<PAGE>
SELECT DIMENSIONS
ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY
SEPARATE ACCOUNT THREE
HARTFORD LIFE
INSURANCE COMPANY
SEPARATE ACCOUNT THREE
ANNUAL REPORT
DECEMBER 31, 1996
[LOGO] [LOGO]
<PAGE>
SELECT DIMENSIONS
ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY
SEPARATE ACCOUNT THREE
<PAGE>
- --------------------------------------------------------------------------------
Separate Account Three
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NORTH AMERICAN
MONEY GOVERNMENT BALANCED
MARKET FUND SECURITIES FUND FUND UTILITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- --------------- ----------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Investment Series:
Money Market Fund
Shares 81,543,258
Cost $ 81,543,258
Market Value......... $81,543,258 -- -- --
North American
Government Securities
Fund
Shares 379,731
Cost $ 3,826,397
Market Value......... -- $3,827,685 -- --
Balanced Fund
Shares 2,775,948
Cost $ 33,022,150
Market Value......... -- -- $36,281,636 --
Utilities Fund
Shares 2,634,068
Cost $ 31,427,131
Market Value......... -- -- -- $34,084,844
Dividend Growth Fund
Shares 14,610,646
Cost $206,342,987
Market Value......... -- -- -- --
Value Added Market Fund
Shares 4,613,248
Cost $ 57,919,878
Market Value......... -- -- -- --
Core Equity Fund
Shares 1,244,437
Cost $ 15,134,747
Market Value......... -- -- -- --
American Value Fund
Shares 7,308,180
Cost $100,443,932
Market Value......... -- -- -- --
Global Equity Fund
Shares 4,433,959
Cost $ 49,931,596
Market Value......... -- -- -- --
Developing Growth Fund
Shares 3,359,116
Cost $ 52,659,636
Market Value......... -- -- -- --
Emerging Markets Fund
Shares 1,419,551
Cost $ 14,892,825
Market Value......... -- -- -- --
Diversified Income Fund
Shares 2,863,074
Cost $ 29,167,738
Market Value......... -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company..... -- -- 1,582 --
Receivable from fund
shares sold........... 483,690 1,041 -- 761,210
--------------- --------------- ----------- --------------
Total Assets........... 82,026,948 3,828,726 36,283,218 34,846,054
--------------- --------------- ----------- --------------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... 483,345 1,052 -- 761,590
Payable for fund shares
purchased............. -- -- 265 --
--------------- --------------- ----------- --------------
Total Liabilities...... 483,345 1,052 265 761,590
--------------- --------------- ----------- --------------
Net Assets (variable
annuity contract
liabilities).......... $81,543,603 $3,827,674 $36,282,953 $34,084,464
--------------- --------------- ----------- --------------
--------------- --------------- ----------- --------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by
Participants.......... 7,480,376 353,083 2,663,434 2,512,201
Unit Price............. $ 10.901003 $10.840708 $13.618100 $ 13.567570
ANNUITY CONTRACTS IN THE
ANNUITY PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by
Participants.......... -- -- 885 --
Unit Price............. -- -- $13.618100 --
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2
<PAGE>
<TABLE>
<CAPTION>
DIVIDEND VALUE ADDED CORE EQUITY AMERICAN GLOBAL DEVELOPING EMERGING
GROWTH FUND MARKET FUND FUND VALUE FUND EQUITY FUND GROWTH FUND MARKETS FUND
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
Investment Series:
Money Market Fund
Shares 81,543,258
Cost $ 81,543,258
Market Value......... -- -- -- -- -- -- --
North American
Government Securities
Fund
Shares 379,731
Cost $ 3,826,397
Market Value......... -- -- -- -- -- -- --
Balanced Fund
Shares 2,775,948
Cost $ 33,022,150
Market Value......... -- -- -- -- -- -- --
Utilities Fund
Shares 2,634,068
Cost $ 31,427,131
Market Value......... -- -- -- -- -- -- --
Dividend Growth Fund
Shares 14,610,646
Cost $206,342,987
Market Value......... $240,345,129 -- -- -- -- -- --
Value Added Market Fund
Shares 4,613,248
Cost $ 57,919,878
Market Value......... -- $65,323,598 -- -- -- -- --
Core Equity Fund
Shares 1,244,437
Cost $ 15,134,747
Market Value......... -- -- $16,862,113 -- -- -- --
American Value Fund
Shares 7,308,180
Cost $100,443,932
Market Value......... -- -- -- $111,815,156 -- -- --
Global Equity Fund
Shares 4,433,959
Cost $ 49,931,596
Market Value......... -- -- -- -- $53,473,545 -- --
Developing Growth Fund
Shares 3,359,116
Cost $ 52,659,636
Market Value......... -- -- -- -- -- $56,701,878 --
Emerging Markets Fund
Shares 1,419,551
Cost $ 14,892,825
Market Value......... -- -- -- -- -- -- $15,927,367
Diversified Income Fund
Shares 2,863,074
Cost $ 29,167,738
Market Value......... -- -- -- -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company..... 145,178 48,517 15,009 34,844 34,234 1,854 2,974
Receivable from fund
shares sold........... -- -- -- -- -- 969 --
------------ ----------- ----------- ------------ ----------- --------------- ------------
Total Assets........... 240,490,307 65,372,115 16,877,122 111,850,000 53,507,779 56,704,701 15,930,341
------------ ----------- ----------- ------------ ----------- --------------- ------------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... -- -- -- -- -- -- --
Payable for fund shares
purchased............. 144,817 48,523 15,014 35,100 34,224 -- 2,987
