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Registration Statement No. 333-58783
811-08867
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective No. 2
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Post-Effective No. 2
THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES
----------------------------------------------------------
(Exact name of Registrant)
THE TRAVELERS INSURANCE COMPANY
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(Name of Depositor)
ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
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(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including area code: (860) 277-0111
--------------
ERNEST J. WRIGHT
The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183
---------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b) of Rule 485.
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X on May 1, 2000 pursuant to paragraph (b) of Rule 485.
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60 days after filing pursuant to paragraph (a)(1) of Rule 485.
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on ___________ pursuant to paragraph (a)(1) of Rule 485.
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If appropriate, check the following box:
_____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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PART A
Information Required in a Prospectus
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TRAVELERS RETIREMENT ACCOUNT
PROSPECTUS
This prospectus describes TRAVELERS RETIREMENT ACCOUNT, a flexible premium
deferred variable annuity contract (the "Contract") issued by The Travelers
Insurance Company or The Travelers Life and Annuity Company, depending on the
state in which you purchased your contract. The Contract is available in
connection with certain retirement plans that qualify for special federal income
tax treatment ("qualified Contracts"). We may issue it as an individual Contract
or as a group Contract. In states where only group Contracts are available, you
will be issued a certificate summarizing the provisions of the group Contract.
For convenience, we refer to Contracts and certificates as "Contracts."
Your contract value will vary daily to reflect the investment experience of the
funding options you select. The variable funding options available are:
Capital Appreciation Fund
High Yield Bond Trust
Managed Assets Trust
Money Market Portfolio
AMERICAN ODYSSEY FUNDS, INC.
Core Equity Fund
Emerging Opportunities Fund
Global High-Yield Bond Fund
Intermediate-Term Bond Fund
International Equity Fund Long-Term Bond Fund
DELAWARE GROUP PREMIUM FUND
REIT Series
Small Cap Value Series
DREYFUS VARIABLE INVESTMENT FUND
Appreciation Portfolio(1)
Small Cap Portfolio
GREENWICH STREET SERIES FUND
Equity Index Portfolio -- Class II Shares
JANUS ASPEN SERIES
Worldwide Growth Portfolio -- Service Shares
THE MONTGOMERY FUNDS III
Montgomery Variable Series: Growth Fund
OCC ACCUMULATION TRUST
Equity Portfolio
SALOMON BROTHERS VARIABLE SERIES FUND INC.
Capital Fund
Investors Fund
Total Return Fund
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Schafer Value Fund II
TRAVELERS SERIES FUND INC.
Alliance Growth Portfolio
MFS Total Return Portfolio
Putnam Diversified Income Portfolio
Smith Barney High Income Portfolio
Smith Barney International Equity Portfolio
Smith Barney Large Capitalization Growth Portfolio
THE TRAVELERS SERIES TRUST
Disciplined Mid Cap Stock Portfolio
Disciplined Small Cap Stock Portfolio
Equity Income Portfolio
Federated Stock Portfolio
Large Cap Portfolio
Lazard International Stock Portfolio
MFS Mid Cap Growth Portfolio
MFS Research Portfolio
Social Awareness Stock Portfolio
Strategic Stock Portfolio
Travelers Quality Bond Portfolio
U.S. Government Securities Portfolio
Utilities Portfolio
VARIABLE INSURANCE PRODUCTS FUND II (FIDELITY)
Asset Manager Portfolio -- Service Class 2
WARBURG PINCUS TRUST
Emerging Markets Portfolio
- ---------------
(1) Formerly Capital Appreciation Portfolio
THE CONTRACT AND/OR SOME OF THE FUNDING OPTIONS MAY NOT BE AVAILABLE IN ALL
STATES. THIS PROSPECTUS IS ONLY VALID WHEN ACCOMPANIED BY THE CURRENT
PROSPECTUSES FOR THE VARIABLE FUNDING OPTIONS. READ AND RETAIN THEM FOR FUTURE
REFERENCE.
This prospectus provides the information that you should know before investing
in the Contract. You can receive additional information about The Travelers
Separate Account Five for Variable Annuities or the Travelers Separate Account
Six for Variable Annuities by requesting a Statement of Additional Information
("SAI") dated May 1, 2000. The SAI has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated by reference to this prospectus.
To request a copy, write to The Travelers Insurance Company, Annuity Services,
One Tower Square, Hartford, CT 06183-8130, call 1-800-842-9406, or access the
SEC's website (http://www.sec.gov). See Appendix D for the SAI's table of
contents.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS ACCOMPANIED BY A COPY EACH OF THE TRAVELERS INSURANCE
COMPANY'S AND THE TRAVELERS LIFE AND ANNUITY COMPANY'S LATEST ANNUAL REPORTS ON
FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 1999. VARIABLE ANNUITY CONTRACTS ARE
NOT DEPOSITS OF ANY BANK, AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
PROSPECTUS DATED MAY 1, 2000
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
Index of Special Terms................ 2
Summary............................... 3
Fee Table............................. 6
Condensed Financial Information....... 13
The Annuity Contract.................. 13
Contract Owner Inquiries............ 13
Purchase Payments................... 13
Conservation Credit................. 13
Accumulation Units.................. 13
The Funding Options................. 14
Charges and Deductions................ 18
General............................. 18
Withdrawal Charge................... 18
Free Withdrawal Allowance........... 19
Premium Tax......................... 19
Mortality and Expense Risk Charge... 19
Funding Option Expenses............. 20
Floor Benefit/Liquidity Benefit..... 20
CHART Asset Allocation Program
Charges.......................... 20
Changes in Taxes Based Upon Premium
or Value......................... 20
Transfers............................. 20
Dollar Cost Averaging............... 20
Asset Allocation Advice............. 21
Access to Your Money.................. 21
Systematic Withdrawals.............. 21
Managed Distribution Program........ 21
Ownership Provisions.................. 22
Types of Ownership.................. 22
Contract Owner................... 22
Annuitant........................ 22
Beneficiary...................... 22
Death Benefit......................... 22
Death Benefit Proceeds Prior to
Maturity Date.................... 22
Death Proceeds After the Maturity
Date............................. 23
Payment of Proceeds................. 24
The Annuity Period.................... 24
Maturity Date....................... 24
Liquidity Benefit................... 24
Allocation of Annuity............... 25
Variable Annuity.................... 25
Fixed Annuity....................... 25
Payment Options....................... 26
Election of Options................. 26
Variable Annuitization Floor
Benefit.......................... 26
Annuity Options..................... 26
Miscellaneous Contract Provisions..... 27
Right to Return..................... 27
Termination......................... 27
Required Reports.................... 28
Suspension of Payments.............. 28
Transfers of Contract Values to
other Annuities.................. 28
The Separate Accounts................. 28
Performance Information............. 28
Federal Tax Considerations............ 29
General Taxation of Annuities....... 29
Qualified Annuity Contracts......... 29
Penalty Tax for Premature
Distributions.................... 30
Taxation of Surrenders Under
Liquidity Feature................ 30
Diversification Requirements of
Variable Annuities............... 30
Ownership of the Investments........ 30
Mandatory Distributions for
Qualified Plans.................. 30
Taxation of Death Benefit
Proceeds......................... 31
Available Information................. 31
Incorporation of Certain Documents By
Reference........................... 31
Other Information..................... 32
The Insurance Companies............. 32
Financial Statements................ 32
IMSA................................ 32
Distribution of Variable Annuity
Contracts........................ 32
Conformity with State and Federal
Laws............................. 32
Voting Rights....................... 33
Contract Modification............... 33
Legal Proceedings and Opinions...... 33
APPENDIX A: Condensed Financial
Information of The Travelers Insurance
Company: Separate Account Five...... A-1
APPENDIX B: Condensed Financial
Information of The Travelers Life
and Annuity Company: Separate
Account Six......................... B-1
APPENDIX C: Nursing Home
Confinement......................... C-1
APPENDIX D: Market Value Adjustment... D-1
APPENDIX E: Contents of the Statement
of Additional Information........... E-1
Financial Statements
</TABLE>
INDEX OF SPECIAL TERMS
The following terms are italicized throughout the prospectus. Refer to the page
listed for an explanation of each term.
<TABLE>
<S> <C>
Accumulation Period................... 13
Annuitant............................. 22
Annuitization Credit.................. 25
Annuity Payments...................... 13
Annuity Unit.......................... 14
Cash Surrender Value.................. 21
Certificate........................... 4
Conservation Credit................... 13
Contract Date......................... 13
Contract Owner........................ 22
Contract Value........................ 13
Contract Year......................... 13
Death Report Date..................... 23
Funding Option(s)..................... 14
Maturity Date......................... 13
Participant........................... 4
Purchase Payment...................... 13
Underlying Fund....................... 14
Written Request....................... 13
</TABLE>
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SUMMARY:
TRAVELERS RETIREMENT ACCOUNT
THIS SUMMARY DETAILS SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD KNOW AND
CONSIDER BEFORE PURCHASING THE CONTRACT. PLEASE READ THE ENTIRE PROSPECTUS
CAREFULLY.
WHAT COMPANY WILL ISSUE MY CONTRACT? Your issuing company is either The
Travelers Insurance Company or The Travelers Life and Annuity Company, ("the
Company," "We" or "Us") depending on where you purchase your Contract. Each
company sponsors its own Separate Account, both of which are described later in
this prospectus. The Travelers Insurance Company sponsors the Travelers Separate
Account Five for Variable Annuities ("Separate Account Five"); The Travelers
Life and Annuity Company sponsors the Travelers Separate Account Six for
Variable Annuities ("Separate Account Six"). When we refer to the Separate
Account, we are referring to either Separate Account Five or Separate Account
Six, depending upon your issuing company. Your issuing company is The Travelers
Life and Annuity Company unless you purchased your contract in the locations
listed below, which contracts are issued by The Travelers Insurance Company.
Bahamas
British Virgin Islands
Guam
New Hampshire
New Jersey
New York
U.S. Virgin Islands
You may also refer to the cover page of your Contract for the name of your
issuing company. You may only purchase a Contract where the Contract has been
approved for sale. This Contract may not currently be available for sale in all
locations.
CAN YOU GIVE ME A GENERAL DESCRIPTION OF THE VARIABLE ANNUITY CONTRACT? The
Contract offered by the Company is intended for retirement savings or other
long-term investment purposes. The Contract provides a death benefit as well as
guaranteed payout options. You direct your payment(s) to one or more of the
variable funding options. Depending on market conditions, you may gain or lose
money in any of these options.
The Contract, like all deferred variable annuity contracts, has two phases: the
accumulation phase and the payout phase. During the accumulation phase
generally, your pre-tax contributions accumulate on a tax-deferred basis and are
taxed as income when you make a withdrawal, presumably when you are in a lower
tax bracket. The payout phase occurs when you begin receiving payments from your
Contract. The amount of money you accumulate in your Contract determines the
amount of income (annuity payments) you receive during the payout phase.
Once you choose one of the annuity options and begin to receive payments, it
cannot be changed. During the payout phase, you have the same investment choices
you had during the accumulation phase. The dollar amount of your payments may
increase or decrease.
In addition, depending on which annuity option you select, and depending on
market conditions, there are several other options and features available upon
annuitization. These include an annuitization credit, a variable annuitization
floor benefit, a liquidity benefit and an increasing benefit option. Please
refer to your Contract and the prospectus for further details.
WHO SHOULD PURCHASE THIS CONTRACT? The Contract is currently available for use
in connection with qualified retirement plans (which include contracts
qualifying under Section 401(a), 403(b), 408 or 457 of the Internal Revenue Code
(the "Code"). Purchase of this Contract through a Plan does not provide any
additional tax deferral benefits beyond those provided by the Plan. Accordingly,
if you are purchasing this Contract through a Plan, you should consider
purchasing the Contract for its Death Benefit, Annuity Option Benefits or other
non-tax related benefits.
You may purchase the Contract with an initial payment of at least $20,000. You
may make additional payments of at least $5,000 any time during the accumulation
phase.
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We may add a conservation credit to funds received as purchase payments if such
funds originated from another Contract issued by Our affiliates or Us. If
applied, we will determine the amount of this credit.
If you select the Optional Death Benefit, we will add a credit to each purchase
payment equal to 2% of that purchase payment. These credits are applied pro rata
to the same funding options to which your purchase payment was applied.
WHO IS THE CONTRACT ISSUED TO? If you purchase an individual contract, you are
the contract owner. If a group contract is purchased, we issue certificates to
the individual participants. Where we refer to "you," we are referring to the
individual contract owner, or the group participant, as applicable. We refer to
both contracts and certificates as "contracts." If a group unallocated contract
is purchased, we issue only the contract. Where we refer to "you," we are
referring to the group participant.
We issue group contracts in connection with retirement plans. Depending on your
retirement plan, certain features and/or funding options described in this
prospectus may not be available to you. Your retirement plan provisions
supercede the prospectus. If you have any questions about your specific
retirement plan, contact your plan administrators.
IS THERE A RIGHT TO RETURN PERIOD? If you cancel the Contract within ten days
after you receive it, you receive a full refund of the cash value (including
charges). Where state law requires a longer right to return (free look), or the
return of the purchase payments, we will comply. You bear the investment risk
during the free look period; therefore, the cash value returned to you may be
greater or less than your purchase payment. The cash value will be determined as
of the close of business on the day we receive a written request for a refund.
If the Contract is purchased as an Individual Retirement Annuity (IRA), and is
returned within the first seven days after contract delivery, your full purchase
payment will be refunded. During the remainder of the IRA free look period, the
cash value (including charges) will be refunded. The cash value will be
determined as of the close of business on the day we receive a written request
for a refund.
WHAT TYPES OF INVESTMENT OPTIONS ARE AVAILABLE? You can direct your money into
any or all of the funding options shown on the cover page. The funding options
are described in the prospectuses for the funds. Depending on market conditions,
you may make or lose money in any of these options.
The value of the Contract will vary depending upon the investment performance of
the funding options you choose. Past performance is not a guarantee of future
results. Standard and nonstandard performance is shown in the Statement of
Additional Information that you may request free of charge.
You can transfer between the funding options as frequently as you wish without
any current tax implications. Currently there is no charge for transfers, nor a
limit to the number of transfers allowed. We may, in the future, charge a fee
for any transfer request, or limit the number of transfers allowed. At a
minimum, we would always allow one transfer every six months. We reserve the
right to restrict transfers that we determine will disadvantage other contract
owners.
WHAT EXPENSES WILL BE ASSESSED UNDER THE CONTRACT? The Contract has insurance
features and investment features, and there are costs related to each. For the
Standard Death Benefit, the annual insurance charge is 0.80% of the amounts you
direct to the funding options. For the Optional Death Benefit and Credit option,
the annual insurance charge is 1.25%. Each funding option also charges for
management and other expenses. Please refer to the Fee Table for more
information about the charges.
A withdrawal charge will apply to withdrawals from the Contract, and is
calculated as a percentage of the purchase payments. The maximum percentage is
5%, gradually decreasing to 0% in year 6 and later.
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<PAGE> 7
If the Variable Annuitization Floor Benefit is selected, there is a Floor
Benefit charge assessed. This charge will vary based upon market conditions, and
will be set at the time you choose this option. Once established, this charge
will remain the same throughout the term of the annuitization.
HOW WILL MY CONTRIBUTIONS AND WITHDRAWALS BE TAXED? Generally, the payments you
make to a qualified Contract during the accumulation phase are made with
before-tax dollars. You will be taxed on your purchase payments and on any
earnings when you make a withdrawal or begin receiving annuity payments.
If you reach a certain age, you may be required by federal tax laws to begin
receiving payments from your annuity or risk paying a penalty tax. In those
cases, we can calculate and pay you the minimum required distribution amounts.
If you are younger than 59 1/2 when you take money out, you may be charged a 10%
federal penalty tax on the amount withdrawn.
During the annuity period, if you have elected the optional Variable Annuity
Floor Option and take a surrender, there will be tax implications. Consult your
tax advisor.
HOW MAY I ACCESS MY MONEY? You can take withdrawals any time during the
accumulation phase. Withdrawal charges, income taxes, and/or a penalty tax may
apply to taxable amounts withdrawn.
WHAT IS THE DEATH BENEFIT UNDER THE CONTRACT? The person you have chosen as
your beneficiary will receive a death benefit upon the death of the owner before
the maturity date. You may select either the Standard Death Benefit or the
Optional Death Benefit and Credit at the time of purchase. The death benefit
paid depends on your age at the time of your death. The death benefit is
calculated as of the close of the business day on which the Home Office receives
due proof of death and written distribution instructions.
Any amount paid will be reduced by any applicable premium tax, or surrenders not
previously deducted. Certain states may have varying age requirements. Please
refer to the Death Benefit section of the prospectus for more details.
ARE THERE ANY ADDITIONAL FEATURES? This Contract has other features you may be
interested in. These include:
- DOLLAR COST AVERAGING. This is a program that allows you to invest a
fixed amount of money in funding options each month, theoretically
giving you a lower average cost per unit over time than a single
one-time purchase. 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.
- ASSET ALLOCATION ADVICE. If allowed, you may elect to enter into a
separate advisory agreement with Copeland Financial Services LLC
("Copeland"), an affiliate of the Company, for the purpose of receiving
asset allocation advice under Copeland's CHART Program. The CHART
Program allocates all purchase payments among the American Odyssey
Funds. The CHART Program and applicable fees are fully described in a
separate disclosure statement.
- MANAGED DISTRIBUTION PROGRAM. This program allows us to automatically
calculate and distribute to you, in November of the applicable tax year,
an amount that will satisfy the Internal Revenue Service's minimum
distribution requirements imposed on certain contracts once the owner
reaches age 70 1/2 or retires. These minimum distributions occur during
the accumulation phase.
- SYSTEMATIC WITHDRAWAL OPTION. Before the maturity date, you can arrange
to have money sent to you at set intervals throughout the year. Of
course, any applicable income and penalty taxes will apply on amounts
withdrawn.
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FEE TABLE
- --------------------------------------------------------------------------------
CONTRACT CHARGES AND EXPENSES:
WITHDRAWAL CHARGE (as a percentage of the purchase payments withdrawn)
<TABLE>
<CAPTION>
YEARS SINCE PURCHASE WITHDRAWAL
PAYMENT MADE CHARGE
<S> <C>
1 or less 5%
2 4%
3 3%
4 2%
5 1%
6 and later 0%
</TABLE>
During the annuity period, if you have elected the Liquidity Benefit, a
surrender charge of 5% of the amount withdrawn will be assessed. See "Liquidity
Benefit."
ANNUAL SEPARATE ACCOUNT CHARGES:
(as a percentage of the average daily net assets of the Separate Account)
<TABLE>
<CAPTION>
STANDARD ENHANCED
DEATH BENEFIT DEATH BENEFIT
<S> <C> <C>
Mortality & Expense Risk Charge...................... 0.80% 1.25%
Administrative Expense Charge........................ None None
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Total Separate Account Charges.................... 0.80% 1.25%
</TABLE>
During the annuity period, if you have elected the Floor Benefit, a total annual
separate account charge of up to 3.80% or 4.25% may apply. See "Floor Benefit
Charge."
FUNDING OPTION EXPENSES:
(as a percentage of average daily net assets of the funding option as of
December 31, 1999, unless otherwise noted.)
Each of the American Odyssey Funds is listed twice, once with the optional CHART
asset allocation fee of .80% reflected and once without the optional asset
allocation fee.
<TABLE>
<CAPTION>
TOTAL ANNUAL
OTHER OPERATING
MANAGEMENT FEE EXPENSES EXPENSES
(AFTER EXPENSE 12B-1 (AFTER EXPENSE (AFTER EXPENSE
UNDERLYING FUNDS: REIMBURSEMENT) FEES REIMBURSEMENT) REIMBURSEMENT)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Appreciation Fund.................. 0.75% 0.08% 0.83%
High Yield Bond Trust...................... 0.50% 0.31% 0.81%
Managed Assets Trust....................... 0.50% 0.10% 0.60%
Money Market Portfolio..................... 0.32% 0.08% 0.40%(1)
AMERICAN ODYSSEY FUNDS, INC.
Core Equity Fund...................... 0.56% 0.08% 0.64%
Emerging Opportunities Fund........... 0.75% 0.12% 0.87%
Global High-Yield Bond Fund........... 0.67% 0.16% 0.83%
Intermediate-Term Bond Fund........... 0.49% 0.10% 0.59%
International Equity Fund............. 0.59% 0.13% 0.72%
Long-Term Bond Fund................... 0.50% 0.10% 0.60%
AMERICAN ODYSSEY FUNDS, INC.*
Core Equity Fund...................... 0.56% 0.88% 1.44%
Emerging Opportunities Fund........... 0.75% 0.92% 1.67%
Global High-Yield Bond Fund........... 0.67% 0.96% 1.63%
Intermediate-Term Bond Fund........... 0.49% 0.90% 1.39%
International Equity Fund............. 0.59% 0.93% 1.52%
Long-Term Bond Fund................... 0.50% 0.90% 1.40%
DELAWARE GROUP PREMIUM FUND
REIT Series........................... 0.64% 0.21% 0.85%(2)
Small Cap Value Series................ 0.75% 0.10% 0.85%
</TABLE>
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<TABLE>
<CAPTION>
TOTAL ANNUAL
OTHER OPERATING
MANAGEMENT FEE EXPENSES EXPENSES
(AFTER EXPENSE 12B-1 (AFTER EXPENSE (AFTER EXPENSE
UNDERLYING FUNDS: REIMBURSEMENT) FEES REIMBURSEMENT) REIMBURSEMENT)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DREYFUS VARIABLE INVESTMENT FUND
Appreciation Portfolio(3)............. 0.75% 0.03% 0.78%
Small Cap Portfolio................... 0.75% 0.03% 0.78%
GREENWICH STREET SERIES FUND
Equity Index Portfolio -- Class II
Shares.............................. 0.21% 0.25% 0.05% 0.51%(4)
JANUS ASPEN SERIES
Worldwide Growth Portfolio -- Service
Shares.............................. 0.65% 0.25% 0.05% 0.95%(5)
THE MONTGOMERY FUNDS III
Montgomery Variable Series: Growth
Fund................................ 0.52% 0.73% 1.25%(6)
OCC ACCUMULATION TRUST
Equity Portfolio...................... 0.80% 0.11% 0.91%
SALOMON BROTHERS VARIABLE SERIES FUND INC.
Capital Fund.......................... 0.00% 1.00% 1.00%(7)
Investors Fund........................ 0.53% 0.45% 0.98%(7)
Total Return Fund..................... 0.15% 0.85% 1.00%(7)
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Schafer Value Fund II.......... 1.00% 0.20% 1.20%(8)
TRAVELERS SERIES FUND INC.
Alliance Growth Portfolio............. 0.80% 0.02% 0.82%(9)
MFS Total Return Portfolio............ 0.80% 0.04% 0.84%(9)
Putnam Diversified Income Portfolio... 0.75% 0.08% 0.83%(9)
Smith Barney High Income Portfolio.... 0.60% 0.06% 0.66%(9)
Smith Barney International Equity
Portfolio........................... 0.90% 0.10% 1.00%(9)
Smith Barney Large Capitalization
Growth Portfolio.................... 0.75% 0.11% 0.86%(9)
THE TRAVELERS SERIES TRUST
Disciplined Mid Cap Stock Portfolio... 0.70% 0.25% 0.95%(10)
Disciplined Small Cap Stock
Portfolio........................... 0.80% 0.20% 1.00%(11)
Equity Income Portfolio............... 0.75% 0.13% 0.88%
Federated Stock Portfolio............. 0.63% 0.19% 0.82%
Large Cap Portfolio................... 0.75% 0.12% 0.87%
Lazard International Stock
Portfolio........................... 0.83% 0.23% 1.06%
MFS Mid Cap Growth Portfolio.......... 0.80% 0.20% 1.00%(11)
MFS Research Portfolio................ 0.80% 0.19% 0.99%
Social Awareness Stock Portfolio...... 0.64% 0.16% 0.80%
Strategic Stock Portfolio............. 0.60% 0.30% 0.90%(11)
Travelers Quality Bond Portfolio...... 0.32% 0.22% 0.54%
U.S. Government Securities
Portfolio........................... 0.32% 0.16% 0.48%
Utilities Portfolio................... 0.65% 0.23% 0.88%
VARIABLE INSURANCE PRODUCTS II
Asset Manager Portfolio -- Service
Class 2............................. 0.53% 0.25% 0.10% 0.88%(12)
WARBURG PINCUS TRUST
Emerging Markets Portfolio............ 0.00% 1.40% 1.40%(13)
* Includes CHART asset allocation fee of 0.80%.
</TABLE>
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NOTES:
The purpose of this Fee Table is to assist Contract Owners in understanding the
various costs and expenses that a Contract Owner will bear, directly or
indirectly. See "Charges and Deductions" in this prospectus for additional
information. Expenses shown do not include premium taxes, which may be
applicable. "Other Expenses" include operating costs of the fund. These expenses
are reflected in each funding option's net asset value and are not deducted from
the account value under the Contract.
(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) The investment adviser for the REIT SERIES is Delaware Management Company
("DMC"). Effective May 1, 2000 through October 31,2000, DMC has voluntarily
agreed to waive its management fee and reimburse the Series for expenses to
the extent that total expenses will not exceed 0.85%. Without such and
arrangement, Total Annual Operating Expenses for the fund would have been
0.96%.
(3) Formerly Capital Appreciation Portfolio.
(4) The Portfolio Management Fee for EQUITY INDEX PORTFOLIO -- CLASS II
includes 0.06% for fund administration and a distribution plan or "Rule
12b-1 plan". Fees for Class II reflect the period from 3/22/99 (inception
date) to 12/31/99. On March 22, 1999, the fund adopted its current fee
structure.
(5) Expenses are based on the estimated expenses that the new Service Shares
Class expects to incur in its initial fiscal year. All expenses are shown
without the effect of offset arrangements.
(6) The investment manager of the MONTGOMERY VARIABLE SERIES: GROWTH FUND has
agreed to reduce some or all of its management fees if necessary to keep
Total Annual Operating Expenses, expressed on an annualized basis, at or
below one and one quarter percent (1.25%) of its average net assets. Absent
this waiver of fees, the Portfolio's Total Annual Operating Expenses would
equal 2.25%.
(7) The Adviser has waived all or a portion of its Management Fees for the year
ended December 31, 1999. If such fees were not waived or expenses
reimbursed, the Management Fee, Other Expenses, and Total Annual Operating
Expenses would have been as follows: 0.70%, 0.45% and 1.15% respectively
for the INVESTORS FUND; 0.85%, 1.14%, and 1.99% respectively for the
CAPITAL FUND; and 0.80%, 0.85%, and 1.65% respectively for the TOTAL RETURN
FUND.
(8) The Adviser for STRONG SCHAFER VALUE FUND II has voluntarily agreed to cap
the Total Annual Operating Expenses at 1.20%. The adviser has no current
intention to, but may in the future, discontinue or modify any waiver of
fees or absorption of expenses at its discretion without further
notification. Absent the waiver of fees, the Total Annual Operating
Expenses would be 1.57%.
(9) 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.
(10) Other Expenses 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
management fees, but excluding brokerage commissions, interest charges and
taxes) exceeds 0.95%. Without such arrangements, the Total Annual Operating
Expenses for the Portfolio would have been 0.99% for the DISCIPLINED MID
CAP STOCK PORTFOLIO.
(11) Travelers Insurance Company has agreed to reimburse the STRATEGIC STOCK
PORTFOLIO, the DISCIPLINED SMALL CAP STOCK PORTFOLIO, and the MFS MID CAP
GROWTH PORTFOLIO for expenses for the period ended December 31, 1999 which
exceeded 0.90%, 1.00% and 1.00% respectively. Without such arrangements,
the actual annualized Total Annual Operating Expenses would have been
0.99%, 1.49%, and 1.07% respectively.
(12) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain funds
custodian, credits realized as a result of uninvested cash balances were
used to reduce a portion of each applicable fund's expenses. Without these
reductions, the Total Annual Operating Expenses presented in the table
would have been 0.89% for ASSET MANAGER PORTFOLIO -- SERVICE CLASS 2.
Service Class 2 expenses are based on estimated expenses for the first
year.
(13) Fee waivers, expense reimbursements, or expense credits reduced expenses
for the WARBURG PINCUS EMERGING MARKETS PORTFOLIO during 1999, but this may
be discontinued at any time. Without such arrangements, the Portfolio's
Management Fees, Other Expenses and Total Annual Operating Expenses would
equal 1.25%, 1.88% and 3.13%, respectively. The Portfolio's other expenses
are based on annualized estimates of expenses for the fiscal year ending
December 31, 1999, net of any fee waivers or expense reimbursements.
8
<PAGE> 11
EXAMPLE*: STANDARD DEATH BENEFIT
Assuming a 5% annual return on assets, a $1,000 investment would be subject to
the following expenses:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
IF CONTRACT IS SURRENDERED AT THE IF CONTRACT IS NOT SURRENDERED OR
END OF PERIOD SHOWN: ANNUITIZED AT END OF PERIOD SHOWN:
------------------------------------- -------------------------------------
UNDERLYING FUNDING OPTIONS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation Fund............ 67 81 99 193 17 51 89 193
High Yield Bond Trust................ 66 81 98 191 16 51 88 191
Managed Assets Trust................. 64 74 87 168 14 44 77 168
Money Market Portfolio............... 62 68 76 146 12 38 66 146
AMERICAN ODYSSEY FUNDS, INC.(1)
Core Equity Fund................. 65 76 89 172 15 46 79 172
Emerging Opportunities Fund...... 67 83 101 198 17 53 91 198
Global High-Yield Bond Fund...... 67 81 99 193 17 51 89 193
Intermediate-Term Bond Fund...... 64 74 86 167 14 44 76 167
International Equity Fund........ 65 78 93 181 15 48 83 181
Long-Term Bond Fund.............. 64 74 87 168 14 44 77 168
AMERICAN ODYSSEY FUNDS, INC.(2)
Core Equity Fund................. 73 100 130 257 23 70 120 257
Emerging Opportunities Fund...... 75 107 142 281 25 77 132 281
Global High-Yield Bond Fund...... 75 106 140 277 25 76 130 277
Intermediate-Term Bond Fund...... 72 99 127 252 22 69 117 252
International Equity Fund........ 74 102 134 266 24 72 124 266
Long-Term Bond Fund.............. 72 99 128 253 22 69 118 253
DELAWARE GROUP PREMIUM FUND
REIT Series...................... 67 82 100 195 17 52 90 195
Small Cap Value Series........... 67 82 100 195 17 52 90 195
DREYFUS VARIABLE INVESTMENT FUND
Appreciation Portfolio........... 66 80 96 188 16 50 86 188
Small Cap Portfolio.............. 66 80 96 188 16 50 86 188
JANUS ASPEN SERIES
Worldwide Growth Portfolio --
Service Shares................. 65 77 92 179 15 47 82 179
GREENWICH STREET SERIES FUND
Equity Index Portfolio -- Class
II Shares...................... 63 72 82 158 13 42 72 158
THE MONTGOMERY FUNDS III
Montgomery Variable Series:
Growth Fund.................... 71 94 120 238 21 64 110 238
OCC ACCUMULATION TRUST
Equity Portfolio................. 67 84 103 202 17 54 93 202
SALOMON BROTHERS VARIABLE SERIES FUND
INC.
Capital Fund..................... 68 87 107 212 18 57 97 212
Investors Fund................... 68 86 106 209 18 56 96 209
Total Return Fund................ 68 87 107 212 18 57 97 212
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Schafer Value Fund II..... 70 93 118 233 20 63 108 233
TRAVELERS SERIES FUND INC.
Alliance Growth Portfolio........ 66 81 98 192 16 51 88 192
MFS Total Return Portfolio....... 67 82 99 194 17 52 89 194
Putnam Diversified Income
Portfolio...................... 67 81 99 193 17 51 89 193
Smith Barney High Income
Portfolio...................... 65 76 90 175 15 46 80 175
Smith Barney International Equity
Portfolio...................... 68 87 107 212 18 57 97 212
Smith Barney Large Capitalization
Growth Portfolio............... 67 82 100 197 17 52 90 197
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
IF CONTRACT IS SURRENDERED AT THE IF CONTRACT IS NOT SURRENDERED OR
END OF PERIOD SHOWN: ANNUITIZED AT END OF PERIOD SHOWN:
------------------------------------- -------------------------------------
UNDERLYING FUNDING OPTIONS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
THE TRAVELERS SERIES TRUST
Disciplined Mid Cap Stock
Portfolio...................... 68 85 105 206 18 55 95 206
Disciplined Small Cap Stock
Portfolio...................... 68 87 107 212 18 57 97 212
Equity Income Portfolio.......... 67 83 101 199 17 53 91 199
Federated Stock Portfolio........ 66 81 98 192 16 51 88 192
Large Cap Portfolio.............. 67 83 101 198 17 53 91 198
Lazard International Stock
Portfolio...................... 69 88 111 218 19 58 101 218
MFS Mid Cap Growth Portfolio..... 68 87 107 212 18 57 97 212
MFS Research Portfolio........... 68 86 107 211 18 56 97 211
Social Awareness Stock
Portfolio...................... 66 81 97 190 16 51 87 190
Strategic Stock Portfolio........ 67 84 102 201 17 54 92 201
Travelers Quality Bond
Portfolio...................... 64 72 83 161 14 42 73 161
U.S. Government Securities
Portfolio...................... 63 71 80 155 13 41 70 155
Utilities Portfolio.............. 67 83 101 199 17 53 91 199
VARIABLE INSURANCE PRODUCTS FUND II
Asset Manager
Portfolio -- Service Class 2... 65 75 88 171 15 45 78 171
WARBURG PINCUS TRUST
Emerging Markets Portfolio....... 72 99 128 253 22 69 118 253
</TABLE>
* THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
(1) Reflects expenses that would be incurred for those Contract Owners who DO
NOT participate in the CHART Asset Allocation program.
(2) Reflects expenses that would be incurred for those Contract Owners who DO
participate in the CHART Asset Allocation program.
10
<PAGE> 13
EXAMPLE*: OPTIONAL DEATH BENEFIT
Assuming a 5% annual return on assets, a $1,000 investment would be subject to
the following expenses:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
IF CONTRACT IS SURRENDERED AT THE IF CONTRACT IS NOT SURRENDERED OR
END OF PERIOD SHOWN: ANNUITIZED AT END OF PERIOD SHOWN:
------------------------------------- -------------------------------------
UNDERLYING FUNDING OPTIONS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation Fund............ 71 95 122 241 21 65 112 241
High Yield Bond Trust................ 71 95 121 239 21 65 111 239
Managed Assets Trust................. 69 88 110 217 19 58 100 217
Money Market Portfolio............... 67 82 100 196 17 52 90 196
AMERICAN ODYSSEY FUNDS, INC.(1)
Core Equity Fund................. 69 89 112 221 19 59 102 221
Emerging Opportunities Fund...... 72 96 124 245 22 66 114 245
Global High-Yield Bond Fund...... 71 95 122 241 21 65 112 241
Intermediate-Term Bond Fund...... 69 88 110 216 19 58 100 216
International Equity Fund........ 70 92 116 230 20 62 106 230
Long-Term Bond Fund.............. 69 88 110 217 19 58 100 217
AMERICAN ODYSSEY FUNDS, INC.(2)
Core Equity Fund................. 77 114 152 302 27 84 142 302
Emerging Opportunities Fund...... 80 120 164 324 30 90 154 324
Global High-Yield Bond Fund...... 79 119 162 320 29 89 152 320
Intermediate-Term Bond Fund...... 77 112 150 297 27 82 140 297
International Equity Fund........ 78 116 156 310 28 86 146 310
Long-Term Bond Fund.............. 77 112 151 298 27 82 141 298
DELAWARE GROUP PREMIUM FUND.
