Select
Dimensions
ITT Hartford Life and Annuity
Insurance Company
Separate Account Three
ITT Hartford Life and Annuity
Insurance Company
Separate Account Five
Hartford Life
Insurance Company
Separate Account Three
Hartford Life
Insurance Company
Separate Account Five
Annual Report
December 31, 1997
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[Dean Witter Logo]
<PAGE>
Select Dimensions
--------------------
[large screen of buck]
<PAGE>
Separate Account Three
ITT Hartford Life & Annuity Insurance Company
Statement of Assets & Liabilities
December 31, 1997
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North American
Money Market Government
Portfolio Securities Portfolio
Sub-Account Sub-Account
---------------- ----------------------
<S> <C> <C>
Assets:
Investments in Dean Witter Select Dimensions Investment Series:
Money Market Portfolio
Shares 74,918,009
Cost $ 74,918,009
Market Value ................................................ $ 74,918,009 --
North American Government Securities Portfolio
Shares 460,057
Cost $ 4,639,126
Market Value ................................................ -- $ 4,678,783
Balanced Portfolio
Shares 4,344,922
Cost $ 55,175,825
Market Value ................................................ -- --
Utilities Portfolio
Shares 3,049,315
Cost $ 37,282,496
Market Value ................................................ -- --
Dividend Growth Portfolio
Shares 23,727,955
Cost $372,983,644
Market Value ................................................ -- --
Value-Added Market Portfolio
Shares 6,858,923
Cost $ 93,586,915
Market Value ................................................ -- --
Core-Equity Portfolio
Shares 2,212,116
Cost $ 29,889,147
Market Value ................................................ -- --
American Value Portfolio
Shares 10,608,128
Cost $157,598,597
Market Value ................................................ -- --
Global Equity Portfolio
Shares 6,906,622
Cost $ 81,860,184
Market Value ................................................ -- --
Developing Growth Portfolio
Shares 3,948,115
Cost $ 63,315,432
Market Value ................................................ -- --
Emerging Markets Portfolio
Shares 1,928,937
Cost $ 21,204,620
Market Value ................................................ -- --
Diversified Income Portfolio
Shares 5,355,531
Cost $ 54,619,270
Market Value ................................................ -- --
Mid-Cap Growth Portfolio
Shares 1,508,987
Cost $ 15,821,601
Market Value ................................................ -- --
Due from ITT Hartford Life and Annuity Insurance Company ...... 506,181 --
Receivable from fund shares sold .............................. -- 180
------------ -----------
Total Assets ................................................. 75,424,190 4,678,963
------------ -----------
Liabilities:
Due to Hartford Life Insurance Company ........................ -- --
Due to ITT Hartford Life and Annuity Insurance Company ........ -- 191
Payable for fund shares purchased ............................. 505,829 --
------------ -----------
Total Liabilities ............................................. 505,829 191
------------ -----------
Net Assets (variable annuity contract liabilities) ............ $ 74,918,361 $ 4,678,772
============ ===========
Deferred annuity contracts in the accumulation period:
Group Sub-Accounts:
Units Owned by Contractholders ............................... 6,624,502 413,249
Unit Price ................................................... $ 11.309282 $ 11.321926
Annuity Contracts in the annuity period:
Group Sub-Accounts:
Units Owned by Contractholders ............................... -- --
Unit Price ................................................... -- --
<CAPTION>
Dividend
Balanced Utilities Growth
Portfolio Portfolio Portfolio
Sub-Account Sub-Account Sub-Account
---------------- ---------------- -----------------
<S> <C> <C> <C>
Assets:
Investments in Dean Witter Select Dimensions Investment Series:
Money Market Portfolio
Shares 74,918,009
Cost $ 74,918,009
Market Value ................................................ -- -- --
North American Government Securities Portfolio
Shares 460,057
Cost $ 4,639,126
Market Value ................................................ -- -- --
Balanced Portfolio
Shares 4,344,922
Cost $ 55,175,825
Market Value ................................................ $ 65,304,172 -- --
Utilities Portfolio
Shares 3,049,315
Cost $ 37,282,496
Market Value ................................................ -- $ 48,270,659 --
Dividend Growth Portfolio
Shares 23,727,955
Cost $372,983,644
Market Value ................................................ -- -- $ 464,356,086
Value-Added Market Portfolio
Shares 6,858,923
Cost $ 93,586,915
Market Value ................................................ -- -- --
Core-Equity Portfolio
Shares 2,212,116
Cost $ 29,889,147
Market Value ................................................ -- -- --
American Value Portfolio
Shares 10,608,128
Cost $157,598,597
Market Value ................................................ -- -- --
Global Equity Portfolio
Shares 6,906,622
Cost $ 81,860,184
Market Value ................................................ -- -- --
Developing Growth Portfolio
Shares 3,948,115
Cost $ 63,315,432
Market Value ................................................ -- -- --
Emerging Markets Portfolio
Shares 1,928,937
Cost $ 21,204,620
Market Value ................................................ -- -- --
Diversified Income Portfolio
Shares 5,355,531
Cost $ 54,619,270
Market Value ................................................ -- -- --
Mid-Cap Growth Portfolio
Shares 1,508,987
Cost $ 15,821,601
Market Value ................................................ -- -- --
Due from ITT Hartford Life and Annuity Insurance Company ...... 33,105 12,112 387,991
Receivable from fund shares sold .............................. -- -- --
------------ ------------ -------------
Total Assets ................................................. 65,337,277 48,282,771 464,744,077
------------ ------------ -------------
Liabilities:
Due to Hartford Life Insurance Company ........................ -- -- --
Due to ITT Hartford Life and Annuity Insurance Company ........ -- -- --
Payable for fund shares purchased ............................. 31,788 12,492 387,631
------------ ------------ -------------
Total Liabilities ............................................. 31,788 12,492 387,631
------------ ------------ -------------
Net Assets (variable annuity contract liabilities) ............ $ 65,305,489 $ 48,270,279 $ 464,356,446
============ ============ =============
Deferred annuity contracts in the accumulation period:
Group Sub-Accounts:
Units Owned by Contractholders ............................... 4,124,239 2,852,564 22,061,872
Unit Price ................................................... $ 15.828958 $ 16.917905 $ 21.045231
Annuity Contracts in the annuity period:
Group Sub-Accounts:
Units Owned by Contractholders ............................... 1,459 642 2,815
Unit Price ................................................... $ 15.828958 $ 16.917905 $ 21.045231
</TABLE>
The accompanying notes are an integral part of these financial statements.
- - - ----------------------------------------2--------------------------------------
<PAGE>
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value-Added Core-Equity American Global Equity
Market Portfolio Portfolio Value Portfolio Value Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - - ------------------ ---------------- ----------------- -----------------
<S> <C> <C> <C>
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
$ 120,442,696 -- -- --
-- $ 36,632,647 -- --
-- -- $ 208,874,038 --
-- -- -- $ 89,578,881
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- 40,124 22,169 15,931
21,088 -- -- --
------------- ------------ ------------- ------------
120,463,784 36,672,771 208,896,207 89,594,812
------------- ------------ ------------- ------------
-- -- -- --
21,091 -- -- --
-- 40,129 22,424 15,920
------------- ------------ ------------- ------------
21,091 40,129 22,424 15,920
------------- ------------ ------------- ------------
$ 120,442,693 $ 36,632,642 $ 208,873,783 $ 89,578,892
============= ============ ============= ============
6,713,291 2,206,662 10,468,383 6,816,205
$ 17.936035 $ 16.595943 $ 19.950549 $ 13.141711
1,833 663 1,193 175
$ 17.936035 $ 16.595943 $ 19.950549 $ 13.141711
<CAPTION>
Developing Emerging Diversified Mid-Cap
Growth Portfolio Markets Portfolio Income Portfolio Growth Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - - ------------------ ------------------- ------------------ -----------------
<S> <C> <C> <C>
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
$ 75,645,883 -- -- --
-- $ 21,816,272 -- --
-- -- $ 55,108,410 --
-- -- -- $17,202,449
-- -- 49,368 84,868
294,958 20,041 -- --
------------ ------------ ------------ -----------
75,940,841 21,836,313 55,157,778 17,287,317
------------ ------------ ------------ -----------
-- -- -- 40,997
292,134 20,055 -- --
-- -- 49,368 43,905
------------ ------------ ------------ -----------
292,134 20,055 49,368 84,902
------------ ------------ ------------ -----------
$ 75,648,707 $ 21,816,258 $ 55,108,410 $17,202,415
============ ============ ============ ===========
4,002,674 1,911,572 4,502,157 1,504,670
$ 18.896418 $ 11.404653 $ 12.237687 $ 11.432686
662 1,354 1,015 --
$ 18.896418 $ 11.404653 $ 12.237687 --
</TABLE>
- - - ----------------------------------------3---------------------------------------
<PAGE>
Separate Account Three
ITT Hartford Life & Annuity Insurance Company
Statement of Operations
For the Year Ended December 31, 1997
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North American
Money Market Government
Portfolio Securities Portfolio
Sub-Account Sub-Account
--------------- ----------------------
<S> <C> <C>
Investment income:
Dividends ................................................. $ 4,267,837 $ 204,407
Expenses:
Mortality and expense undertakings ........................ (1,176,342) (59,394)
------------- ---------
Net investment income (loss) .............................. 3,091,495 145,013
------------- ---------
Capital gains income ....................................... -- --
------------- ---------
Net realized and unrealized gain (loss) on investments:
Net realized (loss) gain on security transactions ......... -- (263)
Net unrealized appreciation (depreciation) of
investments during the period ............................ -- 38,369
------------- ---------
Net realized and unrealized gain (loss)
on investments .......................................... -- 38,106
------------- ---------
Net increase (decrease) in net assets resulting from
operations .............................................. $ 3,091,495 $ 183,119
============= =========
<CAPTION>
Balanced Utilities Dividend
Portfolio Portfolio Growth Portfolio
Sub-Account Sub-Account Sub-Account
------------- ------------- -----------------
<S> <C> <C> <C>
Investment income:
Dividends ................................................. $1,072,401 $1,105,814 $ 7,367,899
Expenses:
Mortality and expense undertakings ........................ (722,836) (537,830) (5,068,304)
---------- ---------- ------------
Net investment income (loss) .............................. 349,565 567,984 2,299,595
---------- ---------- ------------
Capital gains income ....................................... 153,577 134,400 12,570,055
---------- ---------- ------------
Net realized and unrealized gain (loss) on investments:
Net realized (loss) gain on security transactions ......... (30,616) 7,972 (17,569)
Net unrealized appreciation (depreciation) of
investments during the period ............................ 6,868,859 8,330,451 57,370,303
---------- ---------- ------------
Net realized and unrealized gain (loss)
on investments .......................................... 6,838,243 8,338,423 57,352,734
---------- ---------- ------------
Net increase (decrease) in net assets resulting from
operations .............................................. $7,341,385 $9,040,807 $ 72,222,384
========== ========== ============
</TABLE>
*From inception, January 21, 1997 to December 31, 1997.
