<PAGE> 1
Registration Statement No. 333-96521
811-07411
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre-Effective Amendment No. 1
to
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
A. Exact Name of Trust: THE TRAVELERS FUND UL II FOR VARIABLE LIFE INSURANCE
B. Name of Depositor: THE TRAVELERS LIFE AND ANNUITY COMPANY
C. Complete Address of Depositor's Principal Executive Offices:
One Tower Square,
Hartford, Connecticut 06183
D. Name and Complete Address of Agent for Service:
Ernest J. Wright, Secretary
The Travelers Life and Annuity Company
One Tower Square
Hartford, Connecticut 06183
It is proposed that this filing will become effective (check appropriate box):
__________ immediately upon filing pursuant to paragraph (b)
__________ on ___________ pursuant to paragraph (b)
__________ 60 days after filing pursuant to paragraph (a)(1)
__________ on __________ pursuant to paragraph (a)(1) of Rule 485.
If appropriate, check the following box:
__________ this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
E. Title of securities being registered:
Variable Life Insurance Policies.
Pursuant to Rule 24f-2 under the Investment Company Act of
1940 the Registrant hereby declares that an indefinite amount
of its Variable Survivorship Life Insurance Policies is being
registered under the Securities Act of 1933.
F. Approximate date of proposed public offering:
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As soon as practicable following the effectiveness of the
Registration Statement
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
________ Check the box if it is proposed that this filing will become
effective on __________________ at ___ pursuant to Rule 487. _____
<PAGE> 3
RECONCILIATION AND TIE BETWEEN
FORM N-8B-2 AND PROSPECTUS
<TABLE>
<CAPTION>
Item No. of
Form N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
1 Cover page
2 Cover page
3 Not applicable
4 The Company; Distribution
5 The Travelers Fund UL II for Variable Life Insurance
6 The Travelers Fund UL II for Variable Life Insurance
7 Not applicable
8 Not applicable
9 Legal Proceedings and Opinion
10 Prospectus Summary; The Company; The Travelers Fund UL for
Variable Life Insurance, The Investment Options; How the
Policy Works; Transfers of Cash Value; The Separate
Account and Valuation; Voting Rights; Disregard of Voting
Instructions; Dividends; Lapse and Reinstatement
11 Prospectus Summary; The Investment Options
12 Prospectus Summary; The Investment Options
13 Charges and Deductions; Distribution
14 How the Policy Works
15 Prospectus Summary; Applying Premium Payments
16 The Investment Options; Applying Premium Payments
17 Prospectus Summary; Right to Cancel; The Separate Account
and Valuation; Policy Loans; Exchange Rights
18 The Investment Options; Charges and Deductions; Federal Tax
Considerations; Dividends
19 Statements to Policy Owners
20 Not applicable
21 Policy Loans
22 Not applicable
23 Not applicable
24 Not applicable
25 The Company
26 Not applicable
27 The Company
28 The Company; Management
29 The Company
30 Not applicable
31 Not applicable
32 Not applicable
33 Not applicable
34 Not applicable
35 The Company; Distribution
36 Not applicable
37 Not applicable
38 Distribution
39 The Company; Distribution
40 Not applicable
41 The Company; Distribution
42 Not applicable
43 Not applicable
44 Applying Premium Payments; Accumulation Unit Values
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Item No. of
Form N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
45 Not applicable
46 The Separate Account and Valuation; Access to Cash Values
47 The Investment Options
48 Not applicable
49 Not applicable
50 Not applicable
51 Prospectus Summary; The Company; How the Policy Works; Death
Benefits and Lapse and Reinstatement
52 The Investment Options
53 Federal Tax Considerations
54 Not applicable
55 Not applicable
56 Not applicable
57 Not applicable
58 Not applicable
59 Financial Statements
</TABLE>
<PAGE> 5
PROSPECTUS
This Prospectus describes The Travelers Variable Life Accumulator, an individual
variable universal (flexible premium) life insurance Policy (the "Policy")
offered by The Travelers Life and Annuity Company (the "Company"). A Policy
Owner may choose the amount of life insurance coverage desired with a minimum
Stated Amount of $50,000. The premium payment may be allocated by the Policy
Owner to one or more of the variable funding options (the "Investment Options").
During the Policy's Right to Cancel Period, the Applicant may return the Policy
to the Company for a refund. The Right to Cancel Period expires on the latest of
ten days after you receive the Policy, ten days after we mail or deliver to you
a written Notice of Right to Cancel, or 45 days after the Applicant signs the
application for insurance (or later if state laws requires).
There is no guaranteed minimum Cash Value for a Policy. The Cash Value of the
Policy will vary to reflect the investment performance of the Investment Options
to which you have directed your premium payments. You bear the investment risk
under the policy. The Cash Value is reduced by the various fees and charges
assessed under the Policy, as described in this Prospectus. The Policy will
remain in effect for as long as the Cash Surrender Value can pay the monthly
Policy charges (subject to the Grace Period provision), or for a longer period
as may be provided under the Lapse Protection Guarantee Rider.
We offer two death benefits under the Policy -- the "Level Option" and the
"Variable Option." Under either option, the death benefit will never be less
than the Amount Insured (less any outstanding Policy loans or Monthly Deduction
Amounts due and unpaid). You choose one at the time you apply for the Policy,
however you may change the death benefit option, subject to certain conditions.
This Policy may be or become a modified endowment Policy under federal tax law.
If so, any partial withdrawal, Policy surrender or loan may result in adverse
tax consequences or penalties.
REPLACING EXISTING INSURANCE WITH THIS POLICY MAY NOT BE TO YOUR ADVANTAGE.
EACH OF THE INVESTMENT OPTION PROSPECTUSES ARE INCLUDED WITH THE PACKAGE
CONTAINING THIS PROSPECTUS. ALL PROSPECTUSES SHOULD BE READ AND RETAINED FOR
FUTURE REFERENCE.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
VARIABLE LIFE INSURANCE POLICIES ARE NOT DEPOSITS OF ANY BANK AND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY OTHER
GOVERNMENT AGENCY.
THE DATE OF THIS PROSPECTUS IS JUNE 2, 2000.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
Glossary of Special Terms............. 3
Prospectus Summary.................... 5
General Description................... 10
How the Policy Works.................. 10
Beneficiary......................... 10
Applying Premium Payments........... 10
The Investment Options................ 11
Policy Benefits and Rights............ 14
Transfers of Cash Value............. 14
Telephone Transfers................. 14
Automated Transfers................. 14
Dollar-Cost Averaging............ 14
Portfolio Rebalancing............ 15
Lapse and Reinstatement............. 15
Additional Insurance Benefits
(Riders)......................... 15
Lapse Protection Guarantee Rider.... 15
Exchange Rights..................... 16
Right to Cancel..................... 16
Access to Cash Values................. 16
Policy Loans........................ 16
Cash Value and Cash Surrender
Value............................ 17
Death Benefit......................... 18
Payment of Proceeds.............. 19
Payment Options.................. 19
Maturity Benefits..................... 20
Coverage Extension Rider............ 20
Maturity Extension Rider............ 20
Charges and Deductions................ 21
General............................. 21
Charges Against Premium............. 21
Front-End Sales Charge........... 21
State Premium Tax Charge......... 21
DAC Charge....................... 21
Monthly Deduction Amount............ 22
Cost of Insurance Charge......... 22
Administrative Expense Charge.... 22
Charges for Supplemental Benefit
Provisions..................... 22
Charges Against the Separate
Account.......................... 22
Mortality and Expense Risk
Charge......................... 22
Underlying Fund Fees................ 22
Surrender Charges................... 23
Transfer Charge..................... 23
Reduction or Elimination of
Charges.......................... 23
The Separate Account and Valuation.... 23
The Travelers Fund UL II for
Variable Life Insurance (Fund UL
II).............................. 23
How the Cash Value Varies........... 24
Accumulation Unit Value............. 24
Net Investment Factor............... 24
Changes to the Policy................. 25
General............................. 25
Changes in Stated Amount............ 25
Changes in Death Benefit Option..... 25
Additional Policy Provisions.......... 26
Assignment.......................... 26
Limit on Right to Contest & Suicide
Exclusion........................ 26
Misstatement as to Sex and Age...... 26
Voting Rights....................... 26
Other Matters......................... 27
Statements to Policy Owners......... 27
Suspension of Valuation............. 27
Dividends........................... 27
Mixed and Shared Funding............ 27
Distribution........................ 27
Legal Proceedings and Opinion....... 28
Experts............................. 28
Federal Tax Considerations............ 28
General............................. 28
Tax Status of the Policy............ 28
Definition of Life Insurance..... 28
Diversification.................. 29
Investor Control................. 29
Tax Treatment of Policy Benefits.... 30
In General....................... 30
Modified Endowment Contracts..... 30
Exchanges........................ 31
Aggregation of Modified Endowment
Contracts...................... 31
Policies which are not Modified
Endowment Contracts............ 31
Treatment of Loan Interest....... 31
The Company's Income Taxes....... 31
The Company........................... 32
IMSA................................ 32
Management............................ 33
Directors of The Travelers Life and
Annuity Company.................. 33
Senior Officers of The Travelers
Life and Annuity Company......... 34
Example of Policy Charges............. 34
Illustrations......................... 35
Performance Information............... 38
Appendix A............................ A-1
Financial Statements of the Separate
Account
Financial Statements of the Company
</TABLE>
2
<PAGE> 7
GLOSSARY OF SPECIAL TERMS
- --------------------------------------------------------------------------------
The following terms are used throughout the Prospectus, and have the indicated
meanings:
ACCUMULATION UNIT -- a standard of measurement used to calculate the values
allocated to the Investment Options.
BENEFICIARY(IES) -- the person(s) named to receive the benefits of this Policy
at the Insured's death.
CASH SURRENDER VALUE -- the Cash Value less any outstanding Policy loan and
surrender charges.
CASH VALUE -- the current value of Accumulation Units credited to each of the
Investment Options available under the Policy, plus the value of the Loan
Account.
COMPANY'S HOME OFFICE -- the principal executive offices of The Travelers Life
and Annuity Company located at One Tower Square, Hartford, Connecticut 06183.
DEDUCTION DATE -- the day in each Policy Month on which the Monthly Deduction
Amount is deducted from the Policy's Cash Value.
INSURED -- the person on whose life the Policy is issued.
INVESTMENT OPTIONS -- the segments of the Separate Account or Portfolio to which
you may allocate premiums or Cash Value under Fund UL II.
ISSUE DATE -- the date on which the Policy is issued by the Company for delivery
to the Policy Owner.
LAPSE PROTECTION GUARANTEE RIDER -- a rider which provides that the Policy will
not lapse if a required amount of premium is paid. (Not available in all
states.)
LAPSE PROTECTION PREMIUM -- an amount shown on the Policy Summary page, the
cumulative amount of which must be paid in order for the Lapse Protection
Guarantee to be in effect.
LOAN ACCOUNT -- an account in the Company's general account to which we transfer
the amount of any Policy loan, and to which we credit and charge a fixed rate of
interest.
MATURITY DATE -- The anniversary of the Policy Date on which the Insured is age
100.
MINIMUM AMOUNT INSURED -- the amount of Death Benefit required to qualify this
Policy as life insurance under federal tax law.
MONTHLY DEDUCTION AMOUNT -- the amount of charges deducted from the Policy's
Cash Value which includes cost of insurance charges, administrative charges, and
any charges for supplemental benefits.
NET AMOUNT AT RISK -- an amount equal to the Death Benefit minus the Cash Value.
NET PREMIUM -- the amount of each premium payment applied to purchase
Accumulation Units under the Policy, less the deduction of sales expense
charges, premium tax charges, and Deferred Acquisition Cost Charge (DAC).
PLANNED PREMIUM -- the amount of premium which the Policy Owner chooses to pay
to the Company on a scheduled basis, and for which the Company will bill the
Policy Owner, either annually, semiannually or through automatic monthly
checking account deductions.
POLICY DATE -- the date on which the Policy, benefits and provisions of the
Policy become effective.
POLICY MONTH -- monthly periods computed from the Policy Date.
POLICY OWNER (YOU, YOUR OR OWNER) -- the person having rights to benefits under
the Policy during the lifetime of the Insured; the Policy Owner may or may not
be the Insured.
POLICY YEARS -- annual periods computed from the Policy Date.
SEPARATE ACCOUNT -- assets set aside by The Travelers Life and Annuity Company,
for the class of policies and certain other policies, the investment experience
of which is kept separate from that of other
3
<PAGE> 8
assets of The Travelers Life and Annuity Company; for example, The Travelers
Fund UL II for Variable Life Insurance.
STATED AMOUNT -- the amount originally selected by the Policy Owner used to
determine the Death Benefit, or as may be increased or decreased as described in
this Prospectus.
UNDERLYING FUND -- the underlying mutual fund(s) that correspond to each
Investment Option. Each Investment Option invests directly in a Fund.
VALUATION DATE -- a day on which the Separate Account is valued. A Valuation
Date is any day on which the New York Stock Exchange is open for trading. The
value of Accumulation Units will be determined as of 4:00 pm Eastern time.
VALUATION PERIOD -- the period between the close of business on successive
Valuation Dates.
4
<PAGE> 9
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
WHAT IS FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE?
The Flexible Premium Variable Life Insurance Policy is designed to provide
insurance protection on the life of the Insured and to build Cash Value. Like
other life insurance it provides an income tax free death benefit that is
payable to the Beneficiary upon the Insured's death. Unlike traditional,
fixed-premium life insurance, the Policy allows you, as the owner, to allocate
your premium, or transfer Cash Value to various Investment Options. These
Investment Options include equity, bond, money market and other types of
portfolios. Your Cash Value may increase or decrease daily, depending on
investment return. There is no minimum amount guaranteed as it would be in a
traditional life insurance policy.
INVESTMENT OPTIONS: You have the ability to choose from a wide variety of
well-known Investment Options. These professionally managed stock, bond and
money market funding options cover a broad spectrum of investment objectives and
risk tolerance. Currently, the following Investment Options (subject to state
availability) are available under Fund UL II: (Funds offered may change)
<TABLE>
<S> <C>
Capital Appreciation Fund GREENWICH STREET SERIES FUND:
Dreyfus Stock Index Fund Equity Index Portfolio -- Class I
Managed Assets Trust Total Return Portfolio
Money Market Portfolio
JANUS ASPEN SERIES:
DEUTSCHE ASSET MANAGEMENT VIT TRUST: Aggressive Growth Portfolio -- Service Shares
EAFE Equity Index Fund Global Technology Portfolio -- Service Shares
Small Cap Index Fund Worldwide Growth Portfolio -- Service Shares
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND: TRAVELERS SERIES FUND, INC.:
Equity Income Portfolio -- Initial Class AIM Capital Appreciation Portfolio
Growth Portfolio -- Initial Class Alliance Growth Portfolio
High Income Portfolio -- Initial Class MFS Total Return Portfolio
Putnam Diversified Income Portfolio
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND Smith Barney High Income Portfolio
II: Smith Barney Large Capitalization Growth
Asset Manager Portfolio -- Initial Class Portfolio
Smith Barney Large Cap Value Portfolio
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST: TRAVELERS SERIES TRUST:
Templeton Growth Securities Fund -- Class I U.S. Government Securities Portfolio
Zero Coupon Bond Portfolio 2005
</TABLE>
Additional Investment Options may be added from time to time. For more
information see "The Investment Options." Refer to each Fund's prospectus for a
complete description of the investment objectives, restrictions and other
material information.
PREMIUMS: When applying for your Policy, you state how much you intend to pay,
and whether you will pay annually, semiannually or monthly via checking account
deductions. You may also make unscheduled premium payments in any amount. No
premium payments will be accepted if receipt of such premiums would disqualify
the Policy as life insurance under applicable federal tax laws.
You indicate on your application what percentage of each Net Premium you would
like allocated to the Investment Options. You may change your allocations by
writing to the Company or by calling 1-800-334-4298.
During the underwriting period, any premium paid will be held in a non-interest
bearing account. After the Policy Date, your Net Premium will be distributed to
each Investment Option in the percentages indicated on your application (subject
to state variations).
RIGHT TO EXAMINE POLICY: You may return your Policy for any reason and receive
either (depending on state law) a refund of premiums paid less any loans, or a
refund of cash value less
5
<PAGE> 10
any loans plus any charges that were deducted by mailing us the Policy and a
written request for cancellation within a specified period.
DEATH BENEFITS: At time of application, you select a death benefit option.
Under certain conditions you may be able to change the death benefit option at a
later date. The options available are:
- LEVEL OPTION (OPTION 1): the death benefit will be equal to the greater
of the Stated Amount or the Minimum Amount Insured.
- VARIABLE OPTION (OPTION 2): the death benefit will be equal to the
greater of the Stated Amount plus the Cash Value or the Minimum Amount
Insured.
POLICY VALUES: As with other types of non-term insurance policies, this Policy
will accumulate a Cash Value. The Cash Value of the Policy will increase or
decrease to reflect the investment experience of the Investment Options. Monthly
charges and any partial surrenders taken will also decrease the Cash Value.
There is no minimum guaranteed Cash Value.
- ACCESS TO POLICY VALUES: You may borrow against your Policy's Cash
Surrender Value. The maximum loan amount allowable is 100% of the Cash
Value, less surrender penalties.
You may cancel all or a portion of your Policy while the Insured is living and
receive all or a portion of the Cash Surrender Value. Depending on the amount of
time the Policy has been in force, there may be a charge for the partial or full
surrender.
TRANSFERS OF POLICY VALUES: You may transfer all or a portion of your Cash
Value among the Investment Options. You may do this by writing to the Company or
calling 1-800-334-4298.
You can use automated transfers to take advantage of dollar cost
averaging -- investing a fixed amount at regular intervals. For example, you
might have a set amount transferred from a relatively conservative Investment
Option to a more aggressive one, or to several others.
LAPSE PROTECTION GUARANTEE RIDER: This Rider allows for your Policy to remain
in effect until the Insured's death. You are required to pay at least the
cumulative applicable Lapse Protection Premium displayed on your Policy Summary
page. Any loans or partial surrenders are deducted from premium paid to
determine if the Lapse Protection Guarantee is in effect.
GRACE PERIOD: If the Cash Surrender Value of your Policy becomes less than the
amount needed to pay the Monthly Deduction Amount, and the Lapse Protection
Guarantee Rider is not in effect, you will have 61 days to pay a premium that is
sufficient to cover the Monthly Deduction Amount. If the premium is not paid,
your Policy will lapse.
EXCHANGE RIGHTS: During the first two Policy Years, you can exchange this
Policy for one that provides benefits that do not vary with the investment
return of the Investment Options.
TAX CONSEQUENCES: Currently, the federal tax law excludes all Death Benefit
payments from the gross income of the Beneficiary. At any point in time, the
Policy may become a modified endowment contract ("MEC"). A MEC has an
income-first taxation of all loans, pledges, collateral assignments or partial
surrenders. A 10% penalty tax may be imposed on such income distributed before
the Policy Owner attains age 59 1/2. The Company has established safeguards for
monitoring whether a Policy may become a MEC.
CHARGES AND DEDUCTIONS: Your Policy is subject to the following charges, which
compensate the Company for administering and distributing the Policy, as well as
paying Policy benefits and assuming related risks. These charges are summarized
below, and explained in detail under "Charges and Deductions."
6
<PAGE> 11
POLICY CHARGES:
- SALES AND PREMIUM EXPENSE CHARGES -- A sales charge, a premium tax
charge, and a Deferred Acquisition Cost ("DAC") charge are applied to
each premium.
<TABLE>
<CAPTION>
TOTAL
PREMIUM
SALES PREMIUM EXPENSE
STATED AMOUNT CHARGE TAX DAC CHARGE
------------- ------ ------- ------- -------
<S> <C> <C> <C> <C>
$50,000-$4,999,999 2.5% 2.25% 1.25% 6.0%
$5,000,000+ 0 2.25% 1.25% 3.5%
</TABLE>
- MONTHLY DEDUCTION -- deductions taken from the value of your Policy each
month to cover cost of insurance charges, the monthly administrative
expense charges and charges for optional benefits.
- FULL SURRENDER CHARGE -- applies if you surrender your Policy for its
full Cash Value or the Policy lapses, during the first 10 years and for
10 years after requesting an increase in coverage. The surrender charge
is a per thousand of stated amount charge.
- PARTIAL SURRENDER CHARGE -- applies if you surrender part of the Cash
Value of your Policy. After the first policy year, there is no charge on
partial surrenders up to the greater of 10% of premium or 10% of Cash
Value.
ASSET-BASED CHARGES:
- MORTALITY AND EXPENSE RISK CHARGE -- applies to the assets of the
Investment Options on a daily basis which equals an annual rate of .65%
for the first 15 years and .20% thereafter.
- UNDERLYING FUND FEES -- the separate account purchases shares of the
Underlying Funds on a net asset value basis. The shares purchased already
reflect the deduction of investment advisory fees and other expenses. The
fees are shown in the table below.
7
<PAGE> 12
2000 FUND EXPENSES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MANAGEMENT OTHER TOTAL
FEE EXPENSES EXPENSES
(AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE
FUND NAME REIMBURSEMENT) 12B-1 FEES REIMBURSEMENT) REIMBURSEMENT)
Capital Appreciation Fund (Janus) 0.75% 0.08% 0.83%
Dreyfus Stock Index Fund 0.25% 0.01% 0.26%
Managed Assets Trust 0.50% 0.10% 0.60%
Money Market(1) 0.32% 0.08% 0.40%
DEUTCHE ASSET MANAGEMENT VIT TRUST:
EAFE Equity Index Fund(2) 0.26% 0.39% 0.65%
Small Cap Index Fund(2) 0.13% 0.32% 0.45%
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND:
Equity Income Portfolio -- Initial Class(4) 0.48% 0.08% 0.57%
Growth Portfolio -- Initial Class(4) 0.58% 0.07% 0.66%
High Income Portfolio -- Initial Class 0.58% 0.11% 0.69%
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND
II:
Asset Manager Portfolio -- Initial Class(4) 0.53% 0.09% 0.63%
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST:
Templeton Growth Securities Fund(5) 0.83% 0.05% 0.88%
GREENWICH STREET SERIES FUND:
Equity Index Portfolio(7) 0.21% 0.07% 0.28%
Total Return Portfolio(8) 0.75% 0.04% 0.79%
JANUS ASPEN SERIES FUND:
Aggressive Growth Portfolio -- Service
Shares(3) 0.65% 0.25% 0.02% 0.92%
Global Technology Portfolio -- Service
Shares(3) 0.65% 0.25% 0.13% 1.03%
Worldwide Growth
Portfolio --Service Shares(3) 0.65% 0.25% 0.05% 0.95%
TRAVELERS SERIES FUND, INC.:
AIM Capital Appreciation Portfolio(6) 0.80% 0.04% 0.84%
Alliance Growth Portfolio(6) 0.80% 0.02% 0.82%
MFS Total Return Portfolio(6) 0.80% 0.04% 0.84%
Putnam Diversified Income Portfolio(6) 0.75% 0.08% 0.83%
Smith Barney High Income Portfolio(6) 0.60% 0.06% 0.66%
Smith Barney Large Cap Value(6) 0.65% 0.02% 0.67%
Smith Barney Large Cap Growth(6) 0.75% 0.11% 0.86%
TRAVELERS SERIES TRUST:
Travelers U.S. Govt Securities 0.32% 0.16% 0.48%
Zero Coupon Bond Portfolio 2005 0.10% 0.05% 0.15%
</TABLE>
(1) Other Expenses have been restated to reflect the current expense
reimbursement arrangement with Travelers Insurance Company. Travelers has
agreed to reimburse the Portfolio for the amount by which its aggregate
expenses (including the management fee, but excluding brokerage commissions,
interest charges and taxes) exceeds 0.40%. Without such arrangement, Total
Expenses would have been 0.50% for the Money Market Portfolio.
(2) These fees reflect a voluntary expense reimbursement arrangement whereby the
Adviser has agreed to reimburse the funds. Without such arrangement, the
Management Fee, Other Expenses and Total Expenses for the Deutsche VIT EAFE
Equity Index Fund and Small Cap Index Fund would have been 0.45%, 0.69%, and
1.14%, and 0.35%, 0.83%, and 1.18%, respectively. Effective April 2000, the
Trust's name was changed from BT Insurance Funds Trust to Deutsche Asset
Management VIT Funds.
(3) Expenses are based on the estimated expenses that the new Service Shares
Class of each Portfolio expects to incur in its initial fiscal year. All
expenses are shown without the effect of offset arrangements.
8
<PAGE> 13
(4) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain funds,
or FMR on behalf of certain funds, custodian, credits realized as a result
of uninvested cash balances were used to reduce a portion of each applicable
fund's expenses. With these reductions, the total operating expenses
presented in the table are 0.56% for Equity-Income Portfolio, 0.65% for
Growth Portfolio, and 0.62% for Asset Manager Portfolio.
(5) On 2/8/00, a merger and reorganization was approved to merge the assets of
Templeton Stock Fund into Templeton Global Growth Fund (which then changed
its name to Templeton Growth Securities Fund), effective 5/1/00. The above
table shows restated total expenses based upon the fees and assets of
Templeton Global Growth Fund as of 12/31/99, and not the assets of the
combined fund on 5/1/00. However, if the table reflected the combined
assets, the fund's expenses after 5/1/00 would be estimated as: Management
Fees 0.80%, Other Expenses 0.05%, and Total Annual Operating Expenses 0.85%.
The Fund's administration fee is paid indirectly through the management fee.
(6) Expenses are as of October 31, 1999 (the Fund's fiscal year end). There were
no fees waived or expenses reimbursed for these funds in 1999.
(7) The Portfolio Management Fee for Equity Index Portfolio includes 0.06% for
fund administration.
(8) The Portfolio Management Fee for the Appreciation Portfolio, the Total
Return, and the Diversified Strategic Income Portfolio includes 0.20% for
fund administration.
9
<PAGE> 14
GENERAL DESCRIPTION
- --------------------------------------------------------------------------------
This prospectus describes an individual flexible premium variable life insurance
Policy offered by The Travelers Life and Annuity Company ("Company"). The policy
offers:
- Flexible premium payments (you select the timing and amount of the
premium)
- A selection of investment options
- A choice of two death benefit options
- Loans and partial withdrawal privileges
- The ability to increase or decrease the Policy's face amount of insurance
- Additional benefits through the use of optional riders
This Policy is both an insurance product and a security. The Policy is first and
foremost a life insurance Policy with death benefits, cash values and other
features traditionally associated with life insurance. The Policy is a security
because the Cash Value and, under certain circumstances, the Amount Insured, and
Death Benefit may increase or decrease depending on the investment experience of
the Investment Options chosen.
THE APPLICATION. In order to become a policy owner, you must submit an
application to the Company. You must provide evidence of insurability. On the
application, you will also indicate:
- the amount of insurance desired (the "Stated Amount"); minimum of $50,000
- your choice of the two death benefit options
- the beneficiary(ies), and whether or not the beneficiary is irrevocable
- your choice of investment options.
Our underwriting staff will review the application, and, if approved, we will
issue the Policy.
HOW THE POLICY WORKS
- --------------------------------------------------------------------------------
You make premium payments and direct them to one or more of the available
investment options. The Policy's Cash Value will increase or decrease depending
on the performance of the investment options you select. In the case of death
benefit option 2, the Death Benefit will also vary based on the investment
options' performance.
BENEFICIARY
The Applicant names the Beneficiary in the application for the Policy. The
Policy Owner may change the Beneficiary (unless irrevocably named) during the
Insured's lifetime by sending a written request to the Company. If no
Beneficiary is living when the Insured dies, the Death Benefit will be paid to
the Policy Owner, if living; otherwise, the Death Benefit will be paid to the
Policy Owner's estate.
Your Policy becomes effective once our underwriting staff has approved the
application and once the first premium payment has been made. The Policy Date is
the date we use to determine all policy charges, for example, the deduction
dates, policy months, policy years. The Policy Date may be before or the same
date as the Issue Date (the date the policy was issued). During the underwriting
period, any premium paid will be held in a non-interest bearing account. Your
policy will stay in effect as long as the policy's cash surrender value can pay
the policy's monthly charges.
APPLYING PREMIUM PAYMENTS
We apply the first premium on the later of the Policy Date or the date we
receive it at our Home Office. During the Right to Cancel Period, we allocate
net premiums to the Investment Options selected by you (subject to state law).
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<PAGE> 15
The investment options are segments of the separate account. They correspond to
underlying funds with the same names. The available investment options are
listed below.
We credit your policy with accumulation units of the investment option(s) you
have selected. We calculate the number of accumulation units by dividing your
net premium payment by each investment option's accumulation unit value computed
after we receive your payment.
THE INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
You may allocate premium payments to one or more of the available Investment
Options. The Investment Options currently available under the Policy may be
added, withdrawn or substituted as permitted by applicable state or federal law.
We would notify you before making such a change. Please read carefully the
complete risk disclosure in each Investment Option's prospectus before
investing. For more detailed information on the investment advisers and their
services and fees, please refer to the prospectuses for the Investment Options.
In addition, Travelers has entered into agreements with either the investment
adviser or distributor of certain of the underlying funds in which the adviser
or distributor pays us a fee for providing administrative services, which fee
may vary. The fee is ordinarily based upon an annual percentage of the average
aggregate net amount invested in the underlying funds on behalf of the Separate
Account.
The Investment Options currently available under Fund UL II are as follows:
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
<S> <C> <C>
Capital Appreciation Fund Seeks growth of capital through the Travelers Asset Management
use of common stocks. Income is not an International Company LLC
objective. The Fund invests ("TAMIC")
principally in common stocks of small Subadviser: Janus Capital
to large companies which are expected Corp.
to experience wide fluctuations in
price in both rising and declining
markets.
Dreyfus Stock Index Fund Seeks to provide investment results Mellon Equity
that correspond to the price and yield
performance of publicly traded common
stocks in the aggregate, as
represented by the Standard & Poor's
500 Composite Stock Price Index.
Managed Assets Trust Seeks high total investment return TAMIC
through a fully managed investment Subadviser: Travelers
policy in a portfolio of equity, debt Investment Management Company
and convertible securities. ("TIMCO")
Money Market Portfolio Seeks high current income from short- TAMIC
term money market instruments while
preserving capital and maintaining a
high degree of liquidity.
DEUTSCHE ASSET
MANAGEMENT VIT FUNDS
EAFE Equity Index Fund Seeks to replicate, before deduction Bankers Trust Global
of expenses, the total return Investment Management
performance of the EAFE index.
Small Cap Index Fund Seeks to replicate, before deduction Bankers Trust Global
of expenses, the total return Investment Management
performance of the Russell 2000 index.
FIDELITY'S VARIABLE INSURANCE
PRODUCTS FUND
Equity-Income Seeks reasonable income by investing Fidelity Management &
Portfolio -- Initial primarily in income-producing equity Research Company ("FMR")
Class securities; in choosing these
securities, the portfolio manager will
also consider the potential for
capital appreciation.
</TABLE>
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<PAGE> 16
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
<S> <C> <C>
Growth Seeks capital appreciation by purchas- FMR
Portfolio -- Initial ing common stocks of well-known,
Class established companies, and small
emerging growth companies, although
its investments are not restricted to
any one type of security. Capital
appreciation may also be found in
other types of securities, including
bonds and preferred stocks.
High Income Seeks to obtain a high level of FMR
Portfolio -- Initial current income by investing primarily
Class in high yielding, lower-rated,
fixed-income securities, while also
considering growth of capital.
FIDELITY'S VARIABLE INSURANCE
PRODUCTS FUND II
Asset Manager Seeks high total return with reduced FMR
Portfolio -- Initial risk over the long-term by allocating
Class its assets among stocks, bonds and
short-term fixed-income instruments.
GREENWICH STREET
SERIES FUND
Equity Index Portfolio Seeks to replicate, before deduction TIMCO
Class I of expenses, the total return
performance of the S&P 500 index.
Total Return Portfolio An equity portfolio that seeks to pro- SSB Citi Funds Management LLC
vide total return, consisting of ("SSB Citi")
long-term capital appreciation and
income. The Portfolio will invest
primarily in a diversified portfolio
of dividend-paying common stocks.
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST
Templeton Growth Seeks high current income by investing Templeton Global Advisors
Securities Fund (Class 1) primarily in debt securities of compa- Limited
nies, governments and government
agencies of various nations throughout
the world.
JANUS ASPEN SERVICE SHARES
Worldwide Growth Seeks long-term growth of capital in a Janus Capital Corporation
Portfolio manner consistent with the (Janus)
preservation of capital. It pursues
its objective by investing primarily
in common stocks of companies of any
size throughout the world. The
Portfolio normally invests in issuers
from at least five different coun-
tries, including the United States.
The Portfolio may at times invest in
fewer than five countries or even a
single country.
</TABLE>
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<PAGE> 17
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
<S> <C> <C>
Global Technology Seeks long-term growth of capital. It Janus
Portfolio -- Service pursues its objective by investing
Shares primarily in equity securities of US
and foreign companies selected for
their growth potential. Normally, it
invests at least 65% of its total
assets in securities of companies that
the portfolio manager believes will
benefit significantly from advances or
improvements in technology.
Aggressive Growth Seeks long-term capital growth by Janus
Portfolio -- Service investing primarily in common stocks
Shares selected for their growth potential,
normally investing at least 50% in the
equity assets of medium-sized
companies.
TRAVELERS SERIES FUND, INC.
AIM Capital Appreciation Seeks capital appreciation by Travelers Investment Adviser
Portfolio investing principally in common stock, ("TIA")
with emphasis on medium-sized and Subadviser: AIM Capital
smaller emerging growth companies. Management Inc.
Alliance Growth Portfolio Seeks long-term growth of capital by TIA
investing predominantly in equity Subadviser: Alliance Capital
securities of companies with a Management L.P.
favorable outlook for earnings and
whose rate of growth is expected to
exceed that of the U.S. economy over
time. Current income is only an
incidental consideration.
MFS Total Return Seeks to obtain above-average income TIA
Portfolio (compared to a portfolio entirely Subadviser: MFS
invested in equity securities)
consistent with the prudent employment
of capital. Generally, at least 40% of
the Portfolio's assets will be
invested in equity securities.
Putnam Diversified Income Seeks high current income consistent TIA
Portfolio with preservation of capital by Subadviser: Putnam Investment
allocating its investments among the Management, Inc.
following three sectors of the
fixed-income securities markets, a
U.S. Government Sector, a High Yield
Sector and an International Sector.
Smith Barney High Income Seeks high current income. Capital SSB Citi
Portfolio appreciation is a secondary objective.
The Portfolio will invest at least 65%
of its assets in high-yielding
corporate debt obligations and
preferred stock.
Smith Barney Large Cap Seeks current income and long-term SSB Citi
Value Portfolio growth of income and capital by
investing primarily, but not
exclusively, in common stocks.
Smith Barney Large Cap Seeks long-term growth of capital by SSB Citi
Growth Portfolio investing primarily in equity
securities of companies with large
market capitalization.
</TABLE>
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<PAGE> 18
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
<S> <C> <C>
TRAVELERS SERIES TRUST
U.S. Government Seeks to select investments from the TAMIC
Securities Portfolio point of view of an investor concerned
primarily with highest credit quality,
current income and total return. The
assets of the U.S. Government Securi-
ties Portfolio will be invested in
direct obligations of the United
States, its agencies and
instrumentalities.
Zero Coupon Bond Fund Seeks to provide as high an investment TAMIC
Portfolio Series 2005) return as consistent with the
preservation of capital investing in
primarily zero coupon securities that
pay cash income but are acquired by
the Portfolio at substantial discounts
from their values at maturity. The
Zero Coupon Bond Fund Portfolios may
not be appropriate for Policy Owners
who do not plan to have their premiums
invested in shares of the Portfolios
for the long term or until maturity.
</TABLE>
POLICY BENEFITS AND RIGHTS
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TRANSFERS OF CASH VALUE
As long as the Policy remains in effect, you may make transfers of Cash Value
between Investment Options. We reserve the right to restrict the number of free
transfers to four times (twelve times in New York) in any Policy Year and to
charge $10 for each additional transfer; however, there is currently no charge
for transfers.
We calculate the number of Accumulation Units involved using the Accumulation
Unit Values we calculate at the end of the business day on which we receive the
transfer request.
TELEPHONE TRANSFERS
The Policy Owner may make the request in writing by mailing such request to the
Company at its Home Office, or by telephone (if an authorization form is on
file) by calling 1-800-334-4298. The Company will take reasonable steps to
ensure that telephone transfer requests are genuine. These steps may include
seeking proper authorization and identification prior to processing telephone
requests. Additionally, the Company will confirm telephone transfers. Any
failure to take such measures may result in the Company's liability for any
losses due to fraudulent telephone transfer requests.
AUTOMATED TRANSFERS
DOLLAR-COST AVERAGING
You may establish automated transfers of Policy Values on a monthly or quarterly
basis from any Investment Option(s) to any other Investment Option(s) through
written request or other method acceptable to the Company. You must have a
minimum of $5,000 in the fund from which amounts will be transferred out of to
enroll in the Dollar-Cost Averaging program. The minimum total automated
transfer amount is $100.
You may start or stop participation in the Dollar-Cost Averaging program at any
time, but you must give the Company at least 30 days' notice to change any
automated transfer instructions that are currently in place. Automated transfers
are subject to all of the other provisions and terms of the
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<PAGE> 19
Policy. The Company reserves the right to suspend or modify transfer privileges
at any time and to assess a processing fee for this service.
Before transferring any part of the Policy Value, Policy Owners should consider
the risks involved in switching between investments available under this Policy.
Dollar cost averaging requires regular investments regardless of fluctuating
price levels, and does not guarantee profits or prevent losses in a declining
market. Potential investors should consider their financial ability to continue
purchases through periods of low price levels.
PORTFOLIO REBALANCING
You may elect to have the Company periodically reallocate values in your policy
to match your original (or your latest) funding option allocation request.
LAPSE AND REINSTATEMENT
Except as provided below under "Lapse Protection Guarantee Rider", the Policy
will remain in effect until the Cash Surrender Value of the Policy can no longer
cover the Monthly Deduction Amount. If this happens we will notify you in
writing that if the amount shown in the notice is not paid within 61 days (the
"Grace Period"), the Policy may lapse. The amount shown will be enough to pay
the deduction amount due. The Policy will continue through the Grace Period, but
if no payment is received by us, it will terminate at the end of the Grace
Period. If the person Insured under the Policy dies during the Grace Period, the
Death Benefit payable will be reduced by the Monthly Deduction Amount due plus
the amount of any outstanding loan. (See "Death Benefit," below.)
If the Policy lapses, you may reinstate the Policy by paying the reinstatement
premium (and any applicable charges) shown in the Policy. You may request
reinstatement within three years of lapse (unless a different period is required
under applicable state law). Upon reinstatement, the Policy's Cash Value will be
equal to the amount provided by the Net Premium. In addition, the Company
reserves the right to require satisfactory evidence of insurability.
ADDITIONAL INSURANCE BENEFITS (RIDERS)
Subject to certain requirements, there are ten riders which may be added to your
base Policy, including the primary insured term, spouse term, child term,
accidental death benefit, cost of living adjustment, waiver of deduction amount,
specified amount payment and lapse protection guarantee rider. The last rider is
described below. The Coverage Extension Rider and the Maturity Extension Rider
are described under the "Maturity Benefits" section. There may be additional
costs associated with these riders. Depending on your circumstances, it may be
less costly to purchase more death benefit coverage under the primary insured
term rider than under the basic variable policy.