REIT Series...................... 71 96 123 243 21 66 113 243
Small Cap Value Series........... 71 96 123 243 21 66 113 243
DREYFUS VARIABLE INVESTMENT FUND
Capital Appreciation Portfolio... 71 94 119 236 21 64 109 236
Small Cap Portfolio.............. 71 94 119 236 21 64 109 236
GREENWICH STREET SERIES FUND
Equity Index Portfolio -- Class
II Shares...................... 68 85 105 207 18 55 95 207
JANUS ASPEN SERIES
Worldwide Growth Portfolio....... 70 91 115 227 20 61 105 227
THE MONTGOMERY FUNDS III
Montgomery Variable Series:
Growth Fund.................... 75 108 143 284 25 78 133 284
OCC ACCUMULATION TRUST
Equity Portfolio................. 72 98 126 249 22 68 116 249
SALOMON BROTHERS VARIABLE SERIES FUND
INC.
Capital Fund..................... 73 100 130 258 23 70 120 258
Investors Fund................... 73 100 129 256 23 70 119 256
Total Return Fund................ 73 100 130 258 23 70 120 258
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Schafer Value Fund II..... 75 106 141 279 25 76 131 279
TRAVELERS SERIES FUND INC.
Alliance Growth Portfolio........ 71 95 121 240 21 65 111 240
MFS Total Return Portfolio....... 71 95 122 242 21 65 112 242
Putnam Diversified Income
Portfolio...................... 71 95 122 241 21 65 112 241
Smith Barney High Income
Portfolio...................... 69 90 113 223 19 60 103 223
Smith Barney International Equity
Portfolio...................... 73 100 130 258 23 70 120 258
Smith Barney Large Capitalization
Growth Portfolio............... 71 96 123 244 21 66 113 244
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
IF CONTRACT IS SURRENDERED AT THE IF CONTRACT IS NOT SURRENDERED OR
END OF PERIOD SHOWN: ANNUITIZED AT END OF PERIOD SHOWN:
------------------------------------- -------------------------------------
UNDERLYING FUNDING OPTIONS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
THE TRAVELERS SERIES TRUST
Disciplined Mid Cap Stock
Portfolio...................... 72 99 128 253 22 69 118 253
Disciplined Small Cap Stock
Portfolio...................... 73 100 130 258 23 70 120 258
Equity Income Portfolio.......... 72 97 124 246 22 67 114 246
Federated Stock Portfolio........ 71 95 121 240 21 65 111 240
Large Cap Portfolio.............. 72 96 124 245 22 66 114 245
Lazard International Stock
Portfolio...................... 73 102 134 265 23 72 124 265
MFS Mid Cap Growth Portfolio..... 73 100 130 258 23 70 120 258
MFS Research Portfolio........... 73 100 130 257 23 70 120 257
Social Awareness Stock
Portfolio...................... 71 94 120 238 21 64 110 238
Strategic Stock Portfolio........ 72 97 125 248 22 67 115 248
Travelers Quality Bond
Portfolio...................... 68 86 107 211 18 56 97 211
U.S. Government Securities
Portfolio...................... 68 85 104 204 18 55 94 204
Utilities Portfolio.............. 72 97 124 246 22 67 114 246
VARIABLE INSURANCE PRODUCTS FUND II
Asset Manager Portfolio -- Service
Class II........................... 69 89 112 220 19 59 102 220
WARBURG PINCUS TRUST
Emerging Markets Portfolio....... 77 112 151 298 27 82 141 298
</TABLE>
* THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
(1) Reflects expenses that would be incurred for those Contract Owners who DO
NOT participate in the CHART Asset Allocation program.
(2) Reflects expenses that would be incurred for those Contract Owners who DO
participate in the CHART Asset Allocation program.
12
<PAGE> 15
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
See Appendices A and B.
THE ANNUITY CONTRACT
- --------------------------------------------------------------------------------
Travelers Retirement Account Annuity is a contract between the contract owner
("you"), and the Company. You make purchase payments to us and we credit them to
your Contract. The Company promises to pay you an income, in the form of annuity
payments, beginning on a future date that you choose, the maturity date. The
purchase payments and any applicable credits accumulate tax deferred in the
funding options of your choice. The contract owner assumes the risk of gain or
loss according to the performance of the variable funding options. The contract
value is the amount of purchase payment plus any applicable credits, plus or
minus any investment experience or interest. The contract value also reflects
all surrenders made and charges deducted. There is generally no guarantee that
at the maturity date the contract value will equal or exceed the total purchase
payments made under the Contract. The date the contract and its benefits become
effective is referred to as the contract date. Each 12-month period following
the contract date is called a contract year.
Certain changes and elections must be made in writing to the Company. Where the
term "written request" is used, it means that written information must be sent
to the Company's Home Office in a form and content satisfactory to us.
CONTRACT OWNER INQUIRIES
Any questions you have about your Contract should be directed to the Company's
Home Office at 1-800-842-9406.
PURCHASE PAYMENTS
The initial purchase payment must be at least $20,000. You may make additional
payments of at least $5,000 at any time. Under certain circumstances, we may
waive the minimum purchase payment requirement. Purchase payments over
$1,000,000 may be made with our prior consent.
We will apply the initial purchase payment within two business days after we
receive it in good order at our Home Office. Subsequent purchase payments will
be credited to a Contract on the same business day, if received in good order by
our Home Office by 4:00 p.m. Eastern time. A business day is any day that the
New York Stock Exchange is open. Our business day ends at 4:00 p.m. Eastern time
unless we need to close earlier due to an emergency.
If the Optional Death Benefit is selected, we will add a credit to your Contract
with each purchase payment. Each credit is added to the contract value when the
applicable purchase payment is applied, and will equal 2% of each purchase
payment. These credits are applied pro rata to the same funding options to which
your purchase payment was applied.
CONSERVATION CREDIT
If you are purchasing this Contract with funds from another contract issued by
Us or Our affiliates, you may receive a conservation credit to your purchase
payments. If applied, we will determine the amount of such credit.
ACCUMULATION UNITS
The period between the contract effective date and the maturity date is the
accumulation period. During the accumulation period, an accumulation unit is
used to calculate the value of a Contract. An accumulation unit works like a
share of a mutual fund. Each funding option has a corresponding accumulation
unit value. The accumulation units are valued each business day and their values
may increase or decrease from day to day. The number of accumulation units we
will credit to your Contract once we receive a purchase payment is determined by
dividing the amount directed to
13
<PAGE> 16
each funding option by the value of its accumulation unit. We calculate the
value of an accumulation unit for each funding option each day the New York
Stock Exchange is open. The values are calculated as of 4:00 p.m. Eastern time.
After the value is calculated, we credit your Contract. During the annuity
period (i.e., after the maturity date), you are credited with annuity units.
THE FUNDING OPTIONS
You choose which of the following variable funding options to have your purchase
payments allocated to. These funding options are subsections of the Separate
Account, which invest in the underlying mutual funds ("underlying funds"). You
will find detailed information about the options and their inherent risks in the
current prospectuses for the funding options which must accompany this
prospectus. You are not investing directly in the underlying fund. Since each
option has varying degrees of risk, please read the prospectuses carefully
before investing. Contact your registered representative or call 1-800-842-9406
to request additional copies of the prospectuses.
If any of the funding options become unavailable for allocating purchase
payments, or if we believe that further investment in a funding option is
inappropriate for the purposes of the Contract, we may substitute another
funding option. However, we will not make any substitutions without notifying
you and obtaining any state and SEC approval, if necessary. From time to time we
may make new funding options available.
The current variable funding options are listed below, along with their
investment advisers and any subadviser:
<TABLE>
<CAPTION>
INVESTMENT OPTIONS INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Capital Appreciation Fund Seeks growth of capital through the use of Travelers Asset Management
common stocks. Income is not an objective. International Company LLC
The Fund invests principally in common stocks ("TAMIC")
of small to large companies which are Subadviser: Janus Capital Corp.
expected to experience wide fluctuations in
price both in rising and declining markets.
High Yield Bond Trust* Seeks generous income. The assets of the High TAMIC
Yield Bond Trust will be invested in bonds
which, as a class, sell at discounts from par
value and are typically high risk securities.
Managed Assets Trust** Seeks high total investment return through a TAMIC
fully managed investment policy in a Subadviser: Travelers
portfolio of equity, debt and convertible Investment Management Company
securities. ("TIMCO")
Money Market Portfolio Seeks high current income from short-term TAMIC
money market instruments while preserving
capital and maintaining a high degree of
liquidity.
AMERICAN ODYSSEY FUNDS, INC.
Core Equity Fund Seeks maximum long-term total return by American Odyssey Funds
investing primarily in common stocks of well- Management, Inc.
established companies. Subadvisers: Equinox
Capital Management, L.L.C.;
Putnam Investment Management
Inc.; and State Street Global
Advisors
Emerging Opportunities Fund Seeks maximum long-term total return by American Odyssey Funds
investing primarily in common stocks of Management, Inc.
small, rapidly growing companies. Subadviser: Cowen Asset
Management; Chartwell
Investment Partners; and State
Street Global Advisors
Global High-Yield Bond Fund*(1) Seeks maximum long-term total return (capital American Odyssey Funds
appreciation and income) by investing Management, Inc.
primarily in high-yield debt securities from Subadviser: Credit Suisse Asset
the United States and abroad. Management
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
INVESTMENT OPTIONS INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AMERICAN ODYSSEY FUNDS, INC.
(CONT.)
Intermediate-Term Bond Fund* Seeks maximum long-term total return by American Odyssey Funds
investing primarily in intermediate-term Management, Inc.
corporate debt securities, U.S. government Subadviser: TAMIC
securities, mortgage-related securities and
asset-backed securities, as well as money
market instruments.
International Equity Fund Seeks maximum long-term total return by American Odyssey Funds
investing primarily in common stocks of Management, Inc.
established non-U.S. companies. Subadviser: Bank of Ireland
Asset Management (U.S.) Limited
Long-Term Bond Fund* Seeks maximum long-term total return by American Odyssey Funds
investing primarily in long-term corporate Management, Inc.
debt securities, U.S. government securities, Subadviser: Western Asset
mortgage-related securities, and asset-backed Management Company
securities, as well as money market
instruments.
DELAWARE GROUP PREMIUM
FUND
REIT Series Seeks maximum long-term total return by Delaware Management Company,
investing in securities of companies Inc.
primarily engaged in the real estate Subadviser: Lincoln Investment
industry. Capital appreciation is a secondary Management, Inc.
objective.
Small Cap Value Series Seeks capital appreciation by investing in Delaware Management Company,
small to mid-cap common stocks whose market Inc.
value appears low relative to their Subadviser: Lincoln Investment
underlying value or future earnings and Management, Inc.
growth potential Emphasis will also be placed
on securities of companies that may be
temporarily out of favor or whose value is
not yet recognized by the market.
DREYFUS VARIABLE
INVESTMENT FUND
Appreciation Portfolio Seeks primarily to provide long-term capital The Dreyfus Corporation
growth consistent with the preservation of Subadviser: Fayez Sarofim & Co.
capital; current income is a secondary ("Sarofim")
investment objective. The portfolio invests
primarily in the common stocks of domestic
and foreign issuers.
Small Cap Portfolio Seeks to maximize capital appreciation. The Dreyfus Corporation
Subadviser: Sarofim
GREENWICH STREET SERIES FUND
Equity Index Portfolio -- Class Seeks to replicate, before deduction of TIMCO
II Shares expenses, the total return performance of the
S&P 500 Index.
JANUS ASPEN SERIES
Worldwide Growth Portfolio -- Seeks growth of capital in a manner Janus Capital
Service Shares consistent with preservation of capital by
investing primarily in common stocks of
companies of any size throughout the world.
MONTGOMERY FUNDS III
Montgomery Variable Series: Seeks capital appreciation by investing Montgomery Asset Management
Growth Fund primarily in equity securities, usually
common stock, of domestic companies of all
sizes, and emphasizes companies having market
capitalizations of $1 billion or more.
OCC ACCUMULATION TRUST
Equity Portfolio Seeks long-term capital appreciation through OpCap Advisors
investment in securities (primarily equity
securities) of companies that are believed by
the adviser to be undervalued in the
marketplace in relation to factors such as
the companies' assets or earnings.
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
INVESTMENT OPTIONS INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SALOMON BROTHERS VARIABLE SERIES
FUND, INC.
Capital Fund Seeks capital appreciation, primarily through Salomon Brothers Asset
investments in common stocks which are Management ("SBAM")
believed to have above-average price
appreciation potential and which may involve
above average risk.
Investors Fund Seeks long-term growth of capital, and, SBAM
secondarily, current income, through
investments in common stocks of well-known
companies.
Total Return Fund Seeks above-average income (compared to a SBAM
portfolio invested entirely in equity
securities). Secondarily, seeks opportunities
for growth of capital and income.
STRONG VARIABLE INSURANCE FUNDS,
INC.
Strong Schafer Value Fund II Seeks long-term capital appreciation. Current Strong Capital Management Inc.
income is a secondary objective when Subadviser: Schafer Capital
selecting investments. The goal is to Management, Inc.
identify stocks that provide above-average
earnings growth prospects at a
price-to-earnings ratio lower than that of
the S&P 500.
TRAVELERS SERIES FUND INC.
Alliance Growth Portfolio Seeks long-term growth of capital. Current Travelers Investment Adviser
income is only an incidental consideration. ("TIA")
The Portfolio invests predominantly in equity Subadviser: Alliance Capital
securities of companies with a favorable Management L.P.
outlook for earnings and whose rate of growth
is expected to exceed that of the U.S.
economy over time.
MFS Total Return Portfolio (a balanced portfolio) Seeks to obtain above- TIA
average income (compared to a portfolio Subadviser: Massachusetts
entirely invested in equity securities) Financial Services Company
consistent with the prudent employment of ("MFS")
capital. Generally, at least 40% of the
Portfolio's assets are invested in equity
securities.
Putnam Diversified Income Seeks high current income consistent with TIA
Portfolio preservation of capital. The Portfolio will Subadviser: Putnam Investment
allocate its investments among the U.S. Management, Inc.
Government Sector, the High Yield Sector, and
the International Sector of the fixed income
securities markets.
Smith Barney High Income Seeks high current income. Capital SSB Citi Fund Management LLC
Portfolio appreciation is a secondary objective. The ("SSB Citi")
Portfolio will invest at least 65% of its
assets in high-yielding corporate debt
obligations and preferred stock.
Smith Barney International Equity Seeks total return on assets from growth of SSB Citi
Portfolio capital and income by investing at least 65%
of its assets in a diversified portfolio of
equity securities of established non-U.S.
issuers.
Smith Barney Large Seeks long-term growth of capital by SSB Citi
Capitalization Growth Portfolio investing in equity securities of companies
with large market capitalizations.
THE TRAVELERS SERIES TRUST
Disciplined Mid Cap Stock Seeks growth of capital by investing TAMIC
Portfolio primarily in a broadly diversified portfolio Subadviser: TIMCO
of U.S. common stocks.
Disciplined Small Cap Stock Seeks long term capital appreciation by TAMIC
Portfolio investing primarily (at least 65% of its Subadviser: TIMCO
total assets) in the common stocks of U.S.
Companies with relatively small market
capitalizations at the time of investment.
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
INVESTMENT OPTIONS INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
THE TRAVELERS SERIES TRUST
(CONT.)
Equity Income Portfolio Seeks reasonable income by investing at least TAMIC
65% in income-producing equity securities. Subadviser: Fidelity Management
The balance may be invested in all types of & Research Company ("FMR")
domestic and foreign securities, including
bonds. The Portfolio seeks to achieve a yield
that exceeds that of the securities
comprising the S&P 500. The Subadviser also
considers the potential for capital
appreciation.
Federated Stock Portfolio Seeks growth of income and capital by TAMIC
investing principally in a professionally Subadviser: Federated
managed and diversified portfolio of common Investment Counseling, Inc.
stock of high-quality companies (i.e.,
leaders in their industries and characterized
by sound management and the ability to
finance expected growth).
Large Cap Portfolio Seeks long-term growth of capital by TAMIC
investing primarily in equity securities of Subadviser: FMR
companies with large market capitalizations.
Lazard International Stock Seeks capital appreciation by investing TAMIC
Portfolio primarily in the equity securities of Subadviser: Lazard Asset
non-United States companies (i.e., Management
incorporated or organized outside the United
States).
MFS Mid Cap Growth Portfolio Seeks to obtain long-term growth of capital TAMIC
by investing, under normal market conditions, Subadviser: MFS
at least 65% of its total assets in equity
securities of companies with medium market
capitalization which the investment adviser
believes have above-average growth potential.
MFS Research Portfolio Seeks to provide long-term growth of capital TAMIC
and future income. Subadviser: MFS
Social Awareness Stock Portfolio Seeks long-term capital appreciation and SSB Citi
retention of net investment income by
selecting investments, primarily common
stocks, which meet the social criteria
established for the Portfolio. Social
criteria currently excludes companies that
derive a significant portion of their
revenues from the production of tobacco,
tobacco products, alcohol, or military
defense systems, or in the provision of
military defense related services or gambling
services.
Strategic Stock Portfolio Seeks to provide an above-average total TAMIC
return through a combination of potential Subadviser: TIMCO
capital appreciation and dividend income by
investing primarily in high dividend yielding
stocks periodically selected from the
companies included in (i) the Dow Jones
Industrial Average and (ii) a subset of the
S&P Industrial Index.
Travelers Quality Bond Portfolio Seeks current income, moderate capital TAMIC
volatility and total return.
U.S. Government Securities Seeks to select investments from the point of TAMIC
Portfolio view of an investor concerned primarily with
the highest credit quality, current income
and total return. The assets of the Portfolio
will be invested in direct obligations of the
United States, its agencies and
instrumentalities.
Utilities Portfolio Seeks to provide current income by investing SSB Citi
in equity and debt securities of companies in
the utilities industries.
VARIABLE INSURANCE PRODUCTS FUND II
Asset Manager Seeks high total return with reduced risk FMR
Portfolio -- Service Class 2 over the long-term by allocating its assets
among stocks, bonds and short-term
fixed-income instruments.
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
INVESTMENT OPTIONS INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
WARBURG PINCUS TRUST
Emerging Markets Portfolio Seeks long-term growth of capital by Warburg Pincus Asset
investing primarily in equity securities of Management, Inc.
non-U.S. issuers consisting of companies in
emerging securities markets.
</TABLE>
(1) Formerly American Odyssey Short-Term Bond Fund. The name investment
objective and investment subadviser of this fund were changed pursuant to a
shareholder vote effective May 1, 1998.
* The funding options marked with an asterisk (*) are considered competing
funds, and may be subject to transfer restrictions. Those marked with two
asterisks (**) are not currently considered competing funds, but may be so in
the future because of an allowable change in the funding option's investment
strategy. Please refer to the contract for transfer restrictions.
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
GENERAL
We deduct the charges described below. The charges are for the service and
benefits we provide, costs and expenses we incur, and risks we assume under the
Contracts. We may also deduct a charge for taxes. Services and benefits we
provide include:
- the ability for you to make withdrawals and surrenders under the
Contracts;
- the death benefit paid on the death of the contract owner,
annuitant, or first of the joint contract owners,
- the available funding options and related programs (including
dollar-cost averaging, portfolio rebalancing, and systematic
withdrawal programs);
- administration of the annuity options available under the Contracts;
and
- the distribution of various reports to contract owners.
Costs and expenses we incur include:
- losses associated with various overhead and other expenses
associated with providing the services and benefits provided by the
Contracts,
- sales and marketing expenses, including commission payments to your
sales agent, and
- other costs of doing business.
Risks we assume include:
- risks that annuitants may live longer than estimated when the
annuity factors under the Contracts were established,
- that the amount of the death benefit will be greater than the
contract value and
- that the costs of providing the services and benefits under the
Contracts will exceed the charges deducted.
Unless otherwise specified, charges are deducted proportionately from all
funding options in which you are invested.
We may reduce or eliminate the withdrawal charge, and/or the mortality and
expense risk charge under the Contract when certain sales or administration of
the Contract result in savings or reduced expenses and/or risks. For certain
trusts, we may change the order in which purchase payments and earnings are
withdrawn in order to determine the withdrawal charge. We will not reduce or
eliminate the withdrawal charge or the administrative charge where such
reduction or elimination would be unfairly discriminatory to any person.
WITHDRAWAL CHARGE
We do not deduct a sales charge from purchase payments when they are made to the
Contract. However, a withdrawal charge will apply if purchase payments are
withdrawn before they have
18
<PAGE> 21
been in the Contract for six years. We will assess the charge as a percentage of
the purchase payment withdrawn as follows:
<TABLE>
<CAPTION>
YEARS SINCE PURCHASE WITHDRAWAL
PAYMENT MADE CHARGE
<S> <C>
1 or less 5%
2 4%
3 3%
4 2%
5 1%
6 and thereafter 0%
</TABLE>
For purposes of the withdrawal charge calculation, withdrawals are deemed to be
taken first from:
(a) any purchase payments and associated credits to which no
withdrawal charge applies; then
(b) from any remaining free withdrawal amount (as described below)
after the reduction by the amount of (a); then
(c) from any remaining purchase payments and associated credits (on a
first-in, first-out basis); and then
(d) from any contract earnings.
Unless you instruct us otherwise, we will deduct the withdrawal charge from the
amount requested.
We will not deduct a withdrawal charge:
- from payments we make due to the death of the annuitant;
- if an annuity payout has begun, other than the Liquidity Benefit
Option (see "Liquidity Benefit");
- if an income option of at least ten years' duration is elected;
- from amounts withdrawn which are deposited to other contracts issued
by Us or our affiliate, subject to Our approval;
- if withdrawals are taken under our Managed Distribution Program, if
elected by you (see "Access to Your Contract Values"); or
- if you are confined to an Eligible Nursing Home, as described in
Appendix C.
FREE WITHDRAWAL ALLOWANCE
You may withdraw up to 20% of the contract value annually. During the first
contract year, the available withdrawal amount will be 20% of the initial
purchase payment. After the first contract year, the available withdrawal amount
will be calculated as of the end of the previous contract year. The free
withdrawal provision applies to all partial withdrawals and full withdrawals,
except those transferred directly to annuity contracts issued by other financial
institutions. We reserve the right to not permit the provision on a full
surrender. In Washington state, the free withdrawal provision applies to all
withdrawals.
PREMIUM TAX
Certain state and local governments charge premium taxes ranging from 0% to 5%,
depending upon jurisdiction. The Company is responsible for paying these taxes
and will determine the method used to recover premium tax expenses incurred. We
will deduct any applicable premium taxes from the contract value either upon
death, surrender, annuitization, or at the time purchase payments are made to
the Contract, but no earlier than when we have a tax liability under state law.
MORTALITY AND EXPENSE RISK CHARGE
Each business day, the Company deducts a mortality and expense risk ("M&E")
charge from amounts held in the variable funding options. The deduction is
reflected in our calculation of accumulation and annuity unit values. The
charges stated are the maximum for this product. We reserve the right to lower
this charge at any time. For the Standard Death Benefit, this charge
19
<PAGE> 22
equals, on an annual basis, 0.80% of the amounts held in each funding option.
For the Optional Death Benefit and Credit, this charge equals, on an annual
basis, 1.25% of the amounts held in each funding option. This charge compensates
the Company for risks assumed, benefits provided and expenses incurred,
including the payment of commissions to your sales agent.
FUNDING OPTION EXPENSES
The charges and expenses of the funding options are summarized in the fee table
and are described in the accompanying prospectuses.
FLOOR BENEFIT/LIQUIDITY BENEFIT CHARGES
If the Variable Annuitization Floor Benefit is selected, a charge is deducted
upon election of this benefit. This charge compensates Us for guaranteeing a
minimum variable annuity payment regardless of the performance of the funding
options selected by you. This charge will vary based upon market conditions, but
will never increase your annual separate account charge by more than 3%. The
charge will be set at the time of election, and will remain level throughout the
term of annuitization. If the Liquidity Benefit is selected, there is a
surrender charge of 5% of the amounts withdrawn. Please refer to "The Annuity
Period" for a description of these benefits.
CHART ASSET ALLOCATION PROGRAM CHARGES
Under the CHART Program, purchase payments and cash values are allocated among
the specified asset allocation funds. The charge for this advisory service is
equal to a maximum of 0.80% of the assets subject to the CHART Program. The
CHART Program fee will be paid by quarterly withdrawals from the cash values
allocated to the asset allocation funds. The Company will not treat these
withdrawals as taxable distributions. Please refer to "Miscellaneous Contract
Provisions" for further information.
CHANGES IN TAXES BASED UPON PREMIUM OR VALUE
If there is any change in a law assessing taxes against the Company based upon
premiums, contract gains or value of the contract, we reserve the right to
charge you proportionately for this tax.
TRANSFERS
- --------------------------------------------------------------------------------
Up to 30 days before the maturity date, you may transfer all or part of the
contract value between funding options. Transfers are made at the value(s) next
determined after we receive your request at the Home Office. There are no
charges or restrictions on the amount or frequency of transfers currently;
however, we reserve the right to charge a fee for any transfers exceeding 12 per
year, and to limit the number of transfers to one in any six-month period. We
also reserve the right to restrict transfers by any market timing firm or any
other third party authorized to initiate transfers on behalf of multiple
contract owners. We may, among other things, not accept: 1) the transfer
instructions of any agent acting under a power of attorney on behalf of more
than one owner, or 2) the transfer or exchange instructions of individual owners
who have executed pre-authorized transfer forms which are submitted by market
timing firms or other third parties on behalf of more than one owner. We further
reserve the right to limit transfers that we determine will disadvantage other
contract owners.
Since different funding options have different expenses, a transfer of contract
values from one funding option to another could result in your investment
becoming subject to higher or lower expenses. After the maturity date, you may
make transfers between funding options only with our consent.
DOLLAR COST AVERAGING
Dollar cost averaging or the pre-authorized transfer program (the "DCA Program")
allows you to transfer a set dollar amount to other funding options on a monthly
or quarterly basis during the accumulation phase of the Contract. Using this
method, more accumulation units are purchased in a funding option if the value
per unit is low and fewer accumulation units are purchased if the
20
<PAGE> 23
value per unit is high. Therefore, a lower-than-average cost per unit may be
achieved over the long run.
You may elect the DCA Program through written request or other method acceptable
to the Company. You must have a minimum total contract value of $5,000 to enroll
in the DCA Program. The minimum amount that may be transferred through this
program is $400.
You may start or stop participation in the DCA 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. All provisions and terms of the
Contract apply to the DCA and Special DCA Programs, including provisions
relating to the transfer of money between investment options. We reserve the
right to suspend or modify transfer privileges at any time and to assess a
processing fee for this service.
ASSET ALLOCATION ADVICE
Owners may elect to enter into a separate advisory agreement with Copeland , an
affiliate of the Company. For a fee, Copeland provides asset allocation advice
under its CHART Program(R), which is fully described in a separate Disclosure
Statement. The CHART Program may not be available in all marketing programs
through which this Contract is sold.
ACCESS TO YOUR MONEY
- --------------------------------------------------------------------------------
Any time before the maturity date, you may redeem all or any portion of the cash
surrender value, less any premium tax not previously deducted. Unless you submit
a written request specifying the funding option(s) from which amounts are to be
withdrawn, the withdrawal will be made on a pro rata basis. The cash surrender
value will be determined as of the close of business after we receive your
surrender request at the Home Office. The cash surrender value may be more or
less than the purchase payments made.
We may defer payment of any cash surrender value for a period of up to seven
days after the written request is received, but it is our intent to pay as soon
as possible. We cannot process requests for withdrawals that are not in good
order. We will contact you if there is a deficiency causing a delay and will
advise what is needed to act upon the withdrawal request.
We also provide access to your money during the annuitization period, which is
discussed in detail in the "Annuity Period" section of this prospectus.
SYSTEMATIC WITHDRAWALS
Before the maturity date, you may choose to withdraw a specified dollar amount
on a monthly, quarterly, semiannual or annual basis. Any applicable premium
taxes and withdrawal charge will be deducted. To elect systematic withdrawals,
you must make the election on the form provided by the Company. You may begin or
discontinue systematic withdrawals at any time by notifying us in writing, but
at least 30 days' notice must be given to change any systematic withdrawal
instructions that are currently in place.
We reserve the right to discontinue offering systematic withdrawals or to assess
a processing fee for this service upon 30 days' written notice to contract
owners (where allowed by state law).
Each systematic withdrawal is subject to federal income taxes on the taxable
portion. In addition, a 10% federal penalty tax may be assessed on systematic
withdrawals if the contract owner is under age 59 1/2. You should consult with
your tax adviser regarding the tax consequences of systematic withdrawals.
MANAGED DISTRIBUTION PROGRAM. Under the systematic withdrawal option, you may
choose to participate in the Managed Distribution Program. At no cost to you,
you may instruct Us to calculate and make minimum distributions that may be
required by the IRS upon reaching age 70 1/2. (See "Federal Tax
Considerations.") These payments will not be subject to the withdrawal charge
and will be in lieu of the free withdrawal allowance. No Dollar Cost Averaging
will be permitted if you are participating in the Managed Distribution Program.
21
<PAGE> 24
OWNERSHIP PROVISIONS
- --------------------------------------------------------------------------------
TYPES OF OWNERSHIP
Contract Owner ("you"). The Contract belongs to the contract owner named in the
Contract (on the Specifications page.) The annuitant is the individual upon
whose life the maturity date and the amount of monthly annuity payments depend.
Because this is a qualified contract, the owner and the annuitant must always be
the same person. You have sole power to exercise any rights and to receive all
benefits given in the contract provided you have not named an irrevocable
beneficiary.
Beneficiary. The beneficiary is named by you in a written request. The
beneficiary has the right to receive any remaining contractual benefits upon
your death. If more than one beneficiary survives the annuitant, they will share
equally in benefits unless other shares are recorded with the Company by written
request before your death.
Unless an irrevocable beneficiary has been named, you have the right to change
any beneficiary by written request and while the Contract continues.
DEATH BENEFIT
- --------------------------------------------------------------------------------
DEATH BENEFIT PROCEEDS PRIOR TO MATURITY DATE
The person chosen as the beneficiary will receive a death benefit upon the death
of the owner/annuitant before the maturity date. You may select either the
Standard Death Benefit or the Optional Death Benefit and Credit at the time of
purchase:
STANDARD DEATH BENEFIT:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
ANNUITANT'S AGE DEATH BENEFIT PAYABLE
ON THE CONTRACT DATE (CALCULATED AS OF THE DEATH REPORT DATE)
- ------------------------------------------------------------------------------------------
<S> <C>
Before age 80 IF NOTIFIED WITHIN 6 MONTHS OF THE DEATH: Greater of:
(1) Contract value, or
(2) Total purchase payments less any withdrawals (and
related charges).
IF NOTIFIED 6 MONTHS OR MORE AFTER THE DEATH: Contract value
(unless prohibited by state law)
- ------------------------------------------------------------------------------------------
On or after age 80 Contract value.
- ------------------------------------------------------------------------------------------
</TABLE>
OPTIONAL DEATH BENEFIT AND CREDIT
The Optional Death Benefit and Credit varies depending on the annuitant's age on
the Contract Date.
22
<PAGE> 25
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
ANNUITANT'S AGE DEATH BENEFIT PAYABLE
ON THE CONTRACT DATE (CALCULATED AS OF THE DEATH REPORT DATE)
- ------------------------------------------------------------------------------------------
<S> <C>
Under Age 70 IF NOTIFIED WITHIN 6 MONTHS OF THE DEATH: Greatest of:
(1) Contract value; or
(2)
Total purchase payments, less any withdrawals (and related charges), or
(3) Maximum Step-Up death benefit value (described below)
associated with contract date anniversaries beginning with
the 5th, and ending with the last before the annuitant's
76th birthday.
IF NOTIFIED 6 MONTHS OR MORE AFTER THE DEATH: Contract value
(unless prohibited by state law)
- ------------------------------------------------------------------------------------------
Age 70-75 IF NOTIFIED WITHIN 6 MONTHS OF THE DEATH: Greatest of:
(1) Contract value, or
(2)
Total purchase payments, less any withdrawals (and related charges), or
(3) Step-Up death benefit value (described below) associated
with the 5th contract date anniversary.
IF NOTIFIED 6 MONTHS OR MORE AFTER THE DEATH: Contract value
(unless prohibited by state law)
- ------------------------------------------------------------------------------------------
Age 76-80 Greater of (1) or (2) above.
- ------------------------------------------------------------------------------------------
Age over 80 Contract value.
- ------------------------------------------------------------------------------------------
</TABLE>
All death benefit values described above are calculated at the close of business
on the date the Company receives due proof of death and written distribution
instructions (the "death report date"). The amounts will be reduced by any
applicable premium taxes due.
STEP-UP DEATH BENEFIT VALUE
A separate Step-Up death benefit value will be established on the fifth contract
date anniversary and on each subsequent contract date anniversary on or before
the death report date and will initially equal the contract value on that
anniversary. After a Step-Up death benefit value has been established, it will
be recalculated each time a purchase payment is made or a partial surrender is
taken until the death report date. Step-Up death benefit values will be
recalculated by increasing them by the amount of each applicable purchase
payment and by reducing them by a Partial Surrender Reduction (as described
below) for each applicable partial surrender. Recalculations of Step-Up death
benefit values related to any purchase payments or any partial surrenders will
be made in the order that such purchase payments or partial surrender reductions
occur.
The Partial Surrender Reduction referenced above is equal to:
1. The amount of a Step-Up death benefit value immediately prior to the
reduction for the partial surrender, multiplied by
2. The amount of the partial surrender divided by the contract value
immediately prior to the partial surrender.
For example, assume your current contract value is $55,000. If your original
step-up value is $50,000, and you decide to make a partial withdrawal of
$10,000, the step-up value would be reduced as follows:
50,000 x (10,000/55,000) = 9,090
Your new step-up value would be 50,000-9,090, or $40,910.
The following example shows what would happen in a declining market. Assume your
current contract value is $30,000. If your original step-up value is $50,000,
and you decide to make a partial withdrawal of $10,000, the step-up value would
be reduced as follows:
50,000 x (10,000/30,000) = 16,666
Your new step-up value would be 50,000-16,666, or $33,334.
DEATH PROCEEDS AFTER THE MATURITY DATE
If you die on or after the maturity date, the Company will pay the beneficiary a
death benefit consisting of any benefit remaining under the annuity option then
in effect.
23
<PAGE> 26
PAYMENT OF PROCEEDS
Generally, the person(s) receiving the benefit may request that the proceeds be
paid in a lump sum, or be applied to one of the settlement options available
under the Contract.
The Company will pay the proceeds to the beneficiary (ies), or if none, to the
contract owner's estate.
THE ANNUITY PERIOD
- --------------------------------------------------------------------------------
MATURITY DATE
Under the Contract, you can receive regular income payments (annuity payments).