The accompanying notes are an integral part of these financial statements.
- - - ----------------------------------------4---------------------------------------
<PAGE>
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value-Added Core-Equity American Global
Market Portfolio Portfolio Value Portfolio Equity Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - - ------------------ ------------- ----------------- ------------------
<S> <C> <C> <C>
$ 1,356,495 $ 51,453 $ 535,247 $ 653,755
(1,327,641) (384,040) (2,232,481) (1,066,529)
------------ ---------- ------------ -------------
28,854 (332,587) (1,697,234) (412,774)
------------ ---------- ------------ -------------
189,721 117,643 3,034,595 115,160
------------ ---------- ------------ -------------
30,754 (18,550) (68,035) 36,445
19,452,060 5,016,132 39,904,216 4,176,748
------------ ---------- ------------ -------------
19,482,814 4,997,582 39,836,181 4,213,193
------------ ---------- ------------ -------------
$ 19,701,389 $4,782,638 $ 41,173,542 $ 3,915,579
============ ========== ============ =============
<CAPTION>
Developing Emerging Diversified Mid-Cap
Growth Portfolio Markets Portfolio Income Portfolio Growth Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account*
- - - ------------------ ------------------- ------------------ -----------------
<S> <C> <C> <C>
$ 134,565 $ 105,189 $3,306,076 $ 122,846
(918,863) (319,665) (591,432) (112,110)
---------- ---------- ---------- ----------
(784,298) (214,476) 2,714,644 10,736
---------- ---------- ---------- ----------
-- -- 85,168 --
---------- ---------- ---------- ----------
(5,287) (289,528) (5,596) (7,656)
8,288,212 (422,890) 109,953 1,380,848
---------- ---------- ---------- ----------
8,282,925 (712,418) 104,357 1,373,192
---------- ---------- ---------- ----------
$7,498,627 $ (926,894) $2,904,169 $1,383,928
========== ========== ========== ==========
</TABLE>
- - - ----------------------------------------5---------------------------------------
<PAGE>
Separate Account Three
ITT Hartford Life & Annuity Insurance Company
Statement of Changes in Net Assets
For the Year Ended December 31, 1997
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North American
Money Government
Market Portfolio Securities Portfolio
Sub-Account Sub-Account
------------------ ----------------------
<S> <C> <C>
Operations:
Net investment income (loss) .............................. $ 3,091,495 $ 145,013
Capital gains income ...................................... -- --
Net realized (loss) gain on security transactions ......... -- (263)
Net unrealized appreciation (depreciation) of
investments during the period ............................ -- 38,369
-------------- ----------
Net increase (decrease) in net assets resulting from
operations ............................................... 3,091,495 183,119
-------------- ----------
Unit transactions:
Purchases ................................................. 64,717,334 1,138,836
Net transfers ............................................. (63,595,299) (44,078)
Surrenders ................................................ (10,838,772) (426,779)
Net annuity transactions .................................. -- --
-------------- ----------
Net (decrease) increase in net assets resulting from unit
transactions ............................................. (9,716,737) 667,979
-------------- ----------
Total (decrease) increase in net assets ................... (6,625,242) 851,098
Net Assets:
Beginning of period ....................................... 81,543,603 3,827,674
-------------- ----------
End of period ............................................. $ 74,918,361 $4,678,772
============== ==========
<CAPTION>
Balanced Utilities Dividend
Portfolio Portfolio Growth Portfolio
Sub-Account Sub-Account Sub-Account
--------------- --------------- -----------------
<S> <C> <C> <C>
Operations:
Net investment income (loss) .............................. $ 349,565 $ 567,984 $ 2,299,595
Capital gains income ...................................... 153,577 134,400 12,570,055
Net realized (loss) gain on security transactions ......... (30,616) 7,972 (17,569)
Net unrealized appreciation (depreciation) of
investments during the period ............................ 6,868,859 8,330,451 57,370,303
------------ ------------ -------------
Net increase (decrease) in net assets resulting from
operations ............................................... 7,341,385 9,040,807 72,222,384
------------ ------------ -------------
Unit transactions:
Purchases ................................................. 18,839,623 8,183,839 132,652,810
Net transfers ............................................. 6,155,476 175,689 35,404,176
Surrenders ................................................ (3,322,915) (3,224,364) (16,271,820)
Net annuity transactions .................................. 8,967 9,844 3,406
------------ ------------ -------------
Net (decrease) increase in net assets resulting from unit
transactions ............................................. 21,681,151 5,145,008 151,788,572
------------ ------------ -------------
Total (decrease) increase in net assets ................... 29,022,536 14,185,815 224,010,956
Net Assets:
Beginning of period ....................................... 36,282,953 34,084,464 240,345,490
------------ ------------ -------------
End of period ............................................. $ 65,305,489 $ 48,270,279 $ 464,356,446
============ ============ =============
</TABLE>
*From inception, January 21, 1997 to December 31, 1997.
- - - --------------------------------------------------------------------------------
ITT Hartford Life and Annuity Insurance Company
Statement of Changes in Net Assets
For the Year Ended December 31, 1996
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North American
Money Government
Market Portfolio Securities Portfolio
Sub-Account Sub-Account
------------------ ----------------------
<S> <C> <C>
Operations:
Net investment income (loss) ................................. $ 2,015,660 $ 91,770
Capital gains income ......................................... -- --
Net realized gain (loss) on security transactions ............ -- 146
Net unrealized (depreciation) appreciation of
investments during the period ............................... -- (7,752)
-------------- ----------
Net increase in net assets resulting from operations ......... 2,015,660 84,164
-------------- ----------
Unit transactions:
Purchases .................................................... 87,509,584 2,449,165
Net transfers ................................................ (44,621,372) 203,409
Surrenders ................................................... (4,023,173) (41,335)
Net annuity transactions ..................................... -- --
-------------- ----------
Net increase in net assets resulting from unit
transactions ................................................ 38,865,039 2,611,239
-------------- ----------
Total increase (decrease) in net assets ...................... 40,880,699 2,695,403
Net Assets:
Beginning of period .......................................... 40,662,904 1,132,271
-------------- ----------
End of period ................................................ $ 81,543,603 $3,827,674
============== ==========
<CAPTION>
Balanced Utilities Dividend
Portfolio Portfolio Growth Portfolio
Sub-Account Sub-Account Sub-Account
-------------- -------------- -----------------
<S> <C> <C> <C>
Operations:
Net investment income (loss) ................................. $ 291,816 $ 516,486 $ 1,329,294
Capital gains income ......................................... 133,324 19,659 171,162
Net realized gain (loss) on security transactions ............ (2,137) (9,700) (18,644)
Net unrealized (depreciation) appreciation of
investments during the period ............................... 2,434,571 1,346,860 27,743,616
----------- ----------- ------------
Net increase in net assets resulting from operations ......... 2,857,574 1,873,305 29,225,428
----------- ----------- ------------
Unit transactions:
Purchases .................................................... 16,974,073 16,024,407 125,692,963
Net transfers ................................................ 2,397,686 (75,687) 16,517,648
Surrenders ................................................... (792,598) (938,935) (5,468,368)
Net annuity transactions ..................................... 11,286 -- 39,927
----------- ----------- ------------
Net increase in net assets resulting from unit
transactions ................................................ 18,590,447 15,009,785 136,782,170
----------- ----------- ------------
Total increase (decrease) in net assets ...................... 21,448,021 16,883,090 166,007,598
Net Assets:
Beginning of period .......................................... 14,834,932 17,201,374 74,337,892
----------- ----------- ------------
End of period ................................................ $36,282,953 $34,084,464 $240,345,490
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
- - - ----------------------------------------6---------------------------------------
<PAGE>
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value-Added Core-Equity American Global Equity
Market Portfolio Portfolio Value Portfolio Value Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - - ------------------ --------------- ----------------- -----------------
<S> <C> <C> <C>
$ 28,854 $ (332,587) $ (1,697,234) $ (412,774)
189,721 117,643 3,034,595 115,160
30,754 (18,550) (68,035) 36,445
19,452,060 5,016,132 39,904,216 4,176,748
------------ ------------ ------------ ------------
19,701,389 4,782,638 41,173,542 3,915,579
------------ ------------ ------------ ------------
27,666,361 12,427,733 45,122,601 27,675,147
11,734,255 3,567,836 17,691,903 8,014,517
(3,984,638) (1,013,872) (6,922,611) (3,499,654)
1,734 6,199 (6,552) (252)
------------ ------------ ------------ ------------
35,417,712 14,987,896 55,885,341 32,189,758
------------ ------------ ------------ ------------
55,119,101 19,770,534 97,058,883 36,105,337
65,323,592 16,862,108 111,814,900 53,473,555
------------ ------------ ------------ ------------
$120,442,693 $ 36,632,642 $208,873,783 $ 89,578,892
============ ============ ============ ============
<CAPTION>
Developing Emerging Diversified Mid-Cap
Growth Portfolio Markets Portfolio Income Portfolio Growth Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account*
- - - ------------------ ------------------- ------------------ -----------------
<S> <C> <C> <C>
$ (784,298) $ (214,476) $ 2,714,644 $ 10,736
-- -- 85,168 --
(5,287) (289,528) (5,596) (7,656)
8,288,212 (422,890) 109,953 1,380,848
------------ ------------ ------------ -----------
7,498,627 (926,894) 2,904,169 1,383,928
------------ ------------ ------------ -----------
13,609,919 7,234,504 20,848,788 9,195,939
1,398,815 665,359 4,855,360 6,858,060
(3,560,130) (1,087,778) (3,059,195) (235,512)
(3,225) 3,713 12,363 --
------------ ------------ ------------ -----------
11,445,379 6,815,798 22,657,316 15,818,487
------------ ------------ ------------ -----------
18,944,006 5,888,904 25,561,485 17,202,415
56,704,701 15,927,354 29,546,925 --
------------ ------------ ------------ -----------
$ 75,648,707 $ 21,816,258 $ 55,108,410 $17,202,415
============ ============ ============ ===========
</TABLE>
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value-Added Core-Equity American Global Equity Developing Emerging Diversified
Market Portfolio Portfolio Value Portfolio Value Portfolio Growth Portfolio Markets Portfolio Income Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
- - - ------------------ -------------- ----------------- ----------------- ------------------ ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
$ 107,879 $ (68,420) $ (592,660) $ (46,532) $ (465,111) $ (10,378) $ 1,113,077
22,962 23,882 343,751 38,052 39,359 -- 19,526
(9,711) (19,763) (18,375) 3,232 (2,418) 2,901 (14,054)
6,274,483 1,628,841 8,398,356 2,977,064 2,663,616 1,086,487 258,517
------------ ----------- ------------ ------------ ------------ ----------- ------------
6,395,613 1,564,540 8,131,072 2,971,816 2,235,446 1,079,010 1,377,066
------------ ----------- ------------ ------------ ------------ ----------- ------------
29,831,198 10,134,999 61,308,203 30,438,241 34,425,443 9,543,061 16,710,309
8,058,083 1,785,696 8,928,691 5,422,580 5,020,629 1,898,163 4,393,264
(1,128,293) (166,416) (2,457,975) (1,262,709) (1,291,832) (429,144) (1,150,693)
23,528 1,831 23,364 2,008 16,307 11,920 --
------------ ----------- ------------ ------------ ------------ ----------- ------------
36,784,516 11,756,110 67,802,283 34,600,120 38,170,547 11,024,000 19,952,880
------------ ----------- ------------ ------------ ------------ ----------- ------------
43,180,129 13,320,650 75,933,355 37,571,936 40,405,993 12,103,010 21,329,946
22,143,463 3,541,458 35,881,545 15,901,619 16,298,708 3,824,344 8,216,979
------------ ----------- ------------ ------------ ------------ ----------- ------------
$ 65,323,592 $16,862,108 $111,814,900 $ 53,473,555 $ 56,704,701 $15,927,354 $ 29,546,925
============ =========== ============ ============ ============ =========== ============
</TABLE>
- - - ----------------------------------------7---------------------------------------
<PAGE>
Separate Account Three
ITT Hartford Life & Annuity Insurance Company
Notes to Financial Statements
December 31, 1997
- - - --------------------------------------------------------------------------------
1. Organization:
Separate Account Three (the Account) is a separate investment account
within ITT Hartford Life & Annuity Insurance Company (the Company) and is
registered with the Securities and Exchange Commission (SEC) as a unit
investment trust under the Investment Company Act of 1940, as amended. Both
the Company and the Account are subject to supervision and regulation by
the Department of Insurance of the State of Connecticut and the SEC. The
Account invests deposits by variable annuity contractholders of the Company
in various mutual funds (the Portfolios) as directed by the
contractholders.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) Security Transactions--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividend and capital
gains income are accrued as of the ex-dividend date. Capital gains
income represents dividends from the Funds which are characterized as
capital gains under tax regulations.
