<PAGE>
SEPARATE ACCOUNT THREE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
NORTH AMERICAN
GOVERNMENT
MONEY SECURITIES
MARKET PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
----------------- ---------------
<S> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Funds:
Money Market
Portfolio
Shares 9,681,027
Cost $9,681,027
Market Value....... $9,681,027 --
North American
Government
Securities Portfolio
Shares 83,072
Cost $839,998
Market Value....... -- $ 843,179
Balanced Growth
Portfolio
Shares 770,270
Cost $11,079,141
Market Value....... -- --
Utilities Portfolio
Shares 328,294
Cost $4,879,422
Market Value....... -- --
Dividend and Growth
Portfolio
Shares 3,546,756
Cost $63,451,773
Market Value....... -- --
Value-Added Market
Portfolio
Shares 1,414,630
Cost $21,709,319
Market Value....... -- --
Growth Portfolio
Shares 305,601
Cost $34,532,827
Market Value....... -- --
American Value
Portfolio
Shares 1,620,036
Cost $28,275,121
Market Value....... -- --
Global Equity
Portfolio
Shares 1,074,553
Cost $13,436,117
Market Value....... -- --
Due from Hartford Life
Insurance Company..... -- --
Receivable from fund
shares sold........... 11,776 32
----------------- ---------------
Total Assets........... 9,692,803 843,211
----------------- ---------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 11,768 34
Payable for fund shares
purchased............. -- --
----------------- ---------------
Total Liabilities...... 11,768 34
----------------- ---------------
Net Assets (variable
annuity contract
liabilities).......... $9,681,035 $ 843,177
----------------- ---------------
----------------- ---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 34
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
DIVIDEND VALUE-ADDED AMERICAN GLOBAL
BALANCED UTILITIES GROWTH MARKET GROWTH VALUE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Funds:
Money Market
Portfolio
Shares 9,681,027
Cost $9,681,027
Market Value....... -- -- -- -- -- -- --
North American
Government
Securities Portfolio
Shares 83,072
Cost $839,998
Market Value....... -- -- -- -- -- -- --
Balanced Growth
Portfolio
Shares 770,270
Cost $11,079,141
Market Value....... $12,617,022 -- -- -- -- -- --
Utilities Portfolio
Shares 328,294
Cost $4,879,422
Market Value....... -- $6,142,373 -- -- -- -- --
Dividend and Growth
Portfolio
Shares 3,546,756
Cost $63,451,773
Market Value....... -- -- $78,205,970 -- -- -- --
Value-Added Market
Portfolio
Shares 1,414,630
Cost $21,709,319
Market Value....... -- -- -- $27,146,755 -- -- --
Growth Portfolio
Shares 305,601
Cost $34,532,827
Market Value....... -- -- -- -- $5,571,107 -- --
American Value
Portfolio
Shares 1,620,036
Cost $28,275,121
Market Value....... -- -- -- -- -- $37,763,046 --
Global Equity
Portfolio
Shares 1,074,553
Cost $13,436,117
Market Value....... -- -- -- -- -- -- $15,785,190
Due from Hartford Life
Insurance Company..... 5,233 124 5,081 65 1,159 80,137 1,949
Receivable from fund
shares sold........... -- 406 -- -- -- -- --
------------- ------------ ------------ ------------ ------------ ------------ ------------
Total Assets........... 12,622,255 6,142,903 78,211,051 27,146,820 5,572,266 37,843,183 15,787,139
------------- ------------ ------------ ------------ ------------ ------------ ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- -- -- -- -- -- --
Payable for fund shares
purchased............. 5,246 -- 3,951 156 1,203 79,961 1,921
------------- ------------ ------------ ------------ ------------ ------------ ------------
Total Liabilities...... 5,246 -- 3,951 156 1,203 79,961 1,921
------------- ------------ ------------ ------------ ------------ ------------ ------------
Net Assets (variable
annuity contract
liabilities).......... $12,617,009 $6,142,903 $78,207,100 $27,146,664 $5,571,063 $37,763,222 $15,785,218
------------- ------------ ------------ ------------ ------------ ------------ ------------
------------- ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
---------------------------------------------------- 35
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
DEVELOPING EMERGING
GROWTH MARKETS
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Funds:
Developing Growth
Portfolio
Shares 332,915
Cost $5,400,245
Market Value....... $6,927,952 --
Emerging Markets
Portfolio
Shares 147,336
Cost $1,557,101
Market Value....... -- $1,165,424
Diversified Income
Portfolio
Shares 1,279,817
Cost $13,039,634
Market Value....... -- --
Mid-Cap Growth
Portfolio
Shares 263,850
Cost $2,905,773
Market Value....... -- --
Investments in Morgan
Stanley Universal
Funds:
High Yield Portfolio
Shares 40,897
Cost $438,209
Market Value....... -- --
Mid-Cap Portfolio
Shares 27,437
Cost $377,432
Market Value....... -- --
Emerging Markets Debt
Portfolio
Shares 3,074
Cost $23,779
Market Value....... -- --
Investments in Van
Kampen Funds:
Strategic Stock
Portfolio
Shares 57,168
Cost $644,056
Market Value....... -- --