You can choose the month and the year in which those payments begin (maturity
date). You can also choose among income payouts (annuity options). You can
change your selection any time up to the maturity date. Annuity payments will
begin on the maturity date stated in the Contract unless the Contract has been
fully surrendered or the proceeds have been paid to the beneficiary before that
date, or unless you elect another date. Annuity payments are a series of
periodic payments (a) for life; (b) for life with either a minimum number of
payments or a specific amount assured; (c) for the joint lifetime of the
annuitant and another person, and thereafter during the lifetime of the survivor
or (d) for a number of payments assured. We may require proof that you are alive
before annuity payments are made. Not all options may be available in all
states.
You may choose to annuitize at any time after you purchase the contract. Unless
you elect otherwise, the maturity date will be the later of your 90th birthday,
or ten years after the effective date, if later. (In certain states, the
maturity date elected may not be later than the annuitant's 90th birthday; refer
to your Contract.) At least 30 days before the original maturity date, you may
elect to extend the maturity date to any time prior to your 90th birthday or to
a later date with the Company's consent.
Certain annuity options taken at the maturity date may be used to meet the
minimum required distribution requirements of federal tax law, or a program of
partial surrenders may be used instead. These mandatory distribution
requirements take effect generally upon either the death of the contract owner,
or upon the later of the contract owner's attainment of age 70 1/2 or year of
retirement. Please refer to the optional, no-cost Managed Distribution Program
described in the "Access to your Money" section of this prospectus. You should
seek independent tax advice regarding the election of minimum required
distributions.
LIQUIDITY BENEFIT
If you select any annuity option which guarantees you payments for a minimum
period of time ("period certain"), you may take a lump sum payment (equal to a
portion or all of the value of the remaining period certain payments) any time
after the first contract year. There is a surrender charge of 5% of the amount
withdrawn under this option.
For variable annuity payments, we use the Assumed Net Investment Factor,
("ANIF") as the interest rate to determine the lump sum amount. If you request
only a percentage of the amount available, we will reduce the amount of each
payment during the rest of the period certain by that percentage. After the
certain period expires, any remaining payments, if applicable, will not be
affected by the utilization of this benefit.
For fixed annuity payments, we calculate the present value of the remaining
period certain payments using a current interest rate. The current interest rate
used depends on the amount of time left in the annuity option you elected. The
current rate will be the same rate we would give someone electing an annuity
option for that same amount of time. If you request a percentage of the amount
available during the period certain, we will reduce the amount of each payment
during the rest of the period certain by that percentage. After the certain
period expires, any remaining payments, if applicable, will not be affected by
the utilization of this benefit.
24
<PAGE> 27
The market value adjustment formula for calculating the present value described
above for fixed annuity payments is as follows:
Present Value =LOGO[Payment(s) X (1/1 + iC)(t/365)]
Where
<TABLE>
<S> <C> <C>
iC = the interest rate described above
n = the number of payments remaining in the contract owner's
certain period at the time of request for this benefit
t = number of days remaining until that payment is made,
adjusting for leap years.
</TABLE>
See Appendix D for examples of this market value adjustment.
ALLOCATION OF ANNUITY
When an annuity option is elected, it may be elected as a variable annuity, a
fixed annuity, or a combination of both. If, at the time annuity payments begin,
no election has been made to the contrary, the cash surrender value will be
applied to provide an annuity funded by the same investment options as you have
selected during the accumulation period . At least 30 days before the maturity
date, you may transfer the contract value among the funding options in order to
change the basis on which annuity payments will be determined. (See
"Transfers.")
ANNUITIZATION CREDIT. This credit is applied to the contract value used to
purchase one of the annuity options described below. The credit equals 0.5% of
your contract value if you annuitize during contract years 2-5, 1% during
contract years 6-10, and 2% after contract year 10. There is no credit applied
to contracts held less than 1 year.
VARIABLE ANNUITY
You may choose an annuity payout that fluctuates depending on the investment
experience of the variable funding options. The number of annuity units credited
to the Contract is determined by dividing the first monthly annuity payment
attributable to each funding option by the corresponding accumulation unit value
as of 14 days before the date annuity payments begin. An annuity unit is used to
measure the dollar value of an annuity payment. The number of annuity units (but
not their value) remains fixed during the annuity period.
DETERMINATION OF FIRST ANNUITY PAYMENT. The Contract contains tables used to
determine the first monthly annuity payment. If a variable annuity is elected,
the amount applied to it will be the value of the funding options as of 14 days
before the date annuity payments begin less any applicable premium taxes not
previously deducted.
The amount of the first monthly payment depends on the annuity option elected
and the annuitant's adjusted age. A formula for determining the adjusted age is
contained in the Contract. The total first monthly annuity payment is determined
by multiplying the benefit per $1,000 of value shown in the Contract tables by
the number of thousands of dollars of contract value applied to that annuity
option and factors in an assumed daily net investment factor. The Assumed Daily
Net Investment factor corresponds to an annual interest rate of 3%, used to
determine the guaranteed payout rates shown. If investment rates are higher at
the time annuitization is selected, payout rates will be higher than those
shown. The Company reserves the right to require satisfactory proof of age of
any person on whose life annuity payments are based before making the first
payment under any of the payment options.
DETERMINATION OF SECOND AND SUBSEQUENT ANNUITY PAYMENTS. The dollar amount of
all subsequent annuity payments changes from month to month based on the
investment experience of the applicable funding options. The total amount of
each annuity payment will be equal to the sum of the basic payments in each
funding option. The actual amounts of these payments are determined by
multiplying the number of annuity units credited to each funding option by the
corresponding annuity unit value as of the date 14 days before the date the
payment is due.
FIXED ANNUITY
You may choose a fixed annuity that provides payments which do not vary during
the annuity period. We will calculate the dollar amount of the first fixed
annuity payment as described under
25
<PAGE> 28
"Variable Annuity," except that the amount applied to begin the annuity will be
determined as of the date annuity payments begin. Payout rates will not be lower
than those shown in the Contract. If it would produce a larger payment, the
first fixed annuity payment will be determined using the Life Annuity Tables in
effect on the maturity date.
If you have elected the Increasing Benefit Option, the payments will be
calculated as above. However, the initial payment will be less than that
reflected in the table and the subsequent payments will be increased by the
percentage you elected.
PAYMENT OPTIONS
- --------------------------------------------------------------------------------
ELECTION OF OPTIONS
You can change your annuity option selection any time up to the maturity date.
Once annuity payments have begun, no further elections are allowed.
During the annuitant's lifetime, if you do not elect otherwise before the
maturity date, we will pay you (or another designated payee) the first of a
series of monthly annuity payments based on the life of the annuitant, in
accordance with Annuity Option 2 (Life Annuity with 120 monthly payments
assured). For certain contracts, Annuity Option 4 (Joint and Last Survivor Joint
Life Annuity -- Annuity Reduced on Death of Primary Payee) will be the automatic
option as described in the Contract.
The minimum amount that can be placed under an annuity option will be $2,000
unless we agree to a lesser amount. If any monthly periodic payment due is less
than $100, the Company reserves the right to make payments at less frequent
intervals, or to pay the contract value in a lump sum.
On the maturity date, we will pay the amount due under the Contract in
accordance with the payment option that you select. You may choose to receive a
single lump-sum payment. You must elect an option in writing, in a form
satisfactory to the Company. Any election made during the lifetime of the
annuitant must be made by you.
VARIABLE ANNUITIZATION FLOOR BENEFIT. This benefit may not be available, or may
only be available under certain annuity options, if we determine market
conditions so dictate. If available, the Company will guarantee that, regardless
of the performance of the funding options selected by you, your annuity payments
will never be less than a certain percentage of your first annuity payment. This
percentage will vary depending on market conditions, but will never be less than
50%. You may not elect this benefit if you are over age 80. Additionally, you
must select from certain funds available under this guarantee. Currently, these
funds are the Equity Index Portfolio Class II, the Travelers Quality Bond
Portfolio, and the U.S. Government Securities Portfolio. We may, at our
discretion, increase or decrease the number of funds available under this
benefit. This benefit is not currently available under Annuity Option 5. The
benefit is not available with the 5% ANIF under any Option. If you select this
benefit, you may not elect to liquidate any portion of your Contract.
There is a charge for this guarantee, which will begin upon election of this
benefit. This charge will vary based upon market conditions, and will be
established at the time the benefit is elected. Once established, the charge
will remain level throughout the remainder of the annuitization, and will never
increase your annual separate account charge by more than 3% per year.
We reserve the right to restrict the amount of contract value to be annuitized
under this benefit.
ANNUITY OPTIONS
Subject to the conditions described in "Election of Options" above, all or any
part of the cash surrender value (less any applicable premium taxes) may be paid
under one or more of the following annuity options. Payments under the annuity
options may be elected on a monthly, quarterly, semiannual or annual basis.
Options 1-5 below may be applied to either a Fixed or Variable Annuity. We may
offer additional options.
INCREASING BENEFIT OPTION. For Fixed Annuities, the annuity payment you receive
may be either level (except after death of Primary Payee in Option 4) or
increasing. If increasing payments are
26
<PAGE> 29
selected, the initial payment will be less than the corresponding level payment
for the same annuity option, but your payments will increase on each contract
date anniversary by a percentage chosen by you. You may choose a whole number
percentage from one to four.
Option 1 -- Life Annuity -- No Refund. The Company will make annuity payments
during your lifetime ending with the last payment before death. This option
offers the maximum periodic payment, since there is no assurance of a minimum
number of payments or provision for a death benefit for beneficiaries.
Option 2 -- Life Annuity with 120, 180 or 240 Monthly Payments Assured. The
Company will make monthly annuity payments during your lifetime, with the
agreement that if, at the death of that person, payments have been made for less
than 120, 180 or 240 months as elected, we will continue making payments to the
beneficiary during the remainder of the period.
Option 3 -- Joint and Last Survivor Life Annuity -- No Refund. The Company will
make regular annuity payments during the lifetime of the annuitant and a second
person. When either person dies, we will continue making payments to the
survivor. No further payments will be made following the death of the survivor.
Option 4 -- Joint and Last Survivor Life Annuity -- Annuity Reduced on Death of
Primary Payee. The Company will make annuity payments during your lifetimes of
you and a second person. One will be designated the primary payee, the other
will be designated the secondary payee. On the death of the secondary payee, the
Company will continue to make monthly annuity payments to the primary payee in
the same amount that would have been payable during the joint lifetime of the
two persons. On the death of the primary payee, the Company will continue to
make annuity payments to the secondary payee in an amount equal to 50% of the
payments which would have been made during the lifetime of the primary payee. No
further payments will be made once both payees have died.
Option 5 -- Payment for a Fixed Period. The Company will make monthly payments
for the period selected.
Option 6 -- Income Option. The Company will make a certain number of payments
which are not based on the annuitant's lifetime.
MISCELLANEOUS CONTRACT PROVISIONS
- --------------------------------------------------------------------------------
RIGHT TO RETURN
You may return the Contract for a full refund of the contract value (including
charges) within ten days after you receive it (the "right to return period").
You bear the investment risk on the purchase payment during the right to return
period; therefore, the contract value returned may be greater or less than your
purchase payment.
If the Contract is purchased as an Individual Retirement Annuity, and is
returned within the first seven days after delivery, your purchase payment will
be refunded in full; during the remainder of the right to return period, the
contract value (including charges) will be refunded.
The contract value will be determined following the close of the business day on
which we receive the Contract and a written request for a refund. Where state
law requires a longer period, or the return of purchase payments or other
variations of this provision, the Company will comply. Refer to your Contract
for any state-specific information.
TERMINATION
You do not need to make any purchase payments after the first to keep the
Contract in effect. However, we reserve the right to terminate the Contract on
any business day if the contract value as of that date is less than $2,000 and
no purchase payments have been made for at least two years, unless otherwise
specified by state law. Termination will not occur until 31 days after the
Company has mailed notice of termination to the contract owner's last known
address and to any assignee of record. If the Contract is terminated, we will
pay you the cash surrender value less any applicable contract or premium tax
charges.
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<PAGE> 30
REQUIRED REPORTS
As often as required by law, but at least once in each contract year before the
due date of the first annuity payment, we will furnish a report showing the
number of accumulation units credited to the Contract and the corresponding
accumulation unit value(s) as of the report date for each funding option to
which the contract owner has allocated amounts during the applicable period. The
Company will keep all records required under federal and state laws.
SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone the date of any payment or
determination of values on any business day (1) when the New York Stock Exchange
("the Exchange") is closed; (2) when trading on the Exchange is restricted; (3)
when an emergency exists as determined by the SEC so that the sale of securities
held in the Separate Account may not reasonably occur or so that the Company may
not reasonably determine the value the Separate Account's net assets; or (4)
during any other period when the SEC, by order, so permits for the protection of
security holders.
TRANSFERS OF CONTRACT VALUES TO OTHER ANNUITIES
Where state law permits, we may allow contract owners to transfer their contract
values into other annuities offered by us or our affiliated insurance companies
under rules then in effect.
THE SEPARATE ACCOUNTS
- --------------------------------------------------------------------------------
The Travelers Insurance Company and the Travelers Life and Annuity Company each
sponsor separate accounts: The Travelers Separate Account Five for Variable
Annuities ("Separate Account Five") and the Travelers Separate Account Six for
Variable Annuities ("Separate Account Six"), respectively. Both Separate Account
Five and Separate Account Six were established on June 8, 1998 and are
registered with the SEC as unit investment trusts (separate account) under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Separate
Account assets attributable to the Contracts will be invested exclusively in the
shares of the variable funding options.
The assets of Separate Account Five and Separate Account Six are held for the
exclusive and separate benefit of the owners of each separate account, according
to the laws of Connecticut. Income, gains and losses, whether or not realized,
from assets allocated to the Separate Account are, in accordance with the
Contracts, credited to or charged against the Separate Account without regard to
other income, gains and losses of the Company. The assets held by the Separate
Account are not chargeable with liabilities arising out of any other business
which the Company may conduct. Obligations under the Contract are obligations of
the Company.
All investment income and other distributions of the funding options are payable
to the Separate Account. All such income and/or distributions are reinvested in
shares of the respective funding option at net asset value. Shares of the
funding options are currently sold only to life insurance company separate
accounts to fund variable annuity and variable life insurance contracts.
PERFORMANCE INFORMATION
From time to time, we may advertise several types of historical performance for
the Contract's funding options. We may advertise the "standardized average
annual total returns" of the funding option, calculated in a manner prescribed
by the SEC, and the "nonstandardized total return," as described below. Specific
examples of the performance information appear in the SAI.
STANDARDIZED METHOD. Quotations of average annual total returns are computed
according to a formula in which a hypothetical initial investment of $1,000 is
applied to the funding option, and then related to ending redeemable values over
one-, five-, and ten-year periods, or for a period
28
<PAGE> 31
covering the time during which the funding option has been in existence, if
less. These quotations reflect the deduction of all recurring charges during
each period (on a pro rata basis in the case of fractional periods). Each
quotation assumes a total redemption at the end of each period with the
applicable withdrawal charge deducted at that time.
NONSTANDARDIZED METHOD. Nonstandardized "total returns" will be calculated in a
similar manner based on the performance of the funding options over a period of
time, usually for the calendar year-to-date, and for the past one-, three-,
five- and ten-year periods. The withdrawal charge is not reflected because the
Contract is designed for long-term investment.
For funding options that were in existence before they became available under
the Separate Account, the nonstandardized average annual total return quotations
will reflect the investment performance that such funding options would have
achieved (reduced by the applicable charges) had they been held under the
Contract for the period quoted. The total return quotations are based upon
historical earnings and are not necessarily representative of future
performance.
GENERAL. Within the guidelines prescribed by the SEC and the National
Association of Securities Dealers, Inc. ("NASD"), performance information may be
quoted numerically or may be presented in a table, graph or other illustration.
Advertisements may include data comparing performance to well-known indices of
market performance (including, but not limited to, the Dow Jones Industrial
Average, the Standard & Poor's (S&P) 500 Index, the S&P 400 Index, the Lehman
Brothers Long T-Bond Index, the Russell 1000, 2000 and 3000 Indices, the Value
Line Index, and the Morgan Stanley Capital International's EAFE Index).
Advertisements may also include published editorial comments and performance
rankings compiled by independent organizations (including, but not limited to,
Lipper Analytical Services, Inc. and Morningstar, Inc.) and publications that
monitor the performance of the Separate Account and the variable funding
options.
FEDERAL TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
The following general discussion of the federal income tax consequences under
this Contract is not intended to cover all situations, and is not meant to
provide tax advice. Because of the complexity of the law and the fact that the
tax results will vary depending on many factors, you should consult your tax
adviser regarding your personal situation. For your information, a more detailed
tax discussion is contained in the SAI.
GENERAL TAXATION OF ANNUITIES
Congress has recognized the value of saving for retirement by providing certain
tax benefits, in the form of tax deferral, for money put into an annuity. The
Internal Revenue Code (Code) governs how this money is ultimately taxed,
depending upon the type of contract, qualified or non-qualified, and the manner
in which the money is distributed, as briefly described below.
TAX-FREE EXCHANGES: The Internal Revenue Code provides that, generally, no gain
or loss is recognized when an annuity contract is received in exchange for a
life, endowment, or annuity contract. Since different annuity contracts have
different expenses, fees and benefits, a tax-free exchange could result in your
investment becoming subject to higher or lower fees and/or expenses.
QUALIFIED ANNUITY CONTRACTS
Under a qualified annuity, since amounts paid into the contract have not yet
been taxed, the full amount of all distributions, including lump-sum withdrawals
and annuity payments, are taxed at the ordinary income tax rate unless the
distribution is transferred to an eligible rollover account or contract. The
Contract is available as a vehicle for IRA rollovers and for other qualified
contracts. There are special rules which govern the taxation of qualified
contracts, including withdrawal restrictions, requirements for mandatory
distributions, and contribution limits. We have provided a more complete
discussion in the SAI.
29
<PAGE> 32
PENALTY TAX FOR PREMATURE DISTRIBUTIONS
Taxable distributions taken before the contract owner has reached the age of
59 1/2 will be subject to a 10% additional tax penalty unless the distribution
is taken in a series of periodic distributions, for life or life expectancy, or
unless the distribution follows the death or disability of the contract owner.
Other exceptions may be available in certain qualified plans.
TAXATION OF SURRENDERS UNDER THE LIQUIDITY FEATURE
As discussed above, no taxable income is recognized prior to the distribution of
proceeds to the contract owner. The Liquidity Benefit available under this
Contract is considered a distribution under the Code, and therefore is subject
to ordinary income tax as well as the penalty tax for premature distributions,
if applicable.
DIVERSIFICATION REQUIREMENTS FOR VARIABLE ANNUITIES
The Code requires that any nonqualified variable annuity contracts based on a
separate account shall not be treated as an annuity for any period if
investments made in the account are not adequately diversified. Final tax
regulations define how separate accounts must be diversified. The Company
monitors the diversification of investments constantly and believes that its
accounts are adequately diversified. The consequence of any failure to diversify
is essentially the loss to the Contract Owner of tax deferred treatment. The
Company intends to administer all contracts subject to this provision of law in
a manner that will maintain adequate diversification.
OWNERSHIP OF THE INVESTMENTS
Assets in the separate accounts, also referred to as segregated asset accounts,
must be owned by the Company and not by the Contract Owner for federal income
tax purposes. Otherwise, the deferral of taxes is lost and income and gains from
the accounts would be includable annually in the Contract Owner's gross income.
The Internal Revenue Service has stated in published rulings that a variable
contract owner will be considered the owner of the assets of a segregated asset
account if the owner possesses an incident of ownership in those assets, such as
the ability to exercise investment control over the assets. The Treasury
Department announced, in connection with the issuance of temporary regulations
concerning investment 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, rather than
the insurance company, to be treated as the owner of the assets of the account."
This announcement, dated September 15, 1986, also stated that the guidance would
be issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular subaccounts [of a segregated asset
account] without being treated as owners of the underlying assets." As of the
date of this prospectus, no such guidance has been issued.
The Company does not know if such guidance will be issued, or if it is, what
standards it may set. Furthermore, the Company does not know if such guidance
may be issued with retroactive effect. New regulations are generally issued with
a prospective-only effect as to future sales or as to future voluntary
transactions in existing contracts. The Company therefore reserves the right to
modify the contract as necessary to attempt to prevent Contract Owners from
being considered the owner of the assets of the separate account.
MANDATORY DISTRIBUTIONS FOR QUALIFIED PLANS
Federal tax law requires that minimum annual distributions begin by April 1st of
the calendar year following the calendar year in which an IRA owner attains age
70 1/2. Participants in qualified plans and 403(b) annuities may defer minimum
distributions until the later of April 1st of the calendar year following the
calendar year in which they attain age 70 1/2 or the year of retirement.
Distributions must begin or be continued according to required patterns
following the death of the contract owner or annuitant of both qualified and
nonqualified annuities.
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<PAGE> 33
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a Contract because of the death of an owner.
Generally, such amounts are includible in the income of the recipient as
follows: (i) if distributed in a lump sum, they are taxed in the same manner as
a full surrender of the contract; or (ii) if distributed under a payment option,
they are taxed in the same way as annuity payments.
AVAILABLE INFORMATION
- --------------------------------------------------------------------------------
The Companies are both subject to the information requirements of the Securities
and Exchange Act of 1934 ("the 1934 Act"), as amended, and file reports and
other information with the Securities and Exchange Commission ("Commission").
You may read and copy this information and other information at the following
locations:
- public reference facilities of the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C.
- the Commission's Regional Offices located at Seven World Trade
Center, New York, New York 10048,
- the Commission's Regional Offices located at Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661.
Under the Securities Act of 1933, the Companies have each filed with the
Commission registration statements (the "Registration Statement") relating to
the Contracts offered by this Prospectus. This Prospectus has been filed as a
part of the Registration Statement and does not contain all of the information
set forth in the Registration Statement and the exhibits. Reference is hereby
made to such Registration Statement and exhibits for further information about
the Companies and the Contracts. The Registration Statement and the exhibits may
be inspected and copied as described above. Although the Companies each furnish
the Annual Reports on Form 10-K for the year ended December 31, 1999 to owners
of contracts or certificates, the Companies do not plan to furnish subsequent
annual reports containing financial information to the owners of contracts or
certificates described in this Prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
- --------------------------------------------------------------------------------
Each Company's latest Annual Report on Form 10-K has been filed with the
Commission. They are both incorporated by reference into this Prospectus and
copies must accompany this Prospectus.
The Forms 10-K for the fiscal year ended December 31, 1999 contain additional
information about each Company including audited financial statements for the
latest fiscal year. The Travelers Insurance Company filed its Form 10-K on March
21, 2000 via Edgar, File No. 33-33691. The Travelers Life and Annuity Company
filed its Form 10-K on March 21, 2000 via Edgar; File No. 33-58677.
If requested, the Companies will furnish, without charge, a copy of any and all
of the documents incorporated by reference, other than exhibits to those
documents (unless such exhibits are specifically incorporated by reference in
those documents). You may direct your requests to: The Travelers Insurance
Company, One Tower Square, Hartford, Connecticut 06183-8130, Attention: Annuity
Services. The telephone number is (860) 422-3985. You may also obtain copies of
any documents, incorporated by reference into this prospectus by accessing the
SEC's website (http://www.sec.gov).
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<PAGE> 34
OTHER INFORMATION
- --------------------------------------------------------------------------------
THE INSURANCE COMPANIES
Please refer to the first page of the Summary of this prospectus to determine
which company issued your Contract.
The Travelers Insurance Company is a stock insurance company chartered in 1864
in Connecticut and continuously engaged in the insurance business since that
time. It is licensed to conduct life insurance business in all states of the
United States, the District of Columbia, Puerto Rico, Guam, the U.S. and British
Virgin Islands and the Bahamas. The Company is an indirect wholly owned
subsidiary of Citigroup Inc. The Company's Home Office is located at One Tower
Square, Hartford, Connecticut 06183.
The Travelers Life and Annuity Company is a stock insurance company chartered in
1973 in Connecticut and continuously engaged in the insurance business since
that time. It is licensed to conduct life insurance business in a majority of
the states of the United States, the District of Columbia and Puerto Rico, and
intends to seek licensure in the remaining states, except New York. The Company
is an indirect wholly owned subsidiary of Citigroup Inc. The Company's Home
Office is located at One Tower Square, Hartford, Connecticut 06183.
FINANCIAL STATEMENTS
The financial statements for each insurance company are included in the Form
10-K, which are attached to this prospectus. The financial statements for each
separate account are located in their respective Statements of Additional
Information.
IMSA
The Companies are members of the Insurance Marketplace Standards Association
("IMSA"), and as such may use the IMSA logo and IMSA membership in
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.
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
The Company intends to sell the Contracts in all jurisdictions where it is
licensed to do business and where the Contract is approved. Any sales
representative or employee who sells the Contracts will be qualified to sell
variable annuities under applicable federal and state laws. Each broker-dealer
is registered with the SEC under the Securities Exchange Act of 1934, and all
are members of the NASD. The principal underwriter of the Contracts is CFBDS,
Inc., 21 Milk St., Boston, MA. CFBDS, Inc. is not affiliated with the Company or
the Separate Account. However, it is currently anticipated that Travelers
Distribution LLC, an affiliated broker-dealer, may become the principal
underwriter for the Contracts during the year 2000.
Up-front compensation paid to sales representatives will not exceed 7% of the
purchase payments made under the Contracts. If asset based compensation is paid,
it will not exceed 2% of the average account value annually. From time to time,
the Company may pay or permit other promotional incentives, in cash, credit or
other compensation.
CONFORMITY WITH STATE AND FEDERAL LAWS
The Contract is governed by the laws of the state in which it is delivered.
Where a state has not approved a contract feature or funding option, it will not
be available in that state. Any paid-up annuity, cash surrender value or death
benefits that are available under the Contract are not less than the minimum
benefits required by the statutes of the state in which the Contract is
delivered. We reserve the right to make any changes, including retroactive
changes, in the Contract to the extent that the change is required to meet the
requirements of any law or regulation issued by any governmental agency to which
the Company, the Contract or the contract owner is subject.
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<PAGE> 35
VOTING RIGHTS
The Company is the legal owner of the shares of the funding options. However, we
believe that when a funding option solicits proxies in conjunction with a vote
of shareholders we are required to obtain from you and from other owners
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. Should we determine that
we are no longer required to comply with the above, we will vote on the shares
in our own right.
CONTRACT MODIFICATION
The Company reserves the right to modify the Contract to keep it qualified under
all related law and regulations which are in effect during the term of this
Contract. We will obtain the approval of any regulatory authority needed for the
modifications.
LEGAL PROCEEDINGS AND OPINIONS
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 Companies, their authority to issue variable annuity
contracts under Connecticut law and the validity of the forms of the variable
annuity contracts under Connecticut law, have been passed on by the General
Counsel of the Companies.
THE TRAVELERS INSURANCE COMPANY
There are no pending legal proceedings affecting the Separate Account. There is
one material pending legal proceeding, other than ordinary routine litigation
incidental to business, to which the Company is a party. In March, 1997, a
purported class action entitled Patterman v. The Travelers, Inc. et al, was
commenced in the Superior Court of Richmond County, Georgia, alleging, among
other things, violation of the Georgia RICO statute and other state laws by an
affiliate of the Company, Primerica Financial Services, Inc. and certain of its
affiliates. Plaintiffs seek unspecified compensatory and punitive damages and
other relief. In October 1997, defendants answered the complaint, denied
liability and asserted numerous affirmative defenses. In February 1998, the
Superior Court of Richmond County transferred the lawsuit to the Superior Court
of Gwinnett County, Georgia. The plaintiffs appealed the transfer order, and in
December 1998 the Court of Appeals of the State of Georgia reversed the lower
court's decision. Later in December 1998, defendants petitioned the Georgia
Supreme Court to hear the appeal from the decision of the Court of Appeals,
which was granted in May 1999. In September 1999, the Georgia Supreme Court
heard oral argument on defendant's petition for an order reversing the Georgia
Court of Appeals and transferring the lawsuit from the Superior Court of
Richmond County to the Superior Court of Gwinnett County. The Georgia Supreme
Court reversed its decision, and has not yet issued its opinion. Pending appeal,
proceedings in the trial court have been stayed. Defendants intend to vigorously
contest the litigation.
THE TRAVELERS LIFE AND ANNUITY COMPANY
There are no pending material legal proceedings affecting the Separate Account,
the principal underwriter or the Company.
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THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 37
APPENDIX A
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES
AIR = ASSUMED INVESTMENT RATE
FC = FLOOR BENEFIT CHARGE
STANDARD = STANDARD DEATH BENEFIT
OPTIONAL = OPTIONAL DEATH BENEFIT
<TABLE>
<CAPTION>
PERIOD FROM JUNE 9, 1999* TO DECEMBER 31, 1999
STANDARD STANDARD OPTIONAL OPTIONAL
STANDARD STANDARD OPTIONAL OPTIONAL 3%AIR, 3%AIR, 3%AIR, 3%AIR,
3%AIR 5%AIR 3%AIR 5%AIR .62FC 1.1%FC .83FC 1.40%FC
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HIGH YIELD BOND TRUST (9/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 0.980 0.980 0.977 0.977 -- -- -- --
Number of units outstanding at end
of year......................... -- -- 93,082 -- -- -- -- --
MANAGED ASSETS TRUST (6/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.102 1.102 1.098 1.098 -- -- -- --
Number of units outstanding at end
of year......................... 13,609 -- 899,389 -- -- -- -- --
MONEY MARKET PORTFOLIO (9/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.032 1.032 1.028 1.028 -- -- -- --
Number of units outstanding at end
of year......................... 36,453 -- 134,132 -- -- -- -- --
AMERICAN ODYSSEY FUNDS, INC.
CORE EQUITY FUND (9/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 0.995 0.995 0.992 0.992 -- -- -- --
Number of units outstanding at end
of year......................... 21,459 -- 68,472 -- -- -- -- --
EMERGING OPPORTUNITIES FUND (9/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.465 1.465 1.460 1.460 -- -- -- --
Number of units outstanding at end
of year......................... 6,201 -- 29,981 -- -- -- -- --
GLOBAL HIGH-YIELD BOND FUND
(12/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.070 1.070 1.066 1.066 -- -- -- --
Number of units outstanding at end
of year......................... -- -- 18,317 -- -- -- -- --
INTERMEDIATE-TERM BOND FUND (8/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.005 1.005 1.002 1.002 -- -- -- --
Number of units outstanding at end
of year......................... 73,160 -- 44,935 -- -- -- -- --
INTERNATIONAL EQUITY FUND (7/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.272 1.272 1.267 1.267 -- -- -- --
Number of units outstanding at end
of year......................... 6,933 -- 91,971 -- -- -- -- --
LONG-TERM BOND FUND (9/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 0.979 0.979 0.976 0.976 -- -- -- --
Number of units outstanding at end
of year......................... 37,502 -- 49,414 -- -- -- -- --
DELAWARE GROUP PREMIUM FUND
REIT SERIES
Unit Value at beginning of year... -- -- -- -- -- -- -- --
Unit Value at end of year......... -- -- -- -- -- -- -- --
Number of units outstanding at end
of year......................... -- -- -- -- -- -- -- --
SMALL CAP VALUE SERIES (10/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 0.991 0.991 0.988 0.988 -- -- -- --
Number of units outstanding at end
of year......................... -- -- 3,413 -- -- -- -- --
</TABLE>
A-1
<PAGE> 38
APPENDIX A
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES (CONTINUED)
<TABLE>
<CAPTION>
PERIOD FROM JUNE 9, 1999* TO DECEMBER 31, 1999
STANDARD STANDARD OPTIONAL OPTIONAL
STANDARD STANDARD OPTIONAL OPTIONAL 3%AIR, 3%AIR, 3%AIR, 3%AIR,
3%AIR 5%AIR 3%AIR 5%AIR .62FC 1.1%FC .83FC 1.40%FC
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DREYFUS VARIABLE INVESTMENT FUND
CAPITAL APPRECIATION PORTFOLIO**
(7/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.081 1.081 1.077 1.077 -- -- -- --
Number of units outstanding at end
of year......................... 24,552 -- 320,468 -- -- -- -- --
SMALL CAP PORTFOLIO (10/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.240 1.240 1.236 1.236 -- -- -- --
Number of units outstanding at end
of year......................... -- -- 37,863 -- -- -- -- --
GREENWICH STREET SERIES FUND
EQUITY INDEX PORTFOLIO II (7/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
Unit Value at end of year......... 1.133 1.133 1.129 1.129 1.127 1.123 1.122 1.117
Number of units outstanding at end
of year......................... 13,350 -- 317,090 -- -- -- -- --
THE MONTGOMERY FUNDS III
MONTGOMERY VARIABLE SERIES; GROWTH
FUND (10/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.208 1.208 1.204 1.204 -- -- -- --
Number of units outstanding at end
of year......................... -- -- 22,857 -- -- -- -- --
OCC ACCUMULATION TRUST
EQUITY PORTFOLIO
Unit Value at beginning of year... -- -- -- -- -- -- -- --
Unit Value at end of year......... -- -- -- -- -- -- -- --
Number of units outstanding at end
of year......................... -- -- -- -- -- -- -- --
SALOMON BROTHERS VARIABLE SERIES
FUNDS, INC.
CAPITAL FUND (7/98)
Unit Value at beginning of year... -- -- -- -- -- -- -- --
Unit Value at end of year......... -- -- -- -- -- -- -- --
Number of units outstanding at end
of year......................... -- -- -- -- -- -- -- --
INVESTORS FUND (10/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.088 1.088 1.084 1.084 -- -- -- --
Number of units outstanding at end
of year......................... 13,535 -- 6,020 -- -- -- -- --
TOTAL RETURN FUND
Unit Value at beginning of year... -- -- -- -- -- -- -- --
Unit Value at end of year......... -- -- -- -- -- -- -- --
Number of units outstanding at end
of year......................... -- -- -- -- -- -- -- --
STRONG VARIABLE INSURANCE FUNDS,
INC.
STRONG SCHAFER VALUE FUND II
(7/98)
Unit Value at beginning of year... -- -- -- -- -- -- -- --
Unit Value at end of year......... -- -- -- -- -- -- -- --
Number of units outstanding at end
of year......................... -- -- -- -- -- -- -- --
TRAVELERS SERIES FUND INC.
ALLIANCE GROWTH PORTFOLIO (7/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.303 1.303 1.298 1.298 -- -- -- --
Number of units outstanding at end
of year......................... 17,222 -- 226,122 -- -- -- -- --
MFS TOTAL RETURN PORTFOLIO (7/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 0.994 0.994 0.991 0.991 -- -- -- --
Number of units outstanding at end
of year......................... -- -- 114,042 -- -- -- -- --
</TABLE>
A-2
<PAGE> 39
APPENDIX A
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES (CONTINUED)
<TABLE>
<CAPTION>
PERIOD FROM JUNE 9, 1999* TO DECEMBER 31, 1999
STANDARD STANDARD OPTIONAL OPTIONAL
STANDARD STANDARD OPTIONAL OPTIONAL 3%AIR, 3%AIR, 3%AIR, 3%AIR,
3%AIR 5%AIR 3%AIR 5%AIR .62FC 1.1%FC .83FC 1.40%FC
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<->TRAVELERS SERIES FUND
INC. (CONT.)