b) Security Valuation--The investment in shares of the Dean Witter Select
Dimensions Investment Series Mutual Funds are valued at the closing net
asset value per share as determined by the appropriate Fund as of
December 31, 1997.
c) Federal Income Taxes--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as
an insurance company under the Internal Revenue Code. Under current law,
no federal income taxes are payable with respect to the operations of
the Account.
d) Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the financial statements and
the reported amounts of income and expenses during the period. Operating
results in the future could vary from the amounts derived from
management's estimates.
3. Administration of the Account and Related Charges:
a) Mortality and Expense Undertakings--The Company, as issuer of variable
annuity contracts, provides the mortality and expense undertakings and,
with respect to the Account, receives a maximum annual fee of up to
1.25% of the Account's average daily net assets. The Company also
provides administrative services and receives an annual fee of 0.15% of
the Account's average daily net assets.
b) Deduction of Annual Maintenance Fee--Annual maintenance fees are
deducted through termination of units of interest from applicable
contract owners' accounts, in accordance with the terms of the
contracts.
- - - ----------------------------------------8---------------------------------------
<PAGE>
Report of Independent Public Accountants
To ITT Hartford Life and Annuity Insurance Company
Separate Account Three and to the
Owners of Units of Interest Therein:
- - - --------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities of ITT
Hartford Life and Annuity Insurance Company Separate Account Three (the
Account) as of December 31, 1997, and the related statement of operations for
the year then ended and statements of changes in net assets for each of the two
years in the period then ended. These financial statements are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ITT Hartford Life and Annuity
Insurance Company Separate Account Three as of December 31, 1997, the results
of its operations for the year then ended and the changes in its net assets for
each of the two years in the period then ended in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 16, 1998
- - - ----------------------------------------9---------------------------------------
<PAGE>
Separate Account Five
ITT Hartford Life & Annuity Insurance Company
Statement of Assets & Liabilities
December 31, 1997
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North American
Money Market Government
Portfolio Securities Portfolio
Sub-Account Sub-Account
-------------- ----------------------
<S> <C> <C>
Assets:
Investments in Dean Witter Select Dimensions Investment Series:
Money Market Portfolio
Shares 796,437
Cost $ 796,437
Market Value ................................................ $ 796,437 --
North American Government Securities Portfolio
Shares 102
Cost $ 1,030
Market Value ................................................ -- $ 1,042
Balanced Portfolio
Shares 11,020
Cost $ 163,054
Market Value ................................................ -- --
Utilities Portfolio
Shares 422
Cost $ 6,260
Market Value ................................................ -- --
Dividend and Growth Portfolio
Shares 80,887
Cost $1,566,131
Market Value ................................................ -- --
Value-Added Market Portfolio
Shares 7,479
Cost $ 128,573
Market Value ................................................ -- --
Core-Equity Portfolio
Shares 7,299
Cost $ 119,430
Market Value ................................................ -- --
American Value Portfolio
Shares 34,623
Cost $ 666,591
Market Value ................................................ -- --
Global Equity Value Portfolio
Shares 39,257
Cost $ 505,232
Market Value ................................................ -- --
Developing Growth Portfolio
Shares 10,906
Cost $ 206,994
Market Value ................................................ -- --
Emerging Market Portfolio
Shares 3,273
Cost $ 37,927
Market Value ................................................ -- --
Diversified Income Portfolio
Shares 44,216
Cost $ 455,007
Market Value ................................................ -- --
Mid-Cap Growth Portfolio
Shares 11,757
Cost $ 129,561
Market Value ................................................ -- --
Due from ITT Hartford Life & Annuity Insurance Company ........ -- --
Receivable from fund shares sold .............................. -- --
---------- -----------
Total Assets ................................................. 796,437 1,042
---------- -----------
Liabilities:
Due to ITT Hartford Life & Annuity Insurance Company .......... -- --
Payable for fund shares purchased ............................. -- --
---------- -----------
Total Liabilities ............................................. -- --
---------- -----------
Net Assets (variable life contract liabilities) ............... $ 796,437 $ 1,042
========== ===========
Deferred annuity contracts in the accumulation period:
Group Sub-Accounts:
Units Owned by Contractholders ............................... 771,485 100
Unit Values .................................................. $ 1.032342 $ 10.420600
<CAPTION>
Dividend
Balanced Utilities and Growth
Portfolio Portfolio Portfolio
Sub-Account Sub-Account Sub-Account
--------------- --------------- ---------------
<S> <C> <C> <C>
Assets:
Investments in Dean Witter Select Dimensions Investment Series:
Money Market Portfolio
Shares 796,437
Cost $ 796,437
Market Value ................................................ -- -- --
North American Government Securities Portfolio
Shares 102
Cost $ 1,030
Market Value ................................................ -- -- --
Balanced Portfolio
Shares 11,020
Cost $ 163,054
Market Value ................................................ $ 165,626 -- --
Utilities Portfolio
Shares 422
Cost $ 6,260
Market Value ................................................ -- $ 6,687 --
Dividend and Growth Portfolio
Shares 80,887
Cost $1,566,131
Market Value ................................................ -- -- $ 1,582,969
Value-Added Market Portfolio
Shares 7,479
Cost $ 128,573
Market Value ................................................ -- -- --
Core-Equity Portfolio
Shares 7,299
Cost $ 119,430
Market Value ................................................ -- -- --
American Value Portfolio
Shares 34,623
Cost $ 666,591
Market Value ................................................ -- -- --
Global Equity Value Portfolio
Shares 39,257
Cost $ 505,232
Market Value ................................................ -- -- --
Developing Growth Portfolio
Shares 10,906
Cost $ 206,994
Market Value ................................................ -- -- --
Emerging Market Portfolio
Shares 3,273
Cost $ 37,927
Market Value ................................................ -- -- --
Diversified Income Portfolio
Shares 44,216
Cost $ 455,007
Market Value ................................................ -- -- --
Mid-Cap Growth Portfolio
Shares 11,757
Cost $ 129,561
Market Value ................................................ -- -- --
Due from ITT Hartford Life & Annuity Insurance Company ........ 1 -- 1
Receivable from fund shares sold .............................. -- -- --
----------- ----------- -----------
Total Assets ................................................. 165,627 6,687 1,582,970
----------- ----------- -----------
Liabilities:
Due to ITT Hartford Life & Annuity Insurance Company .......... -- -- --
Payable for fund shares purchased ............................. -- -- --
----------- ----------- -----------
Total Liabilities ............................................. -- -- --
----------- ----------- -----------
Net Assets (variable life contract liabilities) ............... $ 165,627 $ 6,687 $ 1,582,970
=========== =========== ===========
Deferred annuity contracts in the accumulation period:
Group Sub-Accounts:
Units Owned by Contractholders ............................... 14,784 543 141,825
Unit Values .................................................. $ 11.202964 $ 12.314200 $ 11.161390
</TABLE>
The accompanying notes are an integral part of these financial statements.