Enterprise Portfolio
Shares 3,441
Cost $68,226
Market Value....... -- --
Due from Hartford Life
Insurance Company..... 182 --
Receivable from fund
shares sold........... -- 45
------------ ------------
Total Assets........... 6,928,134 1,165,469
------------ ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- 75
Payable for fund shares
purchased............. 147 --
------------ ------------
Total Liabilities...... 147 75
------------ ------------
Net Assets (variable
annuity contract
liabilities).......... $6,927,987 $1,165,394
------------ ------------
------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 36
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
DIVERSIFIED MID-CAP EMERGING
INCOME GROWTH HIGH YIELD MID-CAP MARKETS DEBT STRATEGIC STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------ ------------ ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Funds:
Developing Growth
Portfolio
Shares 332,915
Cost $5,400,245
Market Value....... -- -- -- -- -- --
Emerging Markets
Portfolio
Shares 147,336
Cost $1,557,101
Market Value....... -- -- -- -- -- --
Diversified Income
Portfolio
Shares 1,279,817
Cost $13,039,634
Market Value....... $12,708,581 -- -- -- -- --
Mid-Cap Growth
Portfolio
Shares 263,850
Cost $2,905,773
Market Value....... -- $3,129,258 -- -- -- --
Investments in Morgan
Stanley Universal
Funds:
High Yield Portfolio
Shares 40,897
Cost $438,209
Market Value....... -- -- $ 423,287 -- -- --
Mid-Cap Portfolio
Shares 27,437
Cost $377,432
Market Value....... -- -- -- $ 407,995 -- --
Emerging Markets Debt
Portfolio
Shares 3,074
Cost $23,779
Market Value....... -- -- -- -- $ 18,753 --
Investments in Van
Kampen Funds:
Strategic Stock
Portfolio
Shares 57,168
Cost $644,056
Market Value....... -- -- -- -- -- $ 682,008
Enterprise Portfolio
Shares 3,441
Cost $68,226
Market Value....... -- -- -- -- -- --
Due from Hartford Life
Insurance Company..... -- 1,627 2,284 -- -- --
Receivable from fund
shares sold........... 11,004 -- -- 15 1 26
------------ ------------ ------------ ------------ ------------- ----------------
Total Assets........... 12,719,585 3,130,885 425,571 408,010 18,754 682,034
------------ ------------ ------------ ------------ ------------- ----------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 11,007 -- -- 15 1 26
Payable for fund shares
purchased............. -- 1,628 2,284 -- -- --
------------ ------------ ------------ ------------ ------------- ----------------
Total Liabilities...... 11,007 1,628 2,284 15 1 26
------------ ------------ ------------ ------------ ------------- ----------------
Net Assets (variable
annuity contract
liabilities).......... $12,708,578 $3,129,257 $ 423,287 $ 407,995 $ 18,753 $ 682,008
------------ ------------ ------------ ------------ ------------- ----------------
------------ ------------ ------------ ------------ ------------- ----------------
<CAPTION>
ENTERPRISE
PORTFOLIO
SUB-ACCOUNT
------------
<S> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Funds:
Developing Growth
Portfolio
Shares 332,915
Cost $5,400,245
Market Value....... --
Emerging Markets
Portfolio
Shares 147,336
Cost $1,557,101
Market Value....... --
Diversified Income
Portfolio
Shares 1,279,817
Cost $13,039,634
Market Value....... --
Mid-Cap Growth
Portfolio
Shares 263,850
Cost $2,905,773
Market Value....... --
Investments in Morgan
Stanley Universal
Funds:
High Yield Portfolio
Shares 40,897
Cost $438,209
Market Value....... --
Mid-Cap Portfolio
Shares 27,437
Cost $377,432
Market Value....... --
Emerging Markets Debt
Portfolio
Shares 3,074
Cost $23,779
Market Value....... --
Investments in Van
Kampen Funds:
Strategic Stock
Portfolio
Shares 57,168
Cost $644,056
Market Value....... --
Enterprise Portfolio
Shares 3,441
Cost $68,226
Market Value....... $ 77,055
Due from Hartford Life
Insurance Company..... --
Receivable from fund
shares sold........... 3
------------
Total Assets........... 77,058
------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 3
Payable for fund shares
purchased............. --
------------
Total Liabilities...... 3
------------
Net Assets (variable
annuity contract
liabilities).......... $ 77,055
------------
------------
</TABLE>
---------------------------------------------------- 37
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
NORTH AMERICAN
GOVERNMENT
MONEY MARKET SECURITIES
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------- ---------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 394,845 $24,239
EXPENSES:
Mortality and expense
undertakings.......... (110,113) (7,890)
------------- -------
Net investment income
(loss).............. 284,732 16,349
------------- -------
CAPITAL GAINS INCOME..... -- --
------------- -------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- (53)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- (1,035)
------------- -------
Net gain (loss) on
investments......... -- (1,088)