------------ ----------- ----------- ------------ ----------- --------------- ------------
Total Liabilities...... 144,817 48,523 15,014 35,100 34,224 2,987
------------ ----------- ----------- ------------ ----------- --------------- ------------
Net Assets (variable
annuity contract
liabilities).......... $240,345,490 $65,323,592 $16,862,108 $111,814,900 $53,473,555 $56,704,701 $15,927,354
------------ ----------- ----------- ------------ ----------- --------------- ------------
------------ ----------- ----------- ------------ ----------- --------------- ------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by
Participants.......... 14,201,405 4,527,796 1,232,899 7,289,696 4,359,716 3,365,764 1,393,640
Unit Price............. $ 16.920959 $14.421708 $13.674730 $ 15.335469 $12.264831 $ 16.843276 $ 11.419991
ANNUITY CONTRACTS IN THE
ANNUITY PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by
Participants.......... 2,606 1,736 186 1,565 194 843 1,051
Unit Price............. $ 16.920959 $14.421708 $13.674730 $ 15.335469 $12.264831 $ 16.843276 $ 11.419991
<CAPTION>
DIVERSIFIED
INCOME FUND
SUB-ACCOUNT
-----------
<S> <C>
ASSETS:
Investments in Dean
Witter Select
Investment Series:
Money Market Fund
Shares
Cost
Market Value......... --
North American
Government Securities
Fund
Shares
Cost
Market Value.........
Balanced Fund
Shares
Cost
Market Value......... --
Utilities Fund
Shares
Cost
Market Value......... --
Dividend Growth Fund
Shares
Cost
Market Value......... --
Value Added Market Fund
Shares
Cost
Market Value......... --
Core Equity Fund
Shares
Cost
Market Value......... --
American Value Fund
Shares
Cost
Market Value......... --
Global Equity Fund
Shares
Cost
Market Value......... --
Developing Growth Fund
Shares
Cost
Market Value......... --
Emerging Markets Fund
Shares
Cost
Market Value......... --
Diversified Income Fund
Shares
Cost
Market Value......... $29,546,924
Due from ITT Hartford
Life and Annuity
Insurance Company..... 798,989
Receivable from fund
shares sold........... --
-----------
Total Assets........... 30,345,913
-----------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... --
Payable for fund shares
purchased............. 798,988
-----------
Total Liabilities...... 798,988
-----------
Net Assets (variable
annuity contract
liabilities).......... $29,546,925
-----------
-----------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by
Participants.......... 2,579,010
Unit Price............. $11.456694
ANNUITY CONTRACTS IN THE
ANNUITY PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by
Participants.......... --
Unit Price............. --
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NORTH AMERICAN
MONEY GOVERNMENT BALANCED
MARKET FUND SECURITIES FUND FUND UTILITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ --------------- ----------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $2,816,822 $127,649 $ 640,232 $ 897,736
EXPENSES:
Mortality and expense
undertakings.......... (801,162) (35,879) (348,416) (381,250)
------------ --------------- ----------- --------------
Net investment income
(loss)................ 2,015,660 91,770 291,816 516,486
------------ --------------- ----------- --------------
CAPITAL GAINS INCOME..... -- -- 133,324 19,659
------------ --------------- ----------- --------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- 146 (2,137) (9,700)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- (7,752) 2,434,571 1,346,860
------------ --------------- ----------- --------------
Net gain (loss) on
investments......... -- (7,606) 2,432,434 1,337,160
------------ --------------- ----------- --------------
Net increase in net
assets resulting
from operations..... $2,015,660 $ 84,164 $ 2,857,574 $1,873,305
------------ --------------- ----------- --------------
------------ --------------- ----------- --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
<PAGE>
<TABLE>
<CAPTION>
DIVIDEND VALUE ADDED CORE EQUITY AMERICAN GLOBAL DEVELOPING EMERGING
GROWTH FUND MARKET FUND FUND VALUE FUND EQUITY FUND GROWTH FUND MARKETS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 3,479,959 $ 715,389 $ 51,464 $ 435,307 $ 442,106 $ 51,682 $ 136,550
EXPENSES:
Mortality and expense
undertakings.......... (2,150,665) (607,510) (119,884) (1,027,967) (488,638) (516,793) (146,928)
------------ ------------ ----------- ----------- ----------- ----------- ------------
Net investment income
(loss)................ 1,329,294 107,879 (68,420) (592,660) (46,532) (465,111) (10,378)
------------ ------------ ----------- ----------- ----------- ----------- ------------
CAPITAL GAINS INCOME..... 171,162 22,962 23,882 343,751 38,052 39,359 --
------------ ------------ ----------- ----------- ----------- ----------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (18,644) (9,711) (19,763) (18,375) 3,232 (2,418) 2,901
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 27,743,616 6,274,483 1,628,841 8,398,356 2,977,064 2,663,616 1,086,487
------------ ------------ ----------- ----------- ----------- ----------- ------------
Net gain (loss) on
investments......... 27,724,972 6,264,772 1,609,078 8,379,981 2,980,296 2,661,198 1,089,388
------------ ------------ ----------- ----------- ----------- ----------- ------------