- - - ---------------------------------------10---------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Value-Added Core-Equity American Global Equity
Market Portfolio Portfolio Value Portfolio Value Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - - ------------------ --------------- ----------------- -----------------
<S> <C> <C> <C>
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
$ 131,338 -- -- --
-- $ 120,870 -- --
-- -- $ 681,732 --
-- -- -- $ 509,165
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
----------- ----------- ----------- -----------
131,338 120,870 681,732 509,165
----------- ----------- ----------- -----------
1 -- 1 4
-- -- -- --
----------- ----------- ----------- -----------
1 -- 1 4
----------- ----------- ----------- -----------
$ 131,337 $ 120,870 $ 681,731 $ 509,161
=========== =========== =========== ===========
11,342 10,527 53,983 50,897
$ 11.579600 $ 11.482200 $ 12.628705 $ 10.003694
<CAPTION>
Developing Emerging Diversified Mid-Cap
Growth Portfolio Markets Portfolio Income Portfolio Growth Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - - ------------------ ------------------- ------------------ -----------------
<S> <C> <C> <C>
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
$ 208,967 -- -- --
-- $ 37,013 -- --
-- -- $ 454,987 --
-- -- -- $ 134,031
-- -- -- --
-- -- -- --
----------- ---------- ----------- -----------
208,967 37,013 454,987 134,031
----------- ---------- ----------- -----------
1 -- -- --
-- -- -- --
----------- ---------- ----------- -----------
1 -- -- --
----------- ---------- ----------- -----------
$ 208,966 $ 37,013 $ 454,987 $ 134,031
=========== ========== =========== ===========
17,358 3,988 42,778 11,317
$ 12.038601 $ 9.281000 $ 10.635925 $ 11.843234
</TABLE>
- - - ---------------------------------------11---------------------------------------
<PAGE>
Separate Account Five
ITT Hartford Life & Annuity Insurance Company
Statement of Operations
For the Period from Inception, May 20, 1997, to December 31, 1997
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North American
Money Market Government
Portfolio Securities Portfolio
Sub-Account Sub-Account
-------------- ----------------------
<S> <C> <C>
Investment income:
Dividends ............................................ $12,586 $30
------- ---
Net investment income ................................ 12,586 30
------- ---
Capital gains income .................................. -- --
------- ---
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) on security transactions .... -- --
Net unrealized appreciation (depreciation) of
investments during the period ....................... -- 12
------- ---
Net realized and unrealized gain (loss) on
investments ....................................... -- 12
------- ---
Net increase (decrease) in net assets resulting from
operations ......................................... $12,586 $42
======= ===
<CAPTION>
Dividend
Balanced Utilities and Growth
Portfolio Portfolio Portfolio
Sub-Account Sub-Account Sub-Account
------------- ------------- ------------
<S> <C> <C> <C>
Investment income:
Dividends ............................................ $ 238 $ 21 $ 3,650
------ ---- -------
Net investment income ................................ 238 21 3,650
------ ---- -------
Capital gains income .................................. 3 4 37
------ ---- -------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) on security transactions .... 2 -- 4
Net unrealized appreciation (depreciation) of
investments during the period ....................... 2,572 427 16,838
------ ---- -------
Net realized and unrealized gain (loss) on
investments ....................................... 2,574 427 16,842
------ ---- -------
Net increase (decrease) in net assets resulting from
operations ......................................... $2,815 $452 $20,529
====== ==== =======
</TABLE>
*From inception, January 21, 1997 to December 31, 1997.
The accompanying notes are an integral part of these financial statements.
- - - ---------------------------------------12---------------------------------------
<PAGE>
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value-Added Core-Equity American Global Equity
Market Portfolio Portfolio Value Portfolio Value Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - - ------------------ ------------- ----------------- -----------------
<S> <C> <C> <C>
$ 185 $ 32 $ 318 $ 257
------- ------- ------- ------
185 32 318 257
------- ------- ------- ------
2 5 22 2
------- ------- ------- ------
(1) (3) 5 5
2,765 1,440 15,141 3,933
------- ------- ------- ------
2,764 1,437 15,146 3,938
------- ------- ------- ------
$ 2,951 $ 1,474 $15,486 $4,197
======= ======= ======= ======
<CAPTION>
Developing Emerging Diversified Mid-Cap
Growth Portfolio Markets Portfolio Income Portfolio Growth Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account*
- - - ------------------ ------------------- ------------------ -----------------
<S> <C> <C> <C>
$ 10 $ 3 $ 4,938 $ 76
------ ------- ------- ------
10 3 4,938 76
------ ------- ------- ------
-- -- 2 --
------ ------- ------- ------
160 (1) 15 --
1,973 (914) (20) 4,470
------ ------- ------- ------
2,133 (915) (5) 4,470
------ ------- ------- ------
$2,143 $ (912) $ 4,935 $4,546
====== ======= ======= ======
</TABLE>
- - - ---------------------------------------13---------------------------------------
<PAGE>
Separate Account Five
ITT Hartford Life & Annuity Insurance Company
Statement of Changes in Net Assets
For the Period from Inception, May 20, 1997, to December 31, 1997
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North American
Money Government
Market Portfolio Securities Portfolio
Sub-Account Sub-Account
------------------ ----------------------
<S> <C> <C>
Operations:
Net investment income ..................................... $ 12,586 $ 30
Capital gains income ...................................... -- --
Net realized gain (loss) on security transactions ......... -- --
Net unrealized appreciation (depreciation) of investments
during the period ........................................ -- 12
------------- ------
Net increase (decrease) in net assets resulting from
operations ............................................... 12,586 42
------------- ------
Unit transactions:
Purchases ................................................. 5,462,868 1,000
Net transfers ............................................. (3,978,866) --
Surrenders ................................................ (4,968) --
Loan withdrawals .......................................... (691,140) --
Cost of insurance ......................................... (4,043) --
------------- ------
Net increase in net assets resulting from unit
transactions ............................................. 783,851 1,000
------------- ------
Total increase in net assets .............................. 796,437 1,042
Net Assets:
Beginning of period ....................................... -- --
------------- ------
End of period ............................................. $ 796,437 $1,042
============= ======
<CAPTION>
Dividend
Balanced Utilities and Growth
Portfolio Portfolio Portfolio
Sub-Account Sub-Account Sub-Account
------------- ------------- ---------------
<S> <C> <C> <C>
Operations:
Net investment income ..................................... $ 238 $ 21 $ 3,650
Capital gains income ...................................... 3 4 37
Net realized gain (loss) on security transactions ......... 2 -- 4
Net unrealized appreciation (depreciation) of investments
during the period ........................................ 2,572 427 16,838
-------- ------- -----------
Net increase (decrease) in net assets resulting from
operations ............................................... 2,815 452 20,529
-------- ------- -----------
Unit transactions:
Purchases ................................................. 1,000 1,000 1,000
Net transfers ............................................. 162,221 5,243 1,566,768
Surrenders ................................................ (294) (3) (3,663)
Loan withdrawals .......................................... -- -- (2)
Cost of insurance ......................................... (115) (5) (1,662)
-------- ------- -----------
Net increase in net assets resulting from unit
transactions ............................................. 162,812 6,235 1,562,441
-------- ------- -----------
Total increase in net assets .............................. 165,627 6,687 1,582,970
Net Assets:
Beginning of period ....................................... -- -- --
-------- ------- -----------
End of period ............................................. $165,627 $ 6,687 $ 1,582,970
======== ======= ===========
</TABLE>
*From inception, January 21, 1997 to December 31, 1997.
The accompanying notes are an integral part of these financial statements.
- - - ---------------------------------------14---------------------------------------
<PAGE>
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value-Added Core-Equity American Global Equity
Market Portfolio Portfolio Value Portfolio Value Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - - ------------------ ---------------- ----------------- -----------------
<S> <C> <C> <C>
$ 185 $ 32 $ 318 $ 257
2 5 22 2
(1) (3) 5 5
2,765 1,440 15,141 3,933
--------- --------- --------- ---------
2,951 1,474 15,486 4,197
--------- --------- --------- ---------
1,000 1,000 1,000 1,000
127,593 118,955 667,750 506,969
(101) (397) (1,813) (2,610)
-- (1) (2) (1)
(106) (161) (690) (394)
--------- --------- --------- ---------
128,386 119,396 666,245 504,964
--------- --------- --------- ---------
131,337 120,870 681,731 509,161
-- -- -- --
--------- --------- --------- ---------
$ 131,337 $ 120,870 $ 681,731 $ 509,161
========= ========= ========= =========
<CAPTION>
Developing Emerging Diversified Mid-Cap*
Growth Portfolio Markets Portfolio Income Portfolio Growth Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - - ------------------ ------------------- ------------------ -----------------
<S> <C> <C> <C>
$ 10 $ 3 $ 4,938 $ 76
-- -- 2 --
160 (1) 15 --
1,973 (914) (20) 4,470
--------- -------- -------- --------
2,143 (912) 4,935 4,546
--------- -------- -------- --------
1,000 1,000 1,000 1,000
206,516 37,031 451,162 128,658
(526) (76) (1,494) (123)
(1) -- -- --
(166) (30) (616) (50)
--------- -------- -------- --------
206,823 37,925 450,052 129,485
--------- -------- -------- --------
208,966 37,013 454,987 134,031
-- -- -- --
--------- -------- -------- --------
$ 208,966 $ 37,013 $454,987 $134,031
========= ======== ======== ========
</TABLE>
- - - ---------------------------------------15---------------------------------------
<PAGE>
Separate Account Five
ITT Hartford Life and Annuity Insurance Company
Notes to Financial Statements
December 31, 1997
- - - --------------------------------------------------------------------------------
1. Organization:
Separate Account Five (the Account) is a separate investment account within
ITT Hartford Life and Annuity Insurance Company (the Company) and is
registered with the Securities and Exchange Commission (SEC) as a unit
investment trust under the Investment Company Act of 1940, as amended. The
Account consists of forty-one sub-accounts. These financial statements
include thirteen sub-accounts which invest solely in Dean Witter Select
Dimensions Portfolios (the Funds). The twelve sub-accounts which invest in
Hartford Mutual Funds and the sixteen sub-accounts which invest in Putnam
VT Mutual Funds are presented in separate financial statements. Both the
Company and the Account are subject to supervision and regulation by the
Department of Insurance of the State of Connecticut and the SEC. The
Account invests deposits by variable life contractholders of the Company in
the Funds as directed by the contractholders.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) Security Transactions--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividend and capital
gains income are accrued as of the ex-dividend date. Capital gains
income represents dividends from the Funds which are characterized as
capital gains under tax regulations.
b) Security Valuation--The investment in shares of the Dean Witter Select
Dimensions Investment Series Mutual Funds are valued at the closing net
asset value per share as determined by the appropriate Fund as of
December 31, 1997.
c) Federal Income Taxes--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as
an insurance company under the Internal Revenue Code. Under current law,
no federal income taxes are payable with respect to the operations of
the Account.
d) Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the financial statements and
the reported amounts of income and expenses during the period. Operating
results in the future could vary from the amounts derived from
management's estimates.
3. Administration of the Account and Related Charges:
In accordance with the terms of the contracts, the Company makes deductions
for mortality and expense undertakings, cost of insurance, administrative
fees, and state premium taxes. These charges are deducted through
termination of units of interest from applicable contract owners' accounts.