PUTNAM DIVERSIFIED INCOME
PORTFOLIO ()
Unit Value at beginning of year... -- -- -- -- -- -- -- --
Unit Value at end of year......... -- -- -- -- -- -- -- --
Number of units outstanding at end
of year......................... -- -- -- -- -- -- -- --
SMITH BARNEY HIGH INCOME PORTFOLIO
(8/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.007 1.007 1.004 1.004 -- -- -- --
Number of units outstanding at end
of year......................... 20,231 -- -- -- -- -- -- --
SMITH BARNEY INTERNATIONAL EQUITY
PORTFOLIO (12/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.569 1.569 1.563 1.563 -- -- -- --
Number of units outstanding at end
of year......................... -- -- 53,669 -- -- -- -- --
SMITH BARNEY LARGE CAPITALIZATION
GROWTH PORTFOLIO (10/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.132 1.132 1.128 1.128 -- -- -- --
Number of units outstanding at end
of year......................... -- -- 77,927 -- -- -- -- --
THE TRAVELERS SERIES TRUST
DISCIPLINED MID CAP STOCK
PORTFOLIO (8/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.132 1.132 1.129 1.129 -- -- -- --
Number of units outstanding at end
of year......................... 4,950 -- 13,503 -- -- -- -- --
DISCIPLINED SMALL CAP STOCK
PORTFOLIO ()
Unit Value at beginning of year... -- -- -- -- -- -- -- --
Unit Value at end of year......... -- -- -- -- -- -- -- --
umber of units outstanding at end
of year......................... -- -- -- -- -- -- -- --
EQUITY INCOME PORTFOLIO (7/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.021 1.021 1.017 1.017 -- -- -- --
Number of units outstanding at end
of year......................... 12,381 -- 255,091 -- -- -- -- --
FEDERATED STOCK PORTFOLIO ()
Unit Value at beginning of year... -- -- -- -- -- -- -- --
Unit Value at end of year......... -- -- -- -- -- -- -- --
Number of units outstanding at end
of year......................... -- -- -- -- -- -- -- --
LARGE CAP PORTFOLIO (7/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.224 1.224 1.219 1.219 -- -- -- --
Number of units outstanding at end
of year......................... 12,719 -- 89,328 -- -- -- -- --
LAZARD INTERNATIONAL STOCK
PORTFOLIO (8/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.194 1.194 1.190 1.190 -- -- -- --
Number of units outstanding at end
of year......................... 4,591 -- -- -- -- -- -- --
MFS MID CAP GROWTH PORTFOLIO
(10/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.603 1.603 1.598 1.598 -- -- -- --
Number of units outstanding at end
of year......................... -- -- 91,838 -- -- -- -- --
MFS RESEARCH PORTFOLIO ()
Unit Value at beginning of year... -- -- -- -- -- -- -- --
Unit Value at end of year......... -- -- -- -- -- -- -- --
Number of units outstanding at end
of year......................... -- -- -- -- -- -- -- --
</TABLE>
A-3
<PAGE> 40
APPENDIX A
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES (CONTINUED)
<TABLE>
<CAPTION>
PERIOD FROM JUNE 9, 1999* TO DECEMBER 31, 1999
STANDARD STANDARD OPTIONAL OPTIONAL
STANDARD STANDARD OPTIONAL OPTIONAL 3%AIR, 3%AIR, 3%AIR, 3%AIR,
3%AIR 5%AIR 3%AIR 5%AIR .62FC 1.1%FC .83FC 1.40%FC
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<->THE TRAVELERS SERIES
TRUST (CONT.)
SOCIAL AWARENESS PORTFOLIO (7/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.115 1.115 1.111 1.111 -- -- -- --
Number of units outstanding at end
of year......................... 14,167 -- 57,036 -- -- -- -- --
STRATEGIC STOCK PORTFOLIO
Unit Value at beginning of year... -- -- -- -- -- -- -- --
Unit Value at end of year......... -- -- -- -- -- -- -- --
Number of units outstanding at end
of year......................... -- -- -- -- -- -- -- --
TRAVELERS QUALITY BOND PORTFOLIO
(8/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
Unit Value at end of year......... 1.002 1.002 0.998 0.998 1.000 0.999 0.996 0.994
Number of units outstanding at end
of year......................... 19,941 -- 8,527 -- -- -- -- --
U.S. GOVERNMENT SECURITIES
PORTFOLIO (8/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
Unit Value at end of year......... 0.968 0.968 0.965 0.965 0.966 0.965 0.962 0.961
Number of units outstanding at end
of year......................... 20,423 -- 75,867 -- -- -- -- --
UTILITIES PORTFOLIO (8/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 0.959 0.959 0.956 0.956 -- -- -- --
Number of units outstanding at end
of year......................... -- -- 2,049 -- -- -- -- --
WARBURG PINCUS TRUST
EMERGING MARKETS PORTFOLIO (10/99)
Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year......... 1.506 1.506 1.502 1.502 -- -- -- --
Number of units outstanding at end
of year......................... -- -- 42,199 -- -- -- -- --
</TABLE>
The date next to each funding option's name reflects the date money first came
into the funding option through the Separate Account. The financial statements
for Separate Account Five and the consolidated financial statements for The
Travelers Insurance Company and subsidiaries are contained in the SAI. Those
funding options not listed above were not available as of December 31, 1999.
* Date money first came into the Separate Account.
** Formerly Capital Appreciation Portfolio
A-4
<PAGE> 41
APPENDIX B
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES
AIR = ASSUMED INVESTMENT RATE
FC = FLOOR BENEFIT CHARGE
STANDARD = STANDARD DEATH BENEFIT
OPTIONAL = OPTIONAL DEATH BENEFIT
<TABLE>
<CAPTION>
PERIOD FROM MARCH 22* TO DECEMBER 31, 1999
STANDARD STANDARD OPTIONAL OPTIONAL
STANDARD STANDARD OPTIONAL OPTIONAL 3%AIR, 3%AIR, 3%AIR, 3%AIR,
3%AIR 5%AIR 3%AIR 5%AIR .62FC 1.1%FC .83%FC 1.40%FC
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HIGH YIELD BOND TRUST (5/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 0.980 0.980 0.977 0.977 -- -- -- --
Number of units outstanding at
end of year.................... 92,789 -- 879,832 -- -- -- -- --
MANAGED ASSETS TRUST (3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.102 1.102 1.098 1.098 -- -- -- --
Number of units outstanding at
end of year.................... 232,345 -- 5,360,035 -- -- -- -- --
MONEY MARKET PORTFOLIO (4/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.032 1.032 1.028 1.028 -- -- -- --
Number of units outstanding at
end of year.................... 239,890 -- 5,359,933 -- -- -- -- --
AMERICAN ODYSSEY FUNDS, INC.
CORE EQUITY FUND (3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 0.995 0.995 0.992 0.992 -- -- -- --
Number of units outstanding at
end of year.................... 228,230 -- 5,697,520 -- -- -- -- --
EMERGING OPPORTUNITIES FUND
(3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.465 1.465 1.460 1.460 -- -- -- --
Number of units outstanding at
end of year.................... 113,574 -- 2,542,636 -- -- -- -- --
GLOBAL HIGH-YIELD BOND FUND
(3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.070 1.070 1.066 1.066 -- -- -- --
Number of units outstanding at
end of year.................... 48,457 -- 1,363,227 -- -- -- -- --
INTERMEDIATE-TERM BOND FUND
(3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.005 1.005 1.002 1.002 -- -- -- --
Number of units outstanding at
end of year.................... 187,387 -- 2,889,162 -- -- -- -- --
INTERNATIONAL EQUITY FUND (3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.272 1.272 1.267 1.267 -- -- -- --
Number of units outstanding at
end of year.................... 90,221 -- 3,413,512 -- -- -- -- --
LONG-TERM BOND FUND (3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 0.979 0.979 0.976 0.976 -- -- -- --
Number of units outstanding at
end of year.................... 139,623 -- 3,629,750 -- -- -- -- --
DELAWARE GROUP PREMIUM FUND
REIT SERIES (7/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 0.937 0.937 0.935 0.935 -- -- -- --
Number of units outstanding at
end of year.................... -- -- 22,639 -- -- -- -- --
SMALL CAP VALUE SERIES (4/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 0.991 0.991 0.988 0.988 -- -- -- --
Number of units outstanding at
end of year.................... -- -- 184,589 -- -- -- -- --
</TABLE>
B-1
<PAGE> 42
APPENDIX B
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES (CONTINUED)
<TABLE>
<CAPTION>
PERIOD FROM MARCH 22* TO DECEMBER 31, 1999
STANDARD STANDARD OPTIONAL OPTIONAL
STANDARD STANDARD OPTIONAL OPTIONAL 3%AIR, 3%AIR, 3%AIR, 3%AIR,
3%AIR 5%AIR 3%AIR 5%AIR .62FC 1.1%FC .83%FC 1.40%FC
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DREYFUS VARIABLE INVESTMENT FUND
CAPITAL APPRECIATION PORTFOLIO**
(3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.081 1.081 1.077 1.077 -- -- -- --
Number of units outstanding at
end of year.................... 244,529 -- 2,447,252 -- -- -- -- --
SMALL CAP PORTFOLIO (4/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.240 1.240 1.236 1.236 -- -- -- --
Number of units outstanding at
end of year.................... 45,091 -- 1,060,068 -- -- -- -- --
GREENWICH STREET SERIES FUND
EQUITY INDEX PORTFOLIO II (3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
Unit Value at end of year........ 1.133 1.133 1.129 1.129 1.127 1.123 1.122 1.117
Number of units outstanding at
end of year.................... 207,054 -- 5,953,238 -- -- -- -- --
THE MONTGOMERY FUNDS III
MONTGOMERY VARIABLE SERIES;
GROWTH FUND (3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.208 1.208 1.204 1.204 -- -- -- --
Number of units outstanding at
end of year.................... 16,056 -- 573,739 -- -- -- -- --
OCC ACCUMULATION TRUST
EQUITY PORTFOLIO (3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 0.930 0.930 0.927 0.927 -- -- -- --
Number of units outstanding at
end of year.................... -- -- 150,291 -- -- -- -- --
SALOMON BROTHERS VARIABLE SERIES
FUNDS, INC.
CAPITAL FUND (3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.222 1.222 1.218 1.218 -- -- -- --
Number of units outstanding at
end of year.................... 13,279 -- 1,398,956 -- -- -- -- --
INVESTORS FUND (3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.088 1.088 1.084 1.084 -- -- -- --
Number of units outstanding at
end of year.................... 5,119 -- 665,635 -- -- -- -- --
TOTAL RETURN FUND (3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.002 1.002 0.998 0.998 -- -- -- --
Number of units outstanding at
end of year.................... -- -- 163,763 -- -- -- -- --
STRONG VARIABLE INSURANCE FUNDS,
INC.
STRONG SCHAFER VALUE FUND II
(7/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 0.877 0.877 0.875 0.875 -- -- -- --
Number of units outstanding at
end of year.................... 6,351 -- 114,839 -- -- -- -- --
TRAVELERS SERIES FUND INC.
ALLIANCE GROWTH PORTFOLIO (3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.303 1.303 1.298 1.298 -- -- -- --
Number of units outstanding at
end of year.................... 274,568 -- 4,867,877 -- -- -- -- --
MFS TOTAL RETURN PORTFOLIO (4/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 0.994 0.994 0.991 0.991 -- -- -- --
Number of units outstanding at
end of year.................... 56,338 -- 822,665 -- -- -- -- --
</TABLE>
B-2
<PAGE> 43
APPENDIX B
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES (CONTINUED)
<TABLE>
<CAPTION>
PERIOD FROM MARCH 22* TO DECEMBER 31, 1999
STANDARD STANDARD OPTIONAL OPTIONAL
STANDARD STANDARD OPTIONAL OPTIONAL 3%AIR, 3%AIR, 3%AIR, 3%AIR,
3%AIR 5%AIR 3%AIR 5%AIR .62FC 1.1%FC .83%FC 1.40%FC
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TRAVELERS SERIES FUND INC. (CONT.)
PUTNAM DIVERSIFIED INCOME
PORTFOLIO (6/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.010 1.010 1.007 1.007 -- -- -- --
Number of units outstanding at
end of year.................... -- -- 188,752 -- -- -- -- --
SMITH BARNEY HIGH INCOME
PORTFOLIO (5/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.007 1.007 1.004 1.004 -- -- -- --
Number of units outstanding at
end of year.................... -- -- 174,517 -- -- -- -- --
SMITH BARNEY INTERNATIONAL EQUITY
PORTFOLIO (3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.569 1.569 1.563 1.563 -- -- -- --
Number of units outstanding at
end of year.................... 33,821 -- 942,437 -- -- -- -- --
SMITH BARNEY LARGE CAPITALIZATION
GROWTH PORTFOLIO (3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.132 1.32 1.128 1.128 -- -- -- --
Number of units outstanding at
end of year.................... 100,647 -- 2,808,440 -- -- -- -- --
THE TRAVELERS SERIES TRUST
DISCIPLINED MID CAP STOCK
PORTFOLIO (6/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.132 1.132 1.129 1.129 -- -- -- --
Number of units outstanding at
end of year.................... -- -- 131,236 -- -- -- -- --
DISCIPLINED SMALL CAP STOCK
PORTFOLIO (5/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.150 1.150 1.147 1.147 -- -- -- --
Number of units outstanding at
end of year.................... -- -- 41,709 -- -- -- -- --
EQUITY INCOME PORTFOLIO (3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.021 1.021 1.017 1.017 -- -- -- --
Number of units outstanding at
end of year.................... 216,322 -- 2,462,986 -- -- -- -- --
FEDERATED STOCK PORTFOLIO (4/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 0.965 0.965 0.962 0.962 -- -- -- --
Number of units outstanding at
end of year.................... -- -- 342,000 -- -- -- -- --
LARGE CAP PORTFOLIO (3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.224 1.224 1.219 1.219 -- -- -- --
Number of units outstanding at
end of year.................... 247,021 -- 2,827,437 -- -- -- -- --
LAZARD INTERNATIONAL STOCK
PORTFOLIO (4/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.194 1.194 1.190 1.190 -- -- -- --
Number of units outstanding at
end of year.................... 13,922 -- 118,109 -- -- -- -- --
MFS MID CAP GROWTH PORTFOLIO
(5/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.603 1.603 1.598 1.598 -- -- -- --
Number of units outstanding at
end of year.................... 22,378 -- 519,757 -- -- -- -- --
</TABLE>
B-3
<PAGE> 44
APPENDIX B
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES (CONTINUED)
<TABLE>
<CAPTION>
PERIOD FROM MARCH 22* TO DECEMBER 31, 1999
STANDARD STANDARD OPTIONAL OPTIONAL
STANDARD STANDARD OPTIONAL OPTIONAL 3%AIR, 3%AIR, 3%AIR, 3%AIR,
3%AIR 5%AIR 3%AIR 5%AIR .62FC 1.1%FC .83%FC 1.40%FC
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
THE TRAVELERS SERIES TRUST (CONT.)
MFS RESEARCH PORTFOLIO (3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.213 1.213 1.209 1.209 -- -- -- --
Number of units outstanding at
end of year.................... -- -- 169,528 -- -- -- -- --
SOCIAL AWARENESS PORTFOLIO (3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.115 1.115 1.111 1.111 -- -- -- --
Number of units outstanding at
end of year.................... 204,232 -- 1,692,027 -- -- -- -- --
STRATEGIC STOCK PORTFOLIO (9/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 0.942 0.942 0.940 0.940 -- -- -- --
Number of units outstanding at
end of year.................... -- -- 75,116 -- -- -- -- --
TRAVELERS QUALITY BOND PORTFOLIO
(3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
Unit Value at end of year........ 1.002 1.002 0.998 0.998 1.000 0.999 0.996 0.994
Number of units outstanding at
end of year.................... 30,445 -- 1,489,904 -- -- -- -- --
U.S. GOVERNMENT SECURITIES
PORTFOLIO (3/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
Unit Value at end of year........ 0.968 0.968 0.965 0.965 0.966 0.965 0.962 0.961
Number of units outstanding at
end of year.................... 81,239 -- 1,134,380 -- -- -- -- --
UTILITIES PORTFOLIO (5/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 0.959 0.959 0.956 0.956 -- -- -- --
Number of units outstanding at
end of year.................... 52,624 -- 426,556 -- -- -- -- --
WARBURG PINCUS TRUST
EMERGING MARKETS PORTFOLIO (5/99)
Unit Value at beginning of
year........................... 1.000 1.000 1.000 1.000 -- -- -- --
Unit Value at end of year........ 1.506 1.506 1502 1.502 -- -- -- --
Number of units outstanding at
end of year.................... 54,662 -- 563,587 -- -- -- -- --
</TABLE>
The date next to each funding option's name reflects the date money first came
into the funding option through the Separate Account. The financial statements
for Separate Account Six and the financial statements for The Travelers Life and
Annuity Company are contained in the SAI. Those funding options not listed above
were not available as of December 31, 1999.
* Date money first came into Separate Account
** Formerly Capital Appreciation Portfolio
B-4
<PAGE> 45
APPENDIX C
- --------------------------------------------------------------------------------
WAIVER OF WITHDRAWAL CHARGE FOR NURSING HOME CONFINEMENT
(This waiver is not available if the Annuitant is age 71 or older on the date
the Contract is issued.
Please refer to your contract for any state variations of this waiver)
If, after the first contract year and before the maturity date, the annuitant
begins confinement in an Eligible Nursing Home, you may make a total or partial
withdrawal, subject to the maximum withdrawal amount described below, without
incurring a Withdrawal Charge. In order for the Withdrawal Charge to be waived,
the withdrawal must be made during continued confinement in an Eligible Nursing
Home after the qualifying period has been satisfied, or within sixty (60) days
after such confinement ends. The qualifying period is confinement in an Eligible
Nursing Home for ninety (90) consecutive days. We will require proof of
confinement in a form satisfactory to us, which may include certification by a
licensed physician that such confinement is medically necessary.
An Eligible Nursing Home is defined as an institution or special nursing unit of
a hospital which:
(a) is Medicare approved as a provider of skilled nursing care services; and
(b) is not, other than in name only, an acute care hospital, a home for the
aged, a retirement home, a rest home, a community living center, or a place
mainly for the treatment of alcoholism, mental illness or drug abuse.
OR
Meets all of the following standards:
(a) is licensed as a nursing care facility by the state in which it is licensed;
(b) is either a freestanding facility or a distinct part of another facility
such as a ward, wing, unit or swing-bed of a hospital or other facility;
(c) provides nursing care to individuals who are not able to care for themselves
and who require nursing care;
(d) provides, as a primary function, nursing care and room and board; and
charges for these services;
(e) provides care under the supervision of a licensed physician, registered
nurse (RN) or licensed practical nurse (LPN);
(f) may provide care by a licensed physical, respiratory, occupational or speech
therapist; and
(g) is not, other than in name only, an acute care hospital, a home for the
aged, a retirement home, a rest home, a community living center, or a place
mainly for the treatment of alcoholism, mental illness or drug abuse.
FILING A CLAIM: You must provide the Company with written notice of a claim
during continued confinement after the 90-day qualifying period, or within sixty
days after such confinement ends.
The maximum withdrawal amount for which we will waive the Withdrawal Charge is
the contract value on the next valuation date following written proof of claim,
less any purchase payments made within a one-year period before confinement in
an Eligible Nursing Home begins, less any purchase payments made on or after the
Annuitant's 71st birthday.
Any withdrawal requested which falls under the scope of this waiver will be paid
as soon as we receive proper written proof of your claim, and will be paid in a
lump sum. You should consult with your personal tax adviser regarding the tax
impact of any withdrawals taken from your contract.
C-1
<PAGE> 46
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<PAGE> 47
APPENDIX D
- --------------------------------------------------------------------------------
MARKET VALUE ADJUSTMENT
If you (the Annuitant) have selected any period certain option, you may elect to
surrender a payment equal to a portion or all of the present value of the
remaining period certain payments any time after the first contract year. There
is a surrender charge of 5% of the amount withdrawn under this option.
For fixed annuity payments, we calculate the present value of the remaining
period certain payments using a current interest rate. The current interest rate
is the then current annual rate of return offered by Us on new Fixed Annuity
period certain only annuitizations for the amount of time remaining in the
certain period. If the period of time remaining is less than the minimum length
of time for which we offer a new Fixed Annuity Period Certain Only
Annuitization, then the interest rate will be the rate of return for that
minimum length of time.
The formula for calculating the Present Value is as follows:
Present Value =LOGO[Payment(s) X (1/1 + iC)(t/365)]
Where
iC = the interest rate described above
n = the number of payments remaining in the contract owner's certain
period at the time of request for this benefit
t = number of days remaining until that payment is made, adjusting for
leap years.
If you request a percentage of the total amount available, the remaining period
certain payments will be reduced by that percentage for the remainder of the
certain period. After the certain period expires, any remaining payments will
increase to the level they would have been had no liquidation taken place.
Illustration:
<TABLE>
<S> <C>
Amount Annuitized: $12,589.80
Annuity Option: Life w/10 Year Certain
$1,000 Annually--first payment
Annuity Payments: immediately
</TABLE>
For the purposes of this illustration, assume after two years (immediately
preceding the third payment), you choose to receive full liquidity, and the
current rate of return which we are then crediting for 8 year fixed Period
Certain Only Annuitizations is 4.00%. The total amount available for liquidity
is calculated as follows:
1000 + (1000/1.04) + (1000/1.04)( 7/8)2 + (1000/1.04)( 7/8)3 + (1000/1.04)
( 7/8)4 + (1000/1.04)( 7/8)5 + (1000/1.04)( 7/8)6 + (1000/1.04)
( 7/8)7 = $7002.06
The surrender penalty is calculated as 5% of $7,002.06, or $350.10.
The net result to you after subtraction of the surrender penalty of $350.10
would be $6,651.96.
You would receive no more payments for 8 years. After 8 years, if you are still
living, you will receive $1000 annually until your death.
D-1
<PAGE> 48
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<PAGE> 49
APPENDIX E
- --------------------------------------------------------------------------------
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information and
financial statements relating to The Travelers Insurance Company or The
Travelers Life and Annuity Company. A list of the contents of the Statement of
Additional Information is set forth below:
The Insurance Company
Principal Underwriter
Distribution and Principal Underwriting Agreement
Valuation of Assets
Mixed and Shared Funding
Performance Information
Federal Tax Considerations
Independent Accountants
Financial Statements
- --------------------------------------------------------------------------------
Copies of the Statement of Additional Information dated May 1, 2000 are
available without charge. To request a copy, please complete the coupon found
below and mail it to: The Travelers Insurance Company, Annuity Services, One
Tower Square, Hartford, Connecticut, 06183-8130. The Travelers Insurance Company
Statement of Information is printed on Form L-21256S, and The Travelers Life and
Annuity Company Statement of Information is printed on Form L-21257S.
Name:
- ------------------------------------------------
Address:
- ------------------------------------------------
---------------------------------------------------------
E-1
<PAGE> 50
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<PAGE> 51
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<PAGE> 52
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<PAGE> 53
L-21256 TIC Ed. 5-2000
Printed in U.S.A.
<PAGE> 54
PART B
Information Required in a Statement of Additional Information
<PAGE> 55
TRAVELERS RETIREMENT ACCOUNT
VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
dated
May 1, 2000
for
THE TRAVELERS SEPARATE ACCOUNT FIVE
FOR VARIABLE ANNUITIES
ISSUED BY
THE TRAVELERS INSURANCE COMPANY
This Statement of Additional Information ("SAI") is not a prospectus but relates
to, and should be read in conjunction with, the Variable Annuity Contract
Prospectus dated May 1, 2000. A copy of the Prospectus may be obtained by
writing to The Travelers Insurance Company, Annuity Services, One Tower Square,
Hartford, Connecticut 06183-8036, or by calling (800) 842-9406 or by accessing
the Securities and Exchange Commission's website at http://www.sec.gov.
TABLE OF CONTENTS
THE INSURANCE COMPANY . . . . . . . . . . . . . . . . . . . . . . . 2
PRINCIPAL UNDERWRITER . . . . . . . . . . . . . . . . . . . . . . . 2
DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT . . . . . . . . . 3
VALUATION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 3
MIXED AND SHARED FUNDING . . . . . . . . . . . . . . . . . . . . . 4
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . 4
FEDERAL TAX CONSIDERATIONS . . . . . . . . . . . .. . . . . . . . . 9
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . 11
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . F-1
<PAGE> 56
THE INSURANCE COMPANY
The Travelers Insurance Company (the "Company") is a stock insurance
company chartered in 1864 in Connecticut and continuously engaged in the
insurance business since that time. The Company is licensed to conduct life
insurance business in all states of the United States, the District of Columbia,
Puerto Rico, Guam, the U.S. and British Virgin Islands and the Bahamas. The
Company's Home Office is located at One Tower Square, Hartford, Connecticut
06183 and its telephone number is (860) 277-0111.
The Company is a wholly owned subsidiary of The Travelers Insurance
Group Inc., an indirect, wholly owned subsidiary of Citigroup Inc.
("Citigroup"), a diversified holding company whose businesses provide a broad
range of financial services to consumer and corporate customers around the
world. Citigroup's activities are conducted through the Global Consumer, Global
Corporate and Investment Bank, Global Investment Management and Private Banking,
and Investment Activities segments.
STATE REGULATION. The Company is subject to the laws of the state of Connecticut
governing insurance companies and to regulation by the Insurance Commissioner of
the state of Connecticut (the "Commissioner"). An annual statement covering the
operations of the Company for the preceding year, as well as its financial
conditions as of December 31 of such year, must be filed with the Commissioner
in a prescribed format on or before March 1 of each year. The Company's books
and assets are subject to review or examination by the Commissioner or his
agents at all times, and a full examination of its operations is conducted at
least once every four years.
The Company is also subject to the insurance laws and regulations of all
other states in which it is licensed to operate. However, the insurance
departments of each of these states generally apply the laws of the home state
(jurisdiction of domicile) in determining the field of permissible investments.
THE SEPARATE ACCOUNT. Separate Account Five meets the definition of a separate
account under the federal securities laws, and will comply with the provisions
of the 1940 Act. Additionally, the operations of Separate Account Five are
subject to the provisions of Section 38a-433 of the Connecticut General Statutes
which authorizes the Commissioner to adopt regulations under it. Section 38a-433
contains no restrictions on the investments of the Separate Account, and the
Commissioner has adopted no regulations under the Section that affect the
Separate Account.
PRINCIPAL UNDERWRITER
CFBDS, Inc. serves as principal underwriter for Separate Account Five
and the Contracts. The offering is continuous. CFBDS, Inc.'s principal executive
offices are located at 21 Milk Street, Boston, MA 02116. CFBDS is not affiliated
with the Company or Separate Account Five. However, it is currently anticipated
that Travelers Distribution LLC, an affiliated broker dealer, may become the
principal underwriter for the Contracts during the year 2000.
2
<PAGE> 57
DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT
Under the terms of the Distribution and Principal Underwriting Agreement
among the Separate Account, CFBDS and the Company, CFBDS acts as agent for the
distribution of the Contracts and as principal underwriter for the Contracts.
The Company reimburses CFBDS for certain sales and overhead expenses connected
with sales functions.
VALUATION OF ASSETS
FUNDING OPTIONS: The value of the assets of each Funding Option is determined at
4:00 p.m. Eastern time on each business day, unless we need to close earlier due
to an emergency. A business day is any day the New York Stock Exchange is open.
Each security traded on a national securities exchange is valued at the last
reported sale price on the business day. If there has been no sale on that day,
then the value of the security is taken to be the mean between the reported bid
and asked prices on the business day or on the basis of quotations received from
a reputable broker or any other recognized source.
Any security not traded on a securities exchange but traded in the
over-the-counter-market and for which market quotations are readily available is
valued at the mean between the quoted bid and asked prices on the business day
or on the basis of quotations received from a reputable broker or any other
recognized source.
Securities traded on the over-the-counter-market and listed securities
with no reported sales are valued at the mean between the last reported bid and
asked prices or on the basis of quotations received from a reputable broker or
other recognized source.
Short-term investments for which a quoted market price is available are
valued at market. Short-term investments maturing in more than sixty days for
which there is no reliable quoted market price are valued by "marking to market"
(computing a market value based upon quotations from dealers or issuers for
securities of a similar type, quality and maturity.) "Marking to market" takes
into account unrealized appreciation or depreciation due to changes in interest
rates or other factors which would influence the current fair values of such
securities. Short-term investments maturing in sixty days or less for which
there is no reliable quoted market price are valued at amortized cost which
approximates market.
THE CONTRACT VALUE: The value of an accumulation unit on any business day is
determined by multiplying the value on the preceding business day by the net
investment factor for the valuation period just ended. The net investment factor
is used to measure the investment performance of a Funding Option from one
valuation period to the next. The net investment factor for a Funding Option for
any valuation period is equal to the sum of 1.000000 plus the net investment
rate (the gross investment rate less any applicable Funding Option deductions
during the valuation period relating to the mortality and expense risk charge
and the administrative expense charge). The gross investment rate of a Funding
Option is equal to (a) minus (b), divided by (c) where:
(a) = investment income plus capital gains and losses (whether realized or
unrealized);
(b) = any deduction for applicable taxes (presently zero);
and
(c) = the value of the assets of the funding option at the beginning of
the valuation period.
The gross investment rate may be either positive or negative. A Funding
Option's investment income includes any distribution whose ex-dividend date
occurs during the valuation period.
3
<PAGE> 58
ACCUMULATION UNIT VALUE. The value of the accumulation unit for each Funding
Option was initially established at $1.00. The value of an accumulation unit on
any business day is determined by multiplying the value on the preceding
business day by the net investment factor for the valuation period just ended.
The net investment factor is calculated for each Funding Option and takes into
account the investment performance, expenses and the deduction of certain
expenses.
ANNUITY UNIT VALUE. The initial Annuity Unit Value applicable to each Funding
Option was established at $1.00. An annuity unit value as of any business day is
equal to (a) the value of the annuity unit on the preceding business day,
multiplied by (b) the corresponding net investment factor for the valuation
period just ended, divided by (c) the assumed net investment factor for the
valuation period. (For example, the assumed net investment factor based on an
annual assumed net investment rate of 3.0% for a Valuation Period of one day is
1.000081 and, for a period of two days, is 1.000081 x 1.000081.)
MIXED AND SHARED FUNDING
Certain variable annuity separate accounts and variable life insurance
separate accounts may invest in the Funding Options simultaneously (called
"mixed" and "shared" funding). It is conceiveable that in the future it may be
disadvantageous to do so. Although the Company and the Funding Options do not
currently forsee any such disadvantages either to variable annuity contract
owners or variable life policy owners, each Funding Option's Board of Directors
intends to monitor events in order to identify any material conflicts between
them and to determine what action, if any, should be taken. If a Board of
Directors was to conclude that separate funds should be established for variable
life and variable annuity separate accounts, the variable annuity contract
owners would not bear any of the related expenses, but variable annuity contract
owners and variable life insurance policy owners would no longer have the
economies of scale resulting from a larger combined fund.
PERFORMANCE INFORMATION
From time to time, the Company may advertise several types of historical
performance for the Funding Options of Separate Account Five. The Company may
advertise the "standardized average annual total returns" of the Funding
Options, calculated in a manner prescribed by the Securities and Exchange
Commission, as well as the "nonstandardized total returns," as described below:
STANDARDIZED METHOD. Quotations of average annual total returns are
computed according to a formula in which a hypothetical initial investment of
$1,000 is applied to the Funding Option, and then related to ending redeemable
values over one-, five-, and ten-year periods, or for a period covering the time
during which the Funding Option has been in existence, if less. If a Funding
Option has been in existence for less than one year, the "since inception" total
return performance quotations are year-to-date and are not average annual total
returns. These quotations reflect the deduction of all recurring charges during
each period (on a pro rata basis in the case of fractional periods). Each
quotation assumes a total redemption at the end of each period with the
applicable withdrawal charge deducted at that time.
NONSTANDARDIZED METHOD. Nonstandardized "total returns" will be
calculated in a similar manner based on the performance of the Funding Options
over a period of time, usually for the calendar year-to-date, and for the past
one-, three-, five- and ten-year periods. Nonstandardized total returns will not
reflect the deduction of any applicable withdrawal charge, which, if reflected,
would decrease the level of performance shown. The withdrawal charge is not
reflected because the Contract is designed for long-term investment.
For Funding Options that were in existence prior to the date they became
available under Separate Account Five, the nonstandardized average annual total
return quotations will reflect the investment performance that such Funding
Options would have achieved (reduced by the applicable charges) had they been
held under the Contract for the period quoted. The total return quotations are
based upon historical earnings and are not necessarily representative of future
performance.
4
<PAGE> 59
GENERAL. Within the guidelines prescribed by the SEC and the National
Association of Securities Dealers, Inc. ("NASD"), performance information may be
quoted numerically or may be presented in a table, graph or other illustration.
Advertisements may include data comparing performance to well-known indices of
market performance (including, but not limited to, the Dow Jones Industrial
Average, the Standard & Poor's (S&P) 500 Index and the S&P 400 Index, the Lehman
Brothers Long T-Bond Index, the Russell 1000, 2000 and 3000 Indices, the Value
Line Index, and the Morgan Stanley Capital International's EAFE Index).
Advertisements may also include published editorial comments and performance
rankings compiled by independent organizations (including, but not limited to,
Lipper Analytical Services, Inc. and Morningstar, Inc.) and publications that
monitor the performance of Separate Account Six and the Funding Options.
Average annual total returns for each Funding Option computed according
to the standardized and nonstandardized methods for the period ending December
31, 1999 are set forth in the following tables.