Net increase in net
assets resulting
from operations..... $ 29,225,428 $6,395,613 $ 1,564,540 $ 8,131,072 $ 2,971,816 $2,235,446 $1,079,010
------------ ------------ ----------- ----------- ----------- ----------- ------------
------------ ------------ ----------- ----------- ----------- ----------- ------------
<CAPTION>
DIVERSIFIED
INCOME FUND
SUB-ACCOUNT
-----------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $1,363,694
EXPENSES:
Mortality and expense
undertakings.......... (250,617)
-----------
Net investment income
(loss)................ 1,113,077
-----------
CAPITAL GAINS INCOME..... 19,526
-----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (14,054)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 258,517
-----------
Net gain (loss) on
investments......... 244,463
-----------
Net increase in net
assets resulting
from operations..... $1,377,066
-----------
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
<PAGE>
- --------------------------------------------------------------------------------
Separate Account Three
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 BALANCED
MARKET FUND SECURITIES FUND FUND UTILITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ --------------- ----------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 2,015,660 $ 91,770 $ 291,816 $ 516,486
Capital gains income... -- -- 133,324 19,659
Net realized gain
(loss) on security
transactions.......... -- 146 (2,137) (9,700)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- (7,752) 2,434,571 1,346,860
------------ --------------- ----------- --------------
Net increase in net
assets resulting from
operations............ 2,015,660 84,164 2,857,574 1,873,305
------------ --------------- ----------- --------------
UNIT TRANSACTIONS:
Purchases.............. 87,509,584 2,449,165 16,974,073 16,024,407
Net transfers.......... (44,621,372) 203,409 2,397,686 (75,687)
Surrenders............. (4,023,173) (41,335) (792,598) (938,935)
Net annuity
transactions.......... -- -- 11,286 --
------------ --------------- ----------- --------------
Net increase in net
assets resulting from
unit transactions..... 38,865,039 2,611,239 18,590,447 15,009,785
------------ --------------- ----------- --------------
Total increase in net
assets................ 40,880,699 2,695,403 21,448,021 16,883,090
NET ASSETS:
Beginning of period.... 40,662,904 1,132,271 14,834,932 17,201,374
------------ --------------- ----------- --------------
End of period.......... $ 81,543,603 $3,827,674 $36,282,953 $ 34,084,464
------------ --------------- ----------- --------------
------------ --------------- ----------- --------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
NORTH AMERICAN
MONEY GOVERNMENT BALANCED
MARKET FUND SECURITIES FUND FUND UTILITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ --------------- ----------- --------------
OPERATIONS:
Net investment
income................ $ 639,855 $ 14,980 $ 91,861 $ 98,105
Net realized gain
(loss) on security
transactions.......... -- 21 3,651 1,504
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 8,961 822,659 1,309,995
------------ --------------- ----------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 639,855 23,962 918,171 1,409,604
------------ --------------- ----------- --------------
UNIT TRANSACTIONS:
Purchases.............. 56,967,713 1,274,912 12,856,387 14,264,648
Net transfers.......... (17,794,789) (178,952) 697,577 1,290,090
Surrenders............. (283,062) (9,537) (332,221) (160,134)
------------ --------------- ----------- --------------
Net increase in net
assets resulting from
unit transactions..... 38,889,862 1,086,423 13,221,743 15,394,604
------------ --------------- ----------- --------------
Total increase in net
assets................ 39,529,717 1,110,385 14,139,914 16,804,208
NET ASSETS:
Beginning of period.... 1,133,187 21,886 695,018 397,166
------------ --------------- ----------- --------------
End of period.......... $ 40,662,904 $1,132,271 $14,834,932 $ 17,201,374
------------ --------------- ----------- --------------
------------ --------------- ----------- --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
6
<PAGE>
<TABLE>
<CAPTION>
DIVIDEND VALUE ADDED CORE EQUITY AMERICAN GLOBAL DEVELOPING EMERGING
GROWTH FUND MARKET FUND FUND VALUE FUND EQUITY FUND GROWTH FUND MARKETS FUND
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)................ $ 1,329,294 $ 107,879 $ (68,420) $ (592,660) $ (46,532) $ (465,111) $ (10,378)
Capital gains income... 171,162 22,962 23,882 343,751 38,052 39,359 --
Net realized gain
(loss) on security
transactions.......... (18,644) (9,711) (19,763) (18,375) 3,232 (2,418) 2,901
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 27,743,616 6,274,483 1,628,841 8,398,356 2,977,064 2,663,616 1,086,487
------------ ----------- ----------- ------------ ----------- ----------- ------------
Net increase in net
assets resulting from
operations............ 29,225,428 6,395,613 1,564,540 8,131,072 2,971,816 2,235,446 1,079,010
------------ ----------- ----------- ------------ ----------- ----------- ------------
UNIT TRANSACTIONS:
Purchases.............. 125,692,963 29,831,198 10,134,999 61,308,203 30,438,241 34,425,443 9,543,061