- - - ---------------------------------------16---------------------------------------
<PAGE>
Report of Independent Public Accountants
To ITT Hartford Life and Annuity Insurance Company
Separate Account Five and to the
Owners of Units of Interest Therein:
- - - --------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities of the
Money Market Portfolio Sub-Account, North American Government Securities
Portfolio Sub-Account, Balanced Portfolio Sub-Account, Utilities Portfolio
Sub-Account, Dividend Growth Portfolio Sub-Account, Value-Added Market
Portfolio Sub-Account, Core-Equity Portfolio Sub-Account, American Value
Portfolio Sub-Account, Global Equity Value Portfolio Sub-Account, Developing
Growth Portfolio Sub-Account, Emerging Markets Portfolio Sub-Account,
Diversified Income Portfolio Sub-Account and Mid-Cap Growth Portfolio
Sub-Account (constituting ITT Hartford Life and Annuity Insurance Company
Separate Account Five) (the Account) as of December 31, 1997, and the related
statement of operations and statement of changes in net assets for the period
from inception, May 20, 1997, to December 31, 1997. 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 Money Market Portfolio
Sub-Account, North American Government Securities Portfolio Sub-Account,
Balanced Portfolio Sub-Account, Utilities Portfolio Sub-Account, Dividend
Growth Portfolio Sub-Account, Value-Added Market Portfolio Sub-Account,
Core-Equity Portfolio Sub-Account, American Value Portfolio Sub-Account, Global
Equity Value Portfolio Sub-Account, Developing Growth Portfolio Sub-Account,
Emerging Markets Portfolio Sub-Account, Diversified Income Portfolio
Sub-Account and Mid-Cap Growth Portfolio Sub-Account (constituting ITT Hartford
Life and Annuity Insurance Company Separate Account Five) as of December 31,
1997, the results of its operations and the changes in its net assets for the
period from inception, May 20, 1997, to December 31, 1997, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 16, 1998
- - - ---------------------------------------17---------------------------------------
<PAGE>
Separate Account Three
Hartford Life Insurance Company
Statement of Assets & Liabilities
December 31, 1997
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North American
Money Market Government
Portfolio Securities Portfolio
Sub-Account Sub-Account
-------------- ----------------------
<S> <C> <C>
Assets:
Investments in Dean Witter Select Dimensions Investments Series:
Money Market Portfolio
Shares 8,308,517
Cost $ 8,308,517
Market Value ................................................. $ 8,308,517 --
North American Government Securities Portfolio
Shares 40,418
Cost $ 406,836
Market Value ................................................. -- $ 411,052
Balanced Portfolio
Shares 388,986
Cost $ 5,065,773
Market Value ................................................. -- --
Utilities Portfolio
Shares 156,115
Cost $ 1,972,904
Market Value ................................................. -- --
Dividend and Growth Portfolio
Shares 2,670,124
Cost $44,966,952
Market Value ................................................. -- --
Value-Added Market Portfolio
Shares 1,180,018
Cost $17,364,030
Market Value ................................................. -- --
Core-Equity Portfolio
Shares 214,810
Cost $ 2,984,976
Market Value ................................................. -- --
American Value Portfolio
Shares 1,035,552
Cost $16,093,852
Market Value ................................................. -- --
Global Equity Value Portfolio
Shares 932,369
Cost $11,371,601
Market Value ................................................. -- --
Developing Growth Portfolio
Shares 355,870
Cost $ 5,856,576
Market Value ................................................. -- --
Emerging Market Portfolio
Shares 173,585
Cost $ 1,928,974
Market Value ................................................. -- --
Diversified Income Portfolio
Shares 650,152
Cost $ 6,646,543
Market Value ................................................. -- --
Mid-Cap Growth Portfolio
Shares 155,803
Cost $ 1,646,491
Market Value ................................................. -- --
Due from Hartford Life Insurance Company ....................... -- --
Receivable from fund shares sold ............................... 16,577 16
----------- -----------
Total Assets .................................................. 8,325,094 411,068
----------- -----------
Liabilities:
Due to Hartford Life Insurance Company ......................... 16,568 17
Payable for fund shares purchased .............................. -- --
----------- -----------
Total Liabilities .............................................. 16,568 17
----------- -----------
Net Assets (variable annuity contract liabilities) ............. $ 8,308,526 $ 411,051
=========== ===========
Variable annuity contracts in the accumulation period:
Individual Sub-Accounts:
Units Owned by Contractholders ................................ 734,664 36,306
Unit Values ................................................... $ 11.309282 $ 11.321926
Annuity Contracts in the annuity period:
Individual Sub-Accounts
Units Owned by Contractholders ................................ -- --
Unit Values ................................................... -- --
<CAPTION>
Dividend
Balanced Utilities and Growth
Portfolio Portfolio Portfolio
Sub-Account Sub-Account Sub-Account
--------------- --------------- ----------------
<S> <C> <C> <C>
Assets:
Investments in Dean Witter Select Dimensions Investments Series:
Money Market Portfolio
Shares 8,308,517
Cost $ 8,308,517
Market Value ................................................. -- -- --
North American Government Securities Portfolio
Shares 40,418
Cost $ 406,836
Market Value ................................................. -- -- --
Balanced Portfolio
Shares 388,986
Cost $ 5,065,773
Market Value ................................................. $ 5,846,457 -- --
Utilities Portfolio
Shares 156,115
Cost $ 1,972,904
Market Value ................................................. -- $ 2,471,297 --
Dividend and Growth Portfolio
Shares 2,670,124
Cost $44,966,952
Market Value ................................................. -- -- $ 52,254,318
Value-Added Market Portfolio
Shares 1,180,018
Cost $17,364,030
Market Value ................................................. -- -- --
Core-Equity Portfolio
Shares 214,810
Cost $ 2,984,976
Market Value ................................................. -- -- --
American Value Portfolio
Shares 1,035,552
Cost $16,093,852
Market Value ................................................. -- -- --
Global Equity Value Portfolio
Shares 932,369
Cost $11,371,601
Market Value ................................................. -- -- --
Developing Growth Portfolio
Shares 355,870
Cost $ 5,856,576
Market Value ................................................. -- -- --
Emerging Market Portfolio
Shares 173,585
Cost $ 1,928,974
Market Value ................................................. -- -- --
Diversified Income Portfolio
Shares 650,152
Cost $ 6,646,543
Market Value ................................................. -- -- --
Mid-Cap Growth Portfolio
Shares 155,803
Cost $ 1,646,491
Market Value ................................................. -- -- --
Due from Hartford Life Insurance Company ....................... -- -- 27,269
Receivable from fund shares sold ............................... 12,386 5,805 --
----------- ----------- ------------
Total Assets .................................................. 5,858,843 2,477,102 52,281,587
----------- ----------- ------------
Liabilities:
Due to Hartford Life Insurance Company ......................... 12,369 5,333 --
Payable for fund shares purchased .............................. -- -- 26,288
----------- ----------- ------------
Total Liabilities .............................................. 12,369 5,333 26,288
----------- ----------- ------------
Net Assets (variable annuity contract liabilities) ............. $ 5,846,474 $ 2,471,769 $ 52,255,299
=========== =========== ============
Variable annuity contracts in the accumulation period:
Individual Sub-Accounts:
Units Owned by Contractholders ................................ 369,353 146,104 2,483,000
Unit Values ................................................... $ 15.828958 $ 16.917905 $ 21.045231
Annuity Contracts in the annuity period:
Individual Sub-Accounts
Units Owned by Contractholders ................................ -- -- --
Unit Values ................................................... -- -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.
- - - ---------------------------------------18---------------------------------------
<PAGE>
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value-Added Core-Equity American Global Equity
Market Portfolio Portfolio Value Portfolio Value Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - - ------------------ --------------- ----------------- -----------------
<S> <C> <C> <C>
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
$ 20,721,116 -- -- --
-- $ 3,557,261 -- --
-- -- $ 20,390,011 --
-- -- -- $ 12,092,829
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
14,524 -- 13,160 15,629
-- 136 -- --
------------ ----------- ------------ ------------
20,735,640 3,557,397 20,403,171 12,108,458
------------ ----------- ------------ ------------
-- 165 -- --
14,564 -- 13,142 15,624
------------ ----------- ------------ ------------
14,564 165 13,142 15,624
------------ ----------- ------------ ------------
$ 20,721,076 $ 3,557,232 $ 20,390,029 $ 12,092,834
============ =========== ============ ============
1,136,343 214,343 1,022,028 920,187
$ 17.936035 $ 16.595943 $ 19.950549 $ 13.141711
18,933 -- -- --
$ 17.936035 -- -- --
<CAPTION>
Developing Emerging Diversified Mid-Cap
Growth Portfolio Markets Portfolio Income Portfolio Growth Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - - ------------------ ------------------- ------------------ -----------------
<S> <C> <C> <C>
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
$ 6,818,465 -- -- --
-- $ 1,963,242 -- --
-- -- $ 6,690,066 --
-- -- -- $ 1,776,152
5,022 424 59,934 2,432
-- -- -- --
----------- ----------- ----------- -----------
6,823,487 1,963,666 6,750,000 1,778,584
----------- ----------- ----------- -----------
-- -- -- --
4,810 425 59,936 2,432
----------- ----------- ----------- -----------
4,810 425 59,936 2,432
----------- ----------- ----------- -----------
$ 6,818,677 $ 1,963,241 $ 6,690,064 $ 1,776,152
=========== =========== =========== ===========
360,845 172,144 546,677 155,357
$ 18.896418 $ 11.404653 $ 12.237687 $ 11.432686
-- -- -- --
-- -- -- --
</TABLE>
- - - ---------------------------------------19---------------------------------------
<PAGE>
Separate Account Three
Hartford Life Insurance Company
Statement of Operations
For the Year Ended December 31, 1997
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North American
Money Market Government
Portfolio Securities Portfolio
Sub-Account Sub-Account
-------------- ----------------------
<S> <C> <C>
Investment income:
Dividends ............................................ $ 429,621 $ 18,324
Expenses:
Mortality and expense undertakings ................... (118,156) (5,346)
----------- --------
Net investment income (loss) ......................... 311,465 12,978
----------- --------
Capital gains income .................................. -- --
----------- --------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) on security transactions .... -- 134
Net unrealized appreciation (depreciation) of
investments during the period ....................... -- 3,756
----------- --------
Net realized and unrealized gain (loss)
on investments ..................................... -- 3,890
----------- --------
Net increase (decrease) in net assets resulting from
operations ......................................... $ 311,465 $ 16,868
=========== ========
<CAPTION>
Dividend
Balanced Utilities and Growth
Portfolio Portfolio Portfolio
Sub-Account Sub-Account Sub-Account
------------- ------------- --------------
<S> <C> <C> <C>
Investment income:
Dividends ............................................ $ 85,051 $ 50,582 $ 694,925
Expenses:
Mortality and expense undertakings ................... (57,969) (24,857) (487,695)
--------- --------- ----------
Net investment income (loss) ......................... 27,082 25,725 207,230
--------- --------- ----------
Capital gains income .................................. 11,255 5,598 1,118,280
--------- --------- ----------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) on security transactions .... 1 (1,072) 1,187
Net unrealized appreciation (depreciation) of
investments during the period ....................... 532,164 385,952 5,104,874
--------- --------- ----------
Net realized and unrealized gain (loss)
on investments ..................................... 532,165 384,880 5,106,061
--------- --------- ----------
Net increase (decrease) in net assets resulting from
operations ......................................... $ 570,502 $ 416,203 $6,431,571
========= ========= ==========
</TABLE>
*From inception, January 21, 1997 to December 31, 1997.