LAPSE PROTECTION GUARANTEE RIDER
You may elect to have a Lapse Protection Guarantee Rider added to the Policy at
issue (provided that the Insured meets all underwriting requirements for this
Rider). The Lapse Protection Guarantee Rider benefit provides that if during the
lifetime of the Insured the total premiums paid under the Policy, less any Loan
Account Value and partial surrenders, equal or exceed the cumulative applicable
Lapse Protection Premium shown on the Policy Summary Page of the Policy, a Lapse
Protection Guarantee will be in effect. (This feature may be included in the
base Policy in some jurisdictions and may not be available in all
jurisdictions.) This rider provides that the Policy will not lapse during the
next Policy Month even if the Cash Surrender Value is insufficient to pay the
Monthly Deduction Amount due. The Lapse Protection Premium will change if the
Policy Owner makes a change in the Stated Amount or adds or eliminates
supplemental benefit riders under the Policy. In such event, the Company will
send the Policy Owner notice of the new applicable Lapse Protection Premium
which must be met in order for the guarantee to remain in effect. The lapse
protection premium requirement increases after the 10th policy year.
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<PAGE> 20
EXCHANGE RIGHTS
Once the Policy is in effect, it may be exchanged during the first 24 months for
a form of non-variable permanent individual life insurance policy issued by the
Company (or an affiliated company if allowed by state law) on the life of the
Insured. Benefits under the new life insurance policy will be as described in
that policy. No evidence of insurability will be required. You have the right to
select the same Death Benefit or Net Amount At Risk as the former Policy at the
time of exchange. Cost of insurance rates will be based on the same risk
classification as those of the former Policy. Any outstanding Policy loan must
be repaid before we will make an exchange. In addition, there may be an
adjustment for the difference in Cash Value between the two Policies.
RIGHT TO CANCEL
An Applicant may cancel the Policy by returning it via mail or personal delivery
to the Company or to the agent who sold the Policy. The Policy must be returned
by the latest of:
(1) 10 days after delivery of the Policy to you
(2) 45 days of completion of the Policy application
(3) 10 days after the Notice of Right to Cancel has been mailed or
delivered to the Applicant whichever is latest, or
(4) later if required by state law.
We will refund either (depending on state law) any premiums paid less any loans,
or the Cash Value of the Policy on the date we receive the returned Policy, plus
any charges that were deducted, less any Loan Account Value.
We will make the refund within seven days after we receive your returned policy.
ACCESS TO CASH VALUES
- --------------------------------------------------------------------------------
POLICY LOANS
A Policy Owner may obtain a cash loan from the Company secured by the Policy not
to exceed 100% of the Policy's Cash Value (determined on the day on which the
Company receives the written loan request), less any surrender penalties.
Subject to state law, no loan requests may be made for amounts of less than
$500.
If there is a loan outstanding at the time a subsequent loan request is made,
the amount of the outstanding loan will be added to the new loan request. The
Company will charge interest on the outstanding amounts of the loan, which must
be paid in advance by the Policy Owner. During the first fifteen (15) Policy
Years, the full Loan Account Value will be charged an annual interest rate of
5.66% (7.4% in NY and MA); thereafter 3.85% (5.66% in NY and MA) will be
charged.
The amount of the loan will be transferred as of the date the loan is made on a
pro rata basis from each of the Investment Options attributable to the Policy
(unless the Policy Owner states otherwise) to another account (the "Loan
Account"). Amounts in the Loan Account will be credited by the Company with a
fixed annual rate of return of 4% (6% in New York and Massachusetts) and will
not be affected by the investment performance of the Investment Options. When
loan repayments are made, the amount of the repayment will be deducted from the
Loan Account and will be reallocated based upon premium allocation percentages
among the Investment Options applicable to the Policy (unless the Policy Owner
states otherwise). The Company will make the loan to the Policy Owner within
seven days after receipt of the written loan request.
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<PAGE> 21
An outstanding loan amount decreases the Cash Surrender Value. If a loan is
taken or a loan is not repaid, it permanently decreases the Cash Surrender
Value, which could cause the Policy to lapse (see "Lapse and Reinstatement.")
For example, if a Policy has a Cash Surrender Value of $10,000, the Policy Owner
may take a loan of 100% or $10,000, leaving a new Cash Surrender Value of $0.00.
In addition, the Death Benefit actually payable would be decreased because of
the outstanding loan. Furthermore, even if the loan is repaid, the Death Benefit
and Cash Surrender Value may be permanently affected since the Policy Owner was
not credited with the investment experience of an Investment Option on the
amount in the Loan Account while the loan was outstanding. All or any part of a
loan secured by a Policy may be repaid while the Policy is still in effect.
CASH VALUE AND CASH SURRENDER VALUE
The Cash Value of a Policy changes on a daily basis and will be computed on each
Valuation Date. The Cash Value will vary to reflect the investment experience of
the Investment Options, as well as any partial Cash Surrenders, Monthly
Deduction Amount, daily Separate Account charges, and any additional premium
payments. There is no minimum guaranteed Cash Value.
The Cash Value of a particular Policy is related to the net asset value of the
Investment Options to which premium payments on the Policy have been allocated.
The Cash Value on any Valuation Date is calculated by multiplying the number of
Accumulation Units credited to the Policy in each Investment Option as of the
Valuation Date by the current Accumulation Unit Value of that Investment Option,
then adding the collective result for each of the Investment Options credited to
the Policy, and finally adding the value (if any) of the Loan Account. A Policy
Owner may withdraw Cash Value from the Policy, or transfer Cash Value among the
Investment Options, on any day that the Company is open for business.
As long as the Policy is in effect, a Policy Owner may elect, without the
consent of the Beneficiary (provided the designation of Beneficiary is not
irrevocable), to surrender the Policy and receive its "Cash Surrender Value";
i.e., the Cash Value of the Policy determined as of the day the Company receives
the Policy Owner's written request, less any outstanding Policy loan, and less
any applicable Surrender Charges. For full surrenders, the Company will pay the
Cash Surrender Value of the Policy within seven days following its receipt of
the written request, or on the date requested by the Policy Owner, whichever is
later. The Policy will terminate on the date of the Company's receipt of the
written request, or on the date the Policy Owner requests the surrender to
become effective, whichever is later.
In the case of partial surrenders, the Cash Surrender Value will be equal to the
amount requested to be surrendered minus any applicable Surrender Charges. The
deduction from Cash Value for a partial surrender will be made on a pro rata
basis against the Cash Value of each of the Investment Options attributable to
the Policy (unless the Policy Owner states otherwise in writing).
After the first policy year there is no charge for partial surrenders of 10% of
the greater of the cash value or premiums paid. The available charge-free
surrender is reduced by the sum of previous free surrender in the same policy
year.
In addition to reducing the Cash Value of the Policy, partial cash surrenders
will reduce the Death Benefit payable under the Policy. Under Option 1, the
Stated Amount of the Policy will be reduced by the amount of the partial cash
surrender. Under Option 2, the Cash Value, which is part of the Death Benefit,
will be reduced by the amount of the partial cash surrender. The Company may
require return of the Policy to record such reduction.
17
<PAGE> 22
DEATH BENEFIT
- --------------------------------------------------------------------------------
The Death Benefit under the Policy is the amount paid to the Beneficiary upon
the Insured's death. The Death Benefit will be reduced by any outstanding
charges, fees and Policy loans. All or part of the Death Benefit may be paid in
cash or applied to one or more of the payment options described in the following
pages.
You may elect one of two Death Benefit options. As long as the Policy remains in
effect, the Company guarantees that the Death Benefit under either option will
be at least the current Stated Amount of the Policy less any outstanding Policy
loan and unpaid monthly Deduction Amount due. The Death Benefit under either
option may vary with the Cash Value of the Policy. Under Option 1 (the "Level
Option"), the Death Benefit will be equal to the Stated Amount of the Policy or,
if greater, a specified multiple of Cash Value (the "Minimum Amount Insured").
Under Option 2 (the "Variable Option"), the Death Benefit will be equal to the
Stated Amount of the Policy plus the Cash Value (determined as of the date of
the Insured's death) or, if greater, the Minimum Amount Insured.
The Minimum Amount Insured is the amount required to qualify the Policy as a
life insurance Policy under the current federal tax law. Under that law, the
Minimum Amount Insured equals a stated percentage of the Policy's Cash Value
determined as of the first day of each Policy Month. The percentages differ
according to the attained age of the Insured. The Minimum Amount Insured is set
forth in the Policy and may change as federal income tax laws or regulations
change. The following is a schedule of the applicable percentages. For attained
ages not shown, the applicable percentages will decrease evenly:
<TABLE>
<CAPTION>
ATTAINED AGE PERCENTAGE
- ------------ ----------
<S> <C>
0-40 250
45 215
50 185
55 150
60 130
65 120
70 115
75 105
95+ 100
</TABLE>
Federal tax law imposes another cash funding limitation on cash value life
insurance Policies that may increase the Minimum Amount Insured shown above.
This limitation known as the "guideline premium limitation," generally applies
during the early years of variable universal life insurance Policies.
The following examples demonstrate the relationship between the Death Benefit,
the Cash Surrender Value and the Minimum Amount Insured under Options 1 and 2 of
the Policy. The examples assume an Insured of age 40, a Minimum Amount Insured
of 250% of Cash Value (assuming the preceding table is controlling as to Minimum
Amount Insured), and no outstanding Policy loan.
OPTION 1 -- "LEVEL" DEATH BENEFIT
STATED AMOUNT: $50,000
In the following examples of an Option 1 "Level" Death Benefit, the Death
Benefit under the Policy is generally equal to the Stated Amount of $50,000.
Since the Policy is designed to qualify as a life insurance Policy, the Death
Benefit cannot be less than the Minimum Amount Insured (or, in this example,
250% of the Cash Value).
EXAMPLE ONE. If the Cash Value of the Policy equals $10,000, the Minimum Amount
Insured would be $25,000 ($10,000 x 250%). Since the Death Benefit in the Policy
is the greater of the
18
<PAGE> 23
Stated Amount ($50,000) or the Minimum Amount Insured ($25,000), the Death
Benefit would be $50,000.
EXAMPLE TWO. If the Cash Value of the Policy equals $40,000, the Minimum Amount
Insured would be $100,000 ($40,000 x 250%). The resulting Death Benefit would be
$100,000 since the Death Benefit is the greater of the Stated Amount ($50,000)
or the Minimum Amount Insured ($100,000).
OPTION 2 -- "VARIABLE" DEATH BENEFIT
STATED AMOUNT: $50,000
In the following examples of an Option 2 "Variable" Death Benefit, the Death
Benefit varies with the investment experience of the applicable Investment
Options and will generally be equal to the Stated Amount plus the Cash Value of
the Policy (determined on the date of the Insured's death). The Death Benefit
cannot, however, be less than the Minimum Amount Insured (or, in this example,
250% of the Cash Value).
EXAMPLE ONE. If the Cash Value of the Policy equals $10,000, the Minimum Amount
Insured would be $25,000 ($10,000 x 250%). The Death Benefit ($60,000) would be
equal to the Stated Amount ($50,000) plus the Cash Value ($10,000), unless the
Minimum Amount Insured ($25,000) was greater.
EXAMPLE TWO. If the Cash Value of the Policy equals $60,000, then the Minimum
Amount Insured would be $150,000 ($60,000 x 250%). The resulting Death Benefit
would be $150,000 because the Minimum Amount Insured ($150,000) is greater than
the Stated Amount plus the Cash Value ($50,000 + $60,000 = $110,000).
PAYMENT OF PROCEEDS
Death Benefits are payable within seven days after we receive satisfactory proof
of the Insured's death. The amount of Death Benefit paid may be adjusted to
reflect any Policy loan, any material misstatements in the Policy application as
to age or sex of the Insured, and any amounts payable to an assignee under a
collateral assignment of the Policy. (See "Assignment.")
Subject to state law, if the Insured commits suicide within two years following
the Issue Date, limits on the amount of Death Benefit paid will apply. (See
"Limit on Right to Contest and Suicide Exclusion.") In addition, if the Insured
dies during the Grace Period then the Death Benefit actually paid to the Policy
Owner's Beneficiary will be reduced by the amount of the Deduction Amount that
is due and unpaid. (See "Cash Value and Cash Surrender Value," for effects of
partial surrenders on Death Benefits.)
PAYMENT OPTIONS
We will pay policy proceeds in a lump sum, unless you or the Beneficiary select
one of the Company's payment options. We may defer payment of proceeds which
exceed the Death Benefit for up to six months from the date of the request for
the payment. A combination of options may be used. The minimum amount that may
be placed under a payment option is $5,000 unless we consent to a lesser amount.
Proceeds applied under an option will no longer be affected by the investment
experience of the Investment Options.
The following payment options are available under the Policy:
OPTION 1 -- Payments of a Fixed Amount
OPTION 2 -- Payments for a Fixed Period
OPTION 3 -- Amounts Held at Interest
OPTION 4 -- Monthly Life Income
OPTION 5 -- Joint and Survivor Level Amount Monthly Life Income
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<PAGE> 24
OPTION 6 -- Joint and Survivor Monthly Life Income-Two-thirds to Survivor
OPTION 7 -- Joint and Last Survivor Monthly Life Income-Monthly Payment
Reduces on Death of First Person Named
OPTION 8 -- Other Options
We will make any other arrangements for periodic payments as may be agreed upon.
If any periodic payment due any payee is less than $100, we may make payments
less often. If we have declared a higher rate under an option on the date the
first payment under an option is due, we will base the payments on the higher
rate.
MATURITY BENEFITS
- --------------------------------------------------------------------------------
The Maturity Date is the anniversary of the Policy Date on which the Insured is
age 100. If the Insured is living on the Maturity Date, the Company will pay you
the Policy's Cash Value less any outstanding Policy loan or unpaid Deduction
Amount. You must surrender the Policy to us before we make a payment. After
payment, we will have no further obligation under the Policy.
COVERAGE EXTENSION RIDER
The Coverage Extension rider allows coverage to be extended beyond the Maturity
Date as long as there is Cash Value in the Contract. Upon request from the
owner, the Company will continue to keep the Policy in force until the death of
the Insured or request for payment of the full cash surrender value, as defined
by this rider, prior to the death of the Insured. The death benefit will equal
the amount insured, less any outstanding loans. This Rider can be selected only
from the Policy anniversary when the Insured is age 99 to the Maturity Date. Any
monthly deduction amounts due must be paid for this Rider to take effect. There
is no charge for this Rider, however, it is available only if the Insured's
Issue age is 80 or less.
MATURITY EXTENSION RIDER
When the Insured reaches age 99, and at any time during the twelve months
thereafter, you may request that coverage be extended beyond the Maturity Date
(the "Maturity Extension Benefit"). This Maturity Extension Benefit may not be
available in all jurisdictions. If we receive such a request before the Maturity
Date and any past Monthly Deduction Amounts have been paid, the Policy will
continue until the earlier of the Insured's Death or the date on which you
request that the Policy terminate. When the Maturity Extension Benefit ends, a
Death Benefit consisting of the Cash Value less any Loan Account Value will be
paid. The Death Benefit is based on the experience of the Investment Options
selected and is not guaranteed. After the Maturity Date, periodic Deduction
Amounts will no longer be charged against the Cash Value and additional premiums
will not be accepted. This Rider is available for Issue Ages 81-85.
We intend that the Policy and the Maturity Extension Rider will be considered
life insurance for tax purposes. The Death Benefit is designed to comply with
Section 7702 of the Internal Revenue Code of 1986, as amended, or other
equivalent section of the Code. However, the Company does not give tax advice,
and cannot guarantee that the Death Benefit and Cash Value will be exempt.
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CHARGES AND DEDUCTIONS
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GENERAL
We deduct the charges described below. The charges are for services and benefits
we provide, costs and expenses we incur, and risks we assume under the Policies.
Services and benefits we provide include:
- the ability for you to make withdrawals under the Policies;
- the ability for you to obtain a loan under the Policies;
- the death benefit paid on the death of the Insured;
- the available funding options and related programs (including dollar-cost
averaging and portfolio rebalancing);
- administration of the various elective options available under the
Policies; and
- the distribution of various reports to policy owners.
Costs and expenses we incur include:
- expenses associated with underwriting applications, increases in the
stated amount, and riders;
- losses associated with various overhead and other expenses associated
with providing the services and benefits provided by the Policies;
- sales and marketing expenses including commission payments to your sales
agent; and
- other costs of doing business.
Risks we assume include:
- that insureds may live for a shorter period of time than estimated
resulting in the payment of greater death benefits than expected; and
- that the costs of providing the services and benefits under the Policies
will exceed the charges deducted.
CHARGES AGAINST PREMIUM
FRONT-END SALES CHARGE
When we receive a Premium Payment, and before allocation of the payment among
the Investment Options, we deduct a front-end sales charge of 2.5% of premium
(waived if policy stated amount plus primary insured term benefit is at least
$5,000,000.)
STATE PREMIUM TAX CHARGE
A charge of 2.25% of each premium payment will be deducted for state premium
taxes (tax chargeback in Oregon) (except for Policies issued in the Commonwealth
of Puerto Rico where no premium tax is deducted). These taxes vary from state to
state and currently range from 0.75% to 3.5%; 2.5% is an average. Because there
is a range of premium taxes, a Policy Owner may pay a premium tax charge that is
higher or lower than the premium tax actually assessed or not assessed in his or
her jurisdiction.
DEFERRED ACQUISITION COST CHARGE
A charge of 1.25% of each premium payment will be deducted, which compensates
the Company for expenses associated with its federal income tax liability
relating to its receipt of premium.
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The Company also reserves the right to charge the assets of each Investment
Option for a reserve for any income taxes payable by the Company on the assets
attributable to that Investment Option. (See "Federal Tax Considerations.")
MONTHLY DEDUCTION AMOUNT
We will deduct a Monthly Deduction Amount to cover certain charges and expenses
incurred in connection with the Policy. The Monthly Deduction Amount is deducted
pro rata from each of the Investment Options' values attributable to the Policy.
The amount is deducted on the first day of each Policy Month (the "Deduction
Date"), beginning on the Policy Date. The dollar amount of the Deduction Amount
will vary from month to month. The Monthly Deduction Amount consists of the Cost
of Insurance Charge, Policy Administrative Expense Charge and Charges for any
Supplemental Benefit Provision. These are described below:
COST OF INSURANCE CHARGE
The amount of the Cost of Insurance deduction depends on the amount of insurance
coverage on the date of the deduction and the current cost per dollar for
insurance coverage. The cost per dollar of insurance coverage varies annually
and is based on issue age, policy year, sex and risk class of the Insured.
ADMINISTRATIVE EXPENSE CHARGE
An administrative charge is deducted monthly from the Policy's Cash Value. This
charge consists of a per thousand charge for the first three Policy years and
for three years following any increases in the Stated Amount (excluding Cost of
Living Adjustments and increases in Stated Amounts due to Death Benefit Option
changes.) This charge is used to cover expenses associated with issuing the
Policy.
The charge currently varies by issue age and Stated Amount. The current
administrative charges are lower than the guaranteed maximum charges.
For policies with Stated amounts of less than $100,000, there is an additional
$6 per month administrative charge until the Maturity Date.
CHARGES FOR SUPPLEMENTAL BENEFIT PROVISIONS [RIDERS]
The Company will include a supplemental benefits charge in the Monthly Deduction
Amount if you have elected any supplemental benefit provision for which there is
a charge. The amount of this charge will vary depending upon the actual
supplemental benefits selected.
CHARGES AGAINST THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE
We deduct a daily charge for mortality and expense risks. This charge is at an
annual rate of 0.65% for the first fifteen (15) Policy Years, and 0.20%
thereafter. This change compensates us for various risks assumed, benefits
provided and expenses incurred.
UNDERLYING FUND FEES
When you allocate money to the Investment Options, the Separate Account
purchases shares of the corresponding Underlying Funds at net asset value. The
net asset value reflects investment advisory fees and other expenses already
deducted. The investment advisory fees and other expenses paid by each of the
underlying Mutual Funds are described in the individual fund prospectuses for
the Investment Options and in the Policy prospectus summary. These are not
direct charges under the Policy; they are indirect because they affect each
Investment Option's accumulation unit value.
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SURRENDER CHARGES
A Per Thousand of Stated Amount Surrender Charge is imposed on full and partial
surrenders, and applies only during the first ten Policy Years or the ten years
following an increase in Stated Amount (other than an increase for a Cost of
Living Adjustment or a change in Death Benefit Option). The charge is equal to a
specified dollar amount for each $1,000 of Stated Amount to which it applies,
and will apply only to that portion of the Stated Amount (except for increases
excluded above) which has been in effect for less than ten years.
The Per Thousand of Stated Amount Charge varies by original issue age, and
increases with the issue age of the Insured. This charge varies in the first
year from $2.04 per $1,000 of Stated Amount for issue ages of 4 years or less,
to $25.40 per $1,000 of Stated Amount for issue ages of 65 years or higher.
Additionally, the charge decreases by 10% each year over the ten-year period.
For example, for a 45-year old with a Stated Amount of $150,000, the charge in
the first year is $7.18 for each $1,000 of Stated Amount, or $1,077. The charge
decreases 10%, or approximately $0.72, each year, so in the fifth year, it is
$4.31 for each $1,000 of Stated Amount, or $646.50; in the tenth year, it is
$0.72 for each $1,000, or $108.
A Surrender Charge is not assessed on partial surrenders up to the greater of
10% of the Cash Value or premiums paid (less any free partial surrenders made in
the same policy year). This charge is designed to compensate the Company for
administrative expenses not covered by other administrative charges. This charge
may be reduced or eliminated when sales are made under certain arrangements.
(See "Reduction or Elimination of Charges" below.) The Per Thousand of Stated
Amount surrender charges are set forth in Appendix A.
TRANSFER CHARGE
There is currently no charge for transfers. The Company reserves the right to
limit free transfers of Cash Value from one Investment Option to another by the
Policy Owner to four times (twelve times in New York) in any Policy Year, and to
charge $10 for any additional transfers.
REDUCTION OR ELIMINATION OF CHARGES
We may offer the Policy in arrangements where an employer or trustee will own a
group of policies on the lives of certain employees, or in other situations
where groups of policies will be purchased at one time. We may reduce or
eliminate the mortality and expense risk charge, sales or surrender charges and
administrative charges in such arrangements to reflect the reduced sales
expenses, administrative costs and/or mortality and expense risks expected as a
result of sales to a particular group.
We will not reduce or eliminate the withdrawal charge, mortality and expense
risk charge or the administrative charge if the reduction or elimination will be
unfairly discriminatory to any person.
THE SEPARATE ACCOUNT AND VALUATION
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THE TRAVELERS FUND UL II FOR VARIABLE LIFE INSURANCE (FUND UL II)
The Travelers Fund UL II for Variable Life Insurance was established on October
17, 1995 under the insurance laws of the state of Connecticut. It is registered
with the Securities and Exchange Commission ("SEC") as a unit investment trust
under the Investment Company Act of 1940. A Registration Statement has been
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended. This Prospectus does not contain all information set forth in
the Registration Statement, its amendments and exhibits. You may access the
SEC's website (http://www.sec.gov) to view the entire Registration Statement.
This registration does not mean that the SEC supervises the management or the
investment practices or policies of the Separate Account.
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The assets of Fund UL II are invested exclusively in shares of the Investment
Options. The operations of Fund UL II are also subject to the provisions of
Section 38a-433 of the Connecticut General Statutes which authorizes the
Connecticut Insurance Commissioner to adopt regulations under it. Under
Connecticut law, the assets of Fund UL II will be held for the exclusive benefit
of Policy Owners and the persons entitled to payments under the Policy. The
assets held in Fund UL II are not chargeable with liabilities arising out of any
other business which the Company may conduct. Any obligations arising under the
Policy are general corporate obligations of the Company.
All investment income of and other distributions to each Investment Option are
reinvested in shares of corresponding underlying fund at net asset value. The
income and realized gains or losses on the assets of each Investment Option are
separate and are credited to or charged against the Investment Option without
regard to income, gains or losses from any other Investment Option or from any
other business of the Company. The Company purchases shares of the Fund in
connection with premium payments allocated according to the Policy Owners'
directions, and redeems Fund shares to meet Policy obligations. We will also
make adjustments in reserves, if required. The Investment Options are required
to redeem Fund shares at net asset value and to make payment within seven days.
HOW THE CASH VALUE VARIES. We calculate the Policy's Cash Value each day the
New York Stock Exchange is open for trading (a "valuation date"). A Policy's
Cash Value reflects a number of factors, including Premium Payments, partial
withdrawals, loans, Policy charges, and the investment experience of the
Investment Option(s) chosen. The Policy's Cash Value on a valuation date equals
the sum of all accumulation units times the unit value for each Investment
Option chosen, plus the Loan Account Value.
The Separate Account purchases shares of the underlying funds at net asset value
(i.e., without a sales charge). The Separate Account receives all dividends and
capital gains distributions from each underlying fund, and reinvests in
additional shares of that fund. The Accumulation Unit Value reflects the
reinvestment of any dividends or capital gains distributions declared by the
underlying fund. The Separate Account will redeem underlying fund shares at
their net asset value, to the extent necessary to make payments under the
Policy.
In order to determine Cash Value, Cash Surrender Value, policy loans and the
number of Accumulation Units to be credited, we use the values calculated as of
the close of business on each valuation date we receive the written request, or
payment in good order, at our Home Office.
ACCUMULATION UNIT VALUE. Accumulation Units measure the value of the Investment
Options. The value for each Investment Option's Accumulation Unit is calculated
on each valuation date. The value equals the Accumulation Unit value for the
preceding valuation period multiplied by the underlying fund's Net Investment
Factor during the next Valuation Period. (For example, to calculate Monday's
valuation date price, we would multiply Friday's Accumulation Unit Value by
Monday's net investment factor.)
The Accumulation Unit Value may increase or decrease. The number of Accumulation
Units credited to your Policy will not change as a result of the Investment
Option's investment experience.
NET INVESTMENT FACTOR. For each Investment Option, the value of its
Accumulation Unit depends on the net rate of return for the corresponding
underlying fund. We determine the net rate of return at the end of each
Valuation Period (that is, the period of time beginning at 4:00 p.m. Eastern
time and ending at its close of business on the next Valuation Date). The net
rate of return reflects the investment performance of the investment option,
includes any dividends or capital gains distributed, and is net of the Separate
Account charges.
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CHANGES TO THE POLICY
- --------------------------------------------------------------------------------
GENERAL
Once the policy is issued, you may make certain changes. Some of these changes
will not require additional underwriting approval; some changes will. Certain
requests must be made in writing, as indicated below:
WRITTEN CHANGES REQUIRING UNDERWRITING APPROVAL:
- increases in the stated amount of insurance;
- changing the death benefit from Option 1 to Option 2
WRITTEN CHANGES NOT REQUIRING UNDERWRITING APPROVAL:
- decreases in the stated amount of insurance
- changing the death benefit from Option 2 to Option 1
- changes to the way your premiums are allocated (Note: you can also make
these changes by telephone)
- changing the beneficiary (unless irrevocably named)
Written requests for changes should be sent to the Company's Home Office at One
Tower Square, Hartford, Connecticut, 06183. The Company's telephone number is
(860) 277-0111.
CHANGES IN STATED AMOUNT
You may request in writing an increase (after the first policy year) or decrease
(after the second policy year) in the Policy's Stated Amount, provided that the
Stated Amount after any decrease may not be less than the minimum amount of
$50,000. For purposes of determining the cost of insurance charge, a decrease in
the Stated Amount will reduce the Stated Amount in the following order:
1) against the most recent increase in the Stated Amount;
2) to other increases in the reverse order in which they occurred;
3) to the initial Stated Amount.
A decrease in Stated Amount in a substantially funded Policy may cause a cash
distribution that is includable in the gross income of the Policy Owner.
For increases in the Stated Amount, we may require a new application and
evidence of insurability as well as an additional premium payment. The effective
date of any increase will be shown on the new Policy Summary which we will send.
The effective date of any increase in the Stated Amount will generally be the
Deduction Date next following either the date of a new application or, if
different, the date requested by the Applicant. There is an additional Policy
Administrative Charge and a Per Thousand of Stated Amount Surrender Charge
associated with a requested increase in Stated Amount. A proportional surrender
charge applies for requested decreases in stated amount. The charge is
determined by dividing the amount of the decrease by the total stated amount and
multiplying by the full surrender charge.
CHANGES IN DEATH BENEFIT OPTION
You may change the Death Benefit option by sending a written request to the
Company. There is no direct tax consequence of changing a Death Benefit option,
except as described under "Tax Treatment of Policy Benefits." However, the
change could affect future values of Net Amount At Risk, and with some Option 2
to Option 1 changes involving substantially funded Policies, there may be a cash
distribution which is included in your gross income. The cost of insurance
charge which is based on the Net Amount At Risk may be different in the future.
A change from Option 1 to Option 2 will not be permitted if the change results
in a Stated Amount of less than $50,000. A
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change from Option 1 to Option 2 is also subject to underwriting. Contact your
registered representative for more information.
ADDITIONAL POLICY PROVISIONS
- --------------------------------------------------------------------------------
ASSIGNMENT
The Policy may be assigned as collateral for a loan or other obligation. The
Company is not responsible for any payment made or action taken before receipt
of written notice of such assignment. Proof of interest must be filed with any
claim under a collateral assignment.
LIMIT ON RIGHT TO CONTEST AND SUICIDE EXCLUSION
We may not contest the validity of the Policy after it has been in effect during
the Insured's lifetime for two years from the Issue Date. Subject to state law,
if the Policy is reinstated, the two-year period will be measured from the date
of reinstatement. Each requested increase in Stated Amount is contestable for
two years from its effective date (subject to state law). In addition, if the
Insured commits suicide during the two-year period following issue, subject to
state law, the Death Benefit will be limited to the premiums paid less (i) the
amount of any partial surrender, (ii) the amount of any outstanding Policy loan
and (iii) the amount of any unpaid Deduction Amount due. During the two-year
period following an increase, the Death Benefit in the case of suicide will be
limited to an amount equal to the Deduction Amount paid for such increase.
MISSTATEMENT AS TO SEX AND AGE
If there has been a misstatement with regard to sex or age, benefits payable
will be adjusted to what the Policy would have provided with the correct
information. A misstatement with regard to sex or age in a substantially funded
Policy may cause a cash distribution that is includable in whole or in part in
the gross income of the Policy Owner.
VOTING RIGHTS
The Company is the legal owner of the underlying fund shares. However, we
believe that when an underlying fund solicits proxies, we are required to obtain
from policy owners who have chosen those investment options instructions on how
to vote those shares. When we receive those instructions, we will vote all of
the shares we own in proportion to those instructions. This will also include
any shares we own on our own behalf. If we determine that we no longer need to
comply with this voting method, we will vote on the shares in our own right.
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OTHER MATTERS
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STATEMENTS TO POLICY OWNERS
We will maintain all records relating to the Separate Account and the Investment
Options. At least once each Policy Year, we will send you a statement containing
the following information:
- the Stated Amount and the Cash Value of the Policy (indicating the number
of Accumulation Units credited to the Policy in each Investment Option
and the corresponding Accumulation Unit Value);
- the date and amount of each premium payment;
- the date and amount of each Monthly Deduction;
- the amount of any outstanding Policy loan as of the date of the
statement, and the amount of any loan interest charged on the Loan
Account;
- the date and amount of any partial cash surrenders and the amount of any
partial surrender charges or decrease charges;
- the annualized cost of any supplemental benefits purchased under the
Policy; and
- a reconciliation since the last report of any change in Cash Value and
Cash Surrender Value.
We will also send any other reports required by any applicable state or federal
laws or regulations.
SUSPENSION OF VALUATION
We reserve the right to suspend or postpone the date of any payment of any
benefit or values for any Valuation Period (1) when the New York Stock Exchange
("Exchange") is closed; (2) when trading on the Exchange is restricted; (3) when
the SEC determines that disposal of the securities held in the Underlying Funds
is not reasonably practicable or the value of the Investment Option's net assets
cannot be determined; or (4) during any other period when the SEC, by order, so
permits for the protection of security holders.
DIVIDENDS
No dividends will be paid under the Policy.
MIXED AND SHARED FUNDING
It is conceivable that in the future it may not be advantageous for variable
life insurance and variable annuity Separate Accounts to invest in the
Investment Options simultaneously. This is called mixed funding. Certain funds
may be available to variable products of other companies not affiliated with
Travelers. This is called "shared funding." Although we -- and the funds -- do
not anticipate any disadvantages either to variable life insurance or to
variable annuity Policy Owners, the Investment Options' Boards of Directors
intend to monitor events to identify any material conflicts that may arise and
to determine what action, if any, should be taken. If any of the Investment
Options' Boards of Directors conclude that separate mutual funds should be
established for variable life insurance and variable annuity Separate Accounts,
the Company will bear the attendant expenses, but variable life insurance and
variable annuity Policy Owners would no longer have the economies of scale
resulting from a larger combined fund. Please consult the prospectuses of the
Investment Options for additional information.
DISTRIBUTION
The Company intends to sell the Policies in all jurisdictions where it is
licensed to do business and where the Policy is approved. The Policies will be
sold by life insurance sales representatives who are registered representatives
of the Company or certain other registered broker-dealers. The maximum
commission payable by the Company for distribution would be no greater than 50%
of the actual premium paid in the first twelve months. Any sales representative
or employee will have
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been qualified to sell variable life insurance Policies under applicable federal
and state laws. Each broker/dealer is registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1934 and all are
members of the National Association of Securities Dealers, Inc.
CFBDS, Inc. serves as principal underwriter of the Policies. However, it is
anticipated that Travelers Distribution LLC, an affiliated company, will become
principal underwriter some time in 2000.
LEGAL PROCEEDINGS AND OPINION
There are no pending material legal proceedings affecting the Separate Account.
Legal matters in connection with the federal laws and regulations affecting the
issue and sale of the Contract described in this prospectus, as well as the
organization of the Company, its authority to issue variable life contracts
under Connecticut law and the validity of the forms of the variable life
contracts under Connecticut law, have been reviewed by the General Counsel of
the Company.
EXPERTS
The financial statements of Fund UL II as of December 31, 1999 and for the year
ended December 31, 1999 have been included herein and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, and upon the authority of said firm as experts in accounting and
auditing.
The financial statements of The Travelers Life and Annuity Company as of
December 31, 1999 and 1998, and for each of the years in the three-year period
ended December 31, 1999, have been included herein and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
FEDERAL TAX CONSIDERATIONS
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GENERAL
The following is a general discussion of the federal income tax considerations
relating to the Policies. This discussion is based upon the Company's
understanding of the federal income tax laws as they are currently interpreted
by the Internal Revenue Service ("IRS"). These laws are complex, and tax results
may vary among individuals. A person contemplating the purchase of or the
exercise of elections under a Policy should seek competent tax advice.
IT SHOULD BE UNDERSTOOD THAT THIS IS NOT AN EXHAUSTIVE DISCUSSION OF ALL TAX
QUESTIONS THAT MIGHT ARISE UNDER THE POLICIES. NO ATTEMPT HAS BEEN MADE TO
ADDRESS ANY FEDERAL ESTATE TAX OR STATE AND LOCAL TAX CONSIDERATIONS WHICH MAY
ARISE IN CONNECTION WITH A POLICY. FOR COMPLETE INFORMATION, A QUALIFIED TAX
ADVISOR SHOULD BE CONSULTED.
THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF ANY POLICY AND THE FOLLOWING
TAX DISCUSSION IS BASED ON THE COMPANY'S UNDERSTANDING OF FEDERAL INCOME TAX
LAWS AS THEY ARE CURRENTLY INTERPRETED. THE COMPANY CANNOT GUARANTEE THAT THOSE
LAWS OR INTERPRETATIONS WILL REMAIN UNCHANGED.
TAX STATUS OF THE POLICY
DEFINITION OF LIFE INSURANCE
Section 7702 of the Code sets forth a definition of a life insurance contract
for federal tax purposes. Guidance as to how Section 7702 is to be applied,
however, is limited. Although the Secretary of the Treasury (the "Treasury") is
authorized to prescribe regulations implementing Section 7702, and while
proposed regulations and other limited, interim guidance has been issued, final
regulations have not been adopted. If a Policy were determined not to be a life
insurance contract for purposes of Section 7702, such Policy would not provide
the tax advantages normally provided by a life insurance policy.
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With respect to a Policy issued on the basis of a standard rate class, the
Company believes (largely in reliance on IRS Notice 88-128 and the proposed
regulations under Section 7702) that such a Policy should meet the Section 7702
definition of a life insurance contract. There is less guidance on the
application of the rules with respect to a Policy that is issued on a
substandard basis (i.e., a premium class involving higher than standard
mortality risk). Thus, it is not clear whether such a Policy would satisfy
Section 7702, particularly if the Policy Owner pays the full amount of premiums
permitted under the Policy.
The Company reserves the right to make changes in the Policy if such changes are
deemed necessary to attempt to assure its qualification as a life insurance
contract for tax purposes.
DIVERSIFICATION
Section 817(h) of the Code provides that separate account investments (or the
investments of a mutual fund, the shares of which are owned by separate accounts
of insurance companies) underlying the Policy must be "adequately diversified"
in accordance with Treasury regulations in order for the Policy to qualify as
life insurance. The Treasury Department has issued regulations prescribing the
diversification requirements in connection with variable contracts. The Separate
Account, through the Investment Options, intends to comply with these
requirements. Although the Company does not control the Investment Options, it
intends to monitor the investments of the Investment Options to ensure
compliance with the diversification requirements prescribed by the Treasury
Department.
INVESTOR CONTROL
In certain circumstances, owners of variable life insurance contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contract. In those circumstances, income
and gains from the separate account assets would be includable in the variable
contract owner's gross income each year. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The Treasury
has also announced, in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the Policy Owner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular Investment Options without being treated as owners of
the underlying assets." As of the date of this prospectus, no such guidance has
been issued.
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it determined that
the policy owners received the desired tax benefits because they were not owners
of separate account assets. For example, a Policy Owner of this Policy has
additional flexibility in allocating payments and cash values. These differences
could result in the Policy Owner being treated as the owner of the assets of the
Separate Account. In addition, the Company does not know what standard will be
set forth in the regulations or rulings which the Treasury is expected to issue,
nor does the Company know if such guidance will be issued. The Company therefore
reserves the right to modify the Policy as necessary to attempt to prevent the
Policy Owner from being considered the owner of a pro rata share of the assets
of the Separate Account.
The remaining tax discussion assumes that the Policy qualifies as a life
insurance contract for federal income tax purposes.
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TAX TREATMENT OF POLICY BENEFITS
IN GENERAL
The Company believes that the proceeds and cash value increases of a Policy
should be treated in a manner consistent with a fixed-benefit life insurance
policy for federal income tax purposes. Thus, the Death Benefit under the Policy
should be excludable from the gross income of the Beneficiary.
In addition, the Policy Owner will generally not be deemed to be in constructive
receipt of the Cash Value, including increments thereof, until there is a
distribution. The tax consequences of distribution from, and loans taken from or
secured by, a Policy depend on whether the Policy is classified as a "Modified
Endowment Contract." However, whether a Policy is or is not a Modified Endowment
Contract, upon a complete surrender or lapse of a Policy or when benefits are
paid at a Policy's maturity date, if the amount received plus the amount of
indebtedness exceeds the total investment in the Policy, the excess will
generally be treated as ordinary income subject to tax.
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's Death Benefit Option, a Policy loan, a partial withdrawal, a surrender,
a change in ownership, or an assignment of the Policy may have federal income
tax consequences. In addition, federal, state and local transfer, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or beneficiary. Therefore, it is important to check
with a tax adviser prior to the purchase of a policy.
