
representative of current characteristics.
(4) The outlook for this Portfolio may differ from that presented for other
Nations Funds Portfolios.
BECAUSE SMALL COMPANIES OFTEN HAVE NARROWER MARKETS, LIMITED FINANCIAL RESOURCES
AND STOCKS THAT ARE NOT AS ACTIVELY TRADED AS LARGE COMPANY STOCKS, THEIR SHARE
PRICES WILL BE MORE VOLATILE.
<PAGE>
NATIONS VALUE PORTFOLIO
- --------------------------
PORTFOLIO MANAGER
- --------------------------
VALUE MANAGEMENT TEAM,
TRADESTREET INVESTMENT ASSOCIATES, INC.(1)
- ------------------------
PERFORMANCE OVERVIEW
- ------------------------
3/27/98 - 12/31/99
GROWTH OF A $10,000 INVESTMENT.
[GRAPH]
<TABLE>
<S> <C>
Nations Value Portfolio $13,660
S&P 500 $10,710
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
RETURNS AS OF 12/31/99
1 YEAR SINCE INCEPT.*
------ --------------
<S> <C> <C>
NATIONS VALUE PORTFOLIO 2.50% 3.96%
S&P 500 21.03% 19.34%
</TABLE>
*Annualized Returns
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN NATIONS VALUE PORTFOLIO. (THE
RETURNS INCLUDE THE PORTFOLIO LEVEL EXPENSES, BUT EXCLUDE THE INSURANCE
CHARGES).
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE VALUE OF THE CONTRACT
WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL INVESTMENT.
HOW DID THE PORTFOLIO PERFORM?
Nations Value Portfolio's total return for the year was 2.50%, compared with the
21.03% return of the Standard & Poor's Composite 500 Stock Price Index (S&P 500
Index)(2). The equity market environment overwhelmingly favored growth stocks
over value stocks in 1999. Illustrating this point is the performance of two
style-oriented benchmarks - for the year the Russell 1000 Growth Index(3)
returned more than 4 times that of the Russell 1000 Value Index(4).
WHY DID THE PORTFOLIO PERFORM THIS WAY?
Since the first interest rate hike by the Federal Reserve Board on June 30,
the market's performance reminded us of a Force 5 tornado: unbelievably
powerful, leaving extraordinary damage in its wake. As illustrated, growth stock
performance shocked value investors with its incredible success in 1999. But, as
one strategist noted and few investors realized, "instead of the 20% return for
the S&P 500, the average index stock, excluding technology, gained just 2%." The
huge disparity between the performance of the Russell 1000 Growth Index and the
Russell 1000 Value Index was essentially the result of the technology sector
with help from mega-capitalization companies WAL-MART STORES, HOME DEPOT and
GENERAL ELECTRIC. All together, one sector and three stocks represented 86% of
the performance difference between the styles.
Nations Value Portfolio's investment philosophy is that a portfolio of
undervalued companies exhibiting low price/earnings ratios with a catalyst for
improvement should, over time, outperform the market while incurring lower than
market risk.
The discipline's valuation factors (low price to earnings, low price to book)
proved to be decidedly negative elements as the market exhibited the phenomena
known as GAAP investing ("growth at any price"). Additionally, the market
favored the largest companies. Because many mega-capitalization companies'
valuations are extended relative to historical norms, the Portfolio's holdings
during 1999 were typically companies with smaller market capitalizations than
the S&P 500 average. This posture proved to be out of favor during the year.
(1) As of January 18, 2000, the Value Management Team changed its name to the
Value Strategies Team and TradeStreet Investment Associates, Inc. became
Banc of America Capital Management, Inc.
(2) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
market-capitalization weighted index that measures the market value of 400
industrial stocks, 60 transportation and utility company stocks, and 40
financial issues. It is unmanaged and unavailable for investment.
(3) The Russell 1000-Registered Trademark- Growth Index measures the performance
of those Russell 1000 companies with higheR price-to-book ratios and higher
forecasted growth values relative to the Russell 1000 Index as a whole.
(4) The Russell 1000-Registered Trademark- Value Index measures the performance
of those Russell 1000 companies with lower price-to-booK ratios and lower
forecasted growth values relative to the Russell 1000 Index as a whole. The
Indexes are unmanaged and unavailable for investment.
<PAGE>
NATIONS VALUE PORTFOLIO
WHAT IS YOUR OUTLOOK FOR 2000?(5)
It is important to recognize the extraordinary and likely short-term nature of
the market's current returns as well as the circumstances driving that
performance. Strategically, the Portfolio has maintained a cyclical tilt, owning
stocks that are sensitive to economic strength, since the late spring of 1999.
This strategy is supported by both strong economic data and solid traditional
valuation measures.
Looking forward, the domestic economy continues to remain strong as witnessed by
the strongest holiday sales in seven years and improved consumer confidence.
Globally, leading indicators in Canada, Japan, France and the Netherlands, and
the United Kingdom are strong. Asia, ex-Japan, seems to have bottomed and the
region may once again roar as the U.S. and China made significant progress on
World Trade Organization issues. Also, support for firmer commodity prices is
building as evidenced by price increases in pulp, paper, aluminum, nickel, zinc,
steel, petrochemical feed stocks, oil, freight, labor, selective engineering and
construction services, cans and fructose. These factors and increased overall
global economic strength should create a favorable economic backdrop for
domestic value oriented stocks such as INTERNATIONAL PAPER, NUCOR CORPORATION
and EXXON MOBIL CORPORATION, among others.
Entering the year 2000, the Portfolio is most overweighted in the basic
materials, energy and finance sectors because we think the valuations in these
sectors are compelling from a "bottom up" perspective. The Portfolio is most
underweighted in technology, health care and consumer staples as the majority of
stocks in these areas are overvalued within the framework of the value
discipline.
Some of the companies considered most attractive within the overweighted sectors
include, as noted, INTERNATIONAL PAPER and NUCOR in the basic materials sector;
ROYAL DUTCH PETROLEUM and EXXON in the energy sector; and CITIGROUP, INC., CHASE
MANHATTAN, THE BANK OF NEW YORK and FLEETBOSTON FINANCIAL in the finance sector.
All of the above companies offer attractive valuations with solid improving
earnings potential. They are undervalued relative to their peers in the same
industry as well as to the market.(6)
Based on the compelling undervaluation of the companies held in the portfolio,
we believe Nations Value Portfolio remains an attractive, timely investment
opportunity for investors seeking long term capital growth.
(5) The outlook for this Portfolio may differ from that presented for other
Nations Funds Portfolios.
(6) Portfolio holdings are subject to change and may not be representative of
current holdings.
<PAGE>
NATIONS MARSICO GROWTH & INCOME PORTFOLIO
- --------------------------
PORTFOLIO MANAGER
- --------------------------
THOMAS F. MARSICO,
MARSICO CAPITAL MANAGEMENT, LLC
- ------------------------
PERFORMANCE OVERVIEW
- ------------------------
3/27/98 - 12/31/99
GROWTH OF A $10,000 INVESTMENT.
[GRAPH]
<TABLE>
<S> <C>
Nations Marsico Growth & Inc. $18,891
S&P 500 $13,660
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
RETURNS AS OF 12/31/99
1 YEAR SINCE INCEPT.*
------ --------------
<S> <C> <C>
NATIONS MARSICO GROWTH & INCOME 55.10% 43.33%
S&P 500 21.03% 19.34%
</TABLE>
*Annualized Returns
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN NATIONS MARSICO GROWTH &
INCOME PORTFOLIO. (THE RETURNS INCLUDE THE PORTFOLIO LEVEL EXPENSES, BUT EXCLUDE
THE INSURANCE CHARGES).
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE VALUE OF THE CONTRACT
WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL INVESTMENT.
HOW DID THE PORTFOLIO PERFORM?
Over the past year, the Portfolio significantly outperformed the Standard &
Poor's 500 Composite Stock Price Index (S&P 500)1, the Portfolio's primary
equity benchmark. For the 12 months ended December 31, 1999 Nations Marsico
Growth & Income Portfolio gained 55.10%. The S&P 500 for the same period
returned 21.03%.
WHY DID THE PORTFOLIO PERFORM THIS WAY?(2)
The Portfolio's investment strategies were well positioned from a macroeconomic
outlook. This included being invested in some of the better performing sectors,
industries and individual stocks.
The Portfolio has been well represented in the technology sector through its
holdings in companies such as QUALCOMM, INC., EMC CORPORATION, CISCO SYSTEMS,
INC. and SUN MICROSYSTEMS, INC. -- which produced strong gains in the year.
However, the Portfolio had a variety of positive contributors to performance
outside the technology arena as well, including CITIGROUP, INC., GENENTECH,
INC., SPRINT CORPORATION PCS, GENERAL ELECTRIC COMPANY, AMERICA ONLINE, INC. and
TIFFANY & CO. Retail stocks such as HOME DEPOT and WAL-MART STORES also
continued to perform very well for the Portfolio.
Given the underlying strength of the Portfolio's investment results, there were
- -- fortunately -- relatively feW areas that detracted from returns. However,
certain financial services positions struggled. In addition, positions in health
care were reduced, as were several energy-related holdings.
WHAT IS YOUR OUTLOOK FOR 2000?(3)
Our overall macroeconomic outlook remains positive. We believe there is good
potential for strong equity returns in 2000. There are several primary factors
that, in our opinion, help create an overall favorable investing backdrop for
equities. These include productivity gains associated with technological
advancements, a strong U.S. consumer, higher-than-expected Federal budget
surpluses and the expected escalation of free trade.
(1) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
market-capitalization weighted index that measures the market value of 400
industrial stocks, 60 transportation and utility company stocks, and 40
financial issues. It is unmanaged and unavailable for investment.
(2) Portfolio holdings are subject to change and may not be representative of
current holdings.
(3) The outlook for this Portfolio may differ from that presented for other
Nations Funds Portfolios.
<PAGE>
NATIONS MARSICO FOCUSED EQUITIES PORTFOLIO
- --------------------------
PORTFOLIO MANAGER
- --------------------------
THOMAS F. MARSICO,
MARSICO CAPITAL MANAGEMENT, LLC
- ------------------------
PERFORMANCE OVERVIEW
- ------------------------
3/27/98 - 12/31/99
GROWTH OF A $10,000 INVESTMENT.
[GRAPH]
<TABLE>
<S> <C>
Nations Focused Equities $19,951
S&P 500 $13,660
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
RETURNS AS OF 12/31/99
1 YEAR SINCE INCEPT.*
------ --------------
<S> <C> <C>
NATIONS FOCUSED EQUITIES 53.28% 47.83%
S&P 500 21.03% 19.34%
</TABLE>
*Annualized Returns
THE CHART REPRESENTS A HYPOTHETICAL INVESTMENT IN NATIONS MARSICO FOCUSED
EQUITIES PORTFOLIO. (THE RETURNS INCLUDE THE PORTFOLIO LEVEL EXPENSES, BUT
EXCLUDE THE INSURANCE CHARGES).
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE VALUE OF THE CONTRACT
WILL FLUCTUATE SO THAT WHEN REDEEMED, IT MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL INVESTMENT.
HOW DID THE PORTFOLIO PERFORM?
Over the past year, the Portfolio significantly outperformed the Standard &
Poor's 500 Composite Stock Price Index (S&P 500 Index)(1), the Portfolio's
primary equity benchmark. For the 12 months ended December 31, 1999 Nations
Marsico Focused Equities Portfolio gained 53.28%. The S&P 500 for the same
period returned 21.03%.
WHY DID THE PORTFOLIO PERFORM THIS WAY?(2)
The Portfolio's investment strategies were well positioned from a macroeconomic
outlook. This included being invested in some of the better performing sectors,
industries and individual stocks.
The Portfolio was well represented in the technology sector through its holdings
in companies such as QUALCOMM, INC., EMC CORPORATION, CISCO SYSTEMS, INC. and
SUN MICROSYSTEMS, INC. -- which produced strong gains for the year. However, the
Portfolio had a variety of positive contributors to performance outside the
technology arena as well, including CITIGROUP, INC., GENENTECH, INC., SPRINT
CORPORATION PCS, GENERAL ELECTRIC COMPANY, AMERICA ONLINE, INC. and TIFFANY &
CO. Retail stocks such as HOME DEPOT and WAL-MART STORES also continued to
perform very well for the Portfolio.
Given the underlying strength of the Portfolio's investment results, there were
- -- fortunately -- relatively feW areas that detracted from returns. However,
certain financial services positions struggled. In addition, positions in health
care were reduced, as were several energy-related holdings.
WHAT IS YOUR OUTLOOK FOR 2000?(3)
Our overall macroeconomic outlook remains positive. We believe there is good
potential for strong equity returns in 2000. There are several primary factors
that, in our opinion, help create an overall favorable investing backdrop for
equities. These include productivity gains associated with technological
advancements, a strong U.S. consumer, higher-than-expected Federal budget
surpluses and the expected escalation of free trade.
(1) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
market-capitalization weighted index that measures the market value of 400
industrial stocks, 60 transportation and utility company stocks, and 40
financial issues. It is unmanaged and unavailable for investment.
(2) Portfolio holdings are subject to change and may not be representative of
current holdings.
(3) The outlook for this Portfolio may differ from that presented for other
Nations Funds Portfolios.
<PAGE>
IF YOU'D LIKE TO WRITE
US, PLEASE SEND YOUR
NOTE OR LETTER TO
ONE OF THE FOLLOWING
ADDRESSES:
BY REGULAR MAIL:
Hartford Life, Inc.
Attention: IPS
P.O. Box 5085
Hartford, CT 06102-5085
BY E-MAIL ON THE INTERNET:
[email protected]
ISSUER:
Hartford Life Insurance Company
P.O. Box 2999
Hartford, CT 06104-2999
PRINCIPAL UNDERWRITER:
Hartford Securities Distribution Company, Inc.
P.O. Box 2999
Hartford, CT 06104-2999
[LOGO]
INVESTMENT MANAGERS:
HL Investment Advisors, Inc.
P.O.Box2999
Hartford,CT06104-2999
INVESTMENT SUB-ADVISERS:
Hartford Investment Management Company (HIMCO)
P.O. Box 1744
Hartford, CT 06114-1744
Wellington Management Company, LLP
75 State Street
Boston, MA 02109
Banc of America Advisors, Inc.
101 S. Tryon Street, 33rd Floor
Charlotte, NC 28255
INVESTMENT SUB-ADVISERS:
Gartmore Global Partners
101 S. Tryon Street, 10th Floor
Charlotte, NC 28255
Marsico Capital Management, LLC
1200 17th Street
Denver, CO 80202
Banc of America
Capital Management, Inc.
101 S. Tryon Street, 9th Floor
Charlotte, NC 28255
AIM Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
The Nations Variable Annuity is a flexible premium variable annuity issued by
Hartford Life Insurance Company, Simsbury, CT (Countrywide: HL-VA99; FL:
HL-VA99FL; NY: HL-VACRT94NY, NC: HL-VA9920P, OR: HL-VA99OR; TX: HL-VA99TX and
HL-VA99ODBTX). The Nations Variable Annuity is under written and distributed by
Hartford Securities Distribution Company, Inc.
This material is authorized for distribution only when preceded or accompanied
by a current prospectus and current Nations Variable Annuity performance sheet.
Please read the prospectus carefully before investing or sending money.
NATANN-2-00-1189 Printed in U.S.A. (C) 2000 TheHartford, Hartford, CT 06115
Hartford Life Insurance Company
P.O. Box 5085
Hartford, CT 06102-5085
<PAGE>
- --------------------------------------------------------------------------------
Performance Summary of Hartford HLS Mutual Funds
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
FUNDS
----------------------------------------------------------------------------------------------------------------------------
CLASS IA SHARES TOTAL RETURNS FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------
Stock.............................. 19.78% 33.47% 31.38% 24.37% 34.10% (1.89)% 14.34% 10.04% 24.58% (3.87)% 26.02%
Bond............................... (2.02) 8.15 11.35 3.52 18.49 (3.95) 10.24 5.53 16.43 8.39 12.10
Money Market....................... 4.89 5.25 5.31 5.19 5.74 3.95 2.94 3.63 6.01 8.09 9.10
Advisers........................... 10.59 24.66 24.51 16.59 28.34 (2.74) 12.25 8.30 20.33 1.26 21.72
Capital Appreciation............... 37.46 15.48 22.34 20.70 30.25 2.50 20.80 16.98 53.99 (10.90) 24.11
Mortgage Securities................ 1.52 6.72 9.01 5.07 16.17 (1.61) 6.31 4.64 14.71 9.70 13.13
Index.............................. 20.49 28.06 32.61 22.09 36.55 0.94 9.12 6.82 29.53 (3.99) 30.47
International Opportunities........ 39.86 13.16 0.34 12.93 13.93 (1.94) 33.73 (4.43) 13.00 (11.76)* --
Dividend and Growth................ 5.31 16.42 31.89 22.91 36.37 1.96* -- -- -- -- --
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% 1.31% 10.06% 7.61% 30.39% (3.11)% 31.62%
Standard & Poor's 400 Stock Index
(MidCap).......................... 14.7 19.11 32.25 19.18 30.88 (3.59) 11.03 7.58 16.13 8.28 14.24
Lehman Gov't./Corp. Bond Index..... (2.15) 9.47 9.76 2.90 19.24 (3.51) 11.03 7.58 16.13 8.28 14.24
90-Day Treasury Bills.............. 4.87 4.98 5.33 5.29 5.80 4.14 3.12 3.70 5.90 7.95 8.67
MSCI EAFEGDP....................... 31.02 26.71 5.77 7.63 11.16 7.81 33.56 (9.65) 10.73 -- --
Russell 2000 Index................. 21.26 (2.55) 22.36 16.51 28.45 (1.82) 18.71 18.41 46.04 (19.48) 16.26
Russell 2500 Index................. 24.15 0.38 24.43 19.04 31.70 (1.07) 16.54 16.18 46.69 (14.88) 19.43
Lehman Brothers Mortgage Backed
Bond Index........................ 1.86 6.96 9.49 5.35 16.80 (1.61) 6.84 8.96 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.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS
BALANCED DISCIPLINED INTERNATIONAL
ASSETS PORTFOLIO EQUITY PORTFOLIO GROWTH PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- ----------------
<S> <C> <C> <C>
ASSETS:
Investments:
Nations Balanced Assets Portfolio
Shares 574,858
Cost $5,506,191
Market Value................................ $5,547,378 -- --
Nations Disciplined Equity Portfolio
Shares 559,018
Cost $5,804,268
Market Value................................ -- $6,501,381 --
Nations International Growth Portfolio
Shares 307,105
Cost $3,349,127
Market Value................................ -- -- $4,406,953
Nations Managed Index Portfolio
Shares 1,078,917
Cost $12,180,804
Market Value................................ -- -- --
Nations Managed SmallCap Index Portfolio
Shares 247,799
Cost $2,246,503
Market Value................................ -- -- --
Nations Value Portfolio
Shares 901,207
Cost $9,157,946
Market Value................................ -- -- --
Nations Marsico Growth & Income Portfolio
Shares 3,094,944
Cost $40,545,791
Market Value................................ -- -- --
Nations Marsico Focused Equities Portfolio
Shares 5,434,567
Cost $76,385,267
Market Value................................ -- -- --
Hartford Bond HLS Fund, Inc. -- Class IB
Shares 15,905,231
Cost $16,939,113
Market Value................................ -- -- --
Hartford Stock HLS Fund, Inc. -- Class IB
Shares 6,632,177
Cost $48,829,881
Market Value................................ -- -- --
Due from Hartford Life Insurance Company...... 13,927 6,292 5,651
Receivable from fund shares sold.............. -- -- --
---------- ---------- ----------
Total Assets.................................. 5,561,305 6,507,673 4,412,604
---------- ---------- ----------
LIABILITIES:
Due to Hartford Life Insurance Company........ -- -- --
Payable for fund shares purchased............. 13,944 6,286 5,650
---------- ---------- ----------
Total Liabilities............................. 13,944 6,286 5,650
---------- ---------- ----------
Net Assets (variable annuity contract
liabilities)................................. $5,547,361 $6,501,387 $4,406,954
========== ========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 20 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONS
NATIONS MANAGED NATIONS MARSICO
MANAGED SMALLCAP NATIONS GROWTH &
INDEX PORTFOLIO INDEX PORTFOLIO VALUE PORTFOLIO INCOME PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Nations Balanced Assets Portfolio
Shares 574,858
Cost $5,506,191
Market Value................................ -- -- -- --
Nations Disciplined Equity Portfolio
Shares 559,018
Cost $5,804,268
Market Value................................ -- -- -- --
Nations International Growth Portfolio
Shares 307,105
Cost $3,349,127
Market Value................................ -- -- -- --
Nations Managed Index Portfolio
Shares 1,078,917
Cost $12,180,804
Market Value................................ $14,058,292 -- -- --
Nations Managed SmallCap Index Portfolio
Shares 247,799
Cost $2,246,503
Market Value................................ -- $2,366,484 -- --
Nations Value Portfolio
Shares 901,207
Cost $9,157,946
Market Value................................ -- -- $9,561,809 --
Nations Marsico Growth & Income Portfolio
Shares 3,094,944
Cost $40,545,791
Market Value................................ -- -- -- $58,370,642
Nations Marsico Focused Equities Portfolio
Shares 5,434,567
Cost $76,385,267
Market Value................................ -- -- -- --
Hartford Bond HLS Fund, Inc. -- Class IB
Shares 15,905,231
Cost $16,939,113
Market Value................................ -- -- -- --
Hartford Stock HLS Fund, Inc. -- Class IB
Shares 6,632,177
Cost $48,829,881
Market Value................................ -- -- -- --
Due from Hartford Life Insurance Company...... 73,142 446 -- 38,258
Receivable from fund shares sold.............. -- -- 64,669 --
----------- ---------- ---------- -----------
Total Assets.................................. 14,131,434 2,366,930 9,626,478 58,408,900
----------- ---------- ---------- -----------
LIABILITIES:
Due to Hartford Life Insurance Company........ -- -- 64,711 --
Payable for fund shares purchased............. 73,393 440 -- 38,051
----------- ---------- ---------- -----------
Total Liabilities............................. 73,393 440 64,711 38,051
----------- ---------- ---------- -----------
Net Assets (variable annuity contract
liabilities)................................. $14,058,041 $2,366,490 $9,561,767 $58,370,849
=========== ========== ========== ===========
<CAPTION>
NATIONS MARSICO
FOCUSED HARTFORD BOND HARTFORD STOCK
EQUITIES PORTFOLIO FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ---------------- ----------------
<S> <C> <C> <C>
ASSETS:
Investments:
Nations Balanced Assets Portfolio
Shares 574,858
Cost $5,506,191
Market Value................................ -- -- --
Nations Disciplined Equity Portfolio
Shares 559,018
Cost $5,804,268
Market Value................................ -- -- --
Nations International Growth Portfolio
Shares 307,105
Cost $3,349,127
Market Value................................ -- -- --
Nations Managed Index Portfolio
Shares 1,078,917
Cost $12,180,804
Market Value................................ -- -- --
Nations Managed SmallCap Index Portfolio
Shares 247,799
Cost $2,246,503
Market Value................................ -- -- --
Nations Value Portfolio
Shares 901,207
Cost $9,157,946
Market Value................................ -- -- --
Nations Marsico Growth & Income Portfolio
Shares 3,094,944
Cost $40,545,791
Market Value................................ -- -- --
Nations Marsico Focused Equities Portfolio
Shares 5,434,567
Cost $76,385,267
Market Value................................ $107,115,307 -- --
Hartford Bond HLS Fund, Inc. -- Class IB
Shares 15,905,231
Cost $16,939,113
Market Value................................ -- $15,817,863 --
Hartford Stock HLS Fund, Inc. -- Class IB
Shares 6,632,177
Cost $48,829,881
Market Value................................ -- -- $47,427,123
Due from Hartford Life Insurance Company...... 170,131 32,440 22,212
Receivable from fund shares sold.............. -- -- --
------------ ----------- -----------
Total Assets.................................. 107,285,438 15,850,303 47,449,335
------------ ----------- -----------
LIABILITIES:
Due to Hartford Life Insurance Company........ -- -- --
Payable for fund shares purchased............. 169,915 32,440 22,157
------------ ----------- -----------
Total Liabilities............................. 169,915 32,440 22,157
------------ ----------- -----------
Net Assets (variable annuity contract
liabilities)................................. $107,115,523 $15,817,863 $47,427,178
============ =========== ===========
</TABLE>
______________________________________ 21 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HARTFORD HARTFORD
MONEY MARKET ADVISERS
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
---------------- ----------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Money Market HLS Fund, Inc. --
Class IB
Shares 8,803,924
Cost $8,803,924
Market Value................................ $8,803,924 --
Hartford Advisers HLS Fund, Inc. -- Class IB
Shares 46,289,836
Cost $140,913,914
Market Value................................ -- $137,318,011
Hartford Capital Appreciation HLS Fund,
Inc. -- Class IB
Shares 3,766,760
Cost $20,221,327
Market Value................................ -- --
Hartford International Opportunties HLS Fund,
Inc. -- Class IB
Shares 1,696,401
Cost $2,574,165
Market Value................................ -- --
Hartford Dividend and Growth HLS Fund,
Inc. -- Class IB
Shares 7,479,077
Cost $16,307,225
Market Value................................ -- --
Hartford Small Company HLS Fund, Inc. --
Class IB
Shares 4,658,400
Cost $7,269,447
Market Value................................ -- --
Nations AIM V.I. High Yield Fund
Shares 972,655
Cost $9,025,936
Market Value................................ -- --
Nations AIM V.I. Value Fund
Shares 737,057
Cost $21,357,532
Market Value................................ -- --
Nations AIM V.I. Capital Appreciation Fund
Shares 156,307
Cost $4,123,037
Market Value................................ -- --
Due from Hartford Life Insurance Company........ -- 327,600
Receivable from fund shares sold................ 307 --
---------- ------------
Total Assets.................................... 8,804,231 137,645,611
---------- ------------
LIABILITIES:
Due to Hartford Life Insurance Company.......... -- --
Payable for fund shares purchased............... -- 326,945
---------- ------------
Total Liabilities............................... -- 326,945
---------- ------------
Net Assets (variable annuity contract
liabilities)................................... $8,804,231 $137,318,666
========== ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 22 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HARTFORD HARTFORD
CAPITAL INTERNATIONAL HARTFORD HARTFORD
APPRECIATION OPPORTUNITIES DIVIDEND AND GROWTH SMALL COMPANY
FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- ------------------- ----------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Money Market HLS Fund, Inc. --
Class IB
Shares 8,803,924
Cost $8,803,924
Market Value................................ -- -- -- --
Hartford Advisers HLS Fund, Inc. -- Class IB
Shares 46,289,836
Cost $140,913,914
Market Value................................ -- -- -- --
Hartford Capital Appreciation HLS Fund,
Inc. -- Class IB
Shares 3,766,760
Cost $20,221,327
Market Value................................ $22,964,615 -- -- --
Hartford International Opportunties HLS Fund,
Inc. -- Class IB
Shares 1,696,401
Cost $2,574,165
Market Value................................ -- $3,183,274 -- --
Hartford Dividend and Growth HLS Fund,
Inc. -- Class IB
Shares 7,479,077
Cost $16,307,225
Market Value................................ -- -- $16,086,731 --
Hartford Small Company HLS Fund, Inc. --
Class IB
Shares 4,658,400
Cost $7,269,447
Market Value................................ -- -- -- $10,186,416
Nations AIM V.I. High Yield Fund
Shares 972,655
Cost $9,025,936
Market Value................................ -- -- -- --
Nations AIM V.I. Value Fund
Shares 737,057
Cost $21,357,532
Market Value................................ -- -- -- --
Nations AIM V.I. Capital Appreciation Fund
Shares 156,307
Cost $4,123,037
Market Value................................ -- -- -- --
Due from Hartford Life Insurance Company........ 3,836 -- 2,071 5,728
Receivable from fund shares sold................ -- 110 -- --
----------- ---------- ----------- -----------
Total Assets.................................... 22,968,451 3,183,384 16,088,802 10,192,144
----------- ---------- ----------- -----------
LIABILITIES:
Due to Hartford Life Insurance Company.......... -- 107 -- --
Payable for fund shares purchased............... 3,923 -- 2,043 5,690
----------- ---------- ----------- -----------
Total Liabilities............................... 3,923 107 2,043 5,690
----------- ---------- ----------- -----------
Net Assets (variable annuity contract
liabilities)................................... $22,964,528 $3,183,277 $16,086,759 $10,186,454
=========== ========== =========== ===========
<CAPTION>
AIM V.I.