The accompanying notes are an integral part of these financial statements.
- - - ---------------------------------------20---------------------------------------
<PAGE>
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value-Added Core-Equity American Global Equity
Market Portfolio Portfolio Value Portfolio Value Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - - ------------------ ------------- ----------------- -----------------
<S> <C> <C> <C>
$ 188,926 $ 4,297 $ 46,393 $ 76,975
(187,821) (32,895) (193,423) (128,221)
---------- --------- ---------- -----------
1,105 (28,598) (147,030) (51,246)
---------- --------- ---------- -----------
25,010 9,815 253,252 13,138
---------- --------- ---------- -----------
(250) (35) 25,705 (626)
2,624,687 423,579 3,404,201 378,264
---------- --------- ---------- -----------
2,624,437 423,544 3,429,906 377,638
---------- --------- ---------- -----------
$2,650,552 $ 404,761 $3,536,128 $ 339,530
========== ========= ========== ===========
<CAPTION>
Developing Emerging Diversified Mid-Cap
Growth Portfolio Markets Portfolio Income Portfolio Growth Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account*
- - - ------------------ ------------------- ------------------ -----------------
<S> <C> <C> <C>
$ 10,754 $ 8,429 $ 331,153 $ 12,328
(76,188) (25,945) (60,296) (11,171)
--------- --------- --------- ---------
(65,434) (17,516) 270,857 1,157
--------- --------- --------- ---------
-- -- 7,785 --
--------- --------- --------- ---------
(5,860) (14,073) 153 1,041
665,187 (42,909) 12,589 129,661
--------- --------- --------- ---------
659,327 (56,982) 12,742 130,702
--------- --------- --------- ---------
$ 593,893 $ (74,498) $ 291,384 $ 131,859
========= ========= ========= =========
</TABLE>
- - - ---------------------------------------21---------------------------------------
<PAGE>
Separate Account Three
Hartford Life Insurance Company
Statement of Changes in Net Assets
For the Year Ended December 31, 1997
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North American
Money Market Government
Portfolio Securities Portfolio
Sub-Account Sub-Account
--------------- ----------------------
<S> <C> <C>
Operations:
Net investment income (loss) ................................ $ 311,465 $ 12,978
Capital gains income ........................................ -- --
Net realized gain (loss) on security transactions ........... -- 134
Net unrealized appreciation (depreciation) of
investments during the period .............................. -- 3,756
------------- ---------
Net increase in net assets resulting from operations ........ 311,465 16,868
------------- ---------
Unit transactions:
Purchases ................................................... 10,986,034 80,522
Net transfers ............................................... (7,694,766) (501)
Surrenders .................................................. (752,612) (27,777)
Net annuity transactions .................................... -- --
------------- ---------
Net increase in net assets resulting from unit
transactions ............................................... 2,538,656 52,244
------------- ---------
Total increase in net assets ................................ 2,850,121 69,112
Net Assets:
Beginning of period ......................................... 5,458,405 341,939
------------- ---------
End of period ............................................... $ 8,308,526 $ 411,051
============= =========
<CAPTION>
Dividend
Balanced Utilities and Growth
Portfolio Portfolio Portfolio
Sub-Account Sub-Account Sub-Account
------------- ------------- ---------------
<S> <C> <C> <C>
Operations:
Net investment income (loss) ................................ $ 27,082 $ 25,725 $ 207,230
Capital gains income ........................................ 11,255 5,598 1,118,280
Net realized gain (loss) on security transactions ........... 1 (1,072) 1,187
Net unrealized appreciation (depreciation) of
investments during the period .............................. 532,164 385,952 5,104,874
---------- ---------- ------------
Net increase in net assets resulting from operations ........ 570,502 416,203 6,431,571
---------- ---------- ------------
Unit transactions:
Purchases ................................................... 2,480,988 787,145 25,298,127
Net transfers ............................................... 773,542 (218,038) 5,093,960
Surrenders .................................................. (584,850) (112,067) (2,369,968)
Net annuity transactions .................................... -- -- --
---------- ---------- ------------
Net increase in net assets resulting from unit
transactions ............................................... 2,669,680 457,040 28,022,119
---------- ---------- ------------
Total increase in net assets ................................ 3,240,182 873,243 34,453,690
Net Assets:
Beginning of period ......................................... 2,606,292 1,598,526 17,801,609
---------- ---------- ------------
End of period ............................................... $5,846,474 $2,471,769 $ 52,255,299
========== ========== ============
</TABLE>
*From inception, January 21, 1997 to December 31, 1997.
- - - --------------------------------------------------------------------------------
Hartford Life Insurance Company
Statement of Changes in Net Assets
For the Year Ended December 31, 1996
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North American
Money Market Government
Portfolio Securities Portfolio
Sub-Account Sub-Account
--------------- ----------------------
<S> <C> <C>
Operations:
Net investment income (loss) ................................ $ 99,617 $ 8,511
Capital gains income ........................................ -- --
Net realized gain (loss) on security transactions ........... -- 335
Net unrealized appreciation of investments during the
period ..................................................... -- 60
------------- ---------
Net increase in net assets resulting from operations ........ 99,617 8,906
------------- ---------
Unit transactions:
Purchases ................................................... 6,948,541 205,518
Net transfers ............................................... (2,722,056) 173,663
Surrenders .................................................. (186,897) (93,829)
------------- ---------
Net increase in net assets resulting from unit
transactions ............................................... 4,039,588 285,352
------------- ---------
Total increase in net assets ................................ 4,139,205 294,258
Net Assets:
Beginning of period ......................................... 1,319,200 47,681
------------- ---------
End of period ............................................... $ 5,458,405 $ 341,939
============= =========
<CAPTION>
Dividend
Balanced Utilities and Growth
Portfolio Portfolio Portfolio
Sub-Account Sub-Account Sub-Account
------------- ------------- --------------
<S> <C> <C> <C>
Operations:
Net investment income (loss) ................................ $ 20,892 $ 21,954 $ 82,889
Capital gains income ........................................ 8,328 894 10,163
Net realized gain (loss) on security transactions ........... 6,424 (1,428) (1,335)
Net unrealized appreciation of investments during the
period ..................................................... 165,616 59,442 1,770,825
---------- ---------- -----------
Net increase in net assets resulting from operations ........ 201,260 80,862 1,862,542
---------- ---------- -----------
Unit transactions:
Purchases ................................................... 1,550,548 896,723 11,219,771
Net transfers ............................................... (295,995) 128,215 1,189,188
Surrenders .................................................. (203,150) (137,390) (665,008)
---------- ---------- -----------
Net increase in net assets resulting from unit
transactions ............................................... 1,051,403 887,548 11,743,951
---------- ---------- -----------
Total increase in net assets ................................ 1,252,663 968,410 13,606,493
Net Assets:
Beginning of period ......................................... 1,353,629 630,116 4,195,116
---------- ---------- -----------
End of period ............................................... $2,606,292 $1,598,526 $17,801,609
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- - - ---------------------------------------22---------------------------------------
<PAGE>
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value-Added Core-Equity American Global Equity
Market Portfolio Portfolio Value Portfolio Value Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - - ------------------ ------------- ----------------- -----------------
<S> <C> <C> <C>
$ 1,105 $ (28,598) $ (147,030) $ (51,246)
25,010 9,815 253,252 13,138
(250) (35) 25,705 (626)
2,624,687 423,579 3,404,201 378,264
----------- ---------- ----------- -----------
2,650,552 404,761 3,536,128 339,530
----------- ---------- ----------- -----------
8,641,262 1,171,717 7,393,097 5,772,577
1,738,699 745,942 1,198,780 1,004,060
(827,826) (124,197) (804,164) (784,786)
341,474 -- -- --
----------- ---------- ----------- -----------
9,893,609 1,793,462 7,787,713 5,991,851
----------- ---------- ----------- -----------
12,544,161 2,198,223 11,323,841 6,331,381
8,176,915 1,359,009 9,066,188 5,761,453
----------- ---------- ----------- -----------
$20,721,076 $3,557,232 $20,390,029 $12,092,834
=========== ========== =========== ===========
<CAPTION>
Developing Emerging Diversified Mid-Cap
Growth Portfolio Markets Portfolio Income Portfolio Growth Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account*
- - - ------------------ ------------------- ------------------ -----------------
<S> <C> <C> <C>
$ (65,434) $ (17,516) $ 270,857 $ 1,157
-- -- 7,785 --
(5,860) (14,073) 153 1,041
665,187 (42,909) 12,589 129,661
---------- ---------- ---------- ----------
593,893 (74,498) 291,384 131,859
---------- ---------- ---------- ----------
2,012,667 809,422 2,936,575 1,190,000
36,985 6,465 1,246,736 495,122
(235,174) (120,404) (347,647) (40,829)
-- -- -- --
---------- ---------- ---------- ----------
1,814,478 695,483 3,835,664 1,644,293
---------- ---------- ---------- ----------
2,408,371 620,985 4,127,048 1,776,152
4,410,306 1,342,256 2,563,016 --
---------- ---------- ---------- ----------
$6,818,677 $1,963,241 $6,690,064 $1,776,152
========== ========== ========== ==========
</TABLE>
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value-Added Core-Equity American Global Equity Developing Emerging Diversified
Market Portfolio Portfolio Value Portfolio Value Portfolio Growth Portfolio Markets Portfolio Income Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
- - - ------------------ ------------- ----------------- ----------------- ------------------ ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
$ 7,612 $ (5,790) $ (45,165) $ (5,756) $ (33,989) $ (1,247) $ 83,793
1,620 1,743 23,844 3,905 2,707 -- 1,078
3,162 519 179 932 3,963 (27) 101
638,574 144,463 660,479 304,832 196,773 77,164 21,655
---------- ---------- ---------- ---------- ---------- ---------- ----------
650,968 140,935 639,337 303,913 169,454 75,890 106,627
---------- ---------- ---------- ---------- ---------- ---------- ----------
5,771,510 819,995 5,876,271 3,658,651 3,157,803 932,707 1,616,132
118,782 109,486 669,473 948,105 274,161 206,356 235,033
(62,463) (12,084) (319,324) (211,305) (148,442) (38,428) (38,500)
---------- ---------- ---------- ---------- ---------- ---------- ----------
5,827,829 917,397 6,226,420 4,395,451 3,283,522 1,100,635 1,812,665
---------- ---------- ---------- ---------- ---------- ---------- ----------
6,478,797 1,058,332 6,865,757 4,699,364 3,452,976 1,176,525 1,919,292
1,698,118 300,677 2,200,431 1,062,089 957,330 165,731 643,724
---------- ---------- ---------- ---------- ---------- ---------- ----------
$8,176,915 $1,359,009 $9,066,188 $5,761,453 $4,410,306 $1,342,256 $2,563,016
========== ========== ========== ========== ========== ========== ==========
</TABLE>
- - - ---------------------------------------23---------------------------------------
<PAGE>
Separate Account Three
Hartford Life Insurance Company
Notes to Financial Statements
December 31, 1997
- - - --------------------------------------------------------------------------------
1. Organization:
Separate Account Three (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). Cost of investments
sold is determined on the basis of identified cost. Dividend and capital
gains income are accrued as of the ex-dividend date. Capital gains
income represents dividends from the Funds which are characterized as
capital gains under tax regulations.
b) Security Valuation--The investment in shares of the Dean Witter Select
Dimensions Investment Series Mutual Funds are valued at the closing net
asset value per share as determined by the appropriate Fund as of
December 31, 1997.
c) Federal Income Taxes--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as
an insurance company under the Internal Revenue Code. Under current law,
no federal income taxes are payable with respect to the operations of
the Account.
d) Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the financial statements and
the reported amounts of income and expenses during the period.