Net transfers.......... 16,517,648 8,058,083 1,785,696 8,928,691 5,422,580 5,020,629 1,898,163
Surrenders............. (5,468,368) (1,128,293) (166,416) (2,457,975) (1,262,709) (1,291,832) (429,144)
Net annuity
transactions.......... 39,927 23,528 1,831 23,364 2,008 16,307 11,920
------------ ----------- ----------- ------------ ----------- ----------- ------------
Net increase in net
assets resulting from
unit transactions..... 136,782,170 36,784,516 11,756,110 67,802,283 34,600,120 38,170,547 11,024,000
------------ ----------- ----------- ------------ ----------- ----------- ------------
Total increase in net
assets................ 166,007,598 43,180,129 13,320,650 75,933,355 37,571,936 40,405,993 12,103,010
NET ASSETS:
Beginning of period.... 74,337,892 22,143,463 3,541,458 35,881,545 15,901,619 16,298,708 3,824,344
------------ ----------- ----------- ------------ ----------- ----------- ------------
End of period.......... $240,345,490 $65,323,592 $16,862,108 $111,814,900 $53,473,555 $56,704,701 $ 15,927,354
------------ ----------- ----------- ------------ ----------- ----------- ------------
------------ ----------- ----------- ------------ ----------- ----------- ------------
DIVIDEND VALUE ADDED CORE EQUITY AMERICAN GLOBAL DEVELOPING EMERGING
GROWTH FUND MARKET FUND FUND VALUE FUND EQUITY FUND GROWTH FUND MARKETS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ----------- ------------ ----------- ----------- ------------
OPERATIONS:
Net investment
income................ $ 265,572 $ 66,441 $ 4,336 $ 7,105 $ 51,620 $ 13,093 $ 13,633
Net realized gain
(loss) on security
transactions.......... (16,328) 3,791 (1,489) 3,381 987 9,785 (1,257)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 6,252,310 1,125,137 97,871 2,960,702 562,561 1,376,027 (52,783)
------------ ----------- ----------- ------------ ----------- ----------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ 6,501,554 1,195,369 100,718 2,971,188 615,168 1,398,905 (40,407)
------------ ----------- ----------- ------------ ----------- ----------- ------------
UNIT TRANSACTIONS:
Purchases.............. 60,696,608 18,013,450 2,831,593 28,794,175 12,926,622 12,424,796 3,281,107
Net transfers.......... 6,571,343 2,886,893 428,776 3,710,153 1,525,052 2,386,662 285,332
Surrenders............. (708,897) (201,852) (34,978) (315,577) (260,038) (190,170) (48,675)
------------ ----------- ----------- ------------ ----------- ----------- ------------
Net increase in net
assets resulting from
unit transactions..... 66,559,054 20,698,491 3,225,391 32,188,751 14,191,636 14,621,288 3,517,764
------------ ----------- ----------- ------------ ----------- ----------- ------------
Total increase in net
assets................ 73,060,608 21,893,860 3,326,109 35,159,939 14,806,804 16,020,193 3,477,357
NET ASSETS:
Beginning of period.... 1,277,284 249,603 215,349 721,606 1,094,815 278,515 346,987
------------ ----------- ----------- ------------ ----------- ----------- ------------
End of period.......... $ 74,337,892 $22,143,463 $ 3,541,458 $ 35,881,545 $15,901,619 $16,298,708 $ 3,824,344
------------ ----------- ----------- ------------ ----------- ----------- ------------
------------ ----------- ----------- ------------ ----------- ----------- ------------
<CAPTION>
DIVERSIFIED
INCOME FUND
SUB-ACCOUNT
-----------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ 1,113,077
Capital gains income... 19,526
Net realized gain
(loss) on security
transactions.......... (14,054)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 258,517
-----------
Net increase in net
assets resulting from
operations............ 1,377,066
-----------
UNIT TRANSACTIONS:
Purchases.............. 16,710,309
Net transfers.......... 4,393,264
Surrenders............. (1,150,693)
Net annuity
transactions..........
-----------
Net increase in net
assets resulting from
unit transactions..... 19,952,880
-----------
Total increase in net
assets................ 21,329,946
NET ASSETS:
Beginning of period.... 8,216,979
-----------
End of period.......... $29,546,925
-----------
-----------
DIVERSIFIED
INCOME FUND
SUB-ACCOUNT
-----------
OPERATIONS:
Net investment
income................ $ 101,020
Net realized gain
(loss) on security
transactions.......... 1,092
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 119,949
-----------
Net increase (decrease)
in net assets
resulting from
operations............ 222,061
-----------
UNIT TRANSACTIONS:
Purchases.............. 7,211,967
Net transfers.......... 514,813
Surrenders............. (33,450)
-----------
Net increase in net
assets resulting from
unit transactions..... 7,693,330
-----------
Total increase in net
assets................ 7,915,391
NET ASSETS:
Beginning of period.... 301,588
-----------
End of period.......... $ 8,216,979
-----------
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
7
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION:
Separate Account Three (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. 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. Dividends 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 is valued at the closing net
asset value per share as determined by the appropriate Fund as of
December 31, 1996.