5
<PAGE> 60
TRAVELERS RETIREMENT ACCOUNT
STANDARDIZED PERFORMANCE UPDATE AS OF 12/31/99
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
STOCK ACCOUNTS: 1 Year 5 Year 10 Year (or inception) Inception Date #
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alliance Growth Portfolio - - 23.32% 3/25/99
- -------------------------------------------------------------------------------------------------------------------------
American Odyssey Core Equity Fund - - -5.77% 3/23/99
- -------------------------------------------------------------------------------------------------------------------------
American Odyssey Emerging Opportunities Fund - - 38.70% 3/23/99
- -------------------------------------------------------------------------------------------------------------------------
American Odyssey International Equity Fund - - 20.40% 3/22/99
- -------------------------------------------------------------------------------------------------------------------------
Delaware Investments REIT Series - - -11.17% 7/20/99
- -------------------------------------------------------------------------------------------------------------------------
Delaware Small Cap Value Series - - -6.13% 4/20/99
- -------------------------------------------------------------------------------------------------------------------------
Dreyfus Capital Appreciation Portfolio - - 2.32% 3/23/99
- -------------------------------------------------------------------------------------------------------------------------
Dreyfus Small Cap Portfolio - - 17.38% 4/6/99
- -------------------------------------------------------------------------------------------------------------------------
Equity Income Portfolio (Fidelity) - - -3.36% 3/25/99
- -------------------------------------------------------------------------------------------------------------------------
Equity Index Portfolio Class II * - - 7.23% 3/22/99
- -------------------------------------------------------------------------------------------------------------------------
Federated Stock Portfolio - - -8.61% 4/21/99
- -------------------------------------------------------------------------------------------------------------------------
Large Cap Portfolio (Fidelity) - - 15.85% 3/23/99
- -------------------------------------------------------------------------------------------------------------------------
Lazard International Stock Portfolio - - 13.04% 4/21/99
- -------------------------------------------------------------------------------------------------------------------------
MFS Mid Cap Growth Portfolio - - 51.85% 5/10/99
- -------------------------------------------------------------------------------------------------------------------------
MFS Research Portfolio - - 14.85% 3/25/99
- -------------------------------------------------------------------------------------------------------------------------
Montgomery Variable Series: Growth Fund - - 14.41% 3/25/99
- -------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Equity Portfolio - - -11.89% 6/17/99
- -------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Capital Fund - - 15.66% 3/22/99
- -------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Investors Fund - - 3.02% 3/31/99
- -------------------------------------------------------------------------------------------------------------------------
Smith Barney International Equity Portfolio - - 48.53% 3/22/99
- -------------------------------------------------------------------------------------------------------------------------
Smith Barney Large Cap Growth Portfolio - - 7.19% 3/29/99
- -------------------------------------------------------------------------------------------------------------------------
Social Awareness Stock Portfolio (Smith Barney) - - 5.53% 3/23/99
- -------------------------------------------------------------------------------------------------------------------------
Strategic Stock Portfolio - - -10.68% 9/8/99
- -------------------------------------------------------------------------------------------------------------------------
Strong Schafer Value Fund II - - -16.88% 7/6/99
- -------------------------------------------------------------------------------------------------------------------------
Travelers Disciplined Mid Cap Stock Portfolio - - 7.29% 6/15/99
- -------------------------------------------------------------------------------------------------------------------------
Travelers Disciplined Small Cap Stock Portfolio - - 8.94% 5/10/99
- -------------------------------------------------------------------------------------------------------------------------
Utilities Portfolio (Smith Barney) - - -9.14% 5/4/99
- -------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Emerging Markets Portfolio - - 42.66% 5/24/99
- -------------------------------------------------------------------------------------------------------------------------
BOND ACCOUNTS:
- -------------------------------------------------------------------------------------------------------------------------
American Odyssey Global High-Yield Bond Fund - - 1.27% 3/23/99
- -------------------------------------------------------------------------------------------------------------------------
American Odyssey Intermediate-Term Bond Fund - - -4.85% 3/23/99
- -------------------------------------------------------------------------------------------------------------------------
American Odyssey Long-Term Bond Fund - - -7.29% 3/22/99
- -------------------------------------------------------------------------------------------------------------------------
Putnam Diversified Income Portfolio - - -4.30% 6/8/99
- -------------------------------------------------------------------------------------------------------------------------
Smith Barney High Income Portfolio - - -4.64% 5/19/99
- -------------------------------------------------------------------------------------------------------------------------
Travelers High Yield Bond Trust - - -7.17% 5/7/99
- -------------------------------------------------------------------------------------------------------------------------
Travelers Quality Bond Portfolio - - -5.16% 3/23/99
- -------------------------------------------------------------------------------------------------------------------------
Travelers U.S. Government Securities Portfolio - - -8.34% 3/23/99
- -------------------------------------------------------------------------------------------------------------------------
BALANCED ACCOUNTS:
- -------------------------------------------------------------------------------------------------------------------------
MFS Total Return Portfolio - - -5.85% 4/16/99
- -------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Total Return Fund - - -5.18% 3/23/99
- -------------------------------------------------------------------------------------------------------------------------
Travelers Managed Assets Trust - - 4.33% 3/22/99
- -------------------------------------------------------------------------------------------------------------------------
MONEY MARKET ACCOUNTS:
- -------------------------------------------------------------------------------------------------------------------------
Travelers Money Market Portfolio - - -2.32% 4/6/99
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Certain funds offer multiple classes of shares. The performance above may
reflect the fees and performance of another class of the same fund for periods
before the current class existed. If the current class's 12b-1 fee and other
expenses were higher, the performance shown would be lower. # The inception date
used to calculate standardized performance is based on the date that the
investment option became active in the product.
6
<PAGE> 61
TRAVELERS RETIREMENT ACCOUNT
NON STANDARDIZED PERFORMANCE UPDATE AS OF 12/31/99
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
----------------------------------------------------------------------------
YTD 1 YR 3YR 5YR Inception To Inception
Date Date #
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
STOCK ACCOUNTS:
- -------------------------------------------------------------------------------------------------------------------------------
Alliance Growth Portfolio 30.62% 30.62% 28.49% 29.25% 27.15% 6/20/94
- -------------------------------------------------------------------------------------------------------------------------------
American Odyssey Core Equity Fund -1.52% -1.52% 13.54% 19.48% 14.10% 5/1/93
- -------------------------------------------------------------------------------------------------------------------------------
American Odyssey Emerging Opportunities Fund 35.03% 35.03% 8.79% 9.97% 9.92% 5/1/93
- -------------------------------------------------------------------------------------------------------------------------------
American Odyssey International Equity Fund 30.89% 30.89% 15.49% 16.85% 13.76% 5/1/93
- -------------------------------------------------------------------------------------------------------------------------------
Delaware Investments REIT Series -3.83% -3.83% - - -8.20% 5/6/98
- -------------------------------------------------------------------------------------------------------------------------------
Delaware Small Cap Value Series -6.04% -6.04% 5.06% 10.93% 9.28% 12/23/93
- -------------------------------------------------------------------------------------------------------------------------------
Dreyfus Capital Appreciation Portfolio 10.08% 10.08% 21.43% 23.96% 18.56% 4/5/93
- -------------------------------------------------------------------------------------------------------------------------------
Dreyfus Small Cap Portfolio 21.63% 21.63% 10.17% 14.49% 33.99% 8/31/90
- -------------------------------------------------------------------------------------------------------------------------------
Equity Income Portfolio (Fidelity) 3.61% 3.61% 14.35% - 16.47% 8/30/96
- -------------------------------------------------------------------------------------------------------------------------------
Equity Index Portfolio Class II * 19.10% 19.10% 25.85% 27.03% 19.72% 11/30/91
- -------------------------------------------------------------------------------------------------------------------------------
Federated Stock Portfolio 4.04% 4.04% 16.83% - 19.02% 8/30/96
- -------------------------------------------------------------------------------------------------------------------------------
Large Cap Portfolio (Fidelity) 27.72% 27.72% 27.22% - 28.74% 8/30/96
- -------------------------------------------------------------------------------------------------------------------------------
Lazard International Stock Portfolio 20.20% 20.20% 12.64% - 13.39% 8/1/96
- -------------------------------------------------------------------------------------------------------------------------------
MFS Mid Cap Growth Portfolio 62.14% 62.14% - - 30.99% 3/23/98
- -------------------------------------------------------------------------------------------------------------------------------
MFS Research Portfolio 22.14% 22.14% - - 14.99% 3/23/98
- -------------------------------------------------------------------------------------------------------------------------------
Montgomery Variable Series: Growth Fund 19.29% 19.29% 15.47% - 18.52% 2/9/96
- -------------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Equity Portfolio 1.25% 1.25% 11.84% 18.50% 14.40% 8/1/88
- -------------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Capital Fund 20.57% 20.57% - - 20.13% 2/17/98
- -------------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Investors Fund 10.27% 10.27% - - 10.54% 2/17/98
- -------------------------------------------------------------------------------------------------------------------------------
Smith Barney International Equity Portfolio 65.66% 65.66% 20.90% 17.68% 14.88% 6/20/94
- -------------------------------------------------------------------------------------------------------------------------------
Smith Barney Large Cap Growth Portfolio 29.21% 29.21% - - 32.71% 5/6/98
- -------------------------------------------------------------------------------------------------------------------------------
Social Awareness Stock Portfolio (Smith Barney) 14.40% 14.40% 23.39% 23.99% 16.62% 5/1/92
- -------------------------------------------------------------------------------------------------------------------------------
Strategic Stock Portfolio 3.66% 3.66% - - -1.86% 5/6/98
- -------------------------------------------------------------------------------------------------------------------------------
Strong Schafer Value Fund II -4.06% -4.06% - - -2.09% 10/10/97
- -------------------------------------------------------------------------------------------------------------------------------
Travelers Disciplined Mid Cap Stock Portfolio 12.06% 12.06% - - 21.87% 4/1/97
- -------------------------------------------------------------------------------------------------------------------------------
Travelers Disciplined Small Cap Stock Portfolio 18.92% 18.92% - - 2.91% 5/1/98
- -------------------------------------------------------------------------------------------------------------------------------
Utilities Portfolio (Smith Barney) -1.32% -1.32% 12.53% 14.06% 11.89% 2/4/94
- -------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Emerging Markets Portfolio 79.18% 79.18% - - 21.82% 12/31/97
- -------------------------------------------------------------------------------------------------------------------------------
BOND ACCOUNTS:
- -------------------------------------------------------------------------------------------------------------------------------
American Odyssey Global High-Yield Bond Fund 9.31% 9.31% - - 1.39% 5/1/98
- -------------------------------------------------------------------------------------------------------------------------------
American Odyssey Intermediate-Term Bond Fund 0.23% 0.23% 4.47% 5.85% 4.25% 5/1/93
- -------------------------------------------------------------------------------------------------------------------------------
American Odyssey Long-Term Bond Fund -3.95% -3.95% 4.60% 6.72% 5.15% 5/1/93
- -------------------------------------------------------------------------------------------------------------------------------
Putnam Diversified Income Portfolio -0.15% -0.15% 1.83% 5.52% 5.13% 6/20/94
- -------------------------------------------------------------------------------------------------------------------------------
Smith Barney High Income Portfolio 1.32% 1.32% 4.17% 8.23% 7.17% 6/22/94
- -------------------------------------------------------------------------------------------------------------------------------
Travelers High Yield Bond Trust 3.13% 3.13% 7.70% 10.30% 7.48% 6/10/83
- -------------------------------------------------------------------------------------------------------------------------------
Travelers Quality Bond Portfolio -0.17% -0.17% 4.23% - 4.75% 8/30/96
- -------------------------------------------------------------------------------------------------------------------------------
Travelers U.S. Government Securities Portfolio -5.33% -5.33% 4.65% 7.13% 5.39% 1/24/92
- -------------------------------------------------------------------------------------------------------------------------------
BALANCED ACCOUNTS:
- -------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Portfolio 1.36% 1.36% 10.20% 13.43% 11.62% 6/20/94
- -------------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Total Return Fund -0.47% -0.47% - - 2.23% 2/17/98
- -------------------------------------------------------------------------------------------------------------------------------
Travelers Managed Assets Trust 12.81% 12.81% 17.46% 17.97% 10.24% 6/7/83
- -------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET ACCOUNTS:
- -------------------------------------------------------------------------------------------------------------------------------
Travelers Money Market Portfolio 3.67% 3.67% 3.72% 3.39% 3.78% 12/31/87
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Certain funds offer multiple classes of shares. The performance above may
reflect the fees and performance of another class of the same fund for periods
before the current class existed. If the current class's 12b-1 fee and other
expenses were higher, the performance shown would be lower. # The inception date
is the date that the underlying fund commenced operations.
7
<PAGE> 62
TRAVELERS RETIREMENT ACCOUNT CHART PROGRAM
STANDARDIZED PERFORMANCE UPDATE AS OF 12/31/99
<TABLE>
<CAPTION>
-------------------------------------------------------------
1 YR 5 YR 10 YR or Inception Inception Date #
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STOCK ACCOUNTS:
- -------------------------------------------------------------------------------------------------------------
American Odyssey Core Equity Fund - - -6.53% 3/23/1999
- -------------------------------------------------------------------------------------------------------------
American Odyssey Emerging Opportunities Fund - - 39.88% 3/23/1999
- -------------------------------------------------------------------------------------------------------------
American Odyssey International Equity Fund - - 20.75% 3/22/1999
- -------------------------------------------------------------------------------------------------------------
BOND ACCOUNTS
- -------------------------------------------------------------------------------------------------------------
American Odyssey Global High -Yield Bond Fund - - 0.76% 3/23/1999
- -------------------------------------------------------------------------------------------------------------
American Odyssey Intermediate-Term Bond Fund - - -5.61% 3/23/1999
- -------------------------------------------------------------------------------------------------------------
American Odyssey Long-Term Bond Fund - - -8.21% 3/22/1999
- -------------------------------------------------------------------------------------------------------------
</TABLE>
# The inception date used to calculate standardized performance is based on the
date that the investment option became active in the product.
TRAVELERS RETIREMENT ACCOUNT CHART PROGRAM
NON STANDARDIZED PERFORMANCE UPDATE AS OF 12/31/99
<TABLE>
<CAPTION>
------------------------------------------
AVERAGE ANNUAL RETURNS
------------------------------------------
Inception To Inception
YTD 1 YR 3YR 5YR Date Date #
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
STOCK ACCOUNTS
- -----------------------------------------------------------------------------------------------------------
American Odyssey Core Equity Fund -2.31% -2.31% 12.63% 18.53% 13.21% 5/1/93
- -----------------------------------------------------------------------------------------------------------
American Odyssey Emerging Opportunities Fund 33.99% 33.99% 7.87% 0.92% 2.85% 5/1/93
- -----------------------------------------------------------------------------------------------------------
American Odyssey International Equity Fund 29.87% 29.87% 14.58% 15.88% 12.81% 5/1/93
- -----------------------------------------------------------------------------------------------------------
BOND ACCOUNTS
- -----------------------------------------------------------------------------------------------------------
American Odyssey Global High -Yield Bond Fund 8.44% 8.44% - - 0.55% 5/1/98
- -----------------------------------------------------------------------------------------------------------
American Odyssey Intermediate-Term Bond Fund -0.56% -0.56% 3.64% 2.74% 1.72% 5/1/93
- -----------------------------------------------------------------------------------------------------------
American Odyssey Long-Term Bond Fund -5.10% -5.10% 3.49% 5.71% 4.18% 5/1/93
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------
CALENDAR YEAR RETURNS
--------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCK ACCOUNTS
- -------------------------------------------------------------------------------------
American Odyssey Core Equity Fund -2.31% 13.19% -
- -------------------------------------------------------------------------------------
American Odyssey Emerging Opportunities Fund 33.99% -10.68% -
- -------------------------------------------------------------------------------------
American Odyssey International Equity Fund 29.87% 12.54% -
- -------------------------------------------------------------------------------------
BOND ACCOUNTS
- -------------------------------------------------------------------------------------
American Odyssey Global High -Yield Bond Fund 8.44% - -
- -------------------------------------------------------------------------------------
American Odyssey Intermediate-Term Bond Fund -0.56% 6.28% -
- -------------------------------------------------------------------------------------
American Odyssey Long-Term Bond Fund -5.10% 6.40% -
- -------------------------------------------------------------------------------------
</TABLE>
# The inception date is the date that the underlying fund commenced operations.
8
<PAGE> 63
FEDERAL TAX CONSIDERATIONS
The following description of the federal income tax consequences under
this Contract is not exhaustive and is not intended to cover all situations.
Because of the complexity of the law and the fact that the tax results will vary
according to the factual status of the individual involved, tax advice may be
needed by a person contemplating purchase of an annuity contract and by a
contract owner or beneficiary who may make elections under a contract. For
further information, please consult a qualified tax adviser.
MANDATORY DISTRIBUTIONS FOR QUALIFIED PLANS
Federal tax law generally requires that minimum annual distributions
begin by April 1st of the calendar year following the calendar year in which a
participant under a qualified plan, a Section 403(b) annuity, or an IRA attains
age 70 1/2. Distributions must also begin or be continued according to required
patterns following the death of the contract owner or the annuitant.
INDIVIDUAL RETIREMENT ANNUITIES
To the extent of earned income for the year and not exceeding $2,000 per
individual, an individual may make deductible contributions to an individual
retirement annuity (IRA). There are certain limits on the deductible amount
based on the adjusted gross income of the individual and spouse and based on
their participation in a retirement plan. If an individual is married and the
spouse does not have earned income, the individual may establish IRAs for the
individual and spouse. Purchase payments may then be made annually into IRAs for
both spouses in the maximum amount of 100% of earned income up to a combined
limit of $4,000.
The Code provides for the purchase of a Simplified Employee Pension
(SEP) plan. A SEP is funded through an IRA with an annual employer contribution
limit of 15% of compensation up to $30,000 for each participant.
SIMPLE PLAN IRA FORM
Effective January 1, 1997, employers may establish a savings incentive
match plan for employees ("SIMPLE plan") under which employees can make elective
salary reduction contributions to an IRA based on a percentage of compensation
of up to $6,000. (Alternatively, the employer can establish a SIMPLE cash or
deferred arrangement under IRS Section 401(k)). Under a SIMPLE plan IRA, the
employer must either make a matching contribution of 100% on the first 3% or 7%
contribution for all eligible employees. Early withdrawals are subject to the
10% early withdrawal penalty generally
9
<PAGE> 64
applicable to IRAs, except that an early withdrawal by an employee under a
SIMPLE plan IRA, within the first two years of participation, shall be subject
to a 25% early withdrawal tax.
ROTH IRAS
Effective January 1, 1998, Section 408A of the Code permits certain
individuals to contribute to a Roth IRA. Eligibility to make contributions is
based upon income, and the applicable limits vary based on marital status and/or
whether the contribution is a rollover contribution from another IRA or an
annual contribution. Contributions to a Roth IRA, which are subject to certain
limitations ($2,000 per year for annual contributions), are not deductible and
must be made in cash or as a rollover or transfer from another Roth IRA or other
IRA. A conversion of a "traditional" IRA to a Roth IRA may be subject to tax and
other special rules apply. You should consult a tax adviser before combining any
converted amounts with other Roth IRA contributions, including any other
conversion amounts from other tax years.
Qualified distributions from a Roth IRA are tax-free. A qualified
distribution requires that the Roth IRA has been held for at least 5 years, and
the distribution is made after age 59 1/2, on death or disability of the owner,
or for a limited amount ($10,000) for a qualified first time home purchase for
the owner or certain relatives. Income tax and a 10% penalty tax may apply to
distributions made (1) before age 59 1/2 (subject to certain exceptions) or (2)
during five taxable years starting with the year in which the first contribution
is made to the Roth IRA.
QUALIFIED PENSION AND PROFIT-SHARING PLANS
Under a qualified pension or profit-sharing plan, purchase payments made
by an employer are not currently taxable to the participant and increases in the
value of a contract are not subject to taxation until received by a participant
or beneficiary.
Distributions are taxable to the participant or beneficiary as ordinary
income in the year of receipt. Any distribution that is considered the
participant's "investment in the contract" is treated as a return of capital and
is not taxable. Certain lump-sum distributions may be eligible for special
forward averaging tax treatment for certain classes of individuals.
FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient
will be subject to federal income tax withholding as follows:
1. ELIGIBLE ROLLOVER DISTRIBUTION FROM SECTION 403(b) PLANS OR ARRANGEMENTS
OR FROM QUALIFIED PENSION AND PROFIT-SHARING PLANS
There is a mandatory 20% tax withholding for plan distributions that are
eligible for rollover to an IRA or to another retirement plan but that are not
directly rolled over. A distribution made directly to a participant or
beneficiary may avoid this result if:
(a) a periodic settlement distribution is elected based upon a life
or life expectancy calculation, or
(b) a term-for-years settlement distribution is elected for a period
of ten years or more, payable at least annually, or
(c) a minimum required distribution as defined under the tax law is
taken after the attainment of the age of 701/2 or as otherwise
required by law.
10
<PAGE> 65
A distribution including a rollover that is not a direct rollover will
be subject to the 20% withholding, and a 10% additional tax penalty may apply to
any amount not added back in the rollover. The 20% withholding may be recovered
when the participant or beneficiary files a personal income tax return for the
year if a rollover was completed within 60 days of receipt of the funds, except
to the extent that the participant or spousal beneficiary is otherwise
underwithheld or short on estimated taxes for that year.
2. OTHER NON-PERIODIC DISTRIBUTIONS (FULL OR PARTIAL REDEMPTIONS)
To the extent not described as requiring 20% withholding in 1 above, the
portion of a non-periodic distribution which constitutes taxable income will be
subject to federal income tax withholding, if the aggregate distributions exceed
$200 for the year, unless the recipient elects not to have taxes withheld. If no
such election is made, 10% of the taxable distribution will be withheld as
federal income tax. Election forms will be provided at the time distributions
are requested. This form of withholding applies to all annuity programs.
3. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN
ONE YEAR)
The portion of a periodic distribution which constitutes taxable income
will be subject to federal income tax withholding under the wage withholding
tables as if the recipient were married claiming three exemptions. A recipient
may elect not to have income taxes withheld or have income taxes withheld at a
different rate by providing a completed election form. Election forms will be
provided at the time distributions are requested. This form of withholding
applies to all annuity PROGRAMS. As of January 1, 1999, a recipient receiving
periodic payments (e.g., monthly or annual payments under an annuity option)
which total $14,850 or less per year, will generally be exempt from periodic
withholding.
Recipients who elect not to have withholding made are liable for payment
of federal income tax on the taxable portion of the distribution. All recipients
may also be subject to penalties under the estimated tax payment rules if
withholding and estimated tax payments are not sufficient to cover tax
liabilities.
Recipients who do not provide a social security number or other taxpayer
identification number will not be permitted to elect out of withholding.
Additionally, U.S citizens residing outside of the country, or U.S. legal
residents temporarily residing outside the country, are not permitted to elect
out of withholding.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements of The Travelers Insurance Company
and subsidiaries as of December 31, 1999 and 1998, and for each of the years in
the three-year period ended December 31, 1999, included herein, and the
financial statements of Separate Account Five as of December 31, 1999 and for
the period from June 9, 1999 (date operations commenced) to December 31, 1999,
also included herein, have been included in reliance upon the reports of KPMG
LLP, independent certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.
11
<PAGE> 66
ANNUAL REPORT
DECEMBER 31, 1999
THE TRAVELERS SEPARATE ACCOUNT FIVE
FOR VARIABLE ANNUITIES
[TRAVELERS LIFE & ANNUNITY LOGO]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183
<PAGE> 67
THE TRAVELERS SEPARATE ACCOUNT FIVE
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
American Odyssey Funds, Inc., 22,541 shares (cost $283,969)....................... $ 295,362
Delaware Group Premium Fund, Inc., 220 shares (cost $3,207)....................... 3,381
Dreyfus Variable Investment Fund, 10,030 shares (cost $401,226)................... 418,572
Greenwich Street Series Fund, 10,420 shares (cost $340,622)....................... 373,136
High Yield Bond Trust, 9,608 shares (cost $89,634)................................ 90,988
Managed Assets Trust, 47,492 shares (cost $954,674)............................... 1,003,037
Money Market Portfolio, 175,109 shares (cost $175,109)............................ 175,109
Salomon Brothers Variable Series Funds Inc., 1,739 shares (cost $21,065).......... 21,265
Montgomery Funds III, 1,498 shares (cost $25,619)................................. 27,543
The Travelers Series Trust, 48,281 shares (cost $756,381)......................... 772,542
Travelers Series Fund Inc., 27,421 shares (cost $568,112)......................... 621,393
Warburg Pincus Trust, 4,470 shares (cost $57,109)................................. 63,389
--------------
Total Investments (cost $3,676,727)............................................. $ 3,865,717
Receivables:
Dividends.......................................................................... 461
Purchase payments and transfers from other Travelers accounts...................... 195,272
Other assets......................................................................... 38
--------------
Total Assets....................................................................... 4,061,488
--------------
LIABILITIES:
Payables:
Insurance charges.................................................................. 1,190
--------------
Total Liabilities.............................................................. 1,190
--------------
NET ASSETS: $ 4,060,298
==============
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 68
THE TRAVELERS SEPARATE ACCOUNT FIVE
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE PERIOD JUNE 9, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends..................................................................... $ 27,054
EXPENSES:
Insurance charges............................................................. 8,775
--------------
Net investment income...................................................... 18,279
--------------
REALIZED GAIN (LOSS) AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold.............................................. $ 489,944
Cost of investments sold................................................... 500,008
--------------
Net realized gain (loss)................................................ (10,064)
Unrealized gain (loss) on investments:
Unrealized gain at December 31, 1999.......................................... 188,990
--------------
Net realized gain (loss) and unrealized gain (loss)..................... 178,926
--------------
Net increase in net assets resulting from operations............................. $ 197,205
==============
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 69
THE TRAVELERS SEPARATE ACCOUNT FIVE
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD JUNE 9, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999
<TABLE>
<S> <C>
OPERATIONS:
Net investment income....................................................... $ 18,279
Net realized gain (loss) from investment transactions....................... (10,064)
Unrealized gain (loss) on investments....................................... 188,990
-------------------
Net increase in net assets resulting from operations...................... 197,205
-------------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 4,009,338 units)........................................... 4,252,582
Participant transfers from other Travelers accounts
(applicable to 80,997 units).............................................. 86,139
Contract surrenders
(applicable to 23,101 units).............................................. (23,541)
Participant transfers to other Travelers accounts
(applicable to 446,596 units)............................................. (449,434)
Other payments to participants
(applicable to 2,657 units)............................................... (2,653)
-------------------
Net increase in net assets resulting from unit transactions............... 3,863,093
-------------------
Net increase in net assets.............................................. 4,060,298
NET ASSETS:
Beginning of period......................................................... -
-------------------
End of period............................................................... $ 4,060,298
===================
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 70
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Separate Account Five for Variable Annuities ("Separate
Account Five") is a separate account of The Travelers Insurance Company
("The Travelers"), an indirect wholly owned subsidiary of Citigroup Inc.,
and is available for funding certain variable annuity contracts issued by
The Travelers. Separate Account Five is registered under the Investment
Company Act of 1940, as amended, as a unit investment trust. Separate
Account Five is comprised of the Travelers Retirement Account product.
Participant purchase payments applied to Separate Account Five are invested
in one or more eligible funds in accordance with the selection made by the
contract owner. As of December 31, 1999, the eligible funds available under
Separate Account Five were: Managed Assets Trust; High Yield Bond Trust;
Money Market Portfolio; U.S. Government Securities Portfolio, Utilities
Portfolio, Social Awareness Stock Portfolio, Travelers Quality Bond
Portfolio, Lazard International Stock Portfolio, Federated Stock Portfolio,
Large Cap Portfolio, Equity Income Portfolio, Disciplined Mid Cap Stock
Portfolio, Disciplined Small Cap Stock Portfolio, MFS Mid Cap Growth
Portfolio, MFS Research Portfolio and Strategic Stock Portfolio of The
Travelers Series Trust; American Odyssey Core Equity Fund, American Odyssey
Emerging Opportunities Fund, American Odyssey International Equity Fund,
American Odyssey Long-Term Bond Fund, American Odyssey Intermediate-Term
Bond Fund and American Odyssey Global High-Yield Bond Fund of American
Odyssey Funds, Inc.; Alliance Growth Portfolio, Smith Barney High Income
Portfolio, MFS Total Return Portfolio, Smith Barney International Equity
Portfolio, Putnam Diversified Income Portfolio and Smith Barney Large
Capitalization Growth Portfolio of Travelers Series Fund Inc.; Equity Index
Portfolio Class II of the Greenwich Street Series Fund; Salomon Brothers
Variable Investors Fund, Salomon Brothers Variable Total Return Fund and
Salomon Brothers Variable Capital Fund of Salomon Brothers Variable Series
Funds Inc. (all of which are managed by affiliates of The Travelers); Small
Cap Portfolio and Capital Appreciation Portfolio of Dreyfus Variable
Investment Fund; REIT Series and Small Cap Value Series of Delaware Group
Premium Fund, Inc.; Montgomery Variable Series: Growth Fund of Montgomery
Funds III; Equity Portfolio of OCC Accumulation Trust; Strong Schafer Value
Fund II of Strong Variable Insurance Funds, Inc; and Emerging Markets
Portfolio of Warburg Pincus Trust. All of the funds are Massachusetts
business trusts, except for American Odyssey Funds, Inc., Dreyfus Stock
Index Fund, Travelers Series Fund Inc., Salomon Brothers Variable Series
Funds Inc. and Delaware Group Premium Fund, Inc. which are incorporated
under Maryland law; Strong Variable Insurance Funds, Inc. which is a
Wisconsin corporation and Montgomery Funds III which is a Delaware business
trust. Not all funds may be available in all states or to all contract
owners.
The following is a summary of significant accounting policies consistently
followed by Separate Account Five 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 Separate Account Five form a part
of the total operations of The Travelers and are not taxed separately. The
Travelers 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 Separate Account
Five. Separate Account Five 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> 71
NOTES TO FINANCIAL STATEMENTS - CONTINUED
2. INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments
were $4,176,734 and $489,944 respectively, for the period 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 $3,676,727 at December 31, 1999. Gross unrealized appreciation
for all investments at December 31, 1999 was $198,640. Gross unrealized
depreciation for all investments at December 31, 1999 was $9,650.
3. CONTRACT CHARGES
Insurance charges are paid for the mortality and expense risks assumed by
The Travelers. Each business day, The Travelers deducts a mortality and
expense charge which is reflected in the calculation of accumulation and
annuity unit values. This charge equals, on an annual basis, 0.80%, for
Standard Death Benefit contracts (identified in Note 5 with a preface of
"Standard") and 1.25% for the Optional Death Benefit and Credit contracts
(identified in Note 5 with a preface of "Optional").
No sales charge is deducted from participant purchase payments when they
are received. However, The Travelers may assess a contingent deferred sales
charge (up to 5% if a participant's purchase payment is surrendered within
five years of its payment date). Contract surrender payments include $92 of
contingent deferred sales charges for the ended December 31, 1999. See the
product prospectus for a more detailed explanation of withdrawal charges.
Participants in American Odyssey Funds, Inc. (the "Funds"), may elect to
enter into a separate asset allocation advisory agreement with Copeland
Financial Services, Inc. ("Copeland"), an affiliate of The Travelers. Under
this arrangement, Copeland provides asset allocation advice and charges
participants an annual fee. The annual fee, which decreases as a
participant's assets in the Funds increase, is equivalent to an amount of
up to 0.80% of the participant's assets in the Funds. There were no annual
fee charges for the period ended December 31, 1999.
If the Variable Annuitization Floor Benefit is selected, a charge is
deducted. This charge compensates The Travelers for guaranteeing a minimum
variable annuity payment regardless of the performance of the funding
option. This charge will vary based upon market conditions, but will not
exceed 3% annually. This charge will be set at the time of election and
will remain level throughout the term of annuitization. If the Liquidity
Benefit is selected, there is a surrender charge of 5% of the amount
withdrawn. This floor benefit feature is available in Equity Index
Portfolio Class II, Travelers Quality Bond Portfolio and U.S. Government
Securities Portfolio only. Accordingly, in Note 5, these funding options
list the values associated with each of these charges in effect as of
December 31, 1999.
4. OTHER
If the Optional Death Benefit and Credit is selected, The Travelers will
add a credit to the contract with each purchase payment. Each credit is
added to the contract value when the applicable purchase payment is applied
and will equal 2% of each purchase payment. These credits are applied pro
rata to the same funding option(s) to which the purchase payment was
applied. An additional annuitization credit is applied to a contract value
once an annuity option is purchased. This credit equals 0.5% of the
contract value if annuitized during contract years 2-5, 1% during contract
years 6-10 and 2% after contract year 10. There is no credit applied to
contracts held less than one year.
-5-
<PAGE> 72
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. NET CONTRACT OWNERS' EQUITY *
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------------------------------------------------------
ACCUMULATION ANNUITY UNIT NET
UNITS UNITS VALUE ASSETS
----- ----- ----- ------
<S> <C> <C> <C> <C>
American Odyssey Funds, Inc.
American Odyssey Core Equity Fund
Standard, 3% AIR.............................. 21,459 - $ 0.995 $ 21,361
Standard, 5% AIR.............................. - - 0.995 -
Optional, 3% AIR.............................. 68,472 - 0.992 67,919
Optional, 5% AIR.............................. - - 0.992 -
American Odyssey Emerging Opportunities Fund
Standard, 3% AIR ............................. 6,201 - 1.465 9,086
Standard, 5% AIR ............................. - - 1.465 -
Optional, 3% AIR ............................. 29,981 - 1.460 43,775
Optional, 5% AIR ............................. - - 1.460 -
American Odyssey Global High-Yield Bond Fund
Standard, 3% AIR.............................. - - 1.070 -
Standard, 5% AIR.............................. - - 1.070 -
Optional, 3% AIR.............................. 18,317 - 1.066 19,527
Optional, 5% AIR..................... - - 1.066 -
American Odyssey Intermediate-Term Bond Fund
Standard, 3% AIR.............................. 73,160 - 1.005 73,531
Standard, 5% AIR.............................. - - 1.005 -
Optional, 3% AIR.............................. 44,935 - 1.002 45,006
Optional, 5% AIR.............................. - - 1.002 -
American Odyssey International Equity Fund
Standard, 3% AIR.............................. 6,933 - 1.272 8,817
Standard, 5% AIR.............................. - - 1.272 -
Optional, 3% AIR.............................. 91,971 - 1.267 116,562
Optional, 5% AIR.............................. - - 1.267 -
American Odyssey Long-Term Bond Fund
Standard, 3% AIR.............................. 37,502 - 0.979 36,727
Standard, 5% AIR.............................. - - 0.979 -
Optional, 3% AIR.............................. 49,414 - 0.976 48,223
Optional, 5% AIR.............................. - - 0.976 -
Delaware Group Premium Fund, Inc.
Small Cap Value Series
Optional, 5% AIR.............................. - - 0.991 -
Standard, 3% AIR.............................. - - 0.991 -
Optional, 3% AIR.............................. 3,413 - 0.988 3,373
Standard, 5% AIR.............................. - - 0.988 -
</TABLE>
-6-
<PAGE> 73
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. NET CONTRACT OWNERS' EQUITY (CONTINUED) *
<TABLE>
<CAPTION>
DECEMBER 31, 1999
--------------------------------------------------------------------
ACCUMULATION ANNUITY UNIT NET
UNITS UNITS VALUE ASSETS
----- ----- ----- ------
<S> <C> <C> <C> <C>
Dreyfus Variable Investment Fund
Capital Appreciation Portfolio
Standard, 3% AIR........................ 24,552 - $ 1.081 $ 26,535
Standard, 5% AIR........................ - - 1.081 -
Optional, 3% AIR........................ 296,595 23,873 1.077 345,145
Optional, 5% AIR........................ - - 1.077 -
Small Cap Portfolio
Standard, 3% AIR........................ - - 1.240 -
Standard, 5% AIR........................ - - 1.240 -
Optional, 3% AIR........................ 37,863 - 1.236 46,785
Optional, 5% AIR........................ - - 1.236 -
Greenwich Street Series Fund
Equity Index Portfolio Class II
Standard, 3% AIR........................ 13,350 - 1.133 15,122
Standard, 5% AIR........................ - - 1.133 -
Optional, 3% AIR........................ 293,320 23,770 1.129 357,922
Optional, 5% AIR........................ - - 1.129 -
Standard, 3% AIR, .62% Floor Charge..... - - 1.127 -
Standard, 3% AIR, 1.10% Floor Charge.... - - 1.123 -
Optional, 3% AIR, .83% Floor Charge..... - - 1.122 -
Optional, 3% AIR, 1.40% Floor Charge.... - - 1.117 -
High Yield Bond Trust
Standard, 3% AIR........................ - - 0.980 -
Standard, 5% AIR........................ - - 0.980 -
Optional, 3% AIR........................ 93,082 - 0.977 90,960
Optional, 5% AIR........................ - - 0.977 -
Managed Assets Trust
Standard, 3% AIR........................ 13,609 - 1.102 14,998
Standard, 5% AIR........................ - - 1.102 -
Optional, 3% AIR........................ 899,389 - 1.098 987,740
Optional, 5% AIR........................ - - 1.098 -
Money Market Portfolio
Standard, 3% AIR........................ 36,453 - 1.032 37,604
Standard, 5% AIR........................ - - 1.032 -
Optional, 3% AIR........................ 134,132 - 1.028 137,910
Optional, 5% AIR........................ - - 1.028 -
</TABLE>
-7-
<PAGE> 74
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. NET CONTRACT OWNERS' EQUITY (CONTINUED) *
<TABLE>
<CAPTION>
DECEMBER 31, 1999
---------------------------------------------------------------------------
ACCUMULATION ANNUITY UNIT NET
UNITS UNITS VALUE ASSETS
----- ----- ----- ------
<S> <C> <C> <C> <C>
Salomon Brothers Variable Series Funds Inc.