MODIFIED ENDOWMENT CONTRACTS
A modified endowment contract is defined under tax law as any policy that
satisfies the present legal definition of a life insurance contract but which
fails to satisfy a 7-pay test. This failure could occur with contracts entered
into after June 21, 1988, or with certain older contracts materially changed
after that date. A Section 1035 exchange of an older contract into a contract
after that date will not by itself cause the new contract to be a modified
endowment contract if the older contract had not become one prior to the
exchange. However, the new contract must be re-tested under the 7-pay test
rules.
A contract fails to satisfy the 7-pay test if the cumulative amount of premiums
paid under the contract at any time during the first seven contract years
exceeds the sum of the net level premiums that would have been paid on or before
such time had the contract provided for paid-up future benefits after the
payment of seven level annual premiums. If a material change in the contract
occurs either during the first seven contract years, or later, a new seven-year
testing period is begun. A decrease to Stated Amount made in the first seven
years will cause a retest of the cumulative amount of premiums. Decreases made
after the first seven contract years are not considered a material change,
provided no other material changes have occurred prior. Tax regulations or other
guidance will be needed to fully define those transactions which are material
changes. The Company has established safeguards for monitoring whether a
contract may become a modified endowment contract.
Loans and partial withdrawals from, as well as collateral assignments of,
Policies that are modified endowment contracts will be treated as distributions
to the Policy Owner for tax purposes. All pre-death distributions (including
loans, partial withdrawals and collateral assignments) from these Policies will
be included in gross income on an income-first basis to the extent of any income
in the Policy (the cash value less the Policy Owner's investment in the Policy)
immediately before the distribution.
The law also imposes a 10% penalty tax on pre-death distributions (including
loans, collateral assignments, partial withdrawals and complete surrenders) from
modified endowment contracts to the extent they are included in income, unless a
specific exception to the penalty applies. The penalty does not apply to amounts
which are distributed on or after the date on which the taxpayer attains age
59 1/2, because the taxpayer is disabled, or as substantially equal periodic
payments over the taxpayer's life (or life expectancy) or over the joint lives
(or joint life expectancies) of the taxpayer and his or her beneficiary.
Furthermore, if the loan interest is capitalized by adding the amount due to the
balance of the loan, the amount of the capitalized
30
<PAGE> 35
interest will be treated as an additional distribution subject to income tax as
well as the 10% penalty tax, if applicable, to the extent of income in the
Policy.
The Death Benefit of a modified endowment contract remains excludable from the
gross income of the Beneficiary to the extent described above in "Tax Treatment
of Policy Benefits." Furthermore, no part of the investment growth of the Cash
Value of a modified endowment contract is includable in the gross income of the
Contract Owner unless the contract matures, is distributed or partially
surrendered, is pledged, collaterally assigned, or borrowed against, or
otherwise terminates with income in the contract prior to death. A full
surrender of the contract after age 59 1/2 will have the same tax consequences
as noted above in "Tax Treatment of Policy Benefits."
EXCHANGES
Any Policy issued in exchange for a modified endowment contract will be subject
to the tax treatment accorded to modified endowment contracts. However, the
Company believes that any Policy received in exchange for a life insurance
contract that is not a modified endowment contract will generally not be treated
as a modified endowment contract if the face amount of the Policy is greater
than or equal to the death benefit of the policy being exchanged. The payment of
any premiums at the time of or after the exchange may, however, cause the Policy
to become a modified endowment contract. A prospective purchaser should consult
a qualified tax advisor before authorizing the exchange of his or her current
life insurance contract for a Policy.
AGGREGATION OF MODIFIED ENDOWMENT CONTRACTS
In the case of a pre-death distribution (including a loan, partial withdrawal,
collateral assignment or complete surrender) from a Policy that is treated as a
modified endowment contract, a special aggregation requirement may apply for
purposes of determining the amount of the income on the Policy. Specifically, if
the Company or any of its affiliates issues to the same Policy Owner more than
one modified endowment contract within a calendar year, then for purposes of
measuring the income on the Policy with respect to a distribution from any of
those Policies, the income on the Policy for all those Policies will be
aggregated and attributed to that distribution.
POLICIES WHICH ARE NOT MODIFIED ENDOWMENT CONTRACTS
Unlike loans from modified endowment contracts, a loan from a Policy that is not
a modified endowment contract will be considered indebtedness of the Owner and
no part of a loan will constitute income to the Owner. However, the treatment of
loans taken after the 15th Policy Year, is unclear; such loans might be
considered a withdrawal instead of indebtedness for federal tax purposes.
Pre-death distributions from a Policy that is not a modified endowment contract
will generally not be included in gross income to the extent that the amount
received does not exceed the Policy Owner's investment in the Policy. (An
exception to this general rule may occur in the case of a decrease or change
that reduces the benefits provided under a Policy in the first 15 years after
the Policy is issued and that results in a cash distribution to the Policy
Owner. Such a cash distribution may be taxed in whole or in part as ordinary
income to the extent of any gain in the Policy.) Further, the 10% penalty tax on
pre-death distributions does not apply to Policies that are not modified
endowment contracts.
Certain changes to Policies that are not modified endowment contracts may cause
such Policies to be treated as modified endowment contracts. A Policy Owner
should therefore consult a tax advisor before effecting any change to a Policy
that is not a modified endowment contract.
TREATMENT OF LOAN INTEREST
If there is any borrowing against the Policy, the interest paid on loans may not
be tax deductible.
THE COMPANY'S INCOME TAXES
The Company is taxed as a life insurance company under federal income tax law.
Presently, the Company does not expect to incur any income tax on the earnings
or the realized capital gains
31
<PAGE> 36
attributable to Fund UL II. However, the Company may assess a charge against the
Investment Options for federal income taxes attributable to those accounts in
the event that the Company incurs income or capital gains or other tax liability
attributable to Fund UL II under future tax law.
THE COMPANY
- --------------------------------------------------------------------------------
The Travelers Life and Annuity Company (the "Company") is a stock insurance
company which has been continuously engaged in the insurance business since its
incorporation in the state of Connecticut in 1973. The Company writes individual
life insurance and individual and group annuity contracts on a non-participating
basis, and acts as depositor for Fund UL II. The Company is licensed to conduct
life insurance business in a majority of the states of the United States, and
intends to seek licensure in the remaining states, except New York. The
Company's obligations as depositor for Fund UL II may not be transferred without
notice to and consent of Policy Owners.
The Company is an indirect wholly owned subsidiary of Citigroup Inc. The
Company's principal executive offices are located at One Tower Square, Hartford,
Connecticut 06183, telephone number (860) 277-0111.
The Company is subject to Connecticut law governing insurance companies and is
regulated and supervised by the Connecticut Commissioner of Insurance. An annual
statement in a prescribed form must be filed with the Commissioner on or before
March 1 in each year covering the operations of the Company for the preceding
year and its financial condition on December 31 of such year. The Company's
books and assets are subject to review or examination by the Commissioner, and a
full examination of its operations is conducted at least once every four years.
In addition, the Company is subject to the insurance laws and regulations of any
jurisdiction in which it sells its insurance Policies, as well as to various
federal and state securities laws and regulations.
IMSA
The Company is a member of the Insurance Marketplace Standards Association
("IMSA"), and as such may use the IMSA logo and IMSA membership in its
advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and service for individually
sold life insurance and annuities. IMSA members have adopted policies and
procedures that demonstrate a commitment to honesty, fairness and integrity in
all customer contacts involving the sale and service of individual life
insurance and annuity products.
32
<PAGE> 37
MANAGEMENT
- --------------------------------------------------------------------------------
DIRECTORS OF THE TRAVELERS LIFE AND ANNUITY COMPANY
The following are the Directors and Executive Officers of The Travelers Life and
Annuity Company. Unless otherwise indicated, the principal business address for
all individuals is the Company's Home Office at One Tower Square, Hartford,
Connecticut 06183. References to Citigroup include, prior to December 31, 1993,
Primerica Corporation or its predecessors, and prior to October 8, 1998,
Travelers Group Inc.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND POSITION SINCE PRINCIPAL BUSINESS
----------------- -------- ------------------
<S> <C> <C>
George C. Kokulis.......... 1996 President and Chief Executive Officer since April
2000,
Director Executive Vice President (7/1999 to 3/2000), Senior
Vice President (1995-1999), Vice President (1993-1995)
of The Travelers Life and Annuity Company.
Glenn D. Lammey............ 2000 Executive Vice President since May 2000 and Chief
Director Financial Officer, Chief Accounting Officer and
Controller since March 2000 of The Travelers Life and
Annuity Company; Executive Vice President, Claim
Services (1997-2000), Senior Vice President, Corporate
(1996-1997) of Travelers Property Casualty Corp.; Vice
President (1988) and Chief Financial Officer (1992)
Personal Lines of The Travelers Insurance Company.
Marla Berman Lewitus....... 2000 Senior Vice President and General Counsel since August
Director 1999 of The Travelers Life and Annuity Company;
Associate General Counsel (11/98-7/99), Assistant
General Counsel (11/91-7/93) of Citigroup Inc.; Senior
Counsel (11/91-7/93) Primerica Corporation.
Katherine M. Sullivan...... 1996 Senior Vice President since May 1996 and General
Director Counsel from May 1996 to August 1999 of The Travelers
Life and Annuity Company; Senior Vice President and
General Counsel (1994-1996) Connecticut Mutual;
Special Counsel & Chief of Staff (1988-1994) Aetna
Life & Casualty.
Marc P. Weill*............. 1994 Senior Vice President-Investments since 1993 and Chief
Director Investment Officer since 1995 of The Travelers Life
and Annuity Company; Senior Vice President and Chief
Investment Officer of Citigroup Inc. since 1992; Vice
President (1990-1992), Primerica Corporation; Vice
President (1989-1990), Smith Barney Inc.
</TABLE>
- ---------------
* Principal business address: Citigroup Inc., 153 East 53rd St., New York, New
York 10043
33
<PAGE> 38
SENIOR OFFICERS OF THE TRAVELERS LIFE AND ANNUITY COMPANY
The following are the Senior Officers of The Travelers Life and Annuity Company,
other than the Directors listed above, as of the date of this Prospectus. Unless
otherwise indicated, the principal business address for all individuals listed
is One Tower Square, Hartford, Connecticut 06183.
<TABLE>
<CAPTION>
NAME POSITION WITH INSURANCE COMPANY
---- -------------------------------
<S> <C>
Stuart Baritz........................ Senior Vice President
Barry Jacobson....................... Senior Vice President
Russell H. Johnson................... Senior Vice President
Glenn D. Lammey...................... Executive Vice President, Chief
Financial Officer, Chief Accounting
Officer and Controller
Marla Berman Lewitus................. Senior Vice President and General
Counsel
Brendan Lynch........................ Senior Vice President
Warren H. May........................ Senior Vice President
Kathleen A. Preston.................. Senior Vice President
Mary Jean Thornton................... Executive Vice President and
Chief Information Officer
David A. Tyson....................... Senior Vice President
F. Denney Voss....................... Senior Vice President
</TABLE>
Information relating to the management of the underlying funds is contained in
the applicable prospectuses.
EXAMPLE OF POLICY CHARGES
- --------------------------------------------------------------------------------
The following chart illustrates the surrender charges and Monthly Deduction
Amounts that would apply under a Policy based on the assumptions listed below.
Surrender charges and Monthly Deductions Amounts generally will be higher for an
Insured who is older than the assumed Insured, and lower for an Insured who is
younger (assuming the Insureds have the same risk classification). Cost of
Insurance rates go up each year as the Insured becomes a year older.
Male, Issue Age 45
Preferred, Non-Smoker
Annual Premium: $12,000.00
Hypothetical Gross Annual Investment
Rate of Return: 8%
Face Amount: $209,481
Variable Death Benefit Option
Current Charges
<TABLE>
<CAPTION>
TOTAL MONTHLY DEDUCTION
FOR THE POLICY YEAR
--------------------------
ADMINISTRATIVE
CUMULATIVE COST OF CHARGES AND
POLICY GROSS INSURANCE MONTHLY
YEAR PREMIUM SURRENDER CHARGES CHARGES POLICY CHARGES
- ------ ----------- ----------------- --------- --------------
<S> <C> <C> <C> <C>
1 $ 12,000.00 $1,504.07 $632.99 $845.66
2 $ 24,000.00 $1,353.25 $676.78 $845.66
3 $ 36,000.00 $1,202.42 $729.33 $845.66
5 $ 60,000.00 $ 902.86 $797.13 $720.00
10 $120,000.00 $ 150.83 $970.01 $720.00
</TABLE>
Hypothetical results shown above are illustrative only and are based on the
Hypothetical Gross Annual Investment Rate of Return shown above. This
Hypothetical Gross Annual Investment Rate of Return should not be deemed to be a
representation of past or future investment results. Actual
34
<PAGE> 39
Investment results may be more or less than shown. No representations can be
made that the hypothetical rates assumed can be achieved for any one year or
sustained over a period of time.
ILLUSTRATIONS
- --------------------------------------------------------------------------------
The following pages are intended to illustrate hypothetically how the Cash
Value, Cash Surrender Value and Death Benefit can change over time for Policies
issued to a 45-year old male. The difference between the Cash Value and the Cash
Surrender Value in these illustrations reflects the Surrender Charge that would
be incurred upon a full surrender of the Policy.
Two pages of values are shown. One page illustrates the assumption that the
maximum Guaranteed Cost of Insurance Rates allowable under the Policy are
charged in all years. The other page illustrates the assumption that the current
scale of Cost of Insurance Rates are charged in all years. The Cost of Insurance
Rates charged vary by age, sex (where permitted by state law) and underwriting
classification.
The values shown in these illustrations vary according to assumptions used for
charges, and gross rates of investment returns. For the first fifteen Policy
Years, the current and guaranteed charges consist of 0.65% for mortality and
expense risks and 0.67% for Investment Option expenses and thereafter 0.20% for
mortality and expense risks and 0.67% for Investment Option expenses. The charge
for Investment Option expenses reflected in the illustrations assumes that Cash
Value is allocated equally among all Investment Options and that no Policy Loans
are outstanding, and is an average of the investment advisory fees and other
expenses charged by each of the Investment Options during the most recent
audited calendar year. After deduction of these amounts, the illustrated gross
annual investment rates of return of 0%, 6%, and 12% correspond to approximate
net annual rates of -1.32%, 4.68%, and 10.68%, respectively on a current and
guaranteed basis during the first fifteen Policy Years, and to approximate net
annual rates of -0.87%, 5.13%, and 11.13%, respectively on a current and
guaranteed basis thereafter. The actual charges under a Policy for expenses of
the Investment Options will depend on the actual allocation of Cash Value and
may be higher or lower than those illustrated.
As stated above, the examples illustrate values that would result based upon
hypothetical uniform gross investment rates of return of 0%, 6% and 12%. The
values would be different from those shown if the gross rates averaged 0%, 6%,
and 12% over a period of years, but fluctuated above and below those averages.
The illustrations also assume that premiums are paid as indicated, no policy
loans are made, no increases or decreases to the Stated Amount are requested, no
partial surrenders are made, and no charges for transfers between funds are
incurred.
The illustrations do not reflect any charges for federal income taxes against
Fund UL II, since the Company is not currently deducting such charges from Fund
UL II. However, such charges may be made in the future, and in that event, the
gross annual investment rates of return would have to exceed 0%, 6% and 12% by
an amount sufficient to cover the tax charges in order to produce the Death
Benefits, Cash Values and Cash Surrender Values illustrated.
The second column of each Illustration shows the amount that would accumulate if
an amount equal to the Premium Payment was invested to earn interest (after
taxes) at 5%, compounded annually.
Upon request, the Company will provide a comparable personalized illustration
based upon the proposed Insured's age, sex, underwriting classification, the
specified insurance benefits, and the premium requested. The illustration will
show average fund expenses or, if requested, actual fund expenses. The
hypothetical gross annual investment return assumed in such an illustration will
not exceed 12%.
35
<PAGE> 40
TRAVELERS VARIABLE LIFE ACCUMULATOR
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE POLICY
VARIABLE DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED CHARGES
<TABLE>
<S> <C>
Male, Issue Age 45 Face Amount $209,481
Preferred, Non-Smoker Annual Premium $12,000.00
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% --------------------------------- --------------------------------- ---------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 12,600.00 $219,430 $220,068 $220,707 $ 9,949 $ 10,587 $ 11,226 $ 8,444 $ 9,083 $ 9,722
2 $ 25,830.00 $229,167 $231,067 $233,046 $ 19,686 $ 21,586 $ 23,565 $ 18,332 $ 20,233 $ 22,212
3 $ 39,721.50 $238,690 $242,494 $246,613 $ 29,209 $ 33,013 $ 37,132 $ 28,007 $ 31,810 $ 35,929
4 $ 54,307.58 $248,195 $254,565 $261,742 $ 38,714 $ 45,084 $ 52,261 $ 37,660 $ 44,031 $ 51,207
5 $ 69,622.95 $257,473 $267,097 $278,379 $ 47,992 $ 57,616 $ 68,898 $ 47,089 $ 56,714 $ 67,996
6 $ 85,704.10 $266,515 $280,099 $296,673 $ 57,034 $ 70,618 $ 87,192 $ 56,282 $ 69,866 $ 86,440
7 $102,589.31 $275,307 $293,574 $316,782 $ 65,826 $ 84,093 $107,301 $ 65,225 $ 83,492 $106,699
8 $120,318.77 $283,837 $307,528 $338,881 $ 74,356 $ 98,047 $129,400 $ 73,905 $ 97,597 $128,950
9 $138,934.71 $292,086 $321,963 $363,164 $ 82,605 $112,482 $153,683 $ 82,304 $112,181 $153,381
10 $158,481.45 $300,043 $336,884 $389,843 $ 90,562 $127,403 $180,362 $ 90,412 $127,252 $180,211
15 $271,889.90 $335,088 $419,077 $568,610 $125,607 $209,596 $359,129 $125,607 $209,596 $359,129
20 $416,631.02 $363,691 $520,193 $868,686 $154,210 $310,712 $659,205 $154,210 $310,712 $659,205
</TABLE>
These hypothetical rates of returns are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
36
<PAGE> 41
TRAVELERS VARIABLE LIFE ACCUMULATOR
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE POLICY
VARIABLE DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT CHARGES
<TABLE>
<S> <C>
Male, Issue Age 45 Face Amount $209,481
Preferred, Non-Smoker Annual Premium $12,000.00
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% --------------------------------- --------------------------------- ---------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 12,600.00 $219,859 $220,511 $221,164 $ 10,378 $ 11,030 $ 11,683 $ 8,874 $ 9,526 $ 10,179
2 $ 25,830.00 $230,056 $232,013 $234,048 $ 20,575 $ 22,532 $ 24,567 $ 19,222 $ 21,178 $ 23,214
3 $ 39,721.50 $240,067 $243,998 $248,253 $ 30,586 $ 34,517 $ 38,772 $ 29,383 $ 33,315 $ 37,569
4 $ 54,307.58 $250,031 $256,634 $264,066 $ 40,550 $ 47,153 $ 54,585 $ 39,496 $ 46,099 $ 53,531
5 $ 69,622.95 $259,836 $269,831 $281,538 $ 50,355 $ 60,350 $ 72,057 $ 49,452 $ 59,447 $ 71,154
6 $ 85,704.10 $269,493 $283,628 $300,857 $ 60,012 $ 74,147 $ 91,376 $ 59,260 $ 73,395 $ 90,624
7 $102,589.31 $278,995 $298,042 $322,210 $ 69,514 $ 88,561 $112,729 $ 68,913 $ 87,960 $112,127
8 $120,318.77 $288,289 $313,045 $345,755 $ 78,808 $103,564 $136,274 $ 78,358 $103,114 $135,823
9 $138,934.71 $297,453 $328,743 $371,807 $ 87,972 $119,262 $162,326 $ 87,671 $118,961 $162,025
10 $158,481.45 $306,460 $345,138 $400,603 $ 96,979 $135,657 $191,122 $ 96,828 $135,506 $190,971
15 $271,889.90 $348,593 $438,077 $596,387 $139,112 $228,596 $386,906 $139,112 $228,596 $386,906
20 $416,631.02 $390,061 $560,001 $933,411 $180,580 $350,520 $723,930 $180,580 $350,520 $723,930
</TABLE>
These hypothetical rates of returns are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
37
<PAGE> 42
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, Fund UL II Investment Options may show the percentage change
in the value of an Accumulation Unit based on the performance of the Investment
Option over a period of time, usually for the past one-, two-, three-, five-,
and ten-year periods determined by dividing the increase (decrease) in value for
that unit by the Accumulation Unit Value at the beginning of the period.
For Investment Options of Fund UL II that invest in underlying funds that were
in existence prior to the date on which the Investment Option became available
under the Policy, average annual rates of return may include periods prior to
the inception of the Investment Option. Performance calculations for Investment
Options with pre-existing Investment Options will be calculated by adjusting the
actual returns of the Investment Options to reflect the charges that would have
been assessed under the Investment Options had the Investment Option been
available under
Fund UL II during the period shown.
The following performance information represents the percentage change in the
value of an Accumulation Unit of the Investment Options for the periods
indicated, and reflects all expenses of the Investment Options. The chart
reflects the guaranteed maximum 0.65% mortality and expense risk charge. The
rates of return do not reflect the 2.5% front-end sales charge, the 2.25% state
premium tax charge or the 1.25% DAC charge (all of which are deducted from
premium payments) nor do they reflect surrender charges or Monthly Deduction
Amounts. The surrender charges and Monthly Deduction Amounts for a hypothetical
Insured are depicted in the Example following the Rates of Returns. Information
about the Charges and Deductions assessed under the Policy, can be found on page
21. Illustrations of how these charges affect Cash Values and Death Benefits,
begin on page 35. The performance information described in this prospectus, may
be used from time to time in advertisement for the Policy, subject to National
Association of Securities Dealers, Inc. ("NASD") and applicable state approval
and guidelines.
The table below shows the net annual rates of return for accumulation units of
investment options available through this Policy.
38
<PAGE> 43
AVERAGE ANNUAL RETURNS THROUGH 12/31/1999
<TABLE>
<CAPTION>
FUND
INCEPTION
UNDERLYING INVESTMENT OPTIONS ONE YEAR THREE YEARS FIVE YEARS TEN YEARS DATE
----------------------------- -------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
STOCK FUNDS:
AIM Capital Appreciation Portfolio 41.58% 22.24% -- -- 10/10/95
Alliance Growth Portfolio 30.97% 28.85% 29.60% -- 06/16/94
Capital Appreciation Fund (Janus) 51.97% 44.82% 39.07% 23.30% 03/18/82
Deutsche VIT EAFE Equity Index Fund 26.33% -- -- -- 08/22/97
Deutsche VIT Small Cap Index Fund 19.00% -- -- -- 08/25/97
Dreyfus Stock Index Fund 19.46% 25.93% 26.82% 16.58% 09/29/89
Fidelity VIP Equity Income Portfolio 5.36% 13.92% 17.48% 13.41% 10/09/86
Fidelity VIP Growth Portfolio 36.09% 31.98% 28.46% 18.79% 10/09/86
Janus Aspen Ser. Aggressive Growth N/A N/A N/A N/A N/A
Janus Aspen Ser. Global Technology N/A N/A N/A N/A N/A
Janus Aspen Series Worldwide Growth N/A N/A N/A N/A N/A
Smith Barney Equity Index Portfolio 19.59% 26.22% 27.39% -- 10/16/91
Smith Barney Large Cap Growth 30.05% -- -- -- 05/06/98
Smith Barney Large Cap Value -0.83% 10.61% 16.16% -- 06/16/94
Smith Barney Total Return Portfolio 20.89% 13.33% 17.46% -- 10/16/91
Templeton Growth Securities Fund 27.85% 12.45% 16.41% 12.50% 08/31/88
BOND FUNDS:
Fidelity VIP High Income Portfolio 7.16% 5.81% 9.83% 11.41% 09/19/85
Putnam Diversified Income Portfolio 0.20% 2.18% 5.87% -- 06/16/94
Smith Barney High Income Portfolio 1.67% 4.51% 8.37% -- 06/16/94
Travelers US Govt Securities -4.99% 5.00% 7.48% -- 01/24/92
Travelers Zero Coupon Bond 2005 -6.27% 4.88% -- -- 10/11/95
BALANCED FUNDS:
Fidelity VIP II Asset Mgr Portfolio 10.06% 14.45% 14.54% 12.08% 09/06/89
MFS Total Return Portfolio 1.71% 10.54% 13.77% -- 06/16/94
Travelers Managed Assets Trust 13.16% 17.82% 18.32% 12.00% 08/06/82
MONEY MARKET FUND:
Travelers Money Market(1) 4.04% 4.08% 3.76% 3.69% 10/01/81
</TABLE>
The information presented in the above chart represents the percentage change in
the value of an accumulation unit of the underlying investment options for the
periods indicated, and reflects all expenses of the underlying funds, 0.65%
mortality and expense risk charge for the first fifteen years and 0.20%
thereafter against amounts allocated to the underlying funds. The rates of
return do not reflect the 2.5% front-end sales charge, 2.25% state premium tax
charge, and 1.25% deferred acquisition cost charge (all of which are deducted
from premium payments) nor do they reflect surrender charges or monthly
deduction amounts. These charges would reduce the average annual return
reflected.
(1) An investment in Money Market Portfolio is neither insured nor guaranteed by
the United States Government. There is no assurance that a stable $1.00
value will be maintained.
39
<PAGE> 44
TRAVELERS VARIABLE LIFE ACCUMULATOR HYPOTHETICAL EXAMPLE*
Male Age 45 Preferred Non-smoker
Variable Death Benefit of $209,481 and annual premium payments of $12,000
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS
------------------------------- --------------------------------
CASH CASH
TOTAL CASH SURRENDER TOTAL CASH SURRENDER
UNDERLYING INVESTMENT OPTION INVESTMENT VALUE VALUE INVESTMENT VALUE VALUE
---------------------------- ---------- ----- --------- ---------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
STOCK FUNDS
AIM Capital Appreciation Portfolio 12,000 14,906 13,402 N/A N/A N/A
Alliance Growth Portfolio 12,000 13,749 12,244 60,000 118,604 117,701
Capital Appreciation Fund (Janus) 12,000 16,040 14,536 60,000 153,057 152,154
Deutsche VIT EAFE Equity Index Fund 12,000 13,243 11,739 N/A N/A N/A
Deutsche VIT Small Cap Index Fund 12,000 12,445 10,941 N/A N/A N/A
Dreyfus Stock Index Fund 12,000 12,495 10,991 60,000 109,863 108,961
Fidelity VIP Equity Income Portfolio 12,000 10,961 9,457 60,000 84,432 83,529
Fidelity VIP Growth Portfolio 12,000 14,307 12,803 60,000 114,960 114,058
Janus Aspen Ser. Aggressive Growth N/A N/A N/A N/A N/A N/A
Janus Aspen Ser. Global Technology N/A N/A N/A N/A N/A N/A
Janus Aspen Series Worldwide Growth N/A N/A N/A N/A N/A N/A
Smith Barney Equity Index Portfolio 12,000 12,509 11,005 60,000 111,612 110,709
Smith Barney Large Cap Growth 12,000 13,649 12,144 N/A N/A N/A
Smith Barney Large Cap Value 12,000 10,288 8,784 60,000 81,302 80,399
Smith Barney Total Return Portfolio 12,000 12,650 11,146 60,000 84,393 83,490
Templeton Growth Securities Fund 12,000 13,409 11,905 60,000 81,887 80,984
BOND FUNDS:
Fidelity VIP High Income Portfolio 12,000 10,378 8,874 60,000 67,609 66,706
Putnam Diversified Income Portfolio 12,000 11,157 9,653 60,000 60,112 59,210
Smith Barney High Income Portfolio 12,000 10,560 9,055 60,000 64,757 63,854
Travelers US Govt Securities 12,000 9,836 8,332 60,000 63,075 62,172
Travelers Zero Coupon Bond 2005 12,000 9,697 8,193 N/A N/A N/A
BALANCED FUNDS:
Fidelity VIP II Asset Mgr Portfolio 12,000 11,472 9,968 60,000 77,574 76,671
MFS Total Return Portfolio 12,000 10,564 9,059 60,000 75,860 74,958
Travelers Managed Assets Trust 12,000 11,809 10,304 60,000 86,509 85,606
MONEY MARKET FUND:
Travelers Money Market 12,000 10,817 9,313 60,000 56,430 55,527
</TABLE>
The charges used in the above example consist of a front-end sales charge of
2.5%, a state premium tax charge of 2.25%, a deferred acquisition cost charge of
1.25%, the 0.85% mortality and expense risk charge, all expenses of the
underlying funds, and monthly deduction charges including cost of insurance. The
benefits illustrated above may differ from other policies as a results of
differences in investment allocation, premium timing and amount, death benefit
type, as well as age and underwriting classification of the insured (which could
result in higher cost of insurance). Because Travelers Variable Life Accumulator
is a variable universal life insurance policy, actual performance should always
be considered in conjunction with the level of death benefit and cash values.
* These hypothetical examples show the effect of the performance quoted on the
cash values. Performance, loans, and withdrawals will affect the cash value
and death benefit of your policy. Since the values of the portfolio will
fluctuate, the cash value at any time may be more or less than the total
principal investment made, including at the time of surrender of the policy,
when surrender charges may apply.
40
<PAGE> 45
APPENDIX A
- --------------------------------------------------------------------------------
SURRENDER PENALTIES PER THOUSAND OF ISSUE AND INCREASE AMOUNT
<TABLE>
<CAPTION>
DURATION
ISSUE --------------------------------------------------------------------------
AGE 1 2 3 4 5 6 7 8 9 10
----- ----- ----- ----- ----- ----- ----- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 2.04 1.84 1.63 1.43 1.22 1.02 0.82 0.61 0.41 0.20
1 2.04 1.84 1.63 1.43 1.22 1.02 0.82 0.61 0.41 0.20
2 2.04 1.84 1.63 1.43 1.22 1.02 0.82 0.61 0.41 0.20
3 2.04 1.84 1.63 1.43 1.22 1.02 0.82 0.61 0.41 0.20
4 2.04 1.84 1.63 1.43 1.22 1.02 0.82 0.61 0.41 0.20
5 2.19 1.97 1.75 1.53 1.31 1.10 0.88 0.66 0.44 0.22
6 2.19 1.97 1.75 1.53 1.31 1.10 0.88 0.66 0.44 0.22
7 2.21 1.99 1.77 1.55 1.33 1.11 0.88 0.66 0.44 0.22
8 2.23 2.01 1.78 1.56 1.34 1.12 0.89 0.67 0.45 0.22
9 2.26 2.03 1.81 1.58 1.36 1.13 0.90 0.68 0.45 0.23
10 2.39 2.15 1.91 1.67 1.43 1.20 0.96 0.72 0.48 0.24
11 2.46 2.21 1.97 1.72 1.48 1.23 0.98 0.74 0.49 0.25
12 2.54 2.29 2.03 1.78 1.52 1.27 1.02 0.76 0.51 0.25
13 2.65 2.39 2.12 1.86 1.59 1.33 1.06 0.80 0.53 0.27
14 2.75 2.48 2.20 1.93 1.65 1.38 1.10 0.83 0.55 0.28
15 2.76 2.48 2.21 1.93 1.66 1.38 1.10 0.83 0.55 0.28
16 2.77 2.49 2.22 1.94 1.66 1.39 1.11 0.83 0.55 0.28
17 2.79 2.51 2.23 1.95 1.67 1.40 1.12 0.84 0.56 0.28
18 2.82 2.54 2.26 1.97 1.69 1.41 1.13 0.85 0.56 0.28
19 2.90 2.61 2.32 2.03 1.74 1.45 1.16 0.87 0.58 0.29
20 2.86 2.57 2.29 2.00 1.72 1.43 1.14 0.86 0.57 0.29
21 2.93 2.64 2.34 2.05 1.76 1.47 1.17 0.88 0.59 0.29
22 2.99 2.69 2.39 2.09 1.79 1.50 1.20 0.90 0.60 0.30
23 3.04 2.74 2.43 2.13 1.82 1.52 1.22 0.91 0.61 0.30
24 3.06 2.75 2.45 2.14 1.84 1.53 1.22 0.92 0.61 0.31
25 3.08 2.77 2.46 2.16 1.85 1.54 1.23 0.92 0.62 0.31
26 3.14 2.83 2.51 2.20 1.88 1.57 1.26 0.94 0.63 0.31
27 3.25 2.93 2.60 2.28 1.95 1.63 1.30 0.98 0.65 0.33
28 3.37 3.03 2.70 2.36 2.02 1.69 1.35 1.01 0.67 0.34
29 3.47 3.12 2.78 2.43 2.08 1.74 1.39 1.04 0.69 0.35
30 3.49 3.14 2.79 2.44 2.09 1.75 1.40 1.05 0.70 0.35
31 3.64 3.28 2.91 2.55 2.18 1.82 1.46 1.09 0.73 0.36
32 3.78 3.40 3.02 2.65 2.27 1.89 1.51 1.13 0.76 0.38
33 3.92 3.53 3.14 2.74 2.35 1.96 1.57 1.18 0.78 0.39
34 4.08 3.67 3.26 2.86 2.45 2.04 1.63 1.22 0.82 0.41
35 4.19 3.77 3.35 2.93 2.51 2.10 1.68 1.26 0.84 0.42
36 4.43 3.99 3.54 3.10 2.66 2.22 1.77 1.33 0.89 0.44
37 4.66 4.19 3.73 3.26 2.80 2.33 1.86 1.40 0.93 0.47
38 4.91 4.42 3.93 3.44 2.95 2.46 1.96 1.47 0.98 0.49
39 5.14 4.63 4.11 3.60 3.08 2.57 2.06 1.54 1.03 0.51
40 5.69 5.12 4.55 3.98 3.41 2.85 2.28 1.71 1.14 0.57
41 6.05 5.45 4.84 4.24 3.63 3.03 2.42 1.82 1.21 0.61
42 6.41 5.77 5.13 4.49 3.85 3.21 2.56 1.92 1.28 0.64
43 6.76 6.08 5.41 4.73 4.06 3.38 2.70 2.03 1.35 0.68
44 7.13 6.42 5.70 4.99 4.28 3.57 2.85 2.14 1.43 0.71
45 7.18 6.46 5.74 5.03 4.31 3.59 2.87 2.15 1.44 0.72
46 7.66 6.89 6.13 5.36 4.60 3.83 3.06 2.30 1.53 0.77
</TABLE>
A-1
<PAGE> 46
<TABLE>
<CAPTION>
DURATION
ISSUE --------------------------------------------------------------------------
AGE 1 2 3 4 5 6 7 8 9 10
----- ----- ----- ----- ----- ----- ----- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
47 8.14 7.33 6.51 5.70 4.88 4.07 3.26 2.44 1.63 0.81
48 8.63 7.77 6.90 6.04 5.18 4.32 3.45 2.59 1.73 0.86
49 9.11 8.20 7.29 6.38 5.47 4.56 3.64 2.73 1.82 0.91
50 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00
51 10.67 9.60 8.54 7.47 6.40 5.34 4.27 3.20 2.13 1.07
52 11.35 10.22 9.08 7.95 6.81 5.68 4.54 3.41 2.27 1.14
53 12.02 10.82 9.62 8.41 7.21 6.01 4.81 3.61 2.40 1.20
54 12.70 11.43 10.16 8.89 7.62 6.35 5.08 3.81 2.54 1.27
55 13.01 11.71 10.41 9.11 7.81 6.51 5.20 3.90 2.60 1.30
56 13.99 12.59 11.19 9.79 8.39 7.00 5.60 4.20 2.80 1.40
57 14.97 13.47 11.98 10.48 8.98 7.49 5.99 4.49 2.99 1.50
58 15.96 14.36 12.77 11.17 9.58 7.98 6.38 4.79 3.19 1.60
59 16.93 15.24 13.54 11.85 10.16 8.47 6.77 5.08 3.39 1.69
60 17.91 16.12 14.33 12.54 10.75 8.96 7.16 5.37 3.58 1.79
61 19.52 17.57 15.62 13.66 11.71 9.76 7.81 5.86 3.90 1.95
62 21.12 19.01 16.90 14.78 12.67 10.56 8.45 6.34 4.22 2.11
63 22.73 20.46 18.18 15.91 13.64 11.37 9.09 6.82 4.55 2.27
64 24.34 21.91 19.47 17.04 14.60 12.17 9.74 7.30 4.87 2.43
65 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
66 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
67 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
68 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
69 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
70 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
71 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
72 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
73 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
74 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
75 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
76 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
77 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
78 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
79 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
80 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
81 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
82 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
83 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
84 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
85 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
</TABLE>
A-2
<PAGE> 47
ANNUAL REPORT
DECEMBER 31, 1999
THE TRAVELERS FUND UL II
FOR VARIABLE LIFE INSURANCE
[TRAVELERS LIFE & ANNUITY LOGO]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183
<PAGE> 48
THE TRAVELERS FUND UL II
FOR VARIABLE LIFE INSURANCE
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
BT Insurance Funds Trust, 37,556 shares (cost $474,890) ............................ $ 485,472
Capital Appreciation Fund, 139,048 shares (cost $13,959,917) ....................... 15,128,425
Dreyfus Stock Index Fund, 237,186 shares (cost $8,549,801) ......................... 9,119,796
Fidelity's Variable Insurance Products Fund, 420,445 shares (cost $11,388,087) ..... 13,307,429
Fidelity's Variable Insurance Products Fund II, 74,865 shares (cost $1,302,334) .... 1,397,728
Greenwich Street Series Fund, 69,985 shares (cost $1,320,813) ...................... 1,458,014
Managed Assets Trust, 44,354 shares (cost $859,891) ................................ 936,763
Money Market Portfolio, 7,336,067 shares (cost $7,336,067) ......................... 7,336,067
Templeton Variable Products Series Fund, 217,152 shares (cost $4,661,360) .......... 4,914,376
The Travelers Series Trust, 112,152 shares (cost $1,362,030) ....................... 1,323,353
Travelers Series Fund Inc., 1,080,689 shares (cost $22,143,901) .................... 23,915,595
-----------
Total Investments (cost $73,359,091) ............................................. $ 79,323,018
Receivables:
Dividends .......................................................................... 12,267
Premium payments and transfers from other Travelers accounts ....................... 6,314,069
Other assets ......................................................................... 11
-------------
Total Assets ..................................................................... 85,649,365
-------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other Travelers accounts ...................... 6,303,726
Insurance charges .................................................................. 14,874
Administrative charges ............................................................. 1,860
Accrued liabilities .................................................................. 8
-------------
Total Liabilities ................................................................ 6,320,468
-------------
NET ASSETS: ............................................................................ $ 79,328,897
=============
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 49
THE TRAVELERS FUND UL II
FOR VARIABLE LIFE INSURANCE
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................................. $ 2,182,985
EXPENSES:
Insurance charges ..................................................... $ 397,527
Administrative charges ................................................ 49,690
------------
Total expenses ...................................................... 447,217
------------
Net investment income ............................................. 1,735,768
------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ...................................... 650,438,540
Cost of investments sold ............................................ 643,284,634
------------
Net realized gain (loss) .......................................... 7,153,906
Change in unrealized gain (loss) on investments:
Unrealized gain at December 31, 1998 ................................ 2,071,549
Unrealized gain at December 31, 1999 ................................ 5,963,927
------------
Net change in unrealized gain (loss) for the year ................. 3,892,378
------------
Net realized gain (loss) and change in unrealized gain (loss) ... 11,046,284
------------
Net increase in net assets resulting from operations .................. $ 12,782,052
============
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 50
THE TRAVELERS FUND UL II
FOR VARIABLE LIFE INSURANCE
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income ................................................... $ 1,735,768 $ 904,958
Net realized gain (loss) from investment transactions ................... 7,153,906 2,285,688
Net change in unrealized gain (loss) on investments ..................... 3,892,378 1,465,346
------------- -------------
Net increase in net assets resulting from operations .................. 12,782,052 4,655,992
------------- -------------
UNIT TRANSACTIONS:
Participant premium payments
(applicable to 18,476,388 and 13,807,247 units, respectively) ......... 35,436,722 23,714,477
Participant transfers from other Travelers accounts
(applicable to 355,543,526 and 112,904,264 units, respectively) ....... 735,676,151 180,481,902
Contract surrenders
(applicable to 2,397,489 and 1,573,510 units, respectively) ........... (5,462,769) (2,923,386)
Participant transfers to other Travelers accounts
(applicable to 358,082,881 and 114,570,535 units, respectively) ....... (735,489,577) (180,744,823)
Other payments to participants
(applicable to 1,822 units) ........................................... (5,081) -
------------- -------------
Net increase in net assets resulting from unit transactions ........... 30,155,446 20,528,170
------------- -------------
Net increase in net assets .......................................... 42,937,498 25,184,162
NET ASSETS:
Beginning of year ....................................................... 36,391,399 11,207,237
------------- -------------
End of year ............................................................. $ 79,328,897 $ 36,391,399
============= =============
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 51
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Fund UL II for Variable Life Insurance ("Fund UL II") is a
separate account of The Travelers Life and Annuity Company ("Travelers
Life"), a wholly owned subsidiary of The Travelers Insurance Company ("The
Travelers"), an indirect wholly owned subsidiary of Citigroup Inc., and is
available for funding certain variable life insurance contracts issued by
Travelers Life. Fund UL II is registered under the Investment Company Act of
1940, as amended, as a unit investment trust. Fund UL II is comprised of the
MarketLife product.