Operating results in the future could vary from the amounts derived
from management's estimates.
3. Administration of the Account and Related Charges:
a) Mortality and Expense Undertakings--The Company, as issuer of variable
annuity contracts, provides the mortality and expense undertakings and,
with respect to the Account, receives a maximum annual fee of up to
1.25% of the Account's average daily net assets. The Company also
provides administrative services and receives an annual fee of 0.15% of
the Account's average daily net assets.
b) Deduction of Annual Maintenance Fee--Annual maintenance fees are
deducted through termination of units of interest from applicable
contract owners' accounts, in accordance with the terms of the
contracts.
- - - ---------------------------------------24---------------------------------------
<PAGE>
Report of Independent Public Accountants
To Hartford Life Insurance Company
Separate Account Three and to the
Owners of Units of Interest Therein:
- - - --------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities of
Hartford Life Insurance Company Separate Account Three (the Account) as of
December 31, 1997, and the related statement of operations for the year then
ended and statements of changes in net assets for each of the two years in the
period then ended. These financial statements are the responsibility of the
Account's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hartford Life Insurance
Company Separate Account Three as of December 31, 1997, the results of its
operations for the year then ended and the changes in its net assets for each
of the two years in the period then ended, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 16, 1998
- - - ---------------------------------------25---------------------------------------
<PAGE>
Separate Account Five
Hartford Life Insurance Company
Statement of Assets & Liabilities
December 31, 1997
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North American
Money Market Government
Portfolio Securities Portfolio
Sub-Account Sub-Account
-------------- ----------------------
<S> <C> <C>
Assets:
Investments in Dean Witter Select Dimensions Investment Series:
Money Market Portfolio
Shares 22,367
Cost $ 22,367
Market Value ................................................ $ 22,367 --
North American Government Securities Portfolio
Shares 102
Cost $ 1,030
Market Value ................................................ -- $ 1,042
Balanced Portfolio
Shares 248
Cost $ 3,515
Market Value ................................................ -- --
Utilities Portfolio
Shares 78
Cost $ 1,022
Market Value ................................................ -- --
Dividend and Growth Portfolio
Shares 5,414
Cost $102,239
Market Value ................................................ -- --
Value-Added Market Portfolio
Shares 66
Cost $ 1,012
Market Value ................................................ -- --
Core-Equity Portfolio
Shares 69
Cost $ 1,006
Market Value ................................................ -- --
American Value Portfolio
Shares 2,332
Cost $ 43,243
Market Value ................................................ -- --
Global Equity Value Portfolio
Shares 4,454
Cost $ 57,976
Market Value ................................................ -- --
Developing Growth Portfolio
Shares 1,040
Cost $ 18,386
Market Value ................................................ -- --
Emerging Market Portfolio
Shares 82
Cost $ 1,003
Market Value ................................................ -- --
Diversified Income Portfolio
Shares 856
Cost $ 8,748
Market Value ................................................ -- --
Mid-Cap Growth Portfolio
Shares 518
Cost $ 5,495
Market Value ................................................ -- --
Due from Hartford Life Insurance Company ...................... -- --
Receivable from fund shares sold .............................. -- --
---------- -----------
Total Assets ................................................. 22,367 1,042
---------- -----------
Liabilities:
Due to Hartford Life Insurance Company ........................ -- --
Payable for fund shares purchased ............................. -- --
---------- -----------
Total Liabilities ............................................. -- --
---------- -----------
Net Assets (variable life contract liabilities) ............... $ 22,367 $ 1,042
========== ===========
Units Owned by Contractholders ............................... 21,667 100
Unit Values .................................................. $ 1.032342 $ 10.420600
<CAPTION>
Dividend
Balanced Utilities and Growth
Portfolio Portfolio Portfolio
Sub-Account Sub-Account Sub-Account
--------------- --------------- ---------------
<S> <C> <C> <C>
Assets:
Investments in Dean Witter Select Dimensions Investment Series:
Money Market Portfolio
Shares 22,367
Cost $ 22,367
Market Value ................................................ -- -- --
North American Government Securities Portfolio
Shares 102
Cost $ 1,030
Market Value ................................................ -- -- --
Balanced Portfolio
Shares 248
Cost $ 3,515
Market Value ................................................ $ 3,723 -- --
Utilities Portfolio
Shares 78
Cost $ 1,022
Market Value ................................................ -- $ 1,232 --
Dividend and Growth Portfolio
Shares 5,414
Cost $102,239
Market Value ................................................ -- -- $ 105,958
Value-Added Market Portfolio
Shares 66
Cost $ 1,012
Market Value ................................................ -- -- --
Core-Equity Portfolio
Shares 69
Cost $ 1,006
Market Value ................................................ -- -- --
American Value Portfolio
Shares 2,332
Cost $ 43,243
Market Value ................................................ -- -- --
Global Equity Value Portfolio
Shares 4,454
Cost $ 57,976
Market Value ................................................ -- -- --
Developing Growth Portfolio
Shares 1,040
Cost $ 18,386
Market Value ................................................ -- -- --
Emerging Market Portfolio
Shares 82
Cost $ 1,003
Market Value ................................................ -- -- --
Diversified Income Portfolio
Shares 856
Cost $ 8,748
Market Value ................................................ -- -- --
Mid-Cap Growth Portfolio
Shares 518
Cost $ 5,495
Market Value ................................................ -- -- --
Due from Hartford Life Insurance Company ...................... -- -- --
Receivable from fund shares sold .............................. -- -- --
----------- ----------- -----------
Total Assets ................................................. 3,723 1,232 105,958
----------- ----------- -----------
Liabilities:
Due to Hartford Life Insurance Company ........................ -- -- --
Payable for fund shares purchased ............................. -- -- --
----------- ----------- -----------
Total Liabilities ............................................. -- -- --
----------- ----------- -----------
Net Assets (variable life contract liabilities) ............... $ 3,723 $ 1,232 $ 105,958
=========== =========== ===========
Units Owned by Contractholders ............................... 332 100 9,493
Unit Values .................................................. $ 11.202964 $ 12.314200 $ 11.161390
</TABLE>
The accompanying notes are an integral part of these financial statements.
- - - ---------------------------------------26---------------------------------------
<PAGE>
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value-Added Core-Equity American Global Equity
Market Portfolio Portfolio Value Portfolio Value Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - - ------------------ --------------- ----------------- -----------------
<S> <C> <C> <C>
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
$ 1,158 -- -- --
-- $ 1,149 -- --
-- -- $ 45,925 --
-- -- -- $ 57,762
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
----------- ----------- ----------- -----------
1,158 1,149 45,925 57,762
----------- ----------- ----------- -----------
-- -- -- --
-- -- -- --
----------- ----------- ----------- -----------
-- -- -- --
----------- ----------- ----------- -----------
$ 1,158 $ 1,149 $ 45,925 $ 57,762
=========== =========== =========== ===========
100 100 3,637 5,774
$ 11.579600 $ 11.482200 $ 12.628705 $ 10.003694
<CAPTION>
Developing Emerging Diversified Mid-Cap
Growth Portfolio Markets Portfolio Income Portfolio Growth Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - - ------------------ ------------------- ------------------ -----------------
<S> <C> <C> <C>
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
$ 19,932 -- -- --
-- $ 928 -- --
-- -- $ 8,807 --
-- -- -- $ 5,906
-- -- -- --
-- -- -- --
----------- ---------- ----------- -----------
19,932 928 8,807 5,906
----------- ---------- ----------- -----------
-- -- -- --
-- -- -- --
----------- ---------- ----------- -----------
-- -- -- --
----------- ---------- ----------- -----------
$ 19,932 $ 928 $ 8,807 $ 5,906
=========== ========== =========== ===========
1,656 100 828 499
$ 12.038601 $ 9.281000 $ 10.635925 $ 11.843234
</TABLE>
- - - ---------------------------------------27---------------------------------------
<PAGE>
Separate Account Five
Hartford Life Insurance Company
Statement of Operations
For the Period from Inception, May 20, 1997 to December 31, 1997
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North American
Money Market Government
Portfolio Securities Portfolio
Sub-Account Sub-Account
-------------- ----------------------
<S> <C> <C>
Investment income:
Dividends ................................................ $950 $30
---- ---
Net investment income .................................... 950 30
---- ---
Capital gains income ...................................... -- --
---- ---
Net realized and unrealized gain (loss) on investments:
Net realized gain on security transactions ............... -- --
Net unrealized appreciation (depreciation) of
investments during the period ........................... -- 12
---- ---
Net realized and unrealized gain (loss)
on investments ......................................... -- 12
---- ---
Net increase (decrease) in net assets resulting from
operations ............................................. $950 $42
==== ===
<CAPTION>
Dividend
Balanced Utilities and Growth
Portfolio Portfolio Portfolio
Sub-Account Sub-Account Sub-Account
------------- ------------- ------------
<S> <C> <C> <C>
Investment income:
Dividends ................................................ $ 17 $ 18 $ 729
---- ---- ------
Net investment income .................................... 17 18 729
---- ---- ------
Capital gains income ...................................... 3 4 37
---- ---- ------
Net realized and unrealized gain (loss) on investments:
Net realized gain on security transactions ............... -- -- 49
Net unrealized appreciation (depreciation) of
investments during the period ........................... 208 210 3,719
---- ---- ------
Net realized and unrealized gain (loss)
on investments ......................................... 208 210 3,768
---- ---- ------
Net increase (decrease) in net assets resulting from
operations ............................................. $228 $232 $4,534
==== ==== ======
</TABLE>
*From inception, January 21, 1997 to December 31, 1997.