Salomon Brothers Variable Investors Fund
Standard, 3% AIR.............................. 13,535 - $ 1.088 $ 14,727
Standard, 5% AIR.............................. - - 1.088 -
Optional, 3% AIR.............................. 6,020 - 1.084 6,529
Optional, 5% AIR.............................. - - 1.084 -
Montgomery Funds III
Montgomery Variable Series: Growth Fund
Standard, 3% AIR.............................. - - 1.208 -
Standard, 5% AIR.............................. - - 1.208 -
Optional, 3% AIR.............................. 22,857 - 1.204 27,527
Optional, 5% AIR.............................. - - 1.204 -
The Travelers Series Trust
Equity Income Portfolio
Standard, 3% AIR.............................. 12,381 - 1.021 12,639
Standard, 5% AIR.............................. - - 1.021 -
Optional, 3% AIR.............................. 255,091 - 1.017 259,491
Optional, 5% AIR.............................. - - 1.017 -
Large Cap Portfolio
Standard, 3% AIR.............................. 12,719 - 1.224 15,564
Standard, 5% AIR.............................. - - 1.224 -
Optional, 3% AIR.............................. 89,328 - 1.219 108,929
Optional, 5% AIR.............................. - - 1.219 -
Lazard International Stock Portfolio
Standard, 3% AIR.............................. 4,591 - 1.194 5,481
Standard, 5% AIR.............................. - - 1.194 -
Optional, 3% AIR.............................. - - 1.190 -
Optional, 5% AIR.............................. - - 1.190 -
MFS Mid Cap Growth Portfolio
Standard, 3% AIR.............................. - - 1.603 -
Standard, 5% AIR.............................. - - 1.603 -
Optional, 3% AIR.............................. 91,838 - 1.598 146,798
Optional, 5% AIR.............................. - - 1.598 -
</TABLE>
-8-
<PAGE> 75
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. NET CONTRACT OWNERS' EQUITY (CONTINUED) *
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------------------------------------------------------
ACCUMULATION ANNUITY UNIT NET
UNITS UNITS VALUE ASSETS
----- ----- ----- ------
<S> <C> <C> <C> <C>
The Travelers Series Trust (continued)
Social Awareness Stock Portfolio
Standard, 3% AIR...................... 14,167 - $ 1.115 $ 15,792
Standard, 5% AIR...................... - - 1.115 -
Optional, 3% AIR...................... 57,036 - 1.111 63,356
Optional, 5% AIR...................... - - 1.111 -
Disciplined Mid Cap Stock Portfolio
Standard, 3% AIR...................... 4,950 - 1.132 5,605
Standard, 5% AIR...................... - - 1.132 -
Optional, 3% AIR...................... 13,503 - 1.129 15,249
Optional, 5% AIR...................... - - 1.129 -
Travelers Quality Bond Portfolio
Standard, 3% AIR...................... 19,941 - 1.002 19,978
Standard, 5% AIR...................... - - 1.002 -
Optional, 3% AIR...................... 8,527 - 0.998 8,513
Optional, 5% AIR...................... - - 0.998 -
Standard, 3% AIR, .25% Floor Charge... - - 1.000 -
Standard, 3% AIR, .43% Floor Charge... - - 0.999 -
Optional, 3% AIR, .33% Floor Charge... - - 0.996 -
Optional, 3% AIR, .53% Floor Charge... - - 0.994 -
U.S. Government Securities Portfolio
Standard, 3% AIR...................... 20,423 - 0.968 19,774
Standard, 5% AIR...................... - - 0.968 -
Optional, 3% AIR...................... 75,867 - 0.965 73,201
Optional, 5% AIR...................... - - 0.965 -
Standard, 3% AIR, .25% Floor Charge... - - 0.966 -
Standard, 3% AIR, .43% Floor Charge... - - 0.965 -
Optional, 3% AIR, .33% Floor Charge... - - 0.962 -
Optional, 3% AIR, .53% Floor Charge... - - 0.961 -
Utilities Portfolio
Standard, 3% AIR...................... - - 0.959 -
Standard, 5% AIR...................... - - 0.959 -
Optional, 3% AIR...................... 2,049 - 0.956 1,960
Optional, 5% AIR...................... - - 0.956 -
Travelers Series Fund Inc.
Alliance Growth Portfolio
Standard, 3% AIR...................... 17,222 - 1.303 22,433
Standard, 5% AIR...................... - - 1.303 -
Optional, 3% AIR...................... 226,122 - 1.298 293,526
Optional, 5% AIR...................... - - 1.298 -
MFS Total Return Portfolio
Standard, 3% AIR...................... - - 0.994 -
Standard, 5% AIR...................... - - 0.994 -
Optional, 3% AIR...................... 114,042 - 0.991 113,023
Optional, 5% AIR...................... - - 0.991 -
</TABLE>
-9-
<PAGE> 76
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. NET CONTRACT OWNERS' EQUITY (CONTINUED) *
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------------------------------------------
ACCUMULATION ANNUITY UNIT NET
UNITS UNITS VALUE ASSETS
----- ----- ----- -------
<S> <C> <C> <C> <C>
Travelers Series Fund Inc. (continued)
Smith Barney International Equity Portfolio
Standard, 3% AIR............................. - - $ 1.569 $ -
Standard, 5% AIR............................. - - 1.569 -
Optional, 3% AIR............................. 53,669 - 1.563 83,908
Optional, 5% AIR............................. - - 1.563 -
Smith Barney High Income Portfolio
Standard, 3% AIR............................. 20,231 - 1.007 20,365
Standard, 5% AIR............................. - - 1.007 -
Optional, 3% AIR............................. - - 1.004 -
Optional, 5% AIR............................. - - 1.004 -
Smith Barney Large Capitalization Growth
Portfolio
Standard, 3% AIR............................. - - 1.132 -
Standard, 5% AIR............................. - - 1.132 -
Optional, 3% AIR............................. 77,927 - 1.128 87,930
Optional, 5% AIR............................. - - 1.128 -
Warburg Pincus Trust
Emerging Markets Portfolio
Standard, 3% AIR............................. - - 1.506 -
Standard, 5% AIR............................. - - 1.506 -
Optional, 3% AIR............................. 42,199 - 1.502 63,372
Optional, 5% AIR............................. - - 1.502 -
-------------
Net Contract Owners' Equity............................................................................. $ 4,060,298
=============
</TABLE>
* An assumed interest rate of either 3% or 5% is applied in the calculation of
annuity unit values depending on the type of annuitization selected. The
values associated with each are identified in the table above as "3% AIR" and
"5% AIR".
-10-
<PAGE> 77
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
INVESTMENT OPTIONS NO. OF MARKET
SHARES VALUE
---------- ----------
<S> <C> <C>
AMERICAN ODYSSEY FUNDS, INC. (7.6%)
American Odyssey Core Equity Fund (Cost $41,067) 2,298 $ 40,479
American Odyssey Emerging Opportunities Fund (Cost $11,132) 842 13,819
American Odyssey Global High-Yield Bond Fund (Cost $0) - -
American Odyssey Intermediate-Term Bond Fund (Cost $107,724) 10,501 108,799
American Odyssey International Equity Fund (Cost $68,712) 3,430 76,584
American Odyssey Long-Term Bond Fund (Cost $55,334) 5,470 55,681
---------- ----------
Total (Cost $283,969) 22,541 295,362
---------- ----------
DELAWARE GROUP PREMIUM FUND, INC. (0.1%)
Small Cap Value Series
Total (Cost $3,207) 220 3,381
---------- ----------
DREYFUS VARIABLE INVESTMENT FUND (10.8%)
Capital Appreciation Portfolio (Cost $359,122) 9,325 371,773
Small Cap Portfolio (Cost $42,104) 705 46,799
---------- ----------
Total (Cost $401,226) 10,030 418,572
---------- ----------
GREENWICH STREET SERIES FUND (9.7%)
Equity Index Portfolio Class II
Total (Cost $340,622) 10,420 373,136
---------- ----------
HIGH YIELD BOND TRUST (2.4%)
Total (Cost $89,634) 9,608 90,988
---------- ----------
MANAGED ASSETS TRUST (25.9%)
Total (Cost $954,674) 47,492 1,003,037
---------- ----------
MONEY MARKET PORTFOLIO (4.5%)
Total (Cost $175,109) 175,109 175,109
---------- ----------
SALOMON BROTHERS VARIABLE SERIES FUNDS INC. (0.6%)
Salomon Brothers Variable Investors Fund
Total (Cost $21,065) 1,739 21,265
---------- ----------
MONTGOMERY FUNDS III (0.7%)
Montgomery Variable Series: Growth Fund
Total (Cost $25,619) 1,498 27,543
---------- ----------
</TABLE>
-11-
<PAGE> 78
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
THE TRAVELERS SERIES TRUST (20.0%)
Equity Income Portfolio (Cost $279,635) 18,085 $ 272,188
Large Cap Portfolio (Cost $119,967) 5,899 124,522
Lazard International Stock Portfolio (Cost $4,958) 351 5,496
MFS Mid Cap Growth Portfolio (Cost $135,095) 8,936 146,819
Social Awareness Stock Portfolio (Cost $75,455) 2,692 79,184
Disciplined Mid Cap Stock Portfolio (Cost $17,905) 1,337 20,863
Travelers Quality Bond Portfolio (Cost $28,274) 2,635 28,507
U.S. Government Securities Portfolio (Cost $93,092) 8,223 93,002
Utilities Portfolio (Cost $2,000) 123 1,961
---------- -------------
Total (Cost $756,381) 48,281 772,542
---------- -------------
TRAVELERS SERIES FUND INC. (16.1%)
Alliance Growth Portfolio (Cost $277,512) 9,612 316,050
MFS Total Return Portfolio (Cost $114,545) 6,966 113,058
Smith Barney International Equity Portfolio (Cost $72,484) 3,655 83,945
Smith Barney High Income Portfolio (Cost $19,785) 1,687 20,375
Smith Barney Large Capitalization Growth Portfolio (Cost $83,786) 5,501 87,965
---------- -------------
Total (Cost $568,112) 27,421 621,393
---------- -------------
WARBURG PINCUS TRUST (1.6%)
Emerging Markets Portfolio
Total (Cost $57,109) 4,470 63,389
---------- -------------
TOTAL INVESTMENT OPTIONS (100%)
(COST $3,676,727) $ 3,865,717
=============
</TABLE>
-12-
<PAGE> 79
This page intentionally left blank.
-13-
<PAGE> 80
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF SEPARATE ACCOUNT FIVE OPERATIONS AND CHANGES IN NET ASSETS FOR
THE PERIOD JUNE 9, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN AMERICAN
AMERICAN ODYSSEY EMERGING ODYSSEY GLOBAL ODYSSEY ODYSSEY
ODYSSEY CORE OPPORTUNITIES HIGH-YIELD BOND INTERMEDIATE- INTERNATIONAL
EQUITY FUND FUND FUND TERM BOND FUND EQUITY FUND
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.......................... $ - $ - $ - $ - $ -
-------------- -------------- -------------- -------------- --------------
EXPENSES:
Insurance charges.................. 94 29 - 270 132
-------------- -------------- -------------- -------------- --------------
Net investment income (loss). (94) (29) - (270) (132)
-------------- -------------- -------------- -------------- --------------
REALIZED GAIN (LOSS) AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment
transactions:
Proceeds from investments sold... 77 16 - 212 1,055
Cost of investments sold......... 79 15 - 210 1,044
-------------- -------------- -------------- -------------- --------------
Net realized gain (loss)..... (2) 1 - 2 11
-------------- -------------- -------------- -------------- --------------
Unrealized gain (loss) on investments:
End of period.................... (588) 2,687 - 1,075 7,872
-------------- -------------- -------------- -------------- --------------
Net increase (decrease) in net assets
resulting from operations.... (684) 2,659 - 807 7,751
-------------- -------------- -------------- -------------- --------------
UNIT TRANSACTIONS:
Participant purchase payments...... 89,964 50,202 19,527 109,217 117,673
Participant transfers from other
Travelers accounts.............. - - - 8,513 (45)
Contract surrenders ............... - - - - -
Participant transfers to other
Travelers accounts.............. - - - - -
Other payments to participants..... - - - - -
-------------- -------------- -------------- -------------- --------------
Net increase in net assets resulting
from unit transactions....... 89,964 50,202 19,527 117,730 117,628
-------------- -------------- -------------- -------------- --------------
Net increase in net assets... 89,280 52,861 19,527 118,537 125,379
NET ASSETS:
Beginning of period.............. - - - - -
-------------- -------------- -------------- -------------- --------------
End of period.................... $ 89,280 $ 52,861 $ 19,527 $ 118,537 $ 125,379
============== ============== ============== ============== ==============
</TABLE>
-14-
<PAGE> 81
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
AMERICAN DREYFUS CAPITAL
ODYSSEY LONG- SMALL CAP VALUE APPRECIATION DREYFUS SMALL
TERM BOND FUND SERIES PORTFOLIO CAP PORTFOLIO
- ---------------- ---------------- --------------- -------------
<S> <C> <C> <C>
$ - $ - $ 3,390 $ -
- ---------------- ---------------- --------------- -------------
135 8 1,156 56
- ---------------- ---------------- --------------- -------------
(135) (8) 2,234 (56)
- ---------------- ---------------- --------------- -------------
113 - 47,063 24
112 - 47,358 23
- ---------------- ---------------- --------------- -------------
1 - (295) 1
- ---------------- ---------------- --------------- -------------
347 174 12,651 4,695
- ---------------- ---------------- --------------- -------------
213 166 14,590 4,640
- ---------------- ---------------- --------------- -------------
84,737 3,207 408,607 42,145
- - 2,020 -
- - (3,503) -
- - (48,715) -
- - (1,319) -
- ---------------- ---------------- --------------- -------------
84,737 3,207 357,090 42,145
- ---------------- ---------------- --------------- -------------
84,950 3,373 371,680 46,785
- - - -
- ---------------- ---------------- --------------- -------------
$ 84,950 $ 3,373 $ 371,680 $ 46,785
================ ================ =============== =============
</TABLE>
<TABLE>
<CAPTION>
SALOMON BROTHERS
EQUITY INDEX HIGH YIELD BOND MANAGED ASSETS VARIABLE INVESTORS
PORTFOLIO CLASS II TRUST TRUST FUND
- ------------------ --------------- -------------- ------------------
<S> <C> <C> <C>
$ - $ - $ 4,133 $ 94
- ------------------ ---------------- -------------- ---------------
1,132 234 2,146 17
------------------ ---------------- -------------- ---------------
(1,132) (234) 1,987 77
------------------ ---------------- -------------- ---------------
75,540 30,808 223,246 -
74,514 30,892 232,943 -
------------------ ---------------- -------------- ---------------
1,026 (84) (9,697) -
------------------ ---------------- -------------- ---------------
32,514 1,354 48,363 200
------------------ ---------------- -------------- ---------------
32,408 1,036 40,653 277
------------------ ---------------- -------------- ---------------
414,338 120,548 1,172,096 15,324
2,250 - 12,787 5,655
(9,631) - (3,850) -
(64,987) (30,624) (218,948) -
(1,334) - - -
------------------ ---------------- -------------- ---------------
340,636 89,924 962,085 20,979
------------------ ---------------- -------------- ---------------
373,044 90,960 1,002,738 21,256
- - - -
------------------ ---------------- -------------- ---------------
$ 373,044 $ 90,960 $ 1,002,738 $ 21,256
================== ================ ============== ===============
</TABLE>
-15-
<PAGE> 82
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF SEPARATE ACCOUNT FIVE OPERATIONS AND CHANGES IN NET ASSETS FOR
THE PERIOD JUNE 9, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999
(CONTINUED)
<TABLE>
<CAPTION>
MONTGOMERY
MONEY MARKET VARIABLE SERIES: EQUITY INCOME
PORTFOLIO GROWTH FUND PORTFOLIO
------------ ---------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends .............................................. $ 1,616 $ 116 $ 12,146
--------- --------- ---------
EXPENSES:
Insurance charges ...................................... 319 31 587
--------- --------- ---------
Net investment income (loss) ......................... 1,297 85 11,559
--------- --------- ---------
REALIZED GAIN (LOSS) AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment
transactions:
Proceeds from investments sold ....................... 60,367 14 1,377
Cost of investments sold ............................. 60,367 14 1,425
--------- --------- ---------
Net realized gain (loss) ......................... - - (48)
--------- --------- ---------
Unrealized gain (loss) on investments:
End of period ....................................... - 1,924 (7,447)
--------- --------- ---------
Net increase (decrease) in net assets
resulting from operations ....................... 1,297 2,009 4,064
--------- --------- ---------
UNIT TRANSACTIONS:
Participant purchase payments .......................... 217,798 25,518 251,078
Participant transfers from other Travelers
accounts ........................................... - - 17,888
Contract surrenders .................................... - - (900)
Participant transfers to other Travelers
accounts ............................................. (43,581) - -
Other payments to participants ......................... - - -
--------- --------- ---------
Net increase in net assets
resulting from unit transactions .................. 174,217 25,518 268,066
--------- --------- ---------
Net increase in net assets ...................... 175,514 27,527 272,130
NET ASSETS:
Beginning of period ............................... - - -
--------- --------- ---------
End of period ..................................... $ 175,514 $ 27,527 $ 272,130
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
LAZARD
LARGE CAP INTERNATIONAL
PORTFOLIO STOCK PORTFOLIO
--------- ---------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................................ $ 3,715 $ -
--------- ---------------
EXPENSES:
Insurance charges .................................................... 194 15
--------- ---------------
Net investment income (loss) ....................................... 3,521 (15)
--------- ---------------
REALIZED GAIN (LOSS) AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment
transactions:
Proceeds from investments sold ..................................... 119 -
Cost of investments sold ........................................... 115 -
--------- ---------------
Net realized gain (loss) ....................................... 4 -
--------- ---------------
Unrealized gain (loss) on investments:
End of period ..................................................... 4,555 538
--------- ---------------
Net increase (decrease) in net assets
resulting from operations ..................................... 8,080 523
--------- ---------------
UNIT TRANSACTIONS:
Participant purchase payments ........................................ 104,163 4,958
Participant transfers from other Travelers
accounts ......................................................... 12,250 -
Contract surrenders .................................................. - -
Participant transfers to other Travelers
accounts ........................................................... - -
Other payments to participants ....................................... - -
--------- ---------------
Net increase in net assets
resulting from unit transactions ................................ 116,413 4,958
--------- ---------------
Net increase in net assets .................................... 124,493 5,481
NET ASSETS:
Beginning of period................................................ - -
--------- ---------------
End of period ..................................................... $ 124,493 $ 5,481
========= ===============
</TABLE>
-16-
<PAGE> 83
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
U.S. GOVERNMENT
MFS MID CAP SOCIAL AWARENESS DISCIPLINED MID TRAVELERS QUALITY SECURITIES
GROWTH PORTFOLIO STOCK PORTFOLIO CAP STOCK PORTFOLIO BOND PORTFOLIO PORTFOLIO
----------------- --------------- -------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
$ - $ - $ - $ - $ -
----------------- --------------- -------------------- ----------------- -------------
71 227 49 82 306
----------------- --------------- -------------------- ----------------- -------------
(71) (227) (49) (82) (306)
----------------- --------------- -------------------- ----------------- -------------
33 145 33 51 5,037
27 148 30 50 5,038
----------------- --------------- -------------------- ----------------- -------------
6 (3) 3 1 (1)
----------------- --------------- -------------------- ----------------- -------------
11,724 3,729 2,958 233 (90)
----------------- --------------- -------------------- ----------------- -------------
11,659 3,499 2,912 152 (397)
----------------- --------------- -------------------- ----------------- -------------
135,139 73,399 17,942 19,832 98,129
- 2,250 - 8,507 -
- - - - (4,757)
- - - - -
- - - - -
----------------- --------------- -------------------- ----------------- -------------
135,139 75,649 17,942 28,339 93,372
----------------- --------------- -------------------- ----------------- -------------
146,798 79,148 20,854 28,491 92,975
----------------- --------------- -------------------- ----------------- -------------
$ 146,798 $ 79,148 $ 20,854 $ 28,491 $ 92,975
================= =============== ==================== ================= =============
</TABLE>
<TABLE>
<CAPTION>
ALLIANCE GROWTH MFS TOTAL
UTILITIES PORTFOLIO PORTFOLIO RETURN PORTFOLIO
- ---------------------- ----------------- ------------------
<S> <C> <C>
$ - $ - $ -
- ---------------------- ----------------- ------------------
5 598 636
- ---------------------- ----------------- ------------------
(5) (598) (636)
- ---------------------- ----------------- ------------------
- 384 44,080
- 358 45,106
- ---------------------- ----------------- ------------------
- 26 (1,026)
- ---------------------- ----------------- ------------------
(39) 38,538 (1,487)
- ---------------------- ----------------- ------------------
(44) 37,966 (3,149)
- ---------------------- ----------------- ------------------
- 265,933 159,651
2,004 12,060 -
- - (900)
- - (42,579)
- - -
- ---------------------- ----------------- ------------------
2,004 277,993 116,172
- ---------------------- ----------------- ------------------
1,960 315,959 113,023
- ---------------------- ----------------- ------------------
$ 1,960 $ 315,959 $ 113,023
====================== ================= ==================
</TABLE>
-17-
<PAGE> 84
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF SEPARATE ACCOUNT FIVE OPERATIONS AND CHANGES IN NET ASSETS FOR
THE PERIOD JUNE 9, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999
(CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY
SMITH BARNEY SMITH BARNEY LARGE
INTERNATIONAL HIGH INCOME CAPITALIZATION
EQUITY PORTFOLIO PORTFOLIO GROWTH PORTFOLIO
----------------- -------------- ----------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends....................................... $ - $ - $ 189
----------------- -------------- ----------------
EXPENSES:
Insurance charges............................... 62 58 67
----------------- -------------- ----------------
Net investment income (loss)............ (62) (58) 122
----------------- -------------- ----------------
REALIZED GAIN (LOSS) AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment
transactions:
Proceeds from investments sold.............. 26 48 33
Cost of investments sold.................... 24 47 30
----------------- -------------- ----------------
Net realized gain (loss)............... 2 1 3
----------------- -------------- ----------------
Unrealized gain (loss) on investments:
End of period............................. 11,461 590 4,179
----------------- -------------- ----------------
Net increase (decrease) in net assets
resulting from operations............... 11,401 533 4,304
----------------- -------------- ----------------
Unit Transactions:
Participant purchase payments................... 72,507 19,832 83,626
Participant transfers from other Travelers
accounts...................................... - - -
Contract surrenders............................. - - -
Participant transfers to other Travelers
accounts...................................... - - -
Other payments to participants.................. - - -
----------------- -------------- ----------------
Net increase in net assets
resulting from unit transactions........... 72,507 19,832 83,626
----------------- -------------- ----------------
Net increase in net assets................. 83,908 20,365 87,930
NET ASSETS:
Beginning of period....................... - - -
----------------- -------------- ----------------
End of period............................. $ 83,908 $ 20,365 $ 87,930
================= ============== ================
</TABLE>
<TABLE>
<CAPTION>
EMERGING
MARKETS PORTFOLIO COMBINED
----------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends....................................... $ 1, 655 $ 27,054
----------------- -------------
EXPENSES:
Insurance charges............................... 59 8,775
----------------- -------------
Net investment income (loss)............. 1, 596 18,279
----------------- -------------
REALIZED GAIN (LOSS) AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment
transactions:
Proceeds from investments sold.............. 43 489,944
Cost of investments sold.................... 39 500,008
----------------- -------------
Net realized gain (loss)............... 4 (10,064)
----------------- -------------
Unrealized gain (loss) on investments:
End of period............................. 6, 280 188,990
----------------- -------------
Net increase (decrease) in net assets
resulting from operations............... 7, 880 197,205
----------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments................... 55, 492 4,252,582
Participant transfers from other Travelers
accounts...................................... - 86,139
Contract surrenders............................. - (23,541)
Participant transfers to other Travelers
accounts...................................... - (449,434)
Other payments to participants.................. - (2,653)
----------------- -------------
Net increase in net assets
resulting from unit transactions........... 55, 492 3,863,093
----------------- -------------
Net increase in net assets................. 63, 372 4,060,298
NET ASSETS:
Beginning of period....................... - -
----------------- -------------
End of period............................. $ 63, 372 $ 4,060,298
================= =============
</TABLE>
-18-
<PAGE> 85
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR SEPARATE ACCOUNT FIVE FOR THE
PERIOD JUNE 9, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN
ODYSSEY CORE ODYSSEY EMERGING ODYSSEY GLOBAL
EQUITY FUND OPPORTUNITIES FUND HIGH-YIELD BOND FUND
-------------- -------------------- ----------------------
<S> <C> <C> <C>
Accumulation and annuity units
beginning of peiod ........................ - - -
Accumulation units purchased and
transferred from other Travelers accounts.. 89,931 36,182 18,317
Accumulation units redeemed and
transferred to other Travelers accounts.... - - -
Annuity units.................................. - - -
-------------- -------------------- ----------------------
Accumulation and annuity units
end of period............................. 89,931 36,182 18,317
============== ==================== ======================
</TABLE>
<TABLE>
<CAPTION>
AMERICAN DREYFUS CAPITAL
ODYSSEY LONG-TERM SMALL CAP VALUE APPRECIATION
BOND FUND SERIES PORTFOLIO
------------------- ----------------- -----------------
<S> <C> <C> <C>
Accumulation and annuity units
beginning of peiod......................... - - -
Accumulation units purchased and
transferred from other Travelers accounts.. 86,916 3,413 397,469
Accumulation units redeemed and
transferred to other Travelers accounts.... - - (51,118)
Annuity units................................. - - (1,331)
------------------- ----------------- -----------------
Accumulation and annuity units
end of period.............................. 86,916 3,413 345,020
=================== ================= =================
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD BOND MANAGED ASSETS MONEY MARKET
TRUST TRUST PORTFOLIO
------------------- ----------------- -----------------
<S> <C> <C> <C>
Accumulation and annuity units
beginning of peiod......................... - - -
Accumulation units purchased and
transferred from other Travelers accounts.. 124,962 1,135,430 212,974
Accumulation units redeemed and
transferred to other Travelers accounts.... (31,880) (222,432) (42,389)
Annuity units................................. - - -
------------------- ----------------- -----------------
Accumulation and annuity units
end of period.............................. 93,082 912,998 170,585
=================== ================= =================
</TABLE>
<TABLE>
<CAPTION>
AMERICAN AMERICAN
ODYSSEY ODYSSEY
IMMEDIATE- INTERNATIONAL
BOND FUND EQUITY FUND
------------ ---------------
<S> <C> <C>
Accumulation and annuity units
beginning of peiod ........................ - -
Accumulation units purchased and
transferred from other Travelers accounts.. 118,095 98,904
Accumulation units redeemed and
transferred to other Travelers accounts.... - -
Annuity units.................................. - -
------------ ---------------
Accumulation and annuity units
end of period............................. 118,095 98,904
============ ===============
</TABLE>
<TABLE>
<CAPTION>
DREYFUS SMALL EQUITY INDEX
CAP PORTFOLIO PORTFOLIO CLASS II
--------------- --------------------
<S> <C> <C>
Accumulation and annuity units
beginning of peiod......................... - -
Accumulation units purchased and
transferred from other Travelers accounts.. 37,863 403,857
Accumulation units redeemed and
transferred to other Travelers accounts.... - (72,091)
Annuity units................................. - (1,326)
--------------- --------------------
Accumulation and annuity units
end of period.............................. 37,863 330,440
=============== ====================
</TABLE>
<TABLE>
<CAPTION>
SALOMON BROTHERS MONTGOMERY
VARIABLE INVESTORS VARIABLE SERIES:
FUND GROWTH FUND
-------------------- --------------------
<S> <C> <C>
Accumulation and annuity units
beginning of peiod......................... - -
Accumulation units purchased and
transferred from other Travelers accounts.. 19,555 22,857
Accumulation units redeemed and
transferred to other Travelers accounts.... - -
Annuity units................................. - -
-------------------- --------------------
Accumulation and annuity units
end of period.............................. 19,555 22,857
==================== ====================
</TABLE>
-19-
<PAGE> 86
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR SEPARATE ACCOUNT FIVE FOR THE
PERIOD JUNE 9, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999
(CONTINUED)
<TABLE>
<CAPTION>
LAZARD
EQUITY INCOME LARGE CAP INTERNATIONAL STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ------------- ---------------------
<S> <C> <C> <C>
Accumulation and annuity units
beginning of peiod.......................... - - -
Accumulation units purchased and
transferred from other Travelers accounts.. 268,401 102,047 4,591
Accumulation units redeemed and
transferred to other Travelers accounts.... (929) - -
Annuity units................................ - - -
----------------- ------------- ---------------------
Accumulation and annuity units
end of period.............................. 267,472 102,047 4,591
================= ============= =====================
</TABLE>
<TABLE>
<CAPTION>
DISCIPLINED MID U.S. GOVERNMENT
CAP STOCK TRAVELERS QUALITY SECURITIES
PORTFOLIO BOND PORTFOLIO PORTFOLIO
------------------ ------------------- ------------------
<S> <C> <C> <C>
Accumulation and annuity units
beginning of peiod.......................... - - -
Accumulation units purchased and
transferred from other Travelers accounts.. 18,453 28,468 101,215
Accumulation units redeemed and
transferred to other Travelers accounts.... - - (4,925)
Annuity units................................ - - -
------------------ ------------------- ------------------
Accumulation and annuity units
end of period.............................. 18,453 28,468 96,290
================== =================== ==================
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY SMITH BARNEY
MFS TOTAL INTERNATIONAL HIGH INCOME
RETURN PORTFOLIO EQUITY PORTFOLIO PORTFOLIO
------------------ ------------------ --------------
<S> <C> <C> <C>
Accumulation and annuity units
beginning of peiod.......................... - - -
Accumulation units purchased and
transferred from other Travelers accounts... 157,975 53,669 20,231
Accumulation units redeemed and
transferred to other Travelers accounts..... (43,933) - -
Annuity units................................. - - -
------------------ ------------------ --------------
Accumulation and annuity units
end of period............................... 114,042 53,669 20,231
================== ================== ==============
</TABLE>
<TABLE>
<CAPTION>
MFS MID CAP SOCIAL AWARENESS
GROWTH PORTFOLIO STOCK PORTFOLIO
---------------- ---------------
<S> <C> <C>
Accumulation and annuity units
beginning of peiod.......................... - -
Accumulation units purchased and
transferred from other Travelers accounts.. 91,838 71,203
Accumulation units redeemed and
transferred to other Travelers accounts.... - -
Annuity units................................ - -
---------------- ---------------
Accumulation and annuity units
end of period.............................. 91,838 71,203
================ ===============
</TABLE>
<TABLE>
<CAPTION>
ALLIANCE GROWTH
UTILITIES PORTFOLIO PORTFOLIO
--------------------- -----------------
<S> <C> <C>
Accumulation and annuity units
beginning of peiod.......................... - -
Accumulation units purchased and
transferred from other Travelers accounts.. 2,049 243,344
Accumulation units redeemed and
transferred to other Travelers accounts.... - -
Annuity units................................ - -
--------------------- -----------------
Accumulation and annuity units
end of period.............................. 2,049 243,344
===================== =================
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY
LARGE
CAPITALIZATION EMERGING
GROWTH PORTFOLIO MARKETS PORTFOLIO
-------------------- -------------------
<S> <C> <C>
Accumulation and annuity units
beginning of peiod.......................... - -
Accumulation units purchased and
transferred from other Travelers accounts... 77,927 42,199
Accumulation units redeemed and
transferred to other Travelers accounts..... - -
Annuity units................................. - -
-------------------- -------------------
Accumulation and annuity units
end of period............................... 77,927 42,199
==================== ===================
</TABLE>
-20-
<PAGE> 87
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR SEPARATE ACCOUNT FIVE FOR THE
PERIOD JUNE 9, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999
(CONTINUED)
<TABLE>
<CAPTION>
COMBINED
----------
1999
----
<S> <C>
Accumulation and annuity units
beginning of peiod ...................................... -
Accumulation units purchased and
transferred from other Travelers accounts ............... 4,090,335
Accumulation units redeemed and
transferred to other Travelers accounts ................. (469,697)
Annuity units ............................................. (2,657)
-----------
Accumulation and annuity units
end of period ........................................... 3,617,981
===========
</TABLE>
-21-
<PAGE> 88
INDEPENDENT AUDITORS' REPORT
To the Owners of Variable Annuity Contracts of
The Travelers Separate Account Five for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Separate Account Five for Variable Annuities as of December 31, 1999,
and the related statements of operations and changes in net assets for the
period June 9, 1999 (date operations commenced) to December 31, 1999. These
financial statements are the responsibility of management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides 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 Separate Account
Five for Variable Annuities as of December 31, 1999, the results of its
operations and the changes in its net assets for the period June 9, 1999 (date
operations commenced) to December 31, 1999, in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
Hartford, Connecticut
February 18, 2000
-22-
<PAGE> 89
This page intentionally left blank
<PAGE> 90
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 Separate Account Five for Variable
Annuities or Separate Account Five's underlying funds. It should not be used in
connection with any offer except in conjunction with the Prospectus for The
Travelers Separate Account Five for Variable Annuities product(s) offered by
The Travelers Insurance Company and the Prospectuses for the underlying funds,
which collectively contain all pertinent information, including the applicable
sales commissions.
VG-SEP5 (Annual) (12-99) Printed in U.S.A.