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 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, 1996, 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 misstatment. 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, 1996, 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 14, 1997
9
<PAGE>
- --------------------------------------------------------------------------------
Separate Account Three
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NORTH AMERICAN
MONEY GOVERNMENT BALANCED
MARKET FUND SECURITIES FUND FUND UTILITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ --------------- ----------- --------------
<S> <C> <C> <C> <C>
ASSETS
Investments in Dean
Witter Select
Dimensions Investment
Series:
Money Market Fund
Shares 5,458,394
Cost $5,458,394
Market Value......... $5,458,394 -- -- --
North American
Government Securities
Fund
Shares 33,923
Cost $ 341,482
Market Value......... -- $ 341,940 -- --
Balanced Fund
Shares 199,404
Cost $2,357,693
Market Value......... -- -- $2,606,214 --
Utilities Fund
Shares 123,502
Cost $1,485,678
Market Value......... -- -- -- $1,598,120
Dividend Growth Fund
Shares 1,082,118
Cost $15,618,347
Market Value......... -- -- -- --
Value Added Market Fund
Shares 577,467
Cost $7,444,538
Market Value......... -- -- -- --
Core Equity Fund
Shares 100,297
Cost $1,210,325
Market Value......... -- -- -- --
American Value Fund
Shares 592,561
Cost $8,174,225
Market Value......... -- -- -- --
Global Equity Fund
Shares 477,733
Cost $5,418,494
Market Value......... -- -- -- --
Developing Growth Fund
Shares 261,262
Cost $4,113,395
Market Value......... -- -- -- --
Emerging Markets Fund
Shares 119,630
Cost $1,265,074
Market Value......... -- -- -- --
Diversified Income Fund
Shares 248,355
Cost $2,532,085
Market Value......... -- -- -- --
Due from Hartford Life
Insurance Company..... -- -- 9,779 10,099
Receivable from fund
shares sold 217 13 -- --
------------ --------------- ----------- --------------
Total Assets........... 5,458,611 341,953 2,615,993 1,608,219
------------ --------------- ----------- --------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 206 14 -- --
Payable for fund shares
purchased............. -- -- 9,701 9,693
------------ --------------- ----------- --------------
Total Liabilities...... 206 14 9,701 9,693
------------ --------------- ----------- --------------
Net Assets (variable
annuity contract
liabilities).......... $5,458,405 $ 341,939 $2,606,292 $1,598,526
------------ --------------- ----------- --------------
------------ --------------- ----------- --------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL
SUB-ACCOUNTS:
Units Owned by
Participants.......... 500,725 31,542 191,384 117,820
Unit Price............. $10.901003 $10.840708 $13.618100 $13.567570
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
10
<PAGE>
<TABLE>
<CAPTION>
DIVIDEND VALUE ADDED CORE EQUITY AMERICAN GLOBAL DEVELOPING EMERGING
GROWTH FUND MARKET FUND FUND VALUE FUND EQUITY FUND GROWTH FUND MARKETS FUND
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 Investment
Series:
Money Market Fund
Shares 5,458,394
Cost $5,458,394
Market Value......... -- -- -- -- -- -- --
North American
Government Securities
Fund
Shares 33,923
Cost $ 341,482
Market Value......... -- -- -- -- -- -- --
Balanced Fund
Shares 199,404
Cost $2,357,693
Market Value......... -- -- -- -- -- -- --
Utilities Fund
Shares 123,502
Cost $1,485,678
Market Value......... -- -- -- -- -- -- --
Dividend Growth Fund
Shares 1,082,118
Cost $15,618,347
Market Value......... $17,800,839 -- -- -- -- -- --
Value Added Market Fund
Shares 577,467
Cost $7,444,538
Market Value......... -- $8,176,937 -- -- -- -- --
Core Equity Fund
Shares 100,297
Cost $1,210,325
Market Value......... -- -- $1,359,028 -- -- -- --
American Value Fund
Shares 592,561
Cost $8,174,225
Market Value......... -- -- -- $9,066,181 -- -- --
Global Equity Fund
Shares 477,733
Cost $5,418,494
Market Value......... -- -- -- -- $5,761,460 -- --
Developing Growth Fund
Shares 261,262
Cost $4,113,395
Market Value......... -- -- -- -- -- $4,410,095 --
Emerging Markets Fund
Shares 119,630
Cost $1,265,074
Market Value......... -- -- -- -- -- -- $1,342,250
Diversified Income Fund
Shares 248,355
Cost $2,532,085
Market Value......... -- -- -- -- -- -- --
Due from Hartford Life
Insurance Company..... 22,161 14,661 -- 13,127 12,097 43 --
Receivable from fund
shares sold -- -- 53 -- -- 168 51
------------ ----------- ----------- ----------- ----------- ----------- ------------
Total Assets........... 17,823,000 8,191,598 1,359,081 9,079,308 5,773,557 4,410,306 1,342,301
------------ ----------- ----------- ----------- ----------- ----------- ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- -- 72 -- -- -- 45
Payable for fund shares
purchased............. 21,391 14,683 -- 13,120 12,104 -- --
------------ ----------- ----------- ----------- ----------- ----------- ------------
Total Liabilities...... 21,391 14,683 72 13,120 12,104 -- 45
------------ ----------- ----------- ----------- ----------- ----------- ------------
Net Assets (variable
annuity contract
liabilities).......... $17,801,609 $8,176,915 $1,359,009 $9,066,188 $5,761,453 $4,410,306 $1,342,256