------------- -------
Net increase
(decrease) in net
assets resulting
from operations..... $ 284,732 $15,261
------------- -------
------------- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 40
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
DIVIDEND VALUE-ADDED AMERICAN GLOBAL
BALANCED UTILITIES GROWTH MARKET GROWTH VALUE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 251,285 $ 81,279 $ 1,225,787 $ 287,008 $ -- $ 190,852 $ 184,065
EXPENSES:
Mortality and expense
undertakings.......... (128,769) (53,918) (923,593) (337,462) (61,332) (388,539) (197,569)
------------ ------------ ------------- ------------ ------------ ------------ ------------
Net investment income
(loss).............. 122,516 27,361 302,194 (50,454) (61,332) (197,687) (13,504)
------------ ------------ ------------- ------------ ------------ ------------ ------------
CAPITAL GAINS INCOME..... 182,182 40,060 2,757,300 348,777 117,693 2,346,274 51,144
------------ ------------ ------------- ------------ ------------ ------------ ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (246) 2,661 (39,000) 1,753 (176) (25,094) (35,419)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 757,197 764,558 7,466,831 2,080,349 465,996 5,191,767 1,627,845
------------ ------------ ------------- ------------ ------------ ------------ ------------
Net gain (loss) on
investments......... 756,951 767,219 7,427,831 2,082,102 465,820 5,166,673 1,592,426
------------ ------------ ------------- ------------ ------------ ------------ ------------
Net increase
(decrease) in net
assets resulting
from operations..... $ 1,061,649 $834,640 $ 10,487,325 $ 2,380,425 $522,181 $ 7,315,260 $ 1,630,066
------------ ------------ ------------- ------------ ------------ ------------ ------------
------------ ------------ ------------- ------------ ------------ ------------ ------------
</TABLE>
---------------------------------------------------- 41
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
DEVELOPING EMERGING
GROWTH MARKETS
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 14,955 $ 17,282
EXPENSES:
Mortality and expense
undertakings.......... (93,171) (19,788)
------------ ------------
Net investment income
(loss).............. (78,216) (2,506)
------------ ------------
CAPITAL GAINS INCOME..... 9,991 3,882
------------ ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (50,218) (98,895)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 565,818 (425,945)
------------ ------------
Net gain (loss) on
investments......... 515,600 (524,840)
------------ ------------
Net increase
(decrease) in net
assets resulting
from operations..... $447,375 $(523,464)
------------ ------------
------------ ------------
</TABLE>
* From inception, April 1, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 42
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
DIVERSIFIED MID-CAP EMERGING
INCOME GROWTH HIGH YIELD MID-CAP MARKETS DEBT STRATEGIC STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
------------ ------------ ------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 740,327 $ 15,261 $ 17,840 $ 908 $ 2,236 $--
EXPENSES:
Mortality and expense
undertakings.......... (141,359) (34,330) (1,845) (1,543) (259) (2,753)
------------ ------------ ------------- ------------- ------------- -------
Net investment income
(loss).............. 598,968 (19,069) 15,995 (635) 1,977 (2,753)
------------ ------------ ------------- ------------- ------------- -------
CAPITAL GAINS INCOME..... 13,039 22,379 3,182 8,170 -- --
------------ ------------ ------------- ------------- ------------- -------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (542) (12,301) (924) (287) (11,790) (321)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (374,577) 93,824 (14,922) 30,563 (5,026) 37,952
------------ ------------ ------------- ------------- ------------- -------
Net gain (loss) on
investments......... (375,119) 81,523 (15,846) 30,276 (16,816) 37,631
------------ ------------ ------------- ------------- ------------- -------
Net increase
(decrease) in net
assets resulting
from operations..... $ 236,888 $ 84,833 $ 3,331 $37,811 $(14,839) $34,878
------------ ------------ ------------- ------------- ------------- -------
------------ ------------ ------------- ------------- ------------- -------
<CAPTION>
ENTERPRISE
PORTFOLIO
SUB-ACCOUNT*
-------------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $--
EXPENSES:
Mortality and expense
undertakings.......... (237)
------
Net investment income
(loss).............. (237)
------
CAPITAL GAINS INCOME..... --
------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 820
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 8,829
------
Net gain (loss) on
investments......... 9,649
------
Net increase
(decrease) in net
assets resulting
from operations..... $9,412
------
------
</TABLE>
* From inception, April 1, 1998, to December 31, 1998.