The accompanying notes are an integral part of these financial statements.
- - - ---------------------------------------28---------------------------------------
<PAGE>
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value-Added Core-Equity American Global Equity
Market Portfolio Portfolio Value Portfolio Value Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - - ------------------ ------------- ----------------- -----------------
<S> <C> <C> <C>
$ 10 $ 1 $ 33 $ 111
----- ---- ------ ------
10 1 33 111
----- ---- ------ ------
-- -- -- --
----- ---- ------ ------
2 5 22 2
----- ---- ------ ------
-- -- 64 58
146 143 2,682 (214)
----- ---- ------ ------
146 143 2,746 (156)
----- ---- ------ ------
$ 158 $149 $2,801 $ (43)
===== ==== ====== ======
<CAPTION>
Developing Emerging Diversified Mid-Cap
Growth Portfolio Markets Portfolio Income Portfolio Growth Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account*
- - - ------------------ ------------------- ------------------ -----------------
<S> <C> <C> <C>
$ 7 $ 3 $348 $ 23
------ ----- ---- ----
7 3 348 23
------ ----- ---- ----
-- -- -- --
------ ----- ---- ----
-- -- 2 --
------ ----- ---- ----
8 -- -- --
1,546 (75) 59 411
------ ----- ---- ----
1,554 (75) 59 411
------ ----- ---- ----
$1,561 $ (72) $409 $434
====== ===== ==== ====
</TABLE>
- - - ---------------------------------------29---------------------------------------
<PAGE>
Separate Account Five
Hartford Life Insurance Company
Statement of Changes in Net Assets
For the period from inception, May 20, 1997 to December 31, 1997
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North American
Money Market Government
Portfolio Securities Portfolio
Sub-Account Sub-Account
-------------- ----------------------
<S> <C> <C>
Operations:
Net investment income (loss) .............................. $ 950 $ 30
Capital gains income ...................................... -- --
Net realized gain (loss) on security transactions ......... -- --
Net unrealized appreciation (depreciation) of
investments during the period ............................ -- 12
----------- ------
Net increase (decrease) in net assets resulting from
operations ............................................... 950 42
----------- ------
Unit transactions:
Purchases ................................................. 259,950 1,000
Net transfers ............................................. (237,803) --
Surrenders ................................................ (491) --
Loan withdrawals .......................................... -- --
Cost of insurance ......................................... (239) --
----------- ------
Net increase (decrease) in net assets resulting from unit
transactions ............................................. 21,417 1,000
----------- ------
Total increase (decrease) in net assets ................... 22,367 1,042
Net Assets:
Beginning of period ....................................... -- --
----------- ------
End of period ............................................. $ 22,367 $1,042
=========== ======
<CAPTION>
Dividend
Balanced Utilities and Growth
Portfolio Portfolio Portfolio
Sub-Account Sub-Account Sub-Account
------------- ------------- ------------
<S> <C> <C> <C>
Operations:
Net investment income (loss) .............................. $ 17 $ 18 $ 729
Capital gains income ...................................... 3 4 37
Net realized gain (loss) on security transactions ......... -- -- 49
Net unrealized appreciation (depreciation) of
investments during the period ............................ 208 210 3,719
------- ------ --------
Net increase (decrease) in net assets resulting from
operations ............................................... 228 232 4,534
------- ------ --------
Unit transactions:
Purchases ................................................. 1,000 1,000 1,000
Net transfers ............................................. 2,500 -- 102,911
Surrenders ................................................ (4) -- (607)
Loan withdrawals .......................................... -- -- (1,647)
Cost of insurance ......................................... (1) -- (233)
------- ------ --------
Net increase (decrease) in net assets resulting from unit
transactions ............................................. 3,495 1,000 101,424
------- ------ --------
Total increase (decrease) in net assets ................... 3,723 1,232 105,958
Net Assets:
Beginning of period ....................................... -- -- --
------- ------ --------
End of period ............................................. $ 3,723 $1,232 $105,958
======= ====== ========
</TABLE>
*From inception, January 21, 1997 to December 31, 1997.
The accompanying notes are an integral part of these financial statements.
- - - ---------------------------------------30---------------------------------------
<PAGE>
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value-Added Core-Equity American Global Equity
Market Portfolio Portfolio Value Portfolio Value Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - - ------------------ ------------- ----------------- -----------------
<S> <C> <C> <C>
$ 10 $ 1 $ 33 $ 111
2 5 22 2
-- -- 64 58
146 143 2,682 (214)
------ ------ -------- --------
158 149 2,801 (43)
------ ------ -------- --------
1,000 1,000 1,000 1,000
-- -- 43,968 58,859
-- -- (138) (256)
(1,653) (1,700)
-- -- (53) (98)
------ ------ -------- --------
1,000 1,000 43,124 57,805
------ ------ -------- --------
1,158 1,149 45,925 57,762
-- -- -- --
------ ------ -------- --------
$1,158 $1,149 $ 45,925 $ 57,762
====== ====== ======== ========
<CAPTION>
Developing Emerging Diversified Mid-Cap
Growth Portfolio Markets Portfolio Income Portfolio Growth Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account*
- - - ------------------ ------------------- ------------------ -----------------
<S> <C> <C> <C>
$ 7 $ 3 $ 348 $ 23
-- -- 2 --
8 -- -- --
1,546 (75) 59 411
------- ------- ------ -------
1,561 (72) 409 434
------- ------- ------ -------
1,000 1,000 1,000 1,000
17,580 -- 7,487 4,498
(151) -- -- --
-- -- (66) (19)
(58) -- (23) (7)
------- ------- ------ -------
18,371 1,000 8,398 5,472
------- ------- ------ -------
19,932 928 8,807 5,906
-- -- -- --
------- ------- ------ -------
$19,932 $ 928 $8,807 $ 5,906
======= ======= ====== =======
</TABLE>
- - - ---------------------------------------31---------------------------------------
<PAGE>
Separate Account Five
Hartford Life Insurance Company
Notes to Financial Statements
December 31, 1997
- - - --------------------------------------------------------------------------------
1. Organization:
Separate Account Five (the Account) is a separate investment account with
Hartford Life Insurance Company (the Company) and is registered with the
Securities and Exchange Commission (SEC) as a unit investment trust under
the Investment Company Act of 1940, as amended. The Account consists of
forty-one sub-accounts. These financial statements include thirteen
sub-accounts which invest solely in Dean Witter Select Dimensions
Portfolios (the Funds). The twelve sub-accounts which invest in Hartford
Mutual Funds and the sixteen sub-accounts which invest in Putnam VT Mutual
Funds are presented in separate financial statements. Both the Company and
the Account are subject to supervision and regulation by the Department of
Insurance of the State of Connecticut and the SEC. The Account invests
deposits by variable life contractholders of the Company in the Funds as
directed by the contractholders.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) Security Transactions--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividend and capital
gains income are accrued as of the ex-dividend date. Capital gains
income represents dividends from the Funds which are characterized as
capital gains under tax regulations.
b) Security Valuation--The investment in shares of the Dean Witter Select
Dimensions Mutual Funds are valued at the closing net asset value per
share as determined by the appropriate Fund as of December 31, 1997.
c) Federal Income Taxes--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as
an insurance company under the Internal Revenue Code. Under current law,
no federal income taxes are payable with respect to the operations of
the Account.
d) Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the financial statements and
the reported amounts of income and expenses during the period. Operating
results in the future could vary from the amounts derived from
management's estimates.
3. Administration of the Account and Related Charges:
In accordance with the terms of the contracts, the Company makes deductions
for mortality and expense undertakings, cost of insurance, administrative
fees, and state premium taxes. These charges are deducted through
termination of units of interest from applicable contract owners' accounts.
- - - ---------------------------------------32---------------------------------------
<PAGE>
Report of Independent Public Accountants
To Hartford Life Insurance Company
Separate Account Five and to the
Owners of Units of Interest Therein:
- - - --------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities of the
Money Market Portfolio Sub-Account, North American Government Securities
Portfolio Sub-Account, Balanced Portfolio Sub-Account, Utilities Portfolio
Sub-Account, Dividend Growth Portfolio Sub-Account, Value-Added Market
Portfolio Sub-Account, Core-Equity Portfolio Sub-Account, American Value
Portfolio Sub-Account, Global Equity Value Portfolio Sub-Account, Developing
Growth Portfolio Sub-Account, Emerging Markets Portfolio Sub-Account,
Diversified Income Portfolio Sub-Account and Mid-Cap Growth Portfolio
Sub-Account (constituting Hartford Life Insurance Company Separate Account
Five) (the Account) as of December 31, 1997, and the related statement of
operations and statement of changes in net assets for the period from
inception, May 20, 1997, to December 31, 1997. 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 Money Market Portfolio
Sub-Account, North American Government Securities Portfolio Sub-Account,
Balanced Portfolio Sub-Account, Utilities Portfolio Sub-Account, Dividend
Growth Portfolio Sub-Account, Value-Added Market Portfolio Sub-Account,
Core-Equity Portfolio Sub-Account, American Value Portfolio Sub-Account, Global
Equity Value Portfolio Sub-Account, Developing Growth Portfolio Sub-Account,
Emerging Markets Portfolio Sub-Account, Diversified Income Portfolio
Sub-Account and Mid-Cap Growth Portfolio Sub-Account (constituting Hartford
Life Insurance Company Separate Account Five) as of December 31, 1997, the
results of its operations and the changes in its net assets for the period from
inception, May 20, 1997, to December 31, 1997, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 16, 1998
- - - ---------------------------------------33---------------------------------------
<PAGE>
Hartford Life
P.O. Box 2999
Hartford, CT 06104-2999
BULK RATE
U.S. POSTAGE
PAID
PERMIT #20
HOLLISTON, MA
01746
[Dean Witter Logo]
Principal Underwriter for the Separate Accounts:
Hartford Equity Sales Company, Inc. (HESCO)
200 Hopmeadow Street
Simsbury, CT 06089
Hartford Securities Distribution Company, Inc. (HSD)
200 Hopmeadow Street
Simsbury, CT 06089
[Graphic: Buck]
Hartford Life
ITT Hartford Life and Annuity
Insurance Company
Individual Annuity Operations
P.O. Box 5085
Hartford, CT 05102-5085