AIM V.I. AIM V.I. CAPITAL
HIGH YIELD FUND VALUE FUND APPRECIATION FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- -----------------
<S> <C> <C> <C>
ASSETS:
Investments:
Hartford Money Market HLS Fund, Inc. --
Class IB
Shares 8,803,924
Cost $8,803,924
Market Value................................ -- -- --
Hartford Advisers HLS Fund, Inc. -- Class IB
Shares 46,289,836
Cost $140,913,914
Market Value................................ -- -- --
Hartford Capital Appreciation HLS Fund,
Inc. -- Class IB
Shares 3,766,760
Cost $20,221,327
Market Value................................ -- -- --
Hartford International Opportunties HLS Fund,
Inc. -- Class IB
Shares 1,696,401
Cost $2,574,165
Market Value................................ -- -- --
Hartford Dividend and Growth HLS Fund,
Inc. -- Class IB
Shares 7,479,077
Cost $16,307,225
Market Value................................ -- -- --
Hartford Small Company HLS Fund, Inc. --
Class IB
Shares 4,658,400
Cost $7,269,447
Market Value................................ -- -- --
Nations AIM V.I. High Yield Fund
Shares 972,655
Cost $9,025,936
Market Value................................ $8,773,350 -- --
Nations AIM V.I. Value Fund
Shares 737,057
Cost $21,357,532
Market Value................................ -- $24,691,396 --
Nations AIM V.I. Capital Appreciation Fund
Shares 156,307
Cost $4,123,037
Market Value................................ -- -- $5,561,396
Due from Hartford Life Insurance Company........ 3,452 141,795 46,474
Receivable from fund shares sold................ -- -- --
---------- ----------- ----------
Total Assets.................................... 8,776,802 24,833,191 5,607,870
---------- ----------- ----------
LIABILITIES:
Due to Hartford Life Insurance Company.......... -- -- --
Payable for fund shares purchased............... 3,486 141,751 46,478
---------- ----------- ----------
Total Liabilities............................... 3,486 141,751 46,478
---------- ----------- ----------
Net Assets (variable annuity contract
liabilities)................................... $8,773,316 $24,691,440 $5,561,392
========== =========== ==========
</TABLE>
______________________________________ 23 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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:
Nations Balanced Assets Portfolio
1.25%........................... 5,572,071 $0.971285 $ 5,412,069
Nations Balanced Assets Portfolio
1.4%............................ 139,429 0.970327 135,292
Nations Disciplined Equity
Portfolio 1.25%................. 5,488,899 1.148703 6,305,116
Nations Disciplined Equity
Portfolio 1.4%.................. 171,033 1.147563 196,271
Nations International Growth
Portfolio 1.25%................. 2,820,187 1.456237 4,106,861
Nations International Growth
Portfolio 1.4%.................. 206,278 1.454799 300,093
Nations Managed Index Portfolio
1.25%........................... 10,498,075 1.279945 13,436,958
Nations Managed Index Portfolio
1.4%............................ 485,725 1.278673 621,083
Nations Managed SmallCap Index
Portfolio 1.25%................. 2,517,115 0.926420 2,331,905
Nations Managed SmallCap Index
Portfolio 1.4%.................. 37,369 0.925494 34,585
Nations Value Portfolio 1.25%.... 8,893,336 1.045768 9,300,366
Nations Value Portfolio 1.4%..... 250,209 1.044732 261,401
Nations Marsico Growth & Income
Portfolio 1.25%................. 30,214,278 1.828118 55,235,265
Nations Marsico Growth & Income
Portfolio 1.4%.................. 1,716,909 1.826296 3,135,584
Nations Marsico Focused Equities
Portfolio 1.25%................. 53,496,235 1.921235 102,778,839
Nations Marsico Focused Equities
Portfolio 1.4%.................. 2,185,281 1.919315 4,194,243
Hartford Bond Fund 1.25%......... 15,196,721 1.013283 15,398,580
Hartford Bond Fund 1.4%.......... 414,201 1.012271 419,283
Hartford Stock Fund 1.25%........ 34,029,366 1.344228 45,743,226
Hartford Stock Fund 1.4%......... 1,253,993 1.342872 1,683,952
Hartford Money Market Fund
1.25%........................... 8,076,335 1.062965 8,584,861
Hartford Money Market Fund
1.4%............................ 206,577 1.061925 219,370
Hartford Advisers Fund 1.25%..... 108,468,495 1.209174 131,157,285
Hartford Advisers Fund 1.4%...... 4,920,206 1.207970 5,943,461
Hartford Capital Appreciation
Fund 1.25%...................... 15,955,055 1.364508 21,770,800
Hartford Capital Appreciation
Fund 1.4%....................... 875,707 1.363159 1,193,728
Hartford International
Opportunities Fund 1.25%........ 2,221,437 1.350430 2,999,895
Hartford International
Opportunities Fund 1.4%......... 135,930 1.349088 183,382
Hartford Dividend & Growth Fund
1.25%........................... 14,774,415 1.066261 15,753,383
Hartford Dividend & Growth Fund
1.4%............................ 312,973 1.065190 333,376
Hartford Small Company Fund
1.25%........................... 6,011,602 1.598529 9,609,720
Hartford Small Company Fund
1.4%............................ 361,149 1.596941 576,734
AIM V.I. High Yield Fund 1.25%... 8,478,791 0.987879 8,376,020
AIM V.I. High Yield Fund 1.4%.... 402,566 0.986909 397,296
AIM V.I. Value Fund 1.25%........ 16,919,912 1.340529 22,681,633
AIM V.I. Value Fund 1.4%......... 1,500,750 1.339202 2,009,807
AIM V.I. Capital Appreciation
Fund 1.25%...................... 3,467,870 1.444971 5,010,971
AIM V.I. Capital Appreciation
Fund 1.4%....................... 381,301 1.443533 550,421
------------
SUB-TOTAL........................ 508,383,115
------------
ANNUITY CONTRACTS IN THE ANNUITY
PERIOD:
Nations Marsico Focused Equities
Portfolio 1.25%................. 74,140 1.921235 142,441
Hartford Advisers Fund 1.25%..... 180,223 1.209174 217,920
------------
SUB-TOTAL........................ 360,361
------------
GRAND TOTAL........................ $508,743,476
============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 24 ______________________________________
<PAGE>
[Intentionally left blank page]
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HARTFORD HARTFORD
MONEY MARKET ADVISERS
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
---------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends....................................... $265,690 $ 2,712,215
EXPENSES:
Mortality and expense undertakings.............. (71,027) (1,033,901)
-------- -----------
Net investment income (loss).................. 194,663 1,678,314
-------- -----------
CAPITAL GAINS INCOME.............................. 80 10,509,514
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT:
Net realized gain (loss) on security
transactions................................... -- 147
Net unrealized (depreciation) appreciation of
investments during the period.................. -- (4,351,303)
-------- -----------
Net (loss) gain on investments................ -- (4,351,156)
-------- -----------
Net increase in net assets resulting from
operations................................... $194,743 $ 7,836,672
======== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 26 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HARTFORD
HARTFORD INTERNATIONAL HARTFORD HARTFORD
CAPITAL APPRECIATION OPPORTUNITIES DIVIDEND AND GROWTH SMALL COMPANY
FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------------- ---------------- ------------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends....................................... $ 47,931 $ 26,678 $ 240,626 $ --
EXPENSES:
Mortality and expense undertakings.............. (153,020) (17,728) (163,908) (48,943)
---------- -------- --------- ----------
Net investment income (loss).................. (105,089) 8,950 76,718 (48,943)
---------- -------- --------- ----------
CAPITAL GAINS INCOME.............................. 2,166,168 -- 820,318 13,606
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT:
Net realized gain (loss) on security
transactions................................... (4,447) 410 4,115 3,649
Net unrealized (depreciation) appreciation of
investments during the period.................. 2,419,549 609,939 (453,089) 2,865,888
---------- -------- --------- ----------
Net (loss) gain on investments................ 2,415,102 610,349 (448,974) 2,869,537
---------- -------- --------- ----------
Net increase in net assets resulting from
operations................................... $4,476,181 $619,299 $ 448,062 $2,834,200
========== ======== ========= ==========
<CAPTION>
AIM V.I.
AIM V.I. AIM V.I. CAPITAL
HIGH YIELD VALUE APPRECIATION
FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- ----------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends....................................... $ 655,397 $ 63,053 $ 3,419
EXPENSES:
Mortality and expense undertakings.............. (64,208) (134,934) (31,297)
--------- ---------- ----------
Net investment income (loss).................. 591,189 (71,881) (27,878)
--------- ---------- ----------
CAPITAL GAINS INCOME.............................. -- 329,727 106,676
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT:
Net realized gain (loss) on security
transactions................................... 2,649 822 473
Net unrealized (depreciation) appreciation of
investments during the period.................. (179,004) 3,100,198 1,301,433
--------- ---------- ----------
Net (loss) gain on investments................ (176,355) 3,101,020 1,301,906
--------- ---------- ----------
Net increase in net assets resulting from
operations................................... $ 414,834 $3,358,866 $1,380,704
========= ========== ==========
</TABLE>
______________________________________ 27 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS
BALANCED DISCIPLINED INTERNATIONAL
ASSETS PORTFOLIO EQUITY PORTFOLIO GROWTH PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- ----------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends....................................... $ 93,152 $ 13,860 $ 14,599
EXPENSES:
Mortality and expense undertakings.............. (54,669) (63,164) (28,673)
-------- ----------- ----------
Net investment income (loss).................. 38,483 (49,304) (14,074)
-------- ----------- ----------
CAPITAL GAINS INCOME.............................. -- -- 82,257
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT:
Net realized gain (loss) on security
transactions................................... 1,549 18,504 1,750
Net unrealized (depreciation) appreciation of
investments during the period.................. (34,361) 384,708 982,672
-------- ----------- ----------
Net (loss) gain on investments................ (32,812) 403,212 984,422
-------- ----------- ----------
Net increase in net assets resulting from
operations
Net increase (decrease) in net assets
resulting from operations.................... $ 5,671 $ 353,908 $1,052,605
======== =========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 28 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONS
NATIONS MANAGED NATIONS MARSICO
MANAGED SMALLCAP NATIONS GROWTH &
INDEX PORTFOLIO INDEX PORTFOLIO VALUE PORTFOLIO INCOME PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends....................................... $ 64,284 $ 3,452 $ 52,520 $ --
EXPENSES:
Mortality and expense undertakings.............. (105,370) (23,396) (89,552) (349,453)
---------- -------- -------- -----------
Net investment income (loss).................. (41,086) (19,944) (37,032) (349,453)
---------- -------- -------- -----------
CAPITAL GAINS INCOME.............................. -- -- -- --
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT:
Net realized gain (loss) on security
transactions................................... (3,039) (639) 1,282 (2,635)
Net unrealized (depreciation) appreciation of
investments during the period.................. 1,496,743 161,077 82,683 16,435,899
---------- -------- -------- -----------
Net (loss) gain on investments................ 1,493,704 160,438 83,965 16,433,264
---------- -------- -------- -----------
Net increase in net assets resulting from
operations................................... $1,452,618 $140,494 $ 46,933 $16,083,811
========== ======== ======== ===========
<CAPTION>
NATIONS MARSICO HARTFORD HARTFORD
FOCUSED BOND STOCK
EQUITIES PORTFOLIO FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ---------------- ----------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends....................................... $ -- $ 835,869 $ 285,485
EXPENSES:
Mortality and expense undertakings.............. (646,272) (124,292) (338,866)
----------- ----------- -----------
Net investment income (loss).................. (646,272) 711,577 (53,381)
----------- ----------- -----------
CAPITAL GAINS INCOME.............................. 678,013 48,163 6,820,826
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT:
Net realized gain (loss) on security
transactions................................... (31,582) (47,472) 9,437
Net unrealized (depreciation) appreciation of
investments during the period.................. 27,869,380 (993,421) (1,952,858)
----------- ----------- -----------
Net (loss) gain on investments................ 27,837,798 (1,040,893) (1,943,421)
----------- ----------- -----------
Net increase in net assets resulting from
operations................................... $27,869,539 $ (281,153) $ 4,824,024
=========== =========== ===========
</TABLE>
______________________________________ 29 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS
BALANCED DISCIPLINED INTERNATIONAL
ASSETS PORTFOLIO EQUITY PORTFOLIO GROWTH PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- ----------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ 38,483 $ (49,304) $ (14,074)
Capital gains income................................. -- -- 82,257
Net realized gain (loss) on security transactions.... 1,549 18,504 1,750
Net unrealized (depreciation) appreciation of
investments during the period....................... (34,361) 384,708 982,672
---------- ---------- ----------
Net increase (decrease) in net assets resulting from
operations.......................................... 5,671 353,908 1,052,605
---------- ---------- ----------
UNIT TRANSACTIONS:
Purchases............................................ 1,156,272 1,819,944 755,206
Net transfers........................................ 1,911,806 1,154,045 1,456,488
Surrenders for benefit payments and fees............. (363,343) (546,796) (126,539)
Net annuity transactions............................. -- -- --
---------- ---------- ----------
Net increase in net assets resulting from unit
transactions........................................ 2,704,735 2,427,193 2,085,155
---------- ---------- ----------
Net increase in net assets........................... 2,710,406 2,781,101 3,137,760
NET ASSETS:
Beginning of period.................................. 2,836,955 3,720,286 1,269,194
---------- ---------- ----------
End of period........................................ $5,547,361 $6,501,387 $4,406,954
========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION, MARCH 27, 1998 TO DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS
BALANCED DISCIPLINED INTERNATIONAL
ASSETS PORTFOLIO EQUITY PORTFOLIO GROWTH PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- ----------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ 17,594 $ (8,836) $ (1,791)
Net realized gain (loss) on security transactions.... 1,248 333 130
Net unrealized appreciation (depreciation) of
investments during the period....................... 75,548 312,405 75,154
---------- ---------- ----------
Net increase (decrease) in net assets resulting from
operations.......................................... 94,390 303,902 73,493
---------- ---------- ----------
UNIT TRANSACTIONS:
Purchases............................................ 1,191,400 2,135,069 694,879
Net transfers........................................ 1,574,738 1,308,683 509,945
Surrenders for benefit payments and fees............. (23,573) (27,368) (9,123)
Net annuity transactions............................. -- -- --
---------- ---------- ----------
Net increase in net assets resulting from unit
transactions........................................ 2,742,565 3,416,384 1,195,701
---------- ---------- ----------
Net increase in net assets........................... 2,836,955 3,720,286 1,269,194
NET ASSETS:
Beginning of period.................................. -- -- --
---------- ---------- ----------
End of period........................................ $2,836,955 $3,720,286 $1,269,194
========== ========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 30 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONS
NATIONS MANAGED NATIONS MARSICO
MANAGED SMALLCAP NATIONS GROWTH &
INDEX PORTFOLIO INDEX PORTFOLIO VALUE PORTFOLIO INCOME PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ (41,086) $ (19,944) $ (37,032) $ (349,453)
Capital gains income................................. -- -- -- --
Net realized gain (loss) on security transactions.... (3,039) (639) 1,282 (2,635)
Net unrealized (depreciation) appreciation of
investments during the period....................... 1,496,743 161,077 82,683 16,435,899
----------- ---------- ---------- -----------
Net increase (decrease) in net assets resulting from
operations.......................................... 1,452,618 140,494 46,933 16,083,811
----------- ---------- ---------- -----------
UNIT TRANSACTIONS:
Purchases............................................ 4,019,674 413,361 2,498,237 14,891,959
Net transfers........................................ 4,647,387 447,368 2,907,894 16,657,811
Surrenders for benefit payments and fees............. (412,598) (183,734) (486,213) (1,170,199)
Net annuity transactions............................. -- -- -- --
----------- ---------- ---------- -----------
Net increase in net assets resulting from unit
transactions........................................ 8,254,463 676,995 4,919,918 30,379,571
----------- ---------- ---------- -----------
Net increase in net assets........................... 9,707,081 817,489 4,966,851 46,463,382
NET ASSETS:
Beginning of period.................................. 4,350,960 1,549,001 4,594,916 11,907,467
----------- ---------- ---------- -----------
End of period........................................ $14,058,041 $2,366,490 $9,561,767 $58,370,849
=========== ========== ========== ===========
<CAPTION>
NATIONS MARSICO
FOCUSED HARTFORD HARTFORD
EQUITIES PORTFOLIO BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ---------------- ----------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ (646,272) $ 711,577 $ (53,381)
Capital gains income................................. 678,013 48,163 6,820,826
Net realized gain (loss) on security transactions.... (31,582) (47,472) 9,437
Net unrealized (depreciation) appreciation of
investments during the period....................... 27,869,380 (993,421) (1,952,858)
------------ ----------- -----------
Net increase (decrease) in net assets resulting from
operations.......................................... 27,869,539 (281,153) 4,824,024
------------ ----------- -----------
UNIT TRANSACTIONS:
Purchases............................................ 29,008,928 3,905,647 13,615,951
Net transfers........................................ 32,145,445 7,605,278 20,347,861
Surrenders for benefit payments and fees............. (2,587,399) (696,891) (1,527,650)
Net annuity transactions............................. 71,314 -- --
------------ ----------- -----------
Net increase in net assets resulting from unit
transactions........................................ 58,638,288 10,814,034 32,436,162
------------ ----------- -----------
Net increase in net assets........................... 86,507,827 10,532,881 37,260,186
NET ASSETS:
Beginning of period.................................. 20,607,696 5,284,982 10,166,992
------------ ----------- -----------
End of period........................................ $107,115,523 $15,817,863 $47,427,178
============ =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONS
NATIONS MANAGED NATIONS MARSICO
MANAGED SMALLCAP NATIONS GROWTH &
INDEX PORTFOLIO INDEX PORTFOLIO VALUE PORTFOLIO INCOME PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ 7,003 $ (2,330) $ (3,904) $ (26,657)
Net realized gain (loss) on security transactions.... 130 (5) (734) (3,632)
Net unrealized appreciation (depreciation) of
investments during the period....................... 380,746 (41,096) 321,180 1,388,952
----------- ---------- ---------- -----------
Net increase (decrease) in net assets resulting from
operations.......................................... 387,879 (43,431) 316,542 1,358,663
----------- ---------- ---------- -----------
UNIT TRANSACTIONS:
Purchases............................................ 2,891,993 1,174,665 2,902,677 7,617,543
Net transfers........................................ 1,104,396 427,843 1,396,785 3,001,237
Surrenders for benefit payments and fees............. (33,308) (10,076) (21,088) (69,976)
Net annuity transactions............................. -- -- -- --
----------- ---------- ---------- -----------
Net increase in net assets resulting from unit
transactions........................................ 3,963,081 1,592,432 4,278,374 10,548,804
----------- ---------- ---------- -----------
Net increase in net assets........................... 4,350,960 1,549,001 4,594,916 11,907,467
NET ASSETS:
Beginning of period.................................. -- -- -- --
----------- ---------- ---------- -----------
End of period........................................ $ 4,350,960 $1,549,001 $4,594,916 $11,907,467
=========== ========== ========== ===========
<CAPTION>
NATIONS MARSICO
FOCUSED HARTFORD HARTFORD
EQUITIES PORTFOLIO BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ---------------- ----------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ (51,598) $ 233,592 $ 386,624
Net realized gain (loss) on security transactions.... (647) 447 (396)
Net unrealized appreciation (depreciation) of
investments during the period....................... 2,860,660 (127,829) 550,100
------------ ----------- -----------
Net increase (decrease) in net assets resulting from
operations.......................................... 2,808,415 106,210 936,328
------------ ----------- -----------
UNIT TRANSACTIONS:
Purchases............................................ 13,184,406 1,973,020 6,565,916
Net transfers........................................ 4,754,462 3,257,205 2,780,547
Surrenders for benefit payments and fees............. (169,082) (51,453) (115,799)
Net annuity transactions............................. 29,495 -- --
------------ ----------- -----------
Net increase in net assets resulting from unit
transactions........................................ 17,799,281 5,178,772 9,230,664
------------ ----------- -----------
Net increase in net assets........................... 20,607,696 5,284,982 10,166,992
NET ASSETS:
Beginning of period.................................. -- -- --
------------ ----------- -----------
End of period........................................ $ 20,607,696 $ 5,284,982 $10,166,992
============ =========== ===========
</TABLE>
______________________________________ 31 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HARTFORD HARTFORD
MONEY MARKET ADVISERS
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).................. $ 194,663 $ 1,678,314
Capital gains income.......................... 80 10,509,514
Net realized gain (loss) on security
transactions................................. -- 147
Net unrealized appreciation (depreciation) of
investments during the period................ -- (4,351,303)
----------- ------------
Net increase in net assets resulting from
operations................................... 194,743 7,836,672
----------- ------------
UNIT TRANSACTIONS:
Purchases..................................... 3,580,847 34,192,033
Net transfers................................. 4,204,980 65,147,406
Surrenders for benefit payments and fees...... (1,355,381) (4,778,585)
Net annuity transactions...................... -- 207,106
----------- ------------
Net increase in net assets resulting from unit
transactions................................. 6,430,446 94,767,960
----------- ------------
Net increase in net assets.................... 6,625,189 102,604,632
NET ASSETS:
Beginning of period........................... 2,179,042 34,714,034
----------- ------------
End of period................................. $ 8,804,231 $137,318,666
=========== ============
</TABLE>
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE PERIOD FROM INCEPTION, MARCH 27, 1998 TO DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HARTFORD HARTFORD
MONEY MARKET ADVISERS
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)............... $ 22,357 $ 1,676,997
Capital gains income....................... -- --
Net realized gain (loss) on security
transactions.............................. -- 1,191
Net unrealized appreciation (depreciation)
of investments during the period.......... -- 755,399
----------- ------------
Net increase (decrease) in net assets
resulting from operations................. 22,357 2,433,587
----------- ------------
UNIT TRANSACTIONS:
Purchases.................................. 1,205,792 21,876,614
Net transfers.............................. 1,152,764 10,755,426
Surrenders for benefit payments and fees... (201,871) (351,593)
Net annuity transactions................... -- --
----------- ------------
Net increase in net assets resulting from
unit transactions......................... 2,156,685 32,280,447
----------- ------------
Net increase in net assets................. 2,179,042 34,714,034
NET ASSETS:
Beginning of period...................... -- --
----------- ------------
End of period............................ $ 2,179,042 $ 34,714,034
=========== ============
</TABLE>
* From inception, July 16, 1998 to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
______________________________________ 32 ______________________________________
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HARTFORD
HARTFORD INTERNATIONAL HARTFORD HARTFORD
CAPITAL APPRECIATION OPPORTUNITIES DIVIDEND AND GROWTH SMALL COMPANY
FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------------- ---------------- ------------------- ----------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).................. $ (105,089) $ 8,950 $ 76,718 $ (48,943)
Capital gains income.......................... 2,166,168 -- 820,318 13,606
Net realized gain (loss) on security
transactions................................. (4,447) 410 4,115 3,649
Net unrealized appreciation (depreciation) of
investments during the period................ 2,419,549 609,939 (453,089) 2,865,888
----------- ---------- ----------- -----------
Net increase in net assets resulting from
operations................................... 4,476,181 619,299 448,062 2,834,200
----------- ---------- ----------- -----------
UNIT TRANSACTIONS:
Purchases..................................... 5,225,395 823,959 3,202,089 2,064,104
Net transfers................................. 8,027,567 1,251,813 4,526,626 4,660,716
Surrenders for benefit payments and fees...... (706,511) (174,573) (690,509) (68,535)
Net annuity transactions...................... -- -- -- --
----------- ---------- ----------- -----------
Net increase in net assets resulting from unit
transactions................................. 12,546,451 1,901,199 7,038,206 6,656,285
----------- ---------- ----------- -----------
Net increase in net assets.................... 17,022,632 2,520,498 7,486,268 9,490,485
NET ASSETS:
Beginning of period........................... 5,941,896 662,779 8,600,491 695,969
----------- ---------- ----------- -----------
End of period................................. $22,964,528 $3,183,277 $16,086,759 $10,186,454
=========== ========== =========== ===========
<CAPTION>
AIM V.I. AIM V.I. AIM V.I.