---------------------------------------------------- 43
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
NORTH AMERICAN
GOVERNMENT
MONEY SECURITIES
MARKET PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
----------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 284,732 $ 16,349
Capital gains income... -- --
Net realized gain
(loss) on security
transactions.......... -- (53)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- (1,035)
----------------- ---------------
Net increase (decrease)
in net assets
resulting from
operations............ 284,732 15,261
----------------- ---------------
UNIT TRANSACTIONS:
Purchases.............. 2,269,367 193,291
Net transfers.......... (103,876) 228,171
Surrenders for benefit
payments and fees..... (1,077,714) (4,597)
Net annuity
transactions.......... -- --
----------------- ---------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,087,777 416,865
----------------- ---------------
Total increase
(decrease) in net
assets................ 1,372,509 432,126
NET ASSETS:
Beginning of period.... 8,308,526 411,051
----------------- ---------------
End of period.......... $9,681,035 $843,177
----------------- ---------------
----------------- ---------------
</TABLE>
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
NORTH AMERICAN
GOVERNMENT
MONEY SECURITIES
MARKET PORTFOLIO 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................ -- 378,264
----------------- ---------------
Net increase (decrease)
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 for benefit
payments and fees..... (752,612) (27,777)
Net annuity
transactions.......... -- --
----------------- ---------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 2,538,656 52,244
----------------- ---------------
Total increase
(decrease) 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
----------------- ---------------
----------------- ---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 44
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
DIVIDEND VALUE-ADDED AMERICAN GLOBAL
BALANCED UTILITIES GROWTH MARKET GROWTH VALUE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 122,516 $ 27,361 $ 302,194 $ (50,454) $ (61,332) $ (197,687) $ (13,504)
Capital gains income... 182,182 40,060 2,757,300 348,777 117,693 2,346,274 51,144
Net realized gain
(loss) on security
transactions.......... (246) 2,661 (39,000) 1,753 (176) (25,094) (35,419)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 757,197 764,558 7,466,831 2,080,349 465,996 5,191,767 1,627,845
-------------- ------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 1,061,649 834,640 10,487,325 2,380,425 522,181 7,315,260 1,630,066
-------------- ------------ ------------ ------------ ------------ ------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 2,390,416 1,685,047 9,969,087 3,221,008 853,950 6,155,199 1,794,138
Net transfers.......... 3,698,381 1,330,554 8,540,385 1,399,020 760,745 4,983,345 764,415
Surrenders for benefit
payments and fees..... (379,911) (179,107) (3,044,996) (495,307) (123,045) (1,080,611) (496,235)
Net annuity
transactions.......... -- -- -- (79,558) -- -- --
-------------- ------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 5,708,886 2,836,494 15,464,476 4,045,163 1,491,650 10,057,933 2,062,318
-------------- ------------ ------------ ------------ ------------ ------------ ------------
Total increase
(decrease) in net
assets................ 6,770,535 3,671,134 25,951,801 6,425,588 2,013,831 17,373,193 3,692,384
NET ASSETS:
Beginning of period.... 5,846,474 2,471,769 52,255,299 20,721,076 3,557,232 20,390,029 12,092,834
-------------- ------------ ------------ ------------ ------------ ------------ ------------
End of period.......... $ 12,617,009 $ 6,142,903 $ 78,207,100 $ 27,146,664 $ 5,571,063 $ 37,763,222 $ 15,785,218
-------------- ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
DIVIDEND VALUE-ADDED AMERICAN GLOBAL
BALANCED UTILITIES GROWTH MARKET GROWTH VALUE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 27,082 $ 25,725 $ 207,230 $ 1,105 $ (28,598) $ (147,030) $ (51,246)
Capital gains income... 11,255 5,598 1,118,280 25,010 9,815 253,252 13,138
Net realized gain
(loss) on security
transactions.......... 1 (1,072) 1,187 (250) (35) 25,705 (626)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 3,756 532,164 385,952 5,104,874 2,624,687 423,579 3,404,201
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 570,502 416,203 6,431,571 2,650,552 404,761 3,536,128 339,530
------------ ------------ ------------ ------------ ------------ ------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 2,480,988 787,145 25,298,127 8,641,262 1,171,717 7,393,097 5,772,577
Net transfers.......... 773,542 (218,038) 5,093,960 1,738,699 745,942 1,198,780 1,004,060
Surrenders for benefit