<PAGE> 91
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder
The Travelers Insurance Company and Subsidiaries:
We have audited the accompanying consolidated balance sheets of The Travelers
Insurance Company and Subsidiaries as of December 31, 1999 and 1998, and the
related consolidated 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
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Travelers
Insurance Company and Subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their 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> 92
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
($ in millions)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REVENUES
Premiums $1,738 $1,740 $1,583
Net investment income 2,506 2,185 2,037
Realized investment gains 113 149 199
Other revenues 521 440 354
- -------------------------------------------------------------------------------------------------- ------------- -------------
Total Revenues 4,878 4,514 4,173
- -------------------------------------------------------------------------------------------------- ------------- -------------
BENEFITS AND EXPENSES
Current and future insurance benefits 1,515 1,475 1,341
Interest credited to contractholders 937 876 829
Amortization of deferred acquisition costs 315 275 252
General and administrative expenses 519 505 468
- -------------------------------------------------------------------------------------------------- ------------- -------------
Total Benefits and Expenses 3,286 3,131 2,890
- -------------------------------------------------------------------------------------------------- ------------- -------------
Income from continuing operations before federal income taxes 1,592 1,383 1,283
- -------------------------------------------------------------------------------------------------- ------------- -------------
Federal income tax expense
Current 409 442 434
Deferred 136 39 10
- -------------------------------------------------------------------------------------------------- ------------- -------------
Total Federal Income Taxes 545 481 444
- -------------------------------------------------------------------------------------------------- ------------- -------------
Net income $1,047 $902 $839
================================================================================================== ============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE> 93
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in millions)
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Fixed maturities, available for sale at fair value (cost, $24,500, $22,973) $23,866 $23,893
Equity securities, at fair value (cost, $691, $474) 784 518
Mortgage loans 2,285 2,606
Real estate held for sale 236 143
Policy loans 1,258 1,857
Short-term securities 1,283 1,098
Trading securities, at market value 1,678 1,186
Other invested assets 2,098 2,251
- ----------------------------------------------------------------------------------------------------------------------------
Total Investments 33,488 33,552
- ----------------------------------------------------------------------------------------------------------------------------
Cash 85 65
Investment income accrued 395 393
Premium balances receivable 178 99
Reinsurance recoverables 3,234 3,387
Deferred acquisition costs 2,688 2,317
Separate and variable accounts 22,199 15,313
Other assets 1,264 1,422
- ----------------------------------------------------------------------------------------------------------------------------
Total Assets $63,531 $56,548
- ----------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Contractholder funds $17,567 $16,739
Future policy benefits and claims 12,563 12,326
Separate and variable accounts 22,194 15,305
Deferred federal income taxes 23 422
Trading securities sold not yet purchased, at market value 1,098 873
Other liabilities 2,466 2,783
- ----------------------------------------------------------------------------------------------------------------------------
Total Liabilities 55,911 48,448
- ----------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
Common stock, par value $2.50; 40 million shares authorized, issued and outstanding 100 100
Additional paid-in capital 3,819 3,800
Retained earnings 4,099 3,602
Accumulated other changes in equity from non-owner sources (398) 598
- ----------------------------------------------------------------------------------------------------------------------------
Total Shareholder's Equity 7,620 8,100
- ----------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholder's Equity $63,531 $56,548
============================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 94
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN RETAINED EARNINGS AND
ACCUMULATED OTHER CHANGES IN EQUITY FROM NON-OWNER SOURCES
($ in millions)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN RETAINED EARNINGS 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $3,602 $2,810 $2,471
Net income 1,047 902 839
Dividends to parent 550 110 500
- -----------------------------------------------------------------------------------------------------------
Balance, end of year $4,099 $3,602 $2,810
===========================================================================================================
- -----------------------------------------------------------------------------------------------------------
STATEMENTS OF ACCUMULATED OTHER CHANGES
IN EQUITY FROM NON-OWNER SOURCES
- -----------------------------------------------------------------------------------------------------------
Balance, beginning of year $598 $535 $223
Unrealized gains (losses), net of tax (996) 62 313
Foreign currency translation, net of tax 0 1 (1)
- -----------------------------------------------------------------------------------------------------------
Balance, end of year $(398) $598 $535
===========================================================================================================
- -----------------------------------------------------------------------------------------------------------
SUMMARY OF CHANGES IN EQUITY
FROM NON-OWNER SOURCES
- -----------------------------------------------------------------------------------------------------------
Net Income $1,047 $902 $839
Other changes in equity from non-owner sources (996) 63 312
- -----------------------------------------------------------------------------------------------------------
Total changes in equity from non-owner sources $51 $965 $1,151
===========================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 95
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
($ in millions)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Premiums collected $1,715 $1,763 $1,519
Net investment income received 2,365 2,021 2,059
Other revenues received 537 419 373
Benefits and claims paid (1,094) (1,127) (1,230)
Interest credited to contractholders (958) (918) (853)
Operating expenses paid (1,013) 751) (638)
Income taxes paid (393) (506) (368)
Trading account investments purchases, net (80) (38) (54)
Other (104) 12 18
- ---------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 975 875 826
- ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investments
Fixed maturities 4,103 2,608 2,259
Mortgage loans 662 722 663
Proceeds from sales of investments
Fixed maturities 12,562 13,390 7,592
Equity securities 100 212 341
Mortgage loans - - 207
Real estate held for sale 219 53 169
Purchases of investments
Fixed maturities (18,129) (18,072) (11,143)
Equity securities (309) (194) (483)
Mortgage loans (470) 457) (771)
Policy loans, net 599 15 38
Short-term securities (purchases) sales, net 316 495) (2)
Other investments purchases, net (413) (550) (260)
Securities transactions in course of settlement, net (463) 192 311
- ---------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (1,223) (2,576) (1,079)
- ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Redemption of commercial paper, net - - (50)
Contractholder fund deposits 5,764 4,383 3,544
Contractholder fund withdrawals (4,946) (2,565) (2,757)
Dividends to parent company (550) (110) (500)
- ---------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 268 1,708 237
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 20 7 (16)
- ---------------------------------------------------------------------------------------------------------------------
Cash at December 31, $85 $65 $58
====================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 96
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED 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 Insurance Company (TIC), together with its subsidiaries (the
Company), is a wholly owned subsidiary of The Travelers Insurance Group
Inc. (TIGI), an indirect wholly owned subsidiary of Citigroup Inc.
(Citigroup). The consolidated financial statements include the accounts of
the Company and its insurance and non-insurance subsidiaries on a fully
consolidated basis. The primary insurance entities of the Company are TIC
and its subsidiaries, The Travelers Life and Annuity Company (TLAC),
Primerica Life Insurance Company (Primerica Life), and its subsidiaries,
Primerica Life Insurance Company of Canada and National Benefit Life
Insurance Company (NBL).
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.
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 that 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 consolidated statement
of financial position related to the recognition of securities provided and
received as collateral. There was no impact on the Company's results of
operations from the adoption of the collateral provisions of FAS 125.
F-6
<PAGE> 97
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED 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 did not have a material impact on the
Company's financial condition, results 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 nonredeemable preferred stocks,
are classified as "available for sale" and 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
higher returns required in the current real estate financing market.
Impaired loans were insignificant at December 31, 1999 and 1998.
F-7
<PAGE> 98
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Real estate held for sale is carried at the lower of cost or fair value
less estimated cost to sell. Fair value of foreclosed properties is
established at the time of foreclosure by internal analysis or external
appraisers, using discounted cash flow analyses and other accepted
techniques. Thereafter, an allowance for losses on real estate held for
sale is established if the carrying value of the property exceeds its
current fair value less estimated costs to sell. There was no such
allowance at December 31, 1999 and 1998.
Trading securities and related liabilities are normally held for periods
less than six months. These investments are marked to market with the
change recognized in net investment income during the current period.
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.
Other invested assets include partnership investments and real estate joint
ventures accounted for on the equity method of accounting. Undistributed
income is reported in net investment income.
Accrual of income 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 contracts, options, forward contracts, interest rate swaps,
currency swaps, and equity swaps, as a means of hedging exposure to
interest rate and foreign currency risk. 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.
Payments to be received or made under interest rate swaps are accrued and
recognized in net investment income. Swaps hedging investments are carried
at fair value with unrealized gains and losses, net of taxes, charged or
credited directly to shareholder's equity. Interest rate and currency swaps
hedging liabilities are off-balance sheet.
Forward contracts, interest rate options and equity swaps were not
significant at December 31, 1999 and 1998. Information concerning
derivative financial instruments is included in Note 5.
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. The foreign exchange
effects of Canadian operations are included in unrealized gains and losses.
F-8
<PAGE> 99
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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.
DEFERRED ACQUISITION COSTS
Costs of acquiring individual life insurance, annuities and long-term care
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, including term
insurance and long-term care insurance, are amortized in relation to
anticipated premiums; universal life in relation to estimated gross
profits; and annuity contracts employing a level yield method. For life
insurance, a 15 to 20-year amortization period is used; for long-term care
business, a 10 to 20-year period is used, 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 life
insurance, annuities and health 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 interest rates
ranging from 14% to 18%. Traditional life insurance and guaranteed
renewable health policies are amortized in relation to anticipated
premiums; universal life is amortized in relation to estimated gross
profits; and 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.
SEPARATE AND VARIABLE ACCOUNTS
Separate and variable accounts primarily represent funds for which
investment income and investment gains and losses accrue directly to, and
investment risk is borne by, the contractholders. Each account has specific
investment objectives. The assets of each account are legally segregated
and are not subject to claims that arise out of any other business of the
Company. The assets of these accounts are carried at market value. Certain
other separate accounts provide guaranteed levels of return or benefits and
the assets of these accounts are primarily carried at market value. Amounts
assessed to the contractholders for management services are included in
revenues. 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.
GOODWILL
Goodwill represents the cost of acquired businesses in excess of net assets
and is being amortized on a straight-line basis principally over a 40-year
period. The carrying amount is regularly reviewed for indication of
impairment in value that in the view of management would be other than
temporary. If it is determined that goodwill is unlikely to be recovered,
impairment is recognized on a discounted cash flow basis.
F-9
<PAGE> 100
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
CONTRACTHOLDER FUNDS
Contractholder funds represent receipts from the issuance of universal
life, corporate owned life insurance, pension investment and certain
deferred annuity 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 3.5% to 10.0%.
FUTURE POLICY BENEFITS
Future policy benefits represent liabilities for future insurance policy
benefits. Benefit reserves for life insurance and annuities have been
computed based upon mortality, morbidity, persistency and interest
assumptions applicable to these coverages, which range from 2.5% to 10.0%,
including adverse deviation. These assumptions consider Company experience
and industry standards. The assumptions vary by plan, age at issue, year of
issue and duration. Appropriate recognition has been given to experience
rating and reinsurance.
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 had a liability of $21.9 million for
guaranty fund assessments and a related premium tax offset recoverable of
$4.7 million. The assessments are expected to be paid over a period of
three to five years and the premium tax offsets are expected to be realized
over a period of 10 to 15 years.
SECURITIES LOANED
Securities loaned are recorded at the amount of cash received as
collateral. The Company receives cash collateral in an amount in excess of
the market value of securities loaned. The Company monitors the market
value of securities loaned on a daily basis with additional collateral
obtained as necessary.
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company's insurance subsidiaries, domiciled principally in Connecticut
and Massachusetts, prepare statutory financial statements in accordance
with the accounting practices prescribed or permitted by the insurance
departments of the states of domicile. 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 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 will issue 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
F-10
<PAGE> 101
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
by the Connecticut insurance commissioner. The Company has not yet
determined the impact that this change will have on the statutory capital
and surplus of its insurance subsidiaries.
PREMIUMS
Premiums are recognized as revenues when due. Reserves are established for
the portion of premiums that will be earned in future periods and for
deferred profits on limited-payment policies that are being recognized in
income over the policy term.
OTHER REVENUES
Other revenues include management fees for variable annuity separate
accounts; surrender, mortality and administrative charges and fees earned
on investment, universal life and other insurance contracts; and revenues
of non-insurance subsidiaries.
CURRENT AND FUTURE INSURANCE BENEFITS
Current and future insurance benefits represent charges for mortality and
morbidity related to fixed annuities, universal life, term life and health
insurance benefits.
INTEREST CREDITED TO CONTRACTHOLDERS
Interest credited to contractholders represents amounts earned by universal
life, corporate owned life insurance, pension investment and certain
deferred annuity contracts in accordance with contract provisions.
FEDERAL INCOME TAXES
The provision for federal income taxes is comprised of 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.
A 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). 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
which have not adopted FAS 133 to defer its effective date to all fiscal
quarters of all fiscal years beginning after June 15, 2000. FAS 133
establishes accounting and reporting standards for derivative instruments,
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 consolidated 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
recognized asset or liability or of a forecasted transaction, or (c) a
hedge of the foreign currency exposure of a net investment in a foreign
F-11
<PAGE> 102
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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. The Company adopted the deferral provisions of FAS 137,
effective January 1, 2000 and has not yet determined the impact that FAS
133 will have on its consolidated financial statements.
2. COMMERCIAL PAPER AND LINES OF CREDIT
TIC has issued commercial paper directly to investors in prior years. No
commercial paper was outstanding at December 31, 1999 or December 31, 1998.
TIC must maintain bank lines of credit at least equal to the amount of the
outstanding commercial paper. Citigroup and TIC have an agreement with a
syndicate of banks to provide $1.0 billion of revolving credit, to be
allocated to Citigroup or the Company. TIC's participation in this
agreement is limited to $250 million. The agreement consists of a five-year
revolving credit facility that expires in June 2001. At December 31, 1999
and 1998, no credit under this agreement was allocated to TIC. Under this
facility the Company is required to maintain certain minimum equity and
risk-based capital levels. At December 31, 1999, the Company was in
compliance with these provisions. If TIC had borrowings outstanding on this
facility, the interest rate would be based upon LIBOR plus a contractually
negotiated margin.
3. 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.
Since 1997 universal life business was reinsured under an 80%/20% quota
share reinsurance program and term life business was reinsured under a
90%/10% quota share reinsurance program. Prior to 1997, the Company
reinsured all of its life business via first dollar quota share treaties on
an 80%/20% basis. Maximum retention of $1.5 million is generally reached on
policies in excess of $7.5 million. For other plans of insurance, it is the
policy of the Company to obtain reinsurance for amounts above certain
retention limits on individual life policies, which limits vary with age
and underwriting classification. Generally, the maximum retention on an
ordinary life risk is $1.5 million. Total inforce business ceded under
reinsurance contracts is $222.5 billion and $201.3 billion at December 31,
1999 and 1998.
The Company writes workers' compensation business through its Accident
Department. This business is ceded 100% to an affiliate, The Travelers
Indemnity Company.
F-12
<PAGE> 103
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
A summary of reinsurance financial data reflected within the consolidated
statements of income and balance sheets is presented below ($ in millions):
<TABLE>
<CAPTION>
WRITTEN PREMIUMS 1999 1998 1997
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Direct $2,274 $2,310 $2,148
Assumed from:
Non-affiliated companies - - 1
Ceded to:
Affiliated companies (206) (242) (280)
Non-affiliated companies (322) (317) (273)
------------------------------------------------------------------------------------------------------
Total Net Written Premiums $1,746 $1,751 $1,596
======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
EARNED PREMIUMS 1999 1998 1997
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Direct $2,248 $1,949 $2,170
Assumed from:
Non-affiliated companies - - 1
Ceded to:
Affiliated companies (193) (251) (321)
Non-affiliated companies (327) (308) (291)
------------------------------------------------------------------------------------------------------
Total Net Earned Premiums $1,728 $1,390 $1,559
======================================================================================================
</TABLE>
Reinsurance recoverables at December 31, 1999 and 1998 include amounts
recoverable on unpaid and paid losses and were as follows ($ in millions):
<TABLE>
<CAPTION>
REINSURANCE RECOVERABLES 1999 1998
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Life and Accident and Health Business:
Non-affiliated companies $1,221 $1,297
Property-Casualty Business:
Affiliated companies 2,013 2,090
------------------------------------------------------------------------------------------------------
Total Reinsurance Recoverables $3,234 $3,387
======================================================================================================
</TABLE>
Total reinsurance recoverables at December 31, 1999 and 1998 include $569
million and $640 million, respectively, from The Metropolitan Life
Insurance Company in connection with the sale of the Company's group life
insurance and related businesses in 1995.
F-13
<PAGE> 104
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
4. SHAREHOLDER'S EQUITY
Shareholder's Equity and Dividend Availability
The Company's statutory net income, which includes the statutory net income
of all insurance subsidiaries, was $890 million, $702 million and $754
million for the years ended December 31, 1999, 1998 and 1997, respectively.
The Company's statutory capital and surplus was $5.03 billion and $4.95
billion 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 $679 million is available in 2000 for dividend payments by the
Company without prior approval of the Connecticut Insurance Department. In
addition, under a revolving credit facility, the Company is required to
maintain certain minimum equity and risk-based capital levels. The Company
was in compliance with these covenants at December 31, 1999 and 1998. The
Company paid dividends of $550 million, $110 million and $500 million in
1999, 1998 and 1997, respectively.
F-14
<PAGE> 105
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
4. SHAREHOLDER'S EQUITY (continued)
Accumulated Other Changes in Equity from Non-Owner Sources, Net of Tax
Changes in each component of Accumulated Other Changes in Equity from Non-Owner
Sources were as follows:
<TABLE>
<CAPTION>
ACCUMULATED OTHER
NET UNREALIZED FOREIGN CHANGES IN EQUITY FROM
GAIN (LOSS) ON CURRENCY NON-OWNER SOURCES
INVESTMENT SECURITIES TRANSLATION
($ in millions) ADJUSTMENTS
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1997 $232 $(9) $223
Unrealized gain on investment securities,
net of tax of $239 442 - 442
Less: reclassification adjustment for gains
included in net income, net of tax of $70 129 - 129
Foreign currency translation adjustment,
net of tax of $0 - (1) (1)
- -------------------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE 313 (1) 312
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 545 (10) 535
Unrealized gains on investment securities,
net of tax of $85 159 - 159
Less: reclassification adjustment for gains
included in net income, net of tax of $52 97 - 97
Foreign currency translation adjustment,
net of tax of $2 - 1 1
- -------------------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE 62 1 63
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 607 (9) 598
Unrealized losses on investment securities,
net of tax of $497 (923) - (923)
Less: reclassification adjustment for gains
included in net income, net of tax of $40 73 - 73
- -------------------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE (996) - (996)
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 $(389) $(9) $(398)
===============================================================================================================================
</TABLE>
F-15
<PAGE> 106
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
5. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivative Financial Instruments
The Company uses derivative financial instruments, including financial
futures, interest rate swaps, currency 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, through a subsidiary that is a broker/dealer,
Tribeca Investments LLC (Tribeca) holds and issues derivative instruments
for trading purposes. All of 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 associated with these instruments can be less than these
amounts. For interest rate swaps, currency swaps, options and forward
contracts, credit risk is limited to the amount that it would cost the
Company to replace the contracts. Financial futures contracts and purchased
listed option contracts have 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 which 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 $255 million and $459 million, respectively. These
financial futures had a deferred gain of $1.8 million and a deferred loss
of $.5 million in 1999, and a deferred gain of $3.3 million and a deferred
loss of $.1 million in 1998. Total gains of $6.9 million and $1.5 million
from financial futures were deferred at December 31, 1999 and 1998,
respectively, relating to anticipated investment purchases and investment
product sales, and are reported as other liabilities. At December 31, 1999
and 1998, the Company's futures contracts had no fair value because these
contracts were marked to market and settled in cash daily.
F-16
<PAGE> 107
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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. The Company also enters
into basis swaps in which both legs of the swap are floating with each
based on a different index. 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.
At December 31, 1999 and 1998, the Company held interest rate swap
contracts with notional amounts of $1,498.2 million and $1,077.9 million,
respectively. The fair value of these financial instruments was $25.3
million (gain position) and $26.3 million (loss position) at December 31,
1999 and was $5.6 million (gain position) and $19.6 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 $207.5 million and
a fair value of $22.6 million (loss position).
The Company enters into currency swaps in connection with other financial
instruments to provide greater risk diversification and better match assets
purchased in U.S. Dollars with corresponding funding agreements issued in
foreign currencies. Under currency swaps, the Company agrees with other
parties to exchange, at specified intervals, foreign currency for U.S.
Dollars based upon interest amounts calculated by reference to an agreed
notional principal amount. Generally, there is an exchange of foreign
currency for U.S. Dollars at the outset of the contract based upon the
prevailing foreign exchange rate. Swap agreements are not exchange traded
so they are subject to the risk of default by the counterparty.
At December 31, 1999 and 1998, the Company held currency swap contracts
with notional amounts of $732.7 million and $10.0 million, respectively.
The fair value of these financial instruments was $59.2 million (loss
position) at December 31, 1999 and $.4 million (gain position) at December
31, 1998. The fair values were determined using the discounted cash flow
method.
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 options 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 value of these contracts represent the
estimated replacement cost as quoted by independent third party brokers.
The off-balance sheet risks of interest rate options, equity swaps and
forward contracts were not significant at December 31, 1999 and 1998.
The off-balance sheet risk of derivative instruments held for trading
purposes was not significant at December 31, 1999 and 1998.
F-17
<PAGE> 108
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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. The
off-balance sheet risk of these financial instruments was not significant
at December 31, 1999 and 1998. The Company had unfunded commitments to
partnerships with a value of $459.7 million at December 31, 1999.
Fair Value of Certain Financial Instruments
The Company uses various financial instruments in the normal course of its
business. Certain insurance contracts are excluded by Statement of
Financial Accounting Standards No. 107, "Disclosure about Fair Value of
Financial Instruments", and therefore are not included in the amounts
discussed.
At December 31, 1999 and 1998, investments in fixed maturities had a
carrying value and a fair value of $23.9 billion and $23.9 billion,
respectively. See Notes 1 and 12.
At December 31, 1999 mortgage loans had a carrying value of $2.3 billion
and a fair value of $2.3 billion and in 1998 had a carrying value of $2.6
billion and a fair value of $2.8 billion. In estimating fair value, the
Company used interest rates reflecting the current real estate financing
market.
Citigroup Preferred Stock included in other invested assets had a carrying
value and fair value of $987 million at December 31, 1999 and 1998.
At December 31, 1999, contractholder funds with defined maturities had a
carrying value of $5.0 billion and a fair value of $4.7 billion, compared
with a carrying value and a fair value of $3.3 billion 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 $10.1 billion and a fair
value of $9.9 billion at December 31, 1999, compared with a carrying value
of $10.4 billion and a fair value of $10.2 billion at December 31, 1998.
These contracts generally are valued at surrender value.
The carrying values of $228 million and $144 million of financial
instruments classified as other assets approximated their fair values at
December 31, 1999 and 1998, respectively. The carrying values of $1.2
billion and $2.3 billion 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.
The assets of separate accounts providing a guaranteed return had a
carrying value and a fair value of $251 million at December 31, 1999,
compared with a carrying value and a fair value of $235 million at December
31, 1998. The liabilities of separate accounts providing a guaranteed
return had a carrying value and a fair value of $251 million at December
31, 1999, compared with a carrying value and a fair value of $209 million
and $206 million, respectively, at December 31, 1998.
The carrying values of cash, trading securities and trading securities sold
not yet purchased are carried at fair value. The carrying values of
short-term securities and investment income accrued approximated their fair
values.
The carrying value of policy loans, which have no defined maturities, is
considered to be fair value.
F-18
<PAGE> 109
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
6. COMMITMENTS AND CONTINGENCIES
Financial Instruments with Off-Balance Sheet Risk
See Note 5 for a discussion of financial instruments with off-balance sheet
risk.
Litigation
In March 1997, a purported class action entitled Patterman v. The
Travelers, Inc., et al. was commenced in the Superior Court of Richmond
County, Georgia, alleging, among other things, violations of the Georgia
RICO statute and other state laws by an affiliate of the Company, Primerica
Financial Services, Inc. and certain of its affiliates. Plaintiffs seek
unspecified compensatory and punitive damages and other relief. In October
1997, defendants answered the complaint, denied liability and asserted
numerous affirmative defenses. In February 1998, on defendants' motion, the
Superior Court of Richmond County transferred the lawsuit to the Superior
Court of Gwinnett County, Georgia. Plaintiffs appealed the transfer order,
and in December 1998 the Court of Appeals of the State of Georgia reversed
the lower court's decision. Defendants petitioned the Georgia Supreme Court
to hear an appeal from the decision of the Court of Appeals, and the
petition was granted in May 1998. In September 1999, oral argument on
defendants' petition was heard and, on February 28, 2000, the Georgia
Supreme Court affirmed the Georgia Court of Appeals and remanded the matter
to the Superior Court of Richmond County. In March 2000, defendants moved
the Georgia Supreme Court to reconsider its February 28, 2000 decision, and
that motion remains pending. Proceedings in the trial court have been
stayed pending appeal. Defendants intend to vigorously contest the
litigation.
The Company is also a defendant or co-defendant in various other litigation
matters in the normal course of business. Although there can be no
assurances, as of December 31, 1999, the Company believes, based on
information currently available, that 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.
7. 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 TIGI. The Company's share of net expense for the qualified
pension and other postretirement benefit plans was not significant for
1999, 1998 and 1997. Through plans sponsored by TIGI, the Company also
provides defined contribution pension plans for certain agents. Company
contributions are primarily a function of production. The expense for these
plans was not significant in 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.
F-19
<PAGE> 110
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
8. RELATED PARTY TRANSACTIONS
The principal banking functions, including payment of salaries and
expenses, for certain subsidiaries and affiliates of TIGI are handled by
two companies. The Company 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. The Company provides various
employee benefits coverages to employees of 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 shared with affiliated companies. Charges
for these services are shared by the companies on cost allocation methods
based generally on estimated usage by department.
The Company maintains a short-term investment pool in which its insurance
affiliates participate. 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 $1.0 billion and $793 million at
December 31, 1999 and 1998, respectively, and is included in short-term
securities in the consolidated balance sheet.
Included in short-term investments at December 31, 1998 was a 90-day
variable rate note receivable from Citigroup. The rate was based upon the
AA financial commercial paper rate plus 14 basis points. The rate at
December 31, 1998 was 5.47%. The balance, which was $500 million at
December 31, 1998, was paid in full on February 25, 1999. Interest accrued
at December 31, 1998 was $2.2 million. Interest earned was $3.9 million and
$9.4 million in 1999 and 1998, respectively.
The Company markets deferred annuity products and life and health insurance
through its affiliate, Salomon Smith Barney Financial Consultants (SSB).
Premiums and deposits related to these products were $1.4 billion, $1.3
billion, and $1.0 billion in 1999, 1998 and 1997, respectively.
At December 31, 1999 and 1998 the Company had outstanding loaned securities
to SSB for $123.0 million and $39.7 million, respectively.
Included in other invested assets is a $987 million investment in Citigroup
preferred stock at December 31, 1999 and 1998, carried at cost.
The Company sells structured settlement annuities to the insurance
subsidiaries of Travelers Property Casualty Corp. (TAP) in connection with
the settlement of certain policyholder obligations. Such premiums and
deposits were $156 million, $104 million, and $88 million for 1999, 1998
and 1997, respectively. Reserves and contractholder funds related to these
annuities amounted to $798 million and $787 million in 1999 and 1998,
respectively.
In the ordinary course of business, the Company purchases and sells
securities through affiliated broker-dealers. These transactions are
conducted on an arm's length basis.
F-20
<PAGE> 111
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Primerica Life has entered into a General Agency Agreement with Primerica
Financial Services, Inc. (Primerica), that provides that Primerica will be
Primerica Life's general agent for marketing all insurance of Primerica
Life. In consideration of such services, Primerica Life agreed to pay
Primerica marketing fees of no less than $10 million based upon U.S. gross
direct premiums received by Primerica Life. In each of 1999 and 1998 the
fees paid by Primerica Life were $12.5 million.
In 1998 Primerica became a distributor of products for Travelers Life &
Annuity. Primerica sold $903 million and $256 million of deferred annuities
in 1999 and 1998, respectively.
The Company participates in a stock option plan sponsored by Citigroup that
provides for the granting of stock options in Citigroup common stock to
officers and key employees. To further encourage employee stock ownership,
during 1997 Citigroup introduced the WealthBuilder stock option program.
Under this program, all employees meeting certain requirements have been
granted Citigroup stock options.
The Company applies Accounting Principles Board Opinion No. 25 (APB 25) and
related interpretations in accounting for stock options. Since stock
options under the Citigroup plans are issued at fair market value on the
date of award, no compensation cost has been recognized for these awards.
FAS 123 provides an alternative to APB 25 whereby fair values may be
ascribed to options using a valuation model and amortized to compensation
cost over the vesting period of the options.
Had the Company applied FAS 123 in accounting for Citigroup stock options,
net income would have been the pro forma amounts indicated below:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999 1998 1997
($ in millions)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income, as reported $1,047 $902 $839
FAS 123 pro forma adjustments, after tax (16) (13) (9)
------------------------------------------------------------------------------------------------------
Net income, pro forma $1,031 $889 $830
------------------------------------------------------------------------------------------------------
</TABLE>
F-21
<PAGE> 112
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
9. LEASES
Most leasing functions for TIGI and its subsidiaries are administered by
TAP. Rent expense related to all leases is shared by the companies on a
cost allocation method based generally on estimated usage by department.
Net rent expense was $30 million, $24 million, and $15 million in 1999,
1998 and 1997, respectively.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
YEAR ENDING DECEMBER 31, MINIMUM OPERATING RENTAL
($ in millions) PAYMENTS
--------------------------------------------------------------------------
<S> <C>
2000 $38
2001 42
2002 41
2003 41
2004 41
Thereafter 273
--------------------------------------------------------------------------
Total Rental Payments $476
=========================================================================
</TABLE>
Future sublease rental income of approximately $79 million will partially
offset these commitments. Also, the Company will be reimbursed for 50% of
the rental expense for a particular lease totaling $195 million, by an
affiliate. Minimum future capital lease payments are not significant.
The Company is reimbursed for use of furniture and equipment through cost
sharing agreements by its affiliates.
F-22
<PAGE> 113
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
10. FEDERAL INCOME TAXES
EFFECTIVE TAX RATE
<TABLE>
<CAPTION>
($ in millions)
--------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income Before Federal Income Taxes $1,592 $1,383 $1,283
Statutory Tax Rate 35% 35% 35%
--------------------------------------------------------------------------------------------------------
Expected Federal Income Taxes 557 484 449
Tax Effect of:
Non-taxable investment income (19) (5) (4)
Other, net 7 2 (1)
--------------------------------------------------------------------------------------------------------
Federal Income Taxes $ 545 $ 481 $ 444
========================================================================================================
Effective Tax Rate 34% 35% 35%
--------------------------------------------------------------------------------------------------------
</TABLE>
COMPOSITION OF FEDERAL INCOME TAXES
<TABLE>
<CAPTION>
Current:
<S> <C> <C> <C>
United States $377 $418 $410
Foreign 32 24 24
--------------------------------------------------------------------------------------------------------
Total 409 442 434
--------------------------------------------------------------------------------------------------------
Deferred:
United States 143 40 10
Foreign (7) (1) --
--------------------------------------------------------------------------------------------------------
Total 136 39 10
--------------------------------------------------------------------------------------------------------
Federal Income Taxes $545 $481 $444
========================================================================================================
</TABLE>
Additional tax benefits attributable to employee stock plans allocated
directly to shareholder's equity were $17 million for each of the years
ended December 31, 1999, 1998 and 1997.
F-23
<PAGE> 114
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The net deferred tax liabilities at December 31, 1999 and 1998 were
comprised of the tax effects of temporary differences related to the
following assets and liabilities:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
($ in millions) 1999 1998
---- ----
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred Tax Assets:
Benefit, reinsurance and other reserves $ 645 $ 616
Operating lease reserves 70 76
Investments, net 11 --
Other employee benefits 106 103
Other 142 135
-----------------------------------------------------------------------------------------------------------------
Total 974 930
-----------------------------------------------------------------------------------------------------------------
Deferred Tax Liabilities:
Deferred acquisition costs and value of insurance in force (773) (673)
Investments, net -- (489)
Other (124) (90)
-----------------------------------------------------------------------------------------------------------------
Total (897) (1,252)
-----------------------------------------------------------------------------------------------------------------
Net Deferred Tax (Liability) Asset Before Valuation Allowance 77 (322)
Valuation Allowance for Deferred Tax Assets (100) (100)
-----------------------------------------------------------------------------------------------------------------
Net Deferred Tax Liability After Valuation Allowance $ (23) $ (422)
-----------------------------------------------------------------------------------------------------------------
</TABLE>
The Company and its life insurance subsidiaries file a consolidated federal
income tax return. Federal income taxes are allocated to each member of the
consolidated group on a separate return basis adjusted for credits and
other amounts required by the consolidation process. Any resulting
liability will be paid currently to the Company. Any credits for losses
will be paid by the Company to the extent that such credits are for tax
benefits that have been utilized in the consolidated federal income tax
return.
The $100 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 produced by the reversal of
the valuation allowance will be recognized by reducing goodwill.
At December 31, 1999, the Company had no ordinary or capital loss
carryforwards.
F-24
<PAGE> 115
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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 $932 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 $326 million.
11. NET INVESTMENT INCOME
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
($ in millions) ---- ---- ----
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GROSS INVESTMENT INCOME
Fixed maturities $1,806 $1,598 $1,460
Mortgage loans 235 295 291
Joint ventures and partnerships 141 74 55
Trading 141 43 57
Other, including policy loans 287 240 263
------------------------------------------------------------------------------------------------------
2,610 2,250 2,126
------------------------------------------------------------------------------------------------------
Investment expenses 104 65 89
------------------------------------------------------------------------------------------------------
Net investment income $2,506 $2,185 $2,037
------------------------------------------------------------------------------------------------------
</TABLE>
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) for the periods were as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
($ in millions) ---- ---- ----
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REALIZED INVESTMENT GAINS
Fixed maturities $(23) $111 $ 71
Equity securities 7 6 (9)
Mortgage loans 29 21 59
Real estate held for sale 108 16 67
Other (8) (5) 11
------------------------------------------------------------------------------------------------------
Total Realized Investment Gains $113 $149 $199
------------------------------------------------------------------------------------------------------
</TABLE>
F-25
<PAGE> 116
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Changes in net unrealized investment gains (losses) that are reported as
accumulated other changes in equity from non-owner sources or unrealized
gains on Citigroup stock in shareholder's equity were as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
($ in millions) ---- ---- ----
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UNREALIZED INVESTMENT GAINS (LOSSES)
Fixed maturities $(1,554) $ 91 $ 446
Equity securities 49 13 25
Other (30) (169) 520
-------------------------------------------------------------------------------------------------------------
Total Unrealized Investment Gains (Losses) (1,535) (65) 991
-------------------------------------------------------------------------------------------------------------
Related taxes (539) (20) 350
-------------------------------------------------------------------------------------------------------------
Change in unrealized investment gains (losses) (996) (45) 641
Transferred to paid in capital, net of tax -- (585) --
Balance beginning of year 598 1,228 587
-------------------------------------------------------------------------------------------------------------
Balance End of Year $ (398) $ 598 $1,228
-------------------------------------------------------------------------------------------------------------
</TABLE>
Included in Other in 1998 is the unrealized loss on Citigroup common stock
of $167 million prior to the conversion to preferred stock. Also included
in Other were unrealized gains of $506 million, which were reported in
1997, related to appreciation of Citigroup common stock.