HIGH YIELD VALUE CAPITAL APPRECIATION
FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- --------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss).................. $ 591,189 $ (71,881) $ (27,878)
Capital gains income.......................... -- 329,727 106,676
Net realized gain (loss) on security
transactions................................. 2,649 822 473
Net unrealized appreciation (depreciation) of
investments during the period................ (179,004) 3,100,198 1,301,433
---------- ----------- ----------
Net increase in net assets resulting from
operations................................... 414,834 3,358,866 1,380,704
---------- ----------- ----------
UNIT TRANSACTIONS:
Purchases..................................... 2,525,557 8,021,594 1,169,272
Net transfers................................. 4,522,308 11,600,293 2,135,702
Surrenders for benefit payments and fees...... (326,173) (470,425) (122,879)
Net annuity transactions...................... -- -- --
---------- ----------- ----------
Net increase in net assets resulting from unit
transactions................................. 6,721,692 19,151,462 3,182,095
---------- ----------- ----------
Net increase in net assets.................... 7,136,526 22,510,328 4,562,799
NET ASSETS:
Beginning of period........................... 1,636,790 2,181,112 998,593
---------- ----------- ----------
End of period................................. $8,773,316 $24,691,440 $5,561,392
========== =========== ==========
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HARTFORD
HARTFORD INTERNATIONAL HARTFORD HARTFORD
CAPITAL APPRECIATION OPPORTUNITIES DIVIDEND AND GROWTH SMALL COMPANY
FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------------- ---------------- ------------------- ----------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)............... $ 115,336 $ 7,862 $ 216,155 $ (2,997)
Capital gains income....................... -- -- -- --
Net realized gain (loss) on security
transactions.............................. (119) 26 (15) 20
Net unrealized appreciation (depreciation)
of investments during the period.......... 323,740 (830) 232,595 51,082
----------- ---------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations................. 438,957 7,058 448,735 48,105
----------- ---------- ----------- -----------
UNIT TRANSACTIONS:
Purchases.................................. 3,510,954 424,234 6,465,047 485,471
Net transfers.............................. 2,022,841 232,918 1,794,442 166,509
Surrenders for benefit payments and fees... (30,856) (1,431) (107,733) (4,116)
Net annuity transactions................... -- -- -- --
----------- ---------- ----------- -----------
Net increase in net assets resulting from
unit transactions......................... 5,502,939 655,721 8,151,756 647,864
----------- ---------- ----------- -----------
Net increase in net assets................. 5,941,896 662,779 8,600,491 695,969
NET ASSETS:
Beginning of period...................... -- -- -- --
----------- ---------- ----------- -----------
End of period............................ $ 5,941,896 $ 662,779 $ 8,600,491 $ 695,969
=========== ========== =========== ===========
<CAPTION>
AIM V.I. AIM V.I. AIM V.I.
HIGH YIELD VALUE CAPITAL APPRECIATION
FUND FUND FUND
SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
---------------- ---------------- --------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss)............... $ 59,087 $ 4,904 $ (1,052)
Capital gains income....................... -- 85,619 24,715
Net realized gain (loss) on security
transactions.............................. (39) (4,733) 2,118
Net unrealized appreciation (depreciation)
of investments during the period.......... (73,582) 233,667 136,927
---------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations................. (14,534) 319,457 162,708
---------- ----------- ----------
UNIT TRANSACTIONS:
Purchases.................................. 1,011,408 1,133,771 717,967
Net transfers.............................. 646,458 733,569 120,333
Surrenders for benefit payments and fees... (6,542) (5,685) (2,415)
Net annuity transactions................... -- -- --
---------- ----------- ----------
Net increase in net assets resulting from
unit transactions......................... 1,651,324 1,861,655 835,885
---------- ----------- ----------
Net increase in net assets................. 1,636,790 2,181,112 998,593
NET ASSETS:
Beginning of period...................... -- -- --
---------- ----------- ----------
End of period............................ $1,636,790 $ 2,181,112 $ 998,593
========== =========== ==========
</TABLE>
______________________________________ 33 ______________________________________
<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 securites 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 investment in shares of the Hartford, Nations,
and AIM V.I. mutual 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 expenses during the period. Operating results in
the future could vary from the amounts derived from management's
estimates.
3. DEDUCTIONS AND CHARGES:
Certain amounts are deducted from the contracts, as described below:
a) MORTALITY AND EXPENSE RISK CHARGES--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 4.0% of the contract's value to meet premium tax
requirements.
c) ANNUAL MAINTENANCE FEE--An annual maintenance fee up to $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.
______________________________________ 34 ______________________________________
<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 (Nations Balanced
Assets Portfolio, Nations Disciplined Equity Portfolio, Nations
International Growth Portfolio, Nations Managed Index Portfolio, Nations
Managed SmallCap Index Portfolio, Nations Value Portfolio, Nations Marsico
Growth & Income Portfolio, Nations Marsico Focused Equities Portfolio,
Hartford Bond Fund, Hartford Stock Fund, Hartford Money Market Fund,
Hartford Advisers Fund, Hartford Capital Appreciation Fund, Hartford
International Opportunities Fund, Hartford Dividend and Growth Fund,
Hartford Small Company Fund, AIM V.I. High Yield Fund, AIM V.I. Value Fund
and AIM V.I. Capital Appreciation 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.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 17, 2000
______________________________________ 35 ______________________________________
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- INTERNATIONAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -------------------------------------------------------------
COMMON STOCKS - 88.2%
AUSTRALIA - 8.0%
4,000 Australia and New Zealand Banking
Group................................... $ 28,998
1,000 Brambles Industries Ltd................. 27,558
10,000 Cable and Wireless Optus+............... 33,301
6,000 Colonial, Ltd........................... 26,732
100,000 ISIS Communications+.................... 62,152
2,000 Lend Lease Corporation.................. 27,923
2,112 News Corporation........................ 20,436
25,000 Southern Pacific Petroleum+............. 37,619
50,000 TAB Queensland+......................... 69,022
20,000 Techniche Limited+...................... 68,695
1,800 Telstra Corporation ADS Rep 5 Ord.
NPV..................................... 49,050
5,096 Woolworths Ltd.......................... 17,470
----------
468,956
----------
BRAZIL - 1.4%
200 Centrais Eletricas Brasileiras, ADR..... 2,403
15 Centrais Gerasul, ADR+.................. 82
230 Petrol Brasileiros, ADR+................ 5,899
3,000 Tele Norte Leste, ADR................... 76,500
----------
84,884
----------
CANADA - 5.6%
2,500 Biochem Pharma, Inc.+................... 53,812
5,000 Canada Life Financial Corporation+...... 77,096
2,000 Nortel Networks Corporation............. 201,241
----------
332,149
----------
FINLAND - 3.1%
1,000 Nokia AB Oy............................. 181,324
----------
FRANCE - 8.8%
1,500 Accor SA................................ 72,484
1,275 Arentis................................. 74,108
250 Axa..................................... 34,854
600 Carrefour SA............................ 110,668
600 Equant NV+.............................. 68,117
80 L'Oreal................................. 64,189
1,240 Sanofi-Synthelabo+...................... 51,639
304 Total Fina.............................. 40,576
----------
516,635
----------
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -------------------------------------------------------------
GERMANY - 6.9%
1,550 Bayersche Motoren Werke AG+............. $ 47,310
82 Celanese AG+............................ 1,520
330 Deutsch Pfandbrief-Und Hypothekenbank AG
(DePfa-Bank)............................ 24,666
550 Henkel Kgaa NON VTG PRF................. 36,290
750 Mannesman AG (REGD)..................... 180,946
230 SAP AG.................................. 113,297
----------
404,029
----------
HONG KONG - 1.0%
62 i-CABLE Communications Limited+......... 84
25,000 Wharf (Holdings)........................ 58,050
----------
58,134
----------
IRELAND - 4.7%
6,044 Bank of Ireland......................... 48,098
3,000 CRH plc Ord............................. 64,672
2,400 Elan Corporation ADR.................... 70,799
1,000 ESAT Telecom Group ADS+................. 91,500
----------
275,069
----------
ITALY - 1.9%
3,600 ENI SpA (REGD).......................... 19,801
10,000 Tecnost SpA+............................ 37,776
5,000 Telecom Italia Mobile+.................. 55,858
----------
113,435
----------
JAPAN - 8.9%
9,000 Daiwa Securities........................ 140,770
10 East Japan Railway...................... 53,898
6,000 Hitachi................................. 96,254
2,000 Matsushita Electric Industrial.......... 55,366
4 Nippon Telegraph & Telephone............ 68,473
4,000 Sharp Corporation....................... 102,318
1,000 Toppan Printing Company................. 9,978
----------
527,057
----------
MEXICO - 0.6%
1,000 Cifra SA, ADR+.......................... 20,042
280 Grupo Carso SA de CV, ADR+.............. 2,765
170 Grupo Televisa, GDR+.................... 11,603
----------
34,410
----------
NETHERLANDS - 6.5%
1,000 Getronics NV............................ 79,782
1,000 Internationale Nederlanden Groep NV..... 60,381
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
1
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- INTERNATIONAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -------------------------------------------------------------
NETHERLANDS (CONTINUED)
1,200 Koninklijke Kpn NV...................... $ 117,135
1,200 Numico (Koninklijke) NV................. 44,775
400 United Pan-Europe NV+................... 51,174
804 Wolters Kluwer NV....................... 27,213
----------
380,460
----------
PORTUGAL - 0.6%
3,000 Portugal Telecom (REGD)................. 32,910
----------
SINGAPORE - 1.6%
5,815 DBS Group Holding Ltd.+................. 95,288
----------
SOUTH AFRICA - 0.8%
35,000 Sanlam.................................. 48,903
----------
SPAIN - 3.3%
1,320 Endessa................................. 26,209
1,500 Gas Natural+............................ 34,557
2,000 Repsol SA............................... 46,379
3,570 Telefonica SA........................... 89,187
----------
196,332
----------
SWEDEN - 4.0%
1,500 Atlas Copco AB, Series "A".............. 44,382
3,000 Ericsson (L.M.) Telephone Company,
Series B................................ 193,057
----------
237,439
----------
SWITZERLAND - 1.9%
30 Nestle SA (REGD)........................ 54,920
40 Novartis AG (REGD)...................... 58,692
----------
113,612
----------
UNITED KINGDOM - 18.6%
7,500 Amvescap Ord............................ 87,194
24,000 Azlan Group Ord.+....................... 56,192
5,000 Bank of Scotland Ord.................... 58,048
3,511 BG Group plc............................ 22,677
12,000 BP Amoco................................ 120,811
4,800 British Telecommunications Ord.......... 117,266
1,500 EIDOS Ord.+............................. 132,002
2,400 Glaxo Wellcome Ord...................... 67,817
7,000 Granada Group........................... 70,926
7,500 Securicor plc+.......................... 19,255
3,360 Smithkline Beecham Ord.................. 42,861
3,000 Standard Chartered Bank Ord............. 46,552
20,000 Thus plc+............................... 125,301
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -------------------------------------------------------------
UNITED KINGDOM (CONTINUED)
3,000 Unilever................................ $ 20,951
7,000 WPP Group Ord........................... 110,881
----------
1,098,734
----------
TOTAL COMMON STOCKS (Cost $3,715,667)... 5,199,760
----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS (Cost $3,715,667*)........................... 88.2% 5,199,760
----------
OTHER ASSETS AND LIABILITIES (NET)............................. 11.8%
Cash................................................................... $ 702,014
Receivable for investment securities sold.............................. 2,445
Receivable for Fund shares sold........................................ 5,668
Dividends receivable................................................... 2,263
Interest receivable.................................................... 1,064
Receivable from investment advisor..................................... 827
Unamortized organization costs......................................... 12,482
Administration fee payable............................................. (1,002)
Accrued Trustees' fees and expenses.................................... (3,650)
Accrued expenses and other liabilities................................. (23,665)
----------
TOTAL OTHER ASSETS AND LIABILITIES (NET)............................... 698,446
----------
NET ASSETS..................................................... 100.0% $5,898,206
====== ==========
==========
NET ASSETS CONSIST OF:
Net investment loss.................................................... $ (1,090)
Accumulated net realized gain on investments sold...................... 16,664
Net unrealized appreciation of investments, forward foreign currency
contracts and net other assets......................................... 1,484,022
Paid-in capital........................................................ 4,398,610
----------
NET ASSETS............................................................. $5,898,206
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ($5,898,206
DIVIDED BY 410,922 shares outstanding)................................ $ 14.35
==========
</TABLE>
- -----------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $1,586,179 and gross
depreciation of $102,086 for Federal income tax purposes. At December 31,
1999, the aggregate cost of securities for Federal income tax purposes was
$3,715,667.
+ Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS.
2
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- INTERNATIONAL GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
At December 31, 1999, sector diversification was as follows:
<TABLE>
<CAPTION>
% OF
SECTOR DIVERSIFICATION NET ASSETS VALUE
<S> <C> <C>
- -----------------------------------------------------------------
COMMON STOCKS:
Telecommunications...................... 20.3% $1,194,578
Technology.............................. 9.8 575,622
Drugs................................... 5.9 345,620
Oil and Gas............................. 5.6 328,319
Banking................................. 5.1 301,650
Electronics............................. 4.7 278,354
Financial Services...................... 4.3 255,887
Insurance............................... 4.2 247,966
Recreation.............................. 3.4 201,024
Computer Software....................... 3.1 181,992
Retail - Food........................... 2.2 128,138
Food Producers.......................... 2.0 120,646
Advertising and marketing services...... 1.9 110,881
Chemicals - Basic....................... 1.9 110,398
Media................................... 1.6 94,191
Diversified............................. 1.5 92,946
Transportation.......................... 1.4 81,456
Restaurants and lodging................. 1.2 72,484
Construction............................ 1.1 64,672
Cosmetics and toiletries................ 1.1 64,189
Other................................... 5.9 348,747
-------- ----------
TOTAL COMMON STOCKS..................... 88.2 5,199,760
-------- ----------
TOTAL INVESTMENTS....................... 88.2 5,199,760
OTHER ASSETS AND LIABILITIES (NET)...... 11.8 698,446
-------- ----------
NET ASSETS.............................. 100.0% $5,898,206
======== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MARSICO FOCUSED EQUITIES PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------------
COMMON STOCKS - 90.4%
BEVERAGES - 1.5%
23,187 Anheuser-Busch Companies, Inc........... $ 1,643,379
------------
COMPUTER RELATED - 16.6%
56,109 3Com Corporation+....................... 2,637,123
112,429 Dell Computer Corporation............... 5,733,878
65,334 EMC Corporation......................... 7,137,739
41,481 Sun Microsystems, Inc................... 3,212,185
------------
18,720,925
------------
COMPUTER
SOFTWARE - 0.6%
6,463 Oracle Systems Corporation.............. 724,260
------------
ELECTRICAL
EQUIPMENT - 1.5%
5,700 Sony Corporation........................ 1,689,425
222 Sony Corporation, ADR................... 63,215
------------
1,752,640
------------
FINANCIAL SERVICES - 10.7%
130,709 Citigroup Inc........................... 7,262,518
33,119 Fannie Mae.............................. 2,067,868
19,389 Morgan Stanley Dean Witter & Company.... 2,767,780
------------
12,098,166
------------
INTERNET - 4.2%
63,190 America Online Inc...................... 4,766,896
------------
MANUFACTURING - 4.0%
29,101 General Electric Company................ 4,503,380
------------
MEDIA - 5.1%
21,836 Clear Channel Communications, Inc.+..... 1,948,863
14,480 MediaOne Group, Inc.+................... 1,112,245
37,677 Time Warner Inc......................... 2,729,228
------------
5,790,336
------------
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------------
MEDICAL PRODUCTS AND SUPPLIES - 7.1%
59,826 Genentech, Inc.......................... $ 8,046,597
------------
NETWORKING EQUIPMENT AND PRODUCTS - 5.4%
57,251 Cisco Systems, Inc...................... 6,133,013
------------
RECREATION - 0.6%
15,192 Carnival Corporation.................... 726,368
------------
RENTAL AUTO AND EQUIPMENT - 0.9%
19,839 Hertz Corporation, Inc.................. 994,430
------------
RESTAURANTS AND
LODGING - 0.1%
2,434 Four Seasons Hotels Inc................. 129,611
------------
RETAIL - GENERAL - 3.1%
50,912 Wal-Mart Stores, Inc.................... 3,519,292
------------
RETAIL - SPECIALTY - 3.6%
45,340 Home Depot Inc.......................... 3,108,658
10,227 Tiffany & Company....................... 912,760
------------
4,021,418
------------
SEMICONDUCTORS - 2.7%
30,974 Texas Instruments Inc................... 3,000,606
------------
TELECOMMUNICATIONS - 17.2%
56,918 Lucent Technologies, Inc................ 4,258,178
49,744 QUALCOMM Inc............................ 8,761,161
40,144 Sprint Corporation (PCS Group)+......... 4,114,760
45,496 Vodafone AirTouch Plc................... 2,252,052
------------
19,386,151
------------
TRANSPORTATION - 2.6%
38,010 UAL Corporation+........................ 2,948,151
------------
UTILITIES -
TELEPHONE - 2.9%
61,946 MCI Worldcom, Inc....................... 3,286,983
------------
TOTAL COMMON STOCKS
(Cost $70,461,398).................... 102,192,602
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MARSICO FOCUSED EQUITIES PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- --------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS - 9.5%
(Cost $10,799,220)
FEDERAL HOME LOAN BANK (FHLB) - 9.5%
$ 10,800,000 Discount note, due 01/03/00............. $ 10,798,830
------------
<CAPTION>
SHARES
------
<C> <S> <C>
INVESTMENT
COMPANIES - 5.8%
(Cost $6,615,922)
6,615,922 Nations Cash Reserves#.................. 6,615,922
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS (Cost $87,876,540*)......... 105.7% $119,607,354
------------
OTHER ASSETS AND LIABILITIES (NET)............ (5.7)%
Cash.................................................. $ 699
Receivable for Fund shares sold....................... 169,915
Dividends receivable.................................. 14,200
Interest receivable................................... 1,062
Unamortized organization costs........................ 12,482
Collateral on securities loaned....................... (6,586,922)
Investment advisory fee payable....................... (48,282)
Administration fee payable............................ (19,983)
Accrued Trustees' fees and expenses................... (3,650)
Accrued expenses and other liabilities................ (31,430)
------------
TOTAL OTHER ASSETS AND LIABILITIES (NET).............. (6,491,909)
------------
NET ASSETS.................................... 100.0% $113,115,445
====== ============
SHARES
- -----------------------------------------------------
NET ASSETS CONSIST OF:
Accumulated net realized gain on investments sold.....
$ 1,902,024
Net unrealized appreciation of investments............ 31,730,814
Paid-in capital....................................... 79,482,607
------------
NET ASSETS............................................ $113,115,445
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE ($113,115,445 DIVIDED BY 5,739,250 shares
outstanding).......................................... $ 19.71
============
</TABLE>
- -----------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $31,610,732 and gross
depreciation of $240,246 for Federal income tax purposes. At December 31,
1999, the aggregate cost of securities for Federal income tax purposes was
$88,236,868.
+ Non-income producing security.
# Money market mutual fund registered under the Investment Company Act of
1940, as amended, and sub-advised by TradeStreet Investment
Associates, Inc. A portion of this amount represents cash collateral
received from securities lending activity (Note 9). The portion that
represents cash collateral is $6,586,922.