Participant premium payments applied to Fund UL II are invested in one or
more eligible funds in accordance with the selection made by the owner. As
of December 31, 1999, the eligible funds available under Fund UL II were:
Managed Assets Trust; Capital Appreciation Fund; Money Market Portfolio;
U.S. Government Securities Portfolio, Utilities Portfolio, Zero Coupon Bond
Fund Portfolio Series 2000 and Zero Coupon Bond Fund Portfolio Series 2005
of The Travelers Series Trust; Alliance Growth Portfolio, Smith Barney Large
Cap Value Portfolio, Smith Barney High Income Portfolio, MFS Total Return
Portfolio, Putnam Diversified Income Portfolio and AIM Capital Appreciation
Portfolio of Travelers Series Fund Inc.; Total Return Portfolio and Equity
Index Portfolio of Greenwich Street Series Fund (all of which are managed by
affiliates of The Travelers); Templeton Bond Fund (Class 1), Templeton Stock
Fund (Class 1) and Templeton Asset Allocation Fund (Class 1) of Templeton
Variable Products Series Fund; High Income Portfolio, Growth Portfolio and
Equity-Income Portfolio of Fidelity's Variable Insurance Products Fund;
Asset Manager Portfolio of Fidelity's Variable Insurance Products Fund II;
EAFE Equity Index Fund and Small Cap Index Fund of BT Insurance Funds Trust;
and Dreyfus Stock Index Fund. All of the funds are Massachusetts business
trusts, except for Travelers Series Fund Inc. and Dreyfus Stock Index Fund
which are incorporated under Maryland law. Not all funds may be available in
all states or to all contract owners.
Effective December 18, 1998, Zero Coupon Bond Fund Portfolio Series 1998 of
The Travelers Series Trust was fully liquidated.
The following is a summary of significant accounting policies consistently
followed by Fund UL II in the preparation of its financial statements.
SECURITY VALUATION. Investments are valued daily at the net asset values per
share of the underlying funds.
SECURITY TRANSACTIONS. Security transactions are accounted for on the trade
date. Dividend income is recorded on the ex-dividend date.
FEDERAL INCOME TAXES. The operations of Fund UL II form a part of the total
operations of Travelers Life and are not taxed separately. Travelers Life is
taxed as a life insurance company under the Internal Revenue Code of 1986,
as amended (the "Code"). Under existing federal income tax law, no taxes are
payable on the investment income of Fund UL II. Fund UL II is not taxed as a
"regulated investment company" under Subchapter M of the Code.
OTHER. 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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
-4-
<PAGE> 52
NOTES TO FINANCIAL STATEMENTS - CONTINUED
2. INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments were
$682,448,115 and $650,438,540, respectively, for the year ended December 31,
1999. Realized gains and losses from investment transactions are reported on
an average cost basis. The cost of investments in eligible funds was
$73,359,091 at December 31, 1999. Gross unrealized appreciation for all
investments at December 31, 1999 was $6,180,613. Gross unrealized
depreciation for all investments at December 31, 1999 was $216,686.
3. CONTRACT CHARGES
Insurance charges are paid for the mortality and expense risks assumed by
Travelers Life. Each business day, Travelers Life deducts a mortality and
expense risk charge which is reflected in the calculation of unit values.
This charge equals, on an annual basis, 0.80% of the amounts held in each
funding option for the first fifteen years that a policy is in effect.
Beginning in the sixteenth year that a policy is in effect, these charges
are reduced to 0.45% for Travelers Marketlife policies issued prior to May
1, 1998, 0.25% for Travelers Marketlife policies issued after May 1, 1998
and 0.35% for Travelers Variable Survivorship life on an annual basis. As of
December 31, 1999 all contract owners had insurance charges of 0.80%
Administrative charges are paid for administrative expenses. This fee is
also deducted each business day and reflected in the calculation of unit
values. This charge equals, on an annual basis, 0.10% of the amounts held in
each funding option for the first fifteen years the policy is in effect.
Beginning in the sixteenth year that a policy is in effect, these charges
are eliminated. As of December 31,1999 all contract owners had
administrative charges of 0.10%.
Travelers Life receives contingent surrender charges on full or partial
contract surrenders. Such charges are computed by applying various
percentages to premiums and/or stated contract amounts (as described in the
prospectus). Travelers Life received $95,933 and $31,109 in satisfaction of
such contingent surrender charges for the years ended December 31, 1999 and
1998, respectively.
4. CHANGE IN ACCOUNTING
On January 1, 1999, in conjunction with the implementation of a new system,
Fund UL II changed its basis of reporting realized gains and losses for
investment transactions from an identified basis to an average cost basis.
The accounting change had no effect on net assets.
-5-
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------------------------
UNIT NET
UNITS VALUE ASSETS
----- ----- ------
<S> <C> <C> <C>
BT Insurance Funds Trust
EAFE Equity Index Fund ................................................... 297,463 $ 1.136 $ 337,893
Small Cap Index Fund ..................................................... 130,058 1.134 147,490
Capital Appreciation Fund .................................................. 2,419,189 6.559 15,868,506
Dreyfus Stock Index Fund ................................................... 3,193,292 3.322 10,606,961
Fidelity's Variable Insurance Products Fund
Equity-Income Portfolio .................................................. 2,431,810 2.293 5,575,316
Growth Portfolio ......................................................... 1,989,627 3.437 6,839,129
High Income Portfolio .................................................... 585,771 1.529 895,564
Fidelity's Variable Insurance Products Fund II
Asset Manager Portfolio .................................................. 768,105 1.819 1,397,422
Greenwich Street Series Fund
Equity Index Portfolio ................................................... 100,009 1.106 110,617
Total Return Portfolio ................................................... 719,187 1.873 1,347,095
Managed Assets Trust ....................................................... 257,384 3.639 936,573
Money Market Portfolio ..................................................... 4,596,491 1.668 7,666,544
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund (Class 1) ................................ 625,303 1.995 1,247,175
Templeton Bond Fund (Class 1) ............................................ 193,736 1.173 227,181
Templeton Stock Fund (Class 1) ........................................... 1,668,788 2.061 3,439,831
The Travelers Series Trust
U.S. Government Securities Portfolio ..................................... 641,970 1.339 859,667
Utilities Portfolio ...................................................... 122,243 1.955 238,992
Zero Coupon Bond Fund Portfolio Series 2000 .............................. 48,323 1.215 58,726
Zero Coupon Bond Fund Portfolio Series 2005 .............................. 137,305 1.207 165,687
Travelers Series Fund Inc.
AIM Capital Appreciation Portfolio ....................................... 2,347,246 1.940 4,554,365
Alliance Growth Portfolio ................................................ 4,047,929 2.863 11,590,475
MFS Total Return Portfolio ............................................... 1,512,701 1.666 2,520,211
Putnam Diversified Income Portfolio ...................................... 455,112 1.011 459,999
Smith Barney High Income Portfolio ....................................... 436,981 1.272 555,712
Smith Barney Large Cap Value Portfolio ................................... 980,217 1.716 1,681,766
-----------
Net Contract Owners' Equity ...................................................................................... $79,328,897
===========
</TABLE>
-6-
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
INVESTMENT OPTIONS NO. OF MARKET
SHARES VALUE
----------- -----------
<S> <C> <C>
BT INSURANCE FUNDS TRUST (0.6%)
EAFE Equity Index Fund (Cost $333,495) 24,850 $ 337,958
Small Cap Index Fund (Cost $141,395) 12,706 147,514
----------- -----------
Total (Cost $474,890) 37,556 485,472
----------- -----------
CAPITAL APPRECIATION FUND (19.1%)
Total (Cost $13,959,917) 139,048 15,128,425
----------- -----------
DREYFUS STOCK INDEX FUND (11.5%)
Total (Cost $8,549,801) 237,186 9,119,796
----------- -----------
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND (16.8%)
Equity-Income Portfolio (Cost $5,216,966) 216,814 5,574,287
Growth Portfolio (Cost $5,221,004) 124,486 6,838,017
High Income Portfolio (Cost $950,117) 79,145 895,125
----------- -----------
Total (Cost $11,388,087) 420,445 13,307,429
----------- -----------
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II (1.8%)
Asset Manager Portfolio
Total (Cost $1,302,334) 74,865 1,397,728
----------- -----------
GREENWICH STREET SERIES FUND (1.8%)
Equity Index Portfolio (Cost $102,425) 3,085 110,642
Total Return Portfolio (Cost $1,218,388) 66,900 1,347,372
----------- -----------
Total (Cost $1,320,813) 69,985 1,458,014
----------- -----------
MANAGED ASSETS TRUST (1.2%)
Total (Cost $859,891) 44,354 936,763
----------- -----------
MONEY MARKET PORTFOLIO (9.2%)
Total (Cost $7,336,067) 7,336,067 7,336,067
----------- -----------
TEMPLETON VARIABLE PRODUCTS SERIES FUND (6.2%)
Templeton Asset Allocation Fund (Class 1) (Cost $1,153,790) 53,365 1,247,145
Templeton Bond Fund (Class 1) (Cost $236,490) 22,745 227,226
Templeton Stock Fund (Class 1) (Cost $3,271,080) 141,042 3,440,005
----------- -----------
Total (Cost $4,661,360) 217,152 4,914,376
----------- -----------
</TABLE>
-7-
<PAGE> 55
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
----------- -----------
<S> <C> <C>
THE TRAVELERS SERIES TRUST (1.7%)
U.S. Government Securities Portfolio (Cost $892,813) 76,025 $ 859,844
Utilities Portfolio (Cost $239,711) 15,025 239,046
Zero Coupon Bond Fund Portfolio Series 2000 (Cost $58,914) 5,541 58,739
Zero Coupon Bond Fund Portfolio Series 2005 (Cost $170,592) 15,561 165,724
----------- -----------
Total (Cost $1,362,030) 112,152 1,323,353
----------- -----------
TRAVELERS SERIES FUND INC. (30.1%)
AIM Capital Appreciation Portfolio (Cost $9,687,052) 497,559 10,299,480
Alliance Growth Portfolio (Cost $7,127,472) 255,384 8,397,018
MFS Total Return Portfolio (Cost $2,562,258) 155,333 2,521,059
Putnam Diversified Income Portfolio (Cost $456,612) 40,182 460,087
Smith Barney High Income Portfolio (Cost $600,784) 46,013 555,836
Smith Barney Large Cap Value Portfolio (Cost $1,709,723) 86,218 1,682,115
----------- -----------
Total (Cost $22,143,901) 1,080,689 23,915,595
----------- -----------
TOTAL INVESTMENT OPTIONS (100%)
(COST $73,359,091) $79,323,018
===========
</TABLE>
-8-
<PAGE> 56
This page intentionally left blank
-9-
<PAGE> 57
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND UL II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
EAFE EQUITY INDEX FUND SMALL CAP INDEX FUND
------------------------------- -------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ................................................ $ 9,057 $ - $ 3,462 $ -
------------- ------------- ------------- -------------
EXPENSES:
Insurance charges ........................................ 80 - 48 -
Administrative charges ................................... 10 - 6 -
------------- ------------- ------------- -------------
Net investment income (loss) ......................... 8,967 - 3,408 -
------------- ------------- ------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ......................... 9,468 - 2,534 -
Cost of investments sold ............................... 9,125 - 2,527 -
------------- ------------- ------------- -------------
Net realized gain (loss) ............................. 343 - 7 -
------------- ------------- ------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ............... - - - -
Unrealized gain (loss) end of year ..................... 4,463 - 6,119 -
------------- ------------- ------------- -------------
Net change in unrealized gain (loss) for the year .... 4,463 - 6,119 -
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations ............................ 13,773 - 9,534 -
------------- ------------- ------------- -------------
UNIT TRANSACTIONS:
Participant premium payments ............................. 1,934 - 23 -
Participant transfers from other Travelers accounts ...... 332,711 - 140,318 -
Contract surrenders ...................................... (3,091) - (2,384) -
Participant transfers to other Travelers accounts ........ (7,434) - (1) -
Other payments to participants ........................... - - - -
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from unit transactions ..................... 324,120 - 137,956 -
------------- ------------- ------------- -------------
Net increase (decrease) in net assets ................ 337,893 - 147,490 -
NET ASSETS:
Beginning of year ...................................... - - - -
------------- ------------- ------------- -------------
End of year ............................................ $ 337,893 $ - $ 147,490 $ -
============= ============= ============= =============
<CAPTION>
CAPITAL APPRECIATION FUND
----------------------------------
1999 1998
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends ................................................ $ 199,040 $ 74,869
------------- -------------
EXPENSES:
Insurance charges ........................................ 70,272 20,764
Administrative charges ................................... 8,784 2,596
------------- -------------
Net investment income (loss) ......................... 119,984 51,509
------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ......................... 127,243,897 8,939,564
Cost of investments sold ............................... 124,152,005 7,651,328
------------- -------------
Net realized gain (loss) ............................. 3,091,892 1,288,236
------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ............... 332,086 105,992
Unrealized gain (loss) end of year ..................... 1,168,508 332,086
------------- -------------
Net change in unrealized gain (loss) for the year .... 836,422 226,094
------------- -------------
Net increase (decrease) in net assets
resulting from operations ............................ 4,048,298 1,565,839
------------- -------------
UNIT TRANSACTIONS:
Participant premium payments ............................. 3,269,696 1,598,260
Participant transfers from other Travelers accounts ...... 149,612,053 9,781,587
Contract surrenders ...................................... (887,296) (358,656)
Participant transfers to other Travelers accounts ........ (145,074,599) (8,883,995)
Other payments to participants ........................... - -
------------- -------------
Net increase (decrease) in net assets
resulting from unit transactions ..................... 6,919,854 2,137,216
------------- -------------
Net increase (decrease) in net assets ................ 10,968,152 3,703,055
NET ASSETS:
Beginning of year ...................................... 4,900,354 1,197,299
------------- -------------
End of year ............................................ $ 15,868,506 $ 4,900,354
============= =============
</TABLE>
-10-
<PAGE> 58
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
DREYFUS STOCK INDEX FUND EQUITY-INCOME PORTFOLIO GROWTH PORTFOLIO HIGH INCOME PORTFOLIO
- ------------------------------ ------------------------------ ------------------------------ -------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 135,626 $ 38,721 $ 191,104 $ 85,961 $ 311,656 $ 124,603 $ 70,671 $ 49,003
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
52,870 18,973 39,676 18,997 32,020 12,316 6,523 4,741
6,609 2,372 4,960 2,375 4,002 1,540 815 593
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
76,147 17,376 146,468 64,589 275,634 110,747 63,333 43,669
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
97,379,615 29,878,196 597,942 252,634 230,086 172,237 124,435 57,305
96,392,640 29,148,808 554,689 208,954 196,558 146,160 133,821 60,868
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
986,975 729,388 43,253 43,680 33,528 26,077 (9,386) (3,563)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
27,096 86,164 301,675 99,327 477,523 65,515 (56,685) 28,905
569,995 27,096 357,321 301,675 1,617,013 477,523 (54,992) (56,685)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
542,899 (59,068) 55,646 202,348 1,139,490 412,008 1,693 (85,590)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1,606,021 687,696 245,367 310,617 1,448,652 548,832 55,640 (45,484)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
2,381,601 1,639,480 1,765,268 1,065,449 1,742,272 878,682 222,352 291,102
108,487,595 36,723,998 639,875 1,874,478 1,801,905 667,426 83,218 195,962
(735,493) (333,118) (730,264) (342,648) (542,829) (248,686) (88,109) (50,099)
(108,443,070) (32,413,993) (275,030) (151,989) (226,852) (49,786) (97,564) (48,116)
(1,247) - (1,151) - (1,337) - - -
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1,689,386 5,616,367 1,398,698 2,445,290 2,773,159 1,247,636 119,897 388,849
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
3,295,407 6,304,063 1,644,065 2,755,907 4,221,811 1,796,468 175,537 343,365
7,311,554 1,007,491 3,931,251 1,175,344 2,617,318 820,850 720,027 376,662
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 10,606,961 $ 7,311,554 $ 5,575,316 $ 3,931,251 $ 6,839,129 $ 2,617,318 $ 895,564 $ 720,027
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
-11-
<PAGE> 59
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND UL II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
ASSET MANAGER PORTFOLIO EQUITY INDEX PORTFOLIO
----------------------------- ------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends .................................................. $ 56,544 $ 44,447 $ - $ -
----------- ----------- ----------- -----------
EXPENSES:
Insurance charges .......................................... 7,891 3,774 152 -
Administrative charges ..................................... 987 471 19 -
----------- ----------- ----------- -----------
Net investment income (loss) ........................... 47,666 40,202 (171) -
----------- ----------- ----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................... 233,338 84,980 6,103 -
Cost of investments sold ................................. 228,232 81,260 5,967 -
----------- ----------- ----------- -----------
Net realized gain (loss) ............................... 5,106 3,720 136 -
----------- ----------- ----------- -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ................. 40,857 14,373 - -
Unrealized gain (loss) end of year ....................... 95,394 40,857 8,217 -
----------- ----------- ----------- -----------
Net change in unrealized gain (loss) for the year ...... 54,537 26,484 8,217 -
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations .............................. 107,309 70,406 8,182 -
----------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Participant premium payments ............................... 332,908 316,953 662 -
Participant transfers from other Travelers accounts ........ 528,429 133,229 109,725 -
Contract surrenders ........................................ (118,035) (65,210) (7,889) -
Participant transfers to other Travelers accounts .......... (160,687) (11,280) (63) -
Other payments to participants ............................. - - - -
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions ....................... 582,615 373,692 102,435 -
----------- ----------- ----------- -----------
Net increase (decrease) in net assets .................. 689,924 444,098 110,617 -
NET ASSETS:
Beginning of year ........................................ 707,498 263,400 - -
----------- ----------- ----------- -----------
End of year .............................................. $ 1,397,422 $ 707,498 $ 110,617 $ -
=========== =========== =========== ===========
<CAPTION>
TOTAL RETURN PORTFOLIO
------------------------------
1999 1998
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends .................................................. $ 56,611 $ 38,676
----------- -----------
EXPENSES:
Insurance charges .......................................... 7,468 5,776
Administrative charges ..................................... 934 722
----------- -----------
Net investment income (loss) ........................... 48,209 32,178
----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................... 105,351 173,048
Cost of investments sold ................................. 102,692 163,752
----------- -----------
Net realized gain (loss) ............................... 2,659 9,296
----------- -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ................. (8,555) 6,485
Unrealized gain (loss) end of year ....................... 128,984 (8,555)
----------- -----------
Net change in unrealized gain (loss) for the year ...... 137,539 (15,040)
----------- -----------
Net increase (decrease) in net assets
resulting from operations .............................. 188,407 26,434
----------- -----------
UNIT TRANSACTIONS:
Participant premium payments ............................... 302,453 247,970
Participant transfers from other Travelers accounts ........ 174,995 234,893
Contract surrenders ........................................ (60,556) (60,314)
Participant transfers to other Travelers accounts .......... (60,689) (121,404)
Other payments to participants ............................. - -
----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions ....................... 356,203 301,145
----------- -----------
Net increase (decrease) in net assets .................. 544,610 327,579
NET ASSETS:
Beginning of year ........................................ 802,485 474,906
----------- -----------
End of year .............................................. $ 1,347,095 $ 802,485
=========== ===========
</TABLE>
-12-
<PAGE> 60
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
TEMPLETON ASSET ALLOCATION TEMPLETON BOND FUND
MANAGED ASSETS TRUST MONEY MARKET PORTFOLIO FUND (CLASS 1) (CLASS 1)
- ----------------------------- ------------------------------ ------------------------------ -------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 47,603 $ 16,040 $ 208,307 $ 115,285 $ 133,806 $ 30,464 $ 7,557 $ 12,130
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
5,197 1,786 33,484 18,666 8,069 5,100 1,492 1,546
650 223 4,185 2,333 1,009 638 186 193
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
41,756 14,031 170,638 94,286 124,728 24,726 5,879 10,391
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
28,700 43,382 199,337,049 40,088,922 137,071 138,697 113,737 73,913
27,391 37,679 199,337,049 40,088,922 139,841 136,460 119,157 75,268
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1,309 5,703 - - (2,770) 2,237 (5,420) (1,355)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
31,459 4,755 - - 4,636 1,084 3,417 1,000
76,872 31,459 - - 93,355 4,636 (9,264) 3,417
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
45,413 26,704 - - 88,719 3,552 (12,681) 2,417
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
88,478 46,438 170,638 94,286 210,677 30,515 (12,222) 11,453
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
216,077 148,771 18,371,838 13,513,324 298,633 318,867 142,532 26,582
243,370 212,553 218,183,818 37,931,466 153,923 261,063 24,612 121,110
(63,543) (21,950) (764,210) (555,249) (114,783) (80,180) (13,578) (9,468)
(14,357) (9,263) (230,114,295) (50,565,449) (84,066) (76,895) (111,452) (66,157)
- - - - - - - -
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
381,547 330,111 5,677,151 324,092 253,707 422,855 42,114 72,067
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
470,025 376,549 5,847,789 418,378 464,384 453,370 29,892 83,520
466,548 89,999 1,818,755 1,400,377 782,791 329,421 197,289 113,769
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 936,573 $ 466,548 $ 7,666,544 $ 1,818,755 $ 1,247,175 $ 782,791 $ 227,181 $ 197,289
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
-13-
<PAGE> 61
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND UL II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
TEMPLETON STOCK U.S. GOVERNMENT SECURITIES
FUND (CLASS 1) PORTFOLIO
-------------------------------- --------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ 231,144 $ 166,239 $ 55 $ 46,257
------------- ------------- ------------- -------------
EXPENSES:
Insurance charges ....................................... 24,636 16,676 5,037 2,991
Administrative charges .................................. 3,079 2,084 629 374
------------- ------------- ------------- -------------
Net investment income (loss) ........................ 203,429 147,479 (5,611) 42,892
------------- ------------- ------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................ 97,089,877 25,950,404 49,199 13,179
Cost of investments sold .............................. 96,139,573 26,094,788 51,439 12,003
------------- ------------- ------------- -------------
Net realized gain (loss) ............................ 950,304 (144,384) (2,240) 1,176
------------- ------------- ------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .............. 109,315 (7,984) (9,189) 738
Unrealized gain (loss) end of year .................... 168,925 109,315 (32,969) (9,189)
------------- ------------- ------------- -------------
Net change in unrealized gain (loss) for the year ... 59,610 117,299 (23,780) (9,927)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations ........................... 1,213,343 120,394 (31,631) 34,141
------------- ------------- ------------- -------------
UNIT TRANSACTIONS:
Participant premium payments ............................ 586,856 895,395 134,083 50,942
Participant transfers from other Travelers accounts ..... 100,975,933 26,650,363 246,413 456,331
Contract surrenders ..................................... (241,745) (212,082) (30,946) (14,039)
Participant transfers to other Travelers accounts ....... (101,379,349) (26,276,598) (30,641) (2,990)
Other payments to participants .......................... - - - -
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from unit transactions .................... (58,305) 1,057,078 318,909 490,244
------------- ------------- ------------- -------------
Net increase (decrease) in net assets ............... 1,155,038 1,177,472 287,278 524,385
NET ASSETS:
Beginning of year ..................................... 2,284,793 1,107,321 572,389 48,004
------------- ------------- ------------- -------------
End of year ........................................... $ 3,439,831 $ 2,284,793 $ 859,667 $ 572,389
============= ============= ============= =============
<CAPTION>
UTILITIES PORTFOLIO
--------------------------------
1999 1998
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ 11,441 $ 3,805
------------- -------------
EXPENSES:
Insurance charges ....................................... 1,319 604
Administrative charges .................................. 165 75
------------- -------------
Net investment income (loss) ........................ 9,957 3,126
------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................ 27,466 15,147
Cost of investments sold .............................. 25,417 11,670
------------- -------------
Net realized gain (loss) ............................ 2,049 3,477
------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .............. 12,007 6,150
Unrealized gain (loss) end of year .................... (665) 12,007
------------- -------------
Net change in unrealized gain (loss) for the year ... (12,672) 5,857
------------- -------------
Net increase (decrease) in net assets
resulting from operations ........................... (666) 12,460
------------- -------------
UNIT TRANSACTIONS:
Participant premium payments ............................ 84,903 18,753
Participant transfers from other Travelers accounts ..... 92,153 30,394
Contract surrenders ..................................... (16,064) (15,675)
Participant transfers to other Travelers accounts ....... (22,055) (162)
Other payments to participants .......................... - -
------------- -------------
Net increase (decrease) in net assets
resulting from unit transactions .................... 138,937 33,310
------------- -------------
Net increase (decrease) in net assets ............... 138,271 45,770
NET ASSETS:
Beginning of year ..................................... 100,721 54,951
------------- -------------
End of year ........................................... $ 238,992 $ 100,721
============= =============
</TABLE>
-14-
<PAGE> 62
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
ZERO COUPON BOND FUND ZERO COUPON BOND FUND ZERO COUPON BOND FUND AIM CAPITAL APPRECIATION
PORTFOLIO SERIES 1998 PORTFOLIO SERIES 2000 PORTFOLIO SERIES 2005 PORTFOLIO
- ----------------------------- ------------------------------ ------------------------------ -------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ - $ 6 $ - $ 1,849 $ - $ 3,678 $ - $ 2,031
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- 7 354 122 935 331 26,824 14,139
- 1 44 16 117 41 3,353 1,767
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- (2) (398) 1,711 (1,052) 3,306 (30,177) (13,875)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- 2,999 2,043 17,524 8,085 5,292 115,254,018 50,364,424
- 3,068 2,102 16,901 8,288 4,973 114,018,484 50,138,696
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- (69) (59) 623 (203) 319 1,235,534 225,728
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- (113) (1,767) (184) 612 (192) 149,668 14,449
- - (175) (1,767) (4,868) 612 612,428 149,668
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- 113 1,592 (1,583) (5,480) 804 462,760 135,219
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- 42 1,135 751 (6,735) 4,429 1,668,117 347,072
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- 327 5,680 3,385 30,951 28,748 2,273,185 604,531
- 56 19,836 38,105 73,021 35,774 133,209,337 62,271,932
- (543) (1,879) (2,567) (9,508) (6,320) (238,987) (176,136)
- (2,484) (5) (14,973) (184) (109) (134,410,175) (61,632,098)
- - - - - - - -
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- (2,644) 23,632 23,950 94,280 58,093 833,360 1,068,229
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- (2,602) 24,767 24,701 87,545 62,522 2,501,477 1,415,301
- 2,602 33,959 9,258 78,142 15,620 2,052,888 637,587
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ - $ - $ 58,726 $ 33,959 $ 165,687 $ 78,142 $ 4,554,365 $ 2,052,888
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
-15-
<PAGE> 63
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND UL II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
ALLIANCE GROWTH PORTFOLIO MFS TOTAL RETURN PORTFOLIO
------------------------------ ------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ................................................ $ 295,413 $ 157,237 $ 137,794 $ 41,658
------------ ------------ ------------ ------------
EXPENSES:
Insurance charges ........................................ 44,147 18,971 15,507 7,456
Administrative charges ................................... 5,518 2,371 1,938 932
------------ ------------ ------------ ------------
Net investment income (loss) ......................... 245,748 135,895 120,349 33,270
------------ ------------ ------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ......................... 12,091,294 281,429 122,107 99,593
Cost of investments sold ............................... 11,267,691 211,143 120,650 86,784
------------ ------------ ------------ ------------
Net realized gain (loss) ............................. 823,603 70,286 1,457 12,809
------------ ------------ ------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ............... 593,215 127,693 63,893 19,330
Unrealized gain (loss) end of year ..................... 1,269,546 593,215 (41,199) 63,893
------------ ------------ ------------ ------------
Net change in unrealized gain (loss) for the year .... 676,331 465,522 (105,092) 44,563
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ............................ 1,745,682 671,703 16,714 90,642
------------ ------------ ------------ ------------
UNIT TRANSACTIONS:
Participant premium payments ............................. 1,910,552 1,009,403 676,530 507,102
Participant transfers from other Travelers accounts ...... 19,153,955 1,692,140 546,504 550,889
Contract surrenders ...................................... (517,827) (217,311) (127,200) (73,465)
Participant transfers to other Travelers accounts ........ (14,701,709) (245,697) (97,877) (52,303)
Other payments to participants ........................... (1,346) - - -
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions ..................... 5,843,625 2,238,535 997,957 932,223
------------ ------------ ------------ ------------
Net increase (decrease) in net assets ................ 7,589,307 2,910,238 1,014,671 1,022,865
NET ASSETS:
Beginning of year ...................................... 4,001,168 1,090,930 1,505,540 482,675
------------ ------------ ------------ ------------
End of year ............................................ $ 11,590,475 $ 4,001,168 $ 2,520,211 $ 1,505,540
============ ============ ============ ============
<CAPTION>
PUTNAM DIVERSIFIED INCOME
PORTFOLIO
------------------------------
1999 1998
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends ................................................ $ - $ -
------------ ------------
EXPENSES:
Insurance charges ........................................ 206 -
Administrative charges ................................... 26 -
------------ ------------
Net investment income (loss) ......................... (232) -
------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ......................... 1,022 -
Cost of investments sold ............................... 1,011 -
------------ ------------
Net realized gain (loss) ............................. 11 -
------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ............... - -
Unrealized gain (loss) end of year ..................... 3,475 -
------------ ------------
Net change in unrealized gain (loss) for the year .... 3,475 -
------------ ------------
Net increase (decrease) in net assets
resulting from operations ............................ 3,254 -
------------ ------------
UNIT TRANSACTIONS:
Participant premium payments ............................. 35 -
Participant transfers from other Travelers accounts ...... 457,889 -
Contract surrenders ...................................... (1,167) -
Participant transfers to other Travelers accounts ........ (12) -
Other payments to participants ........................... - -
------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions ..................... 456,745 -
------------ ------------
Net increase (decrease) in net assets ................ 459,999 -
NET ASSETS:
Beginning of year ...................................... - -
------------ ------------
End of year ............................................ $ 459,999 $ -
============ ============
</TABLE>
-16-
<PAGE> 64
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
SMITH BARNEY HIGH INCOME SMITH BARNEY LARGE CAP VALUE
PORTFOLIO PORTFOLIO COMBINED
- -------------------------------- -------------------------------- --------------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$ 33,483 $ 35,061 $ 42,611 $ 21,312 $ 2,182,985 $ 1,109,332
- ------------- ------------- ------------- ------------- ------------- -------------
3,867 3,277 9,453 4,653 397,527 181,666
483 410 1,182 581 49,690 22,708
- ------------- ------------- ------------- ------------- ------------- -------------
29,133 31,374 31,976 16,078 1,735,768 904,958
- ------------- ------------- ------------- ------------- ------------- -------------
97,738 137,335 146,365 29,031 650,438,540 156,819,235
105,172 130,279 143,113 23,783 643,284,634 154,533,547
- ------------- ------------- ------------- ------------- ------------- -------------
(7,434) 7,056 3,252 5,248 7,153,906 2,285,688
- ------------- ------------- ------------- ------------- ------------- -------------
(31,663) 14,581 31,949 18,135 2,071,549 606,203
(44,948) (31,663) (27,608) 31,949 5,963,927 2,071,549
- ------------- ------------- ------------- ------------- ------------- -------------
(13,285) (46,244) (59,557) 13,814 3,892,378 1,465,346
- ------------- ------------- ------------- ------------- ------------- -------------
8,414 (7,814) (24,329) 35,140 12,782,052 4,655,992
- ------------- ------------- ------------- ------------- ------------- -------------
118,579 196,364 567,119 354,087 35,436,722 23,714,477
62,015 201,227 322,548 416,926 735,676,151 180,481,902
(46,331) (21,906) (99,055) (57,784) (5,462,769) (2,923,386)
(67,121) (102,054) (110,290) (17,028) (735,489,577) (180,744,823)
- - - - (5,081) -
- ------------- ------------- ------------- ------------- ------------- -------------
67,142 273,631 680,322 696,201 30,155,446 20,528,170
- ------------- ------------- ------------- ------------- ------------- -------------
75,556 265,817 655,993 731,341 42,937,498 25,184,162
480,156 214,339 1,025,773 294,432 36,391,399 11,207,237
- ------------- ------------- ------------- ------------- ------------- -------------
$ 555,712 $ 480,156 $ 1,681,766 $ 1,025,773 $ 79,328,897 $ 36,391,399
============= ============= ============= ============= ============= =============
</TABLE>
-17-
<PAGE> 65
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF UNITS FOR FUND UL II
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
EAFE EQUITY INDEX FUND SMALL CAP INDEX FUND CAPITAL APPRECIATION FUND
---------------------------- --------------------------- ----------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... - - - - 1,136,698 444,866
Units purchased and transferred from
other Travelers accounts ............ 307,507 - 132,394 - 29,498,495 3,060,194
Units redeemed and transferred to
other Travelers accounts ............ (10,044) - (2,336) - (28,216,004) (2,368,362)
------------ ------------ ------------ ------------ ------------ ------------
Units end of year ..................... 297,463 - 130,058 - 2,419,189 1,136,698
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
DREYFUS STOCK INDEX FUND EQUITY-INCOME PORTFOLIO GROWTH PORTFOLIO
---------------------------- --------------------------- ----------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 2,631,052 460,680 1,806,947 597,615 1,037,155 449,618
Units purchased and transferred from
other Travelers accounts ............ 37,195,085 14,840,446 1,064,816 1,446,746 1,222,924 729,395
Units redeemed and transferred to
other Travelers accounts ............ (36,632,845) (12,670,074) (439,953) (237,414) (270,452) (141,858)
------------ ------------ ------------ ------------ ------------ ------------
Units end of year ..................... 3,193,292 2,631,052 2,431,810 1,806,947 1,989,627 1,037,155
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
HIGH INCOME PORTFOLIO ASSET MANAGER PORTFOLIO EQUITY INDEX PORTFOLIO
---------------------------- --------------------------- ----------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 504,806 250,378 428,153 181,740 - -
Units purchased and transferred from
other Travelers accounts ............ 203,325 323,773 502,768 296,426 107,719 -
Units redeemed and transferred to
other Travelers accounts ............ (122,360) (69,345) (162,816) (50,013) (7,710) -
------------ ------------ ------------ ------------ ------------ ------------
Units end of year ..................... 585,771 504,806 768,105 428,153 100,009 -
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN PORTFOLIO MANAGED ASSETS TRUST MONEY MARKET PORTFOLIO
---------------------------- --------------------------- ----------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 518,132 318,844 145,138 33,700 1,134,441 909,353
Units purchased and transferred from
other Travelers accounts ............ 274,684 319,279 135,257 122,196 144,320,269 32,514,069
Units redeemed and transferred to
other Travelers accounts ............ (73,629) (119,991) (23,011) (10,758) (140,858,219) (32,288,981)
------------ ------------ ------------ ------------ ------------ ------------
Units end of year ..................... 719,187 518,132 257,384 145,138 4,596,491 1,134,441
============ ============ ============ ============ ============ ============
</TABLE>
-18-
<PAGE> 66
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF UNITS FOR FUND UL II
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
TEMPLETON ASSET ALLOCATION TEMPLETON BOND FUND TEMPLETON STOCK FUND
FUND (CLASS 1) (CLASS 1) (CLASS 1)
-------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 477,886 212,085 156,953 96,130 1,418,179 689,681
Units purchased and transferred from
other Travelers accounts ............ 259,755 363,199 141,448 123,125 57,222,214 17,899,636
Units redeemed and transferred to
other Travelers accounts ............ (112,338) (97,398) (104,665) (62,302) (56,971,605) (17,171,138)
----------- ----------- ----------- ----------- ----------- -----------
Units end of year ..................... 625,303 477,886 193,736 156,953 1,668,788 1,418,179
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES ZERO COUPON BOND FUND
PORTFOLIO UTILITIES PORTFOLIO PORTFOLIO SERIES 1998
-------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 406,054 37,194 51,014 32,611 - 2,347
Units purchased and transferred from
other Travelers accounts ............ 281,407 381,386 90,088 27,452 - 339
Units redeemed and transferred to
other Travelers accounts ............ (45,491) (12,526) (18,859) (9,049) - (2,686)
----------- ----------- ----------- ----------- ----------- -----------
Units end of year ..................... 641,970 406,054 122,243 51,014 - -
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
ZERO COUPON BOND FUND ZERO COUPON BOND FUND AIM CAPITAL APPRECIATION
PORTFOLIO SERIES 2000 PORTFOLIO SERIES 2005 PORTFOLIO
-------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 28,611 8,316 60,699 13,500 1,499,046 541,898
Units purchased and transferred from
other Travelers accounts ............ 21,285 35,127 84,479 52,454 90,645,661 51,302,755
Units redeemed and transferred to
other Travelers accounts ............ (1,573) (14,832) (7,873) (5,255) (89,797,461) (50,345,607)
----------- ----------- ----------- ----------- ----------- -----------
Units end of year ..................... 48,323 28,611 137,305 60,699 2,347,246 1,499,046
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
PUTNAM DIVERSIFIED INCOME
ALLIANCE GROWTH PORTFOLIO MFS TOTAL RETURN PORTFOLIO PORTFOLIO
-------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 1,831,608 638,546 919,153 326,125 - -
Units purchased and transferred from
other Travelers accounts ............ 8,471,909 1,437,723 729,801 673,650 456,279 -
Units redeemed and transferred to
other Travelers accounts ............ (6,255,588) (244,661) (136,253) (80,622) (1,167) -
----------- ----------- ----------- ----------- ----------- -----------
Units end of year ..................... 4,047,929 1,831,608 1,512,701 919,153 455,112 -
=========== =========== =========== =========== =========== ===========
</TABLE>
-19-
<PAGE> 67
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF UNITS FOR FUND UL II
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY HIGH INCOME SMITH BARNEY LARGE CAP VALUE
PORTFOLIO PORTFOLIO COMBINED
---------------------------- ---------------------------- -----------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............ 383,898 170,588 592,895 185,237 17,168,518 6,601,052
Units purchased and transferred from
other Travelers accounts ......... 143,450 309,772 506,895 452,369 374,019,914 126,711,511
Units redeemed and transferred to
other Travelers accounts ......... (90,367) (96,462) (119,573) (44,711) (360,482,192) (116,144,045)
------------ ------------ ------------ ------------ ------------ ------------
Units end of year .................. 436,981 383,898 980,217 592,895 30,706,240 17,168,518
============ ============ ============ ============ ============ ============
</TABLE>
-20-
<PAGE> 68
INDEPENDENT AUDITORS' REPORT
To the Owners of Variable Life Insurance Contracts of
The Travelers Fund UL II for Variable Life Insurance:
We have audited the accompanying statement of assets and liabilities of The
Travelers Fund UL II for Variable Life Insurance as of December 31, 1999, and
the related statement of operations for the year then ended and the statement of
changes in net assets for each of the two years in the period then ended. These
financial statements are the responsibility of 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. Our procedures included
confirmation of shares owned as of December 31, 1999, by correspondence with the
underlying funds. 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 Travelers Fund UL II for
Variable Life Insurance as of December 31, 1999, 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.