------------ ----------- ----------- ----------- ----------- ----------- ------------
------------ ----------- ----------- ----------- ----------- ----------- ------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL
SUB-ACCOUNTS:
Units Owned by
Participants.......... 1,052,045 566,987 99,381 591,191 469,754 261,844 117,536
Unit Price............. $ 16.920959 $14.421708 $13.674730 $15.335469 $12.264831 $16.843276 $11.419991
<CAPTION>
DIVERSIFIED
INCOME FUND
SUB-ACCOUNT
-----------
<S> <C>
ASSETS
Investments in Dean
Witter Select
Dimensions Investment
Series:
Money Market Fund
Shares
Cost
Market Value......... --
North American
Government Securities
Fund
Shares
Cost
Market Value......... --
Balanced Fund
Shares
Cost
Market Value......... --
Utilities Fund
Shares
Cost
Market Value......... --
Dividend Growth Fund
Shares
Cost
Market Value......... --
Value Added Market Fund
Shares
Cost
Market Value......... --
Core Equity Fund
Shares
Cost
Market Value......... --
American Value Fund
Shares
Cost
Market Value......... --
Global Equity Fund
Shares
Cost
Market Value......... --
Developing Growth Fund
Shares
Cost
Market Value......... --
Emerging Markets Fund
Shares
Cost
Market Value......... --
Diversified Income Fund
Shares
Cost
Market Value......... $2,563,018
Due from Hartford Life
Insurance Company..... --
Receivable from fund
shares sold 98
-----------
Total Assets........... 2,563,116
-----------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 100
Payable for fund shares
purchased............. --
-----------
Total Liabilities...... 100
-----------
Net Assets (variable
annuity contract
liabilities).......... $2,563,016
-----------
-----------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL
SUB-ACCOUNTS:
Units Owned by
Participants.......... 223,713
Unit Price............. $11.456694
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
11
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NORTH AMERICAN
MONEY GOVERNMENT BALANCED
MARKET FUND SECURITIES FUND FUND UTILITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ --------------- ----------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $139,163 $11,760 $ 45,132 $ 38,446
EXPENSES:
Mortality and expense
undertakings.......... (39,546) (3,249) (24,240) (16,492)
------------ ------- ----------- --------------
Net investment income
(loss)................ 99,617 8,511 20,892 21,954
------------ ------- ----------- --------------
CAPITAL GAINS INCOME..... -- -- 8,328 894
------------ ------- ----------- --------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- 335 6,424 (1,428)
Net unrealized
appreciation of
investments during the
period................ -- 60 165,616 59,442
------------ ------- ----------- --------------
Net gain (loss) on
investments......... -- 395 172,040 58,014
------------ ------- ----------- --------------
Net increase in net
assets resulting
from operations..... $ 99,617 $ 8,906 $201,260 $ 80,862
------------ ------- ----------- --------------
------------ ------- ----------- --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
12
<PAGE>
<TABLE>
<CAPTION>
DIVIDEND VALUE ADDED CORE EQUITY AMERICAN GLOBAL DEVELOPING EMERGING
GROWTH FUND MARKET FUND FUND VALUE FUND EQUITY FUND GROWTH FUND MARKETS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 220,469 $ 63,456 $ 4,345 $ 30,554 $ 44,739 $ 3,259 $ 10,801
EXPENSES:
Mortality and expense
undertakings.......... (137,580) (55,844) (10,135) (75,719) (50,495) (37,248) (12,048)
------------ ------------ ----------- ----------- ----------- ----------- ------------
Net investment income
(loss)................ 82,889 7,612 (5,790) (45,165) (5,756) (33,989) (1,247)
------------ ------------ ----------- ----------- ----------- ----------- ------------
CAPITAL GAINS INCOME..... 10,163 1,620 1,743 23,844 3,905 2,707 --
------------ ------------ ----------- ----------- ----------- ----------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (1,335) 3,162 519 179 932 3,963 (27)
Net unrealized
appreciation of
investments during the
period................ 1,770,825 638,574 144,463 660,479 304,832 196,773 77,164
------------ ------------ ----------- ----------- ----------- ----------- ------------
Net gain (loss) on
investments......... 1,769,490 641,736 144,982 660,658 305,764 200,736 77,137
------------ ------------ ----------- ----------- ----------- ----------- ------------
Net increase in net
assets resulting
from operations..... $1,862,542 $650,968 $140,935 $639,337 $303,913 $169,454 $ 75,890
------------ ------------ ----------- ----------- ----------- ----------- ------------
------------ ------------ ----------- ----------- ----------- ----------- ------------
<CAPTION>
DIVERSIFIED
INCOME FUND
SUB-ACCOUNT
-----------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $103,004
EXPENSES:
Mortality and expense
undertakings.......... (19,211)
-----------
Net investment income
(loss)................ 83,793
-----------
CAPITAL GAINS INCOME..... 1,078
-----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 101
Net unrealized
appreciation of
investments during the
period................ 21,655
-----------