payments and fees..... (584,850) (112,067) (2,369,968) (827,826) (124,197) (804,164) (784,786)
Net annuity
transactions.......... -- -- -- 341,474 -- -- --
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 2,669,680 457,040 28,022,119 9,893,609 1,793,462 7,787,713 5,991,851
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total increase
(decrease) in net
assets................ 3,240,182 873,243 34,453,690 12,544,161 2,198,223 11,323,841 6,331,381
NET ASSETS:
Beginning of period.... 2,606,292 1,598,526 17,801,609 8,176,915 1,359,009 9,066,188 5,761,453
------------ ------------ ------------ ------------ ------------ ------------ ------------
End of period.......... $ 5,846,474 $ 2,471,769 $ 52,255,299 $ 20,721,076 $ 3,557,232 $ 20,390,029 $ 12,092,834
------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
---------------------------------------------------- 45
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
DEVELOPING EMERGING
GROWTH MARKETS
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ (78,216) $ (2,506)
Capital gains income... 9,991 3,882
Net realized gain
(loss) on security
transactions.......... (50,218) (98,895)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 565,818 (425,945)
------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 447,375 (523,464)
------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 465,093 108,809
Net transfers.......... (500,337) (289,983)
Surrenders for benefit
payments and fees..... (302,821) (93,209)
Net annuity
transactions.......... -- --
------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (338,065) (274,383)
------------ ------------
Total increase
(decrease) in net
assets................ 109,310 (797,847)
NET ASSETS:
Beginning of period.... 6,818,677 1,963,241
------------ ------------
End of period.......... $6,927,987 $1,165,394
------------ ------------
------------ ------------
</TABLE>
* From inception, April 1, 1998, to December 31, 1998.
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
DEVELOPING EMERGING
GROWTH MARKETS
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)..................... $ (65,434) $ (17,516)
Capital gains income........ -- --
Net realized gain (loss) on
security transactions...... (5,860) (14,073)
Net unrealized appreciation
(depreciation) of
investments during the
period..................... 665,187 (42,909)
------------ ------------
Net increase (decrease) in
net assets resulting from
operations................. 593,893 (74,498)
------------ ------------
UNIT TRANSACTIONS:
Purchases................... 2,012,667 809,422
Net transfers............... 36,985 6,465
Surrenders for benefit
payments and fees.......... (235,174) (120,404)
Net annuity transactions.... -- --
------------ ------------
Net increase (decrease) in
net assets resulting from
unit transactions.......... 1,814,478 695,483
------------ ------------
Total increase (decrease) in
net assets................. 2,408,371 620,985
NET ASSETS:
Beginning of period......... 4,410,306 1,342,256
------------ ------------
End of period............... $6,818,677 $1,963,241
------------ ------------
------------ ------------
</TABLE>
** From inception, January 21, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 46
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
DIVERSIFIED MID-CAP EMERGING
INCOME GROWTH HIGH YIELD MID-CAP MARKETS DEBT STRATEGIC STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
------------ ------------ ------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 598,968 $ (19,069) $ 15,995 $ (635) $ 1,977 $ (2,753)
Capital gains income... 13,039 22,379 3,182 8,170 -- --
Net realized gain
(loss) on security
transactions.......... (542) (12,301) (924) (287) (11,790) (321)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (374,577) 93,824 (14,922) 30,563 (5,026) 37,952
------------ ------------ ------------- ------------- ------------- --------
Net increase (decrease)
in net assets
resulting from
operations............ 236,888 84,833 3,331 37,811 (14,839) 34,878
------------ ------------ ------------- ------------- ------------- --------
UNIT TRANSACTIONS:
Purchases.............. 1,329,914 627,674 303,764 152,667 54,001 280,816
Net transfers.......... 5,025,623 733,380 117,154 219,693 (20,302) 367,384
Surrenders for benefit
payments and fees..... (573,911) (92,782) (962) (2,176) (107) (1,070)
Net annuity
transactions.......... -- -- -- -- -- --
------------ ------------ ------------- ------------- ------------- --------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 5,781,626 1,268,272 419,956 370,184 33,592 647,130
------------ ------------ ------------- ------------- ------------- --------
Total increase
(decrease) in net
assets................ 6,018,514 1,353,105 423,287 407,995 18,753 682,008
NET ASSETS:
Beginning of period.... 6,690,064 1,776,152 -- -- -- --