/s/ KPMG LLP
Hartford, Connecticut
February 18, 2000
-21-
<PAGE> 69
Independent Auditors
KPMG LLP
Hartford, Connecticut
This report is prepared for the general information of contract owners and is
not an offer of shares of The Travelers Fund UL II for Variable Life Insurance
or Fund UL II's underlying funds. It should not be used in connection with any
offer except in conjunction with the Prospectus for The Travelers Fund UL II for
Variable Life Insurance product(s) offered by The Travelers Life and Annuity
Company and the Prospectuses for the underlying funds, which collectively
contain all pertinent information, including the applicable sales commissions.
FNDULII (Annual) (12-99) Printed in U.S.A.
<PAGE> 70
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder
The Travelers Life and Annuity Company:
We have audited the accompanying balance sheets of The Travelers Life and
Annuity Company as of December 31, 1999 and 1998, and the related statements of
income, changes in retained earnings and accumulated other changes in equity
from non-owner sources and cash flows for each of the years in the three-year
period ended December 31, 1999. These financial statements are the
responsibility of the Company'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 Travelers Life and Annuity
Company as of December 31, 1999 and 1998, and the results of its operations and
its cash flows for each of the years in the three-year period ended December 31,
1999, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
- ---------------------
Hartford, Connecticut
January 18, 2000
F-1
<PAGE> 71
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF INCOME
($ in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REVENUES
Premiums $25,270 $23,677 $35,190
Net investment income 177,179 171,003 168,653
Realized investment gains (losses) (4,973) 18,493 44,871
Fee income 54,749 17,718 5,004
Other revenues 13,045 11,168 3,159
- ----------------------------------------------------------------------------------------------------------------------------
Total Revenues 265,270 242,059 256,877
- ----------------------------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Current and future insurance benefits 78,072 81,371 95,639
Interest credited to contractholders 56,216 51,535 35,165
Amortization of deferred acquisition costs 38,902 15,956 4,944
Operating expenses 11,326 5,012 11,554
- ----------------------------------------------------------------------------------------------------------------------------
Total Benefits and Expenses 184,516 153,874 147,302
- ----------------------------------------------------------------------------------------------------------------------------
Income before federal income taxes 80,754 88,185 109,575
- ----------------------------------------------------------------------------------------------------------------------------
Federal income taxes:
Current 21,738 18,917 33,859
Deferred expense 6,410 11,783 4,344
- ----------------------------------------------------------------------------------------------------------------------------
Total Federal Income Taxes 28,148 30,700 38,203
============================================================================================================================
Net income $52,606 $57,485 $71,372
============================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE> 72
THE TRAVELERS LIFE AND ANNUITY COMPANY
BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Fixed maturities, available for sale at fair value (cost, $1,764,329; $1,707,347) $1,713,948 $1,838,681
Equity securities, at fair value (cost, $34,373; $25,826) 33,169 26,685
Mortgage loans 155,719 174,565
Short-term securities 81,119 126,176
Other invested assets 190,622 136,122
- --------------------------------------------------------------------------------------------------------------------------
Total Investments 2,174,577 2,302,229
- --------------------------------------------------------------------------------------------------------------------------
Separate accounts 4,795,165 2,178,474
Deferred acquisition costs 350,088 177,808
Deferred federal income taxes 74,478 12,395
Premium balances receivable 22,420 16,074
Other assets 84,605 57,524
- --------------------------------------------------------------------------------------------------------------------------
Total Assets $7,501,333 $4,744,504
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Future policy benefits $950,959 $963,171
Contractholder funds 1,174,636 947,411
Separate accounts 4,795,165 2,178,474
Other liabilities 114,408 114,690
- --------------------------------------------------------------------------------------------------------------------------
Total Liabilities 7,035,168 4,203,746
- --------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
Common stock, par value $100; 100,000 shares authorized,
30,000 issued and outstanding 3,000 3,000
Additional paid-in capital 167,316 167,314
Retained earnings 335,161 282,555
Accumulated other changes in equity from non-owner sources (39,312) 87,889
- --------------------------------------------------------------------------------------------------------------------------
Total Shareholder's Equity 466,165 540,758
- --------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholder's Equity $7,501,333 $4,744,504
==========================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE> 73
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF CHANGES IN RETAINED EARNINGS AND ACCUMULATED
OTHER CHANGES IN EQUITY FROM NON-OWNER SOURCES
($ in thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN RETAINED EARNINGS 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $282,555 $225,070 $167,698
Net income 52,606 57,485 71,372
Dividends to parent - - 14,000
===========================================================================================================
Balance, end of year $335,161 $282,555 $225,070
===========================================================================================================
- -----------------------------------------------------------------------------------------------------------
STATEMENTS OF ACCUMULATED OTHER CHANGES
IN EQUITY FROM NON-OWNER SOURCES
- -----------------------------------------------------------------------------------------------------------
Balance, beginning of year $87,889 $70,277 $33,856
Unrealized gains (losses), net of tax (127,201) 17,612 36,421
===========================================================================================================
Balance, end of year $(39,312) $87,889 $70,277
===========================================================================================================
- -----------------------------------------------------------------------------------------------------------
SUMMARY OF CHANGES IN EQUITY
FROM NON-OWNER SOURCES
- -----------------------------------------------------------------------------------------------------------
Net Income $52,606 $57,485 $71,372
Other changes in equity from
non-owner sources (127,201) 17,612 36,421
- -----------------------------------------------------------------------------------------------------------
Total changes in equity from
non-owner sources $(74,595) $75,097 $107,793
===========================================================================================================
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE> 74
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
($ in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Premiums collected $24,804 $22,300 $34,553
Net investment income received 150,107 146,158 170,460
Benefits and claims paid (94,503) (90,872) (90,820)
Interest credited to contractholders (50,219) (51,535) (35,165)
Operating expenses paid (235,166) (122,327) (64,698)
Income taxes paid (29,369) (25,214) (22,440)
Other, including fee income 46,028 (46,099) (16,128)
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Operating Activities (188,318) (75,391) 8,018
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investments
Fixed maturities 213,402 113,456 81,899
Mortgage loans 28,002 25,462 8,972
Proceeds from sales of investments
Fixed maturities 774,096 1,095,976 856,846
Equity securities 5,146 6,020 12,404
Mortgage loans - - 5,483
Real estate held for sale - - 4,493
Purchases of investments
Fixed maturities (1,025,110) (1,320,704) (1,020,803)
Equity securities (12,524) (13,653) (6,382)
Mortgage loans (8,520) (39,158) (41,967)
Policy loans, net (5,316) (2,010) (1,144)
Short-term securities (purchases) sales, net 45,057 43,054 (88,067)
Other investments (purchases) sales, net (44,621) 1,110 (51,502)
Securities transactions in course of settlement, net (7,033) 36,459 10,526
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (37,421) (53,988) (229,242)
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits 308,953 211,476 325,932
Contractholder fund withdrawals (83,817) (83,036) (89,145)
Dividends to parent company - - (14,000)
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 225,136 128,440 222,787
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (603) (939) 1,563
============================================================================================================================
Cash at December 31, $21 $624 $1,563
============================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE> 75
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies used in the preparation of the accompanying
financial statements follow.
Basis of Presentation
The Travelers Life and Annuity Company (the Company) is a wholly owned
subsidiary of The Travelers Insurance Company (TIC), an indirect wholly
owned subsidiary of Citigroup Inc. (Citigroup). The financial statements
and accompanying footnotes of the Company are prepared in conformity with
generally accepted accounting principles. 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 and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and benefits and expenses during the reporting
period. Actual results could differ from those estimates.
The Company offers a variety of variable annuity products where the
investment risk is borne by the contractholder, not the Company, and the
benefits are not guaranteed. The premiums and deposits related to these
products are reported in separate accounts. The Company considers it
necessary to differentiate, for financial statement purposes, the results
of the risks it has assumed from those it has not.
Certain prior year amounts have been reclassified to conform to the 1999
presentation.
ACCOUNTING CHANGES
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" (FAS 125). This
statement establishes accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. These
standards are based on an approach that focuses on control. Under this
approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has
incurred, derecognizes financial assets when control has been surrendered
and derecognizes liabilities when extinguished. FAS 125 provides standards
for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. Effective January 1, 1998, the
Company adopted the collateral provisions of FAS 125 which were not
effective until 1998 in accordance with Statement of Financial Accounting
Standards No. 127, "Deferral of the Effective Date of Certain Provisions of
SFAS 125". The adoption of the collateral provisions of FAS 125 created
additional assets and liabilities on the Company's statement of financial
position related to the recognition of securities provided and received as
collateral. There was no impact on the results of operations from the
adoption of the collateral provisions of FAS 125.
F-6
<PAGE> 76
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR
INTERNAL USE
During the third quarter of 1998, the Company adopted (effective January 1,
1998) the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants' Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" (SOP 98-1). SOP 98-1 provides guidance on accounting for the
costs of computer software developed or obtained for internal use and for
determining when specific costs should be capitalized or expensed. The
adoption of SOP 98-1 had no impact on the Company's financial condition,
statement of operations or liquidity.
ACCOUNTING BY INSURANCE AND OTHER ENTERPRISES FOR INSURANCE - RELATED
ASSESSMENTS
In January 1999, the Company adopted (effective January 1, 1999) Statement
of Position 97-3, "Accounting by Insurance and Other Enterprises for
Insurance-Related Assessments" (SOP 97-3). SOP 97-3 provides guidance for
determining when an entity should recognize a liability for guaranty-fund
and other insurance-related assessments, how to measure that liability, and
when an asset may be recognized for the recovery of such assessments
through premium tax offsets or policy surcharges. The adoption of this SOP
had no impact on the Company's financial condition, results of operations
or liquidity.
ACCOUNTING POLICIES
Investments
Fixed maturities include bonds, notes and redeemable preferred stocks. Fair
values of investments in fixed maturities are based on quoted market prices
or dealer quotes or, if these are not available, discounted expected cash
flows using market rates commensurate with the credit quality and maturity
of the investment. Also included in fixed maturities are loan-backed and
structured securities, which are amortized using the retrospective method.
The effective yield used to determine amortization is calculated based upon
actual historical and projected future cash flows, which are obtained from
a widely accepted securities data provider. Fixed maturities are classified
as "available for sale" and are reported at fair value, with unrealized
investment gains and losses, net of income taxes, charged or credited
directly to shareholder's equity.
Equity securities, which include common and non-redeemable preferred
stocks, are classified as "available for sale" and are carried at fair
value based primarily on quoted market prices. Changes in fair values of
equity securities are charged or credited directly to shareholder's equity,
net of income taxes.
Mortgage loans are carried at amortized cost. A mortgage loan is considered
impaired when it is probable that the Company will be unable to collect
principal and interest amounts due. For mortgage loans that are determined
to be impaired, a reserve is established for the difference between the
amortized cost and fair market value of the underlying collateral. In
estimating fair value, the Company uses interest rates reflecting the
current real estate financing market. Impaired loans were insignificant at
December 31, 1999 and 1998.
Short-term securities, consisting primarily of money market instruments and
other debt issues purchased with a maturity of less than one year, are
carried at amortized cost which approximates market.
F-7
<PAGE> 77
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Other invested assets include partnership investments and real estate joint
ventures accounted for on the equity method of accounting. All changes in
equity of these investments are recorded in net investment income.
Accrual of investment income, included in other assets, is suspended on
fixed maturities or mortgage loans that are in default, or on which it is
likely that future payments will not be made as scheduled. Interest income
on investments in default is recognized only as payment is received.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments, including financial
futures, options, forward contracts and interest rate swaps, as a means of
hedging exposure to foreign currency, equity price changes and/or interest
rate risk on anticipated transactions or existing assets and liabilities.
Hedge accounting is used to account for derivatives. To qualify for hedge
accounting the changes in value of the derivative must be expected to
substantially offset the changes in value of the hedged item. Hedges are
monitored to ensure that there is a high correlation between the derivative
instruments and the hedged investment.
Gains and losses arising from financial futures contracts are used to
adjust the basis of hedged investments and are recognized in net investment
income over the life of the investment.
Forward contracts, and interest rate options were not significant at
December 31, 1999 and 1998. Information concerning derivative financial
instruments is included in Note 4.
INVESTMENT GAINS AND LOSSES
Realized investment gains and losses are included as a component of pre-tax
revenues based upon specific identification of the investments sold on the
trade date. Also included are gains and losses arising from the
remeasurement of the local currency value of foreign investments to U.S.
dollars, the functional currency of the Company.
POLICY LOANS
Policy loans are carried at the amount of the unpaid balances that are not
in excess of the net cash surrender values of the related insurance
policies. The carrying value of policy loans, which have no defined
maturities, is considered to be fair value.
SEPARATE ACCOUNTS
The Company has separate account assets and liabilities representing funds
for which investment income and investment gains and losses accrue directly
to, and investment risk is borne by, the contractholders. Each of these
accounts have specific investment objectives. The assets and liabilities of
these accounts are carried at fair value, and amounts assessed to the
contractholders for management services are included in fee income.
Deposits, net investment income and realized investment gains and losses
for these accounts are excluded from revenues, and related liability
increases are excluded from benefits and expenses.
F-8
<PAGE> 78
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
DEFERRED ACQUISITION COSTS
Costs of acquiring individual life insurance and annuity business,
principally commissions and certain expenses related to policy issuance,
underwriting and marketing, all of which vary with and are primarily
related to the production of new business, are deferred. Acquisition costs
relating to traditional life insurance are amortized in relation to
anticipated premiums; universal life in relation to estimated gross
profits; and annuity contracts employing a level yield method. A 15 to
20-year amortization period is used for life insurance, and a seven to
20-year period is employed for annuities. Deferred acquisition costs are
reviewed periodically for recoverability to determine if any adjustment is
required. Adjustments, if any, are charged to income.
VALUE OF INSURANCE IN FORCE
The value of insurance in force is an asset recorded at the time of
acquisition of an insurance company. It represents the actuarially
determined present value of anticipated profits to be realized from annuity
contracts at the date of acquisition using the same assumptions that were
used for computing related liabilities, where appropriate. The value of
insurance in force was the actuarially determined present value of the
projected future profits discounted at an interest rate of 16% for the
annuity business acquired. The annuity contracts are amortized employing a
level yield method. The value of insurance in force is reviewed
periodically for recoverability to determine if any adjustment is required.
Adjustments, if any, are charged to income.
FUTURE POLICY BENEFITS
Benefit reserves represent liabilities for future insurance policy
benefits. Benefit reserves for life insurance and annuity policies have
been computed based upon mortality, morbidity, persistency and interest
assumptions applicable to these coverages, which range from 3.0% to 7.5%,
including a provision for adverse deviation. These assumptions consider
Company experience and industry standards. The assumptions vary by plan,
age at issue, year of issue and duration.
CONTRACTHOLDER FUNDS
Contractholder funds represent receipts from the issuance of universal
life, certain individual annuity contracts, and structured settlement
contracts. Contractholder fund balances are increased by such receipts and
credited interest and reduced by withdrawals, mortality charges and
administrative expenses charged to the contractholders. Interest rates
credited to contractholder funds range from 3.3% to 10.0%.
OTHER LIABILITIES
Included in Other Liabilities is the Company's estimate of its liability
for guaranty fund and other insurance-related assessments. State guaranty
fund assessments are based upon the Company's share of premium written or
received in one or more years prior to an insolvency occurring in the
industry. Once an insolvency has occurred, the Company recognizes a
liability for such assessments if it is probable that an assessment will be
imposed and the amount of the assessment can be reasonably estimated. At
December 31, 1999, the Company's liability for guaranty fund assessments
was not significant.
F-9
<PAGE> 79
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company, domiciled in the State of Connecticut, prepares statutory
financial statements in accordance with the accounting practices prescribed
or permitted by the State of Connecticut Insurance Department. Prescribed
statutory accounting practices include certain publications of the National
Association of Insurance Commissioners (NAIC) as well as state laws,
regulations, and general administrative rules. Permitted statutory
accounting practices encompass all accounting practices not so prescribed.
The impact of any permitted accounting practices on the statutory surplus
of the Company is not material.
The NAIC recently completed a process intended to codify statutory
accounting practices for certain insurance enterprises. As a result of this
process, the NAIC issued a revised statutory Accounting Practices and
Procedures Manual - version effective January 1, 2001 (the revised Manual)
that will be effective for years beginning January 1, 2001. It is expected
that the State of Connecticut will require that, effective January 1, 2001,
insurance companies domiciled in Connecticut prepare their statutory basis
financial statements in accordance with the revised Manual subject to any
deviations prescribed or permitted by the Connecticut insurance
commissioner. The Company has not yet determined the impact that this
change will have on its statutory capital and surplus.
PREMIUMS
Premiums are recognized as revenues when due. Reserves are established for
the portion of premiums that will be earned in future periods.
FEE INCOME
Fee income includes mortality and equity protection charges and fees earned
on Universal Life and Deferred Annuity businesses.
OTHER REVENUES
Other revenues include surrender, mortality and administrative charges, and
fees earned on investment and other insurance contracts.
FEDERAL INCOME TAXES
The provision for federal income taxes comprises two components, current
income taxes and deferred income taxes. Deferred federal income taxes arise
from changes during the year in cumulative temporary differences between
the tax basis and book basis of assets and liabilities. The deferred
federal income tax asset is recognized to the extent that future
realization of the tax benefit is more likely than not, with a valuation
allowance for the portion that is not likely to be recognized.
FUTURE APPLICATION OF ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (FAS 133). This statement
establishes accounting and reporting standards for derivative instruments,
F-10
<PAGE> 80
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
including certain derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair
value. If certain conditions are met, a derivative may be specifically
designated as (a) a hedge of the exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment, (b) a
hedge of the exposure to variable cash flows of a forecasted transaction,
or (c) a hedge of the foreign currency exposure of a net investment in a
foreign operation, an unrecognized firm commitment, an available-for-sale
security, or a foreign-currency-denominated forecasted transaction. The
accounting for changes in the fair value of a derivative (that is, gains
and losses) depends on the intended use of the derivative and the resulting
designation. Upon initial application of FAS 133, hedging relationships
must be designated anew and documented pursuant to the provisions of this
statement. FAS 133 was to be effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. However, in June 1999 the FASB issued
Statement of Financial Standards No. 137, "Deferral of the Effective Date
of FASB Statement No. 133" (FAS 137) which allows entities that have not
adopted FAS 133 to defer its effective date to all fiscal quarters of all
fiscal years beginning after June 15, 2000. The Company expects to adopt
the deferral provisions of FAS 137 and has not yet determined the impact
that FAS 133 will have on its financial statements.
2. REINSURANCE
The Company participates in reinsurance in order to limit losses, minimize
exposure to large risks, provide additional capacity for future growth and
to effect business-sharing arrangements. Reinsurance is accomplished
through various plans of reinsurance, primarily yearly renewable term
coinsurance and modified coinsurance. The Company remains primarily liable
as the direct insurer on all risks reinsured.
Total in-force business ceded under reinsurance contracts is $12.8 billion
and $8.8 billion at December 31, 1999 and 1998, including $63 million and
$70 million, respectively to TIC. Total life insurance premiums ceded were
$6.5 million, $4.2 million and $2.4 million in 1999, 1998 and 1997,
respectively. Ceded premiums paid to TIC were immaterial for these same
periods.
3. SHAREHOLDER'S EQUITY
Shareholder's Equity and Dividend Availability
The Company's statutory net income (loss) was $(23.4) million, $(3.2)
million and $80.3 million for the years ended December 31, 1999, 1998 and
1997, respectively.
Statutory capital and surplus was $294 million and $328 million at December
31, 1999 and 1998, respectively.
The Company is currently subject to various regulatory restrictions that
limit the maximum amount of dividends available to be paid to its parent
without prior approval of insurance regulatory authorities. Statutory
surplus of $29.4 million is available in 2000 for dividend payments by the
Company without prior approval of the Connecticut Insurance Department.
F-11
<PAGE> 81
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Accumulated Other Changes in Equity from Non-Owner Sources, Net of Tax
Changes in each component of Accumulated Other Changes in Equity From Non-Owner
Sources were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
NET ACCUMULATED
UNREALIZED FOREIGN OTHER CHANGES
GAINS ON CURRENCY IN EQUITY FROM
INVESTMENT TRANSLATION NON-OWNER
($ in thousands) SECURITIES ADJUSTMENT SOURCES
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1997 $33,856 $ -- $33,856
Unrealized gains on investment securities,
net of tax of $35,316 65,587 -- 65,587
Less: reclassification adjustment for gains
included in net income, net of tax of $(15,705) (29,166) -- (29,166)
- --------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE 36,421 -- 36,421
- --------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 70,277 -- 70,277
Unrealized gain on investment securities,
net of tax of $15,957 29,632 -- 29,632
Less: reclassification adjustment for gains
included in net income, net of tax of $(6,473) (12,020) -- (12,020)
- --------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE 17,612 -- 17,612
- --------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 87,889 -- 87,889
Unrealized gains on investment securities,
net of tax of $(70,234) (130,433) -- (130,433)
Less: reclassification adjustment for losses
included in net income, net of tax of $1,741 3,232 -- 3,232
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE (127,201) -- (127,201)
====================================================================================================================
BALANCE, DECEMBER 31, 1999 $ (39,312) $ -- $ (39,312)
====================================================================================================================
</TABLE>
4. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivative Financial Instruments
The Company uses derivative financial instruments, including financial
futures, interest rate swaps, options and forward contracts as a means of
hedging exposure to interest rate, equity price, and foreign currency risk
on anticipated transactions or existing assets and liabilities. The Company
does not hold or issue derivative instruments for trading purposes. These
derivative financial instruments have off-balance sheet risk. Financial
instruments with off-balance sheet risk involve, to varying degrees,
elements of credit and market risk in excess of the amount recognized in
the balance sheet. The contract or notional amounts of these instruments
reflect the extent of involvement the Company has in a particular class of
financial instrument. However, the maximum loss of cash flow
F-12
<PAGE> 82
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
associated with these instruments can be less than these amounts. For
interest rate swaps, options, and forward contracts, credit risk is limited
to the amounts that it would cost the Company to replace the contracts.
Financial futures contracts and purchased listed option contracts have very
little credit risk since organized exchanges are the counterparties. The
Company as a writer of option contracts has no credit risk since the
counterparty has no performance obligation after it has paid a cash
premium.
The Company monitors creditworthiness of counterparties to these financial
instruments by using criteria of acceptable risk that are consistent with
on-balance sheet financial instruments. The controls include credit
approvals, limits and other monitoring procedures.
The Company uses exchange traded financial futures contracts to manage its
exposure to changes in interest rates that arise from the sale of certain
insurance and investment products, or the need to reinvest proceeds from
the sale or maturity of investments. To hedge against adverse changes in
interest rates, the Company enters long or short positions in financial
futures contracts which offset asset price changes resulting from changes
in market interest rates until an investment is purchased or a product is
sold.
Margin payments are required to enter a futures contract and contract gains
or losses are settled daily in cash. The contract amount of futures
contracts represents the extent of the Company's involvement, but not
future cash requirements, as open positions are typically closed out prior
to the delivery date of the contract.
At December 31, 1999 and 1998, the Company held financial futures
contracts with notional amounts of $48.7 million and $41.5 million,
respectively. The deferred gains and/or losses on these contracts were not
significant at December 31, 1999 and 1998. At December 31, 1999 and
1998, the Company's futures contracts had no fair value because these
contracts are marked to market and settled in cash daily.
The Company enters into interest rate swaps in connection with other
financial instruments to provide greater risk diversification and better
match assets and liabilities. Under interest rate swaps, the Company agrees
with other parties to exchange, at specified intervals, the difference
between fixed-rate and floating-rate interest amounts calculated by
reference to an agreed notional principal amount. Generally, no cash is
exchanged at the outset of the contract and no principal payments are made
by either party. A single net payment is usually made by one counterparty
at each due date. Swap agreements are not exchange traded so they are
subject to the risk of default by the counterparty.
As of December 31, 1999 and 1998, the Company held interest rate swap
contracts with notional amounts of $231.1 million and $165.3 million,
respectively. The fair value of these financial instruments was $9.5
million (loss position) at December 31, 1999, and was $3.4 million (gain
position) and $.7 million (loss position) at December 31, 1998. The fair
values were determined using the discounted cash flow method. At December
31, 1999, the Company held swap contracts with affiliate counterparties
with a notional amount of $43.7 million and a fair value of $4.7 million
(loss position).
F-13
<PAGE> 83
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The Company uses equity option contracts to manage its exposure to changes
in equity market prices that arise from the sale of certain insurance
products. To hedge against adverse changes in the equity market prices, the
Company enters long positions in equity option contracts with major
financial institutions. These contracts allow the Company, for a fee, the
right to receive a payment if the Standard and Poor's 500 Index falls below
agreed upon strike prices.
At December 31, 1999 and 1998, the Company held equity option contracts
with notional amounts of $275.4 million and zero, respectively. The fair
value of these financial instruments was $32.6 million (gain position) at
December 31, 1999. The fair values were determined using the discounted
cash flow method.
The off-balance sheet risks of interest rate options and forward contracts
were not significant at December 31, 1999 and 1998.
Financial Instruments with Off-Balance Sheet Risk
In the normal course of business, the Company issues fixed and variable
rate loan commitments and has unfunded commitments to partnerships and
joint ventures. The off-balance sheet risk of these financial instruments
was not significant at December 31, 1999 and 1998.
Fair Value of Certain Financial Instruments
The Company uses various financial instruments in the normal course of its
business. Fair values of financial instruments that are considered
insurance contracts are not required to be disclosed and are not included
in the amounts discussed.
At December 31, 1999, investments in fixed maturities had a carrying value
and a fair value of $1.8 billion and $1.7 billion, respectively, compared
with a carrying value and a fair value of $1.7 billion and $1.8 billion,
respectively, at December 31, 1998. See Notes 1 and 10.
At December 31, 1999, mortgage loans had a carrying value of $155.7 million
and a fair value of $156.0 million and in 1998 had a carrying value of
$174.6 million and a fair value of $185.7 million. In estimating fair
value, the Company used interest rates reflecting the current real estate
financing market.
The carrying values of short-term securities and policy loans totaling
$91.3 million and $131.1 million in 1999 and 1998, respectively,
approximated their fair values and are included in other invested assets.
The carrying values of $57.6 million and $36.5 million of financial
instruments classified as other assets approximated their fair values at
December 31, 1999 and 1998, respectively. The carrying values of $100.2
million and $98.4 million of financial instruments classified as other
liabilities also approximated their fair values at December 31, 1999 and
1998, respectively. Fair value is determined using various methods,
including discounted cash flows, as appropriate for the various financial
instruments.
F-14
<PAGE> 84
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
At December 31, 1999, contractholder funds with defined maturities had a
carrying value of $878.9 million and a fair value of $780.5 million,
compared with a carrying value of $725.6 million and a fair value of $698.1
million at December 31, 1998. The fair value of these contracts is
determined by discounting expected cash flows at an interest rate
commensurate with the Company's credit risk and the expected timing of cash
flows. Contractholder funds without defined maturities had a carrying value
of $481.8 million and a fair value of $409.2 million at December 31, 1999,
compared with a carrying value of $483.0 million and a fair value of $442.5
million at December 31, 1998. These contracts generally are valued at
surrender value.
5. COMMITMENTS AND CONTINGENCIES
Financial Instruments with Off-Balance Sheet Risk
See Note 4.
Litigation
In the ordinary course of business, the Company is a defendant or
co-defendant in various litigation matters incidental to and typical of the
businesses in which it is engaged. In the opinion of the Company's
management, the ultimate resolution of these legal proceedings would not be
likely to have a material adverse effect on its results of operations,
financial condition or liquidity.
6. BENEFIT PLANS
Pension and Other Postretirement Benefits
The Company participates in a qualified, noncontributory defined benefit
pension plan sponsored by Citigroup. In addition, the Company provides
certain other postretirement benefits to retired employees through a plan
sponsored by The Travelers Insurance Group Inc. (TIGI), TIC's direct
parent. The Company's share of net expense for the qualified pension and
other postretirement benefit plans was not significant for 1999, 1998 and
1997.
401(k) Savings Plan
Substantially all of the Company's employees are eligible to participate in
a 401(k) savings plan sponsored by Citigroup. Effective January 1, 1997,
the Company discontinued matching contributions for the majority of its
employees. The Company's expenses in connection with the 401(k) savings
plan were not significant in 1999, 1998 and 1997.
7. RELATED PARTY TRANSACTIONS
The principal banking functions, including payment of salaries and
expenses, for certain subsidiaries and affiliates of TIGI, including the
Company, are handled by two companies. TIC handles banking functions for
the life and annuity operations of Travelers Life & Annuity and some of its
non-insurance affiliates. The Travelers Indemnity Company handles banking
functions for the property-casualty operations, including most of its
property-casualty insurance and non-insurance affiliates. Settlements
between companies are made at least monthly. TIC provides various employee
benefit
F-15
<PAGE> 85
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
coverages to certain subsidiaries of TIGI. The premiums for these coverages
were charged in accordance with cost allocation procedures based upon
salaries or census. In addition, investment advisory and management
services, data processing services and claims processing services are
provided by affiliated companies. Charges for these services are shared by
the companies on cost allocation methods based generally on estimated usage
by department.
TIC maintains a short-term investment pool in which the Company
participates. The position of each company participating in the pool is
calculated and adjusted daily. At December 31, 1999 and 1998, the pool
totaled approximately $2.6 billion and $2.3 billion, respectively. The
Company's share of the pool amounted to $31.4 million and $93.1 million at
December 31, 1999 and 1998, respectively, and is included in short-term
securities in the balance sheet.
The Company's TTM Modified Guaranteed Annuity Contracts are subject to a
limited guarantee agreement by TIC in a principal amount of up to $450
million. TIC's obligation is to pay in full to any owner or beneficiary of
the TTM Modified Guaranteed Annuity Contracts principal and interest as and
when due under the annuity contract to the extent that the Company fails to
make such payment. In addition, TIC guarantees that the Company will
maintain a minimum statutory capital and surplus level.
The Company sold structured settlement annuities to the insurance
affiliates of Travelers Property Casualty Corp. (TAP). Premiums and
deposits were $8.9 million and $70.6 million for 1998 and 1997,
respectively. The reduction in premiums and deposits from 1997 to 1998 was
a result of a decision during 1998 to use TIC as the primary issuer of
structured settlement annuities and the Company as the assignment company.
Policy reserves and contractholder fund liabilities associated with these
structured settlements were $766.4 million and $808.7 million at December
31, 1999 and 1998, respectively.
The Company began distributing variable annuity products through its
affiliate, the Financial Consultants of Salomon Smith Barney (SSB) in 1995.
Premiums and deposits related to these products were $1.1 billion, $932.1
million and $615.6 million in 1999, 1998 and 1997, respectively. In 1996,
the Company began marketing various life products through SSB as well. New
premiums related to such products were $40.8 million, $44.5 million and
$24.4 million in 1999, 1998 and 1997, respectively.
During 1998, the Company began distributing deferred annuity products
through its affiliates Primerica Financial Services (Primerica), Citibank,
N.A. (Citibank) and The Copeland Companies (Copeland). Deposits received
from Primerica were $763 million and $216 million. Deposits from Citibank
and Copeland were immaterial for 1999 and 1998.
The Company participates in a stock option plan sponsored by Citigroup that
provides for the granting of stock options in Citigroup common stock to
officers and key employees. To further encourage employee stock ownership,
during 1997 Citigroup introduced the WealthBuilder stock option program.
Under this program, all employees meeting certain requirements are granted
Citigroup stock options.
Most leasing functions for TIGI and its subsidiaries are handled by TAP.
Rent expense related to these leases is shared by the companies on a cost
allocation method based generally on estimated usage by department. The
Company's rent expense was insignificant in 1999, 1998 and 1997.
F-16
<PAGE> 86
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
At December 31, 1999 and 1998, the Company had investments in Tribeca
Investments, L.L.C., an affiliate of the Company, in the amounts of $22.3
million and $18.3 million, respectively, included in other invested assets.
The Company has loaned $16.6 million of Corporate Bonds to SSB as of
December 31, 1999.
8. FEDERAL INCOME TAXES
The net deferred tax assets at December 31, 1999 and 1998 were comprised of
the tax effects of temporary differences related to the following assets
and liabilities:
<TABLE>
<CAPTION>
($ in thousands) 1999 1998
---- ----
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred Tax Assets:
Benefit, reinsurance and other reserves $161,629 $121,150
Investments, net 14,270 --
Other 2,394 2,810
----------------------------------------------------------------------------------------------------------------
Total 178,293 123,960
----------------------------------------------------------------------------------------------------------------
Deferred Tax Liabilities:
Investments, net -- (56,103)
Deferred acquisition costs and value of insurance in force (100,537) (51,993)
Other (1,208) (1,399)
----------------------------------------------------------------------------------------------------------------
Total (101,745) (109,495)
----------------------------------------------------------------------------------------------------------------
Net Deferred Tax (Liability) Asset Before Valuation Allowance 76,548 14,465
Valuation Allowance for Deferred Tax Assets (2,070) (2,070)
----------------------------------------------------------------------------------------------------------------
Net Deferred Tax Asset After Valuation Allowance $74,478 $12,395
----------------------------------------------------------------------------------------------------------------
</TABLE>
F-17
<PAGE> 87
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
TIC and its life insurance subsidiaries, including the Company, file a
consolidated federal income tax return. Federal income taxes are allocated
to each member on a separate return basis adjusted for credits and other
amounts required by the consolidation process. Any resulting liability has
been, and will be, paid currently to TIC. Any credits for losses have been,
and will be, paid by TIC to the extent that such credits are for tax
benefits that have been utilized in the consolidated federal income tax
return.
The $2.1 million valuation allowance is sufficient to cover any capital
losses on investments that may exceed the capital gains able to be
generated in the life insurance group's consolidated federal income tax
return based upon management's best estimate of the character of the
reversing temporary differences. Reversal of the valuation allowance is
contingent upon the recognition of future capital gains or a change in
circumstances that causes the recognition of the benefits to become more
likely than not. There was no change in the valuation allowance during
1999. The initial recognition of any benefit provided by the reversal of
the valuation allowance will be recognized by reducing goodwill.
In management's judgment, the $74.5 million "net deferred tax asset after
valuation allowance" as of December 31, 1999, is fully recoverable against
expected future years' taxable ordinary income and capital gains. At
December 31, 1999, the Company had no ordinary or capital loss
carryforwards.
The policyholders surplus account, which arose under prior tax law, is
generally that portion of the gain from operations that has not been
subjected to tax, plus certain deductions. The balance of this account is
approximately $2 million. Income taxes are not provided for on this amount
because under current U.S. tax rules such taxes will become payable only to
the extent such amounts are distributed as a dividend or exceed limits
prescribed by federal law. Distributions are not contemplated from this
account. At current rates the maximum amount of such tax would be
approximately $700 thousand.
9. NET INVESTMENT INCOME
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
($ in thousands) 1999 1998 1997
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GROSS INVESTMENT INCOME
Fixed maturities $136,039 $130,825 $120,900
Joint venture and partnership income 22,175 22,107 32,336
Mortgage loans 16,126 15,969 14,905
Other 4,417 3,322 2,284
--------------------------------------------------------------------------------------------------------------
178,757 172,223 170,425
--------------------------------------------------------------------------------------------------------------
Investment expenses 1,578 1,220 1,772
--------------------------------------------------------------------------------------------------------------
Net investment income $177,179 $171,003 $168,653
--------------------------------------------------------------------------------------------------------------
</TABLE>
F-18
<PAGE> 88
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
10. INVESTMENTS AND INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) for the periods were as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
($ in thousands) 1999 1998 1997
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REALIZED INVESTMENT GAINS (LOSSES)
Fixed maturities $2,657 $15,620 $29,236
Equity Securities 1,193 1,819 8,385
Other 1,025 525 2,180
Joint venture and partnerships (9,848) 529 5,070
--------------------------------------------------------------------------------------------------------------
Total Realized Investment Gains (Losses) $(4,973) $18,493 $44,871
--------------------------------------------------------------------------------------------------------------
</TABLE>
Changes in net unrealized investment gains (losses) that are included as
accumulated other changes in equity from non-owner sources in shareholder's
equity were as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
($ in thousands) 1999 1998 1997
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UNREALIZED INVESTMENT GAINS (LOSSES)
Fixed maturities $(181,715) $24,336 $34,451
Other (13,979) 2,760 21,581
--------------------------------------------------------------------------------------------------------------
Total unrealized investment gains (losses) (195,694) 27,096 56,032
Related taxes (68,493) 9,484 19,611
--------------------------------------------------------------------------------------------------------------
Change in unrealized investment gains (losses) (127,201) 17,612 36,421
Balance beginning of year 87,889 70,277 33,856
--------------------------------------------------------------------------------------------------------------
Balance End of Year $(39,312) $87,889 $70,277
--------------------------------------------------------------------------------------------------------------
</TABLE>
F-19
<PAGE> 89
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Fixed Maturities
The amortized cost and fair values of investments in fixed maturities were
as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
GROSS GROSS
DECEMBER 31, 1999 AMORTIZED COST UNREALIZED UNREALIZED FAIR
($ in thousands) GAINS LOSSES VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Mortgage-backed securities - CMOs and
pass-through securities $211,864 $2,103 $(7,818) $206,149
U.S. Treasury securities and obligations
of U.S. Government and government agencies
and authorities 116,082 2,613 (3,704) 114,991
Obligations of states and political
subdivisions 29,801 7 (3,312) 26,496
Debt securities issued by foreign
governments 44,159 2,813 (198) 46,774
All other corporate bonds 1,358,769 10,351 (52,811) 1,316,309
Redeemable preferred stock 3,654 41 (466) 3,229
-----------------------------------------------------------------------------------------------------------------
Total Available For Sale $1,764,329 $17,928 $(68,309) $1,713,948
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
GROSS GROSS
DECEMBER 31, 1998 AMORTIZED COST UNREALIZED UNREALIZED FAIR
($ in thousands) GAINS LOSSES VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Mortgage-backed securities - CMOs and
pass-through securities $220,105 $ 11,571 $(193) $231,483
U.S. Treasury securities and obligations
of U.S. Government and government agencies
and authorities 289,376 53,782 (274) 342,884
Obligations of states and political
subdivisions 28,749 994 (17) 29,726
Debt securities issued by foreign
governments 40,786 2,966 (375) 43,377
All other corporate bonds 1,124,298 75,870 (13,000) 1,187,168
Redeemable preferred stock 4,033 119 (109) 4,043
-----------------------------------------------------------------------------------------------------------------
Total Available For Sale $1,707,347 $145,302 $(13,968) $1,838,681
-----------------------------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sales of fixed maturities classified as available for sale
were $774 million, $1.1 billion and $857 million in 1999, 1998 and 1997,
respectively. Gross gains of $24.6 million, $32.6 million and $38.1 million
and gross losses of $22.0 million, $17.0 million and $8.9 million in 1999,
1998 and 1997, respectively were realized on those sales.