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MANAGED SMALLCAP INDEX PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------
COMMON STOCKS - 99.5%
ADVERTISING AND MARKETING SERVICES -
1.1%
250 Catalina Marketing Corporation+......... $ 28,938
1,200 True North Communications............... 53,625
----------
82,563
----------
AEROSPACE AND DEFENSE - 0.6%
800 AAR Corporation......................... 14,350
350 Alliant Techsystems Inc.+............... 21,810
700 BE Aerospace, Inc.+..................... 5,906
----------
42,066
----------
APPAREL AND TEXTILES - 2.4%
600 Brown Shoe Company, Inc................. 8,475
1,000 Cone Mills Corporation+................. 4,500
450 Footstar Inc.+.......................... 13,725
450 Haggar Corporation...................... 5,119
500 J. Baker Inc............................ 3,000
500 Linens 'N Things Inc.+.................. 14,813
950 Oshkosh B'Gosh Inc...................... 20,009
650 Pacific Sunwear of California........... 20,719
800 Phillips-Van Heusen Corporation......... 6,650
700 Quiksilver, Inc......................... 10,850
850 The Men's Wearhouse Inc.+............... 24,969
750 Timberland Company, Class A............. 39,655
----------
172,484
----------
AUTOMOBILE PARTS MANUFACTURERS - 1.1%
750 Intermet Corporation.................... 8,719
750 Myers Industries Inc.................... 11,813
600 Simpson Industries...................... 6,750
1,050 Standard Motor Products, Inc............ 16,931
1,000 TBC Corporation+........................ 6,250
1,300 Tower Automotive Inc.+.................. 20,068
550 Wynn's International, Inc............... 7,769
----------
78,300
----------
BANKING - 5.1%
100 Anchor Bancorp Wisconsin Inc............ 1,513
700 BankNorth Group Inc..................... 18,725
300 Carolina First Corporation.............. 5,475
800 Commerce Bancorp, Inc................... 32,350
800 Community First Bankshares, Inc......... 12,600
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------
BANKING (CONTINUED)
2,150 Cullen Frost Bankers Inc................ $ 55,362
750 Downey Financial Corporation............ 15,141
75 First Midwest Bancorp, Inc.............. 1,988
700 Firstbank Corporation................... 14,525
1,250 Firstmerit Corporation.................. 28,750
900 Hudson United Bancorp................... 23,006
150 MAF Bancorp Inc......................... 3,141
150 Provident Bankshares Corporation........ 2,597
450 Queens County Bancorp Inc............... 12,206
1,050 Silicon Valley Bancshares+.............. 51,974
550 Susquehanna Bancshares Inc.............. 8,731
300 U.S. Trust Corporation.................. 24,056
650 United Bankshares Inc................... 15,519
1,150 UST Corporation......................... 36,512
----------
364,171
----------
BEVERAGES - 0.3%
450 Canandaigua Brands Inc., Class A+....... 22,950
----------
BUILDING MATERIALS - 1.1%
1,050 Building Materials Holding
Corporation+............................ 10,763
100 Butler Manufacturing Company............ 2,231
250 Champion Enterprises Inc.+.............. 2,141
150 Coachmen Industries Inc................. 2,269
500 Hughes Supply Inc....................... 10,781
1,000 Insteel Industries, Inc................. 9,063
450 Monaco Coach Corporation+............... 11,502
250 Simpson Manufacturing Company, Inc.+.... 10,937
250 Skyline Corporation..................... 5,875
450 Universal Forest Products............... 6,638
700 Watsco Inc.............................. 8,094
----------
80,294
----------
BUSINESS SERVICES - 0.2%
250 Fair, Issac and Company Inc............. 13,250
----------
CHEMICALS - BASIC - 0.5%
600 Cambrex Corporation..................... 20,662
350 Scotts Company, Class A+................ 14,088
----------
34,750
----------
CHEMICALS - SPECIALTY - 0.6%
150 Chemed Corporation...................... 4,294
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MANAGED SMALLCAP INDEX PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------
CHEMICALS - SPECIALTY (CONTINUED)
500 Lilly Industries Inc., Class A.......... $ 6,719
150 MacDermid, Inc.......................... 6,159
400 OM Group, Inc........................... 13,774
150 Penford Corporation..................... 2,588
500 Quaker Chemical Corporation............. 7,125
----------
40,659
----------
COMMERCIAL SERVICES - 2.0%
800 Computer Task Group Inc................. 11,850
1,200 Insurance Auto Auctions Inc.+........... 18,900
1,850 Interim Services Inc.+.................. 45,788
700 Lason, Inc.+............................ 7,700
350 NFO Worldwide Inc.+..................... 7,831
1,250 Prepaid Legal Services Inc.+............ 30,000
850 Profit Recovery Group
International, Inc...................... 22,578
----------
144,647
----------
COMPUTER RELATED - 3.1%
1,350 American Management Systems+............ 42,356
250 Choicepoint Inc.+....................... 10,344
150 Cybex Computer Products Corporation+.... 6,075
1,300 Filenet Corporation+.................... 33,150
150 Hutchinson Technology, Inc.+............ 3,188
150 Jack Henry & Associates................. 8,053
500 Kronos Inc.............................. 30,000
450 Micros Systems, Inc.+................... 33,300
1,050 National Computer
Systems Inc............................. 39,506
1,250 Standard Microsystems Corporation+...... 13,516
----------
219,488
----------
COMPUTER SERVICES - 2.5%
100 Acxiom Corporation+..................... 2,400
450 Ciber Inc.+............................. 12,375
150 Factset Research Systems Inc............ 11,944
800 Gerber Scientific Inc................... 17,550
650 Primark Corporation+.................... 18,078
150 RSA Security Inc.+...................... 11,625
700 Technology Solutions Company+........... 22,925
450 The BISYS Group, Inc.+.................. 29,363
850 Whittman-Hart, Inc.+.................... 45,580
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------
COMPUTER SERVICES (CONTINUED)
150 Zixit Corporation+...................... $ 5,944
----------
177,784
----------
COMPUTER SOFTWARE - 5.5%
500 Aspen Technologies, Inc.+............... 13,219
350 Avid Technology, Inc.+.................. 4,572
350 Clarify, Inc.+.......................... 44,100
1,550 Epicor Software Corporation+............ 7,847
400 Harbinger Corporation+.................. 12,725
450 HNC Software Inc.+...................... 47,587
650 Hyperion Solutions Corporation+......... 28,275
650 Macromedia Inc.+........................ 47,531
650 Mercury Interactive Corporation......... 70,158
1,550 Midway Games Inc.+...................... 37,103
450 National Instruments Corporation........ 17,213
200 Project Software &
Development, Inc........................ 11,100
1,000 Remedy Corporation+..................... 47,375
400 Verity, Inc............................. 17,025
----------
405,830
----------
CONSTRUCTION - 2.4%
600 Dycom Industries Inc.................... 26,438
400 Elcor Corporation....................... 12,050
1,550 Insituform Technologies Inc.,
Class A+................................ 43,788
800 M.D.C. Holdings, Inc.................... 12,550
1,600 Morrison Knudsen Corporation+........... 12,500
700 Ryland Group Inc........................ 16,144
650 Southern Energy Homes Inc.+............. 1,523
1,350 Standard Pacific Corporation............ 14,850
250 TJ International Inc.................... 10,500
600 Toll Brothers Inc.+..................... 11,175
550 U.S. Home Corporation+.................. 14,059
----------
175,577
----------
CONSUMER GOODS AND
SERVICES - 2.4%
350 ABM Industries Inc...................... 7,131
1,400 ADVO Inc.+.............................. 33,249
350 Angelica Corporation.................... 3,413
850 Fedders Corporation..................... 4,675
200 Harman International Industries......... 11,225
1,000 Kaman Corporation....................... 12,875
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MANAGED SMALLCAP INDEX PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------
CONSUMER GOODS AND
SERVICES (CONTINUED)
600 Kellwood Company........................ $ 11,663
2,050 La-Z-Boy Inc............................ 34,465
650 Royal Appliance Manufacturing
Company+................................ 3,169
450 Russ Berrie & Company Inc............... 11,813
1,100 Smithfield Foods Inc.+.................. 26,400
450 Thomas Industries Inc................... 9,197
----------
169,275
----------
CONTAINERS AND PACKAGING - 0.4%
900 AptarGroup Inc.......................... 22,612
450 Shorewood Packaging Corporation+........ 8,522
----------
31,134
----------
COSMETICS AND TOILETRIES - 0.4%
700 Natures Sunshine Products Inc........... 5,600
1,800 NBTY, Inc.+............................. 20,813
----------
26,413
----------
DISTRIBUTION AND
WHOLESALE - 0.4%
1,850 Brightpoint Inc.+....................... 24,281
200 Lawson Products......................... 4,625
----------
28,906
----------
DIVERSIFIED - 0.6%
900 Justin Industries Inc................... 13,388
700 Mascotech, Inc.......................... 8,881
500 SPS Technologies Inc.+.................. 15,969
300 Standex International Corporation....... 6,281
----------
44,519
----------
DRUGS - 2.7%
800 Alpharma Inc., Class A.................. 24,600
300 Barr Laboratories, Inc.+................ 9,413
1,600 Bindley Western Industries.............. 24,100
1,800 Bio-Technology General Corporation+..... 27,450
1,150 Jones Pharma Incorporated............... 49,952
450 Medicis Pharmaceutical Corporation+..... 19,153
350 Noven Pharmaceuticals, Inc.+............ 6,344
800 Regeneron Pharmaceuticals, Inc.+........ 10,200
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------
DRUGS (CONTINUED)
750 Syncor International Corporation+....... $ 21,844
1 Watson Pharmaceutical, Inc.+............ 36
----------
193,092
----------
ELECTRIC POWER - 0.7%
500 Bangor Hydro-Electric Company........... 8,156
350 Central Vermont Public Services......... 3,719
400 TNP Enterprises Inc..................... 16,500
450 United Illuminating Company............. 23,119
----------
51,494
----------
ELECTRICAL COMPONENTS - 0.2%
850 Artesyn Technologies, Inc.+............. 17,850
----------
ELECTRICAL EQUIPMENT - 1.9%
250 C&D Technologies, Inc................... 10,625
450 C-COR Electronics....................... 34,480
1,150 General Semiconductor, Inc.+............ 16,316
850 Intermagnetics General Corporation+..... 7,438
600 KEMET Corporation+...................... 27,038
450 Micrel Inc.............................. 25,622
500 Park Electrochemical Corporation........ 13,281
----------
134,800
----------
ELECTRONICS - 6.4%
150 Analogic Corporation.................... 4,950
800 BMC Industries, Inc..................... 3,900
1,575 Burr-Brown Corporation.................. 56,896
550 C-Cube Microsystems Inc.+............... 34,238
750 Checkpoint Systems Inc.+................ 7,641
950 CTS Corporation......................... 71,605
400 Dallas Semiconductor Corporation........ 25,775
200 Dionex Corporation+..................... 8,238
350 Electro Scientific Industries, Inc.+.... 25,550
250 Esterline Technologies Corporation+..... 2,891
1,600 Gentex Corporation+..................... 44,400
250 Hadco Corporation+...................... 12,750
1,600 Intervoice Inc.......................... 37,200
250 Itron Inc.+............................. 1,531
900 Kulicke & Soffa Industries Inc.+........ 38,306
150 Methode Electronics Inc................. 4,819
450 Oak Industries Inc.+.................... 47,756
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MANAGED SMALLCAP INDEX PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------
ELECTRONICS (CONTINUED)
1,050 Pioneer Standard Electronics............ $ 15,159
450 Technitrol Inc.......................... 20,025
----------
463,630
----------
ENERGY - 0.2%
500 Barrett Resources Corporation+.......... 14,719
----------
ENTERTAINMENT - 0.2%
50 Anchor Gaming+.......................... 2,172
600 THQ, Inc................................ 13,912
----------
16,084
----------
ENVIRONMENTAL - 0.5%
300 American States Water Company........... 10,800
400 Clarcor Inc............................. 7,200
350 IMCO Recycling Inc...................... 4,419
800 Tetra Tech Inc.......................... 12,300
----------
34,719
----------
EXPLORATION AND DRILLING - 0.6%
1,000 Energen Corporation..................... 18,063
600 Northwest Natural Gas Company........... 13,163
950 Southwestern Energy Company............. 6,234
250 Stone Energy Corporation+............... 8,906
----------
46,366
----------
FINANCIAL SERVICES - 3.4%
2,900 Americredit Corporation+................ 53,650
550 Centura Banks Inc....................... 24,269
250 Dain Rauscher Corporation............... 11,625
1,300 Eaton Vance Corporation................. 49,400
1,050 Enhance Financial Services Group Inc.... 17,063
50 Investors Financial Services
Corporation............................. 2,300
200 JSB Financial Inc....................... 10,375
100 Mutual Risk Management Ltd.............. 1,681
300 Raymond James Financial, Inc............ 5,606
450 Riggs National Corporation.............. 5,934
450 SEI Investment Company.................. 53,557
200 Whitney Holding Corporation............. 7,413
----------
242,873
----------
FOOD PRODUCERS - 1.1%
100 Agribrands International, Inc.+......... 4,600
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------
FOOD PRODUCERS (CONTINUED)
1,750 Chiquita Brands
International Inc....................... $ 8,313
750 Corn Products International Inc......... 24,562
350 Delta and Pine Land Company............. 6,081
350 J & J Snack Foods Corporation+.......... 7,175
400 Michael Foods Inc....................... 9,850
200 Panera Bread Company, Class A+.......... 1,550
900 Ralcorp Holdings, Inc.+................. 17,944
----------
80,075
----------
FOREST AND PAPER
PRODUCTS - 0.4%
550 Buckeye Technologies Inc.+.............. 8,181
400 Caraustar Industries, Inc............... 9,601
300 Pope & Talbot Inc....................... 4,800
300 Schweitzer-Mauduit International Inc.... 4,031
----------
26,613
----------
FURNITURE AND APPLIANCES - 0.4%
200 Bassett Furniture Industries, Inc....... 3,200
550 Ethan Allen Interiors, Inc.............. 17,634
900 Interface Inc........................... 5,175
----------
26,009
----------
HEALTHCARE - 1.5%
900 Advance Paradigm, Inc.+................. 19,406
100 COR Therapeutics Inc.+.................. 2,688
1,500 Coventry Health Care Inc.+.............. 10,125
700 Magellan Health Services, Inc.+......... 4,419
1,850 MedQuist Inc.+.......................... 47,752
1,300 Orthodontic Centers of America+......... 15,519
300 Pediatrix Medical Group Inc.+........... 2,100
550 US Oncology, Inc.+...................... 2,716
----------
104,725
----------
HOUSEHOLD PRODUCTS - 0.1%
100 National Presto Industries, Inc......... 3,550
450 SLI, Inc.+.............................. 6,103
----------
9,653
----------
INDUSTRIAL - 0.6%
750 Cognex Corporation+..................... 29,250
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MANAGED SMALLCAP INDEX PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------
INDUSTRIAL (CONTINUED)
500 Geon Company............................ $ 16,250
----------
45,500
----------
INSURANCE - 2.4%
617 Ace Limited............................. 10,296
300 Arthur J. Gallagher & Company........... 19,425
600 Delphi Financial Group Inc., Class A.... 18,000
500 E.W. Blanch Holdings, Inc.+............. 30,625
1,000 Fidelity National Financial, Inc........ 14,375
1,700 First American Financial Corporation.... 21,144
400 Fremont General Corporation............. 2,950
1,050 Radin Group Inc......................... 50,138
700 Sierra Health Services, Inc.+........... 4,681
----------
171,634
----------
MACHINERY AND
EQUIPMENT - 2.8%
350 Applied Industrial
Technologies, Inc....................... 5,819
550 Applied Power, Inc., Class A............ 20,212
850 Astec Industries Inc.................... 15,991
150 CPI Corporation......................... 3,384
200 Gardner Denver Machinery Inc.+.......... 3,338
400 Graco Inc............................... 14,350
300 Helix Technology Corporation............ 13,444
900 JLG Industries Inc...................... 14,344
850 Manitowoc Company, Inc.................. 28,899
900 Paxar Corporation+...................... 7,594
400 Regal Beloit............................ 8,250
150 Robbins & Myers, Inc.................... 3,394
350 X-Rite, Inc............................. 2,188
1,000 Zebra Technologies Corporation+......... 58,499
----------
199,706
----------
MANUFACTURING - 1.8%
900 A. O. Smith Corporation................. 19,687
400 Belden Inc.............................. 8,400
850 Dixie Group Inc.+....................... 6,269
450 Griffon Corporation+.................... 3,516
350 Libbey Inc.............................. 10,063
300 Lydall Inc.+............................ 1,988
600 Roper Industries, Inc................... 22,687
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------
MANUFACTURING (CONTINUED)
300 Scott Technologies, Inc.+............... $ 5,663
450 Sturm, Ruger & Company Inc.............. 3,994
750 Tredegar Industries, Inc................ 15,515
700 Vicor Corporation+...................... 28,349
----------
126,131
----------
MEDIA - 1.1%
1,050 Xircom Inc.+............................ 78,750
----------
MEDICAL PRODUCTS AND
SUPPLIES - 4.5%
100 Biomatrix, Inc.+........................ 1,925
600 Cooper Companies Inc.................... 18,075
400 Datascope Corporation................... 16,000
450 Dendrite International, Inc............. 15,244
450 Dura Pharmaceuticals Inc.+.............. 6,272
300 Enzo Biochem, Inc.+..................... 13,519
300 Hanger Orthopedic Group, Inc.+.......... 3,000
600 IDEC Pharmaceuticals Corporation........ 58,949
1,000 IDEXX Laboratories Inc.+................ 16,125
1,500 Liposome Company Inc.+.................. 18,305
600 Owens & Minor, Inc...................... 5,363
650 Patterson Dental Company+............... 27,705
400 Priority Healthcare Corporation......... 11,575
500 Resmed Inc.+............................ 20,874
200 Respironics, Inc.+...................... 1,594
1,150 Safeskin Corporation+................... 13,944
850 Sola International Inc.+................ 11,794
300 SpaceLabs Medical Inc.+................. 5,569
1,150 Summit Technology Inc.+................. 13,441
500 Varian Medical Systems, Inc.+........... 14,906
250 Vital Signs Inc......................... 5,719
550 Wesley Jessen Visioncare, Inc.+......... 20,831
----------
320,729
----------
MEDICAL SERVICES - 1.7%
600 ADAC Laboratories Designs+.............. 6,450
400 Cerner Corporation+..................... 7,875
700 Coherent Inc.+.......................... 18,725
300 Curative Health Services, Inc.+......... 2,325
1,100 Genesis Health Ventures, Inc.+.......... 2,269
200 Hooper Holmes, Inc...................... 5,150
300 Incyte Pharmaceuticals, Inc.+........... 18,000
650 Invacare Corporation.................... 13,041
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MANAGED SMALLCAP INDEX PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------
MEDICAL SERVICES (CONTINUED)
150 Laser Vision Centers, Inc.+............. $ 1,584
850 Renal Care Group, Inc.+................. 19,869
800 Universal Health Services Inc.,
Class B+................................ 28,800
----------
124,088
----------
METALS AND MINING - 1.8%
350 Amcast Industrial Corporation........... 5,731
1,050 AMCOL International Corporation......... 16,931
450 Commercial Metals Company............... 15,272
350 Commonwealth Industries, Inc............ 4,550
350 Material Sciences Corporation+.......... 3,566
1,000 Mueller Industries Inc.+................ 36,250
650 Quanex Corporation...................... 16,575
800 Reliance Steel & Aluminum Company....... 18,750
200 RTI International Metals, Inc.+......... 1,500
600 Steel Technologies Inc.................. 8,700
----------
127,825
----------
NETWORKING EQUIPMENT AND PRODUCTS - 0.6%
150 Apex Inc.+.............................. 4,838
350 Auspex Systems, Inc.+................... 3,588
350 Black Box Corporation+.................. 23,449
300 Concord Communications, Inc.+........... 13,313
----------
45,188
----------
OFFICE EQUIPMENT - 0.5%
500 Brady Corporation....................... 16,969
900 John H. Harland Company................. 16,481
350 Nashua Corporation+..................... 2,625
----------
36,075
----------
OIL AND GAS - 2.0%
450 Cabot Oil & Gas Corporation............. 7,228
300 HS Resources, Inc.+..................... 5,175
300 New Jersey Resources Corporation........ 11,719
1,200 Newfield Exploration Company+........... 32,100
1,050 Oceaneering International Inc.+......... 15,684
250 Plains Resources Inc.+.................. 3,125
1,000 Pride International Inc.+............... 14,625
900 Seitel Inc.+............................ 6,075
1,900 Vintage Petroleum Inc.+................. 22,919
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------
OIL AND GAS (CONTINUED)
750 Wicor Inc............................... $ 21,891
----------
140,541
----------
OIL FIELD SERVICES &
EQUIPMENT - 0.3%
1,200 Cross Timbers Oil Company............... 10,875
550 Pogo Producing Company.................. 11,275
----------
22,150
----------
PHOTO AND OPTICAL - 0.0% ++
50 Electroglas Inc.+....................... 1,269
----------
PRINTING AND PUBLISHING - 1.2%
900 Bowne & Company Inc..................... 12,150
350 Consolidated Graphics Inc.+............. 5,228
700 Thomas Nelson, Inc...................... 6,475
1,400 Valassis Communications Inc............. 59,150
----------
83,003
----------
PROFESSIONAL SERVICES - 1.2%
550 CDI Corporation+........................ 13,269
750 InaCom Corporation+..................... 5,484
350 MAXIMUS, Inc.+.......................... 11,878
700 National Data Corporation............... 23,757
950 Offshore Logistics Inc.+................ 8,906
950 Staffmark, Inc.+........................ 7,184
350 URS Corporation+........................ 7,591
350 Volt Information Sciences Inc.+......... 8,356
----------
86,425
----------
RECREATION - 1.6%
700 Arctic Cat Inc.......................... 7,000
1,900 Aztar Corporation+...................... 20,663
200 Carmike Cinemas Inc., Class A+.......... 1,563
150 GC Companies Inc.+...................... 3,881
1,100 Hollywood Park Inc.+.................... 24,680
200 Huffy Corporation....................... 1,050
300 K2 Inc.................................. 2,288
1,400 Players International, Inc.+............ 11,506
600 Polaris Industries Inc.................. 21,750
350 Thor Industries Inc..................... 10,653
650 Winnebago Industries.................... 13,041
----------
118,075
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MANAGED SMALLCAP INDEX PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------
RESTAURANTS AND LODGING - 2.0%
500 Applebees International Inc............. $ 14,750
850 CEC Entertainment Inc................... 24,118
1,050 Jack In the Box Inc.+................... 21,722
1,050 Landry's Seafood
Restaurants Inc.+....................... 9,122
500 Marcus Corporation...................... 6,719
1,100 Prime Hospitality Corporation+.......... 9,694
1,050 Ruby Tuesday Inc........................ 19,097
1,400 Ryan's Family Steak
Houses Inc.+............................ 11,900
500 Sonic Corporation+...................... 14,250
850 TCBY Enterprises Inc.................... 3,241
200 The Cheesecake Factory+................. 7,000
----------
141,613
----------
RETAIL - FOOD - 0.8%
1,450 Earthgrains Company..................... 23,381
850 Fleming Companies Inc................... 8,713
550 Nash-Finch Company...................... 3,506
400 Whole Foods Market Inc.+................ 18,550
----------
54,150
----------
RETAIL - GENERAL - 0.8%
150 Ames Department Stores+................. 4,322
1,350 Casey's General Stores, Inc............. 14,091
400 Cash America Investments Inc............ 3,900
500 MicroAge Inc.+.......................... 1,750
1,050 Regis Corporation....................... 19,818
650 ShopKo Stores, Inc.+.................... 14,950
----------
58,831
----------
RETAIL - SPECIALTY - 3.3%
350 AnnTaylor Stores Corporation+........... 12,053
600 Books-A-Million Inc.+................... 4,988
1,050 Cato Corporation........................ 13,256
150 Cost Plus, Inc.+........................ 5,344
150 Damark International, Inc.+............. 2,363
250 Discount Auto Parts Inc.+............... 4,516
650 Dress Barn Inc.+........................ 10,806
850 Fossil, Inc............................. 19,656
500 Goody's Family Clothing Inc.+........... 2,688
500 Gottschalks Inc.+....................... 3,719
750 Insight Enterprises Inc................. 30,468
1,000 Jan Bell Marketing Inc.+................ 2,875
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------
RETAIL - SPECIALTY (CONTINUED)
650 Jo-Ann Stores Inc.+..................... $ 7,313
750 Just For Feet Inc.+..................... 8
150 Lillian Vernon Corporation.............. 1,669
350 Michaels Stores Inc.+................... 9,975
800 O'Reilly Automotive Inc................. 17,200
750 Pier 1 Imports Inc...................... 4,781
1,000 The Bombay Company Inc.+................ 4,500
850 Toro Company............................ 31,715
950 Zale Corporation+....................... 45,955
----------
235,848
----------
SEMICONDUCTORS - 2.0%
350 Alpha Industries, Inc.+................. 20,059
2,250 International Rectifier Corporation+.... 58,501
850 Lattice Semiconductor Corporation....... 40,056
400 Plexus Corporation+..................... 17,600
100 Watkins-Johnson Company................. 4,000
----------
140,216
----------
STEEL - 0.0% ++
500 Birmingham Steel Corporation............ 2,656
----------
TECHNOLOGY - 1.5%
400 Digital Microwave Corporation+.......... 9,375
1,850 Komag Inc.+............................. 5,781
900 Progress Software Corporation+.......... 51,075
2,400 S3 Inc.+................................ 27,750
650 Telxon Corporation...................... 10,400
----------
104,381
----------
TELECOMMUNICATIONS - 2.8%
250 Adaptive Broadband Corporation+......... 18,453
750 Aspect Communications Corporation+...... 29,344
1,050 CommScope, Inc.+........................ 42,328
700 Digi International Inc.+................ 7,306
950 Inter-Tel Inc........................... 23,750
200 Plantronics Inc.+....................... 14,313
500 Powerwave Technologies, Inc.+........... 29,188
100 Proxim, Inc.+........................... 11,000
300 SymmetriCom Inc.+....................... 2,981
1,400 TALK.com, Inc.+......................... 24,850
----------
203,513
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MANAGED SMALLCAP INDEX PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------
TRANSPORTATION - 2.2%
1,500 American Freightways Corporation+....... $ 24,281
450 Eagle USA Airfreight, Inc.+............. 19,406
450 Expeditors International of
Washington, Inc......................... 19,716
1,200 Fritz Companies, Inc.+.................. 12,600
300 Kirby Corporation+...................... 6,150
1,050 Mesa Air Group Inc.+.................... 4,988
250 Midwest Express Holdings, Inc.+......... 7,969
450 Pittston BAX Group...................... 4,781
500 Railtex Inc.+........................... 8,938
450 SkyWest Inc............................. 12,600
800 U.S. Freightways Corporation............ 38,299
----------
159,728
----------
TRUCKING AND SHIPPING - 1.7%
1,250 Arkansas Best Corporation+.............. 15,000
300 Frozen Food Express Industries, Inc..... 1,163
300 Heartland Express Inc.+................. 4,725
700 Landstar System Inc.+................... 29,969
700 M.S. Carriers Inc.+..................... 16,713
2,650 Rollins Truck Leasing Corporation....... 31,633
700 Wabash National Corporation............. 10,500
900 Yellow Corporation+..................... 15,131
----------
124,834
----------
UNIT INVESTMENT TRUST - 2.9%
2,600 S&P Mid-Cap 400 Depositary Receipts..... 210,925
----------
UTILITIES - NATURAL GAS - 1.1%
650 Cascade Natural Gas Corporation......... 10,481
400 Connecticut Energy Corporation.......... 15,550
450 Piedmont Natural Gas Company, Inc....... 13,613
350 Public Service Company of North
Carolina, Inc........................... 11,309
850 Southwest Gas Corporation............... 19,550
400 Valmont Industries Inc.................. 6,425
----------
76,928
----------
UTILITIES - WATER - 0.7%
200 Aquarion Company........................ 7,400
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------
UTILITIES - WATER (CONTINUED)
400 Philadelphia Suburban Corporation....... $ 8,275
1,000 United Water Resources Inc.............. 34,188
----------
49,863
----------
WIRE AND CABLE PRODUCTS - 0.6%
1,100 Anixter International Inc.+............. 22,688
650 Barnes Group Inc........................ 10,603
450 Cable Design Technologies
Corporation+............................ 10,350
----------
43,641
----------
TOTAL COMMON STOCKS
(Cost $6,514,370)....................... 7,151,978
----------
RIGHTS - 0.0%+
(Cost $0)
5 Tel-Save.Com, Inc.+..................... 0
----------
INVESTMENT COMPANIES - 2.6%
(Cost $185,507)
185,507 Nations Cash Reserves#.................. 185,507
----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS (Cost $6,699,877*)........................... 102.1% 7,337,485
----------
OTHER ASSETS AND LIABILITIES (NET)............................. (2.1)%
Cash.................................................................... $ 4,600
Receivable for investment securities sold............................... 5,353
Receivable for Fund shares sold......................................... 440
Dividends receivable.................................................... 3,927
Interest receivable..................................................... 535
Unamortized organization costs.......................................... 12,482
Collateral on securities loaned......................................... (28,507)
Investment advisory fee payable......................................... (84,206)
Administration fee payable.............................................. (1,339)
Shareholder servicing and distribution fees payable.....................
(25,975)
Accrued Trustees' fees and expenses..................................... (3,650)
Accrued expenses and other liabilities.................................. (34,216)
----------
TOTAL OTHER ASSETS AND LIABILITIES (NET)................................ (150,556)
----------
NET ASSETS..................................................... 100.0% $7,186,929
====== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MANAGED SMALLCAP INDEX PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
SHARES VALUE
<C> <S> <C> <C>
- -----------------------------------------------------
NET ASSETS CONSIST OF:
Accumulated net realized loss on investments sold.......................
$ (737,233)
Net unrealized appreciation of investments.............................. 637,608
Paid-in capital......................................................... 7,286,554
----------
NET ASSETS.............................................................. $7,186,929
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($7,186,929 DIVIDED BY 752,513 shares outstanding)...................... $ 9.55
==========
</TABLE>
- -----------------------------------------------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $1,454,273 and gross
depreciation of $825,597 for Federal income tax purposes. At December 31,
1999, the aggregate cost of securities for Federal income tax purposes was
$6,708,809.