------------ ------------ ------------- ------------- ------------- --------
End of period.......... $ 12,708,578 $3,129,257 $423,287 $407,995 $18,753 $682,008
------------ ------------ ------------- ------------- ------------- --------
------------ ------------ ------------- ------------- ------------- --------
<CAPTION>
ENTERPRISE
PORTFOLIO
SUB-ACCOUNT*
-------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ (237)
Capital gains income... --
Net realized gain
(loss) on security
transactions.......... 820
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 8,829
-------------
Net increase (decrease)
in net assets
resulting from
operations............ 9,412
-------------
UNIT TRANSACTIONS:
Purchases.............. 32,385
Net transfers.......... 36,080
Surrenders for benefit
payments and fees..... (822)
Net annuity
transactions.......... --
-------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 67,643
-------------
Total increase
(decrease) in net
assets................ 77,055
NET ASSETS:
Beginning of period.... --
-------------
End of period.......... $77,055
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
DIVERSIFIED MID-CAP
INCOME GROWTH
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT**
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)..................... $ 270,857 $ 1,157
Capital gains income........ 7,785 --
Net realized gain (loss) on
security transactions...... 153 1,041
Net unrealized appreciation
(depreciation) of
investments during the
period..................... 12,589 129,661
------------ --------------
Net increase (decrease) in
net assets resulting from
operations................. 291,384 131,859
------------ --------------
UNIT TRANSACTIONS:
Purchases................... 2,936,575 1,190,000
Net transfers............... 1,246,736 495,122
Surrenders for benefit
payments and fees.......... (347,647) (40,829)
Net annuity transactions.... -- --
------------ --------------
Net increase (decrease) in
net assets resulting from
unit transactions.......... 3,835,664 1,644,293
------------ --------------
Total increase (decrease) in
net assets................. 4,127,048 1,776,152
NET ASSETS:
Beginning of period......... 2,563,016 --
------------ --------------
End of period............... $ 6,690,064 $1,776,152
------------ --------------
------------ --------------
</TABLE>
---------------------------------------------------- 47
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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 is accrued as of the ex-dividend date. Capital gains income
represents those dividends from the Funds which are characterized as
capital gains under tax regulations.
b) SECURITY VALUATION--The investments in shares of the Morgan Stanley Dean
Witter Select Dimensions Investment Series, the Morgan Stanley Universal
Funds, Inc. and the Van Kampen American Capital Life Investment Trust
Mutual Funds is valued at the closing net asset value per share as
determined by the appropriate Fund as of December 31, 1998.
c) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no
federal income taxes are payable with respect to the operations of the
Account.
d) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported
amounts of income and expenses during the period. Operating results in
the future could vary from the amounts derived from management's
estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
a) 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 1.50%
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. These expenses
are reflected in Surrenders for benefit payments and fees on the
accompanying statements of changes in net assets.
______________________________________ 48 ______________________________________
<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 statements of assets and liabilities of
Hartford Life Insurance Company Separate Account Three (Money Market Portfolio,
North American Government Securities Portfolio, Balanced Portfolio, Utilities
Portfolio, Dividend Growth Portfolio, Value-Added Market Portfolio, Growth
Portfolio, American Value Portfolio, Global Equity Portfolio, Developing Growth
Portfolio, Emerging Markets Portfolio, Diversified Income Portfolio, Mid-Cap
Growth Portfolio, High Yield Portfolio, Mid-Cap Portfolio, Emerging Markets Debt
Portfolio, Strategic Stock Portfolio, and Enterprise Portfolio), (collectively,
the Account) as of December 31, 1998, and the related statements of operations
and the statements of changes in net assets for the periods presented. These
financial statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1998, and the results of their operations and the changes in their net assets
for the periods presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 15, 1999 ARTHUR ANDERSEN LLP
______________________________________ 49 ______________________________________