F-20
<PAGE> 90
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Fair values of investments in fixed maturities are based on quoted market
prices or dealer quotes or, if these are not available, discounted expected
cash flows using market rates commensurate with the credit quality and
maturity of the investment. The fair value of investments for which a
quoted market price or dealer quote are not available amounted to $486.2
million and $427.0 million at December 31, 1999 and 1998, respectively.
The amortized cost and fair value of fixed maturities available for sale at
December 31, 1999, by contractual maturity, are shown below. Actual
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
AMORTIZED FAIR
($ in thousands) COST VALUE
-------------------------------------------------------------------------------------------
<S> <C> <C>
MATURITY:
Due in one year or less $40,556 $40,092
Due after 1 year through 5 years 327,632 322,082
Due after 5 years through 10 years 451,635 441,307
Due after 10 years 732,642 704,318
-------------------------------------------------------------------------------------------
1,552,465 1,507,799
-------------------------------------------------------------------------------------------
Mortgage-backed securities 211,864 206,149
-------------------------------------------------------------------------------------------
Total Maturity $1,764,329 $1,713,948
-------------------------------------------------------------------------------------------
</TABLE>
The Company makes significant investments in collateralized mortgage
obligations (CMOs). CMOs typically have high credit quality, offer good
liquidity, and provide a significant advantage in yield and total return
compared to U.S. Treasury securities. The Company's investment strategy is
to purchase CMO tranches which are protected against prepayment risk,
including planned amortization class (PAC) tranches. Prepayment protected
tranches are preferred because they provide stable cash flows in a variety
of interest rate scenarios. The Company does invest in other types of CMO
tranches if a careful assessment indicates a favorable risk/return
tradeoff. The Company does not purchase residual interests in CMOs.
At December 31, 1999 and 1998, the Company held CMOs with a market value of
$167.7 million and $181.6 million, respectively. The Company's CMO holdings
were 65.9% and 62.9% collateralized by GNMA, FNMA or FHLMC securities at
December 31, 1999 and 1998, respectively.
F-21
<PAGE> 91
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Equity Securities
The cost and market values of investments in equity securities were as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
EQUITY SECURITIES: GROSS UNREALIZED GROSS UNREALIZED
($ in thousands) COST GAINS LOSSES FAIR VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1999
Common stocks $4,966 $ 730 $ (256) $5,440
Non-redeemable preferred stocks 29,407 533 (2,211) 27,729
------------------------------------------------------------------------------------------------------------------
Total Equity Securities $34,373 $1,263 $(2,467) $33,169
------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1998
Common stocks $5,185 $ 889 $(292) $5,782
Non-redeemable preferred stocks 20,641 707 (445) 20,903
------------------------------------------------------------------------------------------------------------------
Total Equity Securities $25,826 $1,596 $(737) $26,685
------------------------------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sales of equity securities were $5.1 million, $6.0 million
and $12.4 million in 1999, 1998 and 1997, respectively. Gross gains of $1.5
million, $2.6 million and $8.6 million were realized on those sales during
1999, 1998 and 1997, respectively.
Gross losses were insignificant during the same periods.
Mortgage Loans
Underperforming assets include delinquent mortgage loans, loans in the
process of foreclosure and loans modified at interest rates below market.
At December 31, 1999 and 1998, the Company's mortgage loan portfolios
consisted of the following:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
($ in thousands) 1999 1998
-----------------------------------------------------------------------------------
<S> <C> <C>
Current Mortgage Loans $151,814 $170,635
Underperforming Mortgage Loans 3,905 3,930
-----------------------------------------------------------------------------------
Total $155,719 $174,565
-----------------------------------------------------------------------------------
</TABLE>
Aggregate annual maturities on mortgage loans at December 31, 1999 are as
follows:
<TABLE>
----------------------------------------------------------------
<S> <C>
($ in thousands)
2000 $20,791
2001 1,563
2002 6,292
2003 4,896
2004 4,167
Thereafter 118,010
================================================================
Total $155,719
================================================================
</TABLE>
F-22
<PAGE> 92
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Concentrations
Significant individual investment concentrations included:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
($ in thousands) 1999 1998
---------------------------------------------------------------------
<S> <C> <C>
Tishman Speyer Joint Venture $63,199 $62,400
Bell South Corp. 23,689 53,322
---------------------------------------------------------------------
</TABLE>
The Company participates in a short-term investment pool maintained by an
affiliate. See Note 7.
Included in fixed maturities are below investment grade assets totaling
$141.4 million and $102.4 million at December 31, 1999 and 1998,
respectively. The Company defines its below investment grade assets as
those securities rated "Ba1" or below by external rating agencies, or the
equivalent by internal analysts when a public rating does not exist. Such
assets include publicly traded below investment grade bonds and certain
other privately issued bonds and notes that are classified as below
investment grade bonds.
The Company's industry concentrations of investments, primarily fixed
maturities, were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
($ in thousands) 1999 1998
---------------------------------------------------------------------
<S> <C> <C>
Banking $152,848 $160,713
Transportation 139,519 155,116
Electric utilities 103,897 109,027
Finance 103,385 69,916
Oil & Gas 102,739 45,172
---------------------------------------------------------------------
</TABLE>
The Company held investments in Foreign Banks in the amount of $125 million
and $115 million at December 31, 1999 and 1998, respectively, which are
included in the table above.
Below investment grade assets included in the preceding table were not
significant.
The Company monitors creditworthiness of counterparties to all financial
instruments by using controls that include credit approvals, limits and
other monitoring procedures. Collateral for fixed maturities often includes
pledges of assets, including stock and other assets, guarantees and letters
of credit. The Company's underwriting standards with respect to new
mortgage loans generally require loan to value ratios of 75% or less at the
time of mortgage origination.
Non-Income Producing Investments
Investments included in the December 31, 1999 and 1998 balance sheets that
were non-income producing were insignificant.
F-23
<PAGE> 93
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Restructured Investments
Mortgage loan and debt securities which were restructured at below market
terms at December 31, 1999 and 1998 were insignificant. The new terms of
restructured investments typically defer a portion of contract interest
payments to varying future periods. The accrual of interest is suspended on
all restructured assets, and interest income is reported only as payment is
received. Gross interest income on restructured assets that would have been
recorded in accordance with the original terms of such assets was
insignificant. Interest on these assets, included in net investment income,
was insignificant.
11. DEPOSIT FUNDS AND RESERVES
At December 31, 1999, the Company had $2.1 billion of life and annuity
deposit funds and reserves. Of that total, $1.4 billion were not subject to
discretionary withdrawal based on contract terms. The remaining $.7 billion
were life and annuity products that were subject to discretionary
withdrawal by the contractholders. Included in the amount that is subject
to discretionary withdrawal were $.5 billion of liabilities that are
surrenderable with market value adjustments. The remaining $.2 billion of
life insurance and individual annuity liabilities are subject to
discretionary withdrawals with an average surrender charge of 4.9%. The
life insurance risks would have to be underwritten again if transferred to
another carrier, which is considered a significant deterrent for long-term
policyholders. Insurance liabilities that are surrendered or withdrawn from
the Company are reduced by outstanding policy loans and related accrued
interest prior to payout.
12. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
The following table reconciles net income to net cash provided by (used in)
operating activities:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
($ in thousands)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income From Continuing Operations $ 52,606 $ 57,485 $ 71,372
Adjustments to reconcile net income to cash provided by
operating activities:
Realized gains (4,973) (18,493) (44,871)
Deferred federal income taxes 6,410 11,783 4,344
Amortization of deferred policy acquisition costs 38,902 15,956 4,944
Additions to deferred policy acquisition costs (211,182) (120,278) (56,975)
Investment income accrued (27,072) (3,821) 908
Premium balances (466) (6,786) (3,450)
Insurance reserves (16,431) (8,431) 3,981
Other (26,112) (2,806) 27,765
------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operations $(188,318) $(75,391) $8,018
------------------------------------------------------------------------------------------------------------------
</TABLE>
13. NON-CASH INVESTING AND FINANCING ACTIVITIES
There were no significant non-cash investing and financing activities
for 1999, 1998 and 1997.
F-24
<PAGE> 94
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
RULE 484 UNDERTAKING
Sections 33-770 et seq, inclusive of the Connecticut General Statutes ("C.G.S.")
regarding indemnification of directors and officers of Connecticut corporations
provides in general that Connecticut corporations shall indemnify their
officers, directors and certain other defined individuals against judgments,
fines, penalties, amounts paid in settlement and reasonable expenses actually
incurred in connection with proceedings against the corporation. The
corporation's obligation to provide such indemnification generally does not
apply unless (1) the individual is wholly successful on the merits in the
defense of any such proceeding; or (2) a determination is made (by persons
specified in the statute) that the individual acted in good faith and in the
best interests of the corporation and in all other cases, his conduct was at
least not opposed to the best interests of the corporation, and in a criminal
case he had no reasonable cause to believe his conduct was unlawful; or (3) the
court, upon application by the individual, determines in view of all of the
circumstances that such person is fairly and reasonably entitled to be
indemnified, and then for such amount as the court shall determine. With respect
to proceedings brought by or in the right of the corporation, the statute
provides that the corporation shall indemnify its officers, directors and
certain other defined individuals, against reasonable expenses actually incurred
by them in connection with such proceedings, subject to certain limitations.
Citigroup Inc. also provides liability insurance for its directors and officers
and the directors and officers of its subsidiaries, including the Registrant.
This insurance provides for coverage against loss from claims made against
directors and officers in their capacity as such, including, subject to certain
exceptions, liabilities under the federal securities laws.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
UNDERTAKING TO REPRESENT REASONABLENESS OF CHARGES
The Company hereby represents that the aggregate charges under the Policy of the
Registrant described herein are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by the Company.
<PAGE> 95
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
- - The facing sheet.
- - The Prospectus.
- - The undertaking to file reports.
- - The signatures.
ATTACHMENTS:
A. Consent of Kathleen A. McGah, Deputy General Counsel, to the filing of
her opinion as an exhibit to this Registration Statement and to the
reference to her opinion under the caption "Legal Proceedings and
Opinion" in the Prospectus. (See Exhibit 11 below.)
B. Consent and Actuarial Opinion Mahir Dugentas, pertaining to the
illustrations contained in the Prospectus.
C. Consent of KPMG LLP, Independent Certified Public Accountants.
D. Powers of Attorney. (See Exhibit 12 below.)
EXHIBITS:
1. Resolution of the Board of Directors of The Travelers Life and Annuity
Company authorizing the establishment of the Registrant. (Incorporated
herein by reference to Exhibit 1 to Registration Statement on Form S-6
filed November 2, 1995.)
2. Not applicable.
3(a). Distribution and Principal Underwriting Agreement among the Registrant,
The Travelers Life and Annuity Company and CFBDS, Inc.) (Incorporated
herein by reference to Exhibit 3(a) to the Registration Statement on
Form N-4, File No. 333-60215, filed November 9, 1998.)
3(b). Specimen Form of Selling Agreement. (Incorporated herein by reference
to Exhibit 3(b) to the Registration Statement on Form N-4, File No.
333-60215, filed November 9, 1998.)
4. None
5. Form of Variable Life Insurance Policy.
6(a). Charter of The Travelers Life and Annuity Company, as amended on April
10, 1990. (Incorporated herein by reference to Exhibit 6(a) to the
Registration Statement on Form N-4, File No. 333-40191, filed November
13, 1997.)
6(b). By-Laws of The Travelers Life and Annuity Company, as amended on
October 20, 1994. (Incorporated herein by reference to Exhibit 6(b) to
the Registration Statement on Form N-4, File No. 333-40191, filed
November 13, 1997.)
7. None
8. Participation Agreements.
9. None
<PAGE> 96
10. Application for Variable Life Insurance Policy. (Incorporated herein
by reference to Exhibit 10 to Post-Effective Amendment No. 1 to the
Registration Statement on Form S-6, File No. 333-15053, filed April 24,
1998.)
11. Opinion of Counsel regarding the legality of securities being
registered.
12(a). Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as
signatory for Marc P. Weill. (Incorporated herein by reference to
Exhibits 12 and 12(b) to the Registration Statement and Post-Effective
Amendment No. 1 on Form S-6 filed November 2, 1995 and April 25, 1997.)
12(b). Power of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as
signatory for J. Eric Daniels and Jay S. Benet. (Incorporated herein by
reference to Exhibit 12(b) to Post-Effective Amendment No. 3 to the
Registration Statement on Form S-6, File No. 333-63927, filed April 28,
1999.)
12(c). Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as
signatory for George C. Kokulis and Katherine M. Sullivan.
(Incorporated herein by reference to Exhibits 15(b) to the Registration
Statement on Form S-6 filed April 25, 2000.)
12(d) Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as
signatories for Glenn D. Lammey and Marla Berman Lewitus.
<PAGE> 97
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, The
Travelers Fund UL II for Variable Life Insurance, has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of Hartford, state of Connecticut, on the 24th day
of May 2000.
THE TRAVELERS FUND UL II FOR VARIABLE LIFE INSURANCE
(Registrant)
THE TRAVELERS LIFE AND ANNUITY COMPANY
(Depositor)
(Depositor)
By:*GLENN D. LAMMEY
-----------------------------------------
Glenn D. Lammey, Chief Financial Officer,
Chief Accounting Officer and Controller
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities indicated
on the 24th day of May 2000.
<TABLE>
<S> <C>
*GEORGE C. KOKULIS Director, Chairman of the Board, President
- ------------------------------ and Chief Executive Officer
(George C. Kokulis) (Principal Executive Officer
*GLENN D. LAMMEY Director, Executive Vice President, Chief Financial
- ------------------------------ Officer, Chief Accounting Officer and Controller
(Glenn D. Lammey) (Principal Financial Officer)
*MARLA BERMAN LEWITUS Director, Senior Vice President and
- ------------------------------ General Counsel
(Marla Berman Lewitus)
*KATHERINE M. SULLIVAN Director
- ------------------------------
(Katherine M. Sullivan)
*MARC P. WEILL Director
- ------------------------------
(Marc P. Weill)
*By: /s/Ernest J. Wright, Attorney-in-Fact
</TABLE>
<PAGE> 98
EXHIBIT INDEX
<TABLE>
<CAPTION>
Attachment
or
Exhibit
No. Description Method of Filing
- ---------- ----------- ----------------
<S> <C> <C>
A. Consent of Kathleen A. McGah, Deputy General Counsel, to filing of her See Exhibit 11
opinion as an exhibit to this Registration Statement and to the below
reference to her opinion under the caption "Legal Proceedings and
Opinion" in the Prospectus.
B. Consent and Actuarial Opinion of Mahor Dugentas, pertaining to the Electronically
illustrations contained in the prospectus.
C. Consent of KPMG LLP, Independent Certified Public Accountants Electronically
D Powers of Attorney See Exhibit 12(d)
EXHIBITS
5. Form of Variable Life Insurance Contracts. Electronically
8. Participation Agreement. Electronically
11. Opinion of counsel as to the legality of the securities being Electronically
registered.
12(d). Powers of Attorney authorizing Ernest J. Wright or Kathleen A. Electronically
McGah as signatories for Glenn D. Lammey and Marla Berman Lewitus.
</TABLE>
<PAGE> 1
Attachment B
Re: Travelers Variable Life Accumulator (File No. 333-96521)
The Travelers Fund UL II for Variable Life Insurance
Dear Sir or Madam:
In my capacity as Actuary of The Travelers Life and Annuity Company, I have
provided actuarial advice concerning Travelers Variable Life Accumulator
product. I also provided actuarial advice concerning the preparation of the
Registration Statement on Form S-6, File No. 333-96521 (the "Registration
Statement") for filing with the Securities and Exchange Commission under the
Securities Act of 1933 in connection with the Policy.
In my opinion the illustrations of benefits under the Policies included in the
prospectus under the caption "Illustrations of Death Benefit, Cash Values and
Cash Surrender Values" are, based on the assumptions stated in the
illustrations, consistent with the provisions of the Policies. Also, in my
opinion the age selected in the illustrations is representative of the manner in
which the Policies operate.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/Mahir Dugentas, ASA, MAAA
Pricing Actuary
Product Development
May 23, 2000
<PAGE> 1
ATTACHMENT C
Consent of Independent Certified Public Accountants
Board of Directors
The Travelers Life and Annuity Company
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/KPMG LLP
Hartford, Connecticut
May 23, 2000
<PAGE> 1
EXHIBIT 5
THE TRAVELERS LIFE AND ANNUITY COMPANY - ONE TOWER SQUARE - HARTFORD, CT 06183
A STOCK COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
We will pay the Death Benefit to the Beneficiary upon receipt at Our Office of
Due Proof of the Insured's Death while this policy is in force. Refer to the
"Death Benefit" provision on Page 5 and to the "Policy Values" section on Page
6 for information on determining the amount payable upon the Insured's Death.
READ YOUR POLICY CAREFULLY
This is a legal contract between You and Us.
RIGHT TO CANCEL
We want You to be satisfied with the policy that You have purchased. We urge
You to examine it closely. If, for any reason, You are not satisfied, You may
return the policy to Us or to the agent from whom it was purchased for
cancellation within the latest of:
1. ten days after the policy was delivered to You; or
2. ten days after We have mailed or delivered the Notice of the Right
to Cancel to You; or
3. forty-five days after the date the application for this policy was
signed.
Within seven days after We receive Your returned policy, We will refund to You
all premiums paid, less any Loan Account value. After the policy is returned,
it will be considered as if it were never in effect.
Signed at Hartford, Connecticut
[SIG]
President
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
PREMIUMS PAYABLE UNTIL EARLIER OF MATURITY OR INSURED'S DEATH
INSURANCE PAYABLE UPON DEATH OF INSURED
NON-PARTICIPATING
THE AMOUNT AND/OR DURATION OF THE DEATH BENEFIT AND OTHER VALUES PROVIDED BY
THIS POLICY ARE BASED ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT(S).
VALUES ARE VARIABLE, MAY INCREASE OR DECREASE, AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Right to Cancel Policy Jacket
Policy Summary Page 3
Definitions Page 4
Benefits--Basic Policy Page 5
Policy Values Page 6
Premium and Valuation Provisions Page 7
Continuation of Insurance, Grace Period and Reinstatement Page 8
Exchange Option Page 9
Ownership Rights Page 9
General Provisions Page 10
Settlement Options
</TABLE>
A copy of the application and any riders follows the Settlement Options.
<PAGE> 3
EXHIBIT 5
POLICY SUMMARY
INSURED: JOHN DOE STATED AMOUNT: $ 50,000
POLICY NUMBER: 1234567 POLICY DATE: JUN 1, 2000
AGE: 35 ISSUE DATE: JUN 1, 2000
MATURITY DATE: JUN 1, 2065 MONTHLY DEDUCTION DAY: 1ST
OF EACH MONTH
-----------------------------------------------------------------------
BENEFIT DESCRIPTION
-----------------------------------------------------------------------
INITIAL STATED AMOUNT: $50,000
INITIAL PREMIUM: $561.00
PLANNED PREMIUM: $561.00
PLANNED PREMIUM PAYABLE: MONTHLY
INSURANCE OPTION: 1 (LEVEL OPTION)
MINIMUM STATED AMOUNT: $50,000
MINIMUM AMOUNT INSURED: THE PERCENTAGE OF THE CASH VALUE, BASED ON THE
INSURED'S AGE, REQUIRED FOR THE POLICY TO
QUALIFY AS LIFE INSURANCE ACCORDING TO FEDERAL
INCOME TAX LAWS. SEE TABLE IN POLICY FOR
DETAILS.
MINIMUM INCREASE AMOUNT:$50,000
MINIMUM LOAN AMOUNT: $500
MAXIMUM LOAN AMOUNT: 100% OF (CASH VALUE LESS SURRENDER PENALTIES)
AS OF THE DAY WE RECEIVE YOUR LOAN REQUEST
ANNUAL LOAN INTEREST POLICY YEARS 1-15: 5.66% IN ADVANCE
RATE CHARGED: POLICY YEARS 16 AND THEREAFTER: 3.85% IN ADVANCE
ANNUAL LOAN INTEREST
RATE CREDITED: 4.00% IN ARREARS
FULL SURRENDER CHARGE: APPLIES FOR THE FIRST 10 POLICY YEARS PER THOUSAND OF
INITIAL STATED AMOUNT, AND FOR THE FIRST 10 POLICY
YEARS FOLLOWING ANY APPLIED FOR STATED AMOUNT INCREASE
PER THOUSAND OF INCREASE AMOUNT, AS FOLLOWS:
POLICY CHARGE POLICY CHARGE
YEAR PER $1000 YEAR PER $1000
1 $ 4.19 6 $ 2.10
2 $ 3.77 7 $ 1.68
3 $ 3.35 8 $ 1.26
4 $ 2.93 9 $ .84
5 $ 2.51 10 $ .42
MINIMUM PARTIAL SURRENDER AMOUNT: $ 500
TL-TVLAC PAGE 3(A)
<PAGE> 4
POLICY SUMMARY
INSURED: JOHN DOE STATED AMOUNT: $ 50,000
POLICY NUMBER: 1234567 POLICY DATE: JUN 1, 2000
AGE: 35 ISSUE DATE: JUN 1, 2000
MATURITY DATE: JUN 1, 2065 MONTHLY DEDUCTION DAY: 1ST
OF EACH MONTH
-----------------------------------------------------------------------
BENEFIT DESCRIPTION
-----------------------------------------------------------------------
PARTIAL SURRENDER AFTER THE FIRST POLICY YEAR THERE IS NO
CHARGE CHARGE FOR PARTIAL SURRENDERS UP TO AN AMOUNT
EQUAL TO THE GREATER OF: A)10% OF TOTAL PREMIUMS PAID
AS OF THE DATE OF SURRENDER REQUEST OR B)10% OF THE
CASH VALUE AS OF THE DATE OF SURRENDER REQUEST. THE
AMOUNTS CALCULATED IN A) AND B) WILL BE REDUCED BY THE
AMOUNT OF ANY FREE PARTIAL SURRENDERS MADE IN THE SAME
POLICY YEAR. PARTIAL SURRENDERS IN EXCESS OF THE FREE
PARTIAL SURRENDER AMOUNT WILL INCUR A CHARGE IN
PROPORTION TO THE CHARGE THAT WOULD APPLY TO A FULL
SURRENDER. THE PROPORTION WILL BE COMPUTED AS THE
SURRENDER AMOUNT DIVIDED BY(CASH VALUE MINUS LOAN
ACCOUNT VALUE). WHEN THE PARTIAL SURRENDER IS MADE,
FUTURE SURRENDER CHARGES WILL BE REDUCED BY THE SAME
PROPORTION.
CHARGE FOR REQUESTED IN PROPORTION TO THE CHARGE THAT WOULD
STATED AMOUNT DECREASE: APPLY TO A FULL SURRENDER. THE PROPORTION
WILL BE COMPUTED AS THE AMOUNT OF THE REQUESTED STATED
AMOUNT DECREASE DIVIDED BY THE TOTAL STATED AMOUNT
THAT WAS IN EFFECT IMMEDIATELY PRIOR TO THE REQUESTED
DECREASE. WHEN THE REQUESTED DECREASE IS MADE, FUTURE
SURRENDER CHARGES WILL BE REDUCED BY THE SAME
PROPORTION.
SALES EXPENSE CHARGE: 2.50% OF EACH PREMIUM PAID, WAIVED IF POLICY
STATED AMOUNT PLUS PRIMARY INSURED TERM BENEFIT
IS AT LEAST $5,000,000
PREMIUM TAX CHARGE: 2.25% OF EACH PREMIUM PAID
FEDERAL DEFERRED
ACQUISITION COST CHARGE: 1.25% OF EACH PREMIUM PAID
MONTHLY ADMINISTRATIVE MAXIMUM $ .08 PER THOUSAND OF INITIAL
EXPENSE CHARGES: STATED AMOUNT FOR THE FIRST THREE YEARS FROM
THE EFFECTIVE DATE AND FOR THE FIRST THREE
YEARS FROM THE EFFECTIVE DATE OF EACH REQUESTED
STATED AMOUNT INCREASE; PLUS $6 PER MONTH UNTIL
MATURITY DATE IF STATED AMOUNT IS LESS THAN $100,000.
INTEREST FACTOR: 1.00327374
RATE CLASS: MALE ,PREFERRED PLUS,NONSMOKER
TL-TVLAC PAGE 3(B)
<PAGE> 5
POLICY SUMMARY
INSURED: JOHN DOE STATED AMOUNT: $ 50,000
POLICY NUMBER: 1234567 POLICY DATE: JUN 1, 2000
AGE: 35 ISSUE DATE: JUN 1, 2000
MATURITY DATE: JUN 1, 2065 MONTHLY DEDUCTION DAY: 1ST
OF EACH MONTH
-----------------------------------------------------------------------
BENEFIT DESCRIPTION
-----------------------------------------------------------------------
[SEPARATE ACCOUNT:
THE TRAVELERS FUND ULII FOR VARIABLE LIFE INSURANCE
INVESTMENT OPTIONS:
CAPITAL APPRECIATION FUND
DREYFUS STOCK INDEX FUND
MANAGED ASSETS TRUST
TRAVELERS MONEY MARKET PORTFOLIO
DEUTSCHE ASSET MANAGEMENT VIT FUNDS:
EAFE EQUITY INDEX FUND
SMALL CAP INDEX FUND
VARIABLE INSURANCE PRODUCTS FUND:
EQUITY-INCOME PORTFOLIO - INITIAL CLASS
GROWTH PORTFOLIO - INITIAL CLASS
HIGH INCOME PORTFOLIO - INITIAL CLASS
VARIABLE INSURANCE PRODUCTS FUND II:
ASSET MANAGER PORTFOLIO - INITIAL CLASS
TRAVELERS SERIES TRUST:
U.S. GOVERNMENT SECURITIES PORTFOLIO
ZERO COUPON BOND PORTFOLIO 2005
GREENWICH STREET SERIES FUND:
EQUITY INDEX PORTFOLIO -CLASS I
TOTAL RETURN PORTFOLIO
TRAVELERS SERIES FUND INC.:
AIM CAPITAL APPRECIATION PORTFOLIO
ALLIANCE GROWTH PORTFOLIO
MFS TOTAL RETURN PORTFOLIO
PUTNAM DIVERSIFIED INCOME PORTFOLIO
SMITH BARNEY HIGH INCOME PORTFOLIO
SMITH BARNEY LARGE CAPITALIZATION GROWTH PORTFOLIO
SMITH BARNEY LARGE CAP VALUE PORTFOLIO
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST:
TEMPLETON GLOBAL SECURITIES FUND - CLASS I
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO - SERVICE SHARES
GLOBAL TECHNOLOGY PORTFOLIO - SERVICE SHARES
WORLDWIDE GROWTH PORTFOLIO - SERVICE SHARES]
TL-TVLAC PAGE 3(C)
<PAGE> 6
POLICY SUMMARY
INSURED: JOHN DOE STATED AMOUNT: $ 50,000
POLICY NUMBER: 1234567 POLICY DATE: JUN 1, 2000
AGE: 35 ISSUE DATE: JUN 1, 2000
MATURITY DATE: JUN 1, 2065 MONTHLY DEDUCTION DAY: 1ST
OF EACH MONTH
-----------------------------------------------------------------------
BENEFIT DESCRIPTION
-----------------------------------------------------------------------
THE MAXIMUM INVESTMENT OPTION DAILY DEDUCTION FOR ALL INVESTMENT OPTIONS
(IN BASIS POINTS) IS .1781 FOR POLICY YEARS 1-15, AND .0548 FOR POLICY
YEARS 16 AND AFTER.
INFORMATION ABOUT THE SEPARATE ACCOUNT IS PROVIDED IN THE PROSPECTUS FOR
THE POLICY AND THE SEPARATE ACCOUNT. YOU SHOULD CAREFULLY REVIEW
THE PROSPECTUS.
WE RESERVE THE RIGHT TO LIMIT FREE TRANSFERS AMONG THE INVESTMENT OPTIONS TO
FOUR TIMES IN ANY POLICY YEAR AND TO CHARGE A $10 FEE FOR EACH ADDITIONAL
TRANSFER THAT WE ALLOW.
PREMIUM FOR THE BASIC POLICY MAY BE PAID UNTIL THE EARLIER OF THE MATURITY DATE
OR THE INSURED'S DEATH. CHARGES FOR RIDERS ARE PAYABLE TO THE EARLIER OF THE
APPLICABLE EXPIRY DATE OR THE INSURED'S DEATH. NO INSURANCE WILL BE IN EFFECT
UNLESS AT LEAST ONE DEDUCTION AMOUNT HAS BEEN PAID.
COVERAGE UNDER THIS POLICY MAY END PRIOR TO THE MATURITY DATE IF PREMIUM
PAYMENT AND/OR INVESTMENT EXPERIENCE ARE INSUFFICIENT TO CONTINUE
INSURANCE TO SUCH DATE.
TL-TVLAC PAGE 3(D)
<PAGE> 7
POLICY SUMMARY
INSURED: JOHN DOE STATED AMOUNT: $ 50,000
POLICY NUMBER: 1234567 POLICY DATE: JUN 1, 2000
AGE: 35 ISSUE DATE: JUN 1, 2000
MATURITY DATE: JUN 1, 2065 MONTHLY DEDUCTION DAY: 1ST
OF EACH MONTH
-----------------------------------------------------------------------
TABLE OF MAXIMUM MONTHLY GUARANTEED COST OF INSURANCE RATES
(MONTHLY RATE PER $1000 OF COVERAGE AMOUNT)
-----------------------------------------------------------------------
POLICY MAXIMUM POLICY MAXIMUM POLICY MAXIMUM POLICY MAXIMUM
YEAR RATE YEAR RATE YEAR RATE YEAR RATE
---- ---- ---- ---- ---- ---- ---- ----
1 0.18150 18 0.69760 35 3.21700 52 15.87440
2 0.19360 19 0.76490 36 3.52680 53 17.26970
3 0.20780 20 0.83900 37 3.88180 54 18.71940
4 0.22410 21 0.91900 38 4.29100 55 20.23610
5 0.24240 22 1.00420 39 4.75550 56 21.84550
6 0.26340 23 1.09410 40 5.26770 57 23.59540
7 0.28590 24 1.19050 41 5.81880 58 25.57450
8 0.31020 25 1.29590 42 6.40060 59 28.00750
9 0.33650 26 1.41320 43 7.00680 60 31.40160
10 0.36500 27 1.54520 44 7.64310 61 36.79810
11 0.39560 28 1.69490 45 8.33070 62 44.65000
12 0.42780 29 1.86310 46 9.09340 63 58.04500
13 0.46220 30 2.04930 47 9.95610 64 78.36080
14 0.49950 31 2.25090 48 10.94090 65 82.27880
15 0.54020 32 2.46630 49 12.04620
16 0.58590 33 2.69610 50 13.25080
17 0.63840 34 2.94350 51 14.53250
RATE CLASS: MALE ,PREFERRED PLUS,NONSMOKER
THE RATES USED FOR THE COST OF INSURANCE DEDUCTION ARE GUARANTEED NOT TO EXCEED
THE MAXIMUM RATES SHOWN ABOVE. THE RATES ARE BASED ON THE 1980 COMMISSIONERS
STANDARD ORDINARY SEX DISTINCT MORTALITY TABLE. THE COST OF INSURANCE IS
DEDUCTED ON THE MONTHLY DEDUCTION DAY.
TL-TVLAC PAGE 3(COI)
<PAGE> 8
RIDERS:
LAPSE PROTECTION RIDER
INITIAL MONTHLY PREMIUM THRESHOLD: $14.90
DATE OF ISSUE: JUN 1, 2000
EXPIRY DATE: JUN 1, 2010
PREMIUM CLASS: MALE ,PREFERRED PLUS,NONSMOKER
<PAGE> 9
DEFINITIONS
ACCUMULATION UNIT: a standard of measurement used to determine the values in
each Investment Option.
AGE: age as of the Insured's most recent birthday.
AMOUNT INSURED: equals the Stated Amount if Death Benefit Option 1 is selected;
equals the Stated Amount plus Cash Value if Death Benefit Option 2 is selected.
The Amount Insured will always be at least equal to the Minimum Amount Insured
described on the Policy Summary.
BENEFICIARY(IES): the person(s) named to receive the benefits of this policy
upon the death of the Insured.
CASH SURRENDER VALUE: the Cash Value less any Loan Account value and
applicable surrender charges.
CASH VALUE: the sum of the values held in the Investment Options and the Loan
Account.
COVERAGE AMOUNT: the Amount Insured less the Cash Value.
DEATH BENEFIT: the amount payable to the Beneficiary if the Insured's death
occurs while this policy is in force. See "Death Benefit" provision on Page 5
for details.
DEDUCTION AMOUNT: a monthly charge deducted from the Cash Value. See
"Deduction Amount" provision on Page 6 for detail on components of this charge.
DEDUCTION DAY: the day of each month on which the Deduction Amount is
deducted. Shown on the Policy Summary.
DUE PROOF OF INSURED'S DEATH: a copy of a certified death certificate; a copy
of a certified decree of a court of a competent jurisdiction as to the finding
of death; a written statement by a medical doctor who attended the deceased; or
any other proof satisfactory to Us.
IN WRITING: in a written form satisfactory to Us and received at Our Office.
INSURED: the person whose life is insured under this policy. Shown on the
Policy Summary.
INVESTMENT OPTION: an open-ended management investment company, or a portfolio
thereof, to which values may be directed under the Separate Account. Shown on
the Policy Summary.
ISSUE DATE: the date on which We issue the policy. Shown on the Policy
Summary.
LOAN ACCOUNT: the account to which We transfer the amount of any policy loan.
MATURITY DATE: an anniversary of the Policy Date on which the policy matures
(see Maturity Benefit, page 5). Shown on the Policy Summary.
MAXIMUM INVESTMENT OPTION DAILY DEDUCTION: the maximum charge that We deduct
from each Investment Option to cover Our mortality and expense risk charges.
Shown on the Policy Summary.
MINIMUM AMOUNT INSURED: a stated percentage of the Cash Value determined as of
the first day of the Policy Month, as specified on "Minimum Amount Insured
Table" in policy.
NET PREMIUM: Premium paid less the Sales Expense Charge, Premium Tax Charge
and Federal Deferred Acquisition Cost Charge as shown on the Policy Summary.
OUR OFFICE: The Travelers Life and Annuity Company, Policyholder Services, One
Tower Square, Hartford, Connecticut 06183-5071 or any other office which We may
designate for the purpose of administering this policy.
POLICY ANNIVERSARY: an anniversary of the Policy Date.
POLICY DATE: the date on which the policy becomes effective. Shown on the
Policy Summary.
POLICY MONTH: twelve one-month periods during the Policy Year, each of which
begins on the Policy Date or the Deduction Day.
POLICY YEAR: each successive twelve-month period; the first beginning with the
Policy Date.
SEPARATE ACCOUNT: the Separate Account that We established for this class of
policies and certain other policies. The Separate Account is shown on the
Policy Summary and is divided into segments that correspond to the Investment
Options.
STATED AMOUNT: a dollar amount used to determine the Death Benefit of the
policy. Shown on the Policy Summary.
VALUATION DATE: a date on which policy values are determined. This is any day
on which the New York Stock Exchange is open for trading.
VALUATION PERIOD: the period between successive valuations.
WE, US, OUR: The Travelers Life and Annuity Company.
YOU, YOUR: the owner(s) of this policy.
<PAGE> 10
BENEFITS--BASIC POLICY
DEATH BENEFIT
Upon receipt at Our Office of Due Proof of the Insured's Death while the policy
is in force, We will pay to the Beneficiary the Death Benefit of the policy.
The Death Benefit will be the Amount Insured at the time of the Insured's
death, less any:
1. Loan Account value;
2. Deduction Amount due but not paid; and
3. amount payable to an assignee under a collateral assignment of the
policy.
The Death Benefit may be limited as provided under the Misstatement and Suicide
provisions on Page 10. The Death Benefit depends on the Death Benefit Option
that is in effect on the date of the Insured's death, and is affected by any
increase or decrease to the Initial Stated Amount. Benefits provided by any
rider attached to this policy will end according to the termination
provision(s) therein.
MATURITY BENEFIT
If the Insured is living on the Maturity Date, We will pay You the Cash Value
as of the Maturity Date, less any:
1. Loan Account value;
2. Deduction Amount due but not paid; and
3. amount payable to an assignee under a collateral assignment of the
policy.
Upon maturity, insurance will end and We will have no other obligation under
this policy. We will request that You return the policy to Us.
DEATH BENEFIT OPTIONS AND AMOUNT INSURED
There are two Death Benefit Options. Under Option 1 (the Level Death Benefit
Option), the Amount Insured is the greater of the Stated Amount or any Minimum
Amount Insured on the date of the Insured's death. Under Option 2 (the Variable
Death Benefit Option), the Amount Insured is the greater of the Stated Amount
plus the Cash Value, or any Minimum Amount Insured on the date of the Insured's
death.
You may request a change in Death Benefit Option while the Insured is living
and this policy is in force. We will require evidence of insurability
satisfactory to Us if You request a change from Option 1 to Option 2. We will
effect the change on the later of the Deduction Day on or following the day We
receive the request, or the Deduction Day on or immediately following Your
requested effective date. If You request a change from Option 2 to Option 1,
the Stated Amount will be increased by the Cash Value. If You request a change
from Option 1 to Option 2, the Stated Amount will be decreased by the Cash
Value.
The remaining Amount Insured and the remaining Stated Amount in effect after
any change may not be less than the respective minimum amounts shown on the
Policy Summary.
REQUESTED CHANGES IN STATED AMOUNT
Increases -- After the first Policy Year and prior to the Policy Anniversary on
which the Insured is Age 86, You may request an increase to the Stated Amount.
The request must be made In Writing. We will not allow a requested increase to
the Stated Amount for less than the Minimum Increase Amount shown on the Policy
Summary. The increase will be effective on the date shown on the supplemental
Policy Summary that We will send You. We will require evidence of insurability
satisfactory to Us if You request an increase.
Decreases -- After the second Policy Year, You may request a decrease to the
Stated Amount. The decrease will be effective on the later of the Deduction Day
on or following Our receipt of Your request, or the Deduction Day on or
immediately following Your requested effective date. There is a charge for
requested Stated Amount decreases as shown on the Policy Summary.
The decrease will be applied as follows: first against the most recent increase
to the Stated Amount; then to other increases in the Stated Amount in the
reverse order in which they occurred; and last, to the Initial Stated Amount.
After any change, the Stated Amount in effect may not be less than the Minimum
Stated Amount shown on the Policy Summary. We will send You a supplemental
Policy Summary reflecting any change.
<PAGE> 11
POLICY VALUES
CASH VALUE
The Cash Value on the Policy Date is equal to the initial Net Premium minus the
Deduction Amount due. On each Valuation Date, the Cash Value is equal to the
sum of the accumulated values in the Investment Options plus any Loan Account
value. The accumulated value in an Investment Option equals a times b where:
a is the number of Accumulation Units on the Valuation Date; and
b is the then current Accumulation Unit Value for that Investment
Option.