+ Non-income producing security.
++ Amount represents less than 0.1%.
# Money market mutual fund registered under the Investment Company Act of
1940, as amended, and sub-advised by TradeStreet Investment
Associates, Inc. A portion of this amount represents cash collateral
received from securities lending activity (Note 9). The portion that
represents cash collateral is $28,507.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- DISCIPLINED EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------
COMMON STOCKS - 97.5%
AEROSPACE AND DEFENSE - 2.9%
2,025 General Dynamics Corporation............ $ 106,819
2,100 Northrop Grumman Corporation............ 113,531
----------
220,350
----------
APPAREL AND TEXTILES - 1.1%
5,525 Shaw Industries, Inc.................... 85,292
----------
AUTOMOBILES AND TRUCKS - 1.7%
2,375 Ford Motor Company...................... 126,914
----------
BANKING - 1.7%
1,725 Chase Manhattan Corporation............. 134,011
----------
BEVERAGES - 1.7%
1,825 Anheuser-Busch Companies, Inc........... 129,347
----------
COMPUTER RELATED - 3.5%
5,325 Adaptec, Inc.+.......................... 265,584
----------
COMPUTER SERVICES - 2.4%
1,950 Computer Sciences Corporation+.......... 184,519
----------
COMPUTER SOFTWARE - 5.9%
5,575 Compuware Corporation................... 207,669
2,125 Microsoft Corporation++................. 248,094
----------
455,763
----------
CONGLOMERATE - 1.9%
2,225 United Technologies Corporation......... 144,625
----------
CONSTRUCTION - 2.8%
4,775 Sherwin-Williams Company................ 100,275
2,475 USG Corporation......................... 116,634
----------
216,909
----------
COSMETICS AND TOILETRIES - 2.0%
2,375 Kimberly-Clark Corporation.............. 154,969
----------
ELECTRIC POWER - 2.7%
3,025 DTE Energy Company...................... 94,909
3,175 PECO Energy Company..................... 110,332
----------
205,241
----------
FINANCIAL SERVICES - 7.1%
3,675 AXA Financial, Inc...................... 124,491
3,275 Greenpoint Financial Corporation........ 77,986
1,675 Morgan Stanley Dean Witter & Company.... 239,105
2,775 Paine Webber Group, Inc................. 107,705
----------
549,287
----------
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------
FOREST AND PAPER
PRODUCTS - 3.7%
3,400 Georgia-Pacific Corporation............. $ 172,550
2,000 Louisiana Pacific Corporation........... 28,500
1,150 Weyerhaeuser Company.................... 82,584
----------
283,634
----------
INSURANCE - 5.2%
2,625 Allstate Corporation.................... 63,000
1,600 American International Group, Inc....... 173,000
2,700 MGIC Investment Corporation............. 162,506
----------
398,506
----------
MACHINERY AND
EQUIPMENT - 6.1%
2,625 Cummins Engine Company, Inc............. 126,820
3,111 Illinois Tool Works, Inc................ 210,187
2,400 Ingersoll-Rand Company.................. 132,150
----------
469,157
----------
MEDICAL PRODUCTS AND
SUPPLIES - 4.4%
4,150 Allergan, Inc........................... 206,463
1,450 Johnson & Johnson....................... 135,031
----------
341,494
----------
MEDICAL SERVICES - 4.2%
6,475 Columbia/HCA Healthcare Corporation..... 189,799
2,475 United Healthcare Corporation........... 131,484
----------
321,283
----------
OFFICE EQUIPMENT - 3.7%
3,175 Lexmark International Group, Inc.,
Class A................................. 287,338
----------
OIL - DOMESTIC - 6.1%
2,300 Amerada Hess Corporation................ 130,526
2,650 Ashland Inc............................. 87,284
2,025 Columbia Energy Group................... 128,081
4,825 USX-Marathon Group Inc.................. 119,117
----------
465,008
----------
PRINTING AND PUBLISHING - 1.8%
2,275 Knight-Ridder Inc....................... 135,363
----------
RETAIL - FOOD - 1.5%
5,800 Supervalu Inc........................... 116,000
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- DISCIPLINED EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------
RETAIL - GENERAL - 1.5%
2,350 Federated Department Stores, Inc.+...... $ 118,822
----------
RETAIL - SPECIALTY - 3.2%
2,800 Best Buy Company, Inc................... 140,525
5,100 TJX Companies Inc....................... 104,231
----------
244,756
----------
SEMICONDUCTORS - 2.6%
4,075 Altera Corporation...................... 201,967
----------
TELECOMMUNICATIONS - 2.8%
2,825 Lucent Technologies, Inc.++............. 211,345
----------
UNIT INVESTMENT TRUST - 4.6%
2,400 Standard and Poor's 500 Depositary
Receipts................................ 352,500
----------
UTILITIES - NATURAL GAS - 1.8%
3,850 Coastal Corporation..................... 136,434
----------
UTILITIES - TELEPHONE - 6.9%
1,925 ALLTEL Corporation...................... 159,174
1,600 AT&T Corporation........................ 81,200
3,050 BellSouth Corporation................... 142,778
3,011 SBC Communications Inc.................. 146,786
----------
529,938
----------
TOTAL COMMON STOCKS (Cost $6,503,197)... 7,486,356
----------
INVESTMENT COMPANIES - 2.6%
(Cost $202,000)
202,000 Nations Cash Reserves#.................. 202,000
----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
- ----------------------------------------------------------
<S> <C> <C> <C>
TOTAL INVESTMENTS
(Cost $6,705,197*)........ 100.1% $7,688,356
----------
OTHER ASSETS AND
LIABILITIES (NET)......... (0.1)%
Receivable for Fund shares sold.... $ 6,286
Dividends receivable............... 5,822
Interest receivable................ 686
Receivable for variation margin.... 518
Unamortized organization costs..... 12,482
Payable for Fund shares redeemed... (3)
Investment advisory fee payable.... (2,217)
Administration fee payable......... (1,445)
Due to custodian................... (9)
Accrued Trustees' fees and
expenses........................... (3,650)
Accrued expenses and other
liabilities........................ (22,798)
----------
TOTAL OTHER ASSETS AND LIABILITIES
(NET).............................. (4,328)
----------
NET ASSETS................ 100.0% $7,684,028
===== ==========
NET ASSETS CONSIST OF:
Accumulated net realized loss on
investments sold................... $ (95,431)
Net unrealized appreciation of
investments and futures
contracts.......................... 983,397
Paid-in capital.................... 6,796,062
----------
NET ASSETS......................... $7,684,028
==========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($7,684,028 DIVIDED BY 660,474
shares outstanding)................ $ 11.63
==========
</TABLE>
- -----------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $1,368,821 and gross
depreciation of $402,372 for Federal income tax purposes. At December 31,
1999, the aggregate cost of securities for Federal income tax purposes was
$6,721,907.
+ Non-income producing security.
++ All or a portion of security segregated as collateral for futures
contracts.
# Money market mutual fund registered under the Investment Company Act of
1940, as amended, and sub-advised by TradeStreet Investment
Associates, Inc.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MARSICO GROWTH & INCOME PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -----------------------------------------------------------------
COMMON STOCKS - 93.4%
BANKING - 0.7%
8,438 Northern Trust Corporation.............. $ 447,214
-----------
BEVERAGES - 1.3%
11,746 Anheuser-Busch Companies, Inc........... 832,498
-----------
CHEMICALS - BASIC - 0.8%
7,533 E.I. duPont de Nemours and Company...... 496,236
-----------
COMPUTER RELATED - 14.6%
33,495 3Com Corporation+....................... 1,574,265
62,066 Dell Computer Corporation............... 3,165,366
29,667 EMC Corporation......................... 3,241,119
17,828 Sun Microsystems, Inc................... 1,380,556
-----------
9,361,306
-----------
COMPUTER SOFTWARE - 0.7%
3,858 Oracle Systems Corporation.............. 432,337
-----------
CONSTRUCTION - 0.2%
8,056 M.D.C. Holdings, Inc.................... 126,379
-----------
COSMETICS AND
TOILETRIES - 0.5%
6,647 Estee Lauder Companies Inc.............. 335,258
-----------
ELECTRICAL EQUIPMENT - 0.1%
132 Sony Corporation, ADR................... 37,587
-----------
ELECTRONICS - 5.0%
70,000 Flextronics International Ltd........... 3,220,000
-----------
FINANCIAL SERVICES - 8.2%
45,130 Citigroup Inc........................... 2,507,535
18,532 Fannie Mae.............................. 1,157,092
11,016 Morgan Stanley Dean Witter & Company.... 1,572,534
-----------
5,237,161
-----------
INTERNET - 3.6%
30,653 America Online Inc...................... 2,312,386
-----------
LEISURE AND RECREATION PRODUCTS - 0.1%
887 Royal Caribbean Cruises Ltd............. 43,740
-----------
MANUFACTURING - 4.0%
16,471 General Electric Company................ 2,548,887
-----------
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -----------------------------------------------------------------
MEDIA - 7.4%
12,406 Clear Channel Communications, Inc.+..... $ 1,107,236
4,494 Comcast Corporation, Class A............ 227,228
8,181 MediaOne Group, Inc.+................... 628,403
7,677 Omnicom Group........................... 767,700
20,530 Time Warner Inc......................... 1,487,141
7,500 UnitedGlobalCom Inc..................... 529,688
-----------
4,747,396
-----------
MEDICAL PRODUCTS AND SUPPLIES - 4.3%
18,596 Genentech, Inc.......................... 2,501,162
8,673 Priority Healthcare Corporation......... 250,975
-----------
2,752,137
-----------
NETWORKING EQUIPMENT AND PRODUCTS - 7.0%
29,300 Cisco Systems, Inc...................... 3,138,763
3,577 Juniper Networks, Inc.+................. 1,216,180
1,475 Nortel Networks Corporation............. 148,975
-----------
4,503,918
-----------
RENTAL AUTO AND
EQUIPMENT - 1.5%
18,747 Hertz Corporation, Inc.................. 939,693
-----------
RESTAURANTS AND
LODGING - 1.4%
16,791 Four Seasons Hotels Inc................. 894,121
-----------
RETAIL - GENERAL - 2.7%
25,028 Wal-Mart Stores, Inc.................... 1,730,061
-----------
RETAIL - SPECIALTY - 4.8%
25,552 Home Depot Inc.......................... 1,751,943
14,836 Tiffany & Company....................... 1,324,113
-----------
3,076,056
-----------
SEMICONDUCTORS - 3.6%
11,064 CIENA Corporation+...................... 636,180
17,499 Texas Instruments Inc................... 1,695,216
-----------
2,331,396
-----------
TELECOMMUNICATIONS - 15.6%
8,114 JDS Uniphase Corporation................ 1,308,890
21,771 Lucent Technologies, Inc................ 1,628,743
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MARSICO GROWTH & INCOME PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -----------------------------------------------------------------
TELECOMMUNICATIONS (CONTINUED)
24,396 QUALCOMM Inc............................ $ 4,296,745
17,328 Sprint Corporation (PCS Group)+......... 1,776,119
19,827 Vodafone AirTouch plc................... 981,437
-----------
9,991,934
-----------
TRANSPORTATION - 2.4%
8,682 AMR Corporation+........................ 581,694
11,911 UAL Corporation+........................ 923,847
-----------
1,505,541
-----------
UTILITIES - TELEPHONE - 2.9%
35,343 MCI Worldcom, Inc....................... 1,875,388
-----------
TOTAL COMMON STOCKS
(Cost $40,587,455).................... 59,778,630
-----------
<CAPTION>
PRINCIPAL
AMOUNT
------
<C> <S> <C>
CONVERTIBLE BONDS AND NOTES - 2.8%
COMPUTER SOFTWARE - 2.1%
$ 503,000 Bea Systems Inc.,
4.000% 12/15/06^........................ 586,624
555,000 i2 Technologies, Inc.,
5.250% 12/15/06^........................ 794,344
-----------
1,380,968
-----------
TELECOMMUNICATIONS - 0.7%
300,000 Level 3 Communications, Inc.,
6.000% 09/15/09......................... 420,000
-----------
TOTAL CONVERTIBLE BONDS AND NOTES
(Cost $1,358,000)..................... 1,800,968
-----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -----------------------------------------------------------------
CORPORATE BONDS AND NOTES - 0.1%
(Cost $96,968)
CONSTRUCTION - 0.1%
$ 100,000 M.D.C. Holdings, Inc.,
8.375% 02/01/08......................... $ 92,000
-----------
<CAPTION>
SHARES
------
<C> <S> <C>
PREFERRED STOCKS - 2.1%
TELECOMMUNICATIONS - 1.4%
9,475 General Motors Corporation -
Class H+................................ 909,600
-----------
UTILITIES - ELECTRIC - 0.7%
7,226 AES Trust III+.......................... 445,302
-----------
TOTAL PREFERRED STOCKS
(Cost $1,220,935)..................... 1,354,902
-----------
<CAPTION>
PRINCIPAL
AMOUNT
------
<C> <S> <C>
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS - 0.9%
(Cost $599,957)
FEDERAL HOME LOAN BANK (FHLB) - 0.9%
$ 600,000 Discount note, due 01/03/00............. 599,935
-----------
<CAPTION>
SHARES
------
<C> <S> <C>
INVESTMENT COMPANIES - 8.3% (Cost $5,310,698)
5,310,698 Nations Cash Reserves#.................. 5,310,698
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MARSICO GROWTH & INCOME PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
- --------------------------------------------------------
<S> <C> <C> <C>
TOTAL INVESTMENTS
(Cost $49,174,013*)..... 107.6% $68,937,133
-----------
OTHER ASSETS AND
LIABILITIES (NET)....... (7.6)%
Cash............................. $ 78
Receivable for investment
securities sold.................. 424,709
Receivable for Fund shares
sold............................. 38,051
Dividends receivable............. 10,021
Interest receivable.............. 11,914
Unamortized organization costs... 12,482
Collateral on securities
loaned........................... (5,309,698)
Payable for Fund shares
redeemed......................... (1,135)
Investment advisory fee
payable.......................... (33,223)
Administration fee payable....... (11,319)
Accrued Trustees' fees and
expenses......................... (3,650)
Accrued expenses and other
liabilities...................... (26,829)
-----------
TOTAL OTHER ASSETS AND
LIABILITIES (NET)................ (4,888,599)
-----------
NET ASSETS.............. 100.0% $64,048,534
===== ===========
NET ASSETS CONSIST OF:
Accumulated net realized gain on
investments sold................. $ 719,550
Net unrealized appreciation of
investments...................... 19,763,120
Paid-in capital.................. 43,565,864
-----------
NET ASSETS....................... $64,048,534
===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($64,048,534 DIVIDED BY
3,396,438 shares outstanding).... $ 18.86
===========
</TABLE>
- -----------------------------------------------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $19,937,009 and gross
depreciation of $282,552 for Federal income tax purposes. At December 31,
1999, the aggregate cost of securities for Federal income tax purposes was
$49,282,676.
^ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
+ Non-income producing security.
# Money market mutual fund registered under the Investment Company Act of
1940, as amended, and sub-advised by TradeStreet Investment
Associates, Inc. A portion of this amount represents cash collateral
received from securities lending activity (Note 9). The portion that
represents cash collateral is $5,309,698.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MANAGED INDEX PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS - 97.2%
AEROSPACE AND DEFENSE - 1.1%
2,700 Boeing Company........................................ $ 112,219
788 Honeywell International Inc.+......................... 45,458
400 Northrop Grumman Corporation.......................... 21,625
1,000 Rockwell International Corporation.................... 47,875
-----------
227,177
-----------
APPAREL AND TEXTILES - 0.1%
500 National Service Industries, Inc...................... 14,750
100 Russell Corporation................................... 1,675
100 Springs Industries Inc................................ 3,994
-----------
20,419
-----------
AUTOMOBILES AND TRUCKS - 1.3%
2,200 Ford Motor Company.................................... 117,563
1,800 General Motors Corporation............................ 130,837
200 ITT Industries, Inc................................... 6,688
500 PACCAR, Inc........................................... 22,156
-----------
277,244
-----------
BANKING - 4.3%
2,000 Amsouth Bancorporation................................ 38,625
1,200 Banc One Corporation.................................. 38,475
2,500 Chase Manhattan Corporation........................... 194,218
1,000 First Union Corporation............................... 32,813
4,900 Firstar Corporation................................... 103,513
1,800 Golden West Financial Corporation..................... 60,300
1,000 Huntington Bancshares Inc............................. 23,875
700 J.P. Morgan & Company Inc............................. 88,638
1,200 KeyCorp............................................... 26,550
1,300 PNC Bank Corporation.................................. 57,850
1,700 SouthTrust Corporation................................ 64,281
4,000 Wells Fargo Company................................... 161,750
-----------
890,888
-----------
BEVERAGES - 2.2%
1,300 Anheuser-Busch Companies, Inc......................... 92,138
3,200 Coca-Cola Company..................................... 186,400
5,200 PepsiCo, Inc.......................................... 183,300
-----------
461,838
-----------
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
CHEMICALS - BASIC - 1.5%
1,100 Dow Chemical Company.................................. $ 146,987
1,200 E.I. duPont de Nemours and Company.................... 79,050
100 Eastman Chemical Company.............................. 4,769
400 FMC Corporation+...................................... 22,925
1,300 Mallinckrodt Group Inc................................ 41,356
200 Praxair Inc........................................... 10,063
-----------
305,150
-----------
CHEMICALS - DIVERSIFIED - 0.1%
600 Monsanto Company...................................... 21,375
-----------
CHEMICALS - SPECIALTY - 0.0%+
100 Great Lakes Chemical Corporation...................... 3,818
100 W.R. Grace & Company+................................. 1,388
-----------
5,206
-----------
COMPUTER RELATED - 6.1%
1,100 3Com Corporation+..................................... 51,700
800 Apple Computer Inc.+.................................. 82,250
3,300 Dell Computer Corporation............................. 168,300
1,600 EMC Corporation....................................... 174,800
1,700 Gateway Inc........................................... 122,506
600 Hewlett-Packard Company............................... 68,363
3,000 International Business Machines Corporation........... 324,000
800 Seagate Technology Inc.+.............................. 37,250
2,400 Sun Microsystems, Inc................................. 185,850
1,200 Unisys Corporation+................................... 38,325
-----------
1,253,344
-----------
COMPUTER SERVICES - 1.4%
1,600 Automatic Data Processing Inc......................... 86,200
500 Computer Sciences Corporation+........................ 47,313
2,300 Electronic Data Systems............................... 153,956
-----------
287,469
-----------
COMPUTER SOFTWARE - 7.0%
100 Adobe Systems Inc..................................... 6,725
500 BMC Software, Inc.+................................... 39,969
300 Computer Associates International Inc................. 20,981
1,000 Compuware Corporation................................. 37,250
1,000 First Data Corporation................................ 49,313
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MANAGED INDEX PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
COMPUTER SOFTWARE (CONTINUED)
9,500 Microsoft Corporation++............................... $ 1,109,124
1,000 Novell Inc.+.......................................... 39,938
1,300 Oracle Systems Corporation............................ 145,680
-----------
1,448,980
-----------
CONGLOMERATE - 1.3%
5,000 Tyco International Ltd................................ 194,375
1,200 United Technologies Corporation....................... 78,000
-----------
272,375
-----------
CONSTRUCTION - 0.2%
100 Centex Corporation.................................... 2,469
300 Fluor Corporation..................................... 13,763
100 Kaufman & Broad Home Corporation...................... 2,419
100 Owens-Corning Fiberglass Corporation.................. 1,931
100 Pulte Corporation..................................... 2,250
1,000 Sherwin-Williams Company.............................. 20,999
-----------
43,831
-----------
CONTAINERS AND
PACKAGING - 0.1%
150 Pactiv Corporation+................................... 1,594
600 Tupperware Corporation................................ 10,162
-----------
11,756
-----------
COSMETICS AND TOILETRIES - 1.7%
1,100 Alberto-Culver Company, Class B....................... 28,394
300 Colgate-Palmolive Company............................. 19,500
1,100 Kimberly-Clark Corporation............................ 71,775
2,200 Procter & Gamble Company.............................. 241,037
-----------
360,706
-----------
DIVERSIFIED - 1.2%
1,700 Fortune Brands Inc.................................... 56,206
1,500 Minnesota Mining & Manufacturing Company.............. 146,812
600 Textron Inc........................................... 46,013
-----------
249,031
-----------
DRUGS - 5.9%
1,300 American Home Products Corporation.................... 51,269
2,100 Amgen Inc............................................. 126,131
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
DRUGS (CONTINUED)
3,200 Bristol-Myers Squibb Company.......................... $ 205,400
1,500 Eli Lilly and Company................................. 99,750
3,600 Merck & Company, Inc.................................. 241,425
9,100 Pfizer Inc............................................ 295,181
100 Pharmacia & Upjohn, Inc............................... 4,500
2,100 Schering-Plough Corporation........................... 88,594
1,200 Warner-Lambert Company................................ 98,325
-----------
1,210,575
-----------
ELECTRIC POWER - 1.7%
1,700 Constell Energy....................................... 49,300
1,300 Edison International.................................. 34,044
1,000 Entergy Corporation................................... 25,750
1,800 FirstEnergy Corporation............................... 40,838
100 Florida Progress Corporation.......................... 4,231
1,700 Public Service Enterprise Group....................... 59,181
3,100 Southern Company...................................... 72,850
400 Texas Utilities Company............................... 14,225
1,700 Unicom Corporation.................................... 56,950
-----------
357,369
-----------
ELECTRICAL EQUIPMENT - 0.0%+++
100 Scientific-Atlanta Inc................................ 5,563
-----------
ELECTRONICS - 1.1%
1,500 Applied Materials Inc.+............................... 190,031
300 Solectron Corporation................................. 28,538
-----------
218,569
-----------
ENVIRONMENTAL - 0.2%
600 Johnson Controls Inc.................................. 34,125
-----------
EXPLORATION AND
DRILLING - 0.0%+++
100 McDermott International Inc........................... 906
-----------
FINANCIAL SERVICES - 6.4%
7,300 Citigroup Inc......................................... 405,605
1,700 Fannie Mae............................................ 106,144
2,800 Fleet Boston Financial Corporation.................... 97,475
2,200 Freddie Mac........................................... 103,538
1,700 Household International Inc........................... 63,325
300 Lehman Brothers Holdings Inc.......................... 25,406
500 Marsh & McLennan Companies Inc........................ 47,844
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MANAGED INDEX PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (CONTINUED)
1,500 MBNA Corporation...................................... $ 40,875
600 Merrill Lynch & Company Inc........................... 50,100
1,600 Morgan Stanley Dean Witter & Company.................. 228,400
900 Paine Webber Group, Inc............................... 34,931
1,400 Providian Financial Corporation....................... 127,488
-----------
1,331,131
-----------
FOOD PRODUCERS - 1.6%
2,200 Bestfoods............................................. 115,637
2,700 ConAgra Inc........................................... 60,919
100 Quaker Oats Company................................... 6,563
2,300 Ralston Purina Group.................................. 64,113
4,000 Sara Lee Corporation.................................. 88,249
-----------
335,481
-----------
FOREST AND PAPER
PRODUCTS - 0.7%
400 International Paper Company........................... 22,575
300 Temple-Inland Inc..................................... 19,781
1,300 Weyerhaeuser Company.................................. 93,357
-----------
135,713
-----------
FURNITURE AND
APPLIANCES - 0.3%
100 Black & Decker Corporation............................ 5,225
300 Maytag Corporation.................................... 14,400
500 Whirlpool Corporation................................. 32,531
-----------
52,156
-----------
INSURANCE - 2.4%
700 Aetna Life and Casualty Company....................... 39,069
1,000 Aflac, Inc............................................ 47,188
2,100 American International Group, Inc..................... 227,062
1,300 Conseco Inc........................................... 23,238
500 Loews Corporation..................................... 30,344
100 MBIA Inc.............................................. 5,281
1,100 MGIC Investment Corporation........................... 66,205
1,800 St. Paul Companies Inc................................ 60,638
-----------
499,025
-----------
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
INTERNET - 1.2%
3,300 America Online Inc.................................... $ 248,944
-----------
MACHINERY AND
EQUIPMENT - 0.3%
500 Briggs & Stratton Corporation......................... 26,812
100 Cooper Industries Inc................................. 4,044
200 Cummins Engine Company, Inc........................... 9,663
100 Foster Wheeler Corporation............................ 888
400 Ingersoll-Rand Company................................ 22,024
-----------
63,431
-----------
MANUFACTURING - 3.7%
5,000 General Electric Company++............................ 773,750
-----------
MEDIA - 2.2%
3,100 Comcast Corporation, Class A.......................... 156,744
200 MediaOne Group, Inc.+................................. 15,363
1,200 Time Warner Inc....................................... 86,925
3,100 Viacom Inc., Class B.................................. 187,356
-----------
446,388
-----------
MEDICAL PRODUCTS AND
SUPPLIES - 2.2%
2,500 Abbott Laboratories................................... 90,781
400 Allergan, Inc......................................... 19,900
200 Baxter International Inc.............................. 12,563
200 Becton Dickinson & Company............................ 5,350
700 Cardinal Health, Inc.................................. 33,513
3,200 Johnson & Johnson..................................... 297,999
-----------
460,106
-----------
MEDICAL SERVICES - 0.5%
700 Columbia/HCA Healthcare Corporation................... 20,519
400 Tenet Healthcare Corporation+......................... 9,400
1,300 United Healthcare Corporation......................... 69,062
-----------
98,981
-----------
METALS AND MINING - 0.7%
1,100 Alcan Aluminium Ltd................................... 45,306
900 Alcoa Inc............................................. 74,700
600 Barrick Gold Corporation.............................. 10,613
300 Homestake Mining Company.............................. 2,344
400 Inco Ltd.+............................................ 9,400
-----------
142,363
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MANAGED INDEX PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
NETWORKING EQUIPMENT AND PRODUCTS - 4.1%
5,600 Cisco Systems, Inc.................................... $ 599,900
2,500 Nortel Networks Corporation........................... 252,500