Net gain (loss) on
investments......... 21,756
-----------
Net increase in net
assets resulting
from operations..... $106,627
-----------
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
13
<PAGE>
- --------------------------------------------------------------------------------
Separate Account Three
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NORTH AMERICAN
MONEY GOVERNMENT BALANCED
MARKET FUND SECURITIES FUND FUND UTILITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ --------------- ----------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 99,617 $ 8,511 $ 20,892 $ 21,954
Capital gains income... -- -- 8,328 894
Net realized gain
(loss) on security
transactions.......... -- 335 6,424 (1,428)
Net unrealized
appreciation of
investments during the
period................ -- 60 165,616 59,442
------------ --------------- ----------- --------------
Net increase in net
assets resulting from
operations............ 99,617 8,906 201,260 80,862
------------ --------------- ----------- --------------
UNIT TRANSACTIONS:
Purchases.............. 6,948,541 205,518 1,550,548 896,723
Net transfers.......... (2,722,056) 173,663 (295,995) 128,215
Surrenders............. (186,897) (93,829) (203,150) (137,390)
------------ --------------- ----------- --------------
Net increase in net
assets resulting from
unit transactions..... 4,039,588 285,352 1,051,403 887,548
------------ --------------- ----------- --------------
Total increase in net
assets................ 4,139,205 294,258 1,252,663 968,410
NET ASSETS:
Beginning of period.... 1,319,200 47,681 1,353,629 630,116
------------ --------------- ----------- --------------
End of period.......... $ 5,458,405 $341,939 $ 2,606,292 $1,598,526
------------ --------------- ----------- --------------
------------ --------------- ----------- --------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FROM INCEPTION (FEBRUARY 15, 1995) TO DECEMBER 31, 1995
NORTH AMERICAN
MONEY GOVERNMENT BALANCED
MARKET FUND SECURITIES FUND FUND UTILITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ --------------- ----------- --------------
OPERATIONS:
Net investment
income................ $ 26,554 $ 1,090 $ 9,765 $ 3,983
Net realized gain
(loss) on security
transactions.......... -- 93 784 6
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 400 82,904 52,999
------------ --------------- ----------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 26,554 1,583 93,453 56,988
------------ --------------- ----------- --------------
UNIT TRANSACTIONS:
Purchases.............. 2,795,148 81,336 1,183,650 466,844
Net transfers.......... (1,478,107) (35,237) 169,596 118,572
Surrenders............. (24,395) (1) (93,070) (12,288)
------------ --------------- ----------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,292,646 46,098 1,260,176 573,128
------------ --------------- ----------- --------------
Total increase
(decrease) in net
assets................ 1,319,200 47,681 1,353,629 630,116
NET ASSETS:
Beginning of period.... -- -- -- --
------------ --------------- ----------- --------------
End of period.......... $ 1,319,200 $ 47,681 $ 1,353,629 $ 630,116
------------ --------------- ----------- --------------
------------ --------------- ----------- --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
14
<PAGE>
<TABLE>
<CAPTION>
DIVIDEND VALUE ADDED CORE EQUITY AMERICAN GLOBAL DEVELOPING EMERGING
GROWTH FUND MARKET FUND FUND VALUE FUND EQUITY FUND GROWTH FUND MARKETS FUND
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)................ $ 82,889 $ 7,612 $ (5,790) $ (45,165) $ (5,756) $ (33,989) $ (1,247)
Capital gains income... 10,163 1,620 1,743 23,844 3,905 2,707 --
Net realized gain
(loss) on security
transactions.......... (1,335) 3,162 519 179 932 3,963 (27)
Net unrealized
appreciation of
investments during the
period................ 1,770,825 638,574 144,463 660,479 304,832 196,773 77,164
------------- ----------- ----------- ----------- ----------- ----------- ------------
Net increase in net
assets resulting from
operations............ 1,862,542 650,968 140,935 639,337 303,913 169,454 75,890
------------- ----------- ----------- ----------- ----------- ----------- ------------
UNIT TRANSACTIONS:
Purchases.............. 11,219,771 5,771,510 819,995 5,876,271 3,658,651 3,157,803 932,707
Net transfers.......... 1,189,188 118,782 109,486 669,473 948,105 274,161 206,356
Surrenders............. (665,008) (62,463) (12,084) (319,324) (211,305) (148,442) (38,428)
------------- ----------- ----------- ----------- ----------- ----------- ------------
Net increase in net
assets resulting from
unit transactions..... 11,743,951 5,827,829 917,397 6,226,420 4,395,451 3,283,522 1,100,635
------------- ----------- ----------- ----------- ----------- ----------- ------------
Total increase in net
assets................ 13,606,493 6,478,797 1,058,332 6,865,757 4,699,364 3,452,976 1,176,525
NET ASSETS:
Beginning of period.... 4,195,116 1,698,118 300,677 2,200,431 1,062,089 957,330 165,731
------------- ----------- ----------- ----------- ----------- ----------- ------------
End of period.......... $ 17,801,609 $8,176,915 $ 1,359,009 $ 9,066,188 $ 5,761,453 $4,410,306 $1,342,256