Policy values on other days are calculated in a manner consistent with this
method.
DEDUCTION AMOUNT
On each Deduction Day, the Deduction Amount is deducted from the Cash Value
minus Loan Account value. The first Deduction Day is the Policy Date. The
Deduction Day is shown on the Policy Summary.
The Deduction Amount will be charged monthly against each Investment Option in
proportion to the value of each Investment Option on each Deduction Day. The
Deduction Amount is equal to:
1. The cost of insurance; plus
2. The Monthly Administrative Expense charge shown on the Policy
Summary; plus
3. The cost of any supplemental benefits for which a separate charge is
shown on the Policy Summary; plus
4. Any other applicable charges shown on the Policy Summary.
The maximum guaranteed cost of insurance for any month is equal to c times the
result of a minus b where:
a is the Amount Insured for the month divided by the Death Benefit
Interest Factor shown on the Policy Summary;
b is the Cash Value on the Deduction Day;
c is the cost for each $1,000 of Coverage Amount shown in the Table of
Maximum Monthly Guaranteed Cost of Insurance Rates on the Policy
Summary, divided by $1,000.
The maximum guaranteed cost of insurance rates shown on the Policy Summary are
based on the Insured's age, sex and rate class for the Initial Stated Amount
and each increase in the Stated Amount. We may use rates lower than those
shown. We will base any future changes in these rates only on Our future
expectations as to mortality, expenses and persistency. Nothing in this policy
will be affected by Our actual mortality and expenses. We will determine the
current rates for the Initial Stated Amount and for each increase to the Stated
Amount at the start of each Policy Year and will guarantee them for that Policy
Year. Any change that We make in the current rates will be on a uniform basis
for insureds of the same age, sex, duration and rate class.
When the Amount Insured is equal to the Minimum Amount Insured shown on the
Policy Summary, We will use the rate class for the most recent increase that
required evidence of insurability to determine the cost of insurance.
If You have selected Death Benefit Option 1 and have made increases in the
Stated Amount, the Cash Value will first be considered a part of the Initial
Stated Amount. If the Cash Value exceeds the Initial Stated Amount, it will
then be considered a part of the additional Stated Amount resulting from
increases in the order of those increases.
The Deduction Amount for the following month will be taken out of the Cash
Value on the Deduction Day. If the Cash Surrender Value is not enough to pay
the Deduction Amount due and no further premiums are paid, the Grace Period
will go into effect (see Grace Period provision, Page 9).
CASH SURRENDER VALUE
The Cash Surrender Value is equal to the Cash Value less any Loan Account value
and applicable surrender charges. It will not be less than the minimum Cash
Surrender Value required by the insurance laws of the state in which this
policy is delivered. A detailed statement of the method of calculating the Cash
Surrender Values has been filed with the insurance department of the state in
which this policy is delivered.
<PAGE> 12
CASH SURRENDER
While the Insured is living and this policy is in force, You may request a full
or partial surrender In Writing. You may do so without the consent of any
Beneficiary, unless irrevocably named. We will calculate Your Cash Surrender
Value as of the day We receive Your request In Writing and will pay this amount
within seven days after such request. A surrender charge may apply as shown on
the Policy Summary.
If you request a full surrender, the policy will end on the date that We
receive Your request In Writing along with the policy.
We will not make a partial surrender to You for less than the Minimum Partial
Surrender Amount shown on the Policy Summary. The amount of any partial cash
surrender may not exceed the Cash Surrender Value. If You request a partial
surrender, then the Death Benefit, Amount Insured, and Cash Value will be
reduced by the amount surrendered, including any applicable partial surrender
charge (as shown on the Policy Summary). Additionally, under Death Benefit
Option 1, the Stated Amount will be reduced by the amount of the surrender,
including any applicable surrender charge. The deduction from the Cash Value
will be made on a pro-rata basis against the Cash Value of each Investment
Option, unless You request otherwise In Writing. After the reduction, the
Amount Insured and Stated Amount must be no less than the respective minimum
amounts shown on the Policy Summary.
POLICY LOANS
We will make a loan to You with the policy as security if You assign this
policy to Us while it is in force. We will not make a loan to You or increase
an outstanding loan for less than the Minimum Loan Amount shown on the Policy
Summary. We will pay the loan amount within seven days after We receive Your
loan request In Writing.
Loan amounts will be transferred from the Investment Options to the Loan
Account in proportion to the Cash Value in each Investment Option as of the
date that the loan is made, unless You request otherwise. A Loan Account will
be maintained while a loan is outstanding and credited at the Annual Loan
Interest Rate Credited shown on the Policy Summary. The value of the Loan
Account is the amount of any outstanding loan plus any interest that We credit
to the Loan Account, less any interest that We transfer to the Investment
Options.
The total Loan Account value may not exceed the Maximum Loan Amount shown on
the Policy Summary. Interest on the loan will be payable in advance, at the
beginning of each Policy Year, at the Annual Loan Interest Rate Charged shown
on the Policy Summary. Interest not paid when due will be added to the Loan
Account Value and will bear interest at the same rate.
While the Insured is living and the policy is in effect, all or part of any
loan may be repaid. Unless You request otherwise, payment received while there
is an outstanding loan on the policy will be applied as follows: first, towards
repayment of any loan interest due; next, towards repayment of the loan
principal; and last, as a premium payment to the policy. The amount of the
repayment will be transferred from the Loan Account and will be allocated among
the Investment Options in proportion to the outstanding loan amount associated
with each Investment Option. You may not repay a loan that exists at the end of
the Grace Period (see provision on Page 9) unless You reinstate this policy.
The Grace Period provision will go into effect if the Loan Account Value
exceeds the Cash Value less applicable surrender charges.
PREMIUM AND VALUATION PROVISIONS
PREMIUM
Insurance under this policy will take effect when We have received Your payment
of at least one Deduction Amount. All premiums are payable at Our Office or to
one of Our authorized representatives.
The amount and frequency of the Planned Premium are shown on the Policy
Summary. You may request a change in the amount and frequency of the Planned
Premium, provided that such change would not disqualify the policy as life
insurance under federal tax law.
Premium payments are flexible. At any time before the Maturity Date, additional
premium payments may be made, provided that the premium payment plus the total
of all premiums already paid does not exceed the limits prescribed by federal
income tax laws or regulations to qualify the policy as life insurance.
Additionally, We reserve the right to require evidence of insurability before
We accept any additional premium payment that would increase the Coverage
Amount.
PAYMENT MODE
Premiums may be paid annually, semi-annually or by other arrangement with Our
consent. The payment mode may be changed with Our approval.
<PAGE> 13
PREMIUM ALLOCATION
Net Premium payments will be applied to provide Accumulation Units which will
be credited to the Investment Options that You have selected in the proportion
stated in Your application, or as You have instructed Us most recently.
INVESTMENT OPTION VALUATION
ACCUMULATION UNITS
The number of Accumulation Units to be credited to each Investment Option once
a premium payment has been received by Us will be determined by dividing the
Net Premium applied to that Investment Option by the current Accumulation Unit
Value of that Investment Option.
ACCUMULATION UNIT VALUE
The value of an Accumulation Unit for each Investment Option was initially set
at $1.00. We will determine the Accumulation Unit value for each Investment
Option on each Valuation Date by multiplying the value on the immediately
preceding Valuation Date by the corresponding net investment factor (see Net
Investment Factor provision below) for that Investment Option for the Valuation
Period just ended.
The value of an Accumulation Unit on any date other than a Valuation Date will
be equal to its value as of the next Valuation Date.
NET INVESTMENT FACTOR
The net investment factor is a factor applied to measure the investment
performance of an Investment Option from one Valuation Period to the next. The
net investment factor for an Investment Option for any Valuation Period is
determined by dividing a by b and subtracting c where:
a is
1. the net asset value per share of the Investment Option as of the
Valuation Date; plus
2. the per-share amount of any dividend or capital gain distributions by
the Investment Option if the ex-dividend date occurs in the Valuation
Period just ended; plus or minus
3. a per-share charge or credit, as We may determine on the Valuation
Date for tax reserves; and
b is
1. the net asset value per share of the Investment Option as of the last
prior Valuation Date; plus or minus
2. the per-share or per-unit charge or credit for tax reserves as of the
end of the last prior Valuation Date; and
c is the applicable Investment Option deduction for the Valuation
Period.
TRANSFERS BETWEEN INVESTMENT OPTIONS
As long as this policy is in effect, You may request that We transfer all or a
part of the Cash Value (minus Loan Account value) from an Investment Option to
any other Investment Option available under this policy at the time of request.
Such transfers must be in accordance with Our rules. We reserve the right to
limit the number of free transfers between Investment Options as described on
the Policy Summary. We reserve the right to charge the fee shown on the Policy
Summary for transfers beyond that number.
Transfers between Investment Options will result in the addition or deletion of
Accumulation Units having a total value equal to the dollar amount being
transferred to or from a particular Investment Option. The number of
Accumulation Units will be determined by dividing the amount transferred by the
Accumulation Unit Value of the Investment Options involved as of the next
Valuation Date after We receive Your request for transfer at Our Office.
CONTINUATION OF INSURANCE, GRACE PERIOD AND REINSTATEMENT
CONTINUATION OF INSURANCE
Subject to the "Grace Period" provision below, if sufficient premium payments
are not made, this policy will continue until the day on which the Cash
Surrender Value is not enough to pay the Deduction Amount due, or until the
Maturity Date, if earlier.
The Continuation of Insurance benefit will not be less than the minimum benefit
required by the insurance laws of the state in which this policy is delivered.
<PAGE> 14
GRACE PERIOD
Thirty days after the Cash Surrender Value is insufficient to pay the Deduction
Amount due, We will send You a notice of required premium to Your last known
address. If the required premium is not paid within 31 days after the notice is
sent, the policy will lapse. The policy will have no Cash Value. The policy
will continue through the Grace Period, but if the required payment has not
been received at Our Office, the policy will terminate at the end of the Grace
Period.
REINSTATEMENT
This policy may be reinstated at any time within three years from the date to
which the Deduction Amount was paid, if:
1. the policy was not surrendered for cash; and
2. evidence of insurability acceptable to Us is furnished; and
3. all Deduction Amounts past due are paid; and
4. premium at least equal to the following three Deduction Amounts is
paid; and
5. all Loan Account value is repaid or restored.
Upon reinstatement, the Cash Value of the policy will be the amount provided by
the premium paid, plus any Cash Value as of the date of lapse.
EXCHANGE OPTION
During the first two Policy Years that this policy is in effect, You may
exchange this policy for a form of non-variable permanent individual life
insurance which We, or one of Our affiliates, then regularly issue for the
amount exchanged. No evidence of insurability will be required. We will issue
the policy as provided below:
1. the amount of insurance under the new policy cannot exceed the
Death Benefit of this policy at the time of the exchange; and
2. the Issue Date of the new policy will be the same as the Issue Date
of this policy; and
3. the Insured under the new policy will be the same as the Insured
under this policy; and
4. the premium for the new policy will be based on the Insured's age
under this policy; and
5. the new policy will be based on the same rate class used as of this
policy's Issue Date; or, if the same rate class is not available
under the new policy, then the new policy will be based on the
class that the Insured qualifies for based on his/her insurability
as of this policy's Issue Date.
Any Loan Account value must be repaid prior to the issuance of the new policy.
Rider benefits included with this policy will be included with the new policy
only if such rider benefits are available with the new policy, and will be
subject to Our rules then in effect.
An exchange made pursuant to this provision is subject to an equitable
adjustment in payments and Cash Values to reflect variance, if any, in the
payments and Cash Values under this policy and the new policy.
OWNERSHIP RIGHTS
OWNERSHIP
The original owner(s) is (are) shown on the application. While the Insured is
living, You may exercise all rights and options that this policy provides and
that We permit without the consent of any Beneficiary, unless irrevocably
named.
Ownership is transferable by assignment. No assignment is binding on Us until
We receive a copy of the assignment In Writing. We will not determine if an
assignment is valid. Proof of interest must be filed with any claim under a
collateral assignment.
BENEFICIARY
The original Beneficiary is stated in the application. Unless the Beneficiary
is irrevocably named, You may name a new Beneficiary while the Insured is
living and while this policy is in force by notifying Us In Writing. Any change
will be effective from the date You signed the notice of change, even if the
Insured's death occurs prior to Our receipt of the notice. We will have no
further responsibility for any payment that We made before the notice was
received at Our Office.
If no Beneficiary survives the Insured, You will be the Beneficiary. If You are
the Insured and no Beneficiary is living at the time of Your death, Your estate
will be the Beneficiary. The rights of any collateral assignee may affect the
interest of the Beneficiary.
<PAGE> 15
GENERAL PROVISIONS
ENTIRE CONTRACT
The entire contract consists of this policy and the application, a copy of
which is attached. The policy is issued in consideration of the application and
the payment of premium. We will not use any statement to void this policy or to
deny a claim under it, unless that statement is contained in an attached
written application. All statements in the application will be considered as
being made to the best knowledge and belief of the applicant and not as
promises of truth.
CHANGES
This policy may only be altered by a written agreement signed by one of Our
officers.
NO DIVIDENDS
This policy is non-participating. It does not share in Our surplus earnings, so
You will receive no dividends under it.
MISSTATEMENT
If the age and/or sex of the Insured was incorrectly stated in the application,
all benefits will be adjusted to the amount which would have been purchased at
the correct age and/or sex, based on the most recent cost of insurance charge.
Proof of age may be filed at any time at Our Office.
SUICIDE
If within two years from the Issue Date, the Insured's death occurs and is due
to suicide while sane or insane, the Death Benefit will be limited to the
premiums paid less the Loan Account value, any Deduction Amount due, and the
amount of any partial surrenders.
If You have applied for an increase to the Stated Amount, the Suicide exclusion
period will be begin on the effective date of the increase with respect to
payment of the increase.
If this policy is reinstated, the Suicide exclusion period will begin on the
reinstatement date.
CONTESTABILITY
No misstatements made in any application for this policy will be used to
contest payment of any Death Benefit after the policy has been in force during
the lifetime of the Insured for two years from the Issue Date.
If You have applied for an increase to the Stated Amount, the contestability
period will begin on the effective date of the increase with respect to payment
of the increase.
If this policy is reinstated, the contestability period will begin on the
reinstatement date.
SEPARATE ACCOUNT
We have exclusive and absolute ownership and control of the assets of the
Separate Account and the associated Investment Options. The assets of the
Separate Account will be available to cover the liabilities of Our general
account only to the extent that those assets exceed the reserves and other
policy liabilities of the Separate Account arising under the variable life
insurance policies supported by the Separate Account. The assets of the
Separate Account will be valued on each Valuation Date. Our determination of
the value of an Accumulation Unit by the method described in this policy will
be conclusive. To the extent required by law, the investment policy of the
Separate Account will not be changed without the approval of the Insurance
Commissioner of Connecticut. If required, this approval process is on file with
the Commissioner of the state where this policy is issued for delivery.
SUBSTITUTION OF SEPARATE ACCOUNT OR INVESTMENT OPTION
If the use of a Separate Account or Investment Option is no longer possible, or
in Our judgment becomes inappropriate for the purposes of this policy, We may
substitute another Separate Account or Investment Option without Your consent.
Substitution may be made with respect to both existing premium payments and
investment of future premium payments. However, no such substitution will be
made without notice to You and without prior approval of the Securities and
Exchange Commission and the approval of the Insurance Commissioner of the state
where this policy is issued for delivery, to the extent required by law. We may
also add other Investment Options under the policy.
<PAGE> 16
EMERGENCY PROCEDURE
We reserve the right to suspend or postpone the date of any payment of any
benefit or values (including the payments of cash surrenders and policy loans)
for any Valuation Period (1) when the New York Stock Exchange is closed (except
for holidays or weekends); (2) when trading on the Exchange is restricted; (3)
when an emergency exists as determined by the Securities and Exchange
Commission so that disposal of the securities held in the Separate Account is
not reasonably practicable or it is not reasonably practicable to determine the
value of the Separate Account's net assets; or (4) when the Securities and
Exchange Commission has ordered that the right of surrender be suspended for
Your protection; or (5) during any other period when the Securities and
Exchange Commission, by order, so permits for Your protection. Any provision of
this policy that specifies a Valuation Date or provides for surrenders or loans
will be superseded by this Emergency Procedure.
VOTING RIGHTS
If current law requires, You will be entitled to certain voting rights with
respect to the Investment Options to which You have allocated premiums.
If current law requires, You will be entitled to instruct Us how to vote at
meetings of the shareholders of the Investment Options. We will determine the
number of votes to which You will be entitled to instruct Us. If there is a
change in the law which permits Us to vote the shares of the Investment Options
without direction from You, We reserve the right to do so.
MATURITY OF AN INVESTMENT OPTION
If any Cash Value is attributable to an Investment Option having a specified
maturity date, the Cash Value in that Investment Option as of such maturity
date will be allocated to the Money Market Investment Option specified on the
Policy Summary, unless You request otherwise. We will send written notice to
Your last known address at least thirty days in advance of the maturity date of
that Investment Option. To select an allocation to an Investment Option other
than the Money Market Investment Option, We must receive Your notification In
Writing at least seven days before the maturity date of the Investment Option.
ANNUAL STATEMENT
As often as required by law, but at least once in each Policy Year, We will
send You a statement showing:
1. the Cash Value, Stated Amount and Amount Insured; and
2. the premiums paid, deductions, surrenders and loans made during the
preceding Policy Year; and
3. total Loan Account value.
ILLUSTRATIVE REPORTS
You may request an up-to-date illustrative report of values based on past
results and current assumptions.
We will provide the illustrative report within a reasonable time and for a
reasonable service fee not to exceed $15, unless prohibited by state law.
<PAGE> 17
MINIMUM AMOUNT INSURED TABLE
<TABLE>
<CAPTION>
Insured's Age Cash Value Percentage Insured's Age Cash Value Percentage
- ------------- -------------------------- ------------- ---------------------
<S> <C> <C> <C>
0-40 250% 60 130%
41 243% 61 128%
42 236% 62 126%
43 229% 63 124%
44 222% 64 122%
45 215% 65 120%
46 209% 66 119%
47 203% 67 118%
48 197% 68 117%
49 191% 69 116%
50 185% 70 115%
51 178% 71 113%
52 171% 72 111%
53 164% 73 109%
54 157% 74 107%
55 150% 75 - 90 105%
56 146% 91 104%
57 142% 92 103%
58 138% 93 102%
59 134% 94 101%
95+ 100%
</TABLE>
<PAGE> 18
PRIMARY INSURED TERM RIDER
This Rider is made a part of the policy to which it is attached. Except where
this Rider provides otherwise, it is subject to all conditions of the policy.
DEFINITIONS
Primary Insured - The person named as the Insured for the policy to which this
Rider is attached.
Primary Insured Term Benefit - shown in the rider information section of the
Policy Summary.
BENEFIT
If the Primary Insured's death occurs while the policy and this Rider are in
force, then We will pay the Primary Insured Term Benefit to the Beneficiary
upon Our receipt of Due Proof of the Insured's death. We will deduct from the
Primary Insured Term Benefit any unpaid charges due to Us at the time of death.
If no Beneficiary survives the Primary Insured, You will be the Beneficiary. If
You are the Primary Insured and no Beneficiary survives Your death, Your estate
will be the Beneficiary. The rights of any collateral assignee may affect the
interest of the Beneficiary.
TERM
Subject to the Termination provision, this Rider is effective until the Expiry
Date shown for the Rider on the Policy Summary.
CHARGE
This Rider is issued in consideration of the application for it and the
deduction of the additional charge shown on the Policy Summary. The maximum
guaranteed cost per $1,000 of the Primary Insured Term Benefit is determined on
each Deduction Day. It is based on the Primary Insured's age, sex and rate
class, and duration of coverage.
We may use rates less than those shown. We will base these rates on our
expectations as to future experience. Any change We make to the current rates
will be on a uniform basis for insureds of the same age, sex, rate class and
duration of coverage. The current rates will never exceed the maximum
guaranteed rates shown.
CHANGE IN AMOUNT
No increases to the Primary Insured Term Benefit amount will be allowed.
Any time after the second Policy Anniversary, You may request a decrease to the
Primary Insured Term Benefit amount. Such request must be made In Writing. A
decrease will be effective on the later of the Deduction Day on or immediately
following Our receipt of Your request, or the Deduction Day on or immediately
following Your requested effective date.
The amount of insurance remaining after the decrease must be at least equal to
the Minimum Primary Insured Term Benefit shown on the Policy Summary.
ISSUE DATE
The Issue Date of this Rider is the same as that of the policy unless otherwise
shown on the Policy Summary.
CONTESTABILITY
When applied to this Rider, the contestability period will begin on this
Rider's Issue Date.
MISSTATEMENT
If the age and/or sex of the Primary Insured was incorrectly stated in the
application, all benefits under this Rider will be adjusted to the amount that
the charge paid would have purchased at the correct age and/or sex.
SUICIDE
If within two years from the Issue Date of this Rider, the Primary Insured's
death occurs and is due to suicide while sane or insane, the amount payable
under this Rider will be limited to the charges paid for this Rider.
CONVERSION OPTION
You may convert insurance under this Rider to a permanent policy if all past
due charges have been paid, and You notify Us In Writing by the earlier of:
a. 31 days after the Conversion Expiry Date for this Rider shown on the Policy
Summary; or
b. 31 days after termination of this Rider (if termination occurs prior to the
Conversion Expiry Date).
No evidence of insurability will be required. The new policy will be an
individual Flexible Premium Adjustable Life Insurance Policy that We regularly
offer at the time of conversion.
<PAGE> 19
We will issue the new policy as follows:
1. the new policy will be based on the same rate class used as of this
Rider's Issue Date; or, if the same rate class is not available under the
new policy, then the new policy will be based on the class that the
Primary Insured qualifies for based on his/her insurability as of this
Rider's Issue Date; and
2. the charge will be based on the Primary Insured's age;
3. the Policy Date will be the date on which the conversion is made, which is
the first Deduction Day following Our receipt of Your request for
conversion;
4. the Issue Date will be the same as the Issue Date of this Rider;
5. the amount of insurance cannot exceed the Primary Insured Term Benefit in
effect at the time of conversion.
If the conversion option of this Rider is exercised, but the Primary Insured's
death occurs within sixty days after the conversion date and prior to the
deduction of any charge on the new policy, then We will pay the Primary Insured
Term Benefit as if the Primary Insured's death had occurred prior to Your
request for conversion.
TERMINATION
This Rider will terminate on the earliest of:
1. subject to the Grace Period provision of the policy, the date on which the
Cash Surrender Value would not be enough to pay charges due for the policy
or the Rider; or
2. the Deduction Day following Your request, In Writing, for termination of
this Rider; or
3. policy termination or maturity; or
4. the Expiry Date of this Rider as shown on the Policy Summary; or
5. conversion of all of the insurance under this Rider.
THE TRAVELERS LIFE AND ANNUITY COMPANY
[SIG]
President
<PAGE> 20
SPOUSE TERM INSURANCE RIDER
This Rider is made a part of the policy to which it is attached. Except where
this Rider provides otherwise, it is subject to all conditions of the policy.
DEFINITIONS
Spouse - The person named in the Spouse Term Insurance Rider section of the
Policy Summary.
Spouse Term Insurance Benefit - shown in the rider information section of the
Policy Summary.
BENEFIT
If the Spouse's death occurs while the policy and this Rider are in force, then
We will pay the Spouse Term Insurance Benefit to the Beneficiary upon Our
receipt of Due Proof of the Spouse's death. We will deduct from the Spouse Term
Insurance Benefit any unpaid charges due to Us at the time of death. If no
Beneficiary survives the Spouse, You will be the Beneficiary. If You are the
Spouse and no Beneficiary survives Your death, Your estate will be the
Beneficiary. The rights of any collateral assignee may affect the interest of
the Beneficiary.
TERM
Subject to the Termination provision, this Rider is effective until the Expiry
Date shown for the Rider on the Policy Summary.
CHARGE
This Rider is issued in consideration of the application for it and the
deduction of the additional charge shown on the Policy Summary. The maximum
guaranteed cost per $1,000 of the Spouse Term Insurance Benefit is determined
on each Deduction Day. It is based on the Spouse's age, sex and rate class, and
duration of coverage.
We may use rates less than those shown. We will base these rates on our
expectations as to future experience. Any change We make to the current rates
will be on a uniform basis for insureds of the same age, sex, rate class and
duration of coverage. The current rates will never exceed the maximum
guaranteed rates shown.
CHANGE IN AMOUNT
No increases to the Spouse Term Insurance Benefit amount will be allowed.
Any time after the second Policy Anniversary, You may request a decrease to the
Spouse Term Insurance Benefit amount. Such request must be made In Writing. A
decrease will be effective on the later of the Deduction Day on or immediately
following Our receipt of Your request, or the Deduction Day on or immediately
following Your requested effective date.
The amount of insurance remaining after the decrease must be at least equal to
the Minimum Spouse Term Insurance Benefit shown on the Policy Summary.
ISSUE DATE
The Issue Date of this Rider is the same as that of the policy unless otherwise
shown on the Policy Summary.
CONTESTABILITY
When applied to this Rider, the contestability period will begin on this
Rider's Issue Date.
MISSTATEMENT
If the age and/or sex of the Spouse was incorrectly stated in the application,
all benefits under this Rider will be adjusted to the amount that the charge
paid would have purchased at the correct age and/or sex.
SUICIDE
If within two years from the Issue Date of this Rider, the Spouse's death
occurs and is due to suicide while sane or insane, the amount payable under
this Rider will be limited to the charges paid for this Rider.
CONVERSION OPTION
You may convert insurance under this Rider to a permanent policy if all past
due charges have been paid, and You notify Us In Writing by the earlier of:
a. 31 days after the Conversion Expiry Date for this Rider shown on the Policy
Summary; or
b. 31 days after termination of this Rider (if termination occurs prior to the
Conversion Expiry Date).
No evidence of insurability will be required. The new policy will be an
individual Flexible Premium Adjustable Life Insurance Policy that We regularly
offer at the time of conversion.
<PAGE> 21
CONVERSION OPTION (CONT'D)
We will issue the new policy as follows:
1. the new policy will be based on the same rate class used as of this
Rider's Issue Date; or, if the same rate class is not available under the
new policy, then the new policy will be based on the class that the Spouse
qualifies for based on his/her insurability as of this Rider's Issue Date;
2. the charge will be based on the Spouse's age;
3. the Policy Date will be the date on which the conversion is made, which is
the first Deduction Day following Our receipt of Your request for
conversion;
4. the Issue Date will be the same as the Issue Date of this Rider;
5. the amount of insurance cannot exceed the Spouse Term Insurance Benefit in
effect at the time of conversion.
If the conversion option of this Rider is exercised, but the Spouse's death
occurs within sixty days after the conversion date and prior to the deduction
of any charge on the new policy, then We will pay the Spouse Term Insurance
Benefit as if the Spouse's death had occurred prior to Your request for
conversion.
TERMINATION
This Rider will terminate on the earliest of:
1. subject to the Grace Period provision of the policy, the date on which the
Cash Surrender Value would not be enough to pay charges due for the policy
or the Rider; or
2. the Deduction Day following Your request, In Writing, for termination of
this Rider; or
3. policy termination or maturity; or
4. the Expiry Date of this Rider as shown on the Policy Summary; or
5. conversion of all of the insurance under this Rider.
THE TRAVELERS LIFE AND ANNUITY COMPANY
[SIG]
President
<PAGE> 22
CHILD TERM INSURANCE RIDER
This Rider is made a part of the policy to which it is attached. Except where
this Rider provides otherwise, it is subject to all conditions and limitations
of the policy.
DEFINITIONS
Covered Child - a child, stepchild or legally adopted child of the Insured who
is at least fifteen days old and no more than seventeen years old, and:
a. on whose life insurance was approved; or
b. who was born to or adopted by the Insured while this Rider is in effect.
Insured - the Insured under the policy as shown on the Policy Summary.
Beneficiary - unless otherwise stated in the application, the Beneficiary at the
death of each Covered Child is:
a. the Insured, if living; otherwise
b. the executors or administrators of the estate of the Covered Child.
After the Insured's death, You may not change the Beneficiary designation.
BENEFITS - If any Covered Child under this Rider dies while the policy and this
Rider are in force, We will pay the Beneficiary the Child Term Benefit when We
receive Due Proof of the Covered Child's death. We will subtract from the Child
Term Benefit any unpaid charges due to Us at the time of death.
The Child Term Benefit provided at the death of a Covered Child is $1,000
multiplied by the number of units shown for this Rider on the Policy Summary.
CONVERSION - Insurance under this Rider may be converted to a permanent plan of
life insurance if:
1. the Covered Child whose insurance coverage is to be converted notifies Us In
Writing; and
2. all past due Deduction Amounts for the policy and this Rider have been paid;
and
3. the insurance provided by this Rider on the life of the Covered Child
requesting conversion has continued for its full term or terminated due to
the death of the Insured.
Insurance under this Rider may be converted within thirty-one days after
termination without evidence of insurability. The new policy will be a permanent
plan of life insurance which We then regularly issue for the amount requested at
the Covered Child's age.
The new policy will be issued as provided below:
1. the amount of insurance on the life of each Covered Child may not exceed the
Child Term Benefit which was in force at the time of termination;
2. the Covered Child's rate class under the new policy will be standard;
3. the charge will be based on the Covered Child's age;
4. the Policy Date of the new policy will be the date on which conversion is
made; and
5. the Issue Date of the new policy will be the same as the Issue Date of this
Rider.
If any Covered Child requests conversion of insurance under this Rider, but dies
during the thirty-one day period allowed for conversion and before the first
charge on the new policy has been deducted, then We will pay the Child Term
Benefit as if the death had occurred prior to the request for conversion.
CHARGE - This Rider is issued in consideration of the application for it and the
deduction of the additional charge shown for this Rider on the Policy Summary.
The charge for this Rider is deducted under the same conditions as the charge
for the policy.
ISSUE DATE - The Issue Date of this Rider is the same as the Issue Date of the
policy unless otherwise shown for this Rider on the Policy Summary.
<PAGE> 23
CONTESTABILITY - We will not contest insurance coverage on the life of any
Covered Child after the Issue Date of this Rider.
SUICIDE - If, within two years from the Issue Date of this Rider, the Insured
commits suicide, while sane or insane:
1. the amount payable will be limited to the charges paid for this Rider; and
2. We will have no other obligations under this Rider except as stated in the
Conversion provision of this Rider.
TERMINATION - This Rider will terminate on the earliest of:
1. Subject to the Grace Period provision of the policy, the date on which the
Cash Surrender Value is insufficient to pay the charges due for the
policy or this Rider; or
2. the Deduction Day next following Your request In Writing to terminate this
Rider; or
3. policy termination (subject to the 'Conversion' provision); or
4. the Expiry Date of this Rider as shown on the Policy Summary; or
5. with respect to each Covered Child, conversion of insurance on his or her
life; or
6. with respect to each Covered Child, his or her twenty-fifth birthday.
THE TRAVELERS LIFE AND ANNUITY COMPANY
[SIG]
President
<PAGE> 24
ACCIDENTAL DEATH BENEFIT RIDER
This Rider is made a part of the policy to which it is attached. Except where
this Rider provides otherwise, it is subject to all conditions of the policy.
BENEFIT
The Accidental Death Benefit is shown on the Policy Summary page for this
Rider. We will pay the Accidental Death Benefit if an accident that occurs
while this Rider is in force causes the Insured's death within ninety days
after the accident. The Insured's death must be due to bodily injuries which
are the direct and independent cause of death. Except in the case of drowning
or internal injury revealed by autopsy, an injury must be evidenced by a
visible wound or contusion.
EXCLUSIONS
We will not pay the Accidental Death Benefit if the Insured's death results
from, and/or is contributed to by:
1. any bodily or mental infirmity or disease; or
2. war, whether declared or not, or any act of war or international armed
conflict; or
3. operating, learning to operate or serving as a crew member of any aircraft
or aerial navigation device; or
4. suicide while sane or insane.
ISSUE DATE
The Issue Date of this Rider is the same as the Issue Date of the basic policy
unless otherwise shown on the Policy Summary.
CONTESTABILITY
When applied to this Rider, the contestability period will begin on this
Rider's Issue Date.
CHARGE
This Rider is issued in consideration of the application for it and the
deduction of the additional charge shown on the Policy Summary. The charge for
this Rider is deducted under the same conditions as the charge for the policy.
AUTOPSY
We reserve the right to make an autopsy if allowed by law.
TERMINATION
This Rider will terminate on the earliest of:
1. Subject to the Grace Period provision of the policy, the date on which the
Cash Surrender Value would not be enough to pay charges due for the policy
or this Rider; or
2. failure to pay any charges due for this Rider or the basic policy; or
3. the Deduction Day following Your request, In Writing, to terminate this
Rider; or
4. the Expiry Date of this Rider as shown on the Policy Summary; or
5. policy termination or maturity.
THE TRAVELERS LIFE AND ANNUITY COMPANY
[SIG]
President
<PAGE> 25
COST OF LIVING ADJUSTMENT RIDER
This Rider is made a part of the policy to which it is attached. Except where
this Rider provides otherwise, it is subject to all conditions and limitations
of the policy.
DEFINITION
Consumer Price Index (CPI) -means the Consumer Price Index for all Urban
Consumers published by the United States Department of Labor for the September
of the calendar year immediately preceding the effective date of the increase.
We may change to another index that We consider appropriate if:
a. publication of the CPI is discontinued, delayed or otherwise not available
for this use; or
b. any change in the composition, base or method of computation of the CPI
makes its continued use inappropriate, in Our opinion, for determining
cost of living increases.
BENEFIT
This Rider provides increases to the Stated Amount of the policy based on
changes in the CPI. We will determine the increased Stated Amount on each
Policy Anniversary.
We will determine the increase by multiplying the number of Cost of Living
Units shown on the Policy Summary by the ratio of a divided by b, where:
a is the change in the CPI between the current Policy Anniversary and
the later of the effective date of the last increase and the effective
date of this Rider; and
b is the CPI on the effective date of this Rider.
In no event will the Death Benefit be reduced due to this calculation. If the
increase as calculated above is less than the Minimum Increase Amount for this
Rider as shown on the Policy Summary, an increase will not be made.
The amount of any single increase made under this Rider will be limited to the
Maximum Increase Amount for this Rider as shown on the Policy Summary. The
total of increases provided by this Rider cannot exceed the Total Increase
Limit for this Rider as shown on the Policy Summary.
CHARGE - This Rider is issued in consideration of the application for it and
the deduction of the additional charge shown for this Rider on the Policy
Summary. The charge for this Rider is deducted under the same conditions as the
charge for the policy. The maximum guaranteed charge for the cost of living
increase will be based on the Insured's age and current rate class.
ISSUE DATE - The Issue Date of this Rider is the same as the Issue Date of the
policy unless otherwise shown for this Rider on the Policy Summary.
CONTESTABILITY - When applied to this Rider, the contestability period will
begin on this Rider's Issue Date.
SUICIDE - If, within two years from the Issue Date of this Rider, the Insured
commits suicide while sane or insane, the amount payable under this Rider will
be limited to the charges paid for this Rider.
TERMINATION - This Rider will terminate on the earliest of:
1. Subject to the Grace Period provision of the policy, the date on which the
Cash Surrender Value is insufficient to pay the charges due for the policy
or this Rider; or
2. failure to pay any charges due for this Rider or the basic policy; or
3. the Deduction Day next following Your request In Writing to terminate this
Rider; or
4. policy termination; or
5. the Expiry Date of this Rider as shown on the Policy Summary; or
6. the effective date of a decrease to the Stated Amount; or
7. the date on which the Total Increase Limit for this Rider (as shown on the
Policy Summary) is reached; or
8. Your rejection of an increase under this Rider; or
9. the effective date of the first benefit payment under the Waiver of
Deduction Amount Rider.
THE TRAVELERS LIFE AND ANNUITY COMPANY
[SIG]
President
<PAGE> 26
WAIVER OF DEDUCTION AMOUNT RIDER
This Rider is made a part of the policy to which it is attached. Except where
this Rider provides otherwise, it is subject to all conditions and limitations
of such policy.
DEFINITIONS
Disability - For the purposes of this Rider, a Disability must:
1. result from bodily injury or disease;
2. begin while the policy and Rider are in force;
3. exist for a period of not less than six consecutive months; and
4. prevent the Insured from being Employed as defined below.
If the Insured was Employed on the date Disability began, the Insured must be
unable to perform:
1. for the first twenty-four months of Disability, the substantial and
material duties of his or her own occupation as of the date of Disability;
and thereafter
2. Employment for which the Insured is or can become reasonably fitted by
education, training or experience.
If the Insured was not Employed (except if the sole occupation was that of a
student or managing a household) on the date Disability began, the Insured must
be unable to perform:
1. for the first twenty-four months of Disability, his or her reasonable and
customary activities as of the date of Disability; and thereafter
2. Employment for which he or she is or can become reasonably fitted by
education, training or experience.
If the Insured's sole occupation was that of student or managing a household on
the date Disability began, he or she must be unable to perform that occupation.
We will consider the Insured to be disabled, even if he or she is Employed,
upon the entire and permanent loss of:
1. sight in both eyes; or
2. the use of both hands or both feet; or
3. the use of one hand and one foot.
Employed/Employment - For the purposes of this Rider, Employed/Employment means
engaged or engagement in any occupation for wages or profit.
BENEFITS
The Deduction Amounts eligible for waiver are shown on the Policy Summary page
for this Rider. While this Rider is in effect and during the Disability of the
Insured, We will waive the eligible Deduction Amounts, and will restore to the
Cash Value any eligible Deduction Amount that was paid during the Disability.
If the Disability occurs before the Policy Anniversary on which the Insured is
age sixty, benefits will continue until the Maturity Date of the policy or the
end of the Insured's Disability, whichever is earlier.
If the Disability occurs on or after the Policy Anniversary on which the
Insured is age sixty, but before the Policy Anniversary on which he or she is
age sixty-five, benefits under this Rider will continue to the Policy
Anniversary on which the Insured is age sixty-five or the end of the Insured's
Disability, whichever is earlier.
If the Disability occurs on or after the Policy Anniversary on which the
Insured is age sixty-five, there will be no benefits under this Rider.
We will not waive or restore any Deduction Amount that was due more than one
year prior to notice of claim under this Rider.
The provisions, values and benefits of the basic policy will be the same as if
the Deduction Amounts were paid to Us. In any settlement under the policy, We
will not deduct any Deduction Amounts that were waived.
<PAGE> 27
DEATH BENEFIT OPTION
If You elected Death Benefit Option 1 under the basic policy, We will
automatically change it to Option 2 on the Deduction Day following the date the
Insured's Disability began. The new Stated Amount will be the Option 1 Stated
Amount on that Deduction Day, less the Cash Value on that Deduction Day. The
new Option 2 Stated Amount will continue unchanged until termination of the
policy.
CHANGES
If the policy is changed to another plan of insurance, the benefits provided by
this Rider will not be included as part of the new policy, unless evidence of
insurability satisfactory to Us is furnished at that time and if a similar
Rider is available with the new policy. If the policy is changed while We are
waiving the Deduction Amount, We will not waive the Deduction Amount on the new
policy.
NOTICE OF CLAIM
Notice of claim must be given to Us In Writing:
1. during the lifetime of the Insured; and
2. during the period of Disability; and
3. within one year after the start of Disability.