-----------
852,400
-----------
OFFICE EQUIPMENT - 0.4%
900 Ikon Office Solutions Inc............................. 6,131
800 Lexmark International Group, Inc., Class A............ 72,400
-----------
78,531
-----------
OIL - DOMESTIC - 1.4%
1,100 Amerada Hess Corporation.............................. 62,425
100 Ashland Inc........................................... 3,294
1,100 Atlantic Richfield Company............................ 95,150
100 Columbia Energy Group................................. 6,325
900 Kerr-McGee Corporation................................ 55,800
400 Occidental Petroleum Corporation...................... 8,650
300 Phillips Petroleum Company............................ 14,100
1,500 USX-Marathon Group Inc................................ 37,031
-----------
282,775
-----------
OIL - INTERNATIONAL - 2.0%
500 Apache Corporation.................................... 18,469
1,400 Chevron Corporation................................... 121,275
3,200 Royal Dutch Petroleum Company......................... 193,399
1,400 Texaco Inc............................................ 76,038
-----------
409,181
-----------
OIL AND GAS - 2.0%
5,216 Exxon Mobil Corporation+.............................. 420,214
-----------
OIL FIELD SERVICES &
EQUIPMENT - 0.3%
1,300 Halliburton Company................................... 52,325
-----------
PHOTO AND OPTICAL - 0.3%
800 Eastman Kodak Company................................. 53,000
-----------
PRINTING AND PUBLISHING - 1.1%
700 Dow Jones & Company Inc............................... 47,600
700 Gannett Company, Inc.................................. 57,094
2,400 Tribune Company....................................... 132,150
-----------
236,844
-----------
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
RECREATION - 0.6%
900 Brunswick Corporation................................. $ 20,025
300 Carnival Corporation.................................. 14,344
600 Harrah's Entertainment Inc.+.......................... 15,863
2,200 Walt Disney Company................................... 64,349
-----------
114,581
-----------
RESTAURANTS AND LODGING - 0.7%
400 Cendant Corporation+.................................. 10,625
1,700 Darden Restaurants Inc................................ 30,813
100 McDonald's Corporation................................ 4,031
2,600 Tricon Global Restaurants Inc.+....................... 100,425
-----------
145,894
-----------
RETAIL - FOOD - 0.6%
200 Great Atlantic & Pacific Tea Company, Inc............. 5,575
100 Kroger Company........................................ 1,888
1,600 Safeway, Inc.+........................................ 56,899
2,100 Supervalu Inc......................................... 42,000
200 SYSCO Corporation..................................... 7,913
-----------
114,275
-----------
RETAIL - GENERAL - 3.5%
1,800 Dayton Hudson Corporation............................. 132,187
1,000 Federated Department Stores, Inc.+.................... 50,563
300 Toys R Us, Inc.+...................................... 4,294
7,700 Wal-Mart Stores, Inc.................................. 532,262
-----------
719,306
-----------
RETAIL - SPECIALTY - 2.7%
400 Best Buy Company, Inc................................. 20,075
800 Circuit City Stores - Circuit City Group.............. 36,050
1,100 Gap Inc............................................... 50,600
4,050 Home Depot Inc........................................ 277,677
600 Limited Inc........................................... 25,988
1,600 Lowe's Companies Inc.................................. 95,600
1,500 Office Depot, Inc..................................... 16,406
1,400 TJX Companies Inc..................................... 28,613
100 Walgreen Company...................................... 2,925
-----------
553,934
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MANAGED INDEX PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
SEMICONDUCTORS - 2.8%
4,300 Intel Corporation..................................... $ 353,943
500 Micron Technology Inc.+............................... 38,875
1,900 Texas Instruments Inc................................. 184,063
-----------
576,881
-----------
STEEL - 0.1%
100 Nucor Corporation..................................... 5,481
1,300 Worthington Industries................................ 21,532
-----------
27,013
-----------
TELECOMMUNICATIONS - 5.3%
100 ADC Telecommunications, Inc.+......................... 7,256
5,100 Lucent Technologies, Inc.............................. 381,544
1,600 Motorola, Inc......................................... 235,600
600 Nextel Communications Inc.+........................... 61,875
2,000 QUALCOMM Inc.......................................... 352,250
400 Sprint Corporation (PCS Group)+....................... 41,000
400 Tellabs, Inc.......................................... 25,675
-----------
1,105,200
-----------
TOBACCO - 0.4%
2,600 Philip Morris Companies Inc........................... 60,287
500 UST Inc............................................... 12,594
-----------
72,881
-----------
TRANSPORTATION - 0.7%
200 AMR Corporation+...................................... 13,400
600 Burlington Northern Santa Fe Inc...................... 14,550
600 Delta Air Lines, Inc.................................. 29,888
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
TRANSPORTATION (CONTINUED)
400 FDX Corporation....................................... $ 16,375
200 Kansas City Southern Industries....................... 14,925
1,500 Union Pacific Corporation............................. 65,437
-----------
154,575
-----------
UNIT INVESTMENT TRUST - 0.3%
420 Standard and Poor's 500 Depositary Receipts........... 61,688
-----------
UTILITIES - NATURAL GAS - 0.1%
700 Coastal Corporation................................... 24,806
-----------
UTILITIES - TELEPHONE - 7.1%
300 ALLTEL Corporation.................................... 24,806
4,300 AT&T Corporation...................................... 218,225
1,900 Bell Atlantic Corporation............................. 116,969
5,300 BellSouth Corporation................................. 248,106
1,300 GTE Corporation....................................... 91,731
5,400 MCI Worldcom, Inc..................................... 286,538
6,100 SBC Communications Inc................................ 297,374
700 Sprint Corporation (FON Group)........................ 47,119
2,000 U.S. West Inc......................................... 144,000
-----------
1,474,868
-----------
TOTAL COMMON STOCKS (Cost $16,131,903)................ 20,082,537
-----------
INVESTMENT COMPANIES - 2.8% (Cost $588,000)
588,000 Nations Cash Reserves#................................ 588,000
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- MANAGED INDEX PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
- --------------------------------------------------------
<S> <C> <C> <C>
TOTAL INVESTMENTS
(Cost $16,719,903*)..... 100.0% $20,670,537
-----------
OTHER ASSETS AND
LIABILITIES (NET)....... 0.0%
Cash............................. $ 1,239
Receivable for Fund shares
sold............................. 73,134
Dividends receivable............. 20,314
Interest receivable.............. 1,429
Receivable for variation
margin........................... 1,380
Unamortized organization costs... 12,482
Variation margin/due to broker... (31)
Investment advisory fee
payable.......................... (11,212)
Administration fee payable....... (3,838)
Shareholder servicing and
distribution fees payable........ (49,649)
Accrued Trustees' fees and
expenses......................... (3,650)
Accrued expenses and other
liabilities...................... (32,601)
-----------
TOTAL OTHER ASSETS AND
LIABILITIES (NET)................ 8,997
-----------
NET ASSETS.............. 100.0% $20,679,534
===== ===========
NET ASSETS CONSIST OF:
Accumulated net realized loss on
investments sold................. $ (534,753)
Net unrealized appreciation of
investments and futures
contracts........................ 3,952,207
Paid-in capital.................. 17,262,080
-----------
NET ASSETS....................... $20,679,534
===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($20,679,534 DIVIDED BY
1,586,471 shares outstanding).... $ 13.03
===========
</TABLE>
- -----------------------------------------------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $4,457,315 and gross
depreciation of $532,628 for Federal income tax purposes. At December 31,
1999, the aggregate cost of securities for Federal income tax purposes was
$16,745,850.
+ Non-income producing security.
++ All or a portion of security segregated as collateral for futures
contracts.
+++ Amount represents less than 0.1%.
# Money market mutual fund registered under the Investment Company Act of
1940, as amended, and sub-advised by TradeStreet Investment
Associates, Inc.
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- VALUE PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ---------------------------------------------------------------
COMMON STOCKS - 97.1%
ADVERTISING AND MARKETING SERVICES -
1.5%
1,325 Interpublic Group Companies, Inc........ $ 76,436
1,150 Young and Rubicam Inc................... 81,362
-----------
157,798
-----------
AEROSPACE AND DEFENSE - 1.9%
3,506 Honeywell International Inc.+........... 202,252
-----------
APPAREL AND TEXTILES - 0.6%
2,400 Jones Apparel Group, Inc.+.............. 65,100
-----------
AUTOMOBILE PARTS MANUFACTURERS - 0.8%
3,350 Genuine Parts Company................... 83,122
-----------
AUTOMOBILES AND TRUCKS - 3.0%
4,120 Ford Motor Company...................... 220,163
3,050 ITT Industries, Inc..................... 101,984
-----------
322,147
-----------
BANKING - 5.6%
2,175 Bank of New York Inc.................... 87,000
3,275 Chase Manhattan Corporation............. 254,427
7,525 Mellon Financial Corporation............ 256,320
-----------
597,747
-----------
BEVERAGES - 2.0%
1,800 Anheuser-Busch Companies, Inc........... 127,575
2,355 PepsiCo, Inc............................ 83,014
-----------
210,589
-----------
CHEMICALS - BASIC - 1.7%
1,616 E.I. duPont de Nemours and Company...... 106,455
850 Eastman Chemical Company................ 40,534
1,825 IMC Global, Inc......................... 29,884
-----------
176,873
-----------
COMPUTER RELATED - 3.7%
1,550 Adaptec, Inc.+.......................... 77,306
1,275 Apple Computer Inc.+.................... 131,086
2,625 Gateway Inc............................. 189,164
-----------
397,556
-----------
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ---------------------------------------------------------------
COMPUTER SOFTWARE - 5.9%
1,550 Adobe Systems Inc....................... $ 104,238
1,850 Computer Associates International
Inc..................................... 129,384
6,850 Compuware Corporation................... 255,162
2,375 Symantec Corporation+................... 139,234
-----------
628,018
-----------
CONGLOMERATE - 2.0%
3,275 United Technologies Corporation......... 212,875
-----------
COSMETICS AND TOILETRIES - 0.9%
900 Procter & Gamble Company................ 98,606
-----------
DIVERSIFIED - 0.9%
1,300 Textron Inc............................. 99,694
-----------
DRUGS - 3.3%
2,875 Bristol-Myers Squibb Company............ 184,539
4,025 Schering-Plough Corporation............. 169,805
-----------
354,344
-----------
ELECTRIC POWER - 1.9%
3,025 DTE Energy Company...................... 94,909
5,300 Energy East Corporation................. 110,307
-----------
205,216
-----------
ELECTRONICS - 5.5%
3,950 American Power Conversion Corporation... 104,181
5,900 Atmel Corporation....................... 174,419
850 CTS Corporation......................... 64,069
1,650 LSI Logic Corporation+.................. 111,375
3,075 National Semiconductor Corporation+..... 131,648
-----------
585,692
-----------
FINANCIAL SERVICES - 5.6%
4,322 Citigroup Inc........................... 240,141
5,397 Fleet Boston Financial Corporation...... 187,883
4,230 Paine Webber Group, Inc................. 164,177
-----------
592,201
-----------
FOOD PRODUCERS - 2.3%
1,875 General Mills Inc....................... 67,031
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- VALUE PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ---------------------------------------------------------------
FOOD PRODUCERS (CONTINUED)
4,525 Nabisco Group Holdings Corporation...... $ 48,078
1,375 Nabisco Holdings Corporation,
Class A................................. 43,484
1,250 Quaker Oats Company..................... 82,032
-----------
240,625
-----------
FOREST AND PAPER
PRODUCTS - 1.4%
1,075 Boise Cascade Corporation............... 43,538
1,925 International Paper Company............. 108,642
-----------
152,180
-----------
FURNITURE AND
APPLIANCES - 2.1%
2,425 Black & Decker Corporation.............. 126,706
1,550 Whirlpool Corporation................... 100,847
-----------
227,553
-----------
INSURANCE - 5.5%
2,025 CIGNA Corporation....................... 163,139
3,335 Hartford Financial Services
Group, Inc.**........................... 157,996
6,650 Lincoln National Corporation Ltd........ 266,000
-----------
587,135
-----------
MEDIA - 1.0%
2,025 Comcast Corporation, Class A............ 102,389
-----------
MEDICAL PRODUCTS AND
SUPPLIES - 1.8%
2,725 Abbott Laboratories..................... 98,952
1,050 Johnson & Johnson....................... 97,781
-----------
196,733
-----------
MEDICAL SERVICES - 2.0%
5,025 Tenet Healthcare Corporation+........... 118,088
1,450 Wellpoint Health Networks, Inc.+........ 95,609
-----------
213,697
-----------
METALS AND MINING - 0.6%
875 Phelps Dodge Corporation................ 58,734
-----------
OFFICE EQUIPMENT - 4.0%
2,425 Electronics for Imaging, Inc.+.......... 140,953
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ---------------------------------------------------------------
OFFICE EQUIPMENT (CONTINUED)
3,175 Lexmark International Group, Inc.,
Class A................................. $ 287,338
-----------
428,291
-----------
OIL - DOMESTIC - 2.0%
3,389 Conoco, Inc............................. 84,301
1,125 Ultramar Diamond Shamrock Corporation... 25,523
3,975 USX-Marathon Group Inc.................. 98,134
-----------
207,958
-----------
OIL - INTERNATIONAL - 1.4%
2,540 Royal Dutch Petroleum Company........... 153,511
-----------
OIL AND GAS - 2.4%
3,170 Exxon Mobil Corporation+................ 255,383
-----------
OIL FIELD SERVICES &
EQUIPMENT - 0.8%
975 Halliburton Company..................... 39,244
1,500 Tosco Corporation....................... 40,781
-----------
80,025
-----------
RETAIL - GENERAL - 1.7%
2,500 Dayton Hudson Corporation............... 183,594
-----------
RETAIL - SPECIALTY - 4.5%
4,450 Abercrombie & Fitch Company............. 118,758
2,775 AnnTaylor Stores Corporation+........... 95,564
2,575 Circuit City Stores - Circuit City
Group................................... 116,036
2,600 Family Dollar Stores.................... 42,413
1,850 Lowe's Companies Inc.................... 110,538
-----------
483,309
-----------
SEMICONDUCTORS - 1.7%
1,335 Intel Corporation....................... 109,887
2,275 Intergrated Device Technology, Inc.+.... 65,975
-----------
175,862
-----------
STEEL - 2.6%
4,225 Bethlehem Steel Corporation+............ 35,384
2,415 Nucor Corporation....................... 132,373
3,395 USX - U.S. Steel Group Inc.............. 112,035
-----------
279,792
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- VALUE PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ---------------------------------------------------------------
TELECOMMUNICATIONS - 2.9%
2,125 ADC Telecommunications, Inc.+........... $ 154,196
1,200 CommScope, Inc.+........................ 48,375
1,575 Tellabs, Inc............................ 101,095
-----------
303,666
-----------
UTILITIES - NATURAL GAS - 1.4%
4,100 Coastal Corporation..................... 145,294
-----------
UTILITIES - TELEPHONE - 8.2%
1,175 ALLTEL Corporation...................... 97,158
4,002 AT&T Corporation........................ 203,101
2,825 BellSouth Corporation................... 132,245
2,075 GTE Corporation......................... 146,417
1,928 MCI Worldcom, Inc....................... 102,278
3,970 SBC Communications Inc.................. 193,537
-----------
874,736
-----------
TOTAL COMMON STOCKS (Cost $9,476,154)... 10,340,297
-----------
INVESTMENT COMPANIES - 3.5% (Cost $371,000)
371,000 Nations Cash Reserves#.................. 371,000
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
TOTAL INVESTMENTS (Cost $9,847,154*).... 100.6%
OTHER ASSETS AND LIABILITIES (NET)...... (0.6)%
Cash.................................................
Dividends receivable.................................
Interest receivable..................................
Unamortized organization costs.......................
Payable for Fund shares redeemed.....................
Investment advisory fee payable......................
Administration fee payable...........................
Accrued Trustees' fees and expenses..................
Accrued expenses and other liabilities...............
TOTAL OTHER ASSETS AND LIABILITIES (NET).............
NET ASSETS.............................. 100.0%
===========
</TABLE>
<TABLE>
<CAPTION>
VALUE
- --------------------------------------------------------
<S> <C> <C> <C>
NET ASSETS CONSIST OF:
Accumulated net realized loss on
investments sold................. $ (392,562)
Net unrealized appreciation of
investments...................... 864,143
Paid-in capital.................. 10,173,192
-----------
NET ASSETS....................... $10,644,773
===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($10,644,773 DIVIDED BY
1,003,156 shares outstanding).... $ 10.61
===========
</TABLE>
- -----------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $1,140,805 and gross
depreciation of $334,674 for Federal income tax purposes. At December 31,
1999, the aggregate cost of securities for Federal income tax purposes was
$9,905,166.
** Affiliated security.
+ Non-income producing security.
# Money market mutual fund registered under the Investment Company Act of
1940, as amended, and sub-advised by TradeStreet Investment
Associates, Inc.
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- BALANCED ASSETS PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -----------------------------------------------------------------
COMMON STOCKS - 63.4%
ADVERTISING AND MARKETING SERVICES -
0.9%
500 Interpublic Group Companies, Inc........ $ 28,844
425 Young and Rubicam Inc................... 30,069
-----------
58,913
-----------
AEROSPACE AND DEFENSE - 1.3%
1,509 Honeywell International Inc.+........... 87,050
-----------
APPAREL AND TEXTILES - 0.4%
925 Jones Apparel Group, Inc.+.............. 25,091
-----------
AUTOMOBILE PARTS MANUFACTURERS - 0.5%
1,310 Genuine Parts Company................... 32,504
-----------
AUTOMOBILES AND
TRUCKS - 1.7%
1,730 Ford Motor Company...................... 92,447
625 ITT Industries, Inc..................... 20,898
-----------
113,345
-----------
BANKING - 3.5%
885 Bank of New York Inc.................... 35,400
1,190 Chase Manhattan Corporation............. 92,448
3,055 Mellon Financial Corporation............ 104,061
-----------
231,909
-----------
BEVERAGES - 1.3%
700 Anheuser-Busch Companies, Inc........... 49,613
940 PepsiCo, Inc............................ 33,135
-----------
82,748
-----------
CHEMICALS - BASIC - 1.0%
462 E.I. duPont de Nemours and Company...... 30,434
300 Eastman Chemical Company................ 14,306
1,125 IMC Global, Inc......................... 18,422
-----------
63,162
-----------
COMPUTER RELATED - 3.7%
625 Adaptec, Inc.+.......................... 31,172
515 Apple Computer Inc.+.................... 52,948
580 Comverse Technology Inc................. 83,955
1,065 Gateway Inc............................. 76,747
-----------
244,822
-----------
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -----------------------------------------------------------------
COMPUTER SOFTWARE - 3.8%
600 Adobe Systems Inc....................... $ 40,350
725 Computer Associates International
Inc..................................... 50,705
2,700 Compuware Corporation................... 100,574
950 Symantec Corporation+................... 55,694
-----------
247,323
-----------
CONGLOMERATE - 1.3%
1,335 United Technologies Corporation......... 86,775
-----------
COSMETICS AND
TOILETRIES - 0.5%
300 Procter & Gamble Company................ 32,869
-----------
DIVERSIFIED - 0.6%
500 Textron Inc............................. 38,344
-----------
DRUGS - 2.2%
1,200 Bristol-Myers Squibb Company............ 77,025
1,660 Schering-Plough Corporation............. 70,031
-----------
147,056
-----------
ELECTRIC POWER - 1.3%
1,225 DTE Energy Company...................... 38,434
2,145 Energy East Corporation................. 44,643
-----------
83,077
-----------
ELECTRONICS - 3.5%
1,575 American Power Conversion Corporation... 41,541
2,250 Atmel Corporation....................... 66,515
325 CTS Corporation......................... 24,497
675 LSI Logic Corporation+.................. 45,563
1,225 National Semiconductor Corporation+..... 52,445
-----------
230,561
-----------
FINANCIAL SERVICES - 3.2%
1,535 Citigroup Inc........................... 85,288
1,809 Fleet Boston Financial Corporation...... 62,976
1,510 Paine Webber Group, Inc................. 58,607
-----------
206,871
-----------
FOOD PRODUCERS - 1.6%
1,190 General Mills Inc....................... 42,543
1,525 Nabisco Group Holdings Corporation...... 16,203
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- BALANCED ASSETS PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -----------------------------------------------------------------
FOOD PRODUCERS (CONTINUED)
395 Nabisco Holdings Corporation,
Class A................................. $ 12,492
530 Quaker Oats Company..................... 34,781
-----------
106,019
-----------
FOREST AND PAPER
PRODUCTS - 1.3%
1,025 Boise Cascade Corporation............... 41,513
775 International Paper Company............. 43,739
-----------
85,252
-----------
FURNITURE AND
APPLIANCES - 1.5%
1,025 Black & Decker Corporation.............. 53,556
675 Whirlpool Corporation................... 43,917
-----------
97,473
-----------
INSURANCE - 3.3%
765 CIGNA Corporation....................... 61,630
1,325 Hartford Financial Services
Group, Inc.**........................... 62,772
2,230 Lincoln National Corporation Ltd........ 89,200
-----------
213,602
-----------
MEDIA - 0.6%
800 Comcast Corporation, Class A............ 40,450
-----------
MEDICAL PRODUCTS AND SUPPLIES - 1.1%
1,025 Abbott Laboratories..................... 37,220
400 Johnson & Johnson....................... 37,250
-----------
74,470
-----------
MEDICAL SERVICES - 1.1%
1,565 Tenet Healthcare Corporation+........... 36,778
525 Wellpoint Health Networks, Inc.+........ 34,617
-----------
71,395
-----------
METALS AND MINING - 0.3%
300 Phelps Dodge Corporation................ 20,138
-----------
OFFICE EQUIPMENT - 2.6%
950 Electronics for Imaging, Inc.+.......... 55,219
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -----------------------------------------------------------------
OFFICE EQUIPMENT (CONTINUED)
1,265 Lexmark International Group, Inc.,
Class A................................. $ 114,482
-----------
169,701
-----------
OIL - DOMESTIC - 1.3%
1,342 Conoco, Inc............................. 33,382
450 Ultramar Diamond Shamrock Corporation... 10,209
1,575 USX-Marathon Group Inc.................. 38,883
-----------
82,474
-----------
OIL - INTERNATIONAL - 0.9%
1,005 Royal Dutch Petroleum Company........... 60,740
-----------
OIL AND GAS - 1.6%
1,336 Exxon Mobil Corporation+................ 107,632
-----------
OIL FIELD SERVICES & EQUIPMENT - 0.5%
280 Halliburton Company..................... 11,270
800 Tosco Corporation....................... 21,750
-----------
33,020
-----------
RETAIL - GENERAL - 1.1%
1,000 Dayton Hudson Corporation............... 73,438
-----------
RETAIL - SPECIALTY - 2.9%
1,650 Abercrombie & Fitch Company............. 44,034
1,125 AnnTaylor Stores Corporation+........... 38,742
1,025 Circuit City Stores - Circuit City
Group................................... 46,190
1,050 Family Dollar Stores.................... 17,128
725 Lowe's Companies Inc.................... 43,319
-----------
189,413
-----------
SEMICONDUCTORS - 1.2%
535 Intel Corporation....................... 44,037
1,150 Intergrated Device Technology, Inc.+.... 33,350
-----------
77,387
-----------
STEEL - 1.7%
1,525 Bethlehem Steel Corporation+............ 12,772
965 Nucor Corporation....................... 52,894
1,345 USX - U.S. Steel Group Inc.............. 44,385
-----------
110,051
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
Nations Funds
NATIONS ANNUITY TRUST -- BALANCED ASSETS PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -----------------------------------------------------------------
TELECOMMUNICATIONS - 1.9%
850 ADC Telecommunications, Inc.+........... $ 61,679
500 CommScope, Inc.+........................ 20,156
625 Tellabs, Inc............................ 40,117
-----------
121,952
-----------
UTILITIES - NATURAL GAS - 0.9%
1,630 Coastal Corporation..................... 57,763
-----------
UTILITIES - TELEPHONE - 5.3%
470 ALLTEL Corporation...................... 38,863
1,667 AT&T Corporation........................ 84,600
1,125 BellSouth Corporation................... 52,664
815 GTE Corporation......................... 57,508
705 MCI Worldcom, Inc....................... 37,409
1,575 SBC Communications Inc.................. 76,781
-----------
347,825
-----------
TOTAL COMMON STOCKS (Cost $3,748,553)... 4,152,615
-----------
<CAPTION>
PRINCIPAL
AMOUNT
------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS - 33.1%
U.S. TREASURY BONDS - 4.1%
$ 286,000 6.125% 11/15/27......................... 266,157
-----------
U.S. TREASURY NOTES - 29.0%
1,132,000 5.625% 12/31/02......................... 1,111,126
840,000 5.625% 05/15/08......................... 790,121
-----------
1,901,247
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $2,270,559)..................... 2,167,404
-----------
<CAPTION>
SHARES
------
<C> <S> <C>
INVESTMENT COMPANIES - 33.9% Cost $2,221,546)
2,221,546 Nations Cash Reserves#.................. $ 2,221,546
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
- ---------------------------------------------------------
<S> <C> <C> <C>
TOTAL INVESTMENTS
(Cost $8,240,658*)....... 130.4% $ 8,541,565
-----------
OTHER ASSETS AND
LIABILITIES (NET)........ (30.4)%
Cash.............................. $ 865
Receivable for Fund shares sold... 13,944
Dividends receivable.............. 5,336
Interest receivable............... 10,021
Receivable from investment
advisor........................... 1,431
Unamortized organization costs.... 12,482
Collateral on securities loaned... (2,007,246)
Administration fee payable........ (1,250)
Accrued Trustees' fees and
expenses.......................... (3,650)
Accrued expenses and other
liabilities....................... (25,052)
-----------
TOTAL OTHER ASSETS AND LIABILITIES
(NET)............................. (1,993,119)
-----------
NET ASSETS............... 100.0% $ 6,548,446
===== ===========
NET ASSETS CONSIST OF:
Accumulated net realized loss on
investments sold.................. $ (289,816)
Net unrealized appreciation of
investments....................... 300,907
Paid-in capital................... 6,537,355
-----------
NET ASSETS........................ $ 6,548,446
===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($6,548,446 DIVIDED BY 678,661
shares outstanding)............... $ 9.65
===========
</TABLE>
- -----------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $532,922 and gross
depreciation of $245,425 for Federal income tax purposes. At December 31,
1999, the aggregate cost of securities for Federal income tax purposes was
$8,254,068.