------------- ----------- ----------- ----------- ----------- ----------- ------------
------------- ----------- ----------- ----------- ----------- ----------- ------------
DIVIDEND VALUE ADDED CORE EQUITY AMERICAN GLOBAL DEVELOPING EMERGING
GROWTH FUND MARKET FUND FUND VALUE FUND EQUITY FUND GROWTH FUND MARKETS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ----------- ----------- ----------- ----------- ----------- ------------
OPERATIONS:
Net investment
income................ $ 18,589 $ 6,069 $ 53 $ 443 $ 2,734 $ 783 $ 220
Net realized gain
(loss) on security
transactions.......... (488) 51 (1) 309 181 107 (63)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 411,667 93,825 4,242 231,478 38,132 99,929 13
------------- ----------- ----------- ----------- ----------- ----------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ 429,768 99,945 4,294 232,230 41,047 100,819 170
------------- ----------- ----------- ----------- ----------- ----------- ------------
UNIT TRANSACTIONS:
Purchases.............. 3,514,160 1,375,238 272,740 1,678,882 802,365 786,803 123,549
Net transfers.......... 352,632 235,521 23,596 358,598 230,961 113,811 41,980
Surrenders............. (101,444) (12,586) 47 (69,279) (12,284) (44,103) 32
------------- ----------- ----------- ----------- ----------- ----------- ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 3,765,348 1,598,173 296,383 1,968,201 1,021,042 856,511 165,561
------------- ----------- ----------- ----------- ----------- ----------- ------------
Total increase
(decrease) in net
assets................ 4,195,116 1,698,118 300,677 2,200,431 1,062,089 957,330 165,731
NET ASSETS:
Beginning of period.... -- -- -- -- -- -- --
------------- ----------- ----------- ----------- ----------- ----------- ------------
End of period.......... $ 4,195,116 $1,698,118 $ 300,677 $ 2,200,431 $ 1,062,089 $ 957,330 $ 165,731
------------- ----------- ----------- ----------- ----------- ----------- ------------
------------- ----------- ----------- ----------- ----------- ----------- ------------
<CAPTION>
DIVERSIFIED
INCOME FUND
SUB-ACCOUNT
-----------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ 83,793
Capital gains income... 1,078
Net realized gain
(loss) on security
transactions.......... 101
Net unrealized
appreciation of
investments during the
period................ 21,655
-----------
Net increase in net
assets resulting from
operations............ 106,627
-----------
UNIT TRANSACTIONS:
Purchases.............. 1,616,132
Net transfers.......... 235,033
Surrenders............. (38,500)
-----------
Net increase in net
assets resulting from
unit transactions..... 1,812,665
-----------
Total increase in net
assets................ 1,919,292
NET ASSETS:
Beginning of period.... 643,724
-----------
End of period.......... $2,563,016
-----------
-----------
DIVERSIFIED
INCOME FUND
SUB-ACCOUNT
-----------
OPERATIONS:
Net investment
income................ $ 6,258
Net realized gain
(loss) on security
transactions.......... 35
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 9,279
-----------
Net increase (decrease)
in net assets
resulting from
operations............ 15,572
-----------
UNIT TRANSACTIONS:
Purchases.............. 587,649
Net transfers.......... 42,607
Surrenders............. (2,104)
-----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 628,152
-----------
Total increase
(decrease) in net
assets................ 643,724
NET ASSETS:
Beginning of period.... --
-----------
End of period.......... $ 643,724
-----------
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
15
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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. Dividends 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 is valued at the closing net
asset value per share as determined by the appropriate Fund as of
December 31, 1996.
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 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.
16
<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, 1996, and the related statement of operations for the year then
ended and statements of changes in net assets for the year ended December 31,
1996 and the period from inception, February 15, 1995, to December 31, 1995.
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 misstatment. 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, 1996, the results of its
operations for the year then ended and the changes in its net assets for the
year ended December 31, 1996 and the period from inception, February 15, 1995,
to December 31, 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 14, 1997
17
<PAGE>
HARTFORD LIFE INSURANCE COMPANIES
BULK RATE
P.O. BOX 2999
U.S. POSTAGE
HARTFORD, CT 06104-2999
PAID
PERMIT NO. 1
HARTFORD, CT
<TABLE>
<S> <C>
PRINCIPAL UNDERWRITER FOR THE SEPARATE ACCOUNTS:
HARTFORD EQUITY SALES COMPANY, INC. (HESCO) [LOGO] [LOGO]ITT HARTFORD LIFE
HARTFORD PLAZA AND ANNUITY
HARTFORD, CT 06115 INSURANCE COMPANY
HARTFORD SECURITIES DISTRIBUTION COMPANY, INC. (HSD) INDIVIDUAL ANNUITY OPERATIONS
HARTFORD PLAZA P.O. BOX 5085
HARTFORD, CT 06115 HARTFORD, CT 05102-5085
</TABLE>