F-26
<PAGE> 117
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Fixed Maturities
The amortized cost and fair value of investments in fixed maturities were
as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
GROSS GROSS
DECEMBER 31, 1999 AMORTIZED UNREALIZED UNREALIZED FAIR
($ in millions) COST GAINS LOSSES VALUE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Mortgage-backed securities - CMOs and
pass-through securities $ 5,081 $ 22 $ 224 $ 4,879
U.S. Treasury securities and obligations of
U.S. Government and government agencies and
authorities 1,032 14 53 993
Obligations of states, municipalities and
political subdivisions 214 -- 31 183
Debt securities issued by foreign governments 811 35 10 836
All other corporate bonds 13,938 69 384 13,623
Other debt securities 3,319 30 99 3,250
Redeemable preferred stock 105 4 7 102
-------------------------------------------------------------------------------------------------------------------
Total Available For Sale $24,500 $ 174 $ 808 $23,866
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
GROSS GROSS
DECEMBER 31, 1998 AMORTIZED UNREALIZED UNREALIZED FAIR
($ in millions) COST GAINS LOSSES VALUE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Mortgage-backed securities - CMOs and
pass-through securities $ 4,717 $ 147 $ 11 $ 4,853
U.S. Treasury securities and obligations of
U.S. Government and government agencies and
authorities 1,563 186 3 1,746
Obligations of states, municipalities and
political subdivisions 239 18 -- 257
Debt securities issued by foreign governments 634 41 3 672
All other corporate bonds 13,025 532 57 13,500
Other debt securities 2,709 106 38 2,777
Redeemable preferred stock 86 3 1 88
------------------------------------------------------------------------------------------------------------------
Total Available For Sale $22,973 $ 1,033 $ 113 $23,893
------------------------------------------------------------------------------------------------------------------
</TABLE>
F-27
<PAGE> 118
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Proceeds from sales of fixed maturities classified as available for sale
were $12.6 billion, $13.4 billion and $7.6 billion in 1999, 1998 and 1997,
respectively. Gross gains of $200 million, $314 million and $170 million
and gross losses of $223 million, $203 million and $99 million in 1999,
1998 and 1997, respectively, were realized on those sales.
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 $4.8
billion and $4.8 billion at December 31, 1999 and 1998, respectively.
The amortized cost and fair value of fixed maturities at December 31, 1999,
by contractual maturity, are shown below. Actual maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
AMORTIZED
($ in millions) COST FAIR VALUE
--------------------------------------------------------------------------------------
<S> <C> <C>
MATURITY:
Due in one year or less $1,624 $1,622
Due after 1 year through 5 years 6,633 6,599
Due after 5 years through 10 years 5,257 5,132
Due after 10 years 5,905 5,634
--------------------------------------------------------------------------------------
19,419 18,987
--------------------------------------------------------------------------------------
Mortgage-backed securities 5,081 4,879
--------------------------------------------------------------------------------------
Total Maturity $24,500 $23,866
--------------------------------------------------------------------------------------
</TABLE>
The Company makes 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 classified as
available for sale with a fair value of $3.8 billion and $3.4 billion,
respectively. Approximately 52% and 54%, respectively, of the Company's CMO
holdings are fully collateralized by GNMA, FNMA or FHLMC securities at
December 31, 1999 and 1998. In addition, the Company held $1.1 billion and
$1.4 billion of GNMA, FNMA or FHLMC mortgage-backed pass-through securities
at December 31, 1999 and 1998, respectively. Virtually all of these
securities are rated AAA.
F-28
<PAGE> 119
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Equity Securities
The cost and fair values of investments in equity securities were as
follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
GROSS GROSS
EQUITY SECURITIES: UNREALIZED UNREALIZED FAIR
($ in millions) COST GAINS LOSSES VALUE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1999
Common stocks $195 $123 $ 4 $314
Non-redeemable preferred stocks 496 15 41 470
-------------------------------------------------------------------------------------------------------------------
Total Equity Securities $691 $138 $45 $784
-------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1998
Common stocks $129 $44 $ 3 $170
Non-redeemable preferred stocks 345 10 7 348
-------------------------------------------------------------------------------------------------------------------
Total Equity Securities $474 $54 $10 $518
-------------------------------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sales of equity securities were $100 million, $212 million
and $341 million in 1999, 1998 and 1997, respectively. Gross gains of $15
million, $30 million and $53 million and gross losses of $8 million, $24
million and $62 million in 1999, 1998 and 1997, respectively, were realized
on those sales.
Mortgage Loans and Real Estate Held For Sale
At December 31, 1999 and 1998, the Company's mortgage loan and real estate
held for sale portfolios consisted of the following:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
($ in millions) 1999 1998
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Mortgage Loans $2,228 $2,370
Underperforming Mortgage Loans 57 236
--------------------------------------------------------------------------------------------------
Total Mortgage Loans 2,285 2,606
--------------------------------------------------------------------------------------------------
Real Estate Held For Sale - Foreclosed 223 112
Real Estate Held For Sale - Investment 13 31
--------------------------------------------------------------------------------------------------
Total Real Estate 236 143
--------------------------------------------------------------------------------------------------
Total Mortgage Loans and Real Estate Held for Sale $2,521 $2,749
==================================================================================================
</TABLE>
Underperforming mortgage loans include delinquent mortgage loans, loans in
the process of foreclosure, foreclosed loans and loans modified at interest
rates below market.
F-29
<PAGE> 120
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Aggregate annual maturities on mortgage loans at December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
YEAR ENDING DECEMBER 31,
($ in millions)
-----------------------------------------------------------------------
<S> <C>
Past Maturity $ 39
2000 162
2001 172
2002 137
2003 131
2004 140
Thereafter 1,504
-----------------------------------------------------------------------
Total $2,285
=======================================================================
</TABLE>
Trading Securities
Trading securities of the Company are held in Tribeca.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
($ in millions) 1999 1998
-------------------------------------------------------------------------------------------
TRADING SECURITIES OWNED
<S> <C> <C>
Convertible bond arbitrage $1,045 $754
Merger arbitrage 421 427
Other 212 5
-------------------------------------------------------------------------------------------
Total $1,678 $1,186
-------------------------------------------------------------------------------------------
TRADING SECURITIES SOLD NOT YET PURCHASED
Convertible bond arbitrage $799 $521
Merger arbitrage 299 352
-------------------------------------------------------------------------------------------
Total $1,098 $873
-------------------------------------------------------------------------------------------
</TABLE>
The Company's trading portfolio investments and related liabilities are
normally held for periods less than six months. Therefore, expected future
cash flows for these assets and liabilities are expected to be realized in
less than one year.
F-30
<PAGE> 121
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Concentrations
At December 31, 1999 and 1998, the Company had an investment in Citigroup
Preferred Stock of $987 million. See Note 8.
The Company maintains a short-term investment pool for its insurance
affiliates in which the Company also participates. See Note 8.
The Company had concentrations of investments, primarily fixed maturities,
in the following industries:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
($ in millions) 1999 1998
--------------------------------------------------------------------------
<S> <C> <C>
Banking $1,906 $2,131
Electric Utilities 1,653 1,513
Finance 1,571 1,346
--------------------------------------------------------------------------
</TABLE>
The Company held investments in Foreign Banks in the amount of $1,012
million and $997 million at December 31, 1999 and 1998, respectively, which
are included in the table above. Also, below investment grade assets
included in the preceding table were not significant.
Included in fixed maturities are below investment grade assets totaling
$2.2 billion and $2.1 billion 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.
Mortgage loan investments are relatively evenly dispersed throughout the
United States, with no significant holdings in any one state. Also, there
is no significant mortgage loan investment in a particular property type.
F-31
<PAGE> 122
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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 consolidated balance sheets that were
non-income producing for the preceding 12 months were insignificant.
Restructured Investments
The Company had mortgage loans and debt securities that were restructured
at below market terms at December 31, 1999 and 1998. The balances of the
restructured investments were insignificant. The new terms 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 loans was insignificant in 1999 and in 1998.
Interest on these assets, included in net investment income was
insignificant in 1999 and 1998.
13. DEPOSIT FUNDS AND RESERVES
At December 31, 1999, the Company had $27.0 billion of life and annuity
deposit funds and reserves. Of that total, $13.8 billion is not subject to
discretionary withdrawal based on contract terms. The remaining $13.2
billion is for life and annuity products that are subject to discretionary
withdrawal by the contractholder. Included in the amount that is subject to
discretionary withdrawal is $2.1 billion of liabilities that are
surrenderable with market value adjustments. Also included are an
additional $4.9 billion of life insurance and individual annuity
liabilities which are subject to discretionary withdrawals, and have an
average surrender charge of 4.6%. In the payout phase, these funds are
credited at significantly reduced interest rates. The remaining $6.2
billion of liabilities are surrenderable without charge. More than 12.7% of
these relate to individual life products. These risks would have to be
underwritten again if transferred to another carrier, which is considered a
significant deterrent against withdrawal by long-term policyholders.
Insurance liabilities that are surrendered or withdrawn are reduced by
outstanding policy loans and related accrued interest prior to payout.
F-32
<PAGE> 123
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
14. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
The following table reconciles net income to net cash provided by operating
activities:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
($ in millions) ---- ---- ----
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income From Continuing Operations $ 1,047 $ 902 $ 839
Adjustments to reconcile net income to net cash provided by
operating activities:
Realized gains (113) (149) (199)
Deferred federal income taxes 136 39 10
Amortization of deferred policy acquisition costs 315 275 252
Additions to deferred policy acquisition costs (686) (566) (471)
Investment income (221) (202) (32)
Premium balances (23) 23 (64)
Insurance reserves and accrued expenses 421 348 111
Other 99 205 380
---------------------------------------------------------------------------------------------------------------------
Net cash provided by operations $ 975 $ 875 $ 826
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
</TABLE>
15. NON-CASH INVESTING AND FINANCING ACTIVITIES
Significant non-cash investing and financing activities include the
acquisition of real estate through foreclosures of mortgage loans amounting
to $205 million in 1999, the transfer of Citigroup common stock to
Citigroup preferred stock valued at $987 million in 1998 and the conversion
of $119 million of real estate held for sale to other invested assets as a
joint venture in 1997.
F-33
<PAGE> 124
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
16. OPERATING SEGMENTS
The Company has two reportable business segments that are separately
managed due to differences in products, services, marketing strategy and
resource management. The business of each segment is maintained and
reported through separate legal entities within the Company. The management
groups of each segment report separately to the common ultimate parent,
Citigroup Inc.
The TRAVELERS LIFE & ANNUITY business segment consolidates primarily the
business of The Travelers Insurance Company and The Travelers Life and
Annuity Company. Travelers Life & Annuity offers individual annuity, group
annuity, individual life and long-term care products distributed by the
Company and TLAC under the Travelers name. Among the range of individual
products offered are fixed and variable deferred annuities, payout
annuities and term, universal and variable life and long-term care
insurance. The group products include institutional pensions, including
guaranteed investment contracts, payout annuities, group annuities to
employer-sponsored retirement and savings plans and structured finance
transactions.
The PRIMERICA LIFE business segment consolidates primarily the business of
Primerica Life Insurance Company, Primerica Life Insurance Company of
Canada and National Benefit Life Insurance Company. The Primerica Life
business segment offers individual life products, primarily term insurance,
to customers through a nationwide sales force of approximately 80,000 full
and part-time licensed Personal Financial Analysts.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies (see Note 1), except that
management also includes receipts on long-duration contracts (universal
life-type and investment contracts) as deposits along with premiums in
measuring business volume.
BUSINESS SEGMENT INFORMATION:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
TRAVELERS LIFE & PRIMERICA LIFE
1999 ($ in millions) ANNUITY INSURANCE TOTAL
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Business Volume:
Premiums $ 666 $ 1,072 $ 1,738
Deposits 11,220 -- 11,220
------- ------- -------
Total business volume $11,886 $ 1,072 $12,958
Net investment income 2,249 257 2,506
Interest credited to contractholders 937 -- 937
Amortization of deferred acquisition costs 127 188 315
Federal income taxes on Operating Income 319 186 505
Operating Income (excludes realized gains or
losses and the related FIT) $ 619 $ 355 $ 974
Segment Assets $56,615 $ 6,916 $63,531
-----------------------------------------------------------------------------------------------------------------
</TABLE>
F-34
<PAGE> 125
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
TRAVELERS LIFE & PRIMERICA LIFE
1998 ($ in millions) ANNUITY INSURANCE TOTAL
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Business Volume:
Premiums $ 683 $1,057 $ 1,740
Deposits 7,693 -- 7,693
------- ------ -------
Total business volume $ 8,376 $1,057 $ 9,433
Net investment income 1,965 220 2,185
Interest credited to contractholders 876 -- 876
Amortization of deferred acquisition costs 88 187 275
Federal income taxes on Operating Income 260 170 430
Operating Income (excludes realized gains or
losses and the related FIT) $ 493 $ 312 $ 805
Segment Assets $49,646 $6,902 $56,548
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
TRAVELERS LIFE PRIMERICA LIFE
1997 ($ in millions) & ANNUITY INSURANCE TOTAL
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Business Volume:
Premiums $ 548 $1,035 $ 1,583
Deposits 5,276 -- 5,276
------- ------ -------
Total business volume $ 5,824 $1,035 $ 6,859
Net investment income 1,836 201 2,037
Interest credited to contractholders 829 -- 829
Amortization of deferred acquisition costs 68 184 252
Federal income taxes on Operating Income 221 153 374
Operating Income (excludes realized gains or
losses and the related FIT) $ 427 $ 283 $ 710
Segment Assets $42,330 $7,110 $49,440
-----------------------------------------------------------------------------------------------------------------
</TABLE>
The amount of investments in equity method investees and total expenditures
for additions to long-lived assets other than financial instruments,
long-term customer relationships of a financial institution, mortgage and
other servicing rights, deferred policy acquisition costs, and deferred tax
assets, were not material.
F-35
<PAGE> 126
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
BUSINESS SEGMENT RECONCILIATION:
($ in millions)
----------------------------------------------------------------------------------------------------------
REVENUES 1999 1998 1997
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total business volume $12,958 $9,433 $6,859
Net investment income 2,506 2,185 2,037
Realized investment gains 113 149 199
Other revenues 521 440 354
Elimination of deposits (11,220) (7,693) (5,276)
----------------------------------------------------------------------------------------------------------
Total revenues $4,878 $4,514 $4,173
==========================================================================================================
OPERATING INCOME 1999 1998 1997
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total operating income of business segments $ 974 $805 $710
Realized investment gains net of tax 73 97 129
----------------------------------------------------------------------------------------------------------
Income from continuing operations $1,047 $902 $839
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
ASSETS 1999 1998 1997
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total assets of business segments $63,531 $56,548 $49,440
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
REVENUE BY PRODUCTS 1999 1998 1997
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred Annuities $5,694 $4,198 $3,303
Group and Payout Annuities 7,275 5,326 3,737
Individual Life and Health Insurance 2,434 2,270 2,102
Other (a) 695 413 307
Elimination of deposits (11,220) (7,693) (5,276)
----------------------------------------------------------------------------------------------------------
Total Revenue $4,878 $4,514 $4,173
==========================================================================================================
</TABLE>
(a) Other represents revenue attributable to unallocated capital and run-off
businesses.
The Company's revenue was derived almost entirely from U.S. domestic
business. Revenue attributable to foreign countries was insignificant.
The Company had no transactions with a single customer representing 10% or
more of its revenue.
F-36
<PAGE> 127
TRAVELERS RETIREMENT PRODUCT
VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
SEPARATE ACCOUNT FIVE
Individual and Group
Variable Annuity Contract
issued by
The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183
L-21256S May 2000
<PAGE> 128
PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) The financial statements of the Registrant and the Report of Independent
Auditors thereto are contained in the Registrant's Annual Report and are
included in the Statement of Additional Information. The financial
statements of the Registrant include:
Statement of Assets and Liabilities as of December 31, 1999
Statement of Operations for the period June 9, 1999 (date operations
commenced) to December 31, 1999
Statement of Changes in Net Assets for the period June 9, 1999 (date
operations commenced) to December 31, 1999
Statement of Investments as of December 31, 1999
Notes to Financial Statements
The consolidated financial statements of The Travelers Insurance Company
and subsidiaries and the report of Independent Accountants, are
contained in the Statement of Additional Information. The consolidated
financial statements of The Travelers Insurance Company and subsidiaries
include:
Consolidated Statements of Income for the years ended December 31,
1999, 1998 and 1997
Consolidated Balance Sheets as of December 31, 1999 and 1998
Consolidated Statements of Changes in Retained Earnings and
Accumulated Other Changes in Equity from Non-Owner Sources for the
years ended December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended December
31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
(b) Exhibits
1. Resolution of The Travelers Insurance Company Board of Directors
authorizing the establishment of the Registrant. (Incorporated herein by
reference to Exhibit 1 to the Registration Statement on Form N-4, filed
July 9, 1998.)
2. Not Applicable.
3(a). Distribution and Management Principal Underwriting among the Registrant,
The Travelers Insurance Company and CFBDS, Inc. (Incorporated herein by
reference to Exhibit 3(a) to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-4, File No. 333-58783, filed November
3, 1998.)
3(b). Form of Selling Agreement. (Incorporated herein by reference to Exhibit
3(b) to Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-4, File No. 333-60227, filed November 9, 1998.)
4. Variable Annuity Contract. (Incorporated herein by reference to Exhibit
4 to Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-4, File No. 333-58783, filed November 3, 1998.)
5. Application. (Incorporated herein by reference to Exhibit 5 to
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4,
File No. 333-58783, filed November 3, 1998.)
<PAGE> 129
6(a). Charter of The Travelers Insurance Company, as amended on October 19,
1994. (Incorporated herein by reference to Exhibit 6(a) to the
Registration Statement on Form N-4, File No. 333-40193, filed November
13, 1997.)
6(b). By-Laws of The Travelers Insurance 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. 333-40193, filed November
13, 1997.)
9. Opinion of Counsel as to the legality of securities being registered.
(Incorporated herein by reference to Exhibit 9 to the Registration
Statement on Form N-4, filed July 9, 1998.)
10. Consent of KPMG LLP, Independent Certified Public Accountants.
13. Computation of Total Return Calculations - Standardized and
Non-Standardized. (Incorporated herein by reference to Exhibit 13 to
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4,
File No. 333-58783, filed November 3, 1998.)
15. Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as
signatory for Michael A. Carpenter, Jay S. Benet, George C. Kokulis,
Robert I. Lipp, Ian R. Stuart, Katherine M. Sullivan and Marc P. Weill.
(Incorporated herein by reference to Exhibit 15 to the Registration
Statement on Form N-4, filed July 9, 1998.)
15(b). Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as
signatory for George C. Kokulis, Katherine M. Sullivan and Glenn D.
Lammey.
Item 25. Directors and Officers of the Depositor
Name and Principal Positions and Offices
Business Address with Insurance Company
- ------------------ ----------------------
George C. Kokulis* Director, President and Chief Executive Officer
Katherine M. Sullivan* Director and Senior Vice President
Marc P. Weill** Director and Senior Vice President
Mary Jean Thornton* Executive Vice President and
Chief Information Officer
Stuart Baritz*** Senior Vice President
Jay S. Fishman* Senior Vice President
Barry Jacobson* Senior Vice President
Russell H. Johnson* Senior Vice President
Marla Berman Lewitus* Senior Vice President and General Counsel
Brendan Lynch* Senior Vice President
Warren H. May* Senior Vice President
Kathleen Preston* Senior Vice President
David A. Tyson* Senior Vice President
F. Denney Voss* Senior Vice President
Glenn D. Lammey* Chief Financial Officer, Chief
Accounting Officer and Controller
David A. Golino* Vice President
Donald R. Munson, Jr.* Vice President
Anthony Cocolla Second Vice President
Scott R. Hansen Second Vice President
<PAGE> 130
Linn K. Richardson* Second Vice President and Actuary
Paul Weissman Second Vice President and Actuary
Ernest J. Wright* Vice President and Secretary
Kathleen A. McGah* Assistant Secretary and
Deputy General Counsel
Principal Business Address:
* The Travelers Insurance Company ** Citigroup Inc.
One Tower Square 388 Greenwich Street
Hartford, CT 06183 New York, N.Y. 10013
*** Travelers Portfolio Group
1345 Avenue of the Americas
New York, NY 10105
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
Incorporated herein by reference to Exhibit 16 to Post-Effective
Amendment No.2 to the Registration Statement on Form N-4, File No. 333-40193,
filed April 12, 2000.
Item 27. Number of Contract Owners
As of February 29, 2000, 58 contract owners held qualified and non-qualified
contracts offered by the Registrant.
Item 28. Indemnification
Sections 33-770 to 33-778, 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.
<PAGE> 131
Rule 484 Undertaking
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.
Item 29. Principal Underwriter
(a) CFBDS, Inc.
21 Milk Street
Boston, MA 02109
CFBDS, Inc. also serves as principal underwriter for the following :
(a) CFBDS, the Registrant's Distributor, is also the distributor for
CitiFunds(SM) International Growth & Income Portfolio, CitiFunds(SM)
International Growth Portfolio, CitiFunds(SM) U.S. Treasury Reserves,
CitiFunds(SM) Cash Reserves, CitiFunds(SM) Premium U.S. Treasury Reserves,
CitiFunds(SM) Premium Liquid Reserves, CitiFunds(SM) Institutional U.S. Treasury
Reserves, CitiFunds(SM) Institutional Liquid Reserves, CitiFunds(SM)
Institutional Cash Reserves, CitiFunds(SM) Tax Free Reserves, CitiFunds(SM)
Institutional Tax Free Reserves, CitiFunds(SM) California Tax Free Reserves,
CitiFunds(SM) Connecticut Tax Free Reserves, CitiFunds(SM) New York Tax Free
Reserves, CitiFunds(SM) New York Tax Free Income Portfolio, CitiFunds(SM)
National Tax Free Income Portfolio, CitiFunds(SM) California Tax Free Income
Portfolio, CitiFunds(SM) Intermediate Income Portfolio, CitiFunds(SM) Balanced
Portfolio, CitiFunds(SM) Small Cap Value Portfolio, CitiFunds(SM) Growth &
Income Portfolio, CitiFunds(SM) Large Cap Growth Portfolio, CitiFunds(SM) Small
Cap Growth Portfolio, CitiFunds(SM) Short-Term U.S. Government Income Portfolio,
CitiFunds(SM) Emerging Asian Markets Equity Portfolio CitiSelect(R) VIP Folio
200, CitiSelect(R) VIP Folio 300, CitiSelect(R) VIP Folio 400, CitiSelect(R) VIP
Folio 500, CitiFunds(SM) Small Cap Growth VIP Portfolio, CitiSelect(R) Folio
100, CitiSelect(R) Folio 200, CitiSelect(R) Folio 300, CitiSelect(R) Folio 400,
and CitiSelect(R) Folio 500.
CFBDS is also the placement agent for Large Cap Value Portfolio, Small Cap Value
Portfolio, International Portfolio, Foreign Bond Portfolio, Intermediate Income
Portfolio, Short-Term Portfolio, Growth & Income Portfolio, U.S. Fixed Income
Portfolio, High Yield Portfolio, Large Cap Growth Portfolio, Small Cap Growth
Portfolio, International Equity Portfolio, Balanced Portfolio, Government Income
Portfolio, Tax Free Reserves Portfolio, Cash Reserves Portfolio and U.S.
Treasury Reserves Portfolio, Emerging Asian Markets Equity Portfolio.
CFBDS also serves as the distributor for the following funds: The Travelers Fund
U for Variable Annuities, The Travelers Fund VA for Variable Annuities, The
Travelers Fund BD for Variable Annuities, The Travelers Fund BD II for Variable
Annuities, The Travelers Fund BD III for Variable Annuities, The Travelers Fund
BD IV for Variable Annuities, The Travelers Fund ABD for Variable Annuities, The
Travelers Fund ABD II for Variable Annuities, The Travelers Separate Account PF
for Variable Annuities, The Travelers Separate Account PF II for Variable
Annuities, The Travelers Separate Account QP for Variable Annuities, The
Travelers Separate Account TM for Variable Annuities, The Travelers Separate
Account TM II for Variable Annuities, The Travelers Separate Account Six for
Variable Annuities, The Travelers Separate Account Seven for Variable Annuities,
<PAGE> 132
The Travelers Separate Account Eight for Variable Annuities, The Travelers
Separate Account Nine for Variable Annuities, The Travelers Separate Account Ten
for Variable Annuities, The Travelers Fund UL for Variable Life Insurance, The
Travelers Fund UL II for Variable Life Insurance, The Travelers Fund UL III for
Variable Life Insurance, The Travelers Variable Life Insurance Separate Account
One, The Travelers Variable Life Insurance Separate Account Two, The Travelers
Variable Life Insurance Separate Account Three, The Travelers Variable Life
Insurance Separate Account Four, The Travelers Separate Account MGA, The
Travelers Separate Account MGA II, The Travelers Growth and Income Stock Account
for Variable Annuities, The Travelers Quality Bond Account for Variable
Annuities, The Travelers Money Market Account for Variable Annuities, The
Travelers Timed Growth and Income Stock Account for Variable Annuities, The
Travelers Timed Short-Term Bond Account for Variable Annuities, The Travelers
Timed Aggressive Stock Account for Variable Annuities, The Travelers Timed Bond
Account for Variable Annuities
CFBDS is also the distributor for the following funds: Emerging Growth Fund,
Government Fund, Growth and Income Fund, International Equity Fund, Municipal
Fund, Balanced Investments, Emerging Markets Equity Investments, Government
Money Investments, High Yield Investments, Intermediate Fixed Income
Investments, International Equity Investments, International Fixed Income
Investments, Large Capitalization Growth Investments, Large Capitalization Value
Equity Investments, Long-Term Bond Investments, Mortgage Backed Investments,
Municipal Bond Investments, Small Capitalization Growth Investments, Small
Capitalization Value Equity Investments, Appreciation Portfolio, Diversified
Strategic Income Portfolio, Emerging Growth Portfolio, Equity Income Portfolio,
Equity Index Portfolio, Growth & Income Portfolio, Intermediate High Grade
Portfolio, International Equity Portfolio, Money Market Portfolio, Total Return
Portfolio.
CFBDS is also the distributor for the following Smith Barney Mutual Fund
registrants: Smith Barney Adjustable Rate Government Income Fund, Smith Barney
Aggressive Growth Fund Inc., Smith Barney Appreciation Fund, Smith Barney
Arizona Municipals Fund Inc., Smith Barney California Municipals Fund Inc.,
Smith Barney Large Cap Blend Fund, Smith Barney Fundamental Value Fund Inc.,
Smith Barney Balanced Fund, Smith Barney Convertible Fund, Smith Barney
Diversified Strategic Income Fund, Smith Barney Exchange Reserve Fund, Smith
Barney High Income Fund, Smith Barney Municipal High Income Fund, Smith Barney
Premium Total Return Fund, Smith Barney Total Return Bond Fund, Smith Barney
Contrarian Fund, Smith Barney Government Securities Fund, Smith Barney
Hansberger Global Small Cap Value Fund, Smith Barney Hansberger Global Value
Fund, Smith Barney Investment Grade Bond Fund, Smith Barney Special Equities
Fund, Smith Barney Intermediate Maturity California Municipals Fund, Smith
Barney Intermediate Maturity New York Municipals Fund, Smith Barney Large
Capitalization Growth Fund, Smith Barney S&P 500 Index Fund, Smith Barney Mid
Cap Blend Fund, Smith Barney Managed Governments Fund Inc., Smith Barney Managed
Municipals Fund Inc., Smith Barney Massachusetts Municipals Fund, Cash
Portfolio, Government Portfolio, Retirement Portfolio, California Money Market
Portfolio, Florida Portfolio, Georgia Portfolio, Limited Term Portfolio, New
York Money Market Portfolio, New York Portfolio, Pennsylvania Portfolio, Smith
Barney Municipal Money Market Fund, Inc., Smith Barney Natural Resources Fund
Inc., Smith Barney New Jersey Municipals Fund Inc., Smith Barney Oregon
Municipals Fund, Zeros Plus Emerging Growth Series 2000, Smith Barney Security
and Growth Fund, Smith Barney Small Cap Blend Fund, Inc., Smith Barney
Telecommunications Income Fund, Smith Barney High Income Portfolio, Smith Barney
Large Cap Value Portfolio, Smith Barney International Equity Portfolio, Smith
Barney Large Capitalization Growth Portfolio, Smith Barney Money Market
Portfolio, Smith Barney Pacific Basin Portfolio, Balanced Portfolio,
Conservative Portfolio, Growth Portfolio, High Growth Portfolio, Income
Portfolio, Global Portfolio, Select Balanced Portfolio, Select Conservative
Portfolio, Select Growth Portfolio, Select High Growth Portfolio, Select Income
Portfolio, Concert Social Awareness Fund, Large Cap Value Fund, Short-Term High
Grade Bond Fund, U.S. Government Securities Fund, Cash Portfolio, Government
Portfolio, Municipal Portfolio, Concert Peachtree Growth Fund, Income and Growth
Portfolio, Reserve Account Portfolio, U.S. Government/High Quality Securities
Portfolio, Emerging Markets Portfolio, European Portfolio, Global Government
Bond Portfolio, International Balanced Portfolio, International Equity
Portfolio, Pacific Portfolio, AIM Capital Appreciation Portfolio, Alliance
Growth Portfolio, GT Global Strategic Income Portfolio, MFS Total Return
Portfolio, Putnam Diversified Income Portfolio, TBC Managed
<PAGE> 133
Income Portfolio, Van Kampen American Capital Enterprise Portfolio, Centurion
Tax-Managed U.S. Equity Fund, Centurion Tax-Managed International Equity Fund,
Centurion U.S. Protection Fund, Centurion International Protection Fund, Global
High-Yield Bond Fund, International Equity Fund, Emerging Opportunities Fund,
Core Equity Fund, Long-Term Bond Fund, Global Dimensions Fund L.P., Citicorp
Private Equity L.P., AIM V.I. Capital Appreciation Fund, AIM V.I. Government
Series Fund, AIM V.I. Growth Fund, AIM V.I. International Equity Fund, AIM V.I.
Value Fund, Fidelity VIP Growth Portfolio, Fidelity VIP High Income Portfolio,
Fidelity VIP Equity Income Portfolio, Fidelity VIP Overseas Portfolio, Fidelity
VIP II Contrafund Portfolio, Fidelity VIP II Index 500 Portfolio, MFS World
Government Series, MFS Money Market Series, MFS Bond Series, MFS Total Return
Series, MFS Research Series, MFS Emerging Growth Series.
CFBDS is also the distributor for the following Salomon Brothers funds: Salomon
Brothers Institutional Money Market Fund, Salomon Brothers Cash Management Fund,
Salomon Brothers New York Municipal Money Market Fund, Salomon Brothers National
Intermediate Municipal Fund, Salomon Brothers U.S. Government Income Fund,
Salomon Brothers High Yield Bond Fund, Salomon Brothers Strategic Bond Fund,
Salomon Brothers Total Return Fund, Salomon Brothers Asia Growth Fund, Salomon
Brothers Capital Fund Inc, Salomon Brothers Investors Fund Inc, Salomon Brothers
Opportunity Fund Inc, Salomon Brothers Institutional High Yield Bond Fund,
Salomon Brothers Institutional Emerging Markets Debt Fund, Salomon Brothers
Variable Investors Fund, Salomon Brothers Variable Capital Fund, Salomon
Brothers Variable Total Return Fund, Salomon Brothers Variable High Yield Bond
Fund, Salomon Brothers Variable Strategic Bond Fund, Salomon Brothers Variable
U.S. Government Income Fund, and Salomon Brothers Variable Asia Growth Fund.
(b) The information required by this Item 29 with respect to each director
and officer of CFBDS, Inc. is incorporated by reference to Schedule A of Form BD
filed by CFBDS pursuant to the Securities and Exchange Act of 1934 (File No.
8-32417).
(c) Not Applicable
Item 30. Location of Accounts and Records
(1) The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
The undersigned Registrant hereby undertakes:
(a) To file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial
statements in the registration statement are never more than sixteen
months old for so long as payments under the variable annuity contracts
may be accepted;
(b) To include either (1) as part of any application to purchase a contract
offered by the prospectus, a space that an applicant can check to
request a Statement of Additional Information, or (2) a post card or
similar written communication affixed to or included in the prospectus
that the applicant can remove to send for a Statement of Additional
Information; and
<PAGE> 134
(c) To deliver any Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly
upon written or oral request.
The Company hereby represents:
(a). That the aggregate charges under the Contracts 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> 135
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this amendment to this registration statement
and has caused this amendment to this registration statement to be signed on its
behalf, in the City of Hartford, and State of Connecticut, on this 20th day of
April, 2000.
THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES
(Registrant)
THE TRAVELERS INSURANCE COMPANY
(Depositor)
By:*GLENN D. LAMMEY
------------------------------------------
Glenn D. Lammey, Chief Financial Officer,
Chief Accounting Officer and Controller
As required by the Securities Act of 1933, this registration statement has been
signed by the following persons in the capacities indicated on the 20th day of
April 2000.
*GEORGE C. KOKULIS Director, President and Chief Executive Officer
- ------------------------- (Principal Executive Officer)
(George C. Kokulis)
*KATHERINE M. SULLIVAN Director
- -------------------------
(Katherine M. Sullivan)
*MARC P. WEILL Director
- -------------------------
(Marc P. Weill)
*By: /s/Ernest J. Wright, Attorney-in-Fact
<PAGE> 136
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- -------- ----------- ----------------
<S> <C> <C>
10 Consent of KPMG LLP, Independent Electronically
Certified Public Accountants.
15(b) Powers of Attorney authorizing Ernest J. Wright or Electronically
Kathleen A. McGah as signatory for George C. Kokulis,
Katherine M. Sullivan and Glenn D. Lammey.
</TABLE>
<PAGE> 1
Exhibit 10
Consent of Independent Certified Public Accountants
Board of Directors
The Travelers Insurance Company
We consent to the use of our reports included herein and to the reference to our
firm as experts under the heading "Independent Accountants."
/s/KPMG LLP
Hartford, Connecticut
April 20, 2000
<PAGE> 1
Exhibit 15(b)
THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, GEORGE C. KOKULIS of Simsbury, Connecticut, Director, President
and Chief Executive Officer of The Travelers Insurance 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 N-4 or other appropriate form under the Securities Act of
1933 and the Investment Company Act of 1940 for The Travelers Separate Account
Five for Variable Annuities, a separate account of the Company dedicated
specifically to the funding of variable annuity 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 10th day of April
2000.
/s/George C. Kokulis
Director, President and Chief Executive Officer
The Travelers Insurance Company
<PAGE> 2
THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, KATHERINE M. SULLIVAN of Longmeadow, Massachusetts, a Director
of The Travelers Insurance 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 N-4 or
other appropriate form under the Securities Act of 1933 and the Investment
Company Act of 1940 for The Travelers Separate Account Five for Variable
Annuities, a separate account of the Company dedicated specifically to the
funding of variable annuity 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 31st day of March
2000.
/s/Katherine M. Sullivan
Director
The Travelers Insurance Company
<PAGE> 3
THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, GLENN D. LAMMEY of Simsbury, Connecticut, Chief Financial
Officer, Chief Accounting Officer and Controller of The Travelers Insurance
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 N-4 or other appropriate form under
the Securities Act of 1933 and the Investment Company Act of 1940 for The
Travelers Separate Account Five for Variable Annuities, a separate account of
the Company dedicated specifically to the funding of variable annuity 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 31st day of March
2000.
/s/Glenn D. Lammey
Chief Financial Officer,
Chief Accounting Officer and Controller
The Travelers Insurance Company