** Affiliated security.
+ Non-income producing security.
# Money market mutual fund registered under the Investment Company Act of
1940, as amended, and sub-advised by TradeStreet Investment
Associates, Inc. A portion of this amount represents cash collateral
received from securities lending activity (Note 9). The portion that
represents cash collateral is $2,007,246.
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE>
[Intentionally left blank page]
<PAGE>
Nations Funds
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTERNATIONAL
GROWTH FOCUSED EQUITIES
PORTFOLIO PORTFOLIO
------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes
of $8,445, $4,131, $24, $0, $2,536, $1,317,
$931 and $375, respectively)............... $ 44,281 $ 250,575
Interest..................................... 13,322 265,222
Securities lending........................... -- 8,110
---------- -----------
Total investment income.................. 57,603 523,907
---------- -----------
EXPENSES:
Investment advisory fee...................... 28,528 439,715
Custodian fees............................... 7,681 3,914
Transfer agent fees.......................... 917 13,934
Trustees' fees and expenses.................. 16,239 16,175
Administration fee........................... 6,452 113,284
Shareholder servicing and distribution
fees....................................... 8,573 140,671
Legal and audit fees......................... 18,056 38,224
Amortization of organization costs........... 3,745 3,745
Interest expense............................. -- --
Other........................................ 527 7,095
---------- -----------
Total expenses........................... 90,718 776,757
Fees waived and expenses reimbursed by
investment adviser,sub-adviser and/or
distributor................................ (47,866) (158,006)
Fees reduced by credits allowed by the
custodian.................................. -- (1,007)
---------- -----------
Net expenses............................. 42,852 617,744
---------- -----------
NET INVESTMENT INCOME/(LOSS)................. 14,751 (93,837)
---------- -----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS:
Net realized gain/(loss) from:
Security transactions...................... 227,921 3,082,843
Written Options............................ -- (484,907)
Foreign currency contracts and foreign
currency transactions.................... (2,532) 7,820
---------- -----------
Net realized gain/(loss) on investments...... 225,389 2,605,756
---------- -----------
Change in unrealized
appreciation/(depreciation) of:
Securities................................. 1,292,148 28,089,522
Futures contracts.......................... -- --
Foreign currency and net other assets...... (294) --
---------- -----------
Net change in unrealized
appreciation/(depreciation) of
investments................................ 1,291,854 28,089,522
---------- -----------
Net realized and unrealized gain/(loss) on
investments................................ 1,517,243 30,695,278
---------- -----------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.................. $1,531,994 $30,601,441
========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PAGE>
Nations Funds
STATEMENTS OF OPERATIONS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGED DISCIPLINED GROWTH & MANAGED BALANCED
SMALLCAP INDEX EQUITY INCOME INDEX VALUE ASSETS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes
of $8,445, $4,131, $24, $0, $2,536, $1,317,
$931 and $375, respectively)............... $ 51,179 $ 65,196 $ 156,827 $ 11,584 $ 120,911 $ 50,011
Interest..................................... 4,548 10,337 125,895 189,058 16,479 111,164
Securities lending........................... 65 -- 6,111 -- 170 589
--------- -------- ----------- ---------- --------- --------
Total investment income.................. 55,792 75,533 288,833 200,642 137,560 161,764
--------- -------- ----------- ---------- --------- --------
EXPENSES:
Investment advisory fee...................... 27,461 42,569 251,450 62,246 56,302 35,612
Custodian fees............................... 2,466 1,556 2,865 1,954 1,713 1,494
Transfer agent fees.......................... 2,656 1,638 6,136 1,018 2,138 1,401
Trustees' fees and expenses.................. 6,317 14,240 14,601 6,317 16,239 16,239
Administration fee........................... 12,181 12,092 64,686 28,314 16,145 9,844
Shareholder servicing and distribution
fees....................................... 15,731 15,807 80,414 35,936 20,579 13,387
Legal and audit fees......................... 5,650 18,716 29,050 14,462 20,090 14,500
Amortization of organization costs........... 3,745 3,745 3,745 3,745 3,745 3,745
Interest expense............................. -- 114 -- -- -- --
Other........................................ -- 1,604 250 -- 1,128 --
--------- -------- ----------- ---------- --------- --------
Total expenses........................... 76,207 112,081 453,197 153,992 138,079 96,222
Fees waived and expenses reimbursed by
investment adviser,sub-adviser and/or
distributor................................ (29,157) (50,051) (98,746) (45,639) (55,576) (42,164)
Fees reduced by credits allowed by the
custodian.................................. -- (41) (735) (255) (57) (257)
--------- -------- ----------- ---------- --------- --------
Net expenses............................. 47,050 61,989 353,716 108,098 82,446 53,801
--------- -------- ----------- ---------- --------- --------
NET INVESTMENT INCOME/(LOSS)................. 8,742 13,544 (64,883) 92,544 55,114 107,963
--------- -------- ----------- ---------- --------- --------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS:
Net realized gain/(loss) from:
Security transactions...................... (459,781) 124,855 1,307,074 (431,265) (252,307) (74,908)
Written Options............................ -- -- (258,070) -- -- --
Foreign currency contracts and foreign
currency transactions.................... -- -- (1,282) -- -- --
--------- -------- ----------- ---------- --------- --------
Net realized gain/(loss) on investments...... (459,781) 124,855 1,047,722 (431,265) (252,307) (74,908)
--------- -------- ----------- ---------- --------- --------
Change in unrealized
appreciation/(depreciation) of:
Securities................................. 886,856 385,046 17,460,976 2,936,407 366,501 42,469
Futures contracts.......................... -- 239 -- 1,573 -- --
Foreign currency and net other assets...... -- -- -- -- -- --
--------- -------- ----------- ---------- --------- --------
Net change in unrealized
appreciation/(depreciation) of
investments................................ 886,856 385,285 17,460,976 2,937,980 366,501 42,469
--------- -------- ----------- ---------- --------- --------
Net realized and unrealized gain/(loss) on
investments................................ 427,075 510,140 18,508,698 2,506,715 114,194 (32,439)
--------- -------- ----------- ---------- --------- --------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.................. $ 435,817 $523,684 $18,443,815 $2,599,259 $ 169,308 $ 75,524
========= ======== =========== ========== ========= ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
34
<PAGE>
Nations Funds
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH
PORTFOLIO
------------------------
YEAR ENDED PERIOD ENDED
12/31/99 12/31/98(A)
---------- ------------
<S> <C> <C>
Net investment income/(loss)................. $ 14,751 $ 13,160
Net realized gain/(loss) on investments,
options and foreign currency
transactions............................... 225,389 (95,792)
Net change in unrealized
appreciation/(depreciation) of investments
and assets and liabilities in foreign
currencies................................. 1,291,854 192,168
---------- ----------
Net increase/(decrease) in net assets
resulting from operations.................. 1,531,994 109,536
Distributions to shareholders from net
investment income.......................... (19,866) (6,673)
Distributions to shareholders in excess of
net investment income...................... -- (270)
Distributions to shareholders from net
realized gains............................. (111,940) --
Net increase/(decrease) in net assets from
Fund share transactions.................... 2,188,381 2,197,044
---------- ----------
Net increase/(decrease) in net assets........ 3,588,569 2,299,637
NET ASSETS:
Beginning of Period.......................... 2,309,637 10,000
---------- ----------
End of Period................................ $5,898,206 $2,309,637
========== ==========
Undistributed net investment income /
(distributions in excess of net investment
income) at end of period................... $ (1,090) $ (52)
========== ==========
</TABLE>
- -----------------
(a) Portfolio commenced operations on March 27, 1998. Shares were offered to
the public on April 6, 1998.
SEE NOTES TO FINANCIAL STATEMENTS.
35
<PAGE>
Nations Funds
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGED SMALLCAP INDEX
FOCUSED EQUITIES PORTFOLIO PORTFOLIO DISCIPLINED EQUITY PORTFOLIO
-------------------------- ------------------------ ----------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
12/31/99 12/31/98(A) 12/31/99 12/31/98(A) 12/31/99 12/31/98(A)
---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income/(loss)................. $ (93,837) $ 28,903 $ 8,742 $ 19,921 $ 13,544 $ 9,321
Net realized gain/(loss) on investments,
options and foreign currency
transactions............................... 2,605,756 118,670 (459,781) (277,452) 124,855 (220,287)
Net change in unrealized
appreciation/(depreciation) of investments
and assets and liabilities in foreign
currencies................................. 28,089,522 3,641,292 886,856 (249,248) 385,285 598,113
------------ ----------- ---------- ---------- ---------- ----------
Net increase/(decrease) in net assets
resulting from operations.................. 30,601,441 3,788,865 435,817 (506,779) 523,684 387,147
Distributions to shareholders from net
investment income.......................... -- (28,837) (8,742) (19,921) (13,544) (9,321)
Distributions to shareholders in excess of
net investment income...................... -- -- (1,765) (2,955) (2,847) (1,477)
Distributions to shareholders from net
realized gains............................. (727,438) (1,193) -- -- -- --
Net increase/(decrease) in net assets from
Fund share transactions.................... 58,720,835 20,751,772 664,101 6,607,173 2,380,410 4,409,976
------------ ----------- ---------- ---------- ---------- ----------
Net increase/(decrease) in net assets........ 88,594,838 24,510,607 1,089,411 6,077,518 2,887,703 4,786,325
NET ASSETS:
Beginning of Period.......................... 24,520,607 10,000 6,097,518 20,000 4,796,325 10,000
------------ ----------- ---------- ---------- ---------- ----------
End of Period................................ $113,115,445 $24,520,607 $7,186,929 $6,097,518 $7,684,028 $4,796,325
============ =========== ========== ========== ========== ==========
Undistributed net investment income /
(distributions in excess of net investment
income) at end of period................... $ -- $ -- $ -- $ -- $ -- $ --
============ =========== ========== ========== ========== ==========
</TABLE>
- -----------------
(a) Portfolio commenced operations on March 27, 1998. Shares were offered to
the public on April 6, 1998.
SEE NOTES TO FINANCIAL STATEMENTS.
36
<PAGE>
Nations Funds
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH & INCOME PORTFOLIO
---------------------------
YEAR ENDED PERIOD ENDED
12/31/99 12/31/98(A)
---------- ------------
<S> <C> <C>
Net investment income/(loss)................. $ (64,883) $ 24,450
Net realized gain/(loss) on investments,
options and foreign currency
transactions............................... 1,047,722 (263,298)
Net change in unrealized
appreciation/(depreciation) of investments
and assets and liabilities in foreign
currencies................................. 17,460,976 2,302,144
----------- -----------
Net increase/(decrease) in net assets
resulting from operations.................. 18,443,815 2,063,296
Distributions to shareholders from net
investment income.......................... -- (24,450)
Distributions to shareholders in excess of
net investment income...................... -- (1,078)
Distributions to shareholders from net
realized gains............................. -- --
Net increase/(decrease) in net assets from
Fund share transactions.................... 30,029,023 13,527,928
----------- -----------
Net increase/(decrease) in net assets........ 48,472,838 15,565,696
NET ASSETS:
Beginning of Period.......................... 15,575,696 10,000
----------- -----------
End of Period................................ $64,048,534 $15,575,696
=========== ===========
Undistributed net investment income /
(distributions in excess of net investment
income) at end of period................... $ -- $ --
=========== ===========
</TABLE>
- -----------------
(a) Portfolio commenced operations on March 27, 1998. Shares were offered to
the public on April 6, 1998.
SEE NOTES TO FINANCIAL STATEMENTS.
37
<PAGE>
Nations Funds
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGED INDEX PORTFOLIO VALUE PORTFOLIO BALANCED ASSETS PORTFOLIO
------------------------- ------------------------- --------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
12/31/99 12/31/98(A) 12/31/99 12/31/98(A) 12/31/99 12/31/98(A)
---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income/(loss)................. $ 92,544 $ 56,892 $ 55,114 $ 19,877 $ 107,963 $ 37,187
Net realized gain/(loss) on investments,
options and foreign currency
transactions............................... (431,265) (103,488) (252,307) (140,255) (74,908) (214,908)
Net change in unrealized
appreciation/(depreciation) of investments
and assets and liabilities in foreign
currencies................................. 2,937,980 1,014,227 366,501 497,643 42,469 258,438
----------- ---------- ----------- ---------- ---------- ----------
Net increase/(decrease) in net assets
resulting from operations.................. 2,599,259 967,631 169,308 377,265 75,524 80,717
Distributions to shareholders from net
investment income.......................... (92,544) (56,892) (55,114) (19,877) (107,963) (37,187)
Distributions to shareholders in excess of
net investment income...................... (2,553) (4,633) (3,387) (643) (2,124) (649)
Distributions to shareholders from net
realized gains............................. -- -- -- -- -- --
Net increase/(decrease) in net assets from
Fund share transactions.................... 8,244,288 9,004,978 4,888,909 5,278,312 2,760,168 3,769,960
----------- ---------- ----------- ---------- ---------- ----------
Net increase/(decrease) in net assets........ 10,748,450 9,911,084 4,999,716 5,635,057 2,725,605 3,812,841
NET ASSETS:
Beginning of Period.......................... 9,931,084 20,000 5,645,057 10,000 3,822,841 10,000
----------- ---------- ----------- ---------- ---------- ----------
End of Period................................ $20,679,534 $9,931,084 $10,644,773 $5,645,057 $6,548,446 $3,822,841
=========== ========== =========== ========== ========== ==========
Undistributed net investment income /
(distributions in excess of net investment
income) at end of period................... $ -- $ -- $ -- $ -- $ -- $ --
=========== ========== =========== ========== ========== ==========
</TABLE>
- -----------------
(a) Portfolio commenced operations on March 27, 1998. Shares were offered to
the public on April 6, 1998.
SEE NOTES TO FINANCIAL STATEMENTS.
38
<PAGE>
Nations Funds
SCHEDULES OF CAPITAL STOCK ACTIVITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH PORTFOLIO MANAGED SMALLCAP INDEX PORTFOLIO
---------------------------------------------- ----------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998* DECEMBER 31, 1999 DECEMBER 31, 1998*
---------------------- ---------------------- ------------------- -------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sold..................... 201,958 $ 2,334,605 225,359 $ 2,210,795 115,662 $1,007,940 671,552 $6,589,984
Issued as reinvestment of
dividends.............. 9,469 131,806 678 6,943 1,150 10,507 2,602 22,876
Repurchased.............. (25,273) (278,030) (2,269) (20,694) (39,780) (354,346) (673) (5,687)
--------- ----------- --------- ----------- ------- ---------- ------- ----------
Net
increase/(decrease).... 186,154 $ 2,188,381 223,768 $ 2,197,044 77,032 $ 664,101 673,481 $6,607,173
========= =========== ========= =========== ======= ========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
FOCUSED EQUITIES PORTFOLIO DISCIPLINED EQUITY PORTFOLIO
---------------------------------------------- ----------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998* DECEMBER 31, 1999 DECEMBER 31, 1998*
---------------------- ---------------------- ------------------- -------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sold..................... 3,946,905 $59,984,099 1,889,080 $20,782,314 280,139 $3,169,471 454,328 $4,453,461
Issued as reinvestment of
dividends.............. 48,789 727,437 2,301 30,030 1,458 16,391 1,027 10,798
Repurchased.............. (142,964) (1,990,701) (5,861) (60,572) (72,663) (805,452) (4,815) (54,283)
--------- ----------- --------- ----------- ------- ---------- ------- ----------
Net
increase/(decrease).... 3,852,730 $58,720,835 1,885,520 $20,751,772 208,934 $2,380,410 450,540 $4,409,976
========= =========== ========= =========== ======= ========== ======= ==========
</TABLE>
- ----------------------
* Portfolio commenced operations on March 27, 1998. Shares were offered to
the public on April 6, 1998.
SEE NOTES TO FINANCIAL STATEMENTS.
39
<PAGE>
Nations Funds
SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH & INCOME PORTFOLIO VALUE PORTFOLIO
---------------------------------------------- ----------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998* DECEMBER 31, 1999 DECEMBER 31, 1998*
---------------------- ---------------------- ------------------- -------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sold..................... 2,153,251 $30,512,813 1,290,360 $13,629,359 500,921 $5,318,789 550,414 $5,358,737
Issued as reinvestment of
dividends.............. -- -- 2,092 25,519 5,658 58,501 1,981 20,520
Repurchased.............. (37,540) (483,790) (12,725) (126,950) (45,764) (488,381) (11,054) (100,945)
--------- ----------- --------- ----------- ------- ---------- ------- ----------
Net
increase/(decrease).... 2,115,711 $30,029,023 1,279,727 $13,527,928 460,815 $4,888,909 541,341 $5,278,312
========= =========== ========= =========== ======= ========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
MANAGED INDEX PORTFOLIO BALANCED ASSETS PORTFOLIO
--------------------------------------------- ----------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998* DECEMBER 31, 1999 DECEMBER 31, 1998*
---------------------- --------------------- ------------------- -------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sold..................... 714,740 $ 8,529,730 892,094 $8,962,981 320,303 $3,129,437 400,013 $3,823,085
Issued as reinvestment of
dividends.............. 7,482 95,097 5,558 61,525 11,625 110,087 3,917 37,836
Repurchased.............. (33,590) (380,539) (1,813) (19,528) (48,355) (479,356) (9,842) (90,961)
--------- ----------- --------- ---------- ------- ---------- ------- ----------
Net
increase/(decrease).... 688,632 $ 8,244,288 895,839 $9,004,978 283,573 $2,760,168 394,088 $3,769,960
========= =========== ========= ========== ======= ========== ======= ==========
</TABLE>
- ----------------------
* Portfolio commenced operations on March 27, 1998. Shares were offered to
the public on April 6, 1998.
SEE NOTES TO FINANCIAL STATEMENTS.
40
<PAGE>
Nations Funds
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NET REALIZED
NET ASSET AND NET INCREASE/ DIVIDENDS
VALUE NET UNREALIZED (DECREASE) IN FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT
OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME
--------- ------------- -------------- --------------- ----------
<S> <C> <C> <C> <C> <C>
INTERNATIONAL GROWTH PORTFOLIO
Year ended 12/31/99**................... $10.28 $ 0.06 $ 4.35 $ 4.41 $ (0.05)
Period ended 12/31/98*.................. 10.00 0.06 0.25 0.31 (0.03)(a)
FOCUSED EQUITIES PORTFOLIO
Year ended 12/31/99**................... $13.00 $ (0.03) $ 6.90 $ 6.87 --
Period ended 12/31/98*.................. 10.00 0.02 3.00 3.02 $ (0.02)(a)
MANAGED SMALLCAP INDEX PORTFOLIO
Year ended 12/31/99**................... $ 9.03 $ 0.01 $ 0.52 $ 0.53 $ (0.01)
Period ended 12/31/98*.................. 10.00 0.03 (0.97) (0.94) (0.03)(a)
DISCIPLINED EQUITY PORTFOLIO
Year ended 12/31/99**................... $10.62 $ 0.02 $ 1.02 $ 1.04 $ (0.03)
Period ended 12/31/98*.................. 10.00 0.02 0.62 0.64 (0.02)(a)
GROWTH & INCOME PORTFOLIO
Year ended 12/31/99**................... $12.16 $ (0.03) $ 6.73 $ 6.70 --
Period ended 12/31/98*.................. 10.00 0.02 2.16 2.18 $ (0.02)(a)
MANAGED INDEX PORTFOLIO
Year ended 12/31/99**................... $11.06 $ 0.08 $ 1.95 $ 2.03 $ (0.06)
Period ended 12/31/98*.................. 10.00 0.06 1.07 1.13 (0.07)(a)
VALUE PORTFOLIO
Year ended 12/31/99**................... $10.41 $ 0.07 $ 0.19 $ 0.26 $ (0.06)
Period ended 12/31/98*.................. 10.00 0.04 0.41 0.45 (0.04)(a)
BALANCED ASSETS PORTFOLIO
Year ended 12/31/99**................... $ 9.68 $ 0.20 $ (0.06) $ 0.14 $ (0.17)
Period ended 12/31/98*.................. 10.00 0.09 (0.31) (0.22) (0.10)(a)
</TABLE>
- -----------------
* Portfolio commenced operations on March 27, 1998. Shares were offered to
the public on April 6, 1998.
** Per share net investment income has been calculated using the monthly
average shares method.
+ Total return represents aggregate total return for the period indicated and
assumes reinvestment of all distributions.
++ Annualized.
(a) Includes distributions in excess of net investment income or from net
realized gains which amounted to less than $0.01 per share.
(b) The effect of the custodial expense offset on the operating expense ratio,
with and without waivers and/or expense reimbursements, was less than
0.01%.
(c) The effect of interest expense on the operating expense ratio was less than
0.01%.
41
<PAGE>
Nations Funds
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DISTRIBUTIONS TOTAL NET ASSET
FROM NET DIVIDENDS VALUE
REALIZED AND END OF TOTAL
CAPITAL GAINS DISTRIBUTIONS PERIOD RETURN+
------------- ------------- --------- -------
<S> <C> <C> <C> <C>
INTERNATIONAL GROWTH PORTFOLIO
Year ended 12/31/99**................... $ (0.29) $ (0.34) $ 14.35 43.05%
Period ended 12/31/98*.................. -- (0.03)(a) 10.28 3.11
FOCUSED EQUITIES PORTFOLIO
Year ended 12/31/99**................... $ (0.16) $ (0.16) $ 19.71 53.28%
Period ended 12/31/98*.................. -- (0.02)(a) 13.00 30.16
MANAGED SMALLCAP INDEX PORTFOLIO
Year ended 12/31/99**................... -- $ (0.01) $ 9.55 5.92%
Period ended 12/31/98*.................. -- (0.03)(a) 9.03 (9.35)
DISCIPLINED EQUITY PORTFOLIO
Year ended 12/31/99**................... -- $ (0.03) $ 11.63 9.75%
Period ended 12/31/98*.................. -- (0.02)(a) 10.62 6.44
GROWTH & INCOME PORTFOLIO
Year ended 12/31/99**................... -- -- $ 18.86 55.10%
Period ended 12/31/98*.................. -- $ (0.02)(a) 12.16 21.80
MANAGED INDEX PORTFOLIO
Year ended 12/31/99**................... -- $ (0.06) $ 13.03 18.27%
Period ended 12/31/98*.................. -- (0.07)(a) 11.06 11.39
VALUE PORTFOLIO
Year ended 12/31/99**................... -- $ (0.06) $ 10.61 2.50%
Period ended 12/31/98*.................. -- (0.04)(a) 10.41 4.48
BALANCED ASSETS PORTFOLIO
Year ended 12/31/99**................... -- $ (0.17) $ 9.65 1.44%
Period ended 12/31/98*.................. -- (0.10)(a) 9.68 (2.23)
<CAPTION>
WITHOUT WAIVERS
AND/OR EXPENSE
REIMBURSEMENTS
---------------
RATIO OF RATIO OF RATIO OF
NET ASSETS OPERATING NET INVESTMENT OPERATING
END OF EXPENSES TO INCOME TO PORTFOLIO EXPENSES TO
PERIOD AVERAGE AVERAGE TURNOVER AVERAGE
(000) NET ASSETS NET ASSETS RATE NET ASSETS
---------- ----------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C>
INTERNATIONAL GROWTH PORTFOLIO
Year ended 12/31/99**................... $ 5,898 1.25% 0.43% 24% 2.64%
Period ended 12/31/98*.................. 2,310 1.25++ 1.09++ 16 4.09++
FOCUSED EQUITIES PORTFOLIO
Year ended 12/31/99**................... $ 113,115 1.10%(b) (0.17)% 134% 1.38%(b)
Period ended 12/31/98*.................. 24,521 1.10(b)++ 0.33++ 236 1.94(b)++
MANAGED SMALLCAP INDEX PORTFOLIO
Year ended 12/31/99**................... $ 7,187 0.75% 0.14% 55% 1.21%
Period ended 12/31/98*.................. 6,098 0.75(b)++ 0.49++ 44 1.70(b)++
DISCIPLINED EQUITY PORTFOLIO
Year ended 12/31/99**................... $ 7,684 1.00%(b)(c) 0.22% 50% 1.81%(b)
Period ended 12/31/98*.................. 4,796 1.00(b)++ 0.44++ 40 2.41(b)++
GROWTH & INCOME PORTFOLIO
Year ended 12/31/99**................... $ 64,049 1.10%(b) (0.20)% 110% 1.41%(b)
Period ended 12/31/98*.................. 15,576 1.10(b)++ 0.40++ 184 1.99(b)++
MANAGED INDEX PORTFOLIO
Year ended 12/31/99**................... $ 20,680 0.75%(b) 0.64% 76% 1.07%(b)
Period ended 12/31/98*.................. 9,931 0.75(b)++ 1.04++ 16 1.62(b)++
VALUE PORTFOLIO
Year ended 12/31/99**................... $ 10,645 1.00%(b) 0.67% 82% 1.68%(b)
Period ended 12/31/98*.................. 5,645 1.00(b)++ 0.83++ 27 2.32(b)++
BALANCED ASSETS PORTFOLIO
Year ended 12/31/99**................... $ 6,548 1.00%(b) 2.01% 75% 1.79%(b)
Period ended 12/31/98*.................. 3,823 1.00(b)++ 2.36++ 94 2.71(b)++
</TABLE>
- -----------------
* Portfolio commenced operations on March 27, 1998. Shares were offered to
the public on April 6, 1998.