We will not deny or reduce a claim if it is shown that notice of claim was
given as soon as reasonably possible
PROOF OF LOSS
We may require proof of Disability no more than once a year. We will not waive
further Deduction Amounts if proof is not furnished or if Disability has
terminated.
END OF DISABILITY
The benefits for Disability will end if and when the Insured's Disability ends.
The Deduction Amounts due after that will not be waived.
CHARGE
This Rider is issued in consideration of the application for it and the
deduction of the additional charge for it. The rates and the method of
determining the Rider charge are described on the Policy Summary.
ISSUE DATE
The Issue Date of this Rider is the same as that of the policy unless otherwise
shown for the Rider on the Policy Summary.
CONTESTABILITY
When applied to this Rider, the contestability period will begin on this
Rider's Issue Date.
TERMINATION
This Rider will terminate on the earliest of:
1. Subject to the Grace Period provision of the Policy, the date on which the
Cash Surrender Value would not be enough to pay charges for the policy or
this Rider; or
2. failure to pay any charges due for this Rider or the basic policy; or
3. policy termination or maturity; or
4. the Deduction Day following Your request In Writing for termination of
this Rider; or
5. the Expiry Date of this Rider as shown on the Policy Summary, except with
respect to payment of benefits for a Disability that began prior to the
Policy Anniversary on which the Insured was age sixty as described in the
second paragraph of the "Benefits" provision of this Rider.
THE TRAVELERS LIFE AND ANNUITY COMPANY
[SIG]
President
<PAGE> 28
SPECIFIED AMOUNT PAYMENT RIDER
This Rider is made a part of the policy to which it is attached. Except where
this Rider provides otherwise, it is subject to all conditions and limitations
of the policy.
DEFINITIONS
Disability - For the purposes of this Rider, a Disability must:
1. result from bodily injury or disease;
2. begin while the policy and Rider are in force;
3. exist for a period of not less than six consecutive months; and
4. prevent the Insured from being Employed as defined below.
If the Insured was Employed on the date Disability began, the Insured must be
unable to perform:
1. for the first twenty-four months of Disability, the substantial and
material duties of his or her own occupation as of the date of Disability;
and thereafter
2. Employment for which the Insured is or can become reasonably fitted by
education, training or experience.
If the Insured was not Employed (except if the sole occupation was that of a
student or managing a household) on the date Disability began, the Insured must
be unable to perform:
1. for the first twenty-four months of Disability, his or her reasonable and
customary activities as of the date of Disability; and thereafter
2. Employment for which he or she is or can become reasonably fitted by
education, training or experience.
If the Insured's sole occupation was that of student or managing a household on
the date Disability began, he or she must be unable to perform that occupation.
We will consider the Insured to be disabled, even if he or she is Employed,
upon the entire and permanent loss of:
1. sight in both eyes; or
2. the use of both hands or both feet; or
3. the use of one hand and one foot.
Employed/Employment - For the purposes of this Rider, Employed/Employment means
engaged or engagement in any occupation for wages or profit.
Specified Amount - The amount that You have selected to be credited to the Cash
Value of the policy during the Insured's Disability. This amount is shown on
the Policy Summary for this Rider. You may request an increase to the Specified
Amount at any time while this Rider is in force. You may request a decrease to
the Specified Amount any time after the second Policy Anniversary and while
this Rider is in force. We reserve the right to decrease the Specified Amount
if You request a reduction to the benefits provided by the policy.
BENEFITS
While the policy and this Rider are in effect and during the Disability of the
Insured, We will credit the Specified Amount to the policy's Cash Value on each
Policy Anniversary. The first amount that We will credit will be equal to the
result of (a x b) divided by twelve, where:
a equals the Specified Amount; and b equals the number of months from the start
of the Disability to the first Policy Anniversary that follows the start of the
Disability.
If the Disability occurs before the Policy Anniversary on which the Insured is
age sixty, benefits will continue until the Maturity Date of the policy or the
end of the Insured's Disability, whichever is earlier. In no event will benefits
under this Rider be paid past the Maturity Date, regardless of whether the
policy coverage is extended beyond this date.
If the Disability occurs on or after the Policy Anniversary on which the
Insured is age sixty, but before the Policy Anniversary on which he or she is
age sixty-five, benefits under this Rider will continue to the Policy
Anniversary on which the Insured is age sixty-five or the end of the Insured's
Disability, whichever is earlier.
If the Disability occurs on or after the Policy Anniversary on which the
Insured is age sixty-five, there will be no benefits under this Rider.
<PAGE> 29
We will not credit any Specified Amount that was due to be paid more than one
year prior to notice of claim under this Rider. In any settlement under the
policy, We will not deduct from the proceeds any Specified Amounts that were
credited.
We will not credit any Specified Amount if payment would disqualify the policy
as life insurance.
CHANGES
If the policy is changed to another plan of insurance, the benefits provided by
this Rider will not be included as part of the new policy, unless evidence of
insurability satisfactory to Us is furnished at that time and if a similar
Rider is available under the new policy. If the policy is changed during the
Disability of the Insured, We will not credit the Specified Amount to the new
policy.
NOTICE OF CLAIM
Notice of claim must be given to Us In Writing:
1. during the lifetime of the Insured; and
2. during the period of Disability; and
3. within one year after the start of Disability.
We will not deny or reduce a claim if it is shown that notice of claim was
given as soon as reasonably possible
PROOF OF LOSS
We may require proof of Disability no more than once a year. We will not credit
further Specified Amounts if proof is not furnished or if Disability has
terminated.
END OF DISABILITY
The benefits for Disability as defined above will end if and when the
Disability of the Insured ceases. The Specified Amount will not be credited
after Disability has ended.
CHARGE
This Rider is issued in consideration of the application for it and the
deduction of the additional charge for it. The rates and the method of
determining the Rider charge are described on the Policy Summary.
ISSUE DATE
The Issue Date of this Rider is the same as that of the policy unless otherwise
shown for the Rider on the Policy Summary.
CONTESTABILITY
When applied to this Rider, the contestability period will begin on this
Rider's Issue Date.
TERMINATION
This Rider will terminate on the earliest of:
1. Subject to the Grace Period provision of the policy, the date on which the
Cash Surrender Value would not be enough to pay charges for the policy or
this Rider; or
2. failure to pay any charges due for this Rider or the basic policy; or
3. policy termination; or
4. the policy Maturity Date, regardless of whether the policy coverage is
extended beyond this date; or
5. the Deduction Day following Your request In Writing for termination of
this Rider; or
6. the Expiry Date of this Rider as shown on the Policy Summary, except with
respect to payment of benefits for a Disability that began prior to the
Policy Anniversary on which the Insured was age sixty as described in the
second paragraph of the "Benefits" provision of this Rider.
THE TRAVELERS LIFE AND ANNUITY COMPANY
[SIG]
President
<PAGE> 30
EXTENSION OF COVERAGE RIDER
This Rider is made a part of the policy on the date specified on the
supplemental Policy Summary. Except where this Rider provides otherwise, it is
subject to all conditions of the policy.
BENEFIT - One year prior to the Maturity Date and at any time in the twelve
calendar months thereafter, You may request that coverage be extended beyond
the Maturity Date. If We have received Your request In Writing prior to the
Maturity Date, and any past due Deduction Amounts have been paid, then We will
continue this policy in force beyond the Maturity Date. The policy will be
continued until the earlier of the Insured's death or the date that We receive
Your request for full surrender In Writing. All other riders and supplemental
benefits will terminate on the Maturity Date.
The Death Benefit after the Maturity Date will be equal to the Amount Insured
as of the date of the Insured's death, minus any Loan Account value and any
amounts payable under a collateral assignment of the policy. After the Maturity
Date, Deduction Amounts will not be charged, and additional premium payments
will not be accepted. Interest on loans will continue to accrue and will be
added to the total Loan Account value. Loan repayments will be accepted.
All other provisions of the policy relating to the payment of the Death Benefit
apply to the Death Benefit after the Maturity Date. The Death Benefit and
policy values are based on the experience of the Investment Options selected,
and are variable and not guaranteed.
TAXATION - The policy with which this Rider is used is intended to qualify as a
life insurance policy for Federal tax purposes. The amount payable under this
policy upon the death of the Insured is intended to qualify for the Federal
income tax exclusion. The provisions of the policy are to be interpreted to
ensure such tax qualification, not withstanding any other provision to the
contrary.
The policy may be surrendered prior to the Insured's death for its Cash
Surrender Value. Such a surrender will be treated as a taxable distribution.
THE COMPANY DOES NOT GIVE TAX ADVICE. NO LANGUAGE IN THIS RIDER SHOULD BE
CONSTRUED TO MEAN THAT THE DEATH BENEFIT AND CASH VALUE WILL BE EXEMPT FROM ANY
FUTURE TAX LIABILITY. THE TAX RESULTS OF ANY BENEFITS RECEIVED UNDER THIS RIDER
DEPEND UPON INTERPRETATION OF THE INTERNAL REVENUE CODE. YOU SHOULD CONSULT
WITH YOUR PERSONAL TAX ADVISOR PRIOR TO THE EXERCISE OF THIS OPTION TO ASSESS
ANY POTENTIAL TAX LIABILITY.
THE TRAVELERS LIFE AND ANNUITY COMPANY
[SIG]
President
<PAGE> 1
Exhibit 8
FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of the 31st day of July, 1996, between The
Travelers Insurance Company, and its affiliate The Travelers Life and Annuity
Company (collectively, "Travelers"), both life insurance companies organized
under the laws of the State of Connecticut, and Travelers Series Trust (the
"Fund"), a trust organized under the laws of the State of Massachusetts.
ARTICLE I
DEFINITIONS
1.1 "Act" shall mean the Investment Company Act of 1940, as amended.
1.2 "Board" shall mean the Board of Directors of the Fund having the
responsibility for management and control of the Fund.
1.3 "Business Day" shall mean a day on which both Travelers and the New
York Stock Exchange are open for business.
1.4 "Commission" shall mean the Securities and Exchange Commission.
1.5 "Contract" shall mean a variable annuity contract or a variable life
insurance contract that uses the Fund as an underlying investment
medium. Individuals who participate under a group Contract are
"Participants".
1.6 "Contractholder" shall mean any entity that is a party to a Contract
with a Participating Company.
1.7 "Disinterested Board Members" shall mean those members of the Board
that are not deemed to be "interested persons" of the Fund, as defined
by the Act.
1.8 "TAMIC" shall mean Travelers Asset Management International
Corporation.
1.9 "Participating Companies" shall mean any insurance company (including
Travelers), which offers variable annuity and/or variable life
insurance contracts to the public and which has entered into an
agreement with the Fund similar hereto for the purpose of making Fund
shares available to serve as the underlying investment medium for the
aforesaid Contracts.
1.10 "Prospectus" shall mean the Fund's current prospectus and statement of
additional information, as most recently filed with the Commission.
1.11 "Separate Account" shall mean the applicable variable life or variable
annuity separate account established by Travelers in accordance with
the laws of the State of Connecticut. The Separate Accounts are listed
in Schedule A to the Agreement.
1.12 "Software Program"' shall mean the software program used by the Fund
for providing Fund and account balance information including net asset
value per share. In situations where the Software Program used by the
Fund is not available, such information may be provided by telephone.
Any such software shall be provided to Travelers at no charge.
1.13 "Travelers' General Account(s)" shall mean the general account(s) of
Travelers and its affiliates which invest in the Fund
<PAGE> 2
ARTICLE II
REPRESENTATIONS
2.1 Travelers represents and warrants that: (a) it is an insurance company
duly organized and in good standing under applicable law; (b) it has
legally and validly established the Separate Account pursuant to the
Connecticut Insurance Code for the purpose of offering to the public
certain group and individual variable annuity contracts; and (c) it has
registered the Separate Account as a unit investment trust under the
Act to serve as the segregated investment account for the Contracts.
2.2 Travelers represents and warrants that (a) the Contracts will be
described in a registration statement filed under the Securities Act of
1933, as amended ("1933 Act"); (b) the Contracts will be issued and
sold in compliance in all material respects with all applicable federal
and state laws; and (c) the sale of the Contracts shall comply in all
respects with state insurance law requirements.
2.3 Travelers represents and warrants that the income, gains and losses,
whether or not realized, from assets allocated to the Separate Account
are, in accordance with the applicable Contracts, to be credited to or
charged against such Separate Account without regard to other income,
gains or losses from assets allocated to any other accounts of
Travelers. Travelers represents and warrants that the assets of the
Separate Account are and will be kept separate from Traveler's General
Accounts and any other separate accounts Travelers may have, and will
not be charged with liabilities from any business that Travelers may
conduct or the liabilities of any companies affiliated with Travelers.
2.4(a) Fund represents that the Fund is registered with the Commission under
the Act as an open-end, non-diversified management investment company
and possesses, and shall maintain, all legal and regulatory licenses,
approvals, consents and/or exemptions required for Fund to operate and
offer its shares as an underlying investment medium for Participating
Companies. Fund further respresents and warrants that it is registered
as a non-diversified, open-end management company under the Investment
Company Act of 1940 ("1940 Act") and that it does and will comply in
all material respects with the 1940 Act.
2.4(b) Fund represents and warrants that any charges assessed against the Fund
are, in the aggregate, reasonable in relation to the services rendered,
and the expenses incurred or expected to be incurred.
2.5 Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), and that it will make every effort to
maintain such qualification (under Subchapter M or any successor or
similar provision) and that it will notify Travelers immediately upon
having a reasonable basis for believing that it has ceased to so
qualify or that it might not so qualify in the future.
2.6 Travelers represents that the Contracts are currently treated as life
insurance policies or annuity contracts, under applicable provisions of
the Code, and that it will make every effort to maintain such treatment
and that it will notify the Fund immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or
that they might not be so treated in the future.
2.7 Fund agrees that the Fund's assets shall be managed and invested in a
manner that complies with the requirements of Section 817(h) of the
Code.
2.8 Fund agrees to establish one account in the name of Travelers and its
affiliates and to make its shares available to such account. The shares
shall be offered to the Separate Account and to Travelers' General
Account at the net asset value of such shares.
<PAGE> 3
2.9 Travelers and Fund agree that (1) Travelers shall be permitted (subject
to the other terms of this Agreement) to utilize and employ other
management investment companies as underlying investment media for the
Separate Account, and (2) Fund shall be permitted (subject to the other
terms of this Agreement) to make Fund shares available to other
Participating Companies and contractholders.
2.10 Fund represents and warrants that any of its directors, officers,
employees, investment advisers, and other individuals/entities who deal
with the money and/or securities of the Fund are and shall continue to
be at all times covered by a blanket fidelity bond or similar coverage
for the benefit of the Fund in an amount not less than that required by
Rule 17g-1 under the Act. The aforesaid Bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding
company.
2.11 Travelers represents and warrants that all of its employees and agents
who deal with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or
similar coverage in an amount not less than the coverage required to be
maintained by the Fund. The aforesaid Bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding
company.
2.12 If the Travelers issues variable life insurance policies through a
Separate Account or the Fund enters into a participation agreement with
a Participating Company (including Travelers) offering variable life
insurance policies through a separate account investing in the Fund,
Travelers and the Fund will promptly amend this Agreement to add any
provisions, conditions or undertakings required by an exemptive order
under the Act on which the Fund is then relying.
ARTICLE III
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide for the
investment of certain amounts in the shares of the Fund.
3.2 Fund agrees to make its shares available for purchase at the applicable
net asset value per share by Travelers and the Separate Account on
those days on which the Fund calculates its net asset value pursuant to
rules of the Commission and the Fund shall use all reasonable efforts
to calculate such net asset value on each Business Day. Notwithstanding
the foregoing, the Fund may refuse to sell its shares to any person, or
suspend or terminate the offering of the Fund's shares if such action
is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Board, acting in good faith and in
light of its fiduciary duties under federal and any applicable state
laws, necessary and in the best interests of the Fund's shareholders.
3.3 Fund agrees that shares of the Fund will be sold only to Participating
Companies and their separate accounts and to the general accounts of
those Participating Companies and their affiliates. No Fund shares will
be sold to the general public.
3.4 Fund shall use its best efforts to provide closing net asset value,
dividend and capital gain information on a per-share and Fund basis to
Travelers by 6:00 p.m. Eastern Time on each Business Day. Any material
errors in the calculation of net asset value, dividend and capital gain
information shall be reported immediately upon discovery to Travelers.
Non-material errors will be corrected in the next Business Day's net
asset value per share.
3.5 At the end of each Business Day, Travelers will use the information
described in Sections 3.2 and 3.4 to calculate the Separate Account
unit values for the day. Using this unit value,
<PAGE> 4
Travelers will process the day's Separate Account transactions received
by it by the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m. Eastern time) to determine the net dollar
amount of Fund shares which will be purchased or redeemed at that day's
closing net asset value per share. The net purchase or redemption
orders will be transmitted to the Fund by Travelers by 11:00 a.m.
Eastern Time on the Business Day next following Travelers' receipt of
that information. Subject to Section 3.6, all purchase and redemption
orders for Travelers' General Accounts shall be effected at the net
asset value per share next calculated after receipt of the order by the
Fund or its Transfer Agent.
3.6 Fund appoints Travelers as its agent for the limited purpose of
accepting orders for the purchase and redemption of Fund shares for the
Separate Account. Fund will execute orders at the net asset value per
share determined as of the close of trading on the day of receipt of
such orders by Travelers acting as agent ("effective trade date"),
provided that the Fund receives notice of such orders by 11:00 a.m.
Eastern Time on the next following Business Day.
3.7 Travelers will make its best efforts to notify Fund in advance of any
unusually large purchase or redemption orders.
3.8 If Travelers' order requests the purchase of Fund shares, Travelers
will pay for such purchases by wiring Federal Funds to Fund or its
designated custodial account on the day the order is transmitted. If
payment in Federal Funds for any purchase is received by the Fund after
12:00 noon on the business day on which the applicable purchase request
was received by the Fund pursuant to Section 3.5, Travelers shall
promptly upon the Fund's request, reimburse the Fund for any charges,
costs, fees, interest or other expenses incurred by the Fund in
connection with any advances to, or borrowings or overdrafts by, the
Fund as a result of portfolio transactions effected by the Fund based
upon such purchase request. If Travelers' order requests the redemption
of Fund shares valued at or greater than $1 million dollars, the Fund
will wire such amount to Travelers within seven days of the order.
3.9 Fund has the obligation to ensure that Fund shares are registered with
applicable federal agencies at all times.
3.10 Fund will confirm each purchase or redemption order made by Travelers.
Transfer of Fund shares will be by book entry only. No stock
certificates will be issued to Travelers. Travelers will record shares
ordered from Fund in an appropriate title for the corresponding
account.
3.11 Fund shall credit Travelers with the appropriate number of shares.
3.12 On each ex-dividend date of the Fund or, if not a Business Day, on the
first Business Day thereafter, Fund shall communicate to Travelers the
amount of dividend and capital gain, if any, per share. All dividends
and capital gains shall be automatically reinvested in additional
shares of the Fund at the net asset value per share of the Fund on the
ex-dividend date. Fund shall, on the day after the ex-dividend date or,
if not a Business Day, on the first Business Day thereafter, notify
Travelers of the number of shares so issued.
ARTICLE IV
STATEMENTS AND REPORTS
4.1 Fund shall provide monthly statements of account as of the end of each
month for all of Travelers' accounts by the fifteenth (15th) Business
Day of the following month.
4.2 Fund shall distribute to Travelers copies of the Fund's Prospectuses,
proxy materials, notices, periodic reports and other printed materials
(which the Fund customarily provides to its shareholders) in quantities
as Travelers may, reasonably request for distribution to each
Contractholder and Participant.
<PAGE> 5
4.3 Fund will provide to Travelers at least one complete copy of all
registration statements, Prospectuses, reports, proxy statements, sales
literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any
of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Commission or other
regulatory authorities.
4.4 Travelers will provide to the Fund at least one copy of all
registration statements, Prospectuses, reports, proxy statements, sales
literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any
of the above, that relate to the Contracts or the Separate Account,
contemporaneously with the filing of such document with the Commission.
ARTICLE V
EXPENSES
5.1 The charge to the Fund for all expenses and costs of the Fund,
including but not limited to management fees, administrative expenses
and legal and regulatory costs, will be made in the determination of
the Fund's daily net asset value per share so as to accumulate to an
annual charge at the rate set forth in the Fund's Prospectus. Excluded
from the expense limitation described herein shall be brokerage
commissions and transaction fees and extraordinary expenses.
5.2 Except as provided in this Article V and, in particular in the next
sentence, Travelers shall not be required to pay directly any expenses
of the Fund or expenses relating to the distribution of its shares.
Travelers shall pay the following expenses or costs:
a. Such amount of the production expenses of any Fund materials
or marketing materials for prospective Travelers
Contractholders and Participants as TAMIC and Travelers shall
agree from time to time.
b. Distribution expenses of any Fund materials or marketing
materials for prospective Travelers Contractholders and
Participants.
c. Distribution expenses of Fund materials or marketing materials
for Travelers Contractholders and Participants.
Except as provided herein, all other Fund expenses shall not be borne
by Travelers.
ARTICLE VI
EXEMPTIVE RELIEF
6.1 Travelers has reviewed a copy of the order dated August 23, 1989 of the
Securities and Exchange Commission under Section 6(c) of the Act and,
in particular, has reviewed the conditions to the relief set forth in
the related Notice. As set forth therein, Travelers agrees to report
any potential or existing conflicts promptly to the Board, and in
particular whenever contract voting instructions are disregarded, and
recognizes that it will be responsible for assisting the Board in
carrying out its responsibilities under such application. Travelers
agrees to carry out such responsibilities with a view to the interests
of existing Contractholders.
6.2 If a majority of the Board, or a majority of Disinterested Board
Members, determines that a material irreconcilable conflict exists with
regard to Contractholder investments in the Fund, the Board shall give
prompt notice to all Participating Companies. If the Board determines
that Travelers is responsible for causing or creating said conflict,
Travelers shall at its sole cost and
<PAGE> 6
expense, and to the extent reasonably practicable (as determined by a
majority of the Disinterested Board Members), take such action as is
necessary to remedy or eliminate the irreconcilable material conflict.
Such necessary action may include, but shall not be limited to:
a. Withdrawing the assets allocable to the Separate Account from
the Fund and reinvesting such assets in a different investment
medium, or submitting the question of whether such segregation
should be implemented to a vote or all affected
Contractholders; and/or
b. Establishing a new registered management investment company.
6.3 If a material irreconcilable conflict arises as a result of a decision
by Travelers to disregard Contractholder voting instructions and said
decision represents a minority position or would preclude a majority
vote by all Contractholders having an interest in the Fund, Travelers
may be required, at the Board's election, to withdraw the Separate
Account's investment in the Fund.
6.4 For the purpose of this Article, a majority of the Disinterested Board
Members shall determine whether or not any proposed action adequately
remedies any irreconcilable material conflict, but in no event will the
Fund be required to bear the expense of establishing a new funding
medium for any Contract. Travelers shall not be required by this
Article to establish a new funding medium for any Contract if an offer
to do so has been declined by vote of a majority of the Contractholders
materially adversely affected by the irreconcilable material conflict.
6.5 No action by Travelers taken or omitted, and no action by the Separate
Account or the Fund taken or omitted as a result of any act or failure
to act by Travelers pursuant to this Article VI shall relieve Travelers
of its obligations under, or otherwise affect the operation of, Article
V.
ARTICLE VII
VOTING OF FUND SHARES
7.1 Fund shall provide Travelers with copies at no cost to Travelers, of
the Fund's proxy material, reports to stockholders and other
communications to stockholders in such quantity as Travelers shall
reasonably require for distributing to Contractholders or Participants.
Travelers shall:
(a) solicit voting instructions from Contractholders or
Participants on a timely basis and in accordance with
applicable law;
(b) vote the Fund shares in accordance with instructions received
from Contractholders or Participants; and
(c) vote Fund shares for which no instructions have been received
in the same proportion as Fund shares for which instructions
have been received.
Travelers agrees at all times to votes its General Account shares in
the same proportion as Fund shares for which instructions have been
received from Contractholders or Participants.
ARTICLE VIII
MARKETING AND REPRESENTATIONS
8.1 The Fund or its underwriter shall periodically furnish Travelers with
the following documents, in quantities as Travelers may reasonably
request:
a. Current Prospectus and any supplements thereto;
b. other marketing materials.
<PAGE> 7
Expenses for the production of such documents may be borne by Travelers
in accordance with Section 5.2 of this Agreement.
8.2 Travelers shall designate certain persons or entities which shall have
the requisite licenses to solicit applications for the sale of
Contracts. No representation is made as to the number or amount of
Contracts that are to be sold by Travelers. Travelers shall make
reasonable efforts to market the Contracts and shall comply with all
applicable federal and state laws in connection therewith.
8.3 Travelers shall furnish, or shall cause to be furnished, to the Fund,
each piece of sales literature or other promotional material in which
the Fund, its investment adviser or the administrator is named, at
least fifteen Business Days prior to its use. No such material shall be
used unless the Fund approves such material. Such approval (if given)
must be in writing and shall be presumed not given if not received
within ten Business Days after receipt of such material. The Fund shall
use all reasonable efforts to respond within ten days of receipt.
8.4 Travelers shall not give any information or make any representations or
statements on behalf of the Fund or concerning the Fund in connection
with the sale of the Contracts other than the information or
representations contained in the registration statement or Prospectus,
as may be amended or supplemented from time to time, or in reports or
proxy statements for the Fund, or in sales literature or other
promotional material approved by the Fund.
8.5 Fund shall furnish, or shall cause to be furnished, to Travelers, each
piece of the Fund's sales literature or other promotional material in
which Travelers or the Separate Account is named, at least fifteen
Business Days prior to its use. No such material shall be used unless
Travelers approves such material. Such approval (if given) must be in
writing and shall be presumed not given if not received within ten
Business Days after receipt of such material. Travelers shall use all
reasonable efforts to respond within ten days of receipt.
8.6 Fund shall not, in connection with the sale of Fund shares, give any
information or make any representations on behalf of Travelers or
concerning Travelers, the Separate Account, or the Contracts other than
the information or representations contained in a registration
statement or prospectus for the Contracts, as may be amended or
supplemented from time to time, or in published reports for the
Separate Account which are in the public domain or approved by
Travelers for distribution to Contractholders or Participants, or in
sales literature or other promotional material approved by Travelers.
ARTICLE IX
INDEMNIFICATION
9.1 Travelers agrees to indemnify and hold harmless the Fund, TAMIC, the
Fund's investment adviser, and their affiliates, and each of their
directors, officers, employees, agents and each person, if any, who
controls any of the foregoing entities or persons within the meaning of
the 1933 Act (collectively, the "Indemnified Parties" for purposes of
Section 9.1), against any losses, claims, damages or liabilities for
which the Indemnified Parties may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect to thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in information furnished by Travelers for use in the
registration statement or Prospectus or sales literature or
advertisements of the Fund or with respect to the Separate Account or
Contracts, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
arise out of or as a result of conduct, statements
<PAGE> 8
or representations (other than statements or representations contained
in the Prospectus and sales literature or advertisements of the Fund)
of Travelers or its agents, with respect to the sale and distribution
of Contracts for which Fund shares are an underlying investment; and
Travelers will reimburse any Indemnified Party in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that Travelers will not be liable in any
such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any untrue statement or omission or
alleged omission made in such registration statement, prospectus, sales
literature, or advertisement in conformity with written information
furnished to Travelers by the Fund specifically for use therein. This
indemnity agreement will be in addition to any liability which
Travelers may otherwise have.
9.2 The Fund agrees to indemnify and hold harmless Travelers and each of
its directors, officers, employees, agents and each person, if any, who
controls Travelers within the meaning of the 1933 Act against any
losses, claims, damages or liabilities to which Travelers or any such
director, officer, employee, agent or controlling person may become
subject, under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) (1)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement
or Prospectus or sales literature or advertisements of the Fund; (2)
arise out of or are based upon the omission to state in the
registration statement or Prospectus or sales literature or
advertisements of the Fund any material fact required to be stated
therein or necessary to make the statements therein not misleading; or
(3) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or Prospectus or sales literature or advertisements with
respect to the Separate Account or the Contracts and such statements
were based on information provided to Travelers by the Fund; and the
Fund will reimburse any legal or other expenses reasonably incurred by
Travelers or any such director, officer, employee, agent or controlling
person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Fund
will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or omission or alleged omission made in such Registration
Statement, Prospectus, sales literature or advertisements in conformity
with written information furnished to the Fund by Travelers
specifically for use therein. This indemnity agreement will be in
addition to any liability which the Fund may otherwise have.
9.3 The Fund shall indemnify and hold Travelers harmless against any and
all liability, loss, damages, costs or expenses which Travelers may
incur, suffer or be required to pay due to the Fund's (1) incorrect
calculation of the daily net asset value, dividend rate or capital gain
distribution rate; (2) incorrect reporting of the daily net asset
value, dividend rate or capital gain distribution rate; and (3)
untimely reporting of the net asset value, dividend rate or capital
gain distribution rate; provided that the Fund shall have no obligation
to indemnify and hold harmless Travelers if the incorrect calculation
or incorrect or untimely reporting was the result of incorrect
information furnished by Travelers or information furnished untimely by
Travelers.
9.4 Travelers shall indemnify and hold the Fund harmless against any and
all liability, loss, damages, costs or expenses which the Fund may
incur, suffer or be required to pay due to Travelers' incorrect
calculation and/or untimely reporting of net purchase or redemption
orders.
9.5 Promptly after receipt by an indemnified party under this Article of
notices of the commencement of action, such indemnified party will, if
a claim in respect thereof is to be made against the indemnifying party
under this Article, notify the indemnifying party of the commencement
thereof; but the omission to notify the indemnifying party will not
relieve it
<PAGE> 9
from any liability which it may have to any indemnified party otherwise
than under this Article. In case any such action is brought against any
indemnified party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, assume the
defense thereof, with counsel satisfactory to such indemnified party,
and to the extent that the indemnifying party has given notice to such
effect to the indemnified party and is performing its obligations under
this Article, the indemnifying party shall not be liable for any legal
or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, other than reasonable costs of
investigation.
9.6 Travelers shall indemnify and hold the Fund and the Fund's investment
adviser harmless against any tax liability incurred by the Fund under
Section 851 of the Code arising from purchases or redemptions by
Travelers' General Accounts or the account of its affiliates.
ARTICLE X
COMMENCEMENT AND TERMINATION
10.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions
herein.
10.2 This Agreement shall terminate without penalty:
a. At the option of Travelers or the Fund at any time from the
date hereof upon 180 days' notice, unless a shorter time is
agreed to by the parties;
b. At the option of Travelers, if any of the Fund's shares are
not reasonably available to meet the requirements of the
Contracts as determined by Travelers. Prompt notice of
election to terminate shall be furnished by Travelers, said
termination to be effective ten days after receipt of notice
unless the Fund makes available a sufficient number of shares
to meet the requirements of the Contracts within said ten-day
period;
c. At the option of Travelers, upon the institution of formal
proceedings against the Fund by the Commission, National
Association of Securities Dealers or any other regulatory
body, the expected or anticipated ruling, judgment or outcome
of which would, in Travelers' reasonable judgment, materially
impair the Fund's ability to meet and perform the Fund's
obligations and duties hereunder. Prompt notice of election to
terminate shall be furnished by Travelers with said
termination to be effective upon receipt of notice
d. At the option of the Fund, upon the institution of formal
proceedings against Travelers by the Commission, National
Association of Securities Dealers or any other regulatory
body, the expected or anticipated ruling, judgment or outcome
of which would, in the Fund's reasonable judgment, materially
impair Travelers' ability to meet and perform Travelers
obligations and duties hereunder. Prompt notice of election to
terminate shall be furnished by the Fund with said termination
to be effective upon receipt of notice;
e. At the option of the Fund, if the Fund shall determine, in its
sole judgment reasonably exercised in good faith, that
Travelers has suffered a material adverse change in its
business or financial condition or is the subject of material
adverse publicity and such material adverse change or material
adverse publicity will have a material adverse impact upon the
business and operation of the Fund, the Fund shall notify
Travelers in writing of such determination and its intent to
terminate this Agreement, and after considering the actions
taken by Travelers and any other changes in circumstances
since the giving of such notice, such determination of the
Fund shall continue to apply on the sixtieth (60th)
<PAGE> 10
day following the giving of such notice, which sixtieth day
shall be the effective date of termination:
f. Upon termination of the Management Agreement between the Fund
and Wells Fargo Nikko Investment Advisors or its successors
unless Travelers specifically approves the selection of a new
Fund manager. The Fund shall promptly furnish notice of such
termination to Travelers;
g. In the event the Fund's shares are not registered, issued or
sold in accordance with applicable federal law, or such law
precludes the use of such shares as the underlying investment
medium of Contracts issued or to be issued by Travelers.
Termination shall be effective immediately upon such
occurrence without notice;
h. At the option of the Fund, if the Contracts are not
registered, issued or sold in accordance with applicable
federal law; or
I. Upon assignment of this-Agreement, unless made with the
written consent of the non-assigning party.
Any such termination pursuant to Section 10.2a, 10.2d, 10.2e, 10.2f or
10.2h herein shall not affect the operation of Article V of this
Agreement. Any termination of this Agreement shall not affect the
operation of Article IX of this Agreement.
ARTICLE XI
AMENDMENTS
11.1 Any other changes in the terms of this Agreement shall be made by
agreement in writing between Travelers and Fund.
ARTICLE XII
NOTICE
12.1 Each notice required by this Agreement shall be given by certified
mail, return receipt requested, to the appropriate parties at the
following addresses:
Travelers: The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183
Attn: William D. Wilcox
Fund: The Travelers Series Trust
One Tower Square
Hartford, CT 06183
Attn: Kathleen A. McGah
Notice shall be deemed to be given on the date of receipt by the
addresses as evidenced by the return receipt.
<PAGE> 11
ARTICLE XIII
MISCELLANEOUS
13.1 All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither
the Directors, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
ARTICLE XIV
LAW
14.1 This Agreement shall be construed in accordance with the internal laws
of the State of New York without giving effect to principles of
conflict of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement (or
amendment thereto) to be duly executed and attested as of the date first above
written.
Company:
THE TRAVELERS INSURANCE COMPANY, on
behalf of itself and its affiliate,
Travelers Life and Annuity Company,
By its authorized officer,
Attest /s/William D. Wilcox
William D. Wilcox
THE TRAVELERS SERIES TRUST:
By its authorized officer,
/s/Kathleen A. McGah
Attest Kathleen A. McGah
<PAGE> 12
Schedule A:
<TABLE>
<CAPTION>
DATE THE SEPARATE ACCOUNT WAS ESTABLISHED
BY TRAVELERS INSURANCE COMPANY (TIC) OR
NAME OF ACCOUNT TRAVELERS LIFE AND ANNUITY COMPANY (TLAC)
--------------- ------------------------------------------
<S> <C>
1. The Travelers Fund U for Variable Annuities September 2, 1982 (TIC)
2. The Travelers Fund UL November 10, 1983 (TIC)
3. The Travelers Fund UL II October 17, 1995 (TLAC)
4. The Travelers Fund VA for Variable Annuities August 18, 1994 (TIC)
5. The Travelers Separate Account QP December 26, 1995 (TIC)
6. The Travelers Separate Account Two
for Variable Life Insurance October 16, 1996 (TLAC)
7. The Travelers Separate Account Four
for Variable Life Insurance October 16, 1996 (TIC)
8. The Travelers Fund ABD for Variable Annuities October 17, 1995 (TIC)
9. The Travelers Fund ABD II for Variable Annuities October 17, 1995 (TLAC)
</TABLE>
<PAGE> 1
Exhibit 11
KATHLEEN A. MCGAH
Deputy General Counsel
Legal Division - 8 MS
Telephone: (860) 277-7389
Fax: (860) 277-0842
May 24, 2000
The Travelers Life and Annuity Company
The Travelers Fund UL II Variable Life Insurance
One Tower Square
Hartford, Connecticut 06183
Gentlemen:
With reference to the Registration Statement, File No. 333-96521, on Form
S-6, filed by The Travelers Life and Annuity Company and The Travelers Fund UL
II for Variable Life Insurance with the Securities and Exchange Commission
covering variable life insurance policies, I have examined such documents and
such law as I have considered necessary and appropriate, and on the basis of
such examination, it is my opinion that:
1. The Travelers Life and Annuity Company is duly organized and existing
under the laws of the State of Connecticut and has been duly
authorized to do business and to issue variable life insurance
policies by the Insurance Commissioner of the State of Connecticut.
2. The Travelers Fund UL II for Variable Life Insurance is a duly
authorized and validly existing separate account established pursuant
to Section 38a-433 of the Connecticut General Statutes.
3. The variable life insurance policies covered by the above
Registration Statement, and all pre- and post-effective amendments
relating thereto, will be approved and authorized by the Insurance
Commissioner of the State of Connecticut and when issued will be
valid, legal and binding obligations of The Travelers Life and
Annuity Company and The Travelers Fund UL II for Variable Life
Insurance.
4. Assets of The Travelers Fund UL II for Variable Life Insurance are
not chargeable with liabilities arising out of any other business The
Travelers Life and Annuity Company may conduct.
I hereby consent to the filing of this opinion as an exhibit to the
above-referenced Registration Statement and to the reference to this opinion
under the caption "Legal Proceedings and Opinion" in the Prospectus constituting
a part of the Registration Statement.
Very truly yours,
/s/Kathleen A. McGah
Deputy General Counsel
The Travelers Life and Annuity Company
<PAGE> 1
Exhibit 12(d)
THE TRAVELERS FUND UL II FOR VARIABLE LIFE INSURANCE
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, GLENN D. LAMMEY of Simsbury, Connecticut, a director, Executive
Vice President, Chief Financial Officer, Chief Accounting Officer and Controller
of The Travelers Life and Annuity Company (hereafter the "Company"), do hereby
make, constitute and appoint ERNEST J. WRIGHT, Secretary of said Company, and
KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of them
acting alone, my true and lawful attorney-in-fact, for me, and in my name, place
and stead, to sign registration statements on behalf of said Company on Form S-6
or other appropriate form under the Securities Act of 1933 for The Travelers
Fund UL II for Variable Life Insurance, a separate account of the Company
dedicated specifically to the funding of variable life insurance contracts to be
offered by said Company, and further, to sign any and all amendments thereto,
including post-effective amendments, that may be filed by the Company on behalf
of said registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of May
2000.
/s/Glenn D. Lammey
Director, Executive Vice President
Chief Financial Officer,
Chief Accounting Officer and Controller
The Travelers Life and Annuity Company
<PAGE> 2
THE TRAVELERS FUND UL II FOR VARIABLE LIFE INSURANCE
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, MARLA BERMAN LEWITUS of Marlborough, Massachusetts, a Director,
Senior Vice President and General Counsel of The Travelers Life and Annuity
Company (hereafter the "Company"), do hereby make, constitute and appoint ERNEST
J. WRIGHT, Secretary of said Company, and KATHLEEN A. McGAH, Assistant Secretary
of said Company, or either one of them acting alone, my true and lawful
attorney-in-fact, for me, and in my name, place and stead, to sign registration
statements on behalf of said Company on Form S-6 or other appropriate form under
the Securities Act of 1933 for The Travelers Fund UL II for Variable Life
Insurance, a separate account of the Company dedicated specifically to the
funding of variable life insurance contracts to be offered by said Company, and
further, to sign any and all amendments thereto, including post-effective
amendments, that may be filed by the Company on behalf of said registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of May
2000.
/s/Marla Berman Lewitus
Director
Senior Vice President and General Counsel
The Travelers Life and Annuity Company