** Per share net investment income has been calculated using the monthly
average shares method.
+ Total return represents aggregate total return for the period indicated and
assumes reinvestment of all distributions.
++ Annualized.
(a) Includes distributions in excess of net investment income or from net
realized gains which amounted to less than $0.01 per share.
(b) The effect of the custodial expense offset on the operating expense ratio,
with and without waivers and/or expense reimbursements, was less than
0.01%.
(c) The effect of interest expense on the operating expense ratio was less than
0.01%.
42
<PAGE>
Nations Funds
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Nations Annuity Trust (the "Trust"), was organized as a Delaware business trust
on February 5, 1998 and commenced operations March 27, 1998. The Trust is
registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management investment company whose shares are offered in
the following eight portfolios: Nations International Growth Portfolio, Nations
Marsico Focused Equities Portfolio, Nations Managed SmallCap Index Portfolio,
Nations Disciplined Equity Portfolio, Nations Marsico Growth & Income Portfolio,
Nations Managed Index Portfolio, Nations Value Portfolio and Nations Balanced
Assets Portfolio (individually, a "Portfolio", collectively the "Portfolios").
The Portfolios are made available only to variable annuity and variable life
separate accounts issued by participating life insurance companies. Each
Portfolio has distinct investment objectives as follows:
<TABLE>
<S> <C> <C>
International Growth -- Seeks long-term capital growth by investing primarily in
equity securities of companies domiciled in countries
outside of the United States and listed on major stock
exchanges primarily in Europe and the Pacific Basin.
Focused Equities -- Seeks long-term growth of capital.
Managed SmallCap Index -- Seeks over the long-term, to provide a total return which
(gross of fees and expenses) exceeds the total return of the
Standard & Poor's SmallCap 600 Index.
Disciplined Equity -- Seeks growth of capital by investing in companies that are
expected to produce significant increases in earnings per
share.
Growth & Income -- Seeks long-term growth of capital with a limited emphasis on
income.
Managed Index -- Seeks over the long-term, to provide a total return which
(gross of fees and expenses) exceeds the total return of the
Standard & Poor's 500 Composite Stock Price Index.
Value -- Seeks growth of capital by investing in companies that are
believed to be undervalued.
Balanced Assets -- Seeks total return by investing in equity and fixed income
securities.
</TABLE>
1. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies followed by the Portfolios in the preparation of
their financial statements.
SECURITIES VALUATION - Securities which are traded on a recognized exchange or
on NASDAQ are valued at the last sales price on the exchange or market on which
such securities are primarily traded. Securities traded only over-the-counter
are valued at the mean of the last bid and asked prices. Certain securities may
be valued by one or more principal market makers. Restricted securities,
securities for which market quotations are not readily available, and certain
other assets may be valued by the Portfolios' investment adviser, Banc of
America Advisors, Inc. ("BAAI"), under the supervision of the Board of Trustees.
Short-term investments that mature in 60 days or less are valued at amortized
cost.
FUTURES CONTRACTS - The Managed SmallCap Index, Managed Index and Disciplined
Equity Portfolios may invest in futures contracts. Upon entering into a futures
contract, the Portfolio is required to deposit with the broker an amount of cash
or cash
43
<PAGE>
Nations Funds
NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
equivalents equal to a specified percentage of the contract amount. This is
known as the "initial margin". Subsequent payments ("variation margin") are made
or received by the Portfolio each day, depending on the daily fluctuation of the
value of the contract.
During the period the futures contract is open, changes in the value of the
contract are recognized as unrealized gains or losses by "marking-to-market" on
a daily basis to reflect the market value of the contract. The Portfolio
recognizes a realized gain or loss when the contract is closed, equal to the
difference between the proceeds from (or cost of) the closing transaction and
the Portfolio's basis in the contract.
Risks of investments in futures contracts include the possible movement of the
securities or indices underlying the contracts, the possibility that there may
not be a liquid secondary market for the contracts, that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities, or that the counterparty to a contract may default on its obligation
to perform.
FOREIGN CURRENCY TRANSLATION - The books and records of the Portfolios are
maintained in U.S. dollars. Foreign currencies, investments and other assets and
liabilities are translated into U.S. dollars at the current exchange rates.
Purchases and sales of investment securities and income and expenses are
translated on the respective dates of such transactions. Net realized foreign
currency gains and losses resulting from changes in exchange rates include
foreign currency gains and losses between trade date and settlement date of
securities transactions, foreign currency transactions and the difference
between the amounts of interest and dividends recorded on the books of a
Portfolio and the amounts actually received. The effects of changes in foreign
currency exchange rates on securities are not separately stated in the
Statements of Operations from the effects of changes in market prices of those
securities, but are included with the net realized and unrealized gain or loss
on securities.
FORWARD FOREIGN CURRENCY TRANSACTIONS - Generally, a Portfolio may enter into
forward currency exchange contracts only under two circumstances: (i) when the
Portfolio enters into a contract for the purchase or sale of a security
denominated in a foreign currency, to "lock" in the U.S. exchange rate of the
transaction, with such period being a short-dated contract covering the period
between transaction date and settlement date; and (ii) when the investment
adviser or sub-adviser believes that the currency of a particular foreign
country may experience a substantial movement against the U.S. dollar. Forward
foreign currency contracts are valued at the forward rate and are
marked-to-market daily. The change in market value is recorded by the Portfolio
as an unrealized gain or loss. When the contract is closed or offset with the
same counterparty, the Portfolio 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 or offset. Forward foreign currency contracts
will be used primarily to protect the Portfolios from adverse currency movements
and will generally not be entered into for terms greater than one year. The use
of forward foreign currency contracts does not eliminate fluctuations in the
underlying prices of the Portfolios' investment securities; however, it does
establish a rate of exchange that can be achieved in the future. The use of
forward contracts involves the risk that anticipated currency movements will not
be accurately predicted. A forward contract would limit the risk of loss due to
decline in the value of a particular currency; however, it also would limit any
potential gain that might result should the value of the currency increase
instead of decrease. These contracts may involve market risk in excess of the
unrealized gain or loss reflected in the Statements of Net Assets. In addition,
the Portfolio could be exposed to risks if counterparties to the contracts are
unable to meet the terms of their contracts. The counterparty risk exposure is,
therefore, closely monitored and contracts are only executed with high credit
quality financial institutions.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME - Securities transactions are
accounted for on trade date. Realized gains and losses are computed based on the
specific identification of the securities sold. Interest income, adjusted for
accretion of
44
<PAGE>
Nations Funds
NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
discounts and amortization of premiums, is earned from settlement date and
recorded on an accrual basis. Dividend income is recorded on ex-dividend date,
except that if the ex-dividend date has passed, certain dividends from foreign
securities are recorded as soon as the Portfolios are informed of the
ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Distributions from net investment
income are declared and paid annually by the Portfolios. Each Portfolio will
distribute net realized capital gains (including net short-term capital gains),
annually after the fiscal year in which the capital gains were earned, unless
offset by any available capital loss carryforward. Income distributions and
capital gain distributions are determined in accordance with Federal income tax
regulations that may differ from generally accepted accounting principles.
Certain reclassifications are made to each Portfolio's capital accounts to
reflect income and gains available for distribution (or available capital loss
carryforwards) under Federal income tax regulations. These reclassifications are
due primarily to different book and tax accounting for net operating losses and
currency gains and losses.
Reclassifications for the year ended December 31, 1999 were as follows:
<TABLE>
<CAPTION>
INCREASE DECREASE
UNDISTRIBUTED NET ACCUMULATED NET INCREASE/(DECREASE)
PORTFOLIO INVESTMENT INCOME REALIZED GAIN/(LOSS) PAID-IN CAPITAL
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
International Growth....................... $4,077 $(7,532) $3,455
Focused Equities........................... 93,837 (93,837) --
Managed SmallCap Index..................... 1,765 -- (1,765)
Disciplined Equity......................... 2,847 -- (2,847)
Growth & Income............................ 64,883 (64,874) (9)
Managed Index.............................. 2,553 -- (2,553)
Value...................................... 3,387 -- (3,387)
Balanced Assets............................ 2,124 -- (2,124)
</TABLE>
FEDERAL INCOME TAX - Each Portfolio intends to continue to qualify as a
regulated investment company by complying with the applicable requirements of
the Internal Revenue Code of 1986, as amended, and by distributing substantially
all of its earnings to its shareholders. Therefore, no provision is made for
Federal income or excise taxes.
The Portfolios may be subject to foreign taxes on income, gains on investments
or currency repatriation, a portion of which may be recoverable. The Portfolios
will accrue such taxes and recoveries as applicable, based upon their current
interpretation of tax rules and regulations that exist in the markets in which
they invest.
EXPENSES - General expenses of the Trust are allocated to the Portfolios based
upon relative net assets or other expense allocation methodologies determined by
the nature of the expense in accordance with generally accepted accounting
principles. Expenses directly attributable to a Portfolio are charged to such
Portfolio's operations. The Portfolios bear all costs in connection with their
organization, including the fees and expenses of registering and qualifying
their shares for distribution under Federal and state securities regulations.
All such costs are being amortized on a straight line basis over a period of
five years from commencement of operations.
45
<PAGE>
Nations Funds
NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED
PARTY TRANSACTIONS
The Trust has, on behalf of the Portfolios, entered into an investment advisory
agreement (the "Investment Advisory Agreement") with BAAI, a wholly-owned
subsidiary of Bank of America, N.A. ("Bank of America"), which in turn is a
wholly-owned banking subsidiary of Bank of America Corporation, a bank holding
company organized as a Delaware corporation, pursuant to which BAAI provides
investment advisory services to the Portfolios. Under the terms of the
Investment Advisory Agreement, BAAI is entitled to receive an advisory fee,
calculated daily and payable monthly, based on the following annual rates
multiplied by the average daily net assets of each Portfolio:
<TABLE>
<CAPTION>
ANNUAL RATE
<S> <C>
- -------------------------------------------------------------------------
International Growth........................................ 0.80%
Focused Equities, Growth & Income........................... 0.75%
Disciplined Equity, Value, Balanced Assets.................. 0.65%
Managed SmallCap Index, Managed Index....................... 0.40%
</TABLE>
Effective May 14, 1999, the maximum advisory fee payable by the Portfolios
decreased by 0.10% of the Portfolios' average daily net assets. The table above
shows the current maximum annual rate.
The Trust has, on behalf of the Portfolios listed below, entered into a
sub-advisory agreement with BAAI and TradeStreet Investment Associates, Inc.
("TradeStreet"), a wholly-owned subsidiary of Bank of America, pursuant to which
TradeStreet is entitled to receive a sub-advisory fee from BAAI at the following
maximum annual rate of each Portfolio's average daily net assets:
<TABLE>
<CAPTION>
PORTFOLIO ANNUAL RATE
<S> <C>
- -------------------------------------------------------------------------
Managed SmallCap Index, Managed Index....................... 0.10%
Disciplined Equity, Value, Balanced Assets.................. 0.25%
</TABLE>
The Trust has, on behalf of the Focused Equities and Growth & Income Portfolios,
entered into a sub-advisory agreement with Marsico Capital Management, LLC
("Marsico"), pursuant to which Marsico is entitled to receive a sub-advisory fee
from BAAI at the annual rate of 0.45% of each Portfolio's average daily net
assets. Marsico Management Holdings, LLC, a wholly-owned subsidiary of Bank of
America, owns 50% of the equity of Marsico.
The Trust has, on behalf of the International Growth Portfolio, entered into a
sub-advisory agreement with BAAI and Gartmore Global Partners ("Gartmore").
Gartmore is a joint venture structured as a general partnership between NB
Partner Corp., a wholly-owned subsidiary of Bank of America and Gartmore U.S.
Ltd., an indirect wholly-owned subsidiary of Gartmore Investment Management PLC
("Gartmore PLC"), which is a United Kingdom ("U.K.") holding company for a
leading U.K. based international fund management group of companies. National
Westminster Bank PLC and its affiliated entities own 100% of the equity of
Gartmore PLC. Under the Sub-Advisory Agreement, Gartmore is entitled to receive
a sub-advisory fee from BAAI at the annual rate of 0.70% of the Portfolio's
average daily net assets.
Stephens Inc. ("Stephens") and BAAI serve as co-administrators of the
Portfolios. Under the co-administration agreements, Stephens and BAAI are
currently entitled to receive a combined fee, computed daily and paid monthly,
at the maximum annual rate of 0.22% of the average daily net assets of the
International Growth Portfolio and 0.23% of the average daily net assets of all
other Portfolios of the Trust. Effective May 14, 1999, the combined
co-administration fees payable by the
46
<PAGE>
Nations Funds
NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Portfolios increased by 0.10% of the Portfolios' average daily net assets. The
Bank of New York ("BNY") serves as sub-administrator of the Portfolios pursuant
to an agreement with BAAI. For the year ended December 31, 1999, Stephens and
BAAI earned $78,801 and $112,034, respectively, from the Portfolios for their
co-administration services.
BAAI and /or the sub-advisers and Stephens may, from time to time, reduce their
fees payable by each Portfolio. For the year ended December 31, 1999, BAAI
and/or the sub-advisers and Stephens agreed to reimburse expenses and/or waive
fees to the extent that total expenses (excluding shareholder servicing and
distribution fees), as a percentage of the respective Portfolio's average daily
net assets, exceeded the following annual rates: 1.00% for the Disciplined
Equity Portfolio, Value Portfolio and Balanced Assets Portfolio, 0.50% for the
Managed SmallCap Index Portfolio and Managed Index Portfolio, 1.10% for the
Focused Equities Portfolio and Growth & Income Portfolio and 1.25% for the
International Growth Portfolio.
BNY serves as the custodian for the Trust's assets. Effective December 1, 1999,
First Data Investor Services Group, Inc. ("First Data"), the transfer agent for
the Portfolios' shares, was acquired by PFPC Inc. ("PFPC"). PFPC provides the
same services as the transfer agent for the Portfolios' shares as were
previously provided by First Data.
Stephens also serves as distributor of the Portfolios' shares.
The Trust's eligible Trustees may participate in non-qualified deferred
compensation and retirement plans that may be terminated at any time. All
benefits provided under these plans are unfunded and any payments to plan
participants are paid solely out of the Portfolios' assets. Income earned on
each plan participant's deferral account is tied to the rate of return of the
eligible mutual funds selected by the participants or, if no portfolios are
selected, to the rate of return of Nations Treasury Fund, a portfolio of Nations
Fund, Inc., another registered investment company advised by BAAI. The expense
for the deferred compensation and retirement plans is included in "Trustees'
fees and expenses" in the Statements of Operations.
The Portfolios have made daily investments of cash balances in Nations Cash
Reserves, a portfolio of Nations Reserves, another registered investment company
in the Nations Funds family, pursuant to an exemptive order received from the
Securities and Exchange Commission. For the year ended December 31, 1999, the
Portfolios earned $64,088 in the aggregate from such investments, which is
included in interest income.
3. SHAREHOLDER SERVICING AND DISTRIBUTION PLAN
The Portfolios have adopted a Shareholder Servicing and Distribution Plan (the
"Servicing and Distribution Plan") pursuant to rule 12b-1 under the 1940 Act.
Payments under the Servicing and Distribution Plan are calculated daily and paid
monthly at a rate not exceeding 0.25% (on an annualized basis) of the average
daily net asset value of the Shares beneficially owned through the ownership of
Contracts by customers with whom the selling and servicing agents have a selling
or servicing relationship. In the year ended December 31, 1999, Stephens agreed
to voluntarily waive 100% of the Portfolios' shareholder servicing and
distribution fees except for the Managed Index Portfolio and the Managed
SmallCap Index Portfolio, where there was no waiver of these fees.
47
<PAGE>
Nations Funds
NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
4. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, excluding
long-term U.S. government securities and short-term investments, for the year
ended December 31, 1999, were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
<S> <C> <C>
- ----------------------------------------------------------------------------------------------
International Growth........................................ $ 2,383,180 $ 750,952
Focused Equities............................................ 118,408,765 69,674,622
Managed SmallCap Index...................................... 4,255,532 3,508,666
Disciplined Equity.......................................... 5,307,776 2,990,938
Growth & Income............................................. 62,912,358 33,901,261
Managed Index............................................... 18,620,740 10,799,812
Value....................................................... 11,294,344 6,554,431
Balanced Assets............................................. 5,174,377 2,730,414
</TABLE>
The aggregate cost of purchases and proceeds from sales of long-term U.S.
government securities for the year ended December 31, 1999, were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
<S> <C> <C>
- -----------------------------------------------------------------------------------------
Balanced Assets............................................. $1,578,412 $968,122
</TABLE>
5. FUTURES CONTRACTS
At December 31, 1999, the following Portfolios had futures contracts open:
<TABLE>
<CAPTION>
VALUE OF UNREALIZED
NUMBER OF CONTRACT MARKET VALUE APPRECIATION/
DESCRIPTION CONTRACTS WHEN OPENED OF CONTRACT (DEPRECIATION)
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
DISCIPLINED EQUITY:
S&P 500 Futures (long position)
expiring March 2000 (a) 3 $222,399 $222,638 $ 239
MANAGED INDEX:
S&P 500 Futures (long position)
expiring March 2000 (a) 8 592,127 593,700 1,573
</TABLE>
- ---------------
(a) Securities have been segregated as collateral for the Disciplined Equity
and Managed Index Portfolios for open futures contracts.
48
<PAGE>
Nations Funds
NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
6. WRITTEN OPTIONS
Written options for the Focused Equities and Growth & Income Portfolios for the
year ended December 31, 1999, aggregated the following:
<TABLE>
<CAPTION>
FOCUSED EQUITIES GROWTH & INCOME
--------------------------- ---------------------------
NUMBER OF NUMBER OF
SUMMARY OF WRITTEN OPTIONS CONTRACTS PREMIUM CONTRACTS PREMIUM
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Outstanding at
December 31, 1998.......................... 0 $ 0 0 $ 0
Contracts opened........................... 178 280,753 90 142,726
Contracts closed........................... (178) (280,753) (90) (142,726)
---- --------- --- ---------
Outstanding at
December 31, 1999.......................... 0 $ 0 0 $ 0
==== ========= === =========
</TABLE>
7. SHARES OF BENEFICIAL INTEREST
At December 31, 1999, an unlimited number of shares of beneficial interest
without par value were authorized for the Trust. At December 31, 1999, the
Hartford Life Insurance Company owned the following percentage of shares
outstanding:
<TABLE>
<CAPTION>
PORTFOLIO % OF SHARES HELD
<S> <C>
- ------------------------------------------------------------------------------
International Growth........................................ 25%
Focused Equities............................................ 5
Managed SmallCap Index...................................... 67
Disciplined Equity.......................................... 15
Growth & Income............................................. 9
Managed Index............................................... 32
Value....................................................... 10
Balanced Assets............................................. 15
</TABLE>
8. LINE OF CREDIT
The Trust participates with other Nations Funds advised by BAAI in an
uncommitted line of credit provided by BNY under a line of credit agreement (the
"Agreement"). Advances under the Agreement are taken primarily for temporary or
emergency purposes, including the meeting of redemption requests that otherwise
might require the untimely disposition of securities. Interest on borrowings is
payable at a specified Federal Funds rate plus 0.50% on an annualized basis.
Each participating Portfolio maintains a ratio of no less than 4 to 1 net assets
(not including funds borrowed pursuant to the Agreement) to the aggregate amount
of indebtedness pursuant to the Agreement.
49
<PAGE>
Nations Funds
NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
At December 31, 1999, there were no loans outstanding under this Agreement. For
the year ended December 31, 1999, borrowings by the Portfolios under the
Agreement were as follows:
<TABLE>
<CAPTION>
AVERAGE AMOUNT AVERAGE
PORTFOLIO OUTSTANDING INTEREST RATE
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
Disciplined Equity.......................................... $2,142 5.34%
</TABLE>
The average amount outstanding was calculated based on daily balances in the
period.
The Trust also participates with other Nations Funds advised by BAAI in a
committed line of credit provided by BNY. Interest on borrowings under the
committed line is payable at a specified Federal Funds rate plus 0.50% on an
annualized basis. A facility fee of 0.09% per annum of the total amounts
available under the line of credit is charged, of which each Portfolio has
agreed to pay its pro rata share. This fee is paid quarterly in arrears. Each
participating Portfolio is required to maintain an asset coverage ratio of at
least 300% under the terms of the arrangement. For the year ended December 31,
1999, there were no borrowings by the Portfolios under the committed line of
credit.
9. SECURITIES LENDING
Under an agreement with BNY, the Portfolios can lend their securities to
approved brokers, dealers and other financial institutions. Loans are
collateralized by cash, in an amount at least equal to the market value of the
securities loaned. The cash collateral received is invested in Nations Cash
Reserves. A portion of the income generated by the investment of the collateral,
net of any rebates paid by BNY to borrowers, is remitted to BNY as lending
agent, and the remainder is paid to the Portfolio. Generally, in the event of
counterparty default, the Portfolio has the right to use the collateral to
offset losses incurred. There would be a potential loss to the Portfolio in the
event the Portfolio is delayed or prevented from exercising its right to dispose
of the collateral. The Portfolio bears the risk of loss with respect to the
investment of collateral.
At December 31, 1999, the following Portfolios had securities on loan:
<TABLE>
<CAPTION>
MARKET VALUE OF MARKET VALUE
PORTFOLIO LOANED SECURITIES OF COLLATERAL
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
Focused Equities............................................ $6,347,458 $6,586,922
Managed Small Cap Index..................................... 26,598 28,507
Growth & Income............................................. 5,207,745 5,309,698
Balanced Assets............................................. 1,960,760 2,007,245
</TABLE>
50
<PAGE>
Nations Funds
NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
10. CAPITAL LOSS CARRYFORWARDS
As of December 31, 1999, the following Portfolios had available for Federal
income tax purposes unused capital losses as follows:
<TABLE>
<CAPTION>
EXPIRING IN EXPIRING IN
PORTFOLIO 2006 2007
<S> <C> <C>
- -------------------------------------------------------------------------------------------
Managed SmallCap Index...................................... 136,811 218,448
Disciplined Equity.......................................... 78,483 --
Managed Index............................................... 36,966 221,488
Value....................................................... 79,127 255,423
Balanced Assets............................................. 202,196 74,210
</TABLE>
As of December 31, the following Portfolios utilized capital losses during the
year as follows:
<TABLE>
<CAPTION>
CAPITAL
PORTFOLIO LOSSES UTILIZED
<S> <C>
- -----------------------------------------------------------------------------
International Growth........................................ $ 81,556
Disciplined Equity.......................................... 113,766
Growth & Income............................................. 104,248
</TABLE>
Under current tax law, capital losses realized after October 31 may be deferred
and treated as occurring on the first day of the following fiscal year.
For the fiscal year ended December 31, 1999, the following Portfolios have
elected to defer losses occurring between November 1, 1999 and December 31, 1999
under these rules, as follows:
<TABLE>
<CAPTION>
CAPITAL CURRENCY
PORTFOLIO LOSSES DEFERRED LOSSES DEFERRED
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
International Growth........................................ $ 18,985 $1,089
Managed SmallCap Index...................................... 373,042 --
Managed Index............................................... 248,778 --
</TABLE>
Such deferred losses will be treated as arising on the first day of the fiscal
year ending December 31, 2000.
11. SUBSEQUENT EVENT
On January 18, 2000, TradeStreet changed its name to Banc of America Capital
Management, Inc. ("BACAP").
Effective May 1, 2000, the Disciplined Equity Portfolio will change its
investment objective and principal investment strategies to reflect that it will
seek capital appreciation by investing in the common stocks of large and
medium-sized U.S. companies that have market capitalizations of $500 million or
more. The Portfolio will also change its name to Nations Aggressive Growth
Portfolio on the same date.
51
<PAGE>
Nations Funds
NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Effective May 1, 2000, the Managed SmallCap Index Portfolio will change its
investment objective and principal investment strategies to reflect that it will
seek investment results that (before fees and expenses) correspond to the total
return of the Standard & Poor's SmallCap 600 Stock Price Index. The Portfolio
will also change its name to Nations SmallCap Index Portfolio on the same date.
52
<PAGE>
Nations Funds
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of Nations Annuity Trust
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Nations International Growth Portfolio, Nations Marsico Focused Equities
Portfolio, Nations Managed SmallCap Index Portfolio, Nations Disciplined Equity
Portfolio, Nations Marsico Growth & Income Portfolio, Nations Managed Index
Portfolio, Nations Value Portfolio and Nations Balanced Assets Portfolio (each a
portfolio of Nations Annuity Trust, hereafter referred to as the "Trust") at
December 31, 1999, the results of their operations for the year then ended, the
changes in their net assets and financial highlights for the year then ended and
for the period March 27, 1998 (commencement of operations) through December 31,
1998, 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 Trust'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
New York, New York
February 16, 2000
53
